In fact, you don't have to go, it's useless to go.
Author|Tian Siqi
Eindhoven in the Netherlands is a small city with a population of just over 200,000, and its popularity mainly comes from the Eredivisie football team that has the same name as the city. But it is also a perennial drama where technology and politics are intertwined.
On April 22, ASML, the world's largest manufacturer of lithography machines, announced that it had signed a letter of intent in the Eindhoven region, which is adjacent to its home base of Wildhoven, to explore an expansion in a relatively underdeveloped area near the northern airport of Eindhoven, which is expected to accommodate 20,000 new employees.
This means that the rumors of "ASML leaving the Netherlands", which lasted for more than a month, have officially come to an end.
Thanks to ASML's dominance in the lithography machine market, with a market capitalization of $350 billion, it is the pride of the Dutch business community and one of the largest technology companies in Europe. However, with the aging business infrastructure in the Netherlands and the government's anti-immigration policies heating up, ASML's future in the Netherlands is uncertain with its large number of expatriate talents.
Some speculate that ASML's next stop will be France, the hometown of Christophe Fouquet, the new CEO who took office on April 24, and others believe that it would be a good idea to go to Germany anyway, so ASML will rely on the technology of ZEISS in Germany.
On the other hand, the United States is also pressing in, constantly asking ASML to weaken its ties with its biggest customer, China. First, the export of the highest-end extreme ultraviolet (EUV) lithography machines was banned, and then some models of the next-level deep ultraviolet (DUV) lithography machines were reached. In April 2024, Reuters reported that the United States also wants ASML to stop providing maintenance services for some tools and equipment in China. This also made ASML's exodus turmoil attract great attention in China, and some netizens even shouted: "Come to China!"
But Dutch tech writer René Raaijmakers, author of "Lithography Giants: The Rise of ASML," told Jiazi Lightyear: "ASML is a European company, but it can also be considered an American company." The Dutch government pretends to have control over Asmarc, but the Americans always have the last say. ”
"[ASML] moving to China? The Americans would never allow that to happen. Regimaker said.
1. "Operation Beethoven"
ASML is an indispensable supplier of equipment for the manufacture of advanced chips. In terms of sales, the company has a market share of more than 80% of its lithography machines, and ASML has a 100% market share of the most advanced extreme ultraviolet (EUV) lithography machines.
The three major fab giants, TSMC, Samsung and Intel, rely on ASML's EUV lithography machines to produce flagship products with sub-7nm processes. The system costs about $180 million and requires multiple aircraft to transport. The first High NA (high numerical aperture) EUV lithography machine delivered to Intel in December 2023 is priced at $380 million.
Lithography equipment market share, image source: Khaveen Investments
The Netherlands, famous for its windmills and tulips, has always been an EU country that is happy to embrace foreign talent with open arms. Thanks to this, ASML also attracts talent from all over the world. It employs 23,000 people in the Netherlands, more than 40% of whom are foreign employees without Dutch citizenship. However, under the expectation of the right-wing policy of abolishing tax subsidies for foreigners and reducing the number of foreign students, ASML's talent recruitment may be in trouble, which has also become the direct cause of ASML's exodus.
Peter Wennink, the recently stepped down CEO who has led ASML for ten years, announced via The Guardian in early March 2024 that we can only grow the company if we have enough qualified people. We'd rather do that here [in the Netherlands], but if we can't find these people here, we'll lead them somewhere else, to Eastern Europe, to Asia, or to the United States." ”
Based on these remarks, speculation from the outside world is roaring. The United States and China appear in the list of potentials, but other EU countries are much more likely.
However, due to the lack of suppliers, small customer base and high costs in these EU countries, relocation is impractical. "ASML has never had a strategic need to set up an office in another country, nor has it ever threatened to do so," Rejmaker said. ”
But Rejmaker believes ASML does seek to do business outside the Netherlands, which is largely cost-driven. It may do more processing at the supplier's premises or move the assembly to Asia. Some of ASML's suppliers such as Neways, KMWE and VDL ETG already operate in Malaysia or Vietnam, so he expects ASML to eventually produce cheaper machines in Asia as well.
Despite this, the Dutch government still has an "anxious look". The $2.7 billion Beethoven campaign was launched by a number of government departments to improve infrastructure in the Eindhoven region in an attempt to retain ASML.
It seems that this special operation created by the government to show that it values the tech industry has now done its job.
This is not the first time that the Netherlands has lost a multinational giant.
In 2020, consumer goods giant Unilever changed its long-standing UK-Netherlands dual headquarters structure to a unified headquarters in London, England, and in 2021, Shell also decided to move its headquarters from the Netherlands to London, and removed the words "Royal Netherlands" from the company's name.
It is reported that the ostensible reason for Shell's trip to the UK was dissatisfaction with the Dutch environmental policy and to simplify the corporate structure, but the Financial Times believes that Shell is also optimistic about the prospects of the British economy and hopes to give shareholders more generous returns.
The rumors of Asmir's departure from the Netherlands may also have another layer of consideration.
