ASML Holding Management Presents At Deutsche Bank 2012 Technology Conference (Transcript)

ASML Holding NV (ASML)

Deutsche Bank 2012 Technology Conference Call

September 11, 2012 7:00 PM ET


Craig DeYoung – VP, IR


Kai Korschelt – Deutsche Bank


Kai Korschelt

Okay. Yeah, welcome everyone. My name is Kai Korschelt. I’m the European Semiconductor Analyst at Deutsche Bank. It’s my pleasure to have Craig DeYoung here, like last year, present to us, and I think Craig is going to give about 10 minutes – 5, 10 minutes presentation and then we’ll do...

Craig DeYoung

10 or 15.

Kai Korschelt

Yeah, okay, 10 or 15.

Craig DeYoung

No, I’ll try to go through it quickly. Part of this presentation is anticipation of your questions as well. So hopefully I’ll get some of those covered, and then Kai and I will talk a little bit afterwards. So appreciate your coming this afternoon. I know you would rather be enjoying the Nevada sunshine, but since there isn’t any.

So here is the obligatory safe harbor statement. Just everything that I speak about of course will be covered by this. So I want to do a brief business summary and I’ll talk to you – give you an update on our co-investment program, which I think all of you are probably familiar with, at least in part; talk about the business environment that we are in today, talk a little bit about our strategy on the product side and then just remind you of our outlook.

So in terms of the business summary, this is a repeat of what you’ve already seen, but I thought it worthwhile to remind you that we did about EUR1.2 billion in sales in the second quarter, kind of a typical quarter relative to the last six or seven or eight. So you’ll see that in a bit. 43% gross margin, operating margin of 27%. We booked just under EUR1 billion in systems and that left us with a backlog of EUR1.5 billion coming out of the quarter. And we generated in the first half about EUR470 million, of which a majority returned to you through a combination of buybacks and dividends in the first half.

So here is our sales over the course of the last few years. If we do as I guided, which I tried to indicate the range of guidance, because the second half we guided EUR2.2 billion to EUR2.4 billion in revenue. So you see that if we achieve that, which I believe we will, it will be our second best year on record. So it’s still quite exciting for us.

System sales broke down this way, just still a lot of systems to the foundry, about 61% of our shipments in the quarter supporting ramp of the 28-nanometer node, not so much to the NAND and the DRAM guys, nor the IDMs, but we’ll see that change.

If we look at our backlog, you see growth in the IDM space. Foundries reduced a bit and we expected that second half deliveries to the foundries would be less than the first. There were a confluence of events in the first quarter that drove foundry quite aggressively. The challenges of meeting demand in a relatively low-yield environment and in a state of heightened competition between all the – at least the four foundry players created kind of a fervor in ordering and deliveries in the quarter. So we see that moderate a bit in the second half. Again, that’s what we anticipated would happen.

We took a number of orders in the DRAM and the – sorry, in the NAND space. I wouldn’t be confused or misled by that. Just by way of example, we took 10 orders in the NAND space, half of which were emerging, the other half were KrF tools, which suggest an addition of capacity in an environment where you wouldn’t think capacity was being added. But in fact that was over three different customers.

So if you take, that’s one-and-a-half tools or so each – of each tied to each customer. So it doesn’t represent much of a capacity addition. So again, I wouldn’t want that to be misunderstood. It’s probably more just about balancing out fabs and adding some capacity in the leading-edge nodes, et cetera, to meet the demand. I’ll talk about what that will do for the different memory sectors in terms of bit supply opportunity in a moment.

Regards the co-investment program, everybody is aware that we’ve raised almost EUR1.4 billion in R&D from three of our largest customers, Intel, TSMC and Samsung. Those will be used for two things in the main – well, three: current EUV, next-generation EUV and the development of 450 millimeter. We’re obliged now to develop in the 2015 timeframe 450-millimeter capable tools on three different wavelengths of light, so that at least one customer can start to debug 450 processors out in a couple of years from now.

That will result in minority equity stakes by the three customers actually totaling 23% in aggregate. The current status is as of Friday, we got an authorization from our shareholders to issue additional shares. I won’t talk about the mechanics of this and waste our time, if you will, here. All of that’s available on our website, the timing, the mechanics and everything. So I’d refer you there. If there is any questions after that, then I’d be glad to answer them.

We will return all the proceeds from the issuance. We’ll have to issue shares, sell them to the equity investors, our customer investors, and then we’ll take that money and return it to you through what might seem a light bit complicated mechanism we call it a synthetic share buyback where we return capital to you and then do a reverse split. Those numbers, again, are all defined in the timing of that on our website, if you’d like to look at that.

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