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ASML Reports Export Curbs Impacted Customer Spending in 2024

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ASML, the Dutch semiconductor equipment manufacturer, stated in its annual report that uncertainties surrounding export controls weakened customer demand in 2024. The company, which has faced multiple waves of U.S.-led restrictions on exports to China, cited concerns over technological sovereignty and geopolitical factors affecting capital expenditures.

Major clients, including TSMC, Samsung, SK Hynix, SMIC, and Intel, have exercised caution in their spending due to these uncertainties. China, which accounted for 36% of ASML’s sales in 2024, is expected to see its share decline to around 20% in 2025 as more entities face restrictions.

Despite these challenges, ASML reaffirmed its sales forecast of €30-35 billion for 2025, up from €28.3 billion in 2024, driven by strong demand for extreme ultraviolet (EUV) lithography systems, essential for advanced chip manufacturing.

In a move to strengthen its global strategy, ASML announced the appointment of former Dutch Social Affairs Minister Karien van Gennip to its supervisory board. The company has also brought on political figures such as former French Finance Minister Bruno Le Maire and ex-Deputy Economy Minister Frank Heemskerk to enhance its international positioning.

China’s SMIC Flags Chip Oversupply Risk on Weakening Demand, Rising Output

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Semiconductor Manufacturing International Corp. (SMIC), China’s largest chipmaker, has raised concerns about a potential oversupply of mature-node chips in the second half of 2025. The company, which specializes in established chips used in consumer electronics and home appliances, noted that the market could face an imbalance due to weakening demand and increased output.

During the COVID-19 pandemic, SMIC benefited from a surge in demand for its chips as people relied on consumer electronics during stay-at-home orders. However, as people return to offices and replacement demand slows, SMIC has experienced a drop in consumer-driven demand. Advanced chips for Huawei smartphones account for a small portion of SMIC’s revenue, with the company never confirming whether it produces chips for Huawei.

Co-CEO Zhao Haijun warned analysts that two key factors could impact the second half of 2025. First, the company expects a decline in order volume as demand for chips has been pulled forward into the first half of the year. Second, the increase in production capacity across the industry is likely to result in price competition among manufacturers for orders.

SMIC reported a 31.5% year-on-year increase in revenue for the October-December period, reaching $2.2 billion, meeting market expectations. The company expects first-quarter revenue to grow by 6% to 8% compared to the previous quarter. The positive share movement was attributed to broader optimism in Chinese stocks and the development of cost-effective AI models by DeepSeek, which could benefit domestic chipmakers like SMIC.

Despite the challenges, SMIC’s strong first-quarter outlook and steady capital expenditure (CAPEX) plans have bolstered investor confidence. In 2023, SMIC’s capital expenditure surged to $7.3 billion from $4.5 billion in 2021, and the company expects to maintain a similar level in 2024 and 2025.

However, SMIC’s gross profit margin has seen a decline, dropping to 20% in 2023 compared to over 30% in previous years. While profitability improved in the October-December period, Zhao expects continued pressure on profitability in 2025 due to rising depreciation costs from increased capital expenditure. Profit attributable to owners of SMIC was reported at $107.6 million for the period, below analysts’ expectations of $193.45 million.

Amazon Shares Drop on Weak Cloud Growth and Disappointing Forecast REWRITING TEXT:

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Amazon.com shares declined by as much as 5% in extended trading on Thursday after the company reported weaker-than-expected cloud computing growth and a lower sales forecast for the first quarter of 2025. The decline erased about $90 billion in market value before stabilizing at a 4.2% drop.

Amazon Chief Financial Officer Brian Olsavsky indicated that capital expenditure for 2025 would remain consistent with last year’s fourth-quarter spending of $26.3 billion, driven primarily by investments in artificial intelligence (AI) software development.

The company forecast revenue for the first quarter in the range of $151 billion to $155 billion, falling short of analysts’ average estimate of $158 billion. This gap persists even after adjusting for a $2 billion negative impact from the absence of a Leap Day.

Amazon Web Services (AWS) posted a 19% revenue increase to $28.79 billion, narrowly missing analysts’ expectations of $28.87 billion. CEO Andy Jassy attributed the slower AWS growth to inconsistent chip supplies from third-party partners, which constrained capacity.

Investor impatience with Big Tech’s extensive capital spending on AI has grown. Daniel Morgan, senior portfolio manager at Synovus Trust, noted that slowing growth across Amazon’s cloud and retail segments is concerning, especially as competitors such as China’s DeepSeek gain ground in the AI space.

Amazon’s AI investments were showcased at its annual AWS conference in December, where the company introduced new AI models. Its Alexa generative AI voice service is also slated for release later this month after being delayed due to quality concerns.

The company’s retail business provided a cushion, with online sales growing 7% to $75.56 billion, exceeding estimates of $74.55 billion. Advertising sales rose 18% to $17.3 billion, just shy of the expected $17.4 billion.

Amazon forecast an operating profit of $14 billion to $18 billion for the first quarter, missing the average estimate of $18.35 billion. Despite the challenges, Amazon’s fourth-quarter revenue of $187.8 billion slightly surpassed expectations of $187.30 billion. The company also nearly doubled its net income to $20 billion, reporting earnings of $1.86 per share compared to estimates of $1.49 per share.