- US chip capacity growth offsetting China hurdles
- Stock rallies as Q3 revenues and earnings beat estimates
- Stock remains almost 40% down in 2022
Shares in Dutch microchip kit maker ASML (ASML:AMS) rallied 7% to €433.75 after telling investors it will likely beat fourth-quarter analyst estimates and that it won’t be badly impacted by the latest US restrictions on sales of silicon chips and technology to China.
The Eindhoven-based lithographer, and Europe’s largest semiconductor equipment producer, said its Q4 sales would likely be higher than analyst estimates as demand remains strong for its advanced chip-making machines.
‘Based on our initial assessment, the new restrictions do not amend the rules governing lithography equipment shipped by ASML out of the Netherlands and we expect the direct impact on ASML’s overall 2023 shipment plan to be limited,’ ASML's president and chief executive officer Peter Wennink said in a statement.
ASML AVOIDS WASHINGTON/BEIJING SQUEEZE
ASML, which makes the machines that manufacture high-end semiconductors, has been caught in the crossfire of a battle between the US and China to control semiconductor manufacturing technology.
The €175 billion business had been pressured by Washington to withhold its state-of-the-art EUV (extreme ultraviolet) machines from Chinese customers as a result of growing hostility between the US and China.
However, demand for its machines is booming due to related US pressure on companies to relocate their manufacturing operations out of China and invest more in the US. Intel (INTC:NASDAQ), Samsung (005930:KS), and Taiwan Semiconductor (2330:TPE) have all announced big plans for increased chipmaking capacity in the US over the past year.
This demand tailwind helped drive ASML new orders to a record €8.92 billion in the three months to 30 September 2022, of which €3.8 billion was for EUV machines.
EARNINGS BEAT ESTIMATES BY 10%
Net sales rose 6.4% from the previous quarter to €5.78 billion euros, while the gross profit margin expanded from 49.1% to 51.8%, as the company used its dominant market position to push through price increases. Earnings per share were €4.29.
Consensus analysts forecasts for the quarter were €3.9 earnings per share on €5.6 billion in sales.
Wennink said he expects sales to rise again in the fourth quarter, to between €6.1 billion and €6.6 billion, although gross margin is expected to fall back to 49% again.
ASML’s share price has come under heavy selling pressure in 2022 as investors backed away from highly rated growth stocks. The stock remains nearly 40% down on where it started the year even after today’s rally.
