Dutch firm ASML makes one of the most important machines needed to produce the world’s most advanced chips. The U.S. chip restrictions have left companies, including ASML, scrambling to figure out what the rules mean in practice.

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Dutch manufacturer of microcircuits ASML forecast a jump in revenue in 2023 as the semiconductor industry predicts a recovery in growth in the second half of this year.

ASML is one of the most important global companies in the chip supply chain. It manufactures the machinery needed to produce the world’s most advanced chips.

For the fourth quarter of 2022, ASML’s net sales rose more than 29% to 6.4 billion euros ($7 billion), it said on Wednesday. For the full year, net sales amounted to 21.1 billion euros, an increase of more than 13% compared to the same period last year. However, net profit for the full year actually fell by more than 4% to €5.6 billion.

ASML forecasts that net sales in 2023 will grow by more than 25% compared to 2022.

“When we look at the state of the industry today, we’re not immune to … recessionary fears or high inflation or high interest rates, that’s also clear. And then we see the effect of that in our clients’ businesses,” ASML CEO Peter Wennink told CNBC.

ASML machines are purchased by companies such as Intel and TSMC, which actually makes the chips that go into end products like laptops or smartphones. Wennink said stocks of consumer-related chips are rising because demand for such electronics is “not very good.”

But he said ASML’s customers believed it would be “not long” and were therefore not canceling orders.

“Most of our customers are telling us that they expect to recover in the second half of this year,” Wennink said.

“When you consider that the average lead time of our instruments is … say a year and a half to two years, and if you look at the relatively short waits … of a potential recession, certainly customers are not canceling any orders – because they may find themselves at the back of the line when this thing comes around again.”

Companies like TSMC and Intel are ramping up capacity around the world, especially as the US and Europe try to bring chip manufacturing closer to home. For example, TSMC is set to open two semiconductor manufacturing plants in Arizona.

ASML found itself in the geopolitical crosshairs

The US has imposed sweeping export restrictions aimed at depriving China of key semiconductor chips and equipment. As a result, ASML ordered US employees to stop serving Chinese customers.

Dutch Prime Minister Mark Rutte visited Washington this month to meet with US President Joe Biden. It is unclear at this point whether the US is pushing for a total ban on ASML equipment to China.

Rutte told CNBC last week on the sidelines of the World Economic Forum in Davos, Switzerland, that he hoped the issue would be resolved in “a couple of months, maybe even sooner.”

“I think we can achieve this in a way that it can be done in a friendly way, including with countries where you don’t want to use advanced technology and defense systems,” Rutte told CNBC.

For now, ASML can ship older tools called deep ultraviolet (DUV) lithography machines to China, but not its older EUV systems. ASML CEO Wennink said China accounted for about 15% of sales in 2022 and would be at the “same” level this year.

At the end of the day, he said, it is up to governments to resolve the situation.

“It’s not only between the Dutch and the Americans, but also with other European countries, with Asian countries, so it’s a difficult situation,” Venink said.

“This is their business [governments]. I just have to watch what comes out.”

CNBC’s Silvia Amaro contributed to this report.

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