ASML: How a Philips Spin-Off Built the Only EUV Lithography Machines on Earth

ASML is the clearest example of how a small country can host an irreplaceable node in the global economy: a company that nobody can route around, built on patient R&D, a web of exclusive suppliers and a willingness to bet the firm on a technology that took two decades to work. From a leaky shed on the Philips campus in Eindhoven to a market value that passed US$700bn in mid-2026, the Veldhoven firm now sets the pace of the entire semiconductor industry. This article traces the Philips spin-off, the EUV gamble with Zeiss, the China export-control saga, the 2025 results and 2026 guidance under chief executive Christophe Fouquet, the Mistral AI investment and the Dutch state’s “Project Beethoven” effort to keep the company at home. It is part of the Netherlands Company Stories hub.

How did a Philips side project become ASML?

ASML started life in 1984 as ASM Lithography, a 50/50 joint venture between Philips and the Dutch equipment maker ASM International, housed in temporary buildings next to the Philips campus in Eindhoven. The company’s own history describes the first office as a leaky shed; its first years were marked by small volumes, high development costs and a distant third place behind the Japanese giants Nikon and Canon.

The turning point came with the PAS 5500 in 1991, a modular deep-ultraviolet (DUV) stepper whose first customer was IBM. The modular design allowed ASML to upgrade machines at customer sites rather than redesigning them from scratch, and it became the platform on which the company’s later TWINSCAN systems were built. ASM International had already sold its stake back to Philips in 1988 after years of losses, and the company became independent of Philips in stages after its 1995 flotation on Amsterdam and Nasdaq.

Two people shaped ASML’s culture more than any others: Martin van den Brink, an engineer who joined in 1984 and stayed until his retirement as chief technology officer in 2024, and Peter Wennink, who arrived as chief financial officer in 1999 and served as CEO from 2013 to April 2024. Wennink’s successor, the French-born Christophe Fouquet, had run the EUV business and had been with the company for 15 years when he took over. The headquarters in Veldhoven, a few kilometres from Eindhoven, remains the heart of a company that now employs more than 44,000 people worldwide.

What exactly is EUV lithography, and why can only ASML build it?

EUV lithography prints chip patterns with light at a wavelength of 13.5 nanometres, roughly 14 times shorter than the 193nm DUV light that preceded it. Shorter wavelengths allow smaller transistors, which is why every advanced chip from Apple, Nvidia, TSMC, Samsung and Intel is now made on ASML EUV scanners.

The engineering problem is that 13.5nm light is absorbed by almost everything, including air and glass. ASML’s machines therefore operate in a vacuum, generate the light by hitting 50,000 droplets of molten tin per second with a high-powered CO2 laser, and steer it with multilayer mirrors made by Carl Zeiss SMT in Oberkochen, Germany. Zeiss has been ASML’s optics partner since the 1980s, and in November 2016 ASML paid about €1bn for a 24.9% stake in Carl Zeiss SMT while committing a further €760m of R&D funding, specifically to accelerate the next generation of “High-NA” optics.

Nikon and Canon declined to make the same bet. ASML began investing in EUV in the early 2000s, shipped its first pre-production system in 2013, acquired the San Diego light-source company Cymer for US$2.55bn in the same year and bought Taiwan’s Hermes Microvision for about US$3.1bn in 2016 to add electron-beam inspection. The first production EUV tools shipped in 2018, and TSMC and Apple brought the first EUV-made processors to market around the same time. The result is a supply chain of several thousand companies, from Zeiss optics to VDL mechanical modules and Trumpf lasers, coordinated from Veldhoven. Competitors would have to rebuild that chain from scratch, which is why ASML held an estimated 83% of worldwide lithography sales in 2025 and 100% of EUV.

What did ASML report for 2025 and what is it guiding for 2026?

ASML’s full-year 2025 results, published on 28 January 2026, showed net sales of €32.7bn and net income of €9.6bn, a gross margin of 52.8% and earnings per share of €24.73. The company shipped 300 new lithography systems (down from 380 in 2024, as DUV volumes to China normalised) plus 27 used ones, and installed-base management revenue reached €8.2bn.

The fourth quarter of 2025 was particularly strong: net sales of €9.7bn included revenue for two High-NA systems, and net bookings reached €13.2bn, of which €7.4bn was EUV. The backlog ended the year at €38.8bn. Fouquet attributed the improved medium-term outlook to customers’ expectations of sustained AI-related demand. The board proposed a total 2025 dividend of €7.50 per share, up 17%, and launched a new share buyback of up to €12bn to run through the end of 2028.

