ASML (NASDAQ: ASML) and Applied Materials (NASDAQ: AMAT) are two of the world’s largest semiconductor equipment makers. ASML is the world’s leading producer of lithography systems, which are used to optically etch circuit patterns onto silicon wafers. It’s the only supplier of high-end extreme ultraviolet (EUV) lithography systems which are used to manufacture the world’s smallest, densest, and most power-efficient chips.
Applied Materials provides a wider range of semiconductor manufacturing equipment, services, and software for the foundry, logic, and memory chip markets. It also sells manufacturing equipment for LCD and OLED screens. Both companies are considered linchpins of the semiconductor sector.
Image source: Getty Images.
But over the past three years, ASML’s stock dipped 5% as Applied Materials’ stock rose 15%. Let’s see why that happened, and if Applied Materials remains the stronger semiconductor equipment play than ASML.
ASML, which is based in the Netherlands, monopolizes a key link in the semiconductor market’s supply chain with its EUV systems. All of the world’s leading foundries — including Taiwan Semiconductor Manufacturing, Samsung, and Intel — need to keep purchasing ASML’s EUV systems to produce the world’s highest-end chips.
These massive systems cost more than $150 million each and require multiple planes to ship. Its next-gen high-NA EUV systems, which are required to produce even smaller chips, currently cost about $380 million. It took ASML decades to develop its EUV technology, so it won’t face any meaningful competitors for the foreseeable future.
Yet ASML’s growth still ebbs and flows with the cyclical semiconductor market. It’s also highly exposed to the tech and trade war between the U.S. and China, which has already barred it from selling its EUV systems and some of its older deep ultraviolet (DUV) lithography systems to Chinese chipmakers. It still generated 26% of its revenue from mainland China in 2023.
ASML’s revenue rose 33% in 2021, 14% in 2022, and another 30% in 2023. That growth was driven by robust sales…
..
