ASML Poised for Order Surge as Chip Demand Rebounds

ASML Holding NV (ASML), the world's leading supplier of lithography systems for the semiconductor industry, is positioned for a surge in orders as chip demand rebounds. The Dutch company's market dominance in extreme ultraviolet (EUV) lithography, coupled with the growing demand for advanced chips, is driving a significant increase in orders from major chipmakers.



ASML's order intake in Q4 2023 reached a record €9.2 billion, with around €5.6 billion related to EUV tools. This strong order intake was driven by the demand for both Low-NA and High-NA EUV tools from leading chipmakers like Intel, Micron, Samsung, Samsung Foundry, SK Hynix, and TSMC. The company's market dominance in EUV lithography allows it to capitalize on the growing demand for advanced chips, particularly in the AI and 5G markets.



The expected surge in ASML orders can be attributed to several key factors:

1. Increasing demand for advanced chips: The growing demand for AI-related chips, as well as the need for more advanced logic and memory chips, is driving the need for more advanced lithography tools like those offered by ASML.
2. Expansion of chip manufacturing capacity: Chipmakers are investing in new fab openings and expanding existing ones to meet the increasing demand. This requires additional wafer fab equipment, including ASML's advanced lithography tools.
3. Adoption of EUV lithography: The semiconductor industry is increasingly adopting extreme ultraviolet (EUV) lithography, which enables the production of smaller, more advanced chips. ASML is the only company that makes EUV lithography machines, making it a crucial supplier for leading chipmakers.
4. Geopolitical factors: The geopolitical landscape, particularly the US-China trade tensions, is also influencing ASML's order book. While the US and its allies are limiting access to cutting-edge chip technology for China, ASML's orders from other regions, such as Europe and Asia, are expected to increase.
5. Technological advancements: ASML's continuous innovation and development of new tools, such as the EXE:5000 High NA EUV system, are driving demand from customers looking to stay at the forefront of technology.

AI and other emerging technologies play a significant role in driving ASML's growth. According to the company's CEO, Christophe Fouquet, while demand for AI-related chips remains strong, other market segments are taking longer to recover. This has led to customer cautiousness and a more gradual recovery than previously expected, which is expected to continue in 2025. The strong developments and upside potential in AI are contributing to ASML's growth, despite the slower recovery in other market segments.

In conclusion, ASML's market dominance in EUV lithography, coupled with the growing demand for advanced chips and the expansion of chip manufacturing capacity, positions the company for a surge in orders. The company's strong order intake in Q4 2023 and the expected growth in AI and other emerging technologies further support the bullish outlook for ASML's future.