ASML Shares Fall As Netherlands Blocks Some Chip-Making Machine Exports

Shares of ASML Holding NV fell in premarket trading in New York on the decision by the Dutch government to block the semiconductor manufacturer from exporting some advanced chip equipment to China.  

The Netherlands-based company said the Dutch government “partially revoked” its export license to ship NXT:2050i and NXT:2100i lithography machines to China. These lithography machines are used to make advanced chips. 

The cancellation of the export license comes after the Biden administration announced tighter trade restrictions on state-of-the-art artificial intelligence chips, sparking outrage from Beijing in October. 

ASML told CNBC in a statement that recent discussions with the US government allowed them to “obtain further clarification of the scope and impact” of the October export controls. These trade restrictions are “on certain mid-critical DUV immersion lithography systems for a limited number of advanced production facilities.” 

Under pressure from the Biden administration in June, the Dutch government enforced restrictions on exporting advanced semiconductor equipment.

The Biden administration has been cracking down on Beijing’s ability to manufacture advanced semiconductor chips, inhibiting Chinese firms’ access to lithography machines across the Western world. Despite all of this, China’s Huawei Technologies Co. has still been able to produce a smartphone to rival Apple’s iPhone. 

ASML does not believe these restrictions will “have a material impact on our financial outlook for 2023.”

However, shares of ASML were down in premarket trading by 2%. Other chipmaking companies, Applied Materials, Lam Research, and KLA, were lower in the premarket. 

Here’s what Wall Street analysts are saying (list courtesy of Bloomberg): 

Redburn Atlantic (Timm Schulze-Melander, sell)

• Cancellation of shipments marks a step-up in enforcement of US-China trade restrictions
• Analyst estimates mid-single-digit impact to 4Q23 earnings, as well as FY24 revenue decline of 4% vs. consensus expectation of flat revenue y/y

Equita (Gianmarco Bonacina, hold)

• Revocation of export licenses impacts a limited number of Chinese customers, which analyst notes could include SMIC, a producer for Huawei among others
• China accounted for more than 40% of group’s 3Q revenue, and the stock trades at the upper end of the valuation range — both reasons the broker sees the news as “negative” for ASML
• “We believe China will further accelerate the race to its independence”
• Analyst leaves estimates unchanged, though lowered recently

Oddo (outperform)

• Assumption is that the ban concerns three machines at an average selling price of around €60m, i.e. €180m of sales
• ASML indicated that US blocking deep ultraviolet (DUV) sales to China should have no material impact, so the group might have performed better on the rest of the business
• Long-term outlook “unchanged”

Meanwhile, a spokesperson for the Chinese Foreign Ministry called the US’s intervention in limiting China’s access to chipmaking machines nothing more than “hegemony” and asked the Dutch government to “respect the spirit of the contract and world order, to safeguard the mutual benefits of the two countries.”