* ASML shares surge 10 pct in Amsterdam
* Intel's $4.1 bln spending includes R&D, stake buy
* Intel first to sign onto ASML investment program
* ASML talking to TSMC, Samsung Electronics about similar
(Recasts, add talks with TSMC, Samsung Electronics)
By Edwin Chan and Sara Webb
SAN FRANCISCO/AMSTERDAM, July 10 ASML,
the world's top chip equipment maker, signed up Intel Corp
to bankroll its research into costly next-generation
chipmaking technology, and aims to reach similar deals with TSMC
and Samsung Electronics.
ASML's chief executive said on Tuesday the Dutch firm had
asked its three three biggest customers - Intel, TSMC, and
Samsung Electronics - to help fund its R&D in exchange for up to
25 percent of its shares. Following Intel's decision, it expects
to announce more customer investments in the coming weeks.
ASML shares rose 10 percent on the news. Intel fell about 1
percent after hours.
Fast-tracking the development of such technology not only
cements ASML's position as the market leader ahead of Nikon
, but could also slash production costs for hot consumer
gadgets such as smartphones and tablet computers.
"We're talking about $50 tablets" said Richard Windsor,
Nomura's global technology specialist.
"This brings into the realms of possibility a technology
that we thought wasn't feasible and opens up the possibility for
greater cost reductions".
Intel said on Monday it would spend more than $4 billion to
buy up to 15 percent of ASML and fund its research. TSMC said it
was considering a similar deal.
Intel hopes to speed up the adoption of the next generation
of chip manufacturing processes from ASML by as much as two
years. That will require huge capital investment, but would
deliver billions of savings by cutting chip production costs.
ASML, the world's largest supplier to chipmakers of machines
that etch circuits onto silicon wafers, wants to spread the risk
of developing cutting-edge equipment based on 450-millimeter
wafer sizes and "extreme-ultraviolet" or EUV lithography.
Under the terms of the deal, Intel will invest $1 billion in
research into those two technologies, which are expected to
emerge in the next few years.
It will also acquire an initial 10 percent stake in ASML and
tack on another 5 percent if it wins shareholder approval, for a
total of about $3.1 billion.
Analysts said the deal would help cement ASML's market
leading position, save money, safeguard its technology lead, and
make it harder for smaller competitors to keep going.
Shares in rival Nikon, which also researches and develops
lithography processes, fell 7 percent on the news. A spokesman
said Nikon "would like to continue our cooperation with Intel
"In a bold move to bring heavy investment into its future
development needs, tie in large customers and damage any Nikon
ambitions in EUV, ASML has delivered a strong message of
strategic intent for the next semi cycle and beyond," Jeffries
International research said in a note.
Intel and other chipmakers are grappling with slowing demand
as consumers shift to mobile devices, and economic growth in
Europe and even emerging markets is weakening. On Monday,
Advanced Micro Devices warned its second-quarter revenue may
slide 11 percent, blaming disappointing demand from China and
RBC Capital analyst Doug Freedman said Intel could save
about $2 billion a year on 450mm processes, versus the current
standard of 300mm. Larger silicon wafers lower production costs
because more chips can be sliced off them.
"The transition from one wafer size to the next has
historically delivered a 30 to 40 percent reduction in die
cost," Intel Chief Operating Officer Brian Krzanich said in a
statement. "The faster we do this, the sooner we can gain the
benefit of productivity improvements."
Intel, the world's top chipmaker, gains no exclusive rights
to ASML products in the deal. But Freedman said Intel stood to
gain if the overall industry benefited and by lowering the cost
of technology in emerging markets would open new markets.
Intel remains at the vanguard of computer processors but is
seeing rivals like Samsung Electronics come on strong in
application of microchips for smartphones and other mobile
devices. Analysts say the U.S. company maintains a two-year lead
over the competition but needs to spend heavily to safeguard
A shift to cutting-edge EUV helps push the natural
progression of semiconductor technology advancement known as
"Moore's Law", which posits that the average number of
transistors packed on a chip doubles every 18 months.
While many semiconductor companies outsource the fabrication
of actual chips to third-party "foundries", Intel is among the
last remaining chipmakers that build and operate their own
network of multibillion dollar production facilities, or "fabs".
($1 = 0.8130 euros)
(Additional reporting by Tarmo Virki in Helsinki and Alexei
Oreskovic in San Francisco; Editing by Richard Chang and Richard