Europe’s most valuable technology company, ASML Holdings, is responsible for the manufacturing of semiconductor machinery (the indispensable machines that make the chips). The chip-machinery maker has been on our strategic tracking radar since our OODA Stratigame  –  Scenario Planning For Computer Chip Supply Chain Disruption – surfaced the company as a shocking stovepipe in the future of the IT supply chain in all future scenarios, ranking with the world’s dependence on Taiwanese chip maker TSMC as a troubling risk variable as two potential points of failure (with no redundancies in place for the West to replicate the production capacity of  ASMLor TSMC) the implications of which are high impact.   

Geopolitics and the machinations of the marketplace continue to grind away, however, with incentives, leverage, and outcomes gris for the mill.  Find some of the latest chess moves RE: ASML here.  

Netherlands Seeks to Prevent ASML Expansion Abroad, Report Says

“It’s unclear whether ASML has any concrete plans to expand outside of its headquarters in the Netherlands.”

“The Dutch government is exploring ways to keep ASML Holding NV — Europe’s most valuable technology company — from expanding outside the Netherlands after the chip-machinery maker raised concerns about the country’s business climate.  The government has formed a task force dubbed “Beethoven” to address ASML’s concerns about its supply of skilled workers, environmental regulations, and electricity supplies, people familiar with the situation said, asking not to be identified because the information isn’t public.

The efforts stem from talks between ASML and Prime Minister Mark Rutte’s cabinet in which the Veldhoven-based company said it was considering an expansion outside the Netherlands, possibly in France, De Telegraaf reported Wednesday.  It’s unclear whether ASML has any concrete plans to expand outside of its headquarters in the Netherlands. But its concerns echo those of other Dutch companies that have left the country in recent years and ratchet up pressure on Geert Wilders and his Freedom Party after his surprise election victory last year. Wilders, who has yet to form a government, campaigned on an anti-immigration platform.”

Canon’s Advanced Chip Machines to Cost a Fraction of ASML’s Best

“ASML is banned from exporting EUV systems to Chinese customers…”

Canon Inc. plans to price its new chipmaking gear at a fraction of the cost of ASML Holding NV’s best lithography machines, seeking to make inroads in the cutting-edge equipment now playing a central role in the US-China tech rivalry. The Tokyo-based company’s new nanoimprint technology would open up a way for smaller semiconductor makers to produce advanced chips, now almost wholly the domain of the sector’s biggest firms, Chief Executive Officer Fujio Mitarai said. “The price will be one digit less than ASML’s EUVs,” said the 88-year-old, now on his third stint as Canon’s president after last stepping back from day-to-day operations in 2016.

He added that a final pricing decision hasn’t been made. Veldhoven, Netherlands-based ASML is the only supplier of extreme ultraviolet lithography tools, the world’s most advanced chipmaking machines costing hundreds of millions of dollars each. The product of decades of research and investment, EUV rigs are essential for mass-producing the fastest and most energy-efficient chips, which cram millions of transistors into every square millimeter of silicon. Only a handful of cash-rich companies can afford to invest in the tools, which are now under scrutiny for their linchpin status in the tech supply chain.

ASML is banned from exporting EUV systems to Chinese customers, following US pressure on its allies to restrict technology flows to Beijing. That’s fueled hope for Canon’s new tools, which came to market last month. Tokyo’s chipmaking export curbs, which were expanded in July, do not explicitly name nanoimprint lithography.

ASML and Canon are competitors in the semiconductor manufacturing industry

Introducing the groundbreaking FPA-1200NZ2C system, which boasts the ability to manufacture semiconductors as small as 5 nanometers, with the capacity to scale down to a minuscule 2 nanometers. This remarkable feat surpasses the capabilities of Apple’s A17 Pro chip, as featured in the iPhone 15 Pro and Pro Max.

Canon, the renowned Japanese corporation celebrated for its excellence in printers and cameras, unveiled an ingenious solution on Friday, October 13th [2023]. This innovation is expressly designed to revolutionize the production of cutting-edge semiconductor components.  As reported by CNBC, Canon’s newly introduced “nanoimprint lithography” system stands as a formidable response to ASML, a Dutch industry giant dominating the realm of extreme ultraviolet (EUV) lithography machinery. ASML’s machines are indispensable for crafting state-of-the-art chips, including those adorning the latest Apple iPhones.

The use of these machines has become a focal point in the ongoing technological feud between the United States and China. The U.S. has deployed export restrictions and a myriad of sanctions to hinder China’s access to vital chips and manufacturing equipment, thereby impeding the progress of the world’s second-largest economy in a field where it’s perceived as trailing.  ASML’s EUV technology has garnered significant attention from leading chip manufacturers due to its pivotal role in enabling semiconductor production at the ultra-precise 5-nanometer level and beyond. This nanometer metric refers to the size of chip features, with smaller values accommodating a greater number of features, thereby enhancing semiconductor performance. 

With Canon boldly asserting that its new system can facilitate the production of semiconductors equivalent to 2nm, it is poised to garner heightened scrutiny and attention on the global stage.

Chip Four Alliance Plus The Netherlands: De-Risking from China and Russia?

