According to a recent Bank of America research note, additional U.S. restrictions on semiconductor equipment exports to China could significantly impact ASML Holdings' (ASML) earnings before interest and taxes (EBIT).
The bank's analysts suggest that ASML’s EBIT could be reduced by 3% to 30%, contingent on the severity of the restrictions and ASML’s capacity to redirect sales lost in China to other regions.
Bank of America highlights that recent discussions among investors indicate concerns about the potential for escalated export restrictions.
The note says that last week's media coverage suggested the U.S. administration might restrict ASML’s ability to service certain customers in China. These servicing restrictions alone could account for a 1% to 3% hit to group sales.
The bank outlines three possible scenarios for further export controls. The most likely scenario, they believe, involves a full ban on ArFi immersion and servicing for restricted entities in China, which could cut ASML’s CY25/26E group EBIT by 3% to 4% net of mitigation.
The second scenario, a full ban on ArFi immersion and servicing for all of China, could lead to a 10% EBIT reduction net of mitigation. The least likely scenario involves a full ban on deep ultraviolet (DUV) lithography and servicing for China, with potential EBIT cuts ranging from 12% to 15% net of mitigation.
Despite these risks, Bank of America maintains a Buy rating on ASML with a price objective of €1,302 (US$1,406). They argue that the current market is overly pessimistic, pricing in a roughly 50% chance of a full DUV ban within the next 12 to 24 months.
They view the current stock price as an attractive buying opportunity ahead of the Capital Markets Day in mid-November.
The note also says that such bans could disrupt global automotive and industrial supply chains, potentially benefiting European semiconductor manufacturers like STMicro and Infineon, as production might shift to their onshore facilities.