The Thing Behind The Thing: ASML Powering The World's Semiconductor Companies

Benzinga routinely examines a stock that might be considered a little under the radar. The company may not be well-known, but chances are the line of work it’s in is pretty familiar.

This is called the “thing behind the thing.”

A company that supplies the semiconductor industry is this week's “Thing Behind The Thing.”

About ASML: One of the world’s leading manufacturers of chip-making equipment is ASML Holding NV ASML. The company holds a dominant market share in its segment and counts top chipmakers as customers.

ASML refers to itself as “the world’s supplier to the semiconductor industry.”

“It’s a common misconception that we make chips, also called microchips or integrated circuits, but we actually design and manufacture the lithography machines that are an essential component in chip manufacturing,” the company said in its investor day presentation.

One customer named by ASML is Intel Corporation INTC, which uses the company’s machines to create microchips used in electronic devices such as smartphones and laptops. Qualcomm, Inc. QCOM is also listed.

Other companies named throughout the presentation include Taiwan Semiconductor Mfg. Co. Ltd. TSM, Apple Inc AAPL, Samsung and Micron Technology, Inc. MU.

While the company doesn’t have a monopoly in the industry, a QZ article highlights how the company could be close with over a 60% market share in 2019 and a staggering impact on the semiconductor market.

The article said ASML is the only manufacturer of certain chip-making machines.

“If Veldhoven (ASML headquarter city) vanished tomorrow, our version of capitalism — our cellphone-toting, remote-working, Netflix-binging, online-buying, cloud-storing, smart car-driving, Internet-of-Things-ing capitalism — would judder to a halt,” the article said.

The call-outs of several industries and the dependence on ASML’s products could show exactly how the company is “the thing behind the thing.”

Related Link: MP Materials: Rare Earth Mining Company Is The Thing Behind The Thing For EVS, Other Sectors 

Growth Ahead: At ASML's investor day, a common theme was the demand for its products and technology.

“With strong demand for our products and execution of our strategic priorities, we have increased confidence in our long-term growth opportunities while continuing to deliver value to our stakeholders,” the company said.

Megatrends like 5G, cloud, artificial intelligence and gaming are cited as reasons for more semiconductors and growth across the industry.

Another item highlighted in the investor presentation is the increased push by countries for semiconductor spending, possibly due to a current chip shortage. The countries mentioned were the U.S., China, Japan, South Korea and many European nations.

“Our strategy aims to deliver long-term growth and stakeholder value,” the company said.

ASML highlighted the strong demand across multiple market segments and product lines during its second-quarter earnings report.

“The long-term demand is not only for advanced nodes, but also for legacy and mature nodes in Logic as well as Memory,” ASML CEO Peter Wennink said.

Financials: The company is projecting fiscal 2021 revenue to increase by 35% year-over-year.

“We see significant growth opportunities beyond 2025. Assuming a 1 trillion dollar semiconductor market by 2030, we expect an annual revenue CAGR for 2020-2030 of around 11%,” the ASML said.

Stock Performance: ASML shares were trading at $730.99 at the time of publication Friday. Shares have traded between $357.38 and $895.53 over the last 52 weeks. 

ASML shares are up 93% over the last year and up over 550% over the last five years.

Photo: Courtesy ASML