ASML orders jump due to soaring demand for cutting-edge machines

By Louis Goss

Europe's largest tech company, ASML Holding, on Wednesday held onto its conservative outlook for 2024 despite promising signs of a recovery in the semiconductor industry that saw it receive a record EUR9.2 billion worth of orders in the final quarter of 2023.

The Dutch company which makes the machines used to manufacture microchips saw its orders rise from EUR6.3 billion in the year-earlier quarter and EUR2.6 billion in the third quarter, as its books were bolstered by EUR5.2 billion in orders for its cutting-edge extreme ultraviolet (EUV) lithography systems.

Dutch-listed shares in ASML (NL:ASML) (ASML) increased 7% on Wednesday having rallied 22% over the previous 12 months.

Across the fourth quarter, the Veldhoven headquartered company generated EUR7.2 billion worth of sales, as it sold 113 of its multi-million-euro machines to customers worldwide at margins of 51.4%, that saw it generate net income worth EUR2 billion.

The results saw ASML outperform analysts' expectations following forecasts it would generate EUR1.87 billion in profits on EUR6.9 billion in sales by shipping out 111 of its lithography systems, according to company watchers polled by Visible Alpha.

The Dutch company's record order book also saw it massively exceed analysts expectations following forecasts it would experience a 45% drop in bookings in the fourth quarter to EUR3.5 billion.

ASML said it now expects sales in 2024 to stay at similar levels to those seen during 2023, as it retained a conservative view despite signs the semiconductor industry is starting to recover from the deep slump that has hit microchip sales worldwide since the second half of 2022.

"The semiconductor industry continues to work through the bottom of the cycle. Although our customers are still not certain about the shape of the semiconductor market recovery this year, there are some positive signs... Our strong order intake in the fourth quarter clearly supports future demand," ASML CEO Peter Wennink said.

The ASML chief executive, however, said the lithography systems maker is now preparing for "significant growth" in 2025 as the company said it expects 2024 will be a "transition year."

JPMorgan's analysts led by Sandeep Deshpande said ASML is now well-positioned to capitalize on the global shift toward the use of EUV lithography systems as the world's sole manufacturer of the ultra high-tech manufacturing machines.

Wennink said around 10%-15% of its sales to China will be impacted by newly-introduced restrictions on its ability to export its most high-tech lithography systems to China.

The U.S.-led export rules, that were brought into force by the Dutch government in September, are aimed at blocking China from gaining access to the high-tech machines required to succeed in AI.

In the fourth quarter of 2023, ASML made 39% of all its sales to China, making the country its largest customer of any country worldwide, ahead of South Korea (25%), Taiwan (13%) and the U.S. (11%)

-Louis Goss

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01-24-24 1040ET

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