Q4 2022 ASML Holding NV Earnings Call

January 25, 2023

Speaker 7: 2030, depending on the scenario, between 44 and 60 billion, between 56 and 60 percent gloss margin.

Speaker 8: And I think it's not only us, it's also throughout the supply chain we're significantly investing together with our partners.

Speaker 9: which also means that the company is going to be profitable. We are profitable, we are very profitable, but of course because we will grow, that profitability will grow. And also for our shareholders there is going to be a significant return.

Speaker 10: Now, when we look at the industry...

Speaker 11: Three major drivers. I think it's still we all know this is connectivity. It's connectivity where it's a cloud or the edge computing, it's all connected. These things are not separate. There's no centralized computing in the cloud without the decentralized computing at the edge. So far I think the ride is axe laugh at it.

Speaker 12: That's needed to drive artificial intelligence and the hyper-connectivity now being supported by 5G, but by the end of the decade it will be 6G. So it's going to be faster, lower latency, more bandwidth.

Speaker 13: And then there's this other driver, it's called the climate change and the resource scarcity. And semiconductors.

Speaker 14: I'm going to show you a couple of examples. It's going to be a very significant building block of making sure that we can manage climate change, whether it's electrification, smart mobility, the energy transition, and of course how are we going to use our resources smarter.

Speaker 15: And our last big driver is the social and the socioeconomic shifts. I mean, yes, with the pandemic, they have actually taught us to use different ways of working, working from home, but also that this remote connectivity...

Speaker 16: is extremely important also in areas of medical technology for instance.

Speaker 17: And then, we'll talk about it later, technological sovereignty is a big driver for this socio-economic shift.

Speaker 18: Okay, just a couple of examples. The energy transition, we believe will be one of the main drivers the coming decades and it's about energy generation, it's about storage, about distribution and it's about consumption of this electrical energy.

Speaker 19: And, for example, if you want 1 megawatt of wind power, it needs about 3000 euros of semiconductors.

Speaker 20: and one megawatt of solar power, 4,000 euros.

Speaker 21: If you think about the gigantic increase in demand for electricity and the renewable energy coming from wind and from solar, just from wind and solar, just from generation, you can think about the enormous impact this will have on semiconductor consumption. Don't talk about the grid, about the smart grid that needs...

Speaker 22: a lot of sensors and actuators and compute power.

Speaker 23: And how do we use it? It's used in the electrification of our mobility. The electrical vehicle will at least, at least...

Speaker 24: use twice the number of semiconductors as compared to a combustion engine. I think the electrical vehicles is not our number, it's just an estimate of one of our customers who is very clearly involved in the electrification of the automotive industry. At least it's over $1500 per...

Speaker 25: and some even say over 2000. So, that's just one example. But it's also...

Speaker 26: People talk about advanced semiconductors and the importance of it and mature semiconductors as if these were two different worlds.

Speaker 27: But they aren't. This is a good example which comes from NXP. This is Las Regas, the CTO of NXP. He actually showed this slide and it shows that if you take a car, it consists of 20 proxy forward, which is playing Brokaw makes an oppressed car. Okay, go ahead and

Speaker 28: mature semiconductors and it starts on the left hand side with 40 nanometers, it's just to actuate. It's picking up the sensor data. We're actually picking up the sensor data, a semiconductor technology that is even older than 40 nanometers, a lot older. And it needs to actually go to the central core of the car where it needs to be processed.

Speaker 29: very fast, high processing capacity because the input of that first analog and then digital data into the car is massive.

Speaker 30: But the 5nm chip doesn't work without the input.

Speaker 31: If the input cannot find a placeholder in the central computing engine, it doesn't work either. It's all connected.

Speaker 32: So, mature and advanced semiconductors are part of a systemic approach to a problem.

which you will see with more increasing complexity that the approaches will be more systemic. We don't only need advanced semiconductors, but very much we also need more and more mature semiconductors.

You will see with more increasing complexity that the approaches will be more systemic. We don't only need advanced semiconductors, but very much we also need more and more mature semiconductors. Now customers realise this, so...

Just take an example. Our three major customers, Intel, TSMC and Samsung, they have announced

FAB projects, investment projects. Well, I do the math for you. It's $326 billion announced. $326 billion announced in new FAB expansions. And it's not only leading edge.

It's also mature.

And that's needed. That's needed because of what I just talked about.

Now if we then look at the total semiconductor market.

When you take all those developments and semiconductors are going to be pivotal.

Those developments and semiconductors are going to be pivotal in our day to day life.

And we look at the growth rates that we're currently seeing and the new areas of growth in connectivity, in the energy transition, as a result of the social economic shifts.

It's not a surprise.

that when you do the math, it's not only us, but at different sources come to a semiconductor industry, the business of our customers, that will be anywhere between 1 and 1.3 trillion dollars, which is a doubling of where we are today.

Now, the semiconductor industry took 40 years.

close to 50 years, to grow to 600 billion dollar sales.

It needs another 8 to 10 years to double it again.

And this is the challenge that we have.

the challenge that we have. So what do we need to do?

We need to build capacity.

Because we need to scale and we need to find talent around the world.

We are investing in our production capacity and in our EV factory here, our Prince can factory here, our deep UV capabilities here, but also in Berlin. We invest in Taiwan, we invest in Korea.

we invest around the world to make sure that we can deal with this increase in capacity needs.

So our current build capacity is 375 deep UV systems.

Well, we won't have 600 by 2025-26.

We have last year just a build capacity of around 50 units, this year 60 units for EUV.

I want to get a 90.

That's all needed to drive the growth of this industry and also means we need to hire people. This morning I told the news agency that...

In the last 12 months we received about 300,000 applications for a job at ASML.

But you hired close to 10,000 people.

So we still have a choice.

And we now employ close to 40,000 people worldwide, with about half here in the Netherlands.

That is going to be a constant challenge for us because we need to grow, we need to hire people, that's one, but then we need to onboard and make them effective. to take a management challenge.

Now, so what do we do then on ESG? It's very important. We launched our ESG strategy last year. So what do we do this year? For instance, we have a good example. We connected all the buildings here in Feldhofer in what we call a one energy grid, which basically means we use concept. We find places where...

we will save 70% gas.

in this side, which by the way you've seen is a big side, 70% gas reduction.

And that also means that we're significantly in the social domain, significantly scaling up our investments in the community.

in the infrastructure, to basically make sure that all people in the community that we work in have as much as possible access to personal growth and can also benefit.

from the value that's being created. And I think also from a government's point of view, we're one of the founding members.

of this semiconductor climate consortium which was actually launched a couple of months ago and was opened by Al Gore. I mean we take our responsibility also as an industry.

Now, geopolitics.

Geopolitics. I'm probably not going to get any questions on this.

So that's why I'm going to preempt something. Basically, it's a clear issue. It's driven by the fact that...

We all realize...

that semiconductors are now a pivotal element in creating a sustainable society.

and it's

Perhaps it's mind-boggling that only now governments seem to realize that we have created, you could argue, some single-sided dependencies on certain countries on the planet because they basically have 80% of the world's manufacturing capacity.

So that means everybody's now rethinking this and says, what do we need to do? We need to stay relevant. We don't need to do everything ourselves. We need to stay relevant. So we need to push the development of semiconductor manufacturing in our region, whether the region is.

India or the United States or Europe or Japan.

all governments are rethinking their semiconductor strategy.

and

What are the consequences?

Over the last 40-50 years, the semiconductor industry has...

consolidated itself into a global collaboration network, an ecosystem without borders, without boundaries.

which has great advantages because customers...

could talk with us and throughout the ecosystem very clearly about the road maps, about what needed to be done to drive innovation together. We have worked together with Pierce to just make sure we created processes that customers could use and actually created a semiconductor industry that innovated faster.

very and almost unlimited coordination with academic partners and of course with suppliers and an open structure and open collaboration model to drive innovation.

almost unlimited coordination with academic partners and of course with suppliers in an open structure, an open collaboration model to drive innovation. That's what we created.

and also by sharing risks and rewards. Now, because of the, you could say

the bifurcation of the world.

into new socio-economic blocs.

into new socioeconomic blocks with a significant impact.

that has on the way they look at semiconductors.

You see of course a bifurcation happening.

I have one element of that is export controls, but that's not

Only it. I mean, it's the chips act around the world.

The CHIPS Act that comes with consequences, that comes with liabilities. If you want to get the money from the government, you have to get something in return.

Which basically means that this world is indeed bifurcating. So what does that mean if that happens?

Well, you see that the chip availability could be reduced.

It could be as a result of export controls that go too far and then cut off certain parts of the chip manufacturing capacity which will have an impact on significant industries like the car industry, like the energy transition, like the medical tech. My chain might get disrupted because, you know, countries say, yes, you can get my money.

from the government but these are the conditions. You only need to spend the money where we think it is wise.

Which means that that could put a lid on the collaboration with peers, with academia, because there will be borders. This borderless ecosystem now is a danger of creating hurdles.

I will also have...

impact on the supply chain. That was, I would say, seamless.

I will not be as seamless going forward as it is today.

Now, it also means that...

countries will double down on investing in their own industry.

whether it's in the United States or in China or in Korea or in Europe . And it also means that we will have a less efficient infrastructure.

in China or in Korea or in Europe . And it also means that we will have a less efficient infrastructure. Costs will very likely go up.

And that's the risk that we are facing, but that's the result of, let's say, the realization that this ecosystem that we have built was almost seamless.

is now indeed bifurcating in different social economic blocs, each with their own economic and political interest.

That's where we are today. I'm happy to take some questions later on but Roger, why don't you do the following and talk about something boring like financials. Thank you. This was a former CFO talking, how about that? It's a small step from US politics to US GAAP as I said it yesterday, so that's what we hear.

Small step for a man, a giant leap for mankind. Here we are. Financials. So Q4 results of 2022. Strong quarter, all in all. If you look at the numbers, the net sales came in at the midpoint approximately of our guidance. At $6.4 billion as you see here, based on $4.7 billion of system sales in one year.

to Q4 and that really beefed up the install base number for Q4. Gross margin, pretty strong at 51.5%. We guided 49%. There was some one-offs in there, but again a major driver here is that same install base management sales. There were quite some software upgrades in there.

to the numbers that you see here as net income, earnings, etc.

Important to note, the net bookings, in spite of the climate, in spite of a number of our customers saying that they are looking at ways to reduce capex, it's very clear that we're still adding to our order book. Because if you look at the...

6.3 billion net bookings number that you have here and you compare that to the first bullet where we talk about net system sales of 4.7 that tells you that we're still adding to the order book and you know if we look at the order book today at over 40 billion you're in fact looking at you know more than twice the expected.

and share with you, of course, first off the sales growth, sales growth of 14% for over 2021, really strong demand, reflecting strong demand in all of our products, to 21.2 billion at 50.5% gross, gross margin, pretty strong net income of 5.6 billion.

with accounting rules all that much. But the essence is because of the high demand for EUV tools that we had in 2022, and some of the supply chain limitations that we had, we had to optimize the way we shift tools to our customers that meant that some testing.

in the factory didn't happen as a result of that we could only recognize revenue for 40 tools but in essence we shipped 54 tools. That delta of 14 tools is therefore not recognized in the growth number of 14 percent that you see for the full year but that will come in the course of this year.

Also important to note is that all five EUV customers actually have now placed high ENA orders and I think that really emphasizes the confidence that our customers have in the high ENA technology that really is going to get us into the second half of this decade. And there you will see that high ENA will play a pivotal role in the future.

both in high-end logic and also in the memory business.

Also the DPV business continues to be very very strong in the back of some of the comments that Peter made in the mature business but also in the advanced business. Growth 13% to 7.7 billion as you see here and this really reflects the continued capacity growth that Peter also showed you in the earlier slides.

Two new models were being introduced, the new ARF immersion system, the NXT 2100, and the advanced dry system, the NXT 870. Also in the application business, strong growth, 28% to 660 million, so really firing on all senators.

on the demand from customers on upgrades to increase the productivity of the installed base that they already have.

And finally in terms of capital return, everyone is sharing in our success but also the shareholders are sharing in the success and in the aggregates with a combination of what we paid in terms of dividends and share buybacks, we were able to return to shareholders an amount of 7.2 billion euros.

Very quickly in terms of the sales breakdown, you see technology-wise not a real big difference. You see that the EUV, the web business, RFI, etc. You see that it's more or less in line composition-wise with last year.

You see that in terms of end use actually memory is picking up moving from 30 to 35 percent which might be a surprise to some because you know some of our customers are you know clearly indicating the memory market in 22 was down, also prices were down but this really tells you that you know the investments that our customers make in the memory business are strategic so they're really looking...

in the pickup of the memory business. In terms of regional breakdown, it's more or less in line again with last year. In terms of unit numbers, you see a pickup from 309 units in total in 2021 to 345 in this year.

If we then quickly look at the composition in terms of end use.

Again, as we see here, memory strong growth, logic continued to continue strong growth, and then you see this pickup of the install-based business that we already talked about. It's interesting to see the five years, how particularly the logic market has really, really picked up on the back of the end-use developments that Peter has been talking about.

If we then look at the boring numbers here, it's once again good to take the five-year perspective and then you see that in fact in this period the company doubled in many different ways. We doubled in terms of sales, gross profit is picking up. You see a slight decline in the gross margin percentage for 2022.

in comparison to 2021. There's a number of reasons but the two primary reasons. First off, there is inflation. Inflation has been hitting us in 2022 as it has been hitting everyone. And you know not all of the inflation burden could be passed on within the ecosystem. So that's one driver.

But secondly and very importantly, we are investing in growth. As you see, if you look at the campus here, if you look at some of the slides that Peter was presenting, we're very much gearing up for further growth and it also means that in the growth margin there is quite some money that is being spent on being ready.

for increased capacity in 24, in 25 and 26. So that means that you know that creates a bit of a burden on the on the growth margin. Nonetheless if you take the longer term perspective, very healthy development on that front. R&D also more than doubled which I think is still a good sign because it really tells you that the company is still

has still an abundance of ideas and is driving a very aggressive roadmap towards the targets that you've seen that we articulated at the Capital Markets Day.

Also as the SG&A grows in line with the growth of the company and more or less doubled in comparison to 2018.

The rest is just a translation of that into the bottom line. The last one just to emphasize is the very, very strong net bookings for the year at over $30 billion, already on the back of very, very strong order intake in 2021. And as I mentioned, that led to an order book of over $40 billion.

I mentioned the return to the shareholders. So, you know, we had very strong share buybacks last year. Also in terms of dividends, once again we present to the AGM an increase in the dividends, an increase of 5.5% towards 5.80 euros per ordinary.

1 to 6 billion in terms of net sales which is more or less in line with what we had in Q4. Install base a little bit lower because as I mentioned to you there was quite some pull-in from customers into Q4 so that has a slightly negative effect on the install base that we installed sales that we expect for Q1.

R&D once again a step up to $965 million and SG&E commensurate with the growth of the company to $285. So those are the key parameters for KeyOne. If we look at the full year, we are looking for 2023 at an over 25% increase in terms of sales. So that really tells you that in spite of the growth of the company, we are looking for 2023 at an over 25% increase in terms of sales.

some of the signs that you get. It is very clear that our customers are really looking at investments into lithography as strategic investments. And while it's clearly, you can clearly recognize that there are some end markets that are under pressure, big end markets like PC, smartphones, etc.

you see that growth continues in other markets like in the auto market and I think the example that Pierre just gave you gave you both on electrification but also ADAS systems I think is a good example there.

So clearly there is some pressure on some of our customers and some of the growth of our customers, particularly in the first half of the year. Most of our customers, if you listen to their commentary, they expect the market to regain strength in the second half of this year.

And then the logic of our customers is pretty clear. They say, okay, so if the market within a one year timing is going to pick up, and if the lead time that ASML has for ordering new tools is over that, and as I just mentioned, it's on average about two years time, then we better take our tools.

because if we now let go of our tools that means that we're at the end of the queue, we have to wait two years before we get the tool and if then indeed the market picks up within one year, we will be too late to cater to the pickup of the market and that's the reason why in spite of some of the pressure that some of our customers feel, we still see a very strong demand for ASML. I mentioned the over 40 billion in terms of backlog, very very strong, a record number at day.

business year-on-year growth 40% is expected, 30% for the non-EUV business and the install-based business, we expect a moderate 5% and that is because we think most of our customers have done a lot of upgrades last year. We expect them to slow down a little bit on that in 2023.

With that, dear friends, I've come to the end of my presentation and I hope Peter and Monique can join us for Q&A. Great timing, Roger. I see we have some issues with our website, so the connectivity is not too good. I think this is related to the general IT disturbances that are going on worldwide.

