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ASML on Track for Strong EUV Growth in 2021 Thanks to Demand From TSMC; Raising FVE to $500

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

ASML reported fourth-quarter results ahead of our expectations and above the high end of management’s guidance, thanks to higher system revenue. Despite uncertainty regarding Intel’s manufacturing plans, TSMC has seemingly picked up the slack with a 2021 capital expenditure budget of $25 billion-$28 billion. Consequently, ASML CEO Peter Wennink expects combined logic and foundry revenue to be up at least 10% in 2021. Wennink anticipates ASML’s memory revenue to be up 20% in 2021, primarily due to a recovery in DRAM spending. After revising our wafer fab equipment estimates for 2021 and taking into account ASML’s rosy outlook, we are raising our fair value estimate for the wide-moat company to $500 per share from $365 (and EUR 415 per share from EUR 310), as industry adoption of extreme ultraviolet lithography is set to accelerate this year and beyond.

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Company Profile

Business Description

Founded in 1984 and based in the Netherlands, ASML is a leading manufacturer of photolithography systems used in the manufacturing of semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photomask onto a semiconductor wafer. The latest technological advances in this segment allow chipmakers to continually increase the number of transistors on the same area of silicon, with lithography historically representing a meaningful portion of the cost of making cutting-edge chips. Chipmakers require next-generation EUV lithography tools from ASML to continue past the 7-nanometer process node. ASML's products are used at every major semiconductor manufacturer, including Intel, Samsung, and TSMC.

De Run 6501
Veldhoven, NB, 5504 DR, Netherlands
T +31 402683000
Sector Technology
Industry Semiconductor Equipment & Materials
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type
Employees 28,073