Q4 2021 ASML Holding NV Earnings Press Conference

January 19, 2022

Monique Mols: Welcome everyone. Good morning and good afternoon for those watching in Asia. Welcome to this press conference about the Q4 and full year 2021 at ASML. We are here today in the Veldhoven Auditorium, which is a new auditorium, and we would have loved to have you all here today to interact with us and to see you again, because also last year we weren't able to have the media here. You're all home, you're all listening or in the office. I would like to give you a glimpse of this auditorium, though, before we start, and so you can choose the spot that you want to have next year, because I'm assuming that next year you will be here.

Welcome everyone. Good morning, and good afternoon for those watching our in Asia are welcome to reduce our press conference since press conference about the fourth quarter and full year 2021, Okay smell, we are here today and the and he fell.

Topher auditorium, which is a new auditorium, and we would have loved to have you all here today to to interact with us and to to see you again, because also last year, we weren't able to have to have the media here. So you're all home you are listening or in the office I would like to give you a glimpse of this auditorium, though before we start and so you can chew.

Use the sports that you want to have next year, because I'm assuming that next year you will be here. So if I can ask the the camera people to show the room, a little bit we have a few colleagues in the room to know to have a little bit of an audience, but hopefully we'll see you next year.

Monique Mols: If I can ask the camera people to show the room a little bit. We have a few colleagues in the room to, you know, to have a little bit of an audience, but hopefully we'll see you next year. My name is Monique Mols. I'm responsible for media relations at ASML. With me today are Peter Wennink, CEO of ASML, and Roger Dassen, CFO. Together we will talk you through the results, our business updates, and an outlook for this year. If you are a journalist, you can submit your questions. If you go to the website and you are on the website because you're listening in, you will see this little window where you can submit your question. Just write down your name, your publication name, and submit your question.

My name is Sam when he calls I'm responsible for media relations set a smell.

And with me today are Peter winning Ceos, I smell and what she does so C. F O and together, we will talk you through the results of our business updates and an outlook for for this year.

If you are a journalist you can submit your questions. If you go to the website and you are on the website because youre listening and you will see this little window, where you can submit your question just write down your name your publication name and submit your question my colleagues on the Hoffman will take the question and make sure that I get it.

Monique Mols: My colleague, Sander Hofman, will take the question and make sure that I get it on this iPad. Later on we'll go through them, and we'll answer them as best as we can. Let's start. Peter, can I ask you to come here on stage?

On this iPad. So later on we will go through them and we'll answer them asbestos we can.

And so let's say, let's start Peter can I ask you to come here on stage.

Peter Wennink: Yes. Thank you, Monique. Good morning, good afternoon, good evening, wherever you are. Welcome to the press conference, annual results 2021, Q4 2021. As Monique said, I'm going to give a bit of a high-level overview of the market or basically, the innovation drive that the company continuously has. Roger will also talk about the financials and the business update. Forward-looking statements, I'm not going to ask you to read all of it, but please do, but I'm not going to read it out, but it's for you to read through. I would like to talk about the key messages. The key messages, I'd like to refer back to our Capital Markets Day.

Thank you Monique.

Good morning.

Good afternoon.

Good evening.

Wherever you are.

Welcome to the press conference annual results 2021 fourth quarter, 'twenty, 'twenty, one and S breaks out I'm going to cause a bit of a high level overview of the market or basically.

The innovation drive that to get the company continuously has so.

Rose will also talk about the financials and the business update.

Forward looking statements I don't I'm not going to ask you to read all of it but please do.

Do but I'm not going to read it out.

But it's for you to read through.

I would like to talk about the key messages.

Key messages I'd like to refer back to.

Peter Wennink: This is effectively what we said at the Capital Markets Day. At the Capital Markets Day, we talked about the global trends. I will talk about them. I will repeat them again. Growth in the industry, our product portfolio, what it means in terms of our potential growth numbers, and you know, where we are today and the growth percentages that we currently see ahead of us. Also, our ESG KPIs, which is becoming more and more important. Having said that, I think what we've said in November. I can only repeat, and I said it at the time, that I don't think those are aggressive assumptions.

Our capital markets day. This is effectively what we said at the capital markets Day I had.

At capital markets day, we talked about the global trends I will talk about them I won't repeat them again, a growth in the industry are our product portfolio and what it means in terms of our potential growth numbers.

And where we are today, and and and and and and the growth percentages that we currently see ahead of us.

And also our ESG, kpis, which is becoming more and more important.

Having said that I think what we've said in November .

I can only repeat that I said it at the time.

I don't think those are aggressive assumptions.

Peter Wennink: The reason why I'm going to go into the next couple of slides, because it is about innovation. I think the semiconductor industry has fueled innovation over the last decades, 40 years, and we'll keep doing that in the decades to come. Why is that? It is because we will talk about this later, the value that we create is significant. Because we see that value curve coming, the innovation push that we have is relentless. It will continue. We see it around us. You know, it will create virtual reality, artificial intelligence, high-power compute solutions that we're all going to use, and it's going to create value.

And I and the reason why I'm going to go into the.

Next couple of slides.

Because there is about innovation and I think the semiconductor industry has fueled innovation over the last decades 40 years.

And we will keep doing that in the decades to come.

And why is that it is.

Because we will talk about this later D. The value that we create is significant.

And because we see that value curve coming the innovation push it we have is relentless he will continue in and we see it around US you know it will create a virtual reality artificial intelligence the high power compute solutions that we're all going to use.

And it's going to create value.

Peter Wennink: The chip demand is, as we say, insatiable, but it's also because we've underestimated, structurally underestimated the value that has been created by our customers and the customers, and the application of that technology in day-to-day life. Yeah. I think it's in every corner of day-to-day life, we find semiconductor technology, and we certainly start to realize this. I said this before, I said it in an interview this morning, it's the 1973 revisited, the oil crisis. I said it before, oil was a given in 1973 until it wasn't there. The same with semiconductors in 2021. Semiconductors were a given until they weren't there. Then factories close, and then it becomes a geopolitical issue.

And the chip demand as we say here is insatiable, but there's also because we've underestimated structurally underestimated the value that has been created by our customers and the customer customers and the application of that technology in day to day life.

Yeah, I think it's in the it's in the it's in every corner off day to day life, we find semiconductor technology and we certainly start to realize this.

And I've said this before I said it in an interview this morning.

It's the 1973 revisit it the oil crisis and Terry before oil was a given 90 73 until it wasn't there the.

The same with semiconductors in 2020 one.

Semiconductors, where a given.

Until they were in there and then factories close it and it becomes a geopolitical issue.

Peter Wennink: Because the value of semiconductors is so high that new applications and new services are developed every day by tens of thousands of companies. It also means that the wave of demand is growing very fast, and especially for the logic chips. They do, you know, let's say, easier calculations to very complex, high-power compute calculations. I mean, wave of demand will grow, which also means that the number of machines that we need to ship will grow. Now, I actually, I always like this slide, and I, you know, this is, perhaps it's repetitive, and people who have seen it, I apologize, but I like to talk about this for the simple reason that this slide basically paints the picture.

Because the value of semiconductors is so high.

That new applications and new services are developed everyday by tens of thousands of companies.

So it also means that the wave of demand is growing very fast.

Specialty for the logic chips, they do now.

Let's say easier calculations do very complex high power compute calculations.

<unk> wave.

Wafer demand will grow which also means that the number of machines that we need to ship will grow.

Now.

Actually I'll always liked the slides.

Is it perhaps it's repetitive and people who have seen it I apologize, but I like to talk about this for the simple reason that this slide basically paints the picture.

Peter Wennink: You know, you have the centralized computing in the cloud, yeah, which basically has the big cloud, which is served through the data centers and the cloud at the edge, and it's all connected through this big pipe called 5G, yeah, which is the result of public networks, but also private networks. Why is that important? Because it actually takes away a lot of latency between transferring data from one point to the other. Extremely important that you have the highway, the big data highway, where at maximum speed, data and information can be transferred to the cloud and from the cloud, but basically to what we call the edge. That's all these applications that are working, connected in the internet, yeah, or through the internet, using the big 5G pipe when it's mobile, yeah.

You know you have.

The centralized computing in the cloud.

Which basically has the big crowd do it yourself to the data centers and the cloud at the edge.

And it's all connected through Theres big pipe called five G.

As a result of public networks, but also private networks and why is that important because it actually takes away a lot of latency between.

Transferring data from one point to the other.

Streaming important age at the highway to Big data highway, whereas at maximum speed data and information can be transferred and to answer it from to transfer it to the cloud and from the cloud.

But basically to what we call the edge.

Thats all these applications that are working connected in the internet.

Or through the Internet using the big five G pipe when its mobile yep, and whether it's industrial medical traffic surveillance all through the smartphone robotics you name it is everywhere.

Peter Wennink: Whether it's industrial, medical, traffic, surveillance, all through the smartphone, robotics, you name it's everywhere. I think this is an important slide. Why? Because when you look at the right-hand side, it's the edge. It's what we say, what's called privacy, performance, and personalization. All these services and all these solutions are actually driven by sensing technologies, sensors. Now, sensors are very important because they capture data. Yeah. That analog data needs to be transferred into digital. You have an analog to digital chip converter node. You actually need that. You need an RF device, radio frequency device. You need a power IC, because it's very often mobile, so you want power to be managed well. You have sensor technology, image sensors, movement sensors, chip technology, and microcontrollers. Yeah.

This is an important slide why because when you look at the at the right hand side. It's the edge. It's what we said what's called privacy performance and personalization all these.

Services and all these solutions are actually driven by sensing technologies sensors.

Our sensors are very important because they kept your data.

But that data that analog data needs to be transferred into digital. So you have an analog to digital chip converter NOLA.

Actually you need that.

You need an RF device, Arizona Radiofrequency device, you need a power IC because its very often is mobile so you won't power to be managed well you have sensor technology image sensors movement movement census, chip technology and Microcontrollers.

Peter Wennink: That's not the most advanced logic chip, actually deal with that data, yeah. It's logic chips that can be 10 years old or 15 years old or 20 years old. You know, and a sensor in your washing machine doesn't need a 5-nanometer device. Yeah. It needs a device that from a logic point of view is perhaps 20, 30 years old. Yeah? That is why we currently see this insatiable demand for semiconductors across the entire product line in every technology. This is what's happening today, and it's noticeable. Like I said, you know, in 1973, when we suddenly found out that oil wasn't a given, it became a geopolitical issue.

That's not the most advanced logic chip.

Actually deal with that data, but it's logic chips that it can be 10 years old or 15 years old or 20 years old and OSA and a sensor in your washing machine doesn't need a five nanometer device.

But he said a device from a logic point of view is perhaps 2030 years old.

And that is why we currently see this insatiable.

There's this insatiable demand for semiconductors across the entire product line and every technology.

And this is what's happening today.

And as noticeable.

Like I said down to 73.

Certainly found out that oil wasn't a given it became a geopolitical issue.

