4 ms·

I have an interesting discussion with a senior colleague: why ASML? why are they by far the best? Their competitors are a few generations behind. The colleag

by quanto 5mo ago

I have an interesting discussion with a senior colleague: why ASML? why are they by far the best? Their competitors are a few generations behind. The colleague claimed that there is no special magic. It's not that ASML is using some otherwise unknown laws of physics nor is any single step or component particularly special or novel. It's just that they meticulously optimized each step, and the sum of such steps is the winning solution. In fact, this is probably why it's so hard to copy ASML. If there was a single magic component, a single or few engineers could be poached away to a competitor to copy it. However, copying a well-optimized company with many simultaneous optima is a much harder task. Our discussion was in the context of why our quant hedgefund competitor was performing so well, far above the market norm. By nature and design, quant finance is an incredibly efficient field (and most techniques are more or less known by veterans), and we had thought unlikely that one fund could do so much better. Our conclusion was that this fund must be the well-optimized ASML of our field. My colleague happened to know the founder and indeed that was his personal impression as well.

tim333 5mo ago
ASLM have put massive financial investment into getting where they are including raising money from customers like Intel in return for shares. Also, form wikipedia "employs more than 42,000 people.. and relies on a network of nearly 5,000 tier 1 suppliers". It's going to be a lot of time and money to match that.
random3 5mo ago
Veritasium has a nice video about it https://www.youtube.com/watch?v=MiUHjLxm3V0 https://www.youtube.com/watch?v=MiUHjLxm3V0 Obviously, there are a lot of reasons why. But it boils down to having the vision, the belief and the strength to follow through over many years. It's important to not confound vision with random Kool-Aid. Instead it's grounded in research. That research is itself grounded in a strong vision and belief — it got laughed by the entire physics community at the time: > 'people seemed unwilling to believe bending x-rays, and they tended to that we had actually made an image by regard the whole thing as a big fish story Now contrast this with the current academic reality — "publish or perish" and the reality of venture financing and corporate culture that "depends" (arguably in self-inflicted manner, that's not 100% the case) on quarterly repots. ASML is just a recent story, but if you look back, you'll see that most revolutions have a similar pattern of people crazy enough to deviate from the herd. The rest— the immense financial risk, the 5000 suppliers, etc. came as a result of having the ability to see through all the noise and the grit to to follow through when everyone calls you an idiot for not doing something "useful"
- bobbruno 5mo ago
  One could argue that NVidia's advantage comes from a similar vision epiphany that led to them developing CUDA years before it was viable. The result is similar.
  - CamperBob2 5mo ago
    I'm tempted to call that pure luck. As far as they knew, crypto would be the killer app. However, if you start with the assumption that at some point, people are going to need a lot of fast parallel compute for something, you could rationally justify their long-term strategy. They skated where the proverbial puck was going. They couldn't see the puck, but they were pretty sure there was one. In hindsight that really does look like a safe bet.
    - KK7NIL 5mo ago
      Nvidia subsidized machine learning research for years (both with CUDA, hardware donations and developing what was a very niche product line just for them) before deep learning became big, much less the advent of LLMs. Certainly Jensen seemed to have an extremely long view on this burgeoning machine learning market in the early 2010's.
      - Danox 5mo ago
        It didn’t hurt that they had a two companies named Intel and Microsoft that completely missed the boat where GPUs or mobile computing were concerned both are currently the top two companies in tech today by market cap?
    - dist-epoch 5mo ago
      People were (ab)using OpenGL to run compute on GPUs in 2004-2006, doing stuff like rendering 2 triangles covering the whole screen and then doing the actual compute in the pixel shaders, getting 10x speedups over CPUs for some problems. NVIDIA just had their eyes open to an obvious market demand and made it easier by creating CUDA.
    - 5mo ago
rgalate 5mo ago
The best explanation as to why ASML is so dominant is that they have locked out the best suppliers by signing exclusivity deals with them. If you want to compete with ASML you have to vertically build: the best lenses, the best lasers, the best metrology. A new entrant would need to replace ten different world-class vendors simultaneously. Unlike common business wisdom that dictates having multiple suppliers to mitigate risk, ASML succeeds by identifying the best supplier in the world for each critical component—such as Zeiss for optics or their specific metrology group—and securing exclusive, multi-year deals with them. Dan Gelbart gives exactly this view in a podcast he took part: https://youtu.be/UTgrWmOk4q8?si=Zp13SPqN_Vx-kFlq&t=1564 https://youtu.be/UTgrWmOk4q8?si=Zp13SPqN_Vx-kFlq&t=1564
- EtienneK 5mo ago
  Carl Zeiss only has a €2.2B market cap. What stops someone from just buying all these world class vendors?
  - CGMthrowaway 5mo ago
    Carl Zeiss Meditec /= Carl Zeiss. $AFX is the publicly traded non-semis division. Carl Zeiss AG is the parent company which is private
    - locallost 5mo ago
      Correct. Funny enough though, their corporate structure and the name AG means they do have stocks, but they are not traded and 100% privately owned. For some reason I see this often with German companies, e.g. the German railway. Not sure why that is, although for the railway plausible since they are owned by the state that might eventually want to sell parts of it.