Hoping to get an update in my ear, but let's just start here. We're hoping to fix it as soon as we can so if you're Don't blame it on the semiconductor So I'm We have a microphone here in the room Kelsey Sages will come to you if you indicated you have a question

Thank you very much.

Germany. Could you elaborate a little on the communication between ASML and politics? I wonder in political talks in what way is ASML getting involved specifically when the Dutch Prime Minister has talks in the US for example.

how many ASML representatives will be part of the delegation and what will they communicate with politicians? It can be very short on the content of the delegation. I mean this is geopolitical, it's not geo-business. So I think there are no delegation members of ASML there because it's...

understand how this industry works.

Now until two, three years ago, you could have asked the average politician and said, tell me how the semiconductor industry works. You wouldn't, I have no clue because semiconductors were always there. It's like 1973 revisited, oil was always there until it wasn't and then it became a strategic commodity. Fast forward 2021.

Semiconductor has always been there, nobody needed to worry until they weren't. And we figured out there was a worldwide dependence on only a few countries. It's only very recent. So our role is education. It's basically providing information, data. How does this industry work? How is this global ecosystem connected?

And where are the interfaces between those pieces? And how does it work? So if you think about a bifurcation, but also of the world and the world creating different sets of chips acts and think about export controls, then our role is really to provide the information and the insight into what it means. What are the consequences of certain?

to do.

And that's them, that's not us.

That's not us. So it is our role.

So in your question, we're not part of the delegation, but we're definitely part of the discussion.

And our role is to provide that information and that insight.

And our role is to provide that information and that insight. Good question.

Okay, thank you. I'm just getting an update that there's quite an issue with our website, so we won't be able to get the questions in from people online. Sorry about that. We're available after the press conference, so if you have any questions or want to reach out to us, please do to any of my team members.

Next question herebe did hadack from political I also had a question on expert controls. We've seen last week. There were discussions continue to Biden but to what extent do you think that this should be a debate more on an EU level because I kind of mention that there if.

say it involves only the Netherlands and the United States. He referred to several countries with several companies in a complex supply chain which we need to look at and the consequences of doing anything could be quite significant. He actually mentioned that. So it's sensitive.

I don't remember, he came out of it and said, oh, we have struck a deal. I don't think he said that. I think we are still in discussion because of the complexity of that matter. But you're absolutely right. I mean, it's what I tried to say. This is an ecosystem that has been built over 40 years.

So if it's seamless and you put locks into that system, you need to understand what the consequences will be. You need to understand what the consequences will be.

So, this is why these are decisions that can have far-reaching consequences for the worldwide ecosystem and the capacity in that ecosystem and the flow of semiconductors in that ecosystem.

And this is why it's not between one or two countries.

I think this is what the Prime Minister said. I think he has a point.

Okay, next question.

You have to do this also for the people online. If you know anyone who is watching, open your chat.

You have dwelled on the many drawbacks of the geopolitical situation, but to what extent do you sympathize or understand?

the concerns that the Americans have about China getting more aggressive.

Well, I think that concern is already there. As you know, our extreme upper-violet machines, EUV, are under export control. So that is a fact. Now, of course, listen to the arguments and the arguments are there, you know, these chips will be then used into military applications.

You have to realize that every time when I hear that

And I think about the proposed export control, it's about our advanced technology.

being able to make advanced semiconductors.

But the military applications use rugged, very mature semiconductors.

semiconductors are somewhere 10, 15, 20 years old, which are...

widely available across the globe also in China. So to fuel a significant amount of chips into a military complex.

Well, those chips are available. They're available in the world market and they're made on ASML machines, on EUV machines. But not in China. They're made in Korea, in Taiwan, in the United States. And those chips are available for every...

end-user and manufacturer on the planet to buy. There's also truth for China. China buys is the biggest importer of chips on the planet.

I mean, American chip companies, I don't know, they just look at their financial statements, just add the five biggest...

chip manufacturers on the planet in the United States, they sell 80 billion worth of chips.

in the United States that they sell 80 billion worth of chips to China.

It just shows you how complex this is.

This is

And those chips, those advanced chips, they go into anything. I don't know where, but they're being sold, so they probably end up somewhere.

So I think this is the complexity and this is also where the reference to the complexity was made.

highly sensitive.

It's a much bigger and more complex situation than just saying, well that ship goes into a military application. That's far more complex than that.

Meanwhile, I have really good news. If those who are watching refresh the page, then it should work again.

I have one question in through WhatsApp but I saw someone wanting to ask a question there. Kelsey, can you give the microphone here? Thank you.

Could you say what the possible ban on adjusted DUVs would be? To sell DUVs to China? Yeah, I think that fully depends on what the deal is. I think if they strike a deal, then we can... Actually, we laid out on different scenarios what the potential consequences are.

It's up to them to basically decide on that basis of that information. I cannot even give you that answer because they don't know what the outcome is. It really depends.

I'm not even willing to speculate on this because this is so sensitive. If I start speculating here, you know, I know what's going to happen. I know what you guys are going to write. So I'm not going to do that. This is too sensitive.

I just want to remind everyone that this is annual report. Annual results. You are allowed to ask questions. I will answer those questions. You will be so absolutely clear about this. I can imagine that the question is going to a different direction. If you have anyone here, that's for the web.

what I try to say depends on how deep those export controls are. I think export controls are a legitimate instrument, I think, that's clear. But it's how do you want to use them. And if you overuse them, it will have an effect on availability of mature chips, which are being used not in a military complex, but are used in...

a much larger, way, way larger industrial complex, which is basically what we buy every day from cars to washing machines to PCs to smartphones to infrastructure. We talk about the energy transition. The energy transition needs massive amounts of semiconductors, massive.

So, I think we also need to be careful that we don't, that instruments that are well meant here don't have a consequence that we all...

feel sorry about. So that's also the position that Mark would refer to.

I saw Toby. Yeah, Toby. Hi, Toby Sterling from Reuters. Not purely my question here, but it's financial, so there you go. I think the general idea is there's some skepticism about the weakness in the chip market not having much of an effect on ASML. I know you've explained that a bit, but maybe you could say

I mean there's such a big building program happening right now, is there a chance that that could be slowed down by some of your major customers? And could you break down your projections for DUV and EUV sales, not by systems but by the number? I think Roger can probably put it on the slide.

and there's a recessionary fears, and some people even say some parts of the world are in a recession. Of course, that impacts our customers and will impact us. But you have to remember that we come out of a period like 2022, where we could hardly, hardly ship 55% of what our customers wanted.

And they want this because they know that these investments are long term, so they wanted to have two years of lead time and then they need to build factories and it's going to take time. So basically we have this demand which was significantly over our build capacity which has come down.

True? So this is a reflection of what we see in the mug, but it's still quite a lot above our build capacity.

And that means our customers are actually saying, well, I think the duration of this recession is significantly shorter than the lead time of your tools, and that also means that the recession will turn up into an upturn by the time I need your machines.

So why would I cancel or push back those machines? If I do that and I'm wrong about the duration, it's shorter than I think, I'll be in the back of the line because these guys don't have enough capacity. This is where we are.

push back those machines. If I do that and I'm wrong about the duration, it's shorter than I think, I'll be in the back of the line because these guys don't have enough capacity. This is where we are.

when somebody falls out of line does it just simply go to the very next customer? Absolutely. Because there is a shortage. So if you said, I don't need your machine, and your neighbor says, thank you, thank you, thank you very much, that's gone.

Where's the next thought? So Toby, in terms of numbers, for EUV we're looking at 60 for this year and 375 units for DPV. Those are the numbers that we're envisaging for this year. But what I think is important to note is that the capacity that we are building is not, we're not building that capacity for the short term. I mean the capacity for the 90 EUV and the 600 DPV.

customer capacity you are right. I mean we see a demand reduction again above our build capacity so yes I think customers are reshuffling, retiming some of their capacity and that's for sure. I mean that's what they do. I mean in the memory industry some of our customers have actually set out there we're going to cut cutbacks for this year.

And always I said, we're not going to do that. But in terms of this very strategic, long-term, long lead time item called lithography, they're very cautious. And if for whatever reason the duration of the recession will extend to years, of course we will. We will see the effects. That's not what they currently think. At least that's our conclusion. $SmithVbad.org

And this question was really simple. I mean I could look at the average sale prices, but selling prices for each cut type of machine, but the question is in dollar terms is it about 50-50 the way it was in in 2022 for 2023? You see what I'm saying? I can't multiply 375.

times X and you mean DPV versus versus UV yeah I mean we said that that UV is going to grow a bit a bit harder and faster than the non-EV business so UV we expect to be to grow by 40% and the non-EV business by 30%

So the shift will be a little bit more towards EUV, which makes sense. You know, it's most expensive and that's where a lot of the capacity expansions that I showed you, the $326 billion, is about EUV.

EUV driven fabs. Thanks for that Toby. I have a question in from your colleague John . Chris Bryant from Bloomberg opinion. Is the drive for technological sovereignty including export controls more positive than negative for an equipment supplier like you? Well there are two sides to it. I think the positive side is it will create more

capital inefficiency. So capital inefficiency means high capital allocation so it's good for equipment makers. That's good.

The bad thing is that if you have more locks or hurdles into the system, you have more friction and friction, the flip side of friction is cost. So yes you have a higher level of business but it's not as efficient. So that also is true for us.

So it means that you will create higher cost. I think on balance.

equipment companies will sell more machines. That's it. So on that you could say it's positive. But it's a bit selfish. Yeah, I think so. But hey, that was the question. Anyone here?

Yeah, sure.

Go ahead, go ahead. the

talks in the US, when do we expect a decision?

in the US when do we expect a decision which would help you

assess the commercial ramifications? Yeah, I think it's in the papers and they write about that. The politicians want to do this rather sooner than later, probably also driven by the fact that there's a lot of uncertainty created. So the quicker you know where you are, the better it probably is. So it's probably under high pressure. And I mean, that's also what I read.

So, we'll see, you know, and then, but given the complexity of this, I mean...

You have to distinguish between some kind of general agreement and the details. How do you work out the details of these regulations and these laws? There are a lot of details involved and working out the details will probably take a significant amount of time. It may take days or weeks, I think it took months.

to really talk about the details of something like that, to really understand what does it mean, what are the ramifications of something like this. And that will always take time, but I think we can safely say that the thing is under time pressure.

like that, to really understand what does it mean, what are the ramifications of something like this. And that will always take time, but I think we can safely say that the thing is under time pressure.

Now maybe as an example, the October export controls, I think we're still, everyone in the industry is still trying to figure out what the details are and how to deal with that. Yeah, and that's absolutely true. I think until the end of this month there is a, let's say a feedback opportunity from the industry and industry participants on.

on what it actually means. So I think the final wording is still under review. It's how these things go. So to really say we fully understand all the ramifications and we can transfer that into business plans, I guess it's going to take some time.

Okay, question online, computable. Do you expect any very long term effect of China getting a position in manufacturing its own semiconductor machine equipment? How do you assess the probabilities of Huawei developing competing chip building machinery or probably any other?

party anywhere in the world. You cannot be naive on this, you know, when semiconductors are so pivotal and vital to a responsible economy and a responsible society and you can't get hold of those semiconductors, you're going to do it yourself. That's clear. So I think this will happen. That's one of the consequences of...

and not having this global, fluid, seamless ecosystem is going to develop themselves. But having said that, and I cannot speak for our peers in the semiconductor equipment industry, but for ASML...

In general, I think there is a lot of equipment in the industry that is focusing on a very complex process that is inside the machine, but the machine itself is not that complex. But for lithography, we make a relatively simple process. We just blow light through a lens.

But we do this in a very complex machine. So that's a bit different. So this is why...

basically rebuilding a lithography industry.

rebuilding a lithography industry which...

as it concerns to SML, consists of hundreds of suppliers but each of them are world-class in what they do. I just need to name Trump and Zeiss and VDL and they're world-class in what they do. And it's just three out of a couple of hundreds. Now you need to basically get... and it's not patents, it's know-how, it's people, it's the brains.

You need to just take that and then redo all of that to come to the same conclusion. It took us 40 years. So I'm not going to say that laws of physics are different in China or in the US or in Korea or in Russia for that matter. Not a lot of physics are always...

are all the same. But the accumulated know-how with hundreds of companies where we as a system architect, as a system integrator bring it all together.

That's a bit of a challenge. So I think, yes, of course the efforts will be there. It's going to be massive challenge going forward, because it's not about ASML, it's about the ecosystem. I think the best defense line that we have there, obviously, is to keep on innovating, right? I think that's critical as well. I mean, sometimes you get the question, you know, with the market share that you have, you know, why don't you lay back and be a little.

discussion with the founder of TSMC on what do you do when you have to think about competition coming from different areas. He said, well, it's one solution. You just have to go faster. And that's it. So this is also why you will see that we will invest, to your point, it's not only in capacity, which will of course have a temporary effect on your gross margin. So what you will see is where you go

So John Cox, coach from Bloomberg.

Yes, John , coach from Bloomberg. What do you see as the biggest challenge and risk in the US implementation of CHIPS and Science Act? Well, I think the biggest opportunity, let's talk about the opportunity first, is that you will build...

a part of the semiconductor ecosystem capacity inside the United States. So it means that the dependence, the geopolitical strategic dependence, will of course go down. So that's why they do it. I think the risk is that both in the US and in Europe for that matter.

The experience and the knowledge that semiconductor makers have

in bringing very advanced semiconductor manufacturing onto own soil.

is highly complex. It's an art. And that art is mastered over the last 10-20 years by the TSMCs and assumptions of this world and also Intel, but this is why you see the invitation almost. It's an invitation with a big carrot, which is called subsidy and investment support.

of governments to bring those companies with that particular competence within their borders. And this is exactly what's happening. You know why we had the Arizona fab opening of TSMC. Ultimately two fabs, $40 billion of investments, but that's Taiwanese knowledge.

you know, know how. Now, bring that into your country and then ramping this up in a way that you haven't been doing for the last 20 years also means that talent is a massive risk. You need to get the talent actually to do that. You cannot just...

Draw everybody from Taiwan or from Korea to do it. No, you need to create your talent pool. And that's a big challenge. I think that is a generic risk, not only to the US chip sector, but also to the European chip sector. I just don't think that wouldappen.

And that risk is also the single biggest opportunity because if you're able to do it and if you're able to build an ecosystem around that if you're able to make that the knowledge and the expertise in that ecosystem if you're able to really create that on soil again in Europe in the United States, I think it's a major boost to your to your competitiveness So it's the biggest risk. Are you able to attract that talent? But also by far the biggest opportunity is not just about you know, creating capacity. It's creating that knowledge infrastructure that will

technology partners, it's the peers, that's all there, that's the ecosystem. You see if you find the same in Seoul and in Wazong, you find the same in Silicon Valley, but not manufacturing, but the rest is there, you know, you have the design companies there, this is where, so it's not just the money, throw the money at it, find a deserted air place, you know, air force base and just build a factory.

No, you have to build an ecosystem. We have time for one last question. I have one online but if anyone is here, up for it.

Nope, and we go to Switzerland. Noyetschirchichaitung, how, again, it's not a financial question. You worded it again. Sorry, I tried. How do the US restrictions on the involvement of US persons in the Chinese semiconductor industry affect ASML's daily business, if at all?

Currently not, because I mean we have quite a significant workforce in China, which is non-US, and that's both Chinese nationals and people from outside the US, so that's not the case. Now, we're a European company, so I mean we have European know-how with people with European or with non-US. We're a European company, so I mean we have a significant workforce in China, which is non-US, and that's both Chinese nationals and people from outside the US.

nationality, so that's less of an issue for us. One minute, last call. Yeah. One question. Wow, Doug. Yeah, follow up on that. Are you still able to supply your Chinese customers with parts that are...

more American made than European maybe because that's not always possible so that would have an effect on the operability of the installed base but again we are largely, predominantly a European company with European technology.

So the parts are predominantly European. But here and there, yes, there are issues that we need to deal with, which actually means that some of the tools will then stop working. But it's minimal right now. But yeah, that would be the consequence.

Thanks. Okay. Well, thank you everyone for being here. I'd like to conclude this call. Thank you everyone online for being with us. And hopefully we'll see you next year. Thank you. Thank you very much for your time.