Peter Wennink: 2021, when chip and semiconductor technology goes to the heart of all these value solutions, and suddenly it's not a given. It becomes a geopolitical issue. People start to realize across the globe, the governments, that it's a vital part of the economy. This is why you get geopolitical focus on making sure that this vital technology is available, you know. In the big continents around the globe, in Asia, in the United States, in America, in Europe. This is why governments suddenly start to realize that it's important to have a certain amount of semiconductor manufacturing on local soil. This is why we get these big investments and these Chips Act around the globe. You know, if you read the papers, I mean, there's a European Chips Act in the making.

2021.

And chip chip and semiconductor technology.

Technology goes to the heart of all these all these all these value solutions.

And certainly it's another given it becomes a geopolitical issue.

And people start to realize across the globe governments that is a vital part of the economy.

And this is why you get geopolitical focus on making sure that this vital technologies available.

And the big continents around the globe in Asia in the United States In America, and Europe , and this is why governments suddenly start to realize.

That is important to have a certain amount of semiconductor manufacturing all local soil.

And this is why we get these big investments in these chips act around the globe.

And if you read the papers I mean, there's a European Chip act in the making as a U S chip in the making.

Peter Wennink: There's a US CHIPS and Science Act in the making. There are CHIPS acts around the globe, and if you add it all up, it's hundreds of billions that will become available for the industry. Now you can argue that's a lot of money. You'll create overcapacity. Well, to be honest, the industry will grow, and we will support it. By the way, growing the industry, the expectation is that this industry will double at the end of this decade. At the end, the industry of our customers, the chip industry, to about $1 trillion. Yes, we need capacity. Government support is helpful and will also help to incentivize our customers to build fabs for which we will provide the solutions. What are those solutions? It's not only lithography.

There are chips act around the globe and if you add it all up it's hundreds of billions that will become available for.

For the industry now you can argue that's a lot of the money, you'll grade overcapacity well to be honest the industry will grow in.

And the industry will grow and we will support it and by the way growing the industry. The expectation is that this industry will double.

At the end of this decade.

The industry of our customers to chip in industry to about a trillion dollars. So yes, we need capacity. So government support is helpful. And will also help to incentivize our customers to build festival, which we will provide the solutions and what auto solutions is not only lithography when you look at.

Peter Wennink: When you look at what we provide, we provide the lithography machine that actually creates the pattern on the chip, but we also provide them with metrology and inspection systems to make sure that we can control the process better, 'cause it's all about affordability. You know, Moore's Law, the law to continuously shrink or let's say at the same cost, provide more value on the chip is a law of economics. Yeah? It's about affordable scaling, making things smaller, and yield. Yeah? Why do I want to talk about DUV? You know, DUV is the instrument, it's the technology, it's the machine that provides this mature technology, and we talked about this.

What we provide we provide yes, we provide a lithography machine that actually creates the pattern on the chip, but we also provide them with metrology and inspection systems to make sure that we can control the process better.

Because it's all about affordability of Moore's law and the law to continue Rishi shrink or let's say at the same cost provide more value on the chip is always the law of economics.

So it's about affordable scaling, making things smaller and yield.

So.

Well I don't want to talk about deep UV.

Deep UV is the instrument. It's the it's the technology. It's the machine that provides as mature technology and we talked about this.

Peter Wennink: Mature technology, especially at the edge, you know, supporting the sensing technologies and the applications resulting from sensing technologies, that's done with DUV, deep ultraviolet machines. In 2016, we actually thought that by 2025, the number of systems would go down. How wrong could we be? I mean, what we currently see is that the Internet of Things actually creates a huge demand for DUV systems. Yeah? The markets are very strong. Yeah? It also means that DUV will stay there. When we look at 2021, 75% of our DUV business was systems, and 25% was installed base. We have a lot of machines in the field, and we do upgrades and productivity enhancement packages. By 2025, we expect it's still going to be 70% while the market will grow.

Mature technology, especially at the edge.

Supporting the sensing technologies in the applications.

Nothing from sensing technologies, that's done with deep UV deep ultra violet machines.

And in 2016, we actually thought that by 2025, the number of systems will go down.

How wrong could be beyond maybe what we currently see is that the internet of things actually creates a huge demand for deep UV systems.

So the markets are very strong and it also means that the deep UV will stay there and when we look at 'twenty 'twenty, 175% of our deep UV business while systems.

And 25% was installed base, we have a lot of machines in the field and we do upgrades and productivity enhancement packages.

And by 2025, we expect is still going to be 70%, while the market will grow so actually we will ship more deep UV systems not less.

Peter Wennink: Actually we will ship more DUV systems, not less. Five years ago, we thought it was going to be less. Now we think it's going to be more. This is why we as an industry, our customers, and the customers of our customers structurally underestimated the value and the growth of this industry. DUV is going to stay extremely important. A good example is that what we innovated in 2021 is our NXT 2050. That's a new volume manufacturing machine. If you look at this slide, this information shows two graphs at the bottom, and one basically shows the productivity of that machine.

So five years ago, we thought it was going to be less.

And we think there'll be more.

And then this is why we as an industry.

Our customers and the customers of our customers strictly underestimated the value and the growth of this end of the industry. So deep UV is going to stay extremely important and a good example is that.

What we innovated in 2021 is our NXT 2050 is the new volume manufacturing machine and if you look at this slide is in for this information that shows two graphs at the bottom and one basically shows the productivity of that machine and it actually is.

Peter Wennink: It actually is a good example of the maturity of that machine, because that machine was newly introduced, and we got over 5,000 wafers per day in less than 18 days after shipment. That's the fastest ramp we've ever seen. Now, you have two color charts there, two color bars, the dark blue and the lighter blue. The lighter blue is the previous generation, which was already a very advanced machine, and the dark blue bars are the new system. You can see how much faster we ramp to yield. It's productivity. It's more wafers out. With the chip shortage being what it is, you can imagine how important that is for our customers. Also, the reliability. In 13 weeks, we're close to 200 hours of continuous working without the system having to stop once.

Good example of the maturity of that machine because that machine was newly introduced and we got over 5000 wafers per day in less than 18 days. After shipment is the fastest ramp we've ever seen now you have two car jobs, there too to call a boss dark blue in the lighter blue light blue as the previous generation, which was already a very advanced machine.

And the dark blue bars are the new system. So you can see how much faster we ramp to yield its productivity has more wafers out.

And with the chip shortage being what it is you can imagine how important it is for our customers.

But also the reliability.

In 13 weeks, we're closer 200 hours of continuous working without the system having to stop once.

Peter Wennink: DUV, extremely important for our customers and for our business, and we are working off a high maturity base, which helps our customers to get more wafers out with an ever-increasing complexity in the production process, where DUV will also help. You know, it's what we call the overlays, the positioning accuracy from a DUV layer to an EUV layer is getting tighter and tighter and tighter, and also there we make big progress to help our customers manage the complexity. Now, I talked about wafer capacity. Talked about output. Now, what do you do in a market where we are significantly under shipping the demand of the market? We have to basically give the customer more wafers. How do we do that? We do that by shipping more systems and by making the systems more productive.

So deep UV extremely important.

For our customers and for our business.

And we are working off a high maturity base.

Which helps our customers to get more wafers out with an ever increasing complexity in the production process where.

Deep UV will also help.

The what we call the overlays the positioning accuracy from a deep UV led to an easy layer is getting tighter.

Tighter and tighter and tighter and also there we make big progress to help our customers manage the complexity.

Now.

I talked about wafer capacity figure that out.

And what do you do in a market, where we are significantly under shipping the demand of the market.

We have to basically give the customer more wafers. So.

So how do we do that we do that by shipping more systems.

And by making the system more productive.

Peter Wennink: When you look at this slide, you look at DUV, it's on the left-hand side, and EUV on the right-hand side. We're planning to increase the number of units from 2020 to 2025 with 50%. We'll also make them more productive so that the number of wafers out is double. With EUV, we're going to get twice the number of systems out, yeah? Increasing the wafer capacity threefold because the productivity goes up. Now, these are numbers that we are internally challenging. We might have to do more. We're looking at increasing capacity, quite significant capacity increase, not only at ASML, but particularly also in the supply chain.

So when you look at the slides you look at deep UV. It's on the left hand side, the new V on the right hand side.

We're planning to increase the number of units from 2020 to 2025 with 50%, but also make them more productive so that the number of wafers out is double.

And with EV.

We're going to get twice the number of systems out.

Yeah.

And increasing the wafer capacity three four because the productivity goes up now.

These are numbers that we are internally challenging.

We might have to do more.

So we're looking at increasing capacity quite significant.

The increase not only at ASML, but particularly also in the supply chain.

Peter Wennink: We have to build faster, we have to hire more people, we have to increase production space, so we need to build square meters, and we have to increase the productivity of the machine, get more wafers out per machine. 'Cause we all know the chip shortage has to do with the number of wafers that our customers can produce. Also in EUV. In EUV, we introduced EUV in 2017. It wasn't high volume. High volume really started 2019, and beginning of 2019. You see the dark blue bars here that the average availability of the installed base is growing. This is the average of the installed base, which is a mix of the most advanced EUV systems, which have an availability of over 90%.

To build faster or to hire more people.

To increase production space will have need to built square meters.

And we have to increase the productivity of the machine get more wafers out per machine because we all know the chip shortage has to do with the number of wafers that our customers can produce.

Also an EV.

In your view, we introduced <unk> in 2017, it wasn't high volume high volume really started 2019.

And giving a 2019 and you'll see in the dark blue bars here that the average availability of the installed base is growing growing and this is the average of the installed base, which is a mix of the most advanced <unk> systems.

Whichever an availability of over 90% and more mature I could even say mature says or the systems that we shipped two years ago that have still a little lower level of productivity now those systems to lower level productivity systems, we are upgrading to make sure that they get to the high level of productivity of the most advanced in the newest systems. So you.

Peter Wennink: The more mature, I can even say mature or the systems that we shipped 2 years ago, that have still a lower level of productivity. Now, those systems, the lower level productivity systems we are upgrading to make sure that they get to the high level of productivity of the most advanced, and the newer systems. You will see this bar chart, yeah, going to the right, going up and up and up, over the next couple of years, where our target is to be over 95% availability to get more wafers out, productivity. Now, that's for now. That's for tomorrow. What about the day after tomorrow? It's about next generation EUV.

You will see this bar chart here going to the right going up and up and up over the next couple of years, where our target is to be over 95%.

Availability to get more wafers out productivity.

Now.

And Thats for now that's for Tomorrow.

About the day after tomorrow is.

As of our next generation <unk>.

Peter Wennink: Now, when we introduced EUV and EUV became high volume, we had to think about the next generation that brings us way into the next decade, which is called High NA. The next EUV version, which our customers will use to drive output and a newer generation of chips in H2 of this decade into the next decade, beyond 2030. We're building the first machine in our factory in Veldhoven as we speak. We've started the integration. The first major big modules have arrived, and we're starting to integrate the system. We receive orders. We have 5 orders for, let's say, the pre-high volume systems that customers will use to do R&D. Last week, we also received the first order for the next generation High NA tool, which will be the high volume system.

When we introduced <unk> and UV became high volume.

We had to think about the next generation of Brink's is way into the next decade.

Which has got high in a day.

