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ASML Holding, Lam Research call for a boom in chip equipment sales to China

Yahoo Finance Live’s Ines Ferre discusses the demand for chips to Chinese customers and the outlook for the semiconductor mining and fabrication industry.

Video transcript

- Two companies that make specialized equipment for manufacturing computer chips are calling for a boom in sales to China later this year. Now forecast comes despite US export restrictions on the latest chip making technologies.

Meanwhile, the US is working to develop its chip making infrastructure. For more on the current direction of the semiconductor industry, let's get to Yahoo Finance's Ines Ferre. Hey, Ines.

INES FERRE: Hey, Rochelle. Yeah, and those two companies, well known companies when it comes to manufacturing of semiconductors or the equipment to manufacture semiconductors are LAM Research that's based out of California, and also ASML Holdings and that's based out of the Netherlands.

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So they're both expecting strong demand coming out of China. Now, the US, last year, had announced that it was imposing some restrictions on exports into China of certain chips, and also manufacturing tools for those chips. But that involves the more advanced chips. So you still see chips that are going into the EV vehicles, for example. The demand for those are growing in China.

And those are the types of chips that we're talking about when it comes to the Chinese customers for ASML and for LAM. When it comes to that strong demand that they are seeing, that will continue out of China. So LAM and ASML say that these Chinese customers are buying tools for building the less advanced chips, those chips that go into EVs, those chips that go into mobile phones that also go into laptops.

And this is all happening really when you are seeing each region of the world or the major regions of the world, trying to become more self-sufficient when it comes to making chips because of the supply chain issues that we saw during the pandemic and also because of security concerns as well.

So Europe just approved an EU Chips Act that's aimed at building capacity for building chips in and out of the EU, also making the EU just basically more self-sufficient in trying to avoid those supply chain issues that I just mentioned. As far as where the chip sector is going, analysts are seeing a recovery in the second half of 2023 after an inventory digestion. And you just had a Jefferies analyst that have a buy rating on LAM saying, investors are underestimating the potential for a v-shaped recovery, which is often what happens after a material inventory correction, Rochelle.

- And then also honing in on TSMC, what do their latest results say about the chip space?

INES FERRE: Yeah, basically, what they are-- they revised down their full year sales outlook, so they're expecting their revenue to be a little bit lower. But nevertheless, their CapEx is remaining unchanged. That's a capital expenditure. And so that bodes well for the equipment makers of the chip makers.

So when you're taking a look at the overall sort of health of the industry, they do see that a stronger second half of the year, which kind of jives with what analysts are also saying. They're seeing a second stronger half for the year or so. They're expecting even stronger 2024, Rochelle.

- Well, thank you for getting us up to speed on that. Our very own, Ines Ferre.