New Restrictions on ASML by Dutch Government

Reports indicate that the Dutch government has imposed new restrictions on ASML’s ability to service and provide spare parts for advanced deep ultraviolet (DUV) machines in China. Analysts from JPMorgan and Wells Fargo, however, suggest that the impact on ASML’s overall earnings may be limited.

JPMorgan noted that the Dutch government is likely set to restrict ASML from renewing certain licenses for servicing advanced DUV tools in China, following pressure from the U.S. government. Previously, the U.S. had expressed intentions to impose stricter Foreign Direct Product Rules (FDPR) on partner countries including the Netherlands, aiming to limit China’s access to advanced semiconductor technology.

Despite the restrictions affecting tools already shipped to China, JPMorgan analysts do not expect this to hinder ASML’s ability to service current tools in the country. They estimate that if the restrictions pertain only to servicing advanced DUV tools in China, the impact on ASML’s 2025 revenues would be -1%. However, given that the tool servicing and Installed base management is a high profitability business, the impact on the company’s 2025 gross margins could be greater, at around -1.25% or more.

Wells Fargo analysts share a similar view, acknowledging conflicting reports about the extent of these restrictions but do not consider this development a significant surprise. They estimate that the total domestic service revenue in China accounts for 10% of ASML’s total services (2% of total revenue) and suggest that these restrictions will likely impact only a small portion of that 10%.

In conclusion, while both JPMorgan and Wells Fargo acknowledge that the tougher Dutch governmental stance on China may influence ASML, they believe it will not significantly alter the company’s financial outlook.