Analysis-New ASML boss Fouquet must navigate US/China chip war

By Thomson Reuters Apr 25, 2024 | 7:57 AM

By Toby Sterling

AMSTERDAM (Reuters) – ASML’s new boss Christophe Fouquet faces a tricky balancing act in helping to steer Europe’s biggest tech company through the US/China “chip war”, while maintaining the group’s lead over rivals and managing the current AI boom.

Fouquet, whose appointment as CEO was approved at the semiconductor equipment maker’s annual meeting on Wednesday, inherits a company that is profitable and dominant in its field, but potential pitfalls abound.

Export restrictions imposed by the United States and the Netherlands mean the upper half of ASML’s product range cannot be sold in China, one of its biggest markets.

As Fouquet takes over, ASML is riding high with a lofty stock market valuation, reflecting optimistic expectations but there are risks of disappointment amid a product rollout and capacity expansion.

Outgoing CEO Peter Wennink, who presided over a more than tenfold rise in the company’s market valuation to 320 billion euros ($340 billion) over the past decade, said in a farewell address ASML’s expansion will continue under Fouquet.

The global semiconductor industry has grown to $600 billion in annual sales in a 50-year history, but, Wennink said, “in the next six to eight years, we need to almost double that. This is why we need to build capacity. This is why our customers will grow … and that’s why ASML will grow.”

Fouquet will have to maintain ASML’s position as the dominant vendor of its lithography systems, which use beams of light to create the circuitry of chips, to the likes of Taiwan’s TSMC, Intel, and Samsung.

Lithography makes up about a third of the $100 million chip equipment market, and ASML has a market share above 90%, analysts say, as it is the only company with “EUV” lithography, used to make all of the world’s most advanced chips.

Competitors for older generations of “DUV” lithography include Japan’s Nikon and Canon, but Fouquet will also have to watch Chinese lithography company SMEE and others that may emerge.


Chinese chipmakers have big incentives to develop alternatives to ASML machines they cannot buy under U.S.-led restrictions. These have become a headache for ASML since 2018, as Washington seeks to limit Beijing’s ability to make its own advanced chips.

Chinese chipmakers are expanding capacity to make older chips that do not fall under restrictions, agitating Washington and Brussels. China was ASML’s second-largest market by sales in 2023.

In addition, China’s chipmakers will continue to improve the quality of chips they can make using ASML’s DUV equipment. ASML cannot sell EUV tools in China.

Fouquet explained to shareholders Wednesday that using DUV instead of EUV tools becomes more and more inefficient as chips get more advanced, until it is prohibitively expensive.

So “technically you can, economically you can’t. I think that’s the short answer,” Fouquet said, an argument he must also make to governments seeking further restrictions.

Fouquet oversaw ASML’s EUV programmes in 2018-2022, including the development of the new $375 million “High NA” EUV machine currently being tested by Intel expected to support sales growth into the 2030s.

A source who has worked with Fouquet described him as able to keep people talking even when pressure on a key supplier to improve its technology and triple its output at the same time led to fierce arguments.

“He understands the technology, he understands the business and then also he understands how to make things work” across U.S. designers, European suppliers, and Asian customers, the source said.

Fouquet, a trained physicist, will need his diplomatic skills, especially if Donald Trump wins the U.S. presidency in November with an unpredictable impact on China policy.


ASML grew from 13,000 employees in 2014 to 43,000 at present – and on Monday the company unveiled plans for a new facility in Eindhoven to house another 20,000 staff.

The company’s stock is priced at 40 times 2023 earnings, slightly ahead of other top chip equipment suppliers such as Applied Materials and KLA. Fouquet worked at both earlier in his career.

Investor Nick Rossolillo, who hosts the Chip Stock Investor podcast and has owned ASML shares since 2022, said one concern is that governments are supporting construction of new chip plants in U.S., Japan, Europe, China, South Korea and Taiwan.

“Government subsidies are fantastic for … equipment providers like ASML during this construction boom. But what happens in 2028-30 when all that extra capacity comes online?” Rossolillo said.

($1 = 0.9349 euros)

(Reporting by Toby Sterling; Editing by Matt Scuffham and Jane Merriman)