asml's euv monopoly at risk: chinese competition intensifies

2025-04-03 asml

veldhoven, Thursday, 3 April 2025.
asml, the dominant player in euv lithography, might lose its monopoly due to rising competition from chinese firms. this could significantly impact asml’s stock, potentially causing a 40% decline. while asml expands its japanese workforce by 500% to service increasing euv installations, chinese advancements pose a threat to its market share and future growth. analysts suggest a ‘hold’ rating on asml stock amid these uncertainties.

Financial performance and projections

Despite facing challenges, ASML’s financials remain robust [2]. The company’s revenue for 2024 reached €28.26 billion, surpassing the €27.56 billion from 2023 [2]. A 9% increase is projected for 2025, estimating revenue of €30.84 billion [2]. ASML’s healthy earnings before interest and taxes margin is at 32.1%, and is expected to expand to 43.6% by 2029 due to increased EUV equipment sales and a growing installed base [2]. Net profits for 2024 totaled €7.39 billion, slightly lower than 2023 because of temporary industry challenges, though long-term forecasts remain strong [2].

Dominance and technological edge

ASML’s dominance stems from its technological advantage, particularly its EUV lithography systems crucial for manufacturing advanced semiconductors [2]. The company holds a 90% market share in lithography systems, unmatched by competitors [2]. The deployment of High NA EUV in 2025 will further solidify ASML’s lead, ensuring top chipmakers like TSMC, Samsung, and Intel remain reliant on its technology [2]. Despite reports of chinese alternatives, ASML’s superior energy efficiency, established manufacturing, and integration with the global supply chain keep it ahead [2].

Business model and market position

The company’s strong financial standing is underpinned by its resilient and high-margin business model [2]. ASML’s lithography equipment involves substantial switching costs, securing customers for decades [2]. Once a fab adopts ASML’s EUV system, switching vendors would require billions in restructuring and risk significant output disruption [2]. DUV systems generate service revenue equivalent to 130% of their initial price over their lifespan, while EUV systems may exceed 150%, making ASML’s installed base a reliable revenue source [2].

Factors influencing asml’s stock

Mizuho suggests ASML’s stock improvement hinges on increased investments from key clients like Intel and Samsung in their wafer manufacturing operations [2]. Geopolitical risks are also a concern, particularly ASML’s exposure to the chinese market, which accounted for 36% of its 2024 revenue [2]. Recent restrictions on exporting advanced DUV systems by the U.S. and Netherlands pose potential headwinds, though ASML has navigated these challenges effectively [2]. Further regulatory tightening could impact sales, but ASML’s order backlog and global customer base provide a buffer [2].

Expanding support in japan

To support the rising number of EUV installations in Japan, ASML plans to increase its maintenance staff there fivefold by 2027, reaching 100 employees [2][6]. This expansion addresses the growing demand as Rapidus, a japanese chipmaker, started a trial production line for 2-nanometer chips in Hokkaido [2]. Micron Technology also plans mass production of advanced DRAM chips in Hiroshima Prefecture next year [2]. ASML estimates that an unexpected downtime of EUV equipment could result in thousands of dollars in lost opportunity per minute [2].

Chinese competition and technological advancements

While ASML expands its global support network, chinese companies are striving to develop alternative EUV technologies [2]. One such company, SiCarrier, claims to have developed equipment supporting 5nm processes using multi-patterning techniques [7]. SiCarrier secured patents for its multi-patterning technology and claims its DUV exposure, combined with self-aligned quadruple patterning, can achieve near-5nm results without EUV equipment [7]. However, industry experts question the feasibility and mass production capability of this technology [7].

Bronnen

euv monopoly chinese competition