ASML results to give clues on when chip demand slump will end

By Louis Goss

Europe's largest tech company ASML is on Wednesday set to publish its fourth-quarter results, in what will be poured over by investors seeking to work out when the slump in the global semiconductor market is likely to end.

For investors, the information posted by the Dutch company which makes the machines used to manufacture microchips will offer vital signs as to the health of the worldwide tech industry which relies on ASML's systems.

ASML's results will also offer clues as to the extent to which the company itself is being impacted by U.S. led efforts to block China from becoming a chip-making superpower, which have seen restrictions placed on the Dutch company's abilities to export its machines.

Analysts polled by Visible Alpha expect ASML (ASML) (NL:ASML)to report a profit of EUR1.87 billion on sales of EUR6.9 billion, and shipments of 111 machines. Bookings are expected to fall 45% to EUR3.5 billion at the Nasdaq-100 component.

In its last set of results published in October, ASML reported a 71% drop in orders for its multi-million-euro lithography machines, which the company blamed on a slump in the global semiconductor market which had seen customers take a cautious approach to spending.

The Amsterdam-listed company, however, said it expects the slowdown in the global semiconductor market to bottom out by the end of this year before picking up again in 2025.

Earlier this month, the world's largest chipmaking company Taiwan Semiconductor Manufacturing Co., outstripped analysts' expectations in posting a lesser-than-expected drop in its fourth-quarter revenues.

TSMC's (TSM) fourth-quarter results were taken as another sign the slump in the global semiconductor market may already be starting to bottom out, as analysts said soaring demand for the high-tech chips needed by the artificial intelligence industry had driven demand.

As the world's sole manufacturer of the extreme ultraviolet lithography machines used to make the highest tech chips used in the AI industry, ASML is likely to benefit from any uptick in demand from the sector and any associated demand for its cutting edge EUV systems.

ASML's results will also offer key insights into the impacts of new restrictions agreed to by the Dutch government last July aimed at limiting exports of high-tech lithography to China, to which the European tech giant made 46% of its third-quarter sales.

The Dutch company's chief financial officer, Roger Dassen, previously said in October the restrictions would have a limited impact on revenue.

In January, Bloomberg reported the company canceled three pre-scheduled shipments of its microchip manufacturing machines to China after coming under pressure from the Biden administration.

As the first set of results since those rules came into force last September, ASML's upcoming results will signal the extent to which the rules are truly likely to impact the Dutch firm's business.

ASML's U.S.-listed shares have gained 15% over the last 52 weeks, underperforming the broader chip sector SOX.

-Louis Goss

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01-23-24 1044ET

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