Dutch Royal Philips (Koninklijke Philips) was once a pivotal major shareholder in both TSMC and ASML, yet it gradually liquidated its stakes in the early 21st century, pivoting instead toward healthcare and consumer lifestyle businesses. Today, the two semiconductor companies that Philips once “let go” have a combined market capitalization approaching $2.7 trillion, while Philips itself is worth only about $26 billion — a gap exceeding 7-fold, making it one of the most regrettable capital allocation decisions in corporate history.
Looking back at this history, Philips Research Laboratories (NatLab) invested in lithography process technology development in the late 1970s and early 1980s. This technology uses light to transfer precision circuit patterns onto silicon wafers, a critical step in semiconductor manufacturing. At the time, however, Philips’ core business remained focused on consumer electronics such as televisions, light bulbs, and audio equipment. Lithography equipment not only required massive capital investment but also offered relatively limited profit margins.
In 1984, to reduce lithography development costs, Philips partnered with ASM International to spin off the business into a joint venture called ASM Lithography — later known as ASML. At inception, each side held a 50% stake. Early engineers reportedly worked in a leaky wooden shed near Philips’ offices in Eindhoven, the Netherlands.
After ASML went public in 1995, Philips began steadily reducing its stake through the open market to raise capital for strengthening its core consumer business, and by the mid-2000s it had fully exited ASML.
On the TSMC side, Morris Chang founded TSMC in 1987, introducing what was then a highly innovative “pure-play foundry” model — a wafer fab dedicated exclusively to manufacturing chips for other companies without designing its own. However, the startup required substantial capital and semiconductor technology. Chang struggled to secure funding, and Wall Street was skeptical of the pure-play foundry model.
Philips ultimately became a key investor, acquiring approximately 27.5% of TSMC’s initial equity through technology transfer, patent licensing, and an investment of about $58 million (approximately NT$1.8 billion). It became the largest foreign shareholder outside the Taiwanese government. This investment not only provided TSMC with early-stage capital but also gave the company access to critical semiconductor technology and the foundation needed for global business expansion.
However, from the late 1990s through the 2000s, Philips undertook a major strategic transformation aimed at reducing market volatility and exiting cyclical hardware businesses, focusing instead on “consumer lifestyle and healthcare” devices. Between 2005 and 2008, Philips gradually sold off its TSMC holdings, cashing out billions of dollars, with proceeds primarily directed toward share buybacks, healthcare acquisitions, and debt reduction.
At the time, Wall Street largely applauded Philips’ decision, arguing that the semiconductor industry was subject to cyclical swings, whereas healthcare offered stable and predictable profits. Semiconductor equipment, by comparison, was viewed as capital-intensive and higher-risk.
Yet the arrival of the AI era has made that choice look extraordinarily expensive in hindsight. ASML went on to become the global leader in extreme ultraviolet (EUV) lithography equipment — the critical technology for manufacturing the most advanced semiconductors. Without these systems, no company could produce chips at 5 nanometers or below. TSMC, meanwhile, became the world’s most important foundry, working closely with tech giants such as Nvidia, AMD, and Broadcom to produce advanced chips for companies like Apple, playing a pivotal role in the global AI chip supply chain.
Today, the market capitalization gap between Philips and its two former “affiliates” is staggering.
CompanyMarket CapEquivalent in New Taiwan DollarsTSMCapproximately $2 trillion~NT$63.6 trillionASMLapproximately $650 billion~NT$20.7 trillionPhilipsapproximately $26 billion~NT$830 billion
Note: Market capitalizations are approximate figures from foreign media reports; actual values fluctuate with market movements.
Looking back from today’s vantage point, Philips’ decision to sell its ASML and TSMC stakes in order to reduce industry risk and raise cash may have been an extraordinarily costly capital allocation choice. Had Philips chosen to retain those holdings, its position in the AI and semiconductor era today would likely have been completely rewritten.