introduction
Taiwan is currently at high risk of invasion from China. Of course, Taiwan accounts for 92% of advanced semiconductor production. Most countries see this as a huge security risk so are willing to flex their military power in the interest of national security. Defending Taiwan is a short-term solution though, both the USA and the EU have committed huge stimulus budgets toward domestic chip manufacture. To hold back chip production in China, the US government have been asking the Dutch government since 2018 to ban ASML HOLDINGS (NASDAQ: ASML / AMS: ASML) from selling their last generation manufacturing equipment to Chinese companies. Clearly, ASML is a strategic key to chip manufacture, high end manufacture can't be achieved without their manufacturing equipment. Therefore, with new fabrication plants (fabs) springing up across the western world, ASML is in a strong position for growth and would not be as badly affected by a Chinese invasion of Taiwan as TSMC for example (however, be aware that currently most of ASML's manufacturing is currently done in Taiwan).
Besides their beneficial market position, ASML is running a fundamentally very good business. Over the last 5 years, it has returned shareholders 283% and with a surge in the creation of new fabs, this growth can be expected to continue.
Some financials
NOTE: metrics are at the time of writing and aren't updated
| metric | amount |
|---|---|
| Gross profit margin | 49.1% |
| Return on investment | 29.01% |
| PE | 40.77 |
| PEG | 1.33 |
| PS | 10.79 |
| PB | 22.51 |
| Dividend yeild | 1.28% |
| Revenue growth | 9.88% |
| Market Cap | $232.91 |
| Share price | $577.31 |
| Beta | 1.3 |
| Short interest | 0.25% |
| Rating | Buy (78% of 9 analysts) |
Caveats
ASML have the bulk of their production facilities in Taiwan, failure by the west to protect Taiwan and its production capabilities will result in short-term issues for ASML like loss of production capacity or potentially longer-term issues such as loss of IP.
Sources
Metrics (Freetrade)
Taiwan production statistics (Aljazeera)
USA CHIPS for America Act & FABS Act
European Chips Act
US-Dutch ASML talks (Bloomberg)
Logo (Wikimedia Commons)
Metrics (MacroTrends)
Metrics (FT)
