The Netherlands has decided to "hide" the sales of photolithography giant ASML to China. These sales involve military and political interests and help determine Beijing's technological progress.
The Dutch government told Reuters on Jan. 17 that it had decided to exclude photolithography giant ASML's sales to China from the disclosure of sensitive information on raw material exports. This rare move has drawn attention because the Netherlands has regularly disclosed to experts and parliament the export of "dual-use" items with potential military applications.
In the first half of 2024, ASML's total sales were 11.5 billion, a year-on-year decline of 15 percent. During the same period, sales in mainland China were about 4.8 billion euros, a year-on-year increase of 129%, accounting for 42% of revenues.
ASML's sales involve military and political interests and help determine China's technological progress.
According to data cited by Reuters, in the first three quarters of 2024, ASML sales in China will reach 7 billion euros.
According to the Dutch Ministry of Foreign Affairs, the government decided not to publicly disclose most of the information on ASML sales to China from September 2023. At that time, under pressure from the U.S. government, the Dutch government published a list of "dual-use" goods with military significance, focusing on ASML's deep ultraviolet (DUV) lithography machines. The export of advanced equipment requires a license, while extreme ultraviolet light (EUV) engraving machines have been previously controlled.
While licensing of goods deemed sensitive by the EU, such as EUV lithography machines, must be disclosed, this does not apply to DUV equipment in the new list. The reason is that (the disclosure of) such information can easily allow certain companies to be traced, thus disclosing sensitive commercial data," the Dutch Ministry of Foreign Affairs said in a written statement to Reuters.
Over the past two years, the global semiconductor market has been on the upswing. However, although artificial intelligence has shown strong upward momentum, the progress of the chip market recovery appears to be slower than ASML's major customers expected; TSMC and Samsung, have made more cautious decisions, while the active expansion of mature process manufacturing by mainland China has supported ASML's performance and continues to account for half of the company's revenue.
In disclosing results for the third quarter of 2024, ASML CFO Roger Dassen said that the percentage of the Chinese market is trending toward historically normal levels and that the overall percentage of revenue from the Chinese market is expected to be around 20 percent in 2025.
He also said that many activities in the Chinese market revolve around immersion lithography systems and that the gross profit margin of such lithography systems is significantly higher than the company's overall gross profit margin. Therefore, if the share of the Chinese market changes, ASML's gross profit margin will also be affected.
Chinese changes, ASML's gross profit margin will also be affected.
Assuming that EUV sales will not grow in 2025, ASML expects net sales this year to be between €30 billion and €35 billion, compared to the previous estimate of €30-40 billion, the gross profit margin over the same period will be between 51 percent and 53 percent, while the company's previous gross profit margin target was between 54 percent and 56 percent.
As the market is increasingly influenced by geopolitics, on January 15 this year, the Netherlands announced once again that it would expand the scope of export controls on semiconductor-related items and further tighten export controls on some semiconductor manufacturing equipment, software, etc.
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