ASML says AI demand will exceed chip-tool capacity through 2028

By Nathan Vifflin and Toby Sterling

Oct 14 (Reuters) - ASML said booming AI demand was driving orders for its chipmaking tools into 2030, with customers seeking more capacity than it can supply next year and through 2028, adding to concerns over supply shortages.

Customers are already discussing orders beyond 2027, with some expressing interest in booking capacity for 2029 and 2030, the Dutch company said on Wednesday.

Demand for the company's machines has been fuelled by the AI boom and the rapid expansion of data centres, with customers including TSMC - which manufactures chips for Nvidia, as well as Samsung and Intel investing heavily to increase chip production. ASML shares have risen nearly 70% this year.

ASML, which leads the market for equipment used to make the most advanced semiconductors, said it was looking at ways to expand capacity further.

In July ASML said it would increase capacity in 2027 by 30% and again by 30% in 2028, but CEO Christophe Fouquet said it was clear that would not be enough.

Fouquet said the company was now seeing "a lot of order intake for 2028. But also some strong interest to already place orders for 2029 and sometimes even 2030."

SALES OUTLOOK BOOST

The company's comments came as it reported quarterly results and an improved sales outlook, prompting the company to lift the bottom end of its full-year sales forecast.

ASML now expects fourth-quarter sales of €14.2 billion to €15.2 billion ($15.9 billion to $17 billion), above analyst forecasts, with a gross margin of around 57%. That, in turn, has nudged up its full-year sales forecast to €44 billion to €45 billion.

Shares in ASML, which has a market value of around €586 billion ($657 billion), rose nearly 3% in early Amsterdam trading.

Nick Rossolillo of Chip Stock Investor, which holds shares in the company, said he was satisfied with the pace at which ASML is adding capacity "as long as they do gradually expand to take care of customer demand".

"Staying capacity constrained protects the business and gives a bit of cushion for when there are inevitable years of soft customer order activity," he said, pointing to the 2028 to 2029 period after completion of several new customer plants.

ASML's customers also include SK Hynix, Micron and newcomer Elon Musk and his TeraFab, all of which have expansion plans. ASML is "still kicking the tyres on the exact size of that (TeraFab) opportunity”, CFO Roger Dassen said on a call with reporters.

RACING TO EXPAND CAPACITY

ASML broke ground last month on a major expansion in Eindhoven, Netherlands, but it will need to look at other ways to address capacity before the first phase is completed in 2029.

Dassen said ASML will also address the shortage by upgrading existing tools, and selling new versions of its machines with higher throughput.

Taken together, these measures would provide "a significant enhancement to our customers' capacity", he said, noting that the company will be increasing prices starting in 2027, with the full effect visible from 2028.

ING analyst Marc Hesselink said the earnings beat expectations and he expected consensus earnings forecasts to be revised upward through 2028.

"Management's commentary on demand visibility and capacity ... was again very constructive," he said.

For the third quarter, ASML reported net profit of €4.96 billion on net sales of €11.7 billion, above the €4.05 billion and in line with the expectations of analysts polled by LSEG.

($1 = 0.8923 euros)

(Reporting by Toby Sterling in Amsterdam, Nathan Vifflin in Gdansk, Editing by Milla Nissi-Prussak, Stephen Coates and Louise Heavens)