TMTPost -- ASML Holding NV, the world’s leading lithography machine manufacturer, still sees strong sales performance in China even though technology curbs imposed by the U.S. and its allies started to hit its business.

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ASML posted €5.3 billion (US$5.6 billion) of net sales in the quarter ended March, at the midpoint of its guidance, with a gross margin of 51.0% which is above guidance, primarily driven by product mix and one-offs. However, its orders that month suffered larger-than-expected slump. Bookings at the European tech giant plunged 61% from the fourth quarter of last year to €3.6 billion, versus analysts’ estimated €4.63 billion.The first quarter saw orders for ASML’s most advanced Extreme Ultraviolet (EUV) machine generated €656 million, crashing from €5.6 billion three months earlier.

ASML expected net sales between €5.7 billion and €6.2 billion in the current quarter, missing Wall Street forecast of €6.5 billion. The company reconfirmed its outlook this year with an assumed recovery in the rest of the year.

“Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry's continued recovery from the downturn," said ASML President and CEO Peter Wennink in a statement. Chief Financial Officer Roger Dassen also expressed optimism on the outlook. “We see 2024 as a transition year with continued investments in both capacity ramp and technology, to be ready for the turn in the cycle.” “I think it’s pretty clear that the industry is in its upturn. We will see recovery for the industry in 2024 and that we are building up for a stronger year in 2025,” Dassen  said.

Despite the sales decline, China remains the biggest market for ASML in the first quarter. While Sales in mainland China that quarter were €1.9 billion, declining 13.6% from the previous quarter, the quarter-over-quarter (QoQ) drop in the market still seems less compared with other major markets. 49% of ASML’s quarterly sales came from mainland China, up from a share of 39% in the last quarter of 2023. South Korea, the second largest single market for ASML, contributed €753.5 million in the first quarter, down 46% QoQ, and took a 19% share, versus a 25% share in three months earlier. Sales in Taiwan plunged 67.8% QoQ to €238.0 million with a 6% share, less than half of that in the fourth quarter.

Significant fall in sales in ASML’s major markets signaled top chipmakers like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics Co. are holding off new orders amid manufacturer clients’ ongoing destocking. Still, the company expects strong demand from China to continue for the rest of this year, Chief Financial Officer (CFO) Roger Dassen told analysts at an earnings call.   

Founded in 1984, Netherlands-based ASML provides comprehensive lithography solutions encompassing hardware, software, and services, assisting chip manufacturers in large-scale image etching on silicon wafers. Meanwhile, ASML is currently the only manufacturer of EUV lithography systems in the world. As a key for the future lithography technology and advanced process, EUV lithography is the most expensive step in making the advanced microchips that power data centers, cars and iPhones.

ASML has been restricted from selling its high-end machines in China since 2019 due to U.S.-led export controls. The company confirmed at the beginning of this year that a license for the shipment of NXT:2050i and NXT: 2100i has been revoked by the Dutch government, but added the revocation just affected a small number of customers in China. “We do not expect the current revocation of our export license or the latest U.S. export control restrictions to have a material impact on our financial outlook for 2023,” ASML said in the statement in January.

Later in Janaury, ASML CFO Dassen disclosed new U.S. and Dutch export curbs are expected to reduce sales of its mid-range "DUV" product lines to China by about 10% to 15% this year, after they hit record levels last year. Dassen said the company will not get export licenses for shipment into China for advanced immersion tools like NXT:2000i and up this year, but he still expected demand from China for older tools to stay very solid.