艾司摩爾 (ASML) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the ASML 2011 first-quarter results conference call on April 13, 2011.

Throughout today's introduction all participants will be in a listen-only mode.

After ASML's introduction there will be an opportunity to ask questions.

(Operator Instructions)

I would now like to turn the conference over to Mr.

Craig DeYoung.

Please go ahead, sir.

Thank you, operator, and good afternoon and good morning, ladies and gentlemen.

This is Craig DeYoung, Vice President of Investor Relations at ASML, and I would like to welcome you to our investor call and webcast.

As the operator mentioned, the subject of today's call is ASML's 2011 first-quarter results.

Co-hosting today's call from our headquarters here in Veldhoven, the Netherlands, are Mr.

Eric Meurice, ASML's CEO, and Mr.

Peter Wennink, ASML's CFO.

At this time I would like to draw your attention to the safe harbor statement contained in today's press release and in our fourth-quarter results presentation, both of which you can find on our website at www.ASML.com.

The Safe Harbor statement will apply to this call and to all associated presentation materials.

The length of the call will be 60 minutes and now I would like to turn the call over to Mr.

Eric Meurice for a brief introduction.

Thank you, Craig.

Good afternoon, good morning.

Thank you for attending our first-quarter 2011 results conference call.

Before we begin, and as usual, Peter and I would like to provide an overview.

As usual, Peter will start with a review of our Q1 financial performance with added comment on the short-term outlook and I will complete the introduction with some further details on the current position as we look forward to the rest of 2011.

So please, Peter?

Thank you, Eric, and welcome to everyone.

As Eric mentioned, I would like to take a moment to share some observations of the events of the last quarter and we will share also some details on the Q1 results.

The first-quarter sales, as you will have read, came in at EUR1.45 billion, which was just above our guidance, and sales continue to be driven by foundry and IDM customers as they continue to add further wafer capacity at the leading edge.

The number of dry systems, which were mostly KrF, again represented well over 50% of the total number of systems shipped.

And these shipments increased to almost 70% of our total immersion systems sold and our service and fuel option sales came in close to EUR170 million.

The net income for the first quarter was EUR395 million or 27.2% of sales.

The net bookings for the first quarter came in at 40 systems valued at EUR845 million.

These included advanced immersion systems for critical levels as well as additional KrF systems for less critical layers and also mainly ordered by foundry customers for capacity additions.

The total average selling price of the Q1 bookings was EUR21.1 million.

Looking from where the strength came in the first-quarter bookings, the demand from NAND manufacturers represented almost half of the booked value, 46%, followed by DRM, 23%, and foundry, 26%.

Our order backlog exiting the first quarter was EUR3.3 billion, that included 134 systems with an average selling price of close to EUR25 million.

For the second quarter of 2011 we expect net sales to be about EUR1.5 billion with a gross margin for the second quarter expected to be about 45%, R&D expenses at EUR150 million, which is an increase given a growing focus on second-generation EUV systems deliveries and third-generation EUV system development.

SG&A is guided at EUR55 million.

Our near-term outlook firmly indicates support for another strong year.

We expect bookings in Q2 between EUR900 million and EUR1 billion, justifying again our expectation of net sales in 2011, clearly above EUR5 billion.

As part of the share buyback program announced last quarter, ASML has purchased 4.6 million shares for a total conservation of EUR142 million which includes purchases up to and including March 27.

ASML intends to cancel the repurchased shares and at the end of the first quarter we maintained just over -- close to EUR2.7 billion in cash.

With that short summary, I would like to turn it back to Eric for more on our view of the coming year.

Eric?

Thank you, Peter.

So when we convened here three months ago we were able to confirm that this semiconductor recovery cycle was strong and sustained.

Our backlog had grown to EUR3.8 billion -- a very, very large number -- and the business drivers justified our expectation for revenue growth well above EUR5 billion in 2011.

Today the business sentiment is challenged by increasing oil prices, global conflicts, sovereign debt issues, rising interest rates.

The Japanese disaster also adds up to uncertainty.

Although direct impact to the electronic industry worldwide appears limited at this point, the uncertainty is causing some of our customers to review the existing equipment delivering and order plans.

However, none of this requires us to adjust our revenue expectations for 2011 which is still clearly, clearly above EUR5 billion.

These limited adjustments that we have seen are in fact only affecting litho system demand which was potential upside, and in any event which was above the analysts' revenue consensus for us.

As said last quarter, the reason for the demand for lithography system to be so robust is that it is both, one, critical layer growth driven and, two, strategic capacity addition driven.

On one hand, the NAND and DRAM memory lithography capacity buildout plans have been measured so far and the backlog, and planned bookings appear not to threaten oversupply to analysts' expectation for 2011 as manufacturers drive aggressively for node transition but not so much for wafer starts growth.