The next version, which our customers will use to drive output in a newer generation of chips in the second half of this decade into.

Into the next decade beyond 2030.

And we're building the first machine in our factory in volatile as we speak we have started the integration of first major big modules have arrived.

And we're starting to integrate the system.

And we will receive orders.

We have five orders for let's say the pre high volume systems that customers will use to do R&D.

But last week. We also received our first order for the next generation high and a tool which will be the high volume system that will be the system to crank out more.

Peter Wennink: That will be the system to crank out more wafers with even more advanced chips, in the second half of this decade, going into the 2030s. The future is bright. The market will grow very fast. I think the market will grow faster than we currently think. That's what my expectation is. We need to follow by adding capacity and by relentlessly investing in innovation and R&D to make sure that we provide our customers with the solutions to drive value for these end products way into the next decade. I'd like to turn over to Roger for the financials. Thank you.

Wafers with even more advanced chips.

In the second half of this decade going into the 2013.

So the future's bright.

The market will grow very fast I think the market will grow faster than we currently think that my expectation is.

And we need to follow by adding capacity.

And by relentlessly investing in innovation and R&D to make sure that we provide our customers with the solutions to drive value for these end products way into the next decade.

Like to turn over to Rajeev for the financials. Thank you.

Roger Dassen: Thank you, Peter. Good morning, good afternoon, everyone. Peter, as he said, he took us on this last slide, he took us to the day after tomorrow. Unfortunately, it's the fate of the CFO to take you back to yesterday. That's where we're gonna start, but I won't only keep it to yesterday. I promise you that I will actually, you know, also look at today and look at tomorrow a little bit as well. Let's start with yesterday, and let's start with the Q4 results. I promise you, I won't take you through every single number that we have here on the slide or the slides to come because that would be a bit of a boring session.

Thank you Peter Good morning, good afternoon, everyone. So Peter.

Peter as he said he took us on this light last night it took us till the day after tomorrow. Unfortunately, its the fate of the CFO to take you back to yesterday. So that's what we're gonna start, but I want to I want to only keep it two or three yesterday I promise you that I will actually.

Also look at today and look at say tomorrow little bits of ASUR as well, but let's start with the you have to start with yesterday and let's start with the Q4 results in a promising I won't take you through every single number that we have here on the slide or the slides to come because that would be a bit of a boring section, but just to give you a flavor of what Q4 looks like and I think it's fair to say.

Roger Dassen: Just to give you a flavor of what Q4 looks like. I think it's fair to say Q4 was a good quarter. It really landed as far as revenue, as sales was concerned, it landed within the guidance. It's also fair to say that if you look at the composition of the sales, it changed a little bit to what we expected three months ago. Three months ago, we had higher systems sales that we expected, and we had lower Installed Base Management. It all has to do with what we talked about three months ago. Three months ago, we talked about chip shortages also affecting ourselves. It's a bit cynical, but it's the way it is, right?

Q4 was a good quarter.

Really landed as far as revenue of sales less concerned Atlanta it within the guidance, but it's also fair to say that if you look at the composition of the of the sales it changed a little bit to what we expected three months ago three months ago, We had a higher assistance sales that we expected and we had lower installed base management and it all has to do.

With what we talked about three months ago three months ago, we talked about chips shortages also affecting ourselves.

Cynical, but it's the way it is right to even even the ASML is confronted with a chipset shortages and its and its supply chain and we also talked about a new logistics center that we commissioned and then some of the issues at the start of the problems that we had as a result of that and I think it's fair to say that those issues combined had a little bit more of a bearing on the Q4 than we anticipated.

Roger Dassen: Even ASML is confronted with the chip shortages in its supply chain. We also talked about a new logistics center that we commissioned and some of the issues, the startup problems that we had as a result of that. I think it's fair to say that those issues combined had a little bit more of a bearing on Q4 than we anticipated three months ago. That led to a slightly lower shipment of systems than we anticipated at that point in time.

Three months ago, and that led to a slightly lower a shipment of <unk> systems than we than we anticipated at that point in time.

Roger Dassen: In order to make sure that customers, you know, still get productivity upgrades, that customers still have the potential to have more capacity, given the constraints that they operate in, given the very, you know, significant demand that they are confronted with their customers, we provided them with upgrades. These are the upgrades that Peter talked about, upgrades to really, you know, make sure that the installed base, the systems that are already out there at the customer, that they operate with a higher productivity in order to really give customers a higher capacity for output. That is what we did, and that really is reflected in these numbers.

In order to make sure that customers.

Still gaps productivity upgrades that customers still have the potential to have more capacity given the constraints that they operate in and given the very significant demand that they are confronted with with their customers. We provided them with upgrades and these are the upgrades that Peter talked about upgrades to really make sure that the installed base the systems that are all.

Already out there at the customer that they operate with a higher productivity in order to really give customers a higher capacity for for output. So that is what we did and that really is reflected in these numbers, so slightly lower system sales, but significantly higher installed base management in comparison to what we thought three months three months ago.

Roger Dassen: Slightly lower system sales, but you know, significantly higher Installed Base Management in comparison to what we thought three months ago. That also has an impact on the gross margin because a lot of these upgrades really are software based upgrades because that's a very fast way to give customers this productivity enhancement. Typically the gross margin that we enjoy on software upgrades is fairly high. That's why the gross margin is quite a bit higher than what we anticipated three months ago. That really permeates throughout the entire sequence of numbers that you have here, leading to higher operating margins, and actually you know pretty high net income and earnings per share.

That also has an impact on the gross margin because a lot of these upgrades really are software based upgrades because that's a very fast way to give customers said. These this productivity enhancement and the typically the gross margin that we enjoy on software upgrades is fairly high. So that's why the gross margin is quite a bit higher now.

We anticipated a three months to three months ago and that really permeates throughout the entire sequence of numbers that you have year, leading to higher operating margins and actually you know pretty high net income and earnings per share.

Roger Dassen: Also want to highlight the net bookings of EUR 7.1 billion. Pretty high number, but it's also very interesting to look at the composition, because you've seen high bookings numbers in the past. The total bookings number for the full year was a whopping EUR 26 billion. Typically you would see that a very high portion of the bookings number actually is related to EUV. What you see here is, you know, very solid intake of orders for EUV, but also, you know, a pretty high contingent of the rest of the business, primarily DUV. That goes back to what Peter talked about, because a lot of the demand that is out there in the market is related to, for instance, Internet of Things.

Also want to highlight in that bookings are.

The $7 1 billion pretty high number, but it's also they're interesting to look at the composition because you've seen high bookings numbers in the past the total bookings number for the full year was a whopping 26 billion.

But typically you would see that a very high portion of the bookings number actually is related to easy what you see here is very solid intake of orders for four for EV, but also a pretty high contingent of the rest of the business primarily deep UV, So and that goes back to what Peter talked about because a lot of the <unk>.

Demand that is out there in the market is related to for instance, internet of things is related to.

Roger Dassen: It's related to you know to more mature technology that also demands you know continued increase in capacity, and that really also drives our DUV business. You know, in that way, it's really clear from these numbers, it's not just about EUV, it's also DUV that has gone through you know very high levels of appreciation in the industry and continues to be, as far as we can see, a very strong driver of the demand for our systems. Included in there, as Peter also referenced, one High-NA EUV tool. That's it for Q4. Let's look into 2021 and the highlights of 2021. Again, not gonna talk you through all of the numbers.

Two two more mature technology that also demands continued increase in capacity and that really also drives the drives our deep UV business. So in that way it is.

It's clear from these numbers, it's not just about EV. It's also deep UV that has gone through a very high levels of appreciation in the industry and continues to be as far as we can see it continues to be a very strong driver of the demand for a four hour for our assistance in included in there as Peter also referenced the one <unk>.

One heinie UV tool. So that's it for Q4, let's then look into <unk> into 2021 and the highlights of 2021.

I'm not going to talk you through through all of the numbers are really good year, I mean, a year ago. When we stood here and when the question was asked what do you think in next year is going to be we talked about low double digit growth because that's what that's what the market signaled at that point in time low double digit growth. While 33 is not our equivalent of low double digit growth I think.

Roger Dassen: A really good year. I mean, a year ago when we stood here, and when the question was asked, "What do you think next year is gonna be?" We talked about low double-digit growth, 'cause that's what, you know, that's what the market signaled at that point in time, low double-digit growth. Well, 33 is not our equivalent of low double-digit growth. I think we far exceeded our own expectations, with the performance of this year. 33%, and really, if you look at it, if you look at the composition of the sales, it is very clear that ASML is really firing on all cylinders. You know, if you look at every technology that we have, all the end markets, it really is, they all contribute in their own way to a very strong growth that we experience.

We far exceeded our own expectations with it with the performance of this of this year, 33% and really if you look at it if you look at the composition of the sales it is very clear that ASML.

It's really firing on all cylinders. If you look at every technology that we have all the end markets. It really is they all contribute in their own way to a very strong growth that we that we that we experience and if you'd just quickly look at this at these numbers. So $18 6 billion of total of total sales 52, 7%.

Roger Dassen: If you just quickly look at these numbers, you know, EUR 18.6 billion of total sales, 52.7% gross margin, which is very, very high indeed. Really also echoing the value that we bring to customers. Because the only way that we are able to get to these, you know, high numbers of gross margin, and we will see that also when we make a 4- or 5-year comparison, you will see that that number goes up, and that is because of the value that we provide to our customers. Leading to a net income, which absolutely is an all-time high for ASML. It's a record number at EUR 5.9 billion, with an earnings per share of over EUR 14.

Gross margin, which is very very high indeed, really also echoing the value that we bring to customers because the only way that we are able to get to these high numbers of gross margin and we will see that also when we make a four or five year comparison, you will see that that number goes up and that is because of the value that we that we provide to our customers leading to.

And that income, which absolutely is an all time high for ASML. It's a record number at $5 9 billion with an earnings per share of over 14 or 40 euros.

Roger Dassen: If you look at it all, everything contributes to it. We talk about Installed Base. Installed Base is the service that we provide to customers, but also the upgrade business. The productivity upgrades that we talked about, including the software, but also hardware upgrades. Very strong business for us, growing very, very nicely with 35% this year. We talked about EUV growing 41% this year on the system side. Peter referenced the good progress that we're making on the High-NA program. We talked about DUV, where, you know, a couple of years ago, people started talking about that the market really declining.

If you look at it all everything contributes to it we talk about installed base installed base is that is the service that we provide to customers, but also the upgrade business to productivity upgrades that we talked about including the software, but also hardware upgrades very strong business for us growing very very nicely with our with 35% of 35% this year.

We talked about EV growing 41% this year on the systems on the system side.

And also Peter referenced that the good progress that we're making on the on the <unk> program.

We talked about deep UV, where you know a couple of years ago people started I started talking about that in the market really declining well that's not really what you see and it's certainly also not really what we expect for the for the time to come very very strong very strong growth and that is also what we continue to see into into this into this year and then the application.

