EUV Equipment Production Capacity to Expand
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
During its 2Q21 earnings release, ASML announced record-high new orders for the quarter. Most of the new orders are for EUV equipment. The firm also announced 3Q21 earnings guidance that exceeded consensus.
Increase in new orders for lithography equipment
ASML, the lithography equipment maker, registered 2Q21 sales of EUR4.02bn (-8% q-q), OP of EUR1.24bn (-21% q-q), and NP of EUR1.04bn (-22% q-q). While sales missed consensus, OP beat expectations. The portion of equipment sales for memory chips rose q-q. We believe that this is due to increased capacity investment amid intensifying competition among memory makers such as Samsung Electronics and Micron.
The firm’s new orders in 2Q21 reached a record high of EUR8.3bn (+74% q-q). Among this, EUV equipment accounted for EUR4.9bn. The company also announced 3Q21 guidance, including sales of EUR5.3bn and OP of EUR1.9bn, exceeding consensus by 13% and 21%, respectively.
EUV equipment production capacity to expand
ASML’s 2021 sales are predicted to grow 35% y-y (up from the previous projection of 30%). Machine learning, HPC, and 5G are driving demand for logic semiconductors. More than half of the order backlog of EUR17.5bn is for EUV equipment. Increased demand for high-performance computing leads to greater demand for micro-semiconductor equipment such as EUV. ASML plans to increase EUV production capacity from 40 units to 60 units by 2023 to meet this rise in demand.
PC and home appliance sales have also improved thanks to increased non-face-to-face demand amid the Covid-19 crisis. As these products require legacy node semiconductors larger than 14nm, demand for legacy lithography equipment such as KrF and I-line remains healthy. From 2023, high N/A EUV equipment, which is at least 70% more expensive than regular EUV equipment, is expected to contribute to ASML’s earnings performance.