Worldwide chip shortage boosts ASML's revenue and share price

Worldwide chip shortage boosts ASML's revenue and share price

11 May 2021Reading time: 3 minutes

On April 21, ASML published its first quarter results for this year. The chip machine manufacturer saw its annual revenue increase by more than 2.5 percent to EUR 4.4 billion. The gross margin for the first quarter was 53.9 percent, which resulted in a profit of EUR 1.3 billion. At the beginning of this year, ASML expected a revenue between EUR 3.9 and 4.0 billion for the first quarter against a gross margin between 50 to 51 percent.

Increasing demand for chip machines

 

The fact that the revenue in particular turned out higher than expected was largely due to the increased worldwide demand for chips. Especially the car industry but also for smartphones and computer parts the chip demand rises sharply. By now there is even a worldwide chip shortage. Large chip manufacturers such as Intel, TSMC and Samsung therefore want to expand their production capacity quickly and for ASML this resulted in EUR 4.7 billion for new orders in the first quarter.

The higher revenue is not only due to sold chip machines but especially to more software upgrades. Thanks to so-called "enhancement upgrades", ASML’s customers can improve their chip machine’s  productivity relatively quickly and easily. According to ASML CEO Peter Wennink, many customers have brought forward their planned capacity expansions. Software packages can be delivered faster and offer a profitable margin for the company in Veldhoven.

Adjusted outlook 2021

For this year, ASML expects that the worldwide demand for chips will continue to increase. The chip machine manufacturer foresees that the demand for so-called computing chips will grow by 30 percent this year and the demand for memory chips even by 50 percent. ASML has therefore adjusted its outlook for this year and now expects a revenue growth of 30 percent. Revenue from software upgrades of existing systems is expected to increase by 10 percent. For the second quarter, ASML expects a revenue between EUR 4 and 4.1 billion and a gross margin of 49 percent.

For ASML, maintaining its own production capacity is still the most important challenge in the coming years. Therefor the chip machine manufacturer works closely with its suppliers to scale up the production capacity of both its DUV (Deep Ultraviolet) machines and the latest EUV (Extreme Ultraviolet) machines. Sales results from the EUV machines amounted EUR 2.3 billion in the first quarter. CEO Wennink expects to sell 30 percent more EUV machines this year.

Stock price development

 

Investors reacted very positive to the first-quarter results and ASML’s stock price rose with 5.4 percent the same the day. Since then, the stock price has risen even further and is now (23.04.2021) at a record high of EUR 547.10.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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23/10/2021 20:00:33