艾司摩爾 (ASML) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the ASML 2013 first-quarter conference call on April 17, 2013.

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 here at ASML.

Joining me today from our ASML headquarters in Veldhoven, the Netherlands is Mr. Eric Meurice, ASML's CEO; and Peter Wennink, ASML's CFO.

The subject of today's call is ASML's first-quarter 2013 results.

And we will talk about a couple of other subjects as well.

This call is being broadcast live over the Internet at www.asml.com, and a replay of the call will be available on our website for approximately 90 days.

Now, before we begin, I'd like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal security laws.

These forward-looking statements involve material risks and uncertainties.

For a discussion of risk factors, I encourage you to review the Safe Harbor statement contained in today's press release, and presentation, both found on our website at www.asml.com and in ASML's annual report on form 20-F and other documents as filed with the Securities and Exchange Commissions.

The length of the call will be 60 minutes.

And now I would like to turn the call over to Eric Meurice for a brief introduction.

Eric?

Thank you, Craig.

As usual, Peter and I would like to provide an overview and some commentary on the first-quarter results and our view going forward.

Peter will start with a review of Q1 financials performance with comments on the near-term outlook.

I will complete the introduction, with a brief status update of our product alignment lineup and Cymer acquisition status.

So, Peter, please?

Thank you, Eric, and welcome to everyone.

Our first-quarter results are very much aligned with the expectations we set at the end of the fourth quarter, with sales slightly above expectations.

Systems sales again remained largely skewed towards the foundry IDM sectors, which were 70% of total, including noncritical KrF systems supporting capacity additions.

Combined memory represented the balance of 30%.

As we did last quarter, we are now reporting memory sales of bookings and backlog as one total value due to lack of transparency around systems allocations between NAND and DRAM.

The average selling price of all systems recognized in the first quarter was EUR23.3 million -- a bit higher, but basically the same as in the previous quarter.

Service and field option sales were EUR215 million.

First-quarter net bookings came in at EUR715 million for 25 systems, excluding EUV, with booked ASPs at EUR28.6 million versus EUR20.9 million in the fourth quarter.

The average selling price of the first-quarter bookings were impacted by a high percentage of immersion systems.

Next quarter bookings will reflect the secular ASP trend as well, as we expect to increased demand in the second half of the year for the Company's leading-edge systems for logic applications.

Our system's order backlog at the end of the first quarter was EUR1.27 billion, which totaled 42 systems, excluding EUV.

The backlog profile at the quarter's end remained very similar to that at the end of the previous quarter.

With respect to our cash generation profile, I would like to mention that we expect, over the coming 12 to 18 months, our working capital requirements in support of our EUV and 450 millimeter programs to be substantial.

Longer effective cycle times for these new products and investment in facilities and prototypes to deal with the anticipated volume ramp will obviously require additional capital.

I think that with our attempt to accelerate the delivery of multiple key complex new technologies, this requirement can be easily understood.

Despite these cash requirements for these investments, the Company has confidently increased the dividend to EUR0.53 per share, which is a 15% increase; and has also announced today a share buyback program of up to EUR1 billion to run through the end of 2014.

As to the outlook, we continue to expect sales levels for 2013 to come in at similar levels to 2012.

Second-half 2013 sales will be higher than (technical difficulty), largely due to timing of the next note investments of our foundry customers and as we begin recognizing revenue for our first EUV NXE3300 shipments.

We anticipate second-quarter total sales coming in at about EUR1.1 billion.

Based on this anticipated volume, we will see our second-quarter gross margin come back to between 41% and 42%.

R&D for the quarter will be about EUR187 million; and other income, which again consists of contributions from participants of the Customer Co-Investment Program of EUR16 million.

As discussed last quarter, the co-investments in R&D by key co-investment partners are accounted for in different ways.

The quarterly distribution of two of them is reported as other income.

That amount was EUR14 million in the first quarter, and expected at EUR16 million in the second quarter, as earlier mentioned.

The contribution of the third participant is included in our gross margin.

That amount was EUR16 million in additional gross profit in Q1, with Q2 actuals to again be reported with our second-quarter results.

The SG&A will continue at the EUR63 million as we again anticipate about EUR6 million in additional expenses related to the pending Cymer acquisition.

We continue to see sustained demand from the logic sector as they begin to transition to the 20, 16 and 14 nanometer combined nodes.

However, with recent pricing stability in the two memory sectors, we have started to see inquiries regarding litho system lead times, but have not yet seen a significant order pickup to support capacity additions in addition to the current memory technology buys.

Given the level of these inquiries, we could see a potential pickup in orders in the second half.

In support of our customers' need to move EUV from early development to real process development, in anticipation of potential volume ramps in 2015, we currently have 11 systems in our adoption process.

However, due to current limited supply of resource, we now expect to ship 6 EUV NXE3300 systems this year, with drop shipments of the first few sources directly to the customers' facilities.

We expect that two systems will ship this quarter and four will ship in the second half of the year.

Revenue recognition will only be possible when both scanner and source have been shipped and installed at the customer site.

So we expect to recognize about EUR280 million in revenue this year, which still allows us to forecast 2013 revenues at 2012 levels due to the underlying strength of our non-EUV business.

I think that's what I would like to say about our results and about the forecast.

And with that, I would like to turn it back over to you, Eric.

Thank you, Peter.

