Japanese semiconductor equipment maker Tokyo Electron (TEL) has raised its profit forecast for the fiscal year 2024 (ending March 2025), expecting an operating profit of JPY 627 billion (approximately USD 4.3 billion), an 8% increase from its previous guidance.

Tokyo Electron contributed the strong growth trend compared to the previous fiscal year, driven by China’s significant investment in mature semiconductor nodes. The company has also raised its sales and profit outlook for the period from April to September.

For the quarter ending in June, Tokyo Electron reported revenue of JPY 555 billion, reversing a declining trend seen since 2022. Operating profit for these three months was JPY 165.7 billion.

Source: TEL

The past year, to Tokyo Electron, has been in turbulence year, as initial optimism from AI demand and the semiconductor manufacturing industry was tempered by U.S. export restrictions.

Regarding the matter, Hiroshi Kawamoto, finance division officer of Tokyo Electron, stated in a conference call that there are currently no signs of the U.S. implementing stricter restrictions on chip-making tools, while the company will continue to closely monitor the situation.

As of the quarter ending in March, over 47% of its revenue came from China due to increased equipment stockpiling in anticipation of potential U.S. sanctions. In the recent quarter, nearly 50% of revenue was generated from the Chinese market.

Source: TEL

Looking ahead to the next fiscal year (FY2025), Tokyo Electron expects double-digit growth, driven by strong demand for AI servers and an increase in AI-enabled PCs and smartphones.

This resurgence in demand is anticipated to boost the market. The company expects further expansion in DRAM production and a recovery in NAND investment due to inventory adjustments. However, investment in advanced logic and foundry services is expected to offset the slowdown in mature process technologies.

Per a report from Reuters, Intel is said to be receiving the second new High-NA EUV equipment from ASML, costing EUR 350 million (~USD 383 million).

According to Intel’s earnings call on August 1, CEO Pat Gelsinger stated that Intel began receiving the first large equipment in December, and the installation process would take several months, which is expected to bring about a new generation of more powerful computer chip.

Gelsinger noted during the call that the second High-NA equipment is about to enter the facility in Oregon. Due to the poor stock performance following Intel’s earnings report, this statement did not attract much attention.

Previously, a senior executive from ASML once mentioned in July that the company already begun shipping the second High NA equipment to an unnamed customer, but would only record revenue for the first set this year. However, there are still some uncertainties regarding when the customer will adopt this equipment.

ASML has already received orders for over ten High-NA equipment from customers including TSMC, Samsung, Intel, Micron, and SK Hynix. Intel plans to use this technology for mass production by 2027, and TSMC is also set to receive the equipment this year, the time to put into production has not been disclosed, though.

ASML executive Christophe Fouquet stated on July 17 that DRAM memory chip manufacturers, which could refer to Samsung, SK Hynix, or Micron, are expected to start using High-NA equipment by 2025 or 2026.

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(Photo credit: ASML)

According to a report from Bloomberg, the US is reportedly considering new measures and could unilaterally impose restrictions on China as early as late August. These measures would limit China’s access to AI memory and related equipment capable of producing them.

Moreover, another report from Reuters further indicates that US allies, including semiconductor equipment manufacturers from Japan, the Netherlands, and South Korea—such as major Dutch semiconductor equipment maker ASML and Tokyo Electron—will not be affected in their shipments. The report also notes that countries whose exports will be impacted include Israel, Taiwan, Singapore, and Malaysia. 

Bloomberg, citing sources, revealed that the purpose of these measures is to prevent major memory manufacturers like Micron, SK hynix, and Samsung Electronics from selling high-bandwidth memory (HBM) to China.

These three companies dominate the global HBM market. Reportedly, regarding this matter, Micron declined to comment, while Samsung and SK hynix did not immediately respond to requests for comment. 

Bloomberg’s source also emphasized that the US has yet made a final decision. The source also state that if implemented, the new measures would cover chips such as HBM2, HBM3, and HBM3e, as well as the equipment needed to manufacture these chips.

