Every company should nurture its suppliers and every supplier should value its customers. But sorting out how to encourage and pay for game-changing innovation at different points in the supply chain is a challenge, especially when the costs are high and the benefits accrue widely. Joint ventures are one solution: customer prepayments another. Dutch semiconductor equipment maker ASMLhas an elegant, if complex, alternative.

The plan is based on customer co-investment. Customers are asked to contribute up to €1.4bn to research and development funding over the next five years, accelerating ASML’s development of extreme ultraviolet lithography and 450mm silicon wafer technologies. (These are risky projects but promise to make chip production much more efficient.) ASML’s three biggest customers have been solicited first – Intelhas signed up, while Samsungand TSMCare considering it. If they do not exhaust the funding requirement, others will be approached. To encourage participation, the R&D-funding customers are also being offered ASML share stakes (at market prices) totalling no more than 25 per cent of the equity. These will be non-voting to ensure no undue customer influence, and all cash proceeds from this share issuance will be returned to other ASML shareholders through a synthetic buyback. Assuming upper limits are reached, customers will acquire the shares for €4.2bn.

This looks like a winning deal: innovation moves forward more quickly with the security of customer support and risks are shared. Customers reluctant to participate may fear that they will be disadvantaged but ASML has good reason not to play favourites: only about half of its business comes from the big three. Whether the model is a widely applicable innovation template is debatable but it could be replicable elsewhere in the tech sector and in areas such as healthcare and telecoms. The principles, at any rate, look absolutely right.