Samsung travels to the Netherlands for negotiations with ASML

Samsung travels to the Netherlands for negotiations with ASML

Samsung’s vice chairman travelled to the Netherlands to discuss its future with ASML. Samsung wants to produce groundbreaking microchips. The tech giant depends on a steady supply of ASML’s equipment.

Samsung is one of the world’s largest chip manufacturers. Customers place orders, after which Samsung uses its factories and equipment to produce the chips. The model is comparable to renting. In this case, customers don’t hire cars, but production capacity.

Samsung has to invest in equipment to keep up with demand. Customers seek smaller and smaller chips. Small is better in the industry. The more transistors you can fit on a surface, the more desirable the chip.

ASML, based in the Netherlands, develops machines for the production of tiny chips. The machines use extreme ultraviolet radiation (EUV), suitable for the world’s smallest units. ASML’s technology is so desirable that its market value rose to over 200 billion dollars in the last ten years. Samsung is interested as well — and that’s putting it mildly.

Lee Jae-yong, Samsung’s vice-chairman of the board, recently travelled to an ASML office in Eindhoven. The vice-chairman met with CEO Peter Wennink. Samsung shared the news in a statement, but details are scarce. Nevertheless, it’s safe to say why the tech giant is sending top executives to the Netherlands. Samsung wants to ensure a supply of ASML’s machines.

Fierce competition

ASML’s EUV machines are as unique as they are rare. In 2021, ASML shipped a mere 42 models. Without the machines, customers like TSMC, Intel and Samsung are unable to produce the world’s most advanced chips. Resultingly, the giants compete fiercely.

Samsung acquired a number of EUV machines over the years, but the exact numbers are unknown. Lee Jae-yun, a market expert at Yuanta Securities, estimates that Samsung secured 18 EUV machines from ASML in the past year. The tech giant likely wants to up that number.

A difficult task. ASML isn’t exactly known for impulsive deals. The organization carefully distributes its supply among customers. EUV machines are an important source of income. Favouritism can’t be afforded. Time will tell if and how Samsung’s visit pays off.

Tip: ASML: ‘Production capacity limit in sight’