ASML, a chip equipment giant, is in a dilemma of "it is difficult to sell lithography machines".
Once upon a time, lithography machine manufacturer ASML was a favorite in the chip industry. As a key piece of equipment in chip manufacturing, almost all chipmakers around the world are counting on ASML's lithography machines to meet expanding capacity demands. But just recently, the company, which has 39.6 billion euros in undelivered orders, suddenly fell into a dilemma of "difficult to sell lithography machines".
What is ASML and why is it important? The Netherlands-based company is the world's leading manufacturer of lithography machines. Lithography is a critical part of the chip manufacturing process, where the chip design pattern is precisely transferred to the silicon wafer by the lithography machine. Without advanced lithography machines, it is impossible to produce small but powerful chips.
To put it simply, ASML is the "heart" of the chip manufacturing industry. It controls the lifeblood of the chip industry and determines the upper limit of chip production capacity and performance. Because of this, whether it is Intel, TSMC, Samsung, SMIC, or ASML, they all regard ASML as an important partner.
Just recently released its 2024 quarterly earnings report, ASML's performance data was a big surprise. Net sales fell 27% sequentially, and net profit also plunged 40%. To make matters worse, new orders were only 3.61 billion euros, well below market expectations of 5.1 billion euros.
The chip "lungs" are blocked, and ASML is in a dilemma of "it is difficult to sell lithography machines".
What is the reason why ASML is in the situation of "difficulty in selling lithography machines"? Judging from the company's financial report, there are mainly the following aspects:
The sharp decline in global chip demand is an important reason. In recent years, due to the impact of the epidemic, the demand for chips in fields such as personal electronics and data centers has skyrocketed, leading chipmakers to expand production capacity frantically. However, as the impact of the epidemic weakened, the demand in these areas gradually declined, and chip manufacturers naturally slowed down the pace of production expansion.
Geopolitical factors are also a major bane. Due to the chip export controls imposed by the United States on China, ASML was unable to export high-end lithography machine models to China, which directly affected the company's revenue. According to the data, in the first quarter of 2024, ASML's net system sales in Chinese mainland were only 1.9 billion euros, down from 2.2 billion euros in the previous quarter.
The cyclical nature of the industry is also a factor that cannot be ignored. The chip manufacturing industry has always been cyclical, and fluctuations in demand often lead to overcapacity or shortages. At present, the industry is in a relatively low period, which will naturally affect the sales of lithography machines and other equipment.
ASML's own capacity constraints are also a major constraint. Due to the extremely complex production process of lithography machines, ASML can only produce a limited number of machines per year, which simply cannot meet the needs of the market. This supply shortage makes it difficult for ASML to significantly increase shipments in the short term.
Can ASML revive the "heart of chip manufacturing"?
Looking at ASML's current situation, it is not difficult to find that the chip equipment giant is falling into a dilemma of "internal and external troubles". The harsh external environment, coupled with the limitation of its own production capacity, makes it difficult for ASML to get rid of the problem of "difficulty in selling lithography machines" in the short term.
In the long run, ASML's outlook is not as bleak as it seems. The chip manufacturing industry is entering a new stage of development, and the demand for advanced processes and large-size silicon wafers will continue to grow. As a "unique skill" in this field, ASML's core competitiveness is difficult to be replaced in the short term.
Let's take a look at what the chip manufacturing industry will look like in the future. With the development of emerging technologies such as artificial intelligence, Internet of Things, and autonomous driving, the performance and power consumption requirements for chips will become higher and higher. At that time, chips with advanced processes of 7nm or even 3nm will be popular.
In order to increase the computing power of a single chip, large-size silicon wafers will also become a trend. The current mainstream 12-inch silicon wafer may be replaced by 16-inch or even 18-inch silicon wafers in the future. ASML excels in the production of high-end lithography machines for large-size silicon wafers.
In the coming years, ASML will continue to receive orders in these areas. As long as the company can expand its production capacity in time and increase the shipment of lithography machines, it will be able to regain a firm foothold and revitalize its position as the "heart of the chip manufacturing industry".