Executive Summary

1. The Biden Administration proposed the Chip Four Alliance to strengthen American and Allied access to vital chips and weaken the involvement of American adversaries, namely China and Russia, on trade and national security grounds.
2. The Alliance aims to provide a forum for governments and companies to discuss and coordinate policies on supply chain security, workforce development, research and development, and subsidy harmonization. A series of unresolved challenges remain within the Alliance itself regarding American market regulations.
3. Semiconductors are unique in that, unlike virtually any other commodity (such as oil), they can only be sourced from a small group of countries and their respective companies. In 2022 there were still more semiconductors produced globally than all other manufactured goods combined.
4. The risk of China and Russia gaining access to weapons-grade semiconductors through financial investments in the Chip 4 Alliance countries is a concern for national security agencies.
5. Before the official announcement of the Chip Four Alliance, Chinese and Russian companies had already made substantial investments in these countries and established linkages across the entire value chain, including in research and development.
6. The most active Chinese company has been the Semiconductor Manufacturing International Corporation (SMIC), a state-owned company that is officially domiciled in the Cayman Islands.  State-owned, Moscow-headquartered RUSNANO is the most active Russian semiconductor player in the Chip Four countries and the Netherlands.
7. Even in the event of a forced share sale, Chinese companies can utilize the domestic legal system in question to extend the process. Also, up until recently, companies such as SMIC enjoyed the same investor rights, such as access to intellectual property and research and development projects, as other major investors.
8. This same principle holds for Russian companies such as RUSNANO or Rostec in these same countries. Even if both China and Russia are somehow completely ejected from these countries, they still have been able to absorb technology and know-how that would be considered at least near state-of-the-art as recently as 2023.
9. This knowledge adds to established engineering know-how that exists across the Chinese and Russian semiconductor industries to produce legacy chips. As China currently spends more money importing chips than it does oil, there is a strong incentive to scale up production.
10. China and Russia have established the core structure of an alternative semiconductor industry that covers the entire value chain. Such an alternative industrial structure would likely prioritize mass production of both legacy chips and their most recently acquired chip designs and other technologies before their ejection from Chip Four and Dutch environments.

For the full report from the Frontier Assessment Unit, go to Chip Four Alliance Plus The Netherlands: De-Risking from China and Russia?

The ASML Case Study

Netherlands-based ASML Holding Remains the Central Player in the Global Chip Supply Chain:  A very specific insight from our OODA Network Stratigame – Scenario Planning for Global Computer Chip Supply Chain Disruption was the role the foreign production of Specialized Manufacturing Equipment (SME) built for the manufacturing of computer chips would play in the health of the computer chip supply chain for the U.S.  ASML Holding remains the vital tracking mechanism for indicators in the ongoing “Chip Wars” between China, the EU, the U.S., and Japan.  Following are our most recent OODA Loop News Briefs on ASML Holding, followed by a specific story on the market workaround ASML Holdings is considering with some of its hardware to continue to sell into the Chinese market.  We also provide further resources at the end of this post on the “Origins Story” of export controls which put ASML Holdings’ unique and vital EUV Chip Machines and Deep Ultraviolet Lithography (DUV) tool at the center of the global great power competition over semiconductor manufacturing, SME and component part supply chain availability.

Semiconductor Supply Chain Espionage: Data Stolen from ASML’s Technical Repository for EUV Chip Machines:  The weaponizing of the semiconductor supply chain (in the form of stolen data from an ASML SME technical repository for the abovementioned EUV lithography machines ) may impact the future of the global IT supply chain.

The ASML Holding’s Factory Fire and Specialized Manufacturing Equipment for Semiconductor Production:  The OODA Loop News Brief Team surfaced a story earlier today – Fire at vital tech factory could worsen global computer chip shortage – which we thought was important enough to provide further in-depth analysis.

A Vital Market Development in the Production Capacity of the Global Computer Chip Supply Chain:  Since the publication of the OODA Stratigame  – Scenario Planning for Global Computer Chip Supply Chain Disruption – Netherlands-based ASML Holding has always figured prominently in our tracking and has been central to many of the export control controversies in the ongoing “Chip Wars.”  Why?  ASML was the singular global supplier of extreme ultraviolet (EUV) lithography machines vital to the production of a particular type of high-performance semiconductor.  It has been clear for a few years that new competition and solutions to broaden this production capability globally were crucial to all future global computer chip supply chain scenarios.  Japan-based Canon has entered the field.  Details here.

Further OODA Loop News Briefs and Original Analysis on ASML can be found at OODA Loop | ASML

Additional OODA Loop Resources

Computer Chip Supply Chain Vulnerabilities: Chip shortages have already disrupted various industries. The geopolitical aspect of the chip supply chain necessitates comprehensive strategic planning and risk mitigation. See: Chip Stratigame

The Inevitable Acceleration of Reshoring and its Challenges: The momentum towards reshoring, nearshoring, and friendshoring signals a global shift towards regional self-reliance. Each region will emphasize local manufacturing, food production, energy generation, defense, and automation. Reshoring is a complex process, with numerous examples of failures stemming from underestimating intricacies. Comprehensive analyses encompassing various facets, from engineering to finance, are essential for successful reshoring endeavors. See: Opportunities for Advantage

Embracing Corporate Intelligence and Scenario Planning in an Uncertain Age: Apart from traditional competitive challenges, businesses also confront external threats, many of which are unpredictable. This environment amplifies the significance of Scenario Planning. It enables leaders to envision varied futures, thereby identifying potential risks and opportunities. All organizations, regardless of their size, should allocate time to refine their understanding of the current risk landscape and adapt their strategies. See: Scenario Planning

Economic Weakness in China: China’s economy faces dim prospects exacerbated by disasters, COVID-19, and geopolitical tensions. Amid limited financial transparency, some indicators suggest China’s economic growth is severely stunted, impacting global economic stability. See: China Threat Brief

Technology Convergence and Market Disruption: Rapid advancements in technology are changing market dynamics and user expectations. See: Disruptive and Exponential Technologies.

Track Technology Driven Disruption: Businesses should examine technological drivers and future customer demands. A multi-disciplinary knowledge of tech domains is essential for effective foresight. See: Disruptive and Exponential Technologies.