      - tgsovlerkhgsel 5mo ago
        I believe the two applicable options to have a company that counts as its own "person" is either AG or GmbH (~= LLC / "limited"). There is also SE which is a EU form for an AG, and various "partnership" forms that involve a partner that's fully liable. Usually, that partner is not an actual person but a "legal person", i.e. another SE or GmbH. Even if you're not listed on a stock market, you might want to take on investments, e.g. "give me 10 million for 5% of the company" and I assume the latter is much easier with an AG.
IshKebab 5mo ago
Which hedgefund?
joe_the_user 5mo ago
Technology can explain why ASML or other companies are dominant at a given moment but it can't explain how it became dominant. Essentially, technological superiority involves research and that requires money. IE, it is a product of investment in the various technologies. The history of ASML involves a "failed" company that other multinationals felt they had to keep alive to allow the technologies to continue. And that's saying that the capital investment needed to produce a thing of that scale can't work if it is subject to a yearly profit cycle (or works much more poorly). The further factor shaping ASML is that as chip technology has grown, the investment required for support technology has grown and so only a single supplier can remain profitable and it seem logical there would only be a single company acting as supplier (maintaining research and expertise in two or three huge companies, only one of which can be profitable at a time, is highly inefficient - why we're done down to 1-3 cutting edge chip makers at this point also). So ASML was economically logical and it being in Europe is perhaps a combination of European tradition and Europe wanting some part of the global chip production system (which is by a fair bit the largest/most-valuable concentration of capital and technology in the world). https://medium.com/@crcjeffkim/why-these-5-acquisitions-have-bolstered-asmls-greatest-competitive-advantage-it-s-supply-chain-1e7d50c8aa06 https://medium.com/@crcjeffkim/why-these-5-acquisitions-have...
- AlotOfReading 5mo ago
  ASML is in Europe because Philips/NXP is in Europe. The fundamental research EUV is based on was done in the US, then made available to industry via a holding company called EUV, LLC. Intel tried to bring in Canon and Nikon, but was rejected by the US government. Two others were approved, ASML and an American company called SVG. ASML spent a couple decades doing the incredibly hard work of productizing EUV and acquired SVG along the way. Canon and Nikon tried playing catch-up with an Asian consortium, but arrived late to the party.
- cma 5mo ago
  > it being in Europe is perhaps a combination of European tradition and Europe wanting some part of the global chip production system The US doesn't randomly hold export veto power on ASML through unilateral threats. EUV had a lot of tech transfer from the US of the initial research as the sibling comment lays out, and the agreements for those transfers allowed restrictions.
vrganj 5mo ago
The Economist had a good article on this a few years ago: https://www.economist.com/business/2024/01/08/does-europe-at-last-have-an-answer-to-silicon-valley https://www.economist.com/business/2024/01/08/does-europe-at... https://archive.ph/jP1HX https://archive.ph/jP1HX Basically, ASML has an incredible pan-European supply chain of the sort of stuff Europe does best. Deep tech, advanced precision manufacturing, that sort of thing. I know it's popular to poo-poo Europe around these parts, but those are the sort of thing we genuinely are the best in the world at. Technology isn't just shiny apps and LLMs. It's also this sort of thing, and the shiny LLMs wouldn't work without it.
ijidak 5mo ago
Is the quant competitor Renaissance? The Medallion Fund?
- quanto 5mo ago
  No, not Rentech. While Rentech is truly marvelous, it has been around for a while. There is a new kid in town, and this kid is very very good. To the point that it drove out other veteran shops out of the same market it traded.
  - KellyCriterion 5mo ago
    Who is this new kid in town?
  - infinite8s 5mo ago
    QRT?
pjc50 5mo ago
> It's not that ASML is using some otherwise unknown laws of physics nor is any single step or component particularly special or novel. It's just that they meticulously optimized each step, and the sum of such steps is the winning solution. Previously in the context of Apple I likened this to becoming a chess grandmaster: all you have to do is make the optimal decision every time you make a move, over and over again, for years People don't like hearing that there isn't One Weird Trick which you can just copy, but it's the reality of these situations. To the extent that they can be analyzed, the best people to send are often anthropologists to look at the decision making culture. Culture is even harder to copy; this was a factor in the difficulties of TSMC Arizona starting up, despite it being literally the same company it's not the same people.
skew-aberration 5mo ago
ASML actually did develop new (understanding of the) laws of physics, the so called Extended Nijboer-Zernike theory in the early 2000's (which extended diffraction optics to work in the high-NA regions relevant to modern lithography) and subsequently patented its application. Zernike, a Nobel prize winning physicist who worked on optics, was also Dutch, and developed the original Zernike theory of aberrations in the mid 20th century. This was a vast improvement over previous theories as it was far more useful for optical design and analysis. So the Dutch have a rich history of developing the most advanced physical theories for optical engineering (all the way back to Huygens even)

