On Tuesday, the largest technology company in Europe, the lithography giant $ASML Holding (ASML.US)$ issued a profit warning, triggering a widespread sell-off of global semiconductor stocks, as people are concerned that global chip demand may decline.

Many industry analysts stated that Asml Holding's weak financial forecasts may reflect excess capacity in some chip factories globally. These factories hoarded Asml's expensive lithography machines during the pandemic and have utilized them to produce more chips.

Asml Holding's financial report release process on Tuesday was extremely rare, as it mistakenly released the financial report one day ahead due to a "technical malfunction."

In this inadvertently leaked financial report, Asml Holding announced that its orders for the third quarter of this year were only 2.6 billion euros, nearly half of the market's expected 5.4 billion euros. At the same time, the company expects total net sales to grow to between 30 billion and 35 billion euros by 2025 (previously guided at 30-40 billion euros), placing this figure in the lower range provided at the 2022 Investor Day guidance.

Due to the downward revision of financial estimates, Asml Holding's US stock ADR experienced a sharp decline on Tuesday, closing down 16.26% at $730.43, marking the largest single-day decline since 1998.

This has also dragged down the entire global semiconductor industry, as ASML Holding almost monopolizes the supply of key lithography machines used by major factories like Samsung Electronics for manufacturing advanced chips. $Taiwan Semiconductor (TSM.US)$Please use your Futubull account to access the feature.$Intel (INTC.US)$ US stocks fell 5.28% overnight, marking the largest drop in over a month. $PHLX Semiconductor Index (.SOX.US)$ This has also dragged down the entire global semiconductor industry, as ASML Holding almost monopolizes the supply of key lithography machines used by major factories like Samsung Electronics for manufacturing advanced chips.

Many analysts interpreted that due to the stimulus of the high demand for chips during the epidemic, chip manufacturers such as Taiwan Semiconductor had previously established additional capacity. However, as the tense situation in the supply chain is gradually easing, this growth has become more stable. This has led these manufacturers to pause more orders for new lithography equipment until their factories need to expand capacity again.

The information reflected in ASML's financial report can only be considered a lagging performance of the real situation of these chip factories in recent months.

ASML also acknowledged in a statement released on Tuesday that although there has indeed been a surge in demand for AI-related chips, other parts of the semiconductor market are weaker than expected. This has caused logic chip manufacturers to delay orders, while memory chip manufacturers only plan to 'modestly' increase capacity.

How do industry analysts view this?

Dan Hutcheson, Vice Chairman of research company TechInsights, stated that Intel, Taiwan Semiconductor, and Samsung are reducing orders for ASML equipment because they have realized they have sufficient capacity.

Hutcheson pointed out that this year the chip factories have an utilization rate of about 81%, and chip manufacturers typically tend to purchase new equipment when the utilization rate reaches around 90%. He mentioned that Intel has slowed down factory expansions, indicating that Samsung and Taiwan Semiconductor will also remain cautious.

Currently, chip inventory remains high, and the efficiency of chip manufacturers using ASML lithography machines has improved, meaning they can produce more chips without needing to order more equipment.

Handel Jones, CEO of international business strategy firm tracking the chip manufacturing industry, stated that some chip manufacturers have reduced the steps of using ASML's flagship lithography machines, sometimes by almost one third. Taking Samsung as an example, he believes that Samsung may in the future be able to use cutting-edge chip etching technology to reduce the steps of using ASML's flagship equipment from five or six to one or two.

He said that if successful, Samsung may have a significant overcapacity on these extreme ultraviolet lithography equipment.

However, Jones pointed out that he has not altered his forecast for the entire semiconductor industry, that is, the demand for AI chips and AI dedicated storage chips will thrive.

"This is just a short-term fluctuation. In the long run, everything will get better," Jones said.

Editor/Somer