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ASML's order book fills as chip makers race to boost capacity

By Reuters

By Bart H. Meijer

AMSTERDAM -ASML, one of the world’s biggest suppliers to semiconductor companies, hiked its 2021 sales outlook on Wednesday and announced a new share buyback, as orders for its equipment soared amid a global computer chip shortage.

The Dutch company said demand remained strong as major chip makers, such as TSMC, Samsung and Intel, raced to expand production capacity.

ASML‘s stock price, already up more than 40% since the start of the year, rose 4% in morning trade in Amsterdam.

“Everybody is working extremely hard, us and our suppliers, to actually produce … more machines,” Chief Executive Officer Peter Wennink said. “It’s all driven by basically what we are seeing today which is the digital revolution.”

ASML‘s market valuation has swelled to a record high of more than 240 billion euros ($283 billion), as buoyant sales of consumer electronics in the pandemic, stockpiling in China and supply problems created a global shortage of semiconductors.

ASML, based in Veldhoven, in the south of the Netherlands, is the leading maker of lithography systems used to produce semiconductors. Each machine can cost up to 200 million euros.

Orders for lithography systems reached a record 8.3 billion euros in the second quarter, boosting an order book that was 75% larger than at the end of the first quarter.

ASML reported orders worth 4.9 billion euros for its extreme ultraviolet (EUV) machines used to manufacture advanced chips.

Alongside buying ASML‘s equipment, chipmakers invested in software to boost capacity of existing gear, Wennink said, helping drive up ASML‘s gross profit margin to 50.9%.

“Clients are structurally increasing capacity on the back of the digitalisation wave,” ING analyst Marc Hesselink wrote in a note. “Overall there is a very positive tone on demand for 2021 and beyond.”

ASML, which reported second quarter net profit up 38% at 1.02 billion euros ($1.2 billion), lifted its 2021 sales growth outlook to 35%.

It said it would buy back 9 billion euros worth of its own shares by the end of 2022, replacing its almost finished 6 billion euro buyback launched last year.

“I think the future for the industry looks bright. The semiconductor makers currently have a combined sales number of about $500 billion. That could be a trillion dollars by the end of this decade,” Wennink said.

The bulk of ASML‘s sales are to Taiwan and South Korea, with China ranked third and the United States fourth.

($1 = 0.8495 euros)