Foundries like Intel, Samsung, TSMC , among others like SMIC, Global Foundries, etc., are very particular industries for manufacturing chips. But, despite the direct relationship they have with ASML , it is not the same type of company, but the two types depend on each other and there must be a symbiosis.
Fabless vs Foundry: The TSMC case
First of all, it must be said that the fabless model became popular in the 80s and has continued to grow until today. There are more and more fabless companies, such as AMD (formerly IDM and now fabless, after divesting its factories, now GlobalFoundries), NVIDIA, Apple, Mediatek, Qualcomm, etc. As its name suggests, this is a company that does not have its own factories, i.e. foundries or foundries as they are known in the jargon. They only design the chips and then outsource the manufacturing to foundries.
This allows fabless to get rid of the expense of running a semiconductor factory, and the freedom to choose the factories with the most advanced nodes. They only have to focus on the design, achieving greater agility. However, this leads to lower profit margins as they have to pay for a third-party service, there may also be delays if demand at the chosen foundry is high, and less control over the manufacturing processes.
Well, for there to be fabless, there have to be foundries, as is the case of TSMC (Taiwan Semiconductor Manufacturing Company) . It is a pure foundry, it only manufactures chips for others, and does not design anything internally. In this way, it is able to keep its production lines always busy, manufacturing large volumes, with huge profits that can then be devoted to R&D and upgrades for new nodes.
For example, TSMC makes a huge percentage of all the world’s chips, with more than five hundred customers including Apple, NVIDIA, AMD, Qualcomm, Mediatek, Marvell, Broadcom, Google, Microsoft, Sony, AWS, Cisco, Tesla, etc. In fact, it not only has several lines of advanced nodes and 300mm wafers, it also has other fabs with earlier nodes or smaller diameters for other sectors where chips are simpler, such as the automotive sector, and other simple chips for general electronics.
IDM with foundry service: The case of Intel and Samsung
An IDM (Integrated Device Manufacturer) is a company that designs, develops and manufactures its own semiconductor chips. In other words, they control the entire process, from the creation of the chip design to the final manufacturing of the product. This allows for greater control over the entire process, greater flexibility when adapting to market needs or optimizing nodes for a particular design, and higher profits by not having to pay a third party.
The problem that led many companies to abandon their IDM model, such as Motorola, AMD, Philips, etc., is that the investment in fabs is too high, huge amounts of money are needed to keep fabs up to date with the latest nodes, and if you have problems with a node or fall behind the competition, you won’t have as much flexibility to choose another manufacturer. This was the case for Intel , with its 10nm node that they have been stuck on for a long time, while others like AMD, NVIDIA or Apple could enjoy more advanced nodes from TSMC.
Besides Intel, another of the big IDMs is Samsung. Both of these big companies maintain both design and development teams as well as their own factories. Not only can they afford this since they are very powerful companies, but they have also created a hybrid model between IDM and foundry , since they have foundry services for third parties. Samsung has been making chips for others such as Tesla, Apple, NVIDIA, etc., and continues to do so, being one of the best options along with TSMC since they have made important steps.
As you may know, Intel has recently opened its factories to third parties, in order to obtain greater benefits and thus be able to invest more in continuing to keep its nodes updated. This is what is known as IFS or Intel Foundry Services . In other words, in the Intel and Samsung fabs, not only are chips designed by Intel or Samsung itself, respectively, manufactured, but they can also be used by third parties. Several companies such as SiFive have shown interest in these services, and others are testing them, such as Apple, NVIDIA, or Qualcomm, in order to be able to manufacture within American territory.
ASML: Manufacturing machinery and services
Well, that said, as you know, one of the key processes for chip production at foundries, whether owned by an IDM, like Intel and Samsung, or independent ones like TSMC, is photolithography, a technique that uses light to transfer complex patterns from a mask (a negative-like template) to a silicon wafer, thereby creating the transistors and interconnect tracks needed to create the integrated circuit.
I say this because to carry out this process, you need some of the most expensive machinery in foundries, such as photolithography machines . For example, the TWINSCAN NXE:3600D has a price of 938 million euros. And each fab can have several of these machines for the different production lines. That is why upgrading to new nodes is so expensive, and many have chosen the fabless path.
What I’m getting at is that ASML is the manufacturer of these photolithography machines , so companies like Intel, Samsung and TSMC rely heavily on ASML to provide these advanced machines that allow them to reach new nodes like 5nm, 3nm and beyond. In other words, ASML is neither a fabless, nor an IDM nor a foundry, just a supplier of equipment for them.
Although ASML is the leader in this sector, there are other competitors, such as Canon or Nikon (the Japanese companies were once dominant, but ASML overtook them), among others. In addition, the Dutch company specializes in the development and manufacturing of DUV and EUV photolithography machines, software and services needed by foundries, and other types of machinery for the semiconductor industry.