Dutch-based ASML is one of the world's leading suppliers for advanced chip manufacturing equipment. It may not seem that way now, but there was a time when ASML had to ask its customers for funds to continue business operations. Samsung has long purchased chip manufacturing equipment from ASML and it decided to help out the company.
Samsung made this investment in 2012. It acquired 3% of ASML. Even though the company sold half of its stake by 2016, this proved to be a brilliant move, as the value of its investment has grown 17x since then.
Samsung made this investment back in 2012
Of the three clients that ASML raised funds from, Samsung actually took the smallest position of 3%. TSMC took a 15% stake in the company while Intel took 5%. ASML's fortunes have improved significantly since then. It continues to see strong demand for advanced EUV chip manufacturing machines. Samsung remains one of its biggest customers, as do TSMC and Intel.
ASML's share price has risen considerably over the past decade. In just the last three months, the shares have risen 15.9% to over $724. This means that Samsung's 1.6% stake in the company, which amounts to about 6.3 million shares, is now worth $4.56 billion. That's a 17x increase, an incredible return on investment when you consider that Samsung only paid $278 million for its entire 3% stake in ASML back in 2012.
Had Samsung not halved its share in ASML in 2016, its gains would have been even higher. At least it didn't do what TSMC did, the Taiwan-based semiconductor manufacturing company sold its entire ASML stake in 2015.
Granted, these are unrealized gains, so if ASML's share price decreases so will the value of Samsung's stake. It could go the other way, too, if the share price increases, Samsung's return on investment can be even higher. With the way things are shaping up right now in the semiconductor market, barring a technical correction, the latter seems more plausible.
