Semiconductor makers are bound to face material shortages even as they invest billions of dollars in capacity expansion, but it turns out that’s not the only problem companies are having. and consumers should be concerned. As reported by FinancialTimesASML based in the Netherlands is likely to become the bottleneck of an industry over the next two years as the specialist equipment manufacturer struggles to ramp up production of its lithography machines.
Talk to FT, ASML Managing Director Peter Wennick warned that despite best efforts to increase the company’s manufacturing capacity, the increase in annual production of ASML’s lithography machines will fall short of the requirements put in place. before by chip makers. In fact, Wennick estimated that the company would need to improve production by 50% more machines delivered each year in order to meet demand – a need almost impossible to meet given the complexity of the supply chain and machines.
In 2021, ASML delivered 286 such machines: 50 more units than the company’s sales for 2020. This represents an 18% increase in production in a single year, but it shows the difficulty of achieving the required additional production of 50% just to meet expected demand levels.
Intel CEO Pat Gelsinger himself is well aware of the difficulty in scaling ASML’s lithography machines. According to FTIntel’s CEO is in direct contact with ASML’s Peter Wennick, and expects the complexity of setting up new factory floors – or expanding existing ones – to give ASML a time buffer that allows him to ramp up production in time for when the factory will be shut down (the name given to the factory infrastructure lacking semiconductor manufacturing machinery) are ready.
According to Wennick, ASML is working with its suppliers to try to ramp up its production capacity. However, there is not much to do. ASML can only increase production if its more than 700 suppliers (200 of which are considered critical) can also increase production. But due to the extreme complexity of the materials and components that ASML uses in its lithographic machines, some of the scaling required will take years to materialize.
One such example is ASML supplier Carl Zeiss, which manufactures the lenses that go into the company’s lithography machines. Wennick explained that lenses are the most complex piece of engineering used in an ASML machine, and that Carl Zeiss would have to dramatically increase production so ASML could scale up its manufacturing. But for Carl Zeiss to increase production, the company would need to invest in expanding facilities and clean rooms, as well as hiring specialized technicians. And even then, Wennick explained that it can take up to 12 months for the almost incredibly complex lenses to go through the entire manufacturing process.
Despite heavy investments, capital cannot solve all problems. Semiconductor manufacturers face one of the most complex and globalized supply chains in the world, vulnerable to territorial disputes as well as geopolitics. It remains to be seen whether ASML and its suppliers can reliably increase production without reaching out too much.