On the other hand, the logic and the processor capacity buildup is still driven by a hugely growing number of critical lithography layers from zero up to 18 critical layers per chip and by an overall process complexity.

It is also driven by the customer business need to put a minimum, as we call it, critical mass of strategic capacity in place for the 40 nm and the 30 nm nodes.

And to offer this capacity level to their end-customers long time before they have to ramp.

For beyond 2011 we are preparing the industries next significant emerging technology, EUV, in which we lead a vigorous development effort as you know.

And we are making significant progress.

One, as of today we have delivered three EUV pilot production systems, the NXE3100, which are now demonstrating emerging and overlay results that can meet the value production -- device production specifications requirement.

An additional three systems are still to be delivered with a few months and a qualification of this system are currently underway.

Point two, the aggressive customer process development effort are accelerating on our alpha tools and have begun on a 3100 tools we just shipped.

The general EUV infrastructure including mask writing, mask inspection, mask cleaning, photoresist, etc., is now effectively transitioning into a phase of optimization.

Point number three, the energy source is still the gauging factor.

We are making progress as we have identified the issues and have a roadmap to reach the planned 100-watt corresponding to about 60 wafer per hour by the end of this year.

And point number four, we are starting the industrialization phase at this time with the completion of our new factory planned for this year and with the production start of the new machine, the NXE3300, our new next-generation tool for which we have now 10 commitments.

Revenues for the NXE3100 shipped this year will be recognized in 2012 at the same time we begin to ship the 3300.

Adoption of this tool will provide ASML another engine of growth for 2012 and beyond.

So in summary, we are very confident that our leadership position in leading edge is again enabling us to meet our business objective for 2011 as we are (inaudible) at the beginning of the year.

With that Peter and I would be pleased to take your questions.

Thanks, Eric.

Ladies and gentlemen, the operator will instruct you momentarily on the protocol for the Q&A session, but beforehand I would like to ask that you kindly limit yourself to one question with one short follow-up, if necessary.

This will allow us to get as many callers in as possible.

So we appreciate your attention to that.

Operator, could we have your instructions now and then the first question, please?

(Operator Instructions) Gunnar Plagge.

Yes, hello, Eric.

You talked about the macro dynamics; I was wondering whether you could give us a bit more color.

Are there any patterns in terms of end-user dynamics, any customers that are particularly affected?

And then, secondly, if you could also comment on the competitive dynamics where there were a couple of customers of one of your competitors that have over the quarter made some noises that the 620 is not really meeting their specifications.

And I think you have also alluded to the fact that you might have to take a slightly larger role, which includes obviously also that you have to do some supply things around lenses.

And if you can comment around that would be very helpful.

Thanks.

Okay.

Thank you, Gunnar.

So on the macroeconomic level, clearly at this moment nobody has real facts.

All of us, ourselves, of course, our suppliers, and our customers, have looked into the potential first level impact of Japan and there is no real impact.

Second level of impact, which is the next supplier level, again they don't see much, etc., etc.

So most of the reaction at this moment is a feeling reaction that in view of such a dramatic situation it, quote-unquote, has to have a cooling effect of some sort.

So it's more of a feeling or sentiment that it is anything quantitative.

My analysis, and this is a personal opinion, is in fact it allows most of our customers to digest, to think so we are more in the thinking mode than in a very obvious reaction to a known problem.

This is why what we have seen is in fact very limited.

And if it were to even be a bit bigger than what we have seen, we are still prepared because we have enough buffer demand in front of us to cover for any even potential more negative news.

So this is why we are still bullish with the same numbers as we had three months ago, which is we will be well above the EUR5 billion target that we issued then.

So macroeconomic-wise just a sentiment, no specifics.

On the competitive side, indeed we think that our NXT is doing very well.

That slowly but surely the customers is now going from one version of NXT to a second version with better performance in overlay and in throughput which then potentially put our competition in more difficulties to catch up, if and when their product would be qualified.

So, yes, at this moment we are still managing the Company to a large market share.

We see this as sustained as we go.

Thank you.

Francois Meunier.

Hi, Peter.

Hi, Eric.

Question about the share buyback actually, because you have done EUR140 million in Q1.

I was wondering, because the book-to-bill is below 1 for Q1 and Q2 and the shares are below EUR30, does it make sense to potentially accelerate the share buyback at the moment in Q1 and Q2.

Good question.

Clearly we have said the share buyback is a program [for] in total EUR1 billion, whereby the way that we do this is basically at the day of the conference call we give an assignment or an order to a bank that will help us to buyback a certain number of shares and we give them a euro number for this quarter.

That is what we have done today.

We are not going to disclose that number, but clearly that number will be a reflection of how we see the market and what we feel.