Good morning, everyone, and good afternoon if you're in Asia. Welcome to this press conference of ASML. We are going to talk to you about the fourth quarter and full year 2022 financial results. We're here at the auditorium in Veltov at our headquarters, and I'm actually pretty happy to have a real audience here after two years of...

location name and then send it in and we hope to get an opportunity to come to your question. My name is Monique Moles. I always forget to introduce myself. My name is Monique Moles. I am responsible for media relations at ASML. And with me I have Peter Wenning, CEO of ASML at Aurechiaonia

They will talk you through our financial results, but also developments around our industry that I'm sure also has your interest. Let me invite Peter Wenning to the floor and we'll kick this off.

financial results but also developments around our industry that I'm sure also has your interest. So let me invite Peter Wening to the floor and we'll kick this off. Thank You Monique.

Welcome everybody and yes you're right, I mean it's good to have people live here, but also people on the webcast. I want to just talk about a few things, key messages I think more the industry, the state of the industry right now and then Roger will talk about the financials and the outlook and then we'll take the Q&A.

So, key messages. Well in fact it's what we said and what we told you at the Capital Markets Day. I think despite the fact that what we're currently seeing is of course a lot of turbulence. Questions on are we going to get the recession and if so how deep will it be and how long will it be. Questions on geopolitical developments and export controls.

and in their life, it will only increase. It will only need more semiconductor compute and storage power going forward. And this is why we strongly believe that we need to invest.

And our customers feel the same way. They need to invest for the longer term. We have to remind you that building a semiconductor fab or a factory, we call it a fab,

It will take three years and then if you have to start planning it from day one, probably five.

So it's all about the long term and when we look forward and look at the growth rates of semiconductor sales, you'll see it later, I'll talk about it later, we see a very significant upside for our customers and also for ASML. This is why we need to invest. And this is also why we believe there is an opportunity, depending on different market scenarios, a higher or lower market scenario.

that by 2025, we'll be anywhere between 30 and 40 billion in sales and we have between 54 and 56% gross margin, which will grow to 2030, depending on the scenario, between 44 and 60 billion, between 56 and 60% gross margin. And I think it's not only us, it's also throughout the supply chain, that are going to produce very little profit out of our computer.

significantly investing together with our partners. Which also means that the company is going to be profitable. We are profitable, we are very profitable. But of course because we will grow, that profitability will grow. And also for our shareholders there's going to be a significant return.

Now, when we look at the industry, three major drivers. I think it's still we all know this is connectivity. It's connectivity whether it's a cloud or the edge computing, it's all connected. These things are not separate. There's no centralized computing in the cloud without the decentralized computing at the edge. It's all connected.

And that's needed to drive artificial intelligence and the hyperconductivity now being supported by 5G, but by the end of the decade it will be 6G. So it's going to be faster, lower latency, more bandwidth. And then there's another driver, it's called the climate change and the resource scarcity. I mean semiconductors will, and I'm going to show you a couple of examples, going to be...

I mean, yes, with the pandemic, they have actually taught us to use different ways of working, working from home, but also that this remote connectivity is extremely important also in areas of medical technology, for instance. And then, we'll talk about it later, technological sovereignty is a big driver for this socio-economic shift.

Okay, now just a couple of examples. The energy transition, we believe will be one of the main drivers the coming decades and it's about energy generation, it's about storage, about distribution and it's about consumption of this electrical energy.

Maybe an example, if you want one megawatt of wind power, it needs about 3,000 euros of semiconductors. And one megawatt of solar power, 4,000 euros. If you think about the gigantic increase in demand for electricity and the renewable energy coming from wind and from solar, just from wind and solar, just from generation.

or mobility. The electrical vehicle will at least use twice the number of semiconductors as compared to a combustion engine. I think the electrical vehicle is just an estimate of one of our customers who is very body limited.

very clearly involved in the electrification of the automotive industry. At least it's over $1500 per vehicle and some even say over $2000. So that's just one example.

involved in the electrification of the automotive industry is that at least it's over $1500 per vehicle and some even say over $2000. So that's just one example but it's also...

People talk about advanced semiconductors and the importance of it and mature semiconductors as if these were two different worlds. But they aren't. This is a good example which comes from NXP. This is Las Rhegers, the CTO of NXP. He actually showed this slide and it shows that if you take a car, it consists of mature semiconductors and it starts on the left hand side with 40 nanometers. It's just the actuators. It's taking up the sensor data.

We're actually picking up the sensor data, a semiconductor technology that is even older than 14 nanometer, a lot older. And then it needs to actually go to the central core of the car where it needs to be processed very fast, high processing capacity because the input of that first analog and then digital data into the car is massive. But the 5 nanometer chip doesn't work without the input.

And if the input cannot find a placeholder in the central computing engine, it doesn't work either. So it's all connected. So mature and advanced semiconductors are part of a systemic approach to a problem, which you will see with more increasing complexity that the approaches will be more systemic. We don't only need advanced.

semiconductors, but very much we also need more and more mature semiconductors. Now customers realize this, so let's take an example. For three major customers, Intel, TSMC and Samsung, they have announced...

FAB projects, investment projects. Well I do the math for you, it's a $326 billion announced in new FAB expansions and it's not only leading edge.

It's also mature. And that's needed. That's needed because of what I just talked about. Now if we then look at the total semiconductor market.

When you take all those developments and semiconductors are going to be pivotal in our day to day life and we look at the growth rates that we're going to be seeing and the new areas of growth in connectivity, in the energy transition, as a result of the social economic shifts.

It's not a surprise that when you do the math, it's not only us, but the different sources come to a semiconductor industry, the business of our customers, they will be anywhere between one and 1.3 trillion dollars, which is a doubling of where we are today. Now the semiconductor industry took 40 years, close to 50 years, to grow to 600 billion dollar sales.

It needs another 8 to 10 years to double it again. And this is the challenge that we have. So what do we need to do? We need to build capacity. Because we need to scale and we need to find talent around the world.

So our current build capacity of 375 deep UV systems, well we want to have 600 by 2025-26. We have last year just a build capacity of around 50 units, this year 60 units for EUV, we want to get a 90. That's all needed to drive the growth of this industry and also means we need to hire people.

This morning I told the news agency that in the last 12 months we received about 300,000 applications for a job at the ASML. But you hired close to 10,000 people, so we still have a choice.

And we now employ close to 40,000 people worldwide, a bit about half here in the Netherlands. That is going to be a constant challenge for us because we need to grow, we need to hire people, that's one, but then need to onboard and make them effective. Big management challenge.

We can transfer waste heat, which is in one of the buildings, you could imagine this is waste heat in the factories, and we use it to heat the buildings, but ultimately we will save 70% gas.

in this side, which by the way you've seen is a big side, 70% gas reduction. And that also means that we're significantly in the social domain, significantly scaling up our investments in the community.

in the infrastructure, to basically make sure that all people in the community that we work in have as much as possible access to personal growth and can also benefit.

from the value that's being created. I think also from a government's point of view, we're one of the founding members of this semiconductor climate consortium, which was actually launched a couple of months ago and was opened by Al Gore. I mean, we take our responsibility also as an industry. Now, geopolitics.

the value that's being created. I think also from a governor's point of view we're one of the founding members of this semiconductor climate consortium which was actually launched a couple of months ago and was opened by Al Gore. I mean we take our responsibility also as an industry. Now, geopolitics. I'm probably not going to get any questions on this.

So that's why I'm going to preempt something. Basically, it's a clear issue. It's driven by the fact that we all realize that semiconductors are now a pivotal element in creating a sustainable society. And it's mind-boggling that only now governments seem to realize that we have created a system

you could argue single-sided dependencies on certain countries on the planet because they basically have 80% of the world's manufacturing capacity. So that means everybody's now rethinking this and says what do we need to do? We need to stay relevant. We don't need to do everything ourselves. We need to stay relevant. So we need to push the development of semiconductor manufacturing in our region, whether the region is India or the United States or Europe or Japan.

advantages because now customers could talk with us and throughout the ecosystem very clearly about the roadmaps, about what needed to be done to drive innovation together. We have worked together with Pierce, yeah, with Pierce to just make sure that we created processes that customers could use and actually created a semiconductor industry that innovated faster.

very and almost unlimited coordination with academic partners and of course with suppliers in an open structure, an open collaboration model to drive innovation. That's what we created.

and also by sharing risks and rewards. Now, because of the, you could say, the bifurcation of the world into new socio-economic blocks.

with a significant impact that has on the way they look at semiconductors, you see of course a bifurcation happening. One element of that is export controls but that's not...

Only it. I mean it's the CHIFs Act around the world. The CHIFs Act that come with consequences, that comes with liabilities. If you want to get the money from the government you have to get something in return.

Which basically means that this world is indeed bifurcating. So what does that mean if that happens? Well you see that the chip availability could be reduced.

It could be as a result of export controls that go too far and then cut off certain parts of the chip manufacturing capacity which will have an impact on significant industries like the car industry, like the energy transition, like the medical tech. Supply chain might get disrupted because countries say yes, you can get my money from the government but these are the conditions. We only need to spend the money where we think it is wise.

Which means that that could put a lid on the collaboration with peers, with academia, because there will be borders. This borderless ecosystem now is a danger of creating hurdles.

put a lid on the collaboration with peers, with academia, because there will be borders. This borderless ecosystem now is in danger of creating hurdles. We will also have...

impact on the supply chain that was, I would say, seamless. There will not be as seamless going forward as it is today. Now, it also means that...

countries will double down on investing in their own industry, whether it's in the United States or in China or in Korea or in Europe . And it also means that we will have a less efficient infrastructure.

Cost will very likely go up. And that's the risk that we are facing, but that's the result of, let's say, the realization that this ecosystem that we have built was almost seamless.

is now indeed bifurcating in different social economic blocks each with their own economic and political interest. That's where we are today. I'm happy to take some questions later on but Roger, why don't you do the following and talk about something boring like financials. Thank you. This was a former CFO talking, how about that? It's a small step from US politics to US GAAP as I said yesterday, so that's what we're here.

Small step for a man, a giant leap for mankind. Here we are. Financials. So Q4 results of 2022. Strong quarter, all in all. If you look at the numbers, the net sales came in at the midpoint approximately of our guidance. At 6.4 billion as you see here, based on 4.7 billion of system sales and 1.7 billion of install base management sales. That was pretty strong.

We saw that there were quite some customers that actually do want upgrades to their system in Q4. Actually, a number of upgrades that were planned for Q1 have actually been pulled into Q4. And that really beefed up the install base number for Q4. Gross margin, pretty strong at 51.5%. We got it at 49%. There wasn't one of them there, but again, a major driver here.

is that same install base management sales. There were quite some software upgrades in there. On software upgrades the gross margin is very very high. So if you see install base management go up the way it went in this quarter, that also beats up the gross margin. So that's what you see there. Operating margin 33 percent and then it goes all the way down to the numbers that you see here as net income earnings, etc.

Important to note, the net bookings, in spite of the climate, in spite of the number of our customers saying that they are looking at ways to reduce capex, it's very clear that we're still adding to our order book. Because if you look at the 6.3 billion net bookings number that you have here, and you compare that to the first bullet where we talk about net system sales of 4.7...

That tells you that we're still adding to the order book. And if we look at the order book today, at over 40 billion, you're in fact looking at more than twice the expected system sales for this year in the order book, which is very, very strong, I would say. Included in the 6.3 as we have it here, 3.4 billion for EUV. If we look at the full year, number of highlights that we would like to emphasize and share with you. Of course, first off, the sales growth, sales growth of 14...

what we have here, we recognize revenue for 40 tools, for 40 EUV tools. We actually shipped 54 tools. And I won't bother you with accounting rules all that much, but the essence is because of the high demand for EUV tools that we had in 2022.

And some of the supply chain limitations that we had, we had to optimize the way we shipped tools to our customers that meant that some testing in the factory didn't happen as a result of that we could only recognize revenue for 40 tools. But in essence we shipped 54 tools. That delta of 14 tools is therefore not recognized in the growth number of 14% that you see for the full year.

but that will come in the course of this year. Also important to note is that all five EUV customers actually have now placed high ENA orders and I think that really emphasizes the confidence that our customers have in the high ENA technology that really is going to get us.

you know into the second half of this decade and there you will see that HiNA will play a pivotal role both in high-end logic and also in the in the memory business. Also the DPV business continues to be very very strong in the back of some of the comments that Peter made in the mature business but also in the advanced business. Grew 13% to 7.7 billion as you see here.

and this really reflects the continued capacity growth that Peter also showed you in the earlier slides. Two new models were being introduced, the new ARF immersion system, the NXT 2100, and the advanced dry system, the NXT 870. Also in the application business, strong growth, 28% to 660 million, so really fiery.

the productivity of the install base that they already have. And finally, in terms of capital return, everyone is sharing in our success, but also the shareholders are sharing in the success. In the aggregates with a combination of what we paid in terms of dividends and share buybacks, we were able to return to shareholders an amount of 7.2 billion euros.

Very quickly in terms of the sales breakdown you see technology-wise not a real big difference. You see that the EUV, the web business, RFI, etc. You see that it's more or less in line composition-wise with last year. You see that in terms of end use actually memory is picking up and moving from 30...

not at the demand in Q4 of 22 or even the demand in Q1 of 23, they really look at potential pick up in the second half of this year and they want to continue to make the investments. So they really see lithography investment as critical on their strategic roadmap and that is reflected in the pick up of the memory business.

In terms of regional breakdown, it's more or less in line again with last year. In terms of unit numbers, you see it pick up from 309 units in total in 2021 to 345 this year.

If we then quickly look at the composition in terms of end use, again as you see here, memory, strong growth, logic continue to continue strong growth, and then you see this pickup of the installed base business that we already talked about. It's interesting to see the five years.

how particularly the logic market has really really picked up on the back of the end-use developments that Peter has been talking about. If we then look at the boring numbers here, it's once again good to take the five-year perspective and then you see that in fact in this period the company doubled in many different ways. It's doubled in terms of sales, gross profit is picking up.

You see a slight decline in the gross margin percentage for 2022 in comparison to 2021. There's a number of reasons, but the two primary reasons. First off, there is inflation. Inflation has been hitting us in 2022 as it has been hitting everyone. Not all of the inflation burden could be passed on within the ecosystem. So that's one driver. But secondly and very importantly, we are investing in growth.

As you see, if you look at the campus here, if you look at some of the slides that Peter was presenting, we're very much gearing up for further growth. And it also means that in the growth margin, there is quite some money that is being spent on being ready for increased capacity in 24, in 25 and 26. So that means that creates a bit of a burden.

on the gross margin. Nonetheless, if you take the longer term perspective, very healthy development on that front. R&D also more than doubled, which I think is still a good sign because it really tells you that the company is still, you know, has still an abundance of ideas and is driving a very aggressive roadmap towards, you know, the targets that you've seen that we articulated at the Capital Markets Day.

Also as the SG&A grows in line with the growth of the company and more or less doubled in comparison to 2018. The rest is just a translation of that into the bottom line. The last one just to emphasize is the very very strong net bookings for the year at over 30 billion already on the back of very very strong auto intake in 2021.

And as I mentioned, that led to an order book of over 40 billion. I mentioned the return to the shareholders. So we had very strong share buybacks last year. Also in terms of dividends, once again we present to the AGM an increase in the dividends, an increase of 5.5%.

In terms of outlook, for the quarter, $6.1 to $6.5 billion in terms of net sales, which is more or less in line with what we had in Q4. Install base a little bit lower because as I mentioned to you, there was quite some pull-in from customers into Q4, so that has a slightly negative effect on the install base that we installed, sales that we expect for Q1.

That also has a slightly negative impact on the on the gross margin, although for the full year we expect the gross margin to be slightly up in comparison to the gross margin that we had for the full year 2022. R&D once again a step up to $965 million and SG&E commensurate with the growth of the company to $285. So those are the key parameters for key one. If we look at the full year, you know, we are looking for 2023 at an over 25% increase in term

like in the auto market and I think the example that Peter just gave you both on electrification but also ADAS systems I think is a good example there.

We have to wait two years before we get the tool and if then indeed the market picks up within one year, we will be too late to cater to the pickup of the market. And that's the reason why, in spite of some of the pressure that some of our customers feel, we still see a very strong demand for ASML. I mentioned the over 40 billion in terms of backlog, very, very strong, a record number there. And yes, we are based on the increase in capacity that we're funding. We are looking at plans to ship 60 EUV tools this year.

them to slow down a little bit on that in 2023. With that, dear friends, I've come to the end of my presentation and I hope Peter and Monique can join us for Q&A. Thank you for your time.

I see we have some issues with our website, so the connectivity is not too good. I think this is related to the general IT disturbances that are going on worldwide.

