ASML’s Geographic Strategy: China, Export Controls, and Power Economics

China accounted for 49% of ASML’s business in Q2 2024, an anomaly expected to normalize to 20-25% in 2025. Meanwhile, power efficiency has become a critical upgrade driver as AI chip training threatens to consume worldwide energy by 2035.

Geographic Revenue Dynamics

CEO Fouquet attributes the China surge to clearing a huge backlog of orders. The China revenue is entirely DUV machines, as export controls prohibit EUV sales. Chinese customers receive equipment eight generations behind High NA. This creates a bifurcated business:

• China: High-volume DUV sales at lower ASPs, serving mature node production
• Rest of world: EUV and High NA sales at premium ASPs, serving leading-edge production

The export controls actually create geographic revenue diversification. As Western nations invest in domestic semiconductor capacity through programs like the US CHIPS Act, ASML gains from fab construction in multiple regions.

Power Economics

“If we do not improve the power efficiency of our AI chips over time, the training of the models could consume the entire worldwide energy and that could happen around 2035,” Fouquet said. ASML has reduced the power needed per wafer exposure by more than 60% since 2018. Power efficiency improvements justify machine upgrades even without resolution improvements. A factory running more power-efficient equipment has lower operating costs per wafer. Energy cost per wafer is becoming a binding constraint, and lithography increasingly optimizes operating cost, not just resolution.

The Business Model Summary

ASML’s financial result: 32.5 billion euros projected 2025 revenue, 9.6 billion euros net profit (+27% YoY), and market capitalization around $430 billion, making ASML Europe’s most valuable company.

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This is part of a comprehensive analysis. Read the full analysis on The Business Engineer.