China’s entry to silicon lithography shakes up chip manufacturing
Everyone who follows the tech sector knows it, but the company that is arguably Europe’s single most important player in the wide computing and information technology sector remains virtually unknown to the public. It is not unknown in world capitals, though.
ASML, like Britain’s Arm, is not just a tech giant, but a melancholy sign of a future that never arrived. Spun out from Philips, Netherlands-based ASML manufactures the lithography machines that are used to produce silicon chips and has developed technology that, astonishingly, is both crucial for virtually the entire tech sector and that no-one else can produce.
ASML’s importance can be understood simply by watching its share price, and while the company’s equity is up over 120% in a year, I would like to direct your attention elsewhere. After all, it could just be a bubble – and bubble or not, the ongoing AI boom is good news for ASML. Water is wet, too.
More instinctive is the fact that its price has fluctuated as it has been a target of export controls on sales to China. In other words, Europe and the US recognise that this company’s product matters, and they don’t want China getting a lead in chip design and production.
ASML is, at present, the world’s sole supplier of extreme ultraviolet (EUV) lithography machines that enable the cramming of circuits into tiny nodes on the chips’ dies. While competitors like Nikon and Canon can produce the deep ultraviolet (DUV) machines used to make older-style, but by no means obsolete, chips with larger nodes, only ASML’s machines can make today’s most advanced, tiny chips.
Nikon, Canon and, now, a Chinese company. We just don’t quite know who.
Some alarms, no surprises
That a Chinese company would enter the market is the opposite of a surprise. It is big news, though. Europeans have no magical abilities in semiconductors, and ASML arrived where it did through hard work and investment in research and development. This is good news, of course, as it means its success is replicable. ASML shows us that there is no reason another European company cannot come to define a segment of the technology market. It also means, of course, that companies in other countries have an interest in developing, and besting, ASML’s technology.
In fact, the Chinese company – initially unnamed, but now known to be the state-owned Shanghai Aishengna Electronic Technology Group – reportedly producing chip production tools is using DUV technology. However, it is immersion DUV, which represents the cutting edge of that technology and, more to the point, clearly demonstrates China’s plans to achieve silicon sovereignty.
It is surprisingly hard to explain why lithography matters. Yes, people understand that chips need to be made, and printing is understood widely enough for people to grasp how it is done. What is less clear is just how complicated these machines are. Truthfully, machines that build machines are always a bit obscure to us, but ASML’s devices are staggeringly complex: they generate EUV light by blasting droplets of molten tin with a laser tens of thousands of times per second, then steer that light with ultra-precise mirrors, made by the storied Zeiss.
For now, ASML’s EUV monopoly remains unchallenged. But China’s move to immersion DUV is a bold one, and one does not need to know a single thing about semiconductors to reason that a single Dutch company acting as a chokepoint on the global semiconductor market is, sooner or later, going to be taken on by challengers.
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