Last week, Congress approved the CHIPS and Science Act which President Biden has pledged to sign to help underwrite the construction of new semiconductor plants in the United States. Intel CEO Pat Gelsinger dubbed it “historic legislation” in a conference call with investment analysts.
“Literally since World War II, there might not have been a more important piece of industrial policy that came forward through Congress,” Gelsinger said. “Seeing this come across the line will clearly be part of that ability for us to invest aggressively.”
The bill was in response to disruptions to semiconductor shipments from Taiwan, which has had a significant impact on auto makers and other manufacturers that embed chips in their products. Even industry giant Taiwan Semiconductor Manufacturing is building a factory in Arizona to produce its most advanced chips.
The new U.S. factories should provide a boost for ASML sales, as semiconductor makers buy its machines for production lines that will be created. In the past month, shares of ASML are up 30 percent on the Nasdaq, though at more than $560 a share they are well off the $889 peak the issue hit in September 2021.
Speaking last month on a conference call, ASML CEO Peter Wennink said eight new factories opened their doors globally in the past year which are using ASML’s extreme ultraviolet machines, which are the most advanced in the industry. Second-quarter revenue jumped by more than half from three months earlier to $5.4 billion, producing $1.4 billion in profits.
“Any short-term shocks in the demand cycle, you have to compare with the long-term view of our customers for the whole digital transformation,” Wennink said. “That’s why they’re building fabs.”
ASML has its largest factory at its Netherlands headquarters, with its other major plants in Wilton, San Diego, and in the Taipei metropolitan region of Taiwan. To free up extra capacity in its factories in the past year, ASML has been shipping systems to customers, conducting the intricate final tests at their factories that validate the machines work as designed in producing circuits.
Taiwan chip makers accounted for 40 percent of ASML revenue in the second quarter, with a third of its business in South Korea and just 10 percent in the United States. ASML’s primary competitors are Canon and Nikon.
ASML’s impact on the U.S. economy was mentioned in the April report of the Council of Economic Advisers included in this year’s Economic Report of the President released by the White House. The federal government asked The Netherlands this year to curtail sales of ASML machines to chip makers based in China, according to Bloomberg News.
“It’s not new — it’s been on the table time to time, it pops up,” Wennink said on last month’s conference call in response to an analyst’s question on the U.S. government’s stance. “It’s just a political position — we’ll just have to wait on what the politicians come up with and accept that. I think we need to realize China is an important player in the semiconductor industry.”
In response to a query on Tuesday, an ASML spokesperson indicated company has made no comments specifically on the tensions between Taiwan and China and by extension the United States, that was brought to the fore this week with Pelosi’s trip to Taiwan.
“Our expansion plans in Wilton — and elsewhere within ASML and with our suppliers — is solely the result of organic growth,” stated Ryan Young via email. “Demand continues to exceed our supply capability, and mid- and long-term market expectations are for significant continued growth of the semiconductor market.”
Of nearly 750 open jobs in the United States as of Tuesday, Wilton had the largest number of openings at about 225 in all, about 50 more than in San Diego. Just over 100 more are open in San Jose, Calif., where ASML opened a new campus last year roughly half the size of its Wilton plant.
The company’s $200 million expansion in Wilton will include a new “clean room” measuring more than 12,000 square feet of space, designed to minimize any chance of contamination of systems inside.
Includes prior reporting by Luther Turmelle.
Alex.Soule@scni.com; 203-842-2545; @casoulman