As China rises as a global superpower, there are only a few things out of its range. One of them is a Cold War-era $150 million computer chip-making machine made by a Dutch company.
The machine’s inaccessibility to China has significant geopolitical implications, particularly in the US-China economic rivalry. In addition, it illustrates how any country hoping to build an independent semiconductor supply chain is virtually impossible.
Massive machine beyond China’s reach
This complicated machine is manufactured in Veldhoven, the Netherlands, by ASML Holding. It is renowned for being the most advanced chip-making machine in the world. The tool works by using a unique light to highlight minuscule circuity on the chips, enabling it to make small silicon slices.
After decades of development, the machine was finally introduced in 2017 to meet the demands of high-volume manufacturing. The machine’s price tag is pegged at $150 million, with shipping requiring three Boeing 747 planes, 20 trucks, and 40 shipping containers.
ASML’s machine is the only one of its kind capable of producing the most cutting-edge computer chips. As a result, it has profound geopolitical importance. In 2019, the Trump administration prevailed in convincing the Dutch government to ban shipments of this machine to China. For now, Biden appears to be sticking to the same policy.
Experts have opined that only ASML is capable of making ultramodern chips. Georgetown University research analyst Will Hunt explains that since China can’t access such a machine, they would have to build one themselves, which “is a frustrating thing.”
Self-reliant supply chain ‘unrealistic’
The ASML machine has generated a global bottleneck for the computer chips supply chain. Producing it requires three continents working – Asia, North America, and Europe – and exemplifies the complexity of the supply chain necessary for countries to make semiconductor chips.
The US and China are among countries interested in producing their own computer chips. Already, Congress has mulled plans to spend nearly $50 billion to stop being reliant on chip manufacturers abroad. Specifically, the Pentagon has expressed concerns regarding the federal government’s continuing dependence on Taiwan for chips.
Harvard Business School management professor Willy Shih considers ambitions for a self-reliant supply chain for semiconductors as highly unrealistic. Indeed, the ASML machine provides a great example of why global trade is the only way to go. Moreover, it would require more than $1 trillion to achieve an independent supply chain, according to a Semiconductor Industry Association and Boston Consulting Group study.
ASML ‘s importance
The ASML machine’s importance is so enormous that it’s now valued at $285 million. It has transformed the unnamed Dutch company into “the most important company you never heard of,” opined Evercore ISI analyst C.J. Muse.
ASM was built in 1984 by electronics manufacturer Philips and Advanced Semiconductor Materials International. ASML soon became an independent firm and evolved to be the world’s largest semiconductor chip manufacturing machines and equipment supplier.