#160 ASML 49% Dependent on China, Now Faces Export Regulations from the US
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AI BYTE # 📢: ASML 49% Dependent on China, Now Faces Export Regulations from the US
ASML, the leading supplier of semiconductor manufacturing equipment, has reported that 49% of its total system sales revenue in the second quarter of 2024 came from China.
This shows China’s critical role in ASML’s business, despite ongoing geopolitical tensions and trade restrictions.
However, the landscape is shifting.
The US government is planning to impose stricter export regulations on ASML, aiming to curb China’s access to advanced chipmaking technology.
(already the Netherlands (ASML's home country) has imposed export controls that bar the company from selling its most advanced technology to Chinese companies)
It means shipments to China consist of older generations of chip-making equipment.
These new regulations will require ASML to obtain export licenses for certain advanced lithography systems, potentially impacting its sales and operations in China
Revenue Impact:
ASML’s sales to China have been robust, with the country accounting for nearly half of the company’s system sales in recent quarters. This highlights the strong demand for semiconductor equipment in China, particularly for older-generation lithography systems used in various applications.
Regulatory Changes:
The US has been pushing for tighter controls on the export of advanced semiconductor manufacturing equipment to China. These measures are part of a broader strategy to limit China’s technological advancements. (time will tell how much the US succeeds in this)
The new regulations will affect ASML’s ability to supply its most advanced Deep Ultraviolet (DUV) lithography systems to Chinese companies.
Market Response:
Following the announcement of potential new restrictions, ASML’s shares fell by 7.9%, reflecting investor concerns about the impact of these regulations on the company’s future sales and profitability.
ASML’s results themselves were reassuring after a softer first quarter. Both sales and orders came in ahead of expectations.
The company will need a strong finish to the year to meet its guidance, but everything right now seems on track.
Investors like the company’s long order book and high margins in an industry that is investing heavily in AI.
But the longer-term outlook gets cloudier if the relationship with China changes