- The U.S. requests ASML to halt DUV lithography machine shipments to China, leading to partial license revocation by the Dutch government
- Expect China to continuously rely on ASML’s supply of mature node foundry equipment in the coming five years, despite the unavailability of relatively advanced models
- We continue to maintain a positive view on ASML, underpinned by the recovery in the global semiconductor industry and various drivers such as AI
U.S. government intervene in ASML’s lithography exports to China
Weeks before the January 1, 2024 deadline, the U.S. requested ASML to halt certain pre-scheduled DUV lithography machine shipments to China, following SMIC’s use of ASML technology to produce Huawei’s 7nm HiSilicon Kirin 9000S. The license for the shipment of the newer models(NXT:2050i and NXT:2100i lithography systems) in 2023 was recently partially revoked by the Dutch government, impacting a small number of customers in China. This situation escalated when U.S. National Security Adviser Jake Sullivan reportedly involved the Dutch government, affecting a few final shipments. ASML had Dutch approval for DUV machine exports until the end of 2023. China has been ASML’s third-largest market after Taiwan and South Korea in 1H23. But in 3Q23, China was the largest, accounting for 46% of sales.
Resilient long-term growth outlook amid China’s temporary slowdown
China aims to catch up in lithography as part of its efforts to develop a self-sufficient semiconductor supply chain. However, its local lithography machine maker still lags behind ASML and its Japanese counterparts. We expect China to continue to rely on ASML for the supply of mature node foundry equipment in the coming five years, despite the unavailability of relatively advanced lithography machines. Short-term growth from China is expected to slow down after the stockpiling of lithography equipment in Chinese foundries. However, we maintain a positive outlook on ASML’s long-term growth, underpinned by the recovery in the global semiconductor industry and various drivers such as AI, energy transition, and electrification.