ASML: A Monopoly on Magic
The $300 billion Dutch firm is the most important company you’ve never heard of.
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Actionable insights
If you only have a few minutes to spare, here’s what investors, operators, and founders should know about ASML.
An earned monopoly. ASML is the sole provider of EUV lithography machines. These machines use extreme ultraviolet light to create the world’s most powerful semiconductor chips. As one might expect, that’s a valuable position to be in. ASML has a market cap nearing $300 billion and earns tens of billions of dollars annually.
EUV’s mind-bending complexity. It’s hard to overstate the complexity of ASML’s EUV machines. Each unit has more than 100,000 components sourced from specialty providers, contributing to a $200 million cost. Virtually every step of the machine’s operations involves technological miracles indistinguishable from magic to the layperson.
Supply chain savants. ASML makes only 15% of an EUV machine’s components in-house. The firm’s genius lies in its ability to coordinate a vast supply chain of manufacturers and integrate their products into a cohesive whole. In some instances, ASML acquires its providers outright, giving it more control over its supply chain.
The silicon frontier. The Biden administration has aggressively curbed the chip industry’s commercial relationships with China. Since ASML is located in the Netherlands, an American ally, its business is affected by these restrictions, reducing the machines it can send to Chinese customers. The technological conflict between the US and China is a decisive force for businesses like ASML.
Powering the AI boom. The current artificial intelligence renaissance owes much to ASML. Its machines help create cutting-edge GPUs essential to training and deploying modern AI models. Demand for these chips will likely increase in the coming years, further strengthening ASML’s position. Tomorrow’s most powerful AI experiences will almost certainly rely upon the Dutch firm’s technology.
A parlor game for supervillains: tasked to thwart all human innovation as efficiently as possible, what would you do?
The least creative might suggest a blunt approach – the kind that dominates low-brow thrillers and action flicks. In this banal class, we have the nudged asteroid, conjured epidemic, and detonated caldera. These are weapons that don’t so much end innovation as end, well, everything.
The slightly cleverer fiend might concoct a fresher approach. Why annihilate the world when you could simply snip some subsea internet cables? Why expunge humanity when you could code malware that distorts laboratory measurements and hinders scientific discovery? There are subtler ways to wreak havoc.
These latter suggestions are decent enough, but they’re unlikely to earn much praise from fellow reprobates. If you wish to impress the assorted crowd of calico-stroking-bunker-dwellers, allow me to make a suggestion. The simplest and cleanest way to strangle human progress is to carry a hammer into an ASML laboratory.
The approximately $300 billion Dutch technology firm is the sole manufacturer of extreme ultraviolet (EUV) lithography machines, $200 million contraptions considered by some to be “the most complicated in the world.” These irreplicable marvels of engineering are the result of decades of trial and error, scientific breakthroughs, byzantine supply chains, and billions of dollars. They are irreplicable and, as such, insanely valuable. Without ASML’s EUV technology, it would be impossible to manufacture the world’s most powerful silicon chips – the kinds powering the current artificial intelligence boom. In short, the trajectory of our computational advancement is concentrated in the hands of a provider with a 100% monopoly on a particular kind of magic.
That derailing ASML makes a fitting response to this kind of game is a testament to its unusual, underappreciated power.
How to talk to light
ASML’s EUV lithography is worthy of its title as the world’s most complex machine. With more than 100,000 components, it is a marvel of innovation. It is only thanks to its creation that today’s fabricators can produce chips with transistor gates of just a few nanometers. (If you’re new to the world of chips, you might want to check out our deep dive on TSMC, which covers many of the basics.) The miraculous power of modern phones and computers would not be possible without it. Let’s discuss its magic. We must begin with light.