ASML’s poor quarter is not a good reason to fret about its future

{"text":[[{"start":8.45,"text":"As a rule, companies that urge investors to shrug off poor news, and focus instead on tomorrow’s prospects, are peddling poor advice. "},{"start":16.304,"text":"Yet ASML, Europe’s €350bn lone tech giant, is a rare exception. "}],[{"start":22.52,"text":"The Dutch chipmaking equipment provider has issued what could have been a concerning set of quarterly results. "},{"start":27.799,"text":"Sales of €5.3bn came in at the midpoint of company guidance. "},{"start":32.217,"text":"But China accounted for a massive 49 per cent of the machines it sold, as local chipmakers hoovered up older equipment not restricted by sanctions. "}],[{"start":40.53,"text":"Those hoping that the much-rumoured chip upcycle would show through in new orders were also disappointed. "},{"start":45.697,"text":"At €3.6bn, these were less than half those in the last, blockbuster, quarter of 2023. "},{"start":52.589,"text":"This was also lower than the €5bn that analysts had been expecting, says Simon Coles at Barclays. "},{"start":58.607,"text":"ASML is continuing to invest in capacity, hiring people, building clean rooms and even pre-building equipment that it has not yet sold. "}],[{"start":67.39,"text":"This makes for uncomfortable reading, especially given the group’s strong share price run. "},{"start":72.394,"text":"Indeed, its stock fell about 6 per cent on Wednesday. "}],[{"start":null,"text":"

"}],[{"start":76.97,"text":"This choppy quarter should not obscure ASML’s unassailable market position. "},{"start":81.599,"text":"Orders for its machines — each of which costs hundreds of millions of dollars — are notoriously lumpy. "}],[{"start":88.21,"text":"Demand is building. "},{"start":89.91399999999999,"text":"ASML’s clients, manufacturers such as TSMC and Samsung, are coming out of a slump, normalising inventories and increasing utilisation rates. "},{"start":98.994,"text":"Policy also provides a helpful push. "},{"start":101.374,"text":"Chipmakers are building new fabs, fuelled by funds from the US’s Chips Act. "},{"start":105.967,"text":"Samsung has been awarded $6.4bn and will build capacity in Texas. "},{"start":110.922,"text":"TSMC is setting up shop in Arizona. "},{"start":113.764,"text":"Both will need chipmaking equipment. "}],[{"start":116.78,"text":"Longer term, as the world gets caught up in the artificial intelligence frenzy, it is hard to think of a sector with stronger secular tailwinds than computing power. "},{"start":125.309,"text":"And, most meaningfully, ASML has the luxury of being the only supplier of extreme ultraviolet (EUV) lithography units, which use tiny wavelengths to print patterns for more powerful chips. "},{"start":137.027,"text":"Its latest iterations make more chips per hour, lowering production costs for customers. "},{"start":142.082,"text":"ASML can then not only increase sales but also prices and margins. "}],[{"start":147.34,"text":"All this underpins ASML’s continued conviction that it can make between €30bn and €40bn of sales in 2025, up from €27.5bn last year, with high gross margins of about 55 per cent. "},{"start":161.06900000000002,"text":"For that, it is well worth holding one’s nerve. "}],[{"start":163.84,"text":""}]],"url":"https://creatives.ftacademy.cn/album/150876-1713533683.mp3"}