Intel Stake in ASML Could Be Boon for the Chip Maker

Intel's $4.1 billion investment in the chip-equipment maker could help accelerate the development of such technologies as 450mm wafers and EUV lithography.

Intel€™s $4.1 billion stake in chip-equipment maker ASML was a smart move by a vendor that sees its manufacturing capabilities as a key advantage, not only against traditional rival Advanced Micro Devices, but also in its growing competition with ARM Holdings.

Intel€™s investment in the Dutch company is aimed at helping ASML develop technologies that will have both short- and long-term benefits for the giant chip maker. The more immediate payback will be around developing 450mm wafers, which will enable Intel to manufacture more chips more quickly. Farther down the road will be the benefits from the development of extreme ultraviolet (EUV) lithography, an immature technology that holds promise as chips continue to shrink in size.

Intel is investing more money in the 450mm wafer technology, though both will be crucial to Intel€™s future plans.

"Productivity improvements, driven by enhanced wafer manufacturing technologies, especially larger silicon wafers and enhanced lithography technologies with EUV, are direct enablers of Moore's Law, which delivers significant economic benefits to consumers," Brian Krzanich, senior vice president and chief operating officer at Intel, said in a statement.

Krzanich said that traditionally, moving from one wafer size to the next has meant a 30 to 40 percent reduction in die cost. That should happen when the company transitions from 300mm wafers to 450mm wafers, he said.

€œThe faster we do this, the sooner we can gain the benefit of productivity improvements, which creates tremendous value for customers and shareholders," Krzanich said.

Charles King, principal analyst with Pund-IT Research, said the investment by Intel into ASML to develop these technologies is an example of what such companies need to do to help bring products to the market to meet customer demand.

€œThe IT industry loves to natter on about the benefits of innovation, and consumers tend to fixate on whatever shiny new thing comes to market,€ King wrote in a July 11 report. €œBut getting from the here and now to that glistening, magical innovative future requires a hell of a lot of hard, practical work in materials science, design, manufacturing and production. In essence, successful vendors are a bit like ballet stars€”displaying a level of grace on stage which, when successful, never hints at the months and years of effort required to appear effortless.€

The result, he said, can be good for everyone.

€œDancing at the edge of what is technologically possible with the goal of probable commercial development is no easy task, but it is a process that has brought success to Intel time and time again,€ King wrote. €œFor that reason, we expect the company€™s investment in ASML will deliver significant benefits to both companies and their legions of partners and customers.€

According to Intel, the investments it will make to ASML will come in two phases and will include money to both help fund research and development efforts and for equity investments in the company. In the first phase, Intel will spend about $680 million to help ASML speed up the development of 450mm manufacturing tools, and another $2.1 billion as an equity investment for about a 10 percent stake in ASML.

The second phase includes another $340 million for accelerating the development of EUV technology and about $1 billion for another 5 percent of the company.

Intel officials said the combination of the 450mm wafer production and EUV technology will be a boon to semiconductor manufacturers, both in terms of productivity and cost. The chip maker was involved in the creation of the first EUV consortium in 1997, the company said.

€œEUVL [EUV lithography] is a somewhat larger and riskier investment effort,€ Pund-IT€™s King said. €œThough it has been around for some time and ASML reportedly began shipping non-prototype EUVL machines to customers last year, the technology requires considerably more energy and time to perform etching tasks than do standard immersion lithography solutions. In other words, EUVL is far from being ready for prime time.€

ASML officials have said they intend to sell up to 25 percent of the company to semiconductor companies. With Intel gaining a 15 percent stake, ASML is reportedly in talks with other manufacturers€”including Taiwan Semiconductor Manufacturing Co. and Samsung Electronics€”to sell the remaining 10 percent.