The leading Dutch semiconductor equipment company ASML has reportedly predicted continued strong demand from Chinese customers, with approximately 20% of the company’s backlog attributed to them.

According to reports from Reuters and CNBC, ASML CEO Peter Wennink stated during the first-quarter (January-March) earnings call on April 17th that discussions are ongoing between the Dutch and U.S. governments regarding national security concerns.

In October 2023, the U.S. Department of Commerce expanded its export control regulations on China, with the new provisions taking effect from November 2023.

These regulations specifically restrict the Dutch company ASML from selling certain immersion Deep Ultraviolet (DUV) lithography equipment to Chinese facilities engaged in advanced semiconductor manufacturing. Consequently, Chinese customers turned to purchasing mature process equipment in large quantities, leading to nearly 2 consecutive months of surge in China’s equipment import at that time.

As per information disclosed by ASML during its earnings call, it is currently able to continue serving Chinese customers who have already installed its equipment.

ASML’s CFO Roger Dassen further indicated that Chinese customers account for approximately 20% of the company’s backlog orders. He noted that Chinese chip manufacturers are expanding their production for mature processes, with these chips falling outside the export restrictions of the United States and its allies, primarily used in appliances like refrigerators, phones, toys, and automobiles.

Dassen noted that demand from China is robust due to their expansion of production capacity. As a result, China’s global market share is expected to grow larger in the coming years, leading to increased self-sufficiency compared to the present.

Per ASML’s financial report, during Q1, machine revenue from the Taiwan and South Korean markets decreased from the previous quarter’s 13% and 25% to 6% and 19%, respectively. In contrast, machine revenue from the Chinese market increased significantly from 39% to 49%.

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(Photo credit: ASML)

In June 2023, leading processor manufacturer Intel reached an agreement with the German federal government, announcing the signing of an amended investment memorandum. The plan involves investing over EUR 30 billion to construct two new fabs in Magdeburg. The German federal government has agreed to provide a subsidy of EUR 10 billion, including incentives and subsidies from the European Chips Act and government initiatives.

According to a report by Tom’s Hardware citing sources, Intel has submitted conceptual drawings for a new fab in Germany. The initial plans include two fabs, designated as Fab 29.1 and Fab 29.2, equipped with the world’s most advanced semiconductor tools.

Moreover, Intel reportedly has ample space for up to six additional fabs. The first batch of two fabs is expected to commence operations in the fourth quarter of 2027, with both the Intel 14A (1.4nm) and Intel 10A (1nm) advanced processes believed to be part of the plan.

As per previous reports from TechNews, Intel has not disclosed any details regarding the 10A node, but it promises at least double-digit improvements in power consumption and performance. Intel CEO Pat Gelsinger has previously stated that new processes typically improve critical dimensions by approximately 14% to 15%. Therefore, it is plausible that the 10A and 14A nodes will also experience similar improvements.

Source: Intel

As per Intel’s roadmap, Intel 14A is also optimized in 2027, so it seems that 10A falls between 14A and 14A-E.

The report from Tom’s Hardware further indicates that Fab 29.1 and Fab 29.2, the two three-story buildings, occupy approximately 81,000 square meters, with a total length of 530 meters and a width of 153 meters. Each floor has a height ranging from 5.7 to 6.5 meters. Including the roof structure for air conditioning and heating, the building reaches a height of 36.7 meters.

The High-NA EUV exposure machines are installed on the second floor with a height of 6.5 meters, while the upper and lower floors are used for material logistics, providing necessary resources such as water, electricity, and chemicals.

ASML models that the 1st generation of the High-NA-enabled production node will employ between 4 to 9 High-NA EUV exposures and a total of 20 to 30 EUV exposures, encompassing both Low-NA and High-NA.

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(Photo credit: Intel)

The world’s top five semiconductor equipment manufacturers have released their latest financial reports, signaling a surge in demand for advanced manufacturing equipment and positive signs of industry recovery.

The US has continuously thwarted efforts by equipment suppliers to export advanced machinery to China—citing national security concerns—mid its ongoing tech conflict. How have companies like Applied Materials, ASML, TEL, Lam Research, and KLA been impacted by the US’s stringent export controls on China?

Applied Materials

Applied Materials reported US$6.71B in 1Q24 earnings—marking a less than 1% decline in revenue. The Chinese market, doubling its revenue to $3B last quarter, emerged as a bright spot, jumping from a 17% share a year ago to 45%.

This surge is primarily due to China’s urgent push to build capacity for internet devices, telecommunications, automotive, power, and sensors. Despite not expecting to maintain the current growth rate, Applied Materials believes the continued demand for more chips will drive market development.

ASML

ASML, seen as a weathervane for the industry, reported 4Q23 net sales of €7.2B, up from €6.7B in Q3. With annual sales reaching €27.6B in 2023 and a 26.3% sales share in China, ASML has surpassed South Korea to become its second-largest market.

However, ASML warns that geopolitical tensions and potential US export control expansions to China remain operational risks. The company estimates that US and Dutch export controls could reduce its sales of mid-range DUV equipment to China by about 10–15% this year.

