ASML on Wednesday posted report income and income as demand for chip manufacturing gear hit data regardless of slowdown of PC and smartphones gross sales. The corporate’s backlog for its merchandise — together with deep ultraviolet (DUV) lithography scanners and excessive ultraviolet (EUV) litho instruments — now exceeds $38 billion as chipmakers proceed to spend money on wafer fab gear (WFE). ASML continues to promote its DUV instruments to Chinese language clients. Moreover, all present EUV clients have dedicated to Excessive-NA EUV instruments.
ASML’s third quarter gross sales got here in at €5.8 billion because it bought 80 new lithography programs in addition to six used scanners, together with 12 EUV instruments (according to Q2) in addition to 74 DUV machines (down from 79 in Q2).
The corporate’s income reached €2.994 billion within the quarter, whereas its gross margins hit 51.8%. A few of TSMC shoppers want so-called quick shipments — a cargo course of that omits among the testing at ASML’s amenities and brings remaining testing and formal acceptance to the client website — so among the firm’s Q3 2022 gross sales might be acknowledged within the following quarter(s).
Whereas demand for PC, smartphone, and client electronics chips is getting weaker, chipmakers count on gross sales of their merchandise to begin growing in 2024 ~ 2025, which is when they’ll want new manufacturing capability with put in instruments. At current there are a number of fabs being constructed by such main corporations corresponding to Intel, Micron, Samsung, and SK Hynix that can want gear within the coming years. For ASML this meant report bookings of round €8.9 billion within the third quarter, of which €3.8 billion had been EUV litho instruments, together with these with 0.33 numerical aperture in addition to Excessive NA programs with 0.55 numerical aperture.
As of at present, ASML’s backlog exceeds $38 billion (up from $33 billion in Q2), which incorporates nicely over 600 DUV scanners in addition to nicely over 100 EUV scanners.
“85% of that order e book actually is for EUV and for immersion, so actually caters to the extra superior and strategic a part of semiconductor manufacturing,” stated ASML’s chief monetary officer Roger Dassen. “They are surely constructing capability additionally past 2023. And in addition there may be nonetheless this aspect of tech sovereignty that we now have been speaking about. The truth that governments wish to be extra self-sufficient of their semiconductor manufacturing. So these secular traits are nonetheless very a lot intact, and I feel that creates a scenario that we’re seeing the place the lion’s share of the shoppers are actually nonetheless pushing us to get the instruments sooner somewhat than later.”
It would take years for the corporate to ship these instruments, as its goal manufacturing capability for 2023 is over 375 DUV machines and over 60 EUV machines.
“ASML expects fourth quarter internet gross sales between €6.1 billion and €6.6 billion with a gross margin round 49%,” stated Peter Wennink, chief govt of ASML. “For the complete yr, we count on income of €21.1 billion with a gross margin approaching 50%.”
ASML to Preserve Transport to China, For Now
In contrast to WFE suppliers from the U.S., ASML didn’t decrease its steering for This autumn as a consequence of U.S. sanctions in opposition to the Chinese language semiconductor sector that prohibit American chip manufacturing applied sciences from being shipped to China with out a particular export license from the U.S. Division of Commerce.
ASML relies within the Netherlands and doesn’t use many components designed or produced within the U.S. inside its DUV instruments — due to this fact it will possibly ship most, if not all, of its DUV instruments to corporations corresponding to Semiconductor Manufacturing Worldwide Co. (SMIC), Hua Hong, and Yangtze Reminiscence Know-how Co. (YMTC), in keeping with its chief monetary officer Roger Dassen.
“We’re nonetheless within the strategy of evaluating the [U.S. restrictions against China’s chip industry],” stated Dassen. “Our preliminary appreciation is that the direct implication for us is pretty restricted. […] We are going to do no matter it takes to observe [the new U.S. export laws]. […] However the truth that we’re a European firm with restricted U.S. expertise in [our tools] after all creates this example the place a direct influence on us is pretty restricted. We are able to proceed to ship non-EUV lithography instruments out of Europe into China.”
