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ASML prepares for 2025 recovery

18 Oct 2023

Lithography giant expects 2024 to be a transitional year as the semiconductor industry gears up for its next boom period.

ASML says that it is expecting a surge in sales in 2025 following a “year of transition” in 2024 as the semiconductor industry emerges from its current down cycle.

The lithography equipment giant, whose tools remain in strong demand despite the chip sector’s general downturn, has just posted sales of €6.7 billion for the third quarter of the year - up from €5.8 billion a year ago.

Profits also rose, with ASML’s net income rising from €1.7 billion a year ago to €1.9 billion in the three months ending October 1.

2024 transition; 2025 boom
The Dutch firm’s executives said that sales in the final quarter of this year will likely be around €6.9 billion, meaning that the full-year total should reach more than €27 billion.

If accurate that would equate to a 28 per cent rise on the annual figure posted in 2022, represent yet another record, and be close to double the figure posted by ASML just three years ago.

But after four straight years of rapid sales growth CEO Peter Wennink told investors that 2024 was unlikely to follow the same pattern.

“Our customers across different market segments are currently more cautious due to continued macroeconomic uncertainties, and therefore expect a later recovery of their markets,” he said. “Also, the shape of the recovery slope is still unclear.”

However, 2025 is expected to be a completely different story, as markets recover from the current dip in demand, chip makers gear up to produce devices in much greater volumes for applications like grid electrification and artificial intelligence, and new fabrication facilities currently under construction around the world become operational.

The company's lithography systems all rely on photonics technologies provided by a complex network of suppliers, including excimer and carbon dioxide lasers and high-specification transmission optics.

CFO Roger Dassen summed up: “We’re really looking at 2024 in two regards. On the one hand, we think revenue wise it's going to be similar to 2023. On the other hand, we believe 2024 is going to be a pivotal year in preparing us for what we think will be very significant growth in 2025.”

China export controls
Dassen and Wennink also outlined their initial reaction to the latest US-led decision on export controls to China, which emerged just a day before the company’s financial update.

Noting that the complexity of the multilateral discussions and the length of document that emerged from them means ASML’s full analysis will take some time, Wennink said that he did not expect any material impact on the firm’s 2023 sales revenues.

However, that is partly because of the extremely long lead time on ASML tool shipments, which sees customers routinely wait more than a year for delivery after placing an order.

The new regulations, which restrict shipments to China of immersion lithography tools specifically for use in the production of advanced chips, would have applied to only around 10-15 per cent of ASML’s 2023 sales to China, the CEO indicated.

Wennink also pointed out that several of the firm’s customers in China had pivoted away from manufacturing leading-edge devices to concentrate on more mature and “trailing-edge” chips that are in huge demand in the country as it invests heavily in transport electrification and renewable energy technologies requiring colossal amounts of microelectronics.

The CEO told investors that, overall, although the new export controls could impact sales to China in the longer term, the total demand would not be affected - with China, which is not self-sufficient in terms of chip supplies, instead sourcing devices from somewhere else.

• Following the latest update, ASML’s stock price dropped in value by around 5 per cent. Currently trading at around $580 on the Nasdaq, the firm commands a market capitalization of nearly $230 billion.

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