艾司摩爾 (ASML) 2008 Q4 法說會逐字稿

Peter will start with a summary of our financial results and then Eric will then talk more about the market, the measures that we're taking to deal with the economic downturn and our technology roadmap.

Peter can I ask you to start?

Thank you.

Yes, like I said, we're first going to start with the business summary.

If you refer to the presentation that's on the web, that's more to the back of the presentation.

So [business] summary first.

Just a brief summary of the Q4 results.

Net sales just under EUR500 million.

We shipped 25 systems, system value was around EUR380 million.

Average selling price EUR20.4 million, still a lot of new technology immersion systems shipped.

Gross margin was 35.5%.

We guided at the end of Q3 for a higher sales number in Q4, around 36% gross margin, so gross margin actually is quite good for a level of EUR490 million of sales.

But we took a restructuring charge in the fourth quarter which brought the gross margin down to 8%.

The operating margins, before restructuring, were about 1% and were minus 27% clearly after the restructuring.

We shipped, like I said, 11 immersion systems out of the 25 systems.

We booked a low number of systems, which is understandable.

Customers are really in a wait and see mode.

You could say it's an order freeze at this particular moment.

Customers really want to assess the impact of the economic crisis, first, before they determine what they want to do going forward and that means that we are in a period of a standstill if a -- I would say virtual order freeze for the time being.

And it means we only booked 13 systems with EUR127 million value.

So, backlog stood at around EUR750 million, just over 41 systems.

For the total year, sales just came out just below EUR3 billion, which is between 21% and 22% decline as compared to 2007.

At the end of, I think it was the Q2 results, we guided that sales could be down 10% to a maximum of 20%.

Now we earned just above 20%, which under the circumstances looking at the steep decline that we saw in the fourth quarter, is still reasonably good.

So what did we sell in Q4?

If we look at the slide that shows the breakdown of sales in Q4, the technology was clearly leading in this particular quarter.

73% of our sales were for immersion tools and we shipped largely to IDMs, and those are integrated device manufacturers, or you could say logic makers.

Makers of logic chips.

Memory was only 21% and for those people who follow us closely, that's been a long time since memory is 20% of our sales.

As a matter of fact, over the last couple of years, I cannot remember that happening.

So it is also a reflection of what Eric will talk about later, that our memory customers have virtually stopped adding any capacity.

[That is a matter of fact] of taking capacity out.

So capacity reduction in the DRAM industry is clearly happening and that what you see in the fourth quarter, the shipment to the memory customer, is a clear reflection of that.

Now region wise, it's very easily spread -- evenly spread, I cannot remember a pie chart like this, to be very honest where Korea, Taiwan, Europe, USA and Japan all are within a few percentage points of what we shipped.

So actually throughout the whole world, Japan at 18% I think is a record.

The consolidated statement of operations for the full year, like I said, just under EUR3 billion in sales.

The gross margin was 34.4%, but there was a EUR135 million restructuring charge in there which took us to this level.

R&D cost was slightly up from last year, which is a result of our continued focus on three most important R&D projects that we have which is immersion today.

We have to defend our market position and we have the best technology out there.

And the second one is double patterning, which is going to be the technology that our customers need for the next two years.

And EUV, extreme ultra violet light that we're going to use.

Those tools will actually support our customers in their production from 2012 onwards.

So we keep investing in the future of this Company.

And yes, you have seen over the last few quarters that R&D is coming down somewhat which is a result of the efficiency measures that we have taken, but we're not taking any cuts on our core R&D programs.

On SG&A, it went down on an annual basis from EUR226 million to EUR213 million.

That doesn't look like a big decrease, but the decrease really is shown in the last quarter.

As of the first quarter 2009, we've taken EUR50 million out of our cost base.

That's not only R&D and SG&A, that's also the cost of goods.

So that's EUR50 million from a level of EUR330 million at the end of Q2, 2008 to EUR280 million in the first quarter 2009.

That's EUR200 million on an annual basis, and that is basically spread evenly across all cost line items in the income statement of the Company.

Now we enter the year still with 11% net income.

Key financial trends, which is the slide that shows the quarterly development of our sales and our financial numbers, clearly you can see what happened to the industry.

In Q4, 2007 we were EUR955 million, that was last year, of sales went down to EUR919 million, EUR844 million, dropping to EUR696 million and then finally ending up in the fourth quarter just below EUR500 million.

So that's 50% of your sales, you can say, gone in one year time, clearly the reflection of the economic crisis that we are in.

