ASML

ASML has evolved from being a niche supplier of deep ultraviolet (DUV) lithography systems to become a near-exclusive supplier of highly sought after, cutting edge extreme ultraviolet (EUV) systems. None of ASML’s competitors has yet commercialized large scale EUV systems in the way ASML has.

This competitive advantage confers pricing power and high margins, as chipmakers cannot go anywhere else for their next generation lithography needs. It has also made ASML a linchpin of the global semiconductor supply chain and a critical beneficiary of demand for semiconductors driven by AI, high-performance computing, 5G telecoms, Internet of Things (IoT) and automotive electronics.

ASML has invested heavily in R&D and it has a large portfolio of intellectual property, which cements its position as a global leader in its markets. ASML sits at the epicentre of technological advancement through chip shrinkage, which is essential in areas like digitisation, automation and AI. 

ASML relies on critical minerals such as tin, tantalum, tungsten and gold to manufacture its machines. While the company has procurement processes and due diligence procedures in place, there remains a risk that these minerals may originate from conflict-affected regions.

These resources are also finite and have limited substitutes, making responsible sourcing essential. 

The semiconductor manufacturing process is resource-intensive, requiring significant amounts of water, energy, and chemicals. This contributes to the company’s broader environmental footprint.

Additionally, there are risks to worker health and safety, particularly regarding exposure to hazardous substances and potential labour rights violations. ASML’s reliance on third-party manufacturers heightens these risks.