ASML Holding's Management Presents At Barclays Capital Global Technology Conference (Transcript)

ASML Holding N.V. ( ASML)

Barclays Capital Global Technology Conference Call

December 8, 2011 07:00 pm ET

Executives

Franki D'Hoore - IR

Analysts

Andrew Gardiner - Barclays Capital

Presentation

Andrew Gardiner - Barclays Capital

Good afternoon everybody. My name is Andrew Gardiner on the Technology Research team for Bar Cap in London and thank you all for coming. One of the last sessions of the conference and it’s my pleasure to have ASML with us this afternoon. Franki D'Hoore from Investor Relations. We are just going to do a fireside chat. I will ask a few questions and I think we will have hopefully some time at the end for any questions you guys may have as well.

So Frankie, if we can kick off maybe you can give us a brief update as to how ASML is seeing the market at the moment. The third quarter was certainly at a low point in terms of bookings, you guys have guided quickly slightly higher in the fourth quarter, but how are things going?

Franki D'Hoore

Thank you Andrew and yes thank you for being so brave to be bright and late instead of bright and early. What we observe is the following. We did observe in the second half of 2010 and first half of 2011, a real strong capacity buying environment by customers. And almost in all sectors, meaning very strong in foundry, pretty strong in NAND, no longer very strong in DRAM and we all know that.

And then also in the microprocessor space, we see a rollout of 22 nanometer starting late 2010 and continuing well into say the end of 2012. So that is a very strong capacity buying environment that started from a demand side to slow in Q2. That slowing finally becomes visible in the revenue guidance that we gave for Q4 which is 1.1 and we are coming from levels of 1.5. If you look at what is happening around revenue levels of 1.1, it is still adding capacity but no longer 40 nanometer foundry, 65 nanometer foundry, but yes a 28 nanometer foundry is continuing and will continue throughout 2012 and there is three contenders and that is good news.

In the NAND space, it looks like a bit similar as 2011. DRAM also similar and processors also similar. The booking numbers that you have seen, if you look at bookings $500 million in Q3. What many people do not bear in mind is that we have such strong bookings in Q4 of last year that there was already in fact $500 million in the backlog that was not used in Q1 and Q2 and I think probably some people overlooked that and overall the 500 that was ordered in Q3 plus the 500 that was there, gives enough room from the backlog to have and to sustain capacity additions at the current level.

I think the good news is there is still capacity additions going in NAND than in foundry. And it seems to be quite robust.

Andrew Gardiner - Barclays Capital

So based on that in terms of what you are seeing at the moment, how would you characterize your visibility into next year? And clearly if we look back at this time last year, it was very good. Is it highlighted given the level of bookings or so, what’s the contrast in terms of as we sit here today looking at 2012?

Franki D'Hoore

Well, definitely when you are in an upturn and when customers are waiting for machines, they give you and also from their customers, they have a high visibility. So last year, Q1 and Q2 was quite clear what customers were asking, when the demand situation is a bit slower than, yes Q1, we now are more or less understand how it’s going to be. And Q2 we're starting to build up.

And I would say that what the capacity buying NAND and foundry is kind of continuing.

Andrew Gardiner - Barclays Capital

In terms of the budget setting price here, so many of the major customers that we’ve had for 2012, is that happening later you think this year because of the macro?

Franki D'Hoore

I don’t know about how they manage their process really, but what we have noticed for sure is that the amount of commitment I think, also Peter has said it on a number of occasions, the amount of commitment that we’re seeing for the machines of customers ask us to reserve for them in Q1.

They were very hesitating and hesitant in August-September timeframe. It is that gap between what is committed through orders and what they’re asking us to reserve as capacity, that is now closing. So there is definitely more confidence with us now that what they’re asking us to do in Q1 is going to happen and Q2 looks a bit similar.

Andrew Gardiner - Barclays Capital

And looking at the memory drivers for next, if we can start on DRAM, how much, based on the technology shrink plans that the customers have, what does that equate to in terms of big growth for next year and in that similar or how you are going to see the NAND market and therefore what the capacity additions are on with respect to NAND on top of that?

Franki D'Hoore

So for DRAM, we are told by several customers and also market analysts that it looks like maybe around 40% demand and some would say, highest would be 40 and lowest could be 30 and that is in fact only technology transition. So with technology transitions, you supply that amount of DRAM bit growth. NAND looks like 80% this year and also 80ish % next year and for NAND that requires also capacity additions, otherwise you cannot supply 80%.

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