In this photo taken on January 4, 2024 in Brussels, Belgium, an ASML icon is displayed on a circuit board next to the American and Chinese flags.
Jonathan Ra | Noor Photos | Getty Images
ASML On Tuesday, people got their first look at how U.S. restrictions on exports of its advanced chipmaking tools to China will affect sales in the Asian country.
The Netherlands-based chip equipment maker said on Tuesday in an earnings report released a day earlier due to a “technical error” that it expected net sales in 2025 to be between 30 billion euros and 35 billion euros (about $32.7 billion). and $38.1 billion). This is the lower half of the scope of ASML’s previous guidance.
ASML is an important part of the global chip supply chain. The company’s EUV lithography machines are used by many of the world’s largest wafer manufacturers – from NVIDIA arrive British Semiconductor ——Producing advanced chips.
The company said that while its third-quarter net sales came in at 7.5 billion euros, beating expectations, net bookings came in at 2.6 billion euros ($2.83 billion). That was well below LSEG’s consensus estimate of €5.6 billion.
According to CNBC calculations using LSEG data, ASML’s stock price plummeted 16% on Tuesday, causing the company’s market value to evaporate more than $50 billion in a single day.
In addition to disappointing bookings – which analysts said were due to weakness on the part of some customers, including Intel And Samsung-AMSL also showed how geopolitical tensions are weighing on its 2025 outlook.
ASML Chief Financial Officer Roger Dassen said on Tuesday that he expected the company’s China business to “show a more normalized percentage of our orders and business.”
The change in ASML’s 2025 guidance is mainly related to delays in the development of new logic manufacturing facilities at Intel and Samsung, UBS analysts said, adding that the new guidance means sales to China will fall by 25% to 30% in 2025.
How important is China to ASML?
ASML’s Chinese customers have been stockpiling the company’s less advanced machines in response to U.S. export restrictions on the Dutch company and continuing to gain access to its key technology that allows them to make wafers for the electronics industry.
Due to previous restrictions, ASML has never sold its most advanced extreme ultraviolet lithography machines (EUV) to Chinese customers.
Instead, the country’s wafer companies chose to order ASML’s deep ultraviolet lithography machines (DUV machines). The DUV machine is ASML’s second-layer lithography system and is crucial for manufacturing wafer circuits.
Last year, 29% of ASML’s sales came from China. The company currently expects China’s contribution to fall to around 20% of its total revenue by 2025.
Sales to China grew significantly in the first three quarters of 2024 as customers rushed to buy ASML’s DUV machines due to export restrictions in the United States and the Netherlands.
ASML stated in the company’s second quarter 2024 financial report that 49% of its sales came from China.
The move means the Dutch government will be able to effectively prevent ASML from maintaining the DUV machines it has so far sold to China.
“China is a very important market for China,” Chris Miller, assistant professor of international history at Tufts University’s Fletcher School of Law and Diplomacy and author of “Chip Wars,” told CNBC in emailed comments. “Most of the revenue comes from older generation chip manufacturing tools.”
Ironically, restrictions on the export of DUV machines to China “may have helped ASML online because China accelerated the purchase of older-generation DUV tools,” Miller added.
Now, ASML expects sales to China to decline due to U.S. trade restrictions. The company expects China to return to a smaller share of its total global sales in 2025, Chief Financial Officer Dassen said in a recorded video interview on Tuesday.
“We do see China moving toward historically normal levels as a percentage of our business,” Dason said. “So we expect China to be about 20% of our total revenue next year. That’s also That’s consistent with its share of our backlog.”
Analysts at Bank of America said the company faced “a sharp decline in revenue from China.” They added that ASML forecasts that the Chinese market will account for about 20% of its revenue in 2025, which means that revenue will fall by 48% from the same period last year, which is worse than the 3% they expected.
Abishur Prakash, founder of Toronto-based consultancy The Geopolitical Business, said Chinese demand for ASML machines is likely to drop significantly as the company is “severely restricted by export controls.”
“Just like Intel, China is the largest market and ASML is deeply dependent on China,” Prakash told CNBC via email. “For ASML, it is paying attention to what is happening in China and viewing it as Potential restrictions on business.”
Prakash added: “As the chip world becomes insulated from China, ASML may see reduced demand for its equipment from China and elsewhere.”
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