I will focus my remarks first on the status of our technology development and start by our EUV program.

Regarding the scanners themselves, the EUV scanners themselves, we have now demonstrated production with the 10 nanometer node compatible imaging (technical difficulty) performance.

Stability and reproducibility will certainly have to be improved as we prepare for production in 2014.

But the specification targets have certainly been reached now on the NXE3300 platform.

Regarding the source, significant progress has been made.

The EUV light sources are now running at 55 watts, with production-worthy dose control.

This is equivalent to approximately 43 wafers per hour with a standard resist sensitivity.

To put this performance into perspective, one should remember that of course we lost (technical difficulty) in 2012, when the original source concept that we used to call normal was converted to a more robust concept called mobile [prep].

Since this concept change has been debugged, and it took a bit of time to do so, we have executed cycles of learning as a standard in this industry leading to continuously improved performance, through optimization of the system software and hardware architecture.

Our targeted production throughputs for 2014 and commitment to customers since, in fact, our sales in 2012 remains at 69 wafers per hour, upgradable within three years to 125 wafers per hour.

The current progress and achievement of 43 wafers per hour now puts us well up to target to achieve our commitments.

Indeed, the machines will require another year of continuous improvement to achieve the specification targets, and as already mentioned, production with reproducibility and stability.

However, the system's performance data is now confirmed, and the nodes for which EUV can make a significant contribution -- namely, a 19 nanometer DRAM on about two layers, and a so-called in this industry -- the so-called sub 14 nanometer logic, sometimes called 10 nanometer, sometimes called 7 nanometer -- can be planned with EUV.

These are the nodes on customer roadmap for wafer ramps in 2015, and I see volume production in 2016.

Of particular interest is the logic node in this timeframe, as EUV can become disruptive.

Indeed, customers can use EUV either in one or two layers to reduce the manufacturing complexity and to improve processing costs.

Or they can use EUV on 5 to 7 layers to (technical difficulty) the full nod-- e scaling factor up to 50% scaling factor -- or on 15 to 17 layers to support both scaling processing and cost reduction if you were to build up greenfield fabs.

The customer choices between these alternatives -- 1 to 2 layers; 5 to 7; or 15 to 17 -- will be key for their own competitiveness.

I said EUV can influence the processing costs on one hand, the processing control difficulty on the other; the design rules simplification -- very important in a foundry business; the scaling factor, the shrink factor, as we say; and overrule chip electrical (technical difficulty).

So a lot of valuable performance differentiation can be achieved using EUV.

The current steady progress of the EUV technology makes the layers choice complicated indeed, but potentially rewarding.

As Peter already mentioned, our delivery planning through two system shipments and installing through this quarter -- and the third quarter.

And the remaining nine of the first order batch of 11 to be shipped and installed between the Q4 of this year and Q1 of 2014.

We have additional commitments for seven systems for 2014 deliveries.

We are working on the exact production needs for the customers, but we will be waiting for confirmation of specification before we close further orders above the seven.

In parallel to EUV, we continue to support world-leading performance with ArF immersion systems.

We shipped five of our new NXT 1960Bi systems, the successor to the NXT1950i system already in Q1.

These systems offer 20% improvement of overlay and focus control, as well as 30% improvement in CD uniformity, which supports -- which will support manufacturing at the so-called 20, 16, or 14 nanometer (technical difficulty) logic nodes, with heavy multi-pass patterning required.

In support of the emergent multi-pass patterning, and also with EUV imagined specificity, we continue to focus our efforts on process control products.

These products, that we call holistic lithography products, are beginning to be transferred from R&D to production at our customers, with business volume being significantly larger, obviously.

For instance, we have had to expand our production facility for the YieldStar metrology tool to the ASML Center of Excellence in Taiwan to support production of up to 150 units per year, which is very large.

We will have more than EUR350 million of holistic lithography products sales (technical difficulty) in 2013.

Also, on the product front, supported by our Customer Co-Investment Program, we have completed the concepts for our 450 millimeter architecture for use in EUV, and into emergent lithography systems so as to deliver prototypes in 2015.

And it will be compatible (technical difficulty) 2018 production ramp -- of course, if confirmed by the industry in due time.

Finally, we are awaiting the ruling (technical difficulty) from the Fair Trade Commissions of Japan and Korea, which we still expect in time to close our ASML/Cymer merger, still expected to be, again, closed in the first half of this year.

As you are aware from our press release, I will personally be stepping down as ASML's CEO as of 1 July, 2013.

I will remain Chairman of our Holding Company until March 31, 2014, when I retire from ASML.

This is an anticipated transition, as I signed a two-year extension in Q1 2012, as you know.

As the ASML Supervisory Board has appointed Peter Wennink as my successor, this will lead to an orderly transition period, and confirms continuity of our business strategy.

I would like to say that it has been my great pleasure to have met many of you over the last nine years already, and to have built a relationship based on trust.

I will not dwell on this retirement topic at this moment, as I am still acting active CEO of the Company for the next three months.

But I look forward to seeing you all over these next few quarters, as we manage a smooth transition of Company management.

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

Thank you, Peter and Eric.

Ladies and gentlemen, the operator will instruct you momentarily on the protocol for the Q&A session.

But beforehand, as I usually do -- as I always do -- I'd kindly ask you to limit your questions to one, with one short follow-up if necessary.

This will allow us to get as many (technical difficulty) in as possible.

