ASML’s 1,000-Supplier Ecosystem: The Hidden Moat in Lithography

ASML’s cost structure includes managing an ecosystem of approximately 1,000 suppliers, many of whom required ASML investment to develop required capabilities. This mutual dependency blocks fast-follower competition.

Critical Suppliers

Trumpf (lasers): Creates lasers powerful enough to blast molten tin 50,000 times per second to generate EUV plasma. The system must produce at least 125 wafers per hour reliably.

Zeiss (optics): Each mirror is polished to atomic-level smoothness, with surface errors smaller than the width of a hydrogen atom. These mirrors alone cost up to $70 million each. ASML holds approximately 25% equity stake in Zeiss, having provided capital to invest in advanced processes.

The Collaboration Approach

Former CTO Martin van den Brink’s approach: “You have to help them. Helping suppliers is more effective than shouting at them.” ASML brought German Trumpf employees to the Netherlands to make improvements together when initial reliability fell short.

This supplier investment creates mutual dependency. Suppliers cannot easily serve competitors who do not exist at EUV level. ASML cannot easily switch suppliers for components that took decades to develop. Critical components took decades to industrialize. The ecosystem co-evolved with ASML, creating a moat that no competitor can easily breach.

Customer Concentration

Only a handful of companies can afford leading-edge fabs: TSMC (dominant foundry, largest ASML customer), Samsung (aggressive on advanced nodes), Intel (first High NA customer), SK Hynix (memory-focused), Rapidus (Japanese startup), and Micron (memory manufacturer).

This concentration creates both risk from customer capex cycles and stability from having no alternative supplier.

This is part of a comprehensive analysis. Read the full analysis on The Business Engineer.