ASML will add capacity in the face of unprecedented demand

ASML is the only manufacturer of mission-critical EUV lithography machines, and demand has skyrocketed with the global shortage of chips. Ensuring that capacity matches demand is now its priority.

For the first quarter of 2022, the Veldhoven, Netherlands-based company reported net revenue of 3.5 billion euros, at the upper end of its forecast. Gross margin was also 49.0%.

Currently, the demand for its systems exceeds its production capacity. To overcome this bottleneck, ASML said it aims to increase capacity with its supply chain partners in the coming years.

“We continue to see unprecedented customer demand across all market segments, advanced and mature nodes, driving demand across our product portfolio,” commented ASML’s President and CEO, Peter Wennink, on an investor call April 20, 2022. “We are running at maximum capacity and expect demand to exceed supply through next year.

Despite some economic and geopolitical headwinds, ASML is confident that the fundamental drivers of growth will remain intact. “Strong demand this year and beyond is reflected in strong bookings in recent quarters, resulting in an order book of around 29 billion euros, a record high,” Wennink said.

In the first quarter of 2022, orders amounted to 7 billion euros.

“We expect strong order intake to continue as demand will continue to outpace supply as well over the next year,” Wennink said. “With several countries pursuing technological sovereignty, we are now seeing a number of customer announcements for new factories in the coming years in support of this global trend. These announced investments should have a positive impact on demand in the medium term.

Earlier this month, the US government and domestic chipmakers stepped up efforts to pass the $52 billion CHIPS stimulus bill. Similarly, the European Chips Act, announced on February 8 by the European Commission, should mobilize 43 billion euros in public and private funding for the semiconductor industry, with the ambition of doubling the current share of the EU in global chip production to 20% in 2030.

At its September 2021 Investor Day, ASML said the capacity ramp is expected to provide production capacity of over 70 0.33NA EUV systems and approximately 375 deep ultraviolet (DUV) systems by 2025. During the fourth quarter of 2021, the Dutch group has identified a need to further increase its production beyond this level in order to meet “stronger and longer market demand and to support an industry which is expected to at least double in size. ‘here 2030’. In view of the current situation, Wennink said, “We are studying the possibility of increasing our annual capacity by 2025 to approximately 90 EUV 0.33NA systems and 600 DUV systems.”

He continued: “For DUV, we plan to increase capacity for both immersion and dry, with heavier weighting towards the dry. We are also discussing with our supply chain partners to secure a capacity of approximately 20 EUV 0.55NA systems in the medium term. […] This relates to what we currently believe our maximum capacity target should be and therefore may not be a final release plan. »

The lithography system vendor is currently evaluating feasibility with its supply chain partners. “Once this analysis is complete, we also plan to revisit our 2025 scenarios and growth opportunities beyond 2025. We expect to provide a capital markets update during the fourth quarter.”

For the second quarter of 2022, ASML currently expects its total net sales to be between €5.1 billion and €5.3 billion with a gross margin between 49% and 50%.

For the full year, the group maintains its forecast of revenue growth of around 20% in 2021.

On its Investor Day in September 2021, ASML raised its long-term outlook and said it expects to reach annual revenue of between €24 billion and €30 billion by 2025, with a margin gross between 54% and 56%.

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Mary I. Bruner