Chip-Making Companies Can’t Buy Enough Lithography Machines

There’s a new twist in the ongoing global chip shortage. The industry’s leading manufacturer of lithography machines is warning that its own supply issues will affect companies’ expansion plans. The chief executive of ASML, which creates lithography machines used by companies like Intel and Samsung, has said it won’t have enough parts to meet demand for at least two years.

Speaking to the Financial Times, ASML’s chief executive Peter Wennink said he’s in direct contact with executives like Intel CEO Pat Gelsinger. His message to them is once they finish building their new fabs, it might take some time to fill them up with his company’s machines. “We’re going to ship more machines this year than last year and . . . more machines next year than this year. But it will not be enough if we look at the demand curve. We really need to step up our capacity significantly more than 50 per cent. That will take time.” Wennink says his company has 700 suppliers in its supply chain, and 200 of them are critical.

ASML’s struggles come at a time when semiconductor companies are investing tens of billions of dollars to expand fab capacity. Intel just announced a $19 billion megafab in Germany last week. That follows its previous investment of $20 billion in a fab in Ohio too. Intel’s arch rival TSMC has also announced a $100 billion investment in its own expansion over the next three years. Not to be left out of the party, Samsung will be dropping $150 billion over the next decade to increase production too.

Intel’s Gelsinger says that even though the company will begin building its new fabs this year, it can wait a bit on ASML’s machines. He said it will take them a few years just to get the shell of the facility in place, and hopefully by then ASML will have machines to sell him.

Just as the chip makers are rushing to expand their capacity, so is ASML, and it’s not an easy task. The company’s chief offered an illuminating example to FT, saying the most complex component in its machines is the lens. That lens is made by German company Carl Zeiss, so what does ASML do when it needs more lenses? It can fork over money for more lenses but it’s not so simple. According to Wennink, “They need to make significantly more lenses,” he said. But to do that it would need more factory space, which means it has to “build clean rooms; they need to start asking for permits; they need to start organising the building of a new factory.” He continued, “Once a factory is ready, they need to order the manufacturing equipment; they need to hire people. And then . . . it takes more than 12 months to make the lens.”

Obviously, these things take time to resolve. Based on industry projections, it does seem like the chip shortage will ease up in 2024 or thereabouts. Even TSMC’s Senior Vice President of R&D has said the same thing. Every chip company in the world (it seems) started dumping billions of dollars into expansion plans and long-term supply contracts starting in 2020 as the pandemic took hold. That trend only continued through 2021. Given the timelines involved, those efforts will begin to bear fruit in three to four years from now. Some analysts have even predicted by that time, when all of the chip manufacturers have expanded their capacity, supply might be higher than demand.

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