ASML Beats Estimates, Grapples With Chip Supply Shortage

(Bloomberg) -- ASML Holding NV, a crucial supplier to Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co, beat analyst expectations for the first quarter and is planning a significant share buyback in the first quarter, with U.S.-China tensions doing little to disrupt strong demand.

Chief Executive Officer Peter Wennink said ASML hasn’t shipped EUV machines to China because the request for an export license is still with the Dutch government. “There have been very deep, lengthy discussions between the Dutch, the European and the U.S. governments about the strategic nature of this technology. We don’t expect that the fundamental views of the U.S. towards China will change with the new administration. It is known that China is the big competitor.”ASML shares hit a record high in Amsterdam trading, rising as much as 4.1% to 457.85 euros.

Key Insights

The Dutch supplier of machines to make semiconductors expects revenue in the first quarter of 3.9 billion euros ($4.7 billion) to 4.1 billion euros, with a gross margin of as much as 51%, it said in a statement Wednesday. Analysts had expected sales of 3.52 billion euros and a gross margin of 49.3%.ASML is insulated from the pandemic-induced economic downturn as customers such as Intel Corp., Samsung and TSMC need its latest machines to make chips that are faster, cheaper and more efficient. Developments in artificial intelligence, high-performance computing and 5G wireless networks should support future demand.Still, the chip industry needs to deal with the global chip supply shortage that’s crippling automakers around the world, the CEO said.“This engine needs to start running again,” Wennink said in an interview with Bloomberg. “We start from an under-capacity view today. So we’ll just have to step up and ship more tools and more machines to get more semiconductor capacity out there.”In the fourth quarter, ASML shipped nine of its newest EUV machines and won orders for six EUV systems representing 1.1 billion euros. EUV machines are used to etch smaller circuits while increasing capacity and speed.The company expects total EUV system sales this year of 5.8 billion euros, 30% higher than 2020.“The build out of the digital infrastructure and the continued technology innovation is relevant to the consumer, automotive and industrial markets and drives demand across our entire product portfolio,” Wennink said.

Market Reaction

ASML shares have risen 69% in the past 12 months, outpacing a 14% gain in the Stoxx Europe technology index.

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ASML kept its guidance for low double-digit revenue growth for 2021, and annual revenue at 15 billion euros to 24 billion euros through 2025.The Dutch company has repurchased 1.2 billion euros worth of shares under its 6 billion euro buyback program, running through 2022.

(Updates with CEO comments from second paragraph)

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