R&D, like I said, is remarkably stable, but that is a particular strategic decision that we have taken.

SG&A, that goes down further in the first quarter.

You see you can read it in the press release, we go down to a level of EUR44 million and that is a reflection of the cost cutting that we have done, especially in the last six months.

The average selling price of the systems, that's the pre-last line, which is ASP new systems, went up from EUR16 million to just above EUR20 million in the second half of this year, which is a clear evidence of the fact that what our customers need are leading edge tools.

Our leading edge tools are the most expensive tools that we have.

The most expensive tool is EUR30 million, and that is what we have shipped, especially in the last part of this year.

That's what our customers needed.

Why did they need that?

They need the leading edge tools to make chips actually smaller, to make the feature sizes in those chips smaller and it means a cost reduction.

And when you need a cost reduction, you need a cost reduction when your prices are under pressure, which is basically currently the case.

And it's also why we believe that, somewhere along in this year, customers will need to come back and say, listen the market is tough, chip prices are going down, we need to cut costs.

And how you cut costs, you cut costs by buying the latest and greatest ASML tools.

Cash flow, cash flow for the fourth quarter clearly impacted, like I said, net income of EUR88 million, but we had the impairment charges of EUR107 million.

Depreciation and amortization, other non-cash items, that, plus the decision that we took to keep paying our supply base, our suppliers have provided us with inventory that eventually got pushed out by our customers, so we got stuck with it, you could say.

But we did pay our suppliers, we think it's very important, if you're 90% of your production depending on the supply chain, that you keep paying your suppliers.

The health of the supply chain is very important to us.

So, we did do that, we didn't offload that pressure on to the suppliers.

We had very much a back-end loaded quarter.

So it meant that a lot of the shipments were in December, which meant that those receivables could not be collected before the end of the year.

We kept investing in the EUV factory.

If you look outside that window you see the building cranes, so that means the EUV factory, which is our future, will be finished by the middle of next year, but still we're paying for that.

And we made some tax payments for the 2007 final tax assessment.

So all-in-all we used EUR200 million of cash in the fourth quarter which clearly is not going to repeat itself.

Going forward, with the level of sales that we're currently seeing for the first two quarters, all those sales, service sales and normal shipments, can basically be done out of inventory.

So we don't need to buy inventory.

That means that, as well as the accounts receivable balance, as a big part of the inventory, will be translated into cash for the first half of this year, which is also the reason why we put in the press release that we're going to be cash positive in the first six months.

Now why do I talk a lot about cash, because when there is no business, there is no market, there is no profit.

People focus on cash and from that point of view we feel highly confident and the Company's very well financed, we have EUR1.1 billion in cash by the end of the year.

And we remain confident in our ability to keep generating cash and that's why we say we stay within our bandwidth of EUR1 billion to EUR1.5 billion.

And we have the means to actually do that, like I said, we have a significant inventory balance and we can ship out of that.

Backlog, brief, [so it's a] backlog EUR0.75 billion, 40 systems, about EUR300 million shippable in the first six months.

And the rest shippable in the second half of the year.

Very clearly also big names in there, like our big memory customers that told us, no we don't need your tools or at least very, very few of your tools in the first six months, but we need them in the second half of the year.

This is then a graphical representation of that.

The backlog in value and in litho units, clearly showing the decline in the backlog, which is a reflection of where we are in terms of the industry.

In value, if you look at the 73% immersion, ArF dry is in there which is a relatively high percentage.

ArF dry means -- that's leading edge, but it's not used for memory production, it's largely used for logic chips.

And that's why you also see that what we call IDM, which is the integrated device manufacturers, those are logic chip makers, has a relatively high percentage of the backlog, if you would compare that to the last two or three years.

So memory is going down, and we had memory over in the course of this year went down from two-thirds, close to 70%, to just under 50%.

And IDM, the logic makers, they became a bigger relative part of the backlog.

And where are those customers, close to 40% in the US, 20% in Japan, that just shows important Japan has been for us as a Company over the last couple of years.

Finally, we have seen a profitable year, although the profit halved, as compared to 2007, with just over EUR300 million of net profit.

We are a cash generative Company.

We do not have cash issues, so we are proposing a dividend -- a dividend to the shareholders of EUR0.20, which is EUR0.05 down from last year, but in terms of payout percentage, we talked about that in our general meeting of shareholders last year, that we are focusing on a payout of around 20%.

The payout ratio goes up from 17% to 27%.

