ASML Says New US Chip Controls Will Affect More of Its Equipment Sales
Although Dutch semiconductor equipment company ASML doesn’t expect the new U.S. export controls on China to have a “material effect” on the firm's financial outlook for 2023, it's preparing for the new rules to restrict more sales of its chipmaking equipment.
CEO Peter Wennink, speaking during an earnings call last week, said “uncertainty remains” in the global semiconductor industry, partly due to the “geopolitical environment, including export controls.” He said ASML, the only company producing the lithography tools needed to make the most advanced chips, is still “shipping lithography systems for mature and mid-critical nodes” to China. But sales of some additional equipment could now be affected, including its Twinscan NXT:1980Di tool.
He said that equipment "in principle” would “fall under the export control restrictions.” But Wennink also stressed ASML would need a license “only when those immersion tools are used for advanced semiconductor manufacturing, and that advanced semiconductor manufacturing, we've been informed, only applies to a handful of fabs. So that means that the 1980, for those handful of fabs, is off limits, but not for the vast majority of our Chinese customers for which we don't need an export control license either. We can just ship.”
While Wennink said the new export controls will prohibit those immersion systems from being used only by “let's say, a handful of Chinese fabs,” those are “still sales that we had in 2023 that we will not have in 2024.” That drop in sales could lead to a “bit of a headwind on gross margin,” ASML Chief Financial Officer Roger Dassen added. “You could maybe see less immersion tools into China,” he said.
Other chip companies also have said they will face new restrictions under the controls, including American semiconductor firm Nvidia (see 2310180013).
Wennink said ASML has so far conducted only a “preliminary assessment” of the new U.S. rules -- which updated and expanded parts of the U.S. China-related chip controls announced Oct. 7, 2022 (see 2310170055) -- and stressed that he doesn’t “expect” the measures to substantially affect the company’s 2023 earnings predictions. But the firm still needs to “review the final regulations thoroughly and make a detailed analysis, which will take some time” because of their “length and complexity,” Wennink said. He said the license requirements “could have an impact on the regional split of our shipments in the medium to long term.”
In a separate statement, ASML said “from the information we received, it is our understanding that the new regulations will be applicable to a limited number of fabs in China related to advanced semiconductor manufacturing.” The company also said its second-quarter net sales totaled about $7.3 billion, which was “at the high end of our guidance.”