Computer chip giant ASML places big bets on a tiny future
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[May 21, 2022] By
Toby Sterling
VELDHOVEN, Netherlands (Reuters) - ASML, a
semiconductor industry and stock market giant, has to think smaller. Or
maybe bigger.
It is building machines the size of double-decker buses, weighing over
200 tonnes, in its quest to produce beams of focused light that create
the microscopic circuitry on computer chips used in everything from
phones and laptops to cars and AI.
The company has enjoyed a rosy decade, its shares leaping 1,000% to take
its value past 200 billion euros as it swept up most of the world's
business for these lithography systems.
It's now preparing to roll out a new $400 million machine for
next-generation chips which it hopes will be its flagship by the late
2020s but for now remains an engineering challenge.
Executives at ASML's headquarters in the Dutch town of Veldhoven told
Reuters a prototype was on track to be completed in the first half of
2023. They said the company and longtime R&D partner IMEC were setting
up a test lab on the spot - a first - so top chipmakers and their
suppliers can explore the machine's properties and prepare to use
production models as early as 2025.
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Yet, as investors expect further dominance and growth to justify ASML's
valuation at 35 times 2021 earnings, there is little margin for error
should the company encounter technical or supply-chain snags.
"Every check is green right now," said Christophe Fouquet, head of EUV
programs at ASML. "But, you know, we still have to see it all
(assembled) together."
EUV stands for extreme ultraviolet, the wavelength of light used by
ASML's most advanced machines.
The fortunes of the project are also important for ASML's customers,
chipmakers racing to expand production amid a global shortage. They
include U.S. player Intel, South Korea's Samsung and Taiwan's TSMC, the
biggest, which makes chips for the likes of Apple, AMD and Nvidia.
Industry specialist Dan Hutcheson of TechInsights, who is not involved
with the ASML project, said the new technology - known as a "High-NA"
version of EUV - could provide a significant advantage to some
chipmakers.
"It's a bit like who's got the best gun," he said.
"So either ASML makes it happen or they don't make it happen," he added.
"But if they make it happen, and you don't have your orders and you miss
out on this, you've immediately made yourself non-competitive."
He said TSMC eclipsed its rivals by integrating ASML's EUV machines
first in the late 2010s - a mistake Intel CEO Pat Gelsinger has vowed
not to make again with High-NA.
Lithography is a key determinant of how small circuitry on a chip can
get, with High-NA promising a 66% reduction. Smaller is better in
chipmaking, as the more transistors you pack in the same space, the
faster and more energy efficient a chip can be.
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![](../images/052122pics/busine31.jpg)
ASML employees pose in front of the partially completed frame of the
company?s newest product in Veldhoven, Netherlands, in January 2022,
in this handout picture released by ASML. The "High NA EUV" tool,
still under development, will cost around $400 million and will be
used to help create the circuitry of a new generation of computer
chips. ASML/Handout via REUTERS
![](http://archives.lincolndailynews.com/2022/May/21/images/ads/current/chittick_sda_PROM_2022.png)
Circuitry is now approaching the atomic level, leading to predictions that the
end is nigh for "Moore's Law", a famous 1960's observation that the number of
transistors on a microchip doubles about every two years.
"If they (ASML) don't succeed it will become difficult to continue with Moore's
Law," said Jos Versteeg, an analyst at Dutch-based bank InsingerGilissen, though
he noted engineers had defied similar doubts in the past.
FIRST LIGHT ON SILICON
Since 2000, ASML has rapidly taken market share from Japanese competitors Nikon
and Canon, which now mainly focus on older technology. ASML controls more than
90% of the lithography market. No competitor is attempting to build an EUV
system, citing high development costs.
Shortages of ASML's machines, which cost up to $160 million each, are a
bottleneck for chipmakers, who have plans to spend more than $100 billion in the
coming years to build extra fabrication plants to meet demand.
The High-NA machines will be about 30% bigger than their predecessors, which
themselves require three Boeing 747s to carry them in sections.
IMEC, a non-profit research group that cooperates with companies across the
semiconductor industry, believes setting up the lab at ASML could save up to a
year in development time.
ASML said it had five orders for pilot machines, which should be delivered in
2024, and "more than five" orders from five different customers for faster
production models for delivery starting in 2025.
But this is no slam-dunk.
There are formidable challenges in integrating a host of complex components,
including an optics system of polished, hyper-smooth curved mirrors, which are
being built in a vacuum by Germany's Carl Zeiss.
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Versteeg at InsingerGilissen said that while ASML enjoyed a near monopoly, its
"pricing is dependent on the productivity of the machines". Meanwhile, it must
sell EUV tools to the shrinking number of companies that make leading-edge
chips, which include memory chip makers SK Hynix and Micron.
ASML is also tied to the wider fortunes of the cyclical chip industry, which
some researchers expect to double past $1 trillion in annual sales this decade.
Fouquet worries most about supply-chain issues.
"Right now, and like with every other product, we see some stress in the supply
chain, and this is if you ask me today, probably the biggest challenge we have
with High-NA."
(Reporting by Toby Sterling; Editing by Pravin Char)
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