ASML’s downgraded 2025 sales forecast has sparked a major sell-off in chip stocks, causing concerns about potential faltering global chip demand. However, analysts suggest the issue may lie in factory overcapacity rather than a decline in demand. ASML’s tools, essential for major chipmakers like TSMC, Intel, and Samsung, were heavily purchased during the pandemic, and these companies have become more efficient at using them to produce more chips. This efficiency, coupled with stabilized chip demand, has led to delays in ordering new equipment.
ASML’s stock saw its largest single-day drop in 25 years after inadvertently posting results early, which indicated expected 2025 net sales of 30 billion-35 billion euros, near the lower end of its previous forecast. Given ASML’s near-monopoly on critical chipmaking tools, the downgraded outlook affected much of the semiconductor industry. Despite the surge in AI-related chip demand, the weaker performance of other sectors in the semiconductor market has caused delays in orders for logic chips and limited new capacity plans for memory chip producers.
Intel, TSMC, and Samsung have scaled back orders from ASML due to existing factory capacity, according to TechInsights’ Dan Hutcheson. With current chip factory usage at around 81%, chipmakers typically only increase orders when usage surpasses the mid-90% range. Intel’s slowdown in factory expansion hints that TSMC and Samsung will adopt similar caution.
Moreover, chipmakers have reduced their reliance on ASML’s flagship tools. According to Handel Jones of International Business Strategies, Samsung has potentially cut down the use of extreme ultraviolet lithography machines by as much as two-thirds in certain production steps. This further contributes to excess capacity and delays in ordering new tools from ASML. Jones, however, maintains his forecast for strong long-term demand for AI chips and AI-specific memory chips, viewing this situation as a temporary hurdle in the broader chip market recovery.
Featured image courtesy of Magnifier
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