Chip Equipment Maker ASML Faces Uncertainty As US Sanctions On China Impact Demand

Semiconductor equipment company ASML Holding N.V. ASML disclosed the impact of several U.S. semiconductor technology sanctions on China in its fiscal 2024 annual report.

The chip equipment maker pointed at the U.S. semiconductor embargo on China for affecting customer demand in 2024.

The company said several ASML customers slashed their capital expenditures amid macroeconomic uncertainty perpetrated by the U.S. semiconductor technology sanctions, including artificial intelligence.

Also Read: Taiwan Semiconductor’s Intel Foundry Acquisition Could Be Negative For ASML, KLA, Synopsys, And Cadence: Analyst

ASML said that a growing number of entities in China, which accounted for 36% of sales in 2024, are now subject to restrictions.

According to SEMI, China, Taiwan, and Korea will likely remain the top three destinations for equipment spending through 2026. 

Under Donald Trump’s presidency, Washington restricted Chinese smartphone giant Huawei’s access to advanced semiconductor technology in 2019, citing national security threats.

The U.S. initiated several semiconductor sanctions on China in 2022 (during Joe Biden’s presidency), citing national security threats, while simultaneously, the country started ramping up its semiconductor base to reduce dependence on China.

The 2020 pandemic prompted the U.S. and other countries to tap chipmakers like Taiwan Semiconductor Manufacturing Co TSM and Intel Corp INTC to build their semiconductor fabs to develop advanced semiconductor chips that go into electronic devices ranging from smartphones, PCs to automobiles.

Last week, Intel announced that the first two advanced extreme ultraviolet (EUV) lithography machines from ASML were “in production” at its factories. Reportedly, Intel took seven years to put those earlier machines into full production, which contributed to losing its edge to Taiwan Semiconductor.

ASML stock plunged over 24% in the last 12 months. During that period, at least eight Wall Street firms cut their price targets on the stock after it failed to impress the Market with its outlook. The U.S. embargo on China, a key ASML market, affected its outlook.

Additionally, struggling chipmaker Intel is a key client of ASML. Therefore, reports of a possible takeover or split of the company may impact ASML demand.

Price Action: ASML stock is up 2.63% at $726.84 premarket at last check Wednesday.

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