ASML faces slow start to year as chipmakers delay orders

ASML faces slow start to year as chipmakers delay orders

ASML Holding NV, a major supplier to the world's largest computer chipmakers, said on Wednesday that first-quarter sales would be weak as some of its customers had delayed orders into the second half of 2019.

ASML logos are seen at the headquarters in Veldhoven
ASML logos are seen at the headquarters in Veldhoven, Netherlands August 30, 2018. REUTERS/Piroschka van de Wouw/File Photo

VELDHOVEN, Netherlands: ASML Holding NV, a major supplier to the world's largest computer chipmakers, said sales would be weak in the first quarter as some of its customers had delayed orders into the second half of the year.

The chip equipment maker's update comes after clients Samsung Electronics, the world's largest chipmaker and TSMC, the world's largest maker of chips to order, signalled weakness in memory chip prices and in demand for logic chips used in high end mobile phones.

"The full year is going to be good, but the first quarter is going to be light," CEO Peter Wennink said in a statement.

ASML, whose customers also include Intel, makes lithography machines, a key part of the chip making process that helps trace out circuits. Its shares traded 1.7 percent lower at 0930 GMT, having earlier been down by 3 percent.

The Dutch company forecast first quarter sales of 2.1 billion euros (US$2.4 billion), which would be down from 2.3 billion euros a year ago, adding that both sales and margins would be stronger in the second half than in the first half of 2019.

ASML, however, said it had still seen "solid" demand from China, something of a surprise as Apple, among others, cited weakness among Chinese consumers as a reason for a recent downgrade to revenue forecasts.

It reported fourth-quarter net profit of 788 million euros, up from 643 million in the same period a year ago. That beat the estimates of analysts polled for Reuters who had forecast net profit of 752 million euros.

ORDERBOOK WEAKENS

However, ASML's new bookings during the fourth quarter were 1.59 billion euros, missing analyst estimates of 2.53 billion euros by a wide margin.

"Our customers responded late in Q4 to slowing demand in their end-markets by delaying deliveries ...(of some products) from the first half of 2019 into the second half, in order to balance supply and demand," Wennink said.

ASML has said it still see growth potential in the market for chips for mobile phones, as well as in the developing areas of self-driving and connected cars, and artificial intelligence.

After a decade of outperformance, ASML shares are down 25 percent since July, closing at 141.36 euros on Tuesday.

"We believe that ASML's longer-term investment case remains intact," said analysts at Dutch bank ING.

Wennink said that chipmakers will continue to invest in new capacity for logic chips this year, which he expected to be the main driver of growth. Such chips process information and are seen as the brains of electronic products.

ASML maintained its mid and long term targets of 13 billion euros in sales by 2020 and of at least 15 billion euros in sales by 2025. (US$1 = 0.8798 euros)

(Reporting by Toby Sterling; Editing by Susan Fenton and Keith Weir)

Source: Reuters

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