Ah, the persistence of memory. I'm not talking about one of my favorite master paintings here, but the ongoing importance of the memory chip market for leading semiconductor-lithography equipment maker ASML Holding (NASDAQ:ASML).

Roughly half of the company's business can be tied to the memory market. As people want more Apple (NASDAQ:AAPL) iPods, Dell (NASDAQ:DELL) computers, and Nokia (NYSE:NOK) cell phones, chip makers and foundries will need more equipment to make those chips. That's the way it's supposed to work, anyway. In reality, the semiconductor equipment market is highly cyclical, as chipmakers swing from product gluts to product shortages in fairly short order.

However, we might actually be seeing the beginning of an upswing. ASML reported that sales rose 3% sequentially, down 30% on a year-over-year basis. It shipped a total of 47 systems, versus 39 in the prior quarter and 81 a year ago. Better still, the company reported bookings of 55 systems -- a nice jump from 46 in the third quarter and 29 a year ago -- and that, in turn, led the backlog to increase 15% sequentially.

Whether or not September marks the cyclical trough for ASML (at least in terms of system shipments), the company does have some market-beating opportunities ahead of it. Though ASML has very good share in Europe, the U.S., and Korea, there's a lot of work that could still be done in Japan. About 18% of the world's semiconductor capital spending comes from Japan, but though ASML is the worldwide industry leader, it's still lagging hometown heroes Nikon and Canon (NYSE:CAJ) in that country.

The not-so-good news here is that ASML stock has been rising pretty steadily since mid-2005 on the expectation of a turnaround in the business. That's not exactly a unique phenomenon; other vendors such as Lam Research (NASDAQ:LRCX) and Applied Materials (NASDAQ:AMAT) have been drawing bids as well. Nevertheless, the shares aren't exactly a dirt-cheap, left-for-dead bargain any more. I'm reasonably confident that a sustained recovery in the semiconductor space can push these shares even higher, but investors who choose to bet on market psychology over intrinsic value should remember to keep an eye on the exits.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). Dell is a Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy.