Lithography machine giant ASML panicked

In the past two years, with a series of major events such as the shortage of chips and the ban on China, lithography machines have jumped from an unknown advanced manufacturing equipment to a hot topic on the public news. In this, the Dutch lithography machine manufacturer ASML is almost unavoidable existence.

The reason is not complicated, because ASML is the only company in the world capable of manufacturing advanced EUV lithography machines. TSMC, Samsung and Intel want chip design companies to make advanced process chips, they must use the company's EUV lithography machines. In practice, the complexity and precision of the EUV lithography machine make its mass production extremely low and perennial supply. Even with the increasing production in the past two years, ASML did not meet the demand of the chip industry.

 Before we wrote:

(June) Samsung Electronics Vice Chairman Lee Jae-yong began his visit to Europe, the most critical is the Netherlands, not only held talks with a number of ASML executives, but also turned to support the Dutch Prime Minister: to ensure ASML, stable supply of EUV lithography machines.

But the chill in the consumer electronics market began early last year and eventually spread to ASML, which was never out of stock to sell. On April 17, DigiTimes, a media outlet close to the supply chain, reported that the popularity of TSMC, Samsung and Intel for EUV lithography has cooled, with customer TSMC starting to cut some ASML EUV orders, up to 40%.

 It was both reasonable and unexpected. First of all, starting from the overall weakness of the smartphone and PC market, the shrinking demand will continue to transfer to the upstream supply chain, but the cycle and supply chain of the semiconductor industry are very long, and the transmission speed is relatively slow. Shen Bo, senior vice president of ASML and president of China, also said at a media opening last year:

 Compared with other suppliers in the industry chain, one characteristic of semiconductor equipment is that the relatively long supply cycle. We are almost the last when we feel the demand.

 Secondly, the news of ASML represents the contract factory did not see the industry recovery and demand growth, so it chose the conservative approach of cutting key equipment orders to cope with the uncertainty of the overall environment. In other words, the decline in global chip demand is most likely to continue for some time.

But the above premise is still based on the previous current situation of the market, there are still many potential changes in the coming year.

01 The "unreasonable" Intel

 On April 13, Intel announced that its contract manufacturing services division (IFS) will partner with ARM to build a SoC for mobile devices based on the 18A(1.8nm) process. The two companies plan to focus initially on mobile devices, and then expand to cars, the Internet of Things, data centers and other areas, clearly targeting TSMC's dominant market.

 Given Intel's roadmap, the mass production of the 18A process is scheduled for 2025, and the harvest period with ARM will be at least after that, but Intel's demand for EUV lithography should be added.

 Unlike TSMC and Samsung, Intel has been increasingly aggressive in promoting IDM 2.0 since Pat Kissinger (Pat Gelsinger) became CEO. In response, Intel's demand for EUV lithography machines is growing, and more urgent than the other two.

 In addition, due to the tight capacity of TSMC's advanced processes, price and the anti-globalization process of the chip industry, Intel's demand for advanced processes is also advancing, including Intel 3 and 20A have received customer orders. Among the three, Intel has been fighting for more customer orders due to the low starting point of the OEM business, but the variable is *.

 Another reason, of course, is because Intel has misjudged EUV lithography machines in the past. Kissinger said in an interview that Intel was an important driver of EUV technology development, including ASML developing EUV lithography machine also got a lot of help from Intel, but did not choose the EUV lithography route at the 10nm node, Intel tried the SAQP quadruple exposure technology production advanced process.

After the story, we all learned that —— Intel "optimized" the 14nm node for several generations, failed to achieve 10nm, and finally chose the EUV lithography route. But in terms of the number of EUV lithography machines, time determines Intel's little " in reserve.

 Small reserves and large demand, so although everyone is facing the weak downstream demand, Intel still chose to increase its purchase efforts, including grabbing the first order of ASML and new lithography High-NA EUV last year, in order to ensure the smooth progress of the 18A node.(The High-NA, a high numerical aperture, rises from the current 0.33 to 0.55, allowing for a smaller process and higher production efficiency.）

According to ASML CEO Peter Wennink, the price of a single High-NA EUV is between 300 million and 350 million euros (about 2.26 billion yuan to 2.64 billion yuan).

02 AI war, start the arms race

 Unlike Intel, ChatGPT's explosion surprised everyone, and if there was a wave late last year, this year it has been a worldwide AI war.

 From abroad, OpenAI (and Microsoft), Google, Amazon, Facebook, X. AI (Musk just founded), etc., to domestic Baidu, Ali, Tencent, SenseTime, light years outside (Meituan co-founder Wang Huiwen), etc., are entering the battlefield of AI model. In addition to the mainstream vision, there are more still unknown big models, such as open source BLOOM, Fudan's MOSS, and Stanford's Alpaca.

 Not only that, a large number of AI applications based on large models emerge in an endless stream, and other traditional tools are constantly introducing generative AI, which are rapidly increasing the consumption of computing power, and naturally also need huge computing power to "supplement".

 Without exception, the hardware bases behind them are a large number of high-performance GPU, mainly Nvidia A100 and H100 GPU, manufactured by TSMC's 7nm / 4nm process. While it is not in time for first-quarter earnings, there is already speculation about how much Nvidia will win. Meanwhile, TSMC's orders from Nvidia are also growing.

 In the long run, Nvidia may not be able to dominate, including AMD and Intel, Google, Internet companies that develop AI chips, and domestic GPU manufacturers. Google announced earlier this month that its fourth-generation TPU, the AI supercomputer, outperformed Nvidia's previous flagship GPU A100 supercomputer. However, the chip demand will eventually translate to foundry orders, affecting the EUV lithography market.

In other words, the development of generative AI and large models will also greatly affect the urgency of OEM demand for EUV lithography machines.

 Computing power explosion requires technological advances

 Demand and market are of course critical to the semiconductor industry, but production and efficiency are equally important. Like the "Moore's Law" that guided the semiconductor industry for half a century, the production side promotes the progress of semiconductor technology and the demand side serves to plan and develop more advanced products.

According to the OpenAI report, the global computing power demand for head AI model training doubles every 3-4 months, which means a sharply accelerated computing power consumption curve, and also means a larger chip demand and higher chip technology requirements. Or to put it simply —— With existing technology, cost cannot support a subsequent surge in computing demand.

"Chips need new technology, and there may be ten times the demand," said Nvidia CEO John Huang at this year's GTC Developer conference in terms of computing power.」

 Of course, this is a long-term course. On the one hand, the semiconductor industry is also pushing forward the process of 2nm and below, TSMC, Samsung and Intel all plan to achieve mass production of 2nm around 2025, and Intel even has 18A(1.8nm) mass production plan.

 In addition, the technological improvements in the manufacturing process are also improving the overall production efficiency. Taking the "computational lithography" developed by Nvidia combined with ASML and TSMC as an example, calculating the diffraction effect of laser makes increasingly complex mask manufacturing more efficient.

Moreover, compared with the uncertainty of the market prospect, the progress of manufacturing technology is bound to improve the efficiency of the existing products in demand, and also prepare for the future recovery and even outbreak.