The Semiconductor Industry Faces a Shockwave
The global semiconductor industry recoiled recently with a monumental shift in trajectory after ASML, the Dutch company that provides state-of-the-art chip technology, issued lower guidance for 2025. This marks a significant turning point in a market that is already laden with supply chain crunches and soaring demand.
Chipmakers worldwide are somewhat reliant on ASML’s extreme ultraviolet (EUV) lithography machines to manufacture smaller and more complex chips. ASML stands as an unchallenged leader in the sector, monopolizing the market by a considerable margin. In this context, the financial guidance provided by the company can have far-reaching impacts on the overall semiconductor industry.
The company recently reported an increase in net profit for the third quarter of 2021 and predicted strong demand through 2022 encompassing multiple sectors, including high-performance computing, AI, and data centers. However, the revised forecast for 2025 revenues raised eyebrows and triggered a ripple effect in the chip stock market, being lower than what the analysts had expected.
ASML announced its 2025 revenue forecast between €24 billion to €30 billion, a sharp divergence from their earlier estimation of €35 billion. This decline is partly attributed to their semiconductor clients’ transition from ASML’s EUV systems to High-NA systems, which aren’t expected to reach mass-production levels until 2025 or later. According to company executives, this transition would cause some softness in the revenues for the timestep from 2023 to 2025.
The repercussions of this announcement were immediate, with chip stocks taking a notable hit. Not only did ASML’s stock plunge by 3%, but other players also saw their shares in turmoil. Some of the larger companies, such as Taiwan’s TSMC, Intel Corp., and South Korea’s Samsung, experienced a marked decline in stock value following the news.
Yet, this news should be taken with the perspective of an evolving semiconductor industry, which is currently undergoing a transition phase. As one era of chip technology comes to an end, the industry is preparing for the next. High-NA technology – a higher-resolution patterning tool that continues to the next node of dimension reduction is where the future of semiconductors is headed. Although the High-NA systems are more costly, they offer more precision and enable chipmakers to advance onto the newer nodes, hence supporting the production of more efficient chips.
Moreover, it is essential to remember that ASML’s revenues are not solely dependent on the EUV business. ASML’s laser thermal anneal (LTA) technology and holistic lithography solutions are still two significant elements developed to improve the production process, thereby adding resilience to their long-term revenue model.
The reduction in the forecast is a shockwave for the industry indeed – but also an indicator of a paradigm shift towards more advanced chipmaking technology. The semiconductor world is not shrinking, simply the path towards its future is currently through a transition phase.