ASML expects China to account for ~20% of total sales in 2026, after Q3 sales there surged 109% QoQ, lifting China's share of machine sales from 14% to 23%

ASML's continued strong sales to China, even with potential US export restrictions, means access to advanced chipmaking tools remains crucial for Chinese manufacturers.

ASML, a key supplier of semiconductor manufacturing equipment, reported a significant surge in sales to China for its lithography machines during the third quarter of 2023. Revenue from China increased by 109% quarter-over-quarter, boosting China's share of ASML's total machine sales from 14% to 23%. The company now forecasts that China will represent approximately 20% of its total sales in 2026. This growth occurs amid increasing pressure from the US government for the Netherlands to implement tighter export restrictions on chipmaking equipment destined for China. Despite these geopolitical tensions, ASML CEO Christophe Fouquet noted that Chinese customers are not actively pursuing domestic alternatives as long as ASML's products remain accessible. ASML also raised its full-year 2026 sales guidance, anticipating robust demand, particularly for its advanced extreme ultraviolet (EUV) machines.

The substantial quarter-over-quarter growth in ASML's Chinese sales, outpacing US efforts to curb technology access, suggests that current export controls may not be as effective as intended or that loopholes exist for less advanced but still critical machinery. ASML's own assessment that China has a "very, very long way to go" technologically implies that its equipment remains indispensable for China's chip ambitions for the foreseeable future. This dynamic creates a complex geopolitical and market situation where demand for essential manufacturing tools clashes with national security concerns, potentially leading to more stringent future regulations.

This situation signals a sustained high demand for advanced chipmaking equipment, regardless of geopolitical friction, and indicates that China's domestic semiconductor industry still heavily relies on foreign technology. ASML's significant capacity expansion plans, driven by orders extending to 2030, underscore the long-term growth trajectory of the semiconductor sector, even as supply chain diversification remains a key theme. The ongoing dialogue between the US and the Netherlands regarding export controls will be critical in shaping future market access and the competitive landscape for global chip production.