Semiconductor giant ASML says sales blip is ‘warning sign’ for chip-makers like Apple supplier TSMC and Intel

ASML, the world’s largest supplier to the semiconductor industry, missed sales forecasts in its first quarter sending shares down 4.5 per cent in pre-market trading.

The Dutch technology giant reported that net sales fell 21.6 per cent year on year to 5.29bn euros (£4.51bn) on LSEG consensus estimates of 5.39bn euros (£4.59bn).

ASML designs and builds the systems and software used in the production of microchips, which are essential for data centres, artificial intelligence (AI) models and all kinds of electronic devices including smartphones and TVs.

Taiwan Semiconductor Manufacturing Company (TSMC), which provides Apple with chips, is ASML’s largest customer.

Kathleen Brooks, research director at online broker XTB, warned that ASML sales growth disappointment could be a warning signal for AI chip makers such as TSMC and Intel.

“The company is expecting weaker than expected sales in Q2, before they pick up later this year,” she said. “The slowdown in demand for its top-end machines was blamed for the decline in orders, which is the first sign that cracks could be appearing in the AI theme that was a powerful driver of markets in Q1.

“The company did not change their 2024 outlook but pushed the bulk of sales growth into H2. Q1 weakness came from Taiwan and the US, while China growth remained robust, although it is banned from selling its top flight machines to China,” Brooks explained.

ASML also posted a net profit of 1.22bn euros (£1.04bn), even though analysts were only expecting 1.07bn euros (£913m). This was a drop of 37.4 per cent from the first quarter of 2023.

“Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry’s continued recovery from the downturn,” said ASML chief executive Peter Wennink.

“We see 2024 as a transition year with continued investments in both capacity ramp and technology, to be ready for the turn in the cycle.”

Bookings for ASML’s machinery totalled 3.6bn euros (£3.07bn) in the first quarter, down four per cent year-on-year and plunging nearly two thirds compared to its previous quarter.

“ASML’s equipment is very expensive and it’s common to see swings in sales on a quarterly basis as it is a highly considered purchase and not a low-price, high-volume product which is constantly ordered,” said Russ Mould, investment director at AJ Bell.

“While the latest results have spooked the market, ASML insists its full year outlook is unchanged and it is sticking with the belief that the chip industry will improve as 2024 progresses.

“There is some reassurance in that statement but expect investors to be more nervous towards the stock until it next reports, for fear of repeat setbacks,” he added.

ASML shares have risen over 36 per cent year to date and nearly 53 per cent over the past year as global demand for chips has soared thanks to the AI boom.