The source further revealed that Micron will essentially not be affected by the new regulations, as Micron stopped exporting HBM to China after China banned Micron’s memory from being used in critical infrastructure in 2023.

Reportedly, it is still unclear what methods the US will use to restrict South Korean companies. One possibility is the Foreign Direct Product Rule (FDPR). Under this rule, if a foreign-made product uses any US technology, even just a small amount, the US can impose restrictions.

Both SK hynix and Samsung are said to be relying on chip design software and equipment from US companies such as Cadence Design Systems and Applied Materials.

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(Photo credit: SK hynix)

Lithography machine giant ASML released its financial report for the second quarter of 2024, with net sales amounting to EUR 6.2 billion and net income reaching EUR 1.6 billion. The gross margin was 51.5%.

According to the previous financial forecast, net sales for the second quarter were expected to be between EUR 5.7 and 6.2 billion, with a gross margin of 50% to 51%, making the overall performance for the second quarter slightly better than expected.

Additionally, with the continued increase in demand for AI chips, the order intake for the second quarter was EUR 5.6 billion, significantly up from EUR 3.61 billion in the first quarter, returning to the levels of the fourth quarter of 2023. It is also worth noting that in the order intake for the second quarter, EUR 2.5 billion were EUV orders.

This performance was said to be due to the strong sales of immersion DUV systems. ASML President and CEO Christophe Fouquet noted ongoing improvements in overall semiconductor inventory and further increased utilization rates of lithography equipment by logic and memory chip customers. Despite market uncertainties, ASML anticipates continued industry recovery in the second half of the year.

Fouquet also projected third-quarter net sales for 2024 to range between EUR 6.7 and 7.3 billion, with a gross margin of 50% to 51%. Estimated R&D investments are around EUR 1.1 billion, and sales and general administrative expenses (SG&A) are expected to be approximately EUR 295 million.

ASML reportedly regards 2024 as a transitional year, maintaining unchanged full-year expectations and continuing to invest in capacity and technology enhancements. Additionally, strong developments in AI are driving much of the semiconductor industry’s recovery and growth, positioning it ahead of other markets.

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(Photo credit: ASML)

The China Association for Science and Technology (CAST) recently listed challenges facing China’s semiconductor industry. However, the list did not include lithography. According to a report from TechNews, it’s believed that the move to exclude lithography is more of a political consideration aimed at downplaying the impact of US sanctions on China’s local chip manufacturing industry rather than fostering innovation in lithography equipment within China.

Reportedly, Chinese leader Xi Jinping once told the Dutch Prime Minister that China does not need the help from ASML, the world’s leading advanced lithography system manufacturer, to drive its technological development. Currently, Shanghai Micro Electronics (SMEE) and Naura Technology Group in China aim to develop exposure equipment for the first time by April 2024.

However, regarding in the overall semiconductor manufacturing process in China, the production rate of Chinese chip manufacturing equipment is only 20%, with a global market share of less than 1%. In contrast, ASML holds a global market share of 93%.

EUV (Extreme Ultraviolet) lithography equipment is crucial for manufacturing next-generation chips. Even if Chinese companies had obtained these devices before US sanctions, they still require ongoing maintenance and support. The US ban has cut off this supply line, meaning the currently used exposure equipment will eventually cease to operate.

Unless China makes significant breakthroughs in the semiconductor lithography equipment industry, it will face many obstacles in advanced processes. Some industry leaders have already urged their companies to focus on traditional chips and 3D packaging rather than attempting to continue with advanced processes.

Currently, many companies are still striving to circumvent Washington’s sanctions. For instance, Huawei is establishing a major research and development center for exposure and wafer fabrication equipment. Yet, per an earlier report from Reuters, Peter Wennink, former CEO of ASML, stated in an interview that the chip war between China and the US will not be resolved anytime soon and could potentially persist for decades.

Other Chinese companies are also exploring open standard technologies like RISC-V. However, given the current situation, it could take China several years, if not decades, of research and development to catch up with mainstream exposure equipment manufacturers.

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(Photo credit: ASML)