BUSINESSWEEK ONLINE : AUGUST 28, 2000 ISSUE
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INTERNATIONAL -- EUROPEAN BUSINESS Leapfrogging the Chip-Equipment Heavies (int'l edition) Dutch-based ASM Lithography may soon lead the pack The factory floor is spotless, and workers are dressed in clean white lab suits. Using tiny precision tools, they are assembling the boxlike machines that engrave silicon chips, the key step in semiconductor production. This is advanced microlithography, one of those tech-intensive businesses that have been a Japanese preserve for a decade. This can't be a suburb in the Netherlands, can it? Yes, it can. To be precise, it's the headquarters in Veldhoven of ASM Lithography Holding, a Dutch company that has performed a not-so-minor miracle over the past few years. Spun off from Royal Philips Electronics in 1995, ASML has transformed itself from a money-losing subsidiary into a contender for the No. 1 position in the $6 billion microlithography business. Profits last year were $73 million, a 31% gain, while sales rose 54%, to $1.1 billion. Revenues this year are forecast to top $2 billion. Listed in Amsterdam and on the Nasdaq, ASML stock has quadrupled over the past 18 months, to almost $40 a share. ASML has leapfrogged the technology used by industry leaders Nikon Corp. and Canon Inc. While the Japanese focused on small upgrades in their devices, ASML came out in 1991 with a family of new-generation machines that engrave 30% more chips per hour than standard gear. It also pioneered modular machines, which can be installed in a semiconductor fabrication plant, a ''fab,'' in six days--compared with six weeks for a Japanese machine. That's more than small change. ''Every day a semiconductor fab doesn't run costs at least a million dollars in missed revenues,'' says Kurt Ronse, director of lithography at the Interuniversity Microelectronics Center, a semiconductor research facility in Leuven, Belgium. LEADERSHIP SOON? Indeed, ASML now has a 35% share of the global market for chip-making devices, according to Dataquest Research, compared with Nikon's 37% and Canon's 18%. And that's without even tapping the biggest customers. No Japanese semiconductor makers are ASML clients. Neither is Intel Corp., the world's No. 1 chipmaker. But Chief Executive Doug J. Dunn expects the Japanese will consider new devices so they can compete better with Korean and Taiwanese chipmakers that use them. As for Intel, Dunn says a generational shift from 200mm to 300mm wafers will force it to redesign its fabs--and may open the door to new suppliers. Accordingly, ASML is about to launch a new 300mm family of devices. It's a long way from the beginning. For years after Philips started it in 1984, ASML was stifled in the Dutch giant's sprawling empire. It began to prosper only when, after the spin-off, it could issue stock options to top-performing employees and go after customers on its own. ''Philips provided us with some terrific research abilities, but we were a distraction,'' Dunn says. Dunn knows all about life inside Philips: As a Philips executive in the mid-1990s, the 56-year-old Briton led the ailing consumer-electronics division into mobile phones--only to have top management pull the plug in 1998. Dunn left, then joined ASML a year later. Dunn's challenge now is keeping up with demand. He has added about 1,000 employees in the past year, an increase of 25%; production has risen by half, to 300 machines per year. Dunn says that he could sell 80 to 100 more machines, but key suppliers cannot produce the necessary parts. While this makes analysts worry that the stock may have peaked, ASML is still a study in how Europe is learning to mix strong engineering skills with New Economy thinking. If only more European companies had its problems. By William Echikson in Veldhoven, the Netherlands _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Leapfrogging the Chip-Equipment Heavies (int'l edition) CHART: Vying for Global No. 1 INTERACT E-Mail to Business Week Online

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