Optical system iteration, EUV lenses are 8 times more expensive than DUV lenses. The EUV optical system is composed of a special Bragg reflector, which has a complex manufacturing process and a high price. According to Edmund information, EUV lenses have a higher unit price than DUV lenses, and the price gap between EUV and DUV lenses of the same specification is 8 times. As advanced processes enter the 3nm era, EUV lithography machines have been widely used by head fabs, and the next generation of High NA EUV lithography machines are expected to be launched in 2025, with EUV optical systems becoming a trend or increasing the importance of optical systems in lithography machines.

The ASML lithography machine contains more than 100000 parts, and the optical system suppliers are mainly from Germany. According to the Chinese Academy of Engineering (referred to from the Prospective Industry Research Institute), an EUV lithography machine contains more than 100000 parts and more than 5000 suppliers worldwide. From the structural analysis of the lithography machine, the US light source accounts for 27%, the Dutch cavity and the British vacuum account for 32%, the Japanese material accounts for 27%, and the German optical system accounts for 14%.

EUV upgrade led to the lithography market size to maintain rapid growth, 2022 lithography market size of $17.7 billion. The top three suppliers in the lithography market accounted for the vast majority of the market share, 2017-2022, the three major suppliers' total lithography revenue increased from $8 billion to $17.7 billion, corresponding to CAGR of 17%. Looking to the future, according to ASML information, the proportion of lithography machine market in the total semiconductor market has continued to increase in recent years, and this trend is expected to continue in the future, mainly considering the rapid development of the semiconductor industry in recent years, the increase in the capital expenditure of fabs due to the expansion of advanced processes, the increase in the proportion of equipment expenditure is expected to bring continuous increment to lithography machines, and the market scale will maintain rapid growth.

High-end lithography optical systems are of high value, and the global lithography optical system market is expected to reach $6 billion billion in 2025. With the development of advanced processes, EUV lithography machine shipments continue to increase worldwide, and the next generation of High-NA EUV is expected to ship in 2025, EUV lithography machine market share is expected to continue to grow. Due to the difficulty of manufacturing EUV optical systems, the value of EUV optical systems supplied by the Zeiss Semiconductor Division alone far exceeds that of other types of lithography optical systems, and the importance of optical systems is increasing. Based on our forecasts for global lithography shipments, selling prices, and optical system price ratios, we estimate that the global lithography optical system market size is expected to reach $6 billion in 2025, corresponding to 25% CAGR in 2022-2025.

1) Assumption of global lithography machine shipments in 2025: According to ASML forecast, the global semiconductor market will maintain steady growth from 2020 to 2030, with CAGR of 9%. The growth of the semiconductor industry will drive the increase of wafer demand. Among them, the annual compound growth rate of advanced process and mature process is relatively fast, which is expected to be 12% and 6% respectively. Wafers need to expand production to meet the demand growth. Therefore, we assume that the market demand for EUV lithography machines for the production of advanced processes and ArF lithography machines for auxiliary production will increase rapidly, with shipments expected to reach 80 and 280 units, respectively, in 2025.

2)2025 lithography machine price assumption: According to ASML data, the High-NA EUV price is expected to reach $0.35 billion, and by analyzing the 2018-2022 selling price of ASML types of lithography machines, the price of other models of lithography machines will remain stable, except for the price of EUV lithography machines. We believe that the global lithography machine industry is an oligopoly market, price fluctuations are small, it is expected that 2022-2025 EUV lithography machine shipments into a small growth range, prices will remain stable, other types of lithography machine prices will continue to be stable.

3) Optical systems account for the proportion of lithography machine price assumptions: Zeiss Semiconductor Division mainly produces ultra-precision semiconductor optical systems, its main customer is ASML. According to ASML and Zeiss announcements, 90% of the revenue of Zeiss Semiconductor Division from 2015-2022 comes from ASML, while Zeiss Semiconductor Division is the only supplier of optical systems for ASML lithography machines. Therefore, by analyzing the revenue of the Zeiss Semiconductor Division and the shipments and average selling price of each ASML lithography machine, we estimate the assumption that the optical system of each type of lithography machine accounts for the proportion of the selling price of the lithography machine.