Key Chip Supplier ASML Says No Hit From US China Sanctions

Europe’s largest tech group ASML Holding reported better-than-expected third quarter sales on Wednesday with record new bookings.

But most interestlngly, perhaps, the company, which makes lithography systems for makers of computer chips, said it does not expect a large impact from US chip restrictions on China.

“There is uncertainty in the market due to a number of global macro-economic concerns including inflation, consumer confidence and the risk of a recession,” CEO Peter Wennink said in a statement.

Despite weakness in the end market for memory chips, however, “the overall demand for our systems continues to be strong. This resulted in record bookings in the third quarter of around 8.9 billion euros ($8.74 billion),” he said.

ASML’s large lithography machines cost up to $160 million each and are used by chipmakers such as Taiwan Semiconductor (TMSC), Samsung and Intel to create the circuitry of computer chips.

It is currently unable to keep up with demand from these companies as they seek to build new manufacturing plants, and with ASML’s backlog now at more than 30 billion euros, ASML is seeking to expand its own production capacity by 2025.

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ASML’s third-quarter net profit was 1.7 billion euros ($1.7 billion), on sales of 5.8 billion euros, beating analyst forecasts of profit of 1.42 billion euros, on sales of 5.41 billion euros.

By comparison in the second quarter of 2022, ASML had income of 1.7 billion euros on sales of 5.78 billion euros.

The United States earlier this month issued sweeping new restrictions on exporting semiconductors to China.

ASML has been restricted by the Dutch government in shipping its best machines to China, due to US diplomatic influence, since 2019. However, it still sells slightly older machines in China, where it had 16% of sales in 2021.

ASML said the impact of the new US regulations appears limited given that it is a European company with few US parts used in its machines.

“We can continue to ship non-EUV (less advanced) lithography tools out of Europe to China,” the company said.

However, Chinese customers may have difficulty obtaining other parts they need, the company said. ASML noted that since it cannot keep up with orders in general at the present, if orders for tools from China slow, it could sell them elsewhere.