It's a balanced [position], it does reflect the economic and industry environment clearly, net profit halved, and it also reflects the interest of all stakeholders.

Which actually means that, whether you're a supplier, or you're an employee, or you're a shareholder, we all feel somewhat the effects of the economic crisis.

This was my part of the presentation and I probably stole a bit of your thunder Eric by talking about some references to customers and trends.

But I'm pretty sure you can entertain our audience with some more information.

Enough thunder in to all this.

Thank you Peter.

But I don't think I'm going to hide behind the podium.

It's not because I'm tiny, it's because you guys in Holland are giants or something.

So yes, for the press, I am a very tall French guy.

So on this, in fact and after Peter's bad news, I'm going to probably give you a hint about potential good news.

So let me start however from the low side of the story.

The reason that we have reduced our sales expectation is because the end customer demand, that is the semiconductor industry, or semiconductor demand, is dropping.

And the curve shows in fact how dramatic that is.

I don't think in the history we've ever seen a dramatic reduction of numbers of units of semiconductors sold in the world.

In a period of three months, we went from a gross, compared to last year, of about 8% to, as you can see, a reduction of 4%.

So the total year will not be so bad.

You can see from the chart that the numbers of units of semiconductor will grow by 6%.

But if you only look at the fourth quarter, the drop has been extremely southern and very large.

However, if there is anything positive with statistics about our end demand is the fact that, compared to the past or the last very large recession that some of you may remember in the 2001 timeframe, there was excess in the industry.

There was excess capacity, certain numbers of fads basically have been built on the dream of Internet, on Y2K etc.

So a lot of excess capacity and a lot of excess inventory.

And the good news is, although the demand has dropped tremendously and very, very quickly, the amount of excess in this industry is in fact very low.

I will talk to you about the capacity soon.

But you can see from this chart that although the inventory of chips, which is in the shadow area, is growing, if you divide it by the average demand, you will see that the number is still remaining reasonably low compared to last recession.

So it's a very important point.

That is obviously the demand -- the end demand has dropped tremendously.

But there is no excess created, which means if the demand comes back, then you will have a very quick correction in the need for more capacity.

You would not have had in 2001 a very long time before capacity of lithography machine is purchased.

That's one of the good news.

If you try look at the statistics by segments, and as you know we have now two types or three types of segments in front of us, our customers., either the flash type segment, or the DRAM segment, or the logic segment, you will see that the three of them are in a difficult situation.

On the three segments demand has dropped.

But you will see that there are two or three good signs.

If you look at the memory segment, you are starting to see some price increase in the end demand.

And that means that, although the demand has dropped, something has happened that firms up the market.

And what has happened is in fact that our customers have retired capacity of factories, in fact capacities of [lithography too], significantly.

You can see here, we estimate that in the NAND business, our customers have reduced capacity by about 20%, by basically either dumping machines, old machines, 200mm wafer-type machines, and those will not come back in the business.

Or they have made transition to smarter, more aggressive technology which are good because they allow shrink and better cost, but are using a lot of machinery.

So in other terms, used to have one machine to do a certain number of wafers per day, say 3,000, now they use two machines for 3,000 wafers, and they have done that bit.

And these two activities have allowed in fact the total microeconomic capacity numbers in the DRAM, in the flash business, to have shrunk by 20%.

So now the demand has shrunk by 4%, as I said, and this is a capacity decrease by 20%.

You now start to understand why prices are starting to go up in spite of the fact that there is a recession of units.

The flash is about 20% down in terms of capacity.

DRAM is even better, 30% down in our estimate.

So therefore you can see that we're not optimistic at all.

In fact we cannot call when the numbers of units of semiconductor will grow again.

But we're starting to see very positive news as to whether our customers investment -- and that also shows that this type of investment that they are doing now is very low, is non-sustainable for the future.

What do we do during these difficult times?

Well in fact this four-point strategy is what we think is in fact a winning strategy for the Company and a best way to use opportunistically the situation.

So first of all very important in the business of this nature, we do not touch our R&D programs.

You will have seen that Peter has stolen certain numbers of millions out of our investment, but this is really efficiency improvements; better usage of our machinery and R&D etc.

But it is no impact on the strategic projects and no impact on the dates of delivery of those strategic projects.

And I will go into more details on that later.

Second is, we want to be sure we have enough capacity when the demand comes back.

Now I told you that, as was with the last recession, we do not expect a very slow pick-up.

We expect the possibility of a very fast pick-up because again of the low investment in the system and low excess capacity.

