35432 Mapper dec EN - European Commissionec.europa.eu/competition/state_aid/cases/245982/... · 'Uitdagerskrediet' respectively its successor 'Innovatiekrediet'.3 (5) The notified

Zijne Excellentie de Heer Frans TIMMERMANSMinister van Buitenlandse ZakenBezuidenhoutseweg 67 NL - 2500 EB Den Haag

Commission européenne, B-1049 Bruxelles – BelgiqueEuropese Commissie, B-1049 Brussel – BelgiëTelefoon: 00- 32 (0) 2 299.11.11.

EUROPEAN COMMISSION

Brussels, 16.04.2013C(2013) 1906 final

In the published version of this decision, some information has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […].

PUBLIC VERSION

This document is made available for information purposes only.

Subject: State-aid SA.35432 (2012/N) – The Netherlands – Individual R&D-aid'Mapper II'

Sir,

1. PROCEDURE:

(1) The Netherlands notified the aid measure referred to above to the Commission, by letter of 19.9.2012, registered on the same day.

(2) As the Commission considered the notification as incomplete, it requested additional information by letters of 19.11.2012 and 18.2.2013. The Dutch authorities responded

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respectively by letters of 17.12.2012 and of 8.3.2013, registered on the same dayrespectively.

2. NOTIFIED AID MEASURE

(3) The notified aid is an individual aid to one enterprise, Mapper Lithography B.V(hereinafter "Mapper"). The objective of the aid is research and development (R&D), namely project support for the development of a new 'maskless-lithography' machine.The notified total aid amount is up to EUR 15 million. The aid is granted in the form of three soft loans to the amount of EUR 5 million each, for various phases of the project.

(4) Mapper has already received individual R&D State-aid for previous phases of the overall project. That aid had been approved by the Commission in State-aid case NN 39/2010.1 The approved aid amounted to EUR 21,354,394 in the form of four soft loans and one direct grant.2 It was granted under the Dutch State-aid schemes 'Uitdagerskrediet' respectively its successor 'Innovatiekrediet'.3

(5) The notified increase of individual aid for subsequent phases of the overall project will be granted under the existing Dutch R&D&I State-aid-scheme 'Omnibus', which wasapproved by the Commission in State-aid case N 312/20084 and prolonged in State-aid case SA.352545.

2.1. The technology

(6) With the overall project in question, Mapper develops a lithography machine that is capable of 'maskless parallel electron beam writing' (or 'E-beam'). The name of the machine is "MATRIX". 'Lithography' is the semiconductor manufacturing process of transferring the electronic circuit pattern of an integrated circuit onto a silicon wafer.Normally, industry uses photo masks for that purpose. Given that the number of

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1 Commission decision of 29.9.2010, Steunmaatregel NN 39/2010 – Nederland, Individuele O&O-steun aan "Mapper".

2 Recital (25) ibid.

3 Both aid schemes were exempt from the obligation to notify them to the Commission. In accordance with the previous Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises (expired), OJ L 10, 13.1.2001, p.33 respectively the current Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation). The Commission registered the current scheme 'Innovatiekrediet' under State-aid case X 312/2009.

4 Commission decision of 12.12.2008, Steunmaatregel nr. N 312/2008 – Nederland – aanvullende aanmelding Omnibus – O&O&I-regeling.

5 Commission decision of 14.12.2012, Steunmaatregel SA.35254 (2012/N) - Nederland Verlenging van de bestaande O&O&I Omnibus-regeling.

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transistors that can be placed inexpensively on an integrated circuit is expected toincrease exponentially, doubling approximately every two years (according to 'Moore's Law'), the Dutch authorities assume that existing lithography equipment has reached its physical limits and cannot, in a cost-efficient manner, shrink transistors any further.

(7) R&D on lithography technology is currently exploring several approaches: Optical6, E-beam7 and Nano-imprint lithography.8 Mapper is exploring the E-beam approach.

(8) Instead of masks, E-beam uses parallel electronic beams that 'write' the blueprint of a chip on a wafer. Thus, Mapper hopes to tackle the miniaturisation challenge and to do away with masks, the production of which is costly and time-consuming. The E-beam machine would thus allow for a higher degree of chip customisation.

(9) Mapper's project is synchronised to the semiconductor industry's technology roadmap,ITRS9. This roadmap provides for an assessment of the semiconductor industry's future technology requirements. Mapper hopes to sell its high-volume manufacturing (HVM) Matrix 10.10 machine as from 2013, for the industry's scheduled technology node of a 14-nanometre resolution (the "14-nm node").

(10) In 2007, Mapper obtained its 'Proof of Lithography' (POL) milestone using a demonstrator machine in a laboratory set-up. Mapper believes that passing the POL-milestone has shown that E-beam is viable for lithography.

(11) The estimated sale price of a complete Matrix 10.10 Mapper high-volume machine is estimated to be approximately EUR 50 million, first for the 14 nanometre node. A Matrix 10.10 is capable of producing 100 wafer per hour (wph). It consists of a cluster of 10 Matrix 10.1 single systems with 10-wph capacity each.

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6 According to a technical description provided by the Dutch authorities, optical lithography comprises i) Double Patterning and ii) Extreme Ultra Violet (EUV'). Available information suggests that Double Patterning significantly increases production costs as this technology requires doubling the process steps. According to the Dutch authorities, there is presently no industry consensus about the application of double pattering. According to available technical information, EUV uses light with a wavelength of 13.5nm and requires reflective optics (mirrors) instead of refractive optics (lenses); it also depends on masks.

7 E-beam lithography comprises several approaches:.i) one-optics column/one electronic beam (very low throughput, i.e. production rate); ii) one optics column/many parallel electronic beams; iii) multiple columns withone beam per column; iv) multiple columns with many beams per column.

8 According to a technical description provided by the Dutch authorities, there are many different types of that technology, the most widely investigated ones being i) Thermoplastic Nano-imprint Lithography and ii) Step & Flash Nano-imprint Lithography. Both technologies use a mould or template to press the desired pattern into a substrate before it can be etched into the wafer. According to available technical information, Nano-imprint Lithography has mainly been used to fabricate devices for electrical, optical, photonic and biological applications. Suitability for high-volume manufacturing of chips has not yet been proven but seems absolutely possible.

9 The International Technology Roadmap for Semiconductors is an official and public set of documents produced by a group of semiconductor industry experts from the US, Europe, Japan, Korea and Taiwan, which represent best opinion on the directions of research into several areas of technology, including time-lines up to about 15 years into the future. It summarises the state of the art, identifies critical challenges and possible research paths. It also establishes an agenda concerning the start production dates of various technologies.

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(12) According to the Dutch authorities, the following enterprises are currently developing alternative approaches to E-beam technology: IMS Nanofabrication (Austria), Multibeam Systems (U.S.), KLA Tencor (U.S.), Advantest (Japan). According to theDutch authorities, Mapper has by far the largest workforce dedicated to E-beam development, namely 190 full-time employees (FTE), while Advantest is the second largest with 70 FTE allocated to its E-beam project; the other companies have even lessFTE's.

(13) The Dutch authorities described the principal technical differences between Mapper's approach and the approaches pursued by the abovementioned developers:

• Other developers still use a central point through which all electronic beams that transfer the circuit pattern on the wafer must pass through. Mapper does not use a central point, in order to avoid the mutual repulsion of electronic beams with the same charge, which would result in disturbances of the circuit image that is to be written on the wafer. Thereby, Mapper engineers hope to increase productivity.

• Other developers use high-voltage to accelerate the electrons in the electric field that forces them into the direction required. Mapper engineers use low-voltage, in order to avoid deformation of the wafer due to heat load. Thereby, they also hope to increase productivity.

2.2. The beneficiary

(14) The R&D-project is carried out by Mapper, based in the Netherlands. Mapper is a medium-sized enterprise, as defined in the Commission's SME-definition.10

(15) Mapper was established in 2000, as a spin-off from Technical University Delft, where the technology was originally developed.

(16) Mapper is exclusively committed in the project in question and it has to date only soldexperimental versions of its E-beam machine to an enterprise, TSMC in South Korea, and to a research organisation, CEA-LETI in France, exclusively for testing purposes.Mapper currently has no market share in the lithography market but is a potential entrant. At the time of notification of the aid, Mapper has scheduled the sale of three more test-tools.

(17) As was described in the Commission decision on State aid NN 39/2010,11 Mapperinitially expected to be bought by a large strategic investor by the end of 2010, e.g. by one of the existing major lithography suppliers, ASML or Nikon, or by another equipment supplier who aims at entering the lithography market, in particular Tokyo Electron, KLA Tencor or Hitachi. Mapper believed that such sale is necessary because

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10 OJ L 124, 20.5.2003, p.36. The Dutch authorities provided the SME-declaration form, dated 29.11.2011. 11 recital (13) of the Commission decision in NN 39/2010.

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the lithography market is characterised by few and powerful customers who will not be ready to buy expensive and new technology from a small entrant on the market. Rather, customers in that market have a clear preference for large, established suppliers. Mapper's plan was that such strategic partner would bear the cost of the development of the advanced test tool (now called "Matrix 1.1").

(18) In June 2011, however, it emerged from negotiations with ASML, Nikon and Canon that demonstration of feasibility was not sufficient for a strategic partner to step in. Candidates rather demanded demonstration of Mapper's E-beam technology in a tool.

2.3. The competitors

(19) Only three enterprises presently manufacture lithography machines: Canon, Nikon (both from Japan) and ASML (The Netherlands). ASML is the global market leader inoptical lithography. Based on publicly available information, the Dutch authorities,established the following market data for 2011 (million USD):

• Sales figures: ASML: 7,877.1 million, Nikon: 1,645.5 million, Canon: estimated in the range between zero and 780.9;

• Market size in the range of 9,522.6 to 10,303.5 million;

• Market shares: (2011): ASML: 76% to 83%, Nikon: 16% to 17%, Canon: 0% to 8%.

(20) As already explained, Mapper at present has no market share.

2.4. The project

(21) The overall project in question started in October 2007, after the first 'proof of lithography' (POL) had been achieved with a demonstrator tool capable of using 110 parallel electron beams to create a pattern in resist material with a 32-nm resolution. The ultimate objective of the project is the development of a High-Volume Manufacturing Tool.

(22) Mapper has already received individual R&D State-aid for previous phases of the project. That previous aid was approved by the Commission in State-aid case NN 39/2010.12 The approved aid amounted to EUR 21,354,394 in the form of four soft loans and one direct grant.13 The project, as notified at that time, was based on both a technical-feasibility and machine-development roadmap, which were described in the

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12 Commission decision of 29.9.2010, Steunmaatregel NN 39/2010 – Nederland, Individuele O&O-steun aan "Mapper".


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Commission decision approving the aid.14 The estimated total eligible costs of that project phase amounted to EUR 60.9 million.15 The Dutch authorities informed the Commission that all soft loans granted under NN 39/2010 has in the meantime becomeunconditionally repayable.

