52 Business The EconomistFebruary 29th 2020
2 between Philips, a Dutch electronics giant,
and asmInternational, which made semi-
conductor 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 strug-
gled to find customers. It was kept alive by
Philips, itself facing financial difficulties,
and by subsidies from the Dutch govern-
ment and the eu’s predecessor.
In 1995 it listed its shares in New York
and Amsterdam. Shortly afterwards the
firm bet that euvlithography would be the
future of chipmaking. Big chipmakers
planned to be using its machines by
around 2007. They were to be disappoint-
ed—repeatedly. So were asml’s share-holders, as the company discovered that
euvlight is frustratingly difficult to work
with. Working out the kinks took much
longer than expected, admits Mr Ben-
schop. 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 wave-
lengths 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 re-
leases light of the desired wavelength. The
mirrors guiding this light, made of sand-
wiched layers of silicon and molybdenum,
are ground so precisely that, if scaled to thesize of Germany, they would have no
bumps bigger than a millimetre. Because
euvlight is absorbed by almost anything,
including air, the process must take place
in a vacuum. To get into the production fa-
cilities, your correspondent had to don a
special suit and leave his notebook behind,
lest it shed unwanted fibres.
The machines, weighing 180 tonnes and
the size of a double-decker bus, are them-
selves a testament to the electronics indus-
try’s tangled supply chains. asml has
around 5,000 suppliers. Carl Zeiss, a Ger-
man optics firm, fashions its lenses. vdl, a
Dutch company, makes the robotic arms
that feed wafers into the machine. The light
source comes from Cymer, an American
company bought by asmlin 2013. asmlis,
in turn, one of hundreds of firms that sup-
ply the chipmakers themselves. But it is so
vital that Intel, Samsung and tsmchave all
chipped in to finance its research and de-
velopment in return for stakes in the firm.
Appreciation of asml’s dominant posi-
tion has not been confined to customers or
investors. Politicians share it, too. euvlith-
ography is on the Wassenaar list of “dual-
use” technologies that have military as well
as civilian applications. China is keen to
foster advanced chipmaking firms of its
own, an ambition that America is trying to
thwart. In 2018 asmlreceived an order for
an euvmachine from a Chinese customer,
widely thought to be the Semiconductor
Manufacturing International Corporation,
China’s biggest chipmaker, whose factories
are currently a couple of generations be-
hind the state of the art. Under American
pressure, the Dutch government has yet to
grant asml an export licence.
asml would hate to surrender access to
the Chinese market, which is bigger than
most and as captive. Being kept out of Chi-
na may, in the long run, endanger asml’s
dominance—if it leads a Chinese rival un-
able to secure asml kit to build its own, and
sell it to others. Last April asml said that six
employees, including some Chinese na-
tionals, were involved in pilfering trade se-
crets from its American office in 2015. The
firm disputes the suggestion that the theft
was linked to the Chinese government.
Right now, though, China needs asml
more than asml needs it. Of all the suppli-
ers required for an advanced chip factory of
the sort its authorities want built, “asml’s
technology is the most difficult to repli-
cate”, says Pierre Ferragu, a technology ana-
lyst at New Street Research. Malcolm Penn
of Future Horizons, another consultancy,
thinks that it would take a Chinese rival a
decade or more to catch up—and by then
the cutting edge would have moved on
again. The Dutch are already working on
new euv machines with better optics,
which can process more silicon wafers per
hour. These are due to ship in 2023—this
time, asml hopes, with no delays. 7F
oryearsafterit listeditsshareson
the Hong Kong stock exchange in 2011,
Prada’s business looked considerably
blander than its iconoclastic blend of
ugly chic, counterculture, politics and
fashion. No longer. Its share price rose by
a quarter in the three months to January,
faster than at bigger luxury groups such
as France’s lvmh or Kering. Investors
liked the look of its new partnership with
L’Oréal, a cosmetics giant, and of in-
vestments in online sales. But their
enthusiasm was based chiefly on an
expectation of more radical change:
either a takeover by a bigger luxury con-
glomerate or an internal overhaul.
A buyer has yet to signal interest. But
on February 23rd Prada announced that
Raf Simons, a cerebral industry star from
Belgium who used to be the creative head
of Christian Dior, a French label owned
by lvmh, and of Calvin Klein, an Ameri-
can brand, will join the company. He will
work alongside Miuccia Prada, the grand-
daughter of the company’s founder, as
co-creative director. The duo will unveil
their first joint collection in September.
Both emphasised their intention to
double down on creativity—and prevent
the suits from calling all the shots.
Both Ms Prada and her husband,
Patrizio Bertelli, the group’s chief exec-
utive, have strong personalities. They
also own 80% of Prada. For the arrange-
ment to work, the trio “must get on very
well”, says Luca Solca of Bernstein, a
research firm. It helps that they have
known each other since 2005, when Mr
Simons worked for Jil Sander, a German
label then part of the Prada empire.A goodrapportalonewillnotguaran-
tee Prada’s revival. That, Mr Solca notes,
requires undoing past mistakes. Some,
like its drab online presence and recent
uninventiveness, which Mr Simons is to
tackle, are being reversed. Other errors,
notably efforts to narrow its offering and
to ape rivals like Hermès and Chanel, and
their high prices, have yet to be.
With all luxury firms infected this
week by the new coronavirus, which
hurts their lucrative Chinese sales, it is
hard to discern what investors make of
Mr Simons’s arrival. Those holding out
hope of an acquisition may at least com-
fort themselves that, at 4% of lvmh’s
market value, Prada remains a tasty
morsel—which a talented haute-couturi-
er like Mr Simons makes tastier still.UnbedevillingPrada
Luxury goodsBERLIN
A fashion house tries to revive its creative spark—and its financial fortunesMr Simons struts his stuff