At the apex of the semiconductor equipment industry stands ASML Holding N.V., a Netherlands-based company that holds a near-monopoly on the most critical technology in chip manufacturing: Extreme Ultraviolet (EUV) lithography. This singular chokepoint grants ASML extraordinary strategic power, making it one of the most important companies in the global economy despite its relatively small geographic footprint. Without ASML's machines, producing cutting-edge chips below 7nm is effectively impossible.
The Lithography Monopoly
ASML's Market Dominance
ASML commands an estimated 90% of the global lithography equipment market and 100% of the EUV lithography market. Every advanced chip manufactured by TSMC, Samsung, and Intel requires ASML's EUV systems. This dependency is so profound that there is a historically strong correlation (+0.85) between TSMC's capital expenditures and ASML's revenue, with a six-quarter lag— demonstrating how investment decisions at the world's leading foundry directly fuel ASML's growth.
What is EUV Lithography?
Lithography is the process of projecting circuit patterns onto silicon wafers using light. As transistors shrink to nanometer scales, shorter wavelengths of light are required to achieve the necessary resolution. EUV uses light with a wavelength of 13.5 nanometers— roughly 14 times shorter than the Deep Ultraviolet (DUV) light used in previous generations.
The technical challenges of EUV are staggering:
- Light Source: EUV light is generated by firing a 50,000-watt laser at molten tin droplets 50,000 times per second, creating a plasma that emits EUV photons
- Vacuum Environment: EUV light is absorbed by air and most materials, requiring the entire system to operate in a near-perfect vacuum
- Specialized Mirrors: Conventional lenses cannot focus EUV light, requiring ultra-precise mirrors made by Carl Zeiss with surface irregularities less than 0.1 nanometers
- System Complexity: Each EUV machine contains over 100,000 parts, weighs 180 tons, and requires three Boeing 747 cargo planes to transport
🔬 EUV vs DUV Lithography Comparison
Financial Performance and Market Power
Revenue and Profitability
ASML's financial performance reflects its dominant market position. In Q3 2025, the company reported:
- Net Sales: €7.5 billion
- Gross Margin: 51.6%
- Net Income: €2.1 billion
- Net Bookings: €5.4 billion
Analysts project long-term growth, forecasting annual sales to reach between €44 billion and €60 billion by 2030, a significant increase from the projected €32.5 billion for 2025. This growth is driven by insatiable demand for AI chips, which require the most advanced EUV systems.
Pricing Power
Each EUV machine costs $150-200 million, with the latest High-NA (High Numerical Aperture) EUV systems priced at $380 million. Despite these astronomical prices, TSMC, Samsung, and Intel have no alternative suppliers. ASML's order backlog extends years into the future, with customers willing to wait 18-24 months for delivery.
The Broader Equipment Ecosystem
Applied Materials (USA)
Applied Materials is the world's largest semiconductor equipment company by revenue, specializing in deposition, etching, and ion implantation systems. In Q2 2025, Applied Materials reported $7.2 billion in revenue with a focus on advanced DRAM and logic chips. While critical, Applied Materials lacks ASML's monopoly position— multiple competitors exist in each of its product categories.
Tokyo Electron (Japan)
Tokyo Electron holds a 90% global market share in photoresist coater/developer systems, which apply and develop the light-sensitive chemicals used in lithography. The company reported strong growth in 2024-2025, driven by demand for advanced packaging and memory chips. Tokyo Electron's net profit margin of 25-28% reflects its specialized expertise.
Lam Research (USA)
Lam Research dominates plasma etching equipment, used to remove material from wafers after lithography. The company's systems are essential for creating the vertical structures in 3D NAND memory and advanced logic chips.
🏭 Semiconductor Equipment Market Share
Geopolitical Weaponization
Export Controls on China
U.S. and Dutch export controls severely restrict sales of ASML's most advanced EUV systems to customers in China. These restrictions, implemented in 2019 and tightened in 2023-2024, prevent Chinese foundries like SMIC from accessing cutting-edge technology. China had accounted for up to 15% of ASML's sales in previous years, but the company now anticipates a significant decline in Chinese demand through 2026.
Strategic Implications
The export controls effectively create a two-tier global semiconductor industry: countries with access to EUV (USA, Taiwan, South Korea, Japan, Europe) can produce chips at 7nm and below, while China is limited to 14nm and above using older DUV technology. This technological bifurcation has profound implications for AI development, military capabilities, and economic competitiveness.
The Impossibility of Replication
ASML's monopoly is sustained by astronomical R&D investments and a decades-long head start. The company spent over 30 years and tens of billions of euros developing EUV technology, solving immense scientific and engineering challenges. Key factors making replication nearly impossible:
- Accumulated Expertise: ASML employs 42,000 people, including thousands of PhDs in optics, plasma physics, and precision engineering
- Supply Chain Complexity: ASML integrates components from 5,000+ suppliers across 60 countries, including Carl Zeiss mirrors and Cymer light sources
- Patent Portfolio: Over 20,000 patents protecting core technologies
- Capital Requirements: Estimated $50-100 billion and 15-20 years to develop a competitive EUV system from scratch
China has invested billions in domestic lithography development through Shanghai Micro Electronics Equipment (SMEE), but experts estimate SMEE is 10-15 years behind ASML's current capabilities. This makes ASML's monopoly the most durable chokepoint in the semiconductor supply chain.