The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
LONDON, April 16 (Reuters Breakingviews) - ASML’s ASML.AS lithography machines are renowned for their unmatched precision in manufacturing semiconductors. The $260 billion company’s first-quarter results offer a similarly precise reflection of the deep uncertainty facing the global chip industry as it grapples with U.S. tariffs.
CEO Christophe Fouquet on Wednesday reaffirmed the Dutch company’s guidance to investors that revenue this year will be between 30 billion euros and 35 billion euros. But that steady outlook reflects existing orders for the company’s machines, which can cost up to $400 million and take significant time to build and ship. Demand from customers like Taiwan Semiconductor Manufacturing 2330.TW and Intel INTC.O will determine whether ASML’s top line comes in towards the top or bottom of that range.
How trade and geopolitical tensions affect the industry in future years is harder to predict. U.S. President Donald Trump's administration is examining the case for imposing tariffs on semiconductors, which would push up the cost of smartphones and other gadgets, dampening demand. New trade barriers may add over $1 billion annually in expenses for U.S. chip equipment makers, Reuters reported on Tuesday, citing industry sources. ASML could try to mitigate the impact of the levies by negotiating free trade zones to enable easier shipment of components between Europe and the United States. But even then the company could still get snared in retaliatory actions by other countries.
Rising costs may slow the construction of chip plants in the United States, like the one under construction by TSMC. It could even dampen the enthusiasm of tech giants such as Microsoft MSFT.O for building more of the data centres necessary to power artificial intelligence models. That in turn would weaken the incentive for chipmakers to expand capacity, denting demand for ASML’s machines.
Geopolitical tensions add further complexity. The U.S. has curbed exports to China of an AI chip made by Nvidia NVDA.O, prompting the U.S. group to warn of a $5.5 billion writedown. While ASML may face renewed pressure to limit sales to the People’s Republic, that would require the Dutch government to agree. In the meantime, restrictions on imports of finished chips may prompt Chinese customers to make more of their own, pushing up demand for ASML machines. The company now expects China to account for over 25% of its 2025 group revenue, up from a 20% forecast last October.
Even so, the long-term outlook remains uncertain. Analysts at Degroof Petercam on Wednesday cut estimates for ASML's 2026 and 2027 revenue by mid single-digit percentages. ASML shares, which fell 7% on Wednesday morning, now trade at 24 times expected earnings for 2025, well below the five-year average of 40 times. The caution is shared by its customers and rivals. Viewed through ASML’s high-precision lens, the chip industry’s future looks blurry.
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CONTEXT NEWS
Dutch semiconductor equipment company ASML on April 16 warned that tariffs were increasing uncertainty about the outlook for its business in 2025 and 2026 but stood by its annual revenue guidance.
If demand for artificial intelligence continues to be strong and ASML's customers are capable of adding capacity, the company could hit the upper range of its 2025 range for net sales of between 30 billion euros and 35 billion euros, ASML Chief Executive Christophe Fouquet said in a video.
However, he said uncertainty with some of its customers could mean net sales at the lower end of the range. The company also projected revenue of between 44 billion euros and 60 billion euros in 2030.
ASML reported net bookings in the first quarter at 3.9 billion euros ($4.4 billion), below the average projected by analysts of 4.8 billion euros, using LSEG data.
The U.S. is issuing new export licensing requirements for chips including Nvidia's H20, AMD's MI308 and their equivalents, Reuters reported on April 16, citing a spokesperson for the U.S. Commerce Department. Nvidia said it would take $5.5 billion in charges as a result of the U.S. limiting exports of its chips to China.
ASML shares were down 6% as of 0819 GMT on April 16.
China is set to remain ASML's biggest market in 2025 https://reut.rs/4jyRRP8
(Editing by Peter Thal Larsen and Streisand Neto)
((For previous columns by the author, Reuters customers can click on KWOK/karen.kwok@thomsonreuters.com))
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