ASML’s latest financial forecast reveals the impact of U.S. export controls on its operations in China. In a report released on Tuesday, the leading advanced chip manufacturing equipment company finally shed light on how these restrictions on the export of advanced machinery to China are affecting its sales performance.
The report indicates that the company expects net sales for 2025 to range between €30 billion and €35 billion (approximately $32.7 to $38.1 billion), a figure that falls at the lower end of its previous financial guidance.
ASML plays a pivotal role in the global chip supply chain, with its extreme ultraviolet lithography (EUV) machines being utilized by major chip manufacturers like Nvidia and TSMC for advanced chip production.
In the third quarter, ASML reported net sales of €7.5 billion, surpassing market expectations. However, its order intake of €2.6 billion was less than half of the consensus estimate of €5.6 billion from LSEG- surveyed analysts.
As a result, ASML’s stock plummeted by 16% on Tuesday, leading to a market value decline of over $50 billion, according to calculations by CNBC using LSEG data.
Analysts attributed the disappointing order figures to weakened demand from key customers, including Intel and Samsung Electronics. Furthermore, ASML specifically noted that geopolitical tensions are putting pressure on the company’s operational outlook for 2025.
During a conference call with analysts on Wednesday, CFO Roger Dassen communicated that the company anticipates a decline in sales to China next year, partly due to U.S. export controls.
Dassen remarked, “Everyone is keeping an eye on news reports; there’s a lot of speculation surrounding export controls. The U.S. restrictions are prompting us to approach sales in the Chinese market with more caution.”
UBS analysts believe that ASML’s revision of its 2025 financial forecast primarily stems from delays in the development of new logic process wafer fabs by Intel and Samsung, along with a predicted 25% to 30% decrease in sales within the Chinese market next year.
In response to U.S. export controls and potential cooperation from the Dutch government, ASML’s Chinese clients have been stockpiling less advanced machinery. Consequently, sales to China surged significantly in the first three quarters of this year. Existing restrictions have prevented ASML from selling its state-of-the-art EUV machines to China; instead, Chinese semiconductor companies can only purchase the second-tier deep ultraviolet (DUV) lithography equipment.
Last year, China accounted for 29% of ASML’s total sales, but this figure is forecasted to drop to around 20% by 2025.
Author of “Chip War,” Chris Miller, told CNBC, “China is a crucial market for ASML because a significant portion of its revenue comes from older-generation machines.”
BofA analysts noted that ASML’s revenue from China is experiencing a sharp decline. If ASML’s projections hold true, its sales from China could contribute only about 20% to overall revenue next year, representing a substantial 48% reduction compared to the current year’s strong order backlog.
Praka, founder of Geopolitical Business consultancy, stated that strict export controls will inevitably lead to a drastic decrease in demand for ASML’s machinery in China.
Praka emphasized, “Just as China is Intel’s largest market, ASML has a deep reliance on China. With business transactions restricted, ASML must watch how the future situation develops.”
