ASML expects its planned equipment output to fall short of customer demand in 2027 and 2028. Upgrades to machines already installed in chip factories are becoming a growing source of business.
At its latest earnings call, the Dutch equipment maker said strong demand for productivity upgrades helped lift third-quarter service and field-option sales to approximately €3.3 billion, almost €400 million above guidance. The upgrades cover both extreme ultraviolet, or EUV, and deep ultraviolet, or DUV, lithography equipment.
“The ability to enable an increase in capacity through upgrades on the same footprint is very compelling for our customers, as the effect is an immediate increase in output capability,” said Roger Dassen, chief financial officer at ASML.
US chipmakers are pursuing factory improvements alongside expansion. In Intel’s second-quarter results, CFO Dave Zinsner attributed stronger volumes partly to “higher factory yields and improved cycle times.” Intel is also “meaningfully increasing our investments in equipment, clean room space, and substrates,” he said.
Micron is modernizing existing facilities while building new fabs. Its more than $2 billion Manassas expansion introduced 1-alpha DRAM production in May, a transition the company said would quadruple its DDR4 wafer supply at the Virginia site. Separately, Micron said advanced EUV tools would help it “optimize both cleanroom space efficiency and patterning” as it develops future DRAM technology. Its annual report projects first wafer output from its new Idaho fabs in mid-2027 and late 2028.
Demand is Running Ahead of New Machines
“Supply shortages across advanced logic and memory nodes continue to increase in size and in time horizon,” said Christophe Fouquet, chief executive officer at ASML.
ASML expects memory net system sales to grow around 75% this year, driven by customer expansion and increased EUV use in advanced DRAM production. Advanced logic net system sales are expected to grow more than 25%.
The company is increasing its own output. It expects to produce roughly 65 low-NA EUV systems in 2026, compared with 44 shipped last year. It plans a 30% capacity increase in 2027 for both low-NA EUV and DUV immersion systems, and is investigating an increase beyond 30% in 2028.
Customers are expressing interest in orders for 2029 and 2030, although ASML is still assessing demand and capacity before accepting those commitments.
Dassen said many installed tools had yet to receive upgrades, leaving further opportunities to increase production from existing equipment.
“We will continue to work on this important value driver, expanding the upgrade portfolio offering, new productivity options, to our customers in the coming years,” he said.
More Output Comes at a Price
The upgrade business is helping ASML’s profitability. Its third-quarter gross margin reached 57.5%, above guidance, helped by high-margin contributions from installed base management.
ASML has also completed pricing discussions covering its most critical products. The increases will begin affecting revenue and margins in 2027, with the full effect from 2028.
“And you will also understand that upgrade prices are closely associated with the prices of the tools,” Dassen said.
Discussing higher-throughput DUV equipment, Fouquet connected the production gains for customers to ASML’s commercial opportunity.
“So this is both an opportunity on value, margin, pricing, it is also, of course, very helpful when it comes to capacity,” he said.
Part of the price increase will cover the costs of expanding ASML’s operations and supply chain. Dassen said a significant portion would contribute directly to gross margin, although the company was not planning to repeat those pricing discussions annually.
For manufacturers, the payback depends on the additional chips they can sell after accounting for installation costs and production interruptions. Faster lithography increases factory output only if subsequent production stages can handle the additional wafers; otherwise, it moves the bottleneck elsewhere.
Expansion Still Has to Deliver
Upgrades are being pursued alongside a large construction program across ASML’s customer base.
Fouquet said ASML checks that customers have facilities ready before allocating scarce machines, to avoid shipping equipment that could sit unused while another manufacturer waits.
“We do not see our customer clean room being a major factor on our demand,” he said.
Dassen cautioned that the construction program would require careful execution.
“But it also means that our customers have to manage the execution of all the construction in 2027-2028 very diligently,” he said.
The expansion push also highlights a geographic divide. According to Bloomberg, ASML recorded no European net system sales in the second quarter. “We’re not selling anything at all in Europe,” Frank Heemskerk, ASML’s executive vice president for global public affairs, said in September, warning that the region risked falling behind countries investing more aggressively in chip manufacturing.
Meanwhile, GlobalFoundries was selected to operate two planned fabs in Malta, New York, under a US-Japan initiative providing up to $21 billion. The first is expected online in 2029, adding approximately 900,000 300mm wafers annually when fully operational; a second would add similar capacity. “GF was selected because fabs of this scale require more than capital,” said Tim Breen, chief executive officer at GlobalFoundries.
Texas Instruments is also focusing on equipping and ramping the capacity it has built. In its second-quarter filing, TI said its investments had created the “ability to equip and ramp factories to support customer demand.” The company maintained its $2 billion-$3 billion capital spending forecast for 2026 and said production at its Lehi facility was continuing to ramp.
For US manufacturers, the investment decision comes down to each factory: whether an upgrade can increase output soon enough to justify its cost, and where additional machines and production space are unavoidable.