ASML profits down as chip sales slow

ASML has announced a profit drop in its second quarter financials, with the chip equipment maker’s net income down from the same point last year.

The Dutch firm, recently the recipient of an $4.1 billion investment from Intel, showed a downturn in its financial results compared the same point last year. Net profits were down from €432 million in 2011, to €292 million, while sales were down from €1.5 billion to €1.2 billion.

Looking forward, second half sales are expected to “remain steady” in the second half according to ASML president and CEO Eric Maurice.

This will mean second half revenues of between €2.2 billion and €2.4 billion, he said, though this will come short of expectations according to some analysts.

The results come as a number of semi firms have posted lacklustre financial results, piling gloom on the semiconductor industry.  Intel, for example, showed profits are dropping during a difficult time for the market, particularly with poor PC sales, slow growth in China, and a financial crisis in Europe.

As a manufacturer of chip production equipment ASML can, to a certain degree, act as an industry bellwether, though the long term future of the firm appears to be very positive.

ASML recently received substantial investment in its R&D from Intel in return for a 15 percent stake, as firms clamour to climb on board with its EUV lithography technology.

EUV is fundamental with for moving to advanced processes and the jump to 450mm production.

TSMC and Samsung are also circling before making a likely move too, with the ASML leading the way in lithography, supported by patents from IMEC.

According to chip industry expert Mike Bryant, who highlighted the dominant position ASML has carved out earlier this year, a temporary slowdown in sales will not be denting any future prospects.

“There is bound to be a slowdown at the moment,” he said, speaking with TechEye.  “If you think about it 75 percent of the market is only five customers, and since all five have already ordered the equipment for their latest fabs – Intel Oregon DX1, TSMC Fab 15, GF Malta NY, etc – then ASML sales will be more for upgrades and maintenance for now.”  

“Cash-flow will also be poor until this equipment is delivered which is rather hard since most of these sites are still in construction,” he said. 

He thinks ASML is unlikely to be concerned over a short drop off in profits, and wouldn’t be allowed to come a cropper such is its importance to the European semi industry in the future.

Bryant further commented: “ASML has large cash reserves and also a special bank line from the European Investment bank which it has never used but which would keep it secure if there really were no orders one year.”

With regards to the rumoured deals with TSMC and Samsung, Bryant believes these are more a case of ‘when’ rather than ‘if’ despite any tough times in the semi market.

“As far as I can work our ASML have reserved five percent of their shares for TSMC and five percent for Samsung and offered them to them at the same price as Intel paid, on the condition they also give an advance proportional to Intel’s,” he said. “Obviously they can’t just find this money from petty cash so there will be frantic activity at both deciding what to do.”  

Not buying into the equipment maker, according to Bryant, would be more of a “risky strategy”.