Now, Operator, if we could have your instructions, and the first caller, please.

Thank you.

Ladies and gentlemen, at this time, we will begin the question-and-answer session.

(Operator Instructions).

Nick Gaudois.

Please state your company name, followed by your question.

Yes.

Hi.

It is Nick Gaudois from UBS.

First question is on your comments on inquiries from memory customers effectively coming back in addition to shrink's requirements, if I understood you well.

Could you give us a bit more color in where do you see that in the timeline?

I am assuming this is more NAND [price] related.

In that case, whether the feasibility of (technical difficulty) for one lead nanometer is actually playing a role in the discussions, effectively moving to a firm commitment, and planning for (technical difficulty)?

And I've got a follow-up.

Thank you.

Thank you, Nick.

The issue is, like we said, we have received the first inquiries, and your question is a very specific.

We don't have the specifics as you require.

In the complex of what we are seeing in the industry is that (technical difficulty) quite a significant increase in the DRAM price.

We have seen a small increase in the NAND prices, so it is not a surprising thing that those inquiries are yet coming.

If we would have to make a guess, it would be more DRAM related then it is NAND related.

But like I said, it is pretty recent, and you are asking very specific questions on the architectural choices on the NAND side, which actually we cannot comment on at this moment in time, because we simply don't know.

But the general direction is more DRAM related than it is NAND.

Well, I guess when I was referring to ask from a DRAM standpoint, your own model probably doesn't indicate wafer capacity requirements.

So, assuming -- if you see anything going through that has to do with technology conversion more than capacity, would that be correct?

DRAM is --

Both.

-- as we all know, PC business is not doing well.

So the drivers is not PC.

The driver is mobile in general.

And DRAM mobile has been a fairly good business in 2012.

But you could not see it because it had been compensated by the very bad PC business.

But now you can start seeing that there is genuine (technical difficulty) in the DRAM arena due to portable -- to mobile.

And, therefore, a question that we are seeing about scanner availability for (technical difficulty) is probably for the possibility of moving higher numbers of wafers in DRAM due to (technical difficulty).

Okay, well, that's helpful.

Thank you.

And a quick follow-up -- you guys talked about YieldStar actually starting to be material for revenues as of this year.

How should we think about the ASP addition this would make at all over the next couple of years?

Well, that is what we -- I kind of hinted to you this time a bit more specific than usual.

We are going to add about EUR350 million, or significantly more than EUR350 million, this year of these additional non-scanner products, which is not part of the ASP.

Not on the YieldStar.

And it is not on the YieldStar.

We plan to have this number off because I am a departing CEO, and I put that one target to my successor.

I would say that there is -- we see potential, but I won't tell you when.

We see potential towards EUR800 million to more.

But please don't put this on Peter for next year.

Thank you very much, Eric.

(laughter)

But there is, indeed, potential of about EUR800 million for these products.

But generally speaking, when you look at the requirements, there are production requirements that our customers have on advanced logic -- it is -- we think it is very necessary that the base scanner is equipped with those systems enhancements; which includes, amongst others, also the YieldStar solution.

And that means that when we look at the list price -- I'm not going to talk about net price, because that includes discounts related to the volume that customers are buying -- but list price, it could be between (technical difficulty) and EUR10 million up from the base price.

So it is quite a significant increase of the average selling if they would choose to take the full suite of the system and (technical difficulty) products.

And like I said, on the 20 nanometer multi-pass requirements, we think it is -- we at least advise our customers to include those in their product choices.

Right.

That's very useful.

And we try to maybe forget to reach part of our targets, but not for Peter.

Thank you.

I would appreciate that.

Thank you, Nick.

Simon Schafer.

I actually had a question on memory.

It sounds like maybe expressing a little bit more confidence there.

I was just wondering -- your magic model on the memory segment -- what sort of wafer start additions to you guys assume for NAND in the second half?

I think LAM said on their call that it's probably around 100,000, or even north of that, wafer start additions in the second half.

I am just wondering whether you guys had any thoughts on that.

Yes.

I think it's another unrealistic number.

It could be around 100,000, yes.

Got it.

That's okay.

And I think at the beginning of the year, you guys talked to us about the potential for your memory revenue run rate to be down 30% to 40% this year.

That seems to be quite a lot better now.

And that's offsetting or mitigating the downsides in your EUV revenue.

Is that the way to look at it?

Absolutely.

Yes.

At this moment, what we have put into this guidance, where we still say about the same level as 2012 is a bit less, if you really compare to our last guidance; compensated by a bit more, in fact, memory business.

But in addition to that, there is still upside to the memory business.

Understood.

That's very clear.

My follow-up question is just on litho intensity.

You guys have been very clear about the type of layer intensity increase that you see on the 2X node on 20.

I just wondered whether you could outline the similar sort of maps on -- as foundry migrates to 60 nanometer FinFET, what sort of increase does that entail?

I'd just be interested in your thoughts on how that looks, then.

Thank you.

For lithography at this moment, we see no difference litho intensity between what is called in the industry 14 nanometers, 16 nanometers, or 22 nanometers; FinFET or not.

On paper it is the same amount of litho.

So the issue will probably be (technical difficulty) if there is a yield issue; therefore, the machines will not be as usable.

The utilization may become affected.

But we don't have any effects which would (technical difficulty) at this moment that there is a difference.

