It manufactures the most complex devices ever created by humankind, combining 7 modules into a lithography machine in the south of the Netherlands—out of which modern civilization is born
Although the war in Ukraine is certainly the most dominant topic of the year, it is by no means the only one that will shape the near future of the world. One of the increasingly important topics in the background—rightly so—is semiconductors and their availability. As we’ve already mentioned in several articles on this topic, semiconductors are an absolutely essential component of modern civilization. So much of what surrounds us is built on semiconductors—computers, smartphones, modern cars, airplanes…
But semiconductors as a “resource” are highly concentrated. The most important producer of advanced microchips remains Taiwan, and Taiwan’s stability is increasingly in question. Every few weeks, we see greater and greater “gatherings” of Chinese military aircraft near Taiwan. And even though a Chinese invasion of Taiwan is not as imminent today as Russia’s was on Ukraine at this time last year, the fact that Taiwan is increasingly in Beijing’s crosshairs definitely raises the question—what would happen if Taiwan suddenly could no longer supply the world with microchips?
In a way, the Ukraine scenario showed us what happens when a vital country becomes a warzone. In Ukraine’s case, it was its importance in feeding the world. Disrupted logistics routes have already caused global food prices to rise, and with them, hunger—especially in poorer countries where the situation was already dire (with the crisis compounded by the preceding pandemic).
But Taiwan is not the only key point when it comes to semiconductors. There are production facilities elsewhere—though not many. In fact, we can talk about the “big five” of semiconductors: Taiwan, China, South Korea, Japan, and the United States.
The story isn’t as simple as it may seem—just as it never is when discussing resources or, in this case, components. Like with oil, we can differentiate it by origin—differences exist in quality, price, and production processes. With semiconductors, if we simplify the story completely, we can say there are complex and simple semiconductors.
Because of this, all five major semiconductor producers are also major importers of semiconductors! To explain: Japan and China, two Asian economic powerhouses, specialize in producing simpler chips used in cars, home appliances, and the like. On the other hand, the U.S., South Korea, and Taiwan are far more focused on complex microchips, like those used in desktop computers, laptops, smartphones…
Still, one shouldn’t underestimate the importance of “simpler chips”—here, “simple” refers to configuration, not necessarily construction. Or to simplify even further—countries like the U.S. and South Korea can’t just stop importing from China and Japan. Every member of this “big five” depends on the others for both imports and exports! For example—if the U.S. managed to build enough of its own facilities for “simpler” microchips and no longer needed Chinese ones—it would still rely on China to export to.
China is a massive market. Without it, many companies would collapse. In fact, all non-Chinese semiconductor manufacturers have China as their key export destination.
The story is deeply intertwined. Even the biggest exporters depend on imports!
And into this story enters another giant—not a semiconductor manufacturer, but the producer of the machines that make them. Each one costs around $200 million, weighs 180 tons, and takes three jumbo jets to transport its components. Once assembled, the machines are as large as a bus, containing a powerful laser, precise optics, robotic arms… These are lithography machines, used to make the chips for phones, cars, and even the jumbo jets that transport them.
So where can you get these massive lithography machines? This is where the story becomes truly fascinating and exclusive. If you’re looking for the best of the best—machines that use extreme ultraviolet (EUV) technology to produce microchips—there’s only one place in the world to get them: a single company—ASML (Advanced Semiconductor Materials Lithography) in the Netherlands.
Founded in 1984, this Dutch corporation is today the only company on Earth capable of producing such a machine. It holds a monopoly on them.
But how is that possible? Isn’t it common for companies to copy each other’s success, bringing knock-offs and variations to market shortly after? Yes—except in extreme cases where copying the product is almost impossible. This is truly one of those “knowledge is power” stories where that knowledge is zealously guarded.
Why is ASML the only one that can make such an advanced lithography machine? We have countries copying each other’s most advanced military tech—how hard can this be? Incredibly hard. The machines ASML builds may be the most complex devices ever created by humankind, and EUV is a never-before-seen technology that only ASML knows how to create.
Many are familiar with chip giants like Intel (USA), Samsung (South Korea), and TSMC (Taiwan). But in reality, all of them are less important compared to ASML—though far fewer people have even heard of ASML. It might sound dramatic, but all of them would be “nothing” without ASML.
