The world's most important monopoly

A quick dive into ASML's business

I decided to write up all of my current portfolio companies, regardless of the company's size. ASML ASML 0.00%↑ is a Dutch technology company in the semiconductor equipment industry and my second largest company with over $340 billion in enterprise value. It is also one of my longest held companies, since October 2020. ASML is probably the most important monopoly to the global economy and has one of the deepest moats on the planet.

ASML was founded in 1984 as a JV between ASM and Philips to develop chip manufacturing equipment. The company soon launched its first DUV system in 1991, where Japanese Canon and Nikon owned the market. In 1997, ASML started to study the viability of extreme ultraviolet light (EUV) for lithography instead of deep ultraviolet light (DUV). While Canon and Nikon didn’t believe in the viability of EUV, ASML, in cooperation with the giants of the Chip industry like Intel INTC 1.73%↑ and TSMC TSM -0.51%,↓ managed to develop a viable product. In 2013 the first EUV system shipped.

EUV is a smaller wavelength than DUV and enables the printing of finer structures on the semiconductors. Lithography is the most critical step in the manufacturing process of semiconductors.

Below is an illustration from my friend Leandro at Best Anchor Stocks, check out his post on the history of the semiconductor industry. This simplified graph shows how vast the industry is and how many very specialized players exist within each niche.

Let’s explore more closely how ASML derives a competitive advantage from its systems and why I own it.