Bernstein: 'Can a Start-Up Challenge ASML Inc. (ASML) and TSMC'

Bernstein SocGen Group analyst David Dai reiterated a Market Perform rating and $935.00 price target on ASML Inc. (NASDAQ: ASML).

The analyst commented: "Can a start-up challenge ASML and TSMC with radical lithography tool? According to news reports, a Silicon Valley start-up claims to have developed a radically cheaper semiconductor manufacturing method by using a proprietary particle accelerator and compact lithography machine, and it has demonstrated 12nm features with a custom Xray light source. We provide our views below.

X-ray lithography? While this might be a new idea to many investors today, people who have been in the field long enough would remember that’s the concept dated before EUV in fact, X-ray lithography (1) was first proposed in 1972, but finally was given up in around 2000, and EUV (originally called “Soft X-ray”) was born in its ashes. In theory X-ray (with wavelength of 1-10nm) has shorter wavelength than EUV (13.5nm), and would have offered better lithography resolution, but too many problems around it proved insurmountable. No optics could be used for X-ray to bend it to focus, hence X-ray lithography has to be proximity lithography, meaning the mask needs to be as very close (sub-10 microns) to the wafer, which causes huge alignment and diffraction issues. The mask needs to be tiny; any bigger mask would lead to lack of uniformity, hence restricting the size of chip patterned area. The mask needs to be made with exactly the same feature size as the printed pattern; in contrast, EUV lithography with 4x reduction ratio, meaning the features on masks can be 4x bigger than the actual pattern to be written. While the start-up claims to have solved the light source issue (which is a big question mark in itself), it’s unlikely to solve these intrinsic issues with X-ray lithography. Even if they can bring down the cost of particle accelerator (which costs billions or at least hundreds of millions), there is… a lack of ecosystem support."

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Shares of ASML Inc. closed at $1052.48 yesterday.

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