The Customers Who Helped Build the MachineWide moat

The relationship between ASML and its largest customers is unlike a normal supplier arrangement, because they financed the product. When EUV development required more capital than ASML could raise alone, its principal customers took equity stakes and contributed to research funding, because each needed the machine to exist more than it needed a competitive supplier market.

That history explains behaviour that otherwise looks irrational. Customers accept prices set by a monopolist, pay substantial deposits ahead of delivery, and coordinate their roadmaps around ASML's shipment schedule. They do it because the alternative — a world with no EUV, or with EUV a decade later — would have been far more expensive for them than any price ASML charges.

The consequence is a moat that customers actively maintain. They have every incentive to keep ASML healthy, well-funded and ahead of any potential rival, since a second supplier would take twenty years to become useful and might destabilise the roadmap in the meantime. Prepayments also flatter ASML's returns, which is why its ROIC is presented as an estimate rather than a clean calculation.

Watch customer prepayments and the backlog together. Customers committing cash years ahead is the clearest evidence that this relationship still works the way it has for two decades — with the largest of them at 23.9% of net sales¹, and the first sign of trouble would be them declining to.