(23) According to Mapper's project report of 6.10.2011, as provided by the Dutch authorities, the results achieved thus far can be summarised as follows:

• 2000-2007 - Pathfinding towards a concept for high-throughput electron beam lithography. In this phase Mapper evaluated different concepts to realize high-throughput electron beam lithography. It started with paper studies and university style experimental work. In 2004, Mapper concluded it had defined a system concept that could meet the targets. From 2005 onwards, Mapper started to build a “demonstrator” tool, which resulted in the important milestone “Proof of Lithography” in 2007.

• 2007-2011 - Development of the "Asterix" platform: In this phase, Mapper developed “Asterix” according to its Roadmap. This platform was originally targeted to support the tool development up to a High-Volume Manufacturing tool. In 2007, Mapper started with the development of a 300mm wafer stage. After this the actual “Asterix” platform was realized, resulting in the first exposures end 2008. Two of these systems have been shipped, one to TSMC and one to LETI. On the Asterix platform, 'beam to beam stitching' has been demonstrated, as well as exposures with a resolution of 27nm half pitch. During this phase Mapper also executed its Technical-feasibility Roadmap to resolve a number of remaining technical feasibility items such as patterned beams, contamination control and cost effective data path. For the development of the Asterix platform and the execution of the technical feasibility roadmap, Mapper received individual State-aid as approved in State-aid case NN 39/2010.

(24) The Dutch authorities are regularly monitoring and evaluating the overall project.16

They found that in summary the project has been successful so far. According to the Dutch authorities, the machine development roadmap has been completed to approximately the alpha-tool step described in the previous decision, and Asterix test tools have been shipped to customers. The technical feasibility roadmap has been 90% completed. Mapper could however not demonstrate that the tool's electron source is

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14 Recitals (15)-19) ibid.


16 The Dutch authorities provided the granting authority's appraisal reports on the phases eligible for the notified increase of aid: Reports of 18.11.2011 and of 15.5.2012. As to previous project appraisals in State-aid case NN 39/2010 cf. description in sections 3.9.1 and 3.9.2 and conclusion in recital (138) of Commission decision in State-aid case NN 39/2010.

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able to illuminate the full array with sufficient performance. Mapper hopes to resolve this issue.

(25) According to detailed technical information provided by the Dutch authorities, a number of technical issues arose in the development and prevented Mapper from using the Asterix-tool's platform according to plan, i.e. as the platform for the final High Volume Manufacturing tool. Such issues concerned the wafer handling system, vibration isolation, and the motors of the scanning stage. Mapper therefore concluded that a new platform - the "Matrix" – platform – had to be designed. Mapper also found that a number of aspects had not been included in the first-generation Asterix-platform, e.g. wafer-temperature control and magnetic shielding. These features will now be directly included in the Matrix-platform. Nevertheless, many concepts can be reused from the Asterix platform in the new Matrix platform, e.g. the method of aligning electron optical modules, and software structure.

(26) Due to the issues mentioned above, the Dutch authorities identified three main deviations compared to the initial project plan:

• A new platform must be designed for the initially scheduled Beta and the High-volume tool. As a result the Beta tool and the high-volume tool will be replaced by the Matrix 1.1, which is capable of producing 1 wafer per hour (wph), and the Matrix 10.1 with 10 wph-capability;

• Mapper will develop the Matrix 1.1 and Matrix 10.1. as a stand-alone company, i.e. without any strategic partner;

• The introduction is delayed by approximately 2 years. Target introduction is postponed from the 22-nm to the 14-nm node.

(27) With the notified increase of aid, the Dutch authorities intend to support the development of the Matrix 1.1 and 10.1 tools. Revenues from the sale of prototypes etc. will be deducted from the eligible costs.

(28) The Matrix 1.1 is almost identical to the Matrix 10.1, with the only difference that only the central 10% of the array of electron beams is used (see figure below). This configuration will enable Mapper to relax the tolerances of the most critical subsystems for the Matrix 1.1 generation and thereby speed up the project. Mapper will proceed with a continuous transition from Matrix 1.1 to the Matrix 10.1 by getting a larger part of the array of electron beams within specification without making major design changes.

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(29) According to Mapper's internal project-status reports of 6.10.2011 and 2.1.2012, total funds to raise for the development of the Matrix 1.1 (2011-2012) and Matrix 10.1 (2012-2013) are in the range of EUR 61-81 million. The estimated funding to develop, manufacture and support the final Matrix 10.10 is in the range of EUR […]∗. Mapper expects that this latter phase is financed by a strategic investor.

(30) In the project, Mapper focuses on the concept and integration phase and cooperates with industrial and academic partners and subcontractors in the original-equipment manufacturer (OEM) supply chain. The Dutch authorities declared that research organisations are involved in Mapper's development as sub-contractors who provide knowledge and technologies The Dutch authorities emphasized that there are numerous processes in the semiconductor market, but also in other markets that need similar technical requirements for future applications. Therefore, the technologies developed in Mapper's project would spill over to a broad array of other projects outside Mapper, via its partners.

(31) The Dutch authorities explained that the project is of utmost importance to secure and strengthen the semiconductors-equipment cluster in the Netherlands and its suppliers in the field of electronics, mechatronics, optics and physics. This cluster is mostly based

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∗ Business secret

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around the three areas who have a Technical University in the Netherlands namelyDelft, Eindhoven and Twente.17

(32) In order to underpin this statement, the Dutch authorities provided information on knowledge spill-overs to the following key suppliers and partners in Mapper's development:

• Catena Holding BV: The Dutch authorities estimate that Mapper's project will enable Catena to operate in an upcoming market that is new for the enterprise. This is based on the following assumptions: First, Catena's will get access to hands-on experience in optical data links with optical transmitters and receivers. Catena estimates that such devices are becoming increasingly of interest for data communication between chips and hybrids in future electronic systems. Second,Catena recognizes that micro-electromechanical systems (MEMS) techniques will become of relevance for radio-frequency (RF) systems. Through Mapper's project Catena will be closely involved in these techniques.

• Hittech Multin BV: In Mapper's project, Hittech Multin is involved in a number of technologies.18 These technologies are new for the enterprise which expects themto substitute a large portion of its current turnover with the current generation of technologies. Through its participation in the project, Hittech Multin will get access to knowledge on vacuum-handling technologies. The enterprise hopes that such knowledge will enable it build up presence as a system supplier in the solar sectorwhich it expects to grow very fast. In order to reach its objective, Hittech Multin will have to do R&D of photo-voltaic production processes that take place under vacuum conditions. Here, the enterprise considers vacuum-handling experience gained in Mapper's project as a crucial support.

• Technolution BV: Through the project, Technolution will get access to state-of-the art knowledge on high-performance computing and networking. The Dutch authorities expect that this will enable Technolution to further strengthen the semiconductor manufacturers sector in the Netherlands. The Dutch authorities also pointed to possible spill-over to other applications and sectors, namely by applying the technology developed in the project for upcoming data mining applications, and for applications and sectors that need massive parallel processing in order to meetperformance requirements. This would enable Technolution to enter new markets such as telecommunication or homeland security.

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17 The Dutch authorities provided examples of global semi-conductor equipment companies situated in this Dutch cluster: ASML, ASMI, BE Semiconductors, Road Test House, Philips, NXP, Assembleon, FEI, and more than 50 suppliers.

18 The Dutch authorities provided examples of technical areas: Contamination, Vacuum technology, Data processing, Electron Beam performance, Machine control on nano scale, Thermal control / stability, Electro-Magnetic Shielding, Micro-fluid Handling.

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(33) The Dutch authorities also provided information on positive spill-over in the IMAGINE project. This project is led by the research organisation CEA-LETI which is focused on micro and nanotechnologies and their applications, from wireless devices and systems, to biology and healthcare or photonics.19 According to CEA-Leti's annual activity report for 2011,20 the IMAGINE project is a multi-partner project with potentially broad implications for the semiconductor industry. It would allow the world’s major chip manufacturers to assess maskless lithography technology in a real manufacturing environment with a goal of developing and qualifying the complete infrastructure, from data preparation to process integration, in preparation for its industrial introduction. The project is evaluating a maskless lithography infrastructure and the use of Mapper's lithography tools for high throughput.

(34) The Dutch authorities provided the following examples of enterprises currently involved in the project: leading semiconductor manufacturers TSMC and STMicroelectronics, a number of technical solutions suppliers like Nissan Chemical, TOK, Dow, JSR Micro, Synopsys, Mentor Graphics, Sokudo, Tel and Aselta. According to the Dutch authorities, the number of member companies was 13 in early 2012.

(35) Mapper will own all intellectual property (IP) on the E-beam research and development generated during the project.

(36) Partners must be capable of manufacturing and integrating small tool series (5-20 units/year). They must however not necessarily need to be able to scale up to high-volume manufacturing. Mapper believes it could alternatively work with multiple suppliers to generate sufficient capacity.

2.5. Aid amount and aid instruments

(37) State funding for the project-phase in question amounts to up to EUR 15 million. The aid is granted in the form of three soft loans (Innovatiekrediet 'IK') Nr. 11059, Nr. 12005 and Nr. 13001. The aid amount corresponds to the total amount of the loans.

(38) The conditions of the soft-loan instrument in question have not changed compared to the previous soft loan for the project. The soft loan is neither a senior loan, nor a straightforward subordinate loan, nor does it fully correspond to the concept of a 'repayable advance' defined by the Community Framework for State aid for Research, Development and Innovation (thereinafter "the R&D&I-Framework").21 Repayment depends on technical success, i.e. is not directly linked to the commercial success of the project, as 'repayable advances' in line with the R&D&I-Framework would require.

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19 CEA-Leti is an institute of the French-government funded technological research organisation CEA.

20 http://www.leti.fr/en/Discover-Leti/Documents3

21 OJ C 323, 30.12.2006, p.1.

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The loan rather contains an option of abatement of the debt in case the project is halted due to technical failure or declining commercial perspectives.

(39) In summary, the conditions are as follows:

– If the project is technically completed successfully and if a commercial phase starts, the loan has to be fully repaid.

– If the project fails in a technical sense, no repayment is required. In cases where the commercial perspective of the project has substantially decreased during the developmentphase, for example due to a sudden economic crisis, the beneficiary may request a (partial) exemption for repayment.

– The total amount of a soft loan can never exceed 35% of eligible project costs and is provided to reach a pre-defined milestone.

– The borrower must put in pledge all assets (including tangible assets and intellectual property rights) that are co-financed with the soft loans, or result from the project. The Dutch authorities explained that such collateral is taken to avoid abuse by the borrower rather to cover or mitigate losses due to default. Nevertheless, the Dutch authorities will in the case of default realize the collateral when appropriate.

– The soft loans are interest bearing. Interest is credited and paid at redemption. According to the Dutch authorities, the interest rate reflects, as much as possible, market rates taking thedegree of risk inherent to the project into account. To that end, a premium is added, to reflect the risk of technical and/or commercial failure of a project. Below table shows the applicable interest rate compared to the applicable discount rate for the Netherlands,22 at the date of submission of the respective aid requests:

Soft loan

Amount

of soft loan

(EUR)

Interest rate discount rate

IK11059 5,000,000 6.5% 3.05%

IK12005 5,000,000 7% 3.07%

IK13001 5,000,000 7% 1.66%

Total amount 15,000,000 -

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22 pursuant to the Communication from the Commission on the revision of the method for setting the reference and discount rates:OJ C 14, 19.1.2008, p.6.