So during this quarter the bank is going to execute what we tell them today and that is what they did last quarter.

Actually, last quarter what you will then see is that throughout the quarter we are buying back at the average price of the shares during that particular quarter.

But any additional disclosure about the size of what we have instructed the bank today we are not going to give, but clearly we are looking at the current situation wisely.

Okay, that is very kind.

Thank you.

Andrew Gardiner.

Good morning, guys.

Good afternoon.

Thank you.

I was just interested in a bit more detail in your response to Gunnar's question.

I was wondering whether the caution you are seeing across the customer base -- is this being felt disproportionately in certain areas or with certain customer groups?

And is it having an impact on any major projects or is it just these slight changes in delivery times that your discussion -- you are seeing?

And also what is giving you the confidence that this is more of an issue of just retiming of a limited number of deliveries rather than a bigger problem?

Thank you.

This is in fact a very insightful question.

The impact is mainly in the memory sector, which leads us then to be fairly positive for the future, because if memory doesn't buy now they will buy some time.

So whatever has happened -- is happening now is, in fact, a push out into 2012 which is good.

And what is stable is what we call the strategic buildup of capacity in the logic arena.

This, as we told a long time before, is difficult to -- would not be impacted by small macroeconomic changes because these are strategic decisions by investors to have the right capacity of the right node.

And these things have not changed.

Okay, that is very clear.

Thank you.

Timothy Arcuri, Citi.

This is (inaudible) for Tim.

Thank you for taking my questions.

Just to follow-up on the previous question, you mentioned that some of the delivery schedule change is in the memory sector.

Could you specify is it mostly in the DRAM or NAND?

It's bit of average -- maybe a bit more in DRAM.

Okay, okay.

So just to --.

But remember, these are not big numbers so don't try to make some level detailed analysis on these things.

Okay.

For the foundry standings, your bookings last quarter from the foundry is about more than a EUR1 billion and this quarter it's down almost 80% to about EUR200 million.

We all know that foundry is planning to spend a lot of CapEx this year.

What makes that big drop in foundry orders?

Is there any change in the foundry spending pattern for this year?

Well, I think yourself and Tim have been trying to all the time discovers short-term trend in short-term numbers.

Well, this is not how it works with strategic projects.

The foundries have decided, as we can take examples like GLOBALFOUNDRIES when they decide to make a new fab in New York, do not have a quarterly-type approach to taking decisions and putting orders to us.

So you will have some quarters which are larger when there is a phase of development and you will have quarters which are lower because they are just, I would say, digesting the decisions one by one.

So these are clearly not quarterly trends and you should not even compare one quarter to another in terms of logic bookings.

That is helpful.

Just one last question, the tax rate for Q1 is much lower than previously discussed.

Could you provide some guidance on the tax looking forward?

Thank you.

Yes, sure.

We have an agreement with the Dutch tax inspector under the new legislation which benefits innovative companies and companies that are highly R&D intensive.

And that is for the next four years.

So clearly the level at which we can attribute income that is related to R&D spending to, let's say, the taxable income lines when we have to make a separation between income that can be derived from, you could say, patents.

And the other income, that particular division, that is up for discussion annually, but that has a marginal difference on the overall tax rate.

So the tax rate would be anywhere between 12% and 14% over the next couple of years because this agreement and this legislation we expect to stay in place.

So depending on whether it's 12% it will be lower.

When we are at the high ends of our quarterly sales range, it will be at the 14% level where we are at the more lower end of the sales levels.

So the higher the sales level, the lower the tax rate that is basically how it works.

But if you stay within the 12% to 14% bandwidth for the next couple of years that would be good.

Mehdi Hosseini.

Thanks for taking my question.

I want to go back to the EUV.

It seems like there is maybe a few quarter pushout, but it still doesn't change how your customers are looking at the technology and the benefits that EUV offers.

Is that the right way of thinking about it?

Because there is a perception out there that maybe double patterning is going to be substituted for EUV and I want to get your opinion on what is out there and what you see the trend behind EUV.

So as we said before, there are three segments -- NAND, logic, and DRAM.

We are in DRAM you probably you do not know how to do sub-20 nm without EUV.

So those guys, even if we delay day by day, knowing that they have no alternative, technical alternative we would in fact delay their node if we continue delaying a machine.

So these ones would be, I would say, not having choices.

In the NAND arena they do have choices.

They can develop complicated triple, quadruple patterning NAND up to 15 nm.

After 15 nm they will be in the situation of DRAM where they have no choice; however, they would gladly go to EUV if EUV is cheaper.

So NAND is for us to win.

If you quote the price and you give the machine with the right throughput which hit the right level of cost, then they go.

If you don't, then they wait.

So NAND is, in that sense, [you might] call this, progressive.