Good.

Thanks, Eric.

Thanks for that.

Satya Kumar.

Please state your company name followed by your question.

Yes, hi.

Thank you for taking my questions.

I was wondering if you could comment on what type of other mix you thought to see over the next six months.

And if I look at your second-half guidance, it looks like you need to see orders increase from about EUR715 million in Q1 to maybe [EUR900 million to EUR950 million] or so, excluding EUV and service.

And foundry orders were fairly large in Q1.

So I was wondering if all that increase is going to come from memory, or are you going to start to also see some increases in IDM as you move into the second quarter?

Thank you, Satya.

With respect to the trends -- as we said last quarter -- this year, we will be largely driven by logic with a, let's say, much lower share of our memory customers, which is still the case.

So in your assumption that we should see an order increase for the second quarter, we would agree, although the exact number we will discuss with you within three months.

But indeed, to the order mix -- will be as we planned it, largely skewed towards the logic customers -- the foundry customers -- with what we (technical difficulty) earlier, with some upside on, you know, the memory customers.

But the year will be a logic driven year, and we will see those orders that are needed to support the sales in the second half.

They will come in.

Just remind you, the ordering process with some of those customers where we have very strong relationships, and we know that we are the technology of choice that we have set in earlier quarters, that the ordering process has become more, I would say, administrative in that sense.

It is more important for us that we have an agreement with the customers on the shipment date that they need our tools to introduce their next-generation technology.

So that is why we are more confidently guiding you on sales, and we are pretty confident that the orders backing up the sales will follow in due course.

Got it.

And then a quick follow-up on the (technical difficulty) comment you answered earlier on, that you think it's not unrealistic that you could see 100,000 wafer starts or wafer capacity expansion in the second half of this year for memory.

Could you talk a little bit about what you are baking into your guidance, in terms of the wafer start expansion from memory for your [EUR2.7 billion] (technical difficulty) the 100,000 going to present some sort of upside to what the current forecast is for you?

For the DRAM business, what you have in the current guidance is a reduction of wafers by about 100,000 or so, and replaced by about an additional 100,000 of NAND.

That is what you have in our basics.

And we believe these numbers are conservative at this very moment on the DRAM side, which is visible now because we are negotiating what we call availability, which is another way of saying we are getting orders.

And on the NAND side, we haven't yet negotiated all this, but when you talk to the customers, their statistics of bids out is planned.

It is higher than what we think we have planned for them.

So although this is not yet to a point of discussing (technical difficulty) in NAND, there is a discrepancy about conservative backlog, and what we have in our guidance and what (technical difficulty) says in terms of bids.

Sandeep Deshpande.

Please state your company name followed by your question.

JPMorgan.

Just a couple of questions.

Firstly, regarding your laser roadmap, you've talked about that you have a 55 watt laser which is now working.

Can you talk us through how this 55 watt is going to transition towards the 105 through the year?

Do you have a roadmap (technical difficulty) 55 to 70 or 80?

So how we should be monitoring this through the next 12 months as you transition?

And then I have a follow-up as well.

Yes, so of course we have a roadmap.

And of course I will tell you, Sandeep.

Because if not, you are going to ask me every minute whether I am on top of it.

How can I answer nicely your question, though?

Yes, we are seeing -- we are going to be forced to present to you, on a quarterly basis, improvements.

And we are significantly certain that there is improvement to be shown to you towards this, I would say, minimum performance of 69 wafer, which is 105 watt, by mid- of next year, when we really need to be having this done and in production.

So in other terms, I think we are now on a conservative curve.

We will see improvement every day, but we don't really want to be measured on whether we have one wafer less or more.

Because, indeed, things are not that obvious.

You have multiple architectures being developed at the same time in parallel.

So it would make no real value or understanding for you to know whether we are on track or not, depending on this internal tracking method that, of course, we have.

I think, like Eric said, we are going to inform you quarterly where we are -- also given the fact that we are confident about reaching our, like Eric said, our goals (technical difficulty) a 105 watt, i.e., 69 wafers per hour.

We will inform you every quarter where we are, and you can judge the progress.

But it's -- I do not think it is the forum to start discussing, let's say, a program timetable.

It is not that relevant.

Thanks.

And if I ask a question following up on one of your comments in the last conference call, Eric, you talked about that the EUV, too, went in high volume production could sell along with all of the options for as much as (technical difficulty) euros?

You just talked about this potential EUR800 million of the additional revenue from YieldStar.

So is that included in that ASP calculation of EUR100 million that you are talking about for, say, 2015 or 2016?

And secondly, do you have a potential size that in 2015 you can do this many EUV tools, and you think that there could be potential demand for that?

Thank you, and all the best, Eric.

Yes, I can be free now, as you know.

So the answer is yes.

The EUR100 million of potential EUV ASP will be justified by its content.

But also by its spec (technical difficulty).

And remember, this EUV machine is going to have a multiple NA -- or, not NA, but illuminator settings with part of the ASP of EUV machine.

That is not part of my EUR800 million.

So I make a difference between a machine with attach options, which are 100%.

And that could go okay between EUR90 million and EUR100 million a machine.

And then a set of options which are not 100% attached, which are attached only for a set of process issues, and that is where I say that, at some point, we can see EUR800 million.

But I am not saying (technical difficulty).

So it is, in fact, [documented].

It is easy to add them up.

