ASML share: Digitization drives chip demand

Last Updated: 25. Januar 2024By

There are many people who have never heard of the Dutch company ASML. What about you? But this is not surprising, as the company’s products are not aimed at end consumers. ASML’s systems enable the production of the most advanced chips.

EUV lithography is a key technology for maintaining the „Moore’s Law,“ which states that the number of transistors per unit area doubles every 18 to 24 months. ASML has left its competitors far behind in this field and has a monopoly position in EUV technology. After the Deep Ultraviolet (DUV) process reached its physical limits, ASML developed the EUV lithography process. Only with this process is it possible to produce ever smaller chip structures due to shorter wavelengths of light. The long development time and costs make it impossible for competitors to compete with the lithography specialist in this market for the foreseeable future. ASML is the only company that offers extreme ultraviolet lithography (EUV).

Digitization drives chip demand The Dutch company is a sought-after partner for semiconductor equipment at over 60 locations worldwide in 16 countries. In the lithography process, a layer is created on the wafer (a thin round disc of semiconductor material about 1mm thick) onto which the desired structure for the integrated circuit is transferred through an exposure process. The ongoing digitization with megatrends such as robotics, artificial intelligence, 5G mobile communication, the Internet of Things, cryptocurrencies, or virtual worlds requires many powerful chips.

Chip giants and contract manufacturers need ASML Chip giants like Nvidia do not manufacture their own semiconductors. The company relies on TSMC for the production of its chips. TSMC, in turn, uses the most advanced chip manufacturing equipment in the world, which comes from ASML. ASML’s stock has recently come under pressure due to export restrictions on its products to China. Despite the weak economy, there is a growing demand for more powerful chips worldwide. Even export bans to China due to the possible use of the technology in military goods are unlikely to have a lasting impact on the business.

ASML stock in weekly chart – ISIN: NL0010273215


Rating and technical view ASML is one of the few growth and quality companies in the European technology sector, and its high valuation (forward P/E ratio of 26) seems justified due to its monopoly position in the global market. Technically, the stock has come under some pressure in the past year but has since recovered from this weakness.

Conclusion ASML is one of the most important equipment suppliers for the semiconductor industry worldwide and has a unique selling proposition with its EUV lithography systems. The demand for semiconductors will continue to grow in the coming years. For you, this means that you should keep an eye on the ASML stock.