Dutch chip equipment maker ASML is expected to report an improvement in orders, indicating a technology sector recovery, but analysts said rising expectations could disappoint if any of the numbers slip.

The world's largest maker of semiconductor lithography machines, which map out electronic circuits on silicon wafers, was forecast to report a further rise in bookings from the third quarter, driven by consumer spending on end products.

There are expected to be 37 new system bookings valued at 813 million euros ($1.17 billion) in the fourth quarter, according to a Reuters poll, up from 35 systems worth 777 million euros in the third quarter.

End demand for semiconductors is recovering after a very weak period. Capex is rapidly increasing after a virtual standstill in the first half of 2009. This will lead to positive news flow in the coming quarters, Petercam analyst Eric de Graaf said.

ASML's order book, which is in an important indicator for the chip industry, has been improving since the second quarter of 2009 after a virtual stand-still at the end of 2008 and early 2009.

INTEL HOPES

The initial order growth was driven by ASML's premium clients, which began investing again to maintain their leading market positions.

These customers include the world's largest chip maker Intel Corp and Samsung, especially for ASML's immersion machines, which allow manufacturers to produce chips with ever-finer structures, and sell at about 30 million euros each.

Analysts expect orders from mass production customers such as the world's largest contract chip maker, Taiwan Semiconductor Manufacturing, will also recover on the back of a rise in chip sales for personal computers, wireless devices and consumer electronics.

Hopes for a rebound of the technology sector were also fueled last week by Intel, which beat analyst expectations and gave a bullish outlook for the sector.

Researchers at Gartner said last month worldwide wafer fabrication equipment spending is expected to increase 56.6 percent in 2010, compared with total global semiconductor spending growth, projected up 45 percent in 2010 to $37 billion.

At this time, Gartner analysts do not see that a shortage of immersion tools will develop, but the availability of long lead items could limit wafer fab equipment growth in 2010 if the market heats up more, Gartner said.

OUTPERFORM MARKET

Kepler analyst Peter Olofson said he expected ASML, which competes with Japan's Nikon Corp and Canon Inc, to outperform the industry average.

As the majority of investments continues to be directed toward technology shrinks, demand for lithography tools, which play a key role in feature shrinks, stands to benefit disproportionately, Olofson said.

The big question however will be whether any bullish comments from ASML will be reflected in its shares, which almost doubled in 2009, outperforming the DJ Stoxx European technology index which gained about 20 percent.

ASML shares were down 0.26 percent at 22.8 euros at 1343 GMT.

Of 31 analyst covering ASML 17 rate the shares Strong Buy or Buy, while 10 have a Hold rating and 4 rate the shares Sell or Strong Sell, according to Starmine data.

(Editing by Sharon Lindores)

($1=.6949 Euro)

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