And also, Sandeep, as we have said in earlier calls, also, when we talk about the sales number of (technical difficulty) holistic litho products, some of them will be shown in the ASP of the tools, and others will be shown as system announcement sales in field options.

So it's clearly impossible for us to give you the exact impact of that number that Eric quoted, which of course is not a commitment (laughter).

But if you say how much of that will translate into the ASP and how much of that will be the field sales.

And regarding your question about EUV ramp, we absolutely -- and it is proof of the stabilization of the EUV program -- we committed a number of units, about 25, 30-ish, in 2015, and about 60 in 2016.

And we confirm that this is the proper simulated number.

So of course, it's a simulated number based on layers and numbers of wafers, but it is still there.

Thank you very much, Eric, and all the best here.

Francois Meunier.

Please state your company name followed by your question.

Yes, it's Francois from Morgan Stanley.

So of course, thank you, Eric for what you have done for (technical difficulty) in the past several years.

And congratulations to Peter.

I've got a question about the EUV shipments for this year.

I think last time you were talking about keeping up to 11 this year, and now it's gone down to six.

Obviously, they will be shipped in 2014, I guess, but what is the difference?

Is it just maybe customers being a bit cautious on the tools, and preferring to wait?

Or just -- if you could explain what happened, basically.

Yes, it's (technical difficulty) on the customer side.

We have 11 scanners on the production floor -- that people who recently were in our factories, I should count them.

They are in a very advanced state of production.

The thing that is currently missing is the speed with which we can produce the EUV sources.

There is a delay not so much because of the technical issues that we have with the source, but it is the supply chain issues.

So we are also ramping up the supply chain for key components of the EUV (technical difficulty).

And that is just falling behind a bit, which is only one or two months, but it just pushes the shipments in to 2014.

That is the only issue.

So it's more a logistical issue than it is any customer-related or fundamental technical reason.

Okay.

That is very clear.

If I may, I got a follow-up about the seven EUV tools which are -- it seems like the word you used is, commitment for 2014.

What is the difference between commitment and (technical difficulty) order?

What does it take to move from one to the other?

Okay, so I tried in the script to be subtle, and that didn't work.

So I am going to be (technical difficulty).

At this moment, there is indeed an acceleration of interest, both EUV -- because, in fact, we are (technical difficulty) to make our duty and have enough data that says it is possible.

Then the customers are starting to see that it's a huge opportunity with a huge problem, because if they choose to execute EUV with less enthusiasm than the competition, they can get significantly behind.

Okay?

So it is very clear that you have a risk level which is not yet proven.

We still have to do some effort every quarter, as we said to (technical difficulty).

And on the other hand, you still need to take the right risk to avoid being late in developing a chip, which will be significantly worse if you don't use EUV to its maximum extent.

But if you plan it, and EUV is not exactly performing, you did the wrong thing.

So there is an obvious question mark.

At this moment, we see a huge momentum in the discussion of how many you units and layers will need to be reserved for whom in due time.

This discussion is much more important than the administrative PO question.

So I hope I made myself clear that, at this moment, the paperwork has passed a second priority to -- how many layers?

When?

What (inaudible) is the spec?

What can you do?

How can you guarantee?

What are the exact timing?

Can I go with a single node?

Am I going to do what they call a mid-node or something -- the backup, what sort of backup, et cetera?

So all that discussion has intensified.

So I think that's a positive statement to say to you -- (technical difficulty) and we are discussing more, and we have not pushed for paperwork.

And you could say, if you would want to compare this with our normal PO process, normally our POs are non-cancelable, because then there is a big fine.

These are [commitments], you could say POs, with a possibility of a customer to actually say, that tool needs to perform to certain specs -- which you could call it a cancelable PO, if you want to make that particular (technical difficulty).

So that is what we call a commitment.

Depending on the spec.

Yes, depending on the spec and on the performance.

And if the spec is being discussed, depending on the numbers of players.

So it's a fairly complicated activity that is being done at this moment.

It's a huge positive.

Okay.

That is very clear.

Thank you, Peter.

Thank you, Eric.

Thank you for the good word, Francois.

Timothy Arcuri.

Please state your company name followed by your question.

Cowen.

A couple of things.

First of all, on the ASP for EUV, you said last quarter that you were going to do EUR450 million to EUR500 million this year, which was typically revenue recognition on about seven tools.

You were going to ship 11, and you were going to rev rec seven, which implied an ASP of about EUR70 million.

Now you are going to rev rec EUR280 million.

So is the ASP still EUR70 million, such that now you are talking about shipping six but recognizing revenue on four?

Yes.

That is in (technical difficulty) correct.

So you could argue that to Q3 we had some supply chain issues with the source, as the source comes in later so that we cannot book indeed the (technical difficulty) this year.

Perfect.

Okay, great.

Secondly, on NAND, both you and LAM are talking about this 100,000 worth of wafers added this year.

If you just (technical difficulty) a simple supply/demand, that is going to add a lot of NAND supply this year, such that it would really pretty dramatically change the NAND supply/demand balance.

And it is hard to believe that SanDisk stock would be trading at a peak if that was really true.

So I'm just wondering whether you think that the industry can physically add 100,000 worth of NAND wafers and still maintain supply/demand balance?

It is only 10% or less.

It is less than 10%.

It's less than 10% of wafers.

This is the only way to do 36% big growth.

