ASML’s decoupling doubts and China’s shopping slump

Hi everyone! This is Ting-Fang from Taipei.

It’s been several months since you last heard from me. I have just come back from London, where I was on secondment to the Financial Times, Nikkei Asia’s sister publication. Shortly before I returned to Asia I visited the Netherlands, home to the world’s most valuable chip equipment maker by market cap, ASML.

ASML’s headquarters is Veldhoven, an agricultural town with a population of around 45,000. Outside the train station, I tried to show the ASML address to the taxi driver, but he told me: “I don’t need any directions . . . The tallest building in town is ASML’s headquarters, and don’t you know about a third of the population in town works there?”

From the Dutch capital of Amsterdam, it takes about two hours to get to ASML’s headquarters. That is about as long as the trip by high-speed rail from the Taiwanese capital of Taipei to the southern city of Tainan, where the world’s biggest contract chipmaker, TSMC, operates the world’s most advanced chip plants.

Tainan is where TSMC turns out cutting-edge chips for iPhones and Macs, as well as the Nvidia graphic processors that power ChatGPT’s generative AI computing. These chips, in turn, could not be produced without ASML equipment and the massive supply chain behind it.

At a sprawling facility surrounded by vast green fields, the majority of its 14,000 R&D employees work locally together to build hundreds of the world’s most advanced lithography machines every year. These machines, built in the tranquil Dutch countryside, are shipped to Intel, Samsung and other top chipmakers, fuelling the global race to produce evermore powerful semiconductors.

Too late to untangle

The tech supply chain has become so long and complex for any country to “go back to a dark little corner” with its own isolated chip industry.

That was the message of ASML’s executive vice-president and chief business officer Christophe Fouquet in an exclusive interview with Nikkei Asia’s chief tech correspondent, Cheng Ting-Fang.

“We don’t believe decoupling is possible. We believe this will be extremely difficult and extremely expensive,” the senior executive said.

ASML said its own success over the years has come from working with the best global suppliers instead of trying to develop all of the technologies it needs in-house. This approach, according to Fouquet, has allowed ASML to move forward with cutting-edge lithography — a key process in all types of chip manufacturing — faster than its smaller Japanese rivals Nikon and Canon.

But while it works with critical suppliers globally, Europe’s top chip equipment maker said it still believes the best production strategy is to bring all the components and modules back home and assemble the machines close to its headquarters. ASML said it will continue this strategy until at least 2026.

Welcome back, Jack?

Alibaba is shaking up its management as the Chinese tech giant races to split into six entities and reinvent itself, write the Financial Times’ Ryan McMorrow and Eleanor Olcott.

Longtime chief executive and chair Daniel Zhang is out, to be replaced by two top lieutenants to former boss Jack Ma, Alibaba co-founders Eddie Yongming Wu as CEO and Joe Tsai as chair. The changes will take effect in September.

The switch and recent Ma appearances in Hangzhou suggest the billionaire intends to play a greater role in piloting Alibaba through the major restructuring and tougher competitive environment.

At the end of May, Ma summoned top executives at its ecommerce business to talk strategy and plot a path forward for Taobao and Tmall, which have been besieged by competition from upstarts Pinduoduo and ByteDance’s Douyin.

While Ma holds no formal position at the company, he remains on the partnership committee, which sets the direction and resembles a de facto board.

China’s first major online shopping festival since lifting its strict Covid restrictions at the end of last year was not the spending extravaganza many were hoping for, despite domestic household savings hitting a record high, Nikkei Asia’s Cissy Zhou writes.

The muted results for 618, named for the date it originally started on, were not only a blow to the momentum of ecommerce giants JD.com and Alibaba Group Holding. Even more importantly, economists said, they underscored China’s economic woes.

Weak consumer spending continues to stand in the way of a robust economic recovery, even as Beijing tries to shift from the country’s growth model from one driven by exports and property to one led by consumption.

The paradox is that many shoppers have more money in their bank accounts, but they still aren’t spending as uncertainty about the job market and the overall economy saps consumer confidence. Some are warning that the old golden era of online extravaganzas may be gone for good.

Looking to new screens

Major Taiwanese display maker AUO is stepping up efforts to develop and commercialise micro-LED screens, a technology Apple is also aggressively developing, Nikkei Asia’s Lauly Li writes.

AUO has been increasing its investments in micro-LED display tech to reduce its reliance on its liquid crystal-diode display (LCD) business, a segment that is extremely sensitive to market dynamics. The company plans to ship its first batch of micro-LED screens, to be used for luxury brand Tag Heuer’s smartwatches, in the final quarter of this year, sources said, which could help AUO to attract other clients in wearables, TVs and automobiles.

The AUO plan includes scaling back production at its facility in Singapore and possibly moving some of the equipment back to Taiwan to help development efforts near its headquarters, according to people with direct knowledge of the matter.

The display industry has suffered a serious downturn since last year, and most display makers are looking to transform their business and find new growth drivers. Micro-LED screens are less power-hungry and can be made thinner than organic light-emitting diode (OLED) displays, the most advanced display technology currently on the market. Companies like AUO and Apple see these cutting-edge screens as a way to counter the South Korean and Chinese companies that dominate the OLED segment.

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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