ASML shrugs off analysts’ fears

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ASML, which supplies more than half the world’s chip-making systems by value, on Wednesday reported record results that far exceeded expectations, but its upbeat outlook was seized upon as evidence that the sector was overheating.

The Dutch company reported no let-up in demand for production capacity from chipmakers. Eric Meurice, chief executive, said that was consistent with industry estimates of 10 per cent value growth and 15 per cent unit growth this year in the
semiconductor sector.

Net sales rose to €942m ($1.2bn), 50 per cent up from the first quarter and 23 per cent higher than a year earlier, while operating profit more than doubled to €238m from €114m.

Mr Meurice indicated ASML could survive any downturn because of growing market share, the variety of customers and segments in which it is active, and high-tech product launches. “We feel 2007 could be a very good year for ASML,” he said.

His comments came as analysts fretted over the company’s order book, a key barometer of demand. Higher-than-anticipated second-quarter orders, for 93 systems, coupled with cautious comments for the third quarter, implied the company was on course for a 25-30 per cent fall in third-quarter orders, said Scott Geels at Bernstein.

He said higher orders were “extremely negative for 2007”, adding: “this is the clearest sign yet that the industry is going to over-supply itself.”

Dresdner Kleinwort noted that inventory had been building up as demand from PC, mobile phone and television manufacturers slowed in the second quarter. It said sales were likely to weaken at most semiconductor companies, and that might mean order cancellations at ASML and reduced earnings per share.

ASML shares rose 6.4 per cent to €15.80 as it reported net profit of €167m. It said it might launch a new share buy-back scheme, having returned €400m to shareholders from a programme completed this week, equivalent to 5.25 per cent of shares outstanding.

The average price of a lithography system rose from €13.5m in the first quarter to €13.7m as the company sold more high-tech machines. ASML has shipped 21 of the latest immersion systems and reiterated guidance of sales of 20-25 units in 2006. Immersion tools allow production at microscopic dimensions,shrinking the size of chips or increasing the data stored on them.

New technology has been key to gaining market share, especially in Japan, home to rivals Nikon and Canon.

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