ASML Holding NV (ASML) shares fell sharply in Amsterdam Wednesday after the semiconductor supplier cautioned that delayed orders and swelling inventories would hit first quarter sales, echoing concerns for the sector as chip prices fall and smartphone demand wanes.
ASML posted net sales of around €3.1 billion for the three months ending in December, resulting in net income of around €788 million, topping the consensus forecast of $752 million. However, ASML said it sees first quarter revenues slowing to around €2.1 billion, notably weaker than the €2.78 billion consensus, as customer demand for its extreme ultraviolet lithography systems, or EUV, machines, which design complex chips used by, sector titans such as Samsung Electronics (SSNLF) , Intel Corp. (INTC) and Taiwan Semiconductor (TSM) and cost as much as €100 million each, eases
"Our customers responded late in Q4 to slowing demand in their end-markets by delaying deliveries of some of our litho systems from the first half of 2019 into the second half, in order to balance supply and demand," said ASML CEO Peter Wennink. "Despite some uncertainty in the current environment, we remain confident about our sales and profit targets for 2020 and beyond."
ASML shares were marked 4.15% lower in the opening minutes of trading in Europe and changing hands at €135.64 each, a move that extends the stock's three-month decline to around 27.1%.
Peer chipmakers were also on the move, with AMS AG (AMSSY) , a key Apple Inc. (AAPL) supplier, falling 2.23% and STMicroelectronics (STM) , which reports Thursday, sliding 2% to change hands at €12.22 each. Germany's Infineon Technologies AG (IFNNY) , the largest chipmaker in Europe, fell 2.06% in Frankfurt to trade at €17.80 each.
Last week, Taiwan Semiconductor Mfg. Co. Ltd., (TSM) the world's biggest contract chipmaker and a lead supplier for Apple Inc. (AAPL) iPhones, cautioned that near-term sales would slide the most in 10 years as global smartphone markets continue to slow.
"Moving into first quarter 2019, we anticipate our business will be dampened by the overall weakening of the macroeconomic outlook, mobile product seasonality, and high levels of inventory in the semiconductor supply chain," said CFO Lora Ho, with chairman Mark Liu telling reporters that drop in high-end smartphone demand "came a little bit sudden", adding that the inventory in the supply chain is quite a lot."
Apple's shock sales warning earlier this month, which it pegged to slowing demand in China, was echoed by its main rival Samsung, which said fourth quarter profits would likely come in at around 10.8 trillion Korean won ($9.67 billion), well shy of the market consensus of 13.2 trillion won, with sales falling 11% to 59 trillion won.
Samsung only has a 1% share of the China handset market, compared to around 9% for Apple, but its chips and screens make their way into handsets made by Huawei Technologies, as well as Apple's iPhones, and that segment comprises a much larger portion of its operating profits.
"Operating profits sharply decreased due to lackluster demand in the memory division and intensifying competition in the smartphone sector," Samsung said in a rare explanatory statement alongside the earnings forecast. "Memory demand will rebound in the second half with the release of new CPUs and smartphones."