ASML Holding NV (NASDAQ:ASML), the Dutch maker of semiconductor lithography machinery, managed to steer its revenues and margins higher in 2023 despite a generally depressed chipmaking environment.
Net sales for the year came to €27.6, while net income of €7.8 billion resulted in an annual earnings per share (EPS) of €19.91.
ASML’s margins increased in every major aspect, gross margins increasing from 50.5% in 2022 to 51.3% in 2023 and net income margins increasing from 26.6% to 28.4%.
The group commands these high margins partially due to its ‘installed base management’ sales, encompassing equipment servicing and field work offerings.
ASML’s complex lithography machinery, which is used for manufacturing semiconductors, requires highly specialised on-site maintenance support, meaning ASML’s three core clients, Taiwan Semiconductor Manufacturing Company, Intel Corporation and Samsung Electronics (KRX:005930), are effectively locked into perpetual installed base management contracts.
These high-margin contacts comprised 20% of group-wide sales in 2023.
ASML sold 421 new lithography machines and 28 used machines over the 12-month period, representing a 23% total increase.
This is despite the semiconductor industry being in a cyclical downturn.
However, with sales weighted to a record-setting fourth quarter, signs of recovery have emerged.
As chief executive Peter Wennink commented: “The semiconductor industry continues to work through the bottom of the cycle. Although our customers are still not certain about the shape of the semiconductor market recovery this year, there are some positive signs.
“Industry endmarket inventory levels continue to improve and litho tool utilisation levels are beginning to show improvement. Our strong order intake in the fourth quarter clearly supports future demand.”
For the first quarter of 2024, ASML expects net sales between €5 billion and €5.5 billion with a gross margin between 48% and 49%.
The group maintains a “conservative view” of the full year ahead, with total sales in 2024 expected to be roughly the same as in 2023.
ASML intends to declare a total dividend for the year 2023 of €6.10 per ordinary share.
The market was encouraged by these results, sending ASML shares 6.5% higher on Wednesday.