–Forecast for 2025 lowered
–Chip stocks come under pressure
(NEW: Details, share prices)
By Patrick Seitz
AMSTERDAM (Dow Jones)–ASML, the leading provider of advanced lithography equipment for the production of semiconductors, sent shockwaves through the stock markets on Tuesday with a profit warning. The company reported disappointing third-quarter orders and lowered its 2025 forecast. Other chip stocks fell with ASML stock on the news. On the US stock exchange, ASML shares fell by 15.5 percent.
The Dutch semiconductor equipment maker reported a jump in third-quarter profits but flagged significant headwinds ahead. “While there continues to be strong developments and upside in the artificial intelligence space, other market segments are taking longer to recover. It looks like the recovery is more gradual than previously expected,” said CEO Christophe Fouquet.
Philadelphia’s semiconductor index, known as SOX, fell 4.2 percent on Tuesday. The SOX includes the 30 largest semiconductor stocks traded in the USA.
ASML received orders worth 2.63 billion euros in the third quarter, up from 2.60 billion euros last year, but well below analysts’ forecasts of 5.59 billion euros, according to Visible Alpha consensus estimates .
The company expects sales of between 30 and 35 billion euros for the coming year, below a previous forecast of up to 40 billion euros.
Chipmakers require highly complex production facilities as they need to build increasingly advanced semiconductors to take advantage of artificial intelligence features in smartphones, laptops and data centers. This puts providers like ASML at the forefront of AI spending.
Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip manufacturer, and South Korean memory chip maker Samsung Electronics are among ASML’s largest customers. The two companies are under additional pressure from their own customers to produce more powerful chips that tech giants like Microsoft and Google owner Alphabet need to modernize their data centers.
But as demand for AI semiconductors continues to boom, chipmakers are facing a glut of inventory as makers of consumer devices like smartphones, laptops, electric vehicles and industrial equipment stockpiled the chips they need years ago and now have fewer orders give up.
ASML’s announcement came a day earlier than planned due to a technical error, the company said.
The company said it had placed 1.4 billion euros in orders for its high-end extreme ultraviolet tools, which are used to print the most complicated layers on chips used in the latest gaming consoles, smartwatches and smartphones . Analysts had expected EUV orders worth 2.82 billion euros.
The lower-than-expected order intake is another setback for ASML. Investors have been nervous in recent months at the prospect of tougher export restrictions to China as Washington and its allies have sought to restrict Beijing’s access to advanced semiconductors that could be used for military applications.
The Dutch government last month expanded export control rules requiring ASML to obtain authorization in Amsterdam, rather than Washington, to ship certain chip machines to countries outside the European Union, citing security reasons. Meanwhile, the U.S. Department of Commerce’s Bureau of Industry and Security is implementing global export controls on advanced semiconductor manufacturing facilities.
In the third quarter, ASML achieved sales of almost 7.47 billion euros, exceeding analysts’ forecasts and the company’s expectations.
The net profit of 2.08 billion euros also exceeded analysts’ forecasts. Gross profit – a highly regarded key figure for companies in the semiconductor industry – amounted to 3.79 billion euros and, with a margin of 50.8 percent, corresponded to the consensus and the company forecast.
For the current quarter, ASML expects sales of between 8.8 and 9.2 billion euros with a gross margin of between 49 and 50 percent. For the year as a whole, the company expects sales of around 28 billion euros.
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(END) Dow Jones Newswires
October 15, 2024 13:28 ET (17:28 GMT)