In that sense, ASML is arguably the most important tech company of our time, and considering how much we depend on technology, it might just be the most important company—period.
Put simply: without ASML, there are no chips, and without chips, there is no modern civilization.
It’s hard to overstate the importance of chips. The battle for chips is—already—is becoming the battle that will shape the future of the world, and definitely of geopolitics. Many argue that steel and aluminum determined the outcome of WWII. In that sense, chips are the next resource to determine the course of human history—and possibly the next global conflict.
ASML, which started as a Philips subsidiary, now supplies its machines to all major chipmakers. Not surprisingly, its profits have surged in recent years.
Exactly how ASML creates EUV light inside the machine is known only to them. Extreme ultraviolet light naturally occurs in space—but ASML has found a way to generate it inside the machine, allowing for the production of even more complex chips.
This is very advanced technology. The EUV light wavelength is just 13.5 nanometers (a nanometer is a billionth of a meter). That’s a 15x reduction compared to deep ultraviolet (DUV) lithography, which uses 193 nm light (smaller is better here).
Of course, it would be impossible to explain precisely how all this works (which is why ASML holds a monopoly!), but powerful lasers use an intricate mirror system made from what the company calls “the flattest materials on Earth,” to etch integrated circuits directly onto silicon.
Does that mean ASML—and by extension the Netherlands—is the “master of the new world”? Not quite. As soon as you talk about monopolies and exclusivity, the story becomes complicated—and ASML is no exception. Yes, ASML can produce the most complex machine on Earth, which in turn makes the most complex chips for our fast-growing tech needs—but that one lithography machine—priced at $200 million—is made up of thousands of components. And where do they come from? Certainly not from ASML alone. In fact, ASML sources components from about 5,000 different suppliers!
Moreover, the entire process doesn’t happen in the Netherlands alone. The company is headquartered there, but ASML’s production facilities are spread across 60+ locations on three continents.
The machine consists of 7 major modules, assembled all over the world. But the final process, the finishing touch—the “secret ingredient”—is applied at home. These 7 modules are shipped back to the Netherlands, specifically to Veldhovenin the south, where they are assembled into the final machine—ready for delivery to Intel, Samsung, or others.
Will someone eventually “crack” ASML’s technology and start producing their own extreme lithography machines? One day—almost certainly—but not soon. Even when they do (whether Americans or Chinese), ASML will likely be a step ahead. In fact, the company has said they are already working on the next generation of lithography machines!
Still, a day will come when ASML’s monopoly will break, and many believe China will be the one to do it. China is investing heavily to become a self-sufficient semiconductor power.
While some argue that China is doing this just to become “the leading global power”—which may be part of the agenda—the truth is, China has no choice. Earlier this year, the U.S. banned the sale of EUV lithography machines to China(yes, the U.S. can do this despite ASML not being an American company—by threatening sanctions against any company that violates U.S. policy!).
But China has already surprised the world. Using the “older” DUV technology, they’ve managed to produce 7-nanometer chips, and are now working on 5-nanometer chips!
Still, DUV can only go so far. Sooner or later, China will have to enter the EUV zone. When? Experts say—relatively soon—probably within 5 years.
China’s main player is SMIC (Semiconductor Manufacturing International Corporation) based in Shanghai. ASML stated earlier this year that SMIC had “tried to steal trade secrets.” Whether that’s true is unclear—but if SMIC achieves EUV capabilities—by any means—ASML’s monopoly will be broken. Unless, of course, ASML launches another “unreachable revolution,” which they are already working on.
It’s expected that ASML will unveil its new technology—high NA-EUV lithography (“NA” refers to numerical aperture)—by 2025.
ASML’s Chief Technology Officer, Martin van den Brink, believes that once high NA-EUV is fully developed, it could represent “the end”—in other words, that chips won’t be able to become more complex beyond that point. Some agree, others don’t—but that’s part of a broader debate involving Moore’s Law and others.
In the meantime, the struggle continues—and as U.S.-China tensions grow, the issue of semiconductors and the machines that create them may become the most important issue of the coming era—or rather, it already is.
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