High demand for chips made ASML €5.6 billion in profits last year

High global demand for chips resulted in an excellent 2022 for Dutch chip machine maker ASML. The Veldhoven company recorded a profit of 5.6 billion euros. Despite the economic and geopolitical uncertainties, ASML expects sales in 2023 to be over 25 percent higher than last year.

“For ASML, 2022 was another strong year ending with total net sales for the year of €21.2 billion, gross margin of 50.5%, and a record backlog at the end of 2022 of €40.4 billion,” CEO Peter Wennink said in a brief explanation of the annual figures.

Inflation, rising interest rates, and the risk of recession are all causing uncertainty in the market. But perhaps the biggest looming problem for ASML is the rising geopolitical tensions between the United States and China.

The U.S. wants to keep its technological edge, and therefore military might, over China and intends to ban ASML from selling to the country. ASML has already stopped selling its very latest machines - EUV, Extreme Ultraviolet - to China, but the U.S. wants to also ban it from selling older chip machines to the country.

Prime Minister Mark Rutte discussed the matter with U.S. President Joe Biden last week. After the meeting, Rutte said he expected this discussion to “reach a good outcome,” though he wouldn’t commit to a ban. According to the Dutch Prime Minister, it is a balancing act between preventing your chips from being used in the military and ensuring value chains aren’t disrupted too much, with the economic consequences that entail.

Despite these uncertainties, ASML expects this year to be another good year with “continued strong growth” and a slight improvement in gross margin compared to 2022. “Our customers indicate that they expect the market to rebound in the second half of the year. Considering our order lead times and the strategic nature of lithography investments, demand for our systems remains strong,” Wellink said.