One analyst believes ASML, a Dutch company that makes and sells the world's most advanced chipmaking equipment, may lose a significant portion of its orders next year. ASML is the only company that makes chipmaking equipment that uses ultraviolet light to print billions of transistors on a small piece of silicon. The equipment, known as EUV lithography machines, is one of the world's most sought-after industrial products and is widely used by the world's leading chipmakers, including Taiwan Semiconductor Manufacturing Company (TSMC) and Intel Corporation.

ASML's EUV equipment is also controversial because it allows any chip manufacturing company to produce cutting-edge products. The U.S. government has banned the supply of these equipment to China due to concerns that the products it produces could be used by the Chinese military to harm U.S. national security interests. At the same time, because ASML is the only company producing such equipment, companies such as Intel and TSMC often need to mass-produce tens of thousands of silicon wafers in a month, so the equipment is reserved months in advance.

Ming-Chi Kuo, an analyst known for his insights into Apple's supply chain, believes that declining demand for Apple's 3-nanometer iPads and MacBooks, reduced orders for Qualcomm's 3-nanometer chips due to Huawei abandoning the company's products, declining demand for Samsung's wafer foundry's 3GAP+ products and Intel's 20A products, as well as longer delays in future expansion by memory manufacturers, are also expected to lead to a decline in shipment forecasts for 2024.

In ASML's TWINSCANNXE:3400 machine, a laser hits the tin droplet, generating extreme ultraviolet (EUV) light in the machine's light source. These machines are used to "print" chips and cost more than $120 million each. Image: ASML

TSMC and Intel already have EUV machines, and the competition between them has extended to EUV successors. Known as high-NAEUV, these machines have wider lenses that allow more light to pass through. This is critical because advanced chip manufacturing technologies, such as 2nm and 3nm, can cause patterns printed on the chip to be blurred due to smaller feature sizes.

In ASML's second quarter financial report, the company achieved revenue of 6.9 billion euros and net profit of 1.9 billion euros. The company shipped 13 EUV machines, earning €2 billion in revenue. The company's management also said that EUV shipments have been delayed due to the slowdown in the chip industry, and ASML now plans to ship 52 systems throughout 2023. The cut also cuts ASML's 2023 EUV revenue growth forecast by nearly half, as the company now expects EUV revenue to grow 25% instead of the 40% it previously expected.

During the first quarter of 2023 earnings call, ASML had intended to ship 60 EUV equipment, as the company's revenue in the second quarter was expected to be 6.5 billion euros, having shipped 9 EUV equipment in the first quarter.

ASML CEO Peter Wennink weighed in on the current downturn in the chip industry during a video interview following the second-quarter earnings report. He explained: "Our customers are very interested in our products, but that means our customers are still dealing with relatively high inventories. How to deal with high inventories? Basically, reduce wafer output. Of course, wafer output means that our tool utilization will also be lower. What does that mean? In our EUV business, we see demand timing happening. Some changes. A lot of it is determined by the readiness of the fabs, I think the fabs are not ready. Why is that? We have said before that there are skills issues, both in Taiwan and in the United States. There are also some macroeconomic factors and there are some concerns about the duration of the economic downturn. "

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