(Bloomberg) — Christophe Fouquet, chief executive of ASML Holding NV, said he expects the chip market's long-awaited recovery to last “well into 2025” after disappointing third-quarter results sparked a broad selloff across the semiconductor industry triggered.

Most read by Bloomberg

The slow recovery in demand has led to “caution among customers and some reluctance to invest,” Fouquet said in a call with investors on Wednesday. This has led ASML to cut its profit forecast, although Fouquet said the artificial intelligence boom, energy transition and electrification continue to provide strong upside.

Fouquet, who took over at ASML in April, is facing one of the most turbulent periods in the company's history. The Dutch company, which makes the world's most advanced chipmaking machines, has lost over 60 billion euros ($65 billion) in value since it reported new orders on Tuesday that were less than half of what analysts had expected.

ASML is a trailblazer for the entire chip industry, and Fouquet's comments were a clear indication that the AI ​​boom is not a panacea for the sector's problems. It has a monopoly on making the machines that help companies like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. make the most advanced chips that power everything from Apple Inc.'s smartphones to its AI accelerators Nvidia Corp.

“If you ask me, the market today would be very sad without AI,” Fouquet said. “The recovery, in my opinion, is not what everyone wanted.”

Fouquet said recovery in demand in the automotive, mobile and PC markets has been particularly slow, although demand for AI-related servers has been robust. The Dutch company will slow down its short-term investment plans to adapt to the market, he added.

Pushed back

Some orders that were planned for 2025 have been postponed to 2026, Chief Financial Officer Roger Dassen said in the conference call.

ASML cut its outlook for next year, triggering a 16% drop in its share price in Amsterdam on Tuesday, the most since June 12, 1998. On Wednesday the company fell 5.1%, surrendering its place as Europe's most valuable technology company to a software company SAP SE. Since Fouquet took over, it has lost about a quarter of its value.

The weak results were compounded by the company mistakenly reporting its financial results a day earlier than planned. Fouquet apologized for the early release of the press release, which was expected on Wednesday.

The story continues

“It was very unfortunate,” he said, attributing the problem to a “technical error.”

ASML is under pressure from multiple directions. While demand for the chips that power AI data centers remains strong, key customers like Intel Corp. and Samsung problems.

Faced with shrinking sales and mounting losses, Intel last month delayed plans for new factories in Germany and Poland. Samsung apologized to investors this month for disappointing results after delays left competitors dominating the market for high-bandwidth memory chips used in AI.

Companies that make automotive and industrial chips, often using ASML's less advanced machines, are also in an ongoing crisis because their customers have too much inventory.

Apple shares fell 1.5% on Wednesday. Analysts say preliminary data on pre-orders and delivery times for the iPhone 16 suggests subdued demand.

China sales

Meanwhile, the US and its allies are increasing pressure on China, ASML's biggest market over the past five quarters, as Washington seeks to restrict access to cutting-edge chip technology. China accounted for 2.79 billion euros in sales in the third quarter, almost half of ASML's total sales.

Dassen said the company expects sales in China to account for about 20% of total revenue next year, adding that this figure is a “normal percentage” for that market.

Analysts repeatedly pressed management on the call for details on ASML's prospects for China, which Dassen said is expected to account for about 20% of total sales next year.

“The 20% is, in our opinion, a normal percentage of our business in China,” Fouquet said. “So we assume that this is a number that we believe would be realistic for China in the future.” Subject to all export controls, of course.”

Last month, the Netherlands published new export control rules that prompted ASML to apply for export licenses for some of its older machines in The Hague rather than the United States. This came after Bloomberg News reported that the Dutch government would partially restrict ASML's ability to repair and service its semiconductor equipment in China.

“We read newspapers and we read ongoing speculation about things that could happen,” Dassen said. “For this reason, we have decided to take a more cautious stance towards China,” he added.

– With support from Sarah Jacob.

(Updates with details throughout.)

Most read by Bloomberg Businessweek

©2024 Bloomberg LP