Goldman Sachs: EUV Technology Driving Semiconductor Growth

Goldman Sachs Research has highlighted the transformative potential of extreme ultraviolet (EUV) lithography in the semiconductor industry, with the latest iteration, High NA, set to revolutionize chip production. This advanced technology, poised to push the global semiconductor market from $600 billion to $1 trillion by the end of the decade, is enabling more powerful chips for artificial intelligence, high-end computing, and autonomous driving.

EUV technology, some experts once thought impossible, is now a reality, with machines costing around €300 million ($330 million) or more. The engineering challenges are immense, with a lens so precisely engineered that if expanded to the size of the Earth, the biggest blemish would be smaller than a fingernail. This precision allows for high-precision printing, packing more transistors into chips and increasing processing power.

High NA EUV machines are expected to be key enablers of the semiconductor market growth, facilitating the production of more powerful chips for AI, edge computing, and other advanced applications. However, the high cost of these machines may initially limit their adoption, potentially leading to supply chain bottlenecks and higher pricing. As more companies invest in EUV technology, competition will likely increase, driving down prices and fostering a more efficient global semiconductor supply chain.

Geopolitical tensions and trade policies significantly impact the adoption and distribution of EUV technology. The Ukraine-Russia crisis has minimal direct impact on EUV producers due to low exposure (<2%), but neon gas, crucial for EUV production, is predominantly sourced from Ukraine. Disruptions here could strain supply, though near-term risks seem limited. Longer-term, trade policies like the U.S. CHIPS Act and European initiatives may reshape the semiconductor landscape, potentially re-shoring parts of the supply chain.



Companies like TSMC, ASML, and Applied Materials are well-positioned to benefit from the adoption of High NA EUV technology. TSMC's solid technology leadership and execution, ASML's monopoly on EUV, and Applied Materials' broad product portfolio and margin expansion make them strong contenders in this evolving market.

In conclusion, Goldman Sachs' forecast highlights the potential of EUV technology in driving semiconductor market growth. As the technology evolves and becomes more accessible, it could reshape the semiconductor landscape, with companies that adopt it potentially gaining a competitive edge. Investors should keep a close eye on this dynamic sector, as the future of semiconductors is being shaped by these advanced technologies.