The 2026 guidance has been raised repeatedly. In January ASML guided to €34–39bn of net sales; by April the range was €36–40bn; after the second quarter it rose to €43–45bn; and on 14 October 2026, alongside record third-quarter sales of €11.7bn and net income of about €5.0bn at a 57.5% gross margin, the company narrowed it to €44–45bn with a gross margin of around 56%. Fourth-quarter guidance of €14.2–15.2bn would be the biggest quarter in the company’s history. Fouquet also told investors that planned supply for 2027 and 2028 may fall short of demand, so ASML intends to lift 2027 capacity by about 30% over 2026 and is weighing a similar increase for 2028. The company says it is cutting assembly time per machine from about 22 weeks to 15–16 weeks to keep up.

Sources: ASML Q4 2025 and Q3 2026 results releases; ASML investor presentations; analyst coverage of regional mix. FY2024 figures from ASML’s 2024 annual report.

How has China gone from ASML’s biggest market to its biggest headache?

China became ASML’s single largest market in 2023 and 2024 as Chinese fabs stockpiled DUV immersion tools ahead of tightening controls, and it has since shrunk sharply under a cascade of Dutch and US rules. ASML has never been allowed to ship EUV systems to China; the Dutch government declined to grant an export licence as early as 2019 under US pressure.

The restrictions then moved down the technology ladder. In March 2023 the Netherlands announced licence requirements for advanced DUV immersion systems, effective September 2023; in January 2024 further shipments of specific NXT:2000-series tools were blocked; on 6 September 2024 the Dutch government took direct control of licensing for the NXT:1970i and NXT:1980i models; and in January 2025 the licence regime was widened again. Servicing and spare parts for installed Chinese tools became part of the debate, and in 2026 the US Congress took up a “MATCH Act” that would push allies to align further on DUV and services.

The numbers show the effect. China was about 36% of system sales in the fourth quarter of 2025 and roughly a third of 2025 revenue, but only 19% of system sales in the first quarter of 2026 and 14% in the second. The third quarter of 2026 saw a rebound to 23% as memory makers and mature-node logic fabs rushed orders, but chief financial officer Roger Dassen has repeatedly said the company expects China to be around 20% of 2026 business under current geopolitical conditions. Chinese firms have meanwhile begun producing their own immersion DUV tools for 2026 deliveries, and ASML has flagged the risk that controls could block equipment already on order. The broader national context is covered in our story on Dutch multinationals’ China exposure and de-risking.

Why did ASML put €1.3bn into Mistral AI?

On 9 September 2025 ASML announced it would invest €1.3bn in the Paris-based model developer Mistral AI, taking about an 11% stake at a valuation of almost €12bn and becoming Mistral’s largest shareholder. It was the largest single investment ASML had ever made outside its own supply chain, and it surprised many investors who expected the company to keep its cash for buybacks and capacity.

The company framed the deal as a long-term collaboration agreement rather than a financial bet. ASML’s machines already generate enormous volumes of sensor and process data, and the company said it wanted to apply Mistral’s models across its products and operations to get systems to customers faster and improve their performance. CFO Roger Dassen took the seat on Mistral’s strategic committee. In practice the investment also serves two strategic ends: it gives ASML a stake in the European AI stack that drives demand for its machines, and it hedges against a future in which US hyperscalers set the terms of AI compute.

The timing was not accidental. By September 2025 ASML’s share price had been flat for more than a year as investors worried about China, and the company was looking for ways to signal that it saw AI demand as structural rather than cyclical. Within twelve months the stock had risen roughly 60% and the market value had passed US$700bn, making ASML the most valuable European company on record in June 2026. Whether the Mistral stake contributed to that re-rating is debatable, but the message that ASML intends to be an active participant in AI rather than a passive supplier was received.

What is High-NA EUV and why does it matter for 2027 and beyond?

High-NA EUV is the next generation of ASML’s technology: the EXE:5000 and EXE:5200 systems use Zeiss optics with a numerical aperture of 0.55 rather than 0.33, allowing roughly 1.7 times finer resolution and fewer multi-patterning steps. Each machine costs on the order of US$370m–380m, nearly twice the price of a standard NXE:3800E, and a single tool fills two cargo aircraft.

Intel was the first customer to install a High-NA system in Oregon, and ASML has said Intel’s first high-volume commercial chips were made with the tool. ASML recognised revenue on two High-NA systems in the fourth quarter of 2025 alone. SK Hynix, Samsung and TSMC have all taken delivery of early units, although TSMC has been publicly cautious about the economics for its A14 node. Van den Brink, before retiring, expressed doubts that a further “Hyper-NA” step would ever be economically viable, which means High-NA may be the last optical leap and incremental gains will come from software, metrology and throughput.

