ASML’s ability to expand capacity is being put to the test as the company vows to avoid constraining a semiconductor upcycle driven by AI demand.
ASML says it won’t become the semiconductor industry’s bottleneck as surging AI demand drives another capacity wave. “This is something we’ll avoid by all possible means; it’s essential to maintaining our current position,” CEO Christophe Fouquet told investors Wednesday at the company’s annual general meeting (via Reuters).
At the peak of the Covid boom, ASML’s manufacturing capacity could satisfy only roughly half of demand. In response, the lithography giant announced a significant expansion of manufacturing capability, which could be activated when needed. That ramp-up is now in full swing.
Before anything else, the question of whether ASML can avoid being the bottleneck during the current upturn depends on the company’s execution. If it manages to keep up with demand without extending lead times, the capacity planning of its biggest customers comes into view. While both TSMC and memory makers have announced major capex hikes, these firms face a limit on how quickly new capacity can be added and how fast they’re willing to do so.
So far, it doesn’t look like supply will meet demand. “TSMC will be increasing the capacity to 2027, but that has become a bottleneck,” a Broadcom executive recently noted. Nvidia CEO Jensen Huang has encouraged TSMC to double leading-edge production capacity over the next decade. SK Hynix and Micron have said that the memory chip shortage will last until 2028 or even 2030.
Seasoned by previous boom-bust cycles, chipmakers may indeed be erring on the side of caution, at least from the perspective of Big Tech. “There’s a maximum rate at which Samsung, TSMC, Micron and others are comfortable expanding. That rate is much less than we would like,” said Elon Musk, unveiling plans for a greenfield semiconductor plant called Terafab. Intel has since joined this initiative.
Should the Terafab materialize, then the yoke of the bottleneck may land on the shoulders of ASML after all. At what rate is the Veldhoven-based firm comfortable expanding?
