Netherlands,Not Just ASML

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 Netherlands,Not Just ASML

ASML, the Overlord of Lithography Machines, Stands Out

As the jewel of the Netherlands semiconductor industry, ASML occupies a pivotal position in the field of global semiconductor equipment manufacturing. ASML is the Netherlands's largest exporter, Netherlands largest technology employer, and the world's largest chip equipment manufacturer. This is mainly because of ASML's lithography machines. As of September 24, 2024, ASML has a market capitalization of $322.9 billion. In 2023, ASML's full-year net sales reached 27.6 billion euros, with a gross margin of 51.3% and a net profit of 7.8 billion euros.

Lithography is an indispensable key step in today's chip industry, and advanced lithography machine is known as the "crown jewel" in the integrated circuit equipment manufacturing industry. The lithography machine is mainly responsible for accurately projecting the layout of the integrated circuit on the wafer. The lithography machine is a system that integrates precision optics, precision mechanics, automation control and software engineering, which not only needs to achieve extremely high exposure resolution, but also has extremely high repeatability and positioning accuracy.

Lithography is an indispensable key step in today's chip industry, and advanced lithography machine is known as the "crown jewel" in the integrated circuit equipment manufacturing industry. The lithography machine is mainly responsible for accurately projecting the integrated circuit layout More than 30 years ago, the entire lithography machine market was monopolized by Nikon, which United States GCA and Japan. Today, 30 years later, United States has almost no footprint of lithography machines, and Nikon is lagging behind, but ASML's lithography machines are unbeatable. From almost nothing in 1984 to becoming the undisputed leader in lithography machines, ASML has many untold stories behind it.

In the 80s of the 20th century, ASML got off to a difficult start. In 1984, electronics giant Philips and chip machine maker Advanced Semiconductor Materials International (ASMI) founded ASM Lithography, located in a leaky shed next to Philips' office in Eindhoven, Netherlands, the same year ASML introduced its first system, the PAS 2000 stepper. In 1985, ASML had 100 employees and moved into a new office and factory in Feldhofen. In 1986, ASML introduced the PAS 2500 stepper and in the same year established a partnership with ZEISS. In 1988, Philips began to enter the Asian market after establishing a joint venture factory in Taiwan. However, ASML had few customers and was unable to support itself, and to make matters worse, its shareholder, ASMI, was unable to maintain a high level of investment and decided to withdraw. The situation in the global electronics industry has taken a turn for the worse, and Philips has also announced a massive cost-cutting program. ASML is on the line. Eventually, Philips board member Henk Bodt persuaded his colleagues to lend a last helping hand.

In the 90s of the 20th century, ASML was on the right track and officially IPO. During this decade, ASML introduced the groundbreaking platform PAS 5500, which is also ASML's "longest-lived" lithography system. ASML notes that more than 90% of PAS 5500s are still active in production lines in various segments, and their service life will be extended until at least 2035. PAS5500 was significant for ASML, helping it gain a major customer from IBM, which catapulted from a start-up less than a decade old to the runner-up in the market in the 90s. In 1995, ASML became a fully independent public company, listed on the Amsterdam and New York stock exchanges. Philips sold half of its shares in the IPO and sold the remaining shares in the following years.

Early advertising for the PAS 5500 system

(Source: ASML official WeChat)

In the 2000s, immersion systems developed greatly. ASML dramatically increased the resolution of the system with immersion technology and dramatically increased productivity with revolutionary two-stage TWINSCAN technology. In 2003, the industry's first immersion machine, the TWINSCAN AT:1150i, was unveiled, followed by the TWINSCAN XT:1250i, XT:1400i, and in 2006, the first production machine for immersion, the XT:1700i. In 2007, ASML introduced the TWINSCAN XT:1900i immersion system, which has the highest numerical aperture of 1.35 in the industry.

Beginning in the 2010s, ASML introduced EUV lithography technology, which once again changed the face of the semiconductor industry. In 2010, the first EUV lithography machine, the TWINSCAN NXE:3100, was shipped to a research facility of an Asian chip manufacturer. In 2013, the second-generation EUV system NXE:3300 was introduced, and in 2015, the third-generation EUV system NXE:3350 was launched. In 2016, EUV lithography reached a turning point when customers began placing mass orders for ASML's first production-ready system, the NXE: 3400. The NXT1970Ci and NXT1980Di became the mainstays of the chip industry.

Source: ASML official website

Heading into the 2020s, no one could have predicted the challenges the world would face at the beginning of the new decade. But ASML continues to move forward fearlessly. At the beginning of 2020, EUV entered the stage of mass production, and ASML shipped 100 EUV systems. In December 2023, ASML delivered the first modules of the first High-NA EUV lithography system, the TWINSCAN EXE:5000, to Intel, which will represent a significant step forward in cutting-edge chip manufacturing.