ASML couldn’t ship EUV scanners to its Chinese language clients as a result of Wassenaar Association and now can not ship them to China as a result of they use Cymer’s gentle sources designed and produced within the USA. Since ASML by no means anticipated to ship its Twinscan NXE scanners to its shoppers in China (which is why potential shipments EUV shipments to China had been by no means counted in any steering) and the influence of U.S. crackdown of Chinese language semiconductor business on ASML is projected to be restricted, the corporate didn’t replace its expectations for the fourth quarter and for the yr 2022.
In the meantime, ASML admits that there could be oblique influence on gross sales of its DUV instruments to its Chinese language clientele. Fabs want completely different sorts of equipment to function, so if a buyer doesn’t get instruments from Utilized Supplies or KLA, it might not want ASML’s lithography scanners and should cancel its orders. That is considerably unlikely as corporations like SMIC and YMTC have billions in authorities subsidies and can in all probability proceed to purchase new litho instruments whereas they’ll, and try to obtain used American instruments or components made for U.S.-made gear on the secondhand market.
And even when Chinese language clients stop shopping for lithography instruments from ASML, demand nonetheless outpaces provide and its backlog is so enormous that gross sales to different shoppers will greater than offset gross sales to corporations in China.
All EUV Prospects Dedicated to Excessive-NA EUV
Extra excellent news for ASML this quarter are extra orders for its first industrial Excessive-NA scanner, the Twinscan EXE:5200. Not less than one of many orders got here from its present EUV buyer that beforehand has not ordered this software, which implies that all corporations that use (or plan to make use of) excessive ultraviolet lithography with 0.33 numerical aperture will finally migrate to next-generation EUV lithography with 0.55 NA.
Beforehand the corporate stated that three Logic and two Reminiscence clients had ordered its Excessive-NA scanners, and whereas ASML didn’t disclose names of its 0.55 NA EUV shoppers, we will deduce that it meant Intel, Samsung Foundry, and TSMC (Logic) in addition to Samsung and SK Hynix (Reminiscence). ASML doesn’t disclose the identify of its newest Excessive-NA EUV buyer for apparent causes, however it’s affordable to imagine that Micron ordered its first Excessive-NA scanner within the third quarter.
At the moment Micron is constructing two modern reminiscence fabs within the U.S. — in Utah and New York — which might be set to begin ramping up DRAM manufacturing in a 2025 – 2026 timeframe. Initially each fabs will use Twinscan EXE 0.33 EUV instruments, however finally Micron will want one thing much more superior, which is why it’s going to want 0.55 EUV scanners. Apparently the corporate has already begun making ready for the subsequent era.
Micron but has to touch upon its Excessive-NA EUV dedication, however we now have all causes to consider that the corporate is trying ahead ASML’s next-generation Excessive-NA EUV manufacturing instruments.
Whereas demand for logic and reminiscence chips geared toward PCs, smartphones, and client electronics obtained decrease within the latest months and are unlikely to rebound within the subsequent two and even three quarters, chipmakers proceed to spend money on their fabs — thus bringing their cash to ASML. Demand for WFE is so excessive that ASML’s backlog for superior gear elevated to $38 billion in Q3, or by $5 billion in only one quarter.
Whereas American corporations now require a particular export license from the U.S. DoC to promote their wafer fab gear to clients in China, ASML believes that it will possibly export its DUV scanners to the Folks’s Republic with none restrictions. Whereas it stays to be seen whether or not U.S. sanctions in opposition to China’s semiconductor business will hit ASML not directly, demand for the corporate’s instruments round is so sturdy that even full lack of Chinese language shoppers may not be seen for a minimum of a few years.
Main makers of logic and reminiscence chips that at present use EUV scanners that value $160 – $170 per unit all plan to undertake much more superior Excessive-NA EUV machines sooner or later, ASML stated.