For investors, the significance of High-NA is that it extends ASML’s pricing power and installed-base revenue into the 2030s. Installed-base management, which includes service contracts and upgrades, reached €3.3bn in the third quarter of 2026 alone, and every High-NA tool sold adds a long tail of maintenance income. For the Dutch economy, it also cements Veldhoven as the only place where these systems are assembled, which brings us to the question of whether ASML will stay.

Will ASML stay in the Netherlands, and what is Project Beethoven?

ASML will stay in the Netherlands, but only after the Dutch government committed €2.5bn of public money in March 2024 to a package nicknamed “Project Beethoven” aimed at keeping the company’s expansion in the Eindhoven region. The trigger was a warning from then-CEO Peter Wennink that restrictive migration policies, a planned end to the 30% expat tax ruling, housing shortages and grid congestion were pushing ASML to consider growing abroad.

The package allocates about €1.7bn from the central government and €800m from the region to roads and rail around Eindhoven, electricity-grid upgrades (TenneT is extending a high-voltage station near Best) and technical education at Eindhoven University of Technology and vocational colleges, alongside plans for nearly 20,000 new homes. Eindhoven’s mayor, Jeroen Dijsselbloem, had originally asked for €5–8bn. The cabinet made clear that the money was conditional: if ASML changed its plans, the commitment would be reviewed.

The payoff came on 8 September 2026 when Prime Minister Rob Jetten and Fouquet broke ground on a new ASML campus at Brainport Industries Campus North in Eindhoven. The 350,000 square metre site is designed to house up to 20,000 workers at full build-out, with a first phase for at least 3,000 staff, including a cleanroom factory and offices, due to be operational in 2028 and complete in 2029. The province of Noord-Brabant granted the nitrogen permit in March 2026. The campus is the largest single corporate construction project in Dutch history, and it sits inside the wider Dutch chip cluster described in our story on NXP, ASM International and Besi. The grid constraints that nearly derailed it are explained in our piece on TenneT and Dutch grid congestion.

How does ASML make money, and how does it return it?

ASML earns revenue from two streams: system sales, which were about €8.4bn in the third quarter of 2026, and installed-base management (service, upgrades and spare parts), which added €3.3bn. System sales are lumpy because each EUV tool is worth €200m–380m, but the installed base of more than 5,000 lithography systems worldwide produces increasingly predictable recurring revenue.

Gross margin has climbed from the low 50s to 57.5% in the latest quarter as EUV becomes a larger share of the mix and as High-NA, immersion DUV and upgrade revenue carry higher margins. R&D runs at around €1.2bn per quarter, close to 10% of sales, which is the price of maintaining a one-generation lead. Operating leverage is strong: net income in the third quarter of 2026 was €5.0bn on €11.7bn of sales, a net margin above 42%.

Capital returns have scaled with profits. ASML repurchased €7.6bn of shares under its 2022–2025 programme, launched a new €12bn programme to run through 2028 and bought back about €4.1bn of stock in the third quarter of 2026 alone. The interim dividend of €1.88 per share payable in November 2026 compares with a total 2025 dividend of €7.50. Unlike many Dutch multinationals that have moved their listings or headquarters abroad, a theme explored in our story on the Dutch headquarters exodus, ASML remains a Dutch N.V. listed in Amsterdam and New York.

What can founders and investors learn from ASML?

ASML’s story teaches that a monopoly can be earned rather than bought, but only through decades of consistent investment in a technology that competitors considered too hard. The company put money into EUV from the early 2000s, carried years of losses on the programme and did not see production shipments until 2018. Few boards would tolerate that timeline today; ASML’s did because Philips-era engineers like Van den Brink convinced management that there was no alternative path to smaller transistors.

The second lesson is about ecosystems. ASML does not make lasers, mirrors or most of its mechanical modules; it integrates them. By taking equity in Zeiss SMT, acquiring Cymer and funding joint development with hundreds of suppliers in the Brainport region, it turned a supply chain into a moat. The same logic applies to software and services companies: control of the critical interfaces matters more than owning every component.

The third lesson concerns the relationship between a champion company and its home state. ASML used its leverage openly in 2024, and the Dutch government responded with €2.5bn and a new campus. Investors should watch how that relationship evolves as export-control pressure from Washington intensifies and as the company becomes more valuable than the rest of the Amsterdam exchange combined. For a comparison with a company that lost its sovereignty in the same sector, read our story on the Dutch government’s seizure of Nexperia. Readers interested in how other national champions navigated similar questions can also visit the Germany Company Stories hub.

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