Major supplier to chip makers expects a recovery sooner rather than later

A key supplier of chip manufacturing tools believes that demand for semiconductors could pick back up in the second half of this year, CNBC and the Financial Times report. “Most of our customers tell us that they expect a recovery in the second half of this year,” ASML CEO Peter Wennink tells CNBC. The prediction comes after a difficult few months for the tech industry that has been marked by layoffs and a slump in demand for consumer tech following a pandemic boom.

ASML is a lesser known, but critical player in the global semiconductor supply chain. The FT notes it’s the only company in the world that produces the extreme ultraviolet lithography (EUV) machines needed to produce today’s most advanced chips. ASML’s customers include TSMC, Samsung, and Intel.

Demand for ASML equipment can therefore provide an indication of where companies think demand for consumer tech products could be in the longer term. Wennink tells CNBC that the average lead time of ASML’s machines is roughly a year and a half to two years and that “when you look at the relatively short expectations… of a potential recession, then customers are of course not canceling any orders because they could find themselves in the back of the queue when this thing turns up again.”

“They want to prepare… for an upturn in the second half of the year and 2024,” the ASML CEO told the Financial Times.

Overall, ASML forecasts that its 2023 revenue will be up 25 percent year-over-year in 2023, and it expects to produce 60 EUV machines alongside 375 less-advanced deep lithography (DUV) machines.

ASML’s position as a key player in the semiconductor industry means the Dutch company has been caught up in the ongoing tensions between the US and China. The White House has imposed increasingly strict restrictions on US companies looking to supply advanced chipmaking tools to China, while lobbying the Netherlands to do the same.

Wennink says ASML is currently unable to ship EUV machines to China. Instead, the company ships less advanced DUV machines, allowing China to account for around 15 percent of ASML’s 2022 sales. Both Japan and the Netherlands are expected to follow the US with chipmaking sanctions of their own in the coming weeks, the FT notes.  

Wennink’s forecast is not shared by everyone in the industry. Microsoft CEO Satya Nadella, for example, recently said that he expects the downturn to last around two years.