source: china securities

on september 6, lithography machine giant asml issued a statement on its official website saying that the dutch government announced new export regulations for immersion duv lithography machines, which will take effect on september 7. this means that asml needs to apply for an export license from the dutch government to ship twinscannxt:1970i and 1980i duv lithography machines.

it is worth noting that recently, ubs downgraded asml's stock rating from "buy" to "neutral" and lowered its target price from 1,050 euros to 900 euros. the adjustment was made against the backdrop of market expectations that the company's earnings per share growth rate will slow down.

asml suddenly announced

according to an announcement on asml's website, the dutch government issued the latest licensing requirements for the export of immersion duv semiconductor equipment on september 6. asml believes that this requirement will coordinate the way export licenses are issued.

under the updated licensing requirements, and in accordance with § 734.4.(a).(3) of the u.s. export administration regulations, asml will need to apply for an export license from the netherlands government, rather than the u.s. government, to ship its twinscannxt:1970i and 1980i duv immersion lithography systems. the dutch export licensing requirements already apply to twinscannxt:2000i and subsequent duv immersion systems. sales of asml's extreme ultraviolet (euv) systems are also subject to licensing requirements. the latest licensing requirements issued by the dutch government will take effect on september 7.

it is reported that the new export control regulations announced by the dutch government on friday require asml to apply for a license from the hague instead of the us government for some of its machines. asml spokesperson monique mools said, "due to the new requirements, asml will need to apply for an export license from the dutch government instead of the us government for the lithography machines twinscannxt:1970i and 1980i. the new regulations are not expected to have any impact on our financial outlook for 2024, nor on the long-term outlook communicated during the investor day in november 2022."

announcing the latest news, dutch trade minister renette kleve said: "i took this decision for our security. we found that due to technological developments, there are more security risks in the export of these specific production machines." although the united states and the netherlands are still negotiating export policy, friday's decision is a practical move that should ease tensions between the two governments.

the machines in question are asml’s 1970i and 1980i duv immersion lithography tools, about the middle of its product line. under pressure from the united states, the dutch government never allowed asml to ship its best euv tools to chinese customers, while requiring licensing for nxt:2000 series and later duv tools starting in september 2023.

in october 2023, the united states unilaterally began to restrict shipments of asml 1970i and 1980i tools on the grounds that they contained some american components. members of the dutch parliament had questioned the impact on dutch sovereignty.

rating downgraded

on wednesday, ubs downgraded asml's stock rating from "buy" to "neutral" and lowered its target price from 1,050 euros to 900 euros. the adjustment was made against the backdrop of market expectations that the company's earnings per share growth rate will slow.

despite asml's prominence in the european tech sector, ubs expects its earnings per share to grow at a compound annual rate of 13% from 2025 to 2030, compared with a 24% compound annual growth rate from 2018 to 2025.

the company said the expected growth rates justify the "normalization" of asml's stock price-to-earnings ratio relative to its peers and historical averages. although the outlook for 2025 is bullish, the focus is expected to shift to 2026 and 2027. ubs predicts that earnings before interest and taxes will fall by 5%-10% compared with general expectations in the next few years.

ubs believes that several factors will lead to this change. lithography intensity in the logic and memory sectors will stabilize, and lithography is expected to decline from a peak of 30% in 2025 to 25% of total fab equipment spending in 2027. this decline is partly due to the architectural shift to all-gate technology and a possible slowdown in the addition of euv layers in dram manufacturing.

in addition, revenue from ai terminal applications may not be enough to offset the change in trend, accounting for only 10%-15% of asml's revenue in the next three to five years.

according to the performance forecast for 2024, the chinese market accounts for 35% of asml's revenue. however, with the arrival of additional export controls, sales will inevitably be affected. ubs expects that china's market revenue will fall to 24% year-on-year in 2025 and to 11% in 2026. in addition, asml has recently achieved a 1.3% growth in the technology sector. however, according to wolfe research data, the company's third-quarter revenue expectations are lower than generally expected.

however, barclays upgraded asml's stock rating from "hold" to "overweight" and raised its target price from 930 euros previously to 1,150 euros. barclays expects asml's year-on-year growth rate to be 15% in 2026 and 27% in 2025. the company also expects asml to continue to maintain double-digit growth in the following years (2027 and 2028).

it is worth noting that recently, dutch prime minister dick schauf expressed optimism when discussing new restrictions on semiconductor equipment exports to china with the united states. the outcome of these negotiations could have a significant impact on the semiconductor industry, especially for companies such as asml that occupy a core position in the global supply chain.

editor: wan jianyi

proofreading:zhu tianting

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