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Trump China Loom over Chipmaker Asml's Investor Day

Trump, China Loom Over Chipmaker ASML’s Investor Day

AMSTERDAM – The threat of further U.S.-led restrictions on ASML Holding’s (NASDAQ: ASML) sales to China will hang over the leading computer chip equipment maker on Thursday when it offers up new medium- and long-term financial guidance at its biannual Investor Day.

Analysts expect only modest changes to the company’s long-term outlook, given its near-monopoly position in lithography systems – machines that chipmakers must have to create circuitry.

However, the indispensable nature of the company’s technology has made it particularly vulnerable to geopolitically-driven restrictions as the tech rivalry between the U.S. and China intensifies.

It is as yet unknown whether incoming U.S. President Donald Trump will further restrict the company’s sales to China, as he did in his first term.

The main financial question facing ASML (NASDAQ: ASML) is whether it can continue to grow faster than the overall computer chip market, as it has over the past decade during which its machines boosted productivity for top client TSMC of Taiwan.

That will depend on whether customers look more to ASML’s machines, which are needed to make chips smaller, or more to other design considerations to make advances.

In either case, ASML should grow as long as its dominance in high-end lithography equipment remains intact.

ASML’s current forecast for 2030 is 44 billion-60 billion euros in sales, which implies 8-14% growth from a forecast of 27.5 billion euros ($29.22 billion) this year.

The investor day follows third-quarter results that featured ASML’s biggest earnings miss in years as end markets for chips used in smartphones, cars, and industry remained weak, despite the current AI boom.

As well as regaining investor confidence following that warning, the company must also do its best to guide on the likely impact of China trade restrictions – a factor beyond its control.

China has been its largest market over the past six quarters, accounting for more than 40% of group sales. The company says that reflects demand in China, the world’s largest consumer of computer chips, and not stockpiling in advance of more restrictions.

U.S.-Dutch restrictions in place since September mean ASML (NASDAQ: ASML) can only ship its oldest DUV product lines to customers in China without a license. It has said it expects China to make up around 20% of sales in 2025 and beyond.

ASML has competition in older product lines from Canon and Nikon of Japan, and from Chinese domestic firm SMEE – a factor governments must consider as they weigh the effectiveness of additional restrictions.

($1 = 0.9412 euros)