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2.6. Eligible costs

(40) The total eligible costs of the project phases in question amount to EUR 53,441,308.00.The following tables show the project costs broken down according to the three soft-loans, eligible cost category and project milestones for which the loans are granted:

Soft loan IK11059 Milestone I 01/01/2012-30/06/2012 "Alignment Frame"

Milestone II 01/07/2012 –31/12/2012 "Stage stability; wafer cycle; stitch vector repro"

Total

Personnel costs 4.864.620 2.553.000 7.417.620

Costs of instruments and equipment

Costs for building and land

Costs of contractual research, technical

knowledge and patens bought or licensed from outside sources at market prices

600.000 600.000 1.200.000

Additional overheads incurred directly as a result of the research project

Other operating expenses (mostly materials)

3.007.688 3.529.732 6.537.420

Total eligible costs 15.155.040

Soft loan IK12005 Milestone I 04/01/2012–

Milestone II 01/07/2012 –

Total

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12/08/2012 "Patterned beam down"

31/03/2013 " Raster scan exposure "

Personnel costs 8.023.620 1.824.000 9.847.620







5.885.834 3.339.600 9.225.434


Soft loan IK13001 Milestone I

01/01/2013-30/06/2013

"Clamp reliability, Wafer contamination control"

Milestone II 01/07/2013-31/12/2013 " Number of beams in spec; 10 wph; EO slit; EO contamination control"

Total

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Personnel costs 5.721.480 4.648.860 10.370.340





700.000 700.000 1.400.000



4.329.224 3.113.650 8.842.874


2.7. Aid intensities

(41) The soft loans in question will each defray up to 35% of eligible costs incurred for experimental development activities in the respective milestone. The total aid intensity for the eligible project phase subject to this decision will therefore not exceed 35%. This aid intensity consists of a basic aid intensity of 25% of eligible costs plus an SME-bonus of 10 percentage points.

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2.8. Aid applications to the Dutch authorities

2.8.1. The history of previous aid applications as assessed under State-aid case NN 39/2010

(42) As described in the Commission decision approving aid to Mapper for previous phases of the project,23 Mapper had started the first eligible sub-project on 19.10.2007 and submitted the first formal application for aid on the same day. Mapper submitted further aid applications for subsequent sub-projects as the project proceeded. Each new application was subject to a new project appraisal by the funding authority. None of the sub-projects started prior to submission of each corresponding request for aid.

2.8.2. The aid application for the new soft-loans subject to this decision

(43) Mapper has submitted its applications for soft loan

• Nr. IK11059 on 14.10.2011; the eligible project phase started on 1.1.2012;

• Nr. IK12005 on 4.1.2012; the eligible project phase started on the same day;

• Nr. IK13001 on 2.1.2013; the eligible project phase started on the same day.

2.9. Cumulation with other aid

(44) The Dutch authorities confirmed that the aid in question will not be cumulated with aid received from other local, regional, national or Community schemes to cover the same eligible costs.

3. ASSESSMENT OF THE AID

3.1. Existence of aid

(45) The notified aid is provided by the Dutch Ministry of Economic Affairs and is financed through the national budget of the Netherlands, and is thus granted through State resources. The measure will be selective, as it will favour only one undertaking, namely Mapper. The aid improves the overall financial condition of Mapper and will allow acquiring a better technological and possibly market position. With the product that is developed with the aid, Mapper will compete in an EU or worldwide market, e.g. with ASML (NL), and draw on a network of suppliers in the EU. Hence, the measure mayaffect trade between Member States. Thus, the notified measure is State aid, as it meets the conditions of Article 107 (1) of the TFEU.

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23 recitals (37)-(40) of Commission decision in State-aid case NN 39/2010.

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3.2. Obligation to notify the aid to the Commission

(46) Pursuant to Article 108 (3) of the TFEU, the Commission shall be informed in sufficient time of any plans to grant or alter State aids. Council Regulation n 659/99 of 22.3.1999 (thereinafter the "Procedural Regulation")24 lays down rules for the application of Article 93 of the EC Treaty [now Article 108 of the TFEU]. Pursuant to Article 2 (1) of the Procedural Regulation, save as otherwise provided in regulations made pursuant to Article 94 of the Treaty [now Article 108 of the TFEU] or to other relevant provisions thereof, any plans to grant new aid shall be notified to the Commission in sufficient time by the Member State concerned. According to Article 1(c) of the Procedural Regulation, new aid means all aid, that is to say aid schemes and individual aid, which is not existing aid, including alterations to existing aid. Pursuant to Article 3 of the Procedural Regulation, notifiable aid shall not be put into effect before the Commission has taken, or is deemed to have taken, a decision authorising such aid.

(47) Article 4 (1) of Commission Regulation (EC) 794/2004, implementing Regulation (EC) No 659/99,25 defines the term 'alteration of existing aid for the purposes of Article 1(c) of Regulation (EC) No 659/1999, as "any change, other than modifications of a purely formal or administrative nature which cannot affect the evaluation of the compatibility of the aid measure with the common market. However an increase in the original budget of an existing aid scheme by up to 20 % shall not be considered an alteration to existing aid."

(48) The notified aid is individual aid granted to Mapper under an aid scheme. The aid is for the development of the Matrix 1.1 and 10.1 tools. These developments are part of an overall project, namely the development of a high-volume lithography machine that is capable of maskless parallel electron beam writing. Individual aid to Mapper for certain previous phases of that overall project had already been approved by the Commission in State-aid case NN 39/2010.

(49) Hence, the aid in question is an alteration to existing individual aid and therefore new aid in the meaning of Article 1 (c) of the Procedural Regulation.

(50) The notified aid will be granted in the form of three soft loans. The loan agreements between the Dutch authorities and Mapper will only enter into force after the Commission has approved the aid.

(51) By notifying the aid prior to implementing it, the Netherlands complied with itsobligation to inform the Commission ex ante of any plans to grant new aid.

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24 Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty; OJ L 83, 27.3.1999, p. 1.

25 OJ L 140 of 30.4.2004, p.1

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3.3. Basis for assessment of the compatibility of the aid with the Internal Market

(52) According to the documents submitted by the Dutch authorities, the aid in question will be granted for certain phases of one single R&D-project. The R&D&I-Framework sets forth criteria, based on which the Commission will assess whether aid for R&D-projects is compatible with the internal market under Article 107(3) (c) of the TFEU.

(53) The R&D&I-Framework provides for several Chapters. This structure translates into two different levels of assessment. At the first level, Chapter 5 sets forth a series of conditions and parameters in respect of the aided activity, aid intensities and conditions attached to compatibility. Pursuant to point 1.4 of the R&D&I-Framework, all notified aid will be assessed first under the provisions in Chapter 5.

(54) In Chapter 6, the Framework provides for more specific rules on the necessity and incentive effect of the aid. As regards the first level of assessment, the Commission considers that it is in principle sufficient that the measure concerned is in line with the conditions described in Chapter 5, provided that the conditions in Chapter 6 to presume the incentive effect are fulfilled. All notified aid will be assessed first under the provisions in Chapter 5.

(55) The second level of assessment requires additional scrutiny, based on the criteria laid down in Chapter 7 of the Framework. Such scrutiny applies to large aid measures thatexceed the thresholds laid down in section 7.1 of the R&D&I-Framework, as such aid implies a higher risk of distortion of competition. As regards projects with a predominant share of experimental-development activities, this threshold is EUR 7.5 million per undertaking/per project.

(56) Firstly, the aid in question is to the benefit of one enterprise, namely Mapper, and is for one project, namely the development of a High-volume E-beam Tool. Secondly, the R&D-activities eligible for aid consist exclusively of experimental development.Thirdly, existing individual aid as authorised in State-aid case NN 39/2010 amounted to EUR 21,354,394. The notified new aid amounts to EUR 15,000,000. Hence, the aid measure exceeds aforesaid 7.5 million-EUR threshold and therefore has to undergo additional scrutiny under Chapter 7 of the R&D&I-Framework.

(57) Chapter 8 of the Framework provides for rules for the cumulation of the aid in questionwith other State aid, and applies to all aid measures falling under the Framework.

3.4. Assessment on the basis of Chapter 5 of the Framework

3.4.1. Eligible activities, category of research

(58) The aided part of a project must completely fall within one or more of the research categories enumerated in Point 5.1.1 and as defined in Point 2.2 e), f), g) of the R&D&I-Framework. The Dutch authorities declared that the eligible activities fall under the category of experimental development and provided for a technical description of these activities.

18

(59) The eligible research can in fact be considered to be completely in the experimentaldevelopment category, as defined in Point 2.2 g) of the R&D&I-Framework. Therefore, the aided part of the project falls within the research categories set out in Point 5.1.1 of the R&D&I-Framework.

3.4.2. Eligible costs

(60) Point 5.1.4 of the R&D&I-Framework defines eligible costs of R&D projects, which shall be allocated to a specific category of R&D.

(61) All eligible costs have been allocated to experimental development (point 2.6 above), and correspond to the definitions set out in Point 5.1.4 of the R&D&I-Framework. Hence, the notified aid measure is in line with Point 5.1.4 of the R&D&I-Framework.

(62) There is no overlap of eligible costs under State-aid NN 39/2010 and those covered by the notified extension of aid.

3.4.3. Aid intensity

(63) Point 5.1.2 of the R&D&I-Framework sets forth permitted basic aid intensities, in terms of percentages of eligible costs. Bonuses on top of basic aid intensities may be granted in accordance with Point 5.1.3 of the R&D&I-Framework.

(64) The Commission notes that the Dutch authorities have not notified specific information allowing a proper calculation of the gross grant equivalent of the soft loans in question. The Commission therefore considers that the total amount of the soft loans has to be taken into consideration for the assessment of the aid.

(65) Aid granted for experimental development will not cover more than 35% of eligible costs.

(66) The permitted basic aid intensity for experimental development is 25%. For medium-sized enterprises, a bonus of 10 percentage points on top of basic aid intensities is allowed. Mapper is a medium-sized enterprise.

(67) Hence, the aid intensity is in line with Points 5.1.2 and 5.1.3 of the R&D&I-Framework.

3.5. Assessment on the basis of Chapter 6 of the Framework – incentive effect of the aid

(68) State aid must have an incentive effect, i.e. it must result in the recipient changing its behaviour so that it increases its level of R&D&I activity. Analysing the incentive effect of the aid measure is the most important condition in analysing State aid for R&D&I. Identifying the incentive effect means assessing whether the planned aid will induce undertakings to pursue R&D&I which they would not otherwise have pursued.

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(69) Chapter 6 of the Framework lays down formal criteria to determine whether the aid has an incentive effect. Pursuant to the formal criterion of Chapter 6 of the Framework, the aid does not present an incentive for the beneficiary where the R&D&I activity commences prior to the beneficiary applying for aid to the national authorities.

