Without China, will Netherlands ASML go out of business? Now, the lithography giant is finally facing this problem.
In the past two years, many people have thought that ASML, which is in a dilemma among the great power competitors, will hit the iceberg sooner or later, but they didn't expect the retribution to come so quickly. Behind this, there are great changes in the global chip industry, and production capacity has been transferred, can ASML still have a chance?
Despite a lot of efforts by Netherlands officials, lithography giant ASML has ushered in the expected darkest moment. The company's earnings momentum has come to a catastrophic ride.
On October 15, ASML released its financial report for the third quarter of 2024, with net sales of 7.467 billion euros, an increase of 19.6% from the previous quarter; Net income of 2,077 million euros increased by 31.6 percent quarter-on-quarter, both of which reached record highs since the first quarter of 2021.
If you just look at these numbers, you will think that this company is better, but these data are the results of the last quarter, and some other data shows that this company has fallen headlong.
The catastrophic figures came, ASML's new orders for the quarter were only 2.633 billion euros, down 52.7% from the previous quarter, less than half of the market expectation of 5.4 billion euros, which is also too frightening.
As soon as these data came out, ASML's stock price plummeted, with U.S. stocks falling more than 15% intraday and Amsterdam plummeting 16% on the same day.
Yesterday, U.S. stocks fell sharply, falling more than 6% intraday, and the cumulative decline in two days has exceeded 20%, is this a stock market crash?
Since ASML's U.S. stock reached a high of $1,110 per share on July 24, it has fallen sharply, and yesterday's lowest has fallen to $686, with a cumulative decline of nearly 40% in more than two months! Isn't this a stock market crash?
What is even more frightening is that ASML's new orders of 2.6 billion euros in the third quarter are about 1.4 billion euros for EUV and only 1.2 billion euros for DUV.
Let's compare the orders data for the previous three quarters.
1. In the second quarter of this year, new orders were 5.6 billion euros, EUV 2.5 billion euros, and DUV 3.1 billion euros.
2. In the first quarter of this year, new orders were 3.6 billion euros, EUV 656 million euros, and DUV 2.944 billion euros.
3. In the fourth quarter of last year, new orders were 9.19 billion euros, EUV was 5.6 billion euros, and DUV was 3.59 billion euros.
What do you see from these new order data? There are at least 3 facts that make ASML shudder.
1. The amount of new orders has declined sharply in the past four quarters, indicating that the market space of ASML lithography machine is shrinking rapidly.
2. DUV lithography machine orders have declined even faster, from 3.59 billion euros in the fourth quarter of last year to 1.2 billion euros! Even compared to the 3.1 billion euros in the previous quarter, it is too far behind, and this is a cliff-like decline.
3. The price of EUV lithography machine is very high, the market space is limited, and the order is also very unstable.
Based on these data, ASML's new orders hit the wall, EUV is unreliable, and the cliff-like decline in DUV orders is a disaster.
As a large technology equipment company, ASML's business model is similar to Boeing and Airbus aircraft, the cost of the industrial chain is high, and the order delivery cycle is long, so new orders are very important.
Boeing's situation is a bit more serious than ASML's, but one thing is very similar: orders have shrunk sharply, and the company has serious cash flow problems.
In June, for example, Boeing sold only a pitiful 14 aircraft, including only three airliners.
Now, a similar trend is emerging at ASML, how can this not make investors' hearts tremble?
The most important question is, why are DUV orders running out? The reasons are similar to Boeing's, which have lost the world's largest market: China.
As for the reason for the decline in orders for DUV lithography machines, ASML's CFO Roger Dassen's judgment is clear.
In the revenue structure of the third quarter of ASML2024, the share from China is still as high as 47%, and China can currently buy DUV lithography machines, United States it is not allowed to sell EUV to China.
Dai Houjie said in an interview with the financial report that the revenue from the Chinese market will drop to about 20% of the total revenue in 2025. Judging from this, the decrease in orders from China will be the most important reason for the decrease in new orders for ASML's DUV lithography machines.
So, without China, will ASML be in trouble like Boeing, or even go out of business?
The answer to this question is directly related to the capacity transfer of the global chip industry. Judging from the current data and momentum, China's chip production capacity will surpass Korea in 2024 and rank first in the world, with a share of about 23%-25%.
Analysts at Barclays Bank in United Kingdom said China could expand its chip production capacity by 60% in the next three years and double in the next five years after studying the plans of 48 Chinese chipmakers.
By that time, the global share of China's chip production capacity is expected to reach more than 40%.
However, due to the continuous tightening of chip and lithography machine restrictions in the United States and the Netherlands, China had to develop its own lithography machines, and finally officially released two domestic lithography machines in early September this year.
If this continues, will there be a chance for ASML in another 5 years?
In the world of great controversy, when business is tied to the political chariot, the company is not far from death.