ASML is the most important company you've never heard of.
The $300B+ Dutch firm makes the machines that make semiconductors. Each one costs $150m and access to them are a huge geopolitical flashpoint.
Here's a breakdown 🧵
1/ What *exactly* does ASML sell?
Its key product is an extreme ultraviolet lithography (EUV) machine, which uses advanced light technology to "print" tiny circuits onto Silicon wafers.
Only ~50 are made a year and ASML has a near monopoly on the machine technology.
2/ You def know ASML's main clients: Intel, Samsung and Taiwan Semiconductor Manufacturing Co. (TSMC).
They need EUV to keep Moore's Law ("# of transistors on microchips doubles every 2 years") alive and continue to advance computing.
Total ASML sales in 2020 = $16B+.
3/ The ASML story begins in 1984, as a joint venture between Dutch conglomerate Philips and an electronics maker called Advanced Semiconductor Materials Int.
The project had a very humble start: it was launched in a shed behind a Philip's building in Eindhoven, Netherlands.
4/ The venture's first product was called the PA 2000 stepper (think a slide projector "projecting" designs on silicon).
For years, the product failed to make headway against leading Japanese competitors (Nikon, Canon) and, in 1990, ASML was spun out as its own company.
5/ ASML scored its 1st hit product in 1991, giving it momentum to IPO in 1995.
Soon after, it acquired a # of US lithography firms and -- by the end of 1990s -- it had comparable market share to Nikon and Canon.
From there, ASML made 2 big bets that separated it from the pack.
6/ Both bets were made to keep up with Moore's law.
First: In 2006, ASML released its TWINSCAN system using immersion lithography (it utilizes water as lens to shrink the laser's wavelength = more circuits on chip).
It was ASML's first market-leading product.
7/ Also in the mid-2000s, ASML started spending huge R&D on EUV technology.
It was a massive risk, though: EUV lithography would require Samsung, Intel and TMSC to completely rebuild and redesign their fabrication plants.
From 2008-14, ASML put $5B+ into EUV research.
8/ The science behind EUV was established in the late 1980s. It was a US-led effort between the Dept. of Energy and industry (e.g. AMD, IBM, Intel).
ASML licensed EUV tech in 1999. Canon elected not to pursue it due to financial problems while Nikon chose to develop older tech.
9/ How EUV works today:
◻️ A tin droplet drops into a vacuum
◻️ It's pulsed by a high-power laser
◻️ Tin atoms are ionized, creating plasma
◻️ A mirror captures EUV radiation emitted by plasma
◻️ Mirror transfers EUV to wafer (wavelength=13.5 nanometers, basically X-ray level)
10/ The potential of EUV was so great that Intel, Samsung and TMSC -- all competitors -- jointly acquired 23% of ASML.
Intel put up the most: €2.5B for a 15% share (today, the firms have sold down most their stakes).
The first production-ready EUV machine was released in 2016.
11/ Why are EUVs so expensive?
ASML plays a role similar to Boeing for airplanes (also $100m+ products): it's an integrator of 4750 global high-value parts suppliers:
12/ Why can ASML only produce 50 EUV machines a year?
◻️ Co-ordinating 1000s of suppliers is very difficult (just like an aircraft)
◻️ Each machine is custom (30+ variables to choose from)
◻️ Lead-time are long (speciality parts like the Zeiss lens takes 40 weeks to produce)
13/ The delivery process is nuts, too:
◻️ Each EUV weighs 180 tons
◻️ A disassembled EUV takes up 40 shipping containers
◻️ Shipping it (mostly to Asia) takes 20 trucks and 3 Boeing 747s
◻️ ASML teams must be on-the-ground to maintain them
◻️ The min spend to house EUVs is $1B
14/ Today, ASML has a 90% share in semi lithography (EUV and Deep UV).
EUV tailwinds are huge:
◻️ Semi CAPEX >$120B+ in 2021 (similar spend in following years)
◻️ Key sectors (esp. auto AKA Tesla chips) will see growth for years
◻️ Transition to 5nm process requires more EUV
15/ Even if machine sales slow, ASML's business is increasingly shifting to system maintenance, relocation and upgrades.
Over a 20yr lifespan of an ASML machine, services-based sales may reach 50% of the initial machine price (w/ high margins)...across a growing installed base.
16/ With chips needed in everything (data centres, AI, autos, mining), semis are the OIL of the 21st century.
The US has even blocked Dutch exports of EUV-licensed tech to China. As the Tech Cold War heats up, expect to hear more of ASML: the $300B+ giant that started in a shed.
17/ If you enjoyed that, I write threads breaking down tech and business 1-2x a week.
Def follow @TrungTPhan to catch them in your feed.
Here's a related one that might tickle your fancy:
Francis Ford Coppola’s new film “Megalopolis” cost $120m and he self-financed it (including money from selling his winery).
Coppola is a legend of “going all in” and “putting skin in the game”.
The GOAT example is “Apocalypse Now”, his classic 1979 war film with arguably the most insane production story ever.
Let’s rewind to 1975, the year Copolla turned 36: he is on top of Hollywood after directing “The Godfather” (1972) and “The Godfather II” (1974).
What does Coppola choose to do next? Make a film about the Vietnam War. The script was based on Joseph Conrad’s “Heart of Darkness”, the 1889 novel about the horrors of colonialism in the Belgian Congo.
