Dutch firm ASML’s shares fall on geopolitical risk
US government tells allies it will tighten controls on exports to China
17 July 2024 - 13:18
byToby Sterling and Nathan Vifflin
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A smartphone with a displayed ASML logo is placed on a computer motherboard in this illustration taken on March 6, 2023. Picture: REUTERS/Dado Ruvic/Illustration//File Photo
Amsterdam — Shares in ASML, the biggest supplier of computer chip-making equipment, fell on Wednesday on the prospect pressure from the US government could lead to tighter restrictions on its exports to China.
The investor concerns overshadowed second-quarter earnings at Europe’s largest technology company that beat forecasts and showed a rise in AI-linked bookings.
Shares dropped by about 6% in early trading after Bloomberg reported on Tuesday that the US is telling allies, including the Netherlands, it may take unilateral action to restrict exports of chip equipment to China if they fail to do so themselves.
ASML, which is already restricted from selling most of its advanced product lines in China, declined comment. The Dutch foreign ministry could not immediately be reached for comment.
In his first results as CEO, Christophe Fouquet said ASML continued to view 2024 as a “transition year” with broadly flat performance as it prepares for a strong 2025.
“We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments,” Fouquet said in a statement.
Net income of €1.6bn for the quarter ended June 30 was down 19% from a year earlier but beat the €1.41bn expected by analysts, LSEG data showed.
Revenue fell 9.5% to €6.2bn but topped an analysts estimate of €6.04bn.
ASML dominates the market for lithography systems, complex tools that use lasers to help create the tiny circuitry of computer chips.
Older generation
Chinese chipmakers, facing escalating US-led restrictions on ASML’s top-end gear, have increased purchases of equipment used to make older generations of chips widely used in cars and industrial applications.
China, usually ASML’s third market after Taiwan and South Korea, accounted for more than €2bn in lithography system sales in the second quarter, about 49% of the total.
Analysts linked the fall in share price to the Bloomberg report and remarks Bloomberg published from a June interview with US presidential candidate Donald Trump in which he said Taiwan had taken “100% of our chip business”.
ASML’s top customer is Taiwan’s TSMC, which makes chips for Nvidia and Apple.
“The geopolitical angle … is more likely to be in focus today than the results,” Citi analysts wrote in a note.
“The arguments being referenced [in the Bloomberg report] are not new, but pressure is building” for further restrictions, they said.
Shares in Europe’s second-largest listed company behind pharmaceuticals maker Novo Nordisk fell 5.8% to €920.50 at 7.42am GMT, pulling other European chip stocks lower.
ASML’s shares are up 36% in the year to date.
In the earnings report, new bookings increased to €5.6bn from €3.6bn in the first quarter, with about half of that coming from the its most advanced EUV product lines — vital to manufacturing AI and smartphone chips.
Analysts had expected ASML’s order book to increase to about €5bn, according to estimates compiled by Visible Alpha.
“EUV orders increased substantially” in the quarter, Mizuho Securities analyst Kevin Wang told Reuters. “We attribute this to strong orders from TSMC and Intel.”
TSMC, Intel and Samsung are engaged in new construction projects that will be outfitted with equipment in 2025-2027.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Dutch firm ASML’s shares fall on geopolitical risk
US government tells allies it will tighten controls on exports to China
Amsterdam — Shares in ASML, the biggest supplier of computer chip-making equipment, fell on Wednesday on the prospect pressure from the US government could lead to tighter restrictions on its exports to China.
The investor concerns overshadowed second-quarter earnings at Europe’s largest technology company that beat forecasts and showed a rise in AI-linked bookings.
Shares dropped by about 6% in early trading after Bloomberg reported on Tuesday that the US is telling allies, including the Netherlands, it may take unilateral action to restrict exports of chip equipment to China if they fail to do so themselves.
ASML, which is already restricted from selling most of its advanced product lines in China, declined comment. The Dutch foreign ministry could not immediately be reached for comment.
In his first results as CEO, Christophe Fouquet said ASML continued to view 2024 as a “transition year” with broadly flat performance as it prepares for a strong 2025.
“We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments,” Fouquet said in a statement.
Net income of €1.6bn for the quarter ended June 30 was down 19% from a year earlier but beat the €1.41bn expected by analysts, LSEG data showed.
Revenue fell 9.5% to €6.2bn but topped an analysts estimate of €6.04bn.
ASML dominates the market for lithography systems, complex tools that use lasers to help create the tiny circuitry of computer chips.
Older generation
Chinese chipmakers, facing escalating US-led restrictions on ASML’s top-end gear, have increased purchases of equipment used to make older generations of chips widely used in cars and industrial applications.
China, usually ASML’s third market after Taiwan and South Korea, accounted for more than €2bn in lithography system sales in the second quarter, about 49% of the total.
Analysts linked the fall in share price to the Bloomberg report and remarks Bloomberg published from a June interview with US presidential candidate Donald Trump in which he said Taiwan had taken “100% of our chip business”.
ASML’s top customer is Taiwan’s TSMC, which makes chips for Nvidia and Apple.
“The geopolitical angle … is more likely to be in focus today than the results,” Citi analysts wrote in a note.
“The arguments being referenced [in the Bloomberg report] are not new, but pressure is building” for further restrictions, they said.
Shares in Europe’s second-largest listed company behind pharmaceuticals maker Novo Nordisk fell 5.8% to €920.50 at 7.42am GMT, pulling other European chip stocks lower.
ASML’s shares are up 36% in the year to date.
In the earnings report, new bookings increased to €5.6bn from €3.6bn in the first quarter, with about half of that coming from the its most advanced EUV product lines — vital to manufacturing AI and smartphone chips.
Analysts had expected ASML’s order book to increase to about €5bn, according to estimates compiled by Visible Alpha.
“EUV orders increased substantially” in the quarter, Mizuho Securities analyst Kevin Wang told Reuters. “We attribute this to strong orders from TSMC and Intel.”
TSMC, Intel and Samsung are engaged in new construction projects that will be outfitted with equipment in 2025-2027.
Reuters
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