ASM bookings hit by disappointing China, AI demand
News Summary
Semiconductor equipment maker ASM International reported third-quarter bookings of 637 million euros, falling short of analysts' average forecast of 719 million euros, marking a 22% year-on-year and 9% quarter-on-quarter decline. The disappointing bookings were primarily attributed to a larger-than-expected drop in orders from Chinese chipmakers. While AI-related spending from clients increased, the rise was less than the company had anticipated. ASM expects the subdued order trend to bottom out in Q4 at a slightly higher level than Q3, with quarterly orders projected to pick up again as 2026 progresses. An analyst highlighted that China spend weighs more on ASM's margins than AI-related demand.
Background
ASM International is one of the world's leading suppliers of semiconductor manufacturing equipment, specializing in advanced thin-film deposition technologies like Atomic Layer Deposition (ALD), which are crucial for chip fabrication. The semiconductor equipment industry is cyclical and highly influenced by global economic conditions, technological innovation cycles, and geopolitical factors, particularly the US-China tech rivalry. Currently, the Trump administration continues to implement technology export controls against China, aiming to curb China's development in advanced semiconductors. This directly impacts global equipment makers like ASM and their sales to the Chinese market. Concurrently, the rapid advancement of Artificial Intelligence (AI) is seen as a new growth driver for the semiconductor industry, stimulating demand for advanced chips and their manufacturing equipment.
In-Depth AI Insights
What does the disappointing China demand truly signify for the global semiconductor equipment market? It signifies that the Trump administration's export control measures are profoundly reshaping the global semiconductor supply chain. Chinese chipmakers face sustained pressure in acquiring advanced equipment, which not only accelerates their push for domestic substitution but also exposes international equipment suppliers' China operations to long-term uncertainty and margin dilution risks. For ASM, the significant drop in China orders suggests that geopolitical factors remain a critical constraint on its market performance, even amidst growing AI demand. Is ASM's expectation for orders to pick up in 2026 overly optimistic? This outlook is predicated on a gradual global economic recovery, sustained growth in AI investments, and an impending equipment upgrade cycle. However, risks include: a global economic recovery that might underperform expectations, potential volatility in AI-related investments, and a possible escalation of US-China tech competition leading to even stricter export controls on China. Furthermore, the accelerating rise and technological maturity of domestic Chinese semiconductor equipment manufacturers will challenge international players' market share, making the path to recovery in 2026 fraught with variables. What investment signal does the analyst's comment, "China spend weighs more on margins than AI related demand," convey? This suggests that orders from the Chinese market, traditionally attractive in both volume and margin, are diminishing due to export controls. While AI-related demand is growing, it might be concentrated in specific technologies or clients, face intense competition, and potentially offer lower margins compared to past high-end orders from China. Investors should monitor whether ASM can effectively adapt its market strategy, for instance, by diversifying its client base, penetrating unrestricted markets, or focusing on high-value, high-barrier AI-related technologies, to offset the profit gap from the China market and enhance overall profitability.