Why ASML Dominates the Chip Market

ASML Holding NV (ASML) isn’t a company; it’s the linchpin in the supply chain that global semiconductors need. Due to the uniqueness of supplying extreme ultraviolet, or EUV, lithography systems, the company enjoys a monopolistic position in its market. Advanced semiconductor chips manufactured on those machines are needed for everything from AI applications to 5G and high-performance computing.

ASML projects revenues between €30 and €35 billion for its 2025 lot. Saying the longer-term opportunity exceeds €60 billion through 2030, ASML seems unstoppable in about every metric available. It is true that success brings risks, and it would raise the possibility of potential or eventual disruption to ASML’s dominance because of hostility between blocs or by large economies such as China rising in self-sufficiency.

ASML has emerged successfully due to its unparalleled technological edge. EUV lithography is the jewel of its portfolio and will play an important role in making next-generation chips with smaller geometries and big processing power. Given this increasing demand for the systems in AI, cloud computing, and telecommunications, ASML is strategically positioned to lead the globe in technological innovation. Finally, adding services and managing upgrades to ASML’s currently installed bases formed a core part of its growth, with IBM. Further expansion of this install base promises income security at present or in the even cyclic semiconductor industry by continuing revenue streams until FY30 on higher revenues. At the same point, IBM thus contributes to about one-third in recurring advanced costs, underlines the capability for monetizing more effectively an increase in the scale with customers.

With such monopolistic power, however, ASML became a target for its rivals, particularly the People’s Republic of China. The company presently receives a substantial portion of its revenues from China, but the export restrictions made things more complex. The US has placed tight controls on the export of high-tech equipment, including ASML’s EUV systems, and that forces China to invest aggressively in developing its semiconductor capabilities. It reportedly spends an astonishing $50 billion a year developing chips.

According to the finance expert, Sami Andreani while this push for self-reliance could eventually reduce China’s dependency on ASML, its technological capabilities remain far behind. Furthermore, the potential 30% decline in China sales for FY25, while significant, is expected to be offset by robust demand in other regions. The U.S. and Europe, driven by increased semiconductor production capacity and government-backed initiatives to strengthen domestic chip manufacturing, are poised to fill the gap. This regional diversification ensures ASML’s continued growth and shields it from over-reliance on a single market, mitigating the risks posed by China’s evolving strategy.

Notwithstanding all these challenges, ASML is well-positioned to realize further growth and protect the leadership in its market segment. Aggressive investment in research and development by the company is projected to reach €6-6.6 billion annually by 2030, underlining its commitment to staying ahead of the curve. Its leading position in the US and European markets shields it from some of the risks related to China’s ambitions.

Valuation metrics also underpin the strength of ASML: with a forecast FY25 EPS of €22.20 and a forward P/E of 39 (5-year average), the intrinsic value for the company is more than €865, representing substantial upside for long-term investors. Notwithstanding geopolitical risks, ASML has monopolistic power and technological advantages that place it at the heart of the semiconductor industry, making it impossible for any investor to resist the company.