1.23.24
This is a summary of ASML’s Q4 2023 results as they apply to Micron and the memory industry, vs. a full review of ASML’s financial performance, etc.
Total memory spending (the company doesn’t break revenue out by memory type) nearly doubled, to €2.10B from in the previous quarter. This is the highest level of total spending by the memory sector in the history of ASML, a result that made me check my math again. If there is an error, I haven’t found it. The reason this is surprising is all three DRAM companies – DRAM consumes the highest volume and technology among the memory types – have slashed capital expenditures on WFE over the last six quarters. In their most recent calls, none of them have indicated a departure from this plan. It could be a case of timing, when a lot of memory revenue happened to fall in a single quarter. This is something to watch closely. Looking at the last five years of ASML revenue, split out by source between logic, memory, and services, it is a steady rise up and to the right for all three sources of sales. Memory shows a shallowing of the upward slope between 2022 and 2023, but not the decline I expect to see given the reductions in capex announced by Samsung, Hynix, and Micron. Following a decline of nearly two-thirds between Q2 and Q3 of 2023 (€1.4B to €520M,) net bookings for memory in the fourth quarters were €4.32B. This is a massive jump and follows the lowest quarter for memory bookings ever at ASML. Bookings don’t come with precise timing on when tool delivery will be taken, so many of these tools may go to memory customers a year or more from now. Given that the memory upturn is clearly underway, this is likely the memory makers securing their slots for the coming upturn. I’m less concerned about these bookings than about the massive jump in revenue from memory customers in the quarter, because the latter is photo capacity that will come online in the first half of calendar 2024. From the analyst call, memory inventories are approaching normal levels. DRAM is the primary demand driver of lithography growth, to support technology node transitions and HBM to support AI-related demand. While the company is seeing signs of recovery in both logic and memory, it is too early for them to change their conservative view of 2024, therefore, they are still forecasting 2024 revenue to be flat to 2023 and characterize the annum as a “transition year.” They did see strong order intake in the fourth quarter, indicating customers’ positivity about future demand. When asked if memory investment had started to recover, Peter stopped short of confirming that. He said we have crossed the bottom of the memory cycle, with prices now going up and utilizations increasing.
-S. Hughes (cyclical long MU)