An in-depth examination of ASML, the sole manufacturer of $200 million machines used in printing advanced microchips.

The only factory in the southern Dutch town of Veldhoven, near the Belgian border, produces a revolutionary machine used by the world's largest chip manufacturers.

The production of advanced microchips used in data centers, cars, and iPhones involves the most expensive step, which is EUV lithography. This technology is manufactured by only one company, Advanced Semiconductor Materials Lithography.

EUV lithography machines, which are the most advanced type of lithography equipment required to manufacture advanced processor chips, are exclusively produced by a company that has a monopoly on their fabrication, according to Chris Miller, an assistant professor at the Fletcher School at Tufts University. These machines are incredibly complex, with each one being among the most intricate devices ever created.

ASML generates EUV light, an incredibly short wavelength of light, in large quantities to print small, complex designs on microchips. This light is created through tiny explosions of molten tin at extreme speeds and bounced off unique Zeiss mirrors, which ASML claims are the flattest surface in the world. A small percentage of EUV light particles reach the surface of a silicon wafer, where they print the minuscule designs that determine each chip's function.

The global chip shortage has led to a surge in demand for ASML's EUV technology, resulting in back orders for various products including PlayStation 5 consoles and Chevrolet Malibu sedans. Since the end of 2018, ASML's stock price has increased by over 340%, making the company more valuable than some of its top customers, such as .

Since its inception 38 years ago, ASML has been lowering semiconductor prices and will continue to do so for the foreseeable future, according to CEO Peter Wennink.

"To address the growing demand for chips, we must increase production, which will result in higher average selling prices as long as we continue to reduce the cost per transistor," Wennink stated to CNBC.

The global chip shortage presents a dilemma for ASML, according to Wennink.

Our suppliers informed us that they may be delayed in delivering modules due to chip shortages, which we responded by stating that we cannot manufacture more chips without the chips.

ASML is still managing, but it's a daily struggle, according to Wennink.

$200 million machines

Wennink stated that ASML has sold approximately 140 EUV systems in the past decade, with each system costing up to $200 million. The price for their upcoming machine, High NA, will exceed $300 million.

Joanne Itow, managing director of manufacturing at Semico Research, stated that the EUV machine is "so expensive that most companies cannot afford it." This has resulted in the elimination of many players in the market, including chip manufacturer, which stopped working on more-advanced chips due to the high cost, as Itow explained.

In 2021, ASML's biggest three clients were Samsung and Intel, accounting for nearly 84% of its business. TSMC was the first to deliver high-volume chips made with EUV in 2019 and has maintained its lead ever since, with chip technology at least one node ahead of Samsung and Intel.

Intel, Samsung, and TSMC were the major investors in ASML's ability to research EUV a decade ago.

Wennink, who joined ASML in 1999, stated that they lacked the funds. As a result, they sought out partners, which became the foundation of the company's construction. Consequently, they were compelled to function as a system architect and a system integrator.

In 1984, ASML was established as a subsidiary of Philips and began operations by launching its first semiconductor lithography machine, which had been invented in a U.S. military lab, from a leaky shed next to a Philips office building in Eindhoven, the Netherlands.

Christophe Fouquet, ASML's executive vice president of EUV, stated that the first lithography tool resembled a projector. It consisted of a reticle, which held the desired image, and an optical system that projected the image onto the wafer.

In March, CNBC got an exclusive tour of ASML's facility in Veldhoven, which eventually became its headquarters and had five U.S. offices with 84 employees by 1988.

According to Miller, author of the upcoming book "Chip War: The Fight for the World's Most Critical Technology," when the industry was preparing to enter the early stages of EUV research, none of the U.S. firms were ready to take the risk of investing in what would be an expensive and uncertain venture. However, ASML, a Dutch company, was ready to take the plunge. Despite being a Dutch company, ASML heavily relies on U.S. components in its machines.

China and a global supply chain

EUV machines consist of numerous modules, totaling hundreds of thousands of components sourced from 800 global suppliers. Each module is constructed at one of ASML's 60 global locations and then transported to Veldhoven for assembly. Following assembly, the machine undergoes testing before being disassembled for shipment to a chipmaker. This process necessitates the use of 20 trucks and three fully loaded 747s for transportation.

One country ASML won’t ship its EUV technology to is China.

Governments worldwide have agreed to impose export controls on it due to its critical nature, as stated by Wennink.

Since 2018, the Trump administration reportedly urged ASML not to provide EUV technology to Chinese companies.

"China has been politically restricted from accessing the technology needed to participate in the race, as stated by Itow," said the expert.

ASML also collaborates with China in a different way. The company repairs and sends older lithography systems, known as deep ultraviolet, or DUV, to the country with the highest population. According to Wennink, 96% of all machines ASML has ever sold are still operational.

Miller stated that there is debate about whether selling additional DUV equipment to China poses a national security risk, as it allows China to enhance its ability to produce cutting-edge semiconductors. He believes that there is a possibility that new restrictions may be imposed on ASML's ability to sell DUV equipment to China in the future.

Currently, ASML is the only company that provides DUV lithography machines for EUV, with Nikon being the only competitor in the market. Experts predict that it may take several decades for any other company to catch up due to ASML's proprietary technology and exclusive deals with hundreds of suppliers.

Our unique customer and supply relationships are unparalleled, and some people believe that these almost symbiotic connections are more challenging than marriage because they cannot be dissolved.

ASML has mitigated supply chain risks by acquiring some of its suppliers, including Cymer in San Diego and Berliner Glas in 2020. Despite a fire at the Berlin site in January, Wennink stated that the damage will not significantly affect system output this year.

ASML anticipates a 20% increase in sales in 2022 and expects to achieve an annual revenue growth rate of 11% by the end of the decade.

Get a rare look at the technology inside ASML's clean rooms in California and the Netherlands, where EUV machines use precision lasers, exploding molten tin, and ultra-flat surfaces to create the components of our digital world.