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Business Breakdowns (Colossus)
ASML: Competing with Moore’s Law - [Business Breakdowns, REPLAY]
Business Breakdowns (Colossus)
•March 6, 2026•52 min
0
Business Breakdowns (Colossus)•Mar 6, 2026
Why It Matters
Understanding ASML’s technology is crucial because EUV lithography is the bottleneck that enables the continued miniaturization of chips, a prerequisite for advances in AI, cloud computing, and consumer electronics. Investors and industry professionals gain insight into a company with near‑monopoly power and high margins, making it a bellwether for the broader semiconductor ecosystem.
Key Takeaways
- •ASML evolved from Philips spin‑out to global lithography leader
- •EUV lithography powers AI; 2022 revenue 21B €, 2025 32B €
- •Holds over 90% share of next‑gen lithography market worldwide
- •Each EUV machine costs >150M €, 345 units sold yearly
- •CEO Peter Wennink and CTO Martin van den Brink drove success
Pulse Analysis
ASML’s journey from a modest Philips spin‑out in 1984 to the world’s dominant lithography supplier illustrates how strategic focus and relentless R&D can reshape an entire industry. Early survival relied on niche optical patents and a willingness to chase the looming transition from contact printing to projection photolithography. By the mid‑1990s the company had risen to the top three alongside Nikon and Canon, and in 2002 it finally eclipsed Nikon as the market leader. This historical arc underscores the importance of timing and technology foresight in semiconductor equipment markets.
The breakthrough that cemented ASML’s supremacy is extreme ultraviolet (EUV) lithography, a technology essential for today’s AI‑driven data centers and high‑performance computing. EUV’s 13.5‑nanometer wavelength enables patterning at sub‑5‑nanometer nodes, keeping Moore’s Law alive when older deep‑ultraviolet sources stalled. Revenue surged from €21 billion in 2022 to an expected €32 billion by 2025, reflecting the rapid adoption of EUV across leading foundries. With gross margins consistently above 50 percent, the financial metrics highlight a business model that extracts outsized value from a low‑volume, high‑price product portfolio.
ASML now controls more than 90 percent of the next‑generation lithography market and virtually 100 percent of EUV shipments, a monopoly reinforced by massive capital barriers: each machine exceeds €150 million and requires three jumbo jets for transport. Leadership under CEO Peter Wennink, who steered the firm through the post‑dot‑com slump, and CTO Martin van den Brink, the technical visionary behind EUV, has kept the company on an innovation treadmill. Looking ahead, larger, more complex EUV systems slated for 2025‑2026 will further entrench ASML’s position as the indispensable gatekeeper of semiconductor scaling and AI hardware advancement.
Episode Description
This conversation was originally released in June of 2023.
Today we return to the semiconductor value chain with one of the most important companies in modern technology: ASML. The company began life as an unwanted spin-out from Philips with no real product and little expectation of success. Today, it builds the only machines capable of manufacturing the most advanced chips in the world.
To break down ASML, I’m joined by Tom Walsh, portfolio manager at Baillie Gifford. Tom walks through how photolithography works, what’s happening inside an extreme ultraviolet machine, and how a small Dutch company came to dominate one of the most complex technologies ever built.
This breakdown pairs very well with our breakdowns on AMD, Qualcomm and Cadence. And I'd also highlight the Founders Podcast episode #8 on the Intel Trinity. Please enjoy this breakdown of ASML.
For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.
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Timestamps
(00:00:00) Update on ASML and Welcome to Business Breakdowns
(00:04:01) Intro
(00:04:50) The ASML back story
(00:08:20) A deep dive into what semiconductors and Lithography are
(00:10:10) Alternate business directions ASML could have pursued
(00:21:45) How large ASML is in the industry today
(00:12:43) A look into the management team over time
(00:16:09) Moore’s Law and the key components of chip production
(00:17:15) Overall size of the machines manufactured
(00:18:20) The evolution of UV light and its important role in the advancement of Lithography
(00:22:35) Other competing companies within the field
(00:25:16) A detailed look into the cost of production industry wide
(00:26:10) Unlocked innovations associated with the development technology
(00:27:38) The life cycle of a lithography machine
(00:29:10) Revenue gained from new versus refurbished machines
(00:29:33) The cyclicality of the ASML machine revenue
(00:31:38) Potential production limitations due to capacity
(00:33:06) Margin profile and how ASML sets prices
(00:34:39) What the concentration of customers looks like
(00:39:06) Reasons why an acquisition has not taken place to date
(00:40:48) He explains where investor cash flow is directed
(00:42:07) An investors perspective on ASML opportunities
(00:44:30) How milestones in new technology are regulated and measured
(00:47:46) Potential business risks
(00:51:27) Lessons he’s learned from studying ASML
Show Notes
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