Business Model of ASML

How ASML Started ?

April 1, 1984. A leaky shed next to Philips’s research facility in Eindhoven, Netherlands. That’s where ASML was born.

But here’s the real story: ASML wasn’t some garage startup gamble. It was a calculated strategic move. Philips-one of Europe’s largest electronics conglomerates-realized the semiconductor industry needed specialized lithography equipment. They couldn’t build chips without the right tools. So Philips partnered with ASM International (ASMI), a smaller but growing semiconductor equipment supplier. They created a 50-50 joint venture with a mission: commercialize the PAS 2000 stepper (a wafer printer) that Philips had been developing internally.

The initial funding? $2.1 million from each partner. Philips even contributed 17 PAS 2000 machines and 47 engineers. ASMI contributed cash. They grabbed Gjalt Smit (a scientist with a PhD in plasma physics) as CEO and literally started in that infamous leaky shed.

Fast forward to 1985: They had 100 employees and moved into a purpose-built facility in Veldhoven, just kilometers from Philips labs. By 1988, Philips bought out ASMI, making ASML fully Philips-owned. Then in 1995, ASML went public on Amsterdam and New York stock exchanges, raising capital to fund relentless R&D.

Competitive Advantage MOAT (Unique Strengths)-

• Near-Total Monopoly on EUV Lithography: ASML holds 100% market share in Extreme Ultraviolet (EUV) lithography-the technology required to make the most advanced chips (2nm and below). Nobody else makes EUV machines at production scale. That’s a choke-point monopoly.

• 40+ Years of Accumulated Engineering Excellence: ASML hasn’t just been making lithography machines-they’ve been obsessively perfecting the craft since 1984. Every generation learned from the last. That’s institutional knowledge competitors can’t replicate. Carl Zeiss partnership (since 1986) gives them best-in-class optics.

• Unbreakable Relationships with Chip Manufacturers: TSMC, Samsung, Intel-the world’s biggest chipmakers-depend entirely on ASML machines. Switching costs are astronomical. You can’t just replace a $300+ million machine or retrain thousands of engineers overnight. ASML is embedded in their operations.

• Recursive Technology Advantage: ASML designs machines to make chips that make machines that make chips. As chips get more advanced, ASML’s own engineering teams use those advanced chips to design better machines. It’s a self-reinforcing loop that competitors can’t break into.

• Extreme Capital and R&D Requirements: Building EUV lithography systems requires absurd levels of capital, expertise, and failure tolerance. A single machine costs $300+ million to develop. ASML has already spent 40 years doing this. A new competitor would need $5-10 billion and 15+ years just to catch up-and by then, ASML will be generations ahead.

How ASML Makes Money ?

ASML operates a hardware + service revenue model:

Equipment Sales: ASML sells lithography machines. A single EUV machine costs €150+ million (DUV machines are cheaper at €27+ million). Chip manufacturers buy them, install them, and run them for 20+ years. ASML generates revenue per machine sold.

Service & Maintenance Contracts: Once a machine is installed, customers pay ongoing fees for maintenance, upgrades, software licenses, and technical support. This is recurring, high-margin revenue. A customer running a machine for 20 years pays hundreds of millions in service contracts alone.

Spare Parts & Upgrades: Machines need replacement components. Optics need upgrades. Software gets updated. ASML captures margin on every consumable and upgrade.

Key Metrics (showing the money machine):

• Q3 2025: €7.5 billion net sales
• Full-year 2025 projected growth: ~15% vs. 2024
• Q3 2025 net bookings: €5.4 billion (forward-looking orders)
• 2024 revenue: $35 billion (up from $13 billion in 2018)

Market Share of ASML-

• EUV Market: ASML owns 100%. Complete monopoly. Nobody else manufactures production-ready EUV systems. Full stop.

• DUV (Deep Ultraviolet) Market: ASML competes with Nikon and Canon but dominates with 50%+ market share. However, DUV is the legacy technology-the growth is in EUV.

• Overall Semiconductor Equipment Market: ASML is the largest supplier globally. The entire semiconductor equipment industry generates ~$100 billion annually. ASML captures significant share across lithography, metrology, and inspection.

• Geopolitical Leverage: ASML can’t legally sell EUV machines to China due to U.S. export controls. This actually gives them MORE power-they control the gate to advanced semiconductor manufacturing. Taiwan, South Korea, and Japan depend on ASML for their technological edge.

• Valuation: Current Share Price of ASML is trading at around $1,400. As of January 2026, ASML’s market cap is approximately $527 billion-making it Europe’s largest technology company. For context, that’s more than most countries’ GDPs.

The Real Story-

ASML isn’t just a company. It’s a chokepoint in global technology. You cannot make advanced chips without ASML’s machines. Every AI chip, every smartphone processor, every data center GPU-ASML’s technology was involved somewhere in the manufacturing process.

They started in a leaky shed with 47 Philips engineers and $2.1 million. Forty years later, they have 44,000+ employees, $35 billion annual revenue, and a monopoly on the most critical technology in computing.

That’s not just a business. That’s structural power.

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