Lithography giant ASML profit cut behind and prospects

Lithography machine leading company ASML (ASML) recently released the first quarter of 2024 financial results show that the company's revenue and profit have declined sharply, especially net profit fell 37.4% year-on-year, almost can be said to be "halved". Crucially, ASML's new orders have been even weaker. According to the data, in the first quarter, the company's new order book was 3.61 billion euros, compared with the record 9.19 billion euros in the fourth quarter of 2023, the first quarter of this year's order book fell by nearly two-thirds. Profits halved, orders fell by two-thirds, and ASML's share price fell in response, losing more than 200 billion yuan, causing widespread concern and concern in the market.

The reasons for ASML's poor performance were mainly reduced production capacity and lower demand from customers such as TSMC and Samsung, as well as hindered sales in the domestic market due to Sino-US trade frictions. First of all, the decline in market demand is one of the main reasons. With the adjustment of the global semiconductor market, especially the slowdown of TSMC and Korean customers, ASML's lithography machine sales have been significantly affected. The decline in new orders led directly to a sharp decline in the company's operating income. At the same time, while the Chinese market contributed a large amount of revenue to ASML, the weakness of other important markets also took a toll on the company's overall results.

Secondly, the implementation of export control measures also had a negative impact on ASML's performance. Affected by export restrictions in the United States and the Netherlands, ASML was unable to sell its most advanced EUV lithography machines to the Chinese mainland market, which further limited the company's sales revenue. In addition, with the complex changes in the global trading environment, ASML is also facing more uncertainties and challenges.

Third, from the company's own operating level, ASML's investment in research and development and manufacturing may also put some pressure on its profits. Although these investments are necessary to maintain technological leadership and market competitiveness, they may increase the company's costs in the short term, thus affecting the level of profit.

Finally, cyclical fluctuations in the global semiconductor industry are also an important reason for ASML's profit halve. The semiconductor industry has a strong cyclical characteristics, when the industry is in the trough period, the performance of enterprises will often be greatly affected. At present, the global semiconductor industry is in a period of adjustment, which has also led to a decline in the performance of companies such as ASML.

Commenting on the results for the first quarter, ASML CEO Peter Wennink stressed in a statement that the company's outlook for the full year 2024 remains unchanged and that the second half of the year is expected to be stronger than the first half, in line with the trend of the industry gradually emerging from the downturn. He said that despite the market challenges, ASML will continue to invest in capacity improvements and technological advances to prepare for the industry's turning points in the cycle ASML has adopted a variety of strategies to stabilize and improve performance in response to the challenges brought about by the decline in profits.

In response to the challenges posed by export control measures, ASML said that it will do its best to support all customers as long as it is within the framework of legal compliance. This demonstrates ASML's commitment to maintaining its global customer relationships, market share and competitiveness while complying with export control regulations. At the same time, we actively communicate with governments and regulatory agencies to seek more understanding and support. By working with government authorities, ASML may be able to secure more flexible export control policies that mitigate the impact on its business.

In addition, ASML has strengthened its relationships with customers and partners around the world. By maintaining close communication and cooperation with customers, ASML is able to better understand market needs and changes, so as to adjust product and market strategies and reduce risks. Therefore, from a longer term perspective, ASML remains optimistic about future developments and plans to address current challenges through capacity expansion and technological advancements.