ASML Holding, the world leader in extreme ultraviolet (EUV) lithography systems crucial for advanced chip manufacturing, has revealed a significant downward revision to its 2025 sales forecast. This adjustment, primarily attributed to the impact of US export restrictions on its sales to China, sent shockwaves through the semiconductor industry, causing ASML’s stock to plummet and raising concerns about the broader global chip supply chain. The company’s revised sales projection, coupled with lower-than-expected bookings, paints a complex picture of geopolitical influence on the industry’s future.
ASML’s Revised 2025 Sales Forecast: A Geopolitical Earthquake
Key Takeaways: ASML’s Shifting Landscape
- Revised Sales Projections: ASML lowered its 2025 sales forecast to between €30 billion and €35 billion, significantly below its previous guidance.
- China’s Shrinking Role: The company anticipates a dramatic reduction in its China-based sales to roughly 20% of its total revenue in 2025, down from a high of 49% earlier this year and a 29% share in 2024.
- US Export Restrictions: The revised forecast is largely attributed to the US government’s restrictions on the export of advanced chip manufacturing equipment to China, forcing Chinese customers to rely less on ASML.
- Disappointing Bookings: Third-quarter net bookings fell far short of analyst expectations, signaling potential weakness in demand from key clients like Intel and Samsung.
- Market Reaction: ASML’s stock experienced a sharp drop, reflecting investor concerns about the company’s future performance in light of the changed outlook.
How Important is China to ASML? A Declining Market Share
China has historically been a vital market for ASML. In the first three quarters of 2024, the country accounted for a staggering 49% of ASML’s sales, as Chinese companies rushed to stockpile less advanced deep ultraviolet (DUV) lithography machines ahead of anticipated export restrictions. Although ASML has never been permitted to sell its most advanced extreme ultraviolet (EUV) lithography machines to China, the DUV systems still represent a crucial segment of its business. However, the Dutch government’s expansion of export restrictions in September tightened the screws further by bringing all of ASML’s machines under a licensing scheme and therefore, controlling what machines it exports to certain other countries.
ASML’s CFO, Roger Dassen, stated that the company expects China’s contribution to its revenue to normalize, settling at approximately 20% in 2025. This projection represents a substantial decline compared to its recent performance and showcases the impact of US-led geopolitical tensions.
The Impact of Stockpiling and Restrictions
The surge in Chinese purchases of DUV machines earlier in 2024 was a direct response to the looming export controls. This stockpiling created a temporary boost in sales, but the long-term effects of the restrictions are now becoming apparent. Analysts at Bank of America predict a “sharp decline” in ASML’s China revenues, estimating a 48% year-over-year drop – significantly exceeding earlier projections.
Consequences and Future Outlook: Navigating a Complex Geopolitical Landscape
The implications of ASML’s revised forecast extend beyond the company itself. The semiconductor industry, already grappling with supply chain challenges, faces further uncertainty. ASML’s reduced sales to China could signify broader shifts in the global chip landscape, potentially impacting the availability and cost of advanced chips, with implications across various technology sectors.
Expert Perspectives on the Geopolitical Shift
Chris Miller, an expert in the geopolitical aspects of the chip industry, notes that while the restrictions have temporarily boosted ASML’s sales due to stockpiling, the long-term impact will be a reduction in China’s reliance on the company’s technology. Abishur Prakash highlights that ASML, like Intel, possesses significant but vulnerable dependency on the Chinese market. The ripple effects of export controls and reduced demand from China could influence ASML’s overall demand from other regions as well.
Implications for ASML and the Broader Chip Industry
The decline in China’s contribution to ASML’s revenue necessitates a critical re-evaluation of the company’s business strategy. Diversification into other markets and a focus on technological innovation become imperative for future growth and stability. Beyond ASML, the broader semiconductor industry is facing a new era of geopolitical complexity that will affect supply chain dynamics, investment decisions and technological development.
A Challenging Future for ASML and its Customers
ASML’s earnings report underscores the increasing entanglement of technology and geopolitics. The company’s revised sales outlook demonstrates that the future of the chip manufacturing sector is not solely determined by market demand and technological innovation, but also by factors far beyond the control of companies: international relations and government regulations hold considerable sway.
The long-term impact of these restrictions on ASML and the broader semiconductor industry remains to be seen. However, this scenario underscores the growing need for global cooperation and a more predictable, stable international framework within which the industry can operate and thrive.
