ASML: Extreme UV is Delivering Extreme New Orders; Upgrading Our Conviction - 7investing 7investing
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ASML: Extreme UV is Delivering Extreme New Orders; Upgrading Our Conviction

The Dutch lithography equipment supplier will have a very busy second half of the year in 2024.

July 2, 2024

ASML (Nasdaq: ASML), the Dutch lithography equipment maker, had a rough start to 2024.

It reported that its first quarter revenues were down 22% to 5.3 billion Euro ($5.9b USD). That on the surface sounds pretty bad, and it’s reflective of the slowdown we’ve seen across the semiconductor industry.

Nearly all of the chipmaking big boys felt the sting of capital budgets becoming constrained in our higher interest rate environment. ASML’s dip in revenues this year mirrors a similar drop in Applied Material’s fab equipment sales and in Taiwan Semiconductor silicon wafer output.
Applied Materials’ System Revenues. Source:
TSMC Wafer Revenue. Source:

A Source of Hope

Even though the headline-grabbing story might be the lackluster sales number, I’m actually quite optimistic for ASML this year. And unexpectedly, the white knight that’s riding in to save its year is named Intel.

Intel has faced its own set of challenges in recent years, from losing market share in the data center to both NVIDIA’s GPUs and AMD’s GPUs. Yet to offset this cutthroat data center server race (which Intel is going to lose), the company has been investing heavily to build out its Foundry division. At the service of others, Intel is going all-in to manufacture chips for America’s largest tech companies. NVIDIA and Apple are both currently working with TSMC for the production of their most cutting-edge chips. But Intel hasn’t been shy about wooing them to use an American-based domestic supplier.

The reason Intel’s recent venture to the dark..err…Foundry side is so interesting is because it’s been placing a boatload of orders for ASML’s lithography equipment.

In the previous fourth quarter of 2023, ASML booked an absolutely massive 9.2 billion Euro ($9.9b USD) of new orders — which was an all-time new bookings record. 60% of those Q4 bookings — around 5.6 billion Euro ($6b USD) were for ASML’s cutting edge and very expensive extreme ultraviolet system (EUV).

It’s furthermore been reported that Intel stepped to the front of the line and immediately ordered six of ASML’s newest Twinscan EXE:5000 High-NA EUV lithography machines during 4Q. Six machines might not sound like a lot until you realize that they take several months to build and are priced at 354 million Euro apiece ($380 million USD).

Six machines would total more than 2.1 billion Euro ($2.3b USD) that will hit Intel’s capital expenditures budget this year. That’s a massive investment, presumably to fund Intel’s upcoming 18A (1.8nm) and 14A (1.4nm) process nodes.

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