Intel's $4.1 billion investment in ASML is not unlike the waiter bringing the check before serving the meal. But it had to be this way.
ASML is willing to sell another 10 percent of the company to other chip makers who are willing to kick in for the development of 450-mm litho tools and EUV. The firm is currently in discussions with both Samsung and TSMC on taking a piece of the action. If those firms decline to participate, or agree to participate but don't collectively buy the entire 10 percent remaining that ASML is willing to sell, ASML will invite others to participate. (As a condition imposed by ASML, Intel's stake in the company is limited to a maximum of 15 percent.)
The whole thing is not unlike a waiter bringing the check before serving the meal. But it had to be this way. ASML was not going to put out the investment required on 450-mm without money up front. And owing to its dominant market share in leading-edge lithography tools, there will be no 450-mm chip production without ASML.
Intel has the most to gain from the move to 450-mm. Stacy Smith, the company's chief financial officer, said this week that it expects the move to 450-mm to save the company more than $10 billion in manufacturing costs. Still, Intel alone takes ASML up on its offer, its deep pockets will no doubt also benefit rivals who will then get access to 450-mm and EUV lithography tools.
That's where the 15 percent stake comes in. Even if Intel is the only chip firm to directly support ASML's development of these technologies, the world's biggest chip maker will get a piece of the action every time a rival pulls out its checkbook to buy one of the new tools. In the words of a spokesman for ASML, Intel now has real skin in the game and even more interest in seeing the development of these technologies succeed.
Whether Samsung, TSMC or any other chip vendor takes ASML up on its offer remains to be seen. On one hand, it can be argued, there is little incentive for them to do so at this point. Especially now that Intel has put its money where its mouth is, there is little doubt that ASML will develop 450-mm tools (though for EUV, the case is far from closed). Once ASML has the tools available, they will presumably be happy to sell them to Samsung, TSMC and anyone else who wants them and has the means to pay.
But Samsung and TSMC would be wise to pony up and get involved. When 450-mm tools become available, the leading-edge chip makers will want them ASAP. While there is no publicly disclosed intent to give Intel right of first refusal on new tools—other than those Intel has already committed to buying—come sense dictates that you take care of any part owners of your company before shopping them to the general public. If Samsung and TSMC don't get in on the ground floor, they may end up waiting until Intel is pretty sure it has all of the tools it wants before they get their hands on any.
Also, Intel's 15 percent stake in ASML—as well as any stake Samsung and TSMC may take—is in non-voting shares. But again, common sense dictates that the customer who is helping to foot the bill for the development of the technology will have a louder voice when it's time to make development decisions. Samsung, TSMC and any other firm that does not get in on the action may find itself outside looking in.
This equity plus research funding is an interesting strategy. When your customer list is so short and development costs are so high, it makes a lot sense for both ASML and Intel. Should Samsung and TSMC join the party? That's a tougher call, now that Intel is in with both feet.
I have mixed feelings about this strategy. In most respects I guess it was somewhat inevitable that even ASML would want/need help with 450 mm and EUV litho, but is it one step too many down the road of industry consolidation? Are Intel, Samsung, and to a lesser extent TSMC going to be "too big to fail" at some point if they they start taking equity positions in equipment companies? Are AMAT, TEL, and other equipment companies going to follow ASMLs lead? Where does it all end?
It seems to me that there is little doubt that ASML went public with this deal because a) it's a big boost for both 450 and EUV (not to mention a vote of confidence for EUV) and b) to put the heat on TSMC and Saumsun. As you say, it would be no big deal for ASML to keep at least part of this plan a secret. But ASML wants the world to know that Samsung and TSMC have a shot to get involved too.
Could this be a boost for Nikon? I think if Nikon has the ability to match ASML in either of this technologies, now is its golden opportunity to turn the tides and level the playing feel. But I don't think Nikon can do that at this point.
Interesting that ASML went public on Intel while telling analysts that Samsung and TSMC have 45 days to get in on the deal at the same price.
The argument runs that ASML was obliged to go public once it had signed the deal with Intel.
But I have known public companies keep secrets while they dot the tees and cross the eyes.
Could ASML be trying a touch of high-pressure salespersonship?
Will it rebound the benefit of Nikon?