Q4 2022 ASML Holding NV Earnings Press Conference

January 25, 2023

[music].

Good morning, everyone and good afternoon, if you're in Asia are welcome to this press conference of ASML, we are going to talk to you about the fourth quarter and full year 2020 to our financial results well here at the auditorium and felt over at our headquarters and I'm actually pretty happy to have a real Audi.

Monique Mols: 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 Q4 and full year 2022 financial results. We're here at the auditorium in Veldhoven at our headquarters, and I'm actually pretty happy to have a real audience here after two years of COVID. It's nice to have a few journalists that we've known for so long here in the room. There are also people watching and following this press conference online. They are also allowed to ask questions. There is a form on the website. Just fill that out, state your name and your publication name, and then send it in, and we hope to get an opportunity to come to your question. My name is Monique Mols.

In here after two years of Covid. So it's nice to have a few journalists that we've known for so long here in the room. There are also people watching and following this press conference online. They are also allowed to ask questions. There is a form on the website just fill that out state. Your name annual publication name and then send it in and we are we hope to.

Had an opportunity to go to come to your question.

My name is when he moves I always forget to introduce myself. My name is when he goes I am responsible for media relations at ASML and with me I have Peter winning CEO of ASML, and where she doesn't see F. O S. Now and they will talk you through our financial results, but also developments around our industry that I'm sure also how are you.

Monique Mols: I always forget to introduce myself. My name is Monique Mols. I am responsible for media relations at ASML. 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 has your interest. Let me invite Peter Wennink to the floor, and we'll kick this off.

Interest so let me invite Peter went into the floor and we'll kick this off.

Thank you Dominic.

Welcome everybody and yes, Youre right I mean, it's good to have people life here I would also people are all.

Pieter Wennink: Thank you, Monique. Welcome everybody. Yes, you're right. I mean, it's good to have people live here, but also people on the webcast. I wanna 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. 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, you know. There's questions on, are we going to get the recession, and if so, how deep will it be and how long will it be? There are issues on, geopolitical developments and export controls.

Peter Wennink: Thank you, Monique. Welcome everybody. Yes, you're right. I mean, it's good to have people live here, but also people on the webcast. I wanna 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. 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, you know. There's questions on, are we going to get the recession, and if so, how deep will it be and how long will it be? There are issues on, geopolitical developments and export controls.

All the webcast.

I want to just talk about view, thanks key messages I think Monty industry. This state of the industry right now.

And then Rajiv will talk about financials and the outlook and then we'll take the Q&A.

So our key messages.

In fact, that's what we say there what we told you.

At the capital markets day, I think despite the fact that although were currently seeing is of course a lot of turbulence.

Questions on the are we going to get a recession and if so how deep will it be and how long will it be.

There are issues on the geopolitical developments and export controls, there's a lot of uncertainties right now but.

Pieter Wennink: 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 10 years ahead. Why is that? We're 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 need more semiconductor compute and storage power going forward. 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 fab, it will take three years. Then if you start...

Peter Wennink: 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 10 years ahead. Why is that? We're 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 need more semiconductor compute and storage power going forward. 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 fab, it will take three years. Then if you start...

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 10 years ahead.

And why is that because we are convinced that semiconductors.

Currently playing a critical role in the economy any day. They live it will only increase it will only only 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 and you have to remind you that we have to remind you that building a semiconductor fab or a factory fab.

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

Pieter Wennink: Have to start planning it from day one, probably five, yeah? This is all about the longer term. When we look forward and look at the growth rates of, you know, 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. 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 EUR 30 billion and 40 billion in sales, and we have between 54% and 56% gross margin, which will grow to 2030, depending on the scenario, between EUR 44 billion and 60 billion, between 56% and 60% gross margin.

Peter Wennink: Have to start planning it from day one, probably five, yeah? This is all about the longer term. When we look forward and look at the growth rates of, you know, 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. 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 EUR 30 billion and 40 billion in sales, and we have between 54% and 56% gross margin, which will grow to 2030, depending on the scenario, between EUR 44 billion and 60 billion, between 56% and 60% gross margin.

So it is all about the longer term and when we look forward and you look at the growth rates.

Of.

Semiconductor sales.

You'll see it later I'll talk about later that we see a very significant upside.

For our customers and also for SME. This is why we need to invest.

And that's also why we believe there is an opportunity depending on different market scenarios are higher or lower market scenario that by 2025.

It will be anywhere between 30, and 40 billion in sales and we have it in 54% to 56% gross margin, which will grow to 90.

<unk> 30, depending on the scenario between 44, and 60 billion between a 56% and 60% gross margin.

And I think it's all of the US its 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 all profitable very profitable but of course, because we will grow that profitability will grow and I was also for our shareholders is going to be a significant return.

Pieter Wennink: 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's going to be profitable. We are profitable. We're very profitable. 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 hyperconnectivity now being supported by 5G, but by the end of the decade will be 6G.

Peter Wennink: 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's going to be profitable. We are profitable. We're very profitable. 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 hyperconnectivity now being supported by 5G, but by the end of the decade will be 6G.

Now.

When we look at the industry.

Three major drivers I think it's still we all notice is connectivity.

It's got activity, where it's a cloud or the edge computing. It's all connected these things are not separate there is not that.

Theres not theres no centralized computing in the cloud without the decentralized computing at the edge, it's all connected and that's needed for to drive artificial intelligence and a hyper connectivity now being supported by five G. But by the end of the decade will be 60, so I'm going to be faster lower lower latency more bandwidth.

Pieter Wennink: Going to be faster, lower latency, more bandwidth. Then there's other 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? The last big driver is the social and the socioeconomic shifts. I mean, yes, with the pandemic have actually taught us to, you know, use different ways of working from home. But also, that this remote connectivity is extremely important, also in areas of medical technology, for instance. We'll talk about it later.

Peter Wennink: Going to be faster, lower latency, more bandwidth. Then there's other 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? The last big driver is the social and the socioeconomic shifts. I mean, yes, with the pandemic have actually taught us to, you know, use different ways of working from home. But also, that this remote connectivity is extremely important, also in areas of medical technology, for instance. We'll talk about it later.

And then there's other drivers called D climate change and the resource scarcity, I mean semiconductors will and won't go to show you. A couple of 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.

Sharon.

And of course, how are we going to use our resources smarter.

And then the last big drivers of social and the social economic shifts I mean, yes with the pandemic.

That's it for us too.

It taught us to use different ways of working working from home.

But also that.

This remote connectivity is extremely important it also in the areas of medical technology for instance.

And then we'll talk about it later technological sovereignty is a big driver for this is social economic shift.

Pieter Wennink: Technological sovereignty is a big driver for this socioeconomic shift. Okay. Now just a couple of examples. Just the energy transition, we believe it 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 consumption of this electrical energy. I'll give you an example. If you want 1MW of wind power, it needs about EUR 3000 of semiconductors. One megawatt of solar power want EUR 4000. But 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.

Peter Wennink: Technological sovereignty is a big driver for this socioeconomic shift. Okay. Now just a couple of examples. Just the energy transition, we believe it 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 consumption of this electrical energy. I'll give you an example. If you want 1MW of wind power, it needs about EUR 3000 of semiconductors. One megawatt of solar power want EUR 4000. But 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.

Hey, just a couple of examples because the energy transition we believe it will be one of the main drivers the coming decades.

It's it's about energy generation, it's about storage about distribution, it's about consumption of this electrical energy.

Have you know an example, if you want one megawatt of of a wind power it needs about 3000 euros of semiconductors, and and while megawatt of solar power 4000 euros, but if you think about the gigantic increase in demand for electricity and the renewable energy.

You're coming from winter from so just wind and solar just from generation you can think about the enormous impact. This will have on semiconductor consumption and then I don't talk about the grid about the smart grids that needs.

Pieter Wennink: Then I don't talk about the grid, about the smart grid that needs a lot of sensors and actuators and compute power. Yeah. How do we use it? I mean, it's used in the electrification of our mobility. You know, the electric vehicle will at least use twice the number of semiconductors as compared to a combustion engine. Yeah. I think the electric vehicles is not ours. I mean, it's just an estimate of one of our customers who is very clearly involved in the electrification of the automotive industry, said at least it's over $1,500 per vehicle, and some even say over $2,000. That's just one example.

Peter Wennink: Then I don't talk about the grid, about the smart grid that needs a lot of sensors and actuators and compute power. Yeah. How do we use it? I mean, it's used in the electrification of our mobility. You know, the electric vehicle will at least use twice the number of semiconductors as compared to a combustion engine. Yeah. I think the electric vehicles is not ours. I mean, it's just an estimate of one of our customers who is very clearly involved in the electrification of the automotive industry, said at least it's over $1,500 per vehicle, and some even say over $2,000. That's just one example.

Lot of sensors, and actuators and and compute power.

No.

And how do we use it I mean, it's it's use Indiana in the electrification of our mobility.

The.

The electric vehicle will at least at least use twice the number of semiconductors as compare to a combustion engine.

And I think the ethical vehicles is not ours, it's Justin.

Estimate of one of our customers who was very very clearly involved in the electrification of the automotive industry is that at least it's over $500 per.

Vehicle and some even say over 2000.

So.

That's just one example, but it's also people.

We'll talk about advanced semiconductors, and the importance of it and mature semiconductors as if these were two different worlds. The arm. This is a good example, which comes from from NXP is Las Vegas, the CTO of NXP simpler. He actually showed this slide and it shows that if.

Pieter Wennink: 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 Lars Reger, he's the CTO of NXP Semiconductors. He actually showed this slide, and it shows that if you take a car, it consists of mature semiconductors. Here starts on left-hand side with 40nm. It's just the actuators picking up the sensor data. Actually picking up the sensor data is semiconductor technology that is even older than 40nm, a lot older. It needs to actually go to the central core of the car where it needs to be processed very fast.

Peter Wennink: 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 Lars Reger, he's the CTO of NXP Semiconductors. He actually showed this slide, and it shows that if you take a car, it consists of mature semiconductors. Here starts on left-hand side with 40nm. It's just the actuators picking up the sensor data. Actually picking up the sensor data is semiconductor technology that is even older than 40nm, a lot older. It needs to actually go to the central core of the car where it needs to be processed very fast.

If you look if you take a car it consists of.

Mature semiconductors and his thoughts on the left side with 14 nanometers is just the activity is picking up the sensor data, we're actually picking up the sensor data a semiconductor technology that is even older than 40 nanometer a little yeah.

And then it needs to actually go through the central core of the car where it needs to be processed very fast yeah, hi, pulsing high processing capacity because the input of that first and look and then digital data into the car is massive.

Pieter Wennink: High processing capacity, because the input of that first analog and then digital data into the car is massive. The five-nanometer chip doesn't work without the input. If the input cannot find a placeholder thing in the central computing engine, it doesn't work either. It's all connected. Mature and advanced semiconductors are part of a systemic approach, yeah, to a problem, which you will see with more increase in complexity that the approaches will be more systemic. It means 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 Samsung, they have announced fab projects, investment projects. Well, I do the math for you. It's $326 billion announced.

Peter Wennink: High processing capacity, because the input of that first analog and then digital data into the car is massive. The five-nanometer chip doesn't work without the input. If the input cannot find a placeholder thing in the central computing engine, it doesn't work either. It's all connected. Mature and advanced semiconductors are part of a systemic approach, yeah, to a problem, which you will see with more increase in complexity that the approaches will be more systemic. It means 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 Samsung, they have announced fab projects, investment projects. Well, I do the math for you. It's $326 billion announced.

The five nanometer chip doesn't work without the input.

And if the input cannot find a placeholder.

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 increasing complexity that the approaches will be more systemic and it needs we own don't only need advanced similar but very much we also need more and more mature semiconductors.

Now customers realize this so.

Let's take an example, our three major customers Intel.

Intel TSMC and Samsung they have announced fab.

Fab projects investment projects, well I do the math for you.

$326 billion announced $326 billion announced in new fab expansions and it's not only leading edge is also mature.

Pieter Wennink: $326 billion announced in new fab expansions. It's not only leading-edge, it's also mature. 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, then and we look at the growth rates that we're currently seeing and the new areas of growth in connectivity, in the energy transition, let's say, as a result of the socioeconomic 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, there will be anywhere between $1 and $1.3 trillion, which is a doubling of where we are today.

Peter Wennink: $326 billion announced in new fab expansions. It's not only leading-edge, it's also mature. 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, then and we look at the growth rates that we're currently seeing and the new areas of growth in connectivity, in the energy transition, let's say, as a result of the socioeconomic 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, there will be anywhere between $1 and $1.3 trillion, which is a doubling of where we are today.

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

Now if we then look at it till the semiconductor market.

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

In our day to day life.

Then we look at the growth rates that we're currently seeing in the new areas of growth and productivity in the energy transition.

Indeed, let's say as a result of the social economic shifts as.

It's not a surprise that when you do the math suddenly us, but a different sources come to a semiconductor industry either the business of our customers. They will have anywhere between one and one three trillion, 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.

Pieter Wennink: Now, the semiconductor industry took 40 years, close to 50 years, to grow to $600 billion sales. It needs another 8 to 10 years to double it again. This is the challenge that we have. What do we need to do? We need to build capacity because we need to scale. We need to find talent around the world. We're investing in our production capacity and in our EUV factory here, our TWINSCAN factory here, our DUV 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. Our current build capacity, 375 DUV systems. Well, we want to have 600 by 2025, 2026.

Peter Wennink: Now, the semiconductor industry took 40 years, close to 50 years, to grow to $600 billion sales. It needs another 8 to 10 years to double it again. This is the challenge that we have. What do we need to do? We need to build capacity because we need to scale. We need to find talent around the world. We're investing in our production capacity and in our EUV factory here, our TWINSCAN factory here, our DUV 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. Our current build capacity, 375 DUV systems. Well, we want to have 600 by 2025, 2026.

It's another eight 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.

We need to find talent around the world.

And we are investing in our production capacity and in our EV factory here, our Princeton factory here our hour of.

Deep UV capabilities here, but also in Berlin, we invest in Taiwan, we invest in Korea.

Around the world to make sure that we can deal with this increase in capacity needs and also so our current build capacity of 375 deep UV systems.

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

We have last year.

Pieter Wennink: We have last year, you know, 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. Now we just this morning, I told a 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. We now employ close to 40,000 people worldwide, 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. I need to onboard and make them effective. Big management challenge.

Peter Wennink: We have last year, you know, 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. Now we just this morning, I told a 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. We now employ close to 40,000 people worldwide, 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. I need to onboard and make them effective. Big management challenge.

A build capacity of around 50 units this year 60 units for EV.

Well when I got the 90 S O.

All needed to drive the growth of this industry and it also means we need to hire people.

Now we we just this morning I told a news agency that.