So we have to be ready and therefore we have taken a decision to have enough capacity available for a fairly fast pick-up.

The second bit is -- the third bit is, however we're making significant losses, EUR88 million is a large number.

We are guiding for even a lower -- bigger loss for the first quarter.

But very important in this type of environment is to not lose cash.

And we are successful in our restructuring effort and our management of the working capital to say that in the next few months, with very, very low level of sales, extremely low level of sales; about four times less than normal type activity, we're able to declare that we will be cash positive.

So this also speaks a lot about our capability as a Company to manage the cycle.

But I would say even more importantly, and this is where we think we are going to make value out of this recession, this recession for us translates also in a reduction of activity; activity to support customers; activity to build machines etc.

We're using the bandwidths available to go and aggressively pursue an improved cost structure for the future.

So the idea is not only to reduce cost and restructure for the very short-term, and obviously we do this a bit to improve our cash generation, but it is also to think about the next generation cash structure that we should have for year 2010 and so on.

And we believe by having the opportunity of this recession to think about efficiency, we can gain for the future.

So in other terms, we used to say that our target for the future would be to reach about EUR5 billion of sales, and deliver a significant profit.

Now we're saying, we will reach EUR5 billion of sales, obviously this recession is a short-term impact, but in addition we will be more profitable than we think we would have been in the first place.

So let me get into excitement, or some of you may be excitement.

Who is in the financial sectors?

You may not be excited; these are machine stuff.

And all the scientific guys here will be excited.

We are doing pretty good activities in engineering.

We are developing and will introduce this year, a new machine for the cost effective segment of our business; this is called the XT4 platform.

We are introducing another platform called the NXT which is a high-end platform.

For the first time in our history, we are going to have two platforms; a low-end and a high-end.

So it will increase our competitivity.

And that new machine will be able to get into the new technologies called double patterning of our customers.

We are also preparing the PAS 2010, 2011-type technology and in this industry, it is called the EUV Extreme UV, which allows nodes to shrink from -- probably the first node would be a 22 nanometer, to 12 nanometer or so.

That ensures basically five to 10 years of activity beyond 2010.

But in addition to those three pieces of hardware, I remind you that we made an acquisition about two years ago now, a company in the US called Brion.

And we used the know-how of Brion to start addressing the issue of optimizing the manufacturing environment and the design environment of our customers.

So we used to do hardware and now we are helping in a software environment, a service environment, and we are nearer and nearer to develop certain numbers of exciting new products.

So let me very briefly show you the picture, the family picture, and we won't talk further about that.

But again the XT4, the NXT and the EUV machine ,and this has been absolutely drawn not to scale.

The EUV machine is a significant monster and nobody will ask me, or I hope to have the question at the end, what's the ASP, the price, of one of those monsters?

That is exciting.

The holistic lithography, or the service and software support that I talked about, again is certain numbers of software service programs which we are now able to start selling to the market.

And this has value because first, it has money and margin, but also it enables the machines.

So the more you make use of them, the more you want to use the latest machine.

So it has a leverage impact on the rest of our business.

So now let me talk about the bad news in fact.

Yes, we did reduce our cost structure which means we have a certain number of impact; some of it is on the human side, where we are proud of, is at this moment, we have been able to execute a significant cost [reduction] of about EUR50 million per quarter, EUR200 million per year, by exercising not yet to its maximum, our flexible structure.

You know we are in a cyclical industry, so for us we have to live with a structure which is flexible.

In other terms, the possibility of saving EUR50 million per quarter without layoffs.

And at this moment we have reduced layoffs to a very small amount, mainly outside of Holland, and we have executed in Holland most of our reduction of flexibility in the workforce, that is temporary workers or use of contractors.

So we have been able to execute extremely fast and deep cost reduction using this model.

We have taken therefore EUR138 million roughly for the different closures and restructuring and impairment, but we also, and this is the important message I gave at the beginning, during this recession we want to use this opportunity to think how to prolong or to make sure that this cost structure could be usable when the market picks up again.

And so we expect a very large part of this EUR50 million savings to be continued well into 2010 when the market recovers.

Today again, and I think we are not going to talk about this further much because Peter has hinted this, our cash outflow has been bad in the fourth quarter, which is not abnormal when the demand drops immediately in a business of long lead time like ours, six to nine months.

If the business drops you don't get revenue but you have to pay your suppliers, it's nothing special.

But the good news is of course we are going to get the money back, which is why we announced that we are going to be cash positive in the next quarters.

