The Dutch government has introduced new restrictions on ASML’s operations in China, specifically limiting the company’s ability to service and supply spare parts for its advanced deep ultraviolet (DUV) lithography machines. Despite these measures, analysts from JPMorgan and Wells Fargo believe that the impact on ASML’s overall earnings will be minimal.
According to a note from JPMorgan, the Dutch government is reportedly planning to restrict ASML from renewing certain licenses required for servicing advanced DUV tools in China, a move likely influenced by pressure from the U.S. government. This comes in the wake of the U.S. signaling the potential for stricter Foreign Direct Product Rules (FDPR) on partner countries, including the Netherlands, to curb China’s access to advanced semiconductor technologies.
JPMorgan analysts acknowledge that while these restrictions will affect the servicing of equipment already shipped to China, they do not expect this to hinder ASML’s ability to continue servicing its existing tools in the country.
“If the current restrictions are confined to servicing advanced DUV tools in China, we estimate a 1% reduction in ASML’s 2025 revenues,” JPMorgan notes. “However, since tool servicing and installed base management are higher-margin activities, the impact on ASML’s 2025 gross margins could be around 1.25% or more.”
Similarly, analysts from Wells Fargo offer a comparable assessment, pointing out that while there have been mixed reports regarding the scope of these restrictions, the development is not seen as a major surprise.
“We estimate a limited impact on revenue, with domestic China service revenue comprising 10% of total services and about 2% of ASML’s total revenue,” Wells Fargo states.
The analysts further add that these restrictions are likely to affect only a small portion of the 10% related to China services.
Both JPMorgan and Wells Fargo conclude that while the Dutch government’s stricter stance on China may present some challenges for ASML, it is unlikely to have a significant impact on the company’s overall financial performance.