So at this moment, you will hear that they want to do even more than 36%.

So it would take technically -- it makes sense.

So you can imagine that of course is (technical difficulty) continues in the wrong trend -- but on the other hand, look at the new PCs.

Their content demand is much bigger.

So now this thing is going to be driven, not so much by unit of PC, but it will be driven by content per unit.

And the content per unit is clearly going to double, easily, with the number of -- I mean, the need for solid state drive minimum size.

So you can be less -- more conservative than us, and take 10% less.

But again, by the way, 10% less is (technical difficulty).

So, yes, I am okay with one machine less, plus or minus.

All right.

Okay.

Two more quick ones.

The tax this quarter was lower, and I was thinking something like 13% for the rest of the year.

That's where I thought tax would come in.

So should I still think 13% per quarter for the rest of the year?

No.

It is [up] 10%.

It is more like 8% to 9%.

8% to 9%.

Okay.

And then on R&D, you had previously said something like EUR750 million up to EUR800 million for the year, but you are tracking a little below that.

Should we still think EUR750 million to EUR800 million for the year?

You can do EUR750 million to EUR800 million.

It's okay.

But it's logical that it tracks a bit lower than the average because we are ramping up.

So it's normal that in the profile, you would see it going up over the quarters, between EUR750 million and EUR800 million is what we have said, and that is still where we are.

Perfect.

Thanks a lot.

Didier Scemama.

Please state your company name followed by your question.

Yes, good afternoon -- it's Merrill Lynch.

First I'd like to say congratulations to (technical difficulty) for his promotion.

And also many thanks to Eric for the quite amazing work you have done in the last nine years or so.

We will miss you most particularly on the conference calls.

I'd just like to start --

Thank you.

Why amazing?

Amazing, like you are surprised?

Not good enough?

(laughter)

It's fine.

Go ahead, sorry.

Now, I'd just like to take a step back here.

So if I take basically your comments so far -- and you are quite punchy (technical difficulty) confidence on EUV, what you just said, how should we think about 2015 EUV deliveries in 2016?

Are we still talking 30, 35 tools in 2016?

Or can we think about a higher number because of what you said -- you know, the sort of various options and plans, numbers of layers?

How should we think about that?

And I've got a quick follow-up.

Thanks.

No.

As I said to Sandeep, 25 to 30 in 2015; 60 in 2016, is the nominal assimilation.

It does not include any NAND; only includes two layers, I think, of DRAM; and only includes seven layers of logic -- 5 to 7 layers of logic with an aggressive uptime.

So we know (inaudible) if we miss 7 layers -- 5 to 7 layers -- we may not have the right uptime anyway, because technically that means the customers will not want to use that many machines, because they do not feel comfortable.

But then that means the machine will be economically not as good.

So we will ship more of them.

So that's why the simulation tools come around; it is about the same number.

And you have to also remember, Didier, that these numbers are bouncing against the ceiling of our capacity -- of our production capacity.

So like I said in my introductory statements, we will have to start spending money on some production facilities to be able to meet those numbers.

And there are currently plans to do what Eric just -- to actually output those numbers that Eric just mentioned.

So there's not much upside to that.

Got it.

And then my other question is regards to some -- the DSA technology as a potential threat to EUV.

What are your thoughts on that?

No.

DSA is like -- double, sorry, how do you call this -- double patterning of space or -- it has an opportunity to steal one layer or so from us.

But this is not (inaudible) in the NAND arena.

It could be one layer in logic for very, very specific designs.

It is within the noise.

Say we would prefer that if it is not working, then we have 5% more sales, 7% more sales, if they are not working.

If they work, you won't probably see the difference anyway.

And then, in any case, I think what we have understand from DSA, that it's not a slam dunk either.

I mean, there's a quite significant (technical difficulty) issues that still need to be mastered.

So this is (technical difficulty) is a promise to our customers, but it is not really production-worthy at this moment.

Fine.

And then the main final point -- I think you sort of touched on that in your prepared statements -- but in terms of foundry bookings, it looks like it came down a bit in Q1.

But obviously, to meet your revenue target in the second half, and give in this sort of 16 nanometer FinFET, and 14 nanometer FinFET, that the foundry customers have got in mind for next year, do you think we should see (technical difficulty) a proper acceleration of bookings in Q2 and Q3?

Or as you mentioned before -- because, basically, the customer base is so concentrated and you know what they want.

And they know that they know what you want; basically, there is no orders; and, therefore, you're more confident on revenues than on bookings?

I think you gave the answer in your last sentence.

We are guiding (technical difficulty) sales, because the sales is driven by the need of our customers to be extremely specific on when they need what for their next technology ramp.

The order process is almost an administrative process.

And sometimes you have customers placing orders six months before shipment; sometimes three months; and it's an application -- it's two weeks for whatever the reason.

And we need that order because we need to have the shipping documents that go with a tool when it passes customs.

So it's almost an administrative thing.

But we are highly confident that the order profile will mimic our sales profile that we are guiding you.

Brilliant.

And good luck; thank you very much.

Stephane Houri.

Please state your company name followed by your question.

Yes, hello.

Good afternoon.

This is Stephane Houri from Natixis.

I am sorry to come back on the EUV delivery schedule, but I heard you say that 25, 30 for 2015; and 60-something for 2016.

The right number?

You also gave some elements for 2014.

