ASML Sees Chip Market Rebound, Says China Controls Aren’t Hurting Business

Some chip makers are now cutting back on spending in an industry downturn, with semiconductor maker
Texas Instruments
(TXN) saying on Tuesday that it was facing softening demand and higher cancellations for orders. 

“We continue to see uncertainty in the market caused by inflation, rising interest rates, risk of recession, and geopolitical developments related to export controls. However, our customers indicate that they expect the market to rebound in the second half of the year,” ASML CEO Peter Wennink said. 

“Considering our order lead times and the strategic nature of lithography investments, demand for our systems therefore remains strong,” he said. 

Wennink also said that the U.S. push to restrict exports of high-end chipmaking to Chinese companies hadn’t changed business expectations for ASML, which generates around 15% of its sales from China. The company has been prohibited from exporting its extreme ultraviolet lithography machines to China since 2019, due to Dutch restrictions. The U.S. has reportedly been pushing for the Netherlands to also limit exports of older deep ultraviolet lithography equipment.

“The fundamental question in the coming months is how sustainable is the compliance of ASML, TSMC,
Samsung,
and
Canon
to expanding U.S. restrictions on the export of advanced chips and tools to China,” GlobalData’s Josep Bori wrote in a research note. “Remaining neutral will become increasingly difficult for companies based in Taiwan, South Korea, the Netherlands, or Japan, despite the significant economic costs of not doing so.”

ASML’s net profit for the final quarter of 2022 was 1.8 billion euros ($1.96 billion), beating a consensus forecast of €1.71 billion, according to FactSet. Net sales for the quarter were €6.4 billion compared with €4.99 billion a year earlier, with a gross margin of 51.5%.

ASML said it expects first-quarter net sales between €6.1 billion and €6.5 billion. For 2023 overall it forecast a net sales increase of more than 25% and a slight improvement in gross margin relative to 2022. 

Analysts at UBS wrote in a research note that the guidance for sales growth was ahead of consensus expectations of around 21% for this year and that the results were “reassuring.”

American depositary receipts of ASML were down 1.7% in recent trading, after a strong run-up to the results that had sent the shares up 23% this year so far.

ASML said it would pay a total dividend of €5.80 per share for the year, up 5.5% from 2021.

Write to Adam Clark at adam.clark@barrons.com