Hoping to get an update in my ear, but let's just start here. We're hoping to fix it as soon as we can so if you're Don't blame it on the semiconductor So I'm We have a microphone here in the room Kelsey Vegas will come to you if you indicated you have a question

and Sander, my colleague Sander Hofmann is checking the website to see if there's any questions coming in through the website. So let's start off with the first one. So state your name and your publication number, and then we'd be happy to answer your question so people can hear it.

Could you elaborate a little on the communication between ASML and politics? I wonder in political talks in what way is ASML getting involved specifically when the Dutch Prime Minister has talks.

in the US for example, how many ASML representatives will be part of the delegation and what will they communicate with politicians? It can be very short on the content of the delegation. I mean this is geopolitical, it's not geo-business. So I think there are no delegation members of ASML there because it's political.

And again, yes, we cannot deny that we are at the heart of a lot of political discussions because of the importance of semiconductors. I just explained it in my introductory comments. Our role is predominantly the role of making sure that people understand how this industry works. Now, until two, three years ago, you could have asked the average politician and said, tell me how the semiconductor industry works. And I wouldn't.

I have no clue. Because semiconductors were always there. It's like 1973 we visited, Oriel was always there. Until it wasn't and then it became a strategic commodity. Fast forward, 2021, semiconductors always been there. Nobody needed to worry until they weren't. And we figured out there was a worldwide dependence on only a few countries. It's only very recent. So our role is education. It's basically providing information, data.

How does this industry work? How is this global ecosystem connected? And where are the interfaces between those pieces? And how does it work? So if you think about a bifurcation but also of the world and the world creating different sets of chips acts and think about export controls, then our role is really to provide the information and the insight into what it means. What are the consequences?

That's not us.

So this is our role. So in your question, we're not part of the delegation, but we're definitely part of the discussion.

And our role is to provide that information and that insight. Good question. Okay, thank you. I'm just getting an update that there's quite an issue with our website, so we won't be able to get the...

The question is in from people online. Sorry about that. We're available after the press conference, so if you have any questions or want to reach out to us, please do to any of my team members.

Next question here. Peter Hack from Politico. I also had a question on export controls. We've seen last week there were discussions between Rutte and Biden. But to what extent do you think that this should be a debate more on an EU level? Because I can imagine that if there are bans in place that this would have a ripple effect to certain of your suppliers. What are your thoughts on that?

Yes, I think that's a good comment, but I think our Prime Minister was pretty clear on that. He said, listen, this is a complex situation because it involves several countries. He didn't say it involves only the Netherlands and the United States. He referred to several countries with several companies in a complex supply chain, which we need to look at and the consequences of doing anything could be quite significant. He actually mentioned that. So it's sensitive.

I don't remember, he came out of it and said, oh, we struck a deal. I don't think he said that. I think we are still in discussion because of the complexity of that matter. But you're absolutely right. I mean it's what I tried to say. This is an ecosystem that has been built over 40 years. So if it's seamless and you put locks into that system, you need to understand what the consequences will be. And if it's not, you need to understand what the consequences will be.

Because, you know, you just ask the automotive customers, you know, how they think about the chip shortage. Try to still order a car and you'll find out that your waiting time is more than 12 months pretty even longer. I don't know for sure because of the chip shortage. It's all connected. So this is why these are decisions that can have far-reaching consequences for the worldwide ecosystem and the capacity in that ecosystem and the flow of semiconductors in that ecosystem.

the many drawbacks of the geopolitical situation, but to what extent do you sympathize or understand the concerns that the Americans have about China getting more HML machines? Well, I think that concern is already there. As you know, our extreme ultraviolet machines, EUV, are under export control, so that is a fact. Now.

Of course, listen to the arguments and the arguments are there, you know, these chips will be then used into military applications. You have to realize that every time when I hear that and I think about the export control or proposed export control, it's about our advanced technology, being able to make advanced semiconductors. That the military applications use.

very mature semiconductors. And a semiconductor is somewhere 10, 15, 20 years old, which are widely available across the globe also in China. So to fuel a significant amount of chips into a military complex.

There is a significant amount of systems out there that are not advanced. They're mature. It's already there. Now having said that, of course there is artificial intelligence, smart algorithms, they need high power compute. Well those chips are available. They're available in the world market and they're made on ASML machines, on EUV machines. Well they're China.

They are made in Korea, in Taiwan, in the United States. And those chips are available for every end user and manufacturer on the planet to buy. This is also true for China. China buys is the biggest importer of chips on the planet.

I mean, American chip companies, I don't know, they just look at their financial statements, just add the five biggest chip manufacturers on the planet in the United States, they sell 80 billion worth of chips.

American chip companies, I don't know, they just look at their financial statements, just add the five biggest chip manufacturers on the planet in the United States, they sell 80 billion worth of chips to China.

It just shows you how complex this is. And those chips, those advanced chips, they go into anything. I don't know where, but they're being sold, so they probably end up somewhere.

So I think this is the complexity. And this is also where the reference to the complexity was made. It's highly sensitive. It's a much bigger and more complex situation than just saying, well, that ship goes into a military application. That's far more complex than that. Meanwhile, I have really good news. If those who are watching refresh the page, then it should work again.

I have one question in through WhatsApp, but I saw someone wanting to ask a question there. Kelsey, can you give the microphone here? Right here. Could you say what the influence of a possible ban on adjusted DOVs would be? Oh yeah, that's a, that's a, that's a. To sell DOVs to China. Yeah, I think that fully depends on what the deal is. I think if they strike a deal, then we can, actually we laid out on different scenarios what the potential consequences are. So it's up to them to.

to basically decide on that basis of that information. I cannot even give you that answer because I don't know what the outcome is. It fully depends. And I'm not even willing to speculate on this because this is so sensitive. If I start speculating here, I know what's going to happen. I know what you guys are going to write. So I'm not going to do that. It's too sensitive. I just want to remind everyone that this is annual report. Annual results. You are allowed to ask questions. I will answer those.

But it's how do you want to use them? And if you overuse them, it will have an effect on availability of mature chips, which are being used not in a military complex, but are used in a much larger, way, way larger industrial complex, which is basically what we buy every day from cars to washing machines to PCs to smartphones to infrastructure. You know, we talk about the energy transition.

The energy transition needs massive amounts of semiconductors, massive. So I think we also need to be careful that we don't, that instruments that are well meant don't have a consequence that we all...

feel sorry about. So that's also the position that Mark would refer to. I saw Toby. Toby Sterling from Reuters. Not purely my question here, but it's financial, so there you go.

I think the general idea is there's some skepticism about the weakness in the chip market not having much of an effect on ASML. I know you've explained that a bit, but maybe you could say, well, there's such a big building program happening right now. Is there a chance that that could be slowed down by some of your major customers? And yeah, and could you break down your projections for DUV and EUV sales not by systems but by

Yeah, I think Roger can, I think he probably put it on the slide so we can refer to that for this year. But you need to remember we are not insulated. We're not from any macroeconomic events and especially not when it's such a big inflation coming at us and there's a recessionary fear and some people even say some parts of the world are in a recession. Of course that impacts our customers and will impact us. You have to remember that we come out of a period like 2022.

where we could hardly, hardly ship 55% of what our customers wanted. And they want this because they know that these investments are long term, so they wanted to have two years of lead time, and then they need to build factories and it's going to take time. So basically we have this demand which was significantly over our build capacity which has come down. True, so this is a reflection of what we see in the market, but it's still quite a lot above our build capacity. And that means our customers are actually saying, well, we have a lot of work to do, but we have to do it.

Well, what I think the duration of this recession is significantly shorter than the lead time of your tools, and that also means that the recession will turn up into an upturn by the time I need your machines. So why would I cancel or push back those machines? If I do that, and I'm wrong about the duration, it's shorter than I think, I'll be in the back of the line because these guys don't have enough capacity. This is where we are. Yeah, and then. I need to follow up, but is there, when somebody falls out of line, does it just simply go to the very next customer? Absolutely, because there is a shortage. So if you said, I don't need your machine.

And your neighbour says, thank you, thank you, thank you very much. That's gone. Where's the next thought? So, Toby, in terms of numbers, for EUV we're looking at 60 for this year and 375 units for DPV. Those are numbers that we're envisaging for this year. What I think is important to note is that the capacity that we are building, we're not building that capacity for the short term. I mean the capacity for the 90 EUV and the 600 DPV, and that's the capacity that we're driving towards. Of course we drive that for the medium and for the longer term. And any cyclicality that might be there in demand might be there. But one thing is for sure...

long-term, long lead time item called lithography, they're very cautious. And if for whatever reason the duration of the recession will extend to years, of course we will. We will see the effects. That's not what they currently think. At least that's our conclusion.

And this question was really simple. I mean, I could look at the average sale prices, but selling prices for each type of machine. But the question is, in dollar terms, is it about 50-50 the way it was in 2022 for 2023? Do you see what I'm saying? I can't multiply 375 times x. You mean, the EUV versus the EUV? Yeah. I mean, we said that EUV is going to grow a bit faster than the non-EUV business. So EUV, we expect to grow by 40% and the non-EUV business by 30%.

So the shift will be a little bit more towards EUV, which makes sense. It's most expensive and that's where a lot of the capacity expansions that I showed you, the $326 billion, is about EUV-driven FABs.

So the shift will be a little bit more towards EUV, which makes sense. It's most expensive and that's where a lot of the capacity expansions that I showed you, the $326 billion is about EUV, EUV driven fabs. Thanks for that, Joey.

I have a question from your colleague, John . Chris Bryant from Bloomberg Opinion. Is the drive for technological sovereignty, including export controls, more positive than negative for an equipment supplier like you? Well, there are two sides to it. I think the positive side is it will create more...

capital inefficiency. So capital inefficiency means high capital allocation so it's good for equipment makers. That's good. The bad thing is that if you have more locks or hurdles into the system you have more friction and friction, the flip side of friction is cost. So yes you have a higher level of business but it's not as efficient so that also is true for us. So it means that you will create higher cost. I think on balance equipment companies will sell more machines. That's it. So on balance you could say it's positive.

That's a bit selfish. Yeah, I think so. But hey, that was the question. Anyone here?

Nobody else has been. No, go ahead. On the talks in the US, when do we expect a decision which would help you assess the commercial ramifications? Yeah, I think it is in the papers and they're right about that. The politicians want to do this rather sooner than later, probably also driven by the fact that there's a lot of uncertainty created. So the quicker you know where you are, the better it probably is. So it's...

probably under high pressure and I mean that's also what I read. So we'll see, you know, and then, but given the complexity of this, I mean, you have to distinguish between some kind of general agreement and the details. How do you work out the details of these regulations and these laws? There's a lot of details involved and working out the details will probably take a significant amount of time, so you don't talk days or weeks, I think you talk months, you know, you really talk about the details of something like that to really understand what does it mean, what are the ramifications of something like this, you know? And that will always take time.

I think we can safely say that the thing is under time pressure. Now, maybe as an example, the October export controls, I think everyone in the industry is still trying to figure out the details and how to deal with that. Yeah, and that's absolutely true. I think until the end of this month, there is, let's say, a feedback opportunity from the industry and industry participants on what that actually means. So I think the final wording is still under review, and that's how these things go. So, to really say we fully understand all the ramifications and can translate that into business plans would be premature.

I think it's going to take some time. Question online. Computable. Do you expect any very long-term effect of China getting a position in manufacturing its own semiconductor machine equipment? How do you assess the probabilities of Huawei developing competing chip-building machinery or probably any other party anywhere in the world? You cannot be naïve about this. When semiconductors are pivotal and vital to a responsible economy and a responsible society, and you can't get hold of those semiconductors, you're going to do it yourself. That's clear.

So, I think this will happen. That's one of the consequences of not having this global, fluid, seamless ecosystem. It's going to develop on its own. But having said that, and I cannot speak for our peers in the semiconductor equipment industry, but for ASML, in general, I think there is a lot of equipment in the industry that is focused on a very complex process inside the machine, but the machine itself is not that complex. However, for lithography...

We make a relatively simple process. We just pass light through a lens. But we do this in a very complex machine. So that's a bit different. This is why, basically, rebuilding a lithography industry, which, as it pertains to XML, consists of hundreds of suppliers, each of them world-class in what they do. Just to name a few: Trump, Zeiss, and VDL. And they're world-class in what they do. And it's just three out of a couple of hundreds. Now, you need to basically get... And it's not patents. It's know-how. It's people. It's the brains.

You need to just take that and then redo all of that to come to the same conclusion. It took us 40 years. So I'm not going to say that the laws of physics are different in China or in the US or in Korea or in Russia for that matter. No, the laws of physics are all the same. But to accumulate the know-how, with hundreds of companies where we, as the system architect and as the system integrator, bring it all together.

That's a bit of a challenge. So I think, yes, of course the efforts will be there. It's going to be massive challenge going forward. Because it's not about AIASML. It's about the ecosystem.

I'm going to take the best defense line that we have there obviously to keep on innovating right I think that's critical I mean Sometimes you get the question you know with the market share that you have you know why don't you lay back and and be a little slow Well, we're not well, we're as you could see we're investing very very significantly on our R&D roadmap And we truly believe that pushing down the accelerator there is the best potential defense into anyone you know trying to get get on par with our technology

I'm going to be challenging sometimes. That's absolutely true. I had a discussion with the founder of TSMC on what to do when you have to think about competition coming from different areas. He said, well, there's one solution: you just have to go faster. That's it. So this is also why you will see that we will invest, to your point, not only in capacity, which will of course have a temporary effect on your gross margin, but also in technology. In R&D, we will spend more because we spend the R&D not just for the next.

Chips and Science Act.

Well, I think the biggest opportunity, let's talk about the opportunity first, is that you will build a part of the semiconductor ecosystem capacity inside the United States. So it means that the dependence, the geopolitical strategic dependence, will of course go down. That's why they do it. I think the risk is present both in the US and in Europe for that matter.

The experience and knowledge that semiconductor makers have in bringing very advanced semiconductor manufacturing onto own soil is highly complex. It's an art. And that art is mastered over the last 10, 20 years by the TSMCs and assumptions of this world, and also in tell. But this is why you see the invitation almost well.

It's an invitation where the big carrots, which are called subsidy and investment support, are offered by governments to bring those companies with that particular competence within their borders. And this is exactly what's happening. This is why we had the Arizona factory opening of TSMC. Ultimately, two factories, $40 billion of investments, but that's Taiwanese knowledge and know-how. Now.

Bring that into your country, and then ramp up in a way that you haven't been doing for the last 20 years. It also means that talent is a massive risk. You need to get the talent to actually do that. You cannot just get everybody from Taiwan or from Korea to do it. No, you need to create your talent pool, and that's a big challenge. Yeah, I think that is a generic risk, not only to the US chipset but also to the European chipset people. And that risk is also the single biggest opportunity because if you're able to do it and if you're able to build an ecosystem around that, if you're able to make that...

you and Ty and Am and it's not only does factories, it's the suppliers, it's the universities, the knowledge institutions, the customers, it's the partners, the technology partners, it's the peers, that's all there, that's the ecosystem. If you find the same in Seoul and in Wasong, if you find the same in Silicon Valley but not manufacturing, but the rest is there, you have the design companies there.

We have time for one last question. I have one online but if anyone is here up for it. Nope, and we go to Switzerland. Noyetschirchisaitung, how, again, not a financial question. You worded it again. Sorry, I tried. How do the US restrictions on the involvement of US persons in the Chinese semiconductor industry affect ASML's daily business, if at all? Currently not, because we have quite a significant workforce in China which is non-US. Both Chinese nationals and people from outside the US. That's not the case. We're a European company. So we have European know-how with people with European or with non-US nationalities. So that's less of an issue for us.

One minute, last call. Yeah, one question. Yeah, follow up on that. Are you still able to supply your Chinese customers with parts that are more American-made than European maybe? Because if that's not always possible, it would have an effect on the...

Of the tools will then stop working. But it's minimal right now, but yeah, that will be the consequence. Thanks. Well, thank you, everyone, for being here. I'd like to conclude this call. Thank you, everyone, online for being with us. And hopefully, we'll see you next year.

Thank you. Thank you very much for your time.

