ASML reports profit of €1.7 bn on revenue of €5.8 bn in Q3

ASML Holding, a key equipment supplier to chip manufacturers, reported revenue of €5.78 billion in Q3 2022 vs €5.43 billion in Q3 2021.
ASML Holding chip businessASML reported net income of €1.7 billion vs €1.4 billion.

ASML recorded new bookings of €8.9 billion vs €8.4 billion.

ASML expects fourth-quarter sales between €6.1 billion and €6.6 billion with gross margin around 49 percent. ASML expects R&D costs of around €880 million and SG&A costs of around €265 million. ASML aims revenue of €21.1 billion with a gross margin approaching 50 percent in 2022.

ASML said it does not expect a large impact from U.S. sanctions on China. The United States earlier this month issued sweeping new restrictions on exporting semiconductors to China.

“There is uncertainty in the market due to a number of global macro-economic concerns including inflation, consumer confidence and the risk of a recession,” said ASML CEO Peter Wennink in a news statement.

“Despite weakness in the end market for memory chips, however, the overall demand for our systems continues to be strong. This resulted in record bookings in the third quarter of around 8.9 billion euros,” Peter Wennink said.

ASML, Europe’s largest technology company, makes lithography systems, large machines that cost up to $160 million each and are used by chipmakers such as Taiwan Semiconductor (TMSC), Samsung and Intel to create the circuitry of computer chips.

ASML has sold 83 units of new lithography systems and 8 units of used lithography systems during the third quarter of 2022.

ASML is currently unable to keep up with demand from customers as they seek to build new manufacturing plants, and with ASML’s backlog now at more than 30 billion euros, ASML is seeking to expand its own production capacity by 2025.

ASML has been restricted by the Dutch government in shipping its best machines to China, due to U.S. diplomatic influence, since 2019. However, it still sells slightly older machines in China, where it had 16 percent of sales in 2021.

ASML said the impact of the new U.S. regulations appears limited given that it is a European company with few U.S. parts used in its machines.

“We can continue to ship non-EUV (less advanced) lithography tools out of Europe to China,” ASML said.

However, Chinese customers may have difficulty obtaining other parts they need, ASML said. ASML noted that since it cannot keep up with orders in general at the present, if orders for tools from China slow, it could sell them elsewhere.

ASML highlighted the costs and risks of the US bans on chip technology exports to China for leading semis vendors. Management at next ASML Investor Day in early November may revise their 2025 revenue target and 2020–30 growth target, Josep Bori, Thematic Research Director at GlobalData, said.

ASML’s extreme ultraviolet lithography (EUV) machines, capable of manufacturing the smallest chips (i.e., 7, 5, and soon 3-nanometer nodes), accounted for 51 percent of total system sales in Q3, up from 26 percent in Q1.

Further, its demand remains robust, and the net bookings growth of 44 percent year-over-year bodes well for future sales. Moreover, this manufacturing technology leadership places ASML front and center of any country’s artificial intelligence (AI) strategy, as advanced AI chips require this miniaturization level.

The drop in system sales to China from 34 percent contribution in Q1 to 15 percent in Q3 is a significant worry. It is compounded by the fact that the slack seems to have been picked up by Taiwan rather than the US and EMEA, Josep Bori said.