Chip Gear-Maker ASML’s Sales Outlook Beats Analyst Estimates

(Bloomberg) -- ASML Holding NV forecast fourth-quarter sales ahead of analysts’ expectations, as Europe’s largest semiconductor equipment maker won orders for 23 more of its newest lithography machines.

The Netherlands-based company, which has a monopoly on extreme ultraviolet-lithography equipment, predicts sales of 3.9 billion euros ($4.3 billion) for the fourth quarter, compared with an average estimate of 3.87 billion euros. A year earlier, ASML reported sales of 3.14 billion euros over that quarter.

Shares of ASML fell as much as 2.1%. The shares has surged 77% so far this year through Tuesday, making ASML the fourth Dutch company with a market value of more than a 100 billion euros.

Key Insights

ASML, an important supplier to chip makers including Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co., forecasts a gross margin of about 48% to 49% in the fourth quarter of the year, matching the average estimate for 48.8%.

The 23 EUV orders in the third quarter contributed to the highest-ever value of bookings in one quarter, said Chief Executive Officer Peter Wennink. “This strong order flow confirms the adoption of EUV in high volume manufacturing for Logic and Memory.”

Wennink added he expects the Logic business to continue to be strong, driven by the leading-edge nodes supporting end-market technology and applications such as 5G and artificial intelligence, while the timing of the memory industry’s recovery remains uncertain.

ASML locked in bookings worth of 5.1 billion euros in the last quarter.

Analyst Comment

“The order value really pops out, what is impressive amid the trade war and negative impact on electronics,” InsingerGilissen Bankiers analyst Jos Versteeg said by phone, “Such a strong growth does show how confident chip manufacturers are and that they do not want to miss the boat. I think the build-up to 5G leads to a considerable demand for semiconductors.”

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Third-quarter sales came in at 2.99 billion euros, slightly below the average estimate of 3.01 billion euros. In the quarter, ASML shipped seven EUV systems, three of which were NXE:3400C, the higher productivity model.

ASML newest machines, called extreme ultraviolet lithography systems or EUV, etch smaller circuits while increasing capacity and speed. EUV machines, about the size of a bus, cost more than 100 million euros each. ASML earns the bulk of its revenue in Asia.

ASML models an annual revenue opportunity of 13 billion euros in 2020 and an annual revenue of between 15 billion euros and 24 billion euros through 2025, based on its positive view of technology drivers such as 5G communications, automotive, artificial intelligence and data centers. CEO Wennink said in the statement he continues to see 2019 as a growth year.

What Bloomberg Intelligence says:

Greater exposure to chip lithography equipment could help ASML achieve strong sales growth from 2020 onward, although sales and profit may temporarily drop in 2019. ASML is well-positioned as the only maker of extreme ultraviolet lithography (EUV) machines, for the next generation of chips for AI and 5G.

To contact the reporter on this story: Ellen Proper in Amsterdam at eproper@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Edwin Chan

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