Over the last 12 months, we received about 300000 applications for a job at ASML.

But your highest close to 10000 people.

So we still have a choice and.

And we now employ close to 40000 people worldwide have here in the Netherlands.

That is going to be a constant challenge for us because we need to grow with the Hydra people, that's warm, but I need to onboard and make them effective big management challenge.

Now so what do we do that on.

On ESG, it's very important we launched our ESG strategy last year. So what do we do this year for instance, we are a good example, we connected all the buildings here in Velvet and what will go in one energy grid, which basically means we use concert we find places where we can transfer a waste heat which is in <unk>.

Pieter Wennink: Now, what do we do then on ESG? It's very important. We launched our ESG strategy last year. What do we do this year? For instance, we have a good example. We connected all the buildings here in Veldhoven 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. Ultimately, we will save 70% gas in this site, which, by the way, you've seen is a big site.

Peter Wennink: Now, what do we do then on ESG? It's very important. We launched our ESG strategy last year. What do we do this year? For instance, we have a good example. We connected all the buildings here in Veldhoven 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. Ultimately, we will save 70% gas in this site, which, by the way, you've seen is a big site.

One of the business you could imagine this is waste heat in the factories and we used it to heat the buildings, but ultimately we will save 70% gas.

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

Pieter Wennink: 70% gas reduction. 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 communities 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 governance point of view, we're one of the founding members of this Semiconductor Climate Consortium, which was actually launched just 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.

Peter Wennink: 70% gas reduction. 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 communities 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 governance point of view, we're one of the founding members of this Semiconductor Climate Consortium, which was actually launched just 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.

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

In the infrastructure.

To basically make sure that all people in the communities that we are working at as much as possible access to personal growth and can also benefit from the value that's being created.

I think also from a governance point of view, we're one of the founding members.

All of these semiconductor climate Gulf, Sasha, 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.

Pieter Wennink: It's driven by the fact that we all realize that semiconductors are now a pivotal element in creating a sustainable society. It's perhaps a bit 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. 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, the United States, Europe, or Japan. All governments are rethinking their semiconductor strategy. What are the consequences?

Peter Wennink: It's driven by the fact that we all realize that semiconductors are now a pivotal element in creating a sustainable society. It's perhaps a bit 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. 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, the United States, Europe, or Japan. All governments are rethinking their semiconductor strategy. What are the consequences?

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 is now rethinking that says what do we need to do we need to stay relevant we don't need to do everything ourselves, where we need to stay relevant so we need to push.

The development of semiconductor manufacturing in our region, where the region is.

India, or the United States or Europe or Japan.

All governments are rethinking their semiconductor strategy.

And.

What are the what are the consequences well.

For the last 40 50 years, the semiconductor industry has.

Pieter Wennink: 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, you know, 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 and open collaboration model to drive innovation. That's what we created, and also by sharing risks and rewards.

Peter Wennink: 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, you know, 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 and open collaboration model to drive innovation. That's what we created, and also by sharing risks and rewards.

Consolidated itself into a global collaboration network and ecosystem without borders without boundaries, which has great 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 P. S. Yeah with with best to just make sure we created processes of customers could use and actually created a semiconductor industry that's innovative faster.

Very and almost unlimited.

Coordination with our academic partners and of course with suppliers in an open structure and open collaboration model to drive innovation.

That will be created.

And also by sharing risks and rewards now because of the you could say the bifurcation of the world.

Pieter Wennink: Now, because of 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, you see, of course, a bifurcation happening. Now, 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. What does that mean if that happens? Well, you see that the chip availability could be reduced.

Peter Wennink: Now, because of 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, you see, of course, a bifurcation happening. Now, 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. What does that mean if that happens? Well, you see that the chip availability could be reduced.

Into new social economic blocks.

We had a significant impact.

It has on the way to 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 at 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 bifurcated. So what does that mean if that happens.

Well you know as you said that the chip availability could be reduced.

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.

Pieter Wennink: 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. Yeah. 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 know? "You only need to spend the money where we think it is wise." Which means 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. Will also have impact on the supply chain that was, I would say, seamless. Yeah. It will not be as seamless going forward as it is today. Yeah.

Peter Wennink: 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. Yeah. 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 know? "You only need to spend the money where we think it is wise." Which means 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. Will also have impact on the supply chain that was, I would say, seamless. Yeah. It will not be as seamless going forward as it is today. Yeah.

Supply chain might get disrupted because in all 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 border lists ecosystem.

And now is a danger of creating hurdles.

It will also have.

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

Yeah.

Now it also means that countries.

Pieter Wennink: 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. It also means that we will have a less efficient infrastructure. Costs will very likely go up. 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, and happy to take some questions later on. Roger, why don't you do the following and talk about something boring like financials? Thank you.

Peter Wennink: 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. It also means that we will have a less efficient infrastructure. Costs will very likely go up. 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, and happy to take some questions later on. Roger, why don't you do the following and talk about something boring like financials? Thank you.

Countries, we'll 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 to go up.

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

Now indeed bifurcated in different social economic blocks each with their own.

Economic and political interest.

That's where we are today and happy to take some questions later on but Rajiv why don't you do the following and talk about something boring like financials. Thank you.

Hello.

This was a former CFO talking how about that.

Roger Dassen: I have one. This was a former CFO talking. How about that? It's a small step from U.S. politics to U.S. GAAP, as I said yesterday. That's why we're here. Small step for a man, a giant leap for mankind. Here we are, financials. Q4 results of 2022, strong quarter all in all, if you look at the numbers. The net sales came in, you know, at the midpoint approximately of our guidance at EUR 6.4 billion, as you see here. You know, based on EUR 4.7 billion of system sales and EUR 1.7 billion of installed 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.

It's a small step from U S politics to U S. GAAP as I said it yesterday. So that's definitely here small step for man a giant leap for mankind Haley our 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 a third of our guidance at 6.41 billion as you see here.

You know based on $4 7 billion of system sales and $1 7 billion of installed base management sales that was pretty strong. We saw that there were quite some customers that actually do want upgrades to their to their system in Q4 actually a number of upgrades that were planned for Q1 actually.

Roger Dassen: Actually, a number of upgrades that were planned for Q1 have actually been pulled into Q4, and that really beefed up the installed 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 installed 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 installed base management go up the way it went in this quarter, that also beefed up the gross margin. So that's what you see there.

Being pulled into into Q4 and that really beefed up the installed base number for for Q4 gross margin are pretty strong at at 51.5%. We guide at 49% there wasn't one of them there, but again a major driver here is that same installed base management sales there were quite some software.

Grades in there on software upgrade said the gross margin is very very high. So if you see installed base management to go up and the way to the way. It went in this quarter that also beef up the gross margin. So that's what you. If that's what you see theyre operating margin of 33%.

Roger Dassen: Operating margin, 33%, and then goes all the way down, to the numbers that you see here as net income, earnings, et cetera. Important to note, the net bookings, you know, 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 EUR 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 EUR 4.7 billion, that tells you that we're still adding to the order book.

And then it goes all the way down to numbers that you see here as net income and earnings etc.

Important to note that bookings.

In spite of a inspite of.

Part 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 to our order book and because if you look at the $6 3 billion in net bookings number that you have here and you compare that to the first bullet when we talk about our net system sales of $4 seven.

That tells you that we're still adding to the to the order book and you know if we look at your order book today at over 40 billion. You are in fact looking at more than twice the expected system sales for this year and the order book, which is very very strong I would say included in the $6 three as we have it here $3 4 billion for.

Roger Dassen: You know, if we look at the order book today at over EUR 40 billion, you're in fact looking at you know, more than twice the expected system sales for this year in the order book, which is very strong, I would say. Included in the 6.3 as we have it here, EUR 3.4 billion for EUV. If we look at the full year, a number of highlights that we would like to emphasize and share with you. Of course, first off, the sales growth. Sales growth of 14% over 2021. Strong, really strong demand, reflecting strong demand in all of our products. To EUR 21.2 billion at 50.5% gross margin.

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 all of the sales growth sales growth of 14, 14%.

For over 2021 strong.

Really strong demand, reflecting strong demand in all of our products.

To $21 2 billion at 55% of gross gross margin pretty strong net income of $5 6 billion and EPS of 14 over 14 euros.

Roger Dassen: Pretty strong net income of EUR 5.6 billion and an EPS of over EUR 14. Lithography, very strong once again, grew 12%, EUR 7 billion. Important to recognize what we have here. We recognize revenue for 40 tools, for 40 EUV tools. We actually shipped 54 tools. You know, 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 you know, some of the supply chain limitations that we had, we had to optimize the way we ship tools to our customers. That meant that you know, some testing in the factory didn't happen.

Lithography very strong once again grew 12% a 7 billion, but important to recognize what we have here. We recognize revenue for 42 was for 40 E V tools, we actually shipped 54 tools and you know I won't bother you with a with accounting rules all that all that much but he essence is because of the high demand for E V tools that we had.

In in 2022 and you know 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 denim said they didn't happen as a result of that we could only recognize revenue for 42 has been in essence, we shipped 54 tools that delta of 14 tools.

Roger Dassen: 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 5 EUV customers actually have now placed High NA orders, and I think that really you know emphasizes the confidence that our customers have in the High NA technology that really is going to get us you know into the H2 of this decade. There you will see that High NA will play a pivotal role both in high-end logic and also in the memory business.

His death or not recognize in the growth number of 14% that you see for the full year, but that will come in in the course of this of this year.

Also important to note is that all five <unk> customers actually have now placed high any orders or nothing that really emphasizes the the the confidence that that our customers have in the high <unk> technology that really is going to get us.

Into the second half of this of this decade and there you will see the tiny will play a pivotal role both in our in high end logic and also in the in the memory business.

Also the deep UV business continues to be very very strong in the back of some of the comments that Peter made in the mature business, but also India and the advanced <unk> business grew 13% to $7 7 billion as you say as you see here and this really reflects the continued capacity growth appear also showed you in the in the earlier slides.

Roger Dassen: The DUV business continues to be very, very strong. On the back of some of the comments that Peter made in the mature business, but also in the advanced business. It grew 13% to EUR 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 EUR 660 million. Really firing on all cylinders there. There you see that we had quite a few new products that we were able to launch.

Two new two new models for being introduced the new E. R. S immersion system Yannick <unk> 'twenty 100, and the the advanced dry system. The NXT eight to 870 also only application business strong growth, 28% to 660 million, so really firing on all cylinders there.

And there you see that we had quite a few new products that we were able to launch it.

Installed base business, we talked about that as a major driver for the growth and in Q4 very strong iron ore at $5 7 billion. You know both based on service, but also on the on the demand from from customers on upgrades to increase the productivity of the installed base that they already have.

Roger Dassen: Installed base business, we talked about that as a major driver for the growth in Q4. Very strong all in all at EUR 5.7 billion. You know, both based on service but also on the demand from customers on upgrades to increase the productivity of the installed base that they already have. Finally, in terms of capital return, you know, everyone is sharing in our success, but also the shareholders are sharing in the success. In the aggregates, with the combination of what we paid in terms of dividend and share buybacks, we were able to return to shareholders an amount of EUR 7.2 billion. Very quickly, in terms of the sales breakdown, you see technology-wise, not a real big difference.

And finally in terms of capital return you know everyone else, they're sharing in our success, but also the shareholders are sharing in the success in India aggregates with a combination of what we paid in terms of dividend and share buybacks, we were able to two returned to.

Two shareholders, an amount of 7.21 billion euros.

Very quickly in terms of the sales breakdown you see technology wise not a real big difference you see that you know that our debt to EV.

Roger Dassen: You see that, you know, that the EUV, the wet business, ArFi, et cetera, 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%, which might be a surprise to some because, you know, some of our customers are, you know, clearly indicating the memory market in 2022 was down, also prices were down. This really tells you that, you know, the investments that our customers make in the memory business are strategic. They're really looking, you know, not at the demand in Q4 of 2022 or even the demand in Q1 of 2023. They really look at potential pickup in H2 of this year.

The the web business are avaya et cetera, you'll see that that's more or less in line composition wise with that with last year you see that in terms of end use actually memory is picking up and moving from 30% to 35% which might be a surprise to some because some of our customers are clearly, indicating the memory market in 'twenty two.

What was down also prices were down but it's really tells you that you know the.

The investments that our customers make in the memory business, our strategic so they're really looking not at the demand in Q4 of 'twenty, two or even the demand in Q1 of 'twenty three they really look at potential pickup in the second half of this of this of this year and they want to continue to make the investments. So we really see lithography investments is critical.

Roger Dassen: They wanna continue to make the investments. They really see lithography investment as critical on their strategic roadmap, and that is reflected in, you know, 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 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 we see here, memory strong growth, logic continued strong growth. You see this pickup of the installed base business that we already talked about.

On our strategic roadmap and that is reflected in the pickup of the of the memory business in terms of regional breakdown, it's it's more or less in line again with our with last year and in terms of the unit numbers you see a pick up from the 309 units in total in 2021 to 345 and this year.

If we done quickly look at the composition in terms of and use it.

Again, as we see here at memory strong growth logic continued to continued strong growth and then you see the pickup of the installed base business that we already talked about and it's interesting to see D. The five years, how particularly the logic market has really really picked up on the on the on the back of the end use developments that Peter has been talking them.

Roger Dassen: It's interesting to see the five years, how particularly the logic market it has really picked up on the back of, you know, the end use developments that Peter has been talking about. If we look at the boring numbers here, it's once again good to take the five-year perspective, and 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.

Yeah.

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 and in fact in this period the company doubled in many in many different ways. We doubled in terms of the 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 is there has been hitting us in 2022 as it has been heading everyone and you know not all of the inflation burden could be it could be passed on within the year within the ecosystem. So that's one driver.

Roger Dassen: Inflation has been hitting us in 2022, as it has been hitting everyone. You know, not all of the inflation burden could be passed on within the ecosystem. That's one driver. 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. It also means that in the gross margin, there is, you know, quite some money that is being spent on being ready for increased capacity in 2024, 2025, and 2026.

Secondly, and very importantly, we are investing in growth.

As you see if if you if you if you look at the at the campus here. If you look at some of the slides that Peter was presenting with very much gearing up for further growth and it also means that in the gross margin. There is quite some quite some money that is being spent on being ready for increased capacity and 24 and 25 and 26, so that that said that means.

You know that said that that creates a bit of a burden on the on the gross margin. Nonetheless, if you take the longer term perspective, very healthy development on that 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.

Roger Dassen: That means that, you know, 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 SG&A grows in line with the growth of the company and more or less doubled in comparison to 2018. The rest, you know, is just a translation of that into the bottom line.

Still an abundance of ideas and is driving a very aggressive roadmap towards the targets that you have seen that we articulated at the at the capital markets day.