This year marks the 40th anniversary of ASML, which has always insisted on innovation, constantly breaking through technical bottlenecks, and making outstanding contributions to the development of the global semiconductor industry for 40 years. At present, ASML is actively laying out the "panoramic lithography" strategy to meet the increasingly complex chip manufacturing needs.

ALD equipment giant ASMI has a longer history

In fact, in the Netherlands, before ASML, there is an old semiconductor equipment company ASM International NV (abbreviation: ASM), which is the parent company of ASML that we mentioned above and Philips.

ASM was founded in 1968 and has a history of 55 years. ASM initially acted in the furnace deposition market and began producing these devices in the Netherlands in the early 70s of the 20th century.

Since then, ASM has continued to expand around the world. In the mid-70s of the 20th century, ASMPT was established in Hong Kong and became a market leader in back-end semiconductor assembly and packaging equipment. ASM divested its majority stake in ASMPT in 2013 but retains a minority stake to this day. ASM United States was also founded in the 70s of the 20th century and now mainly does epitaxial equipment. In the early 80s of the 20th century, ASM Japan was founded, laying the foundation for today's plasma CVD products. Subsequently, in the mid-80s of the 20th century, ASM developed a joint venture with Philips to develop lithography technology, which is today ASML. ASM sold its stake in ASML in 1988.

ASM has a presence in 16 countries, so in a sense, ASM is already a global company.

ASM's main focus is on ALD (atomic layer deposition) and epitaxy. The ALD business is ASM's trump card. With a global market share of more than 55%, ASM is an absolute leader in the ALD field. ALD is the most advanced deposition method on the market to produce ultra-thin films with superior material quality, uniformity, and conformal retention. ALD is also one of the fastest-growing segments of the fab equipment market, with an average annual growth rate (CAGR) of 10% to 14% expected between 2022 and 2027.

Silicon epitaxy is ASM's second largest product line, and the silicon epitaxy (Si Epi) business is growing steadily, with ASM aiming to reach at least 30% market share by 2025. In recent years, through mergers and acquisitions, ASM has also occupied a relatively niche market in the field of vertical furnaces and PECVD.

Source: ASM's financial report

ASM is also a beneficiary of the development of advanced process nodes. Over the past few years, ASM's revenues have continued to grow steadily, from €1,284 million in 2019 to €2,634 million in 2023. Equipment sales accounted for 84% of its revenue, and spare parts and services accounted for 16%.

In the second half of 2023, ASM received significant orders for the first GAA pilot line activities, and the company believes that GAA is a major turning point for the company, as GAA's more complex device architectures will increase the need for ALD, such as more dipole and work function layers, compared to previous technology nodes. Silicon epitaxy (Si Epi) is also a key technology for GAA, which is used to build nanosheets that form the core of a transistor.

ASM expects the introduction of 2nm/GAA in high-volume manufacturing (HVM) to significantly drive logic/foundry sales growth in 2025. GAA 2nm technology is expected to enter high-yield manufacturing by 2025 and will be a significant driver for ASM. It is expected that by 2027, logic/foundry spending on GAA nodes will account for more than 40% of the total WFE market. And ASM is in a stronger position than ever.

Mixing bonding equipment is new: BESI

Founded in May 1995, BE Semiconductor Industries NV (Besi) is a semiconductor packaging equipment company headquartered in Duevenn, Netherlands. The Netherlands equipment manufacturer has gained the attention of the market and investors because of its hybrid bonding equipment, which has hitched a ride on AI. Throughout 2023, Besi's share price has risen by 141% (from €56.56 in 2022 to €136.45 at the end of 2023), making Besi one of the most valued companies in the European tech sector.

A snapshot of BESI's share price movements

However, since the beginning of this year, BESI's share price has fallen by another 27%. A large part of this is due to a new regulation, "JEDEC, the standardization organization that developed the HBM4 standard, is discussing its intention to relax the package thickness of HBM4 from 720 microns to 775 microns." "If this thickness standard is followed, there are industry sources that 16-layer HBM4 can be fully realized using existing bonding technology. This means that there is no need for hybrid bonding technology. For details, please refer to "Equipment Companies "Intimidated" by a piece of news".

According to the current development progress, hybrid bonding is still the future development direction of the industry. This can be seen in Besi's 2024 order book for hybrid bonding equipment.

On May 9, 2024, Besi announced that it has received an order for 26 hybrid bonding systems from a leading semiconductor logic manufacturer. The order is Besi's latest generation of systems with 100 nm positioning accuracy and is scheduled for delivery in the fourth quarter of 2024 and the first quarter of 2025.

