Key Points
Taiwan Semiconductor will continue to operate its current chip-making equipment.
While this is a setback for ASML, the company does have other clients for its next-generation machines.
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A decision by one of the top names in the microprocessor industry had a negative effect on ASML Holdings (NASDAQ: ASML) stock on Wednesday. Although the news wasn't necessarily alarming, it was dispiriting enough to drive ASML's shares down by slightly over 1% that trading session.
A big customer hesitates
That monster chip company is Taiwan Semiconductor. Its co-COO, Kevin Zhang, told reporters that it had no plans to deploy ASML's cutting-edge chip-making equipment, specifically the high-numerical-aperture extreme ultraviolet (NA-EUV) lithography machines designed for next-generation processors.
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The earliest time Taiwan Semi would consider adopting the equipment is in 2029 for its A13 node.
The costs of NA-EUV equipment are steep; according to Bloomberg reporting, these sophisticated and large-scale machines can fetch at least $410 million apiece.
In a briefing for members of the press and analysts just before the opening of his company's annual Technology Symposium, Zhang implied it was comfortable with its existing low-NA EUV equipment. He said the company's research and development personnel "continue to find a way to drive technology scaling without using high-NA."
Initial overreaction
On Wednesday, ASML stock fell as much as 5.5% as investors parsed these remarks. The fact that the shares recovered relatively well from this suggests that investors are viewing it more as a setback than a damaging blow to the company's business.
I think that's a realistic way to look at it. ASML is still an important, some would say critical, company in the development and rollout of artificial intelligence (AI) hardware. Even if its high-NA gear doesn't make its way into Taiwan Semi's facilities right away, 2029 isn't very far off.
And Taiwan Semi, of course, isn't the only potential client for this equipment -- Intel purchased a set of the ASML machines and put one into operational use in April 2024.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
