4.17.24
Total memory WFE sales (ASML doesn’t break out DRAM and NAND) came back down to below €1.5B in the quarter, from the €2.1B spike in the fourth quarter. This makes last quarter look like an outlier. Outside of that data point, equipment sales to memory customers have trended up off of a bottom hit in the second quarter of 2023. Bookings also saw a large spike in Q4. They came down in Q1 but are still higher than the first three quarters of 2023. Bookings this quarter looks like memory customers have confidence in the recovery and are securing more delivery slots in anticipation of higher demand. Memory demand is primarily from node transitions to support DDR5 and HBM. The company believes they are passing through the bottom of “this specific cycle”. They are fully booked for the year 2024. Roger Dassan: “… the utilization [in] memory is going up and we’ve seen that now quite sustainably for quite a while.” They expect to see the addition of bits in the second half of 2024. So, the significant step-up in revenue that ASML is expecting in the third and fourth quarter of 2024 will come, in part, from adding memory capacity. The outlier in bookings and deliveries to memory customers in Q4-23 obfuscates my view of how quickly memory makers are raising their investment plans in lithography capacity. The high fourth quarter could be from Chinese customers getting their slots ahead of changes in export restriction. Orders for EUV machines many quarters out are also a factor. Finally, we don’t know the lead time on each type of machine, so some of the machines ordered by memory customers in Q4-23 may not be delivered until the middle of 2025, or later. Twelve months was quoted as one lead time, so I’ll use that as a starting point. The executives also said they expect to see more bits delivered in the second half of 2024. I combine these two pieces of information and conclude that in the fourth quarter of 2024 there will be meaningfully higher deliveries of lithography tools to memory customers, assuming a 12 month lead time. The increased bookings in Q1-24 will translate into increasing deliveries, relative to what will be seen for most of 204, in early 2025. That Q4 spike is the wild card. What we are seeing is the memory customers increasing fab utilization and ordering more new equipment in anticipation of the recovery. For memory investors, the question is how this first wave of higher investment, which will translated into more bit output around the end of 2024, will affect the supply-demand balance at that point. Results from the other WFE companies coming out in the next few weeks will fill in that picture some.
-S. Hughes (cyclical long MU)