ASML shrugs off China slump with faith in AI-fueled chip demand

Beijing's self-reliance push and US export limits hit orders

Europe's tech darling ASML has warned Chinese demand for its chipmaking kit will plummet next year, as Beijing doubles down on home-grown alternatives in response to Uncle Sam's export restrictions and trade war shenanigans.

The Dutch firm remains bullish overall, pointing to continued momentum around AI investments driving demand for more advanced logic and memory from the chip companies that snap up its lithography machines.

But ASML pulled no punches about the expected drop in sales to Chinese customers next year, as it coughed up financial results for Q3 2025. China has been a big buyer of the company's kit over the past several years.

"We expect China customer demand, and therefore our China total net sales in 2026 to decline significantly compared to our very strong business there in 2024 and 2025," said chief executive Christophe Fouquet.

At one point last year, the Middle Kingdom was generating almost half ASML's sales, as China-based chipmakers rushed to get their orders in for new machinery before anticipated US export restrictions landed.

ASML remains the only game in town for extreme ultraviolet (EUV) photolithography equipment, which can reproduce finer and more complex patterns on silicon wafers, allowing more transistors to be crammed into chips.

However, it hasn't been permitted to sell these to Chinese customers, and new US restrictions last year were extended to some of its deep ultraviolet (DUV) lithography kit as well, while Washington applied pressure to make ASML withdraw maintenance and repair services for chip making kit that customers had already bought.

In response, China set to work developing its own equipment, with the Financial Times reporting last month that Shanghai-based Semiconductor Manufacturing International Corporation (SMIC) is testing a homegrown DUV machine.

This mirrors the situation in other product lines like GPUs, where China is now moving to force domestic companies to use locally made hardware after facing years of US restrictions on Nvidia and AMD imports.

Fouquet said he expects the situation in China to wallop ASML's DUV business there, while the market dynamics look set to favor an increase in EUV elsewhere. "We do not expect 2026 total net sales to be below 2025," he added. ASML will provide more details during its 2026 outlook in January.

As for the quarter ended September 28, 2025, ASML reported total net sales of €7.5 billion ($8.7 billion), flat with its Q3 last year, and nearer the bottom end of its earlier forecast of €7.4 to €7.9 billion.

The company sold one fewer new lithography systems (66) than in the previous quarter, and net bookings were also slightly down at €5.4 billion ($6.3 billion), of which €3.6 billion ($4.2 billion) is EUV kit.

Curiously, ASML didn't mention tariffs in its financial results, despite previously highlighting the uncertainty that Trump's trade policies were casting over the market.

Instead, it talked up the recent €1.3 billion funding for French machine learning biz Mistral AI as having "strategic importance." ASML hopes this will allow it to improve the precision and the speed of its tools, and get new products to market faster.

For Q4, ASML is forecasting a jump in total net sales to between €9.2 and €9.8 billion ($10.7 to $11.4 billion), while for full year 2025, the company expects roughly 15 percent growth in total net sales. Given last year's figure of €28.3 billion ($32.2 billion), that implies about €32.5 billion ($38 billion). ®