ASML shares experienced a significant rise on Wednesday, following a report from a Jefferies analyst. This report highlighted comments made by CFO Roger Dassen, which indicated his positive outlook on the likelihood of receiving orders from their major customer, TSMC, in the upcoming quarters. The optimism expressed by Dassen during this call is crucial because TSMC is not just any customer, but a pivotal player in the semiconductor industry. TSMC’s decisions and investments heavily influence market dynamics and the demand for advanced semiconductor manufacturing equipment. Dassen’s remarks have, therefore, sent a positive signal to investors, reflecting potential growth in ASML's future revenue.
An ASML spokesperson confirmed that CFO Roger Dassen had participated in a call hosted by Jefferies with investors, where he shared his insights. This kind of direct communication between company executives and investors is part of ASML’s strategy to maintain transparency and provide up-to-date information on their business operations and market outlook. By engaging directly with investors, ASML aims to build confidence and provide clarity on their strategic direction, which can help stabilize and potentially boost their stock prices in the face of market fluctuations.
ASML's shares had increased by 6.3%, reaching 927.10 euros ($1,008.78). This substantial increase reflects the market's reaction to the positive news regarding potential future orders from TSMC. Share price movements like this are often driven by investor sentiment and expectations about a company’s future performance. The surge in ASML's share price indicates that investors are optimistic about the company's prospects and believe in its ability to secure significant new orders and maintain its leadership position in the semiconductor equipment market.
ASML, recognized as the world's leading manufacturer of semiconductor equipment, specializes in producing lithography tools. These tools utilize beams of light to assist in the creation of the intricate circuitry found in computer chips. Lithography is a critical process in semiconductor manufacturing, as it defines the size and shape of the transistors and circuits on a chip. ASML's advanced lithography tools enable chipmakers to produce smaller, more powerful, and more efficient chips, which are essential for modern electronic devices ranging from smartphones to servers. On the other hand, TSMC holds the position of the world's largest producer of advanced chips, playing a crucial role in the global supply chain of semiconductors. TSMC’s advanced manufacturing capabilities and its significant investments in cutting-edge technology make it a vital partner for ASML.
The Jefferies report mentioned that Dassen "sounded optimistic" regarding the progression of commercial discussions with TSMC. He suggested that these talks were close to concluding and anticipated "significant" orders related to 2 nm technology to start materializing in the second or third quarter. The 2 nm technology represents the next generation of semiconductor manufacturing, promising even greater performance and efficiency improvements over current technologies. If these orders come through as expected, it would mark a significant milestone for both ASML and TSMC, as they push the boundaries of what is technically possible in chip manufacturing.
ASML has previously set a target for its 2025 sales to be within the range of 30-40 billion euros. This ambitious target is driven by the soaring demand for state-of-the-art logic chips used in smartphones and artificial intelligence applications. The demand for these advanced chips is fueled by the rapid growth of technologies such as 5G, artificial intelligence, and high-performance computing, all of which require highly sophisticated and efficient semiconductor components. ASML’s ability to meet this demand hinges on its continued innovation in lithography technology and its capacity to deliver advanced tools that enable chipmakers to produce ever-smaller and more powerful chips.
According to the Jefferies report, the company expects the strong demand to persist into 2026, supported by the establishment of government-subsidized factories worldwide. These subsidies are part of broader national strategies to secure semiconductor supply chains and reduce dependence on foreign manufacturers. Governments around the world, recognizing the strategic importance of semiconductors, are investing heavily in domestic chip production capabilities. This trend is expected to drive sustained demand for ASML’s advanced lithography tools, as new factories will require cutting-edge equipment to produce the latest generation of chips.
The report also indicated that TSMC anticipates receiving one of ASML's new High NA extreme ultraviolet (EUV) machines, each valued at over 350 million euros, sometime within this year. These High NA EUV machines represent the pinnacle of lithography technology, enabling chipmakers to achieve even finer resolutions and produce more advanced chips. The high numerical aperture (NA) of these machines allows for greater precision in the lithography process, which is critical for the production of next-generation semiconductors.
Intel was the first company to acquire one of these machines, while another has been installed in a newly opened ASML-Imec laboratory. Intel’s acquisition of the High NA EUV machine underscores its commitment to maintaining a leadership position in semiconductor manufacturing. The installation of another machine in the ASML-Imec laboratory highlights the importance of research and collaboration in advancing lithography technology. This laboratory will serve as a center for innovation, where ASML and its partners can develop and refine the processes needed to fully leverage the capabilities of High NA EUV technology.
ASML has received orders for more than a dozen High NA tools from all the customers currently utilizing its existing EUV line, including Intel, TSMC, Samsung, SK Hynix, and Micron. This widespread interest from multiple leading semiconductor manufacturers indicates strong confidence in ASML’s technology and its potential to drive future advancements in chip production. These orders also reflect the industry's recognition of the need for continued investment in cutting-edge equipment to stay competitive in the rapidly evolving semiconductor market.
Furthermore, the Jefferies report noted that ASML does not foresee any competition in EUV technology from Chinese lithography company SMEE or Huawei "in the foreseeable future." This is attributed to the intricate nature of the technology and the complexity of the supporting ecosystem. EUV lithography is an exceptionally challenging technology to develop and deploy, requiring a deep understanding of physics, engineering, and materials science, as well as a robust supply chain for the specialized components used in the machines. ASML’s extensive experience, accumulated knowledge, and established ecosystem give it a significant advantage over potential competitors. This technological lead and the barriers to entry suggest that ASML will maintain its dominant position in the EUV market for the foreseeable future.
05.06.2024
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