A Significant Chip Manufacturer, ASML, Increased Profits By 38% Despite Chinese Export Restrictions

ASML, a Major player in the semiconductor equipment industry, reported impressive growth in revenue and profit for Q2 despite potential economic uncertainties.

The Dutch company produces the expensive machines necessary for manufacturing advanced chips and counts TSMC among its clients.

However, due to the significance of its tools, ASML has become embroiled in the US-China technology conflict.

In Q2, ASML exceeded Refinitiv’s estimates with net sales of 6.9 billion euros ($7.7 billion) and net profit of 1.9 billion euros, representing YoY increases of 27% and 37.6%, respectively.

For Q3, the company predicts net sales between 6.5 billion euros and 7 billion euros.

Additionally, ASML raised its 2023 outlook, now anticipating a 30% YoY growth in net sales, up from a previous estimate of 25%.

ASML said that the brighter outlook is due to strong revenue from its deep ultraviolet (DUV) lithography machine, which is used to manufacture memory chips.
These go into various devices, from smartphones to laptops and servers, and could ultimately be used for artificial intelligence applications.

ASML CEO Peter Wennink has expressed concerns about macroeconomic uncertainties, leading to cautiousness among customers in various market segments.

Chipmakers are experiencing high inventory levels as a result of the sluggish demand for finished goods like consumer electronics, which is slowing chip production and reducing the utilization of ASML equipment.

The company has also been impacted by export restrictions on certain technologies to China, with the Dutch government introducing similar regulations in June.

Wennink believes that these rules may apply to certain DUV machines, but ASML does not expect a significant impact on their 2023 year or the long-term outlook.

The company is keeping an eye on any further restrictions from the U.S., which reportedly plans to tighten technology exports to China.

ASML Long (Buy)
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