Good morning everyone, and good afternoon. If you're in Asia, welcome to this press conference of ASML. We are going to talk to you about the fourth quarter and full-year 2022 financial results. We're here at the auditorium in Veldhoven at our headquarters, and I'm actually quite happy to have a real audience here after two years of dealing with COVID.

name and then send it in and we hope to get an opportunity to come to your question. My name is Monique Moles. I would forget to introduce myself. My name is Monique Moles. I am responsible for media relations at A-SML. And with me, I have Peter Wenning, CEO of A-SML and Roche Doss, CFO of A-SML.

and they will talk you through our financial results, but also developments around our industry that I'm sure also have your interest. So let me invite Peter Wenning to the floor, and we'll kick this off. Thank you, Monique.

talk about the financials and the outlook and then we'll take the Q&A. So key messages. Well in fact it's what we said or what we told you at the Capital Markets Day. I think despite the fact that what we're currently seeing is of course a lot of turbulence. Questions on are we going to get the recession and if so how deep will it be and how long will it be.

issues on geopolitical developments and export controls. There's a lot of uncertainties right now, but our company and our industry really looks beyond the short term. I think we really look beyond the next 12 months, the next two years, we look five to ten years ahead. And why is that? Because we are convinced that semiconductors are currently playing a critical role in the economy and in day-to-day life. It will only increase. It will only... It will only increase.

We need more semiconductor compute and storage power going forward. And this is why we strongly believe that we need to invest. And our customers feel the same way. They need to invest. We need more semiconductor compute and storage power going forward.

For the longer term, we have to remind you that building a semiconductor fab, or a factory (we call it a fab), will take three years. And then, if you have to start planning it from day one, probably five.

So this is all about the longer term and when we look forward and look at the growth rates of semiconductor sales, you'll see it later, I'll talk about it later, we see a very significant upside for our customers and also for ASML. This is why we need to invest. And this is also why we believe there is an opportunity, depending on different market scenarios, a higher or a lower market scenario, that by 2025, we will have a better chance

It will be anywhere between $30 and $40 billion in sales and we have between 54 and 56% gross margin which will grow to $20, $30 depending on the scenario between $44 and $60 billion between 56 and 60% gross margin. And I think it's not only us, it's also throughout the supply chain we're significantly investing together with our partners.

Which also means that the company is going to be profitable. We are profitable, we are very profitable, but of course, because we will grow, that profitability will grow, and also for our shareholders, there is going to be a significant return.

Now, when we look at the industry, three major drivers. I think it's still we all notice is connectivity.

It's connectivity where it's a cloud or the edge computing, it's all connected. These things are not separate. There's no centralized computing in the cloud without the decentralized computing at the edge. It's a cloud or the edge computing at the edge.

And that's needed to drive artificial intelligence and the hyper-connectivity now being supported by 5G, but by the end of the decade it will be 6G. So it's going to be faster, lower latency, more bandwidth. And then there's another driver, it's called the climate change and the resource scarcity. I mean semiconductors will, and I'm going to show you a couple of examples, going to be very significant.

Building block of making sure that we can manage climate change, whether it's electrification, smart mobility, the energy transition, and of course, how are we going to use our resources smarter?

And our last big drive is the social and the social economic shifts. I mean, yes, with the pandemic, I've actually thought us to, you know, thought us to use different ways of working, working from home. But also that this remote connectivity is extremely important, also in areas of medical technology, for instance. And then we'll talk about a later technological sovereignty. The 20 is a big driver for this social economic shift.

Okay, now just a couple of examples. Just the energy transition, we believe, will be one of the main drivers in the coming decades. And it's about energy generation, it's about storage, about distribution, and it's about consumption of this electrical energy.

Just a couple of examples. The energy transition, we believe, will be one of the main drivers in the coming decades. It's about energy generation, it's about storage, about distribution, and it's about the consumption of this electrical energy.

If you know an example, if you want one megawatt of wind power, it needs about 3,000 euros of semiconductors. And one megawatt of solar power, 14,000 euros. If you think about the gigantic increase in demand for electricity and the renewable energy coming from wind and from solar, just from wind and solar, just from generation. You can think about the enormous impact that we have on.

Semiconductor consumption. And then I don't talk about the grid, about the smart grid that needs a lot of sensors and actuators and compute power. And how do we use it? I mean, it's used in the electrification of our mobility. The electric vehicle will, at least, use twice the number of semiconductors as compared to combustion engines. And I think the electric vehicle says, no, I mean, it's just an estimate from one of our customers.

and she showed this slide and it shows that if you look, if you take a car, it consists of mature semiconductors and it starts on left hand side with 14 nanometers, it's just to actuate. It's picking up the sensor data, we're actually picking up the sensor data.

A semiconductor technology that is even older than 14, a lot older. And then it needs to actually go to the central core of the car where it needs to be processed. Very fast, high processing capacity because the input of that first analog and then digital data into the car is massive.

But the 5-nanometer chip doesn't work without the input. And if the input cannot find a placeholder thing in the central computing edge, it doesn't work either. So it's all connected.

So mature and advanced semiconductors are part of a systemic approach to a problem, which you will see with more increase in complexity that the approaches will be more systemic. And it needs, we don't only need advanced semiconductors, but very much we also need more and more mature semiconductors. Now, customers realize this. So...

Just take an example: our three major customers - Intel, TSMC, and some took - have announced FAP investment projects. Well, I did the math for you. It's 326 billion dollars announced. Yes, 326 billion dollars announced in new fat expansions, and it's not only leading edge.

Many major customers, such as Intel, TSMC, and Samsung, have announced FAB projects and investment projects. Well, let me do the math for you: it's a total of $326 billion announced. $326 billion announced in new FAB expansions. And it's not only leading edge, but also mature.

And that's needed because of what I just talked about. Now, if we look at the total semiconductor market, taking into account all those developments, semiconductors are going to be pivotal in our day-to-day life. When we look at the growth rates that we're going to be seeing and the new areas of growth.

In connectivity, in the energy transition, and as a result of the socio-economic shifts, it's not a surprise that when you do the math, it's not only us, but various sources indicate that the semiconductor industry, the business of our customers, will be anywhere between 1 and 1.3 trillion dollars, which is a doubling.

of where we are today. Now, the semiconductor industry took 40 years, close to 50 years, to grow to 600 billion dollar sales. It needs another 8 to 10 years to double it again.

Now, the semiconductor industry took 40 years, plus the 50 years, to grow to 600 billion dollar sales. It needs another 8 to 10 years to double it again. And this is the channel that we have.

So what do we need to do? We need to build capacity. Because we need to scale and we need to find talent around the world.

We are investing in our production capacity and in our EV factory here, our Transcon factory here, our deep UV capabilities here, but also in Berlin. We invest in Taiwan, we invest in Korea. We invest around the world to make sure that we can deal with this increase in capacity in Sixcent, and we are investing in our Q municipality here in Berlin. Whether you guys spend $ancer, maybe you should spend it on $ Wesley, and the CRM company.

So, our current build capacity is 375 deep UV systems. Well, we want to have 600 by 2025-26.

We have last year just a build capacity of around 50 units, this year 60 units for EUV.

We have last year just a build capacity of around 50 units, this year 60 units for EUV. We are going to get a 90.

That's all needed to drive the growth of this industry and also means we need to hire people. This morning I told the news agency that...

Over the last 12 months, we received about 300,000 applications for a job at ASML. However, we hired close to 10,000 people.

We received about 300,000 applications for a job at ASML. However, we hired close to 10,000 people, so we still have a choice.

And we now employ close to 40,000 people. We're a little light, but half are here in the Netherlands. That is going to be a constant challenge for us, because we need to grow with higher people, that's one, but we need to onboard and make them effective. Big management challenge. Now, so what do we do then on ESG? It's very important we...

Launched our ESG strategy last year. So, what do we do this year? For instance, we have a good example. We connected all the buildings here in Feldhauven in what we call a one-energy grid. This basically means we use concepts to find places where we can transfer waste heat, which is in one of the buildings. You could imagine this is waste heat in the factories, and we use it to heat the buildings. Ultimately...

We will save 70% gas at this site, which, by the way, you've seen, is a big site. A 70% gas reduction. And that also means that we're significantly, in the social domain, scaling up our investments in the community and in the infrastructure, to basically ensure that all people in the community that we work in...

Have as much access as possible to personal growth and also benefit from the value that's being created. I think, from a government's point of view, we're one of the founding members.

Of this Semiconductor Climate Consortium, which was actually launched a couple of months ago and was opened by Al Gore. I mean, we take our responsibility seriously as an industry.

Now, in geopolitics, I'm probably not going to get any questions on this. That's why I'm going to preempt something. Basically, it's a clear issue driven by the fact that...

We all recognize that semiconductors are now a pivotal element in creating a sustainable society.

that semiconductors are now a pivotal element in creating a sustainable society. And it's...

Perhaps it's my bubbling that only now governments seem to realize that we have created, you could argue, some one-sided dependencies on certain countries on the planet because they basically have 80% of the world's manufacturing capacity. So that means everybody's now rethinking this, saying, what do we need to do? We need to stay relevant. We don't need to do everything ourselves. We need to stay relevant. So we need to push...

The development of semiconductor manufacturing in our region, whether the region is India, the United States, Europe, or Japan, is causing all governments to rethink their semiconductor strategy.

And what are the consequences?

Over the last 40-50 years, the semiconductor industry has consolidated itself into a global collaboration network - an ecosystem without borders or boundaries. This has great advantages because now customers...

Could talk with us and throughout the ecosystem very clearly about the roadmaps and what needed to be done to drive innovation together. We have worked together with peers, yeah, with peers, to ensure we created processes that customers could use and actually created a semiconductor industry that innovated faster.

Very nearly unlimited coordination with academic partners and, of course, with suppliers in an open structure and open collaboration model to drive innovation. That's what we created.

and also by sharing risks and rewards. Now, because of the, you could say, bifurcation of the world.

Into new socio-economic blocs with a significant impact.

into new social-economic blocks, with a significant impact that has on the way they look at semiconductors.

You see, of course, a bifurcation happening. One element of that is export controls, but that's not...

Only, I mean, is the Chips Act implemented around the world; the Chips Act that comes with consequences, that comes with liabilities? If you want to get the money from the government, you have to give something in return, which basically means that this world is indeed bifurcating. So what does that mean if that happens? Well, you might see that chip availability could be reduced.

It could be as a result of export controls that go too far and then cut off certain parts of the chip manufacturing capacity, which will have an impact on significant industries like the car industry, the energy transition, and the medical tech. The supply chain might get disrupted because, you know, countries say, "Yes, you can have my money.

from the government, but these are the conditions: You only need to spend the money where we think it is wise. This means that it could put a lid on collaboration with peers and academia, as there will be borders. This previously borderless ecosystem is now in danger of creating hurdles.

You only need to spend the money where we think it is wise, which means that that could put a lid on the collaboration with peers with academia because there will be borders this borderless ecosystem And now is a danger of creating hurdles and we'll also have

impact on the supply chain that was, I would say, seamless. I will not be as seamless going forward as it is today.

Now, it also means that countries will double down on investing in their own industries.

whether it's in the United States or in China or in Korea or in Europe. And it also means that we will have a less efficient infrastructure.

whether it's in the United States or in China or in Korea or in Europe . And it also means that we will have a less efficient infrastructure. Costs will very likely go up.

And that's the risk we are facing, but that's the result of, let's say, the realization that this ecosystem that we have built was almost seamless.

is now indeed bifurcating into different socioeconomic blocs, each with its own economic and political interests.

That's where we are today. I'm happy to take some questions later on, but Roger, why don't you do the following and talk about something boring like financials? Thank you. I have one. This was a former CFO talking; how about that? It's a small step from US politics to US GAAP, as I said yesterday, so that's where we are. Small step for man, giant leap for mankind; here we are. Financials.

Q4 results of 2022, a strong quarter all in all if you look at the numbers. The net sales came in at the midpoint approximately of our guidance. At 6.4 billion, as you see here, based on 4.7 billion of system sales and 1.7 billion of install base management sales. That was pretty strong.

We saw that there were, you know, quite some customers that actually do want upgrades to their system in Q4. Actually, a number of upgrades that were planned for Q1 have been pulled into Q4. And that really beefed up the install base number for Q4.

Gross margin is pretty strong at 51.5%. We guided 49%; there was some one of them there. But again, a major driver here is that same install base management sales. There were quite some software upgrades in there; on software upgrades, the gross margin is very, very high. So, if you see install base management go up...

The way it went in this quarter also beat up the gross margin. So, that's what you see there. Operating margin 33%.

And that goes all the way down to none of the numbers that you see here as a net income earnings, etc. Important to note, the net bookings, you know, in spite of, in spite of, you know, in spite of the climate, in spite of the number of our customers saying that they are looking at ways to reduce capex. It's very clear that we're still adding to, to,

With over 40 billion, you're in fact looking at more than twice the expected system sales for this year in the audible, which is very, very strong, I would say. Included in the 6.3 as we have it here is 3.4 billion for the EV.

If we look at the full year, a number of highlights that we would like to emphasize and share with you. Of course, first of the sales growth, sales growth of 14% for, you know, over 2021. Really strong demand, reflecting strong demand in all of our products. To 21.2 billion at 50.5% growth margin. Pretty strong. Not income of...

It is because of the high demand for EUV tools that we had in 2022, and some of the supply chain limitations that we had, we had to optimize the way we shipped tools to our customers. That meant that some testing in the factory didn't happen, as a result of which we could only recognize revenue for 40 tools. But in essence, we shipped. Alright, I'm assuming that's it, thank you.

54 tools. That delta of 14 tools is therefore not recognized in the growth number of 14% that you see for the full year, but that will come in the course of this year.

Also important to note is that all five EUV customers have now actually placed high-end A orders, and I think that really emphasizes the confidence that our customers have in the high-end A technology that really is going to get us into the second half of this decade. There, you will see that high-end A will play a pivotal role both in high-end logic and also in the memory business.

Also, the DPV business continues to be very, very strong. In the back of some of the comments that Peter made in the mature business, but also in the advanced business, it grew 13% to 7.7 billion, as you can see here. And this really reflects the continued capacity growth that Peter also showed you in the earlier slides.

Two new models were being introduced: the new ARF immersion system, the NXT 2100, and the advanced dry system, the NXT 870. Also in the application business, strong growth of 28% to 660 million was seen, so it's really firing on all cylinders there, with a lot of growth.

on upgrades to increase the productivity of the installed base that they already have.

And finally, in terms of capital return, everyone is sharing in our success, but also the shareholders are sharing in the success. In the aggregate, with a combination of what we paid in terms of dividends and share buybacks, we were able to return to shareholders an amount of 7.2 billion euros."

Very quickly in terms of the sales breakdown, you see technology-wise not a real big difference. You see that the EUV, the wet business, RFI, etc. You see that it's more or less in line composition-wise with last year. You see that in terms of end use, actually memory is picking up, moving from 30 to 35 percent, which might be a surprise to some because some of our customers...

are clearly indicating the memory market in '22 was down, and prices were also down. However, this really tells you that the investments our customers make in the memory business are strategic. So, they're not really looking at the demand in Q4 of '22 or even the demand in Q1 of '23; they're looking at

Potential pick-up in the second half of this year, and they want to continue making the investments. So, they really see the photography investment as critical on their strategic roadmap, and that is reflected in the pick-up of the memory business. Those are the regional breakdowns. It's more or less in line again with last year.

And in terms of unit numbers, you see it pick up from 309 units in total in 2021 to 345 in this year. If we then quickly look at the composition in terms of end use, again, as you see here, memory shows strong growth, logic continues with strong growth, and then you see this pickup of the installed base business that we already mentioned.

perspective and then you see that in fact in this period the company doubled in many different ways. We doubled in terms of sales, gross profit is picking up. You see a slight decline in the gross margin percentage for 2022 in comparison to 2021. There's a number of reasons but the two primary reasons. First off there is inflation. This has been hitting us in 2022.

were very much gearing up for further growth and it also means that in the growth margin there is quite some money that is being spent on being ready for increased capacity in 24, in 25 and 26. So that means that that creates a bit of a burden on the on the growth margin. Nonetheless, if you take the longer term perspective, very healthy development on that front.

R&D also more than doubles which I think is still a good sign because it really tells you that the company is still, you know, has still an abundance of ideas and is driving a very aggressive roadmap towards the targets that you've seen that we articulated at the Capital Markets Day.

Also, as the STNA grows in line with the growth of the company, it more or less doubled in comparison to 2018.

The rest is simply a translation of that into the bottom-line. The final point to emphasize is the incredibly strong net bookings for the year at over $30 billion, already on the back of a very strong order intake in 2021. As I mentioned, that led to an order book of over $40 billion.

I mentioned the return to the shareholders. So we had very strong share buybacks last year. Also, in terms of dividends, once again, we present to the AGM an increase in the dividends, an increase of 5.5% to 5.80 euros per ordinary share dividend.

Less in line with what we had in Q4. The install base is a little bit lower because, as I mentioned to you, there was quite some pull-in from customers into Q4. So, that has a slightly negative effect on the install base and the installed sales that we expect for Q1. This also has a slightly negative impact on the gross margin.

