"Of all the competitive advantages, of all the technological advantages that I've ever come across, I can't think of one that's more significant than ASML's." - Tom Walsh []()
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"You have to shoot a laser at droplets of tin that are smaller than a dust particle. You have to strike each dust particle twice. Once to flatten it, once to vaporize it, to turn it into plasma, which is 40 times hotter than the surface of the sun. And you have to do that 50,000 times a second." - Tom Walsh [00:21:44](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h21m44s)
"Martin van den Brink said to him, I think at least 15 years. And 15 years later, he goes back to Martin and says, that's still going, how long do you give it. Martin says, I think about another 15 years." - Tom Walsh [00:50:16](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h50m16s)
Institutional investor at one of the UK's most prominent long-term equity investment firms.
Deep specialist in the semiconductor value chain with decades of longitudinal research notes on ASML.
Provides both a technical and capital-allocator perspective on ASML's business model, moat, and risks.
1. Executive Summary
ASML is arguably the most strategically critical technology company in the world — it holds a near-100% monopoly on Extreme Ultraviolet lithography machines, the only equipment capable of manufacturing the world's most advanced semiconductors, without which Moore's Law effectively halts. [00:06:06](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h6m6s)
The company's origins were inauspicious in the extreme: spun out of Philips in 1984 as a problem child with no revenue, no offices, no credible product, and ranked 10th of 10 players in the global lithography market — internally mocked as a delayed layoff process. [00:03:26](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h3m26s)
ASML's ascent to dominance took nearly two decades — it overtook Nikon as the number one lithography player in 2002, approximately 18 years after spin-out, by surviving brutal industry cycles, capitalizing on competitor failures, and making sustained bets on moonshot technologies. [00:05:23](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h5m23s)
EUV technology was over a decade late, was supposed to enter high-volume production around 2004–2006, yet only did so in 2019, after ASML sank more than €10 billion in R&D and convinced Intel, Samsung, and TSMC to co-invest €1.4 billion and take a combined 23% stake. [00:19:08](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h19m8s)
The business model defies conventional manufacturing logic: ASML sells fewer than 350 machines per year, yet generated ~€21 billion in revenue in 2022. Each leading-edge EUV machine sells for north of €150 million and requires three jumbo jets to transport. [00:10:24](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h10m24s)
ASML functions as an architect and integrator, not a traditional manufacturer: ~80% of COGS is externally sourced components from a highly specialized supplier ecosystem; this model was born of financial necessity but has become a defining competitive strength. [00:30:36](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h30m36s)
Pricing strategy is deliberately non-extractive — despite having a monopoly on EUV, ASML targets a 50/50 value-split with customers, understanding that price gouging would incentivize customers to fund alternative technologies and eliminate the collaborative ecosystem that underpins the entire industry. [00:34:39](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h34m39s)
Three key risks identified: supply chain capacity keeping pace with technological demands, disruptive alternative manufacturing architectures, and geopolitical concentration where ~40% of sales go to Taiwan, ~30% to South Korea, and historically ~15% to China. [00:47:42](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h47m42s)
The meta-lesson from ASML's history is that human ingenuity consistently outpaces even expert forecasts — Moore's Law has survived every predicted death, and ASML's CTO Martin van den Brink has perpetually extended his personal 15-year runway estimate for its continuation. [00:49:50](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h49m50s)
The photoresist process: Silicon wafers are coated with special light-sensitive chemicals called photoresists; light is then projected through a mask to etch that pattern onto the chip surface. [00:07:12](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h7m12s)
The cinema projector analogy: Tom Walsh describes it as an old-fashioned cinema projector, but instead of projecting Spider-Man onto a large screen, you project circuit patterns and use lenses to miniaturize rather than magnify the image. [00:07:42](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h7m42s)
The snow shovel analogy: Trying to manufacture 5nm transistors using 193nm deep UV light is like trying to write your signature using a snow shovel — technically possible, but error-prone and inefficient. [00:17:52](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h17m52s)
Hidden assets that mattered: Despite the bleak exterior, ASML had specific industry-leading technologies developed within Philips, tenacious engineers, and a window of opportunity during a major industry technology transition. [00:04:15](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h4m15s)
The EUV light source as a physics marvel: A laser shoots at tin droplets smaller than a dust particle, striking each twice to create plasma 40 times hotter than the surface of the sun, operating 50,000 times per second in a vacuum. [00:21:44](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h21m44s)
Risk 3 — Geopolitical Concentration: Revenue is heavily concentrated with ~40% of sales to Taiwan, ~30% to South Korea, and historically ~15% to China, creating significant tail risk amidst export controls. [00:47:42](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h47m42s)
THEME 8: Leadership — The Human Capital Behind the Moat
Martin van den Brink (CTO & President): Joined the Philips spin-out division in 1983, was put in charge of the primary product merely two years into his career, and has proven central to advancing the semiconductor industry's roadmap over decades. [00:12:23](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h12m23s)
Definition: Rather than vertically integrating, ASML sources ~80% of components externally and focuses on system design, integration, and assembly.
