Why doesn’t ASML sell lithography machines to China? Can’t we afford 100 million?

ASML announces second quarter 2017 financial results

ASML, the world's largest chip lithography equipment supplier, recently announced its second quarter 2017 financial report. ASML's second quarter net revenue was 2.1 billion euros, with a gross profit margin of 45%. In the second quarter, 8 new EUV system orders were received, bringing the total number of unshipped EUV lithography system orders to 27 units, with a total value of 2.8 billion euros.

The company estimates that the net revenue for the third quarter of 2017 will be approximately 2.2 billion euros, with a gross profit margin of approximately 43%. Due to market demand and strong financial performance in the second quarter, ASML estimates that its full-year revenue growth for 2017 will reach 25%.

ASML President and CEO Peter Winn said: "ASML's main revenue contribution this year comes from memory chip customers, especially driven by the demand in the DRAM market. This part of revenue is expected to grow by 50% compared with last year, and revenue from logic chips is also expected to grow by 15%. In addition to the continued growth of DUV lithography system business, the accumulated amount of unshipped orders for EUV lithography systems has accumulated to 2.8 billion euros in the second quarter, indicating that both logic chip and DRAM customers are actively preparing to introduce EUV into chip mass production."

In addition, ASML has been actively promoting system upgrade business in recent years, and the revenue contribution of this part is expected to grow by 20% this year. "Based on the good news in the market and various business areas, we believe that the growth momentum will continue into 2018," said Peter Winn.

EUV becomes the main revenue source in the second quarter

As one of the few chip lithography equipment suppliers and the only EUV equipment provider, ASML performed very well in the past quarter, mainly in the following aspects:

(1) Deep ultraviolet (DUV) lithography

ASML launched the latest immersion lithography system TWINSCAN NXT:2000i, which has many hardware technology innovations, allowing customers to use immersion lithography and EUV systems for mass production at 7nm and 5nm process nodes, and achieve 2.5nm overlay accuracy. On the other hand, 3D NAND customers' demand for KrF dry lithography systems continues to increase, and the number of unshipped orders for TWINSCA NXT:860 has accumulated to more than 20 units. The productivity of the TWINSCA NXT:860 system can reach 5,300 wafers exposed per day.

(2) Comprehensive lithography optimization solution

This quarter, we started shipping the latest Yield Star 375F measurement system, which features the latest optical technology and can obtain measurement results faster and more accurately.

(3) Extreme ultraviolet lithography

The upgraded EUV light source has been successfully integrated into the NXE:3400B system at the headquarters in the Netherlands, and the productivity target of 125 wafers per hour has been achieved. So far, ASML's EUV system has successfully achieved all the key performance indicators in the plan. In the next stage, ASML will focus on achieving the relevant availability indicators required by customers in mass production and continue to improve system productivity.

In the second quarter, ASML also completed the acquisition of a 24.9% stake in Carl Zeiss SMT, a subsidiary of Germany's Carl Zeiss, to further deepen the strategic partnership between the two parties and jointly develop the next-generation EUV lithography system.

Looking ahead to the third quarter of 2017, ASML estimates that overall net sales will reach 2.2 billion euros, with a gross margin of about 43%, including about 300 million euros in EUV revenue recognition. R&D investment increased to 315 million euros, other income (including income from customer co-investment plans) was about 24 million euros, and SG&A expenses were about 105 million euros, with an annualized tax rate of about 14%. ASML expects to ship another three NXE:3400B EUV lithography systems in the third quarter.

But they don’t sell such expensive equipment with a unit price of over 100 million US dollars to China!

Some netizens said: Only he can produce it in the world, no one else can. And he won't sell it to China. No matter how much money China offers, he won't sell it. He can make 1000% profit. This is the circuit inside the chip, which is a few nanometers, about one ten-thousandth the size of a hair. Isn't it awesome?

Why can’t it be sold to China?

ASML: An indispensable supporter of modern chips

ASML Holding NV was founded in 1984 and is a semiconductor equipment manufacturer that was spun off from Philips. Formerly known as ASM Lithography Holding NV, it was renamed in 2001 and is headquartered in Veldhoven, the Netherlands. It has 12,168 full-time employees and is a semiconductor equipment design, manufacturing and sales company.

ASML provides lithography machines and related services to semiconductor manufacturers. The TWINSCAN series is currently the world's most accurate, most efficient and most widely used high-end lithography machine.

Currently, most semiconductor manufacturers in the world purchase TWINSCAN models from ASML, such as Intel, Samsung, Hynix, TSMC, UMC, GlobalFoundries and other semiconductor manufacturers. With the development of Moore's Law, chips are moving below 7nm, which requires more advanced EUV lithography systems. Only ASML's NXE:3400B can meet the demand.

How does ASML's lithography machine help chips? Let's take a look at ASML's official introduction:

In simple terms, the lithography equipment we manufacture is a projection system that is made up of 50,000 parts.

In actual use, a laser beam is projected through a blueprint or photomask with a pattern printed on it, and an optical lens focuses the pattern on a silicon wafer with a photosensitive chemical coating. When the unexposed part is etched away, the pattern appears…

This process is repeated over and over again to create billions of microscopic structures on a single chip. The wafers are stacked on top of each other with a precision of 2 nanometers and moved at lightning speed. This precision is high-tech. You know, even a hair has 100,000 nanometers, so you can imagine how fine 2 nanometers is.

In the future, only his EUV lithography machine can help continue to miniaturize chips, so even if these devices are sold for hundreds of millions of euros, they will be accepted by customers.

Why not sell to China?

As the most core equipment in the integrated circuit manufacturing process, the photolithography machine is of vital importance. Chip manufacturers cannot do without it if they want to improve their process technology. The ban on the sale of photolithography machines is a major factor in why China's semiconductor technology cannot be improved.

