Oct 16 (Reuters) - ASML's deep forecast cuts

that sparked a global tech stock selloff signal overcapacity at

chip factories rather than a slowdown in global semiconductor

demand, analysts said.

While the weaker 2025 sales outlook from the chip equipment

maker on Tuesday raised fears of faltering global semiconductor

demand, several analysts pointed to inventory build-ups at chip

factories that stocked up on ASML's expensive tools during the

pandemic and have become better at using them to produce a

larger number of chips.

ASML's forecast was a lagging indicator of what has been

playing out at these chip factories for months, analysts said.

The company's stock had on Tuesday plummeted to its biggest

single-day loss in a quarter century. In results that the

company inadvertently posted a day ahead of schedule, ASML said

it expects 2025 total net sales of 30 billion-35 billion euros,

near the bottom of its previous forecast.

That had dragged down a large swath of the semiconductor

industry because ASML has a near-monopoly on critical tools used

by TSMC, Intel ( INTC ), and Samsung Electronics ( SSNLF )

to make advanced chips.

U.S. chip stocks, however, steadied on Wednesday, with

Nvidia ( NVDA ), Advanced Micro Devices ( AMD ) and Arm

rising between 0.2% and 1.1%.

Spurred by blockbuster demand for chips during the pandemic,

chipmakers had built extra capacity. That growth stabilized as

supply chain issues eased, leaving them to wait to order new

tools until their factories looked ready to overflow with

orders.

ASML said on Tuesday that despite a boom in AI-related

chips, other parts of the semiconductor market were weaker for

longer than expected, leading companies that make logic chips to

delay orders and customers that make memory chips to only plan

"limited" new capacity additions.

Intel ( INTC ), TSMC and Samsung are pulling back on orders from ASML

because they have realised there is plenty of capacity, said Dan

Hutcheson, vice chair at analyst firm TechInsights.

Chip factory usage is around 81% this year, but

manufacturers tend to buy tools when that gets into the mid-90%

range, Hutcheson said. Intel ( INTC ) has slowed down its factory

expansion, which suggests Samsung and TSMC will also be

cautious, he said.

Chip stockpiles remain high, and chipmakers have become more

efficient with ASML's tools, meaning they can make more chips

without having to order more.

Handel Jones, CEO of International Business Strategies,

which tracks the chipmaking industry, said the sector has

slashed the number of steps where ASML's flagship machines are

used, sometimes by almost a third.

Jones said Samsung, for example, may be able to use cutting

edge chip-etching technology to reduce the number of steps using

ASML's flagship machines from five or six down to one or two.

If successful, Samsung could have significant excess

capacity for those machines, known as extreme ultraviolet

lithography machines, he said.

Jones said he had not changed any of his overall chip

industry forecasts, which call for booming demand for AI chips

and AI-specific memory chips.

"This is a short-term blip. In the long term, it's going to

be okay," Jones said.