ASML and the Unrivalled Future of Semiconductor Lithography: Can Global Rivals Compete?

When contemplating the geopolitical chessboard of semiconductor manufacturing, the mind often drifts to the sprawling tech hubs of Taiwan, South Korea, Japan, and the United States. From the industrial corridors of Hsinchu to the megafabs of Gyeonggi Province and Arizona, these regions are synonymous with technological leadership. Yet, it is in Veldhoven, a quiet Dutch town near the Belgian border, where the most consequential player in this global game resides: ASML Holding N.V..

Home to just over 46,000 residents, Veldhoven has transformed from pastoral anonymity to the nerve centre of the semiconductor lithography industry. Towering above its windmills, ASML’s €4 billion headquarters stands as a modern-day Brabantian Burj Khalifa, overseeing what is effectively a monopoly on extreme ultraviolet lithography (EUV)—the technology that enables the world’s most advanced semiconductors. From Apple’s iPhones to Nvidia’s AI accelerators, ASML’s machines are essential components in global supply chains underpinning the AI-powered digital economy.

But as China, Japan, and other nations ramp up domestic semiconductor efforts, an inevitable question arises: Can anyone crack ASML’s grip on the lithography market?

ASML: Master of a Critical Chokepoint in Semiconductor Manufacturing

ASML’s dominance lies in its EUV lithography systems, highly sophisticated machines that etch complex circuitry onto silicon wafers using extreme ultraviolet light. EUV machines are so complex that each one costs upwards of €200 million and takes months to assemble, drawing on a supply chain of 5,000 suppliers (ASML Technology).

These machines are indispensable for producing chips with features smaller than 7 nanometres—critical for the AI revolution, autonomous vehicles, and next-generation consumer electronics. With 44,000 employees globally, ASML commands a market share that no competitor has managed to erode.

A Booming Market—And a Strategic Position No One Can Ignore

The semiconductor market itself is surging. In 2023, global sales jumped 19% to $627 billion, according to the Semiconductor Industry Association. The World Semiconductor Trade Statistics forecasts nearly $700 billion in sales for 2024, while Deloitte predicts revenues could hit $1 trillion by 2030.

ASML is positioned squarely at the centre of this explosive growth. In 2023, it reported record sales of €28 billion ($30.5 billion), a gross margin of 51%, and €7.6 billion ($8.3 billion) in net income (ASML Annual Report).

Governments and private sector players alike are investing hundreds of billions to onshore chip production and secure technological sovereignty:

• The United States announced $280 billion through the CHIPS and Science Act to boost domestic semiconductor manufacturing.
• South Korea is investing $470 billion over 20 years to build a semiconductor cluster with Samsung and SK Hynix (Reuters).
• Japan has pledged $66 billion for semiconductor and AI development, with ¥27 trillion yen earmarked for next-gen chip production (Nikkei Asia).

These monumental investments signal a secular demand for ASML’s technologies.

Cracks Beneath the Surface: Market Volatility and Geopolitical Strains

Despite ASML’s unparalleled market position, it is not immune to geopolitical crosscurrents and cyclical demand pressures.

In October 2023, ASML’s Q3 earnings triggered alarm bells when booked orders plunged to €2.6 billion ($2.8 billion), well below the €5.4 billion ($5.8 billion) forecast by analysts (Bloomberg). The result was a 16% share price crash, wiping out €48.7 billion ($53 billion) in market capitalisation—the company’s steepest one-day loss in two decades.

Even after Q4 earnings beat expectations, with €7 billion ($7.6 billion) in new orders, ASML’s stock has continued to drift downward, losing 7% over the past month (CNBC). Nevertheless, TD Cowen analysts reaffirmed their Buy rating, citing the 1.5 price/earnings-to-growth ratio, near its five-year low.

China: Racing Against Time for Lithography Autonomy

One of ASML’s greatest geopolitical challenges remains China. Although ASML has never sold its EUV machines to China due to Dutch export restrictions—recently tightened again in September 2023—the company has significantly expanded sales of less advanced deep ultraviolet (DUV) equipment (Reuters).

In 2023, ASML’s China revenue surged to €9 billion ($9.8 billion), up from €6.4 billion ($6.9 billion) the previous year (Bloomberg).

Meanwhile, China is accelerating its homegrown lithography initiatives, spearheaded by Shanghai Micro Electronics Equipment (SMEE). Yet, SMEE’s machines remain years behind ASML’s EUV systems, with significantly lower overlay accuracy, limiting their capacity to produce chips under 14nm (South China Morning Post).

The Competitive Landscape: Nikon and Canon’s Uphill Battle

Outside China, Japan’s Nikon and Canon are ASML’s primary competitors in photolithography. Both have historical pedigree, but neither has made meaningful progress in EUV technology. Nikon, once a market leader, has seen its share shrink dramatically, and Canon has largely focused on legacy nodes and non-semiconductor lithography (Nikkei Asia).

ASML: Still the Most Critical Player in the Semiconductor Industry

Despite cyclical headwinds and geopolitical pressures, ASML remains the indispensable enabler of the world’s AI and digital future. Its technological moat in EUV lithography is fortified by decades of R&D investment, IP protection, and engineering expertise that are difficult, if not impossible, to replicate in the near term.

For nations and companies betting on AI, quantum computing, and next-generation technologies, ASML is the bottleneck—and the gateway.

Conclusion: Who Will Challenge ASML?

ASML’s dominance is not accidental; it is the result of sustained innovation and strategic alliances. While China and Japan race to develop alternatives, ASML continues to advance toward high-NA EUV systems, which promise even finer resolution and faster processing for 2nm nodes and below (ASML Technology Roadmap).

For now, no competitor is close. The question for investors and policymakers is not whether ASML will remain dominant, but how to manage global dependence on a single company at the heart of a strategic industry.