by quanto 5mo ago

tim333 5mo ago

ASLM have put massive financial investment into getting where they are including raising money from customers like Intel in return for shares. Also, form wikipedia "employs more than 42,000 people.. and relies on a network of nearly 5,000 tier 1 suppliers". It's going to be a lot of time and money to match that.

random3 5mo ago

Veritasium has a nice video about it https://www.youtube.com/watch?v=MiUHjLxm3V0 https://www.youtube.com/watch?v=MiUHjLxm3V0 Obviously, there are a lot of reasons why. But it boils down to having the vision, the belief and the strength to follow through over many years. It's important to not confound vision with random Kool-Aid. Instead it's grounded in research. That research is itself grounded in a strong vision and belief — it got laughed by the entire physics community at the time: > 'people seemed unwilling to believe bending x-rays, and they tended to that we had actually made an image by regard the whole thing as a big fish story Now contrast this with the current academic reality — "publish or perish" and the reality of venture financing and corporate culture that "depends" (arguably in self-inflicted manner, that's not 100% the case) on quarterly repots. ASML is just a recent story, but if you look back, you'll see that most revolutions have a similar pattern of people crazy enough to deviate from the herd. The rest— the immense financial risk, the 5000 suppliers, etc. came as a result of having the ability to see through all the noise and the grit to to follow through when everyone calls you an idiot for not doing something "useful"

bobbruno 5mo ago
One could argue that NVidia's advantage comes from a similar vision epiphany that led to them developing CUDA years before it was viable. The result is similar.
- CamperBob2 5mo ago
  I'm tempted to call that pure luck. As far as they knew, crypto would be the killer app. However, if you start with the assumption that at some point, people are going to need a lot of fast parallel compute for something, you could rationally justify their long-term strategy. They skated where the proverbial puck was going. They couldn't see the puck, but they were pretty sure there was one. In hindsight that really does look like a safe bet.
  - KK7NIL 5mo ago
    Nvidia subsidized machine learning research for years (both with CUDA, hardware donations and developing what was a very niche product line just for them) before deep learning became big, much less the advent of LLMs. Certainly Jensen seemed to have an extremely long view on this burgeoning machine learning market in the early 2010's.
    - Danox 5mo ago
      It didn’t hurt that they had a two companies named Intel and Microsoft that completely missed the boat where GPUs or mobile computing were concerned both are currently the top two companies in tech today by market cap?
  - dist-epoch 5mo ago
    People were (ab)using OpenGL to run compute on GPUs in 2004-2006, doing stuff like rendering 2 triangles covering the whole screen and then doing the actual compute in the pixel shaders, getting 10x speedups over CPUs for some problems. NVIDIA just had their eyes open to an obvious market demand and made it easier by creating CUDA.
  - 5mo ago

rgalate 5mo ago

The best explanation as to why ASML is so dominant is that they have locked out the best suppliers by signing exclusivity deals with them. If you want to compete with ASML you have to vertically build: the best lenses, the best lasers, the best metrology. A new entrant would need to replace ten different world-class vendors simultaneously. Unlike common business wisdom that dictates having multiple suppliers to mitigate risk, ASML succeeds by identifying the best supplier in the world for each critical component—such as Zeiss for optics or their specific metrology group—and securing exclusive, multi-year deals with them. Dan Gelbart gives exactly this view in a podcast he took part: https://youtu.be/UTgrWmOk4q8?si=Zp13SPqN_Vx-kFlq&t=1564 https://youtu.be/UTgrWmOk4q8?si=Zp13SPqN_Vx-kFlq&t=1564

EtienneK 5mo ago
Carl Zeiss only has a €2.2B market cap. What stops someone from just buying all these world class vendors?
- CGMthrowaway 5mo ago
  Carl Zeiss Meditec /= Carl Zeiss. $AFX is the publicly traded non-semis division. Carl Zeiss AG is the parent company which is private
  - locallost 5mo ago
    Correct. Funny enough though, their corporate structure and the name AG means they do have stocks, but they are not traded and 100% privately owned. For some reason I see this often with German companies, e.g. the German railway. Not sure why that is, although for the railway plausible since they are owned by the state that might eventually want to sell parts of it.
    - tgsovlerkhgsel 5mo ago
      I believe the two applicable options to have a company that counts as its own "person" is either AG or GmbH (~= LLC / "limited"). There is also SE which is a EU form for an AG, and various "partnership" forms that involve a partner that's fully liable. Usually, that partner is not an actual person but a "legal person", i.e. another SE or GmbH. Even if you're not listed on a stock market, you might want to take on investments, e.g. "give me 10 million for 5% of the company" and I assume the latter is much easier with an AG.

