Toby Starling and Nathan Vifrin
AMSTERDAM (Reuters) – ASML, the largest supplier of equipment to computer chip makers, is expected to report a surge in new orders when its new president reports second-quarter earnings on Wednesday as customers expand production capacity to meet surging demand for AI chips.
Another focus is whether Chinese companies continue to buy large amounts of equipment used to make older generations of semiconductors such as those used in electric vehicles, a concern for Western policymakers who have been curbing purchases of advanced technology.
Analysts say the company may revise its guidance upwards as major makers of cutting-edge chips, such as Taiwan’s TSMC, which makes chips for Nvidia and Apple and reports earnings on Thursday, are likely to ramp up and accelerate equipment purchases.
ASML dominates the market for lithography systems, complex tools that use lasers to create the tiny circuits on computer chips. It is the only maker of lithography systems that use extreme ultraviolet (EUV) wavelengths needed by TSMC, which makes the most complex chips for smartphones and AI chips.
“We expect ASML’s orders to reach nearly 5 billion euros in the second quarter, above consensus expectations,” Mifuzo analyst Kevin Wang said, citing strong orders from TSMC for ASML’s EUV product line.
The result is ASML’s first under new CEO Christophe Fouquet, who took over the helm of Europe’s largest technology company as it navigates the U.S.-China battle over semiconductors.
ASML, which has a market capitalization of about 400 billion euros ($437 billion), has positioned 2024 as a “transition” year, with business expected to remain flat but recover strongly in 2025, driven by demand for cutting-edge tools.
The group’s shares have risen 45% this year and are trading near record highs of just over 1,000 euros a share, roughly 40 times expected 12-month earnings and significantly outperforming the STOXX Europe 600 tech index.
The growing backlog will reassure investors that demand for the company’s cutting-edge products is recovering after a weak first half of 2024, when it relied heavily on orders for older equipment from China.
Analysts expect second-quarter net profit of 1.41 billion euros and sales of 6.04 billion euros, based on an average estimate of 16 analysts based on LSEG data.
In the same period last year, sales were 6.9 billion euros and net profit was 1.94 billion euros.
Backlog
ASML had a backlog of €38 billion at the end of the first quarter, meaning it needs €4 billion to €6 billion in new orders per quarter to hit its 2025 sales guidance at the high end of its €30 billion to €40 billion range.
The company’s machines can cost up to $300 million each, with lead times of 12 to 18 months for delivery, and orders are closely coordinated with customers such as Samsung, Intel and memory specialists SK Hynix and Micron.
The company competes with Japan’s Canon and Nikon in a slightly older generation of chip-making technology, and Chinese companies such as Shanghai Microelectronics Equipment Co. (SMEE) are trying to develop rival lithography tools.
But Chinese chipmakers, unable to get their hands on ASML’s top-of-the-line equipment because of U.S.-led export controls, have increased their purchases of ASML’s older equipment over the past year, accounting for nearly half of the company’s sales in the first quarter.
China’s rapid rise means lost market share and increased competition for non-Chinese companies. The European Commission has launched an investigation into European semiconductor industry companies about whether they feel Chinese government subsidies are distorting the market.
ASML argues that the world needs the old chips, as shortages during the COVID pandemic have shown, and China is stepping up to supply them.
(1 dollar = 0.9164 euros)
(Reporting by Toby Sterling; Editing by Jan Harvey)