Logic is in between.

It's in between DRAM and NAND.

On one hand, logic would absolutely need EUV on some layers like DRAM does, but, on the other hand, you can design in logic less aggressive layers which makes your chip bigger and not as good in power consumption.

But you can go around it, which is what you hear some players saying, well, if push comes to shove they can go beyond 15 nm node.

What they really mean by this is they can compromise the performance lower if EUV is not available.

So NAND is economics, logic is performance, DRAM is you have no choice.

So at this moment we are not -- we are delaying without delaying.

That is we are, as you see, delivering our machines as we planned to ship them, but we haven't yet proven the performance that the machine will run at.

We were planning to prove that performance in Q4 timeframe; I think we made it clear.

Now we still have more work to do to prove that performance.

And as I said, proving the performance is important because you will then determine which node you take and then the customer will align to that node.

So we are in this situation where customers are developing the nodes anyway, but there is a bit of uncertainty as to exactly how many layers we are going to catch when.

What is the critical factor here?

Is that for you and your (inaudible) provider to hit the 60 wafer per hour or does that have to be 100 wafers per hour?

So the target of the production machine, the 3300, is about 120 wafers per hour.

So if we are at 120 wafers per hour this is near (inaudible); this is we catch all the layers and everybody fight to have the machine.

If we are in the -- between 60 and 100 we are in a good business where we catch probably 80% of the layers.

If you are under 60, we are starting to only catch the ones who have no choice.

All right, thank you.

Sandeep Deshpande, JPMorgan.

Firstly, regarding your visibility, based on what has changed at the customers at this point would you say now that you have full visibility into 2011?

Last quarter you had talked to about third-quarter visibility so now does your visibility extend to the end of the year?

And given that you have seen some pushouts for next year, do you have any visibility into 2012?

And I have one follow-up.

So indeed we are getting more visibility in 2011 and, therefore, we confirm this number with more certainty than what we had three months ago.

But reading 2012 now with the current database that anybody has is impossible.

The only way at this moment to read 2012 is through our, what we call, simulation system where you have a theoretical set of models of how many machines you need but the data does not allow you to read 2012.

The only thing that we learned today is, well, it's not the bad news that an amount of machines are slipping from 2011 to 2012.

This is the good news for us who would prefer to manage a company with growth potential year-to-year rather than a very, very, very high year and then the lower year the next year.

That usually is a bit more difficult to manage.

Thank you.

And on the EUV question, following on on that, is the laser now the only gating item?

And if you do get this -- to this arena of 120 wafers per hour by the end of next year potentially, then would 2013 be a year when you would actually sell -- the volumes of the EUV tools shipped would suddenly jump up because that would be a production tool in that year?

Yes, so this is a very good question.

So EUV targets are still the same and we should be able to guarantee or prove to the 60 wafer per hour by the end of this year and 120 wafer per hour by the end of 2012.

If we do that I would guess that a good standard ramp would be about one tool per month in 2012/2013 and then 2014 would be a multiplier.

This is not -- it's just normal time.

It takes a bit of time to do R&D with such a new technology.

Sorry, I didn't understand 2012.

So if you are able to do 60 wafers per hour at the end of this year you will have a ramp, additional ramp of one tool per month in 2012 itself?

No, I do a total market.

So if we have the right performance, the 60 at the end of this year, 100 at the end of next year, we could maximize the introduction of the machines.

And I would estimate this to be about one machine a month in 2012 and one machine a month in 2013 and 2014 being the big one.

But in 2012 -- what Eric is saying, this does not start in January 2012.

It just starts somewhere in the middle of the year, that is the point.

Okay, understood.

Thanks a lot.

Janardan Menon, Liberum Capital.

Thanks for taking the question.

Just a follow-up on the EUV, on the 3300 side.

Since you expect to start shipping 3300s in the second half of next year would you be including any of them in your backlog from the second half of this year?

And if so, roughly how much of the 10 commitments you have can we expect you to include in the second half of this year?

And a second question, if I may, is on your Q2 order visibility your backlog right now is quite heavily memory intensive, quite a lot of both DRAM and NAND is in the backlog.

And given your earlier comments about some of the moving of the timescale coming from the memory side, would it be fair to assume that your Q2 orders will be predominantly on the logic side?

And to what extent would the Q2 orders be shipped in Q4 of this year and to what extent -- what percentage of them do you expect to be into Q1, Q2 of next year?

Okay, good.

So on the EUV booking, I think Peter and I will probably say that we want to be conservative and we probably will not recognize the bookings this year.

We will recognize the bookings and the billings probably at the same time in 2012 as a way to have all the data with us when we do that.

Because, again, we will recognize revenue only when we are sure the machine has real performance, so we will wait until the last moment where we recognize bookings and billings.

