Asia to remain center of chip industry despite West’s push: ASML CEO

The buildup of chip production in Western countries is unlikely to shift the industry’s balance of power away from Asia, according to Christophe Fouquet, president and CEO of ASML, the Dutch maker of highly prized semiconductor making machinery.

Fouquet spoke to Nikkei Asia in an exclusive interview at ASML’s headquarters a few weeks after traveling to Dresden, Germany, for the groundbreaking ceremony for Taiwan Semiconductor Manufacturing Co.’s first European plant, seen as crucial to the bloc’s effort to restore its chip production prowess.

ASML, the world’s most valuable semiconductor equipment maker, is renowned for its advanced lithography technology, which is crucial for transferring and printing circuit designs onto silicon wafers being made into semiconductors.

The company’s headquarters in the southeastern Dutch city of Veldhoven, where 19,000 of its 43,000 global staff work, is situated in the European technology hub known as Brainport Eindhoven, also home to the head offices of Philips and chipmaker NXP.
 

In Fouquet’s view, Europe and the U.S. will need to do more than build subsidized chip plants to have a real impact on the shape of the industry.

“Success is not guaranteed,” he said. “Cost and flexibility must be addressed in the long term to really develop the ecosystem. ... You cannot give incentives forever. Therefore, the cost has to be right, the flexibility has to be right.

“If Europe and the U.S. want to be successful, the economic model of semiconductor [manufacturing] has to improve,” said Fouquet, a native of France who ascended to his current role in April after two years as ASML’s chief business officer. “You cannot produce things at a higher cost for a very long time. It just doesn’t work.

“Incentives should be temporary,” he said, with a view toward using them to “create time and space to basically solve the more structural challenges fully.” Europe’s key advantages in chips lie in its access to good engineering talent and renewable energy, he added.

Even with the launch of new chip plants in the West backed by subsidies and tax incentives, the pace of semiconductor capacity growth in Asia remains faster, Fouquet said. He expects the “highly competitive” region to remain the leading area for production for “many years to come.”

Asia accounted for 84% of ASML’s revenue last year, with Taiwan its largest individual market, followed in the region by China, South Korea, Japan and Singapore. The U.S. and Europe generated 12% and 4%, respectively, of the company’s sales.

Fouquet, 51, previously worked for chip equipment suppliers Applied Materials and KLA before joining ASML in 2008. For both companies as well as other key chipmaking tool providers like Lam Research and Tokyo Electron, Asia remains the preeminent market.
 

Spending on chip production equipment has long been viewed as a key barometer of the outlook for future chip demand and production capacity growth.

Industry trade group SEMI calculates that China probably spent more on chip equipment in the first half of the year than Taiwan, South Korea and the U.S. combined as Beijing stockpiled items ahead of an expected tightening in Western export restrictions. However, the group forecasts that this spending will slow through 2027 while the U.S., Europe, Japan and Southeast Asia step up investment.

Only Japan’s Canon and Nikon offer semiconductor lithography machines comparable to those of ASML. China’s Shanghai Micro Electronics Equipment and Huawei are developing their own lithography tools but have yet to produce commercially viable models.

So far, ASML remains the world’s exclusive provider of extreme ultraviolet (EUV) lithography machines. This cutting-edge technology is required for producing advanced semiconductors beyond the benchmark of 7-nanometers, as required for the manufacture of high-performance mobile and computer processors and artificial intelligence chips like those in the iPhone 16 series and Nvidia’s high-end product line. (With semiconductors, smaller numbers generally indicate a more advanced and powerful chip, with more transistors packed more closely together.)

All of ASML’s EUV machines are assembled at its headquarters, including its latest high numerical aperture EUV machines. These boast a redesigned optical system and a much faster staging system for moving around the masks, or reticles, embedded with the design blueprints used to produce each chip.

The company’s push to develop a new generation of chipmaking equipment to support more intricate, high-resolution designs relates to the demand ASML is getting from makers of both logic and memory chips for the development of AI computing, said Fouquet, who was responsible for the EUV business as executive vice president between 2018 and 2022.

ASML has already shipped its first High NA EUV machine to Intel. The Dutch company says all its other EUV customers have also placed orders for the latest model. The machine sells for around $350 million, well above the $180 million to $200 million level of ASML’s standard EUV line.

Customers have begun testing the new machines, and Fouquet expects broad adoption of the technology to start in 2026 or 2027. Some clients like TSMC and Intel run tests with their own wafers in a laboratory at ASML headquarters. Tokyo Electron, Japan’s top chip equipment maker, even has staff stationed at the lab to facilitate parallel development of its machines for coating wafers with light-sensitive chemicals known as photoresists; these will directly link to ASML’s EUV machines.

Fouquet said that for ASML, it is vital to keep research and development activity close to production to improve the speed of adjustments and the introduction of new models. The company’s R&D budget last year reached 4 billion euros ($4.39 billion), more than double the 1.6 billion euros it spent in 2018.
 

ASML is adding new facilities close to its headquarters while looking for additional nearby sites for expansion. It is also enlarging its presence in key markets like South Korea and Taiwan through the establishment of training, repair and refurbishment centers and production lines for less complex tools. The biggest tool refurbishment center operated by ASML, which overhauls machines from its oldest surviving product line, is in Taoyuan, Taiwan.

“As the CEO in the last few months, I spent a lot of time with customers in Taiwan, in Korea, in the U.S.,” Fouquet said. “We have basically very deep discussions on what is needed, not only tomorrow, [but] in five years from now, in 10 years from now.”

Referring to product development, he said: “If we do it too early and they don’t need the tool, it’s a big waste of money for ASML. ... We have to bring the tool [out] at the right time.”

Fouquet’s goal is to ensure the company, which has more than tripled revenues since 2017, remains “well-organized, very efficient and very flexible.”

While fewer chipmakers are pursuing cutting-edge semiconductors due to the massive cost of the latest production technologies, more and more companies are making less advanced, or “mature node,” chips due to rising demand for sensors and other computerized functions, a development Fouquet called a “phenomenon.”

ASML has faced restrictions since 2019 on exporting its most advanced machines, like its EUV systems, to China due to their potential use in supporting military applications. The Dutch government recently tightened its export control rules to better align them with those of the U.S. This could affect ASML’s sales of immersion deep ultraviolet lithography machines to China.

Fouquet said ASML will respect and abide by whatever rules are set by the government but added that constant rule tweaks can create uncertainty.

“Businesses always look for clarity,” he said. “I think we don’t mind any rules, as long as the rule doesn’t change every six months. What the geopolitics discussion created today is a lot of uncertainty, and uncertainty is never good for business.’
 

The writer is the chief tech correspondent at Nikkei Asia.