Taiwan Semiconductor Manufacturing's (TSM) comment that ASML Holding NV's (ASML) newest high-end lithography machine is "too expensive" caused a brief market disturbance. However, multiple analysts quickly moved to reassure investors, framing the issue as one of timing rather than a structural shift in industry demand.
Kevin Zhang, TSM's Deputy Co-Chief Operating Officer, told reporters on Wednesday that the company currently has no plans to purchase ASML's latest-generation High NA EUV lithography machines, citing a price tag exceeding $400 million per unit.
This statement prompted a sharp decline in ASML's American Depositary Receipts (ADRs) from $1,470 to below $1,400. Although the stock subsequently recovered most of its losses, it still closed the day down approximately 1%, with pre-market trading the next day indicating a further 2% drop.
Kevin Zhang's remarks were the direct catalyst for the market volatility. As a primary contract manufacturer for the world's most advanced chips, TSM is one of ASML's very few high-end customers. Its purchasing decisions significantly impact ASML's revenue projections.
The High NA EUV is ASML's most advanced lithography equipment to date, with a unit cost substantially higher than the previous generation of EUV machines. Zhang's clear statement that TSM has no current purchase plans raised market concerns about the product's commercial rollout timeline.
In response to the market's reaction, several institutional analysts promptly issued comments to calm investor sentiment. UBS analyst Francois-Xavier Bouvignies characterized TSM's stance as a "timing hurdle" rather than a structural change. He noted that UBS previously expected High NA EUV to account for 15% to 20% of ASML's total lithography system sales by the end of the decade, emphasizing that ASML maintains a "unique monopoly position" and is continuously gaining market share in the wafer fab equipment sector.
A Citigroup analyst team, led by Andrew Gardiner, suggested in a report titled "Déjà EUV all over again" that Zhang has consistently expressed a cautious procurement stance towards this product over recent years, making his latest comments unsurprising. The Citigroup team also stated they had not anticipated significant High NA EUV shipment volumes before 2028, with mass production targets set for 2029 and beyond.
In contrast to TSM's conservative position, ASML's two other major clients, Intel and Samsung, have shown a more positive attitude towards High NA EUV. Andrew Gardiner pointed out that both companies have expressed favorable views on the technology's capabilities and procurement outlook, which somewhat alleviates broader demand concerns.
This indicates that TSM's absence from initial purchases does not equate to a wholesale contraction in demand for High NA EUV. Instead, it reflects differing customer approaches to technology roadmaps and cost considerations, suggesting that the commercial adoption timeline may vary by client.
Comments