It’s been nearly a decade of trade war, tariff threats, and extreme supply chain disruption for the semiconductor industry. 2025 hasn’t disappointed in its ability to test investor resolve. We need not review all the gritty details. But throughout it all, we preached caution and moderation when making portfolio adjustments, if any. https://chipstockinvestor.com/will-tariffs-doom-chip-stocks-and-end-the-bull-market/
That said, there was still a sizable overhang of risk because of the ongoing trade negotiations between the U.S. and EU. This risk had a big impact on key linchpin in the global electronics supply chain, ASML Holding (ASML), during and in the couple weeks following the company’s second quarter 2025 earnings update.
However, on Sunday July 27, 2025, the U.S. and EU announced a high-level trade framework that could remove a key risk for ASML in particular. We don’t make political commentary here at Chip Stock Investor, but here are the key points impacting ASML and peers.
The key risk ASML was facing
Back in April 2025, U.S. president Donald Trump announced new baseline tariffs of 10%, plus an additional 25% tariff on products like autos and auto parts, including on products coming from the EU. Threats ratcheted up in mid July with Trump calling for additional tariffs on the EU of 30% if a trade deal wasn’t made by an August 1, 2025 deadline.
While there were exceptions made for semiconductors and related equipment, many of ASML’s end market customers were set to be impacted by the tariffs. Additionally, there was no guarantee that ASML wouldn’t have been impacted by new tariffs after August 1.
This was the key reason ASML declined to provide any guidance as to growth for 2026. Expecting guidance for 2026 while nearly half of 2025 still remains may sound like an absurd expectation. Nevertheless, given the high level of expense and coordination needed between semiconductor manufacturer customers (especially third-party foundry TSMC) and other semiconductor suppliers, companies like ASML tend to have extended foresight into demand for the sale of their lithography equipment.
The threat of high tariffs was casting doubt on that foresight. ASML CEO Christophe Fouquet had this to say on the Q2 2025 earnings call, July 16, 2025:
“As we look ahead to 2026, we continue to see strong demand related to AI for both logic and memory. And we see the positive impact of a growing number of UV [ultraviolet lithography] layers. On the other hand, as we said before, customers are facing increasing uncertainties based on microeconomic and geopolitical developments. Further, some customers are navigating specific challenges that might affect the timing of their capital expenditure. Against this backdrop, while we are still praying for growth in 2026, we cannot confirm it at this stage. We will continue monitoring developments over the coming months.”
Up until the Q2 2025 earnings call, ASML management was clearly still factoring for the threatened 25% U.S. tariff on EU imports (ASML makes its machines in the Netherlands). When you sell machines that cost upwards of €300 million to €400 million each, a 25% tariff would make a really big impact on customer demand for the product in the U.S.
During the Q&A portion of the call, ASML CFO Roger Dassen added this regarding an analyst question as to why the outlook had gotten worse as of July rather than better compared to April 2025:
“…it’s interesting that we have such a different perspective on what the world looked like three months ago versus today. I would say three months ago, I think, versus today, I can tell you that our customers are more concerned about the tariffs discussion today than they were three months ago. Three months ago, there was the indication of a pause in the tariffs. Right now, I think it seems like the countries are in full battle mode again when it [comes to] tariffs… So we sense in all conversations with customers a higher level of uncertainty than three months ago. And that’s the reason why, as I mentioned before, they keep the cards closer to the chest and wait with confirming their demands up to the point in time that they can do that.”
Clouds clear a bit for ASML
The U.S.-EU trade framework announced on July 27 seemingly removes this key risk for ASML. Again, it’s important to note this isn’t a completely done deal. Many details will need to be agreed upon. But it appears that semiconductor manufacturing equipment are among the categories exempt from the 15% tariff rate that has been set on goods from the EU entering the U.S.
From the standpoint of industry of critical U.S. importance, exempting ASML lithography machines from tariffs makes sense. With Intel continuing to cut spending on its U.S.-based manufacturing footprint, TSMC has been picking up the slack in a big way – and once again turning the U.S. into a key geographic growth driver for ASML. In the recent past, the U.S. had fallen to under 10% of ASML’s revenue, but that has changed as of late (the U.S. was 16% of sales in 2024, with things trending similarly for 2025).
Check out Fiscal.ai for all of your financial visualization and investment research needs. Get 15% off a paid plan with our link! Fiscal.ai/csi
A big tariff on the U.S. would have had an outsized impact on ASML and its customers – especially the one with plans down in the southwest United States.
Check out Semi Insider for the rest of the conversation, and a lot more!
