July 17, 2019 / 5:31 AM / a month ago

ASML beats forecasts as 5G sales offset weak memory demand

AMSTERDAM (Reuters) - The rollout of 5G telecom networks helped semiconductor equipment maker ASML (ASML.AS) beat second-quarter forecasts on Wednesday despite weak demand in the memory chip market.

FILE PHOTO: ASML Holding logo is seen at company's headquarters in Eindhoven, Netherlands, Januari 23, 2019. REUTERS/Eva Plevier

The Dutch company, which supplies major chipmakers such as Samsung (005930.KS), TSMC and Intel (INTC.O), retained its forecast for “a growth year”, even though demand from memory chips producers is expected to drop 30%.

The outlook “implies a very strong fourth quarter”, said ING analyst Marc Hesselink.

ASML shares were up 4.1% at 192.10 euros at 0837 GMT, topping the Amsterdam blue chip AEX index.

The semiconductor industry has grappled with slowing demand since the second half of 2018, as mobile phone markets in major economies are increasingly saturated. Sales have also been hurt by the U.S.-China trade standoff.

But new technologies such as the rollout of 5G telecom networks have kept up demand for ASML’s machines, CEO Peter Wennink said, leading to increasing orders for its newest and most expensive lithography systems, which are used to map out the circuitry of computer chips.

“This means that logic sales will be up significantly this year”, Wennink said. “We know that memory is down as compared to last quarter, but all in all this compensates.”

Swedish mobile network gear maker Ericsson (ERICb.ST) on Wednesday also said it expected strong demand for 5G equipment to help it meet its financial targets for 2020 and 2022.

Rising logic demand meant ASML could ship seven of its newest EUV machines in the second quarter, while receiving new orders for 10 more, Wennink said.

In all, the company expects to deliver 30 EUV machines this year, with 12 systems expected to be shipped in the last quarter.

“We are making good progress with EUV”, the CEO said. “The demand is very clearly there.”

IMPROVING MARGINS

ASML, which dominates the international market for chip-making machines, reported a rise in profit margin to 43% in the second quarter from 41.6% in the first three months of the year, topping its own estimate of a 41-42% margin.

Sales of 2.57 billion euro (£2.32 billion) were in line with the company’s guidance.

It expects sales of 3 billion euros in the third quarter and a profit margin of 43-44%, the company said.

That margin could improve to around 50% in the fourth quarter, Wennink said.

“All in all we are happy, the CEO said. “2019 will be a good year.”

Reporting by Bart Meijer; editing by Himani Sarkar and Jason Neely

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