But the target is probably to ship, and this is while we have -- between us, I would say when I say one month in 2012 starting in June-ish or so 2012 we could on paper ship 6 or 7.

I think we are going to still target 10 in 2012.

This is pretty hard to do, but we owe that to the customers.

In fact, all the customers want us to do so, so we are going to try to do the full 10 in 2012.

Regarding the orders for Q2, as I said before, the bookings at this moment and the bookings in Q2 will probably not give any information on 2012.

I mean this would be -- I would be highly surprised if there would be an appetite for any of our customers to already call some capacity in Q1 2012.

We don't see this.

It wouldn't be non-natural so therefore the whole Q2 bookings, and we have given a range of EUR900 million to EUR1 billion, would be for shipment in 2011.

And would it be fair to assume that it will be more logic than memory in Q2 bookings?

Peter, do you have (multiple speakers)?

Is it -- yes, okay, sorry.

Yes.

That is a correct assumption.

Okay, thank you very much.

Gareth Jenkins, UBS.

Hi, Eric.

Hi, Peter.

Just a quick one on new fab plants.

I think historically last quarter you talked about 13 potential new fab plants between 2011 and 2012.

I just wondered if there has been any change in that either up or down, and then I have a quick follow-up as well.

The plans are the same.

The timing and intensity of the numbers of machine going into is the stuff that is being discussed because of sentiment.

Okay.

And then the follow-up is somewhat different, just on directed self assembly, whether you feel it's a technology that is complementary or something that poses a threat long term to EUV?

No, I think there will be certain numbers of layers which could potentially be done with self-assembly.

But at this moment I think if ever it is successful it would be one very specific layer, maximum two.

So I would see this as complementary.

Thanks.

Simon Schafer, Goldman Sachs.

Thanks so much.

A quick question, I am sorry to dwell on this topic, but again is on EUV.

Did I understand correctly, you said 10 EUV systems in total would be a real challenge or were you referring to the 3300?

The 10 3300 in 2012 is a possibility, but of course it is challenging.

Before the 10 3300 we are going to ship 6 3100; we have shipped already 3.

Understood.

And the 10 systems is what our customers want.

And that is why I said it's our challenge to get them out, but it's going to be a bit of a fight.

So to be honest, on your plan for 2012 you may want to plan the best case of us shipping 6 NXE3100 and 10 NXE3300.

This is the maximum, best case we could do.

Yes, understood; very clear.

Thank you very much.

My second question actually was just when you look at your own forecasts and you have derived that you are basically still very comfortable with where consensus expectations are in the mid-EUR5 billions, EUR5.5 billion or so.

Does that incorporate a specific thinking on wafer fab equipment spend in 2011 or overall CapEx budgets?

Just trying to get a sense as to what your own assumptions are based on.

I know you have your own very specific modeling as it relates to the memory industry and so on, but any sort of color as to what your assumption is for overall wafer fab equipment would be very helpful.

Thank you.

So for these -- the assumption is based on the fact that memory DRAM will be a bit on the low side of what Gartner says.

So in DRAM they would not have enough capacity to do 55% bit growth.

Let me just be sure I say the same thing, the right thing.

So, yes, they would not be able to do the 57% from Gartner.

At this moment our forecast, which is well above EUR5 billion, would not guarantee 57%.

It would be guaranteeing under 50%.

For flash it would not guarantee the Gartner 83% NAND; it will guarantee nearer to 70%, 75%.

But the logic will be higher than the full Gartner unit growth expectation, which I think is 7%-ish.

So in the logic arena we would expect to build more than 7, but as we said -- 7% unit growth equivalent, but as we said this is natural because there are new fabs strategically have to be ready before they can garner some new customers.

So in other terms, it is very clear that TSMC, Samsung logic, GLOBALFOUNDRIES, now UMC is in and SMIC is starting are building up capacity to try to attack sort of numbers of similar businesses.

And as we said before, there will be duplication in this business.

This is not to say that there is overheating, but there is duplication in this business because there is more competition.

Yes, I think, Eric, Simon was probably referring to the total wafer fab equipment for 2011 and whether we have a view on that, which I think we don't.

No, we don't.

We don't.

I mean, we stick to our simulation model and we have said it more often on calls like this that wafer fab equipment CapEx will be what it is going to be.

It will go up when customers see that they have a business opportunity.

It will go down when they don't see it.

We actually don't follow it.

I understand.

That is very clear.

Thank you for sharing those assumptions.

Thanks.

I apologize; if I feel at any time somebody asked me about CapEx in the fab, I only think about I litho.

I didn't even know there was any other equipment.

Fair enough, fair enough.

Thank you.

Jagadish Iyer, Arete Research.

Thanks for taking the question, Eric and Peter.

Two questions.