The major studios all said “no” to Coppola’s pitch for three major reasons:
1️⃣ He wanted full creative control
2️⃣ He wanted to own all of the film rights
3️⃣ The Fall of Saigon happened in April 1975 and the American audience wasn’t exactly asking for a Vietnam War film (the studios wanted Coppola to make another Mafia flick)
Coppola was undeterred and made a huge bet.
“The Godfather II” cost $14m and the director estimated that “Apocalypse Now” would be the same budget.
He put up $7m (mostly from those sweet Godfather checks) and raised another $7m from United Artists (which bought domestic distribution rights for ~7 years).
But the project was a disaster from the start.
Filming started in The Philippines in March 1976 and was supposed to last 3-4 months…it would take 16 months:
▫️Harvey Keitel was the initial lead but Coppola fired him after one week.
▫️Martin Sheen (Captain Willard) took the lead role but drank so much on set that he gave himself a stress-induced heart attack and almost died.
▫️Dennis Hopper was doing 3g of coke and 20+ drinks a day while on set (him and Marlon Brandon also hated each other).
▫️A typhoon destroyed 80% of the set and delayed filming for 2-3 months.
▫️Actual dead bodies — stolen from a local grave — were used on set and the Filipino government and its strongman leader Ferdinand Marcos threatened to shut down production after finding out.
▫️Marlon Brando (Col. Kurtz) demanded a huge fee ($3m+ for 3 weeks of work and 10% of the film’s gross). He then showed up late, asked for rewrites, declined to read Conrad’s book and was so overweight that the costumes wouldn’t fit (to obscure his heft, Copolla filmed Brando in the shadows and had him wear oversized dark clothing).
The budget ballooned to over $30m.
To maintain creative control and maintain all the film rights, Coppola mortgaged his home and borrowed money against his ownership in The Godfather.
After the success of “Star Wars” (1977), Coppola even asked his friend and business partner George Lucas — who was originally tapped to direct Apocalypse — for some funds.
I repeat: Coppola went ALL THE WAY IN and had SKIN IN THE GAME.
His wife Eleanor took recorded video of all the insanity and the footage was turned into a 1991 documentary (“Hearts of Darkness: A Filmmaker's Apocalypse”).
The total cost for the film — including marketing spend — reached $45m.
Against all odds, Coppola finished the project and the film was released in August 1979. It grossed $105m and Coppola would make a fortune on future DVD, Home Video and other ancillary revenue streams (below is a trailer for a re-mastered cut from 2019).
During the Cannes Festival in May 1979, Coppola famously said of the film: “The way we made it was very much like the way the Americans were in Vietnam. We were in the jungle, there were too many of us, we had access to too much money, too much equipment, and little by little, we went insane.”
Coppola also said at Cannes that “My movie is not *about* Vietnam. My movie *is* Vietnam”.
It’s def one of the best films ever but that is … a stretch of a comparison.
If you want more on Apocalypse Now, I went on Jim O'Shaughnessy’s “Infinite Loops” podcast with Rob Henderson to talk about the making and psychology of the film. open.spotify.com/episode/38OYIn…
When Iron Man came out in 2008, Robert Downey Jr. was *not* a marquee star.
He was rebuilding his career and paid a below market rate of $500k.
But the deal terms set him up for one of the great acting comebacks ever (while earnings $450m+ as Tony Stark).
Here’s the story 🧵
The Marvel Cinematic Universe (MCU) we know today was a long shot in the early 2000s.
Marvel was a public co. coming off bankruptcy in 1996 and had sold rights to its best IP (Spiderman, X-Men, Fantastic 4)
From 2000-07, films based on the IP minted cash but Marvel made little:
In the early-90s, Downey Jr. was one of the brightest young stars in Hollywood, receiving a Best Actor nomination for "Charlie Chaplin" in 1992 (@ 27yrs old).
In the 2nd half of the decade, though, he dealt with drug addiction, arrests and jail stints before going clean in 2003.
Masayoshi Son does the craziest investment swings:
▫️In mid-90s: invested $1.7B into 100+ internet firms (including a ~30% stake in Yahoo! for $100m)
▫️In 2000: was worth $78B at peak Dotcom and was the richest person in the world for 3 days (ahead of Gates)
▫️The bubble burst and he lost 99% of wealth
▫️In 2000, puts $20m into Alibaba for a 34% stake (sold out almost entirely by 2023 and made ~$72B)
▫️Lost $14B on WeWork
▫️Once owned ~5% of Nvidia but sold it all for $3.6B in 2019 (that stake would now be worth $90B)
▫️In 2016, Softbank bought Arm Holdings for $32B (still owns 90% and the stake is $114B, a gain of $82B)
Based on his ownership in Softbank and other investment vehicles, his personal wealth is currently ~$15B.
Nearly 100% of intercontinental internet traffic goes through submarine cables.
It is a robust system with many redundancies.
There are 500+ subsea cables and a fleet of 60 repair shops on stand-by but Big Tech isn’t taking chances:
▫️GOOGLE invested in 25 cables (and owns 12 outright). Per The Economist, the search giant started its sea cable program in 2008.
◽META invested in 15 cables (owns 1 outright).
◽MICROSOFT partly owns 4 cable.
One of the 500+ cable gets cut every 3 days (most common reasons are shark bites, anchor drops and deep-sea fish trawlers).
Remote areas are still very at risk.
Example: In 2022, a volcano erupted near Tonga and a mudslide took out the only cable nearby. Starlink provided some free internet coverage while it took 5 weeks for the cable to be fixed (5 weeks!!).
Robert Metcalfe (inventor, ethernet cable) famously predicted internet would flame out. He thought cables couldn’t handle traffic and not enough investment in them.