By Max A. Cherney and Stephen Nellis
(Reuters) – Laptop chip tools maker ASML (AS:)’s deep cuts to its 2025 gross sales forecast sparked a sell-off in chip shares on Tuesday over worries that international chip demand could also be faltering.
The weaker outlook may, as an alternative, replicate some overcapacity at chip factories that had already stocked up on ASML’s dear instruments throughout the pandemic and have turn into higher at utilizing them to provide a bigger numbers of chips, analysts mentioned.
ASML’s inventory plummeted to its greatest single-day loss in 1 / 4 century on its downgraded forecast. In outcomes that the corporate inadvertently posted a day forward of schedule, ASML mentioned it expects 2025 whole internet gross sales of 30 billion-35 billion euros, close to the underside of its earlier forecast.
That dragged down a big swath of the semiconductor business as a result of ASML has a near-monopoly on vital instruments utilized by TSMC, Intel (NASDAQ:), and Samsung Electronics (KS:) to make superior chips.
Spurred by blockbuster demand for chips throughout the pandemic, these chipmakers constructed additional capability. That progress stabilized as provide chains eased, leaving them to attend to order new instruments till their factories seemed able to overflow with orders.
ASML’s forecast was a lagging indicator of what has been enjoying out at these chip factories for months, analysts mentioned.
The corporate mentioned in a press release that regardless of a growth in AI-related chips, different elements of the semiconductor market had been weaker for longer than anticipated, main firms that make logic chips to delay orders and clients that make reminiscence chips to solely plan “limited” new capability additions.
Intel, TSMC and Samsung are pulling again on orders from ASML as a result of they’ve realized there may be loads of capability, mentioned Dan Hutcheson, vice chair at analyst agency TechInsights.
Chip manufacturing unit utilization is round 81% this yr, however producers have a tendency to purchase instruments when that will get into the mid-90% vary, Hutcheson mentioned. Intel has slowed down its manufacturing unit growth, which suggests Samsung and TSMC will even be cautious, he mentioned.
Chip stockpiles stay excessive, and chipmakers have turn into extra environment friendly with ASML’s instruments, which means they will make extra chips with out having to order extra.
Handel Jones, CEO of Worldwide Enterprise Methods, which tracks the chipmaking business, has slashed the variety of steps the place ASML’s flagship machines are used, typically by nearly a 3rd.
Jones mentioned Samsung, for instance, could possibly use leading edge chip-etching know-how to cut back the variety of steps utilizing ASML’s flagship machines from 5 or 6 down to 1 or two.
If profitable, Samsung may have important extra capability for these machines, often called excessive ultraviolet lithography machines, he mentioned.
Jones mentioned he had not modified any of his total chip business forecasts, which name for booming demand for AI chips and AI-specific reminiscence chips.
“This is a short-term blip. In the long term, it’s going to be okay,” Jones mentioned.