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ASML is doing well, but losing the Chinese market will hurt the company


The figures that ASML publishes today for the second quarter of 2023 are better than both analysts and the management themselves had expected. The revenue reached €6.9 billion, the profit was €1.9 billion, and the gross profit margin also improved to 51.3%. For the entire year of 2023, the chip machinery manufacturer from Veldhoven now expects a revenue increase between 25% and 30%. The company’s shares are slightly higher, following the market trend.

It becomes interesting when we look at where the positive surprise comes from. Companies from China purchased more, especially the machines (DUV immersion) that require an export license from September 1, 2023. The market share of Chinese customers in ASML’s revenue rose from 8% in the first quarter to 24% in the second quarter. This is not unique (the first quarter of 2022 showed a similar pattern), but it is notable. Are these orders one-time purchases before they can no longer do so? During the conference call this afternoon, the management will undoubtedly be asked for further clarification.

Another noteworthy aspect of the figures is the new order intake amounting to €4.5 billion. This is higher than the €3.6 billion in the first quarter but significantly lower than, for example, the €8.5 billion from a year ago. Likely, the Taiwanese TSMC (with Apple as its largest customer) has postponed some orders due to caution in light of the economic conditions. The total order book remains well-filled (was €38.9 billion, now €38 billion), still significantly exceeding the current capacity.

We can say that the potential loss of significant orders from China could indeed have an impact on ASML’s growth curve in the long term. However, export restrictions are currently temporary measures, which may have less inhibiting effects in the future with a different geopolitical climate. Only time will tell how the situation will unfold.

Written by: Patrick O'Brien

Patrick O'Brien is a student who is taking only the first steps in journalism. The main interest is events from the world of macroeconomics and finance.

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