(70) The existing individual aid in State-aid case NN 39/2010 was granted in instalments in accordance with the advancement of pre-defined project phases, and only after the submission of corresponding aid requests. The Commission found that the aid met the formal criterion of Chapter 6. 26

(71) As regards the notified increase of the existing aid, the Dutch authorities are still pursuing the same funding approach, namely granting aid in instalments as the projectadvances. Mapper has accordingly submitted several applications:

Soft loan Nr. Amount EUR Submission of aid request

Start of eligible project phase

IK11059 5 million 14/10/2011 1/1/2012

IK12005 5 million 4/1/2012 4/1/2012

IK13001 5 million 2/1/2013 2/1/2013

(72) Mapper applied for an increase of the existing individual aid as its plan, as it encountered an unexpected change in investor-behaviour between mid-2010 and early 2011. As a result, Mapper was not bought by a strategic investor partner prior to the start of the development of the Beta-tool (now Matrix 1.1), as it had initially planned.27

Such strategic investor would have borne the cost of the development of the beta tool (now Matrix 1.1) and beyond.

(73) In particular, Mapper had expected that such strategic partner would be found as soon as stitching-capability has been demonstrated (tiling writing fields exactly against each other) and the technical feasibility roadmap has been completed. In the beginning of2011 both technical milestones have been met.

(74) Negotiations with potential partners ASML, Nikon and Canon who had previously evaluated Mapper's technology however showed that demonstration of feasibility wasnot sufficient for them to step in. They rather needed to see demonstration of the technology in a tool. Hence, Mapper decided to carry on with the development as a stand-alone company. The failure of the market to provide financing, and in particular

__________

26 assessment in recitals (70)-(75) of the Commission decision in NN 39/2010.

27 recitals (13) and (99) ibid.

20

the negotiations with investors will be described in more detail further below in point 3.9.1. Mapper then decided to continue the subsequent phases of the development as a stand-alone company and requested aid in order to fill the funding gap caused by the hesitation of investors.

(75) Firstly, the aid requests by which Mapper requests new aid have not been submitted after the start of the corresponding eligible project phases which are part of Mapper's single overall project. Secondly, those project phases were not the object of the previous individual aid under State-aid NN 39/2010, as they were initially scheduled to be financed by private investors. Company-internal documentation submitted both under State-aid case NN 39/2010 and the present case demonstrates that if Mapper could have foreseen the investors' hesitation already in 2007 when the development started, it would have already from the outset have applied for aid for the subsequent development phases in question.

(76) Therefore, although the increase of the individual aid has been applied for only after the overall development project has started, the formal condition of Chapter 6 of the Framework can be deemed to be fulfilled in this particular case.

(77) Chapter 6 provides for a number of quantitative and qualitative indicators for the purposes of verifying the induced increase in R&D, on the basis of an analysis comparing a situation without aid and a situation with aid being granted: increase inproject size, increase in scope, increase in speed, increase in total amount spent on R&D&I, and other quantitative and/or qualitative factors. A significant effect on at least one of these criteria must be demonstrated. The detailed analysis of such effect will follow in Section 3.9.3 further below, on the basis of a counterfactual analysispursuant to Point 7.3.3 of the Framework.

3.6. Cumulation of aid

(78) Chapter 8 of the Framework sets forth rules for the cumulation of aid.

(79) The Dutch authorities declared that the aid cannot be cumulated with aid received from other local, regional, national or EU schemes to cover the same eligible costs. Therefore,the conditions set out in Chapter 8 of the R&D&I-Framework are met.

3.7. INTERMEDIATE CONCLUSION

(80) Based on the above considerations, the Commission concludes that the notified measure complies with Chapter 5 of the Framework as well as with the formal criterion set out in Chapters 6 and 8 of the Framework.

3.8. DETAILED ASSESSMENT ON THE BASIS OF CHAPTER 7 OF THE R&D&I-FRAMEWORK

(81) Section 7.1 of the Framework sets forth thresholds of aid amounts beyond which an aid measure is subject to detailed assessment. As regards aid for R&D-projects, Section 7.1

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provides for specific thresholds for predominantly fundamental research, predominantly industrial research and all other projects.

(82) The notified increase in individual aid to Mapper amounts to up to EUR 15 million. This new aid is earmarked for new project phases that consist of experimental development. Hence, the project in question falls under the category 'all other projects', as provided for in Section 7.1 of the Framework. The corresponding threshold, above which a detailed assessment of State aid is warranted, is EUR 7.5 million per undertaking, per project.

(83) Consequently, the Commission carried out the detailed assessment based on Sections 7.3 and 7.4 of the Framework. These Sections provide for positive and negative elements which will apply in addition to the criteria set out in Chapters 5 and 6. In the light of these positive and negative elements, the Commission balances the effects of the measure and determines whether the resulting distortions adversely affect trading conditions to an extent contrary to the common interest. When assessing the positive and negative elements of the notified measures, the Commission considered the nature of the case, in particular the form and objective of the aid and the risk of distortion of competition.

3.9. Positive effects of the aid

(84) Section 7.3 of the R&D&I-Framework provides for criteria for the assessment of the positive effects of a R&D&I-aid. The Commission accordingly assessed the existence of a market failure that prevented the market from delivering an optimal outcome without aid. Then the Commission assessed the appropriateness of the aid, its incentive on the beneficiary, and whether it is proportional.

3.9.1. Market failures

(85) According to Section 7.3.1 of the R&D&I-Framework, State aid may be necessary to increase R&D&I in the economy only to the extent that the market, on its own, fails to deliver an optimal outcome. Therefore, the Commission will take into consideration adequate information on whether the aid refers to a general market failure regardingR&D&I in the Community, or to a specific market failure.

(86) The project, at the stage assessed under State-aid case NN 39/2010, was affected by a market failure in the form of imperfect and asymmetric information on the project's technological risks, which resulted in difficulties in access to finance; the previously granted existing aid was aimed at that existing market failure.28 That market failure was particularly pronounced given Mapper's single-project company and SME-status.

__________

28 paras (83)-(100) ibid.

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(87) Based on information provided by the Dutch authorities with the notification of the new aid, the Commission examined the presence of a market failure again, taking into account the situation of the overall project at the time when Mapper applied for the new aid.

(88) The Dutch authorities asserted that the project at its advanced stage continued beingaffected by a market failure in the form of imperfect and asymmetric information. In summary, the Dutch authorities submitted that the investment appetite of venture capitalist had not improved in the meantime, and that they consider the project as highly risky. In particular, the Dutch authorities claimed that the new crisis (credit crisis) had made the chance of finding venture capital for the project even less probable. Information on the market failure, as provided by the Dutch authorities, will be assessed in the following.

(89) As was explained further above as well as in the Commission decision in State-aid case NN 39/2010, Mapper had initially planned to obtain private external financing for the development of the "beta tool" and then the "HVM tool". Due to the technical issues described above, Mapper will now have to develop the "Matrix 1.1" and "Matrix 10.1"tools instead. Mapper estimated the financing need for these next project phases at approximately EUR 80 million.

(90) Mapper split the EUR 80-million investment round for the project phase in questioninto two tranches of EUR 40 million each:

• First tranche:

• EUR 20 million from new Russian investor 'Rusnano'

• EUR 10 million from current shareholders

• EUR 10 million State aid in the form of soft loans

• Second tranche:

• EUR 20 million from new Russian investor 'Rusnano'

• EUR 15 million new venture capital

• EUR 5 million State aid in the form of soft loans

(91) Mapper hopes that EUR 15 million of venture capital can be attracted for the later tranche, since the technical risks are expected to be significantly reduced by then.

3.9.1.1. Project-reports and appraisals:

(92) According to a project-status report to the Dutch authorities, of 6 October 2011, Mapper decided to carry on with the development even without the support of a

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strategic investor because since the realization of the 'Asterix'-tool phase, the company had become much more mature compared to what it was in 2007.

(93) According to that project-status report, Mapper estimated the financing need for these next project phases at approximately EUR 80 million, and that State aid is needed to realize that project. An updated project-status report, dated 2 January 2012, maintains that estimate.

(94) The Dutch granting authority AgentschapNL evaluated the project, in particular i) the exit strategy and strategic partners; ii) management and organisation; iii) the financial situation of the company. The appraisal report dated 18 November 2011 confirms that EUR 80 million are needed to reach own cash flow. Further to that report, it had become very uncertain that a strategic investor would take over Mapper at this stage. Rather, such investment would be most probable once the capability to produce 10 wafers per hour has been demonstrated.

(95) The report also evaluates the professional competence of Mapper's management team and finds that it had difficulties negotiating with large investors. The report however makes a positive appraisal of Mapper's technical expertise.

(96) The funding agency made a new appraisal in its report of 15 May 2012, based on updated information. The new report notes positively that shareholders, and in particular a very experienced businessman among them, give advice in strategic matters. The report assesses the financial situation: A private investor would provide first instalments of his EUR-40 million investment in mid-2012 and end 2012; Mapper would also request a suspension of repayments of soft loans in the years 2012 and 2013, which would result in additional available funds of around EUR 8 million. The report also finds that Mapper would have sufficient financing to roll out production, as it would by the end of 2013 already be able to produce about 20 units of a tool that could be used for the prototyping market.29

(97) That report concludes that soft loans IK11059 and 12005 could now be granted,provided that the Commission approves the aid.

(98) The Dutch authorities informed the Commission that they decided to suspend the repayments of the soft loans. The repayment schedules (initial and current) are shownhere below:

• initial schedule UK07031/IK08003/IK09002/IK10001 (until July 2012):

• repayment per 1.3.2012: 20 % of the softloan;

__________

29 Such tool would have a lower productivity and would only be used by customers to produce prototypes of semi-conductors

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• repayment per 1.3.2015: total accumulated interest;

• current schedule for UK07031/IK08003/IK09002/IK10001:




• repayment per 1.3.2017: total accumulated interest.

(99) Without suspension of these loans, a total amount of EUR 8.3 million would have to be repaid during the project period. As a result Mapper would have had to raise that amount from equity investors, which the Dutch authorities did not consider as realistic.

3.9.1.2. Mapper's attempts to seek market financing

(100) […]*.

Upon request of its customer […]*,[…]* assessed Mapper's technology. To that end, an expert team of […]* visited Mapper, on […]*. The experts found that Mapper's tool is designed with multiple excellent components, but that a number of concepts and subjects need proof of feasibility by development effort. In […]*'s experience, developments of such unproven subjects would take longer than scheduled in Mapper's roadmaps. Therefore, […]* concluded that currently there is a high risk for […]* to depend on Mapper for the high-volume manufacturing technology.

(101) Later, in […]*, Mapper learnt from […]* that […]* had decided not to pursue E-beam lithography. […]*.

(102) Mapper also tried to approach […]*. […]*. Afterwards, […]* confirmed that Mapper's technology would be the only technology capable of meeting the productivity required for wafer manufacturing, but that productivity capability still is to be demonstrated. Therefore, […]* would not be in a position today to take a positive business decision to co-develop the technology. […]*.

(103) In the years 2011 and 2012, Mapper hired corporate-finance consultancy Polarwide Ltd., to investigate venture capital funds in Asia. Polarwide presented Mapper's venture to 11 Asian funds in total. Eventually, all funds backed out firstly because of lack of knowledge of the technology involved, and secondly due to their local orientation.

