The value of ASML Holding NV shares was on a downward trajectory amid the prospect of tightening restrictions from the United States on the business of this Dutch company in the Chinese market.
Currently, the administration of US President Joe Biden is currently considering the possibility of introducing new solutions to its export policy concept towards Beijing. In this case, the changes provide for more stringent measures within the regime for the supply of certain categories of products to China. Washington’s corresponding intentions are related to its desire to limit Beijing’s technological potential and narrow the space of opportunities for the Asian capital to move towards progress in the appropriate sector. Supply restrictions by the Joe Biden administration primarily affect high-tech products. Most of the related measures are aimed at advanced chips. The United States has limited the supply of cut-edge microcircuits and equipment necessary for the manufacturing of appropriate products in China. Some allied capitals, including Amsterdam, whose decisions have an impact on ASML’s business, also joined Washington’s corresponding decision on the practical plane.
It is highly likely that new bans on exports to China, which are currently being considered by the United States Presidential Administration, will also be supported by US allies. This means that the potential implementation of tightening restrictions on the supply of products and equipment to the Asian country will become a factor affecting the activities of ASML. For the Dutch company, this prospect means financial losses, since in the Chinese market, against the backdrop of a more favorable geopolitical environment, the firm could interact with a larger number of customers. New restrictive measures are not yet guaranteed, but the likelihood of their materialization in practical space is high since such actions are fully consistent with Washington’s political logic aimed at containing Beijing’s technological potential.
The United States Presidential Administration, in the context of justifying its current export strategy towards China, has repeatedly stated that the Asian country can use chips to develop various advanced military technologies and, as a result, strengthen its military capabilities. As part of the relevant reasoning, Washington logically argues that supply measures are a matter of ensuring US national security. Moreover, the lack of access to advanced chips and equipment necessary for the production of microcircuits of the corresponding category could potentially harm the Chinese economy in the medium and long term. In the context of the possibilities of competition in the international arena in a large-scale and multivariate aspect of the corresponding process, the implementation of the mentioned scenario could weaken Beijing’s position. The economic base actually determines a country’s ability to advance in the global area.
Media reports that policymakers in Washington are considering the possibility of introducing new restrictive measures regarding the supply of advanced technological products and equipment to China, taking into account the current state of affairs in the space of trade relations between the Asian country and other states. The implication here is that new bans will become a reality if companies, including ASML, continue to provide Beijing with access to high-end semiconductor technologies. It is possible that Washington will initially try in some way to convince firms to stop the mentioned activities. If companies in this case refuse proposals to stop exporting products and technologies to China, the United States will decide to introduce new restrictive measures. It is worth noting that these are only assumptions, the materialization of which is not guaranteed and has not yet been commented on at the official level. At the same time, Washington has repeatedly stated its intention to limit the supply of advanced technological products to China.
It is worth noting that at present, the semiconductor industry is gradually becoming one of the main areas of global competition. Chips are a kind of basic component for the functioning of artificial intelligence systems. At the same time, AI is gradually becoming the main technology of modernity and the major driving force of progress at the current stage of human civilization. Against the backdrop of the mentioned circumstances, access to chips determines the possibilities for developing artificial intelligence systems. Countries without access to microcircuits will be significantly limited in terms of global competitiveness, which will have negative economic consequences and even impact political positions.
It is worth noting that Washington is paying increased attention to the activities of ASML. This situation is explained by the fact that the company has a monopoly on the production of machines for the manufacturing of the most advanced semiconductors. The increased attention to ASML is logical in the context of Washington’s desire to increase pressure to stop Chinese accomplishments in the chip-making area.
The company’s shares on Wednesday, July 17, at trading in Amsterdam fell by 7.7%. This drop in the indicator is the most significant since October 2022. The negative performance of ASML securities comes despite the company reporting that bookings in the second quarter of the current year increased by 54% compared to the previous quarter, amounting to 5.57 billion euros ($6.1 billion) and exceeding forecasts. The firm’s share value after the drop is 903 euros per equity.
Citi analyst Andrew Gardiner says the geopolitical aspect will take center stage and become a bigger factor than the firm’s performance as media reports suggest the United States is pushing for more restrictions on ASML’s business.
The company expects its sales in the current quarter to range from 6.7 billion to 7.3 billion euros.
It is worth noting that previous measures taken by the United States regarding ASML exports to China did not affect demand from the Asian country. In the second quarter of the current year, almost half of the company’s revenue accounted for China. ASML’s sales in the Asian country increased by 21% in April-June 2024 compared to the previous quarter. Media reports that Beijing has been buying up unrestricted older kits to make more mature types of semiconductors.
Demand for ASML products is growing due to the demand for high-powered chips that are needed for artificial intelligence apps. Chief Executive Officer of the company Christophe Fouquet says that strong developments are currently being observed in the area of machine intelligence, which are significantly contributing to the recovery and growth of the industry, outpacing other market segments.
As we have reported earlier, ASML CEO Says World Needs Legacy China’s Chips.
