How the global semiconductor tussle is shaping ASML’s future

The future of ASML, Europe’s most valuable tech company, looks constantly bright, except for one point: geopolitics.As a manufacturer One tech executive calls it “the most complex machine made by humans.”ASML benefits from the global boom in semiconductors that power our connected world.

On Wednesday, a Dutch company selling photolithography machines to the world’s leading chip makers announced Outstanding quarterly financial results.. The company currently boasts a stock market value of approximately $ 300 billion, reflecting a nearly six-fold increase over the last five years.Growth prospects remain compelling: ASML predicts total sales in the semiconductor industry will double Up to $ 1 trillion Peter Wennink, ASML’s Chief Executive Officer, said:

But like other semiconductor players, ASML is trapped in a tense vice between the United States and China competing for technological advantage. How companies deal with this dilemma tells us a lot about the future shape of our technological world. Under US pressure, the Dutch government is considering a license to export ASML’s state-of-the-art machinery to China. Dividing the world into blue (US) and red (China) supply chains can disrupt one of the most tightly integrated industries. For a company with 5,000 suppliers, it can make life tricky and costly.

The focus of export control is ASML’s extreme ultraviolet (EUV) technology. This is a miracle of modern engineering that uses light to etch integrated circuits onto silicon wafers on a tiny scale. Each EUV machine weighs 180 tons and costs over $ 150 million. ASML sells them to TSMC, Samsung, Intel and more. It seems that Chinese manufacturers are also desperately purchasing.

Currently, more than three-quarters of ASML’s technology sales are to Asia, primarily Taiwan, South Korea and China. However, both the US and the EU are trying to strengthen their domestic semiconductor manufacturing capacity while dragging the center of gravity of the industry to the west.under Wassenaar Arrangement Exporting technology with dual military and civilian use between 42 countries, including the Netherlands, requires government approval. Joe Biden may have replaced Donald Trump, but it hasn’t changed the United States’ determination to cut off its technological foundation from China’s feet. “Friend Shore” Semiconductor Manufacturing..

In the short term, ASML may benefit from the “inefficiencies” of this market. This is because the company is archaic about geopolitical reorders.With the United States European government We are tempting chip makers to open factories locally. But wherever they build, these companies will continue to be enthusiastic customers of ASML’s machines. ASML also benefits from a pandemic-suppressed global economic recovery and a long-term shift to on-device or “edge” computing.

Pierre Ferragu, managing partner of New Street Research, said the US strategy is straightforward and well-implemented, encouraging traditional allies to line up. For example, some European countries are rejecting China’s Huawei in operating 5G communications networks. “China hasn’t had state-of-the-art semiconductor technology for 20 years. It’s easy for Europe to support the US side,” he says.

But, Report from the American Silicon Industry Association The Boston Consulting Group warns that a strategic separation from China could be counterproductive, slowing innovation, losing market share and significantly expanding China’s manufacturing capacity. The United States may simply be stimulating competition for hunger.

ASML acknowledges that export control is an effective tool for “specific targeted national security issues,” but raises questions about the harm it can cause if overused. In the event of a global chip shortage, manufacturing capacity can be further disrupted.

U.S. weapons technology policy also said there was a risk of aggravating geopolitical tensions over Taiwan, where state-of-the-art chip manufacturing is currently based and China has an “unknown red line.” Eurasia GroupTechnical practice. “Government needs to be very careful about tampering with this global supply chain. For 40 years, we have all benefited from a very robust, open and free supply chain. A huge amount of innovation has been brought about. “

ASML has done a decent job in establishing a dominant position in the important and fast-growing capital-intensive industry. However, its future success depends in part on learning new skills: how to play 3D geopolitical chess.

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How the global semiconductor tussle is shaping ASML’s future Source link How the global semiconductor tussle is shaping ASML’s future

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