Although for the full year, we expect the gross margin to be slightly up in comparison to the gross margin that we had for the full year 2022. R&D will once again take a step up to $965 million, and SG&A will be commensurate with the growth of the company at $285. So those are the key parameters for Q1. If we look at the full year, we are expecting a 25% increase in terms of sales for 2023.

Growth continues in other markets, such as the auto market, and I think the example that Pierre just gave you, both on electrification and ADAS systems, is a good example there. So clearly, there is some pressure, I would say, on some of our customers and some of the growth of our customers, particularly in the first half of the year.

Most of our customers, if you listen to their commentary, expect the market to regain strength in the second half of this year. And then the logic of our customers is pretty clear. They say, 'Okay, so if the market is going to pick up within a one-year timeframe, and if the lead time that ASMR has for ordering new tools is more than that,' and as I just mentioned, it's on average about two years' time.

Then we better take our tools because if we now let go of our tools, that means that we're at the end of the queue; we have to wait two years before we get the tools. And if, indeed, the market picks up within one year, we will be too late to cater to the pickup of the market. And that's the reason why, you know, in spite of some of the pressure that some of our customers feel, we still see a very strong demand for our tools.

I mentioned the over $40 billion in terms of backlog, which is very, very strong - a record number there. And yes, based on the increase in capacity that we're funding, we are looking at plans to ship 60 EUV tools this year and 375 DPV tools. So, that gets you significantly north of the 345 lithography tools.

in total EUV and DPV combined that we had for 2022. EUV business year-on-year growth 40% is expected 30% for the non-EUV business and the install-based business we expect a moderate 5% and that is because we think most of our customers have done a lot of upgrades last year. We expect them to slow down a little bit on that in 2023.

With that, dear friends, I've come to the end of my presentation and I hope Peter and Monique can join us for Q&A. Great timing, Voche.

I see we have some issues with our website, so the connectivity is not too good. I think this is related to the general IT disturbances happening worldwide.

I'm hoping to get an update in my ear, but let's just start here. I'm hoping to fix it as soon as we can. So, if you're... Those are important semiconductors, right? We all rely on them every day. Don't blame it on the semiconductors. So, we have a microphone here in the room. Kelsey Segges will come to you if you indicate that you have a question. And Sander, my colleague Sander Hofmann, is checking the website to see if there are any

And politics are a wonder in political talks. In what way is ASML getting involved, specifically when the Dutch Prime Minister has talks?

In the US, for example, how many ASML representatives will be part of the delegation, and what will they communicate with politicians? Well, the content of the delegation can be very brief. I mean, this is geopolitical; it's not geo-business. So, I think there are no ASML delegation members there because it's political.

And again, yes, we cannot deny that we are at the heart of a lot of political discussions because of the importance of semiconductors. I just explained this in my introductory comments.

Our role is predominantly the role of ensuring that people understand how this industry works.

Up until two or three years ago, you could have asked the average politician, "Tell me how the semiconductor industry works," and they would have had no clue. Semiconductors were always there, just like oil in 1973; it was always there until it wasn't, and then it became a strategic commodity. Fast forward to 2021, semiconductors have always been there, and nobody needed to worry.

Until they weren't. And we figured out there was a worldwide dependence on only a few countries. It's only very recent. So our role is education. It's basically providing information, data. How does this industry work? How is this global ecosystem connected? And where are the interfaces between these two countries?

Pieces, and how does that work? So, if you think about a bifurcation, but also of the world and the world creating different sets of chips and acts, and think about export controls, then our role is really to provide the information and the insight into what it means, what are the consequences of certain scenarios.

That's our role. But then ultimately, this whole concept of national security and economic interests is something that is of a higher political nature that, of course, governments, each with their own views and desires, they need to discuss this amongst themselves what they want to do.

And that's them, that's not us. So this is our role. In your question, we're not part of the delegation, but definitely part of the discussion. Our role is to provide that information and insight. Good question. Okay, thank you. Just getting an update that there's quite an issue.

Peter Hack from Politico. I also had a question on expert controls. We've seen last week there were discussions between the Putin and Biden. But to what extent do you think that this should be a debate more on an EU level? Because I can imagine that there if there are bans in place that this would have a ripple effect to certain of your suppliers. What are your thoughts on that?

Yes, I think that's a good comment. However, I believe our Prime Minister was quite clear on that. He said, 'Listen, this is a complex situation because it involves several countries.' He didn't say it involves only the Netherlands and the United States. He referred to several countries with various companies in a complex supply chain.

Which we need to look at, and the consequences of doing anything could be quite significant. He actually mentioned that. So it's sensitive. I don't remember him coming out of it and saying, 'Oh yeah, we struck a deal.' I don't think he said that. I think we're still in discussion because of the complexity of that matter. But you're absolutely right.

I mean, it's what I try to say; this is an ecosystem that has been built over 40 years. So if it's seamless, and you put locks into that system, you need to understand what the consequences will be.

So, this is why these decisions can have far-reaching consequences for the worldwide ecosystem, the capacity within that ecosystem, and the flow of semiconductors in that ecosystem.

And this is why it's not between one or two countries. I think this is what the Prime Minister said. I think he has a point.

Okay, next question. You have to do this also for the people online. So if you know anyone who's watching, open your chat. You have discussed the many drawbacks of the geopolitical situation, but to what extent do you sympathize or understand the concerns that Americans have about China obtaining more HML machines?

Well, I think that concern is already there. As you know, our extreme ultraviolet machines, EUV, are on the export control. So that is a fact. Now, of course, listen to the arguments. The arguments are there. You know, these chips will be then used in military applications.

The military applications use rugged, very mature semiconductors.

And the semiconductor is over the 10, 15, 20 years old, which are...

Widely available across the globe, also in China, so as to fuel a significant amount of chips into a military complex.

There is a significant amount of systems out there that are not advanced.

They're mature. It's already there. Now, having said that, of course, there's artificial intelligence, smart algorithms, they need high-power computing. Well, those chips are available. They're available in the global market. And they're made on ASML machines, using EUV technology.

But not only China. They're made in Korea, Taiwan, and the United States. And those chips are available for everyone...

End-users and manufacturers on the planet buy. This is also true for China. China, as the biggest importer of chips on the planet, buys. I mean, American chip companies, I don't know. Just look at their financial statements. The five biggest chip manufacturers on the planet are in the United States. They sell 80 billion dollars' worth of chips.

To China. It just shows you how complex this is. And those chips, those advanced chips, they go into anything. I don't know where, but they're being sold, so they probably end up somewhere. So, I think this is the complexity.

And this is also where the reference to the complexity was made. It's highly sensitive. It's a much bigger and more complex situation than just saying, well, that chip goes into a military application. It's far more complex than that. Meanwhile, I have really good news. If those who are watching refresh the page, then it should work again.

I have one question through WhatsApp, but I saw someone wanting to ask a question there. Kelsey, can you give the microphone here? Thank you.

If there were a possible ban on just the DOVs, it would be... If you're not... That's the... That's the... It's still up to China. Yeah. I think it fully depends on what the deal is. You know, I think if they start a deal, then we can...

actually we laid out on different scenarios what the potential consequences are. So it's up to them to basically decide on that basis of that information. I cannot even give you that answer because they don't know what the outcome is. That fully depends. And I'm not even willing to speculate on this because this is so sensitive. So I start speculating here.

You know, I know what's going to happen. I know what you guys are going to write. So, I'm going to do that. It's too sensitive.

I just want to remind everyone that this is an annual report and it will be discussed. You are allowed to ask questions, and I will answer those questions. No, it's perfectly accurate, but you are so absolutely clear about what this is. I can't imagine that the questions are going to be in a different direction. I have one here from the web, so, very brave of you to guide them. Eva from Newport scouted and bravely broke through the barriers.

How do you want to use them? And if you overuse them, it will have an effect.

On the availability of mature chips, which are being used not in a military complex but in a much larger, far larger industrial complex, which is basically what we buy every day, from cars to washing machines to PCs to smartphones to infrastructure. We talk about the energy transition.

The energy transition requires massive amounts of semiconductors, massive. So, I think we also need to be careful that we don't... That instruments that are well-meant, don't have consequences that we all feel sorry about. So, that's also the precision that Mark would refer to.

I saw Toby, yeah. Toby. Hi, Toby Sterling from Reuters. Not entirely my question here, but it's financial, so there you go. I think the general idea is that there's some skepticism about the weakness in the chip market.

Not having much of an effect on ASML. And I know you've explained that a bit, but maybe you could say, will they, I mean there's such a big building program happening right now, is there a chance that that could be slowed down by some of your major customers? And yeah, could you break down your projections for DUV and EUV sales, not by systems, but by...

the number. I think Rocheke and I think he probably put it on the slide so we can refer to that for this year. But you need to remember we are not insulated. We're not from any macroeconomic events and especially when it's such a big inflation coming at us.

And there are recessionary fears, and some people even say some parts of the world are in a recession. Of course, that impacts our customers and will impact us. But you have to remember that we come out of a period like 2022, where we could hardly ship 55% of what our customers wanted. So, and they want this because they know that these investments are long-term.

In order to mark, but it's still quite a lot above our building capacity.

And that means our customers are actually saying, 'Well, if the duration of this recession is significantly shorter than the lead time of your tools, then that also means the recession will turn into an upturn by the time I need your machines. So why would I cancel or push back those machines? If I do that, and I'm wrong about the duration being shorter than I think, I'll be at the back of the line because these guys don't have enough capacity.'

This is where we are. When somebody falls out of line, does it just simply go to the very next customer? Absolutely. Because there is a shortage. So if you say, I don't need your machine, and your neighbor says thank you, thank you very much, that's gone. Where's the next stop?

So Toby in terms of numbers, for EUV we're looking at 60, for this year and 375 units for DPV, those are numbers that we're investing for this year. But I think it's important to note is that the capacity that we are building is not, we're not building that capacity for the short term. I mean the capacity for the 90 EUV and the 600 DPV and that's the capacity that we're driving towards.

Of course, we drive that for the medium and long-term. And any cyclicality that might be there in demand might be there, but one thing is for sure, we will need that capacity. And maybe we don't need it in full for 2025, but then we will need it in '26 or '27. And on the customer capacity, you are right. I mean, we see a demand reduction.

Again, above our build capacity. So, yes, I think customers are reshuffling, re-timing some of their capacity. And that's really short. Yeah, I mean, that's what they do. In the memory industry, some of our customers have actually set out there, we're going to cut capital expenditures for this year. And always, I've said, we're not going to do that. But.

In terms of this very strategic, long-term, long lead-time item called lithography, they are very cautious. And if, for whatever reason, the duration of the recession extends for years, we will of course see the effects. That is not what they currently think – at least, that is our conclusion. This question was really simple. I mean, I could look at the average sales prices or the selling prices for each type of machine, but...

The question is, in dollar terms, will it be about 50-50 as it was in 2022 for 2023? Do you see what I'm saying? I can't multiply 375.

times X and you mean VV versus EV? Yeah. I mean, we said that EV is going to grow a bit harder, faster than the non-EV business. So EV would expect to grow by 40% and the non-EV business by 30%.

So the shift will be a little bit more towards EUV, which makes sense. It's the most expensive, and that's where a lot of the capacity expansions that I showed you, the $26 billion, is about EUV-driven fabs. Thanks for that, Jovi. I have a question in from your colleague, John. Chris Bryant from Bloomberg.

means high capital allocation so it's good for equipment makers. That's good. The bad thing is that if you have more locks or hurdles into the system, you have more friction and friction, the flip side of friction is cost. So yes, you have a higher level of business.

But it's not as efficient. So that's also true for us. It means that we will create higher costs. I think, on balance.

equipment companies will sell more machines That's it. So on that's good say it's positive There's a bit selfish. Yeah, thanks But hey, that was the question. Anyone here? Yeah

ramifications.

Yeah, I think it's in the papers, and they write that the politicians want to do this rather sooner than later, probably also driven by the fact that there's a lot of uncertainty created. So, the quicker you know where you are, the better it probably is, so it's likely under high pressure. And I mean, that's also what I've read.

So, we'll see, you know, and then, but given the complexity of this, I mean, you have to distinguish between some kind of general agreement and the details. How do you work out the details of these regulations and laws? A lot of details get involved, and working out the details will probably take...

significant amount of time, so you don't talk days or weeks, I think you talk months, to really talk about the details of something like that, to really understand what does it mean, what are the ramifications of something like this, and that will always take time, but I think we can safely say that the thing is under time pressure. Yeah.

The final wording is still under review. It's how these things go. So, to really say we fully understand all the ramifications and can transfer that into business plans, I think it's going to take some time. Okay, question online, computable. Do you expect any very long-term effect of China getting a position in manufacturing with its own semiconductor machine equipment?

How do you assess the probabilities of Huawei developing competing chip-building machinery, or probably any other party anywhere in the world? You cannot be naive about this when semiconductors are so pivotal and vital to a responsible economy and a responsible society. If you can't get hold of those semiconductors, you're going to do it yourself. That's clear.

So, I think this will happen. That's one of the consequences of not having this global, fluid, seamless ecosystem. It's going to develop on its own. But having said that,

And I cannot speak for our peers in the semiconductor equipment industry, but for ASML, in general, I think there is a lot of equipment in the industry that is focusing on a very complex process that...

that is inside the machine, but the machine itself is not that complex. But for lithography, we make a relatively simple process. We just blow light through a lens. But we do this in a very complex machine. So that's a bit different. So this is why basically, um...

That is inside the machine, but the machine itself is not that complex. However, for lithography, we use a relatively simple process. We just shine light through a lens. But we do this in a very complex machine. So that's a bit different. That is basically why rebuilding the lithography industry.

Which, as it concerns SML, consists of hundreds of suppliers, but each of them is world-class in what they do. I just need to name Trump, Zeiss, and VDL, and they're world-class in what they do. And that's just three out of a couple of hundred. Now, you need to basically obtain, and it's not patents, it's know-how, it's people, it's the brains. You just need to take that.

and then redo all of that, to come to the same conclusion. It took us 40 years. So I'm not going to say that the laws of physics are different in China, or in the US, or in Korea, or in Russia, for that matter. No, the laws of physics are all the same. But there is accumulated know-how.

With hundreds of companies where we as a system architect as a system integrate to bring it all together That's a bit of a challenge, so I think yes of course the efforts will be there It's going to be massive challenge going forward because it's not about ASML It's about the ecosystem. I'm gonna the best defense line that we have there obviously is to keep on innovating right? I think that's critical. I mean you

Sometimes you get the question you know with the market share that you have you know why don't you lay back and and be a little slow? Well, we're not well, we're as you could see we're investing very very significantly on our R&D roadmap And we truly believe that pushing down the accelerator there is the best potential defense into anyone you know trying to get get on par with our technology Yeah, I know it's good to be challenged sometimes

That's absolutely true. I had a discussion with the founder of TSMC on, you know, what do you do when you have to think about competition coming from different areas? He said, well, there's one solution. You just have to go faster. That's it. So this is also why, you know, you will see that we will invest, to your point, not only in capacity, which will, of course, have a temporary effect on our gross margin, but also in technology. So in R&D, we will spend more on R&D because we believe in it.

challenge and risk in the US implementation of CHIPS and Science Act.

Well, of course, go down. So that's why we do it. I think the risk is that, both in the US and in Europe for that matter, the experience and knowledge that semiconductor makers have.

In bringing very advanced semiconductor manufacturing onto one's own soil is highly complex. It's an art. And that art has been mastered over the last 10, 20 years by the TSMCs and assumptions of this world, and also in tell. But this is why you see the invitation.

It's an institution where the big carrots, which are called subsidies and investment support, are provided by governments to attract companies with that particular competence within their borders. And this is exactly what's happening. Ultimately, two fabs, $40 billion of investments. But that's Taiwanese knowledge. And...

You know, you need to know how. Now, bring that into your country and then ramp up in a way that you haven't been doing for the last 20 years. This also means that talent is a massive risk. You need to acquire the talent that you should have to achieve this. You cannot just draw everyone from Taiwan or Korea to do it. You need to create your talent pool, and that's a big challenge, yeah?

I think that is a generic risk, not only to the US chip sector, but also to the European chip sector and people. This risk also presents the single biggest opportunity because if you're able to do it and build an ecosystem around that, if you're able to establish the knowledge and the expertise in that ecosystem, if you're able to truly create that on soil again in Europe and the United States, I think it can be a major boost for Europe.

To your competitiveness. So it's the biggest risk. Are you able to attract that talent? But also, by far, the biggest opportunity is not just about creating capacity. It's creating that knowledge infrastructure that will help you through the next and next. The ecosystem. That's the secret word. You need to build those ecosystems. Because if you look at where the biggest centers are of chip manufacturing.

