Yesterday, lithography leader ASML reported Q3 earnings:
Revenue was €6.673B, up 16% year over year and down 3% sequentially, holding near historical highs.
Gross margin was 51.9%, up 0.1 percentage points year over year and 0.6 percentage points sequentially, mainly due to a higher mix of immersion lithography shipments.
Operating income was €2.182B, up 13% year over year and down 4% sequentially, for an operating margin of 32.7%.
Net income was €1.893B, up 11% year over year and down 2% sequentially, for a net margin of 28.4%.
Backlog was €35B.
Q3 share repurchases of €100M.
Specifically on lithography, Q3 shipped 112 systems in total:
EUV: 11 systems, revenue €1.858B, 35% of lithography revenue, ASP €169M.
ArFi: 32 systems, revenue €2.548B, 48% of lithography revenue, ASP €79.62M.
ArF dry: 9 systems, revenue €212M, 4% of lithography revenue, ASP €23.59M.
KrF: 44 systems, revenue €531M, 10% of lithography revenue, ASP €12.06M.
EUV shipments this quarter were impacted by a slowdown in advanced-node fab expansion cadence, while immersion DUV demand continued to exceed expectations; immersion DUV revenue exceeded EUV for the second consecutive quarter. By contrast, TSMC's 3nm ramp drove 7nm/5nm/3nm mix higher.
The biggest highlight this quarter remains the China market. As ASML previously indicated, China lithography revenue exploded as expected this quarter, with single-quarter lithography revenue of €2.393B, up 291% year over year, setting a new historical high for the second consecutive quarter; lithography revenue mix rose from 8% in Q1 to 46%.
ASML stated that the China demand surge is mainly because China fab expansion cadence differs from the rest of the world. China is primarily mature and mid-critical nodes; shipped orders were placed in 2022 or earlier; in recent years China customer order fill rate was below 50%, but this year as other regions' orders declined, China order fill rate rose rapidly; all shipped products comply with US export control requirements.
Bookings declined sharply this quarter but within expectations; customers are cautious on capex; no High-NA bookings this quarter, last quarter noted High-NA bookings accounted for a double-digit percentage of the €38B backlog. With the memory industry continuing to shrink capex, memory revenue mix was 24%, logic 76%, still highly skewed. Breaking down bookings, memory mix fell to 20%, with amount plunging 63% sequentially.
Regarding the latest US export controls, a new restricted model NXT:1980Di was added.
Outlook:
Q4 revenue guided to €6.7-7.1B, up 4-10% year over year; full-year revenue ~€27.3B, up ~30% year over year.
Q4 gross margin guided to 50-51%; full-year gross margin up slightly year over year.
2024 revenue slight growth; 2025 significant growth (2025 revenue €30-40B, gross margin 54-56%; 2030 revenue €44-60B, gross margin 56-60%).
Overall, as the global semiconductor equipment leader, ASML achieving near 30% full-year growth in a super downcycle is no small feat. But near-term advanced-node EUV demand is slowing, backfilled by China mature-node DUV, which has a whiff of a strong bow at the end of its flight.
ASML's 2024 growth outlook is not optimistic; if targeting €30-40B revenue in 2025 with high growth in 2025, that implies 2024 revenue growth below 10%. While revenue may not see a sharp decline given the €35B backlog, this growth profile is indeed concerning.