First, Eric, you have always talked about a little capital intensity.

So you have given us light which talks about increasing process steps for DRAM, NAND, foundry and all of them.

So I was just wondering what is your early read on this going forward for 2012 versus 2011.

I know it is kind of theoretical, but can you give us some kind of quantitative numbers in terms of how the little capital intensity is going to change?

And I have a follow-up.

Again, this is really more Tim Arcuri doing these things.

CapEx intensity for us is a dangerous thing, in particular, that we can't really correlate to the past because the past doesn't make any more sense.

But the two or three numbers we can follow, in the foundry environment, the possibility of being a total CapEx -- fab CapEx intensity as 50% of the total revenue of foundry is not a ridiculous number.

And then on the 50%, we own of this 20% to 25%.

So you could say that in other terms, 10% to 15% of the revenue of foundry could be given to lithography.

And if you plug those numbers into what GLOBALFOUNDRIES and (inaudible) and SMIC and UMC and Samsung logic would tell you, they expect in sales in 2012, 2013, and 2014 these are good numbers.

In fact, these are higher numbers than what we already hinted.

In the memory business we usually, in fact, do not talk about capital intensity because it's so wildly dependent on the ASP of the memory chip.

Sometimes you have a chip that goes down in price by 70% in a year so the capital intensity basically doubles and therefore we can't follow that one.

So we really follow mostly our own model per unit and per bit for more (inaudible).

So sorry if I did not answer your question.

I think the secular trend -- I think we also said it on the earlier calls -- the secular trend is that we believe that the litho CapEx diffusion rate will go up.

I think historically it was 10 years ago, it was around 12%.

We are currently now between 18% and 20%.

And given the trends that we are seeing and also would like to refer to slide 17 and 18 of the Q1 deck that is on the website where we basically show the number of litho immersion layers that is going up, which is just a function of the complexity that our customers are trying to deal with.

If you add on to that the introduction of EUV in 2013 and beyond, it is, for us, clear that the long-term secular litho diffusion rate will go up, and that will be clearly above the 20%.

So whether it's going to be 24%, 25%, 26%, we will just have to see, but it's very difficult to make this particular comment from one year to the other.

We just look at the medium- and long-term trend and that clearly shows that litho CapEx intensity will go a period.

Okay.

I have a follow-up.

If I take your Q4 bookings and your Q1 bookings, you are probably running close to, say, EUR1.5 billion run rate in bookings.

Do you think your bookings can recover to such levels sometime in 2011 or is it likely probably a 2012 event at this time?

No, it will be natural to go back to EUR1.5 billion sometime.

Remember that if you do also calculation you see the current bookings at EUR3.3 billion is a very large number to justify a run rate of EUR5.5 billion sales.

If you look at our historical backlog to billings, you would -- you don't -- sometimes you could multiply by 2 so a EUR3.3 billion would be a run rate of EUR6.6 billion yearly billings.

This is high; this is on the high side of the equation at this moment.

So you could expect a natural reduction of that backlog to the normal level and then a pick up to EUR1.5 billion per quarter is pretty natural.

So, yes, definitively we should expect this now.

What we don't know is would it happen in a continuous fashion, would it happen a bit bigger on one quarter and not on the other, or would the customer remain at the historically high backlog because we are now so strategic for them and the products are so strategic that we may be now in situations where we manage a higher backlog than we ever did before.

So sorry, at this moment we can't really gauge this and I don't think any analysts should not try to read anything again in this backlog trend.

They do not really correspond to a business trend; they correspond to another way of doing business with us.

Thank you.

Weston Twigg, Pacific Crest Securities.

Just a couple of questions real quick.

First, you said that your cash balance contains EUR863 million for EUV and other programs.

Can you give us an idea of what other programs might be included in that?

That is the regular NXT program, so that is the regular business.

Okay, not new development programs?

No.

And then, just to clarify on EUV for revenue, it sounds like you are still hoping on the upside to maybe ship all 10 of the 3300s in 2012.

But it sounded like you said revenue recognition will be based on performance so not necessarily any revenue on delivery.

Does any of that EUR863 million get recognized on delivery?

Well, in effect the EUR860 million will only be recognized when we formally recognize the revenue on the shipment.

So every prepayment euro that we receive today will be booked in the income statement when we finally have revenue recognized under accounting principles in 2012.

So that will stay in the accrued liabilities until we ship and we recognize the revenue.

Now on the 3100 that revenue recognition will take place on final acceptance.

On the 3300 we have agreements with our customers that the minimum requirements of the 3300 has to fulfill or of such a nature that we believe that we can have revenue recognition upon shipment, because those are really minimum requirements that we have set as minimum for the 3100s, which we think we will definitely achieve when we ship the 3300.

