Dutch firm ASML, which makes and sells the most advanced chip manufacturing equipment in the world, might see a large portion of its orders reduced next year, believes an analyst. ASML is the only company manufacturing chipmaking equipment that uses ultraviolet light to print billions of transistors on a tiny piece of silicon. Dubbed as EUV machines, these are among some of the most highly sought after industrial products in the world, and they are used by all of the world's leading chip manufacturers, such as the Taiwan Semiconductor Manufacturing Company (TSMC) and Intel Corporation.
Drop In Apple's Sales Can Cause ASML To See Up to 30% Drop In EUV Equipment Shipment Forecasts For 2024
Due to their nature, which can enable any chip making company to churn out the latest products, ASML's EUV machines are quite controversial as well. Their supply to China has been banned by the U.S. government due to worries of products made through them being used by the Chinese military against U.S. national security interests. At the same time, since ASML is the only company that makes them, the machines are booked months in advance since companies like Intel and TSMC often require large numbers to produce thousands of silicon wafers in a month.
According to analyst Ming-Chi Kuo who is known for his insight into Apple's supply chain, a drop in demand for Apple's 3-nanometer iPads and MacBooks, a drop in Qualcomm's orders for 3nm chips due to Huawei moving away from the company's products, lower demand for Samsung Foundry's 3GAP+ products and Inte's 20A products and a longer delay in memory manfuacturers' future expansion are also expected to contribute to a reduction in shipment forecasts for 2024.
TSMC and Intel already have the EUV machines, and the race between them has extended to EUV's successors. These machines are called High NA EUV, and they have wider lenses to allow more light to pass through. This is crucial since advanced chip manufacturing technologies such as 2-nanometer and 3-nanometer can lead to blurry patterns printed on the chip due to their small feature sizes.
ASML's earnings report for the second quarter saw the firm post €6.9 billion in revenue and €1.9 billion in net income. The firm shipped 13 EUV machines which allowed it to recognize €2 billion in revenue. Its management also shared that EUV shipments are seeing timing delays due to a slowdown in the chip sector. It added that for full year 2023, ASML now plans to ship 52 systems. This reduction also cut ASML's EUV revenue growth estimates for 2023 nearly in half since the firm now expects to grow EUV revenues by 25% instead of an earlier projected 40%.
During its earnings call for the first quarter of 2023, ASML had intended to ship 60 EUV machines, as the firm guided €6.5 billion in revenue for Q2 and shipped 9 EUV machines in Q1. ASML CEO Peter Wennink commented on the downturn in the chip sector right now during a video interview for the Q2 results, where he explained:
But it means that our customers are still dealing with relatively high inventories. High levels and how do you deal with that? Basically by reducing the wafer output. And wafer output means that of course the utilization of our tools is also less. What does that mean? I mean, on our EUV business we see some shift in demand timing. That is largely driven, I would say predominantly driven, by fab readiness. The fabs are not ready and why is that? There are skills issues. We’ve said that before and whether it is in Taiwan or in the US, there are skills issues. People who actually have the capability to build these very advanced fabs.
There is also some element in there of course of the macroeconomic situation, where people have some concerns about the duration of this downcycle. That’s what we are seeing for EUV.
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