ASML has disclosed its initial assessment of how U.S. export restrictions on its advanced chip manufacturing tools to China might influence its sales in the region. The company, based in the Netherlands, mentioned in its Tuesday earnings report, released a day earlier than expected due to a “technical error,” that it anticipates net sales for 2025 to be between 30 billion euros and 35 billion euros ($32.7 billion and $38.1 billion). This forecast is on the lower end of its previous guidance range.
As a pivotal entity within the global chip supply chain, ASML’s extreme ultraviolet lithography machines are utilized by leading chip manufacturers such as Nvidia and Taiwan Semiconductor Manufacturing to produce advanced chips. Despite the company’s third-quarter net sales reaching 7.5 billion euros, surpassing expectations, the net bookings were reported at 2.6 billion euros ($2.83 billion), significantly below the consensus estimate of 5.6 billion euros by LSEG.
Following this announcement, ASML’s shares dropped by up to 16% on Tuesday, which led to a loss of over $50 billion in market capitalization, as calculated by CNBC using LSEG data. Analysts attributed the decline in bookings to weaknesses among specific customers, including Intel and Samsung. Furthermore, ASML highlighted how geopolitical tensions are affecting its 2025 outlook.
Roger Dassen, ASML’s chief financial officer, expressed expectations for the company’s business in China to reflect a “more normalized percentage in our order book and also in our business.” UBS analysts indicated that changes in ASML’s 2025 guidance are majorly linked to delays in the development of new logic fabrication facilities by Intel and Samsung. They predict that sales to China might decrease by 25% to 30% in 2025.
Customers in China have been stockpiling ASML’s less advanced machines to preempt U.S. export restrictions and continue to access vital technology for chip manufacturing. ASML has never sold its most advanced extreme ultraviolet lithography (EUV) machines to Chinese customers due to existing restrictions. Instead, Chinese chip firms have turned to purchasing deep ultraviolet lithography (DUV) machines, which are crucial for chip circuitry production.
In the previous year, 29% of ASML’s sales were sourced from China. However, the company now expects this figure to decline to around 20% of total revenue by 2025. Sales to China surged in the first three quarters of 2024 as customers sought to acquire DUV machines ahead of impending U.S. and Dutch export restrictions. During the second quarter of 2024, ASML reported sourcing up to 49% of its sales from China.
In September, the Netherlands expanded export restrictions on advanced chipmaking equipment by taking over licensing requirements for ASML’s machines from the U.S., thereby gaining control over which machines ASML can export to other countries. This move could effectively block ASML from maintaining DUV machines previously sold to China.
Chris Miller, an assistant professor at Tufts University and author of “Chip War,” remarked that China is a crucial market for ASML, with most revenue stemming from older-generation chipmaking tools. Miller noted that restrictions might have inadvertently benefited ASML, as China accelerated purchases of older DUV tools.
ASML now expects a decline in sales to China as a result of U.S. trade restrictions, anticipating the country’s share of global sales to return to smaller, historically normal levels by 2025, according to Dassen. He stated that China is expected to constitute around 20% of the company’s total revenue next year, in line with its representation in ASML’s backlog.
Bank of America analysts projected a “sharp decline in China revenues” for ASML, suggesting a more severe year-over-year revenue drop of 48% rather than the previously anticipated 3%. Abishur Prakash, founder of The Geopolitical Business, forecast a significant decrease in demand for ASML’s machines from China due to the export controls. He noted that just as Intel relies heavily on China, ASML is similarly dependent on the market, indicating potential business restrictions as the chip industry disengages from China.