2. Between China and the United States
According to widely circulated theories, ASML's potential relocation was to escape export restrictions imposed by the United States.
Since 2019, ASML's highest-end EUV lithography machines have been difficult to sell in China. In March 2023, under long-term pressure from the United States, the Netherlands officially joined the ranks of the United States in restricting China in the semiconductor industry. On September 1 of that year, the Dutch "New Regulations on Export Control of Semiconductor Equipment" came into effect.
With the exception of existing orders, ASML will no longer be licensed to export high-end products to Chinese customers from January 1, 2024, including EUV lithography machines and DUV models of NXT:2000i and above.
In response to these threats, many Chinese manufacturers stockpiled in the third and fourth quarters of 2023, but these orders will also be gradually depleted. The export restrictions are expected to reduce ASML's total sales to China by 10 to 15 percent in 2024.
In the face of this situation, the advantages of moving to other EU countries are gradually emerging: after going to France or Germany, the EU will have a greater responsibility and say in dealing with the ASML export restrictions imposed by the United States.
In January, the outgoing Winnick called for the European Union to unify export control standards instead of maintaining 27 standards by the number of member states. This makes it more likely to protect European companies like ASML from the United States.
CEO Winnick (first from right), who has led ASML for ten years, and new CEO Fouquet (second from right) Source: ASML
European tech media Bits&Chips also believes that as ASML's second French CEO, Fouquet's nationality will also bring additional benefits. While he may not be smooth enough in dealing with the Dutch government, "his French roots may be helpful in the international arena where the geopolitical storm continues to rage".
"France symbolizes a proud Europe, so when it comes to curbing U.S. interference, such as export restrictions, the new ASML CEO will certainly find the French president on his side," the outlet wrote.
But Dr. Frans-Paul van der Putten, a Dutch geopolitical expert, told Jiazi Lightyear that ASML's desire to maintain close ties with its suppliers meant it preferred to keep its main business in the Netherlands. ZEISS Germany is one of the main suppliers, but the Netherlands also has a large supplier network. The closer you are to ZEISS or any other foreign supplier, the farther away you will naturally be from your Dutch supplier.
"The two EU countries that have the greatest international influence are Germany and France. Theoretically, in order to achieve joint ownership at EU level, a European company would need to have Franco-German 'dual citizenship' and, ideally, a principal presence in all parts of the EU. But in practice, this is hardly feasible. Given the economic rivalry between France and Germany, simply being a German or French company does not necessarily provide more collective political protection at the EU level than remaining in other EU countries. Van der Boden noted.
Zhang Binlei, research director of Xinmou Research, also told Jiazi Lightyear that ASML will have cost considerations when moving its headquarters to other countries or building new factories, but this is not the most important thing. It's more about putting pressure on the Dutch government to provide more asylum. However, the Dutch government is relatively weak in Europe and lacks independence. The U.S. may continue to increase export restrictions, and may even require that all immersion lithography machines not be bought from China in the future.
"ASML hopes to put some pressure on the Dutch government by [proposing to move its headquarters] to at least ensure that all DUV equipment can continue to be open to the Chinese market," Zhang said, "but if it does move to Germany and France, it may not have such an effect." Although Germany and France have a stronger voice, they are also in the same boat as the United States in many strategic considerations, so [the exodus] is just a manifestation of pressure on the government. ”
In fact, from a small company affiliated with Philips to a leading lithography giant, the United States has always played the most important role in ASML's 40-year rise.
3. Not just Dutchman's machine?
In 1984, Philips, another electronics giant in Eindhoven, the Netherlands, and ASM International, a semiconductor equipment company that had just transformed from an agent to a manufacturer, jointly invested in ASML.
In a simple wood-paneled house outside the Philips Building, 31 employees begin their entrepreneurial journey. They are facing a market dominated by giants such as Nikon and Canon, and an uncertain future.
ASML's earliest prefabricated office, image source: ASML
In the early 2000s, ASML was faced with a crucial choice: whether to continue along the path of dry lithography or switch to immersion lithography invented by Benjian Lin, a former deputy manager of research and development at TSMC. After careful consideration, ASML opted for the more innovative latter, and its share of the lithography machine market quickly climbed, eventually overtaking Nikon as the industry leader.
But it doesn't have to be a technical route to ensure success.
Zhang Binlei emphasized: "The reason why ASML stands out in the lithography machine track is because it chose the immersion lithography machine, but this also depends on Intel, TSMC, Samsung and other wafer fabs to choose their equipment. In fact, under the instruction of the United States to suppress Nikon and other Japanese manufacturers, the major wafer factories actively embraced immersion lithography machines, which helped ASML form a monopoly. ”
In the history of EUV lithography, 1997 was crucial. That year, Intel joined forces with the U.S. government to create EUV LLC, an organization to promote research into extreme ultraviolet lithography. At the same time, Intel believes that ASML and Nikon have valuable experience in the field of lithography and should be part of the organization. But the White House is hesitant about the involvement of foreign companies.
