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ASML dismisses claims of Chinese tool stockpiling, says ready for rare earth curbs

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ASML has downplayed concerns that its expected decline in China sales next year is linked to Chinese chipmakers stockpiling its lithography machines, saying the slowdown reflects market dynamics rather than preemptive buying.

“The reason I rule out previous stockpiling is because systems that we ship are actually in a chips factory,” said Chief Financial Officer Roger Dassen during a press briefing on Wednesday. His comments followed ASML’s third-quarter earnings report, which warned of a significant fall in Chinese demand in 2025.

Chinese customers accounted for 42% of ASML’s machine sales in the latest quarter, making China its largest single market. However, U.S. lawmakers have urged tighter export restrictions on ASML, alleging that Chinese firms are purchasing chipmaking tools beyond domestic needs to hedge against future sanctions.

ASML, the world’s top semiconductor equipment maker, said it remains confident in the resilience of its business outside China, despite ongoing geopolitical uncertainty.

Dassen also addressed concerns about China’s rare earth export restrictions, emphasizing that ASML is well prepared in the short term. “We have inventory, we have alternatives. But of course, there is an impact we are navigating,” he said.

China produces over 90% of the world’s processed rare earths and magnets, which are essential components in ASML’s chipmaking tools. Dassen cautioned that longer-term disruptions could be more serious if global trade tensions deepen. “It’s important the world continues to trade so we don’t face lasting limitations,” he said.

China’s Chipmaking Equipment Purchases Expected to Decline in 2025

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China’s spending on chipmaking equipment is projected to decline this year after three consecutive years of growth, driven by overcapacity and U.S. sanctions, according to a report released by Canadian semiconductor research firm TechInsights on Wednesday.

China has led global purchases of wafer fabrication equipment for the past two years, buying $41 billion worth of tools in 2024 and accounting for 40% of global sales. However, spending is expected to fall to $38 billion in 2025, a 6% year-over-year decline, with China’s share of global purchases dropping to 20%, marking the first decrease since 2021, according to Boris Metodiev, a senior semiconductor manufacturing analyst at TechInsights.

“We can see some slowdown in Chinese spending due to export controls and overcapacity,” Metodiev stated during an online seminar.

China had been a key growth driver in the global wafer fabrication equipment sector in 2023 and 2024, even as demand for consumer electronics declined globally. Much of the country’s recent equipment purchases were spurred by stockpiling in response to U.S. sanctions aimed at limiting China’s access to advanced chip technology, particularly those with potential military applications.

Despite these sanctions, Chinese companies such as Semiconductor Manufacturing International Corporation (SMIC) and Huawei have made advancements. Last year, they produced an advanced chip using more labor-intensive and costly methods. Chinese firms have also expanded significantly in the mature-node chip segment, boosting production capacity and gaining market share from Taiwanese competitors.

However, SMIC warned on Wednesday of potential oversupply risks in the mature-node chip market.

Leading Chinese equipment manufacturers like Naura Technology Group and AMEC have also expanded globally, with Naura now ranking as the world’s seventh-largest equipment maker by sales. Despite these efforts to bolster self-sufficiency, China still faces significant challenges in producing lithography systems and testing and assembly tools.

Dutch company ASML, the largest manufacturer of lithography machines, continues to dominate this sector. In 2023, Chinese companies provided only 17% of the testing tools and 10% of the assembly equipment used within the country, Metodiev added.

ASML Maintains Financial Guidance Despite New U.S. Restrictions on China Chip Exports

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INTRODUCTION:
ASML Holding, the leading Dutch semiconductor equipment manufacturer, has reaffirmed its financial projections for 2025 despite the latest U.S. export restrictions targeting China’s chip industry. The company cited minimal long-term impact from the new rules, while the Dutch government expressed alignment with U.S. concerns over advanced semiconductor exports.

KEY DETAILS

  1. ASML’s Financial Guidance:
    • ASML reiterated its November 14 outlook, forecasting group sales between €30-35 billion ($31.5-36.7 billion) in 2025.
    • The company projects China’s contribution to its sales to drop to 20% by 2025, a significant decline from approximately 50% this year.
  2. Impact of U.S. Restrictions:
    • The latest U.S. measures target semiconductor equipment exports to China, including ASML’s deep ultraviolet (DUV) lithography systems, if enforced by Dutch authorities.
    • The new rules also impose stricter controls on computational lithography software and metrology equipment critical to chip production.
  3. Dutch Government’s Position:
    • The Netherlands supports U.S. concerns about uncontrolled semiconductor equipment exports and is evaluating the implications of the updated regulations.
    • Dutch authorities reiterated that export decisions are based on their national security assessments.
  4. ASML’s Long-Term Outlook:
    • ASML stated that the global demand for semiconductors underpins its growth scenarios, minimizing the long-term impact of these regulations.
    • The company’s shares closed 0.9% higher at €664.10 in Amsterdam following the announcement.
  5. Industry-Wide Implications:
    • The restrictions represent the third wave of U.S. efforts in recent years to curtail China’s semiconductor development.
    • Chinese entities, including additional subsidiaries of Semiconductor Manufacturing International Corporation (SMIC), face tightened export curbs.
    • Japanese competitors Nikon and Canon are also affected by restrictions on computational lithography software.

CONTEXT AND ANALYSIS

  • Strategic Implications for ASML:
    ASML’s dominant position in lithography machine manufacturing mitigates immediate risks. However, its reliance on China as a key market presents challenges as geopolitical tensions persist.
  • Dutch Government’s Balancing Act:
    While aligning with U.S. security concerns, the Netherlands must navigate its own economic interests and maintain a competitive edge in the semiconductor sector.
  • Broader Market Impact:
    The global semiconductor supply chain remains under pressure as U.S.-China tech rivalry escalates, with regulatory measures reshaping industry dynamics.

CONCLUSION

ASML’s confidence in its financial resilience reflects the strength of its market leadership and strategic planning. However, the evolving regulatory environment underscores the complexities of balancing business growth with geopolitical realities in the semiconductor industry.