ASML's chip money machines – Financial Times


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While chipmakers make silicon hay from the insatiable demand for semiconductors, those that make the machines that make the hay are benefiting as well.

The Dutch company ASML, which is the leading supplier of semi equipment, reported bumper second-quarter results on Wednesday and raised its guidance for revenue growth in 2021 to around 30 per cent, from “double digits”. “You just read the papers, chip shortages everywhere.,” explained CEO Peter Wennink. Lex says profits have doubled in the past two years while total share returns trebled.

The shortages won’t last for ever, but ASML expects to profit long-term from geopolitics, as the European Union and US seek to reduce their dependence on Asia by boosting their own chipmaking capabilities.

“That will lead to higher capital intensity because it’s decoupling as a worldwide ecosystem, but it also leads to some capital inefficiency,” said Wennink. “There is a beneficiary of that capital inefficiency, and that’s us.”

Today’s Big Read looks at the daunting goal the EU has set itself of doubling its presence in the global chip market by 2030, from a current share of less than 10 per cent. Experts warn this will take vast quantities of public money — at a time when governments in Asia and the US are also pouring tens of billions of dollars of subsidies into the sector. “It’s going to be very, very expensive,” says Peter Hanbury, partner with Bain & Co.

Global wafer semiconductor production capacity

Over in Asia, the more immediate concern is coronavirus, with record levels of infections in Malaysia and Vietnam hitting chipmakers operating in those countries and threatening to exacerbate the global shortage, reports our Asia team.

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The Internet of (Five) Things

1. NSO’s Pegasus aids Israel abroad
NSO’s Pegasus spyware, which requires a government licence for export because it is considered a weapon, has in recent years become a crucial part of Israel’s diplomatic outreach, reports Mehul Srivastava on the surveillance tech that has been tracking journalists, lawyers and political activists. Leila Abboud in Paris reports France is investigating allegations that Morocco may have targeted mobile phones belonging to President Emmanuel Macron and 15 ministers using the tool.

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2. Crypto exchanges get fresh backing
The cryptocurrency exchange FTX has raised one of the largest rounds of financing for a digital assets start-up, pulling in $900m from more than 60 investors to value the business at $18bn, up from just $1.2bn last year. Bank of New York Mellon has joined the consortium of six banks behind the launch of London-based Pure Digital, three months after State Street became the first to announce its support for the planned exchange. Martin Wolf says in his latest column that cryptocurrencies like bitcoin should be illegal. Alphaville has the skinny on a new research paper on DeFi.

3. Biden nominates Google critic
Joe Biden will nominate Jonathan Kanter, who has represented some of Google’s fiercest rivals, to be head of the US justice department’s antitrust division. Kanter would take over responsibility for the government’s case against Google. China’s Big Tech companies have been fined and warned over explicit material and exploitation of children on their platforms.

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4. Netflix loses subscribers at home
Netflix lost 430,000 subscribers in the US and Canada in the second quarter and issued weaker than expected forecasts for later in the year, but executives dismissed the idea that increased streaming competition was behind this. Lex says Netflix’s problem is content — it lacks new blockbuster, original hits, and should consider buying a studio.

Lex chart on Netflix

5. Google and Jio’s smartphone for the masses
Google and Mukesh Ambani’s Jio are launching a smartphone they hope will be cheap enough to convert 450m Indians on “dumb” handsets. The JioPhone Next is expected to cost less than $50. This week’s #techAsia newsletter reports Apple is going all-5G with next year’s iPhones.

Chart showing India's smartphone market

Tech tools — Google’s crowded Maps

With coronavirus restrictions lifted in England this week, greater numbers are using public transport, although masks are still required on London’s Tube system. They seem essential in packed trains in rush hours and Google announced today it was expanding its transit crowdedness predictions to over 10,000 transit agencies in 100 countries. “Pandemic or not, no one likes standing in a jam-packed subway car,” it says. The predictions come from AI technology, contributions from people using Google Maps, and historical location trends that predict future crowdedness levels for transit lines all over the world.

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