SEMICONDUCTOR INDUSTRY ASML ‘Investor Day 2022’ proffered widespread optimism amid ongoing chip shortages

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ASML is predicting rapid growth for itself and the wider chip industry throughout the rest of the decade. While its outlook doesn’t directly imply straight-line growth, analysts are hopeful that ASML’s high visibility into the chip industry hints at an upcoming recovery.

During its annual Investor Day meeting in November, ASML, the world’s largest equipment supplier to the semiconductor industry, updated its investors and key stakeholders about its updated views on demand and outlook going into the new year and beyond.

During the meeting, ASML leaders President & CEO Peter Wennink and Executive Vice President & CFO Roger Dassen made it clear that they were highly optimistic about what’s around the corner not for just ASML but the wider semiconductor industry. Indeed, since dropping substantially in October, ASML’s stock price has recovered by just over 50 % as of mid-December.

The insatiable demand for chips

Semiconductors have become ubiquitous; they impact every facet of our modern lives. They’re in our pockets and in our cars, they’re helping to power the world’s leading businesses, and they’re used extensively in the manufacturing of virtually all consumer goods and services.

In early 2022, it was revealed that global semiconductor sales exceeded USD 600 billion for the first time, and ASML reckons that by 2030, this figure will be in excess of USD 1.3 trillion, exceeding the more conservative estimates of other analysts.

This new outlook from ASML comes at a time when many manufacturers are struggling to grapple with an ongoing semiconductor shortage, and investors fret over a potential recession.

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ASML’s long-term optimism

During the Investor Day meeting, ASML leaders also provided updated scenarios with opportunities to support its future growth.

Although the current macro environment is creating uncertainties in the near term, ASML said that it expects long-term demand and capacity to show healthy growth, with an expanding application space and industry innovation continuing to fuel growth across semiconductor markets.

In response, ASML is planning to adjust its capacity to meet future demand. Namely, the company plans to increase its annual capacity to 90 EUV and 600 DUV systems in 2025-2026, while ramping up High-NA EUV capacity to 20 systems in 2027-2028.

ASML also acknowledged that growth in semiconductor end markets and increasing lithography intensity on future nodes is continuing to fuel demand for its products and services, resulting in updated scenarios for its future growth when compared to Investor Day 2021. Based on different market scenarios, ASML predicts the following growth scenarios:

• 2025: annual revenue between approximately EUR 30 billion and EUR 40 billion with a gross margin between approximately 54 % and 56 %

• 2030: annual revenue between approximately EUR 44 billion and EUR 60 billion with a gross margin between approximately 56 % and 60 %

SEMICONDUCTOR SHORTAGE

The global chip shortage: Causes and state of play in 2023

ASML’s revised 2025 outlook represents a 30 % increase on the figures it had projected at last year’s Investor Day. This increased long-term outlook is particularly reassuring because it hints that the semiconductor industry will begin to recover.

ASML, whose position as the go-to supplier to chipmakers of specialist lithography equipment gives the company a unique insight into the wider industry, cited an improved outlook for AI and edge computing data centers, as well as the controversial metaverse, as part of the reason for its optimism.

The company also pointed towards renewed tech sovereignty, such as regulatory efforts in both the U.S. and Europe (e.g., the CHIPS Act) which may lead to an increase in foundry investments, and by extension semiconductor machinery purchases, by 2030.

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