By the end of the first quarter of 2024, Dutch semiconductor equipment giant ASML had a backlog of orders totaling EUR 38 billion (US$ 41.4 billion). This means that ASML needs EUR 4-6 billion in new orders each quarter to meet the upper limit of its projected 2025 sales, which are expected to reach between EUR 30-40 billion.
The global demand for AI chips is robust, driven by the need to expand the capacity for generative AI hardware. This surge in AI chip demand is positively impacting ASML's new order inflow.
According to Reuters, the growing volume of orders is driving up ASML's demand. Despite a weak market in the first half of 2024, the global semiconductor manufacturing industry's need for ASML's most advanced semiconductor manufacturing equipment is rebounding. ASML continues to rely on orders from China for older semiconductor manufacturing equipment.
Each piece of ASML equipment costs up to US$ 300 million, with a delivery cycle of 12-18 months, requiring close coordination with major customers such as TSMC, Samsung Electronics, Intel, SK Hynix, and Micron. The market reports strong orders from TSMC for ASML's EUV product line.
Japan's Canon and Nikon remain ASML's competitors for older chip manufacturing technologies. Chinese domestic semiconductor equipment manufacturers, such as Shanghai Micro Electronics Equipment, are attempting to develop competitive lithography equipment.
The US restrictions on exporting advanced semiconductor technology and equipment to China have prevented Chinese chip manufacturers from obtaining ASML's high-end lithography equipment. Over the past year, China has increased its procurement of ASML's older technology equipment, contributing nearly half of ASML's total revenue in the first quarter.
However, the rapid expansion of China's domestic mature process capacity will erode the market share of mature processes in other countries and increase market competition pressure on non-Chinese semiconductor manufacturers without advanced processes. The European Commission (EC) has begun investigating whether European chip manufacturers believe China's state subsidies are distorting the market.
ASML believes that the world needs mature process chips as proven during the COVID-19 epidemic, and China is stepping in to supply these mature process chips.
Bloomberg reports that the EU is reviewing the extent of companies using Chinese mature or low-end chips. Latest analyses suggest that fears of Chinese chips systematically flooding the global market are "unlikely" to materialize.
SEMI predicts that from 2023 to 2027, China will have 41 wafer fabs in operation, more than any other region globally. 34 are 12-inch fabs and 7 are 8-inch fabs.
