Tech war: ASML's China shipments rebound in second quarter but further restrictions loom

Dutch lithography system supplier ASML Holding said its second quarter shipments to mainland Chinese customers accounted for nearly half of its worldwide total, despite US restrictions on exporting its most advanced machines to China.

At the same time, reports that Washington is considering even tighter restrictions on tech exports to China have cast a shadow over the company's business prospects.

According to Bloomberg News, the Biden administration has told the Netherlands and Japan that it would resort to the harshest available trade restrictions if companies such as ASML continue providing advanced chip technology to China.

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ASML, which has come under increasing American scrutiny to shun China-based customers, reported that the value of mainland-China bound shipments was 2.35 billion euros (US$2.5 billion) in the June quarter, representing 49 per cent of its total sales.

China is well ahead of South Korea and Taiwan in terms of ASML's geographic sales, with the latest numbers close to the peak of 2.4 billion euros for its China shipments in the third quarter of 2023.

The Netherlands-based company reported 6.2 billion euros in second-quarter revenue, of which 4.8 billion was derived from sales of its equipment, according to ASML data published on Wednesday. The amounts were down 10 per cent and 14 per cent year on year, respectively.

ASML engineers walk past a High NA EUV tool at ASML's headquarters in the Netherlands, November 20, 2023. Photo: Handout via Reuters alt=ASML engineers walk past a High NA EUV tool at ASML's headquarters in the Netherlands, November 20, 2023. Photo: Handout via Reuters>

South Korea accounted for 28 per cent of the company's tool sales in the June quarter, while Taiwan made up 11 per cent.

In total, ASML shipped eight extreme ultraviolet (EUV) lithography machines and 32 immersion deep ultraviolet (DUV) systems in the most recent quarter, compared with 11 EUVs and 20 DUVs in the March quarter, without elaborating on the geographic destinations the machines were shipped to.

Chinese demand has proven resilient despite intensified US sanctions imposed last October, aimed at cutting off the mainland's access to advanced semiconductor-manufacturing equipment over national security concerns.

ASML's sales to China have been hurt by US sanctions that came into effect in November, dipping to 1.9 billion euros in value in the March quarter, the lowest amount over the past four quarters.

ASML's management said in April that mainland Chinese sales would remain strong for mature technologies despite the fact that its advanced immersion DUV systems - including the 2000i, 2050i, 2100i, 1970i and 1980i - could no longer be shipped to China, which would likely reduce sales there by 10 to 15 per cent this year.

Analysts said Chinese wafer foundries have been stockpiling chip-making tools since last year, despite a two-year drop in China's semiconductor sales amid a sluggish economic recovery.

Sales of semiconductor wafer fab equipment in China surged 48 per cent last year against a worldwide growth rate of 1 per cent, according to data from research company TechInsights.

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