It's in Taiwan, around Hsinchu and Taianan. It's not only those factories, it's the suppliers, it's the universities, the knowledge institutions, the customers, it's the partners, the technology partners, it's the peers. That's all there. That's the ecosystem. You see, if you find the same in Seoul and in Hwasong, you find the same in Silicon Valley, but not manufacturing, but the rest is there, you know, you have the design companies there.

This is where, so it's not just the money, throw the money at it, find a deserted air place, you know, Air Force Base and just build a building, you know, factory. Now, you have to build an ecosystem. Okay?

We have time for one last question. I have one online, but if anyone here is up for it... No? Then we'll go to Switzerland. Noyes Yerhirshichaitung, how, again, it's not a financial question. You worded it... again. Sorry, I tried. How do the US restrictions on the involvement of US persons in the Chinese semiconductor industry affect ASML's daily business, if at all?

With people of European or non-US nationalities, this is less of an issue for us. One minute, last call. Yeah. One question. Wow, Doug. Yeah, follow up on that. Are you still able to supply your Chinese customers with these parts that are more valuable than others? And how do you manage the scores with gender? Who's equipping those two things? Or ultimately, how do you make it more productive?

More American-made than European maybe because that's not always possible, so that would have an effect on the operability of the install base. But again, we are predominantly a European company with European technology, so the parts are predominantly.

European, but here in the AES, there are issues that we need to deal with. We actually made some tools that will then stop working. But it's minimal right now; but yeah, that would be the consequence. Thanks. Well, thank you everyone for being here. I'd like to conclude this call. Thank you everyone online for being with us, and hopefully, we'll see you next year. Thank you. Thank you very much for your time. Thank you.

The.

Good morning everyone, and good afternoon if you're in Asia. Welcome to this press conference of ASML. We are going to talk about the fourth quarter and full year 2022 financial results. We're here at the auditorium in Veldhoven at our headquarters, and I'm actually quite happy to have a real audience here after two years of COVID. So it's nice to have a few...

My name is Monique Moles. I would forget to introduce myself. My name is Monique Moles. I am responsible for media relations at ASML. And with me, I have Peter Wennink, CEO of ASML, and Roger Dassen, CFO of ASML. And they will talk you through our financial results, but also developments around our industry that I'm sure also have your interest.

So, let me invite Peter Wenning to the floor, and we'll kick this off. Thank you, Monique. Welcome, everybody, and yes, you're right. I mean, it's good to have people live here. We also have people on the webcast. I want to just talk about a few key messages, mainly about the state of the industry right now. Then, for sure, we'll talk about the financials and the outlook, and after that, we'll take the Q&A.

So, key messages. Well, in fact, it's what we said or what we told you at the Capital Markets today. I think despite the fact that what we're currently seeing is, of course, a lot of turbulence. Questions on whether we are going to get a recession and, if so, how deep will it be and how long will it be.

Issues on geopolitical developments and export controls. There are a lot of uncertainties right now, but our company and our industry really look beyond the short term. I think we really look beyond the next 12 months, the next two years; we look 5 to 10 years ahead. And why is that? We are convinced that semiconductors are currently playing a critical role.

In the economy and in their lives, it will only increase. It will only need more semiconductor compute and storage power going forward. And this is why we strongly believe that we need to invest. And our customers feel the same way. They need to invest for the long term. And we have to remind you that building a semiconductor fab, or as we call it, a factory, is a fab.

It will take three years, and then if you have to start planning it from day one, probably five. So it's all about the long term, and when we look forward and look at the growth rates of semiconductor sales, you'll see it later; I'll talk about it later. We see a very significant upside for our customers and also for ASML. This is why we need to invest.

And this is also why we believe there is an opportunity, depending on different market scenarios - a higher or lower market scenario - that by 2025, we will be anywhere between $30 and $40 billion in sales, and have between 54 and 56% gross margin, which will grow to 2030, depending on the scenario, between $44 and $60 billion.

Between a 56 and 60% cost margin. And I think it's all yes. It's also throughout the supply chain where we're significantly investing together with our partners. This also means that the company is going to be profitable. We are profitable. We're very profitable. But of course, because we will grow, that profitability will grow. And also for our share.

Three major drivers. I think it's still we all know this is connectivity. It's connectivity whether it's a cloud or the edge computing, it's all connected. These things are not separate. There's no centralized computing in the cloud without the decentralized computing at the edge. And that's needed to drive artificial intelligence.

And the hyper-connectivity now being supported by 5G, but by the end of the decade will be 6G. So it's going to be faster, lower latency, and more bandwidth. And then there's another driver; it's called climate change and resource scarcity. I mean, semiconductors will, and I'm going to show you a couple of examples, but it's going to be very significant.

The building block of making sure that we can manage climate change includes electrification, smart mobility, the energy transition, and of course, how we are going to use our resources smarter. The last big driver is the social and socioeconomic shifts. I mean, yes, the pandemic has actually taught us to use different ways of working, such as working from home.

But also, this remote connectivity is extremely important in areas of medical technology, for instance. And then, we'll talk about it later, technological sovereignty is a big driver for this socio-economic shift. Okay, now just a couple of examples. The energy transition, we believe, will be one of the main drivers for the coming decades.

It's about energy generation, it's about storage, about distribution, and it's about consumption of this electrical energy. And an example, if you want one megawatt of wind power, it needs about 3,000 euros of semiconductors. And one megawatt of solar power, 4,000 euros. If you think about...

The gigantic increase in demand for electricity and the renewable energy coming from wind and from solar, just from wind and solar, just from generation. You can think about the enormous impact this will have on semiconductor consumption. And don't even mention the grid, the smart grid that needs a lot of sensors, actuators, and computing power. And how do we use it? I mean, it's used...

industry said at least it's over $1,500 per vehicle and some even say over $2,000.

So, that's just one example. But there's also, people talk about advanced semiconductors and the importance of them, and mature semiconductors, as if these were two different worlds.

But they aren't. This is a good example which comes from NXP. This is Lars Reger, the CTO of NXP. He actually showed this slide, and it shows that if you take a car, it consists of...

Mature semiconductors, and he starts on the left-hand side with 14 nanometers. It's just to actuate. Just picking up the sensor data. We're actually picking up the sensor data. A semiconductor technology that is even older than 14 nanometers. A lot older. And then it needs to actually go to the central core of the car where it needs to be processed.

very fast, high processing capacity because the input of that first analog and then digital data into the car is massive. But the 5nm chip doesn't work without the input.

And if the input cannot find a placeholder in the central computing engine, it doesn't work either. So it's all connected. So mature and advanced semiconductors are part of a systemic approach to a problem which you will see with more increasing complexity that the approaches will be more systemic. We don't only need advanced semiconductors but very much we also need more and more mature semiconductors.

Now, customers realize this; so let's take an example. For three major customers - Intel, TSMC, and Samsung - they have announced that they are

FAB projects, investment projects. Well, I'll do the math for you. It's $326 billion announced. $326 billion announced in new FAB expansions. And it's not only leading edge. It's also mature. And that's needed. That's needed because of what I just talked about. Now, let's look at the total semiconductor market.

When you take all those developments into account, semiconductors are going to be pivotal in our day-to-day life. And when we look at the growth rates that we're going to see and the new areas of growth in connectivity, in the energy transition, and as a result of the socio-economic shifts, it's not a surprise that when you do the math, not only us, but different...

Sources come to a semiconductor industry, the business of our customers; there will be anywhere between 1 and 1.3 trillion dollars, which is a doubling of where we are today.

has come to a semiconductor industry, the business of our customers, that will be anywhere between 1 and 1.3 trillion dollars, which is a doubling of where we are today. Now, the semiconductor industry took 40 years.

Close to 50 years, to grow to 600 billion dollar sales. It needs another 8 to 10 years to double it again. And this is the challenge that we have. So what do we need to do? We need to build capacity.

$600 billion in sales. It needs another 8 to 10 years to double it again. And this is the challenge that we have. So, what do we need to do? We need to build capacity because we need to scale.

and we need to find talent around the world. And we're investing in our production capacity and in our EV factory here, our Transcon factory here, our deep UV capabilities here, but also in Berlin we invest in Taiwan, we invest in Korea, we invest around the world to make sure that we can deal with this increase in capacity needs.

So our current build capacity is 375 deep UV systems. Well, we want to have 600 by 2025-26.

We have last year just a build capacity of around 50 units, this year 60 units for EUV. We want to get a 90. That's all needed to drive the growth of this industry and also means we need to hire people. This morning I told the news agency that over the last 12 months...

we received about 300,000 applications for a job at ASML. But you hired close to 10,000 people, so we still have a choice. And we now employ close to 40,000 people worldwide, with about half here in the Netherlands.

That is going to be a constant challenge for us because we need to grow, we need to hire people, that's one, but then we need to onboard to make them effective. Big management challenge. Now so what do we do then on ESG? It's very important, we launched our ESG strategy last year. So what do we do this year? For instance, we have a good example, we connected all the buildings here in Feldhofer in what we call a one energy grid.

Which basically means we find places where we can transfer waste heat, which is in one of the buildings, you could imagine this is waste heat in the factories, and we use it to heat the buildings. But ultimately we will save 70% gas in this site, which by the way you've seen is a big site. So we will save 90% gas reduction.

And that also means that we're significantly in the social domain, significantly scaling up our investments in the community, in the infrastructure, to basically make sure that all people in the community that we work in have as much as possible access to personal growth and can also benefit from the value that's being created. I think also from a governor's point of view, we're one of the founding members.

of this semiconductor climate consortium which was actually launched a couple of months ago and was opened by Al Gore. We take our responsibility also as an industry. Now, geopolitics. I'm probably not going to get any questions on this.

So that's why I'm going to preempt something. Basically, it's a clear issue. It's driven by the fact that we all realize that we are all human beings.

that semiconductors are now a pivotal element in creating a sustainable society. And it's mind-boggling that only now governments seem to realize that we have created, you could argue, some single-sided dependencies on certain countries on the planet because they basically have 80% of the world's manufacturing capacity.

everybody's now rethinking this and says, what do we need to do? We need to stay relevant. We don't need to do everything ourselves. We need to stay relevant, so we need to push the development of semiconductor manufacturing in our region, whether the region is India or the United States or Europe or Japan. All governments are rethinking their semiconductor strategy. Thank you for your attention.

What are the consequences? Well, over the last 40-50 years, the semiconductor industry has consolidated itself into a global collaboration network, an ecosystem without borders, without boundaries.

which has great advantages because customers could talk with us and throughout the ecosystem very clearly about the roadmaps, about what needed to be done to drive innovation together. We have worked together with peers to just make sure that we created processes that customers could use and actually created a semiconductor industry that innovated faster, very and almost unlimited coordination with academic partners.

and of course with suppliers in an open structure, an open collaboration model to drive innovation. That's what we created and also by sharing risks and rewards. Now, because of the, you could say...

the bifurcation of the world into new socioeconomic blocks with a significant impact that has on the way they look at semiconductors.

of the world into new social economic blocks with a significant impact that has on the way they look at semiconductors. You see, of course,

a bifurcation happening. One element of that is export controls but that's not only it. I mean it's the chips act around the world. The chips act that come with consequences, that comes with liabilities. If you want to get the money from the government you have to give something in return. Which basically means that this world is indeed bifurcating. So what does that mean if that happens?

Well, you see that the chip availability could be reduced. Could be as a result of export controls that go too far and then cut off certain parts of the chip manufacturing capacity which will have an impact on significant industries like the car industry, like the energy transition, like the medical tech. Supply chain might get disrupted because, you know, countries say yes, you can get my money from the government but these are the conditions.

You only need to spend the money where we think it is wise. Which means that that could put a lid on the collaboration with peers, with academia, because there will be borders. This borderless ecosystem now is a danger of creating hurdles. It will also have impact on the supply chain. It was, I would say, seamless.

It will not be as seamless going forward as it is today. Now it also means that countries will double down on investing in their own industry, whether it's in the United States or in China or in Korea or in Europe . And it also means that we will have a less efficient infrastructure. Cost will very likely go up. And that's the risk that we are facing, but that's the result of, let's say, the realization that.

this ecosystem that we have built was almost seamless, is now indeed bifurcating in different social economic blocks each with their own economic and political interest. That's where we are today. I'm happy to take some questions later on, but Roger, why don't you do the following and talk about something boring like financials. Thank you. I have one. This was a former CFO talking, how about that?

It's a small step from US politics to US GAAP as I said it yesterday, so that's where we're here. Small step from man, a giant leap from mankind. Here we are. Financials. So Q4 results of 2022, strong quarter, all in all. If you look at the numbers, the net sales came in at the midpoint approximately of our guidance. At 6.4 billion as you see here, you know, based on 4.7 billion of system sales and 1.7 billion of installed data.

51.5%, we got it at 49%, there was some one-offs in there, but again a major driver here is that same install base management sales. There were quite some software upgrades in there. On software upgrades the gross margin is very, very high. So if you see install base management go up the way it went in this quarter, that also beats up the gross margin. That's what you see there.

operating margin 33% and then goes all the way down to the numbers that you see here as net income, earnings, etc. Important to note, the net bookings, you know, in spite of the climate, in spite of the number of our customers saying that they are looking at ways to reduce capex, it's very clear that we're still adding to our order book. Because if you look at the...

6.3 billion net bookings number that you have here and you compare that to the first bullet where we talk about net system sales of 4.7, that tells you that we're still adding to the order book and if we look at the order book today at over 40 billion you're in fact looking at more than twice the expected system sales for this year in the order book which is very, very strong I would say. Other than the 6.3 as we have it here 3.4 billion for EUV.

pretty strong net income of 5.6 billion and an EPS of over 14 euros. Lithography, very strong once again, grew 12%, 7 billion, but important to recognize what we have here. We recognize revenue for 40 tools, for 40 EUV tools. We actually shipped 54 tools. And I won't bother you with accounting rules or anything like that.

result of that we could only recognize revenue for 40 tools but in essence we shipped 54 tools. That delta of 14 tools is therefore not recognized in the growth number of 14% that you see for the full year but that will come in the course of this year. Also important to note is that all 5 EUV customers actually...

a pivotal role both in high-end logic and also in the memory business. Also the DPV business continues to be very very strong. In the back of some of the comments that Peter made in the mature business but also in the advanced business. It grew 13% to 7.7 billion as you see here.

This really reflects the continued capacity growth that Peter also showed you in the earlier slides. Two new models were being introduced. The new ARF immersion system, the NXT 2100, and the advanced dry system, the NXT 870. Also in the application business, strong growth, 28% to 660 million, so really firing on all cylinders there. There you see that we have quite a few new models that are being introduced.

In return, everyone is sharing in our success, but also the shareholders are sharing in the success and in the aggregates with a combination of what we paid in terms of dividend and share buybacks we were able to return to shareholders an amount of 7.2 billion euros. Very quickly in terms of the sales breakdown, you see technology wise not a real deal.

because some of our customers are clearly indicating the memory market in 2022 was down, also prices were down. But this really tells you that the investments that our customers make in the memory business are strategic. So they're really looking not at the demand in Q4 of 2022 or even the demand in Q1 of 2023, they really look at potential pickup in the second half of this year.

and they want to continue to make the investments. So they really see lithography investment as critical on their strategic roadmap and that is reflected in the pickup of the memory business. In terms of regional breakdown, it's more or less in line again with last year and in terms of unit numbers you see it pick up from 309 units in total in 2021 to 345 in this year. If we then quickly look at the composition in terms of end use.

Again, as you see here, memory, strong growth, logic continue to continue strong growth, and then you see this pickup of the install-based business that we already talked about. It's interesting to see the five years, how particularly the logic market has really, really picked up on the back of the end-use developments that Peter has been talking about. If we then look at the boring numbers here, it's once again good to take the five-year perspective and then use...

and not all of the inflation burden could be passed on within the ecosystem. So that's one driver. But secondly and very importantly, we are investing in growth. As you see, if you look at the campus here, if you look at some of the slides that Peter was presenting, we're very much gearing up for further growth. And it also means that in the growth margin, there is quite some...

which I think is still a good sign because it really tells you that the company is still, you know, has still an abundance of ideas and is driving a very aggressive roadmap towards you know, the targets that you've seen that we articulated at the Capital Markets Day. Also as the SG&A grows in line with the growth of the company and more or less doubled in comparison to 2018.

