Carl Zeiss ZMT employees are seen outside giant vacuum chambers where optical systems for ASML’s new High NA EUV tool are being tested.
ASML
Chip stocks fell on Wednesday after ASML, a major developer of semiconductor manufacturing equipment, said bookings fell 61% during the first quarter, a steeper decline than investors expected.
During trading on Wednesday AMDs shares fell more than 4%, Nvidia shares fell about 3%, Intel shares fell almost 2% and Qualcomm was 2% discount. But the biggest decline affected the chip technology company Armwhich was trading almost 10% lower on Wednesday.
ASML fell more than 8% on a day when the entire S&P 500 index was only down less than 1%.
ASML is essentially the sole supplier of the machines needed to build the world’s most advanced chips, which often cost hundreds of millions of dollars each. The Dutch company shipped 449 “lithography” machines in 2023 and its main customers include the world’s top processor foundries: TSMC, Samsung and Intel.
The two largest customers accounted for more than half of sales in 2023. Sales fell in Taiwan and South Korea, where TSMC and Samsung are located, respectively.
Foundries physically manufacture the chips that companies like Nvidia or Apple design, so any sign that they are buying less equipment could signal a downturn in the deeply cyclical semiconductor industry, which could then impact chip companies’ sales to end customers. And since licensing companies like Arm make a few cents in revenue whenever a chip is made using their technology, lower sales of production machines could mean fewer chips overall coming to market.
Total bookings for ASML’s machines fell 4% year-on-year, and CEO Peter Wennink said in a statement that he expects the second half of 2024 to be stronger than the first half as the semiconductor industry “recovers from the recession” manages to achieve. adding that the company was in a “year of transition.”
“You know it’s pretty clear that there are a few usual suspects missing from the order intake,” Wennink said during a call with analysts.
Wennink will retire at the end of this month, he said during the earnings call. He will be replaced by Christophe Fouquet, the current Chief Business Officer.
Wennink expects companies that build foundries in the US, such as Intel and TSMC, to place more orders for lithography machines later this year. ASML also said it expected government subsidies for chip factories, such as the CHIPS Act in the US, would boost sales. The company did not say how China’s export controls would affect its business.
“If you look at the announced plans from some of our larger customers, it’s pretty clear that there should be significant orders coming in over the next few quarters,” Wennink said.