So that is obvious.

We expect, however, the next quarter to be extremely low and this is why also I said, this level of sales at about EUR180 million to EUR200 million is not sustainable for our customers.

Conclusion of these two statements about the business is, we are a strong Company with EUR1.1 billion cash, we have an additional standby facility of EUR500 million.

We think we are going to be cash positive at the very low level of sales for the next month.

So we are in a solid situation cash-wise, which again allows us to use this recession as an investment period, not as a period where we shut down or cut our wings.

Outlook summary.

Again, EUR200 million.

Gross margin low because at this level of sales it's irrelevant I would say.

Research and development, EUR117 million.

Yes a bit of savings, but as I say, efficiency saving more than anything.

We used to be in the run rate of EUR125-ish million, so EUR117 million is lower, but not significantly lower.

And SG&A significantly lower, we used to run the business at EUR57 million SG&A per quarter.

EUR44 million is proof of the pudding of our capability to move down.

Our breakeven going down significantly, we -- last crisis, we were losing a significant amount of money at this level of sales.

I don't think you want to hear this again.

No -- the freeze of the market at this moment, we cannot predict when it's going to get better.

We will be ready when it happens.

We continue our investment.

We are not concerned about cash in the next few months and we are working -- we are leveraging this recession for an improved efficiency for the future.

Thank you.

Right, thank you Eric, thank you Peter.

Eric mentioned the holistic litho vision.

There is actually a mini documentary available as of today on the website.

So those of you who are listening to this webcast, they can actually click on that little icon right now and enjoy that.

But for here, I think we should open the Q&A.

Does anyone have a first question?

[Vincent Decker] is usually the first one.

What is the ASP of EUV machine?

Yes, well I'm fully obliged to ask.

What's the price?

The answer is, very high, but it is good value.

The ASP of an EUV machine will be in the order of magnitude of EUR55 million to EUR65 million.

EUR55 million to EUR65 million?

Because the high ends now are EUR30 million?

So it's twice the price.

But quadruple the efficiency, roughly.

It must be then, yes, otherwise I wouldn't buy it.

Correct.

I had a few other questions if I may, maybe a second answer too.

On top of my head because I have the notes in my head.

One is, there's another company that recently was in the news again, it's called Mapper, and it more or less suggested that it's starting now and it's probably growing but it might be better to have a bigger parent company.

And who knows, maybe ASML would be in the market.

Are you?

Well yes.

In the business of lithography you have the mainstream lithography which is what we do, which is photon-based, that is light laser.

And you have the possibility also to expose circuits using other technologies.

Mapper is using electronic beams and other companies in the US are trying to use imprint; you print in fact the structures on the silicon.

We are very interested by any other potential technology of course in this business, but we still believe that at this moment these two technologies, E-beam or imprint, are good for lab-type experiments or extremely low throughput type industry or activity.

So a very small market at this moment.

So I don't say that we will never be interested to get into small markets and therefore we'd work with Mapper, that's a possibility.

But this is I would say another segment of business which at this moment we consider a bit small.

In particular, that this technology is not proven, which requires significant investment.

So a significant market with a market which is not a major market is of course a question mark for us.

However you know that we are an integrator-type company and we are very good at integrating different technologies.

So if that technology become or proves to be much more interesting, in terms of market or in terms of capability, then we probably will be --

You [will] have to pay much more then for a company.

Exactly, we'd like to pay for good value.

Okay.

Under the assumption that it becomes value.

Another question maybe.

I have the impression that EUV is coming somewhat late to the market.

It has some problems.

Do you see that too or --?

Well EUV -- the UV concept probably started 25 years ago or something, so if you are asking me that question, yes, it is late because somebody worked on it 25 years ago and it should have been -- but in reality if we introduce our machine, and we are planning to introduce our machines, probably five of them in 2010, we'll probably be three years before the production ramps come.

Because as you imagine, you put a machine in place, then recipes have to be built at the customers, so you've got the technology in time.

And that -- and we expect production in significant volume to be 2012, 2013 or so.

So I would say, no we are in good time.

You will hear in the market, issues with some customers who says for my node x, y, z, for this node, I would have preferred to have EUV in 2009 and now you forced me to use the other machines that showed the NXE for instance, which is called double patterning.

So you have a certain number of fringe customers saying, you're late to my need, I would have preferred EUV.

So for us we take it as a vote of confidence, because if you are criticized to be late that means the concept is very good.

But you lose -- if we are not chosen for EUV we'll be chosen for the NXE so this is a no business impact.

