falling ASML supplies and financial barriers
Source: Reuters
Leading semiconductor equipment manufacturer ASML is facing obstacles. Financial results for the first quarter of 2024 were lower than even pessimistic analysts' forecasts. Along with a drop in orders for its products, the organization is losing money.
Unexpected results
ASML controlled more than 90% of the photolithography market by the end of 2023. But according to the results of the financial report for the first quarter of this year, the situation has changed dramatically. Bloomberg noted that the report contains almost no “positive points.”
The main reason is that orders for lithography equipment fell by 4% compared to the previous year, totaling €3.6 billion. Experts' expectations were not so pessimistic. They assumed that in the first quarter of 2024 the volume of orders would be 4.63 billion euros, which is 1.03 billion euros more than the actual volume.
The summary of ASML's financial report shows a decline in revenue of 21.6% compared to the previous year. According to analysts' forecasts, revenue was expected at 5.39 billion euros. As for net profit, it decreased by 37.4%, amounting to 1.22 billion euros. This is more than experts expected.
Other restrictions
One of ASML's sources of income is servicing and repairing previously sold equipment, but today there are restrictions that do not allow the company to serve customers from China.
Despite this, China's share of ASML's revenue reached a record high of 49% in the first quarter of 2024. This is significantly higher than previous figures of 39%, 46% and 24% in the fourth, third and second quarters of 2023, respectively. ASML management is still looking for new customers outside of China. This would help diversify the client portfolio and reduce dependence on one market.
According to Bloomberg, Samsung (South Korea) and TSMC (Taiwan) are purchasing equipment from ASML in smaller quantities due to the fact that they have already accumulated large inventories. Additionally, Samsung saw orders from ASML decline by up to 19% at the start of 2024, down from 25% at the end of 2023 and 27% in Q2 2023. The share of Taiwanese orders, mainly from TSMC, fell from 49% in the first quarter of 2023 to just 6% in the first quarter of 2024.
Will there be a recovery?
Despite the financial report, ASML has an impressive amount of credibility among investors. Perhaps this is what holds up the value of securities. Immediately after the release of the latest report, ASML's share price fell by just 4%. Today, financial agencies are hesitant to make forecasts regarding further fluctuations in the market.
According to CFO Roger Dassin, ASML management believes in the prospects for growth and development, despite temporary difficulties. He notes that the future of the company should not be called pessimistic. Dassin emphasizes that the outlook for the semiconductor industry is also generally encouraging. “It’s clear that the industry is booming,” he said. Dassin also expressed confidence that the semiconductor sector will recover in 2024, and 2025 will be a year of success.
ASML CEO, Peter Wennink, also sees 2024 as a transition year for the company: “Our forecast for the full year 2024 has not changed. The second half of the year is expected to be stronger than the first, consistent with the industry's recovery from the downturn.”
Peter Wennink, 67, will leave his position as CEO of ASML by the end of this month. He has held the position since July 2013, and during his leadership, the company's shares grew by 1,400%. Wennink himself has worked at ASML since 1999 and was a member of the company's board of directors until July 2013.
Peter Wennink will be replaced as CEO of ASML by Christophe Fouquet, who holds the position of Chief Commercial Officer at ASML. During the 10 years of Peter Wennink's leadership, they became accustomed to the rapid growth of ASML shares. Now Fouquet will have to continue this trend.
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