Semiconductors

ASML’s CFO predicts growth despite rocky chip market

If industries received 2022 superlatives, the chip market would be a prime contender for “Most Hot and Cold.”
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ASML

· 5 min read

If industries received 2022 superlatives, the chip market would be a prime contender for “Most Hot and Cold.”

In the past 12 months, we’ve seen historical shifts in the semiconductor market, including both record high demand and a sudden pullback in demand. The industry has also seen hundreds of billions in government investment in the US, the EU, Japan, and China.

Amid all the supply, demand, and policy changes, ASML—a leading semiconductor equipment manufacturer with a market cap of over $230 billion—could be positioned for growth. The Dutch semiconductor giant is currently the only manufacturer of EUV lithography machines, the machines that companies like TSMC, Samsung, and Intel use to print the advanced chips that help power devices like your iPhone, your friend’s new car, and even the data centers fueling your network’s social media profiles.

Emerging Tech Brew spoke with Roger Dassen, CFO of ASML, about the past 12 months in the chip industry and where we go from here.

This interview has been edited for length and clarity.

Let’s talk about what happened last year in chips from your perspective. What has your experience been like with the highs and lows?

First of all, I think you need to draw a distinction between structural trends and the cycle. For the structural trend, I think it’s pretty clear that the demand for semiconductors is continuing to increase at a very, very high pace…[In] our capital markets a couple of weeks ago, and there we reassured that we believe that the chip market is going to more than double in the course of this decade.

Second…in all major economies, you really see something like a CHIPS Act, and the background is pretty simple: The key policy makers in those countries have determined that it’s important to be self-sufficient when it comes to the manufacturing of semiconductors. I think that started with the whole supply-chain situation in the Covid days, and I think it’s further exacerbated given the geopolitical environment that we operate in…Fabs are being built throughout the globe [on] different continents, and all of those fabs need equipment, which obviously we’re very happy to provide...Given some weakness in the general economy, we all have fears of inflation.

Here, particularly in Europe, inflation expectations are very high, and some people are whispering, “Might we be in a recession?” or “Might we be heading for some sort of recession?” And that, obviously, leads to some sort of market cooldown...It’s a crazy year where, on the one hand, you have very strong secular trends. And then you have the cycle effects, as a result of which demand is cooling down a bit. But all in all, the way we look at everything, the lead time for our products is very, very long. So the long-term secular trends are probably more relevant to us than the short-term cyclicality.

It seems like that’s also the trend for how ASML is thinking about its expansion to more cities. How do those plans align with the longer-term trends you mentioned?

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Absolutely; you’ve got that right. On the one hand, we’ve determined that we want to sort of even more than double capacity from what we produced, let’s say, this year or last, versus where we want to be by around 2025 or 2026. So by 2025 or 2026, we want to be able to produce around 90 EUV tools [the machines chipmakers use to print advanced microchips], which is sort of doubling from where we were last year, and we want to get to around 600 DUV tools capacity, which is more than double what we did last year. So from that vantage point, we’re sort of doubling capacity, and then, medium term, we’re gearing up toward 20 what we call “High-NA tools,” [scanners that are seen as] the successor, or next generation, of EUV tools. Those are the capacity targets that we have articulated. And of course, that has ramifications in all the geographies that we operate in. So particularly to your question on cities, we have a very significant manufacturing and R&D capability in Wilton, Connecticut, so we’re expanding quite significantly in Wilton—adding 1,000 more jobs and investing an extra $200 million…Also, in a number of other cities, like Phoenix, we  had a service facility in Arizona—in Chandler—but we’re now also building one in Phoenix to service TSMC and their plant there.

What’s your prediction for the supply chain in 2023? And any broader predictions for the year?

The supply chain [will be] more relaxed, is my expectation, than it was [in 2022]. At the beginning of the year, it was pretty hectic; it’s now become far more focused. Of course, there are specific things that we need to be cognizant of. Specifically to the situation here in Europe, there are energy challenges, [like] making sure that everyone has sufficient access to gas in particular, because of the situation in Ukraine…But generally, I do have a feeling that most of our supply chain is well-covered to navigate that situation.

In terms of predictions for 2023, it’s hard to predict what the general economy is going to do, but we think the secular trends for us, for the industry, will remain intact…To what extent there might be cooling off, generally, in the economy [will] affect the chip market and have an impact on us. But the structural trends are still so strong that we are still predicting a healthy growth for ASML.

For us, what is going to be a key moment [in 2023] will be shipping the first modules of High-NA to our customers…That’s another leap in technology that’s going to enable our customers to print more detailed and even smaller patterns on the microchip. We’ve spent an awful lot of time—many, many, many years—and…billions of dollars [on development]. So seeing that come to fruition, seeing it come together, and being able to ship the first modules to customers is going to be a moment of great pride for the company and for many of the people that have been working on that.

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