Computer chip equipment maker ASML forecast lower-than-expected sales and bookings in 2025 due to persistent weakness in parts of the semiconductor market, causing its stock to fall the most one-day since 1998. This has dragged down much of the semiconductor industry, as ASML has a near-monopoly on critical assets used by TSMC, Intel and Samsung to make advanced chips.
The company he announcedthat despite the boom in AI-related chips, other parts of the semiconductor market will be weaker for longer than expected, prompting logic chip companies to postpone orders and memory chip customers to plan for only limited additional capacity expansions. ASML is Europe’s largest technology company and a leading supplier of equipment used for the production of chips. Among its clients are Taiwan’s TSMC, a manufacturer of AI chips, as well as logic chip manufacturers Intel and Samsung, as well as memory chip specialists Micron and SK Hynix. The company posted its quarterly results on its website a day earlier than expected, due to what a spokesman called a “technical error”.
“We expect our total net sales in 2025 to grow to a range of 30-35 billion euros, which is the lower half of the previously forecasted range,” CEO Christophe Fouquet said in a statement. The weakness of the chip market “is expected to continue in 2025, which It leads to the caution of customers,” he said. After the announcement, trading in the company’s shares was halted several times before they closed at 668 euros, despite the company’s profit of 2.1 billion euros coupled with a net profit.ASML’s share price has been falling since the summer because of reports that Intel will cut its capital expenditures and memory chip prices are also low.
Regardless, ASML’s sales to China set a record, reaching 2.79 billion euros, i.e. 47% of the total turnover there in the quarter. ASML dominates the market for lithography equipment that uses lasers to help create circuits on chips. The company cannot sell its most advanced product line in China due to restrictions imposed by the United States, but Chinese chipmakers are buying lots of equipment to make older-generation chips.
Analysts say ASML’s deep forecast cuts, which triggered a global sell-off in tech stocks, are a sign of overcapacity in chipmakers rather than a slowdown in global semiconductor demand. Several analysts have pointed to the stockpiling of chip factories, according to which ASML’s forecast is only a delayed indicator of what has been going on in these chip factories for months. During the pandemic, the demand for chips was huge, so chip manufacturers built excess capacity. That growth has stabilized even though supply chain issues have eased, prompting chipmakers to hold off on ordering new devices.
And now Intel, TSMC and Samsung have withdrawn orders from ASML, realizing that there is plenty of capacity. Chip factory utilization is around 81% this year, but manufacturers tend to buy tools when that figure falls in the mid-90% range. Intel has slowed its factory expansion, suggesting that Samsung and TSMC will also be cautious. Chip inventories remain high, and chipmakers have become more efficient with ASML’s tooling, meaning they can produce more chips without ordering more production equipment.
Handel Jones, CEO of International Business Strategies, which tracks the chip industry, said the industry has cut the number of processes using ASML’s most powerful machines by as much as a third. According to Jones, for example, Samsung may be able to use ASML’s best machines for only one or two steps instead of five or six, so the South Korean company could have significant excess capacity for these extreme ultraviolet lithography machines, he said. Still, Jones doesn’t think the general chip industry forecast that demand for AI chips and AI-specific memory chips will increase will change. “It’s just a short-term blip. In the long run, it’s going to be fine,” Jones said.
Source: sg.hu
