Taiwan ripple effect in CT? A fast-growing company could benefit from new legislation

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Last week, Congress approved the CHIPS and Science Act that President Biden pledged to sign to help fund the construction of new semiconductor factories in the United States. Intel CEO Pat Gelsinger called it “landmark legislation” during a conference call with investment analysts.

“Literally since World War II, there has perhaps not been a larger piece of industrial policy that has come before Congress,” Gelsinger said. “Seeing that cross the line will clearly be part of that ability for us to invest aggressively.”

The bill followed disruptions to semiconductor shipments from Taiwan, which have had a significant impact on automakers and other manufacturers who integrate chips into their products. Even industry giant Taiwan Semiconductor Manufacturing is building a factory in Arizona to produce its most advanced chips.

The new US factories are expected to boost ASML’s sales as semiconductor makers buy up its machines for the production lines that will be created. Over the past month, ASML’s shares have risen 30% on the Nasdaq, although at over $560 per share, they are well below the $889 peak reached by the issue in September 2021.

Speaking on a conference call last month, ASML CEO Peter Wennink said eight new factories have opened around the world in the past year and are using the extreme ultraviolet machines from ‘ASML, which are the most advanced in the industry. Second-quarter revenue jumped more than half from three months earlier to $5.4 billion, driving $1.4 billion in profit.

“Any short-term shock in the demand cycle should be weighed against our clients’ long-term vision for the entire digital transformation,” Wennink said. “That’s why they build fabs.”

ASML has its largest factory at its headquarters in the Netherlands, with its other major factories in Wilton, San Diego and the Taipei metropolitan area of ​​Taiwan. To free up additional capacity in its factories over the past year, ASML has been shipping systems to its customers, performing the complex final tests in their factories that validate the operation of the machines as designed in the production circuits.

Taiwanese chipmakers accounted for 40% of ASML’s revenue in the second quarter, with a third of its business in South Korea and just 10% in the United States. ASML’s main competitors are Canon and Nikon.

ASML’s impact on the US economy was mentioned in the April report from the Council of Economic Advisers included in this year’s President’s Economic Report released by the White House. The federal government asked the Netherlands this year to reduce sales of ASML machines to China-based chipmakers, according to Bloomberg News.

“It’s not new – it’s been on the table from time to time, it pops up,” Wennink said on last month’s conference call in response to an analyst’s question about the US government’s position. “It’s just a political position – we’ll just have to wait for what the politicians come up with and accept it. I think we have to realize that China is a big player in the semiconductor industry.

In response to a question on Tuesday, an ASML spokesperson said the company had made no specific comment on the tensions between Taiwan and China and by extension the United States, which have come to light this week. with Pelosi’s trip to Taiwan.

“Our expansion plans at Wilton – and elsewhere within ASML and with our suppliers – are the result of organic growth only,” Ryan Young said by email. “Demand continues to exceed our ability to supply, and medium to long-term market expectations are for significant continued growth in the semiconductor market.”

Of nearly 750 jobs open in the United States on Tuesday, Wilton had the most openings at about 225 in all, about 50 more than in San Diego. Just over 100 more are open in San Jose, Calif., where ASML opened a new campus last year, about half the size of its Wilton plant.

The company’s $200 million expansion in Wilton will include a new “clean room” measuring more than 12,000 square feet of space, designed to minimize any risk of contamination to systems inside.

Includes earlier reports by Luther Turmelle.

[email protected]; 203-842-2545; @casoulman

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