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

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

Roger Dassen: The last one, just to emphasize, is the very, very strong net bookings for the year at over EUR 30 billion, already on the back of very, very strong order intake in 2021. As I mentioned, that led to an order book of over EUR 40 billion. I mentioned the return to the shareholders. 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 dividend, an increase of 5.5% towards EUR 5.80 per ordinary share dividend over 2022. That is the proposal.

I mentioned the return to the to the shareholders. So.

We had very strong share buybacks, Alaska last year also in terms of dividends. Once again, we are we are we present to the to the AGM and increase in the dividends an increase of five 5% towards 580 euros per ordinary share dividend over 2022 and that is the that.

The proposal.

And for the year in terms of share buyback. We in November introduced our new plan for $12 billion of share buybacks over a three year period.

Roger Dassen: You know, in terms of share buyback, we in November introduced our new plan for EUR 12 billion of share buybacks over a three-year period. In terms of outlook for the quarter, EUR 6.1 to 6.5 billion in terms of net sales, which is more or less in line with what we had in Q4. Installed base a little bit lower because as I mentioned to you, there was quite some pull-in from customers into Q4. That has a slightly negative effect on the installed base sales that we expect for Q1. That also has a slightly negative impact on the gross margin.

In terms of outlook for the quarter, a six 1% to six 5 billion in terms of net sales, which is more or less in line with what we had in Q4 installed 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.

A slightly negative effect on the installed base that we instill daily sales that we expect for for Q1 that also has a slightly negative impact on the on the gross margin although for the full year, we expect gross margin to be slightly up in comparison to the gross margin that we had for the full year 2022.

Roger Dassen: 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 EUR 965 million, and SG&A commensurate with the growth of the company to EUR 285 million. Those are the key parameters for Q1. If we look at the full year, you know, we are looking for 2023 at an over 25% increase in terms of sales. That really tells you that, you know, in spite of some of the signs that you get, it is very clear that our customers are really looking at investments into lithography as strategic investments.

R&D once again to step up to $965 million in SG&A commensurate with the growth of the company to 285. So those are the key parameters for Q1, 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 you know in spite of some of the someone's a science that you get it is very clear that our customers are really looking at the investments into LER lithography as strategic investments and while its clearly you can clearly recognize that.

Roger Dassen: You can clearly recognize that there are some end markets that are under pressure, big end markets like PCs, smartphones, et cetera. You see that growth continues in other markets, like in the auto market. I think the example that Peter just gave you both on electrification, but also ADAS systems, I think is a good example there. Clearly, there is some pressure, I would say, on some of our customers and some of the growth of our customers, particularly in the H1 of the year. Most of our customers, if you listen to their commentary, they expect the market to regain strength in the H2 of this year. The logic of our customers is pretty clear.

There are some end markets that are under pressure big end markets like like PC smartphones et cetera, you see that growth continues in other markets like in the auto market and I think the example that Peter just gave you gave you both on electrification, but also a D. A S systems I think is a good example, there.

So clearly there is some some you know some 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 listened to their commentary do you expect the market to you know to regain strength in the second half of this year.

And then the logic of our customers, it's pretty clear they say okay. So if the market you know 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 know let go of our tools that means that we're at the.

Roger Dassen: They say, "Okay, so if the market, you know, within a 1-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 2 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 2 years before we get the tool. And if then indeed the market picks up within 1 year, we will be too late to cater to the pickup of the market." 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 ASML.

End of the queue, we have to wait two years before we get the tool and if done indeed, the market picks up with them within one year, we will be too late to cater to the pick up 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.

Roger Dassen: I mentioned the over EUR 40 billion in terms of backlog, very, very strong, a record number, there. 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 and 375 DUV tools. That gets you significantly north of the 345 lithography tools in total EUV and DUV combined that we had for 2022. EUV business year-on-year growth 40% is expected, 30% for the non-EUV business. The installed base 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 that down a little bit on that in 2023.

Very very strong a record number there and yes, we are based on the increase in capacity. There that we're funding we are looking at at plants to ship 60, UV tools. This year of 375 of deep UV tools. So that gets you significantly north of the 345 lithography tools in total UV and D PV combined.

That we had for 2022.

UV business year on year growth, 40% as expected, 30% for the non <unk> business and the installed base business, we expect a moderate 5% and that is because we think most of our customers have done a lot of upgrades at last year, we expect them to slow that slowed down a little bit on that in 2023.

With that Dear friends have come to the end of my presentation, and I hope Peter and when he can join us for Q&A.

Roger Dassen: 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 of O'shea.

Monique Mols: 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. I'm hoping to fix it as soon as we can. If you're-

Ah I see we have some issues with our website. So the connectivity is not too. Good I think this is related to the general I T disturbance instead of going on worldwide, hoping to get an update my ear, but let's just start here, hoping to fix it as soon as we can so if yours are important semiconductor.

Pieter Wennink: It shows how important semiconductors are. We all rely on it every day.

Peter Wennink: It shows how important semiconductors are. We all rely on it every day.

We will rely on US every day don't blame it on the semiconductor.

Monique Mols: Yeah. Don't blame it on the semiconductors. We have a microphone here in the room. Kelsey Zegers will come to you if you indicated you have a question. Sander, my colleague, Sander Hoffman, is checking the website to see if there's any questions coming in through the website. Let's start off with the first one. State your name and your publication, and then we'd be happy to answer your question so people can hear it.

So I'm, we have a microphone here in the room and Kelsey Sega said, we'll come to you. If you indicate that you have a question and Sunday My colleague Hofmann is checking the web site to see if there's any questions coming in through the website. So let's so let's start off with the first one so state your name and your.

Publication number right then we'd be happy to answer your question. So people can hear it.

Thank you very much it's Klaus marks moniker of Oncotype the minor tight on Ken.

Klaus-Max Smolka: Thank you very much. It's Klaus-Max Smolka of Frankfurter Allgemeine Zeitung in Germany.

Germany.

Could you elaborate a little on the communication between ASML in politics, I wonder in political talks in what way is M. S. ASML getting involved specifically when the Dutch Prime Minister has talks in the U S. For example.

Monique Mols: Mm-hmm.

Klaus-Max Smolka: 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 in what way would they communicate with politicians? Thank you.

What's how many how.

How many a ASML representatives will be part of the delegation and walked away with a communicate with politicians. Thank god.

Can be very short on the on the content of the delegation I mean this is geopolitical is not geo business. So I think as there are no delegation members of ASML there because its political.

Pieter Wennink: Well, it can be very short on the content of the delegation. I mean, this is geopolitical. It's not geobusiness. So I think it's there are no delegation members of ASML there because it's political. Again, you know, 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 2, 3 years ago, you could have asked the average politician and said, "Tell me how the semiconductor industry works." He wouldn't have no clue 'cause 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's always been there.

Peter Wennink: Well, it can be very short on the content of the delegation. I mean, this is geopolitical. It's not geobusiness. So I think it's there are no delegation members of ASML there because it's political. Again, you know, 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 2, 3 years ago, you could have asked the average politician and said, "Tell me how the semiconductor industry works." He wouldn't have no clue 'cause 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's always been there.

And again, you know, 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.

Predominantly the role of making sure that people understand how this industry works.

Now until two or three years ago, you could have asked the average politician says tell me how the semiconductor industry works it wouldn't I have no clue.

Because semiconductors, we're always there it's like 90 73 revisit that oil was always there and then it wasn't and then it became a strategic commodity fast forward 'twenty 'twenty. One semiconductor has always been there nobody needs to worry until they weren't.

Pieter Wennink: Nobody needed to worry until they weren't. We figured out there was a worldwide dependence on only a few countries. This is only very recent. Our role is education. It's basically providing information, data. How does this industry work? How is this global ecosystem connected? Where are the interfaces between those pieces? Yeah. How does it work? If you think about a bifurcation but also of the world and the world creating different sets of Chips Acts, 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. Yeah.

Peter Wennink: Nobody needed to worry until they weren't. We figured out there was a worldwide dependence on only a few countries. This is only very recent. Our role is education. It's basically providing information, data. How does this industry work? How is this global ecosystem connected? Where are the interfaces between those pieces? Yeah. How does it work? If you think about a bifurcation but also of the world and the world creating different sets of Chips Acts, 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. Yeah.

Figured out it wasn't it was a worldwide dependence on only a few countries. It's only very reasons. So our role is education.

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 as you think about.

Hum.

A bifurcation, but also of the world and in the world, creating different sets of chips X and think about export controls than our role is really to provide the information any insight into what it means what are the consequences of certain scenarios.

That's a rule.

But then ultimately.

Pieter Wennink: 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. Yeah. That's them. That's not us. This is our role. In your question, we're not part of the delegation, but we're definitely part of the discussion. Yeah. Our role is to provide that information and that insight. Good question.

This whole concept of National security and economic interest is something that is of a higher political nature of course governments, each with their own views and and desires. They need that they need to discuss this amongst themselves what they want to do.

Peter Wennink: 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. Yeah. That's them. That's not us. This is our role. In your question, we're not part of the delegation, but we're definitely part of the discussion. Yeah. Our role is to provide that information and that insight. Good question.

And that's then 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 it inside.

Good question, Okay. Thank you and just getting an update that there's a there's a quite of an issue with our website, so and we won't be able to get the.

Monique Mols: 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. If you have any questions, wanna reach out to us, please do to any of my team members. Next question here.

The questions and from people online sorry about that where we're available after the press conference. Today. If you have any questions want to reach out to US. Please do to any of my team members.

Our next question here.

Peter Hack: Hi. It's Peter Hack from Politico. I also had a question on export controls. We've seen last week there were discussions between Rutte and Biden. 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?

[Analyst] (Politico): Hi. It's Peter Hack from Politico. I also had a question on export controls. We've seen last week there were discussions between Rutte and Biden. 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?

Peter Hecht from political I also had a question on exports exports controls we've seen last week there were discussions between the return button, but to what extent do you think that this should be a debate more on an EU level, because I kind of mentioned that there if there are better.

In place that this would have a ripple effect to certain of your suppliers what are your thoughts on that.

Pieter Wennink: Yes, I think and that's a good comment. 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, you know, the United States. He referred to several countries with several companies in a complex supply chain, which, you know, we need to look at, and the consequences of doing anything could be quite significant. He actually mentioned that. It's sensitive. I don't remember he came out of it and said, "Oh, yeah, no, 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. You're absolutely right. I mean, it's what I tried to say.

Peter Wennink: Yes, I think and that's a good comment. 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, you know, the United States. He referred to several countries with several companies in a complex supply chain, which, you know, we need to look at, and the consequences of doing anything could be quite significant. He actually mentioned that. It's sensitive. I don't remember he came out of it and said, "Oh, yeah, no, 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. You're absolutely right. I mean, it's what I tried to say.

The United States, he referred to several countries with several companies in a complex supply chain, which we need to look at and <expletive> and the consequences of doing anything could be quite significantly actually mentioned that so it's it's sensitive.

I don't remember he when he came out of it and said Oh, Yes, we have restructured 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, yes.

Pieter Wennink: This is an ecosystem that has been built over 40 years. Yeah. 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, perhaps even longer. I don't know for sure. Because of the chip shortage. It's all connected. 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. This is why it's not between one or two countries.

Peter Wennink: This is an ecosystem that has been built over 40 years. Yeah. 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, perhaps even longer. I don't know for sure. Because of the chip shortage. It's all connected. 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. This is why it's not between one or two countries.

You can see if it seamless and you put locks into the system they need to understand what's what the consequences will be because you know that you just asked the automotive.

Customers you know how do you think about the chip.

Chip shortage try to still order.

Car and you'll find out that you're waiting time has more than 12 months' rajeev even longer I don't know for sure because of the of the chip shortage is 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.

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

I think this is what the Prime Minister said I think.

Pieter Wennink: I think this is what the prime minister said, and I think he has a point.

Peter Wennink: I think this is what the prime minister said, and I think he has a point.

He has a point.

Okay next question.

Monique Mols: Mm-hmm. Okay. Next question. Guys, you have to do this also for the people online. If you know anyone who's watching, open your chat.

I should have to do this also for the people online.

So if you know anyone who's watching opening your chat.

Uh huh.

You have dwelled on the many drawbacks of the geopolitical situation, but to what extent the use sympathizer understand.

[Analyst]: You have dwelled on the many drawbacks of the geopolitical situation. To what extent do you sympathize or understand the concerns that the Americans have about China getting more ASML machines?

The concerns that the Americans have about China getting more ASML machines.

Well I think that concern is already that the Saudi there as you know our extreme ultraviolet machines UV.

Pieter Wennink: Well, I think that concern is already there. As you know, our extreme ultraviolet machines, EUV, are under export control. That's a fact. Now, I've of course listened to the arguments, and the arguments are very, 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, is about our advanced technology being able to make advanced semiconductors, yeah. The military applications use rugged, very mature semiconductors. Yeah. The semiconductors are already 10, 15, 20 years old, yeah, which are widely available across the globe, also in China.

Peter Wennink: Well, I think that concern is already there. As you know, our extreme ultraviolet machines, EUV, are under export control. That's a fact. Now, I've of course listened to the arguments, and the arguments are very, 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, is about our advanced technology being able to make advanced semiconductors, yeah. The military applications use rugged, very mature semiconductors. Yeah. The semiconductors are already 10, 15, 20 years old, yeah, which are widely available across the globe, also in China.

Our under export control. So that's that's a that is a fact now.

And of course listen to the arguments and the arguments out there you know these chips will be then used into military applications, but you have to realize that every time when I hear that and I think about the export control or proposed export kudos, it's about our advanced technology.

Being able to make advanced semiconductors.

But the military applications use rugged very mature semiconductors.

Semiconductors, almost a 10 15 20 years old.

Which are.

Widely available across the globe also in China.

So to fuel a a significant amount of of chips into a military complex.

Pieter Wennink: To fuel a significant amount of chips into a military complex, yeah, a military, you know, machinery. There's a significant amount of systems out there that are not advanced. They're mature. Yeah. It's already there. Now, having said that, of course, there is artificial intelligence, there's 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. Those chips are available for every end user and manufacturer on the planet to buy. It's also true for China. China is the biggest importer of chips on the planet. I mean, American chip companies, I don't know, it's public. They just look at their financial statements.

Peter Wennink: To fuel a significant amount of chips into a military complex, yeah, a military, you know, machinery. There's a significant amount of systems out there that are not advanced. They're mature. Yeah. It's already there. Now, having said that, of course, there is artificial intelligence, there's 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. Those chips are available for every end user and manufacturer on the planet to buy. It's also true for China. China is the biggest importer of chips on the planet. I mean, American chip companies, I don't know, it's public. They just look at their financial statements.

Motive.

Machinery, there's a significant amount of of systems out there.

More advanced they're mature so.

