The most powerful supplier in the global semiconductor industry is ASML of the Netherlands. Its extreme ultraviolet (EUV) lithography machines, essential for cutting-edge chip processes, draw a queue of buyers including Samsung Electronics, TSMC and Intel.
The seeds of EUV, in fact, were planted in the United States. In 1997, Intel, AMD and Motorola joined three national laboratories under the U.S. Department of Energy to form a consortium aimed at commercializing EUV. Silicon Valley Group (SVG), a U.S. lithography equipment maker, came in as the equipment partner and held the right to use the research results first. ASML at the time was an outsider, having been spun off even from Philips, its de facto parent, but Intel pushed to bring it into the consortium in 1999.
Intel had its reasons for backing the outsider. SVG possessed the core optical technology for EUV but lacked the mass-production capability ASML had built on the factory floor. Intel focused on the practical question of whether a process could be brought online on schedule, rather than on the geopolitics or politics of whether a company was American. Yet Intel's choice, made to defend its own competitiveness, would later help build the monopoly position of a Dutch equipment maker.
A weakened SVG was eventually acquired by ASML in 2001. Washington was again skeptical, but approved the deal after Intel's lobbying, on the condition that production facilities remain in the United States. The U.S. government at the time was wary of the rise of Japanese equipment makers and, in part, chose a Dutch company as the next-best option. With SVG unable to survive on its own, officials likely expected that bringing in ASML would at least keep research capacity inside the country.
Over the long run, however, that judgment was wrong. After absorbing SVG's equipment, customer base and engineers, ASML expanded outward in partnership with European component suppliers such as Germany's Zeiss and Taiwanese foundries such as TSMC. That trajectory likely dovetailed with the rapid erosion of U.S. manufacturing capacity.
The balance of power also shifted against Intel, once ASML's patron. In 2012, Intel invested $4.1 billion for a 15% stake in ASML and still could not bend the company to its will. ASML drew investment not only from Intel but also from TSMC and Samsung Electronics, exercising a careful balancing act among the buyers of its lithography machines. From that point, ASML began to act as a supplier with the upper hand.
Even when ASML stood at a technological cliff edge, the United States failed to seize the opening. In the early 2000s, the industry's goal was a 157-nanometer dry deep ultraviolet (DUV) lithography machine. ASML had declared it would begin mass production by 2003, then struggled without an answer.
The clue to a turnaround was water, and the idea came from researchers based in the United States. Burn Lin, who had contributed to immersion development since his days at IBM's research labs in the 1980s, proposed in 2002, after moving to TSMC, that filling the gap with water at a 193-nanometer light source had a better chance of success than the 157-nanometer dry approach. Filling the space between the lens and the wafer with water works like a lens made of a water droplet, allowing finer circuits to be drawn than existing machines could manage.
Once again, it was ASML that put the American idea to use. Intel dismissed immersion technology as not yet mature, while ASML delivered the industry's first immersion lithography machine to TSMC in December 2003.
The results of ASML's bet are now showing up in China. In September this year, the Center for Technology and Statecraft (CTS), a think tank founded by former U.S. administration officials, estimated in a report that China had brought in about 343 of ASML's immersion DUV machines. It noted that some of them could allow Huawei to produce 7-nanometer logic chips for use in making artificial intelligence semiconductors. CTS called for closing loopholes in export controls on China and argued for a full export ban, but the machines are already inside the country.
The United States planted the seeds of EUV, and Intel even put up money for ASML. But it was the Netherlands, working with neighboring manufacturing powers, that grew the fruit — and that fruit is now flowing to factories in China. This is how frightening the consequences are when even a superpower chases short-term expediency and dismantles its manufacturing base. That is why there is something bitter in the sight of U.S. President Donald Trump only now calling again for goods to be made in the USA.
