Telltales: ASML's Rise to Power

How a Dutch Startup Became the Backbone of the Global Tech Industry

This document is Gwendolyn Lawrence’s private work and should not be disseminated without her permission. It is prepared for research purposes only and does not constitute investment advice.

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ASM Lithography (ASML 0.00%↑ ) was founded in 1984 as a joint venture between Philips (PHG 0.00%↑) and Advanced Semiconductor Materials International ($ASMIY). Philips was  a multinational conglomerate corporation based in Eindhoven which focused on consumer electronics. Advanced Semiconductor Materials International, or ASMI, was a chip-machine manufacturer which pioneered important wafer-processing technologies and specialized in the design, manufacturing, sales, and service of semiconductor wafer processing equipment for the fabrication of semiconductor devices. The two companies decided to collaborate together in a new venture, a lithography developing company called ASM Lithography, in order to break into the growing semiconductor market.

The company began with minimal funding working out of a leaky shed nearby a Philips office in Eindhoven, the Netherlands. However, working with pre existing research, ASM Lithography was able to produce their first system, the PAS 2000 stepper, the same year of the company’s founding. ASM Lithography expanded quickly with the help of its parent companies. By 1985 the company employed 100 workers and was able to move into a new office building, and factory, in Veldhoven. In addition, ASM Lithography was able to form a valuable partnership that same year with lens manufacturer Carl Zeiss. In 1986, the company came out with the PAS 2500 stepper, which featured innovative alignment technology that would serve as a basis for many of the company’s future advancements in lithography platforms.

In 1988, ASM Lithography went independent and was officially renamed ASML. However, the newly self-reliant company faced stiff competition in a market with many suppliers. ASML had difficulty procuring customers and was unable to succeed without the backing of its parent companies. Unfortunately, Philips and ASMI were facing their own difficulties. ASMI withdrew support from ASML, unable to keep up funding after little returns on such large investments, and Philips was forced to announce cost-cutting programs after a slowdown in the global electronics market. ASML’s future seemed uncertain. Luckily, some executives successfully lobbied Henk Bodt, a Philips board member, to advocate for ASML’s value. Bodt persuaded Philips’ board to continue to invest in ASML, and the company remained afloat.¹

Philips’ investment paid off. In 1991, ASML launched the PAS 5500, its breakthrough technology. The new platform reduced drastically manufacturing times and its modular design allowed customers to produce multiple generations of chips from the same system. The PAS 5500 attracted the customers that ASML so direly needed to stay afloat, rocketing the company from third in the lithography sector to second. In 1995, ASML became fully independent and went public, being listed on the New York and Amsterdam stock exchanges and expanding to new production facilities in Veldhoven. Philips sold off its shares of ASML, half at the IPO and the rest in the subsequent years. ASML was on its way to becoming the tech giant it is today.

In 1997, ASML began exploring a technique of using extreme ultraviolet light for printing microchips, using pre-existing research from the US Department of Energy. In 1999, it joined a group of other U.S. chipmakers in order to gain licensing for this process. ASML’s collaboration with competition allowed it to advance in this new technique of photolithography. In 2000, ASML further expanded by acquiring the Silicon Valley Group, a U.S. based lithography equipment manufacturer, further advancing ASML’s capabilities in the semiconductor sector. 

In 2001, the company came out with its TWINSCAN system featuring a revolutionary dual-stage technology which maximized productivity  and accuracy by simultaneously exposing one wafer while another is measured. ASML produced multiple editions of the TWINSCAN system over the next several years, culminating in the TWINSCAN XT:1900i which debuted a technology that projected light through a film of water between the lens and wafer which allowed smaller chip features than ever before. By 2002, ASML had become the largest supplier of photolithography systems in the world.²

In 2007, ASML bought another leader in the semiconductor design and manufacturing sector, BRION, kicking off a new era for the company. ASML was newly focused on a ‘Holistic Lithography’ strategy, which combined its expertise in lithography systems with BRION’s skill in chip manufacturing optimization to yield new innovations in efficiency for their customers.

In 2008, ASML faced new difficulties with a severe drop in sales triggered by, in the words of CEO Eric Meurice, “an unprecedented mix of falling end-demand for semiconductors, weak memory prices and restricted access to capital for our customers.”³ The company was forced to lay off about 1000 employees. The company applied for assistance from the Dutch government, relying on the national unemployment fund in order to avoid more cuts.⁴ ASML quickly recovered, however, and reached a record high revenue in 2011.⁵ A year later, Intel invested $4.1 billion in ASML for a 15% stake in the company.

ASML has suffered from problems with intellectual property theft by employees several times. Multiple of these incidents were connected with China. However, ASML has still managed to hold a top spot in its industry, making the most advanced computer chips in the world. The company’s monopoly in photolithography tech has made it an invaluable, hugely influential part of the international technological boom in the last few decades.

Today, ASML is listed on the NASDAQ and operates as one of the world’s biggest semiconductors, leading the cutting edge of photolithography chip manufacturing. ASML’s perseverance through demand slowdowns and its executives’ faith in the company’s value has resulted in a company absolutely integral to the developments that have led to modern technology-based lifestyles.

1. https://www.asml.com/en/company/about-asml/history

2. https://www.lithoguru.com/scientist/litho_history/milestones_tools.pdf

3. https://www.asml.com/en/news/press-releases/2008/asml-takes-action-to-adjust-its-organization-due-to-severe-order-slowdown

4. https://www.wsj.com/articles/SB122959783756317881

5. https://www.wsj.com/articles/SB10001424052748703730104576260091610455466