ASML Warns of Tariff Chips Uncertainty

ASML and Tariff Impact: A Discussion with Pierre Fouquet

Key Concepts: Tariff impact on semiconductor equipment, frontloading, US administration objectives regarding tariffs, semiconductor manufacturing in the US, ASML's EUV tools, final assembly location, geopolitical influence.

1. Quantifying Tariff Impact and ASML's Approach:

• The primary concern is the difficulty in quantifying the impact of tariffs on ASML's business.
• Two approaches to dealing with tariffs are identified:
  • Frontloading: Ordering equipment before tariffs take effect. This is deemed ineffective for large, complex equipment like ASML's.
  • Wait-and-see: Observing the long-term effects and intentions behind the tariffs.
• ASML's perspective: Tariffs require understanding the US administration's objectives.

2. US Administration's Objectives and Semiconductor Equipment:

• The US administration aims to:
  • Encourage behavioral changes in trade partners.
  • Bring back reliable manufacturing to the US.
  • Create additional revenues.
• Pierre Fouquet argues that tariffs on semiconductor equipment would contradict the US's goal of advancing its semiconductor industry.
• He believes tariffs won't hinder the US's ability to build fabs and manufacture leading-edge semiconductors (memory and logic chips).
• Continued technological advancement globally is necessary, even with increased US manufacturing.

3. ASML's Operations and Geopolitical Influence:

• While Mr. Kratsios declined to comment on exemptions for chip equipment makers, Fouquet states ASML will assemble in the Netherlands.
• The US administration has influence ("If they give a phone call, a phone call will be taken").
• It's unlikely the final assembly of ASML's EUV tools will move from the Netherlands.
• Similarly, it's unlikely TSMC's leading-edge manufacturing node will move from Taiwan.
• There are practical and logistical limits to relocation.

4. US Manufacturing and EUV Tool Components:

• The US already has significant semiconductor manufacturing.
• Critical stages of EUV tool manufacturing, specifically the light source, are already done in the US.
• Increasing US manufacturing of EUV components is possible.
• Relocating the final assembly of EUV tools is considered "Proteus types" and impractical.

5. Synthesis/Conclusion:

Pierre Fouquet expresses a measured optimism regarding the impact of tariffs on ASML. He believes that the US administration's objectives, when considered in the context of the semiconductor industry, suggest that tariffs on semiconductor equipment are unlikely. He acknowledges geopolitical influence but emphasizes the practical and logistical challenges of relocating key manufacturing processes, particularly the final assembly of EUV tools, away from the Netherlands. The US already plays a crucial role in EUV tool manufacturing through the production of the light source.