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(104) Mapper evaluated the interest of TSMC, the Taiwanese semiconductor manufacturer who is already testing a Mapper prototype tool in the implementation of the Mapper-technology. Mapper found that on the one hand, TSMC indeed had an intrinsic interest in successful implementation. On the other However, TSMC had not decided yet that it will use Mapper-technology for production. Rather, TSMC would currently be evaluating at least 4 alternatives: i) EUV (developed by ASML); ii) double patterning; iii) E-beam lithography based on the Mapper-concept; iv) E-beam lithography based on the REBL concept (developed by KLA Tencor).

(105) Mapper considered raising venture capital for the financing round in question but for the following reasons rejected that idea:

• Given that the technical risk is even too high for strategic investors such as ASML, Nikon and Canon, the risk would be too high for venture capitalists;

• The risk that MAPPER will be unable to find a strategic partner is seen as significant. Without strategic partner, however, it will take much more time before investors will be able to get their return on investment;

• Market acceptance is perceived as a very high risk. Most of the chipmakers would still only consider the EUV-solution developed by ASML. In particular, Mapper had the impression that the semiconductor industry is very conservative. Further, Mapper is competing with ASML, a multi billion-euro company, which is in itself avery high risk. Although the risk of market acceptance in the prototyping market is seen as low, that market is much smaller, and therefore less interesting for investors.

• The investment in that EUR 80-million round is too large for European venture capitalists. Mapper estimated that in the Dutch venture-capital -market there is only appetite for smaller deals. Non-European investors are not interested because of local orientation of deals.

• Mapper also considered its experience in multiple unsuccessful fundraise processes. In 2006/2007, in total 116 funds had been approached; in 2008 / 2009 intotal 75 funds were approached;30 in 2011 / 2012 in total 11 Asian funds had beenapproached.

• It is clear that an investment of EUR 10 to 15 million (the governmental loan note) as part of a EUR 80 million transaction cannot be attracted from banks or local Venture Capital funds. In addition international funds are very reluctant to make cross border investments in Holland.

__________

30 Description of fundraising efforts by s RaboBank and GP Bullhound in recitals (87), (88), (92), (93) of Commission decision in State aid NN 39/2010.

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(106) Given the apparent perception of very high risk, Mapper also approached investors who it believed were not only focused on financial return on investment. Mapper targeted funds initiated by countries that strive to establish high-tech industry in their country. Mapper believed that although the number of such investors is not large, they would better fit to the proosed investment opportunity. As a result, Mapper found the Russian fund 'Rusnano', who was willing to invest EUR 40 million at most, as part of a totalround of EUR 80 million. As part of the agreement, Mapper will establish certain manufacturing activities in Russia.

3.9.1.3. Risk-sharing arrangements:

(107) As was explained in State-aid case NN 39/2010, Mapper was not in a position to enter into customary risk-and-revenue sharing partnerships (RRSPs).31 In such RRSPs, suppliers usually develop a part of the technology at their own expenses and Intellectual Property (IP) that is generated in the process remains property of the risk-and-revenue sharing partner.

(108) As was further explained in State-aid case NN 39/2010, Mapper however explored an alternative risk-sharing arrangement by offering selected partners the option to be paid in shares and becoming Mapper stockholders. Then, all 5 partners in Mapper's project (Catena, Technolution, Multin, Demcon, TU Delft) accepted the proposal. € 5.5 milliontotal cash out was saved with this arrangement until end of April 2010.

(109) In order to secure financing of the project phase in question, Mapper negotiated an extension of risk-sharing in the form of paying (part of) the invoices with Mapper stock. As a result, Mapper's development partners will contribute EUR 2.15 million to the EUR 80 million investment round (contribution accounted for under the EUR 10million contribution by "current shareholders", in the first tranche of the investment round).

3.9.1.4. The loan and venture-capital markets:

(110) The Dutch authorities provided information on the loan situation of Dutch enterprises.According to that information, banks have become very conservative since the outbreak of the financial crisis in 2008; the long-term trend of providing credit line facilities (loan notes, working capital financing and others) to companies is moving downwards as depicted. The Dutch authorities presented data, according to which the growth of loans provided to Dutch enterprises has declined since late 2007 and despite some recovery still is only slightly above 0%.32

__________

31 recitals (95)-(98) of Commission decision in State-aid NN 39/2010.

32 Financieel Dagblad, of 31.5.2012, based on data provided by Commerzbank.

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(111) The Dutch authorities explained that the conditions for attracting credit lines have become stricter. Therefore, only companies could apply for (new) credit lines that would show i) sufficient profit margin, ii) sufficient solvability and iii) sufficient cash flow in order to meet the interest coverage ratios. The Dutch authorities pointed out that Mapper in its present phase cannot make use of bank financing.

3.9.1.5. Intermediate conclusion on the presence of market failures

(112) The Commission notes that Mapper will possibly be bought by a strategic investor if it successfully demonstrates that its technology is ready for high-volume production. Detailed technical project appraisals made both by the granting authority as well as investors show that the technology has the potential to enter the market. Those evaluations show that there is insufficient information on the technical risks.

(113) The Commission further notes that the granting authority is regularly monitoring the entire project and evaluating Mapper's fundraising efforts, and is documenting its assessment in consecutive project appraisals.33

(114) As was shown in the above, Mapper continued its efforts to attract sufficient external private funding. Despite these efforts and the recognized positive potential of the venture, Mapper is still failing to obtain full market financing for the project phases in question, namely the development of the Matrix 1.1 and 10.1 tools. These tools are needed, however, to convince the market of the technology's high-volume capability.

(115) The Commission also notes that Mapper is still an SME and has no sales. It is exclusively committed in one single project. Project appraisals show that the enterprise has technical expertise but lacks experience in negotiating with large investors. Attempts of professional consultancies to obtain funding failed.

(116) Hence, there is sufficient evidence that the new aid is aimed at an existing market failure, namely asymmetric information both on Mapper's technology in particular as well as on the various technological solutions currently being explored by other companies. That market failure is particularly pronounced given Mapper's single-project company and SME-status.

3.9.2. Appropriate instrument

(117) Pursuant to Section 7.3.2 of the R&D&I-Framework, the Commission will assess whether and to what extent State aid can be considered an appropriate instrument to increase R&D&I activities, given that other less distortive instruments may achieve the same results.

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33 Here: Project appraisals of 18.11.2011 and of 15.5.2012. As to previous project appraisals in State-aid case NN 39/2010 cf. description in sections 3.9.1 and 3.9.2 and conclusion in recital (138) of Commission decision in State-aid case NN 39/2010.

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(118) Documentation in hand demonstrates that the Dutch authorities have carried out duediligence procedures on the necessity and proportionality of the aid and documented that in annual project appraisals. Part of such appraisal was a review of Mapper’s financial position, technical progress, as well as of its managerial and technical expertise. According to the Dutch authorities, the idea was to provide just enough aid to enable Mapper to proceed with the project and to stimulate private investments.

(119) The new aid is in the form of three interest-bearing soft loans to the amount of EUR 5 million each which will be granted for experimental development. The total amount of soft loans is in accordance with permitted aid intensities that apply to direct grants. Although the gross-grant equivalent of the soft loans could not be calculated, it can be safely assumed that it would be far below the permitted aid intensity for experimental development, which is 35% including the SME-bonus of 10 percentage points.

(120) The soft loans in question are reimbursable, depending on the technical success of the project. They will become unconditionally repayable when their corresponding project phases have been completed. The soft loans are interest bearing. They will only be granted upon positive appraisal of each project phase's technical and financial perspectives. Therefore, the intended soft loans as appropriate to bridge funding gaps that affected each eligible project phase.

(121) Given above considerations, the Commission maintains its position taken in State-aid case NN 39/2010,34 namely that no less distortive instrument could achieve the same results, i.e. enable Mapper to tackle the project risks and stick to its roadmap planning.In particular, the soft loans in question are repayable in the event of technical success, and thus imply a risk-sharing element, similar to repayable advances as defined by the R&D&I-Framework. The direct grant will respond to the above described lack of sufficient private funding.

(122) Therefore, the aid is an appropriate instrument in the sense of Section 7.3.2 of the R&D&I-Framework.

3.9.3. Incentive effect and necessity of aid

(123) When the Commission undertakes a detailed assessment of an individual measure, the indicators mentioned in Chapter 6 of the Framework may not be considered assufficient demonstration of an incentive effect, and the Commission may need additional evidence. Point 7.3.3 of the Framework sets forth the elements that the Commission will take into consideration: specification of intended change, counterfactual analysis, level of profitability, amount of investment and time path of cash flows, the level of risk involved in the research project and continuous evaluation.

__________

34 recital (106) ibid.

29

(124) The Commission had already assessed the incentive effect of existing individual aid for the project, in State-aid case NN 39/2010.35 At that time, the Commission took into consideration that Mapper had done its utmost to obtain private-investor funding for a project that is most promising, and that such funding was however insufficiently provided by the market. In particular, the Commission considered that the aid did not bring about a significant increase of the project's profitability, nor did it reduce the burden of negative cash flows on the enterprise, which then had no sales and was exclusively committed in the project.

(125) The Commission had analysed the overall project already in State-aid case NN 39/2010 and established that most of the work on the E-beam-tool is highly innovative and involves a perceived high level of risk in achieving the defined technical objectives. The Commission further took into account that, the Dutch authorities had regularly assessed Mapper's need for aid and in particular its efforts to raise private funding. Then, the Commission concluded that the aid was the only source of financing that allowed Mapper to carry out the project with the intended scope and thus had an incentive effect on Mapper.

(126) When the Commission assessed the incentive effect of the first individual aid in State-aid case NN 39/2010, it took into account Mapper's situation and business strategy attwo particular points in time, namely in 2007, when Mapper initially anticipated the total amount of subordinated loans, and once in 2009, when Mapper requested an additional grant that had not been anticipated in 2007. Mapper's business strategy had developed with the project between 2007 and 2009.

(127) Mapper requested the notified increase of individual aid on 14.10.2011 and on 4.1.2012. Company-internal information provided by the Dutch authorities indicates that Mapper's business strategy had in the meantime evolved further, according to the project's advancement and technological issues.

3.9.3.1. Profitability and counterfactual scenario in 2011

(128) When Mapper applied for the new soft loans in question, the project was more advanced. At that point, Mapper took into account that its project was delayed by approximately 2 years compared to its initial machine-development roadmap. That roadmap foresaw that Mapper develops its first demonstrator, Pre-Alpha and Alpha Tools as a "stand-alone" company and would then proceed with the Beta and High-Volume Tool development together with an equipment partner in 2010 and 2011. As established in State-aid case NN 39/2010, Mapper had to postpone development of the Alpha-tool into 2010 and the Beta-tool into 2012. That year, however, was planned to

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35 assessment in point 3.9.3 ibid.; conclusion in recital (140) ibid.

30

be the year when the functioning HVM-tool should have been ready for the semiconductor industry.36

(129) Both on 14.10.2011 and on 4.1.2012, Mapper assessed possible applications of the technology:

• high volume manufacturing: writing wafers with a high throughput;

• prototyping: writing prototypes of wafers with a low throughput to develop a prototyping tool without aid;

• mask writing: writing masks that are in turn used in customary mask-based lithography machines.