Roger Dassen: Well, that's not really what you see, and it's not also not really what we expect for the time to come. Very strong growth, and that is also what we continue to see into this year. Then the application business, which you know also had a very healthy growth of 47%. Also noteworthy there, the fact that we completed the first eScan 1100 multi-beam system that is very close to shipment to its initial customer.

<unk>, which which also had a very healthy growth of $47, 47% and also noteworthy there. The fact that we completed the first E. Scan 1100, multi beam system that is very close to shipment to two two to its initial initial customer.

Roger Dassen: Also noteworthy I think is that we returned approximately, well close to EUR 10 billion, EUR 9.9 billion, as you see here, back to shareholders in terms of share buyback and the dividend. I'll give you a bit of a breakdown on that later on. A very, very strong year. Not gonna take you through this one. Look at it at your leisure. In essence, it tells you that both on end markets, on technology, and on region, you see that, you know, every one of those components really contributed to the very strong growth that ASML enjoyed in 2021. Same thing here.

And also noteworthy I think is that we and that we returned approximately close to 10 billion $9 9 billion of US here as you see here back to shareholders in terms of in terms of share buyback and dividends I will give you a bit of a breakdown on that later on.

So very very strong year, not going to take you through this one look at it at your leisure, but in essence. It tells you that both on end markets on technology and Norwegian you'll see that every every every one of those components really contributed to the very strong growth that ASML enjoyed in 2021.

Same thing here.

Roger Dassen: This really also illustrates to you graphically that, you know, really 2021 was a year where we have enjoyed quite some growth in the past couple of years. It's very clear that 2021, building on the drivers that Peter was talking about, you know, is a growth acceleration for the company. Wow. What about this slide? Well, I'll take you through it a little bit without referencing every single number once again. There are a few interesting trends here. If you take the 2021 to 2017 comparison, so a four-year growth comparison if you like, it's clear that, you know, on the net sales line, we're doubling. We're actually more than doubling.

And this really also illustrates to you a graphically that's really 2021 was a year, where we have enjoyed quite some growth in the past couple of years, it's very clear that 2021 building on the on the drivers that Peter was talking about.

As a growth acceleration for the company.

Wow, what about this slide well I'll I'll take you through it a little bit without referencing every single number ones again, but there are a few interesting trends here. So if you take the 21 to 2017 comparison. So a four year growth comparison, if you like it's clear that on the net sales line or doubling or actually more.

And more than doubling you see the gross profit increasing from you know a little shy of 45% to 52, 7% and again. This is primarily because of the value that we bring to the customers. The only way that we can do this is because we we achieve and we succeed in bringing more value to the customers with the tools that we provide today.

Roger Dassen: You see the gross profit increasing from, you know, a little shy of 45% to 52.7%. Again, this is primarily because of the value that we bring to the customers. The only way that we can do this is because we achieve and we succeed in bringing more value to the customers with the tools that we provide today. R&D cost. You also see actually more than double in this period, which is, I think, you know, a very clear indication that we continue to see a lot of potential out there in the market, but also a lot of potential within our team to continue to bring technology to the customers, which is appreciated and is conducive to, you know, helping cater to the demand that Peter was talking about.

R&D costs do you also see actually more than doubled and the superior which is I think.

Very clear indication that we continue to see a lot of potential out there in the market, but also a lot of potential within our team to continue to bring technology to the customers, which is appreciated and is conducive to helping cater to the demand that Peter was said that Peter was talking about SG&A.

Roger Dassen: SG&A below doubling, which every CFO loves because that means that we're efficient in our overhead operations. You know, good performance on that front. You see all of that really developing to a net income that nearly triples in a three-year period, and an earnings per share, which literally triples in three years. Also as a result of the fact that through the share buyback, we have been able to reduce the number of outstanding shares, which boosts the earnings per share a little bit more in comparison to the net income growth. Once again, look at the booking number, the net booking number of EUR 26 billion. We're currently looking at an order book of EUR 24 billion.

<unk> below doubling which every CFO loves because that means that we're efficient in our overhead operation. So good. So good performance on that on that front and you see all of that really developing too and that income that that's it that's nearly triples and in a three year period, and an earnings per share, which literally triples and.

Three years also as a result of the fact that through the share buyback, we have been able to reduce the number of outstanding shares, which boosts the earnings per share a little bit more in comparison to the net income growth and once again look at the booking number then that booking number of 26 at 26 1 billion. So we're currently looks.

At an order book of 24 billion.

Roger Dassen: EUR 24 billion, if you recognize that, the expectation that we have for this year in terms of system sales is a little short of EUR 17 billion. That tells you that there is, you know, more than EUR 7 billion in the order book that really relates already to 2023. That I think is a clear illustration of the very, very strong demand that ASML is currently enjoying based on the waves that Peter was talking about. You know, the benefit of that is to the customers, the benefit of that is to all of the stakeholders of ASML, but also to the shareholders.

And 24 billion if you recognize that.

The expectation that we have for this year in terms of system sales is a little short of 17 billion that tells you that there is more than $7 billion in the order book that really relates already to 2023, and so that I think is a clear illustration of the very very strong demand that ASML is currently enjoying based on the waves.

That said Peter was that Peter was talking about.

So you know the benefit of that is due to customers the benefit of that as to all of the stakeholder resolve of ASML, but also to the to the shareholders and as I mentioned $9 9 billion was returned to shareholders $1 4 billion over 'twenty, one and in 'twenty. One in terms of cash provided through our <unk>.

Roger Dassen: As I mentioned, EUR 9.9 billion was returned to shareholders, EUR 1.4 billion over 2021 in 2021 in terms of cash provided through dividends. EUR 8.6 billion in shares that were bought back during 2021. The recommendation we have to the annual general meeting of shareholders is to double the dividends, the total dividends. Dividends last year over 2020, the total dividend was EUR 2.75, and we recommend to the AGM to increase that to EUR 5.5. As I mentioned, doubling it in that regard. Outlook. CFO closes the looking at yesterday chapter, and now we go to today and actually also tomorrow.

Through through dividend.

And the $8 six.

In shares that were bought back during 2021.

And the recommendation we have to the to the annual general meeting of shareholders is to double the dividend. The total evidence a dividend last year over last year over 2020. The total dividend was $2 75, and we recommend to the AGM to increase that to five five so as I mentioned doubling is in that in that regard.

Outlook, so CFO closes the looking at yesterday chapter and now we go to a two day and actually also tomorrow. So let's first look at a little bit at today at <unk> at Q1.

Roger Dassen: Let's first look a little bit at today's Q1. Net sales expected between EUR 3.3 billion and 3.5 billion. I know you're going to look at that and say, "Wait a minute, didn't I just see EUR 5 billion for Q4?" You're right. The 3.3 billion indeed is a number that might strike you as low. You need to watch out here, because of a change that we've really introduced this year. We did a little bit in previous years, but this year we have made a major change in the way we bring systems to our customers.

Net sales expected between three three and three five and I know you are going to look at it and say wait a minute. They didn't they just see 5 billion four for Q4 and you're right. So the $3. Three indeed is a number that might strike you as as low but you need to watch out here because of a change that we that we that we entered that we have.

Really introduced this year, we did a little bit and in previous years, but this years, we have made a major change in the way, we bring systems to our customers.

Roger Dassen: What we do, we ship systems to customers, and we really do, you know, the significant part of the testing at the customer site. We're not doing it in the factory as we used to do, but most of the testing and then the final acceptance happens at the customer site. The reason we do that is because by doing that, you skip a couple of weeks in the cycle time in the cabinet. It was one of the levers that Peter was talking about in terms of, you know, how do you reduce the cycle time and how can you actually increase the productivity for ASML. This was one of the levers. That's why we did this.

What we do we ship systems to customers and we really do.

The significant part of the testing at the customer site. So we're not doing it in the factory as we used to do but most of the most of the testing and then the final acceptance happens at the customer site. The reason, we do that is because by doing that you actually skip a couple of weeks and the cycle time in the cabin. It was one of the.

The levers that Peter was talking about in terms of how do you reduce the cycle time and how can you actually increase productivity for for ASML. This was one of the levers and that's why we that's why we did this so we ship the systems due to customers without them, having been extensively tested at the at the at the factory and the remainder of the test.

Roger Dassen: We ship the systems to the customers without them having been extensively tested at the factory. You know, the remainder of the testing program and the final acceptance happens at the customer site. That means that we ship systems, but we cannot enjoy the revenue of that. Accounting-wise, we can only take the revenue once the final acceptance, the formal acceptance, if you want to call it that way, happens at the customer site. That means that we have about EUR 2 billion of output of shipments that we have this year that we cannot recognize as revenue.

<unk> program and the final acceptance happens at the customer site.

That means that we ship systems, but we cannot enjoy the revenue of that so so accounting wise, we can only take the revenue once the final acceptance the formal acceptance if you want to call. It that way happens at the happens at the customer side and that means that we have about 2 billion of output of shipments that we had this year that we cannot recognize as revenue. So if you add.

Roger Dassen: If you add that to the 3.3 to 3.5, you're looking at a healthy 5.3 to 5.5 billion worth of output that we would be shipping this quarter. That I think is once again in line with how we would be looking at the full year. I'll come to that in a moment. Included in that installed base of EUR 1.2 billion, gross margin also is affected as a result of the fact that two billion is taken out. If you adjust for the, what we call fast shipment effect and the gross margin, you would see gross margins back again at the levels that I showed you that we had for last year.

That's two to three three to three five youre looking at a healthy five three to 5.5 worth of output that we would be shipping at this said this quarter.

That thing is once again in line with how we would be looking at the full year will come to that in a moment.

Then that installed base of $1 2 billion gross margin also was affected as a result of the fact that 2 billion is taken out. So if you adjust for the what we call stack shipment effect on the gross margin you would see gross margins back again at the levels that data that I showed you that we had four four last year.

Roger Dassen: R&D once again growing because of the very aggressive agenda that we're pushing there, and SG&A at around EUR 210 million. Finally, how does that translate into the full year? We expect once again very strong growth at 20% for the full year. That would get you to approximately, you know, EUR 22.3 billion. That's the number that you would end up with if you add the 20% to the EUR 18.6 billion that we had for this year. We expect 55 EUV tools to be shipped. Six of them will be fast shipments. For those, we will not recognize the revenue.

R&D once again growing because of the very aggressive agenda that we're that we're pushing there and SG&A at around $210 million.

And then finally, how does that translate into the full year, we expect the full year.

Once again, 20% or once again very strong growth at 20% for the full year. So that would get you to two approximately a 22 point to three 8 billion. That's the number that you would end up with if you. If you add the 20% to $2 18.6 that we had for for this for this year, we expect 55.

EV UV tools to be shipped six of them will be fast chips are for those we will not we will not recognize that recognize the revenue. So we will recognize revenue for 49 systems.

Roger Dassen: We will recognize revenue for 49 systems. The DUV in the applications business will continue to grow in a very healthy fashion. We expect it to be, you know, north of 20% growth in comparison to last year. Again, the company runs on all cylinders. Also, in terms of end markets, the growth is both in logic and memory. We also continue to see a strong growth in the installed base business that we referenced. Peter said the future is bright. Absolutely. 2022, we expect to be very bright. With that, Monique, I would like to hand it over to you for Q&A.