Sorry, there now having said that of course, there is artificial intelligence and smart algorithms they need high power compute well those chips are available the available in the world market and they're made on a as a mill machines on <unk> machines phenomena.

Well known in China.

Made in Korea, and Taiwan in the United States and those chips.

Available for every <unk>.

And user and manufacturer on the planet Dubai.

It is also true for China, China buys as the biggest importer of chips on the planet.

And I mean.

Imagine chip companies I don't know.

Public data just look at their financial statements just add the five biggest.

Pieter Wennink: 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, yeah? It's much more complex. Those advanced chips go into anything. Yeah. I don't know where, but they're being sold, so they probably end up somewhere. Yeah. This is the complexity, and this is also where the reference to the complexity was made. It's highly sensitive. Yeah. 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.

Peter Wennink: 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, yeah? It's much more complex. Those advanced chips go into anything. Yeah. I don't know where, but they're being sold, so they probably end up somewhere. Yeah. This is the complexity, and this is also where the reference to the complexity was made. It's highly sensitive. Yeah. 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.

Chip manufacturers on the planet in the United States that they sell 80 billion worth of chips.

China.

It just shows you how complex this is yeah.

So, it's it's and those chips those advanced chips they go into anything.

I don't know, where but that being said alternate probably end up somewhere.

So I think this is the complexity.

And it is also where the reference to the complexity was made it's highly sensitive.

It's a much bigger and more complex situations and just say well that chip goes into a military application.

More complex than that.

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

Monique Mols: Mm-hmm. 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?

I have one question through Whatsapp, but I saw someone wanting to ask a question there and kind of.

Can you can you give the microphone here.

Pieter Wennink: Thank you.

Peter Wennink: Thank you.

If it was a proportional been on just did a deal fees would be if you know.

[Analyst]: Could you say what the influence of a possible ban on just the DUVs would be? If you-

As to China, Yeah, I think.

Pieter Wennink: Oh, yeah. That's

Peter Wennink: Oh, yeah. That's

[Analyst]: to sell DUVs to China.

The fully depends on what the deal is.

Pieter Wennink: Yeah. I think that fully depends on what the deal is. You know? I think if they strike a deal, actually, we laid out in 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 I don't know what the outcome is. Yeah. That fully depends. Yeah. 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. Yeah. I'm not going to do that. Yeah. It's too sensitive.

Peter Wennink: Yeah. I think that fully depends on what the deal is. You know? I think if they strike a deal, actually, we laid out in 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 I don't know what the outcome is. Yeah. That fully depends. Yeah. 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. Yeah. I'm not going to do that. Yeah. It's too sensitive.

If they strike a deal that we can actually we laid out on different scenarios of what the what the potential consequences. So it's up to them to that.

Basically decide on the basis of the information I cannot even give you the answer because I don't know what the outcome is.

That's really a defense.

And and.

I'm not even willing to speculate on this because this is so sensitive or I start speculating here.

I know, what's going to happen I would argue with you guys are going through right now so I'm not going to do that.

So it's too sensitive.

I just want to remind everyone that this annual report.

Monique Mols: I just wanna remind everyone that this is annual results. You are allowed to ask questions out of

Any help yourself you you are allowed to ask questions.

I'll answer that.

Pieter Wennink: I will answer those questions. Yeah. You know, you perfectly had to ask those.

Okay.

Peter Wennink: I will answer those questions. Yeah. You know, you perfectly had to ask those.

So absolutely clear about.

[Analyst]: Absolutely.

I can.

Pieter Wennink: He was so absolutely clear about what this is.

Peter Wennink: He was so absolutely clear about what this is.

Imagine that the question is going to a different direct you I have one here that sort of thing.

Monique Mols: Yeah.

Pieter Wennink: I can imagine that the question is going to a different direction.

Peter Wennink: I can imagine that the question is going to a different direction.

It has a very brave guidance yeah.

Monique Mols: Yeah. I have one here through the website. Very bravely-

Pieter Wennink: You can guide them, you know.

Peter Wennink: You can guide them, you know.

I would say from new Pentagon bravely broke through the barriers and she send us a message.

Monique Mols: Yeah. Eva Schouten from NU.nl bravely broke through the barriers, and she sent us a message. She says, "Peter noted that too much export control will lead to fewer chips. Could you define too much? Where do you draw the line?

She says Peter noted that too much expert control will lead to fewer chips could you define too much.

Where do you draw the line that's exactly what I tried to say it depends on how how how deep those export controls I think export controls are a legitimate.

Pieter Wennink: 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, yeah? It's how do you wanna use them.

Peter Wennink: 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, yeah? It's how do you wanna use them.

Instrument I think that's clear yeah, but it's how do you want to use them and if you overused them. It will have an effect.

Monique Mols: Mm-hmm.

Pieter Wennink: You know, if you overuse them, it will have an effect on availability of mature chips, which are being used not only in a military complex, but are used in a much larger way larger industrial complex. Which is basically what we buy every day, you know, 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. You know? I think we also need to be careful that we don't-

Peter Wennink: You know, if you overuse them, it will have an effect on availability of mature chips, which are being used not only in a military complex, but are used in a much larger way larger industrial complex. Which is basically what we buy every day, you know, 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. You know? I think we also need to be careful that we don't-

On availability of mature chips, which are being used not in tune in in military complex, but I used in a much larger way way way larger industrial complex, which is which is basically it was what we buy everyday from cars to washing machines to Pcs to smartphones to infrastructure.

Talk about the energy transition energy transition. These massive amounts of semiconductors is massive.

So I think we also need to be careful that we don't have that.

Monique Mols: Yeah.

Runs at a well meant yeah don't come to their own don't have a consequence that we all.

Pieter Wennink: That, you know, instruments that are well-meant, yeah, don't have a consequence that we all feel sorry about. Huh?

Peter Wennink: That, you know, instruments that are well-meant, yeah, don't have a consequence that we all feel sorry about. Huh?

Feel sorry about that yeah. So that's also the precision that.

Monique Mols: Yeah. That's also the precision that Mark referred to.

Terrific.

I saw Tony Yeah Tobey.

Pieter Wennink: Yeah.

Peter Wennink: Yeah.

Monique Mols: I saw Toby. Yeah.

Sterling from Reuters not purely my question here, but.

Pieter Wennink: Toby.

Peter Wennink: Toby.

Toby Sterling: Hi. Toby Sterling from Reuters. Not purely my question here, but it's financial, so there you go.

Its financials. So there you go.

Just I think the general ideas is a there is some skepticism about the in the weakness in the chip markets not having much of an effect on air smell and I know you've explained a bit, but but maybe you could say.

Pieter Wennink: Hey.

Peter Wennink: Hey.

Toby Sterling: Just, I think the general idea is, there's some skepticism about, you know, the weakness in the chip markets not having much of an effect on ASML. I mean, I know you've explained it a bit.

Pieter Wennink: Yeah.

Peter Wennink: Yeah.

Toby Sterling: 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? Could you break down your projections for DUV and EUV sales not by systems but by the number?

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 yet and could you break down your projections for D V and EV sales not by systems to buy it.

The number.

Rajiv I think he probably put it on the slides we can refer to that for this year, but.

Pieter Wennink: Yeah, I think he probably put it on the slide, so we can refer to that for this year. You need to remember, we are not insulated from any macroeconomic events, and especially not when it's such a big inflation coming at us, and there's recession 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. You have to remember that we come out of a period like 2022, where we could hardly ship 55% of what our customers wanted.

Peter Wennink: Yeah, I think he probably put it on the slide, so we can refer to that for this year. You need to remember, we are not insulated from any macroeconomic events, and especially not when it's such a big inflation coming at us, and there's recession 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. You have to remember that we come out of a period like 2022, where we could hardly ship 55% of what our customers wanted.

You need to remember we are not.

Insulate it we're not from any.

Macroeconomic events, and especially not when it's such a big inflation coming at US and you know and there's a recessionary fears and there won't be but you can say some parts of the world are in a recession of course that impacts our our customers and will impact us, but you have to remember that we come out of a peer.

Like 2022, where we could hardly hardly ship, 55% of our customers want it.

So and then 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.

Pieter Wennink: They want this because they know that these investments are long-term, so they want to have 2 years of lead time, and then they need to build factories and it's gonna take time. They basically, we have this demand, which was significantly over our build capacity, which has come down. True. This is a reflection of what we see in the, you know, the market, but it's still quite a lot above our build capacity. That means our customers are actually saying, "Well, what I think the duration of this recession is significantly shorter than the lead time of your tools. That also means that the recession will turn into an upturn by the time I need your machines. Why would I cancel or push back those machines?

Peter Wennink: They want this because they know that these investments are long-term, so they want to have 2 years of lead time, and then they need to build factories and it's gonna take time. They basically, we have this demand, which was significantly over our build capacity, which has come down. True. This is a reflection of what we see in the, you know, the market, but it's still quite a lot above our build capacity. That means our customers are actually saying, "Well, what I think the duration of this recession is significantly shorter than the lead time of your tools. That also means that the recession will turn into an upturn by the time I need your machines. Why would I cancel or push back those machines?

The basically we have this demand which was significantly over our builds capacity, which has come down.

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

And that means our customers are actually saying well what I think the duration of this recession is significantly shorter than the lead time of your tools.

That also means that the recession will turn up into an upturn by the time I need your machines.

Why would I cancel a pushback those machines, if I do that I'm all about the duration is shorter than I think I'll be in the back of the line because these guys don't have enough capacity.

Pieter Wennink: 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.

Peter Wennink: 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.

This is and this is where we are.

Oh.

Toby Sterling: Yeah. Maybe a naive follow-up. Is there, when somebody falls out of line, does it just simply go to the very next customer?

When somebody falls out of line does it just simply go to the very next customer absolutely.

There is a shortage. So if you said I don't need your machine.

Pieter Wennink: Absolutely. Because, you know, there is a shortage. If you said, "I don't need your machine," then your neighbor says, "Thank you, thank you, thank you very much." That, that's gone.

Peter Wennink: Absolutely. Because, you know, there is a shortage. If you said, "I don't need your machine," then your neighbor says, "Thank you, thank you, thank you very much." That, that's gone.

Neighbours here. Thank you. Thank you. Thank you very much that's wrong.

Whereas than I thought so there'll be in terms of numbers.

Roger Dassen: Where's the next slot? Toby, in terms of numbers, for EUV, we're looking at 60 for this year and 375 units for DUV. Those are the numbers that we're envisaging for this year. I think it's important to note 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 DUV, and that's the capacity that we're driving towards, of course, we drive that for the medium and for the longer term. Any cyclicality that might be there and demand might be there. One thing is for sure, we will need that capacity.

For F. R. E V. We're looking at 64 this year and 375 units for a for deep UV. Those those are the numbers.

That were 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 debt capacity for the short term I mean, the capacity for the 90 E V. In the 600 deep UV and that's the capacity that we're driving towards of course, we drive that for the for the for the medium and for the longer term and any cyclicality that might be there.

Demand might be there, but one thing is for sure we will need that capacity and maybe we don't need it and four for 2025, but we will need it and 26 are on time and on the customer capacity you are right I mean, we see a demand reduction.

Roger Dassen: Maybe we don't need it in full for 2025, but then we will need it in 2026 or in 2027.

Pieter Wennink: On the customer capacity, you are right. I mean, we see a demand reduction, again, above our build capacity. Yes, I think customers are reshuffling, retiming some of their capacity investment. Sure. Yeah. I mean, that's what they do. I mean, in the memory industry, some of our customers have actually set out that we're going to cut CapEx for this year. Yeah. Others have said, "No, we're not going to do that." In terms of this very strategic long-term, long lead time item called lithography, they're very cautious. If for whatever reason, the duration of the recession will extend to years, of course, we will, you know, see the effects. Yeah. That's not what they currently think. At least that's our conclusion.

Peter Wennink: On the customer capacity, you are right. I mean, we see a demand reduction, again, above our build capacity. Yes, I think customers are reshuffling, retiming some of their capacity investment. Sure. Yeah. I mean, that's what they do. I mean, in the memory industry, some of our customers have actually set out that we're going to cut CapEx for this year. Yeah. Others have said, "No, we're not going to do that." In terms of this very strategic long-term, long lead time item called lithography, they're very cautious. If for whatever reason, the duration of the recession will extend to years, of course, we will, you know, see the effects. Yeah. That's not what they currently think. At least that's our conclusion.

Again above our build capacity. So yes, I think customers are reshuffling REIT timing some of their capacity investment sure. Yeah. I mean, that's what they do I mean in the memory industry. Some of our customers are actually sat out there we're going to cut capex for this year.

And always have said, we're not going to do that.

But in terms of this very strategic long term long lead time item called lithography.

We're very cautious and if the if for whatever reason the duration of the recession will extends two years of course Rosemont, we will see the effect.

But it's not what they currently think at least that's our conclusion and discussing with 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 <unk> and 'twenty 'twenty. Two for 2023, you said I'm, saying I can't multiply $3 75.

Toby Sterling: This question was really simple. I mean, I could look at the average selling prices for each type of machine. 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 and

<unk> tons X had you mean deep UV versus EV.

Roger Dassen: You mean DUV versus EUV?

We said that said that EOG is going to grow a bit a bit harder and faster than that than the non EV business. So EV, we expect to be to grow by 40% in the non EV business by 30%. So that gives you. So the shift will be a little bit more towards E rate, which makes sense you know its the most expensive and that's where the capacity a lot of the capacity expansions that I showed you.

Toby Sterling: Yeah.

Roger Dassen: Yeah. I mean, we said that EUV is gonna grow a bit harder, faster than the non-EUV business. EUV, we expect to grow by 40% and the non-EUV business by 30%.

Toby Sterling: Yeah.

Roger Dassen: That gives you.

Pieter Wennink: Yeah. The shift will be.

Peter Wennink: Yeah. The shift will be.

Roger Dassen: Yeah.

Pieter Wennink: 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-driven fabs. Yeah.

Peter Wennink: 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-driven fabs. Yeah.

The 326 billion is about EV.

UV driven fabs.

Thanks for that Tony.

Monique Mols: 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?

I have a question from our colleague John Chris Brian from Bloomberg opinion is the dry 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.

Pieter Wennink: Well, there are two sides to it. I think the positive side is it will create more capital inefficiency.

Peter Wennink: Well, there are two sides to it. I think the positive side is it will create more capital inefficiency.

Capital inefficiency.

So capital in the Fisherman's.

Monique Mols: Mm-hmm.

Pieter Wennink: 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. Friction, the flip side of friction is cost.

Peter Wennink: 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. Friction, the flip side of friction is cost.

Hi.

Our capital allocation. So it's good for equipment makers that's good.

The bad thing is that if you. If you have these more have you had more luxor hurdles into the system you have more friction and friction flips our frictionless cost. So yes, you have a higher level of business, but it's not as efficient. So it's also that also is true for us.

