ASML just gave us a first glimpse into how U.S. chip export curbs will dent its China sales
An ASML icon is being displayed on a circuit board, alongside the flags of the USA and China, in this photo illustration taken in Brussels, Belgium, on January 4, 2024.
Jonathan Raa | Nurphoto | Getty Images
ASML on Tuesday offered the first glimpse into how U.S. restrictions on exports of its advanced chip manufacturing tools to China will impact its sales in the Asian country.
The Netherlands-based chip equipment maker said in its earnings report Tuesday, which was released a day early due to a “technical error,” that it expects net sales for 2025 to come in between 30 billion euros and 35 billion euros ($32.7 billion and $38.1 billion). This is at the lower half of the range ASML had guided previously.
ASML is a critical part of the global chip supply chain. The firm’s extreme ultraviolet lithography machines are used by many of the world’s largest chipmakers — from Nvidia to Taiwan Semiconductor Manufacturing — to produce advanced chips.
While third-quarter net sales at the firm reached 7.5 billion euros — beating expectations — net bookings came in at 2.6 billion euros ($2.83 billion), the company said. That was well below a 5.6 billion euro consensus estimate from LSEG.
ASML shares plunged as much as 16% on Tuesday in response, causing the firm to shed over $50 billion in market capitalization in a single day, according to CNBC calculations using LSEG data.
Beyond the disappointment on bookings — which analysts said was due to weakness in a select number of customers, including Intel and Samsung — AMSL also gave an indication of how geopolitical tensions are putting pressure on its 2025 outlook.
Roger Dassen, ASML’s chief financial officer, said Tuesday that he expects the company’s China business to show a “more normalized percentage in our order book and also in our business.”
UBS analysts said the change in ASML’s 2025 guidance was mainly related to delays with the development of new logic fabrication facilities from Intel and Samsung, adding that the new guidance implies sales to China would fall 25% to 30% in 2025.
How important is China to ASML?
ASML’s China-based customers have been stockpiling the firm’s less advanced machines to get ahead of U.S. export restrictions on the Dutch firm and to continue being able to access its critical technology, which enables them to manufacturer chips for the electronics industry.
ASML has never sold its most advanced extreme ultraviolet lithography, or EUV machines to Chinese customers due to previous restrictions.
Instead, chip firms in the country have opted to order ASML’s deep ultra violet lithography, or DUV machines. DUV machines are ASML’s second-tier lithography systems that are critical to make the circuitry of chips.
Last year ASML sourced 29% of its sales from China. It now expects that contribution from China to drop to around 20% of its total revenue in 2025.
Sales to China grew dramatically in the first three quarters of 2024 as customers scrambled to buy ASML’s DUV machines in bulk head of U.S. and Dutch export restrictions.
In the company’s second-quarter 2024 earnings presentation, ASML said that it sourced as much as 49% of its sales from China.
In September, the Netherlands expanded export restrictions on advanced chip manufacturing equipment by bringing licensing requirements of ASML’s machines under its purview and thereby taking over from the U.S. on controlling what machines ASML is able to export to other countries.
The move meant that the Dutch government would be able to effectively block ASML from maintaining the DUV machines it has sold to China so far.
“China is a very important market for China,” Chris Miller, assistant professor of international history at the Fletcher School of Law and Diplomacy at Tufts University and author of the book “Chip War,” told CNBC in emailed comments. “Most of this revenue is from older-generation chipmaking tools.”
Ironically, restrictions on exports of DUV machines to China “have probably helped ASML on net, because China has accelerated purchases of older generation DUV tools as a result,” Miller added.
Now, ASML is expecting a drop-off in sales to China as a result of U.S. trade restrictions. The firm expects China to return to taking up a smaller share of its overall global sales in 2025, CFO Dassen said in a transcript of a video interview Tuesday.
“We do see China trending towards more historically normal percentages in our business,” Dassen said. “So we expect China to come in at around 20% of our total revenue for next year. Which would also be in line with its representation in our backlog.”