Also the deep UV in the applications business will continue to grow in a very healthy fashion, we expect it to be north of 20% growth in comparison to last year.

And again the company runs on all set and there is also in terms of end markets. The growth is both in logic and memory.

And we also continue to see.

Strong growth in the honest installed base business that we referenced so Pete is that the future's bright absolutely and also 'twenty two we expect to be very bright and with that I would like to hand, it over to you for Q&A.

Monique Mols: Thank you, Peter. Let's see if there's any questions coming in, 'cause I thought that was pretty clear. It was pretty clear. Let's start with the first one. I think you both addressed this question, but maybe there is something you wanna add to that. Debby Wu from Bloomberg had a question. In the morning interview on Bloomberg TV, you mentioned 40% to 50% higher demand versus your max capacity. Can you provide more details? Is it both for DUV and EUV? I think the last question you already answered.

Okay. Thank you Peter.

Saved us any questions coming in.

I thought that was pretty clear.

It was pretty clear.

Let's start with the first one I think you both addressed this question, but maybe there is something.

You want to add to that so Debbie rule from from Bloomberg had a question.

In the morning interview in Bloomberg TV, you mentioned, 40% to 50% higher demand first assume Mexico paucity can you provide more details is it both for <unk> and easy and I think the last question you already heard this morning, because we say, Rick where capacity limited and we're working at our maximum capacity we.

Peter Wennink: Yeah. I said that this morning because we say we're capacity limited, and we're working at our maximum capacity. We, as ASML and the supply chain, don't forget, you know most of our modules come out of the supply chain. We don't have a factory that build those modules. So, I think, you know, when you look at the demand, which is of course a function of the disturbances due to COVID, it's the underlying growth trend. It's, you know, also the focus of governments pushing our customers to build more, creates this massive demand. Yeah, I think we're going to be at 40% to 50% above what we can make. That's what they say.

Israel and the supply chain don't forget you know most of ours.

Our modules come out of their supply chain, we don't have a factory to build those months so.

Yes, I think Joe when you look at the demand.

Which is of course a function of.

The disturbances due to COVID-19 , it's the underlying growth trend, it's a you.

You know also the focus of governments are pushing our customers to to build more creators massive demand.

I think we are where we're going to be a 40% to 50% above where we can make that's what that now you could argue because people know that we are.

Peter Wennink: Now, you could argue, because people know that we are somewhat limited, that they wanna put in some extra demand. That's all. It's all probably logical, but it's across everything. As what I said earlier, it's across our mature products, our advanced products, and our very advanced products. It's across the entire product line for all industry segments. For memory, for logic, it's across the board.

Somewhat limited.

Want to put in some extra demand that's all it's all probably logical but it's of course everything is what I said earlier, it's across our our mature products our.

Advanced products and our very advanced products its across the entire product line for all industry segments.

For memory and for logic.

So across the board.

Monique Mols: Thank you. Eva Schouten, she read our press release about the information about the Berlin fire. She says, you said that the Berlin fire has no significant impact, but what impact does it have?

Thank you.

<unk> he read a press release about the little the information about the Berlin fire. She says.

Said that the Berlin fire has no significant impact, but what impact does it have.

Peter Wennink: Sorry?

Monique Mols: The fire in Berlin did not have a significant impact.

So during the fire in Berlin, They don't have a significant impact.

Peter Wennink: Yeah.

Monique Mols: What impact did it really have?

So what impact did it really have all.

Peter Wennink: Oh, you know, first of all, it scared me to death. That was an impact. Yeah.

First of all it scared me to death.

Monique Mols: Yeah

So oh.

Peter Wennink: You know, you don't wanna start the year, 3 January, and you get a phone call saying, "The factory is on fire." I mean, that's the last thing you wanna hear. It did have an effect, but it also means that you don't know, at that time, you don't know what the consequences are. Yeah? I must say, you know, when I got the first pictures of the factory, I really thought it was going to be very significant, but it turned out that, you know, huge work from our people in Berlin. I mean, a tremendous creativity. The way that they look at it, they were.

Oh, you don't want to start the year January three and you get a phone calls.

Factories are fire when is the last thing you want to hear so it did have an effect, but it also means that you don't know at that time, you don't know what the what the consequences are yeah. So.

I always say you know what I got the first pictures of the of the factory I said I thought it was going to be.

There's always going to be very significant.

But there was just a good feeling that it turned out that.

Huge work from our people in Berlin, I mean, a tremendous creativity the way that I look at it they were within a week or where they could say we can secure the deep UV <unk> modules that go into the deep UV machines as.

Peter Wennink: Within a week, they could say, "We can secure the DUV modules that go into the DUV machines." But we need more time for the EUV. Basically, it's a clamp, a wafer clamp that holds the wafer in the EUV machine. It's a very complex and very critical part of the machine. The fire broke out in that department. So there were machines that were destroyed. And there were machines that seemed untouched, but you know, smoke and water. So, to do that analysis, really took some time. I think it was until the end of last week, I think, over the weekend, that we really understood the consequences, that we could manage this.

But we need more time for the EV was where basically its a client pays a waiver clamp that holds the wafer into EV machine is very complex and very critical part of the machine that the fire broke out in that department.

There were machines that were destroyed.

And there were machines that.

Seemed untouched, but smoke and Walter so that to do that analysis. We took some time and I think it wasn't until the end of last week I think in over the weekend that we really understood. The consequences that we could manage this but actually manage this and that yes of course, there is no production.

Monique Mols: Mm-hmm.

Peter Wennink: We could actually manage this and that, yes, of course, there is no production of those wafer clamps now, but we have inventory. We have work in process. We have repair actions. We have stuff that we can do, which actually buys us time to repair the production flow, and then we think we will not have a significant impact on the EUV shipment this year.

Those wafer plans now that we have inventory we are work in process. We have repair actions, we have a stiff stuff that we can do which actually buys us time to repair the production flow and so we think we will not have a significant impact on the UV shipment. This year. So yeah, yeah definitely has an impact on the first.

Monique Mols: Okay.

Peter Wennink: Yeah, it definitely had an impact, and first of all, on myself when I heard.

Roger Dassen: Monique, what we had to do is to, you know, so late last week, we had an impression of, you know, what is the damage? Then we had to take a fresh look again at our entire output and production plan. How can we include it in that? That was really, you know, working against the wire to get that done. I think also the fact that we're now doing fast shipments gave us a little bit of flexibility. The fact that, you know, rather than having the 55 systems completely shipped, have them gain some time on those 6 shipments as a result of that. I mean, that's the kind of buffer that we also needed-

A all or myself.

What we have to do is to so late last week, we had an impression of you know what is the damage and then we had to take a fresh look again at our entire output and production plan.

How can we included in the end that so that was really working against the wire to get there to get that done and I think also the fact that we're now doing fast shipments gave us a little bit of flexibility. So the fact that rather than having the 55 systems completely shipped have them again, some time on those on those six shipments as a result of that I mean, that's the kind of buffer.

That we also need it they'll get the to get the impact of Berlin addressed yeah. So a lot of creativity with another great.

Peter Wennink: Yeah

Roger Dassen: ... to get the impact of Berlin addressed.

Monique Mols: Yeah. A lot of creativity was.

Peter Wennink: A lot of creativity, a lot of hard work.

Monique Mols: Yeah.

Peter Wennink: They're around the clock, 24/7.

Yes. They are round the clock 24, seven you bet I think are great people.

Roger Dassen: You bet.

Peter Wennink: I think, great people, yeah.

Roger Dassen: Yeah.

Monique Mols: Yeah. Yeah. A question from Max Molka at Frankfurter Allgemeine Zeitung for Peter: Could you give an update about the export of EUV to China?

Yeah.

And a question from Mark small car and Frankfurt.

Frankfurter Allgemeine Zeitung for Peter could you give an update about the export of easy to China.

Peter Wennink: Yeah. Well, the update is business as usual. I mean, there's nothing more to say. You know, I think it is with the governments. You know, it is. EUV is export-controlled technology.

Yeah, well, Jeff that is business as usual I mean, theres nothing more to say Oh I think.

It is with the governments there always is a UV is export controlled technology. So ultimately it's up to the government to say I'm going to issuer.

Monique Mols: Mm-hmm.

Peter Wennink: Ultimately, you know, it's up to the government to say, "I'm going to issue an export license or not," and that's still where it is today.

Export license or not and that's still where it is.

Monique Mols: It's still a no.

Peter Wennink: We'll just wait. Now, we do get some questions: What does it mean for a chip production? Well, you know, chips are being sold into China, but the manufacturing of those very advanced chip doesn't happen in China. The manufacturing happens somewhere else. Happens in Taiwan, in Korea, in the United States. That's where we ship our EUV machines. I said this before, I don't believe that it's going to be a major impact on our shipment pattern. We just ship them somewhere else.

Today, so well just wait now.

We do get some sort of a question what does it mean for.

Chip production well.

Chips are being sold into China, but the manufacturing of those very advanced chip doesn't happen in China. The manufacturing happens somewhere else happens in Taiwan, and Korea, and the United States and so that's where we ship our <unk> machines and I've said this before I don't believe that there's going to be a major impact on our shipment pattern, we just ship them some.

Monique Mols: Yeah. Okay, question for Roger from Sandra Olsthoorn, Het Financieele Dagblad. I'd like to hear more about installed base growth. How predictable is the growth level here? Will it grow on the current level? Can you give an indication on the growth margin compared to the margin on machines?

Where else.

Okay.

A question for Rajiv from Sander <unk> finish it off not I'd like to hear more about installed base growth. How predictable is the growth levels here will it grow on the current level can you give an indication on the gross margin compare to the margin on machines.

Roger Dassen: Yeah. Installed base is very much a mixed bag, and that in terms of all the things that Sandra was referencing. It's a mixed bag in terms of gross margin, right? Because if you just, you know, peel the onion of the installed base, what is in there? First off, you have service, regular service to a tool, and then you have upgrade business. But upgrade business, some of the upgrade business is hardware, some of the upgrade business is software. That's the mixed bag in terms of activities. And then obviously you have a mixed bag in terms of, you know, is it DUV? Is it EUV? Is it in the application business? That makes it a very different composition in terms of many of the things.

And installed base has a is very much a mixed bag in that and in terms of all the things that sound levels referencing so it's a mixed bag in terms of gross margin right because there are and if you just peel.

Peel the onion of the installed base what is in there first off you have surface regular surface to a tool and then you have upgrade business, but upgrade business. Some of the upgrade business as hardware some of the upgrade business as software. So that's the mixed bag in terms of activities and then obviously you have a mixed bag in terms of you know is a deep UV is that EV is it is it is an NDA application.

So that makes it a very different composition in terms of many of the things in terms of predictability I would say that obviously the service business is far better predictability in the upgrade business. This gives the upgrade is discretionary services you know kind of mandatory if you don't serve as the tool then it will break down at a certain point in time, so that's fairly predictable the upgrade business as discretionary.

