Impact on Semiconductor 'Super Eul' ASML from Trump's Tariff Attack [Corporate Research Institute]

Relentless Growth for 40 Years Driven by "Moore's Law": ASML
Rising Interest in Possible Tariff Exemption Request

Editor's NoteSouth Korea ranks 2nd in the world in corporate research and development (R&D) expenditure (2022) and 4th in the number of patent applications filed in the United States (2020). However, the productivity growth rate of companies has sharply declined from an average annual rate of 6.1% during 2001-2010 to 0.5% between 2011 and 2020. This is because the productivity growth of 'innovative companies'?those actively engaged in innovation activities?has slowed down. Without change, companies will be ignored by the market. To help the industry regenerate its innovation DNA, we look into innovation cases pioneered by famous overseas companies. Innovative companies will be the catalyst to boost the stagnant Korean economic growth rate.

Will the Netherlands request tariff exemptions from U.S. President Donald Trump for ASML, a semiconductor equipment company known as the 'super Eul (乙)' in the semiconductor industry?

Semiconductors are excluded from the 20% reciprocal tariffs imposed by the U.S. on European imports. However, since President Trump has decided to impose tariffs on semiconductor-related items soon, there is growing interest in the semiconductor industry about whether ASML's equipment can avoid tariff impacts.

The semiconductor industry predicts that ASML's irreplaceable 'super Eul' status will minimize tariff rates or, even if tariffs cannot be avoided, will not significantly impact ASML's performance. From the U.S. perspective, maintaining semiconductor supremacy requires the equipment made by ASML. About 16% of ASML's net sales last year came from semiconductor facilities in the U.S.

ASML produces extreme ultraviolet (EUV) lithography equipment, which draws circuits on silicon wafers before semiconductor manufacturing. The competitiveness in lithography lies in the ability to draw circuits with extreme precision, and ASML manufactures equipment capable of drawing the thinnest lines in the world. Currently, there is no company worldwide that can replace ASML, and without ASML's equipment, manufacturing semiconductor chips necessary for advanced smartphones and computers is impossible.

Christophe Fouquet, CEO of ASML, announced the fourth-quarter results on January 29 in Veldhoven, Netherlands. Photo by Reuters Yonhap News

Relentless 'Innovation' That Made ASML No.1 in Lithography Equipment

ASML has grown by realizing 'Moore's Law' to become the leader in lithography equipment. Moore's Law is a concept founded by Gordon Moore, co-founder of Intel, in the 1960s. According to the law, the density of microchips doubles every two years. Doubling semiconductor density means maintaining the same processing power even if the size is halved. It also means being able to draw circuits twice as precisely. Despite downturns in the semiconductor industry, ASML never stopped investing in research and development and, although challenged by then-leading Japanese companies like Nikon and Canon, it always found ways to survive.

It was not a successful company from the start. Forty years ago, ASML was merely a startup formed by a joint venture between a research and development group spun off from Philips and ASMI (ASM International). It had only about 40 employees. Its first office was a leaky wooden warehouse located in Eindhoven, Netherlands.

"The only business strategy you can think of in this industry is to aim for first place. You have to want to win the gold medal. If you decide before starting that you will be satisfied with the bronze medal, you will probably end up sixth. Then it's over." (From Semiconductor Super Gap, by Mark Heijink)

This is part of an interview given by Gjalt Smit, then CEO of ASML in May 1985, to the Dutch daily NRC Handelsblad.

Although the Dutch government’s initiative to develop the semiconductor industry provided a supportive backdrop, ASML researchers worked fiercely to create world-class technology. Along with the global growth of the semiconductor market, ASML also rose steadily. ASML, listed on the Amsterdam and U.S. Nasdaq stock exchanges, now has a market capitalization of 400 trillion KRW, with last year's sales exceeding 40 trillion KRW.

"Our industry is fundamentally built on people's ability to work together and innovate together," and "Export controls and escalating geopolitical tensions threaten this collaboration."

Christoph Pueke, ASML CEO, recently warned at a seminar held before President Trump's tariff policy announcement that export controls could threaten innovation not only at ASML but across the semiconductor industry.

ASML's Corporate Culture Emphasizing Diversity and Inclusion

Meanwhile, diversity is also an intrinsic value at ASML. In September 2023, Richard Lamers, Vice President of ASML Korea, took the stage at a forum hosted by the Ministry of Gender Equality and Family to introduce ASML's case under the theme of 'A Company Where Everyone Can Work Well.'

Exterior view of ASML headquarters located in Veldhoven, Netherlands. Photo by Reuters Yonhap News

Vice President Lamers emphasized that ASML pursues an inclusive culture through voluntary participation of its members. He said, “this culture is supported by active management support and concrete actions. In particular, diversity and inclusion are promoted as core global priorities based on clear strategies and execution plans.”

ASML regards diversity as one of its most important corporate values. This is based on the reason that companies in the top 25% in diversity outperform those in the bottom 25% (according to a McKinsey report). ASML has worked to increase the promotion rate of female senior executives and has also led efforts to hire female scientists. Going further, inclusion is also a core value.

The proportion of employees with neurodiversity, such as autism spectrum disorder or attention deficit disorder, is higher than in typical companies. Martin van den Brink, former Chief Technology Officer (CTO) who has been with ASML since its early days, publicly shared his experience with dyslexia. ASML's three core values are the 'three Cs': Challenge, Collaborate, and Care. People who focus only on their own work and do not collaborate are known to receive lower bonuses. At ASML, work is not done based on specific individuals or positions. The top priority is to realize the shared mission by everyone.