ASML Holding, a Netherlands-based manufacturer of equipment used in the chip production process, on Wednesday, January 24, released profit data for the fourth quarter of last year.

The mentioned result of the Dutch company exceeded preliminary expectations. The firm has reported its best quarterly orders ever. At the same time, the company is exercising high-level caution when making a forecast for 2024. This approach of the chip-making equipment manufacturer is related to export restrictions imposed by Washington, which significantly limit the supply of advanced products intended for use in the technology sector to the Chinese market.

The Dutch company’s net profit increased by 9% year-on-year last quarter, reaching 2 billion euros ($2.2 billion). The sales volume of the manufacturer of equipment for making microcircuits in the last three months of 2023 in monetary terms amounted to 7.2 billion euros. It is worth noting that analysts expected this figure to be 6.9 billion euros. Forecasts for the company’s net profit were also worse than the real result. Experts expected that this figure would amount to 1.87 billion euros.

In the fourth quarter of last year, the company registered orders worth more than 9 billion euros. This figure is more than three times higher than the indicator for the period from July to September.

Currently, there is a high level of demand for artificial intelligence chips at the global level. However, ASML is not inclined to believe that this market circumstance will be the driving force behind its sales growth in 2024.

Peter Wennink, CEO of the company, says that the semiconductor industry currently continues to work through the bottom of the cycle. According to him, ASML customers are still not sure what form the recovery of the semiconductor market will take in 2024, but there are already some signs of a change in the situation in this sphere in a positive sense. In this context, Peter Wennink drew attention to the improvement in demand for microcircuits and the increase in plant utilization rates.

ASML reported receiving orders worth 5.6 billion euros for its most advanced extreme ultraviolet (EUV) machines. The company also has numerous orders for new systems of extreme ultraviolet lithography with a high NA.

Robert Schramm-Fuchs, portfolio manager at ASML investor Janus Henderson, said in a comment to the media that the increase in the number of orders for EUV surprised in a positive sense. Separately, he noted that in this case, the most important circumstance is that the mentioned indicators really dispels the bear argument on the midterm technology progression outlook.

TSMC, which manufactures chips for Apple and Nvidia and is ASML’s largest customer, said last week that its expected capital expenditures would remain unchanged in the current year.

ASML is currently the dominant player in the global market for lithography systems, which are equipment used by computer chip manufacturers to create the circuit of microcircuits.

InsingerGilissen analyst Jos Versteeg said that after TSMC’s good results announced last week and the optimistic forecast of this company, there were expectations that the Dutch brand would improve its prognosis for the current year, but this company adheres to a conservative assessment of own prospects for the near future. According to the expert, ASML will still change its forecast in 2024. Jos Versteeg explains this point of view by saying that the end markets are showing a recovery trend.

The price of ASML shares rose by 6.7% on Wednesday, reaching 754.3 euros per security, which is the highest price level since November 2021.

The company said that export restrictions imposed by the United States and the Netherlands will affect up to 15% of its sales in China, which is the third largest market after South Korea and Taiwan for the brand.

Currently, Beijing, which has lost a significant part of the ability to import advanced chips, is taking measures to support the development of the homegrown microcircuits manufacturing sector. At the same time, this week it became known about an increase in Chinese imports of equipment needed for the production of chips. Deliveries of relevant products to this country in 2023 increased by 14% compared to 2022. The total cost of chip manufacturing equipment imported by China last year was almost $40 billion. In December 2023, the volume of shipments of lithographic equipment from the Netherlands to the Asian country increased by 1000% year-on-year. This result is explained by the fact that Chinese companies are making some kind of reserves against the background of rising geopolitical tensions.