ASML Gives Investors The Tingles

Image source: Ajaibs - Shutterstock

What's going on?

Chipmaking equipment maker ASML reported lush quarterly results on Wednesday.

What does this mean?

Investing 101 tells you that when an industry’s facing a downturn, its suppliers are probably poised for a rough patch too. So with the world of smartphones and PCs looking a little limp right now, you’d guess that the makers of chipmaking equipment would be biting their nails too. Nuh-uh: at least, not ASML. In fact, the company said its customers continued to focus on building new manufacturing plants –  likely thanks in part to support from western governments. For ASML, that meant record bookings and unexpectedly high profit and revenue figures. And with an impressive outlook on the cards for the current quarter as well, jubilant investors sent ASML’s shares up 7% after the news.

Why should I care?

The bigger picture: Going like hotcakes.
ASML’s business has been so good that the company just can’t keep up with demand. The firm has a backlog of orders totaling nearly $40 billion – around the size of entire economies of some small European nations. So ASML’s been skipping some final product testing and carrying it out later on customers’ premises, in a bid to deliver products faster. That’s not a long term solution, mind you, which is why the firm’s planning to boost its production capacity over the next few years.

Zooming out: Embargo bugaboo.
Just when everything was going so well for ASML, it looks like Uncle Sam could be about to rain on its parade. Earlier this month, the US issued new restrictions on selling chipmaking equipment to China. And although ASML is a Dutch firm, the US embargo could stop Chinese chipmakers getting their hands on vital American gear, denting demand for ASML’s products by extension. The firm doesn’t seem worried for now, but with 15% of its revenue coming from China last year, this could be a thorn in its side going forward.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

We’re Watching Now, Netflix

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.