Key Points Summary
ASML's performance in the second quarter of 2026 exceeded expectations, with revenue and net profit increasing by 21% and 27% year-on-year, respectively, mainly driven by the "upgrading of existing equipment" business. The Chinese market maintained a 20% share of total sales for the year, with demand focusing on mature manufacturing processes. ASML continues to expand its production capacity for EUV (Extreme Ultraviolet) and DUV (Deep Ultraviolet) lithography machines, and has achieved mass production breakthroughs with High NA EUV technology in collaboration with Intel. Prices for future equipment may increase due to improved efficiency, but these adjustments are dependent on the order fulfillment cycles. While there is sufficient short-term demand, long-term growth will depend on the pace of expansion by downstream chip manufacturers.
Detailed Analysis
1. The Secret Behind Outperforming Expectations: Surging Demand for Equipment Upgrades
The main reason for ASML's better-than-expected results in the second quarter was the surge in demand for "existing equipment maintenance and upgrades." This segment generated revenue of 2.8 billion euros, 300 million euros more than the company's initial estimate. The sudden increase in demand can be attributed to global chip manufacturers' efforts to improve production efficiency—for example, upgrading existing machines from producing 100 wafers per day to 120 wafers per day, leading customers to invest in higher-capacity equipment. This business segment grew by 32% year-on-year and became the main driver of revenue growth.
2. The Chinese Market: Stable Share with Demand for Mature Processes
ASML's revenue from the Chinese market is expected to remain around 20% this year, in line with the overall company growth. New demand focuses on "mature process logic chip equipment" used in the production of consumer electronics such as smartphones and home appliances, aimed at supporting local industrial autonomy. The Chinese mainland contributed approximately 900 million euros to ASML's revenue this quarter, accounting for 14% of total sales (with seasonal fluctuations expected; the annual target is still 20%), ranking after South Korea (43%) and Taiwan China (30%).
3. Significant Capacity Expansion for EUV and DUV Machines
- EUV (Advanced Lithography): ASML has about 65 Low NA EUV machines in production this year, with all orders for 2027 already booked. Plans are to increase capacity by 30% next year and another 30% in 2028. The average price of an EUV machine is 230 million euros (approximately 1.79 billion RMB), and 16 units were sold this quarter, accounting for 57% of total lithography machine revenue.
- DUV (Mature/Mid-range Lithography): The production capacity for immersion DUV machines has increased to 130 units this year, with another 30% expansion planned for next year.
- High NA EUV (Even More Advanced Lithography): In collaboration with Intel, ASML is using this technology to produce Intel's 18A process processors (equivalent to 1.4nm level), confirming the feasibility of mass production. Revenue from these machines totaled 40-50 million euros this year.
4. Potential Price Increases, but Orders Are Too Full for Immediate Adjustments
ASML indicates that there is room for price increases in the long term due to improved efficiency of Low NA EUV machines. However, current orders are so full (e.g., all 2027 EUV orders have been secured) that price adjustments will not happen immediately. The timing depends on the order agreements with customers, as delivery times vary.
5. Sufficient Short-term Demand, but Long-term Growth Depends on Downstream Manufacturers
ASML has raised its annual revenue target to 43-45 billion euros, exceeding the previous lower end of the 2030 forecast. In the short term, there is strong demand for AI and memory chips, ensuring a steady supply of orders. However, long-term growth is uncertain due to factors such as price fluctuations in the memory chip market (which could lead to reduced expansion by manufacturers) and changes in global semiconductor trade policies (e.g., export restrictions). Therefore, whether ASML can maintain its growth will depend on the performance of the downstream market.
In Summary
ASML is currently in a favorable position, with profitable equipment upgrades, full orders for new machines, and a stable Chinese market. However, its future success will depend on how long the demand from chip manufacturers for expansion continues.