Record-breaking Orders and Strategic Restructuring: Unveiling the Lithography Machine Dominance Behind the Chip Boom
30/01/2026
Veldhoven, Netherlands, January 28 – Global semiconductor equipment leader ASML presented a contradictory yet profound picture in its 2025 financial report: net profit surged by 26% year-on-year to 9.6 billion euros, while new orders in the fourth quarter reached a historic high of 13.2 billion euros, far exceeding market expectations. At the same time, this European company with the highest market capitalization and approximately 44,000 employees announced it would cut 1,700 positions globally, primarily in management. CEO Christophe Fouquet emphasized during the press conference that the layoffs are not due to operational difficulties but aim to reshape organizational agility in the face of explosive AI-driven demand, allowing engineers to refocus on innovation itself. These moves have thrust this Dutch company, which operates behind the spotlight of NVIDIA and TSMC yet holds the lifeline of the world's most advanced chip manufacturing, into the industry's scrutiny.
The Infrastructure Arms Race Behind the Order Frenzy
A quarterly order value of 13.2 billion euros speaks for itself. This figure not only represents a historic peak for ASML but also serves as the most robust indicator of the expected strength across the entire AI chip supply chain. Analyzing the order structure further reveals the trend: over half of the orders are directed toward the most advanced extreme ultraviolet (EUV) lithography machines. These colossal systems, each priced at approximately 250 million euros, are the sole tools capable of producing chips at 3-nanometer, 2-nanometer, and more advanced process nodes—precisely the kind of chips required as the computational backbone for training and operating next-generation large language models like GPT-5 and Gemini.
Orders do not appear out of thin air. ASML's client list reads like a who's who of the global semiconductor manufacturing elite: TSMC, Samsung, Intel, SK Hynix, Micron. CEO Fouquet revealed on an analyst call that Micron has been holding groundbreaking ceremonies for new factories almost every week for the past few weeks. TSMC has clearly stated it will undertake significant capacity expansion in 2026, with more capacity planned for 2027 and 2028. Samsung and SK Hynix are also actively expanding production of high-bandwidth memory, a key component that works alongside GPUs in AI servers. Behind these giants' expansion plans lie the annual tens of billions of dollars in data center capital expenditure commitments from cloud service providers like Microsoft, Amazon, Google, and Meta. ASML's order book is, in essence, a forward contract betting on the global supply of AI computing power for the next two to three years.
The conversion of orders into revenue involves a delivery cycle of approximately 12 to 18 months. This means that the 13.2 billion euros in orders received by ASML by the end of 2025 will largely be recognized as revenue in the second half of 2026 through 2027. As of the end of 2025, ASML's backlog of outstanding orders has reached 38.8 billion euros, providing solid support for its 2026 revenue guidance of 34 to 39 billion euros, significantly exceeding the market's previous expectation of around 32.5 billion euros.
Monopoly Technology Moat and Geopolitical Shackles
ASML's market position is not merely a matter of leading market share, but rather a near-absolute, sustainable technological monopoly. Its extreme ultraviolet lithography technology is the result of decades of continuous investment and breakthroughs beyond physical limits. Utilizing extreme ultraviolet light with a wavelength of only 13.5 nanometers, it projects circuit patterns onto silicon wafers through a series of complex, symphony-like mirror systems, achieving atomic-level precision. As investment analysis points out, without ASML's EUV, the 5-nanometer, 3-nanometer, and 2-nanometer chip roadmaps of Intel, Samsung, and TSMC would be impossible.
The formation of this monopoly originated from a high-stakes technological gamble at the beginning of this century. While Japanese giants Nikon and Canon bet on the dry lithography technology path, ASML opted for the more challenging immersion lithography and ultimately achieved breakthroughs in extreme ultraviolet lithography. In 2012, ASML even faced a near breakdown of its funding chain, eventually overcoming the crisis by raising 3.85 billion euros through a unique customer co-investment program from TSMC, Samsung, and Intel. This history has forged the deeply intertwined and mutually dependent symbiotic relationship between ASML and the world's top chip manufacturers today.
However, this Dutch technology is shackled by American geopolitical constraints. Part of ASML's key technologies originate from federally funded research at the Lawrence Livermore National Laboratory under the U.S. Department of Energy, which enables the U.S. government to regulate ASML's exports based on the Foreign Direct Product Rule. Currently, ASML's most advanced EUV systems are prohibited from being exported to mainland China, and the sales of its deep ultraviolet lithography machines are also strictly restricted. Geopolitics directly impacts its market landscape: in 2025, the Chinese market accounted for 33% of ASML's sales, a significant drop from 41% in 2024. The company's Chief Financial Officer, Roger Dassen, expects this proportion to further decline to around 20% in 2026. This tension between dependence and control is a long-term variable hanging over ASML's global operations.
Restructuring Logic: Rebuilding the Innovation Engine at the Peak of Growth
At a time when both performance and orders have set records, ASML's decision to announce layoffs may seem counterintuitive at first glance. However, delving deeper into its organizational structure reveals a common challenge faced by all successful tech giants during periods of rapid expansion: the erosion of innovation by bureaucracy.
