A SK PEOPLE to pinpoint the centre of the digital economy and many will finger Silicon Valley, populated by Apple, Google, Facebook and too many sexy startups to count. Others may nod at the area around Seattle, where Amazon and Microsoft are based. Some could suggest Shenzhen, China’s technology hub. Few would point to a nondescript suburb of Eindhoven, the Netherlands’ fifth-biggest city. Yet on closer inspection, the case for Veldhoven looks compelling. It is home to ASML , the world’s sole manufacturer of the most advanced equipment critical to modern chipmaking. If chips make the world go round, ASML may be the closest the multi-trillion-dollar global tech industry has to a linchpin.

ASML is not the only maker of photolithographic machines, which use light to etch integrated circuits onto silicon wafers. It competes with Canon and Nikon of Japan. But the Dutch firm’s market share has nearly doubled, to 62%, since 2005. And it alone has harnessed “extreme ultraviolet” ( EUV ) light, with wavelengths of just 13.5 nanometres (billionths of a metre). Shorter wavelengths allow the etching of smaller components—vital for chipmakers striving to keep pace with Moore’s Law, which posits that the number of components that can be squeezed into a given area of silicon doubles roughly every two years. The world’s three leading chipmakers—Intel in America, Samsung in South Korea and the Taiwan Semiconductor Manufacturing Company ( TSMC )—have become as reliant on ASML ’s wares as the rest of the technology industry is on theirs.

The company’s performance reflects this increased dependence. Its revenues grew by 8% in 2019, to €11.8bn ($13.2bn), despite a slump in the highly cyclical semiconductor business. Although EUV devices accounted for only 26 of the 229 lithography machines the firm sold in 2019, they made up a third of sales by revenue. The firm expects this to rise to three-quarters by 2025, as other chipmakers upgrade from existing “deep ultraviolet” technology.

With neither Canon nor Nikon pursuing EUV technology, investors have concluded that ASML will enjoy its nanoscopic monopoly for a while. Since 2010 its market capitalisation has grown tenfold, to around €114bn (see chart). It has nearly doubled in the past year alone. ASML is worth more than Airbus, Siemens or Volkswagen. Its share price has suffered along with others as covid-19 rattles global markets, but its longer-term outlook appears as bright as the white-walled cleanrooms where its machines take shape. Its shares trade at a mouthwatering 32 times forward earnings, double or more those of its biggest customers.

Times were not always so good. The firm started life in 1984 as a joint venture between Philips, a Dutch electronics giant, and ASM International, which made semiconductor equipment. Early on it occupied a few wooden huts on Philips’s Eindhoven campus. Jos Benschop, ASML ’s technology chief, is candid about its early troubles. Its first products were obsolete as soon as they were released, he says, and the firm struggled to find customers. It was kept alive by Philips, itself facing financial difficulties, and by subsidies from the Dutch government and the EU ’s predecessor. In 1995 it listed its shares in New York and Amsterdam. Shortly afterwards the firm bet that EUV lithography would be the future of chipmaking. Big chipmakers planned to be using its machines by around 2007. They were to be disappointed—repeatedly. So were ASML ’s shareholders, as the company discovered that EUV light is frustratingly difficult to work with. Working out the kinks took much longer than expected, admits Mr Benschop. The firm’s first prototype machines were sent to IMEC , a research institute in Belgium, in 2006. Commercial clients did not start using the technology until 2018. Earlier generations of kit employ lasers to produce light directly. But as wavelengths shrink, things get trickier. Inside a cutting-edge EUV machine 50,000 droplets of molten tin fall through a chamber at its base each second. A pair of lasers zap every drop, creating a plasma that in turn releases light of the desired wavelength. The mirrors guiding this light, made of sandwiched layers of silicon and molybdenum, are ground so precisely that, if scaled to the size of Germany, they would have no bumps bigger than a millimetre. Because EUV light is absorbed by almost anything, including air, the process must take place in a vacuum. To get into the production facilities, your correspondent had to don a special suit and leave his notebook behind, lest it shed unwanted fibres.