ASML Sees Strong Growth as Countries Race to Build Chip Plants

(Bloomberg) — ASML Holding NV gave a bullish revenue outlook citing strong demand for its machines that make advanced semiconductors and said it will buy back €12 billion ($12.2 billion) of its own stock.

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The Dutch chip production equipment supplier said growth in semiconductor markets and the need for more advanced production will drive demand for its products and services, resulting in annual revenue of as much as €40 billion by 2025. That compares with an average analyst estimate of €32 billion. The stock gained as much as 10.6% in Amsterdam on Thursday.

ASML’s confidence in longer-term growth comes amid a sharp downturn in demand for its customers’ products that’s causing many of them to rein in their spending on new plants and equipment. The Dutch company said increasing competition in outsourced chipmaking and efforts in Europe and the US to nurture domestic production are contributing to the need to add more capacity by the industry.

The company’s buyback program will run through 2025, it said in a regulatory filing Thursday. It will use around 2 million shares to cover employee plans and cancel the remainder.

ASML’s bullishness about the future is growing. Last year it had predicted sales would be between €24 billion to €30 billion by 2025. That target is now €30 billion to €40 billion, it said in the filing. By 2030, revenue will expand further to as much as €60 billion, it said.

“While the current macro environment creates near-term uncertainties, we expect longer-term demand and capacity showing healthy growth,” the company said.

In line with its projection of increasing demand, the company is raising output to 90 of its extreme ultraviolet lithography machines and 600 deep-ultraviolet machines by 2025 to 2026. ASML’s gear performs the crucial function of burning patterns into materials deposited on wafers off silicon that make up the circuits that give chips their function.

Major governments around the world have come up with subsidies and incentives to expand chip production capacities at home to avoid another round of semiconductor shortages that shaved off hundreds of billions from their economies during the pandemic.

Even though the global chip industry is now facing a severe downturn, countries including the US and Japan have not slowed their pace in readying new plants to prepare for the next boom cycle. Taiwan Semiconductor Manufacturing Co. is even now considering adding another advanced facility next to a $12 billion dollar plant that’s under construction in the US state of Arizona.

In early October, Washington unveiled sweeping regulations to curb the sales of advanced semiconductors and chipmaking equipment to China, sending shockwaves through the $550 billion industry. For now, ASML and other non-US chip production equipment companies face fewer hurdles in doing business in China.

ASML has not been able to sell its most advanced extreme ultraviolet lithography machines to China as the Dutch government refused to give it a license to do so, but it has been able to sell its other machinery to the country. The Dutch company sees the total impact from the new US measures to be around 5% of its backlog, it said on a call with investors in October.

ASML and Japan’s Tokyo Electron Ltd. together with US triumvirate Applied Materials Inc., Lam Research Corp. and KLA Corp. dominate the global semiconductor equipment manufacturing market.

American officials have said that their latest round of trade restrictions will lose effectiveness over time if allies do not join the campaign. They’ve also been pushing for ASML to halt the sale of immersion lithography machines to China.

Meanwhile, Dutch Prime Minister Mark Rutte has said that his government is in talks with Washington, Tokyo, Seoul and the European Commission on China chip curbs. Rutte is visiting South Korea next week to discuss tech issues.

ASML’s Chief Executive Officer Peter Wennink will also head to the Asian country next week to attend a groundbreaking ceremony for the company’s new research and development facility.