ASML Order Slump Catapults China’s Share of Sales to 46%

ASML Holding NV’s order intake plunged in the third quarter amid a sector-wide slump in the semiconductor industry, helping propel sales in China to nearly half of its revenue in the period.

(Bloomberg) — ASML Holding NV’s order intake plunged in the third quarter amid a sector-wide slump in the semiconductor industry, helping propel sales in China to nearly half of its revenue in the period. 

Order bookings fell 42% to €2.6 billion ($2.8 billion) in July through September from the previous quarter, Europe’s most valuable technology company said in a statement on Wednesday. That compares with an average estimate of €4.5 billion among analysts polled by Bloomberg.

While ASML maintains a sizable order backlog, the semiconductor industry has been experiencing a slowdown after inflation and recession fears hit consumer spending. Sales at Taiwan Semiconductor Manufacturing Co., ASML’s biggest customer, dropped 11% in the third quarter, according to Bloomberg calculations. Earlier this year, ASML said it plans to slow hiring amid the downturn.

“All in all, on the macro front it’s quite dynamic and quite challenging,” Chief Financial Officer Roger Dassen said in a video interview on the results. “If you then specifically look into the semiconductor industry, I think it’s plain to say that our customers are really going through the cycle trough.”  

ASML, which is the only producer of the lithography equipment needed to make the most advanced semiconductors, has experienced a jump in business from China this year as chipmakers there boosted orders ahead of looming export controls. 

Read More: ASML Says New US Curbs May Hit China Sales in Medium Term

China accounted for 46% of ASML’s sales in the third quarter, compared to 24% in the previous quarter and 8% in January to March. 

“Our Chinese customers say: We are happy to take the machines that others don’t want,” Chief Executive Officer Peter Wennink had said earlier this year. “Because their fabs are ready. They can take the tools.”

ASML has been targeted by the US effort to curb exports of cutting-edge technology to China, one of the Veldhoven-based company’s biggest markets. Earlier this year, US President Joe Biden’s administration convinced the Dutch government to prevent ASML from shipping some immersion deep ultraviolet lithography machines, its second-most advanced product line, to China without a license. The Dutch restrictions are set to take full effect from Jan. 1.

The US announced additional export curbs on Tuesday that are designed to block China’s access to advanced semiconductor technology. ASML said the new measures will hit its sales there in the medium to long term.

ASML is already barred from selling its most advanced equipment, known as extreme ultraviolet machines, to China. The firm says it doesn’t expect the Dutch and US measures to have a material impact on its financial outlook for the year or in the longer term.

Revenue is on track for €6.7 billion to €7.1 billion in the fourth quarter, compared to net sales of €6.7 billion in the previous period, the Dutch company said. The forecast compares to analysts’ average estimate of €6.91 billion, according to a Bloomberg survey.

(Updates with CFO comment and revenue forecast starting from fourth paragraph.)

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