ASM International's Q2 Order Miss: A Strategic Reassessment of Exposure to Foundry and Memory Cycles

ASM International's Q2 2025 financial results have sparked renewed scrutiny of its exposure to the volatile foundry and memory cycles that define the semiconductor equipment sector. While the company reported a 4% year-over-year decline in new orders at constant currencies and a sharper 10% drop compared to Q1 2025, these figures mask a broader narrative of resilience and strategic adaptability. For long-term investors, the key lies in dissecting the short-term volatility and aligning it with the semiconductor industry's transformative trajectory.

The Q2 Order Miss: Timing, Not Trend

ASM's order shortfall in Q2 2025 was primarily attributed to two factors: the lumpy nature of quarterly order intake and a high base from Q2 2024, which saw strong memory-related bookings. Advanced logic/foundry orders, a critical segment for ASM, were particularly affected by delayed customer commitments. However, this does not signal a structural downturn. The company's revenue performance—up 23% year-over-year to €835.6 million—underscores its ability to capitalize on sustained demand in high-margin areas like China and advanced nodes.

The gross margin of 51.8% and operating profit of €258.5 million further highlight operational discipline. A €34 million reversal of prior impairments on its stake in ASMPT (a reversal of a Q1 2025 loss) also skewed earnings positively. These metrics suggest that ASM's core business remains robust, even as order timing creates noise.

Semiconductor Industry Dynamics: AI, Advanced Packaging, and Cyclical Risks

The semiconductor industry's growth from 2023 to 2025 has been driven by generative AI and data center expansion, with AI-related chips accounting for over 20% of total chip sales in 2024. This has reshaped demand patterns, shifting focus from traditional logic and memory to advanced packaging and heterogeneous integration. For example, TSMC's CoWoS capacity is projected to double in 2025, a trend where ASM's ALD and epitaxy tools play a pivotal role.

However, the industry remains cyclical. Between 2023 and 2025, wafer shipments declined in 2023 but rebounded in 2025, while R&D spending hit 52% of EBIT in 2024. Geopolitical tensions—such as U.S. export controls and China's material restrictions—add further complexity. For ASM, the challenge lies in balancing its exposure to memory and foundry cycles with its leadership in ALD, a technology critical to 2nm and 1.4nm nodes.

ASM's Strategic Positioning: ALD Leadership and Long-Term Visibility

ASM's dominance in single-wafer ALD (over 55% market share) is its crown jewel. ALD accounted for more than half of the company's equipment revenue in Q1 2025, with the market expected to grow to €4.2–5.0 billion by 2027. Its platforms—such as the XP8 QCM and Previum Pro—are essential for gate-all-around (GAA) architectures, high-bandwidth memory (HBM), and advanced metal deposition. These technologies are non-negotiable for leading-edge logic and memory manufacturers like TSMC, Samsung, and Intel, ensuring sustained demand.

The company's geographic diversification also strengthens its resilience. While China's equipment sales contributed unexpectedly to Q2 revenue, ASM is proactively expanding its manufacturing footprint in Korea and Arizona to mitigate geopolitical risks. This agility is critical as the industry shifts toward “friendshoring” and onshoring.

Investment Implications: Balancing Volatility and Growth

For long-term investors, ASM's Q2 order miss should be viewed through a lens of strategic reassessment rather than alarm. The company's exposure to foundry and memory cycles is mitigated by its focus on ALD, a technology with multi-year growth visibility. Key metrics to monitor include:
- Order-to-Deliver Ratio: ASM's book-to-bill ratio remains below one, indicating short-term underperformance but not a collapse in demand.
- China's Role: While China's bookings are expected to decline in H2 2025, the region's equipment sales are projected to hit the upper end of prior forecasts, driven by advanced node adoption.
- R&D Efficiency: The industry's 12% CAGR in R&D spending (vs. 10% for EBIT) underscores the importance of innovation. ASM's R&D collaborations with partners and universities position it to lead in next-gen materials and processes.

Conclusion: A Buy for the Long Haul

ASM International's Q2 order miss is a temporary setback in an industry prone to quarterly volatility. The company's leadership in ALD, strong customer relationships, and strategic expansion into advanced packaging and silicon carbide epitaxy provide a durable moat. While short-term order trends should be watched, the long-term fundamentals—driven by AI, advanced nodes, and a resilient supply chain strategy—remain compelling. For investors with a multi-year horizon, ASM's stock offers a high-conviction opportunity to capitalize on the semiconductor industry's next phase of innovation.