ASML: Walking a Tight Rope on China, Intel, and Samsung Says The Information Network

PRESS RELEASE

New Tripoli, PA—October 21, 2024—ASML Holding N.V. (NASDAQ: ASML), the leading supplier of photolithography equipment, faces mounting challenges amid geopolitical tensions in China, uncertain demand from major customers like Intel and Samsung, and broader volatility in the wafer fab equipment (WFE) sector, according to The Information Network’s recent report entitled Global Semiconductor Equipment: Markets, Market Shares and Market Forecasts.

According to Dr. Robert Castellano, President of The Information Network, “ASML is currently navigating complex dynamics in China, while also managing evolving demand patterns from key clients like Intel and Samsung. The company’s performance and guidance for 2025 reflect both the near-term pressures and strategic adjustments required to sustain growth.”

Surge in DUV Imports to China: Temporary Stockpiling

ASML's revenue growth in China has been largely driven by accelerated purchases of Deep Ultraviolet (DUV) lithography equipment, as Chinese semiconductor manufacturers stockpile machines ahead of potential U.S. sanctions. While imports of DUV tools to China include contributions from Canon and Nikon, ASML remains the dominant supplier, particularly in the high-resolution DUV segment.

Lithography equipment imports into China surged to €3.4 billion in Q3 2024, reflecting an urgent push by Chinese firms to secure critical tools before export controls potentially expand to cover more advanced DUV systems. However, ASML projects a steep decline in Chinese demand by 2025, with revenue expected to normalize to 20% of total sales, down from nearly 50% in Q3 2023. This normalization aligns with expectations of saturated inventories and tighter U.S. export controls, which could restrict ASML’s ability to sell and service these systems in China.

Dr. Castellano added, “The sharp ramp-up in DUV sales to China is not sustainable. The anticipated downturn in 2025 is driven by the combination of tighter export regulations, inventory saturation, and the broader geopolitical environment.”

Intel and Samsung’s EUV Demand: Concerns on the Horizon

ASML’s position as the exclusive supplier of Extreme Ultraviolet (EUV) lithography systems places it at the center of technological advancements in chip production. However, uncertainties regarding future EUV orders from major customers like Intel and Samsung are creating concerns about ASML’s growth trajectory in 2025.

Intel has announced plans to reduce its capital expenditures by 20% in 2024, targeting €21 billion as it faces delays in 3nm and 4nm production. This CapEx cut raises questions about Intel’s EUV purchasing plans, as the company prioritizes cost controls over aggressive capacity expansion. Dr. Castellano commented, “Intel’s CapEx cuts could lead to deferred EUV orders, impacting ASML’s sales forecast for next year. Intel’s challenges in achieving yield stability at smaller nodes further complicate its equipment purchasing plans.”

Similarly, Samsung continues to struggle with yield issues in its 3nm Gate-All-Around (GAA) process, leading to a strategic shift toward improving yield efficiency over expanding capacity. This shift could result in softer EUV demand from Samsung, as the company reassesses its CapEx allocation for 2025.

ASML’s ability to ramp EUV production to 65-70 systems by 2025 could exceed actual demand if Intel and Samsung maintain cautious investment strategies. This mismatch could create additional volatility in ASML’s revenue and earnings, despite its leading position in the advanced lithography market.

The Road Ahead: ASML’s Strategic Balancing Act

ASML’s projected revenue for 2025 is €30-35 billion, reflecting a more cautious outlook compared to its previous guidance of up to €40 billion. The combination of declining Chinese demand for DUV, potential order deferrals from Intel and Samsung, and ongoing geopolitical risks will require ASML to carefully manage production, pricing, and strategic focus in the coming quarters.

While ASML retains a dominant position in the global lithography market, its near-term growth will be shaped by how effectively it navigates these complex challenges. Dr. Castellano concluded, “ASML’s future growth hinges on its ability to balance demand shifts across regions, manage geopolitical risks, and align production capacity with evolving customer needs. The company’s long-term prospects remain strong, but the short-term outlook is clouded by uncertainty.”