ASML, the leading Dutch semiconductor equipment manufacturer, surpassed market expectations with its second-quarter earnings and revised its full-year sales forecast upwards. The company cited robust demand from Chinese customers as a key driver for its performance. ASML’s CEO, Peter Wennink, announced that the full-year sales growth projection has been increased to 30%, up from the previous estimate of 25%, largely due to the sustained demand from Chinese customers who are subject to export control regulations, limiting their access to the latest equipment.

Strong Performance and Positive Outlook

ASML reported a net profit of 1.9 billion euros, a 35% increase from the previous year. Sales also grew significantly, rising by 28% to reach 6.9 billion euros. These figures exceeded average analyst expectations of 1.82 billion euros and 6.74 billion euros, respectively. Wennink emphasized that despite the cautious sentiment among customers across various market segments due to ongoing macroeconomic uncertainties, the company’s robust order backlog of approximately 38 billion euros provides a solid foundation for navigating short-term challenges.

Dominance in the Semiconductor Equipment Market

ASML is the dominant player in the market for lithography systems, which are high-cost machines (up to $200 million each) utilizing lasers, lenses, and mirrors to produce intricate chip circuitry. The company serves nearly every computer chip manufacturer and is scaling up production to meet increasing customer demand. However, Wennink highlighted that chip makers relying on ASML’s most advanced equipment, known as EUV (extreme ultraviolet) systems, are currently requesting a slower delivery pace. This is because major players like TSMC, Samsung, and Intel are expanding their production capabilities worldwide, but their new fabrication facilities are not yet prepared to accommodate EUV machines.

Continued Demand from Chinese Customers

In contrast, customers using ASML’s second-most advanced product line, the DUV (deep ultraviolet) systems utilized for slightly older chip technology, are still seeking to acquire as many tools as possible. Wennink shared that Chinese customers are particularly interested in purchasing these machines, as they are content with equipment that others do not want. While ASML has been unable to sell EUV machines in China due to export control restrictions, the Chinese market remains significant for the company.

Export Control Regulations and Future Impact

The Dutch government recently introduced licensing requirements for certain DUV models, under pressure from the United States to limit Beijing’s ability to develop advanced chips. However, Wennink reassured investors that he does not anticipate the Dutch regulations or potential future U.S. measures to have an impact on ASML’s financial forecasts for 2023 or the long term.

Conclusion

ASML’s second-quarter earnings outperformed expectations, driven by strong demand from Chinese customers. The company revised its full-year sales growth forecast upwards, citing sustained Chinese demand and its robust order backlog as favorable factors. ASML’s dominance in the lithography systems market and its expanding production capabilities position it well to meet customer requirements, despite some chip makers requesting slower delivery of the most advanced equipment. Additionally, while export control rules limit ASML’s sales of EUV machines in China, the company continues to view the Chinese market as significant and unaffected by current regulations.