ASML is seeing huge demand for its chipmaking EUV and DUV machines.
ASML is seeing huge demand for its chipmaking EUV and DUV machines.
Semiconductor equipment maker ASML Holding (ASML +0.00%) is arguably the most important company on the planet that most people have never heard of before. Its position in the semiconductor industry makes the stock a buy.
The Dutch company has a monopoly on extreme ultraviolet (EUV) lithography technology, and without its machines, foundries would not be able to manufacture the advanced chips used in smartphones, computers, and artificial intelligence (AI) infrastructure. It is also a leader in deep ultraviolet (DUV) machines, which can make the less critical components of logic and memory chips.
With ASML's EUV machines needed to make the critical components of advanced logic chips, like graphics processing units (GPUs) and high-performance central processing units (CPUs), as well as high bandwidth memory (HBM), business has been booming. In fact, on its Q3 earnings call, the company said that it will not be able to make as many machines as customers want in either 2027 or 2028. In addition, it said customers have already been expressing interest in placing orders for deliveries in 2029 and 2030.
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As a result, ASML is looking for ways to increase its own manufacturing capacity in 2028 and beyond the original 30% it had planned. Its newer NXE:3800F machine, being introduced next year, will raise wafer throughput from 230 to 260 wafers per hour, helping its customers improve their capacity. It also plans to increase wafer output for its DUV immersion tools next year.
In addition to the strength the company is seeing in its core EUV and DUV machines, it is also receiving commitments from foundries to start using its new High NA (high numerical aperture) EUV machines in the coming years. Samsung Electronics plans to start using these machines at high volume around 2028, with Taiwan Semiconductor Manufacturing following around 2030. These machines will be able to help foundries push node sizes (chip density) even further and, at around $400 million apiece, are roughly double the cost of its Low NA EUV machines.
Turning to its numbers, ASML's Q3 revenue soared 55% year over year to 11.7 billion euros ($13 billion), which came in at the high end of the company's guidance range of 11 billion to 12 billion euros ($12.2 billion to $13.4 billion). Equipment sales jumped by 51% to 8.4 billion euros ($9.3 billion), while service revenue soared 65% to 2 billion euros ($2.2 billion).
During the quarter, the company sold 113 new lithography systems and eight used systems, compared to 66 new and six used systems in the prior-year period. Approximately 49% of its sales came from higher-priced EUV technology, versus 38% a year ago. Meanwhile, 23% of its sales were to China, down from 42% a year ago. It expects China to remain around 20% of its business.
Averytin News Financial update.