Monopoly industries are also challenging, as the lithography giant ASML experiences a Waterloo in revenue.

Recently, ASML announced its financial report for the first quarter of this year, showing that its new orders amounted to 3.61 billion euros, with a total of 70 lithography machines sold.

This performance not only fell short of the market's expected 5.1 billion euros but was also far from the record 9.19 billion euros in orders in the fourth quarter of last year, with a nearly two-thirds plunge in new orders.

Revenue declined, and net profit performance was equally poor, with ASML achieving a net profit of 1.2 billion euros in the first quarter, a year-on-year decrease of 38%, and a sequential drop of 40%.

The global monopoly was supposed to be exclusive, so how could the order amount in the monopoly industry still decline? What is the relationship between ASML's revenue explosion and China?

Today, let's discuss these issues. Writing is not easy, so welcome to like, share, and bookmark.

ASML's Revenue Explosion

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Behind ASML's plummeting revenue this year is a record-breaking performance last year.

In 2023, ASML's sales reached as high as 27.6 billion euros, and after deducting the revenue from the maintenance of old equipment, the year-on-year growth was as high as 42%, making a huge profit.It is worth mentioning that throughout the entire year of last year, the fourth quarter's performance was the most eye-catching, reaching an all-time high.

Why did such a trend emerge?

The reason lies in China, and it is no exaggeration to say that China is now ASML's largest customer.

Many people may already know that last year, the United States passed new restrictions prohibiting ASML from exporting NXT:2000i and above immersion equipment to Chinese companies, with NXT:1970i and NXT:1980i being banned from export to certain Chinese enterprises.

The effective date of the new restrictions was January 1, 2024.

In other words, to meet the order demands of Chinese customers, ASML directly switched to an intense production mode last year, prioritizing supply to China.

As a result, we can observe that in just the month of December last year, the order amount from China to ASML surged by 10 times.

Of course, the "side effects" brought about by the surge in order volume last year are also quite apparent:

As ASML's largest customer, China's order volume has significantly decreased this year.

This is a simple logic: on one hand, a considerable amount of stock was accumulated previously, so naturally, China's demand for photolithography equipment has now decreased;On the other hand, the implementation of the new U.S. ban is inevitably going to impact ASML's shipments.

In the first two months of this year, ASML delivered a total of 8.8 billion euros worth of orders to China, with 5.4 billion in January and 3.4 billion in February, showing a very clear downward trend.

It can be anticipated that with the continuous decline in orders from China, the largest customer, the recent ASML performance bomb may only be the beginning.

ASML, "Angry"

For merchants, profit comes first. The Chinese market accounts for half of ASML's revenue. If ASML could find a loophole in the U.S. sanctions, its performance predicament could be immediately alleviated.

Unfortunately, not only have the U.S. sanctions not been relaxed, but there are also reports that the U.S. is planning to continue pressuring the Netherlands in an attempt to prevent ASML from providing maintenance services for some of its equipment in China.

In other words, in the future, not only will ASML be prohibited from exporting photolithography machines to China, but they won't even be allowed to repair them.

Even a rabbit will bite when cornered. Pushed to this point, ASML is truly angry. CEO Peter Wennink responded in a recent performance call, saying:

"There is currently nothing that can prevent us from providing services for equipment installed in mainland China."

However, ASML's anger was just a fleeting moment. It has no say in the ever-expanding scope of U.S. sanctions.Some may wonder, isn't ASML a monopolistic company in the photolithography machine industry? Why should it obey the United States' orders?

The reason is that although ASML has mastered the manufacturing technology for high-end photolithography machines, a large part of the key components are supplied by the United States, which is equivalent to having its lifeline held by others.

Moreover, as a Dutch company, ASML cannot withstand the continuous pressure from the U.S. government on the Dutch government, and with some extracurricular moves, ASML also finds it difficult to have any effective countermeasures.

It is also because of this that every time the scope of U.S. sanctions expands, despite ASML's various public statements and resistance, it still has to compromise in the end, after all, one cannot twist an arm against a thigh.

ASML is hurt, and the Netherlands is even more distressed.

The United States continues to expand its export restrictions on ASML to China, which not only hurts ASML but also makes the Netherlands even more distressed.

As a multinational giant, ASML occupies more than 90% of the global photolithography machine market share, bringing considerable tax revenue to the Netherlands every year, and also providing a large number of job opportunities.

However, with the United States causing trouble externally and internal immigration conflicts, the relationship between ASML and the Netherlands has also become delicate.

Some time ago, there were reports in the Dutch media that ASML had expressed its intention to the Dutch government, indicating a desire to "leave its hometown" and expand or relocate to other places.

The biggest reason for ASML's plan to leave the Netherlands is that the Dutch government's anti-immigration tendencies are becoming increasingly severe, posing a serious threat to ASML's production and operations.ASML employs 23,000 people in the Netherlands, 40% of whom are non-Dutch. With the Netherlands now taking an anti-immigration stance, where will they recruit workers in the future?

In addition to this, the poor infrastructure in the Netherlands itself is also a source of dissatisfaction for ASML:

The city of Eindhoven, where the company's headquarters is located, has issues with roads, housing, power grids, and education—virtually every aspect is problematic. As a global leader in photolithography machines, how can they tolerate living in such a "cramped" situation?

Currently, on one hand, ASML is affected by the American stick, with plummeting revenues, and on the other hand, there is talk of moving the company. It's easy to imagine how troubled the Dutch government must be.

The most interesting part is that while the United States publicly claims to want to curb China's development, it is forcing the Netherlands and ASML to expand their restrictions on exports to China, putting their allies in a state of ecstasy and agony.

In contrast, the United States is giving the green light to its own chip companies like Intel and Micron, allowing these favored children to reap huge profits.

Perhaps for this reason, the Netherlands and ASML are full of complaints, but they dare not speak out against the United States. At most, they can only vent to the media, but in the end, they still have to accept American control.

In conclusion:

ASML's exports to China are continuously suppressed by the United States, but at the same time, the pace of our country's independent research and innovation has never stopped.

Perhaps one day in the future, we will completely break through the technical barriers in the field of photolithography machines and capture another "diamond" on the industrial crown. At that time, ASML will not only lose the Chinese market but also its technological monopoly, which would be truly infuriating.