Monique Mols: Mm-hmm.

Pieter Wennink: Yes, you have a higher level of business, but it's not as efficient. It's also that also is true for us. Yeah. It means that you will create higher cost. I think on balance, equipment companies will sell more machines.

Peter Wennink: Yes, you have a higher level of business, but it's not as efficient. It's also that also is true for us. Yeah. It means that you will create higher cost. I think on balance, equipment companies will sell more machines.

So it means that you will create higher cost I think on balance equipment companies will sell more machines.

That's it.

As you would say it's positive.

Monique Mols: Mm-hmm.

Pieter Wennink: That's it. On balance, you could say it's positive.

Peter Wennink: That's it. On balance, you could say it's positive.

That's a bit selfish, yeah, I think so.

Monique Mols: Mm-hmm.

Pieter Wennink: It's a bit selfish.

Peter Wennink: It's a bit selfish.

Monique Mols: Yeah, I think so. Yeah. Hey, that was the question. Anyone here? Yeah, sure. Yeah.

But hey that was the question anyone here.

Yeah.

Yes.

Yeah.

If nobody else Theres been no go ahead go ahead on.

Klaus-Max Smolka: If nobody else has been-

Monique Mols: No, go ahead. Go ahead.

On the <unk>.

Klaus-Max Smolka: On the talks in the US, when do we expect a decision which would help you assess the commercial ramifications?

Docs in the U S. When do you expect a decision.

Klaus-Max Smolka: On the talks in the US, when do we expect a decision which would help you assess the commercial ramifications?

Which would help U S.

Assess the commercial ramifications.

I think.

No I think that it's in the papers ended right about that.

Pieter Wennink: Yeah, I think it is. It's 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. The quicker you know where you are, the better it probably is. It's probably under high pressure. I mean, that's also what I read. We'll see, you know, and then. 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 significant amount of time. You don't talk days or weeks. I think you talk months. Yeah.

Peter Wennink: Yeah, I think it is. It's 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. The quicker you know where you are, the better it probably is. It's probably under high pressure. I mean, that's also what I read. We'll see, you know, and then. 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 significant amount of time. You don't talk days or weeks. I think you talk months. Yeah.

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 at or better it's probably years. So it's probably a.

Under high pressure and that's also what I read so we'll see and then.

But given the complexity of this I mean.

You have to distinguish between some kind of general agreement in the details how do you work out the details of these regulations and these laws.

All of the details you're involved in and working out the details will probably take significant amount of time. So you don't talk 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 other what are the ramifications of something like this.

Pieter Wennink: 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?

Peter Wennink: 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.

Always take time, but I think we can safely say that the thing is under time pressure.

Monique Mols: Mm-hmm.

Pieter Wennink: That will always take, you know, time. I think we can safely say that the thing is under time pressure. Yeah.

Peter Wennink: That will always take, you know, time. I think we can safely say that the thing is under time pressure. Yeah.

Yeah.

And maybe as an example, the October export controls.

Monique Mols: Mm-hmm. Now, 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.

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 and that's absolutely true I think.

Pieter Wennink: Yeah. That's absolutely true. I think until the end of this month, there is, let's say, a, you know, feedback opportunity from the industry and industry participants on what it actually means. I think the, you know, final wording is still under, you know, review. It's how these things go. Yeah. To really say we fully understand all the ramifications and we can translate that into business plans, I think it's going to take some time.

Klaus-Max Smolka: Yeah. That's absolutely true. I think until the end of this month, there is, let's say, a, you know, feedback opportunity from the industry and industry participants on what it actually means. I think the, you know, final wording is still under, you know, review. It's how these things go. Yeah. To really say we fully understand all the ramifications and we can translate that into business plans, I think it's going to take some time.

Till the end of I think the hotels of this month there is a.

Let's say a feedback.

Feedback opportunity from the industry and industry participants on on what actually means so I think the.

If the final wording is still under review and as these things go so to really say, we fully understand all the ramification of that you can translate that into business plans.

I think it's going to take some time.

Okay question online computer will 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 are probably.

Monique Mols: 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 in,

Any other.

Yeah anywhere.

Anywhere in the world.

It cannot be naive on this.

Pieter Wennink: Yeah.

Peter Wennink: Yeah.

Monique Mols: anywhere in the world?

Pieter Wennink: You cannot be naïve 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.

Peter Wennink: You cannot be naïve 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.

When semiconductors ourselves pivotal and vital to our to a responsible economy and a responsible society and you can get hold of the semiconductors, you Gotta do it yourself and that's clear yeah. So I think that this will happen.

Monique Mols: Mm-hmm.

Pieter Wennink: That's clear. Yeah. I think this will happen. That's one of the consequences of not having this global fluid, seamless ecosystem. It's going to develop themselves. Having said that, 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. The machine itself is not that complex. Yeah. For lithography, we make a relatively simple process. We just blow light through a lens. Yeah. We do this in a very complex machine.

Peter Wennink: That's clear. Yeah. I think this will happen. That's one of the consequences of not having this global fluid, seamless ecosystem. It's going to develop themselves. Having said that, 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. The machine itself is not that complex. Yeah. For lithography, we make a relatively simple process. We just blow light through a lens. Yeah. We do this in a very complex machine.

That's the one of the consequences of not having this global fluids seamless ecosystem is gone to develop themselves, but having said that.

<unk>.

And I cannot speak from our peers in the semiconductor equipment industry, but.

For ASML.

But in general I think.

There are there's a lot of equipment in the industry that is focusing on a very complex process that that is that is inside the machine that 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.

Monique Mols: Mm-hmm.

Pieter Wennink: That's a bit different. This is why basically rebuilding a lithography industry, which as it concerns to ASML, consists of hundreds of suppliers-

Peter Wennink: That's a bit different. This is why basically rebuilding a lithography industry, which as it concerns to ASML, consists of hundreds of suppliers-

Basically.

Rebuilding our lithography industry.

Which.

As it concerns to ASML consists of hundreds of suppliers, but each of them are world class in what they do it just need to name drums and thighs in V. D. L. In their world class in what they do and it's just three out of a couple of hundred yet now you need to.

Monique Mols: Mm-hmm.

Pieter Wennink: that each of them are world-class in what they do. I just need to name TRUMPF, Zeiss, and VDL, and they're world-class in what they do. It's just three out of a couple of hundred, yeah. It's not patents, it's know-how, it's people, it's the brains.

Peter Wennink: that each of them are world-class in what they do. I just need to name TRUMPF, Zeiss, and VDL, and they're world-class in what they do. It's just three out of a couple of hundred, yeah. It's not patents, it's know-how, it's people, it's the brains.

Basically get and Theres not patents know how its people as the brains.

You need to just take that.

Monique Mols: Mm-hmm.

Pieter Wennink: You need to just take that and then redo all of that, yeah, to come to the same conclusion. It took us 40 years.

Peter Wennink: You need to just take that and then redo all of that, yeah, to come to the same conclusion. It took us 40 years.

And then.

Redo all of that too.

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 U S or in Korea or in Russia for that matter no laws of physics are all those are all the same but the accumulated knowhow with hundreds of companies, where we as a system architect as a system integrator bring it altogether.

Monique Mols: Mm-hmm.

Pieter Wennink: Yeah. 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. 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. I think, yes, of course, the efforts will be there.

Peter Wennink: Yeah. 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. 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. I think, yes, of course, the efforts will be there.

That's a bit of a challenge so I think yes of course, the efforts will be there.

That's going to be massive challenge going forward, because it's not about air and now it's about the ecosystem.

Monique Mols: Mm-hmm.

Pieter Wennink: It's going to be massive challenge going forward, because it's not about ASML, it's about the ecosystem.

Peter Wennink: It's going to be massive challenge going forward, because it's not about ASML, it's about the ecosystem.

The best Defense line that we have there obviously is to keep on innovating right I think that's critical.

Roger Dassen: I believe the best defense line that we have there obviously is to keep on innovating, right?

Sometimes you get the question ill with a market share that you have why don't you lay back and be a little slow.

Monique Mols: Yeah.

Roger Dassen: I think that's critical as well.

Monique Mols: Run faster. Yeah.

Roger Dassen: 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 slow? Well, we're not. As you could see, we're investing very, very significantly.

And as you could see we're investing very very significantly good point on our R&D roadmap and we truly believe that pushing down the accelerator. There has the best potential defense into anyone trying to get to get on par with our technology.

Pieter Wennink: Good point.

Peter Wennink: Good point.

Roger Dassen: on our R&D roadmap. We truly believe that pushing down the accelerator there is the best potential defense into anyone, you know, trying to get on par with our technology.

There's going to be challenging.

Monique Mols: Yeah.

Pieter Wennink: Yeah.

Peter Wennink: Yeah.

Monique Mols: You know, it's good to be challenged sometimes, huh?

That's absolutely true and 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 as well as the one solution that you're just going to have to go faster.

Pieter Wennink: 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.

Peter Wennink: 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.

And that's it. So this is also why.

Roger Dassen: That's it.

Pieter Wennink: That's it. This is also why, you know, you will see that we will invest. To your point, it's not only in capacity, which will of course have a temporary-

Peter Wennink: That's it. This is also why, you know, you will see that we will invest. To your point, it's not only in capacity, which will of course have a temporary-

You will you will see that we will invest we appoint theres not only in capacity, which will of course have a temporary effect on your gross margin technologies. So in R&D, we will spend more on R&D, because we spent the R&D not for next year or for this year. We spent the R&D for the second half of the decade than the first half of the next decade.

Roger Dassen: Yeah.

Pieter Wennink: Effect on your gross margin.

Peter Wennink: Effect on your gross margin.

Roger Dassen: Technology also. Yeah.

Pieter Wennink: 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 second half of the decade and the first half of the next decade. This is where the R&D goes. Yeah.

Peter Wennink: 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 second half of the decade and the first half of the next decade. This is where the R&D goes. Yeah.

This way the R&D goes yeah.

John .

Monique Mols: John Koch from Bloomberg.

There's a.

So a chunk of Scotch from Bloomberg.

Monique Mols: John Koch from Bloomberg.

Yes, John courtroom with Merck, what do you see as the biggest challenge and risk.

John Koch: Yes. John Koch from Bloomberg. What do you see as the biggest challenge and risk of the US implementation of the CHIPS and Science Act?

[Analyst] (Bloomberg): Yes. John Koch from Bloomberg. What do you see as the biggest challenge and risk of the US implementation of the CHIPS and Science Act?

In the U S implementation of chips.

Chips and Science Act.

Well I think I think the biggest opportunity, let's talk about the opportunity first is.

Pieter Wennink: Well, I think the biggest opportunity, let's talk about the opportunity first, yeah, is that you will build a part of the semiconductor ecosystem capacity inside the United States. It means that the geopolitical strategic dependence will of course go down. Yeah. 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, yeah. That art is mastered over the last 10, 20 years by the TSMCs and the Samsungs of this world, and also Intel.

Peter Wennink: Well, I think the biggest opportunity, let's talk about the opportunity first, yeah, is that you will build a part of the semiconductor ecosystem capacity inside the United States. It means that the geopolitical strategic dependence will of course go down. Yeah. 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, yeah. That art is mastered over the last 10, 20 years by the TSMCs and the Samsungs of this world, and also Intel.

Is that you will build a part of the semiconductor ecosystem capacity in inside the United States. So it means that the dependence the geopolitical strategic dependence will of course go down. So that's why to do it I think the risk is that both in the U S.

And in Europe for that matter.

The experience and the knowledge that semiconductor makers have.

In bringing very advanced semiconductor manufacturing onto onto own soil.

Is highly complex, it's an art, yeah and that art has mastered over the last 10 20 years by the Tsmc's and assumptions of this world and also Intel but this is why you see the invitation.

Pieter Wennink: This is why you see the invitation almost, well, you know, it's an invitation with a big carrot, yeah? Which is called subsidy and investment support, yeah, of governments to bring those companies with that particular competence, yeah, within their borders. This is exactly what's happening. This is, you know, why we had the Arizona fab opening of TSMC. You know, ultimately two fabs, $40 billion of investment. That's Taiwanese knowledge and, you know, you know-how. Now, bringing that into your country and then ramping this 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, you know, draw everybody from Taiwan or from Korea to do it.

Peter Wennink: This is why you see the invitation almost, well, you know, it's an invitation with a big carrot, yeah? Which is called subsidy and investment support, yeah, of governments to bring those companies with that particular competence, yeah, within their borders. This is exactly what's happening. This is, you know, why we had the Arizona fab opening of TSMC. You know, ultimately two fabs, $40 billion of investment. That's Taiwanese knowledge and, you know, you know-how. Now, bringing that into your country and then ramping this 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, you know, draw everybody from Taiwan or from Korea to do it.

Well you know.

It's an it's an invitation where the big carats here, which is called subsidy and investment support of governments, who bring those those those companies with that particular competence yeah within their borders and this is exactly what's happening. This is why we had the Arizona fab opening of TSMC ultimately too fast 40 billion.

Of investments, but it's that's Taiwanese knowledge and you know.

Now bring that into your country.

And then then ramping this up in a way that you haven't been doing for the last 20 years and it also means that talent is a massive risk they need to get the talent that you do that you cannot just.

Draw everybody from Taiwan or from Korea to do that and integrate your talent pool, and that's a big challenge here.

Pieter Wennink: 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 chip sector, also to the European chip sector, yeah. People.

Peter Wennink: 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 chip sector, also to the European chip sector, yeah. People.

Think that is.

That is a generic risk not only to the U S chipset built into the European chips at peak.

<unk>.

And that risk is also the single biggest opportunity because if you're able to do it and if you are able to build an ecosystem around that if you're able to make that the knowledge and the expertise in that ecosystem. If you were able to really create at on soil again in Europe in the United States I think it's a major boost to your <unk>.

Roger Dassen: 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. It's the biggest risk. Are you able to attract that talent? Also, by far the biggest opportunity. It's not just about, you know, creating capacity, it's creating that knowledge infrastructure that will help you know, through the next and next.

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 you know through the through an extra nickel ecosystem. That's what that's this that's a secret word you know you need to build those ecosystems because.

Pieter Wennink: The ecosystem. That's the secret word. You know, you need to build those ecosystems. 'Cause if you look at where the biggest centers are of chip manufacturing, it's in Taiwan, around Hsinchu and Tainan. 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, yeah?

Peter Wennink: The ecosystem. That's the secret word. You know, you need to build those ecosystems. 'Cause if you look at where the biggest centers are of chip manufacturing, it's in Taiwan, around Hsinchu and Tainan. 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, yeah?

If you look at where the biggest centers are of chip manufacturing is in Taiwan around Hsinchu and Tainan and is not only does factories. It's it's the suppliers. It's the universities the knowledge institution their customers is that it's the part is the technology partners at the peers yet that's all there this ecosystem.