But you don't lose the next generation anyway.

So I would say this question is a bit irrelevant.

The real question on EUV is the difficulty of it.

It's a very complicated technology and the next year is going to be extreme activity where the problem is not so much whether we're late or not, it's how fast we can execute to the performance of those machines.

And that's where the challenge will be.

Thank you.

Yes, Marcel van de Hoef from Bloomberg.

First of all, just a follow-up question on EUV.

So when do you start production and when do you start selling it?

So we will deliver what we call pre-production or a production capable machine, but that will be used in R&D in 2010.

So around mid-2010.

And then we have a schedule for about five machines for which we have orders.

For five different customers?

Yes, for five different customers.

Five machines, five different customers in 2010.

Then there will probably be a bit of a stop because they are doing the recipe and then it will go again.

And a ramp-up in 2013 you said, or '12?

'12.

'12.

I would say the customer will be aggressive.

Okay.

And then a question and maybe more for Mr.

Wennink.

Because of the crisis -- the way you generate cash on sales has been impacted quite a lot as you've been deteriorating.

Do you think your cash conversion will deteriorate even further in the next couple of quarters, or will it improve?

And what are you going to do about it, or what are you doing about it actually?

I think we also said this in the presentation.

The decline in our business volume was very steep in the fourth quarter.

Our planning cycle in production is a lot longer, six to nine months.

It actually means you have material in the chain.

Luckily we already had, during this year, by far the most focus on our leading edge products, so it means we have taken a lot of inventory in from our leading edge products.

Now you take that inventory in, customers push it out; they don't take the tool.

They won't say please don't ship it to me, I don't want it in the first six months, it might be the end of the year.

The bad thing about that is, you have to pay for that inventory, so the supplies, you can build the supplies ahead, my customer doesn't push us, [I push but] I'm not going to pay you.

We have chosen not to do that.

We think the health of the supply chain is very important for us.

So we have that inventory which means that the levels of sales that we're talking about like Q1, EUR200 million, EUR300 million, all that inventory is already there, we already bought it.

So it means the cash conversion with very low levels of sales is going to be very high because you don't need to buy anything, you already have it; it's called inventory.

And when it's called inventory, it's first -- it then turns into an accounts receivable balance which customers need to pay you.

We already have a big accounts receivable balance at the end of the fourth quarter because most of our shipments were in the last four or five weeks of 2008 which hadn't been paid yet before the end of the year.

So that comes in.

then you have on top of that the conversion of your inventory into receivables into cash.

So for the next few quarters, that's why we say the first half of 2009, we will remain cash positive.

We can run every model that we do and then the main reason is, you could almost say we've pre-invested.

Not by choice, but it happened to us, but it does give us a very good opportunity to have a very good cash conversion cycle over the next few quarters.

[Howard Holder] from Reuters.

Can you give an indication what the value of your backlog is now in these days?

How many orders are in risk for pushing even further out in the year?

A very good question.

Well Howard, it's a bit indicative what happened in the fourth quarter.

In the fourth quarter we said we had net 13 system orders which were 18 gross.

So we had 18 new orders and we had five push outs, cancelations.

So push outs beyond 12 months.

So we have a rule if somebody has an order and he pushes out the order beyond 12 months we take it out of the backlog because in this industry, 12 months is a very long period.

So that five, you can count on the fingers of one hand, or at least my hand, that has been very normal for us over the last couple of years.

Between two and five push outs, cancelations have been pretty standard.

Now the risk that you can see in the EUR750 million, the 41, is the timing.

So not so much whether they will take it, but as more customers say -- like I said earlier, I had this -- what have customers done?

It's like you're driving your car and you run suddenly into a thick fog.

What do you do?

What's the natural reaction?

You put your feet on the brake.

That's what these customers have done.

So they're driving in the fog, there's no visibility and that means that we are just in that period.

We are in the first part of the fog.

And it's very difficult to predict that what you actually have on the backlog will remain there or will be pulled in, that's very difficult.

We're just at the beginning.

Our customers are going to need one or two quarters to assess where they are.

They are going to assess the outcome of the holiday season.

Which part of the electronics industry have fared reasonably well, which have done badly.

It's not known yet.

So they need time to reassess.

That's why they told us, don't ask us to ship you the tools that we want for Q1 and for Q2.

Push us back one or two quarters.

And well it's very likely that we need them by the end of the year, because like I said earlier, these customers will be under pressure also.

2009 is not going to be a great year.

