*

ASML expects significant fall in China demand next year

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Chinese orders were 42% of ASML's Q3 sales

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ASML prepared for short-term rare earth restrictions

(Updates with CFO comments on rare earth materials in paras

6-11)

By Toby Sterling and Nathan Vifflin

Oct 15 (Reuters) - ASML's expected decline in

China sales is not due to previous stockpiling of chip machines

by its Chinese customers, finance chief Roger Dassen told

reporters on Wednesday.

The world's biggest supplier of computer chip equipment said

in its third-quarter earnings report that it expected a

significant fall in demand from China next year.

"The reason I rule out (previous) stockpiling is because

systems that we ship ... are actually in a chips factory", the

CFO said.

China has been the world's largest buyer of chipmaking tools

since 2020, prompting a group of U.S. lawmakers to call for new

restrictions on ASML's exports to China this month. They said it

is clear Chinese firms have been buying tools in excess of the

country's needs to get ahead of further controls.

Chinese system orders represented 42% of all ASML

machine sales in the third quarter. The company earlier said

demand for this year was stronger than expected.

ASML PREPARED FOR SHORT TERM RARE EARTH RESTRICTIONS

The finance chief also detailed ASML's readiness to face

restrictions on imports of rare earth materials coming from

China.

"We have inventory, we have alternatives. But of

course, you have the impact on us directly that we're

navigating," the CFO said.

ASML is well prepared, Dassen said, but he cautioned

about the potential longer term consequences.

"If you talk about the next three years... it's

important that the world is able to continue to trade and that

we do not end up in a situation where we get limitations in that

regard", he told reporters.

China produces over 90% of the world's processed rare

earths and rare earth magnets, which ASML needs in its machines,

and has

dramatically

expanded its rare earths export controls in early October.