How Philips Once Owned 50% Of ASML And 28% Of TSMC

Philips once owned 50% of ASML and 27.5% of TSMC, stakes that would now be worth trillions, but sold them to focus on healthcare, missing the AI boom. ASML and TSMC now control the chip supply chain essential for AI, while Philips is a mid-cap healthcare vendor.

In the realm of modern corporate history, few capital allocation missteps rival the sheer scale of wealth handed away by Dutch electronics giant Philips. If you trace the physical anatomy of the current AI boom—from the high-bandwidth memory feeding massive data centers to the GPU accelerators driving frontier AI models—every single microchip depends on two undisputed monoliths: ASML and TSMC . What most people forget is that both of these trillion-dollar supply chain gatekeepers were effectively incubated inside Koninklijke Philips N.V. Royal Philips . Had Philips held onto its stakes, it would be the undisputed emperor of global technology today. Instead, Philips transformed itself into a mid-cap healthcare equipment vendor, while its former offspring came to control the bedrock of artificial intelligence. The Birth of ASML: Spin-Off from a Leaky Shed In the late 1970s and early 1980s, Philips’ research lab NatLab was experimenting with advanced photolithography—the process of using light to etch microscopic circuit patterns onto silicon wafers. However, Philips was an empire of consumer electronics TVs, light bulbs, audio cassettes , and lithography machinery was a low-margin capital sink. Desperate to offload costs, Philips partnered with Advanced Semiconductor Materials International ASMI in 1984 to spin off the unit into a joint venture called ASM Lithography ASML . Legend has it that early ASML engineers worked out of a leaky wooden shed next to Philips’ office in Eindhoven. Philips owned 100% of the photolithography technology at launch and shared 50/50 corporate ownership with ASMI. Over the next decade, Philips gradually divested its stake. After ASML went public in 1995, Philips progressively dumped its shares on the open market to shore up cash for its core consumer business. By the mid-2000s, Philips owned zero percent of ASML. The 28% TSMC Stake: Funding Morris Chang’s Dream Just three years after launching ASML, Philips played an equally pivotal role in Taiwan. In 1987, Dr. Morris Chang set out to test a radical thesis: what if semiconductor companies didn’t design and manufacture their own chips? What if a company built chips exclusively for others—a pure-play semiconductor foundry? To launch Taiwan Semiconductor Manufacturing Corporation TSMC , Chang needed both capital and manufacturing intellectual property. Wall Street venture capitalists turned him down. Enter Philips. In exchange for transferring its semiconductor technology, granting patent licenses, and investing roughly $58 million, Philips received a massive 27.5% initial equity stake in TSMC , making it the largest foreign shareholder alongside the Taiwanese government. Without Philips’ balance sheet and technology transfers, TSMC would have likely struggled to gain early commercial credibility with global chip designers. The Great Unwind: Why Did Philips Sell? Between 1997 and 2008, Philips executed a dramatic strategic pivot under successive leadership teams. The mandate was clear: lower volatility, exit cyclical hardware, and focus on consumer lifestyle and healthcare equipment CT scanners, MRIs, sonic toothbrushes . Between 2005 and 2008, Philips systematically liquidated its entire 28% stake in TSMC through secondary offerings, raking in billions of dollars that were largely funneled into share buybacks, acquisitions in healthcare, and debt reduction. Philips had also completed its final exit from ASML by the early 2000s, viewing lithography equipment manufacturing as too capital-intensive compared to medical equipment. At the time, Wall Street analysts applauded the moves. Semiconductors were notoriously cyclical, while healthcare offered steady, predictable margins. The Cost of Missing the AI Revolution Hindsight, however, has proven brutally unforgiving. ASML went on to master Extreme Ultraviolet EUV lithography —a machine so complex that it stands as the single biggest bottleneck in advanced semiconductor manufacturing. Without ASML’s $350 million EUV systems, no company on Earth can build chips below 5-nanometer nodes. Simultaneously, TSMC became the manufacturing engine powering Nvidia, Apple, AMD, and Broadcom, capturing over 60% of global foundry market share and virtually 100% of top-tier AI accelerator manufacturing. Today, the valuation gap between the parent and its spun-off offspring is staggering. Philips is worth just $26 billion. In comparison, ASML is now worth $650 billion. TSMC has done even better, and is worth a staggering $2 trillion. Philips is a largely forgotten name in tech today, but things could’ve been very different if it had continued with its two investments that made it big in the AI era.