By Tony Daltorio - July 16, 2012 | Tickers: ASML, INTC, NINOY.PK, TSM | 0 Comments

Tony is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

One of the companies that is often pointed to in the technology sector as a bellwether and as the world's top chip equipment maker is the Dutch company, ASML Holding NV ADR (NASDAQ: ASML). It not long ago gave a rather upbeat forward assessment of its business (thanks to smartphones and tablets), and now more good news is flowing for ASML shareholders.

The world's biggest semiconductor manufacturerand one of ASML's largest customers,Intel (NASDAQ: INTC)agreed to invest $4.1 billion into the company. Intel is putting $1 billion towards ASML's research and development costs as well as buying a 15 percent stake in the company for $3.1 billion.

Intel's major investment into ASML may soon be followed up by other sizable investments from other major customers. These customers include Taiwan Semiconductor Manufacturing ADR (NYSE: TSM) and Korea's Samsung Electronics Co. Ltd. (OTC: SSNLF). It has been reported that ASML has asked its three biggest customers, accounting for 41 percent of its revenues, to help fund its R&D in exchange for up to 25 percent of the company.

Why would these three semiconductor companies be so anxious to help out ASML? Because they are very concerned about maintaining the progress in chip miniaturization over the coming years.

In particular, the money from Intel, Samsung and TSM will help ASML accelerate the development of the next step beyond laser technology, extreme-ultraviolet (EUV) lithography. This is a new process that is seen as key to producing smaller chips; it involves bouncing a laser beam off molten tin to produce a light ray just 13.5 nanometers in thickness. It also requires a vacuum inside the machine and mirrors instead of lenses to focus the light on the silicon. Current production techniques have a 193 nanometer width.

ASML is seen as the leader in the field, and it believes that the new technology will be able to be used for mass production of chips below 20 nanometers beginning in early 2013. The research money should allow it to break the 10 nanometer barrier later this decade.Transistors in today's chips are separated by a channel of 22 to 28 nanometers.

In addition, the money injections will be used to help with the development of equipment that can handle larger-sized, circular wafers from which chips are cut. The next generation 450 millimeter diameter wafers will contain roughly double the amount of chips as existing 300 millimeter wafers. Development of this technology should result in cost savings for chip makers of 30-40 percent.

From ASML's viewpoint, these investments will be key to it remaining number one in semiconductor equipment and ahead of its Japanese rival Nikon Corporation ADR (NASDAQOTH: NINOY.PK). That company is also working on EUV lithography technology and has ASML a bit worried. But the good news here is that it is believed Nikon is at least two years behind ASML in developing EUV technology, with its version of EUV technology not coming out until at least 2015. And the cash injection from Intel and the other major chip makers into ASML is sure to put Nikon even more behind the proverbial eight ball.

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ASML Strengthens Its Leadership in EUV Technology