Softwares

Chip Gear-Maker ASML Warns of Weak First Quarter as Clients Delay Orders

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Chip Gear-Maker ASML Warns of Weak First Quarter as Clients Delay Orders

ASML Holding NV, a major supplier to the world’s largest computer chipmakers, said on Wednesday that first-quarter sales would be weak as some of its customers had delayed orders into the second half of 2019.

The chip equipment maker’s update comes after clients Samsung, the world’s largest chipmaker and TSMC, the world’s largest maker of chips to order, flagged weakness in memory chips prices and in demand for logic chips used in high end mobile handsets.

“The full year is going to be good, but the first quarter is going to be light,” CEO Peter Wennink said in a statement. He forecast first quarter sales of EUR 2.1 billion ($2.4 billion), which would be down from EUR 2.3 billion a year ago, adding that both sales and margins would be stronger in the second half than in the first half of 2019.

ASML, however, said it had still seen “solid” demand from China, a small surprise as Apple, among others, cited weakness among Chinese consumers as a reason for a recent downgrade to revenue forecasts.

The Dutch company reported fourth-quarter net profit of EUR 788 million, up from 643 million in the same period a year ago. That beat the estimates of analysts polled for Reuters who had forecast net profit of EUR 752 million.

Orderbook weakens
However, ASML’s new bookings during the fourth quarter were EUR 1.59 billion, missing analyst estimates of EUR 2.53 billion by a wide margin.

“Our customers responded late in Q4 to slowing demand in their end-markets by delaying deliveries …(of some products) from the first half of 2019 into the second half, in order to balance supply and demand,” Wennink said.

After a decade of outperformance, ASML shares are down 25 percent since July, closing at EUR 141.36 on Tuesday.

Wennink said that chipmakers will continue to invest in new capacity for logic chips this year, which he expected to be the main driver of growth.

Chinese chipmakers such as Semiconductor Manufacturing International, with the support of Beijing, continue to invest in semiconductor manufacturing capacity and technology but for now remain well behind global leaders such as TSMC, Samsung and Intel.

ASML maintained its mid and long term targets of EUR 13 billion in sales by 2020 and of at least EUR 15 billion in sales by 2025, with demand for chips for artificial intelligence, connected cars, and 5g phones and networks among the driving forces.