And even if it's not 125 wafers per hour, we have an agreement with customers that they will take the full risks and the rewards of ownership at that moment in time.

So that is also the moment in time when we can book the revenue.

Okay.

So just to clarify, for the 3300s you expect to be able to recognize revenue upon shipment?

Yes.

In 2012?

Yes, and on the 3100 it is upon acceptance.

Perfect.

Very helpful, thank you.

[Richard Lee], [Stanford].

Hello.

My question revolves around what is happening here in Connecticut at the Wilton facility.

I was just wondering if you can just give me some idea as to how the slow US economy has impacted operations at the Wilton facility and what you see going into the rest of 2011 here in Wilton.

I think the Wilton operation, the facility is an integral part of the ASML worldwide operations.

They make a significant part of the EUV systems and of our current system.

So you could say that it is more of what happens at the Wilton facility is more a reflection of what happens at ASML and 2011 is the best year ever.

So that should be very good news for our people in the Wilton facility and has not much relevance to the US economy.

Okay.

Well, very good.

Thank you very much.

Adrien Bommelaer.

Good afternoon.

I was wondering if you could give us some color on the disruptions you see to NAND and DRAM production as a result of the events in Japan.

Have any of these machines been turned off?

And I have got a follow-up, please.

Are you specific on our machines in Japan?

Yes, exactly.

You must have a pretty good view as to utilization rates and what is being -- what is basically running and what is not running.

So no impact during the quake and the quakes.

The machine stops and then they restart.

It takes some times, so on the lithography part of it there is no significant impact and our utilization levels are at the same level as (inaudible).

Okay, thanks.

Then just to follow-up and coming back to Japan again, and I know you talked about this already, but you seem to be saying that the delta basically in spending would be linked to memory.

Now if I look at the split between DRAM and NAND this year, DRAM is not really spending so it's essentially NAND.

And when you look at NAND it's actually fairly tight because of the success of the iPad and so forth.

So how does the Japan problem actually impact NAND spending this year?

I am trying to understand what is the thought process of most of the spenders, if you can maybe quantify it if that is possible.

As I say, the sentiment is more of a thinking that maybe things will not be rosy so you have to be cautious so everybody in the NAND and the DRAM business kind of pushout some level.

There are enthusiasm but there is nothing quantitative into this.

It's 1, 2 machines in fab there and there until they get more data.

So I think your questions will be more relevant, I think, if and when people get more specifics at the whole chain.

Yes, and I think customers were quite specific on this and telling us this is what we feel today but please be prepared to turn around in a month's time.

So this just shows you the sentiment right now.

They don't know; they are uncertain.

They ask us to think with them and to be with them, but also to be with them when they are wrong and they want those too.

So they say this could change every month so, please, be prepared.

So this could turn around exactly in the next quarter in a positive manner?

Yes, that could happen.

I mean this is -- at least that is what our customers told us, be prepared that that could happen.

We simply are too uncertain at this moment in time to give you exact guidance, but this is what we feel today.

We might feel different in four week's time.

Okay.

Jerome Ramel, Exane.

Good afternoon.

Quick question on EUV.

Is the situation from your [laser] players the same for each of them?

And just from an OpEx standpoint, would it make sense for you to only focus on one supplier instead of three?

No, in fact, at this moment -- so let me answer this second question first.

It is a chance that we have three suppliers with three different ways of doing something, so they reduce the risk of the total industry.

And as I said before, EUV is so important to this industry -- they need it, everybody needs -- that it is a duty of the industry to have multiple ways of trying to find solutions.

And we are part of it.

Of course, it costs us more money because we support all the compatibility.

It's not a small amount of money but we need to do this to reduce the risk of our customers.

All of them are within their, I would say, original roadmap plus one year, so they are all guilty of the same crime of a delay of about the same amount of time.

But for a while now they have been stabilizing a roadmap of improvement with [Saima], Ushio, and Gigaphoton showing us, to their own speed, certain numbers of progress.

Okay and maybe just a follow-up.

Pure theoretical question, but would you prefer triple or quadruple play or do you prefer EUV from a P&L standpoint for ASML?

Oh, Peter here would kill EUV for the first two years so the financial impact for new product, EUV is one of them and of course it's a big one, is always negative in the first two years.

So whether margin is not going to be as good because the way we price the machine is we price a machine at the target price.

So at the beginning the machine has a warranty impact and also on our side has a multiple obsolescence in terms of parts where we improve parts so we cannot use what we had planned before etc., etc.

So the first two years is bad news, but of course the next years we enjoy what we have been enjoying now for a while, which is leadership in high technology.

And, therefore, we will be more happy financially-wise if we stayed in the commodity business.

So we do this because it's necessary for the industry but we also do this because it is going to be in due point a profitable business.

Thank you.

