(Bloomberg) -- ASML Holding NV posted orders that fell short of analysts’ expectations, as Taiwanese and South Korean chipmakers held off buying the Dutch firm’s most advanced machines.

Bookings at Europe’s most valuable technology firm fell 61% in the first quarter from the previous three months to €3.6 billion ($3.8 billion), missing estimates of €4.63 billion. 

Top chipmakers like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. are holding off new orders as manufacturer clients work through stockpiles of hardware used in smartphones, computers and cars. That’s hurting ASML, which also forecast sales this quarter below analyst expectations. 

ASML shares fell 4.1% to €875.70 at 2:42 p.m. in Amsterdam on Wednesday.

ASML, the world’s sole producer of equipment needed to make the most advanced chips, saw the biggest slump in demand for its top-end extreme ultraviolet machines. Orders for them plunged to €656 million in the period from €5.6 billion in the previous quarter. 

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The level of EUV orders is “extremely low,” indicating major ASML clients like TSMC, Samsung and Intel Corp. didn’t increase investments in the high-end equipment, Oddo BHF analyst Stephane Houri said.

Investors had expected TSMC to book significant EUV tools in the first quarter, according to Redburn Atlantic analyst Timm Schulze-Melander. The disappointment in orders leaves earnings and revenue for next year “vulnerable,” he said.

“Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry’s continued recovery from the downturn,” Chief Executive Officer Peter Wennink said in a statement Wednesday. “We see 2024 as a transition year.”

Countries from Germany to the US have committed tens of billions of dollars in subsidies for chipmakers to build new wafer fabrication facilities, or fabs, in an attempt to ensure domestic supplies. South Korea this year unveiled plans for a $470 billion chipmaking hub. Many of these projects, which should boost demand for ASML equipment, are not yet under construction.

ASML sees sales in the current quarter between €5.7 billion and €6.2 billion, missing estimates of €6.5 billion before demand picks up. 

“I think it’s pretty clear that the industry is in its upturn,” Chief Financial Officer Roger Dassen said in a statement. “We will see recovery for the industry in 2024 and that we are building up for a stronger year in 2025.”

While the company was hit by weakness in Taiwan, South Korea and the US, its China business remained relatively resilient. Chipmakers there are still buying less sophisticated machines in a bid to take over the market for mature chips. 

Sales in China were €1.9 billion in the first quarter, down from €2.2 billion in the previous period. Dutch and US export rules meant to stifle Beijing’s chip ambitions have targeted the Veldhoven-based company’s ability to sell cutting-edge equipment to China. 

ASML benefited from strong demand from China last year as chipmakers there rushed to get advanced lithography machines ahead of the limits. The new measures, which fully kicked in on Jan. 1, restrict ASML from selling immersion DUV lithography machines, its second-most capable category of machinery, to China.

ASML has never been able to sell its EUV machines to China amid pressure from the US government. The company expects as much as 15% of China sales this year will be affected by the new export control measures. 

There may be signs of optimism ahead for some of ASML’s clients. TSMC flagged earlier this month that revenue in January to March grew at its fastest pace in more than a year.

Christophe Fouquet, ASML’s chief business officer, will take over as chief executive officer when Wennink retires later this month. He will have to balance geopolitical pressure from the US while attempting to satisfy shareholders accustomed to growth. During a decade under Wennink, shares rose nearly 1,400%. 

--With assistance from Henry Ren.

(Updates with analyst comment in sixth paragraph.)

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