TSMC A13 not using High NA is a timing disruption, not a break in ASML's thesis
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TSMC A13 not using High NA is a timing disruption, not a break in ASML's thesis
UBS maintains a Buy rating on ASML, believing that TSMC skipping High NA at the A13 node will delay the adoption curve, but Low NA double patterning demand, orders from other customers, and ASML's long-term lithography intensity expansion still support the investment thesis.
- The TSMC A13 node is planned for volume production in 2029, with tools to be shipped in 2028-2029, but it has confirmed that it will not use High NA EUV due to cost considerations.
- UBS believes this is mildly negative relative to its base case, but more like a one- to two-node-cycle delay rather than a structural change in demand.
- In the model, 11 of the original 16 High NA tools in 2028-2029 were allocated to TSMC; the delay may be partially offset by higher Low NA EUV double patterning demand.
- UBS maintains its 12-month Buy rating and €1,600 target price, based on the 22 Apr 2026 price of €1,249.8, implying 28.0% forecast share price upside and 28.8% forecast total return.
Report interpretation
Overview
This report discusses the impact on ASML of TSMC's announcement that its A13 process node will not use High NA EUV. UBS believes A13 is a direct shrink of A14 based on nanosheet transistors, targeting AI, HPC, and mobile applications, with about 6% area scaling while maintaining compatibility with A14 design rules. A13 not adopting High NA EUV is a headwind for ASML at the timing level, but it does not change ASML's long-term demand and structural position in advanced lithography equipment.
Core views
The core views are: first, High NA EUV remains important and can improve lithography intensity over the long term by reducing the cost of critical layers and saving deposition, etch, and other steps; second, TSMC's delayed adoption of High NA for A13 has limited EPS impact because higher Low NA EUV double patterning demand may partially offset delayed High NA shipments, and near-term Low NA margins are higher than High NA; third, other foundry and logic customers may adopt High NA earlier to differentiate themselves from TSMC at advanced nodes, so High NA orders could still have upside over the next 6-12 months.
Analysis framework
The report uses event impact analysis, equipment shipment assumption adjustments, valuation multiple comparisons, and a DCF valuation framework to assess the impact of changes in TSMC's node roadmap on ASML's orders, EPS, valuation, and long-term demand.
Methodology notes
Discounted cash flow valuation
UBS values ASML based on the DCF method, assuming a WACC of 9% and a terminal growth rate of 3%.
Forecast stock return
UBS defines forecast stock return as expected share price appreciation over the next 12 months plus the dividend yield, and compares it with the market return assumption to determine the rating band.
Increase in lithography intensity
The report believes that rising lithography intensity in advanced process and memory markets can support ASML's share of wafer fab equipment spending and its valuation premium.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- ASML.ASCore covered company; affected by TSMC A13 node not using High NA
- Strengths
- ASML is a leading lithography equipment supplier with a scarce monopoly position in advanced EUV, supplying major semiconductor manufacturers such as Samsung, TSMC, Intel, and Hynix.
- Weaknesses
- Customer capex is highly cyclical, and changes in advanced node roadmaps can affect the pace of High NA adoption.
- Comparison
- ASML's 10-year average valuation premium versus U.S. peers is about 85%, while the report says it is currently at a 3% discount; the last time it traded at a discount was in February 2013 before EUV adoption.
- Risks
- A slowdown in semiconductor end demand, customers delaying equipment orders, execution risk in next-generation EUV technology, and deterioration in the macro environment.
- Taiwan Semiconductor ManufacturingKey customer; decided not to use High NA EUV at the A13 node
- Strengths
- A13 targets AI, HPC, and mobile applications, and maintains compatibility with A14 design rules, making customer migration easier.
- Weaknesses
- Not adopting High NA due to cost considerations may delay the High NA adoption curve at advanced nodes.
- Comparison
- TSMC's delayed adoption may create an opportunity for other foundry and logic customers to adopt High NA earlier and differentiate themselves.
- Risks
- Process roadmap adjustments may change the structure and timing of ASML's high-end equipment orders.
Key data
- 12-month ratingBuyThe report cover lists ASML's 12-month rating as Buy.
- 12-month target price€1,600.00The target price corresponds to the 22 Apr 2026 price of €1,249.8.
- Forecast share price appreciation28.0%Forecast price appreciation。
- Forecast dividend yield0.7%Forecast dividend yield。
- Forecast stock return28.8%Forecast stock return。
- Market return assumption7.5%Market return assumption。
- Forecast excess return21.2%Forecast excess return。
- Assumed High NA sales mix15-20%UBS previously estimated that High NA EUV could account for 15-20% of total lithography system sales by the end of the decade, and this proportion may decline due to the TSMC news.
- 2028-2029E High NA tool assumption11 of 16 tools allocated to TSMCUBS's original model assumed 6 units in 2028E and 10 units in 2029E, and the announcement may imply the adoption curve is delayed by about two years.
- 2026E EPS€34.25UBS diluted EPS estimate; consensus is €31.27.
- 2027E EPS€44.75UBS diluted EPS estimate; consensus is €41.37.
- 2028E EPS€49.97UBS diluted EPS estimate; consensus is €47.24.
Impact & implications
In the short term, TSMC A13 not using High NA will delay part of ASML's High NA shipment cadence and put pressure on buy-side expectations for High NA penetration; however, UBS believes this affects the valuation cadence more than actual earnings, because Low NA EUV demand, double patterning, and High NA orders from other customers may provide offsets. In the medium to long term, ASML's monopoly position in advanced lithography, customer coverage, and increasing share of wafer fab equipment spending still support a recovery in its valuation premium.
Risks
- A slowdown in the macro environment or semiconductor end markets may lead to cuts in capital equipment spending.
- Customers may delay or defer existing orders, and ASML remains exposed to cyclical fluctuations in customer business.
- There are execution risks associated with next-generation EUV and High NA technologies.
- A delay in TSMC's High NA adoption could reduce High NA's share of lithography system sales by the end of the decade.
- UBS discloses that it may act as a market maker in the relevant securities or derivatives, hold positions, or have potential conflicts of interest.
What to watch
- Whether High NA EUV order momentum holds up over the next 6-12 months.
- Whether other foundry and logic customers adopt High NA earlier to create node differentiation relative to TSMC.
- Whether TSMC reintroduces High NA EUV in subsequent nodes.
- Whether Low NA EUV double patterning demand can offset the High NA delay.
- Whether ASML's valuation discount versus global peers can recover toward its historical premium levels.