ASML's Geopolitical Exposure and China-Related Risks: Assessing Long-Term Implications for Profitability and Shareholder Value

ASML Holding NV, the Dutch semiconductor equipment manufacturer, has long positioned itself as a linchpin in the global chipmaking industry. However, its financial performance and strategic outlook are increasingly intertwined with geopolitical dynamics, particularly its exposure to China. With China accounting for over 25% of ASML's total sales in 2025 and representing its second-largest market after Taiwan according to Bloomberg, the company's profitability is inextricably linked to the region. Yet, U.S. and Dutch export controls, coupled with China's push for semiconductor self-sufficiency, are reshaping the landscape. This analysis evaluates the long-term implications of these risks for ASML's revenue streams and shareholder value.

China's Strategic Importance and Revenue Exposure

ASML's financial dependence on China has grown significantly in recent years. In 2024, China contributed €10.2 billion in revenue, representing 36.1% of the company's global sales according to Nasdaq. This surge reflects China's aggressive investment in nanoscale chip production, with sales to the region increasing by 250% between 2022 and 2024 according to Nasdaq. However, this growth appears to be peaking. ASML's Q3 2025 financial report warns of a projected decline in China's sales contribution by 2026, attributed to the normalization of sales following a period of high backlog clearance according to China Daily. While China remains a critical market, its role in ASML's revenue is expected to wane in the near term.

Geopolitical Risks: Export Controls and Strategic Constraints

The U.S. and Dutch governments have imposed stringent export controls on ASML's advanced EUV lithography machines, which are essential for manufacturing cutting-edge semiconductors. These restrictions, influenced by U.S. pressure, have limited ASML's ability to ship its most advanced systems to Chinese customers according to CBC. According to a report by Bloomberg, this has already led to canceled shipments and a decline in China-based sales, with further erosion expected in 2026 according to CBC.

ASML's strategic position as the sole provider of EUV lithography has made it a geopolitical chokepoint according to FYVA AI research. Its technology is not only critical for semiconductor production but also for global AI development and supply chain security. However, this dominance has also exposed the company to political leverage, as governments seek to control access to advanced manufacturing capabilities.

China's Self-Sufficiency Drive: A Long-Term Challenge

China's push for semiconductor self-sufficiency poses a dual-edged threat to ASML. While the country has made strides in mature-node manufacturing (≥28nm), its reliance on foreign lithography for advanced nodes remains significant. As of 2024, China's self-sufficiency rate in semiconductors stood at 12–30%, far below its 70% target for 2025 according to Grokipedia. Government-backed initiatives like the National IC Industry Investment Fund and the Made in China 2025 plan have accelerated domestic production, but China's equipment localization rate in lithography remains below 5% according to NBC.

By 2030, China is projected to capture nearly 40% of the mature-node semiconductor market, driven by subsidies and domestic demand. This could reduce reliance on foreign lithography for non-advanced applications, directly impacting ASML's market access. While China will likely continue to depend on ASML for advanced-node production, its growing self-sufficiency in mainstream applications could erode the company's long-term profitability.

Long-Term Implications for Profitability and Shareholder Value

ASML's long-term outlook hinges on balancing its exposure to China with the broader AI-driven semiconductor boom. The company projects annual net sales of €44–60 billion by 2030, driven by demand for AI chips and advanced manufacturing. However, geopolitical tensions and China's self-sufficiency efforts could dampen this growth.

The normalization of China's sales and the potential decline in market share by 2026 according to China Daily highlight the volatility of ASML's revenue streams. Shareholders must weigh the company's technological moat against the risks of regulatory overreach and shifting market dynamics. While ASML remains a leader in EUV lithography, its ability to maintain profitability will depend on navigating geopolitical headwinds and adapting to China's evolving semiconductor ecosystem.

Conclusion

ASML's exposure to China is both a strength and a vulnerability. The company's advanced lithography technology is indispensable for cutting-edge chip production, but geopolitical risks and China's self-sufficiency initiatives threaten to erode its market access. Investors should monitor the interplay between U.S. export controls, China's domestic capabilities, and the global AI-driven demand for semiconductors. While ASML's long-term growth prospects remain robust, its profitability will increasingly depend on its ability to mitigate geopolitical risks and maintain its technological edge in a rapidly shifting landscape.