How ASML took over the chipmaking chessboard

Weekly Business Insights from Top Ten Business Magazines

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 342 | March 29-April 4, 2024

Strategy & Business Model Section | 2

How ASML took over the chipmaking chessboard

By Mat Honan and James O’Donnell | MIT Technology Review | April 1, 2024

Extractive Summary of the Article | Listen

ASML, the Dutch company, makes the machines that in turn let manufacturers produce the most advanced computer chips in the world. In recent years ASML’s machines have kept Moore’s Law from sputtering out. Today, they are the only ones in the world capable of producing circuitry at the density needed to keep chipmakers roughly on track. It is the premise of Moore’s Law itself that drives the industry forward, year after year. 

Moore’s Law holds that the number of transistors on an integrated circuit doubles every two years or so. In essence, it means that chipmakers are always trying to shrink the transistors on a microchip in order to pack more of them in. The cadence has been increasingly hard to maintain now that transistor dimensions measure in a few nanometers.

ASML’s technology, van den Brink its CEO assured, would be there to meet the demands, thanks to the company’s investment in creating tools capable of making ever finer features: the extreme-ultraviolet (EUV) lithography machines it rolled out widely in 2017, the high-numerical-aperture (high-NA) EUV machines it is rolling out now, and the hyper-NA EUV machines it has sketched out for the future.

ASML is such an undisputed leader in today’s chip ecosystem that it’s hard to believe the company’s market dominance really only dates back to 2017, when its EUV machine, after 17 years of development, upended the conventional process for making chips. 

When van den Brink joined in the 1980s, little about ASML made the company stand out from other major lithography players at the time. “We didn’t sell a substantial amount of systems until the ’90s. And we almost went bankrupt several times in that period,” van den Brink says. “So for us there was only one mission: to survive and show a customer that we could make a difference.”

By 1995, it had a strong enough foothold in the industry against competitors Nikon and Canon to go public. But all lithography makers were fighting the same battle to create smaller components on chips. 

If you could have eavesdropped on a meeting at ASML in the late 1990s about this predicament, you might have heard chatter about an idea called extreme-ultraviolet (EUV) lithography—along with concerns that it might never work). By that point, with pressure to condense chips beyond current capabilities, it seemed as if everyone was chasing EUV. The idea was to pattern chips with an even smaller wavelength of light (ultimately just 13.5 nanometers). To do so, ASML would have to figure out how to create, capture, and focus this light—processes that had stumped researchers for decades—and build a supply chain of specialized materials, including the smoothest mirrors ever produced. And to make sure the price point wouldn’t drive away its customers. 

Canon and Nikon were also pursuing EUV, but the US government denied them a license to participate in the consortium of companies and US national labs researching it. Both subsequently dropped out. Meanwhile ASML acquired the fourth major company pursuing EUV, SVG, in 2001. By 2006 it had shipped only two EUV prototype machines to research facilities, and it took until 2010 to ship one to a customer. 

Yet in 2017, after an investment of $6.5 billion in R&D over 17 years, ASML’s bet began to pay off. That year the company shipped 10 of its EUV machines, which cost over $100 million each, and announced that dozens more were on backorder. EUV machines went to the titans of semiconductor manufacturing—Intel, Samsung, and Taiwan Semiconductor Manufacturing Company (TSMC)—and a small number of others. With a brighter light source (meaning less time needed to impart patterns), among other improvements, the machines were capable of faster production speeds. The leap to EUV finally made economic sense to chipmakers, putting ASML essentially in a monopoly position.  A key factor in ASML’s growth was its control of the supply chain. That strategy of pointedly controlling power in the supply chain extended to ASML’s customers, too. 

3 key takeaways from the article

1. ASML, the Dutch company, makes the machines that in turn let manufacturers produce the most advanced computer chips in the world. In recent years ASML’s machines have kept Moore’s Law from sputtering out. Today, they are the only ones in the world capable of producing circuitry at the density needed to keep chipmakers roughly on track. It is the premise of Moore’s Law itself that drives the industry forward, year after year. 
2. ASML is such an undisputed leader in today’s chip ecosystem that it’s hard to believe the company’s market dominance really only dates back to 2017, when its EUV machine, after 17 years of development, upended the conventional process for making chips. 
3. ASML’s ability to take risk, massive investment, and wind on its back it addition to its strategy of pointedly controlling power in the supply chain and ASML’s customers paid off heavily. 

Full Article

(Copyright lies with the publisher)

Topics:  Chip Manufacturing, Holland, USA, China, Information Technology