ASML predicts 2023 sales surge, China revenue to remain steady despite U.S. chip restrictions

ASML is a key company in the chip supply chain that produces machines required to create the world's most advanced chips. ASML reported that its net sales for the fourth quarter of 2022 rose by more than 29% to 6.4 billion euros ($7 billion). For the full year, the company's net sales increased by more than 13% to 21.1 billion euros. However, ASML's full-year net income declined by more than 4% to 5.6 billion euros. ASML is forecasting that its net sales for 2023 will grow by more than 25% compared to 2022.‍

January 25, 2023

7 minutes

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ASML, a Dutch chip equipment maker, forecast a jump in revenue for 2023. This is in line with predictions from the semiconductor industry, which foresee a reacceleration of growth in the second half of this year.

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ASML is a key company in the chip supply chain that produces machines required to create the world's most advanced chips. ASML reported that its net sales for the fourth quarter of 2022 rose by more than 29% to 6.4 billion euros ($7 billion). For the full year, the company's net sales increased by more than 13% to 21.1 billion euros. However, ASML's full-year net income declined by more than 4% to 5.6 billion euros. ASML is forecasting that its net sales for 2023 will grow by more than 25% compared to 2022.

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"The semiconductor industry is not immune to the effects of a recession, high inflation or high interest rates," ASML CEO Peter Wennink told CNBC. "We see this reflected in the business of our customers."

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ASML's machines are used by companies such as Intel and TSMC to manufacture chips for products such as laptops and smartphones. Wennink said that there has been an increase in inventory for chips related to consumer products as demand for such electronics is "not very good." However, ASML's customers believe that this will be a "short-lived" issue and are therefore not canceling orders. Wennink said that most of their customers are expecting a recovery in the second half of this year.

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"When you take into consideration the average lead time of our tools, which is around a year and a half to two years, and compare it to the relatively short expectations for a potential recession, it's clear that customers are not canceling any orders. If they did, they could find themselves at the back of the queue when the economy improves."

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As the U.S. and Europe attempt to bring chip manufacturing closer to home, companies like TSMC and Intel have been ramping up their capacity globally. For example, TSMC is set to open two semiconductor plants in Arizona.

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ASML produces a tool called an extreme ultraviolet (EUV) lithography machine, which is necessary for making the most advanced chips in the world. These chips are used in products like Apple’s iPhones, and are manufactured by companies like TSMC and Samsung.

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ASML is the only company in the world that can produce the machines needed for advanced semiconductor manufacturing. This has made it a target in the ongoing technology battle between the United States and China.The United States is concerned that if ASML ships its machines to China, Chinese chipmakers could begin to produce the most advanced semiconductors in the world. These semiconductors have a wide range of military and artificial intelligence applications, which could give China a significant advantage.

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Since 2018, the U.S. has been putting pressure on the Dutch government to stop ASML from shipping EUV machines to China. However, ASML has never actually shipped the tool to China.

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The U.S. has introduced new export restrictions aimed at cutting off China's access to key chips and semiconductor manufacturing equipment. ASML has told U.S. employees to stop servicing Chinese customers as a result. This month, Mark Rutte, prime minister of the Netherlands, traveled to Washington to meet with U.S. President Joe Biden. It is unclear at this point if the U.S. is pushing for a total ban on ASML shipping equipment to China.

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Rutte told CNBC last week that he is hopeful the issue will be resolved in the next few months. He made the comments on the sidelines of the World Economic Forum in Davos, Switzerland.

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Rutte told CNBC that he believes it is possible to reach an agreement on this issue without resorting to high-end technology and defense systems.
ASML can currently ship older deep ultraviolet (DUV) lithography machines to China, but not its more advanced EUV systems. ASML CEO Peter Wennink has said that China will account for around 15% of sales in 2022, and that this year's sales will be similar.

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Wennink stated that the situation is complex, involving not just the Dutch and Americans, but also other European and Asian countries.
Governments have the ultimate say in what happens, and I just have to go along with whatever they decide.