ASML Q3 earnings beat; sees restricted affect on U.S. chip curbs on China

Shares of ASML, one of many world’s most vital corporations within the semiconductor provide chain, jumped 6% on Wednesday after reporting robust earnings that bucked the pattern of a slowdown within the chip trade.

The Dutch firm additionally mentioned that the newest export curbs on high-end chips to China would have a “restricted” affect on its enterprise.

ASML doesn’t make chips. As a substitute, it sells $200 million excessive ultraviolet lithography machines to semiconductor producers like Taiwan’s TSMC, that are required to take advantage of superior chips. It’s the solely firm on this planet making such machines, giving it a de-facto monopoly on this a part of the availability chain and making it probably the most vital corporations within the semiconductor trade.

ASML mentioned Wednesday income for the third quarter of 2022 got here in at 5.77 billon euros ($5.6 billion), beating analysts forecast of 5.41 billion euros, in line with Reuters. That was a ten% year-on-year rise.

Internet revenue totaled 1.7 billion euros versus forecasts of 1.42 billion euros, a 2.2% lower versus the identical interval final yr, however increased when in comparison with the second quarter of this yr.

Shares of chip corporations have been battered in 2022 amid a slowdown in development amongst corporations like Samsung and Micron because the semiconductor growth hits a wall. ASML shares are down round 40% up to now this yr.

However the robust outcomes from ASML bucked the broader market slowdown, sending shares greater than 6% increased in European morning commerce.

“It is a basic case of ASML’s relative resilience versus the remainder of its friends coming to the fore,” Amit Harchandani, head of European know-how fairness analysis at Citi, advised CNBC’s “Squawk Field Europe” on Wednesday.

“This energy total that ASML sees … we’d say is extra a mirrored image of the relative positioning of the corporate versus the broader semiconductor cycle … The broader cycle undoubtedly appears to be going by means of a downward section now.”

Peter Wennink, CEO of ASML mentioned Wednesday there may be “uncertainty out there attributable to plenty of international macro-economic considerations together with inflation, client confidence and the danger of a recession.”

“Whereas we’re beginning to see diverging demand dynamics per market section, the general demand for our methods continues to be robust.”

The U.S. has just lately launched sweeping guidelines aimed toward slicing China off from acquiring or manufacturing superior chips which might be utilized in functions comparable to supercomputers.

As a part of these guidelines, Washington restricted “U.S. individuals” that assist the event or manufacturing of sure chips in China, together with these for navy makes use of, doing so and not using a license.

ASML advised U.S. staff final week to cease servicing Chinese language prospects because of this.

ASML’s Wennink mentioned the corporate is “persevering with to evaluate and comply with the brand new US export management laws.”

“Based mostly on our preliminary evaluation, the brand new restrictions don’t amend the principles governing lithography gear shipped by ASML out of the Netherlands and we count on the direct affect on ASML’s total 2023 cargo plan to be restricted.”

ASML’s machines are vital for corporations desirous to take advantage of superior chips. If Chinese language chipmakers cannot get their palms on the software, will probably be extremely tough for them to catch as much as the likes of TSMC.