Will ASML starts to decline? Read & decide.
In case you are unaware, $ASML Holding NV(ASML)$ is the monopoly (company) that specializes in the development & manufacturing of photolithography machines that are used to produce computer / semiconductor chips.
Its original name — stands for Advanced Semiconductor Materials Lithography (ASML).
It is a Dutch multinational corporation (MNC) founded in 1984.
As of 2022 it is the largest supplier for the semiconductor industry and the sole supplier in the world of extreme ultraviolet lithography (EUV) photolithography machines that are required to manufacture the most advanced chips.
As of June 2023, ASML was the most highly valued European tech company, with a market cap of about US$280 Billion.
Currently, it counts $Intel(INTC)$ , $Taiwan Semiconductor Manufacturing(TSM)$ and Samsung Electronics as its main customers.
Although China still accounts for 15% of ASML business (revenue), it will not be for long though (see below).
ASML makes use of US’s intellectual property (IP) in its lithographic machines production.
As a result, it has Hobson’s choice but to fall in line as US continues to step up its restrictions against export of advanced lithographic machines and chips to China.
When 31 January 2024 arrives, -15% of ASML’s revenue (from Huawei) will be wiped off its books.
The ban was first mooted on 15 May 2020 during president Trump’s era (see above).
The excuse was none other than national security alibi.
At a point in time when the covid pandemic was at its full-blown infancy stage and Huawei was on the verge of displacing $Apple(AAPL)$ iPhone as the 2nd most popular mobile phone (sales), after Samsung.
Despite all the restrictions rained upon Huawei and a host of other Chinese home grown companies (eg. ZTE Corp), many are still surviving.
Huawei recent launch of its Mate 60 Pro with 5G enabled capabilities, shocked the US to its core, considering substantial effort levied in an attempt to snuff the lights out of this techology leader.
When I came across the above post, the first thing that came to my mind was “Is ASML days as the undisputed lithographic machine manufacturer numbered?”.
More importantly, is the valiant effort by 2 generations of US presidents (Trump & Biden) coming to an end as China ushers in a new way of constructing lithographic machine, on their own terms without any sanctions over them?
What was mentioned in above post?
China is strategizing the establishment of an immense chip manufacturing facility propelled by a particle accelerator to challenge ASML.
The technology could be a game-changer that outstrips US sanctions and make China a key player in the chip world.
The Chinese are pushing forward with the construction of a new and extremely important particle accelerator that will result in cutting-edge laser source for lithography machines, a crucial component in microchip production.
Unlike traditional approaches, the Chinese project aims to [a] localize manufacturing, [b] bolster high-volume, [c] low-cost chip production by constructing a colossal factory housing multiple lithography machines around a single accelerator.
This innovation could position China as a global leader in advanced chips production, including coveted 2nm chips (that is still elusive at the moment).
The core of this possible technological breakthrough was based off the innovative Steady-State Microbunching (SSMB) theory, proposed by Professor Zhao Wu at Stanford University and his student Daniel Ratner in 2010.
This gained significant visibility recently, due to Huawei’s notable advancements in chip manufacturing.
The innovation is still in experimental verification phase, although it has been work-in-progress since 2017.
In 2017, Professor Tang Chuanxiang (from Tsinghua University) assembled a dedicated team to pursue this endeavor.
The team initiated the first verification phase at the Metrological Light Source (MLS) in Berlin, Germany.
By 2019, the experiment had succeeded, leading to the publication of a paper elucidating the phenomenon in the peer-reviewed journal Nature in 2021.
In 2022, the Tsinghua University team devised another prototype.
In January 2022, during an academic workshop, Professor Pan Zhilong (a team member), announced the design of an SSMB-EUV light source at Tsinghua university with an EUV power higher than 1kW.
In February 2022. the Hebei Provincial Science and Technology Department organized a special meeting to discuss strategies for fostering technology companies in Hebei province.
Professor Pan attended the meeting and discussed about advancing SSMB towards practical industry applications.
Since then, there have been no details about the project progress.
How I See The Saga
Regardless, whether the SSMB project (kicked off in 2017) was publicly or privately motivated, it reveals how sharp and focus China is in its core competencies development.
Is that the beauty of Planned economy at play; where limited resources are channeled to where it is most required 10 years down the road.
This also highlights the vision this Superpower possesses — taking care of its short-term needs and keeping an eye on its long-term goals.
(I believed) the next time there is further SSMB updates, it would be about the team — successfully managing the particle accelerator to achieve collective synchronous radiation, required in chip manufacturing.
Do you think the Chinese will be able to achieve its goal in 1 to 2 years’ time?
Do you think ASML will remain the only monopoly lithographic machine maker in the future?
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I've already got 5% in.nvda at 160 basis and I got 6% aapl , msft, asml, lrcx.
ASML seems better value for money than most European and American companies in the chip sector with a PE just below 30; however 17.5 to 22.5 is usually the lower end of the multiple range for ASML. So, in time when they produce and sell more the multiple can drop by itself in the range. In Netherlands ASMI and BESI feel on the higher end of the multiple spectrum, but likely because making a 200B into 1T is harder than a few B into 10s of B.
So far, in 8 years I've always outperformed vti by just going with large cap like asml lrcx aapl msft unh cost googl nvda tsla etc.
Stocks like those are usually higher in a few years if you don't buy them at unreasonable pest.
Asml unh lrcx are also good. And costco
ASML and AAPL
Not sure what’s happening to DG but i’m waiting for a nice consolidation there.
I'm glad 60% of my portfolio is in asml lrcx aapl msft googl nvda amzn tsla meta.....