TOPIC 6.4

Case Study: ASML's EUV Monopoly

⏱️24 min read
📚Case Study

CASE STUDY 6.4

ASML: The 30-Year Journey to EUV Monopoly

⏱️21 min read

🔬Case Study

ASML Holding N.V., a Netherlands-based company, holds the most powerful monopoly in the semiconductor industry: 100% market share in Extreme Ultraviolet (EUV) lithography systems. These machines, costing $150-200 million each and requiring three Boeing 747s to transport, are the only way to manufacture chips below 7nm. ASML's 30-year journey to this position represents one of the most remarkable technology development stories in history.

Origins: From Philips Spinoff to Industry Leader

The Philips Years (1984-1995)

ASML was founded in 1984 as a joint venture between Philips and ASM International. Initially focused on conventional lithography systems, ASML competed against established players like Nikon and Canon. The company went public in 1995 and gradually gained market share through innovation in DUV (Deep Ultraviolet) lithography.

The EUV Bet (1990s-2000s)

In the 1990s, the semiconductor industry recognized that conventional lithography would hit physical limits around 10nm. Multiple approaches were explored: X-ray lithography, electron beam lithography, and EUV. ASML bet on EUV— a technology so challenging that many considered it impossible.

The technical challenges were staggering:

  • Light Source: EUV light (13.5nm wavelength) doesn't exist naturally and must be generated by firing lasers at molten tin droplets 50,000 times per second
  • Vacuum Environment: EUV light is absorbed by air, requiring near-perfect vacuum
  • Mirrors: Conventional lenses can't focus EUV light; specialized mirrors with surface irregularities less than 0.1nm required
  • System Integration: Over 100,000 parts from 5,000+ suppliers across 60 countries

💰 ASML Financial Performance (2015-2025)

2015
€6B

2018
€11B

2020
€14B

2023
€27B

2025
€32B

Gross Margin: 51.6% (Q3 2025) | Market Cap: €389B

Projected: €44-60B by 2030

The EUV Breakthrough

Consortium Approach

Recognizing that no single company could develop EUV alone, ASML formed a consortium in the early 2000s:

  • Intel, Samsung, TSMC: Invested $5.4 billion in ASML (2012) for priority access
  • Carl Zeiss: Developed ultra-precise mirrors
  • Cymer (acquired 2013): Light source technology
  • Trumpf: High-power lasers

First Commercial EUV System (2017)

After 30 years and tens of billions in R&D, ASML shipped its first commercial EUV system (NXE:3400B) in 2017. Early systems had reliability issues and low throughput (125 wafers per hour vs 275 for DUV), but they enabled 7nm production.

Continuous Improvement

ASML has steadily improved EUV performance:

  • NXE:3400C (2019): 170 wafers/hour, improved uptime
  • NXE:3600D (2021): 185 wafers/hour, 5nm production
  • NXE:3800E (2023): 220 wafers/hour, 3nm production
  • High-NA EUV (2024): 0.55 numerical aperture for 2nm and below, $380 million per machine

Market Dominance and Pricing Power

100% EUV Market Share

ASML is the only company in the world that can manufacture EUV systems. Competitors abandoned EUV development decades ago:

  • Nikon: Exited EUV in early 2000s, now focused on mature DUV
  • Canon: Never seriously pursued EUV, limited to older lithography
  • Chinese Efforts: Shanghai Micro Electronics Equipment (SMEE) is 10-15 years behind

Extraordinary Pricing

ASML's monopoly enables premium pricing with no negotiation:

  • DUV Systems: $40-80 million
  • EUV Systems: $150-200 million
  • High-NA EUV: $380 million

Despite these prices, demand far exceeds supply. TSMC, Samsung, and Intel have ordered hundreds of systems with 18-24 month lead times. ASML's order backlog exceeds €40 billion.