Roger Dassen: In terms of predictability, I would say that obviously the service business is far better predictable than the upgrade business, because the upgrade is discretionary. Service is, you know, kind of mandatory. If you don't service the tool, then it will break down at a certain point in time. That's fairly predictable. The upgrade business is discretionary, and that's up to the customer to decide, you know, when am I going to give an upgrade? That's not a very evident case for customers, because they always have to say, "If I do an upgrade, that means that I need to power down the machine for a while." They have to make the trade-off, how much time, how much machine time do I have to give to ASML?

And that's up to the customer to decide when am I going to give an upgrade and it's not a very.

Evident case for customers because they always have to say if I do an upgrades that means that I need to do to power down the machine for a fault for awhile. So they have to make the trade off how much time, how much machine time do I have to give to ASML and what is then the benefit that I get in terms of capacity and output expansion as a result of that so that's a trade off so a lot of emphasis that we have.

Roger Dassen: What is then the benefit that I get in terms of capacity and output expansion as a result of that? That's a trade-off. A lot of emphasis that we've put this year is to try and come up with upgrades and do them in a fashion that really reduces the machine time that the customer needs to give to ASML. There, the software upgrades of course come in handy. In terms of profitability, upgrade business, particularly when it has a software component to it, is very high-margin business. I think the service business historically has been below the corporate gross margin level of ASML.

Put this year is to try and come up with upgrades and do them in a fashion that really reduces the machine time that the customer needs to give to ASML and there the software upgrades of course come in or come in handy in terms of our profitability.

Upgrade business, particularly when it has a software component to it is very high margin business.

The the surface business historically has been below the corporate gross margin level of ASML.

Roger Dassen: We are, you know, providing those services now in a way that it really provides a lot of, you know, a lot of value to the customer and that we are able to drive up the gross margin there as well. Our ultimate goal, I would say in the 2025 timeframe, that's also what we said at the Capital Markets Day, is to try and get the installed base margin, you know, close to the corporate gross margin level.

But we are providing those services now in a way that really provides a lot of.

A lot of value to the customer and that we are able to drive up the gross margin there as well so our ultimate goal I would say in the 2025 timeframe and that's also what we said at the Investor day is to try and get the installed base margin close to the close to the corporate gross margin level.

Monique Mols: Yeah. Thank you. You can still submit your questions, right? If you want to ask a question, please use the website and the little window we have there. A question from Nikkei, Cheng Ting-Fang: How many people are you looking to recruit this year, and do you see talent shortage?

Thank you and you can still submit your questions right. So if you if you want to ask a question. Please use the the website and the little window, we have there.

A question from Nikkei Cheng thing for how many people are you looking to recruit this year and do you see talent shortage.

Peter Wennink: Good question. I mean, if you asked me that question last year, I would have said 1,500, and we did 6,000. So it was a factor of 4 more. That was 2021. Now, I think we are. We've actually hired for our capacity plans in the production area. I think we have hired the number of people that we want. So I don't think we'll hire 6,000 people this year.

Good question I mean, you asked that question last year I would've said 1500 than we did 6000. So it was a factor of four more that was 2021 now I think we are we've actually hired for our capacity plans and a production area I think we have hired.

The number of people that we want.

So I don't think were highest 6000 people this year.

Monique Mols: Mm-hmm.

Peter Wennink: I think if we look at the plan and look at the expansion of R&D that Roger talked about, this is people, yeah? I think we will increase our R&D base and our customer service base, because we will have to ship more, so we need more people in the field. I think it's still going to be a few thousand people, yeah. Anywhere around 3,000 people, 3,000 to 4,000 people, because we also have some attrition. Yeah, why would you leave a great company like ASML? It does happen. Yeah. I think it's probably going to be more like 4,000 people that we're going to have to hire. You're absolutely right. I mean, it's a war on talent. You know, is.

But I think if we look at the plan and look at the expansion of R&D that Rajiv talked talk to these people.

We will increase our R&D base and our customer service base, because we will have to ship more so than if more people in the field. So I think it's still going to be a few thousand people anywhere around 3000 people three to 4000 people.

Because you also have some attrition there why would you leave a great company like asthma when it does happen.

So I think it's probably going to be more like 4000 people that we're going to have to hire.

You're absolutely right I mean, there's a war on talent and it always is.

Peter Wennink: It is getting more complex around the globe.

It is getting more complex around the globe to.

Monique Mols: Mm-hmm

Peter Wennink: ... to find the right level of people for the simple reason that we're competing with our customers and with other players in the industry. I mean, if everybody's growing so fast, I mean, in Taiwan, we're competing with TSMC. You know, in Korea, we're competing with Samsung and SK hynix. In the US, we're competing with Intel, with Micron, and we're competing with Apple and with Qualcomm. Just an appeal also to governments, yeah, to absolutely focus the education system on educating young people and basically driving the interest for science, technology, engineering, and math-related studies. Yeah. I think that is critical. Yeah. I think we'll do fine.

To find.

The right level of people for the simple reason that we're competing with our customers and with with all the players in the industry.

If everything everybody is growing so fast I mean in Taiwan, we're competing with TSMC.

In Korea, we are competing with Samsung and SK Hynix in the U S, where we're competing with Intel and Micron, then and where were competing with with Apple and Qualcomm and so.

Just an appeal also to governments yet to absolutely focus.

Education system on educating young people.

And basically driving the interest for four for Science technology Engineering and math related studies.

I think that is critical so.

So I think I think it will define I mean.

Peter Wennink: I mean, you know, last year we received, I think the latest number I got, 295,644 applications. Yeah. We hired around 6,000 people. You could say you guys still have a choice.

Last year, we received I think latest number I got the tune of 95006 hundred 44 application.

So we hired around 6000 people. So you can say you guys still have a choice, but you know yeah, it's true, but we want really good people. So.

Monique Mols: Yeah.

Peter Wennink: You know, yeah, it's true, but we want really good people. Yeah.

Monique Mols: Yeah.

Peter Wennink: You know, these really good people help us with things like the fire in Berlin.

And then there's really good people to help us with things like the fire in Berlin.

Monique Mols: Yeah. Absolutely.

Peter Wennink: You know, we're very lucky.

Monique Mols: There's a lot to do. Just a tip, on our website, we have a full list of our vacancies. There's a question from several reporters. I don't have a name here, but several people asked, so it's apparently an urgent question. Can you share more color on the High NA efforts? How is assembly going, and when are you shipping?

We're very lucky there's a lot to do so just a tip and on our website, we have a full list of our vacancies.

There's a question from several factors.

Reported so I don't have a name here, but several people asked towards apparently an urgent question can you share more color on the higher Nae efforts, how is assembly going and when are you shipping, yes, I think where we're shipping end of 'twenty three and that was going to be one of those five systems. Those five R&D systems, which will finalize throughout 2020.

Peter Wennink: I think we're shipping end of 2023. That was going to be one of those five R&D systems, which we'll finalize throughout 2024. We will basically start the first shipments of the High NA high volume tool, the one that we received an order from Intel, will be at the end of 2024, and that will move into 2025, 2026, also with other customers. That means we need to. We do the assembly now.

Four and then we will basically start dish the.

First shipments of the high in a high volume tool. The one that we received an order from from Intel.

We will be at the end of 'twenty four and they are all moving into 'twenty five 'twenty six also with other customers.

And that means we need to redo the assembly now.

Monique Mols: Mm-hmm.

Peter Wennink: You know, when you walk into the clean room here in the Netherlands, in Veldhoven, and you walk into the High NA area, you're just flabbergasted by the size of the, you know, machine. It's a big machine. Yeah. But it's getting together. I think the most important thing in High NA was the optics. You know, we basically have a bigger lens, you could say. But the optical technical requirements of that lens were so high, were so different than what we do with Low NA, that that was really a major technical project with a lot of risk. Now, we could use the best optical company on the planet, which is Carl Zeiss, yeah?

And when you walk into the clean room here in the Netherlands, and volatile and you walk into the high <unk> area.

Just flabbergasted by the size of the size of the machine, it's big machine.

But it's getting together I think the most important thing in high in a was the optics, where basically if a bigger lengths you can say, but.

The technical optical technical requirements of the lengths were so high were so different than what we do with low and that that was a really a major technical project with a lot of risk.

Now kudos to the best optical company on the planet.

Which is called ice.

Peter Wennink: You know, they pulled it off together with us, you know, because we created very big measurement machine, which is basically it's a factory, you know, it's a factory where we were able to actually measure those optical systems, and they gave us the results that we wanted, which was, as again, it's an extreme project.

They pulled it off together with us because we created very big measurement machine, which is basically a factory.

And where we were able to actually measure those dose dose optical systems and they gave us the results that we wanted which was a.

It's again, it's an extreme project, but.

Monique Mols: Mm.

Peter Wennink: You know, extremely good people get extremely good results, yeah? That's what happened. Thanks to our colleagues and partners at, you know, ZEISS and with the collaboration with our own people, we're there, you know? We're going to make this machine happen.

Extremely good people get extremely good results.

So that's what happened in the thanks to our colleagues and our partners at.

And as is and where the coal operation with our own people that were there.

And we're going to make this machine happen. So the picture. We just saw that was just one part of it that it wasn't theaters. One part is just when you look at a picture just to go.

Monique Mols: Yeah. The picture we just saw, that was just one part of it. That wasn't the entire-

Peter Wennink: Just one part. Just when you look at the picture, just, you know, go back and look at the picture. Just look at the people in front of one of the modules. There's a frame.

Go back and look at the pictures look at the people informed of one of the one of the modules is a frame metro for here, which actually the actual machine is even bigger than that and so but it just gives you an indication of the size of the machine.

Monique Mols: metrology frame.

Peter Wennink: Yeah. Actually, the actual machine is even bigger than that.

Monique Mols: Mm-hmm.

Peter Wennink: Yeah, it just gives you, as an indication, of the size of-

Monique Mols: Yeah.

Peter Wennink: the machine.

Monique Mols: Oh, it's impressive. Peter van Amerongen of de Volkskrant. A question for Peter. Your machines also have chips on board. Is ASML impacted by the chip shortage as well?

Impressive.

Peter I'm on the way up to folks Scott a question for Peter Your machines also have chips onboard is not impacted by the chip shortage as well.

Peter Wennink: Yeah. It's a daily fight. You know? It is not as we are directly impacted, but not that we buy chips, but our suppliers do. I mean, we have thousands of electronic components in our machine, so it's not strange that when you look at our supply chain, our first tier, they buy from a second tier, they buy from a third tier, that they buy components, as we call them. Electronic components, which have chips in them. Yes, there are shortages. Yeah, this is a day-to-day fight. What we actually do, we actually gather it all together, and we combine it at ASML in a scarcity center, and then we figure out, you know, which semiconductor manufacturer makes those chips, and then we pick up the phone and we call them up.

Yeah.

It is a daily fight alright. It is not we are directly impacted but not that we buy chips, but our suppliers do.

We have thousands of electronic components in our machine. So it's not strange that and when you look at our supply chain, our first year. They buy from a second theater they buy from a third tier.

They buy.

Components, as we call them electronic components, which have chips in them.

And yes, there are shortages and so this is a day to day fight what we actually do work together is altogether, we and we combined it at ASML.

