ASML Holding NV (NASDAQ:AS:ASML) reported its third-quarter financial results on October 18th, 2023, revealing net sales of EUR6.7 billion and a net income of EUR1.9 billion. The Dutch semiconductor equipment supplier expects a transitional year in 2024 before a strong year in 2025, driven by secular growth drivers, a cyclical upturn, and new fab projects.
Key takeaways from the call:
- ASML shipped 10 Extreme Ultraviolet (EUV) systems, recognizing EUR1.9 billion in revenue from 11 systems.
- Net system sales were EUR5.3 billion, primarily driven by Logic at 76% and Memory at 24%.
- The company anticipates net sales to be between EUR6.7 billion and EUR7.1 billion in Q4, with a gross margin of 50% to 51%.
- CEO Peter Wennink expects a strong demand from China, despite export control restrictions.
- The company plans to pay an interim dividend of EUR1.45 per ordinary share on November 10th, 2023.
ASML predicts net sales growth towards 30% for the full year 2023, with a slight improvement in gross margin compared to 2022. Despite uncertainties in the supply chain and the macro environment, the company maintains a positive outlook. The company does not expect the updated export control regulations to significantly impact its financial outlook for 2023.
CEO Peter Wennink highlighted the significant demand for mid-critical and mature technology in China. Despite restrictions starting in January 2023, Wennink stated that 10-15% of shipments to China this year would be excluded. He emphasized that the backlog for EUV tools is around EUR19 billion, covering shipments for this year, 2024, and 2025.
ASML also discussed the drivers of gross margin, including the higher average selling price of the 3800 tool and progress in service on EUV. However, the company also noted headwinds on gross margin due to the training of additional staff for future growth and the small revenue contribution from High-NA tools in 2024.
Wennink acknowledged a demand shift in the semiconductor market, with trailing edge customers remaining relatively strong while leading edge customers experienced pushouts. He also addressed China's export control restrictions, emphasizing that the majority of ASML's immersion revenues in China would not be impacted by the restrictions.
ASML executives emphasized that while the current economic cycle may affect short-term demand, their long-term roadmap remains unchanged. They mentioned that customers have under-invested in 2023 and 2024, which could drive additional demand in the future.
The executives also addressed the impact of US regulations on the Chinese market, noting that most Chinese customers have already shifted their focus to mid-critical and mature manufacturing, reducing the number of fabs involved in advanced manufacturing. This shift, according to ASML, is due to the demand for semiconductors in areas such as electric vehicles and energy transition, with no downside for Chinese customers.
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