Could you be a bit more specific on the delivery number that you have for EUV in 2014?

Thank you.

As we said, regularly, once a month -- one a month.

So for the (technical difficulty) follow me closely and remember the notes.

I used to say one a month in 2013 and 2014.

That is 24.

So now I say one a month as of now.

This is a bit less because have lost, basically, six months of this run rate.

But the interesting bit is that we have lost, I would say, an R&D comfort at the customers.

So that is bad news.

This R&D comfort -- we lost it, but then the customers (technical difficulty) FinFET as an opportunity.

So there is less pressure on them so they can build the node without EUV -- which, in fact, called 14 -- this 22 nanometer with a better architecture.

But now comes back the specter of the new, the real node, beyond 14.

And that's one having to prepare 25-ish tools in 2015.

That is the one which we have to commit if they really go into production with that node.

Okay.

And if I may, I have a follow-up.

You have repeated that you expect the Cymer acquisition to be completed at the end of (technical difficulty).

If it was not the case, would it imply -- make any clearer the delay on the EUV?

No, of course not.

No.

No.

No, we have been working with Cymer closely on these sub-projects.

And at this moment, exactly -- the law, without infringing on the rights as a separate company -- we have been acting like a supplier and a customer, having partitioned the job correctly so that we can execute.

But this has been the case even before the merger.

Yes.

I think the closing will have a significant effect, over time, on the industrialization of the EUV source, which of course is very important (technical difficulty) support the ramp in later years.

That is where you really would see the benefit.

So that would enable us much better to reach those (technical difficulty) for 2015, and 60 in 2016.

But it would not have an impact on our current shipment schedule.

Okay, very good.

Thank you very much.

Weston Twigg.

Please state your company name followed by your question.

Hi.

Pacific Crest.

Just a couple of quick questions.

Just on EUV -- the new timing, first.

For this year it sounds like all the revenue should be lumped in to the second half -- those four tools.

And then in 2014, if you are shipping one per month, can we actually expect revenue to happen (technical difficulty)?

In other words, we have the supply chain issues worked out on the source side?

It could, but we could also have -- because we have, you could say, a block of those shipments, if we can accelerate some of the supply chain issues, you could see more.

You could see two for one, yes?

So -- in one particular month.

But I think for your planning purposes, (technical difficulty) safe to do just one per month.

Okay.

And then, for this year?

Exactly as you said.

As you said, it is H2.

Okay.

And then as a follow-on, just looking a little bit further down the road, the SMT keeps saying they need 100 wafers per hour on EUV.

And you are talking about getting and picking it up in 2015, 2016, from logic and foundry.

But it doesn't sound like you will necessarily -- or that you have yet committed to have a 100 wafer-per-hour EUV tool available then.

You are still targeting the 69 wafers for about mid-year 2014.

So I am just wondering, can you meet that kind of roadmap -- 100 wafers an hour in 2015, to match a timeline for a company like the SMT?

You need to remember what I said, though.

Our commitment is 69 wafers per hour in 2014, upgradable to 225 wafers per hour two years later, so 2016.

So if you make an average, you will come up with 100 wafers -- in fact, more than 100 wafers per hour, during the period of time.

And remember, this node -- the famous node (technical difficulty) things is really ramping in 2016.

Correct.

So the customer is usually -- do not need the speed on the first day on the (technical difficulty).

In fact, that is also when they optimize their process.

So by saying 125 wafers per hour, we are a bit above the 100 wafer per hour business.

Okay.

Would it be safe to assume that the customer would have a contractual commitment from you to give them the confidence in that kind of a ramp to meet these types of milestones, even if it's not applicable early on?

Absolutely.

The PO will look like the price of the machine is -- X for 69, and is Y for 125.

We take (technical difficulty) of X and Y. If you know what I mean.

And both X and Y -- X will not have the same margin as Y. But X will be manageable; and Y will be good.

Perfect.

Very helpful.

Thank you.

Andrew Gardiner.

Please state your company name followed by your question.

Thank you.

It's Barclays.

Another sort of quick follow-up on EUV.

The initial fourth commitment that you have mentioned last year were from DRAM, if I remember correctly.

The additional three that you have now signed, is that for logic?

And can you also talk about, I suppose, the breadth of the customers (technical difficulty) in terms of number of vendors that are -- or manufacturers that have now committed to this?

Memory is under seven, I think.

Memory is difficult to know.

Because as you can imagine, one customer is (technical difficulty) logic and memory at the same time.

So at this point, I could imagine 3 to 4 is memory; and 3 to 4 is logic.

The one in between, as you can imagine, is the customer who can do both.

Got it.

Okay.

Also, just in terms of the increase in demand, or increase in inquiries that you have been seeing recently -- I know you have been keeping a buffer stock on hand of tools to decrease your lead time, or decrease the time from actual firm order to shipment.

Is the amount that you've got -- sort of that flexibility -- is that enough to get you to full-year guidance?

Or is there potential for upside to that, depending on just how quickly demand -- just sort of wondering about your flexibility there in terms of the lead time.

The -- in our production capacity we have, it's definitely sufficient to do the full-year guidance.

And it also poses upside.

So if it would get more, we would be able to ship within, let's say, a standard lead time.

Because, at the beginning of the year, we were confronted with a lot of uncertainty as to where these markets were going.

