Assessing ASM International’s Long-Term Growth Potential Amid Downgraded Earnings Forecasts

ASM International, a leader in advanced semiconductor manufacturing, faces a critical juncture as its 2025 earnings forecasts were downgraded due to weaker-than-expected Q2 orders and macroeconomic headwinds. Yet, beneath these near-term challenges lies a company strategically positioned to capitalize on the next wave of semiconductor innovation. By examining its R&D-driven moat, market share dominance in cutting-edge technologies, and geographic diversification, ASM’s long-term growth potential remains compelling despite current volatility.

Strategic Positioning in Advanced Semiconductor Technologies

ASM’s core strength lies in its leadership in atomic layer deposition (ALD) and epitaxy technologies, which are foundational for next-generation semiconductors. The company holds over 55% market share in the 2nm gate-all-around (GAA) node segment, a critical area for AI accelerators and high-performance computing [1]. This dominance is underpinned by its R&D investments, which accounted for 52% of EBIT in 2024, with a projected 12% compound annual growth rate (CAGR) through 2025 [2]. Such spending ensures ASM remains at the forefront of innovations like 1.4nm nodes and high-bandwidth memory (HBM) integration, which are pivotal for data centers and AI infrastructure [3].

The company’s focus on AI-driven advanced packaging solutions, including chip-on-wafer-on-substrate (CoWoS) technology, further strengthens its position. These technologies are expected to fuel the $500 billion AI chip market by 2028, a segment where ASM’s partnerships with academic and industry leaders accelerate commercialization [4]. Additionally, its recent expansion into silicon carbide (SiC) epitaxy equipment addresses the electrification boom in the automotive sector, diversifying revenue streams [5].

Market Share Dynamics and Competitive Moat

ASM’s market share in ALD technologies—accounting for over half of its equipment revenue—places it in a unique position as the ALD market grows at 10–14% annually through 2027 [6]. This growth is driven by the increasing complexity of semiconductor designs, where ALD’s precision in thin-film deposition becomes indispensable. Competitors struggle to match ASM’s technological depth, particularly in single-wafer ALD tools used in leading-edge logic and memory production [7].

Geographic diversification further fortifies its competitive moat. By expanding operations in South Korea and Arizona, ASM mitigates geopolitical risks while aligning with global “friendshoring” initiatives. This strategy not only stabilizes supply chains but also taps into regional demand for advanced manufacturing [8].

Navigating Earnings Downgrades and Macroeconomic Risks

The recent earnings downgrade, marked by a 4% year-on-year decline in Q2 orders to €702.5 million, reflects short-term pressures. Reduced demand in the advanced logic/foundry segment, U.S. export controls, and EU tariff risks contributed to a dip in gross margins to 51.8% [9]. However, these challenges are contextual. Analysts from Morningstar and JPMorgan argue that ASM’s strong R&D-driven moat and robust free cash flow provide resilience. Morningstar’s fair value estimate of €635 implies a 40% upside from its July 23 closing price [10].

Institutional confidence is also evident: Arrowstreet Capital and Renaissance Technologies increased stakes in Q2 2025, signaling long-term optimism [11]. Meanwhile, ASM’s disciplined capital allocation—exemplified by a €150 million share buyback in July 2025—enhances earnings per share by 1.8–2.5% annually, balancing growth investment with shareholder returns [12].

Conclusion: A Resilient Long-Term Play

While ASM’s near-term earnings face headwinds, its strategic positioning in advanced semiconductor technologies and dominant market share create a durable foundation for growth. The company’s ability to innovate in GAA, AI packaging, and SiC epitaxy, combined with geographic diversification and disciplined capital management, positions it to outperform the semiconductor equipment market in the long run. For investors, the current selloff may represent a strategic buying opportunity, provided they are positioned for a multi-year horizon.

Source:
[1] ASM International's 5.6% Selloff: A Strategic Buying Opportunity for Long-Term Growth [https://www.ainvest.com/news/asm-international-5-6-selloff-strategic-buying-opportunity-long-term-growth-2508/]
[2] ASM International NV's Q2 2025 Earnings [https://www.ainvest.com/news/asm-international-nv-q2-2025-earnings-assessing-resilience-slowing-semiconductor-equipment-market-2507]
[3] ASM International Strengthens ALD Market Leadership Amid [https://www.blog.baldengineering.com/2025/05/asm-international-strengthens-ald.html]
[4] Our strategy [https://www.asm.com/our-company/strategy]
[5] ASM International's Share Buyback Execution and Capital [https://www.ainvest.com/news/asm-international-share-buyback-execution-capital-allocation-strategy-deep-dive-strategic-financial-implications-high-growth-capital-intensive-sector-2507/]
[6] ASM International's 5.6% Selloff: A Strategic Buying Opportunity for Long-Term Growth [https://www.ainvest.com/news/asm-international-5-6-selloff-strategic-buying-opportunity-long-term-growth-2508/]
[7] ASM International NV's Q2 2025 Earnings [https://www.ainvest.com/news/asm-international-nv-q2-2025-earnings-assessing-resilience-slowing-semiconductor-equipment-market-2507]
[8] Our strategy [https://www.asm.com/our-company/strategy]
[9] ASM International's 5.6% Selloff: A Strategic Buying Opportunity for Long-Term Growth [https://www.ainvest.com/news/asm-international-5-6-selloff-strategic-buying-opportunity-long-term-growth-2508/]
[10] ASM Earnings: 2025 Secured but Investors Look Into 2026 [https://global.morningstar.com/en-gb/stocks/asm-earnings-2025-secured-investors-look-into-2026]
[11] ASM International sinks as Q2 new orders fall 4% amid mixed [https://finance.yahoo.com/news/asm-international-orders-fall-4-171337744.html]
[12] ASM International's Share Buyback Execution and Capital [https://www.ainvest.com/news/asm-international-share-buyback-execution-capital-allocation-strategy-deep-dive-strategic-financial-implications-high-growth-capital-intensive-sector-2507/]