ASML Holdings Reported first-quarter Sales and Gross margin in Line with guidance yesterday. Headquartered in Veldhoven, the Netherlands, ASML makes the machines that are used to manufacture semiconductors. ASML designs, develops, integrates, markets and services lithography systems for the semiconductor industry.

ASML’s main clients are Samsung, Intel and TSMC. TSMC is a main supplier of Apple, Nvidia, Qualcomm, AMD and STmicro. In practice, the consumer electronics world today depends on ASML’s capacity to develop machines that can produce faster electronics.

The consumer electronics market is currently going through a difficult period as several products such as mobiles, tablets and TVs appear to have reached a mature phase. Further deterioration in the global environment could see capex pressure intensify on the industry in the short-term.

However, the technology sector is on the eve of a major breakthrough led by the internet. As networks become faster, more reliable and integrated, the need for better technology able to handle massive amounts of data requires next generation semiconductors.

5G will soon be with us. The US will start early testing in 2017 and Korea is expected to launch in time for the 2018 Winter Olympics. 5G will be 100x faster than 4G and will require massive infrastructure upgrade. Demand for faster semiconductors will accelerate as Intel (Increased Server Demand), Samsung (faster mobile phone processors) and TSMC (suppliers to Apple, Nvidia, Qualcomm, AMD, STMicro amongst others) compete for a bigger share in the market.

This places ASML in an ideal position it is able to keep to its development objectives. ASML continues to make progress in the next-generation Extreme Ultraviolet lithography (EUV). In simple terms; machines that are able to manufacture smaller and faster semiconductors.

ASML expect a significant increase in sales in the second quarter of 2016 and intend to continue returning cash to investors through a share buyback program. The stock has increased 7.23 percent year to date compared to European Equities that fell 4.35 percent over the same period. ASML is expected to continue outperforming the main equity market over the medium to long term.

This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.