Taiwan Semiconductor Plans to Invest $1.4 Billion in ASML

Taiwan Semiconductor Agrees to Invest $1.38 Billion in ASML
Taiwan Semiconductor Manufacturing Co. (TSMC) will acquire a 5 percent equity stake in ASML Holding NV for 838 million euros and commit to invest a further 276 million euros in research and development of next-generation lithography technologies. Photographer: Maurice Tsai/Bloomberg

Taiwan Semiconductor Manufacturing Co. agreed to invest 1.11 billion euros ($1.4 billion) in ASML Holding NV, joining Intel Corp. in taking a stake in Europe’s largest chip-equipment maker to secure future technology.

TSMC will acquire a 5 percent equity holding in Veldhoven, Netherlands-based ASML for 838 million euros and invest a further 276 million euros in research and development of next-generation lithography technologies, ASML said.

The purchase will give TSMC access to machines under development that will reduce manufacturing costs and that the Dutch company says may prompt consolidation in the industry. Intel, the world’s biggest chipmaker, agreed to invest as much as $4.1 billion last month in ASML’s so-called co-investment program to fund innovation.

The investment is “long-term positive for TSMC,” Patrick Liao and Jason Ho, technology analysts at Nomura Holdings Inc., said in a note today. The investment implies TSMC will have “joint intellectual property rights of the critical lithography research and development in the future.”

Stock Prices

TSMC rose 1.4 percent to NT$80.90 at the close in Taipei. The stock has gained 6.7 percent this year, more than double the 3 percent advance in the benchmark Taiex index, of which it’s the largest member. ASML increased as much as 1.4 percent to 47.77 euros and was trading up 0.1 percent at 10:58 a.m. in Amsterdam. The shares have risen 45 percent this year, valuing the company at 19.8 billion euros. That compares with an 8.8 percent advance in the Stoxx 600 Index.

The objective of the co-investment program “is to secure and accelerate key lithography technologies,” ASML Chief Executive Officer Eric Meurice said in a statement. “These technologies will benefit the entire industry and are not restricted to our co-investment partners.”

Meurice said last month that ASML was also in talks with Suwon, South Korea-based Samsung Electronics Co. to take part in the investment program.

Lucas van Grinsven, a spokesman for ASML, declined to comment on talks with Samsung. “What we can say is that the announcement of a second partner, TSMC, shows that the program is a success,” he said by phone.

Samsung’s Stance

Samsung Electronics will keep “good” cooperation with ASML and the collaboration can include investment, a Samsung official told investors on a conference call July 27.

The South Korean company is still weighing whether it will invest in ASML, Nam Ki Yung, a Seoul-based spokesman for Samsung, said today.

ASML said that machines using 450-millimeter tools may be available as early as 2018 and will probably be bought initially by larger customers who can achieve a critical mass in production. The machines may promote consolidation in the chip-making industry, the company said.

“The additional funding for ASML’s research and development programs will help secure and accelerate EUV development activities, in parallel with the necessary focus on improved performance of existing optical lithography tools,” TSMC Executive Vice President and co-Chief Operating Officer Shang-yi Chiang said in today’s statement.

It also will “speed up the deployment of new technologies for 450-millimeter wafers,” he said.

Non-Voting Shares

TSMC, which sold NT$18.9 billion ($631 million) of bonds at the end of June, had a total of NT$178 billion in cash as of June 30, according to its second-quarter cash flow statement. The proceeds from the last bond sale will be added to the balance sheet of the Hsinchu, Taiwan-based company during the current period.

Under the co-investment program, ASML said it can sell a total stake of as much as 25 percent to customers. Proceeds from the share sales are to be returned to ASML shareholders through buybacks. With TSMC’s participation, 20 percent of equity has been committed and the remaining 5 percent is being discussed with other customers, ASML said in the statement.

“The shares to be issued to TSMC, Intel and any other customers that participate in the co-investment program will be non-voting except in exceptional circumstances,” ASML said.

The sale of stock under the co-investment program and the buyback are subject to investor approval at an extraordinary shareholders’ meeting on Sept. 7, ASML said.

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