Faced with this opportunity, ASML made a commitment to the United States: it is willing to invest in the construction of factories and R&D centers in the United States, and guarantees that 55% of the raw materials will be purchased from the United States, in exchange for the opportunity to participate in EUV technology research. This strategy has succeeded in making ASML one of the only two non-US companies in EUV LLC, the other being Infineon AG in Germany.
Nikon, meanwhile, was ruled out because of its "possibility of bringing technology to Japan."
In the six years that followed, researchers at EUV LLC published numerous papers that advanced the development of EUV technology. Since 2003, members have been working independently on research and development. ASML continued to lead the development of EUV technology in Europe until 2010, when ASML successfully delivered its first EUV lithography machine.
"The generations of EUV equipment that have been updated in recent years cannot be developed independently by ASML," Zhang said. "ASML needs to continue to polish the production line with the fab, and send the prototype to the fab for optimization after it comes out, and these customers are also major shareholders of ASML. ”
In 2009, San Diego-based Cymer developed the high-power light source required for EUV technology and became ASML's supplier. Four years later, Cymer was acquired by ASML for $2.5 billion, a move that further strengthened ASML's leading position in the field of core components for lithography machines.
To this day, ASML still maintains a deep cooperation with the United States. An employee who has worked at ASML's U.S. branch for more than four years told Jiazi Lightyear that his Silicon Valley branch has about 1,000 people, mainly from Chinese mainland, Taiwan, India and the Netherlands. This division focuses more on the business of semiconductor quality inspection, and usually interacts closely with the Netherlands, for example, some R&D projects need the Netherlands to provide data or existing solutions, and the Netherlands also needs the application of products from the United States.
"As an EU member state, the Netherlands is more focused on doing business and selling tech products. ASML is also a very important company for the Dutch. But for the United States, it also has some technology (like Cymer) in ASML's machine, and it could even be said that the United States has 30% of the machine, so this machine is not just Dutch. I feel that ASML also has to listen to the US, and it is a bit awkward to be caught in the middle," said the ASML employee.
"ASML simply wouldn't be able to function without those key machine components and American technology made in the United States, and at the end of the day, the Americans have all the control, not to mention that ASML's top 10 shareholders are all related to the American side," Rejmaker added.
On ASML's official website, it only names two core shareholders: Capital Research Management, a subsidiary of Capital Group, one of the world's largest funds, and BlackRock Group, also from the United States.
ASML's major shareholder, image source: ASML
4. Semiconductor transition period
The development of the semiconductor industry is not only related to scientific and technological progress, but also to the pulse of the global economy. With the acceleration of digital transformation, chips have become the cornerstone of modern society, from smartphones to automobiles, from data centers to industrial automation, all rely on advances in semiconductor technology.
With the rapid growth of the global chip industry, ASML's share price has risen by nearly 350% in the past five years, and its market value has increased to about $350 billion. Even though the chip industry has experienced two cyclical downturns and the pandemic, its revenue has continued to grow at a compound annual growth rate of 20%.
But in the shadow of export controls, does ASML still have a chance to transform into a trillion-dollar company like Nvidia?
ASML's revenue over the past decade, image source: statistica
ASML's share price fell 6.4% on Wednesday after it announced its first-quarter results, April 18. Net bookings, including orders placed by customers but not yet delivered, decreased from €9.2 billion in the fourth quarter to €3.6 billion in the first quarter. This was below analysts' forecasts of 5 billion euros. The company sold 66 new and 4 used lithography systems in the first quarter, down from 113 and 11 in the previous quarter.
But ASML described 2024 as a "transitional" period, during which the company will continue to invest in technology and increase capacity.
Zhang Binlei said that the current expansion rate of the global semiconductor equipment market is not as fast as in the previous two years, and the amount of ASML equipment purchased in the European and American markets, Japan and South Korea markets is declining. The excellent financial performance in the second two quarters of last year was inseparable from the centralized delivery of the Chinese market. When domestic orders return to normal speed, and the European and American markets have not yet recovered, this quarter's financial report will show a downward trend, and the current trend will continue until the second and third quarters of this year.
ASML is reportedly considering a significant increase in production capacity over the next few years through overseas expansion. ASML may expand its manufacturing capacity to 600 DUV and 90 EUV lithography machines per year by 2025-2026, and 20 High NA (high numerical aperture) EUV lithography systems per year by 2027-2028.
Dr. van der Boden stresses that ASML is a highly international company, but it is not a "half-American, half-European" company: "It was founded by two Dutch companies and is firmly rooted in the Netherlands. ”
However, in the complex political waters, the semiconductor industry, represented by ASML and rooted in international cooperation, may face even greater storms.
The 50-year-old ASML CEO Fuquet told the media last year: "Sooner or later, people will realize that the only way to succeed in semiconductors is through cooperation." ”
*Resources:
《Dutch ministers trying to stop tech firm ASML moving abroad over foreign labour fears》，《卫报》
《ASML wants to move out of the Netherlands to France. But why is China so eager?》，《Firstpost》
《Top tech boss tells EU: Tool up for global trade fight》，《Politico》
《Go or stay? ASML wades from geopolitics into domestic politics》，《digitimes》
(Cover image: High NA EUV lithography system, source: ASML)