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Fitch upgrades ASML on market leadership, growth outlook

Fitch Ratings upgraded the long-term issuer default rating and senior unsecured rating of ASML Holding NV to A- from BBB+, with a stable outlook, citing the company's market-leading position and strong growth prospects.

The Dutch semiconductor equipment maker, which has an 80% revenue market share in the supply of lithography machines, is poised to take an even bigger leadership role in the sector due to its development of extreme ultraviolet lithography, or EUV technology, according to Fitch.

The rating agency noted that ASML is the sole global supplier of EUV technology, which will cut the unit cost of producing smaller and more powerful chips for semiconductor manufacturers.

"ASML's development of EUV technology is now set to achieve industrial production quality and capacity requirements … In our opinion, EUV tools will become essential for leading edge semiconductor chips and driving innovation in new applications but also stimulating upgrades of existing products," Fitch said.

Fitch also expects ASML to achieve strong growth driven by increasing semiconductor content in products, growth in end market applications and domestic investments by China. It projects the company's revenue growth to hit 12% in 2018 before gradually slowing to 6% by 2020.

In 2017, ASML's net sales increased to €9.05 billion from €6.79 billion in the previous year.

Fitch said the rating upgrade also reflects ASML's operating risk profile, which has significantly improved over the past five to six years.

"ASML retains significant financial flexibility to manage operational risks, invest in future growth projects and control its leverage profile," the rating agency said.