Lam Research and ASML Holdings, two
companies that produce tools for
manufacturing chips, have reported that they
expect sales to China to boom later this year,
despite US export restrictions on equipment
used to make cutting-edge semiconductors.
This is a sign that China may be a bigger
customer for the industry than previously
expected this year, given its strong demand for
less-advanced chips like those used in electric
vehicles (EVs).
Although both companies reported quarterly
earnings that beat analyst expectations, Lam's
sales were lower than a year ago because of a
downturn in the memory market. Additionally,
both companies stated that they expect sales
to Chinese companies to increase in the coming
months, despite the US imposing sweeping
restrictions on China's semiconductor sector in
October 2022.
Lam is subject to the US export restrictions,
and ASML will face new rules from the Dutch
government on China sales later this year.
However, these rules have so far only affected
equipment used in making the most advanced
chips. Lam and ASML said that Chinese
customers are buying tools for building less
advanced chips that go into products like EVs,
mobile phones, and personal computers, amid
the country's drive for more self-sufficient
production.
In Lam's case, it had originally estimated that
the China restrictions would cost it between $2
billion and $2.5 billion of revenue in 2023.
However, the company said it had received a
"clarification" of the rules from the US
government, which would allow Lam to sell "a
few hundred million dollars" worth of tools that
it initially thought were banned.
ASML said it has a backlog of about 39 billion
euros, the equivalent of about two years of tool
shipments. Chief Executive Peter Wennink told
investors that Chinese customers working to
make less advanced chips make up about 30%
of those orders. That's a jump from November,
when ASML said China made up 18% of its then
38 billion euro backlog. Wennink said those
Chinese chipmakers were focused on markets
like electric vehicles, which require many more
chips than their combustion-engine
counterparts.
Although later this year, ASML will have to start
applying for Dutch export licenses for
immersion deep ultraviolet lithography
machines (DUV) for shipment to China after
the US, Dutch, and Japanese governments
agreed to begin regulating the tools. These
machines are not ASML's most advanced, but
are still close enough to its state-of-the-art
machines to make powerful computing chips
and were previously not restricted by export
rules. Wennink said ASML expects to sell about
93 immersion DUV machines this year, after
several years of strong demand. They are
cheaper than its most advanced systems but
still cost tens of millions of euros each.
Social Plugin