ASML net income up 23 percent due to semiconductor equipment demand spike

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ASML first quarter profits up 10 percent from last year.
Image: ASML

ASML Holdings NV recently revealed that it exceeded Wall Street’s earnings estimates for the first quarter by 23.1 percent. The Dutch company experienced a significant income spike last period due in part to the global chip shortage.

Its semiconductor manufacturing equipment and software have been in high demand among electronic component providers seeking to expand their output amid the worsening bottleneck.

The world’s only vendor of extreme ultraviolet lithography (EUV) machines expects to do strong business in 2021. CEO Peter Winnick said the firm anticipates expanding its sales by 30 percent annually this year.

Analyst Beating Financial Performance in Q1

In the three months ending March 29, ASML generated €4.4 billion ($5.29 billion) in revenue and a profit of €1.3 billion ($1.54 billion). By comparison, market analysts predicted it would take in €4.02 billion ($4.83 billion) with a net income of €1.08 billion ($1.29 billion). Its sales also outpaced the high end of its Q1 guidance by 7.31 percent.

ASML’s chief executive said the firm’s stronger-than-expected financial performance is the result of intense demand across all of its end markets.

Winnick indicated the recent worldwide embrace of cutting-edge technologies like 5G, AI, and HPC drove its expansion. The company’s EUV machines can create electronic components with remarkable transistor density that enables greater performance and enhanced energy efficiency.

Consequently, the world’s top chipmakers, including Samsung and TSMC, have prioritized acquiring its offerings to reinforce their market leadership.

The corporation also experienced a sharp uptick in demand for its software in Q1. Its upgraded digital services helped semiconductor manufacturers make badly needed enhancement to their production capacity. Since late 2020, part providers have struggled to meet unexpectedly large orders from electronics and automobile vendors.

Ultimately, ASML’s software cannot resolve problems like constrained foundry space and limited raw material availability. But its tools have been effective in assisting some firms in coping with the impact of the industry-wide crisis.

ASML Projects 30 Percent Yearly Revenue Growth in 2021

The Dutch equipment supplier believes current market conditions will let it cultivate substantial long-term growth. To that end, the firm projects its business will grow by 30 percent annually in 2021. In January, it offered guidance indicating its yearly revenue would increase by 10 percent versus FY19.

ASML also expects chip shortage-related demand to boost its near-term sales significantly. It anticipates bringing in between €4 billion ($4.82 billion) to €4.1 billion ($4.94 billion) in the current period. Depending on its performance, it will grow its income by 21.21 to 24.24 percent year-over-year.

Based on recent semiconductor sector developments, the company’s revenue projection is entirely reasonable.

Earlier this month, TSMC revealed it would invest $30 billion in upgrading and expanding its manufacturing capabilities in 2021. The pure-play foundry uses EUV technology to provide state-of-the-art components for its top customers like Apple and AMD. As ASML charges up to $241 million per unit for its equipment, it will greatly benefit from the Taiwanese corporation’s capital expenditure.

In addition, SMIC, China’s largest contract chipmaker, disclosed it would continue its partnership with ASML through 2021. It is eager to acquire more deep ultraviolet lithography (DUV) machines to enhance its production capability. At the time of the announcement, it had spent $1.2 billion on the vendor’s fabrication solutions.

It is also worth noting that industry insiders and analysts expect the semiconductor shortfall to persist into 2022. If so, ASML’s software business will continue doing well for the foreseeable future. With those factors at play, it should be able to achieve or even surpass its financial goals.

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