A single company dominates a crucial link in the global electronics supply chain, supplying the semiconductor industry’s most advanced equipment.
Based in the Netherlands, ASML has become the world’s top supplier of photolithography systems, used in the production of integrated circuits. Although it competes with Japanese giants Canon and Nikon, ASML has nearly doubled its market share in the past 15 years, to 62%. Its edge is that it is the only supplier that has mastered “extreme ultraviolet” (EUV) lithography for chip manufacturing.
The goal of chipmakers is always to produce smaller, more powerful components for next-generation devices. Crucial to this are photolithographic machines, which use light to etch the integrated circuits onto silicon wafers. The shorter the wavelengths of light, the smaller the components can be – and EUV has wavelengths of just 13.5 nanometres (billionths of a metre). Neither Canon nor Nikon are pursuing EUV technology, but the world’s biggest chipmakers including Intel, Samsung and TSMC, rely on it.
ASML’s revenues grew by 8% in 2019, with a third of its sales by revenue coming from EUV lithography machines. The Dutch firm expects this portion to rise to three-quarters by 2025. Investors have been watching closely. In less than 10 years, the company’s market capitalisation has grown tenfold, to around €114 billion, nearly doubling in the past year alone. In these terms, The Economist notes, ASML is worth more than Airbus, Siemens or Volkswagen.
ASML shipped its first prototype EUV lithography device in the 2000s. In 2013 it acquired Cymer, an American maker of lithography light sources, to accelerate its EUV development. The business started gaining momentum a few years later. Today the large, complex machines require ASML to make full use of the electronics industry’s sprawling global supply chain. It does business with some 5,000 suppliers. In turn, ASML is one of hundreds of suppliers to the semiconductor industry.
ASML’s products have also caught the attention of governments, since EUV technology has military applications. China is eager to have it, but the U.S. is trying to quash this ambition by preventing the Dutch government from granting ASML the necessary export licence. Thus politics could keep ASML out of the Chinese market, while Chinese companies work on EUV machines of their own.
This is unlikely to be a problem for ASML, however. Of all the links in the electronics supply chain serving advanced chipmakers, “ASML’s technology is the most difficult to replicate”, says Pierre Ferragu, a technology analyst at New Street Research. Analysts doubt that the Chinese will catch up. ASML is already working on new, faster EUV machines, due to ship in 2023.