The Chip Insider®–ASML Spin-off: Worst or Best Board Decision Ever

Summary: Becoming Great - ASML spin off: Worst or Best Board Decision Ever

This year, ASML was honored with the crown of ‘Europe’s Most Valuable Enterprise,’ based on market cap. That leads to many questions about Philips’ 1984 decision to spin ASML off into a separate enterprise. The central question is: Worst or best board decision ever?

Worst board decision ever: It could be considered the worst board decision ever, by the simple additive metric that the two combined would make Philips Europe’s most valuable company today. However, simple addition rarely works in business as more than 90% of mergers and acquisitions in the semiconductor equipment industry have resulted in abject failure or no greater growth trajectory path than what had been achieved.

Best board decision ever: By the even simpler metric of ASML’s stellar success, it should be considered the best decision ever … but as Sun Tsu advised, when outnumbered, "If you throw your soldiers into positions whence there is no escape, they will prefer death to flight..." What distinguishes tech from all other businesses is the need to constantly innovate … For ASML, the need to innovate was immediate: The stepper developed at Philips was not viable for semiconductor production… It’s hard to over-emphasize the importance of small, overwhelmed teams, in a position “whence there is no escape” when it comes to world-beating innovation…

Philips’ … experiment will probably never be repeated again. But when it comes to the question of was it the best board decision ever… maybe not for Philips, but it certainly was for the industry and the world. What it created was a feisty company that always questioned what customers asked for. At key decision points… Today, people complain about the ASML monopoly. But they fail to realize it was customers that created it, not ASML, by playing fast-and-loose with supplier resources. ASML just did what it had learned to do in it’s life-or-death fights: Question customers, understand them better than they understand themselves. Then move fast and build the best possible products with the certainty that tech customers always buy the best for their own survival.

Questions & Answers: Why AI Memory Demand is Different…

“When everything seems to be going against you …
remember that the airplane takes off against the wind” — Henry Ford