Analysts at Bank of America said the firm faces a “sharp decline in China revenues.” They added that ASML’s forecast of China accounting for around 20% of its revenue in 2025, implies a 48% revenue decline year-over-year — more severe than the 3% they had anticipated.
Abishur Prakash, founder of Toronto-based advisory firm The Geopolitical Business, said that demand from China for ASML’s machines is likely to drop significantly as the firm is “severely restricted by export controls.”
“Like Intel, for whom China is the largest market, ASML is deeply reliant on China,” Prakash told CNBC via email. “For ASML, it is watching what is taking place with China as a potential restriction on business.”
“As the chip world is cut from China, ASML could see demand for its equipment drop — from China and elsewhere,” Prakash added.
Intuit CEO Sasan Goodarzi speaks at the opening night of the Intuit Dome in Los Angeles on Aug. 15, 2024.
Rodin Eckenroth | Filmmagic | Getty Images
Intuit shares fell 6% in extended trading Thursday after the finance software maker issued a revenue forecast for the current quarter that trailed analysts’ estimates due to some sales being delayed.
Here’s how the company performed in comparison with LSEG consensus:
- Earnings per share: $2.50 adjusted vs. $2.35 expected
- Revenue: $3.28 billion vs. $3.14 billion
Revenue increased 10% year over year in the quarter, which ended Oct. 31, according to a statement. Net income fell to $197 million, or 70 cents per share, from $241 million, or 85 cents per share, a year ago.
While results for the fiscal first quarter topped estimates, second-quarter guidance was light. Intuit said it anticipates a single-digit decline in revenue from the consumer segment because of promotional changes for the TurboTax desktop software in retail environments. While that will affect revenue timing, it won’t have any impact on the full 2025 fiscal year.
Intuit called for second-quarter earnings of $2.55 to $2.61 per share, with $3.81 billion to $3.85 billion in revenue. The consensus from LSEG was $3.20 per share and $3.87 billion in revenue.
For the full year, Intuit expects $19.16 to $19.36 in adjusted earnings per share on $18.16 billion to $18.35 billion in revenue. That implies revenue growth of between 12% and 13%. Analysts polled by LSEG were looking for $19.33 in adjusted earnings per share and $18.26 billion in revenue.
Revenue from Intuit’s global business solutions group came in at $2.5 billion in the first quarter. The figure was up 9% and in line with estimates, according to StreetAccount. Formerly known as the small business and self-employed segment, the group includes Mailchimp, QuickBooks, small business financing and merchant payment processing.
“We are seeing good progress serving mid-market customers in MailChimp, but are seeing higher churn from smaller customers,” Sandeep Aujla, Intuit’s finance chief, said on a conference call with analysts. “We are addressing this by making product enhancements and driving feature discoverability and adoption to improve first-time use and customer retention.”
Better outcomes are a few quarters away, Aujla said.
CreditKarma revenue came in at $524 million, above StreetAccount’s $430 million consensus.
At Thursday’s close, Intuit shares were up about 9% so far in 2024, while the S&P 500 has gained almost 25% in the same period.
On Tuesday Intuit shares slipped 5% after The Washington Post said President-elect Donald Trump’s proposed “Department of Government Efficiency” had discussed developing a mobile app for federal income tax filing. But a mobile app for submitting returns from Intuit is “already available to all Americans,” CEO Sasan Goodarzi told CNBC’s Jon Fortt.
Goodarzi said on CNBC that he’s personally communicating with leaders of the incoming presidential administration.
On the earnings call, Goodarzi sounded optimistic about the economy.
“Our belief, which is not baked into our guidance, is that we will see an improved environment as we look ahead in 2025, particularly just with some of the things that I mentioned earlier around just interest rates, jobs, the regulatory environment,” he said. “These things have a real burden on businesses. And we believe that a better future is to come.”
WATCH: H&R Block, Intuit shares fall after report Trump administration is considering a free tax-filing app
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports8 months agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway