Car chip shortages a sign of wider demand crunch: ASML executive

FILE PHOTO: Trainees learn how to build and operate an EUV machine at the training center at ASML Holding in Tainan,
FILE PHOTO: Trainees learn how to build and operate an EUV machine at the training center at ASML Holding in Tainan, Taiwan, August 20, 2020. REUTERS/Ann Wang/File Photo

February 11, 2021

By Toby Sterling

AMSTERDAM (Reuters) – The chip shortages slowing car production are a symptom of broader increased demand that is placing strains on suppliers across the semiconductor sector, according to Dutch equipment maker ASML.

One of ASML’s top executives said that higher demand for most types of computer chips — including those considered one step below cutting edge — looks stronger and more permanent than most players in the industry, including ASML, had expected when the coronavirus pandemic began.

“I think all over the place…the demand to our customers — so the semiconductor manufacturers — I would say that all over the place you see a stressful situation,” Ron Kool, an executive vice president at ASML, told Reuters.

ASML has grown over the past decade to become Europe’s largest industrial tech company, with a value of nearly 200 billion euros ($240 billion). It supplies its machinery to chip makers including Intel Corp, Samsung Electronics and Taiwan Semiconductor Manufacturing Co.

Industry observers had expected demand from one or two specific sectors to underpin growth but Kool said it now looked as if a range of applications from 5G telecoms, automobiles, data centres, industrial electronics and the ‘internet of things’ were all looking to be fed.

“For me personally, I don’t think it’s a wave,” Kool said, adding that demand for internet of things applications in particular look strong. “I think we’ve come to a new level, that’s my view.”

The supply crunch is most evident in the auto industry where shortages of semiconductors have forced carmakers to cut production just at a time when sales have recovered more quickly than expected.


ASML produces “Extreme Ultraviolet” or EUV lithography machines that map out the tiny circuitry of top computer chips.

The company’s CEO has jokingly referred to them as “glorified photo copiers”, but they cost up to 200 million euros each and are used by leading chipmakers.

In ASML’s fourth quarter 2020 earnings report last month, the company surprised analysts with an exceptionally strong order intake for the previous generation of its machines, which still make up the lion’s share of its sales.

Kool, who runs that division, said that at the end of last March, it had looked like 2020 would be a “problematic” year.

“But one or two months later it turned totally different.”

That is in part because demand for cutting edge chips also reflects demand for less complex ones as well.

For example, in the case of a top-of-the-line smartphone, while the very best logic chips in the handset might be made with ASML’s cutting edge EUV machines, the memory and other chips on the device can be made using older tech.

Though Kool is confident ASML can hit its financial targets for 2021, he is not sure it can exceed them, given strains “throughout the whole chain.”

“If we look to this year, I would feel comfortable to have more production capacity, let me put it that way,” he said.

(Reporting by Toby Sterling; Editing by Keith Weir)

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