Chip prices will be under pressure.

What do they need to do?

They need to reduce costs.

So how do you reduce costs?

Put more chips on one wafer.

How do you put more chips on one wafer?

Shrink the chip.

How do you shrink the chip?

You buy a lithography tool.

So you can push it back without paying one or two quarters, but towards the end of the year you have been four quarters without cost reduction.

Not many of our customers can really do that.

So there's always a risk but I think ultimately it will come.

(Inaudible) Television.

Mr.

Meurice, you have invited the unions in Holland to come back to talk about cut costs.

This will be done this afternoon.

What are you going to tell them after?

Could you come back in the afternoon?

You understand --

[In a long answer] that's easy.

I will not tell you, but it is natural for me to put a message to the unions but also to the workers, the employees, and Holland in general, that there is a crisis out there and there could be method for all of us to optimize the situation, so that people get paid and not laid off and there is less risk.

And also less risk -- we are a successful Company.

We just give you a message that we are not going to go bankrupt soon.

But if we don't manage this situation well, you can reduce your capability, your competitiveness etc., worldwide.

And for me, I think it's important that every of our stakeholders -- we're working for every stakeholder, we are working for our employees, for our shareholders and for our customers, that we pragmatically compromise and find solutions.

And as you know we've taken the decision on the dividend, on our shareholders, by reducing a bit, although our share price has already helped them to contribute.

We are talking to our employees and to the trade unions to understand what we can do.

Again, the question is pragmatically, how do we get to be a pretty aggressively successful Company, even during the period of crisis.

But what will be the consequence when the unions would remain -- to refuse to cut costs on personnel here in Holland?

I do not see this as an alternative.

No, I think in the Dutch environment I understand that everybody goes one step towards each other, and this is kind of natural.

And I expect us to do the same and them to do the same.

It's the interest of the union, it's the interest of the employee, and it's a bit also the interest of Holland that we are trying to protect here.

It would not be a good thing for the world to know that we consider that there is no crisis there and people can be erased without problems and you can't do this because then you have difficulty to attract further investment in the country.

So it's in the interest to say, how do we compromise?

So I do expect a natural compromise in which all of us will be successful.

Thank you.

Michael Steen from the Financial Times.

I was interested in the Japan share in your sales which I know you've been trying to grow.

But I'm just wondering, is that because other territories fell away quicker, or you actually did succeed in gaining market share?

I think it's a bit earlier to say what the market share in Japan is, but I could estimate it to be between 30% and 40%.

So when we talked last time, I think about a year, two years ago or something, we were at 5% and we started 2%, 3%, 5% and now we are 30% to 40% real market share.

So, of course they bought and this time they were 20% of our -- or they are 20% of our bookings etc., but they represent now a fairly large part of our business and we represent a fairly large part of their total needs.

The Japan economy and Japanese customers are not shielded from this worldwide economic recession, so they feel the impact just as others do.

So this is a reflection of market (inaudible) gains, not so much other countries or other regions falling away faster.

They go with the rest.

Good morning.

Is the Dutch government doing the right thing to help you through this crisis?

If they don't take my passport away.

No, I think the Dutch government is extremely pragmatic, it has consulted with us, by the way, on a regular basis, have certain numbers of programs that we make use of to support activities, and reduce layoff opportunities.

One of the programs is WBSO support of R&D investment which is very good.

They have also introduced now a system of support of short labor which I would say if I were a politician in every country, I would strengthen.

The problem of a crisis of the nature that we have is obviously demand-driven, but that treatment is going to be based on how many people are going to lose their employment.

And if you succeed to create a strong structure that keeps people employed by securing that they stay available and work 50% of the time for a very long period of time, you really make an economic impact on the demand.

So that's a fundamental position which I feel the government in Holland has shown vision.

The different regions of Holland have also some separate programs and a bit of flexibility to use some of the budget that they have, etc.

I do understand that Essent have been sold and some cash or some funding will be available and that the different regions are starting to think about how to invest this effectively.

In this area I think we have BrainPort which has driven the possibility of a common use of workers etc., subsidized.

So all these are good activities.

What I can always say is, we can use simpler and faster access to those good ideas; it's a normal request of efficiency of anything.

And if we get that I think we'll be able to do things without increasing or doing any layoffs etc.

Yes, can I add to that because I have been in contact with the local governments and with also the Dutch national government.

After an initial slow start, it wasn't quite clear how fast this went and how deep.

I think definitely the government has caught up in terms of pragmatism, I do agree.

