ASML dethrones Applied Materials, becomes world's largest fab tool maker

[Daniel Nenni]

Demand for wafer fab equipment has been proliferating in recent years, which is why fab toolmakers' revenues have also been setting records. As it turns out, last year, ASML became the world's largest maker of fab tools, dethroning Applied Materials, which was a leader for decades, as observed by analyst Dan Nystedt. While this is hardly competition and there are several reasons why ASML came first, it is a remarkable turn of events.

ASML earned $29.83 billion in calendar 2023, whereas Applied's revenue achieved $26.52 billion, according to Nystedt. There are several things to keep in mind here. Firstly, ASML's financial year follows the calendar year, whereas Applied Materials's 2023 financial year ended October 29, 2023. This is why the analyst used the company's Q1 FY2024 results (which ended on January 28, 2024) for his calculations.

(Image credit: Dan Nystedt/Twitter)

While this is not exactly an apples-to-apples comparison, since ASML won by billions, this is a reasonable comparison that reflects the trends.

There are multiple reasons why ASML managed to take away the fab toolmaking crown from Applied Materials. First up, the company recognized revenue for 53 Low-NA EUV Twinscan NXE tools (up from 40 in 2022), each of which costs roughly $183 million. In addition, the company recognized revenue for 125 deep ultraviolet lithography tools (up from 81 a year before). Secondly, ASML could sell sophisticated tools to Chinese customers for most of calendar 2023 as sanctions against the Chinese semiconductor sector kicked in only in September and only for one tool. By contrast, sales of tools to Chinese clients by Applied Materials were, to a degree, impacted by the U.S. export rules introduced in October 2023.

While the turn of the tables is outstanding, this is really not a competition because Applied Materials does not produce lithography equipment. In contrast, ASML does not make tools for epitaxy, ion implant, deposition, and selective materials removal. Meanwhile, virtually no fabs today can run without equipment from Applied Materials, ASML, KLA, and Tokyo Electron, so these companies would rather complement each other. Furthermore, the more ASML tools sold, the more Applied's equipment is required, so both companies are set to thrive in the coming years.

ASML dethrones Applied Materials, becomes world's largest fab tool maker: analyst

ASML gets 2023 chipmaking equipment crown.

www.tomshardware.com

 

[Arthur Hanson]

Both companies are in fast growing markets and will benefit. Both the breadth and depth of tooling and materials needed is increasing and both companies will prosper, it's just by how much.

 

[IanD]

Both companies are in fast growing markets and will benefit. Both the breadth and depth of tooling and materials needed is increasing and both companies will prosper, it's just by how much.

The difference is that ASML are in the area where equipment costs are going up the fastest (EUV and soon low-NA EUV) because it's fundamentally new technology that they have an effective monopoly on, other equipment costs like those for Applied Materials are not rising so rapidly -- which means ASML are taking an increasingly large slice of the fab cake, which is also getting bigger overall as demand continues to increase.

Anyone saying "It's not fair for ASML to have an EUV monopoly!" needs to remember how much money and effort ASML spent developing EUV over many years, and that there was absolutely nothing stopping anyone else doing the same -- but they didn't because it looked too risky and cost too much, and it's now well-nigh impossible for anyone else to get into this market. A bit like TSMC, but even more so... ;-)

 

[nghanayem]

which means ASML are taking an increasingly large slice of the fab cake, which is also getting bigger overall as demand continues to increase.

As an etch engineer I suppose I am kind of biased, but I actually see the winds of change pointing in a different direction. Feature size scaling is less desirable now than it ever was (diminished economic benefits, worse leakage, and RC that throttles any device level enhancements). On the logic side the adoption of GAA and later CFETs will increase the value captured by deposition and etch hardware. For NAND, litho is a small part of total cost and will remain so for the foreseeable future. Finally for DRAM, the switch to 3D will greatly diminish the importance of lithography. ASML is far from "being in trouble". But if I pull out my crystal ball, I think that Litho's share of the equipment TAM will begin to plateau in logic, slightly decline in NAND, and greatly decline in DRAM over the coming decade.