IshKebab 5mo ago

Which hedgefund?

joe_the_user 5mo ago

Technology can explain why ASML or other companies are dominant at a given moment but it can't explain how it became dominant. Essentially, technological superiority involves research and that requires money. IE, it is a product of investment in the various technologies. The history of ASML involves a "failed" company that other multinationals felt they had to keep alive to allow the technologies to continue. And that's saying that the capital investment needed to produce a thing of that scale can't work if it is subject to a yearly profit cycle (or works much more poorly). The further factor shaping ASML is that as chip technology has grown, the investment required for support technology has grown and so only a single supplier can remain profitable and it seem logical there would only be a single company acting as supplier (maintaining research and expertise in two or three huge companies, only one of which can be profitable at a time, is highly inefficient - why we're done down to 1-3 cutting edge chip makers at this point also). So ASML was economically logical and it being in Europe is perhaps a combination of European tradition and Europe wanting some part of the global chip production system (which is by a fair bit the largest/most-valuable concentration of capital and technology in the world). https://medium.com/@crcjeffkim/why-these-5-acquisitions-have-bolstered-asmls-greatest-competitive-advantage-it-s-supply-chain-1e7d50c8aa06 https://medium.com/@crcjeffkim/why-these-5-acquisitions-have...

AlotOfReading 5mo ago
ASML is in Europe because Philips/NXP is in Europe. The fundamental research EUV is based on was done in the US, then made available to industry via a holding company called EUV, LLC. Intel tried to bring in Canon and Nikon, but was rejected by the US government. Two others were approved, ASML and an American company called SVG. ASML spent a couple decades doing the incredibly hard work of productizing EUV and acquired SVG along the way. Canon and Nikon tried playing catch-up with an Asian consortium, but arrived late to the party.
cma 5mo ago
> it being in Europe is perhaps a combination of European tradition and Europe wanting some part of the global chip production system The US doesn't randomly hold export veto power on ASML through unilateral threats. EUV had a lot of tech transfer from the US of the initial research as the sibling comment lays out, and the agreements for those transfers allowed restrictions.

vrganj 5mo ago

The Economist had a good article on this a few years ago: https://www.economist.com/business/2024/01/08/does-europe-at-last-have-an-answer-to-silicon-valley https://www.economist.com/business/2024/01/08/does-europe-at... https://archive.ph/jP1HX https://archive.ph/jP1HX Basically, ASML has an incredible pan-European supply chain of the sort of stuff Europe does best. Deep tech, advanced precision manufacturing, that sort of thing. I know it's popular to poo-poo Europe around these parts, but those are the sort of thing we genuinely are the best in the world at. Technology isn't just shiny apps and LLMs. It's also this sort of thing, and the shiny LLMs wouldn't work without it.

ijidak 5mo ago

Is the quant competitor Renaissance? The Medallion Fund?

quanto 5mo ago
No, not Rentech. While Rentech is truly marvelous, it has been around for a while. There is a new kid in town, and this kid is very very good. To the point that it drove out other veteran shops out of the same market it traded.
- KellyCriterion 5mo ago
  Who is this new kid in town?
- infinite8s 5mo ago
  QRT?

pjc50 5mo ago

> It's not that ASML is using some otherwise unknown laws of physics nor is any single step or component particularly special or novel. It's just that they meticulously optimized each step, and the sum of such steps is the winning solution. Previously in the context of Apple I likened this to becoming a chess grandmaster: all you have to do is make the optimal decision every time you make a move, over and over again, for years People don't like hearing that there isn't One Weird Trick which you can just copy, but it's the reality of these situations. To the extent that they can be analyzed, the best people to send are often anthropologists to look at the decision making culture. Culture is even harder to copy; this was a factor in the difficulties of TSMC Arizona starting up, despite it being literally the same company it's not the same people.

skew-aberration 5mo ago

ASML actually did develop new (understanding of the) laws of physics, the so called Extended Nijboer-Zernike theory in the early 2000's (which extended diffraction optics to work in the high-NA regions relevant to modern lithography) and subsequently patented its application. Zernike, a Nobel prize winning physicist who worked on optics, was also Dutch, and developed the original Zernike theory of aberrations in the mid 20th century. This was a vast improvement over previous theories as it was far more useful for optical design and analysis. So the Dutch have a rich history of developing the most advanced physical theories for optical engineering (all the way back to Huygens even)