Roger Dassen: Yeah.

Pieter Wennink: That's all there. That's the ecosystem, yeah? You see, if you find the same in Seoul and in Hwaseong, yeah? We find the same in Silicon Valley, but not manufacturing, but the rest is there, you know? You have the design companies there. It's not just the money, throw the money at it, find a deserted air force base, and just build a factory. No, you have to build an ecosystem, yeah?

Peter Wennink: That's all there. That's the ecosystem, yeah? You see, if you find the same in Seoul and in Hwaseong, yeah? We find the same in Silicon Valley, but not manufacturing, but the rest is there, you know? You have the design companies there. It's not just the money, throw the money at it, find a deserted air force base, and just build a factory. No, you have to build an ecosystem, yeah?

If you find the same in Seoul and in Washington.

If you find the same in Silicon valley, but not manufacturing, but the rest is there you know.

You have to design companies. There. This is where it's not just the money throwing money at it find a deserted airplane.

Force base and just build a buildup villa affected now you have to build that ecosystem.

Okay.

And we have time for one last question I have one online that's anyone's hear up for it nope and we go to Switzerland near surface title in House again.

Monique Mols: Okay. We have time for one last question. I have one online, but if anyone's here up for it? Nope. We go to Switzerland. Neue Zürcher Zeitung. Again, it's not a financial question.

It's not a financial.

Again, [laughter] Alright, I tried.

Roger Dassen: The C word in it again.

Monique Mols: 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?

How do the U S restrictions on the involvement of U S persons and the Chinese semiconductor industry effect Asml's daily business if at all.

Currently not no because I mean, we have quite a significant workforce.

Pieter Wennink: Currently not.

Peter Wennink: Currently not.

Monique Mols: No.

Pieter Wennink: Because, I mean, we have quite a significant workforce in China, which is, you know, non-US.

Peter Wennink: Because, I mean, we have quite a significant workforce in China, which is, you know, non-US.

In China, which as you know.

Non U S and that's it.

Both Chinese nationals and people from outside the U S. So that that's not that's not the case now where we are a European company yeah. So.

Monique Mols: Mm-hmm.

Pieter Wennink: That's both Chinese nationals and people from outside the US. That's not the case. Now, we're a European company, yeah?

Peter Wennink: That's both Chinese nationals and people from outside the US. That's not the case. Now, we're a European company, yeah?

So I mean, so we have European.

Monique Mols: Mm-hmm.

Pieter Wennink: I mean, we have European know-how with people with European or with non-US nationalities. That's less of an issue for us.

Peter Wennink: I mean, we have European know-how with people with European or with non-US nationalities. That's less of an issue for us.

Knowhow in with people with European or with non U S. Nationality, so that that's less of an issue for us.

Yep.

One minute left.

Monique Mols: Yeah. One minute. Last call. Yeah.

Cool Yeah of course.

Oh, yes.

Pieter Wennink: One question.

Peter Wennink: One question.

Follow up on that I.

Monique Mols: Wouter.

Are you still able to.

[Analyst]: 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, I remember that.

Supplier Chinese customers with parts that are.

American made and then European maybe because I saw it.

Yeah.

Well.

That's not always possible so that would have an effect on the on the opera on the Operability of the installed of installed base, but again, we are there.

Pieter Wennink: Yeah.

Peter Wennink: Yeah.

[Analyst]: Well, it's

Pieter Wennink: That's not always possible, so that would have an effect on the operability of the installed base. Again, we are largely, you know, predominantly a European company with European technology. The parts are predominantly European. Here and there, yes, there are issues, yeah, that we need to deal with, you know. Which actually means that some of the tools will then stop working. Yeah, but it's minimal right now, but yeah, that would be the consequence.

Peter Wennink: That's not always possible, so that would have an effect on the operability of the installed base. Again, we are largely, you know, predominantly a European company with European technology. The parts are predominantly European. Here and there, yes, there are issues, yeah, that we need to deal with, you know. Which actually means that some of the tools will then stop working. Yeah, but it's minimal right now, but yeah, that would be the consequence.

Virtually.

You know 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 you, which actually means that some of the tools will then stop working.

It's minimal right now, but down that would be the consequence.

Okay, well, thank everyone for being here and I'd like to conclude this call. Thank you everyone online for for being with US and hopefully we'll see you next year. Thank.

[Analyst]: Thanks.

Monique Mols: Okay. Well, thank you, everyone, for being here. I'd like to conclude this call. Thank you, everyone, for being with us, and hopefully we'll see you next year. Thank you.

Thank you. Thank you. Thank you very much for your time.

Pieter Wennink: Thank you.

Peter Wennink: Thank you.

Roger Dassen: Thank you.

Pieter Wennink: Very much for your time.

Peter Wennink: Very much for your time.

[music].

Okay.

Yes.

Okay.

[music].

Good morning, everyone and good afternoon, if you're in Asia and welcome to this press conference of ASML, We are going to talk to you about the fourth quarter and full year 2020 to our financial results well here at the auditorium and felt over at our headquarters and I'm actually.

Really happy to have a real audience here after two years of Covid. So it's nice to have a few journalists that we've known for so long here in the room. There are also people watching and following this first conference online. They are also allowed to ask questions. There is a form on the website just fill that out state. Your name annual publication name and then send it in.

And we are we hope to get an opportunity to go to come to your question.

My name as many malls I always forget to introduce myself. My name is when he malls I am responsible for media relations at ASML and with me I have Peter winning CEO of Ace now and let's say he doesn't see F. O S. MAU and Dave will talk you through our financial results, but also developments around our industry that I'm sure also.

Monique Mols: I always forget to introduce myself. My name is Monique Mols. I am responsible for media relations at ASML. With me, I have Peter Wennink, CEO of ASML, and Roger Dassen, CFO of ASML. 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 Wennink to the floor, and we'll kick this off.

Your interest so let me invite Peter lending to the floor and we'll kick this off.

Thank you Dominic.

Welcome everybody and yes, you are right I mean, it's good to have people life here I would also people on the webcast.

Pieter Wennink: Thank you, Monique. Welcome everybody. Yes, you're right. I mean, it's good to have people live here, but also people on the webcast. I wanna 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. 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. You know, questions on are we going to get the recession, and if so, how deep will it be and how long will it be? There are issues on geopolitical developments and export controls.

Want to just talk about a few things key messages I think Monty industry. This state of the industry right now.

And then Rajiv will talk about the financials and the outlook and then we'll take the Q&A.

So our key messages.

Well in.

In fact, that's what we said we told you.

At the capital markets day, I think despite the fact that.

We're currently seeing is of course, a lot of turbulence.

Questions on the are we going to get a recession and if so how deep will it be and how long will it be.

There are issues on the geopolitical developments and export controls, there's a lot of uncertainties right now but.

Pieter Wennink: 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 2 years. We look 5 to 10 years ahead. Why is that? Because we're convinced that semiconductors are currently playing a critical role in economy and in day-to-day life. It will only increase. It will only need more semiconductor compute and storage power going forward. 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 fab, you know, it will take 3 years. Then if you start

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 10 years ahead.

And why is that because we are convinced that semiconductors are currently playing a critical role in the economy any day. They live it will only increase it will only only only need more semiconductor compute and storage power going going forward and as 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 and you have to remind you that we have to remind you that building a semiconductor fab or a factory fab.

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

Pieter Wennink: Have to start planning it from day one, probably five, yeah? It's all about the longer term. When we look forward and look at the growth rates, you know, of semiconductor sales, you'll see it later. I'll talk about it later, that we see a very significant upside for our customers and also for ASML. This is why we need to invest. 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 EUR 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 EUR 44 and 60 billion, between 56% and 60% gross margin.

So it is all about the longer term and when we look forward and you look at the growth rates.

Of <unk>.

Semiconductor sales.

You'll see it later I'll talk about later that we see a very significant upside for our customers and also for ASML. This is why we need to invest.

And that's also why we believe there is an opportunity depending on different market scenarios are higher or lower market scenario that by 2025.

It will be anywhere between 30, and 40 billion in sales and we have between 54% to 56% gross margin, which will grow too.

<unk> 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 all profitable very profitable but of course, because we will grow that profitability will grow and also for our shareholders is going to be a significant return.

Pieter Wennink: 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're very profitable. Of course, because we will grow, that profitability will grow. 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.

Now.

When we look at the industry.

Three major drivers I think it's still we all noticed is connectivity.

It's got activity, where it's a cloud or the edge computing. It's all connected these things are not separate is not.

Theres not theres no centralized computing in the cloud without the decentralized computing at the edge, it's all connected and that's needed for to drive artificial intelligence and Hyperconnectivity now being supported by five G. But by the end of the decade will be <unk>, so I'm going to be faster lower lower latency more bandwidth.

Pieter Wennink: That's needed for to drive artificial intelligence and the hyperconnectivity 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. Then there's other 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? Our last big driver is the social and the socioeconomic shifts.

And then there's a lot of drivers called the climate change and the resource scarcity, I mean semiconductors will and won't going to show you a couple of 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 then the last big drivers of social and the social economic shifts I mean, yes with the pandemic.

Pieter Wennink: I mean, yes, with the pandemic has actually taught us, you know, to use different ways of working from home, but also that this remote connectivity is extremely important also in areas of medical technology, for instance. Then we'll talk about it later. Technological sovereignty is a big driver for this socioeconomic shift. Okay, now just a couple of examples. Just the energy transition, we believe it will be one of the main drivers the coming decades. It's about energy generation, storage, about distribution, and consumption of this electrical energy. If you know an example, if you want 1MW of wind power, it needs about EUR 3 thousand of semiconductors. One megawatt of solar power want EUR 4 thousand.

For us too.

Taught us to use different ways of working working from home.

But also that.

This remote connectivity is extremely important it also in the areas of medical technology for instance.

And then we'll talk about it later technological sovereignty is a big driver for this socioeconomic shifts.

Okay.

Couple of examples because the energy transition we believe it will be one of the main drivers the coming decades.

It's it's about energy generation, it's about storage about distribution, it's about consumption of this electrical energy.

<unk>.

Maybe give an example, if you want one megawatt of of a wind power it needs about 3000 euros of semiconductors.

And while megawatt of solar power for passenger arose, but if you think about the gigantic increase in demand for electricity.

Pieter Wennink: 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 a lot of sensors and actuators and compute power. Yeah. 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 a combustion engine, yeah? I think the electric vehicles is not ours.

And the renewable energy coming from winter from so it just went in sort of general generation you can think about the enormous.

Impact this will have on semiconductor consumption and then I don't talk about the grid about the smart grids that needs a lot of sensors and actuators and and compute power.

<unk>.

And how do we use it I mean, it's it's use Indiana in the electrification of our mobility.

The.

The electric vehicle will at least at least use twice the number of semiconductors as compared to combustion engine.

And I think the electric vehicles is not ours, nobody had just and that is in the U S.

Estimate of one of our customers who was very very clearly involved in the electrification of the automotive industry is that at least it's over $500 per vehicle.

Pieter Wennink: I mean, it's just an estimate of one of our customers who is very clearly involved in the electrification of the automotive industry, that at least it's over $1,500 per vehicle, and some even say over $2,000. That's just one example. 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 Lars Reger, he's the CTO of NXP Semiconductors. He actually showed this slide, and it shows that if you take a car, it consists of mature semiconductors. Here starts on left-hand side with 40 nanometers. It's just the actuator. It's picking up the sensor data.

Eagle and some even say over 2000.

So.

That's just one example, but it's also <unk>.

We'll talk about advanced semiconductors, and the importance of it and mature semiconductors as if these were two different worlds that they aren't this is a good example, which comes from from NXP is Las Vegas, the CTO of NXP. Similarly, actually showed this slide and it shows that if.

If you look if you take a car it consists of.

Pieter Wennink: Actually picking up the sensor data is semiconductor technology that is even older than 40 nanometer, a lot older. 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. The 5-nanometer chip doesn't work without the input. If the input cannot find a placeholder thing in the central computing engine, it doesn't work either. It's all connected. 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. We don't only need advanced semiconductors, but very much we also need more and more mature semiconductors.

Fast, Yeah, hi processing high processing capacity, because the input of debt first analog and digital data into the car is massive.

The five nanometer chip doesn't work without the input.

And if the input cannot find a placeholder 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.

We own don't only need advanced similar but very much we also need more and more mature semiconductors.

Now customers realize this so.

Pieter Wennink: Now, customers realize 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. It's not only leading edge, it's also mature. That's needed. That's needed because of what I just talked about.

Let's take an example, our three major customers Intel.

Intel TSMC and assumptions they have announced fab.

Fab projects investment projects, well I I do the math for you.

$326 billion announced $326 billion announced in new fab expansions and is not only leading edge is also mature.

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

Now if we then look at the total semiconductor market.

Pieter Wennink: 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, then we look at the growth rates that we're currently seeing and the new areas of growth in connectivity, in the energy transition, let's say, as a result of the socioeconomic shifts, it's not a surprise that when you do the math, it's not only us, but other sources come to a semiconductor industry, the business of our customers, there will be anywhere between $1 and 1.3 trillion, 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 sales. It needs another 8 to 10 years to double it again. Yeah?

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

In our day to day life.

Then we look at the growth rates that we're currently seeing in the new areas of growth and productivity in the energy transition.

Indeed, let's say as a result of the social economic shifts.

It's not a surprise that when you do the math, so not only us but a different sources come to a semiconductor industry is in the business of our customers. They will have anywhere between one and one three trillion, 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 eight to 10 years to double it again.

And as the Chairman said we have.

Pieter Wennink: This is the challenge that we have. What do we need to do? We need to build capacity because we need to scale. Yeah, we need to find talent around the world. We're investing in our production capacity and in our EUV factory here, our TWINSCAN 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. Our current build capacity, 375 deep UV systems. Well, we want to have 600 by 2025, 2026. We have last year just, you know, a build capacity of around 50 units. This year, 60 units for EUV. We want to get to 90.

So what do we need to do.

We need to build capacity because.

Because we need to scale.

We need to find talent around the world.

And we are investing in our production capacity and in our EV factory here, our Princeton factory here our R. A T.

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.

And capacity needs.

Our current build capacity of 375 deep UV systems.

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 EV.

When I go to 90.

That's all needed to drive the growth of this industry and also means we need to hire people.

Pieter Wennink: That's all needed to drive the growth of this industry and also means we need to hire people. Now we just this morning I told a news agency that over the last 12 months, we received about 300,000 applications for a job at ASML, which we hired close to 10,000 people, so we still have a choice. We now employ close to 40,000 people worldwide, of which 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 I need to onboard to make them effective. Big management challenge. Now, what do we do then on ESG? It's very important. We launched our ESG strategy last year. What do we do this year?

