ASML Shares Surge by 6.49% Amid New Dutch Export Controls and Regulatory Shifts
2min read ASML, a leading player in the semiconductor equipment industry, saw its shares rise by 6.49%, marking a two-day increase of 6.71%. The company's performance has been noteworthy in light of recent regulatory and market developments.
Recently, the Dutch government announced new export control regulations that mandate ASML to apply for export licenses from The Hague rather than the U.S. government. The new regulations, which will take effect on September 7, 2024, specifically target ASML's TWINSCAN NXT:1970i and 1980i photolithography machines. This move comes amid ASML's growing reliance on the Chinese market, which has been its largest for four consecutive quarters, accounting for about half of the company's revenue in the first half of the year. An ASML spokesperson noted that the company would now need to obtain export licenses from the Dutch government for these machines.
ASML's CEO recently commented on the U.S.-led restrictions on exporting to Chinese customers, stating that these measures, initially justified by national security, increasingly appear to be economically motivated. He expects increasing opposition to these U.S.-led export restrictions.
The U.S., Japan, and the Netherlands have intensified restrictions on Chinese tech firms. However, if ASML cannot collaborate with its fastest-growing market in China, its revenue will likely suffer. In the first quarter of this year, ASML reported a 22% year-over-year decline in sales and a 27% quarter-over-quarter drop; net profit also fell by 40% quarter-over-quarter. The company has already indicated that export restrictions are expected to impact Chinese sales by 10% to 15% this year.
On September 6, the Dutch government announced plans to expand export controls on advanced semiconductor manufacturing equipment, specifically targeting ASML's deep-ultraviolet (DUV) lithography machines. ASML confirmed that the new rules apply to more models of its immersion DUV lithography systems. From September 7, ASML will need to secure Dutch government approval to export these machines outside the EU. Dutch officials cited security concerns as the impetus for the new regulations, given the rapid advancement of technology and the tense geopolitical climate.
CNBC reported that the expanded control measures could significantly impact ASML's ability to export more advanced equipment. However, ASML stated that the new rule represents a "technical adjustment" and should not substantially affect its financial outlook for 2024 or its long-term business prospects.
In a recent public statement, ASML's CEO Christophe Fouquet noted that American export restrictions on the pretext of national security increasingly seem driven by economic considerations. Fouquet predicted a growing opposition to these U.S. restrictions on exporting to China. This statement underscores the complex economic and political battle behind the ostensibly aligned chip export controls of the Netherlands and the U.S.
This global game of semiconductor equipment export restrictions, particularly those involving ASML, not only impacts the global chip supply chain but also portends long-term repercussions for the tech industry's landscape. Encouragingly, there is evidence suggesting that Chinese companies have made strides in overcoming certain technological limitations.
While ASML is a significant player in advanced lithography, China's indigenous advancements in the sector, coupled with the widespread adoption of high-process technology in products like Huawei's smartphones, indicate that China may soon contend on more equal footing with global leaders in semiconductor manufacturing equipment.