The company that owns the 'magic wand' of the semiconductor war

ASML's proprietary photolithography technology, dubbed the "magic wand" of the semiconductor industry, has made the company the center of the US-China semiconductor chip war.

In 1984, Martin van den Brink, a young engineer, joined a newly established venture in the quiet town of Veldhoven, southern Netherlands.

Little did he know that 40 years later, its existence would be so central to the $580 billion semiconductor industry that it would become the focus of the US-China chip war.

The market for lithography machines – the tools that print chip designs onto wafers – is dominated by European-based ASML. Photo: ASML.

That’s ASML, a Dutch-based corporation that has the largest market value in Europe but is an unfamiliar name to many. However, they hold the core technology, the machines that can make modern semiconductor chips.

The 'magic wand' of the technology world

The semiconductor chip manufacturing industry has made great strides and contributed greatly to making the technology world as brilliant as it is today.

Interestingly, though, the complexity and sophistication of all the most advanced chips comes from the town of Veldhoven, in the south of the Netherlands, where the revolutionary machines are assembled, enough to make the big guys dependent on it.

“ASML has a monopoly on EUV lithography, the most advanced lithography equipment needed to create every advanced processor chip we use today. The machines they make are each among the most complex pieces of equipment ever built,” said Chris Miller, assistant professor at the Fletcher School at Tufts University.

Assembly of an EUV machine. Photo: ASML.

According to CNBC , no other company has the ability to create EUV machines for the chip manufacturing industry, ASML is holding a monopoly in the market. There is even no sign that any competitors will catch up with their technology.

“ASML holds a special place in the entire semiconductor ecosystem. In some ways, they are as important as TSMC,” Peter Hanbury, semiconductor market analyst at Bain & Co, told CNBC .

For Van den Brink, over the past nearly four decades, ASML has gone from a small company competing with giants like Nikon, Canon and Ultratech to a monopoly on developing extreme ultraviolet (EUV) lithography technology.

The strong rise has also helped ASML become Europe's most valuable technology company, with a market capitalization of more than $247 billion , double that of Intel, its customer and also a giant in the semiconductor industry.

Despite the semiconductor market still facing many difficulties in 2023, ASML is still growing at a fast pace. In addition, the Dutch company's long-term prospects do not seem to be shaken as demand for hardware for computer computing power skyrockets.

“This is a company that the world can’t live without. They’ve had a head start and are at least 20 years ahead. Investors have recognized the importance of ASML as a company and how difficult it will be to replicate it. It’s a natural monopoly,” said Jon Bathgate, a fund manager at NZS Capital LLC.

ASML headquarters in Veldhoven (Netherlands). Photo: ASML.

ASML has sold a total of about 140 EUV printers over the past decade, according to CEO Peter Wennink. Each currently costs up to $200 million , and the bus-sized machines contain 100,000 parts and have a total cable length of about 2 kilometers.

With such a high price tag, ASML has only sold its machines to five chipmakers so far, including the three largest companies in the semiconductor industry: Samsung, Intel, and TSMC. According to the company’s 2021 financial report, machine sales accounted for 84% of ASML’s revenue.

Machines are more sophisticated than ever

With proprietary technology that creates chips used in AI devices and advanced weapons, it's easy to see why ASML is considered critical infrastructure for US national security and coveted by China's tech industry.

According to CNBC, since 2018, the Trump administration has reportedly asked ASML not to sell EUV technology to Chinese companies.

The US has been lobbying the Netherlands to stop exporting EUV machines to China since former President Donald Trump. Photo: Reuters.

Chinese tech companies have naturally coveted this printing technology, and some Chinese individuals and organizations have even stolen ASML’s technology.

According to Bloomberg , a company with about 1,500 people in China revealed in February that a former employee had stolen some technical information from ASML.

In a 2018 California court case, ASML accused Dongfang Jingyuan Electron and a company called Xtal, founded in 2014 just a month apart, by former employee Zongchang Yu with the express purpose of stealing and transferring technology to China.

The company claims Yu now runs Dongfang in Beijing, with ample support from the Chinese government .

Banned from selling many of its most advanced machines in China, and the victim of data theft, ASML is doing the only thing it can to maintain a lead that rivals have found nearly impossible to overcome: Building ever more sophisticated machines.

ASML employees assemble a part of the EUV machine. Photo: Bloomberg.

ASML's next machine, the size of an Amsterdam studio apartment, is due to hit the market in 2025. At more than $380 million , it's more expensive than a Boeing 787 Dreamliner.

Bloomberg sources said that ASML's new generation machine will be able to engrave complex patterns on silicon panels smaller than viruses.

Despite being far ahead of its competitors, ASML is constantly evolving to ensure that no one can catch up with what the company can do in the near future.

ASML's only real hurdles now will be technological limitations, machine manufacturing capabilities, and cost savings for mass production.

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