Written by Brenda Nakalema

Chip supplier beats earnings expectations.

One of the critical suppliers of manufacturing equipment to the semiconductor industry, ASML, reported better than expected fourth-quarter earnings in …

One of the critical suppliers of manufacturing equipment to the semiconductor industry, ASML, reported better than expected fourth-quarter earnings in the midst of high demand unevenly matched with short supply.

ASML (ticker: ASML) stock gained 2.4% in the U.S premarket trading, compared to trading shares in Amsterdam (ticker: ASML.Netherlands) which rose 1.3%. However, the stock has dropped over 10% so far this year, owing to the general decline in the technology sector.

Fourth-quarter earnings stood at a net income of 1.8 billion Euros on sales of 5 billion Euros, delivering earnings per share of 4.39 Euros.

Analysts had previously expected income of 1.6 billion Euros and per-share profit of 3.71 Euros- from sales of 5.1 billion Euros. The company initially registered an outstanding performance with an income gain of 29% from 1.4 billion earlier in the year, while sales increased 16% from 4.3 billion Euros.

“We have experienced higher demand for our systems than our production capacity can accommodate. Very strong demand in end markets places pressure on our customers for more wafer output,” said the company’s president and CEO, Peter Wennink.

The self-proclaimed “most important tech company you’ve never heard of,” ASML creates equipment for manufacturing semiconductors, supplying major chip makers like Intel (ticker: INTC), Taiwan Semiconductor Manufacturing (ticker: TSM), and Samsung Electronics (ticker: 005930. Korea). The seemingly persistent chip shortage has highlighted just how niche the company’s products are and the important place it holds in the global supply chain.

ASML holds a near-monopoly in the production of lithography systems which are a critical part of the chip-making process. The company also pioneered extreme-ultraviolet (EUV) lithography, which might be the next big thing in the technology industry.

“In order to support our customers, we are providing them with high-productivity upgrade solutions for their installed base, and we are reducing cycle time in our factory to ship more systems,” Wennink said.

Expected net sale growth for 2022 for ASML is roughly 20% from the previous year- this estimate takes of the fire at its Berlin site earlier this month.

“ASML remains core to the miniaturization of Semiconductors as leading customers like TSMC and Samsung continue to invest heavily in leading-edge nodes,” said Dan Thomas, an analyst at investment research consultancy Third Bridge.

Thomas added that, “Any reshoring of semiconductor supply chains probably bodes well for overall demand for lithography tools, of which ASML would be a key beneficiary.”