(130) On that basis, Mapper considered the following alternative strategies:

• Base scenario with the notified aid: Development of the Matrix 1.1 featuring 13,000 electronic beams in total, but only being capable of producing 1 wafer per hour, with only the central 1,300 beams are used; introduction in the prototyping market with 1,300-beam capacity in 2013; then make a continuous transition to the 10.1 tool by getting larger parts of the electronic array into the desired specification, until eventually all 13,000 active beams are active; introduction of the tool in the high-volume market in 2014;

• Counterfactual scenario if no aid is available: To limit the project costs as much as possible and develop a Matrix 1.1 that only features 1,300 beams in total; introduction in the prototyping market also in 2013; then full re-design of electron optics for the 13,000-beam Matrix 10.1 tool; introduction in the high-volume market only in 2016.

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36 recital 90 ibid.

31

(131) The counterfactual analysis of the project's financial indicators with aid and without aid at the time of the application for aid in 2011 was as follows, as calculated from 1.1.2012 (start date of first eligible project phase):

Hypothetical base scenario without aid

Base scenario with aid

Counterfactual scenario

R&D-budget 2012 and 2013

EUR 65 million EUR 65 million EUR 50 million

Equity investment EUR 80 million EUR 65 million EUR 65 million

Soft loan 'IK' zero 15 zero

Market entry high-volume market

2014 2014 2016

Market-entry prototyping market

2013 2013 2013

Internal rate of return 69% 69% 51%

Net present value EUR 521.2 million EUR 515 million EUR 254.2 million

Break-even point 2017 2017 2018

Maximum negative cash flow

(EUR 167 million) (EUR 161 million) (EUR 167 million)

(132) Mapper's supervisory-board considered alternative scenarios in its meeting of 17.8.2011, prior to the submission of the first request for the increase of aid. According to internal documents provided by Mapper, the following three alternatives were discussed at that meeting:

• Reach the situation where Mapper can be self-supporting with Matrix 1.1 sales and continue to develop Matrix 10.1 and finally 10.10: To that end, funding would be required:

• to meet system-acceptance testing (SAT) at TSMC in Taiwan […]*;

• to finish and fully debug the Matrix 1.1 tool […]*;

• to ramp up the manufacturing infrastructure for the Matrix 1.1 tool.

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• Divert to the mask-writing market with customer funding under the assumption that the development effort is similar to the Matrix-1.1 development. To that end, funding would be required:

• to meet SAT at a new customer's site […]*;

• to finish and fully debug the mask-writing tool […]*;

• to ramp up the manufacturing infrastructure for the mask-writer.

• Force a sale of Mapper before March 2012. Then, the Board considered this as the most probable scenario and assumed that the value would be based on personnel and possibly on IP, but not on Mapper's market potential.

(133) At this meeting, the Board selected the first alternative. The Board took the decision to start raising EUR 80 million in order to fund the company in 2012 and 2013

(134) The second alternative was rejected. Here, the Board considered that on the hand, the development effort would be similar to the Matrix 1.1 development. The Board was however concerned that the technical difference with the final High VolumeManufacturing tool (Matrix 10.10) would result in a significant discontinuity in the path towards the Matrix 10.10. The total available market for mask writers and Matrix 1.1 prototyping tools would however be very similar.

(135) Mapper believes that it would not have to choose between the high-volume tool and the prototyping tool, due to their technical similarity. Rather, Mapper believes that the only choice to take would be to which customers the tools will be sold. In particular, Mapper expects the difference between a high-volume tool and a prototyping tool to be continuous, in the sense that higher throughput and lower price would make the tool more attractive for high-volume manufacturing than for prototyping.

(136) Mapper therefore concluded that in order to make the transition between prototyping and high-volume continuous, it would have to design electron optics that contain all 13,000 beams, and to keep the footprint and cost targets of the tool in line with high-volume requirements. In the counterfactual scenario, however, where only a 1,300-beam optic would be made, this principle of continuity would not be followed.

(137) The third alternative was excluded because the expected company value would probably be much smaller than the amount of money invested.

(138) Subsequent to that meeting, Mapper developed the selected scenario. This was discussed at the Supervisory Board's meeting on 1.11.2011, i.e. two weeks after the first aid request had been submitted. Then, the board assumed that:

• it could enter the high-volume manufacturing market with a semiconductor equipment partner;

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• expects that such partnering would occur in 2013, after:

• the Matrix 1.1 at TSMC performs satisfactorily and

• the 10 wph-capacity has been demonstrated;

• if, by the end of 2013, Mapper could support itself with its own revenues, it would not be pushed to sell and the resulting company value would be much higher.

(139) According to information provided by the Dutch authorities, Mapper reconsidered its previous counterfactual of 2009, namely the development of a mask-writing tool instead of the wafer-writing E-beam tool, as assessed under State-aid case NN 39/2010.37 Then, the development of a mask-writing tool would have been the most likely alternative in the absence of aid. Nevertheless, such alternative would have been far less profitable, and R&D-expenses considerably lower. That alternative would have implied a delay in R&D-activities by several years.

(140) In 2011, Mapper made the following considerations:

• Using the mask writer as a counterfactual scenario would at this stage close or at least introduce a strong discontinuity with the development of a High Volume wafer-writer tool.

• At the time of the notification of individual aid under State-aid case NN39/2010, the point where such technical difference between the development efforts of either a mask writer or a wafer writer would occur was still a few years ahead. Then, Mapper hoped that such instance would occur cooperation with a strategic partnerhad already started.

• That situation changed when Mapper could not find any strategic partner before thedevelopment effort for a mask writer and a wafer writer started differentiating.

• Therefore, in 2011, Mapper dropped the alternative scenario of developing a mask-writing machine. It is however not excluded that Mapper reconsiders this position and invest in mask-writer development later, when it generates sufficient revenue streams from either the high-volume or prototyping markets.

(141) The Commission notes that both the estimated IRR and the NPV of the base case have increased significantly as compared to Mapper's business case of 2009, assessed in State-aid case NN 39/2010.38 The Dutch authorities explain this increase with new assumptions that Mapper had now taken to reflect its present situation:

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37 recitals (120) et seq., ibid.


34

• In the business case presented in State-aid case NN 39/2010, both the IRR and the NPV had been calculated at 1.1.2008. The current business case calculates these values at 1.1.2012. Consequently, all cost made in 2008 till 2012 had been considered as “sunk cost” in the IRR and NPV calculations.

• For its current business case, Mapper has used a different weighted average cost of capital (WACC) of 30% instead of 16% for its 2009-business case. Mapper believed this rate to be more in line with the WACC used by its investors.

(142) As regards the WACC, Mapper assessed its situation as follows: […]*.

(143) However, Mapper considered a WACC of 30% as defendable, as it assumes that the risks are in fact lower than as perceived by the investors.

(144) Based on the explanations above, the Commission finds that the increase of the existing aid does not significantly lift the venture's profitability. Rather the additional soft loans will be needed to keep the project on track after Mapper's plan to find a strategic partner has failed and the initially planned platform 'Asterix' has encountered technical issues. The intended increase will close a financing gap that would have seriously compromised Mapper's project, in particular the timely market entry.

3.9.3.2. Specification of intended change

(145) As was shown in above counterfactual analysis, the aid will induce Mapper to invest in the development of a prototype featuring 13,000 electronic beams in total, instead of 1,300 in the counterfactual scenario, and by thus ensuring a continuous transition to the high-volume tool, to significantly increase the speed of the project.

3.9.3.3. Investment amount and cash flow

(146) High start-up investment, low-level appropriable cash flows and a significant fraction of cash flows arising in the very long-term future are considered positive elements in assessing the incentive effect.

(147) The Commission maintains the assessment made in State-aid case NN 39/2010,39

namely that the project requires high up-front investment - up to EUR 81 million in State-aid case NN/39/2010, and up to the same amount again for the period 2011-2013, of which EUR 53.44 million are eligible for the intended soft loans). Mapper is still completely committed in the project in question and has no sales activity throughout the project duration. Therefore, the investment is extremely burdensome for Mapper's liquidity throughout the entire duration of the project, from 2007 until 2013.

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39 recital (127) ibid. Then total eligible costs amount to EUR 60.9 million; total development costs, after the Proof of Lithography, were estimated to amount to EUR 81 million.

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(148) Estimated cumulative cash-flow of the project - in the scenario with aid – at this stage is as follows:

(149) As was described further above, each of the three soft loans in question will enableMapper to carry out a corresponding project phase. In particular, the Dutch authorities checked a soft loan's necessity on the base of Mapper's financial plans for the period concerned and the efforts it made to secure private external funding.

(150) The Commission can therefore conclude that the aid helps to finance high up-front investments for a project that involves high technical risks and where returns materialise only late.

3.9.3.4. Level of risk involved in the R&D-activities

(151) The assessment of risk will in particular take into account the irreversibility of the investment, the probability of commercial failure, the risk that the project will be lessproductive than expected, the risk that conducting the project would undermine other activities and the risk that the project costs undermine the undertaking’s financialviability.

(152) According to information provided by the Dutch authorities, the key factor for determining whether E-beam technology becomes a commercial success is how cost-effective it can be produced, in particular with regard to two different aspects: i) the price and ii) the productivity performance of the machine. The Dutch authorities assert that the productivity performance has traditionally been an E-beam lithography challenge and thus is a challenge for Mapper.

(153) According to Mapper's internal project-status reports, the following main issues, which have an impact on the commercial success of the final product, have to be tackled inthe project phases in question:

• […]*.

• Issue of performance of the vibration- isolation frame: The tool must be protected by a vibration-isolation frame that prevents that floor vibrations affect the frame

Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

MEUR […]* […]* […]* […]* […]* […]* […]* […]* […]* […]* […]*

Year 2023 2024 2025 2026 2027 2028

MEUR […]* […]* […]* […]* […]* […]*

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holding the electron-optical modules. In the previous Asterix platform, the vibration isolated frame was standing on springs. Mapper found that it must significantly reduce vibrations further. Therefore, Mapper will develop a new vibration isolated frame that is hanging as a pendulum on springs.

The consequences of a failing to ensure proper vibration isolation was illustrated by the following incident: Mapper planned to demonstrate that its Alpha-tool could successfully stitch multiple pairs of two neighbouring electronic beams. Demonstration of that capability was scheduled in Mapper's Technical Roadmap, and Mapper considers successful stitching as a key-performance element of its technology. Mapper attempted to show stitching of 110 beams, and published the results of that attempt at the Advanced-lithography Conference of the International Optics and Photonics Society (SPIE), in 2011. Mapper however failed to demonstrate the desired stitching capability at the conference, and stitching of only two neighbouring beams could be showed. Mapper found out that the main reason for this deviation was insufficient vibration isolation of the Asterix platform, on which the Alpha-tool was based.

• Issue of the footprint of the motors of the scanning stage: In the previous Asterix-platform, the motors of the scanning stage were linear motors, which protruded from the vacuum chamber and were placed underneath the wafer-loading robot Mapper found that this configuration significantly increases the footprint of the whole system. Therefore, the Matrix platform will be equipped with rotation motors located below the vacuum chamber; their rotational movements will have to be transformed into a linear movement by means of links and joints.