Focus; I heard Minister Bos say that they're thinking of measures, which he's going to announce, which go right to the heart of the discussions that we have had with them, whether it's on the availability of credit, how are you going to help that.

Whether it's on export financing, guarantees.

Those are all issues that we brought up as potential government measures that can really help.

We've been through the BrainPort organization; BrainPort is a foundation here sponsored by the government that focuses on the technology area in Eindhoven, bigger.

Eindhoven, they've been very helpful.

The mayor of Eindhoven has been very instrumental.

The province minister, Minister Donner, [van] Wouter Bos, have been -- they've shown real pragmatism, and is a clear drive to take action so I'm really pleased about that.

[Something] about your dividends?

You will pay a dividend of EUR0.20 does that (inaudible) in the future?

I think it does.

Yes that's a payout ratio gone up there from 17% to 27%.

I think I don't remember the (inaudible) of shareholders exactly, but they showed data what a normal payout ratio is in our industry; it's about 20% so we do a bit more now and it shows confidence in our ability to keep generating cash, yes.

You talked about your market share in Japan.

How is that worldwide?

What happened in quarter four last year?

We could probably close the year -- again, the numbers will be public in a month or so because we are waiting for external houses to do this.

It will probably be around 65% to 68% market share.

It's all now depending on the exchange rate calculations because all this will have an impact.

But probably in this order of magnitude.

So we would have gained about 2 points of market share in 2008 versus 2007.

And did it also happen in the last quarter?

Or was the last quarter worse for you than for your competitors?

Again, we are waiting for the month of December for us.

The month of December has been very big and this is a business now, we have to be highly cautious with market share now because with some business [tanking] ,one machine makes a difference and that's not relevant any longer.

So the month of December, we've been very good and they have been very bad, so the numbers can be all over the place.

We have to wait a bit.

Anyone else?

Last question?

Yes?

Maybe you can comment on the financials that your customers can get?

Because a few months ago this was not very clear to the financial crisis.

Do you get more -- is it more visible that they can access the --?

It is.

You've got two, three types of customers to simplify.

One which -- for which your question is irrelevant; this would be Samsung, Intel, even Toshiba losing a bit of money.

But where financing is not really the issue ;the issue is end demand.

You have certain numbers where the financing is an issue but they are big enough that they can drive financing.

These are the Heinex, these are the Elpida's, this is the Micronas etc., so it's hard for them.

They have to go on their knees but they do find money.

Heinex announced in December 600 million I think it was; Micronas has got also a source of financing etc, so --

Qimonda announced --

And then you have the smaller types, DRAM and Qimonda etc., and where the struggle is a bit more.

So Qimonda luckily have been able to secure loans or financing from (inaudible) government, Saxony government and the German government on two separate projects.

So this seems to be giving them the opportunity to continue investing during their bad time.

And the rest of the DRAM business, the smaller Taiwanese etc., are now supported by the Taiwanese government.

And this effort is a very interesting fundamental, very good for us and for the industry.

The Taiwanese government has basically said, look we will support this business, it's important for Taiwan, but in return we want you to consolidate your industry or bring a business model that works.

That's a very important thing because some -- we all know that the DRAM business model has been questionable because a lot of people are losing tons of money.

And the Taiwanese government are saying fine, DRAM is a big business obviously, but how do you restructure it, consolidate it for money?

And they have said, when I get a good business plan I start giving money.

And I don't know if you are aware, but at this moment, a lot of people are visiting Taiwan to present their business plan.

And we suppose that within -- before June, a position will be taken that creates a major player in this business, well financed, and in a consolidated-type --

And consolidation means taking capacity out.

You don't restructure, you don't put all the capacity together under a new name which you do; you consolidate and you look what's profitable and what isn't.

And what isn't is a lot of capacity that is older, that has to be taken out.

And if you decrease capacity, it means that you have a much healthier base to basically go back to healthy pricing, and we need healthy pricing to be profitable.

So I think it's a good thing.

It's a good thing that governments are, like Eric said, saying, yes we think it is an important spear point industry.

For us it's very important to have that industry.

But we're going to ask -- we're going to demand certain conditions under which you get the money.

And I think it will be to make that industry healthier, which is in the end very good for us.

Also guess what, when they come back as a healthier company you think they want to decrease costs, they want to cut costs and they want to go to (inaudible), I bet you that they would.

Which is good because they will come to us.

No more questions?

Anyone else?

No?

Thank you very much for attending.

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And thank you very much.

Thank you.