TEL

TEL posted 3Q24 revenues of ¥463.6B, with China accounting for 46.9% of its revenue, a 42.8% QoQ increase. TEL expects continued strong demand from China, noting that the country produces only a small portion of the chips it needs and will actively invest to reduce reliance on foreign technology. This momentum is expected to continue into 2025.

Lam Research

Lam Research saw a 7.9% QoQ increase in 2Q24 revenue to $3.76B, with the share of revenue from the Chinese market decreasing from 48% to 40%. With the semiconductor industry expected to grow robustly in the coming years, driven by innovations like AI, Lam Research is poised to benefit.

The company expects equipment expenditures by DRAM manufacturers to grow due to increased HBM production and process transitions, while NAND manufacturers’ expenditures will strengthen with technological upgrades.

KLA

KLA reported a 16.7% YoY decrease in 2Q24 revenue to $2.487B, with China remaining its largest revenue contributor, though its share dropped from 43% in Q1 to 41%. KLA estimates a mid-point revenue of $2.3B for this quarter.

The demand for wafer fabrication equipment is expected to reach the higher end of the $80B range in 2024, with the second half of the year anticipated to outperform the first.

(Photo credit: iStock)

The demand for Dutch semiconductor equipment manufacturer ASML serves as a trend indicator for the industry. The company optimistically stated in its annual report that the chip industry has hit rock bottom and is beginning to show signs of recovery. However, it also cautioned that geopolitical tensions and the potential expansion of US export controls on China remain operational risks.

ASML’s Chief Financial Officer, Roger Dassen, stated in the annual report for 2023 released on the 14th, “We believe that the market has now reached the lowest point of the dip, and although we cannot predict the exact nature of the slope ahead, the recovery is nascent.”

He further pointed out, “The longer-term trends are unmistakable – artificial intelligence, electrification, and the energy transition are happening,” which bodes well for ASML’s business.

However, the ASML annual report mentioned, “The list of Chinese entities impacted by export control restrictions has increased since 2022,” and “The list of restricted customers and the scope of the restrictions were subject to change.”

According to TrendForce’s analysis, while Chinese semiconductor fabs will be unable to purchase NXT:2000i series tools and newer from 2024 onwards, they will still have access to older models like the NXT1980i. This allows them to continue expanding their capacity for manufacturing processes of 28nm and above.

In last month’s financial report announcement, ASML indicated that it anticipates export controls from both the United States and the Netherlands to result in a decrease of approximately 10% to 15% in sales of its mid-range DUV equipment to China this year.

Regarding the 2023 record of ASML’s DUV sales, Dassen also explained in the interview accompanying the financial report that the strong performance in China’s business in 2023 actually stemmed from orders placed at the end of 2022, with the execution of these orders taking place in 2023.

In 2023, China surpassed South Korea to become ASML’s second-largest market, accounting for 26.3% of sales, while Taiwan maintained its leading position with sales accounting for 29.3%.

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• [News] Despite U.S. Semiconductor Export Restrictions, ASML Reports Doubling of Revenue Share from China in 2023
• [News] ASML Reports Partial Revocation of Export Licenses for DUV Equipment

(Photo credit: ASML)

Despite the U.S. export control measures on semiconductor equipment, including those from the Netherlands-based ASML, a major player in advanced manufacturing tools, recent financial reports have contrastingly indicate a doubling of the revenue share from the Chinese market?

On January 24, ASML, a leading provider of photolithography equipment, released its latest financial results for the fourth quarter and the full year of 2023. In Q4 2023, the revenue reached EUR 5.683 billion, with China accounting for 39% of ASML’s total revenue. 

Source: ASML

Although slightly lower than the 46% in Q3, the annual perspective for 2023 reveals that China contributed to 29% of ASML’s revenue for the year. This marks a significant increase compared to the 14% revenue share from China in 2022, indicating a direct doubling of ASML’s revenue share in the Chinese market.

Source: ASML

ASML’s Chief Financial Officer, Roger Dassen, explained the significant increase in the revenue share from the Chinese market within a year during the interview accompanying the recent financial report. 

Dassen attributed the strong performance in China in 2023 to orders received at the end of 2022, which were executed throughout 2023. In the previous quarter, ASML had highlighted that the global order delivery rates, including the Chinese market, had been relatively low, below 50% over the past few years. 

He then emphasized that the demand from Chinese orders primarily comes from mid-critical and mature manufacturing, and this demand remains solid.

With the Netherlands imposing new restrictions on the export of advanced chip manufacturing equipment effective from January, ASML officially announced that starting from 2024, they would not be able to ship NXT:2000i and higher DUV lithography equipment to China.

Equipment below NXT:2000i, including NXT:1970i and NXT:1980i, would also be restricted from shipment to advanced process fabs in China. Dassen anticipated that this will impact 10% to 15% of sales in the Chinese market in 2024. However, he emphasized that this aligns with the financial forecasts provided in the third quarter of last year, and the demand for mature manufacturing processes remains robust.

For the full year of 2023, ASML reported a net sales revenue of EUR 27.6 billion, with a net income of EUR 7.8 billion and a gross profit margin of 51.3%. ASML estimates that the net sales for 2024 will be similar to those in 2023.

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• [News] ASML Reports Partial Revocation of Export Licenses for DUV Equipment
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(Photo credit: ASML)