(154) The Commission has assessed detailed technical information provided by the Netherlands. On that basis, the Commission maintains its conclusion in State-aid case NN 39/2010,40 namely that the project is characterised by a high level of risk in achieving

the defined technical objectives. In particular, the Commission finds that the technologies that are necessary to meet the requirements of future chip technology generations require highly innovative solutions and hence intensive R&D-efforts.

(155) Mapper's liquidity is exclusively used to fund the project in question. Mapper pursues no other commercial activity. Based on information provided by the Dutch authorities, the Commission finds that delays or failure would seriously affect the productivity of the project. In State-aid case NN 39/2010, the Commission found that in the project's early phases, failure or delay would probably have resulted in the termination of theproject and the sale of Mapper at a low price, and that in a later, more advanced phase, failure or delay would have resulted in the recourse to less profitable mask-writing-

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40 recitals (134)-(136) ibid.

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technology. and, if possible at all, a later introduction of E-beam wafer-writing technology. 41

(156) As regards the project phase which will be supported with the notified new soft loans, failure to demonstrate the capability of the technology will in all likelihood prevent strategic investors from financing the timely market entry of high-volume E-beam tools (the Matrix 10.10 version). Mapper would first have to revert to a less profitable scenario, namely prototyping, in order to generate enough revenues to finance the complete development and market entry alone, however with a 2-year delay.

(157) The Commission has therefore reached the conclusion that the existence of project-specific technical risks, which are to a large extent due to the project's innovativeness,are additional prove of the aid's incentive effect.

3.9.3.5. Continuous evaluation

(158) Aid measures for which (low scale) pilot projects are foreseen, or which define well specified milestones resulting in termination of the project in case of failure and where a publicly available ex-post monitoring is foreseen will be considered more positively as regards the assessment of the incentive effect.

(159) In the particular case, the Dutch authorities are closely monitoring activities, financing,costs, risks, technical milestones and commercial perspectives of the project in question. The results of that monitoring are reflected in annual reports. Such reporting will allow the Dutch funding authority to react in case of failure or in case targets are not reached.

(160) The following procedure applies: Once a soft loan is approved, milestone-based disbursements will be made. The first disbursement will take place if all funding conditions are fulfilled. At each project milestone, Mapper must provide a progress report that contains information on technical progress, updates of commercial prospects and financial results. The Dutch authorities will discuss that report in a meeting with Mapper and an internal monitoring report will be made on which the decision for continuation of the credit-payments will be based. The following decisions are possible: - Positive: next milestone tranche is paid; - Put on hold: company can be given time to meet conditions (e.g. pass the milestone); - Negative: confidence in the successful completion of the project is lost; further payments are stopped. If all obligations have been met the credit can be (partly) acquitted; if the obligation has not been met, the credit will be reclaimed.

(161) According to the Dutch authorities, that monitoring process is quite intense and includes all relevant factors of success (technical, commercial, organizational). They

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38

declared that the key purpose of monitoring is to verify that the prospects of project and company, and thus repayment of the credit, are still good.

(162) The Commission has examined progress reports as well as monitoring reports, both under State-aid case NN 39/2010 and the present notification. On that basis, the Commission finds that the aid measure is subject to continuous evaluation in the sense of Point 7.3.3 of the R&D&I-Framework.

3.9.3.6. Conclusion on the incentive effect

(163) The Commission has taken into consideration that Mapper, just as in the previous project phases assessed in State-aid case NN 39/010, had done its utmost to obtain private-investor funding for the project phases in question. The Commission notes that potential investors as well as the Dutch authorities find the project most promising but affected by a high technological risk. Despite Mapper's efforts, private external funding was insufficiently provided by the market.

(164) In particular, the Commission considers that the aid does not bring about a significant increase of the project's profitability, nor does it significantly reduce the burden of negative cash flows on the enterprise, which has no sales and is exclusively committed in the project. Further, the Dutch authorities have regularly assessed the beneficiary's need for aid, and in particular its efforts to raise private funding. Hence, the notified increase of individual aid is the only source of financing that will allow Mapper to continue with the project with the intended scope. The notified aid thus has an incentive effect on Mapper.

3.9.4. Proportionality of the aid

(165) Pursuant to Point 7.3.4 of the R&D&I-Framework, the Commission must examine whether the aid is proportionate. Member States must explain whether there is an open selection process and whether the aid is limited to the minimum necessary.

(166) In that respect, the Commission established the following:

• Individual aid for the project in question was not respectively will not be granted by an open selection process. However, the aid was, respectively will be, granted under an existing aid scheme and the criteria for eligibility for aid are publicly available.

• Despite the aid, Mapper will have to continue doing its utmost to attract sufficient external private funding for the on-going experimental-development phase.

• The notified increase of aid will be granted in the form of three soft loans. Therefore, total individual aid, both under State-aid case NN 39/2010 (EUR 21.354 million) and the notified increase (EUR 15 million), amounts to EUR 36.354 million. Of this total amount of aid, only EUR 5.71 million was granted in the form of a direct grant, under State-aid case NN 39/2010. The remaining amount of aid,

39

being EUR 30.644 million was, respectively will be, granted in the form of soft loans.

• The total nominal amount of all soft loans, both previous and new, however does not exceed the permissible maximum aid intensities applicable to direct grants. Pursuant to Point 5.1.2, in combination with 5.1.3 of the R&D&I-Framework, these maxima are 50% for industrial research (this maximum is only applicable to the previous project phase under NN 39/2010), and 35% for experimental development, including the bonus for medium-sized enterprises. The soft loans in question are however less distortive than direct grants.

• The Dutch authorities will only grant an amount that allows achieving a pre-defined milestone. Follow-on loans will only be granted if the previous milestone is a technical success. The funding authority is closely following up the project, and in particular Mapper's effort to secure external private financing.

• All soft loans granted under State-aid NN 39/2010 have already become unconditionally repayable.

• The granting authority unconditionally obliges Mapper to secure 65% matching private funding in order to qualify for a maximum 35% soft-loan. Therefore, to obtain a higher soft-loan, Mapper would also have to attract more matching private funding. Consequently, there is no incentive to ask for more public funding than is strictly necessary and to use funding as efficiently as possible.

• As described further above, interest is due for the notified soft loans. The rates are 6.5% for IK11059 and 7% for both IK12005 and IK13001. These rates are significantly above the applicable reference rates for the Netherlands, resulting from the application of the Commission Communication on the revision of the method for setting the reference and discount rates.42

With respect to previous soft loans for the project, under State-aid case NN 39/2010, the Commission found that their interest rates (6.2%, 8.4% and 9.4%) were close to, respectively significantly above, the applicable reference rates for the Netherlands.43

Hence, if the project is successful, EUR 30.644 million of total individual aid of 36.354 million, will leave only little cash benefit at the level of the beneficiary. The fact that interest is due should also make it unattractive for Mapper to apply for a higher credit than needed.

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42 OJ C 14, 19.01.2008, p. 6. Applicable base rates are published by the Commission,http://ec.europa.eu/competition/state_aid/legislation/reference_rates.html.

43 recital (142) of the Commission decision in State aid NN 39/2010.

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(167) The above elements indicate that the aid in question is limited to the minimum.

3.10. Negative effects of the aid: analysis of the distortion of competition and trade

(168) Section 7.4 of the R&D&I-Framework provides for criteria for the assessment of possible negative effects of R&D&I-aid. The Commission accordingly defined the affected product markets and then considered the ways in which these products markets could be distorted by the aid in question.

3.10.1. The affected markets

(169) The E-beam tool currently developed by Mapper is imaging the circuit patterns of semi-conductor chips on silicone wafers. Such machines are usually referred to as 'lithography machines'.44

(170) According to information provided by the Dutch authorities, only three enterprises are presently manufacturing lithography machines: Canon, Nikon (both from Japan) and ASML (from the Netherlands). The market for optical lithography equipment amounted to up to USD 10.3 billion in 2011. ASML is the worldwide market leader in optical lithography. Mapper presently has no market share at present.

(171) In State-aid case NN 39/2010, the Commission established that lithography demand stems from companies who develop and produce semiconductors (integrated device manufacturers) as well as from companies who only manufacture them (foundries).45

The demand side can be structured as follows, with mask costs as variable costs as a key criterion:46

– Manufacturers of Memories ('Flash' and 'DRAM'): Manufacture of high volumes of commodity products. Memory devices are based on repetitive patterns and are less complex to manufacture and mask costs are lower as a result. In addition, the mask cost is amortised across the high volume of products manufactured. The result is that memory companies are less sensitive to increased mask / variable manufacturing costs.

– Manufacturers of Processors: Microprocessors are complex; masks require a large number of layers and are increasingly expensive. However, manufacturers such as Intel focus solely on manufacturing microprocessor products and variable costs are small relative to fixed equipment costs.

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44 As established by the Commission in State-aid case NN 39/2010, recital (145), with reference to recital (8), last sentence of Commission Decision of 10.08.2007, declaring a concentration to be compatible with the common market, Case No IV/M.4751, STM / INTEL / JV. In that decision, the Commission established that, in the context of manufacturing semiconductors, lithography refers to the process of transferring the design of an integrated circuit onto the surface of a wafer.

45 Recital (148) of Commission decision in State-aid case NN 39/2010, with reference to Commission decision of 28.1.2009, in State-aid case N 437/2008, Nano2012.

46 Recital (148) of Commission decision in State-aid case NN 39/2010.

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– Manufacturers of Logic Integrated Circuits: Foundries such as TSMC (i.e. the company that is currently testing Mapper's tool) manufacture a large number of complex chips. As devices are complex, individual mask costs are high. Furthermore, as they manufacture a large number of products, variable mask costs are increasing significantly, compared to memory or microprocessor manufacturers (above). It is expected that a typical foundry, such as TSMC, will manufacture roughly 150 types of chips per year per fabrication plant, with each chip requiring a separate mask. As a result, variable mask costs are expected to exceed USD 350 million per fabrication plant at 45nm and will continue to increase according toMoore’s Law (i.e. constant miniaturisation).

(172) The Commission retains the conclusions in State-aid case NN 39/2010: Mapper's toolwill at least in an earlier phase most probably be used by manufacturers of logic integrated circuits;47 a future, more developed version of Mapper's tool will possibly also be in demand in other segments of the lithography market. Therefore, the entire market for lithography machines is likely to be affected by the aid in the foreseeable future.

(173) The Commission further retains that demand for lithography machines is worldwide.48

(174) Available information shows that although Mapper focuses on developing wafer-writing technology as a priority, it is not excluded that it would invest in mask-writer development later, when it generates sufficient revenue streams.

(175) Therefore, the Commission retains that the aid in question also concerns the global market for mask-writing machines.49 The Commission notes that Mapper continues giving priority to the development of an E-beam lithography tool.

(176) It is also possible that Mapper would market a less accurate and productive version of its tool as a prototyping tool.

(177) According to information provided by the Dutch authorities, existing prototyping tools are provided by companies that sell single-electron beam tools: Jeol (Japan), Raith GmbH (Germany) and Vistec GmbH (Germany). According to a market analysis provided by the Dutch authorities, existing prototyping systems are only used in research organisations for trying out new ideas and making a single structure once or twice.

