ASML forecasts revenue to rise 25% in 2023 as the chip industry recovers

Chip restrictions are a

Dutch manufacturer of chip equipment ASML forecast a jump in sales in 2023 as the semiconductor industry predicts a renewed growth acceleration in the second half of this year.

ASML is one of the world’s most important companies in the chip supply chain. It produces machinery needed to manufacture the world’s most advanced chips.

For the fourth quarter of 2022, ASML’s net sales rose more than 29% to 6.4 billion euros ($7 billion), it said on Wednesday. For the full year, net sales were €21.1 billion, an increase of more than 13% over the previous year. However, net income fell by more than 4% to 5.6 billion euros.

ASML forecast net sales growth of over 25% in 2023 compared to 2022.

“If we look at the situation in the industry today, we are not isolated from … fears of recession or high inflation or high interest rates, that is also clear. And then we see the impact in our customers’ businesses.” ASML CEO Peter Wennink told CNBC.

ASML’s machines are purchased by companies such as intel and TSMC, which actually make the chips used in end products like laptops or smartphones. Wennink said inventories of chips for consumer products have increased as demand for such electronics is “not very good.”

But he said ASML’s customers believe this will only be “short-lived” and are therefore not canceling orders.

“Most of our customers tell us they expect a recovery in the second half of this year,” Wennink said.

“Then if you consider that the average lead time of our tools is … say one and a half to two years and if you look at the relatively short expectations … of a possible recession, then of course customers don’t cancel orders – because they find themselves at the back of the queue might if that thing shows up again.”

Companies like TSMC and Intel have been expanding capacity around the world, particularly as the US and Europe seek to bring chip manufacturing closer to home. For example, TSMC will open two semiconductor fabs in Arizona.

ASML got caught in the geopolitical crosshairs

The US introduced sweeping export restrictions aimed at cutting off China from key chips and semiconductor manufacturing facilities. ASML asked US employees to stop serving Chinese customers.

This month Mark Rutte, Prime Minister of the Netherlands, traveled to Washington to meet with US President Joe Biden. At this point, it’s unclear if the US is pushing for a total ban on ASML shipping equipment to China.

Rutte told CNBC last week on the sidelines of the World Economic Forum in Davos, Switzerland, that he hoped the issue would be resolved in “a couple of months, maybe even sooner.”

“I think we can get there in a way that can be done in a consensual way, even with the countries that don’t want to use the high-end technology and defense systems,” Rutte told CNBC.

For now, ASML can ship older equipment, called Deep Ultraviolet (DUV) lithography machines, to China, but not its EUV systems. ASML CEO Wennink said China accounted for around 15% of sales in 2022 and will reach a “similar” amount this year.

Finally, he said that the situation must be resolved by the governments.

“It’s not just between Dutch people and Americans, it’s affecting other European countries, it’s affecting Asian countries, so it’s a complex situation,” Wennink said.

“It’s up to you [governments]. You just have to follow what comes out.”

CNBC’s Silvia Amaro contributed to this report.

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