Can China’s semiconductor bottleneck be solved with lithography machines?

If ZTE and Huawei had not been successively sanctioned by the United States, I believe most people would not care about the situation of China's semiconductor industry, and lithography machines would have become a hot search term.

When talking about lithography machines, we must mention ASML. In fact, many people connect the two with an equal sign. At the top level of the current human manufacturing industry, lithography machines are the representative, and ASML occupies nearly 80% of the global lithography machine market share. It is also the only company in the world that can provide lithography machines below 7nm process level.

The lithography machine is the most complex, most precise and most expensive device among all semiconductor equipment, and is also the epitome of modern industry. It can be said that the semiconductor equipment with an annual output value of tens of billions of dollars supports the semiconductor manufacturing industry with an annual output value of hundreds of billions of dollars, and ASML almost dominates the entire high-end lithography equipment market.

Some people joked that even if ASML released the blueprints, it would be impossible for them to manufacture it, which shows how difficult it is to manufacture a lithography machine. Currently, Huawei has been cut off from manufacturing and purchasing chips, and it has also stated that it will fully take root in the semiconductor industry. At this time, some people expect Huawei to be able to build a lithography machine on its own, but people in the industry know that relying on Huawei alone is far from enough. Even if the whole country is working on research, this is still not something that can be solved in a few years.

It is important to know that our country is not without the ability to manufacture lithography machines, but there is a huge gap between the performance and process level of lithography machines and the international mainstream advanced ones. Before talking about the current level of lithography machines in our country, it is necessary to first understand the manufacturing path of ASML's lithography machines.

The growth path of the lithography giant

In fact, there is relatively little information about ASML on the Internet and in literature, which is due to its relatively low-key corporate culture. In the book "Lithography Giants", we can learn that part of ASML's predecessor was called ASM, a Dutch technology company engaged in semiconductor equipment manufacturing, only 60 miles away from Philips.

Founder Del Prado founded a company called Advanced Semiconductor Corporation (ASM), which was prepared to make a difference in chip material and equipment manufacturing. ASM started as a seller and distributor, and later transformed into an equipment manufacturer. After the transformation, revenue began to grow explosively, and by 1978, ASM's annual revenue had reached 14 million US dollars.

In fact, the first company to manufacture lithography machines in the Netherlands was the famous Philips. However, in the era of economic expansion in the 1970s, Philips was having a hard time, so it sought to find a buyer for its lithography machine business. ASM had already risen rapidly at that time, and it had always been looking forward to cooperating with Philips in the field of lithography machines.

In 1983, Philips and ASM established a joint venture, ASML, in which Philips and MIP (a private equity fund) each acquired 30% of the shares, while ASM, as the project leader, acquired 40% of the shares.

In the first few months of its establishment, ASML clearly defined itself as a company that only conducts research and development and assembly. The most shocking thing is its ambitious plan. Just four months after its establishment, the company's goal is to turn losses into profits within two years and become one of the top three in the world within four years.

Of course, like the growth experience of many great companies, the road is not always smooth. At that time, Prekin-Elmer of the United States had dominated the lithography machine market for many years, GCA also occupied a large market share, and Canon and Nikon of Japan were also very strong, but ASML still did not find a chance to break through.

In 1988, ASML fell into financial crisis. Unable to bear the heavy burden, ASM withdrew from ASML. Subsequently, Philips assumed ASM's shares and debts in the joint venture. Fortunately, ASML did not die that year.

Interestingly, in 1989, TSMC suffered a fire, which gave ASML an opportunity. TSMC purchased 17 more lithography machines from ASML, which was also the first time ASML achieved profitability. Subsequently, ASML continued to grow through technological development. Interestingly, in 2004, Philips sold the last 2.8% of ASML shares, so now ASML, a star company in the semiconductor manufacturing field, has nothing to do with Philips.

According to the data so far, the largest shareholder of ASML is MSCI, which is headquartered in New York. The second largest shareholder is BlackRock, Inc., also an American company. IBM, Samsung, and Hynix also have a considerable number of shares in this company. Most of the current semiconductor companies have cooperative relations with ASML, and the industrial cooperation is close and the interests are also interrelated.