And we -- like we have mentioned previously on the call, we decided to add some buffer tools to (technical difficulty) we will be able to meet, I would say, a very reasonable part of the potential addition of the bump.

Okay, that's clear.

Just, finally, one quick one.

You have been talking about expanding the capacity for EUV as we come to the coming years.

How should we be thinking about capital spending for this year, now; and then next year, given that (technical difficulty) a material ramp that we should be forecasting?

Yes.

We will be spending about that 18-month period for the facilities, yes?

And it's the -- it will (technical difficulty) about EUR250 million to EUR280 million, of which maximum of EUR50 million will be spent this year.

The rest will be spent next year.

Thanks very much.

Amit Harchandani.

Please state your company name followed by your question.

Hello.

Amit Harchandani from Citigroup.

Thanks for taking my question.

And before I go ahead, congratulations to Peter on his new role.

And thank you, Eric, for your work that you have done at ASML over the last many years.

Thank you.

Eight and a half.

(Laughter) Definitely seem to be in jolly good spirits today.

He is glad he is leaving.

(laughter)

My first one is probably digging a bit deeper on the foundry side.

Clearly the customer in [dive on] has ordered strongly, and continues to ordered strongly.

But besides that customer, how do you see foundry demand from some of the other customers, say, in Korea?

Because there was some hesitation at the start of the year.

And as a follow-up, on the EUV side, clearly, imaging and overlay performance, as you reveal, has been quite good.

And productivity or throughput is based on the source.

But how do you see in terms of defect -- particularly mass defects in the rest of the EUV ecosystem?

Is it shaping up and progressing in the manner that you expected it to do so?

And do you foresee the need to do any more M&A to achieve your target for EUV?

Thank you.

Very good, thank you.

It is usually (technical difficulty) for us to talk about customers, and now it's so granular.

I mean, you know, there are three large foundries.

So I don't know what to tell you.

(technical difficulty) to tell you is one of them, as you know, is ahead of the others in a huge buildup of 20 nanometer, because of potential customer lineup they could have.

So they have to build it up, which forces the other competitors in this business to build up.

Indeed, the orders haven't been received from the other two.

But we know that they have to.

So at this moment, what is happening is (technical difficulty) timing, where you have one big customer ahead, and then the second one comes in and will allow us 3 to 6 months of delay, which is good.

And then the third one will come with a 3 to 6 month delay.

And that would probably help us extremely well in 2014.

So that's why, I guess, Peter's job is going to be pretty easy in 2014 (laughter).

On the subject of the EUV and the infrastructure, it's -- no.

It's not going to be a walk in the park.

Because in this business, like we had in immersion, you are -- the customers are going to discover issues.

(Technical difficulty) going to be as good as expected.

Mass defects will -- blank defect would be a problem.

Defect in writing mass will be a problem.

Defect in processing will be a problem, because inspection is a problem.

But they now have a solution (technical difficulty) for a while.

But it is, absolutely, standard difficulties.

Today, as you heard, nine months to 12 months ago, everybody said FinFET would not work; it is very difficult.

Even Intel had difficulty to build up this technology, et cetera.

But then, a year later, (technical difficulty) everybody has mastered it.

So we are probably going to be in the same mode here of a huge amount of work.

In fact, this is what the problem with EUV is -- the problem of EUV is not that people question whether the machine will work in 2015 when, in fact, it is due.

I guess at this moment everybody is getting (technical difficulty) for that.

But you would prefer to have a working machine now, so that you have two years to create the recipes.

So it is an accumulation of recipe improvement that is going to happen, to resolve the issue of the infrastructure.

So indeed, we don't plan to buy anybody or acquire anybody.

They won't have that chance.

Okay.

And then just maybe, quickly, if you could share with me -- you said 20 nanometer might turn out to be a big node.

Any numbers that you could maybe share with us, what your plan -- thinking about?

Or how do you see that particular node shaping up, in terms of wafer capacity?

Well, it is an impossible question, because what you call 20 nanometer, I call 20-16-14.

Because the same node in lithography will include different transistors -- FinFET transistors; or whether a tri-gate, or whatever they call it.

And (technical difficulty) have the little facet to make this.

So this -- this thing -- if it is normal node, and is driven by so many (technical difficulty) architectures that we see now in the portable world, where everybody has a tape out plan for 2014, we would expect a minimum of 300,000 wafers.

If this is above that, then this is, again, great for Peter.

Because the lithography intensity is such on that node that the multipliers for it, similarly, is huge.

So if you go above 300,000 wafers, we don't need EUV.

It's a big one.

But at this moment, we only simulate as if this to be a normal node at 300,000 wafers.

And then getting into the node with EUV, which has all the goodies I mentioned -- particularly the scaling factor.

Perfect.

Thank you so much.

Ladies and gentlemen, I'm afraid we have run out of time.

IR already has a queue of calls lined up here.

But I would invite you, if you didn't get your question asked, and you think we can help you, to feel free to text us or give us a call.

And we will do our very best to get back to you.

But please be patient, as we have quite a few stacking up now.

So with that, on behalf of ASML's Board and Management, I would like to thank you for (technical difficulty) today.

And, Kirsten, thank you for managing the call for us.

If you could formally conclude the call, we would appreciate it.

Thank you.

Ladies and gentlemen, this concludes the ASML 2013 first-quarter results conference call.

Thanks for participating.

You may now disconnect.