Why not sell such expensive equipment to China? This brings us to the Wassenaar Arrangement.

The Wassenaar Arrangement, also known as the Wassenaar Arrangement Mechanism, is called the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. It currently has 40 member states, including the United States, Japan, the United Kingdom, and Russia (note: China is not included). Although the Wassenaar Arrangement stipulates that member states decide on their own whether to issue export licenses for sensitive products and technologies, and report relevant information to other member states of the "arrangement" on a voluntary basis, the "arrangement" is actually completely controlled by the United States. When a country in the "Wassenaar Arrangement" intends to export a certain high technology to China, the United States even intervenes directly. For example, when the Czech Republic intends to export "passive radar equipment" to China, the United States puts pressure on the Czech Republic to force it to stop the transaction.

However, it is said that this agreement does not completely ban sales to China, but only the latest generations of equipment. The Wassenaar Arrangement updates the banned sales list every few years. For example, in 2010, equipment below 90nm was not allowed to be sold, and in 2015 it was changed to below 65nm.

What is a lithography machine?

For ordinary people, the photolithography machine may be an unfamiliar term, but it is the core equipment for manufacturing large-scale integrated circuits. Every chip must be forged with photolithography technology at the beginning of its birth.

Simply put, a photolithography machine is used to "print" engineers' designs into base materials. Its core technology has long been controlled by the Netherlands, Japan, Germany and other countries.

Lithography machines are one of the core equipment for chip manufacturing. They can be divided into several types according to their uses: lithography machines for chip production; lithography machines for packaging; and projection lithography machines for LED manufacturing. Lithography machines used to produce chips are China's biggest shortcoming in semiconductor equipment manufacturing. The high-end lithography machines needed by domestic wafer factories are completely dependent on imports.

At present, the leader in the field of lithography is ASML of the Netherlands, which has occupied up to 80% of the market share and monopolized the high-end lithography market. The most advanced EUV lithography machine was once priced at up to $100 million per unit, and only ASML can produce it in the world. Intel, TSMC, and Samsung are all its shareholders, and they support ASML with a lot of money and have technical personnel stationed in the factory. Intel and Samsung's 14nm lithography machines are all purchased from ASML, and the lithography machines of wafer factories such as GlobalFoundries, UMC, and SMIC are also mainly from ASML.

The huge gap between Chinese and foreign lithography machines

The lithography machine is regarded as the jewel in the crown of the integrated circuit industry. The technical and financial thresholds for research and development are very high. As a result, there are very few manufacturers that can produce high-end lithography machines. ASML is the only manufacturer of the most advanced 14nm lithography machine. Canon and Nikon of Japan have basically given up the research and development of the sixth-generation EUV lithography machine.

In comparison, domestic lithography machine manufacturers appear to be very shabby. The best-performing lithography machine that has been mass-produced by Shanghai Micro Electronics Equipment Co., Ltd., which is technologically advanced, is a 90nm lithography machine, and the gap in process is huge... The high-end lithography machines needed by domestic wafer fabs are completely dependent on imports.

This not only requires domestic wafer fabs to spend huge amounts of money to purchase equipment, but also has a great adverse impact on industrial development and the growth of independent technology. ASML has a reservation clause when selling lithography machines to domestic wafer fabs, which prohibits the use of lithography machines sold by ASML to domestic domestic CPUs as foundry. As long as the ASML lithography machines purchased by wafer fabs such as SMIC and Huali Microelectronics do not affect the foundry of ARM chips, it is impossible to do foundry and commercial mass production for independent CPUs such as Loongson and Shenwei. Even small-scale production for scientific research and national defense has certain risks. The Loongson 3A1500, which uses ceramic reinforced packaging and is exclusively for military use, and the Loongson 3A2000 used in the party, government and military markets, can only be produced in small batches, and in publicity, it can only be vaguely stated that it is a domestic tape-out... This has greatly affected the development of independent technology and China's integrated circuit industry.

How is China's lithography machine development level?

In 2016, Tsinghua University held an acceptance meeting for the "Photolithography Machine Dual Worktable System Prototype Development" project. The expert group highly evaluated the completion of the project tasks and unanimously agreed that the project passed the acceptance.

The workpiece stage system is an important subsystem of the lithography machine. The operating speed, acceleration, system stability and positioning establishment time of the workpiece stage system play a vital role in the production accuracy and efficiency of the lithography machine. The acceptance of the "Research and Development of Prototype of Dual Workpiece Stage System for Lithography Machine" project marks a technological breakthrough in China's dual workpiece stage system, but this is only part of the long march to realize the localization of lithography machines, and there is still a long way to go to break ASML's technological monopoly.

Recently, the Office of Implementation and Management of the National Science and Technology Major Project "Very Large Scale Integrated Circuit Manufacturing Equipment and Complete Process" organized experts to hold an acceptance meeting for the "Key Technology Research of Extreme Ultraviolet Lithography" project at the Changchun Institute of Optics, Fine Mechanics and Physics, Chinese Academy of Sciences. The review expert group fully affirmed the series of achievements made by the project and unanimously agreed that the project passed the acceptance, believing that the smooth implementation of the project has pushed forward the research and development of extreme ultraviolet lithography technology in my country by an important step.

Extreme ultraviolet lithography optical technology represents the highest level of current development in applied optics. As a forward-looking EUV lithography key technology research, the project has high requirements for indicators, great technical difficulty, many bottlenecks, high innovation, and at the same time, it is severely blocked by foreign technology.

Therefore, we can see that China has also made great progress. However, it will not be a matter of one day or one night for China to catch up. It requires solid talents in various basic fields, which is also the most difficult.

Source | Metalworking, ASML

Exclusively compiled by Xinshiye

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