Customer Dependency

Every advanced chip manufacturer depends entirely on ASML:

  • TSMC: 70+ EUV systems, planning 100+ by 2030
  • Samsung: 40+ EUV systems
  • Intel: 30+ EUV systems, ramping for 18A process

There is a historically strong correlation (+0.85) between TSMC's capital expenditures and ASML's revenue, demonstrating the dependency.

🏭 ASML System Complexity

⚙️

Components

100,000+ parts

5,000+ suppliers

60 countries

📦

Logistics

180 tons weight

3 Boeing 747s

40 shipping containers

🔬

Precision

Mirror accuracy: <0.1nm

Wavelength: 13.5nm

Vacuum: 10⁻⁶ Pa

⚡

Performance

220 wafers/hour

50,000 pulses/sec

95%+ uptime

Geopolitical Weaponization

Export Controls on China

U.S. and Dutch governments have weaponized ASML's monopoly through export controls:

  • 2019: U.S. pressures Netherlands to block EUV sales to China
  • 2023: Netherlands restricts advanced DUV sales to China
  • 2024: Further tightening blocks China from any advanced lithography

These controls effectively prevent China from manufacturing chips below 14nm using conventional methods. China accounted for 15% of ASML sales in previous years; the company now anticipates significant decline in Chinese revenue through 2026.

Strategic Implications

Export controls create a two-tier global semiconductor industry:

  • Tier 1 (EUV Access): USA, Taiwan, South Korea, Japan, Europe can produce 7nm and below
  • Tier 2 (No EUV): China limited to 14nm and above, forcing workarounds with lower yields

The Impossibility of Replication

Barriers to Entry

ASML's monopoly is protected by insurmountable barriers:

  • Time: 30+ years of development, 15-20 years for competitors to catch up
  • Capital: Estimated $50-100 billion required to develop competitive EUV
  • Expertise: 42,000 employees including thousands of PhDs in optics, plasma physics
  • Supply Chain: 5,000+ specialized suppliers, many exclusive to ASML
  • Patents: 20,000+ patents protecting core technologies

China's Attempts

China has invested billions in SMEE to develop domestic lithography, but experts estimate SMEE is 10-15 years behind ASML's current capabilities. Even with unlimited funding, replicating ASML's supply chain and expertise would take decades.

Future Outlook

High-NA EUV and Beyond

ASML continues innovating to maintain its lead:

  • High-NA EUV (2024-2025): Enables 2nm and 1.4nm production
  • Hyper-NA (2030+): Research for sub-1nm nodes
  • Throughput Improvements: Targeting 300+ wafers/hour

Revenue Projections

Analysts project ASML revenue will reach €44-60 billion by 2030, driven by:

  • AI chip demand requiring leading-edge nodes
  • High-NA EUV adoption at $380M per system
  • Installed base growth (service revenue)
  • Geographic expansion (U.S., Japan fabs)

ASML's 30-year journey from Philips spinoff to irreplaceable monopoly demonstrates the power of long-term R&D investment, consortium collaboration, and technological moats. The company's position as the sole provider of EUV systems makes it the most strategically important equipment company in the semiconductor industry— and a key lever in U.S.-China technological competition.

🎯 Key Takeaways

  • 30-year EUV development (1990s-2017 first commercial system) required consortium approach with Intel, Samsung, TSMC investing $5.4B, plus Carl Zeiss mirrors and Cymer light source acquisition
  • 100% monopoly on EUV lithography with systems priced at $150-200M (High-NA: $380M), 18-24 month lead times, €40B+ order backlog, projected €44-60B revenue by 2030
  • System complexity: 100,000+ parts from 5,000+ suppliers across 60 countries, 180 tons requiring 3 Boeing 747s, mirror precision <0.1nm, 50,000 laser pulses/second
  • U.S./Dutch export controls weaponize monopoly against China, creating two-tier industry (EUV access vs 14nm+ limitation), replication requires $50-100B and 15-20 years making ASML's position unassailable

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