Guests at the center and then we figure out you know, which semiconductor manufacturer makes those chips and then we pick up the phone and we call them up.

Peter Wennink: You know, it's basically, say, "Can you help us?" You know, "Would you need to help us because we want to ship those machines, and you need those machines." So how can we, you know, find it either in the distribution system, at the semiconductor maker, with the brokers? It's a constant fight.

Or is it basically can you help US you know, we just need to help us because we want to ship those machines and you need those machines. So.

Can we find it either in the distribution system at the at the semiconductor maker with.

With the brokers.

Monique Mols: Mm-hmm.

Johnson Heights.

Peter Wennink: Until now, we're able to manage.

Until now we were able to manage.

Monique Mols: Okay.

Peter Wennink: that's not a given. It's a challenge, but you know ASML, we like challenges.

And that's not a given so it's it's a challenge but you know you know are similar challenges absolutely do you want to add anything by saying that you're fine okay.

Monique Mols: Absolutely. Do you wanna add anything, Roger?

Peter Wennink: That's it.

Roger Dassen: That's it.

Monique Mols: You're fine? Okay. Question from Joe Miller at Financial Times for Peter. Do you think reshoring parts of the chip value chain will prevent future bottlenecks? Or is it more important that regions double down on their expertise?

A question from Joe Miller at financial Times. So Peter do you think reassuring parts of the chip value chain will prevent future bottlenecks or is it more important that regions double down on their expertise.

Peter Wennink: Both. Yeah, I think we need to do both. You know, if this industry with the current growth rates that we're looking at, I mean, the industry of our customers, the chip industry.

Both.

Yeah, I think we can do both.

If this industry in this industry with the current growth rates. So we're looking at and this is your I mean, the issue of our customers to chip industry.

Monique Mols: Mm-hmm.

Peter Wennink: Will double to $1 trillion by the end of the decade. Yeah? That means we need to add, you know, it took us 40 years to build the capacity to do $500 billion plus of sales, so we need. We're a trillion, so we need to perhaps not double the capacity, but go a long way towards that. We need more capacity. Now, to say, why don't we just expand that capacity on the few places on the planet where we do this today in large volume, which is predominantly Asia, might from a geopolitical risk point of view, might be a bit too much. Yeah? Why don't we then say, the government says, "Yeah, we need to bring some of that back to our continents." Yeah, because the dependency becomes so very high. Just give you an example.

We'll double two trillion by the end of the decade.

It means we need to add.

It took us 40 years to build the capacity to do 500 billion plus of sales, though neither trillions are we need to.

Perhaps not double the capacity, but go a long way towards that so we need more capacity now to say why don't we just expand that capacity on the few places on the planet, where we do this today in large volume, which is predominantly Asia mindful of geopolitical risk point of view might be.

A bit too much.

So why don't we then say the government's Asia, we need to bring some of that back to to our.

Our confidence.

The dependency becomes a very high just give you. An example, 20 years ago.

Peter Wennink: 20 years ago, around 25% of the chip production came out of Europe. It's now 8%. What if the market doubles again? I will tell you, it's less than 4% because it's these were euros, and the most advanced chips are being made somewhere else. You have less than 4% of the world market in chip manufacturing, while chips are so important for your economy.

Around 25% of the chip production came out of Europe production now.

8%.

But what if the market doubles again.

And I will tell you is less than 4% because it's this these were euros and the most advanced chips from being made somewhere else. So you have less than 4% of the world market and chip manufacturing while chips are so important for your economy.

Monique Mols: Mm.

Peter Wennink: It's only logical that governments around the globe say, "Wait, wait a minute. 1973, what happened again? Oil crisis, you know? 1921, chip crisis, you know?" It's geopolitical important. Yeah? This is why we need to both. It also means that you need to invest heavily in knowledge. I go back to the education system. You know, we really need to focus on enticing, stimulating our younger people to say, "I want a career in this exciting industry." Yeah? We have to invest in R&D and in innovation. It is not only about the mature chips where we have big shortages. We will have big shortages in advanced chips also. We do both. Yeah? If there are companies around the globe that say, "Get your point on the geopolitical reliance.

So it's only logical that governments around the globe say wait wait a minute 90 73, what about what's happened again oil crisis 1921 chip crisis, it's geopolitical important.

So this is why we need to both but it also means that you need to invest heavily in knowledge and it go back to the education system, we really need to focus on.

Enticing stimulating our younger people to say I want a career this exciting industry.

And we have to invest in R&D and innovation is not only about the mature chips, where we have big shortages, we will have big shortages in advanced shifts also so we can do both.

And if there are companies around the globe, that's I get.

I get your point on the Jupiter on the geopolitical reliance I wanted to come to your region I want to build a advanced factory, we call it the fab, which cost 15% to 20 billion.

Peter Wennink: I wanna come to your region. I wanna build a advanced factory," we call it a fab, yeah, which costs EUR 15 to 20 billion. Why don't we help them?

Monique Mols: Mm.

Peter Wennink: 'Cause it's a risky project. You know, it's. They could easily build that fab in the area where they are today. Just add one fab, 'cause they already have the ecosystem, the infrastructure. Now, they come here, it's risky, yeah? 'Cause they have to start from scratch, create that new ecosystem, which I think is going to be important for Europe, for instance, if you think about Europe, because it's going to be a magnet. It's going to be a talent magnet, which is important for R&D. So yes, of course, we need to support. But also, we need to support the part of the industry that says, "We need deep UV capacity." Yeah. Because, you know, it's sensing technology, Internet of Things that we talked about. It's going to also need more chips. Yeah? So it's both.

How do we help them.

It's a risky project.

That could easily built at fab in the area, where we are today just add one fat because they already have the ecosystem the infrastructure they come here that's risky.

Because they have to start from scratch create that new ecosystem, which I think is going to be important for Europe . For instance, if you think about Europe , because it's going to be a magnet, it's going to be a talent magnet, which is important for R&D. So yes of course, we need to support but also we need to support the part of the industry to assess when it deep UV capacity because you know it's a sensing.

Technology Internet of things. So we talked about it's going to also need more chips.

Monique Mols: Both. That's always a good answer. There's a question from Paul van Gerven with Bits&Chips for Roger. Is EUV profitability now on par with DUV profitability? Will ASML take an initial hit on gross margin for High NA like it did for 0.33 NA EUV? That's always a very difficult one to pronounce.

So it's both.

That's always a good answer.

There's a question from.

From for O'shea from Paul from Kilobits, and chips is easy profitability now on par with do you see profitability will ASML taken initial hit on gross margin for high and they like it did 4.33 and a easy doesn't always said very difficult entrepreneur.

Roger Dassen: With the TWINSCAN NXE:3600D tool, which is the tool that we introduced last year, we now have the EUV gross margin at the level of what we call the corporate gross margin. I think we've achieved that milestone. We've said that, you know, with the successor to the TWINSCAN NXE:3600D, that's the point in time where we're really gonna see it cross with the DUV profitability. That's still a small step to be made, but getting there, closer and closer. Again, because of the value that the tool provides in terms of productivity, overlay, quality to the customer. In terms of high NA, you know, high NA as Peter pointed out is a massive exercise, but it's also evolutionary.

So we are with our with the 3600 tool, which is the tool that we introduced last year. We now have we now have the EV gross margin at the level of what we call the corporate our corporate gross margin. So I think we've achieved that milestone we've said that.

With the successor to the 3600, that's the point in time, where we're really going to see it crossed with it with DPP profitability. So that's still a small step to be made but getting there closer and closer and again because of the value that said that the tool provides in terms of productivity overlay of quality to the customer.

In terms of high in a you know a high and a as Peter pointed out as a as a massive exercise, but it's also evolutionary it's not it's not a kind of Rev. Revolution that you had going from immersion 222 EV. This is an evolutionary step a big evolutionary step mind, you, but it set an evolutionary step and that means that.

Roger Dassen: It's not the kind of revolution that you had going from immersion to EUV. This is an evolutionary step. A big evolutionary step, mind you.

Monique Mols: Mm-hmm.

Roger Dassen: It's still an evolutionary step. That means that a lot of the components that we have on High NA, by the time High NA really gets introduced, have already been you know tested in many ways on Low NA as well. Actually, one of the key things that we're driving is commonality between a number of parts on the Low NA machine and the High NA machine. I think in that way, it's you know less I would say of a venture in terms of what it does to getting it into high volume manufacturing than it was with Low NA, which really was a paradigm shift. Long way of saying that this will not be a gross margin level from day one.

A lot of the components that we have on high <unk> by the time <unk> really gets introduced have already been tested in many ways on the on LOE in a as well and actually one of the key things that we're driving is commonality between a number of parts on the lower named machine and Heinie and machine and I think in that way.

You know less I would say of a.

All of our <unk> venture in terms of what it does to to get to get into high volume manufacturing than it was with it with low on a which really was a paradigm shift so long way of saying that this will be this will not be a gross margin level from day, one for sure there will be a learning curve that said that we have to go through it together with.

Monique Mols: Mm-hmm.

Roger Dassen: For sure, you know, there will be a learning curve that we have to go through together with our customers. I think this will be accretive to gross margin, I would say, in the 2026, 2027 timeframe.

With our customers, but I think this will be accretive to gross margin I would say and to 'twenty six 'twenty seven timeframe. That's the current expectation that we have so it will be dilutive in the initial years, but by 'twenty six 'twenty seven we should be able to get it to the levels that we wanted to be and.

Monique Mols: Mm-hmm.

Roger Dassen: That's the current expectation that we have. We'll be dilutive in the initial years, but by 2026, 2027, we should be able to get it to the levels that we want it to be.

Monique Mols: Yeah. Just in case anyone who's watching will want a high NA system in their home, how much is that?

So just in case anyone who's watching will want and high in a system in their home how how much is that sorry, how much how much as a high and a system. These days you mean in terms of euros, Okay, well first off you need if you could talk about home you need a big.

Roger Dassen: Sorry, how much?

Monique Mols: How much is a High NA system these days? If you wanna buy one.

Roger Dassen: You mean in terms of euros?

Monique Mols: If you wanna buy one.

Roger Dassen: Okay. Well, first off, if you talk about home, you need a bloody big living room, right? To Peter's-

Living room practically to Peter's, but a very big airline.

Peter Wennink: A very big house.

Roger Dassen: To Peter's point. A significant bank account to go with that.

And the significant bank account to go with that okay. So the R&D tool that.

Monique Mols: Okay. Okay.

Roger Dassen: The R&D tool that Peter talked about is EUR 270 million.

That said that Peter talked about is $270 million for the high end the high volume.

Monique Mols: Okay.

Roger Dassen: for the High NA

Monique Mols: Yeah.

Roger Dassen: The high volume manufacturing tool, the TWINSCAN EXE:5200B, where we just got a first order for, we talk about significantly higher than 300.

Volume manufacturing tool the 50 to 100, where we just got our first order for we talked about significantly higher to 300, Okay. So you know.

