US and China compete for valuable microchip company – 02/24/2023 – Market

It’s hard to imagine that inside an ordinary corporate building, adorned with a lot of glass and steel, the machine that is perhaps the most precious in the world today is manufactured.

There’s a reason the technology behind it is at the center of a fierce race in which the United States and China compete to try to be the dominant superpower of the future.

The factory is located in the south of the Netherlands and belongs to ASML, which has become the most valuable technology company in Europe.

And what is this factory produce?

It designs and manufactures the machines that make computer microchips, but not just any microchip.

They are machines that manufacture the most advanced microchips in the world, and ASML is the only company on the planet that has this type of technology.

This effective monopoly means that the exact operation of ASML machines is subject to some of the strictest corporate security measures in the world.

The BBC had exclusive access to the interior of the building, where those responsible explained how their work works.

Complexity

Microchips are made by building complex patterns of transistors, or miniature electrical switches, layer by layer on a tiny silicon surface.

They are printed using a lithographic system in which light is projected through a plane of the pattern of these miniature switches.

The light is then reduced and focused using advanced optics, and the pattern is etched onto a kind of photosensitive silicon wafer.

This pattern forms the circuitry of a silicon microchip, which can end up in a computer, telephone, or other electrical device.

The goal is to try to make the best and most efficient microchip at scale, and the smaller the better.

This is the differentiating element of the most advanced ASML machines, which can work on minuscule scales by generating superfine extreme ultraviolet light, as small as 13.5 nanometers.

These are finer lines than a human hair, ranging in size from 50 to 100,000 nanometers.

Sander Hofman from ASML compares pens with different tips.

“Due to the short wavelength, it’s as if you’re using a fine-tipped pen to draw these lines of integrated circuits, rather than the previous generation machines that used, so to speak, a felt-tip pen,” compares Hofman.

The ability to etch silicon with such thin circuitry allows more components to be crammed into the silicon, which in turn means that electronic devices can have more processing power and more memory while remaining the same size.

Purity

The machines work in a vacuum, as the entire process of producing a microchip can be ruined by the smallest impurity, such as a speck of fur.

When we visited the factory, technician Bram Matthijssen was putting together one of ASML’s latest projects in what felt like one of the cleanest environments on the planet.

“There are times when we have to put gloves on gloves to make sure we don’t leave fingerprints and thus ensure there isn’t extra dust in the machine,” explains Matthijssen.

“A single fingerprint […] can cause great damage to the machine”, he points out.

The machines are very large and complex. An extreme ultraviolet (EUV) machine can take a year to build and ship.

In 2022, the company delivered just 50 of its highest specification model and 400 machines in total.

Sales, which were added to the revenue from running and updating existing machines, earned ASML around US$ 22.7 billion (R$ 117 billion) last year.

The orders they have in their portfolio double that number. This sales growth translates into an increase in the workforce, which has grown by a third in the past 12 months.

‘Relatively little known’

Wayne Lam, a consultant at technology research firm CCS Insights, says the machines ASML makes take years, if not decades, to develop and refine.

One example is the machines with higher added value that ASML has been working on since the early 2000s, leaving other companies in the sector behind.

“I’m sure there are competitors in the making […] however, in the short term, there are no real competitors for ASML,” he says.

Not bad for a “relatively little-known” company.

The battle between USA and China

Being such a crucial cog in the global electronics industry comes with challenges.

ASML is currently in the midst of a battle between the US and China.

Beijing has long wanted to make the most advanced computer chips, for which it needs ASML machines.

But since 2019, Washington has effectively blocked ASML from exporting these machines to China.

Joris Teer, an analyst at the Center for Strategic Studies in The Hague, says the United States is interested in preventing China from achieving microchip technology.

“The US has changed its goals from being a few generations ahead of its rivals to having the biggest advantage possible, which also means pushing its rivals as far away as possible,” he says.

There were reports that Dutch and US authorities reached an agreement on ASML exports, but no details were released.

ASML itself reacted to the news with a statement explaining that any restriction would require a lot of work and time before the legislation could be implemented.

Although ASML CEO Peter Wennink does not believe that its business will be seriously affected by export restrictions in the long term.

“If semiconductors cannot be manufactured in China, they will be manufactured in South Korea, the United States, Europe or Taiwan,” he says.

“Ultimately, we will ship these machines because the world needs this capability,” he adds.

This text was originally published here.