Niels De Zwart.

Good afternoon, gentlemen.

My first question would be on the increase of your R&D spending going forward.

You mentioned it relates to strategic projects.

Could you maybe elaborate a bit more if it just relates to your current, so to speak, litho business or if there also any additional investments going into your incubator activities?

This particular increase has to do with EUV.

Like I said in the introductory statement, it has to do with bringing our second-generation tool to the market, which is 3100, and the development of the 3300.

And also in a large part has to do with also delays situation that was discussed before.

The investments, let's say, the money that we put aside for the incubator projects, has basically stayed at the same level.

And that is not the reason why we increased the R&D.

Okay.

As a follow-up, you just mentioned that of course in the first two years of shipments the EUV tools will come with a lower gross margin.

Is there any way you can quantify the impact of that on the overall gross margin you would expect, assuming that the revenue level otherwise would have stay the same?

Yes, you can look at what happened in the past.

In the past, although that is not a proxy for what is going to happen now, always, but you would have to think of new systems that we ship with gross margins in the mid to high 20s.

And that in a two-year period -- generally we have a two-year learning curve that brings us to the corporate gross margin now.

Luckily, at the introduction of a new tool there is not going to be, as a lot those tools is going to be -- a few tools and the bulk of our shipments will, of course, be our bread and butter product that we know how to make and where we are constantly looking at improving the gross margins on it.

So really, this is kind of the -- if you want a number think about this, although we are still a year and a half away from the first shipment, so still a lot can be done to focus on this gross margin issue.

But like I said, it's not going to be -- there is a lot of tools in the first 12 to 18 months and that gives us an ample opportunity to start working on the gross margin.

Okay.

And a final question.

If I look back at the last quarter's earnings presentation, your slide presented that you would ship all your NXE3300 systems during 2012.

Now I get the feeling that you mentioned that would be challenging.

Is it just a change -- a different way of saying the same or do you believe something has changed in your expectations on the pace at which you guys ship the 3300 systems?

What has not changed is the customers' appetite so we can still do it.

What has changed, but this is not abnormal, it's the complexity of doing all this at the same time is significant.

I would not change my Excel spreadsheet at this moment; we don't know enough.

Some of the improvement of the 3300 to the 3100 are very straightforward.

In fact, a very large part of the improvement of throughput between 60 and 100 is really within our own responsibility.

It's not even a laser boost.

So this, for instance, we will do pretty easily.

So for instance, imagine that we get the laser people to stabilize a number in three months then we can still do 2012 easily, but if we don't then we are going to have some delays.

Again, at this moment would still keep the target of 10 in 2012.

Okay.

Thank you very much for answering my questions.

Ladies and gentlemen, I think we have time for one last call.

If you were unable to get through and still have a question, you can feel free to contact your friendly IR contact and we would be glad to follow-up with you.

Operator, now if we can have the last question, please.

[Johannes Haller], Deutsche Bank.

Hi, Eric.

Hi, Peter.

Thank you very much for taking my question.

You basically have said that you thought some revenues that got pushed out from 2011 into 2012 and I think you also said that this was quite minimal; I was just wondering, if I think about it basically means that from a bookings perspective it lowers Q2 bookings and will likely then come back in Q3 or Q4 this year.

Is there any way you can put a number kind of to that revenue that has been delayed?

And I have a quick follow-up as well.

Yes and no.

Yes, it is exactly as you said.

The revenue is not -- that we have been discussing being delayed is not going to materialize in the Q2 bookings, which is why we have announced only EUR900 million to EUR1 billion.

But, no, we don't want to quantify it because this is now the key questions about how is 2012 going to look and I think it's a bit too early to guide on.

Yes, thank you for that.

And a follow-up; coming back to EUV, they obviously -- let's say for the EUV ecosystem there are a few things that are not directly in your hands, like the inspection tools for the masks, cleaning, and photoresist.

You have mentioned a few things earlier.

I just wondered where you feel that the most work still has to be done and which of those other products are well on track in order to make EUV ramp as you expect it at the moment.

I am sure they are not on track and I am sure they are terrible suppliers like we are, but to be honest this is an irrelevant question.

The customers are now putting momentum on it.

It's -- problems to resolve are smaller scale than our own problems, so we are the critical pass, they are not.

But if you talk to a customer they will still be pissed off at a mask inspection not getting there, there is not enough interest to buy -- people making blanks.

But, again, this is irrelevant; this has no business impact really.

Thank you.

Very clear.

On behalf of ASML's Board of Management I would like to thank you for joining us on the call today.

Operator, if you could help us by formally concluding the call we would appreciate it.

Ladies and gentlemen, this concludes the ASML 2011 first-quarter results conference call.

Thank you for participating.

You may now disconnect your line.

Have a nice day.