Miller - Chip War
For Frits van Houts, who took over leadership of ASML’s EUV business in 2013, the most crucial input into an EUV lithography system wasn’t any individual component, but the company’s own skill in supply chain management. ASML engineered this network of business relationships “like a machine,” van Houts explained, producing a finely tuned system of several thousand companies capable of meeting ASML’s exacting requirements. ASML itself only produced 15 percent of an EUV tool’s components, he estimated, buying the rest from other firms. This let it access the world’s most finely engineered goods, but it also required constant surveillance.
The company had no choice but to rely on a single source for the key components of an EUV system. To manage this, ASML drilled down into its suppliers’ suppliers to understand the risks. ASML rewarded certain suppliers with investment, like the $1 billion it paid Zeiss in 2016 to fund that company’s R&D process. It held all of them, however, to exacting standards. “If you don’t behave, we’re going to buy you,” ASML’s CEO Peter Wennink told one supplier. It wasn’t a joke: ASML ended up buying several suppliers, including Cymer, after concluding it could better manage them itself.
The result was a machine with hundreds of thousands of components that took tens of billions of dollars and several decades to develop. The miracle isn’t simply that EUV lithography works, but that it does so reliably enough to produce chips cost-effectively. Extreme reliability was crucial for any component that would be put in the EUV system. ASML had set a target for each component to last on average for at least thirty thousand hours—around four years—before needing repair. In practice, repairs would be needed more often, because not every part breaks at the same time. EUV machines cost over $100 million each, so every hour one is offline costs chipmakers thousands of dollars in lost production.