ASML Identifies Geopolitical Risks Amid Export Restrictions
ASML Flags Geopolitical Risks in Annual Report
ASML, the leading supplier of equipment to computer chip makers, has highlighted geopolitical tensions and potential expansion of export restrictions to China as significant business risks. The company’s annual report released on Wednesday emphasizes the growing list of export restrictions imposed by the United States, with the approval of the Dutch government.
Impact of Export Control Restrictions
The restrictions include Dutch licensing requirements for most of ASML’s advanced product lines, as well as a unilateral move by the U.S. in October 2023 to limit exports of older equipment to unspecified Chinese plants. ASML has observed a gradual increase in the number of Chinese entities impacted by export control restrictions since 2022.
Projected Sales Impact
ASML anticipates that U.S. and Dutch export curbs will reduce sales of its mid-range “DUV” product lines to China by approximately 10% to 15% this year, following record levels in 2023. These restrictions stem from a U.S.-led campaign to impede Beijing’s technological and military progress, leading to limitations on ASML’s most advanced EUV tool line in China since 2019.
Market Dynamics and Competition
Despite the export challenges, China has emerged as ASML’s second largest market, accounting for 26.3% of sales in 2023, surpassing South Korea. Taiwan remains the company’s largest market at 29.3%. ASML also acknowledged the proliferation of competitors beyond traditional rivals, with new entrants driven by the pursuit of self-sufficiency in the geopolitical context.
Chinese Government’s Initiatives
Meanwhile, the Chinese government has been subsidizing domestic chip-making to achieve self-sufficiency, given its substantial reliance on chip imports for its market and manufacturing industries. Shanghai Micro Electronics Equipment (SMEE) stands as China’s most prominent manufacturer of lithography machines, further shaping the competitive landscape in the industry.