ASML's layout in China and its success factors

第23届中国集成电路制造年会暨广东集成电路产业发展论坛上，ASML全球副总裁、中国区总裁沈波出席并以《ASML支持集成电路行业发展的技术路线图》为题发表报告。沈波表示ASML在中国其实已经布局已久。

据沈波介绍：“ASML在中国大陆成立第一个办公室迄今已有20年，我们在中国大陆12个城市有办事处或分支机构，2020年中国区有超过1100人的团队，为行业新增和培育了大量光刻技术人才。目前ASML在中国已有700多台光刻机的装机，几乎所有主要芯片生产厂商都有我们的服务。”

According to data, ASML's total operating income in 2019 was 11.82 billion euros, an increase of 8% year-on-year; net profit attributable to shareholders after deducting non-recurring items was 2.592 billion euros. The company's gross profit margin has been maintained at more than 40% for many years, and its net profit margin has been above 20%.

在荷兰国土面积狭小没有完整制造体系的地方，ASML是凭什么获得成功的？沈波认为：“我们是一家开放的公司，而开放和合作的环境是有利于复杂半导体制造企业的发展。”

“ASML最新型号的一台光刻机，其中10万个精密零件来自全球5千多家供应商。”沈波表示，这意味着单单依靠ASML也不足以解决半导体制造的问题，其早已是全球化精细合作的结果。

Image source: Jinshi Data

沈波指出，集成电路的发展追求积极的微缩路线图、尺寸的微缩便需要边缘定位精度（EPA）的不断提高。ASML把研发的技术配套成为光刻解决方案推出，其包括了先进控制能力的光刻机台、计算光刻和测量，通过建模、仿真、分析等技术让边缘定位精度不断提高，令成像达到最优。ASML的整体光刻解决方案能够提高产品良率和生产效率，不但能够帮助行业客户提升芯片价值，同时也可以降低生产成本。

合作开放的策略加上多年的技术研发令ASML走上了成功之路，此外人才招揽和培训也是不可或缺的因素。ASML的2.5万名员工来自全球100多个国家，而在中国，ASML员工来自全球各地，有着多元化的文化背景。据沈波介绍，ASML中国员工和全球员工一样，可以无差别接触到和工作相关的技术知识和培训。每一位刚刚加入ASML中国的工程师在第一年都能够接受1200小时左右的技术培训。

As a leading company in the semiconductor manufacturing field, ASML has entered and established a presence in China for 20 years. In 2000, ASML officially established its first office in mainland China in Tianjin. So far, ASML has offices or branches in 12 cities in mainland China, namely Tianjin, Shanghai, Beijing, Wuxi, Wuhan, Xi'an, Dalian, Nanjing, Xiamen (Jinjiang), Hefei, Shenzhen and Guangzhou.

Following the trend of China's industrial policies and integrated circuit development, ASML has also achieved geographical expansion in mainland China: from east to west, from south to north, from first-tier cities to second- and third-tier cities. In terms of technical cooperation and development, in addition to customizing the corresponding lithography equipment, ASML provides Chinese customers with the lithography technology, services and solutions they need.

While expanding in China, ASML is also accelerating the continuous delivery of knowledge and experience to the Chinese semiconductor industry and the cultivation of technical R&D talents. In 2018, ASML established a global training center in Shanghai, which is now one of the top five training centers in the world. Currently, ASML is recruiting from many science and engineering universities in the STEM field in China to recruit and cultivate talents for the Chinese semiconductor industry.

The gap and breakthrough of China's lithography equipment level

It is not difficult to see that ASML's development is still inseparable from the layout and investment of the market, talents, and technology, which is also what China's semiconductor manufacturing industry needs to learn. At present, high-precision lithography machines are held by ASML, Nikon and Canon, while the top lithography machines (below 7nm level) are monopolized by ASML.

Image source: Jinshi Data

ASML's lithography machine manufacturing is more like a skilled semiconductor craftsman. It actually only masters 10% of the core technology. The technical support and components from the United States, Japan, Europe, Taiwan, China, and South Korea are integrated by ASML, so that the extremely complex EUV lithography machine can be manufactured.

China's current level of lithography machines is far from the world's leading level. The lithography machines produced by Shanghai Micro Electronics Equipment Co., Ltd. (SMEE) have a processing accuracy of 90nm, while the latest commercial chip accuracy has reached 5nm. The gap is at least 4 generations.

At present, China's semiconductor industry has encountered strong external pressure, but there is no doubt that the development of the entire industry is still growing rapidly under the heavy pressure. However, to solve the bottleneck areas of chip and even semiconductor development, chip manufacturing, that is, the manufacturing of lithography machines, is undoubtedly the top priority.

China now has enough funds and talents to overcome the difficulties in the semiconductor field. The Chinese Academy of Sciences recently announced that it will use all its strength to overcome the difficulties in the photolithography machine, and the four major domestic departments, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, and the Ministry of Finance, have also jointly issued guidance on semiconductor and other high-tech materials industries, sending a signal that my country will focus on conquering the core technology in the semiconductor field in the future.