ASML's chief executive officer, Christophe Fouquet, recently stated that Chinese semiconductor firms such as Huawei and SMIC are still around 10 to 15 years behind leading companies including Intel, TSMC, and Samsung. This assertion comes amid increasing scrutiny of ASML’s relationships with Chinese clients, largely due to rising geopolitical tensions.
Challenges with EUV Technology
Fouquet pointed out that a major problem for Chinese manufacturers is their lack of access to cutting-edge extreme ultraviolet (EUV) lithography machines. These machines are essential for keeping pace with the global industry leaders. ASML’s EUV machines, which cost about 400 million euros each, are crucial for producing advanced semiconductors. In fact, transporting the necessary components alone requires seven cargo planes.
ASML's Financial Performance
In spite of these hurdles, the Dutch lithography giant reported impressive figures for the third quarter of 2024, with net sales reaching 7.5 billion euros and profits of 2.1 billion euros. However, new orders dropped to 2.6 billion euros, which is less than half of the 5.6 billion euros seen in the previous quarter. Nevertheless, China continues to represent a significant portion of ASML’s revenue, contributing 47 percent to the company’s Q3 2024 sales.
Future Sales Predictions
UBS analysts are forecasting that ASML might experience nearly a 25 percent decrease in its Chinese sales in the coming year, with as much as 45 percent of its total revenue from China at risk if more restrictions are implemented. While the U.S. is urging ASML to halt servicing existing equipment in China, the Netherlands has not yet followed suit with these demands.
To provide some context, ASML and its partners have invested over twenty years in refining the commercial EUV ecosystem. Although Huawei and its partners are working on developing their own EUV systems, experts believe it could take just as long to establish a comparable ecosystem, even if they gain access to some older technologies that have already been developed.
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