I mentioned the return to the shareholders. So we had very strong share buybacks last year. Also in terms of dividends, once again we present to the AGM an increase in the dividends, an increase of 5.5% towards 5.80 euros per ordinary share dividend over 2022. That is the proposal.

and in terms of share buyback we in November introduced our new plan for 12 billion of share buybacks over a three-year period. In terms of outlook for the quarter, 6.1 to 6.5 billion in terms of net sales which is more or less in line with what we had in in Q4. Install base a little bit lower because as I mentioned to you there was quite some pull in from customers.

into Q4 so that has a slightly negative effect on the installed sales that we expect for Q1. That also has a slightly negative impact on the gross margin, although for the full year we expect the gross margin to be slightly up in comparison to the gross margin that we had for the full year 2022. R&D once again a step up to $965 million and SG&E commensurate with the growth of the company to $285. So those are the key parameters for Q1.

like PC, smartphones, etc. you see that growth continues in other markets like in the auto market and I think the example that Peter just gave you both on electrification but also ADAS systems I think is a good example there. So clearly there is some pressure I would say on some of our customers and some of the growth of our customers particularly in the first half of the year.

Most of our customers, if you listen to their commentary, they expect the market to regain strength in the second half of this year. And then the logic of our customers is pretty clear. They say, okay, so if the market within a one-year timing is going to pick up, and if the lead time that ASML has for ordering new tools is over that, and as I just mentioned, on average about two years' time, then we better take our tools.

because if we now let go of our tools, that means that we're at the end of the queue, we have to wait two years before we get the tool, and if then indeed the market picks up within one year, we will be too late to cater to the pickup of the market. And that's the reason why, in spite of some of the pressure that some of our customers feel, we still see a very strong demand for ASML. I mentioned the over 40 billion in terms of backlog, very, very strong, a record number there. And yes, we are based on the increase in capacity that we're funding, we are looking at plans.

last year, we expect them to slow down a little bit on that in 2023. With that, dear friends, I've come to the end of my presentation and I hope Peter and Monique can join us for Q&A. Great timing, Roché. I see we have some issues with our website, so the connectivity is not too good. I think this is related to the general IT disturbance.

microphone here in the room. Kelsey Segers will come to you if you indicated you have a question. And Sander, my colleague Sander Hofmann is checking the website to see if there's any questions coming in through the website. So let's start off with the first one. So state your name and your publication number and we'd be happy to answer your question so people can hear it. Thank you very much.

would be part of the delegation and what would they communicate with politicians? Thank you. Well, it can be very short on the content of the delegation. I mean this is geopolitical, it's not geo-business. So I think there are no delegation members of ASML there because it's political.

Because semiconductors were always there. It's like 1973 we visited, Oriel was always there, until it wasn't and then it became a strategic commodity. Fast forward to 2021, semiconductors always been there, nobody needed to worry, until they weren't. And we figured out there was a worldwide dependence on only a few countries. It's only very recent. So our role is education. It's basically providing information, data. How does this industry work? How does this industry work?

How is this global ecosystem connected? And where are the interfaces between those pieces? And how does that work? So if you think about a bifurcation, but also of the world, and the world creating different sets of chips acts, and think about export controls, then our role is really to provide the information and the insight into what it means. And the consequences of...

That's not us.

So this is our roll.

So in your question, we're not part of the delegation, but definitely part of the discussion. And our role is to provide that information and that insight.

Good question. Okay, thank you. I'm just getting an update that there's quite an issue with our website, so we won't be able to get the questions in from people online. Sorry about that. We're available after the press conference, so if you have any questions, want to reach out to us, please do to any of my team members.

Peter Hack from Politico. I also had a question on export controls. We've seen last week there were discussions between the UN and Biden, but to what extent do you think that this should be a debate more on an EU level because I can imagine that there if there are bans in place that this would have a ripple effect to certain of your suppliers. What are your thoughts on that? Yes, I think that's a good comment, but I think our Prime Minister was pretty clear on that.

And he came out of it and said, oh, we struck a deal. I don't think he said that. I think we are still in discussion because of the complexity of that matter. But you're absolutely right. I mean it's what I tried to say. This is an ecosystem that has been built over 40 years. So if it's seamless and you put locks into that system, you need to understand what the consequences will be. Because you know…

You just ask the automotive customers, you know, how they think about the chip shortage. Try to still order a car and you'll find out that your waiting time is more than 12 months, maybe even longer. I don't know for sure because of the chip shortage. It's all connected. You ask the automotive customers, you know, how they think about the chip shortage. Try to still order a car and you'll find that your waiting time is more than 12 months,

So, this is why these are decisions that can have far-reaching consequences for the worldwide ecosystem and the capacity in that ecosystem and the flow of semiconductors in that ecosystem. And this is why it's not between one or two countries.

I think this is what the Prime Minister said. I think he has a point. Okay, next question. You have to do this also for the people online. If you know anyone who is watching, open your chat. You have dwelled on the many drawbacks of the geopolitical situation, but to what extent do you sympathise with the people online?

and the arguments are there, you know, these chips will be then used into military applications. You have to realize that every time when I hear that, and I think about the export control, it's about our advanced technology.

being able to make advanced semiconductors. But the military applications use rugged, very mature semiconductors. And the semiconductors are only 10, 15, 20 years old, which are widely available across the globe also in China. So to fuel a significant amount of chips into a military complex.

There's a significant amount of systems out there that are not advanced. They're mature. It's already there. Now having said that, of course there's artificial intelligence, smart algorithms, they need high power compute. Well those chips are available. They're available in the world market and they're made on ASML machines, on EUV machines.

But not in China. They're made in Korea, in Taiwan, in the United States. And those chips are available for every end user and manufacturer on the planet to buy.

This is also true for China. China buys as the biggest importer of chips on the planet. I mean, American chip companies, I don't know, they just look at their financial statements, just add the five biggest...

of chip manufacturers on the planet in the United States, they sell 80 billion worth of chips to China. It just shows you how complex this is. And so it's, and those chips, those advanced chips, they go into anything. I don't know where, but they're being sold, so they probably end up somewhere. So I think this is the complexity.

manufacturers on the planet in the United States, they sell 80 billion worth of chips to China. It just shows you how complex this is. And those chips, those advanced chips, they go into anything. I don't know where but they're being sold so they probably end up somewhere. So I think this is the complexity. And this is also where the reference to the complexity was made.

It's highly sensitive. It's a much bigger and more complex situation than just saying, well, that ship goes into a military application. That's far more complex than that. Meanwhile, I have really good news. If those who are watching refreshed the page, then it should work again. I have one question in through WhatsApp, but I saw someone wanting to ask a question there. Kelsey, can you give the microphone here? Thank you.

Could you say what the possible ban on adjusted DUVs would be? To sell DUVs to China? Yeah, I think that fully depends on what the deal is. I think if they strike a deal then we can actually re-lay it out on different scenarios what the potential consequences are. So it's up to them to basically decide on that basis of that information. I cannot even give you that answer because they don't know what the outcome is. That fully depends.

I'm not even willing to speculate on this because this is so sensitive. If I start speculating here, I know what's going to happen. I know what you guys are going to write. So I'm not going to do that. It's too sensitive. I just want to remind everyone that this is annual report, annual results. You are allowed to ask questions. Well, I'll answer those.

That's exactly what I tried to say. It depends on how deep those export controls are. I think export controls are a legitimate instrument, I think. That's clear. But it's how do you want to use them. And if you overuse them, it will have an effect.

on availability of mature chips, which are being used not in a military complex, but are used in a much larger, way, way larger industrial complex, which is basically what we buy every day, from cars to washing machines to PCs to smartphones to infrastructure. You know, we talk about the energy transition. The energy transition needs massive amounts of semiconductors, massive.

So I think we also need to be careful that we don't, that instruments that are well meant, don't have a consequence that we all feel sorry about. So that's also the position that Mark would refer to. I saw Toby, yeah. Toby. Hi, Toby Sterling from Reuters. Not purely my question here, but it's financial, so there you go. Hey.

I think the general idea is there's some skepticism about the weakness in the chip market not having much of an effect on ASML. I know you've explained that a bit, but maybe you could say, will they, I mean there's such a big building program happening right now, is there a chance that that could be slowed down by some of your major customers? And could you break down your projections for DUV and EUV sales, not by systems but by...

the number. I think Roger can, I think he probably put it on the slide so we can refer to that for this year but you need to remember we are not insulated. We're not from any macroeconomic events and especially not when it's such a big inflation coming at us and you know there's a recessionary fear and some people even say some parts of the world are in a recession.

Of course, that impacts our customers and will impact us. But you have to remember that we come out of a period like 2022 where we could hardly, hardly ship 55% of what our customers wanted. So and they want this because they know that these investments are long term, so they wanted to have two years of lead time and then they need to build factories and it's going to take time. So basically we have this demand which was significantly over our build capacity which has come down.

True? So this is a reflection of what we see in the market, but it's still quite a lot above our build capacity. And that means our customers are actually saying, well, I think the duration of this recession is significantly shorter than the lead time of your tools.

And that also means that the recession will turn up into an upturn by the time I need your machines. So why would I cancel or push back those machines? If I do that and I'm wrong about the duration, it's shorter than I think, I'll be in the back of the line because these guys don't have enough capacity. This is where we are. I know. I have a follow up, but is there, when somebody falls out of line, does it just simply go to the very next customer? Absolutely.

that we're envisaging for this year. But what I think is important to note is that the capacity that we are building, we're not building that capacity for the short term. I mean, the capacity for the 90 EUV and the 600 DPV, and that's the capacity that we're driving towards. Of course, we drive that for the medium and for the longer term. And any cyclicality that might be there and demand might be there, but one thing is for sure, we will.

capacity investment, sure, that's what they do. In the memory industry some of our customers have actually said out there we're going to cut cutbacks for this year. And all of a sudden they said we're not going to do that. But in terms of this very strategic, long-term, long lead time item called lithography, they're very cautious.

And if for whatever reason the duration of the recession will extend to years, of course we will as well. We will see the effects. That's not what they currently think. At least that's our conclusion. And this question was really simple. I mean I could look at the average sale prices, but selling prices for each type of machine, but the question is in dollar terms is it about 50-50 the way it was in 2022 for 2023? Do you see what I'm saying? I can't multiply 375.

You mean BPUV versus EUV? Yeah, I mean we said that EUV is going to grow a bit a bit harder, faster than the non-EUV business. So EUV we expect to grow by 40% and the non-EUV business by 30%. Yeah, so that gives you... So the shift will be a little more towards EUV, which makes sense, you know, it's most expensive and that's where the capacity, a lot of the capacity expansions that I showed you, the $326 billion is about EUV.

You mean EUV versus EUV? Yeah, I mean we said that EUV is going to grow a bit faster than the non-EUV business. So EUV we expect to grow by 40% and the non-EUV business by 30%. So that gives you... So the shift will be a little bit more towards EUV, which makes sense, you know. It's most expensive and that's where the capacity, a lot of the capacity expansions that I showed you, the $326 billion is about EUV. EUV driven fabs. Okay.

I have a question from your colleague, Chris Bryant from Bloomberg Opinion. Is the drive for technological sovereignty, including export controls, more positive than negative for an equipment supplier like you?

Well, there are two sides to it. I think the positive side is it will create more capital inefficiency. So capital inefficiency means high capital allocation so it's good for equipment makers. That's good.

The bad thing is that if you have more locks or hurdles into the system, you have more friction and friction, the flip side of friction is cost. So yes, you have a higher level of business but it's not as efficient. So that also is true for us. So it means that you will create higher cost. I think on balance, equipment companies will sell more machines.

That's it. So on that you could say it's positive. But it's a bit selfish. Yeah, I think so. But hey, that was the question. Anyone here? Yeah, sure. Nobody else has been. No, go ahead. On the talks in the US, when do we expect a decision?

which would help you assess the commercial ramifications. Yeah, I think it's in the papers and they write about that. The politicians want to do this rather sooner than later, probably also driven by the fact that there's a lot of uncertainty created. So the quicker you know where you are, the better it probably is. So it's probably under high pressure. And I mean, that's also what I read. So we'll see, you know, and then...

But given the complexity of this, I mean, you have to distinguish between some kind of general agreement and the details. How do you work out the details of these regulations and these laws? There are a lot of details involved and working out the details will probably take a significant amount of time. So you don't talk days or weeks, I think you talk months. To really talk about the details of something like that, to really understand what does it mean? What are the ramifications of something like this? You know?

And that will always take time, but I think we can safely say that the thing is under time pressure. Maybe as an example, the October export controls, I think everyone in the industry is still trying to figure out what the details are and how to deal with that. That's absolutely true. I think until the end of this month there is a feedback opportunity from the industry and industry participants on what it actually means.

your final wording is still under review. It's how these things go. So to really say we fully understand all the ramifications and we can transfer that into business plans, I think it's going to take some time. Okay, question online, Computable. Do you expect any very long-term effect of China getting a position in manufacturing, its own semiconductor machine equipment?

how do you assess the probabilities of Huawei developing competing chip building machinery or probably any other party anywhere in the world? You cannot be naive on this when semiconductors are so pivotal and vital to a responsible economy and a responsible society and you can't get hold of those semiconductors, you're going to do it yourself. That's clear. So I think this will happen. That's one of the consequences of not having this global, fluid, seamless ecosystem.

is going to develop themselves. But having said that, and I cannot speak for our peers in the semiconductor equipment industry, but for ASML, in general, I think there is a lot of equipment in the industry that is focusing on a very complex process that is inside the machine, but the machine itself is not that complex, yeah? But for lithography, there is a lot of equipment

we make a relatively simple process. We just blow light through a lens. But we do this in a very complex machine. So that's a bit different. So this is why basically rebuilding a lithography industry, which basically means that mainly by winding through Paintbrush.

basically get, and it's not patents, it's know-how, it's people, it's the brains. You need to just take that and then redo all of that, to come to the same conclusion. It took us 40 years. So I'm not going to say that laws of physics are different in China or in the US or in Korea or in Russia for that matter. No, laws of physics are all the same. But the accumulated know-how.

with hundreds of companies where we as a system architect, as a system integrator, bring it all together, that's a bit of a challenge. So I think yes, of course the efforts will be there. It's going to be a massive challenge going forward because it's not about ASML, it's about the ecosystem.

I mean the best defense line that we have there obviously is to keep on innovating, right? I think that's critical as well. I mean sometimes you get the question, you know with the market share that you have, you know Why don't you lay back and and be a little slow? Well, they're not well, we're as you could see we're investing very very significantly on our R&D roadmap And we truly believe that pushing down the accelerator there is the best potential defense into anyone You know trying to get get on par with our technology. Yeah, it's good to be challenged sometimes.

That's absolutely true. I had a discussion with the founder of TSMC on what do you do when you have to think about competition coming from different areas. He said, well, it's one solution. You just have to go faster. And that's it. So this is also why you will see that we will invest, to your point, it's not only in capacity, which will of course have a temporary effect on your gross margin. Also, in R&D we will spend more on R&D because we spend the R&D not for next year or for this year, we spend the R&D for the next year.

second half of the decade to the first half of the next decade. This is where the R&D goes. John , there's a... John Koch from Bloomberg. John Koch from Bloomberg. What do you see as the biggest challenge and risk in the US implementation of the CHIPS and Science Act? Well, I think the biggest opportunity, and let's talk about the opportunity first.

advanced semiconductor manufacturing onto soil is highly complex. It's an art and that art is mastered over the last 10-20 years by the TSMCs and the Samsungs of this world and also Intel but this is why you see the invitation almost. It's an invitation with a big carrot which is called sub-seeds.

know how. Now bring that into your country and then ramping this up in a way that you haven't been doing for the last 20 years also means that talent is a massive risk. You need to get the talent to actually do that. You cannot just draw everybody from Taiwan or from Korea to do that. You need to create your talent pool.

And that's a big challenge. I think that is a generic risk, not only to the US chip sector, but also to the European chip sector. People. And that risk is also the single biggest opportunity because if you're able to do it and if you're able to build an ecosystem around that, if you're able to make that the knowledge and the expertise in that ecosystem, if you're able to really create that on soil again in Europe , in the United States, I think it's a major boost to your competitiveness. So it's the biggest risk. Are you able to attract that talent? And also by far the...

their institutions, their customers, it's the partners, the technology partners, it's the peers, that's all there. That's the ecosystem. You see, if you find the same in Seoul and in Wazung, you find the same in Silicon Valley, but not manufacturing, but the rest is there, you know, you have the design companies there, this is where, so it's not just the money, throw the money at it, find a deserted air place, you know, air force base and just build a factory. No, you have to build an ecosystem. Yeah.

We have time for one last question. I have one online, but if anyone is here, I'll put it up for it.

Q4 2022 ASML Holding NV Earnings Call

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