By Roberta Cowan
AMSTERDAM (Reuters) - Investors will focus on ASML's fourth-quarter orders for signs of a recovery in the global chip sector when the Dutch chip equipment maker reports third-quarter results on Wednesday.
ASML was expected to report a 22 percent rise in third-quarter net profit to 330 million euros ($450 million), a Reuters poll found, while sales were seen up 19 percent to 1.397 billion.
A bellwether for Europe's technology sector, ASML is the world's largest maker of semiconductor lithography machines which map out electronic circuits on silicon wafers, competing with Japanese groups Canon and Nikon.
Its order book development is seen as a barometer for expectations of big chipmakers such as Intel, the world's largest, and Taiwan Semiconductor Manufacturing, the world's biggest contract chipmaker.
Victor Bareno, analyst at SNS Securities, said he expected a pick-up in ASML's fourth-quarter orders from the third quarter, adding that since market conditions have not improved, orders will still be at depressed levels.
What appeared to be a pause in orders for the chip equipment industry is turning into a full-blown downturn, said Bareno, adding he expected orders to bottom out by the end of 2011 and the chip market to recover during the first half of next year.
ASML's fourth-quarter order book was seen at 500-700 million euros -- well below the record year-ago figure of 2.315 billion but above the indicated level for the third quarter, which the company said would not exceed 500 million euros.
Global chipmakers and foundries have been battling falling demand as the industry was hit by economic uncertainties, supply chain disruptions due to the March earthquake in Japan, and customer inventory adjustments.
Last month, research firm Gartner said semiconductor inventories were too high and it expected the sector to go through a moderate inventory correction during the coming few quarters with production and sell-through expected to return roughly to balance by the second quarter of 2012.
Some chipmakers have reportedly said they will cut capital spending in 2012 amid low visibility in the sector and lower growth expectations in some chip markets next year.
ASML chief executive Eric Meurice said on July 13 customers were taking "some time" to assess semiconductor end-demand trends for 2012 before making decisions about how and when they would determine capacity plans.
Despite the expected drop in third-quarter orders, Meurice said at the time ASML's 2011 sales would still be the best yet for the company, topping 5 billion euros. He was expected to reiterate this full-year sales target on Wednesday.
Surging demand for smartphones and tablet computers are the bright spots for the chip sector at the moment as demand for desktop and laptop computers wanes.
So, while Apple has prospered from demand for its iPads and iPhones, and the Galaxy smartphone series has become Samsung's main profit engine, other firms with different chip requirements have not done so well.
AU Optronics, LG Display, Micron Technology and Intel are among those that have recently trimmed outlooks for some products due to weaker demand.
ASML has a global market share of around 70 percent and counts Intel, Samsung Electronics, and Taiwan Semiconductor Manufacturing among its customers.
($1 = 0.733 euro)
(Editing by Dan Lalor)
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