The semiconductor industry continues to navigate geopolitical tensions and technological advancements, with ASML at the center of these developments.
ASML's CEO, Christophe Fouquet, has made several noteworthy statements regarding China's chip manufacturing capabilities and the ongoing pressure from the United States on its allies to restrict technology sales to China.
China's Potential Chip Advancements
Fouquet suggests that China might be able to produce chips on the more advanced 5nm and 3nm nodes, albeit in limited quantities and using older Deep Ultraviolet (DUV) lithography technology. This assessment comes amidst reports that Xiaomi has completed the tape-out of its first 3nm System-on-Chip (SoC), with a potential launch next year.
While Xiaomi's chip is likely to be manufactured by TSMC, there are concerns that sanctioned Chinese entities like Huawei's HiSilicon might leverage similar design innovations to improve their own advanced silicon fabrication efforts.
US Pressure on Allies
Fouquet expects the United States to continue applying pressure on its allies for more restrictions on chip-related exports to China. He emphasized the need for the Netherlands and Europe to determine their own stance on these issues.
Currently, China-based companies like Huawei and SMIC rely on ASML's DUV lithography machines for advanced chip production. However, they are unable to access ASML's cutting-edge Extreme Ultraviolet (EUV) machines, which are used to manufacture the world's most advanced chips for companies such as Nvidia and Apple.
ASML's China Exposure
ASML anticipates its China-exposed revenue to normalize to around 20% of total sales by 2025, down from the current level of approximately 50%. This projection factors in the already saturated DUV inventories within China and potential further tightening of US export controls.
Industry Outlook
Despite recent challenges, including a significant drop in ASML's market capitalization and lower-than-expected orders, Fouquet remains optimistic about the chip industry's growth. He expects both the semiconductor sector and ASML to continue growing next year and into 2026, though he notes that the recovery may be more gradual than previously anticipated.
As the semiconductor landscape evolves, the interplay between technological advancements, geopolitical pressures, and market dynamics will continue to shape the industry's future.