Scratching the surface – ASML to be more than mere supplier

The Dutch lithography machine maker has recently come to the spotlight due to the chip shortage and geopolitical tensions. Shen Bo, head of ASML China, says business in China is about more than just selling machines.

Photo from CFP

Photo from CFP



“Making chips is more than just buying lithography machines,” said SHEN Bo, head of ASML China.

ASML has been in China for more than twenty years but the publicity-shy Dutch company has only recently come into the spotlight because of the chip shortage. When Jiemian News visited ASML’s Shanghai office, staff were getting ready for its first “China Day” on September 1 – basically a day off.

Wanted - all kinds of talent

ASML is best known for its EUV lithography machines, essential in chipmaking and a recent target of a potential sales ban by the US government. Shen says these machines are only part of “a holistic solution.” Client relationships can be multidimensional, therefore, ASML can be, and in many cases already is, a partner rather than a mere supplier.

“We also offer computational lithography, metrology and inspection systems. All these products work together,” he said.

ASML is not the only maker of lithography machines – notable competitors are Canon and Nikon - but ASML controls 60 percent of the market and, more importantly, is the only supplier of extreme ultraviolet (EUV) lithography systems, making small, powerful chips for phones, EVs and AI. Intel, Samsung and TSMC – the largest chip makers in the world – rely on ASML machines.

But, as Shen says, making chips is about more than just acquiring lithography machines. ASML covers the entire process from equipment purchase to actual chipmaking, with engineers on site at clients’ factories. Even when Wuhan was in lockdown in early 2020, ASML staff were on duty in clients’ factories.

China contributes 14.7 percent of ASML’s revenue with 12 offices, three R&D centers and 11 warehouses. A global training center opened in Shanghai in 2018, followed by a repair center in Beijing in 2021, but ASML needs talent more than anything else. Lithographic technology spans many fields including physics, math, computer science, materials science, electronic and software engineering. ASML plans to hire 200 staff in China this year, equivalent to 14 percent of its current workforce.

“There were no more than 500 people in 2017. Now we have 1,500. That’s three times the workforce in four years,” he said. “The business is growing. So is the organization. We pretty much need students from all STEM fields. And we need non-engineers to run operations.”

Question of speed

ASML is one of the most valuable companies in the world thanks to its monopoly of EUV lithography, which has been in high demand in the past two years. Both Intel and TSMC have announced new factory openings. 

The company reported a 35 percent increase in Q2 revenue and a similar increase in profits. Despite this, the sales growth forecast was adjusted down from 20 percent to 10, partly because of an increase in “deferred revenue recognition.” Sales have been reaching accounts slower than before due to longer delivery time.

Doing certain tests at clients' factories instead of its own has reduced delivery time by as much as a month. “At first we were worried that there would be technical difficulties. Or that some clients may not be willing to take the risk,” Shen said. So far there haven’t been any issues. 

Troubles in the pipeline

High inflation and rising interest rates threaten global recession, and even when supply chain challenges are overcome, a bigger risk comes from the macro environment. Consumer demand for electronics is already waning, and the impact is rippling upstream. Electronics makers are having trouble getting rid of excess inventory stockpiled during the pandemic.

The Dutch company is also wary of getting caught in US-China rivalry. Given the geopolitical sensitivity of chips, ASML is walking a fine line. The US government is said to be pushing to ban ASML from selling chip-making equipment to China. CEO Peter Wennink recently said during an earnings call that China “is an important player in the semiconductor industry,” and a “very significant supplier of the global markets.”