ASML's Record Order Levels Show Chipmakers Are Stocking Up
Comment of the Day

July 21 2021

Commentary by Eoin Treacy

ASML's Record Order Levels Show Chipmakers Are Stocking Up

This article from Bloomberg may be of interest to subscribers. Here is a section:

Chief Executive Officer Peter Wennink said that trend, which he called “technological sovereignty,” will also boost orders. The company has historically underestimated how quickly the industry would grow in the past 15 years and Wennink said it’s working to boost manufacturing to keep up.

“Clearly we’ve seen in 2021, the reaction of the industry at large, the electronic industry, to the Covid year,” he said, predicting that “the catch up effect that will stretch into 2022.”

ASML is also discussing ways of increasing supply capacity of both its new and older machines, including increasing headcount and floorspace. Longer term, demand will be driven by advanced chips needed to run artificial intelligence and high-powered computing as well as the proliferation of sensors needed for gadgets like connected home appliances.

The shares rose as much as 4.6% to 609.40 euros in Amsterdam. The stock has jumped 51% this year. That compares with a 20% gain on the Stoxx 600 Technology Index.

New technologies that will rely on faster 5G networks in devices from laptops to cars to home appliances will drive 35% growth in the company’s logic business this year, as the less advanced chips that help run sensors in these devices see higher demand, Wennink said.

Eoin Treacy's view

ASML has a monopoly in the production of chip manufacturing technology. That puts the company in a special position to benefit from increasing demand. With that kind of advantage one might reasonably ask what can go wrong?

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