ASML Holding N.V. (ASML)

[cyclone]

Chip machine maker ASML will grow into a $500 billion business next year, tech investors predict
* ASML provides chip makers with essential hardware, software and services to mass produce patterns on silicon using a method called lithography.
* It is the only company in the world offering extreme ultraviolet lithography machines that the likes of TSMC need to make the smallest and most sophisticated chips.
* Each EUV machine has over 100,000 parts and costs $150 million.
* They’re shipped in 40 freight containers or four jumbo jets.

Sam Shead
PUBLISHED TUE, OCT 12 20213:02 AM EDT

LONDON – ASML, a Dutch firm that makes high-tech machines used in semiconductor manufacturing, will see its market value climb from $302 billion to more than $500 billion next year, according to two tech investors.

Nathan Benaich, founder and general partner of boutique VC firm Air Street Capital, and Ian Hogarth, who sold his AI start-up Songkick to Warner Music Group, wrote in their annual “State of AI” report Tuesday that Europe’s largest tech company is the little-known “linchpin” in the global semiconductor industry.

Founded in 1984, ASML provides chip makers with essential hardware, software and services to mass produce patterns on silicon using a method called lithography.

It is the only company in the world offering extreme ultraviolet lithography machines that the likes of TSMC need to make the smallest and most sophisticated chips.

Each EUV machine has over 100,000 parts and costs $150 million. They’re shipped in 40 freight containers or four jumbo jets.

Closing the gap

Several chip companies have seen their stock prices soar after the coronavirus pandemic led to a global chip shortage, but ASML’s share price still has some room to grow, Hogarth told CNBC.

He said ASML’s market cap isn’t on the same scale as the likes of Nvidia or TSMC because it’s in Europe, where the market values high-tech firms slightly lower, and because its technology is more behind the scenes.

Nvidia is currently valued at $521 billion, while TSMC’s valued at $533 billion.

More details in https://www.cnbc.com/2021/10/12/chip-mac...iness.html

[Wildreamz]

ASML is one of the well-known "pseudo-monopoly" companies in the Semi space:

Source: https://lillianli.substack.com/p/china-s...e-push-de2

Such pseudo-monopolies exist in many other industries, but seems quite commonplace in various parts of the Semi supply-chain (design software, fabrication, manufacturing equipment, testing equipment etc.).

That said, right now ASML is trading close to all-time high multiple in terms of trailing PS and PE ratio, while their products (EUV equipment) seems to be at the height of the demand cycle (not an industry expert).

One can do worse, but is now it really the best time to invest? IMO, still a great pick (together with TSMC), if you want long-term exposure to an important, secular growth industry.

(not vested; ex-investor in TSMC)

[weijian]

ASML, is as blue as TSMC, if one wants a "high quality" exposure to the semiconductor sector. I call it "buying the bankers".

While LAM, AMAT and TEL are fighting each other to supply their own equipment to the Fabs, no one come close to ASML wrt to their lithography tool (which is generally the bottleneck in terms of technology capability to reduce aspect size and manufacturing throughput). However nowadays, disruption comes not from your own competitors outdoing you in your field, but from outsiders inventing something new to replace your usual stickyness, and render your durable competitive advantage over your classical competitors useless.

Applied Materials to challenge ASML’s grip with new machines

The move threatens to disrupt a lithography market dominated by ASML’s machines. Though Applied Materials isn’t challenging that company directly, it’s attempting to rethink the way the industry manufactures chips — the tiny electronic components that are built by depositing materials on disks of silicon.

https://www.businesstimes.com.sg/compani...w-machines

[weijian]

The rest of the likes like AMAT and LAM are fighting over themselves to fit into their customers' technology roadmap. But ASML got their customers to fit into their own (and some more, to fund it). On hindsight, Intel paid to get themselves killed by market disruption.

ASML: Architecting Earth's Most Complex Machines

In 2012, ASML secured significant investments from Intel, Samsung, and TSMC, who collectively took a 23% stake in the company and provided €1.4 billion in R&D funding.

This collaboration, known as The Musketeer Project, was not just about financial support; it was a strategic alliance that ensured ASML had the resources and technical expertise needed to overcome the enormous final challenges associated with developing EUV. This initiative was reportedly "the last big push" in bringing the anticipated technology to market, which finally happened in 2019

To ensure stability in this complex supply chain, ASML has established a few key criteria for its suppliers. No more than 40% of each suppliers' revenue can stem from ASML, to avoid them going bankrupt as the inevitable semiconductor downcycle comes.

The company spends about 15-16% of its annual revenues on R&D. An important point to consider is that this figure overlooks the R&D efforts of their suppliers, who are actually the ones carrying the heaviest load.

https://quartr.com/insights/company-rese...x-machines

[specuvestor]

-20% as bookings collapsed

Last month, the Netherlands published new export control rules that made ASML apply for export licenses in The Hague instead of US for some of its older machines. That came on the heels of a Bloomberg report that the Dutch government would limit some of ASML’s ability to repair and maintain its semiconductor equipment in China. 
China remained ASML’s biggest market, accounting for 47% of sales in the quarter. Sales to the Asian nation jumped by nearly 20% from previous quarter to €2.79 billion.

But the demand from China may slow in the upcoming period and Washington’s ongoing chip war against Beijing continues to be a long-term overhang on ASML shares. The company could lose nearly a quarter of its sales in China next year, and 45% of its overall revenue generated in the country is at risk from further restrictions, according to UBS analyst Francois-Xavier Bouvignies.
-Bloomberg

[weijian]

-20% as bookings collapsed

Last month, the Netherlands published new export control rules that made ASML apply for export licenses in The Hague instead of US for some of its older machines. That came on the heels of a Bloomberg report that the Dutch government would limit some of ASML’s ability to repair and maintain its semiconductor equipment in China. 
China remained ASML’s biggest market, accounting for 47% of sales in the quarter. Sales to the Asian nation jumped by nearly 20% from previous quarter to €2.79 billion.

But the demand from China may slow in the upcoming period and Washington’s ongoing chip war against Beijing continues to be a long-term overhang on ASML shares. The company could lose nearly a quarter of its sales in China next year, and 45% of its overall revenue generated in the country is at risk from further restrictions, according to UBS analyst Francois-Xavier Bouvignies.
-Bloomberg

The quarterly earnings numbers were published on the company’s website a day earlier than expected in error.

Someone's going to be sacked for this - either their PR-in-charge or the PR/technology firm.

Has ASML's competitive moat gotten any better or worst in the few months before/after this earnings report? Probably better, IMHO.

Was ASML overvalued before the earnings report? I am not sure.

Would ASML be a better investment now? I am not sure too.

---------------

Been reading the Good Investor's quarterly reports (Compounders' Fund). They haven't had a good past 4 years (since the fund inception in 2020), after an excellent prior 10 years (2010-2020). And I am trying to learn from there. Something in which they stand by, stood out for me:
We should focus on the quality and don't be obsessed over valuation.

But I really believe we should be obsessed on the quality and focus on valuation.