ASML makes hay while suns shines, but Trump could rain on its parade

Netherlands biz riding AI boom, though China crackdown looms

Dutch tech giant ASML is buoyed up by a wave of new orders during Q4 2024, and expects its business in China to return to a more normal level after a period of high revenue. However, there is uncertainty over whether the Trump administration may try to further restrict its sales there.

The maker of advanced semiconductor production machinery said its net sales were up in both the final quarter of 2024 and for the full year, while its bookings in Q4 jumped to €7.1 billion ($7.4 billion) from €2.6 billion ($2.7 billion) the previous quarter.

However, CEO Christophe Fouquet claimed that bookings "are not necessarily a good reflection or an accurate reflection of the business momentum" and said the company will stop providing this number after this year, instead listing its backlog of orders.

ASML is understood to be the only company in the world that makes extreme ultraviolet (EUV) photolithography equipment, which can reproduce finer and more complex patterns on silicon wafers, allowing for more transistors to be crammed into chip designs.

For Q4, ASML reported revenue of €9.3 billion ($9.7 billion), up 29 percent year-on-year, and net income of €2.7 billion ($2.8 billion), up from €2.077 billion ($2.15 billion)..

Meanwhile, for the full year, the Netherlands-based company saw income dip to €7.6 billion ($7.9 billion) on total net sales of €28.3 billion ($29.4 billion), up from €27.6 billion in the prior 12 months.

Fouquet said Q4 revenue was primarily driven by "additional upgrades," while ASML also recognized revenue on two of its High NA EUV systems and shipped a third to a customer in the fourth quarter. Intel is believed to be the recipient of the first two systems, which are the most advanced produced by ASML.

The CEO credited the company's financial results to demand for AI-related products from its chipmaking customers.

"AI is the clear driver. I think we started to see that last year. In fact, at this point, we really believe that AI is creating a shift in the market and we have seen customers benefiting from it very strongly. Others maybe a bit less," Fouquet said.

If AI demand remains strong and ASML's customers are able to build output capacity, the company reckons its future performance could rise towards the highest part of the range of its forecast.

"On the other hand, there's still quite some uncertainty on the other customers and this also justifies the lowest part of the range," the CEO said.

Those forecasts are for total net sales between €7.5 billion ($7.8 billion) and €8.0 billion ($8.3 billion) for the first quarter of 2025, and for the full year 2025 to come in at between €30 billion ($31.2 billion) and €35 billion ($36.4 billion).

In response to a question about China, Fouquet said he expected its sales there to return to a normal level.

"We had a lot of discussion about China in 2023-2024 because our revenue in China was extremely high. We have explained that this was caused by the fact that we are still working on some backlog created in 2022, when our capacity was not big enough to fulfil the whole market," he explained.

"2025 will be a year where we see China going back to a more normal ratio in our business. So I think we're going to see again numbers people used to see before 2023." This means that China should account for roughly 20 percent of the ASML's revenue, instead of the 49 percent during some recent quarters.

Also in the news over the past several years has been growing US interference in the products that ASML can sell to Chinese customers. While the Netherlands government has barred it from selling its most advanced EUV kit into the Middle Kingdom, the White House has been trying to impose ever tighter export restrictions on the company, allegedly to curb China's ability to make cutting-edge AI chips.

Former ASML boss Peter Wennink gave his opinion last year that the US-China "chip wars" are mainly ideological in nature.

It was reported last week that the Netherlands expects newly inaugurated President Trump to keep pressing to further restrict ASML's exports of chipmaking machines to China.

Dutch Prime Minister Dick Schoof told Bloomberg: "When it comes to ASML, we currently have discussions on a weekly basis." He said ASML is very important for the country's economy and "we want to make sure that position doesn't change."

Speaking of the most recent measures, Fouquet said: "The combination and the impact of those, both US and Dutch measures, has been appropriately reflected in the guidance that we've given before. So, the €30-35 billion properly reflects the limitations that we see from an export controls perspective."

He also intimated that AI would continue to drive growth for the Dutch firm.

"We truly believe that AI is going to bring even more opportunity to this semiconductor industry," Fouquet said, adding: "The second thing is that AI is going to drive more advanced technology to address some of the challenges on cost, on power consumption. We believe that this will drive more advanced DRAM and logic technology. This is, of course, good for lithography."

ASML stock is up by more than 7 percent and is now back to where it was before the market was hit earlier this week by the shockwave from Chinese start-up DeepSeek releasing AI models that challenged the best America had to offer.

"Demand for ASML's products is still likely to remain strong in the future," said James Bull, Technology Industry Senior Analyst at consultants RSM UK.

"While DeepSeek's significant progress has led to fears over future demand for advanced AI chips, which are manufactured using ASML's equipment, ASML remains the sole manufacturer globally. This means that as AI is rapidly becoming more cost efficient, ASML may be well-placed to benefit from the rising adoption of AI as the technology becomes accessible to a wider audience." ®

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