Application in transcript: Born of financial necessity at founding, this model became ASML's primary operational advantage, enabling faster iteration, risk distribution across the supply chain, and modular upgradability of machines in the field. [00:31:13](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h31m13s)
Framework 2: The 50/50 Value-Split Pricing Principle
Definition: When a new machine generation delivers productivity gains to customers, ASML aims to retain approximately half the economic value and pass the other half through to customers in the form of lower cost-per-transistor.
Framework 3: ASML's Competition Is Moore's Law, Not Another Company
Definition: ASML's true competitive benchmark is whether its machines continue to deliver Moore's Law economics to the semiconductor industry.
Application in transcript: This reframes the competitive moat analysis, suggesting the real risk is not competitive entry but technical stagnation that incentivizes customers to find workaround solutions. [00:46:10](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h46m10s)
Framework 4: Modular Risk De-risking in Radical Innovation
Definition: ASML breaks machines into independent modules, develops each in parallel, and upgrades them incrementally.
Application in transcript: This approach manages the paradox of pushing physical boundaries while maintaining investor-grade reliability, allowing progress to be observable in module-level improvements. [00:43:02](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h43m2s)
Framework 5: Looking Beyond the Cycle — The Structural vs. Cyclical Mental Model
Definition: The framework asks what the 5/10/20-year structural opportunity is, independent of the current industry cycle.
Definition: When a supplier and its customers are deeply interdependent, the relationship becomes inherently collaborative and both parties self-regulate against extractive behavior.
Framework 8: The Perpetual 15-Year Moore's Law Horizon
Definition: Martin van den Brink's recurring practice of forecasting Moore's Law survival at least 15 more years from any given point in time.
Application in transcript: This mental model captures the systemic underestimation of human innovation, suggesting that terminal assumptions about the semiconductor roadmap should be held loosely. [00:50:16](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h50m16s)
6. Anecdotes
Anecdote 1: The Delayed Layoff Spin-Out
When Philips spun out ASML in 1984, the internal joke among Philips employees was that ASML's creation was really just a way to delay inevitable layoffs for the workers being transferred there. The anecdote illustrates how improbable ASML's eventual dominance was from the outset and serves as a cautionary tale against dismissing companies based on optics of origin. [00:03:39](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h3m39s)
Anecdote 2: Martin van den Brink's Make-or-Break Promotion
Just two years into his career at ASML, Martin van den Brink was placed in charge of developing the company's commercial product as a temporary stopgap until someone better could be found. He delivered the product, the company survived, and he was elevated to the management board, demonstrating how merit determined ASML's future. [00:13:27](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h13m27s)
Anecdote 3: The Old Philips Hands Laughing at Van den Brink
When Martin van den Brink joined the ASML division, senior employees remaining at Philips chuckled at his fate, confident that EBeam lithography was the true future. Four decades later, ASML is worth billions and EBeam lithography never displaced photolithography, highlighting the limits of expert consensus. [00:12:49](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h12m49s)
Anecdote 4: The 1986 Recession That Saved ASML
In 1986, a severe global recession hit the semiconductor industry, killing several of ASML's better-capitalized competitors who couldn't sustain R&D spending. ASML survived on fumes, underlining the compounding framework of luck and ingenuity that propelled its long-term success. [00:49:24](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h49m24s)
Anecdote 5: The U.S. Government EUV Consortium
In the late 1990s, the U.S. government funded a consortium to develop EUV but couldn't give the technology to Japanese competitors and lacked a viable domestic manufacturer. ASML was the only realistic choice, proving how a single geopolitical constraint produced one of the most durable technology monopolies in industrial history. [00:18:48](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h18m48s)
Anecdote 6: Peter Wennink's "15 More Years" Conversation with Van den Brink
When Peter Wennink asked Martin van den Brink in 1999 how long Moore's Law had left, van den Brink answered "at least 15 years," a timeline he repeated 15 years later. The story illustrates why terminal value assumptions in semiconductor investing should be held with extreme humility. [00:50:16](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h50m16s)
Anecdote 7: The 3D NAND Pivot
Around 2012–2013, when EUV was delayed, NAND flash memory manufacturers found another way by building upward in three dimensions rather than shrinking transistors laterally. This remains the canonical example of what happens when ASML fails to deliver — the industry innovates around it. [00:46:10](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h46m10s)
ASML is not a semiconductor company — it is the keystone of civilization's digital infrastructure, and its monopoly on EUV lithography is arguably the most durable technology moat in existence, the product of 25 years and €10 billion in R&D investment that no competitor can realistically replicate in under a decade. The bull case is straightforward: every transistor in every advanced chip flows through an ASML machine, and the number of transistors the world demands is on a structurally infinite growth curve. Investors should watch three things: the ramp of High-NA EUV machines into production in 2025–26 and whether ASML's supply chain can keep pace; the trajectory of U.S.-China export control escalation, which represents the most acute near-term revenue disruption risk given ~15% of historical China exposure; and whether any credible 3D or alternative architecture emerges in logic chips analogous to the 3D NAND pivot that eroded litho's memory share — because if and when ASML cannot deliver Moore's Law economics on schedule, the market will route around it, and it will do so faster than most investors expect. [00:51:33](https://youtu.be/2kDTybPftG4?si=dPVw-mmZRpgjAfGN&t=0h51m33s)
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