And how are we.

Just this morning, I told a news agency that.

Over the last 12 months, we received about 300000 applications for a job at ASML.

What's your Hyatt close to 10000 people so.

So we still have a choice and.

And we now employ close to 40000 people worldwide.

Half here in the Netherlands.

That is going to be a constant challenge for us because we need to grow with the hydro people, that's warm, but I need to onboard and make them effective big management challenge.

Now so what do we do that on.

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 felt over and want to go a one energy grid, which basically means we use concert we find places where we can transfer a waste heat which is in <unk>.

Pieter Wennink: For instance, we have a good example. We connected all the buildings here in Veldhoven in what we call 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. Ultimately, we will save 70% gas in this site, which, by the way, you've seen is a big site. 70% gas reduction. 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.

One of the buildings you could imagine this is waste heat in the factories and we used it to heat the buildings with ultimately we will save 70% gas.

In this site, which by the way you've seen is a big sites, 70% gas reduction.

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

In the infrastructure.

To basically make sure that all people in the community that we're working at as much as possible access to personal growth and can also benefit from the value that's being created.

I think also from a governance point of view, we're one of the founding members of this.

Pieter Wennink: I think also from a governance point of view, we're one of the founding members of this Semiconductor Climate Consortium, which was actually launched just 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. It's perhaps a bit 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.

Semiconductor climates, cold sorghum, which was actually launched.

Couple of months ago. When it 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.

Going to preempt something basically.

It's a clear issue, it's driven by the fact that.

We all realize there.

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

And it's.

Perhaps it's mind boggling.

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 is now rethinking that says what do we need to do we need to stay relevant we don't need to do everything ourselves, but we need to stay relevant so we need to push.

Pieter Wennink: 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, the United States, Europe, or Japan. All governments are rethinking their semiconductor strategy. 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, you know, customers could talk with us and throughout the ecosystem very clearly about the roadmaps, about what needed to be done to drive innovation together.

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.

Wanted to go what are the consequences well.

For the last 40 50 years, the semiconductor industry has.

Consolidated itself into a global collaboration networking ecosystem without borders without boundaries, which.

Great advantages because now customers good talk with us and throughout the ecosystem very clearly about the roadmaps about what needed to be done there to drive innovation together.

We have worked together with P S. Yeah.

Pieter Wennink: 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, you see, of course, a bifurcation happening. Now, 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.

With with best to just make sure that we created processes of customers could use and actually created a semiconductor industry that's innovative faster.

Very and almost unlimited.

Coordination with academic partners and of course with suppliers and open structure and open collaboration model to drive innovation.

That will be created.

And also by sharing risks and rewards now because of the you could say the bifurcation of the world.

Into new social economic blocks.

We had a significant impact.

That has on the way to 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.

At 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.

Pieter Wennink: 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. 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, and like the medical tech. Yeah. 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 know? "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.

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

Well you know she's here that the chip availability could be reduced.

Supply chain might get disrupted because in all 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 border lists ecosystem yeah.

Pieter Wennink: This borderless ecosystem now is in danger of creating hurdles. It will also have impact on the supply chain that 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. It also means that we will have a less efficient infrastructure. Costs will very likely go up. 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 into different socio-economic blocks, each with their own economic and political interest. That's where we are today, and happy to take some questions later on.

Now is a danger of creating hurdles.

It will also have.

Impact on the supply chain. It was I would say seamless yeah, I will not be a seamless going forward as it is today.

Yeah.

Now it also means that countries.

Countries, we'll 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 were facing but that's the result of let's say the realization that this ecosystem that we have built was almost seamless.

Now indeed bifurcated in different social economic blocks each with their own.

Economic and political interest.

That's where we are today and 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.

Pieter Wennink: Roger, why don't you do the following and talk about something boring like financials? Thank you.

How long.

This was a former CFO talking how about that.

Roger Dassen: I have one. This was a former CFO talking. How about that? It's a small step from US politics to U.S. GAAP, as I said yesterday. That's why we're here. Small step for a man, a giant leap for mankind. Here we are, financials. Q4 results of 2022, strong quarter all in all. If you look at the numbers, the net sales came in, you know, at the midpoint approximately of our guidance at EUR 6.4 billion as you see here. You know, based on EUR 4.7 billion of system sales and EUR 1.7 billion of installed 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.

It's a small step from U S politics to U S. GAAP as I said it yesterday. So that's that's what we're here small step for man a giant leap from Mannkind Haley our 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 a third of our guidance at 6.41 billion as you see here.

Based on $4 7 billion of system sales and $1 7 billion of installed base management sales that was pretty strong. We saw that there were quite some of the customers that actually do want upgrades to their to their system in Q4 actually a number of upgrades that were planned for Q1 of actually.

Roger Dassen: Actually a number of upgrades that were planned for Q1 have actually been pulled into Q4, and that really beefed up the installed base number for Q4. Gross margin pretty strong at 51.5%. We guided 49%. There were some one-offs in there, but again, a major driver here is that same installed base management sales. There were quite some software upgrades in there. On software upgrades, the gross margin is very, very high. If you see installed base management go up the way it went in this quarter, that also beefs up the gross margin. That's what you see there.

<unk> been pulled into into Q4 and that really beefed up the installed base number for for Q4 gross margin are pretty strong at at 51.5%. We guide at 49% there wasn't one of them there, but again a major driver here is that same installed base management sales there were quite some software.

Upgrades in there on software upgrade said the gross margin is very very high. So if you see installed base management to go up the way. It is the way. It went in this quarter that also beef up the gross margin. So that's what you. If that's what you see theyre operating margin of 33%.

Roger Dassen: Operating margin 33%, and then goes all the way down to the numbers that you see here as net income, earnings, et cetera. Important to note, the net bookings, you know, 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 EUR 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 EUR 4.7 billion, that tells you that we're still adding to the order book.

And then it goes all the way down to numbers that you see here as net income and earnings etc.

Important to note that bookings and.

In spite of in spite of you know 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 two to our order book and because if you look at the $6 3 billion in net bookings number that you have here and you compare that to the first bullet while we talk about.

Net system sales of 4.7 that tells you that we're still adding to the to the order book and you know if we look at your order book today at over 40 billion. You are in fact looking at more than twice the expected system sales for this year and the order book, which is very very strong I would say included in the $6 three as we <unk>.

Roger Dassen: You know, if we look at the order book today at over EUR 40 billion, you're in fact looking at, you know, more than twice the expected system sales for this year in the order book, which is very strong, I would say. Included in the 6.3 as we have it here, EUR 3.4 billion for EUV. If we look at the full year, a number of highlights that we would like to emphasize and share with you. Of course, first off, the sales growth. Sales growth of 14% for, you know, over 2021. Strong, you know, really strong demand, reflecting strong demand in all of our products. To EUR 21.2 billion at 50.5% gross margin.

Have it here three 4 billion for EV.

If we look at the full year, a number of highlights that we would like to emphasize that share with you of course first off the sales growth sales growth of 14, 14%.

For over 2021 strong.

Really strong demand, reflecting strong demand in all of our products.

To $21 2 billion at a 55% of gross gross margin pretty strong net income of $5 6 billion and an EPS of 14 over 14 euros.

Roger Dassen: Pretty strong net income of EUR 5.6 billion at an EPS of 14, over 14 euros. Lithography very strong once again, grew 12%, EUR 7 billion. Important to recognize what we have here. We recognized revenue for 40 tools, for 40 EUV tools. We actually shipped 54 tools. You know, 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 you know, some of the supply chain limitations that we had, we had to optimize the way we ship tools to our customers. That meant that you know, some testing in the factory didn't happen. As a result of that, we could only recognize revenue for 40 tools. In essence, we shipped 54 tools.

Lithography very strong once again grew 12% a 7 billion, but important to recognize what we have here. We recognize revenue for 42 was for 40 E V tools, we actually shipped 54 tools and I won't bother you with a with accounting rules all that all that much but the essence is because of the high demand for EV tools that.

We had in the in 2022 and you know 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 it didn't happen as a result of that we could only recognize revenue for 42 has been in essence, we shipped 54 tools that delta of 14.

<unk> is therefore, not recognized and the growth number of 14% that you see for the full year, but that will come in in the course of this of this year.

Roger Dassen: 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 have now placed High-NA orders. I think that really, you know, emphasizes the confidence that our customers have in the High-NA technology that really is going to get us, you know, into the second half of this decade. There you will see that High-NA will play a pivotal role both in high-end logic and also in the memory business. Also, the DUV business continues to be very, very strong.

Into the second half of this of this decade and there you will see the tiny will play a pivotal role both in our in high end logic and also in the in the memory business.

Also the deep UV 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 in the advanced their business grew 13% to $7 7 billion as he says he see here and this really reflects the continued capacity growth that Peter also showed you in the in the earlier slides.

Roger Dassen: On the back of some of the comments that Peter made in the mature business, but also in the advanced business. Grew 13% to EUR 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 EUR 660 million. Really firing on all cylinders there. There you see that we have quite a few new products that we were able to launch.

Two new two new models for being introduce the <unk>. The <unk> the new era of immersion system. The NXT 2100, and the the advanced dry system. The NXT eight to 870.

Also on the application business strong growth, 28% to 660 million, so really firing on all cylinders there and there you see that we had quite a few new products that we were able to launch it.

Installed base business, we talked about that as a major driver for the growth and in Q4 very strong iron ore at $5 7 billion. Both based on service, but also on the on the demand from the from customers on upgrades to increase the productivity of the installed base that they already have.

Roger Dassen: Installed base business, we talked about that as a major driver for the growth in Q4. Very strong all in all at EUR 5.7 billion. You know, both based on service but also on the demand from customers on upgrades to increase the productivity of the installed base that they already have. Finally, in terms of capital return, you know, 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 dividend and share buybacks, we were able to return to shareholders an amount of EUR 7.2 billion. Very quickly, in terms of the sales breakdown, you see technology-wise, not a real big difference.

Two 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 you know that our debt to EV.

Roger Dassen: You see that, you know, that the EUV, the wet business, ArFi, et cetera, 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%, which might be a surprise to some because you know, some of our customers are clearly indicating the memory market in 2022 was down, also prices were down. This really tells you that, you know, the investments that our customers make in the memory business are strategic. They're really looking, you know, not at the demand in Q4 of 2022 or even the demand in Q1 of 2023.

The web business are avaya et cetera, you'll see that that's more or less in line composition wise with that with last year you see that in terms of end use actually memory is picking up and moving from 30% to 35% which might be a surprise to some because you know some of our customers are clearly, indicating the memory market in 'twenty two.

What was down also prices were down, but it's really tells you that.

The investments that our customers make in the memory business, our strategic so they're really looking not at the demand in Q4 of 'twenty, two or even the demand in Q1 of 23, they really look at potential pickup in the second half of this of this of this year and they want to continue to make the investments. So we really see lithography investments as critical.

Roger Dassen: They really look at potential pickup in the H2 of this year, and they wanna continue to make the investments. They really see lithography investment as critical on their strategic roadmap, and that is reflected in the, you know, 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 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 we see here, memory strong growth, logic continued strong growth.

On the strategic roadmap and that is reflected in the pickup of the of the memory business in terms of regional breakdown, it's it's more or less in line again with our with last year and in terms of unit numbers you see a pick up from the 309 units in total in 2021 to 345 and this year.

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

Again, as we see here at memory strong growth logic continued to continued strong growth and then youll see this pickup of the installed base business that we already have talked about and it's interesting to see the the five years, our particularly the logic market has really really picked up on the on the on the back of the end use developments that Peter has been talking them.

Roger Dassen: 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 picked up on the back of, you know, the end use developments that Peter has been talking about. If we look at the boring numbers here, it's once again good to take the five-year perspective, and 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.

Yeah.

If we then look at the boring numbers here.

It's once again good to take their five year perspective, and then you see that and in fact in this period the company doubled in many in many different ways. We doubled in terms of the 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 is there has been hitting us in 2020 two as it has been hitting everyone.

Roger Dassen: Inflation has been hitting us in 2022, as it has been hitting everyone. You know, not all of the inflation burden could be passed on within the ecosystem. That's one driver. 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. It also means that in the gross margin, there is you know, quite some money that is being spent on being ready for increased capacity in 2024, 2025, and 2026.

And you know not all of the inflation burden could be it could be passed on within the year within the ecosystem. So that's one driver, but secondly, and very importantly, we are investing in growth.

As you see if if you if you if you look at the at the campus here. If you look at some of the slides that Peter was presenting with very much gearing up for further growth and it also means that in the gross margin. There is quite some quite some money that is being spent on being ready for increased capacity in 'twenty four and 'twenty five 'twenty six so that that said that means.

Roger Dassen: That means that you know 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 SG&A grows in line with the growth of the company and more or less doubled in comparison to 2018. The rest you know is just a translation of that into the bottom line.

And is driving a very aggressive roadmap towards the targets that you've seen that we articulated at the at the capital markets day.

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

The rest is just the translation of that into and through 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 and in 'twenty, one and as I mentioned that led to an order book of over $40 billion.

Roger Dassen: 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. As I mentioned, that led to an order book of over 40 billion. I mentioned the return to the shareholders. 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 dividend, an increase of 5.5% towards 5.80 EUR per ordinary share dividend over 2022. That is the proposal.

I mentioned the return to the to the shareholders. So you.

We had very strong share buybacks, Alaska last year also in terms of dividends. Once again, we are we are we present to the to the AGM and increase in the <unk> in dividends an increase of five 5% towards five point 80 euros per ordinary share dividend over 2022 and that is the that is.

The proposal and for the year in terms of share buyback. We in November introduced our new plan for $12 billion of share buybacks over a three year period.

Roger Dassen: For the, you know, in terms of share buyback, we in November introduced our new plan for EUR 12 billion of share buybacks over a 3-year period. In terms of outlook for the quarter, EUR 6.1 to 6.5 billion in terms of net sales, which is more or less in line with what we had in Q4. Installed 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 base sales that we expect for Q1. That also has a slightly negative impact on the gross margin.

From customers into Q4, so that has a.

Slightly negative effect on the installed base that we installed daily sales that we expect for <unk> for Q1 that also has a slightly negative impact on the on the gross margin although for the full year, we expect gross margin to be slightly up in comparison to the gross margin that we had for the full year 2022.

R&D once again to step up to $965 million in SG&A commensurate with the growth of the company to 285. So those are the key parameters for Q1, if we look at the full year.

Roger Dassen: While it's clearly you can clearly recognize that there are some end markets that are under pressure, big end markets like PCs, smartphones, et cetera. 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. Clearly there is some, you know, some pressure, I would say, on some of our customers and some of the growth of our customers, particularly in the H1. Most of our customers, if you listen to their commentary, they expect the market to regain strength in the H2. Then the logic of our customers is pretty clear.

