Dutch lithography giant ASML unexpectedly released its financial report early due to a technical glitch, revealing that its third-quarter order volume was less than half of market expectations, catching investors off guard. As a result, ASML's stock price plummeted by 16%.
In the third quarter, ASML secured orders worth €2.6 billion ($2.8 billion), significantly below analysts' expectations of €5.39 billion (approximately 41.8 billion yuan). Moreover, ASML also lowered its revenue forecast for 2025.
A series of negative factors have impacted investor confidence, with concerns rising that the semiconductor market may be entering a downturn, leading to a drop in stock prices.
The largest decline in 26 years
ASML's stock price plummeted by 16%, marking the largest decline since June 12, 1998, meaning this drop is the greatest in 26 years.
Panic spread, with NVIDIA's stock price falling by 4.5%, the Philadelphia Semiconductor Index by 5.3%, and semiconductor equipment manufacturers such as Applied Materials and KLA also being hit, with stock price declines reaching the largest since 2020, with KLA's drop being the worst in a decade.
ASML CEO Christophe Fouquet stated in a declaration: "It is clear that the recovery is slower than expected, and this situation is expected to continue into 2025, making customers more cautious."
The current semiconductor chip market is complex and uncertain. On one hand, NVIDIA chips are in high demand due to the booming AI industry; on the other hand, demand in the automotive and industrial sectors is sluggish, with customers having to cut orders due to excessive inventory accumulation.On the manufacturer side, Intel is in trouble, having delayed construction projects for factories in Germany and Poland; Samsung Electronics and SK Hynix have also become more cautious.
Bernstein analyst Sara Russo said: "The reduction in orders was in line with seasonal patterns, but we still had to lower our performance expectations because the recovery seems to have been delayed, and customers are facing challenges, which put pressure on the performance for 2025."
ASML expects net revenue for 2025 to be between €30 billion and €35 billion (RMB 232.5 billion to RMB 271.2 billion), compared to the previous expectation of €40 billion. The gross margin for next year is expected to be 51-53%, compared to the previous expectation of 54-56%.
Why is the order volume in the third quarter so far from expectations? ASML did not provide an explanation.
The stock price has dropped by 1/3 from this year's high
ASML is the most valuable technology company in Europe. In July, its stock price reached an all-time high, and then it continued to slide, dropping by one-third to date. In July, the United States issued new restrictions targeting China, affecting investor confidence.
Cantor Fitzgerald said: "Many people are debating, some believe that the financial report was deliberately disclosed early due to a technical glitch, regardless, the financial report is indeed disappointing. Looking at Intel, Samsung, the data they bring is also not good, indicating that the situation in 2025 may be worse than expected."
Last month, the Netherlands issued a new export order, requiring ASML to apply for a license from The Hague when exporting some old equipment, previously it had to seek permission from the United States. So far, China remains ASML's largest customer, accounting for 47% of third-quarter sales.
ASML CFO Roger Dassen pointed out that the proportion of China's business in ASML's business will tend to the historical normal level, and it may account for 20% of total revenue next year.
At present, ASML can only sell less advanced photolithography machines to China, and high-end EUV photolithography machines cannot be sold. In addition, there has been recent news that the United States may issue new restrictions prohibiting the sale of AI chips to specific countries in the Persian Gulf region.AJ Bell financial analyst Danni Hewson said: "In terms of productivity enhancement and technological progress, the AI revolution is likely to play a significant role, and it is not surprising that the United States wants to maintain a monopoly position."
TechInsights analyst Dan Hutcheson believes that Intel, TSMC, and Samsung are cutting orders because they have realized overcapacity. This year's chip factory utilization rate is only 81%, and companies will only purchase equipment when it reaches around 95%. Intel has slowed down its expansion pace, and Samsung and TSMC have become cautious.
International Business Strategies CEO Handel Jones believes that companies have made technological progress when using high-end ASML equipment, and the steps may be reduced by two-thirds. Because the utilization rate has increased, there is no longer a need to purchase more new equipment.
For example, Samsung is optimizing the process. Previously, the steps using ASML EUV might have been five or six steps, but once the technology is successful, it may only require one or two steps. However, like Toyota, Samsung likes to hype, so the information it provides cannot be fully trusted.
The future of the chip industry depends on AI
Handel Jones believes that the demand for AI chips and AI storage chips will still be very hot. The chip industry will encounter short-term troubles, but it will be healthy in the long run.
A few days ago, Samsung announced its third-quarter financial report, with operating profit reaching $6.8 billion, which was lower than expected, mainly due to the cold chip sales.
Recently, Morgan Stanley lowered its target stock prices for Samsung Electronics and SK Hynix. In a report titled "Winter is Coming," it pointed out that the price of storage chips will decline. Of course, the performance of memory chip manufacturer Micron was better than expected, seemingly telling the world that there is no semiconductor winter.
Some analysts believe that in the storage chip field, the demand for traditional DRAM and NAND is sluggish, but HBM is still very strong due to AI demand. This can also be confirmed by TSMC's performance. Analysts believe that TSMC's net profit in the third quarter is expected to grow by 40%, reaching $9.27 billion. Apple, NVIDIA, Qualcomm, and MediaTek are launching new products, all of which are manufactured by TSMC.There are numerous indications that the global economy is not thriving, such as layoffs and interest rate cuts in the United States, and a significant decline in car sales in Europe. Besides AI, the entire semiconductor market is indeed not very prosperous, and AI has become one of the few bright spots in the technology industry. However, how long this bright spot can shine is still a question worth considering.
It is also important to note that China's semiconductor industry is rapidly expanding. This can be confirmed by looking at export data or the volume of equipment purchased from ASML.
China's memory chips are also beginning to compete with South Korea. Just yesterday, Wuhan Taizi Microelectronics Technology Co., Ltd. became the first in the country to conquer the raw materials and formulas required for the synthesis of photoresists. China has made a breakthrough in the bottleneck of key raw materials for chip manufacturing.
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