(178) According to technical information provided by the Dutch authorities, the prototyping tool developed by Mapper is different than the prototyping tools currently on the

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market: For example, it is more productive, and it can position a certain pattern on a previous layer ('overlay capability') which is extremely important for prototyping in a manufacturing environment.

(179) Among the top-50 IC manufacturers and foundries, the Dutch authorities have identified 20 potential customers among application-specific integrated circuits (ASIC) manufacturers and approximately 5 foundries. Further, some resist-material developers could also demand Mapper's prototyping tool. That demand would be global.

(180) The prototyping tools that Mapper could develop with the aid are capable of transferring the design of an integrated circuit onto the surface of a wafer. Hence, they are lithography tools. On the other hand, such prototyping tool is far less productive as high-volume lithography tool. Available technical information also suggests that the requirements on cost and footprint are looser than for a high-volume lithography tool.

(181) The Dutch authorities provided the following overview of technical requirements:

(182) Based on above considerations and information, the Commission finds that on the one hand, the technical requirements both for the high-volume and prototyping tools are indeed very similar, and both are based on the same technology. On the other hand, prototyping tools, given their cost, low productivity and lesser precision, cannot substitute high-volume tools.

(183) The Commission therefore concludes that the aid also concerns the global market for lithography prototyping machines.

3.10.2. Distortion of dynamic incentives to invest

(184) According to Section 7.4.1 of the R&D&I-Framework, the main concern related to R&D&I aid to undertakings is that competitors’ dynamic incentives to invest are distorted. For the purpose of analysing such potential distortion, that Section provides for specific elements to be taken into consideration.

3.10.2.1. Aid amount

(185) Total individual aid, both under State-aid case NN 39/2010 (EUR 21.354 million) and the notified increase (EUR 15 million), amounts to EUR 36.354 million. The aid was, respectively will be granted in several instalments from 2007 until 2013 inclusive, i.e.

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over 7 years. While this amount of aid might be considered large relative to the size of the beneficiary, this comparison is less relevant to the extent that Mapper is a young "single-project company" which has to date only sold prototypes for testing.

(186) In this context, the Commission again notes that its conclusion, namely that according to available estimates, lithography equipment companies like ASML, Nikon and Canon typically spend 10 % - 15 % of their revenue on R&D expenditures, e.g. ASML would spend USD 400 - 500 million per year on R&D.50

(187) The Commission therefore deems the amount of the aid for Mapper to be small compared to estimated R&D-expenses in the overall sector.

3.10.2.2. Closeness to the market

(188) The Commission notes that the notified aid will be granted in the in the form of soft loans, for experimental development.

(189) The Commission also notes that currently several enterprises are developing alternative lithography technologies.

(190) The Commission retains its conclusion that regardless of the category of R&D, the E-beam technology as developed by Mapper is presently not available in the market. In particular, the Commission is aware of the fact that all attempts made over the past three decades to come to an E-beam tool that is fit for manufacturing (in terms of productivity) were unsuccessful. Hence, although large part of the aided activities are experimental development, the crowding-out effect of the aid measure is sufficiently limited.51

3.10.2.3. Exit barriers

(191) Based on its previous assessment under State-aid NN 39/201052 as well as information provided by the Dutch authorities with the present notification, the Commission finds that exit barriers are very high for Mapper. The enterprise is exclusively committed in the project in question and in the foreseeable future will have no other product to offerthan primarily E-beam high-volume lithography machines and, probably, E-beam prototyping machines, and maybe also mask-writing machines. All these possible products are based on the technology that Mapper develops in this single project.

(192) On that same basis, the Commission further finds that exit barriers are equally high for enterprises that are exploring comparable E-beam technologies - IMS Nanofabrication

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(Austria), Multibeam Systems (U.S.), KLA Tencor (U.S.), Advantest (Japan). ASML is also facing a high exit barrier, as it is focused on the lithography market and is currently investing in Optical Lithography, in order to meet the ITRS-roadmap's objectives. Nikon and Canon also face exit barriers on the market for lithography machines, which are significant, both having also invested in new Optical Lithography.

3.10.2.4. Incentives to compete for a future market

(193) Various technologies are currently being explored in order to overcome the physical barriers to future miniaturisation. Overcoming such barriers is however imperative, given the high costs of upgrading existing technologies due to their physical limits. Given the risk of the technology explored by Mapper, the aid does not discourage competitors from pursuing alternative technology paths to meet the industry's deadline for a new high-volume manufacturing tool, as described in its roadmap ITRS. Even if Mapper's E-beam technology would eventually support all categories of semiconductor manufacturing, from high volume through to medium and low volume production, the manufacture of prototypes of semiconductors, and also mask making, enough room for more than one global supplier will be left. As regards the prototyping market, Mapper's tool could replace existing technology from the start. The same is valid for the mask-making market, should Mapper decide to resume this scenario, which for the time being has been put off.

(194) Individual aid to Mapper has been granted in instalments, since 2007, in accordance with the project's advancement. According to available information, that aid has not discouraged other enterprises from exploring new lithography technologies.

(195) Hence, the Commission maintains the assessment under State-aid case NN 39/201053, namely that it is unlikely that the aid could reduce competitors' incentives to compete for future markets.

3.10.2.5. Product differentiation and intensity of competition

(196) Mapper's E-beam tool will be differentiated from the products of other lithography suppliers currently on the market, since it is based on a distinct technology, namely E-beam. ASML (The Netherlands), Canon (Japan) and Nikon (Japan) are not exploring E-beam technology. Mapper is not yet present on that market. Further, ASML, Canon and Nikon are very large and effective competitors.

(197) Hence, the Commission maintains the assessment under State-aid case NN 39/201054, namely that Mapper's tool will be a sufficiently differentiated product that will enter into a market where effective competitors are presently active. Mapper with its new

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technology could enter a market with currently only very few competitors. Hence, Mapper's market entry could intensify competition in this market.

(198) As regards Mapper's prototyping tool, which would be based on the technology that is developed with the aid, the Commission finds that it is sufficiently differentiated from exiting tools. Such existing tools are less productive and have no overlay capacity; they are used in research and academia, but not by manufacturers, who would be the principal customers of Mapper's prototyping tool.

3.10.2.6. Conclusion on the distortion of dynamic incentives to invest

(199) Given the elements above, the Commission finds that the aid in question does not crowd out competitors so that they reduce the scope of their original investment plans.

3.10.3. Creation of market power

(200) Pursuant to Section 7.4.2 of the R&D&I-Framework, market power is the power to influence market prices, output, the variety or quality of goods and services, or other parameters of competition on the market for a significant period of time, to the detriment of consumers. However, the Commission is unlikely to identify competition concerns related to market power in markets where each aid beneficiary has a market share below 25 % and in markets having a market concentration with Herfindahl-Hirschman Index (HHI) below 2000.

(201) The Commission established the following: Firstly, Mapper has no market share at present. Secondly, the technology that is developed with the aid will not, at least in an initial stage, replace existing technology and create a dominant position in the market. Thirdly, new lithography technologies are developed by new enterprises and those that are currently active on the market. Traditional mask-based lithography offered by Canon, Nikon and ASML will remain present on the market.

(202) Hence, there are no indications that in a foreseeable future the aid will create any market power for Mapper. The Commission recalls that Mapper has no market share at present. The Commission in so far maintains its findings in State-aid case NN 39/2010.55

3.10.4. Maintaining inefficient market structures

(203) Pursuant to point 7.3.4 of the R&D&I-Framework, the Commission will considerwhether the aid will be granted in markets featuring overcapacity, in declining industries or in sensitive sectors. Concerns are less likely in situations where State aid for R&D&I aims at changing the growth dynamics of the sector, notably by introducing new technologies.

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(204) Recent project appraisals provided by the Dutch authorities show that Mapper can be deemed an efficiently working single-project company.

(205) As was described above, the aid is precisely targeted at the development of a new lithography technology, namely E-beam lithography, which is not yet present on the market. That technology will enable the semi-conductor industry to overcome the limitations of traditional mask-based technology and thus meet imperative future miniaturisation steps, as laid down in its ITRS-roadmap.

(206) The Commission maintains its findings in State-aid case NN 39/2010 that achieving a higher resolution with lithography equipment is mandatory for European photolithography industry to stay competitive, and that Mapper's project is in line with European priorities.56

(207) As was established further above, R&D-expenses in the lithography market are high and R&D-efforts to develop new lithography technologies are presently made by several enterprises. This is sufficient indication that the lithography market is not in decline or featuring overcapacity.

(208) Therefore, the aid in question will not maintain any inefficient market structures but will support the development of a new technology in a key-sector. The Commission in so far maintains its findings in State-aid case NN 39/2010.57

3.11. BALANCING AND CONCLUSION

(209) Point 7.5 of the Framework stipulates that the Commission balances the effects of the measure and determines whether the resulting distortions adversely affect trading conditions to an extent contrary to the common interest.

(210) For the purposes of such balancing, the Commission considers that:

– The aid measure addresses a specific market failure of the private capital market, namely an information asymmetry, which hampered the availability of sufficient external financing for the project phase in question.

– The aid instrument in question, namely three soft loans, is an appropriate instrument and is limited to the minimum that is necessary to deliver the results of the R&D-project, given the aid intensity, repayment conditions and effectiveness in proportion to the degree of success of the project.

– When Mapper initially applied for soft-loan funding in 2007, the aid provided an incentive to carry out the project. When Mapper for an increase of aid in the form

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of a grant in 2009, and then for the additional soft loans subject to this decision, the aid provided an incentive to continue the project and to make up for time that was lost due to the lack of external funding, as well as to overcome technical obstacles.

– Mapper has no market share for the time being and the aid will not enable Mapperto influence market prices, output, the variety or quality of goods and services, or other parameters of competition on the market for a significant period of time, to the detriment of consumers.

– Lastly, the aid will not maintain an inefficient market structure.

(211) In conclusion, the Commission finds that the positive effects of the notified State aid measure outweigh its negative effects.

4. DECISION

(212) The Commission decides that State aid measure SA.35432 (2012/N) – The Netherlands –Individual R&D-aid 'Mapper II', in the form of three soft loans to the amount of EUR 5million each ,is compatible with the internal market, pursuant to Article 107(3) (c) of the TFEU. It accordingly decides not to raise objections to that measure.

(213) The Commission reminds the Dutch Government that, in accordance with Article 108 (3) of the TFEU, all plans to refinance, alter or change the aid have to be notified to the Commission.

(214) The Commission further reminds the Dutch authorities to submit annual reports on the measures, in line with the requirements of Regulation (EC) No 659/199958 and Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC-Treaty [Article 108 of the TFEU]59.

(215) If this letter contains confidential information, which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter inthe authentic language on the Internet site:

http://ec.europa.eu/competition/elojade/isef/index.cfm

Your request should be sent by registered letter or fax to:

European CommissionDirectorate-General for Competition

__________

58 OJ L 83, 27.3.1999, p. 1.59 OJ L 140, 30.4.2004, p. 1. Regulation as last amended by Regulation (EC) No 257/2009 (OJ L 81, 27.3.2009, p.

15).

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Directorate for State AidState Aid GreffeB – 1049 BrusselsFax No.: +32 2 296 12 42

For the Commission

Joaquín ALMUNIA,Vice-President of the Commission