Selling Shovels in a Digital Gold Rush
Let’s be brutally honest. Chipmakers like Micron are in a viciously competitive game. They are constantly battling over performance, price, and the next microscopic innovation. It’s a high stakes, high stress affair. The companies that supply them, however, operate in a rather different world.
Take a firm like ASML Holding. They build the fantastically complex photolithography machines that are utterly essential for making advanced chips. Without their kit, which costs a cool $200 million a pop, you simply can't build a modern semiconductor factory. It’s less a competitive market and more of a private club with a membership of one. Or consider Lam Research, which provides the fabrication equipment that forms the very spine of production. As Japan gears up, these are the firms receiving the purchase orders.
Their business is not about the next hot gadget. It’s about the fundamental infrastructure of the entire digital age. It strikes me that looking at the whole ecosystem is the more sensible play, and it’s an idea that underpins thinking around the Japan Semiconductor Revival: What's Next for Suppliers investment theme. These suppliers often enjoy quasi monopolies and long term contracts, a far cry from the cutthroat world of the chipmakers themselves.