The CEO Fucai's explanation goes straight to the core: Our engineers tell us that a significant amount of their time is no longer spent on innovation because the organization has become too complex. The 1,700 positions planned to be eliminated are mainly concentrated in management and support roles, with the engineering and development department, which has 16,000 employees, being the most affected. Fucai's statement is even more pointed: We want more engineers, but less management. The purpose of this restructuring is to cut management layers, simplify processes, free engineers from endless meetings and reports, and refocus on tackling technical challenges.
This is not a signal of contraction, but rather preparation to tackle longer-term and more challenging technological hurdles. ASML's next battle lies in the full-scale mass production and delivery of High-NA EUV lithography machines. This more advanced system enables higher resolution and smaller chip feature sizes, serving as the key to angstrom-level (sub-nanometer) processes. Simultaneously, the aggressive capacity expansion plans of global customers place extreme demands on ASML's own supply chain management and production ramp-up. During the conference call, Fouquet had to specifically address concerns about whether ASML would become an industry bottleneck. He assured that it would not happen this year, but the underlying implication is that maintaining this non-bottleneck status itself requires extreme internal efficiency. This restructuring is precisely about refining its own innovation and delivery machinery before the tsunami of demand arrives.
Market Valuation and Future Risks: A Sobering Reminder Amid the Feast
ASML's stock price experienced a rollercoaster ride following the earnings release: it once hit a historic high of 1,493.48 euros during the session, but ultimately closed down 2.2% at 1,422.92 euros. This volatility reflects the market's swing between frenzy and caution. Currently, ASML's stock trades at a price-to-earnings ratio of about 46 times based on 2026 expected earnings, significantly higher than NVIDIA's 25 times and well above the semiconductor equipment sector's median of 32 times. Its market capitalization has reached approximately 467 billion euros, firmly ranking it as the highest among European listed companies.
The core of the story supporting the high valuation is the toll bridge in the era of computing power scarcity. According to the International Energy Agency's report in April 2025, global data center electricity consumption is projected to at least double by 2030. As AI models evolve from text to multimodal, the demand for computing power grows exponentially. Even with improvements in chip energy efficiency, the historical Jevons paradox indicates that efficiency gains often lead to an increase in total consumption. ASML, as the sole supplier of the essential equipment required to produce these high-efficiency chips, is regarded as one of the most certain beneficiaries in this computing power arms race.
However, the risks are equally clear. First is the valuation itself. Some institutional investors have already begun taking profits. Han Dieperink, Chief Investment Officer of Aureus Asset Management, stated: "A lot of good news has already been priced in." The company recently halved its ASML holding to 45,000 shares. Second is execution risk. The 38.8 billion euro order backlog is both a blessing and a pressure, presenting an unprecedented test for ASML's supply chain, logistics, and production capacity. Although management denies it, the market consistently worries that its delivery capabilities could become the actual bottleneck constraining the global expansion of chip production capacity. Third are geopolitical and cyclical risks. The long-term impact of U.S.-China tech decoupling is still evolving, and the current frenzied capital expenditure cycle will inevitably face adjustments eventually. Physical constraints such as power infrastructure (e.g., copper shortages) and grid capacity may also slow down the construction speed of data centers, thereby impacting chip equipment orders.
ASML announced a new share buyback program of up to 12 billion euros and increased its dividend to 7.50 euros per share, demonstrating its strong cash flow generation capability and commitment to shareholder returns, which also provides some support for the stock price.
ASML stands at a unique historical intersection: it is both the pinnacle product of globalized precision division of labor and at the forefront of geopolitical friction; it enjoys the endless demand brought by the AI revolution, yet must also combat the bureaucratic inertia typical of large organizations. Its lithography machines are the ultimate sculpting tools carving out the silicon-based intelligent era. Every figure in its financial reports, every organizational adjustment, is not merely a reflection of corporate operations but a crucial window into observing the competition for global technological supremacy, the pulse of industrial cycles, and the expansion of humanity's computational frontiers. In this hardware feast ignited by AI, ASML is not just a participant—to some extent, it is forging the very utensils required for the banquet. And the process of forging is destined to be filled with intense heat and pressure.
Reference materials
https://techcrunch.com/2026/01/28/the-ai-infrastructure-boom-shows-no-sign-of-slowing-down/
https://www.japantimes.co.jp/business/2026/01/29/tech/asml-orders-capacity/
https://seekingalpha.com/article/4864017-asml-finally-breaks-out-but-valuation-says-dont-chase-now
https://nos.nl/artikel/2599982-asml-had-een-recordjaar-maar-gaat-toch-1700-mensen-ontslaan
https://www.investors.com/news/technology/asml-stock-q4-2025-earnings/
https://au.investing.com/analysis/asml-after-the-run-buy-a-monopoly-or-wait-for-shock-200611351
https://www.money.it/stmicroelectronics-accelera-con-i-chip-ai-perche-il-mercato-scommette-su-un-20