Monique Mols: Okay. You know. There's a question from Marc Hijink at NRC Handelsblad. How do you assess the risk for overcapacity and the effect on ASML revenue-

And there's a question from Mark hanging at NSA, almost not how do you assess the risk for overcapacity and the effect on a small revenue when all geographies fire up their plans to build big Fabs at the same time Yep sorry.

Roger Dassen: Yeah.

Monique Mols: When all geographies fire up their plans to build big fabs at the same time?

Roger Dassen: Yep.

Peter Wennink: Sorry. I think, it's a good question. I can only say, well, you know, we've structurally underestimated the growth of this industry.

Sorry that I think.

It's a good question I.

Can always say well you know we've structurally underestimated the growth of this industry.

Monique Mols: Mm-hmm.

Peter Wennink: I don't see any reason why, you know, we would be so much better at guessing where the industry will go. I mean, we currently believe this industry will go to $1 trillion, yeah? By the end of the decade.

And.

I don't see any reason why you know.

We would be so much better at guessing where the industry will go I mean, we currently believe this industry will go to a trillion dollars yeah.

Monique Mols: Mm-hmm.

By the end of the decade sort of doubling here. So we need that capacity also and if you then people say well, but there's so much government funding well if you added all up it's 500 billion.

Peter Wennink: It's sort of doubling. Yeah? We need that capacity also.

Monique Mols: Mm-hmm.

Peter Wennink: If you then people say, "Well, but there's so much government funding." Well, if you add it all up, it's $500 billion. $500 billion euros or dollars. Let's say dollars. Yeah? Probably even a little bit more. Well, this industry is $1 trillion annual sales, so of our customers industry, $1 trillion by the end of the decade. There's only 50% of annual sales, yeah? By that time.

I have a 1 billion euros or dollars lesser dollars yeah.

Even a little bit more.

This industry is a trillion dollars annual sales are to our customers in drilling those by the end of the decade. So there's only 50% of annual sales.

Monique Mols: Mm-hmm.

Peter Wennink: Now, of course, we will pre-invest, yeah? Of course, this industry is also known for these kind of shorter-term cyclical movements, because there are big capacity step-ups, you know. As a big semiconductor factory, we'll create a lot of capacity in one go. Well, you will grow into it, but it will be short-lived.

By that time of course, we will reinvest and of course. This industry is also known for these kind of shorter term cyclical movements because they are big capacity step ups.

So big semiconductor factory will create a lot of capacity in one go well you will grow into it but it will be short lived.

Monique Mols: Mm-hmm.

Peter Wennink: Yeah? I think ultimately it is, it's about do we together believe society needs more technology solutions that are driven by semiconductors? We all believe that, and actually we see the proof of it, yeah? We need capacity.

I think ultimately it is about do we together believe.

Society needs more.

Technology solutions that are driven by ceramic semiconductors, we all believe that actually we see the proof of it.

Then we need capacity and will it when it all happens at the same time, we will give some short term disturbances.

Monique Mols: Mm-hmm.

Peter Wennink: Will it, you know, when it all happens at the same time, give some short-term disturbances? Yeah. You know, we're used to that. Yeah? Longer term, I don't see an issue.

We're used to that.

But longer term I don't see an issue okay.

Monique Mols: Okay. There's a question from Toby Sterling, Reuters. It's a question we get regularly. How long will it take for China to develop EUV lithography that will compete or substitute for ASML's technology?

Then there's a question from Tobey Sterling Reuters, It's a question we get regularly.

How long will it take for China to develop UV lithography that will compete or substitute Tobey that will compete a substitute for Asml's technology.

Peter Wennink: Yeah. It's a good question. You know, EUV technology over the last 15, 20 years, many people said, "What you guys are doing is completely irresponsible." It's not what we're doing, it's what we're doing with our partners and with our knowledge institutions. It cannot be done. Actually, we achieved it because it's this massive ecosystem that is helping us to do that. One example is ZEISS, but I can name another dozens, yeah?

It's a good question.

<unk>.

UV technology.

Over the last 15 20 years. Many people said what you guys are doing is completely irresponsible and is not what we're doing in search we are doing with our partners and along with her knowledge of institutions that it cannot be done.

And actually it.

We achieved it because it's this massive ecosystem.

That is helping us to do that.

One example is zeiss, but I can name a name alone dozens of companies that are absolutely world class in what they do we acquired Berlin, a glass, which in our Els ASML.

Monique Mols: Mm-hmm.

Peter Wennink: Of companies that are absolutely world-class in what they do. We acquired Berliner Glas, which now is ASML Berlin. Why? They make this wafer clamp, which is a module that takes 52 weeks to make. The technology that's in there is decades of know-how. It's not patents, it's know-how.

Israel Berlin, why they make this wafer clamp, which is a module that takes 52 weeks to make.

But the technologists in there is decades of Knowhow, it's not patents just knowhow.

Monique Mols: Mm-hmm.

Peter Wennink: That's spread in this ecosystem of hundreds of companies.

And that spread in this ecosystem of hundreds of companies.

Monique Mols: Mm-hmm.

Peter Wennink: You need to replicate that.

So you need to replicate that and I'm not saying it cannot be done because the laws of physics are the same in China here, but.

Monique Mols: Mm-hmm.

Peter Wennink: I'm not saying it cannot be done, because laws of physics are the same in China as they are here.

Monique Mols: Mm-hmm.

Peter Wennink: I know it's the combined effort, the synergy between all these companies, yeah? Bring it all together in this system approach, which is basically our core competence. Our core competence is system integration and system architecture. Yeah? That, I think, will be very difficult to replicate, because you need to go to all these places where they do these very complex things that nobody else on the planet can do.

But I know, it's the combined effort of synergy.

Between all of these companies.

Bring it all together in the system approach, which is basically our core competence core competencies system integration and system architecture Yep.

That I think will be very difficult to replicate because you need to go to all these places where they do these very complex things that nobody else on the planet can do.

Monique Mols: Mm-hmm.

Peter Wennink: That's going to be a massive exit. Never say never. They'll certainly try. Trust me, they'll certainly try. It's going to be difficult. What do you do? What do you do normally? You just go faster.

Yeah.

And that's so that's going to be a massive et cetera, never say never and they'll certainly try Trust me they'll certainly try.

So it will be difficult so what do you do.

What do you do normally.

Monique Mols: Mm-hmm.

Can you just go faster.

Peter Wennink: Yeah. How do you deal with this level of competition and threat? You go faster, you innovate, you go to High NA, you go beyond High NA, which, by the way, we're also doing in the research, yeah? I think this is what you do.

So how do you.

Deal with this level of competition in threat go faster you innovate you go too high in a <unk>.

You go beyond tiny which by the way we're also doing in research yeah.

So I think this is what you what you do relentless investment in innovation.

Monique Mols: Mm-hmm.

Peter Wennink: Relentless investment in innovation.

Monique Mols: Yeah. We still have a little bit less than two minutes. Koos Swart from Trouw. ASML receives innovation subsidies from the Dutch government. Do you need those subsidies, Roger?

Yeah.

We still have one little.

Little bit less than two minutes course swaps from Tal.

And ethanol receives innovation subsidies from the Dutch government do you need those subsidies okay.

Roger Dassen: Well, I think they are definitely helpful in doing the things that we do, right? I mean, they do allow us to, you know, to invest in the future. That's, I think, you know, the fact where we are today-

Well I think.

They are definitely helpful in doing the things that we do right I mean, they do allow us to.

Invest in the future and that's I think the fact, where we are today.

Monique Mols: Mm-hmm.

Roger Dassen: The position that ASML enjoys today, I think we would not have been able to enjoy without the support that is out there. I think it has been very helpful to get us to where we are today, and I think it also helps us to focus all of the efforts that we're doing in Veldhoven. I mean, if you look at the way we concentrate all of our R&D efforts here in the Netherlands is pretty unique. I don't think there are many companies where you have such a unique focus and the concentration of R&D work as we have it here in the Netherlands.

The position that ASML enjoys today I think we would not have been able to enjoy without the support that is that is out there. So I think it has been very helpful to get us to where we are today and I think it also helps us to focus all of the efforts that we're doing in <unk> I mean, if you look at the way at where we the way we concentrate all of our.

Our R&D efforts here in the Netherlands is pretty unique I don't think there are many companies where you have such a unique focus and concentration of R&D work as we have it here in the Netherlands, and that's not primarily as a result of of subsidies, but definitely it is a reflection I think of.

Roger Dassen: That's not primarily as a result of subsidies, but you know, definitely, it is a reflection, I think, of the very helpful ecosystem that we find ourselves in. I think that ecosystem, you know, with the government supporting that with, you know, with many of the people being attracted to such an environment, I think that really helps us to do the work that we do here.

Very helpful ecosystem that we find ourselves in I think that ecosystem with the government is supporting that with with many of the people being attracted to such an environment I think that really helps us to do the work that we do here I'd like to wrap it up because I think it is particularly the innovation box the real subsidies is that.

Peter Wennink: I'd like to add to that because I think it is particularly the innovation box, the real subsidies is that.

Monique Mols: Yeah, I think that's what it is.

Peter Wennink: It's really the innovation box.

I think that is really inefficient books as a kind of a reduction on your Texas. This is we look at these activities also from a cost point of view what's.

Roger Dassen: Yeah.

Peter Wennink: It's a kind of reduction on your tax. We look at these activities also from a cost point of view. You know, what's the most cost-effective way to do research and development? To Roger's point, yeah, around 40% of our R&D bill, yeah, is in the supply chain.

What's the most cost effective way to do research and development and to Russia point, yeah around 40% of our R&D Bill.

Yeah.

Monique Mols: Yep.

In the supply chain. So it's a it's a it's a multiplier for this ecosystem that we have created in the Netherlands, and partly Germany, yeah. So it's that incentive to keep the cost of R&D, Laura but it isn't the only to have benefit is to the benefit of hundreds of companies in.

Peter Wennink: It's a multiplier for this ecosystem that we have created in the Netherlands and partly Germany, yeah? It's that incentive to keep the cost of R&D lower.

Monique Mols: Mm-hmm.

Peter Wennink: It isn't only to our benefit, it's to the benefit of hundreds of companies in our ecosystem, which is Netherlands and a bit of Germany.

Our ecosystem, which is.

Netherlands, some bit of Germany.

Monique Mols: Yep.

Peter Wennink: Yeah.

Monique Mols: I see that our time is up. No further questions. Reach out to us if you have any additional questions. You know where to find us. We're on the website. Sander and I will be happy to talk to you. If you are an investor, you can talk to my colleagues in investor relations, obviously. Thank you very much for listening. Thank you very much for participating and for sending in your questions. Again, I promise, we'll see you next year here. Thank you very much.

And I said at that time is up and no further questions. So reach out to us. If you have any additional questions you know where to find us where on the website. So some of and I will be happy to talk to you and if you're an investor you can talk to my colleagues in Investor Relations. Obviously, thank you very much for listening. Thank you very much for participating and for sending in your questions.

And again, a promise we will see you next year here. Thank you very much.

Peter Wennink: Thank you very much.

Roger Dassen: Thank you.

Thank you very much thank you stay safe.

Peter Wennink: Stay safe.

Monique Mols: Yeah.

Yes.

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