ASML sells huge amount of chip machines to China while it still can

One in two machines are heading to China

ASML sells huge amount of chip machines to China while it still can

ASML’s Q2 figures exceeded analyst expectations. With 6.2 billion euros in sales and a net income of 1.6 billion euros, the Dutch chip machine maker is doing well for itself. The large share of Chinese sales will leave many in Washington puzzled, though.

Compared to the same quarter last year, orders for chip machines are up 24 percent. “We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments,” said CEO Christophe Fouquet. The Frenchman completed his first quarter as ASML’s chief after veteran Peter Wennink left on April 24.

China shares up sharply this year

The comparison with Q2 2023 offers more striking differences. For example, nearly half of ASML’s new systems are going to be used for memory, not logic chips. Whereas the latter accounted for 84 percent of total end-uses last year, that figure is now only 54 percent. Moreover, the net amount from system sales fell from 5.6 billion to 4.7 billion euros, although that is still an improvement over Q1 2024.

The share of sales to China has been on the rise for several quarters. Taiwan bought up half of all ASML systems in Q1 2023, but now China is claiming 49 percent of the total share. This does not include the very latest EUV machines, which may not end up in China due to export restrictions. As a result, it’s highly likely more than 1 in 2 ASML scanners are heading to China, as the most expensive options aren’t available to it.

US pressure

Trade with China is flourishing just when tensions between that country and the United States have been high for some time. The China issue is a rare one on which both President Biden and former president and presidential candidate Trump can see eye to eye on. No matter who wins the US election at the end of this year, the trade dispute with China will most likely live on.

This is already causing problems for ASML. Apart from the EUV blockade, the U.S. government continuously tries to block Chinese initiatives by the chip maker. For example, the company scrapped deliveries to China under pressure from Washington and the Americans want ASML to effectively abandon already delivered machines to their fate by halting their maintenance. Without ASML assistance, a machine will eventually stop working.

It is to be expected that such restrictions will become more severe. In that case, ASML would again be more dependent on Taiwan (because of TSMC) and South Korea in particular.

Read also: Former ASML CEO Wennink: conflict with China based on politics, not numbers