How important is ASML?

A massive machine sold by a Dutch company has become a key lever for policymakers — a sideshow of just how unrealistic any country's hopes for a fully self-sufficient supply chain in semiconductor technology are.

The machine is manufactured by ASML Holding in Wildhoven.

Its system uses a different kind of light to define ultra-small circuits on a chip, packing more performance into small chips. The tool, which took decades to develop and entered mass production in 2017, cost more than $150 million per plane and required 40 containers, 20 trucks and three Boeing 747s to ship it to customers.

This complex machine is widely considered necessary to make state-of-the-art chips, a capability that has geopolitical implications.

Without the system, manufacturers would not be able to produce leading-edge chips, "however it can only be made by the Dutch company ASML," said Will Hunter, a research analyst at Georgetown University's Center for Security and Emerging Technologies. It will take at least a decade for China to build its own similar equipment, Will Hunter added.

ASML's machines have effectively become a bottleneck in the supply chain of chips that act as the brains of computers and other digital devices. The tool's development and production on three continents - using expertise and parts from Japan, the US and Germany - is also a reminder of just how global this supply chain is, making it available to any country looking to take the lead in semiconductors The reality check itself.

Not only China, but the U.S. Congress is also discussing plans to spend more than $50 billion to reduce reliance on foreign chipmakers. Many parts of the federal government, especially the Pentagon, have been concerned about America's reliance on Taiwan's leading chipmaker.

A study this spring by the Boston Consulting Group and the Semiconductor Industry Association estimated that it would take at least $1 trillion to build a self-sufficient chip supply chain, and that the price of chips and the products made with them would skyrocket.

That goal is "completely unrealistic" for anyone, said Schwilly, a management professor at Harvard Business School who studies supply chains. ASML's technology "is a great example of how you can trade globally."

The situation underscores the pivotal role played by ASML, a once obscure company now worth more than $285 billion. It's "the most important company you've never heard of," said Evercore ISI analyst CJ Muse.

The company was founded in 1984 by electronics giant Philips and another tool maker, Advanced Semiconductor Materials International, and has since become an independent company. ASML is by far the largest supplier of chip-making equipment that involves a process called lithography.

Manufacturers use photolithography to repeatedly project patterns of chip circuits onto silicon wafers. The more tiny transistors and other components you can add to a single chip, the more powerful it becomes and the more data it can store. The pace of miniaturization is known as Moore's Law -- a law named after one of the founders of chip giant Intel.

In 1997, ASML began researching the transition to devices using extreme ultraviolet or EUV light. This light has ultra-small wavelengths and can create smaller circuits than conventional lithography. The company later decided to build machines based on the technology, a work that has cost $8 billion since the late 1990s.

In order to speed up the research and development progress, the development process is also rapidly going global. ASML now assembles advanced machines using lenses from Germany and hardware developed in San Diego that produces light by blasting tin droplets with a laser. And these key chemicals and components come from Japan.

Peter Wennink, chief executive of ASML, said the company's early funding crunch forced them to integrate inventions from specialist suppliers, creating what he called a "collaborative knowledge network" of rapid innovation.

"We are forced not to do what others do better," he said.

ASML builds on other international collaborations. In the early 1980s, researchers in the United States, Japan, and Europe began to consider a fundamental shift in light sources. The concept was adopted by a consortium that includes Intel and two other U.S. chipmakers, as well as a Department of Energy laboratory.

ASML joined in 1999 after more than a year of negotiations, said Martin van den Brink, ASML's president and chief technology officer. The company's other partners include Belgium's Imec research center and another U.S. consortium, Sematech. ASML later attracted huge investments from Intel, Samsung Electronics and TSMC to help it grow.

This development is made more tricky by the properties of extreme ultraviolet light. A lithography machine typically focuses light through a lens to project a circuit pattern on a silicon wafer. But the small EUV wavelengths are absorbed by the glass, so the lens won't work. Mirrors, another common direct light tool, have the same problem. This means that new lithography techniques require mirrors with complex coatings that combine to better reflect small wavelengths.