Richard W. Blickman, President and CEO of Besi, commented, "Winning this important order underscores the commitment of the second leading logic manufacturer to adopt hybrid bonding assembly technology for its state-of-the-art data center applications. It also helps confirm the good long-term prospects and roadmap for BESI's hybrid bonding systems for next-generation AI-related logic, memory, and consumer-related computing applications over the next decade. "

Besi revenue for the first quarter of 2024 was €146.3 million, above the median estimate. The 8.3% decrease compared to the fourth quarter of 2023 was primarily due to lower shipments in the high-performance computing and automotive end-user markets, partially offset by higher shipments of high-end mobile applications. Besi's revenue in the second quarter was €151.2 million, down 7% year-on-year and up 3.3% sequentially, mainly due to higher shipments of photonics and 2.5D assembly applications. Order intake in the second quarter was €185.2 million, up 45.0 percent sequentially and up 64.5 percent year-on-year, mainly due to significant growth in 2.5D assembly solutions for hybrid bonding, photonics and artificial intelligence applications, partially offset by continued weakness in the automotive end market.

An AFM probe company valued at $1 billion is on the rise

In addition to ASML, ASM, and BESI, Nearfield Instruments (referred to as Nearfield) is another potential semiconductor equipment manufacturer in the Netherlands, and is praised by foreign media as a company worth $1 billion in the future. So, what are Nearfield's competitive advantages?

Founded in January 2016, Nearfield is a company that provides metrology and process control equipment to advanced semiconductor manufacturing plants. The company has developed an automated high-throughput 3D scanning probe metrology device. It incorporates atomic force microscopy (AFM) technology, which is currently the most accurate and non-destructive method available for optimizing and monitoring challenging CMP and etching process steps.

In December 2020, Nearfield announced the shipment of the first Quadra, a first-generation high-throughput scanning probe metrology system for the 5 nm node and below. Designed for in-line, on-device, non-destructive three-dimensional (3D) metrology. The system is critical for accelerating yields in advanced semiconductor fabs and optimizing high-volume manufacturing (HVM) yields.

Automated high-throughput 3D scanning probe metrology equipment

(Source:Nearfield Website)

However, AFM probe equipment is a mature and dominant market. Bruker in the United States and Park Systems in Korea each account for 20% of the AFM probe market. Since the introduction of the first commercial system in the 80s of the 20th century, Bruker has been leading the expansion of the capabilities of atomic force microscopy. However, AFM probes are a market with good potential, and the global AFM market is expected to increase from $540 million in 2023 to $631 million in 2026, at a CAGR of 5.2%, according to industry research firm MarketsandMarkets. One of the prominent trends impacting the AFM probe market is the continuous advancement of nanotechnology, and as the semiconductor manufacturing process becomes more sophisticated, more AFM probe equipment will be required.

In the mature market of AFM probes, it is not easy to break through, and it is not enough to rely on "imitation machines", you must have a strong competitive advantage. This could be good news for Nearfield.

According to Nearfield, its Quadra's unique architecture features parallel independent multi-head operation and the ability to position and align extremely fast, precisely. Quadra's 100x increase in throughput compared to other automated, single-probe AFM metrology tools for in-line metrology applications. In addition, Quadra's high sampling rate enables customers to perform in-line process monitoring and identify batch-to-batch, wafer-to-wafer, and intra-wafer process variations. Quadra also includes a unique new imaging mode called Feedforward Trajectory PlannerTM (FFTP), which enables Quadra to perform on-board non-destructive measurements of high-aspect ratio dense structures in memory (1z and above) and logic devices (3 nm and above).

Nearfield has certainly gained momentum in recent years. In July, Nearfield announced that it had received a €135 million Series C investment. It has also significantly increased the output of Quadra's metrology system, and the company recently announced that it has received orders for several machines from "one Asian customer". According to Hamed Sadeghian, CEO of Nearfield Instruments, there is speculation in the industry that the Asian customer is likely to be Samsung.

"We are pleased to receive an order from one of the world's leading advanced fabs in Asia, which continues to aggressively ramp up capacity to meet the growing demand for advanced equipment such as HBM to support AI applications," he said. Nearfield is headquartered in Rotterdam with offices in Eindhoven, Netherlands, and Pyeongtaek, Korea.

Actually, this is very much in line with Samsung's needs. Samsung is facing major problems in high-bandwidth memory (HBM) production and urgently needs to catch up with SK hynix. According to Yole Group's Vishal Saroha, Samsung currently outinvests SK hynix in hybrid bonding equipment from Besi. This also explains the need for AFM probes. Hybrid bonding requires very clean surfaces and precisely sized copper contacts. Infinitesima, Nearfield, and industry insiders point out that post-etching and post-CMP (chemical mechanical polishing) are the main application areas for AFM probes, making them ideal for hybrid bonding in HBM manufacturing.

As ASML experienced in the mid-1990s, Samsung was a very demanding customer. On the one hand, such a relationship provides a lot of information, but on the other hand, it also takes up all the attention. Nearfield will be challenged to turn Samsung's inevitable need for customization into competitiveness.

As ASML experienced in the mid-1990s, Samsung was a very demanding customer. On the one hand, such a relationship provides that it may not be easy for Nearfield to reach the height of a $1 billion valuation in a few years, and it is not enough to have a single customer, and to reach this scale, it must have about half of the high-end buyers (such as TSMC, Samsung, Intel, SK hynix and Micron) to have an installed base.