Roger Dassen: They say, "Okay, so if the market, you know, 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." 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 ASML.

End of the queue, we have to wait two years before we get the tool and if then indeed the market picks up with any within one year, we will be too late to cater to the pick up 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.

Roger Dassen: I mentioned the over EUR 40 billion in terms of backlog, very, very strong, a record number, there. 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 and 375 DUV tools. That gets you significantly north of the 345 lithography tools in total EUV and DUV combined that we had for 2022. EUV business year-on-year growth 40% is expected, 30% for the non-EUV business, and the installed base 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.

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 at plants to ship 60, UV tools. This year of 375 of deep UV tools. So that gets you significantly north of the 345 lithography tools in total UV Mdpv combined.

That we had for 2022.

With that Dear friends have come to the end of my presentation, and I hope Peter and when he can join us for Q&A.

Roger Dassen: 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.

Pieter Wennink: It shows how important semiconductors are. We all rely on it every day.

Every day, we don't blame it on the semiconductor.

Publication number right and then we'd be happy to answer your question. So people can hear it.

Thank you very much it's Klaus marks moniker of <unk> to minus I don't can.

Klaus-Max Smolka: Thank you very much. It's Klaus-Max Smolka of Frankfurter Allgemeine Zeitung in Germany.

Germany.

Could you elaborate a little on the communication between ASML in politics I wondered in political talks in what way is M. S. ASML getting involved specifically when the Dutch Prime Minister has talks in the U S. For example.

Monique Mols: Mm-hmm.

Klaus-Max Smolka: 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 in what way would they communicate with politicians? Thank you.

What's how many how.

How many a ASML representatives will be part of the delegation and walked away with a communicate with politicians.

Can be very short on the on the content of the delegation I mean this is geopolitical is not geo business. So I think as there are no delegation members of ASML there because its political.

Pieter Wennink: Well, it can be very short on the content of the delegation. I mean, this is geopolitical. It's not geo business. I think there are no delegation members of ASML there because it's political. Again, you know, 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 2, 3 years ago, you could have asked the average politician and said, "Tell me how the semiconductor industry works." He wouldn't have no clue, 'cause 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's always been there.

And again, you know, yes, we cannot deny that we are at the heart of a lot of political discussions because of the importance of semiconductor as I just explained it in my introductory comments.

Our role.

Predominately the role of making sure that people understand how this industry works.

Until two or three years ago, you could have asked the average politician says tell me how the semiconductor industry works it wouldn't I have no clue.

Because semiconductors, we're always there it's like 90 73 revisit that oil was always there and then it wasn't in any of the gaming strategic commodity fast forward 'twenty 'twenty. One semiconductor has always been there nobody needs to worry until they weren't.

Pieter Wennink: Nobody needed to worry until they weren't. We figured out there was a worldwide dependence on only a few countries. It's only very recent. 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? Yeah. How does it work? 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 scenarios? That's our role. Yeah.

Figured out it wasn't it was a worldwide dependence on only a few countries. It's only very reasons. So our role is education.

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.

Hum.

A bifurcation, but also of the world and the world, creating different sets of chips X and think about export controls than our role is really to provide the information any insight into what it means what are the consequences of certain scenarios.

That's a rule.

But then ultimately.

Pieter Wennink: 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 among themselves, what they want to do. Yeah. That's them. That's not us. This is our role. In your question, we're not part of the delegation, but we're definitely part of the discussion. Yeah. Our role is to provide that information and that insight. Good question.

And that's then 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 it inside.

Good question. Okay. Thank you I'm, just getting an update that there is a desert quite an issue with our website, so and we won't be able to get the.

The questions from people on line, sorry about that where we're available after the press conference today. If you have any questions want to reach out to US. Please do to any of my team members.

Our next question here.

<unk> in place that this would have a ripple effect to certain of your suppliers what are your thoughts on that.

Pieter Wennink: Yes, I think that's a good comment. 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, you know, the United States. He referred to several countries with several companies in a complex supply chain, which, you know, we need to look at. The consequences of doing anything could be quite significant. He actually mentioned that. It's sensitive. I don't remember he came out of it and said, "Oh, yeah, no, 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. You're absolutely right. I mean, it's what I tried to say.

United States he referred to several countries with several companies in a complex supply chain, which we need to look at at and <expletive> and the consequences of doing anything could be quite significant they actually mentioned that so it's it's sensitive.

I don't remember what he came out of it and said Oh, yes, we have restructured 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, yes.

Pieter Wennink: This is an ecosystem that has been built over 40 years. Yeah. 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, perhaps even longer, I don't know for sure, because of the chip shortage. It's all connected. 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. This is why it's not between one or two countries.

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

Yeah.

Did you just ask the automotive.

Customers you know how do you think about the chip.

Chip shortage try to still order.

Car and you'll find out that you're waiting time has more than 12 months breakeven even longer I don't know for sure because of the of the chip shortage is 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 into the ecosystem.

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

I think this is what the Prime Minister said I think.

Pieter Wennink: I think this is what the Prime Minister said, and I think he has a point.

He has a point.

Okay next question.

Monique Mols: Okay, next question.

I should have to do this also for the people online.

Pieter Wennink: Guys, you have to do this also for the people online. If you know anyone who's watching, open your chat.

So if you know anyone who's watching opening your chat.

Yeah.

Hum.

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 as a male machines.

Well I think that concern is already that the Saudi there as you know our extreme ultraviolet machines UV.

Pieter Wennink: Well, I think that concern is already there. As you know, our Extreme Ultraviolet machines, EUV, are under export control. So that's a fact. Now, I of course listen to the arguments, and the arguments are there, you know, these chips will be then used into military applications. But 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 and being able to make advanced semiconductors, yeah. But the military applications use rugged, very mature semiconductors. Yeah. The semiconductors are sometimes 10, 15, 20 years old, yeah, which are widely available across the globe, also in China.

Our under export control. So that's that's a that is a fact now.

And of course listen to the arguments and the arguments out 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 Goodall, it's about our advanced technology.

Being able to make advanced semiconductors.

But the military applications use rugged very mature semiconductors.

Semiconductors, almost a 10 15 20 years old which are.

Rightly available across the globe also in China.

So you have to fuel a a a significant amount of of chips into a military complex.

Pieter Wennink: To fuel a significant amount of chips into a military complex, yeah, a military, you know, machinery. There's a significant amount of systems out there that are not advanced. They're mature. Yeah. It's already there. Now, having said that, of course, there is artificial intelligence, there's 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. It's also true for China. China is the biggest importer of chips on the planet. And I mean, American chip companies, I don't know, it's public. They just look at their financial statements.

I imagine.

Machinery, there's a significant amount of of systems out there.

Not advanced their mature Tory there now having said that of course, there is artificial intelligence and smart algorithms they need high power compute.

Those chips are available the available in the world market and they're made on a as a mill machines on <unk> machines.

And in China, They're made in Korea, and Taiwan in the United States and those chips.

Available for every.

End user end manufacturer on the planet Dubai.

It is also true for China, China buys as the biggest importer of chips on the planet.

And I mean.

American chip companies.

Public data just look at their financial statements just added five biggest.

Pieter Wennink: 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, yeah? Those chips, those advanced chips, they go into anything. Yeah. I don't know where, but they're being sold, so they probably end up somewhere. Yeah. I think this is the complexity, and this is also where the reference to the complexity was made. It's highly sensitive. Yeah. It's a much bigger and more complex situation than just saying, "Well, that chip goes into a military application." That's far more complex than that. Mm-hmm. Meanwhile, I have really good news. If those who are watching refresh the page, then it should work again.

Chip manufacturers on the planet in the United States that they sell 80 billion worth of chips.

China.

It just shows you how complex this is yeah.

And so it's it's and those chips those advanced chips they go into anything.

I don't know, where but that being sold so they probably end up somewhere.

So I think this is the complexity.

And it is also where the reference to the complexity was made it's highly sensitive.

It's a it's a much bigger and more complex situations and just say well that chip goes into a military application.

More complex than that.

Meanwhile.

I don't have really good news, if those who are watching refreshed. The page then it should work again.

I have one question and through Whatsapp, but I saw someone wanting to ask a question there and kind of thinking can you give the microphone here.

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

Monique Mols: Mike here.

If it was a possible ban on just the <unk> would be if you know.

[Analyst]: Could you say what the influence of a possible ban on just the DUVs would be? If you not-

As to China, Yeah, I think that the fully depends on what the deal is I think if they strike a deal then we can actually we laid out on different scenarios of what the potential consequences. So it's up to them to that.

Pieter Wennink: Oh, yeah. That's

[Analyst]: to sell DUVs to China.

Pieter Wennink: Yeah. I think that fully depends on what the deal is. You know, 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 the basis of that information. I cannot even give you that answer because I don't know what the outcome is. Yeah. That fully depends. Yeah. 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. Yeah. I'm not going to do that. Yeah. It's too sensitive. I just wanna remind everyone that this is annual report, annual results. You are allowed to ask questions.

Basically decide on the basis of at the information I cannot even give you that answer because I don't know what the outcome is.

It really depends.

And.

I'm not even willing to speculate on this because this is so sensitive or I start speculating here.

I know, what's going to happen and argue with you guys are going through right now so.

To do that.

It's too sensitive.

I just want to remind everyone that this annual report.

Don't yourself you you are allowed to ask questions.

Well I'll answer those.

Pieter Wennink: I don't know what happened.

Okay.

So absolutely clear about I can't I can't imagine that the question is going to a different direct you I have one here, it's fair to say, that's a very brave guidance yeah.

Monique Mols: Absolutely.

Pieter Wennink: Absolutely clear about what this is. I can imagine that the question is going to a different direction.

Monique Mols: Yeah. I have one here through the website. Very brave.

Pieter Wennink: You can guide them, you know?

I would say from new Pentagon bravely broke through the barriers and she send us a message.

Monique Mols: Yeah. So Eva Schouten from NU.nl bravely broke through the barriers, and she sent us a message. She says, "Peter noted that too much export control will lead to fewer chips. Could you define too much? Where do you draw the line?

She says Peter noted that too much expert control will lead to fewer chips could you define too much.

Where do you draw the line that's exactly what I tried to say it depends on how how how deep those export controls I think export controls are a legitimate.

Pieter Wennink: That's exactly what I tried to say. It depends on how deep those export controls. I think export controls are a legitimate instrument, I think. That's clear. Yeah. It's how do you wanna use them?

Instrument I think that's clear yeah, but.

But it's how do you want to use them and if you overused them. It will have an effect on availability of mature chips, which are being used not only in the N and M military complex, but I used in a much larger way way way larger industrial complex, which is which is basically it was what we buy every day.

Monique Mols: Mm-hmm.

Pieter Wennink: You know, 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 larger industrial complex. Which is basically what we buy every day, you know, 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. You know? So I think we also need-

From cars to washing machines to Pcs to smartphones to infrastructure.

Talk about the energy transition the energy transition needs massive amounts of semiconductor is massive.

So I think we also need to be careful that we don't have that debt instruments at a well meant yeah don't come to their own don't have a consequence that we all.

Monique Mols: Yeah. She understood that.

Pieter Wennink: -to be careful that we don't-

Monique Mols: Yeah.

Pieter Wennink: that you know, instruments that are well-meant, yeah, don't have a consequence that we all feel sorry about.

Sorry about that.

Yeah. So that's also the precision that.

Monique Mols: Yeah. That's also the precision that Mark would have referred to.

Marketing refreshment.

I saw Tony Yeah Tobey.

Pieter Wennink: Yeah.

Monique Mols: I saw Toby. Yeah.

Hey, Sterling from Reuters not purely my question here, but.

Pieter Wennink: Toby.

Toby Sterling: Hi. Toby Sterling from Reuters. Not purely my question here, but it's financial, so there you go.

Its financials. So there you go.

Just I think the general ideas is a there is some skepticism about the weakness in the chip markets not having much of an effect on air smell.

Pieter Wennink: Yeah.

Toby Sterling: Just, I think the general idea is there's some skepticism about the, you know, the weakness in the chip markets not having much of an effect on ASML. I know you've explained it a bit.

Explain that a bit, but maybe you could say well 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.

Pieter Wennink: Yeah.

And yet and could you break down your projections for D V and EV sales not by systems to buy it.

The number I think Rajiv I think you've probably put it on the slides again refer to that for this year, but.

Pieter Wennink: Yeah, I think he probably put it on the slide, so we can refer to that for this year. You need to remember, we are not insulated. We're not immune from any macroeconomic events, and especially not when it's such a big inflation coming at us and, you know, and there's recession 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. You have to remember that we come out of a period like 2022, where we could hardly ship 55% of what our customers wanted.

You need to remember we are not.

Insulate it we're not from any.

Macroeconomic events, and especially not when it's such a big inflation coming at Us and you know and.

And as a recessionary fears and I won't even say some parts of the world are in a recession of course that impacts our 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 our customers want it.

And then 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.

Pieter Wennink: They want this because they know that these investments are long-term, so they want to have two years of lead time, and then they need to build factories, and it's going to take time. We have this demand, which was significantly over our build capacity, which has come down. True. This is a reflection of what we see in the, in, you know, the market, but it's still quite a lot above our build capacity. That means our customers are actually saying, "Well, what I think the duration of this recession is significantly shorter than the lead time of your tools. That also means that the recession will turn into an upturn by the time I need your machines. Why would I cancel or push back those machines?

The basically we have this this demand which was significantly over our build capacity, which has come down.

So this is a reflection of it.

G in the in the remarks, but it's still quite a lot above our build capacity.

And that makes our customers are actually saying well what I think the duration of this recession is significantly shorter than the lead time of your tools.

That also means that the recession will turn up into an upturn by the time I need your machines.

Why would I cancel a pushback those machines, if I do that I'm all about the duration is shorter than I think I'll be in the back of the line because these guys don't have enough capacity.

Pieter Wennink: If I do that, and I'm wrong about the duration is 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.

This is and this is where we are.

Oh.

Toby Sterling: Yeah. Maybe a naive follow-up. When somebody falls out of line, does it just simply go to the very next customer?

When somebody falls out of line does it just simply go to the very next customer absolutely. Because you know there is a shortage. So if you said I don't need your machine.

Pieter Wennink: Absolutely. Because, you know, there is a shortage. If you said, "I don't need your machine," and your neighbor says, "Thank you, thank you, thank you very much." That, that's gone.

Yes. Thank you. Thank you. Thank you very much that's wrong, whereas the Nox up so there'll be in terms of numbers for four four E. V. We're looking at 64 this year and 375 units for a for deep UV. Those those are the numbers.

Roger Dassen: Where's the next stop? Toby, in terms of numbers, for EUV, we're looking at 60 for this year and 375 units for DUV. 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, we're not building that capacity for the short term. I mean, the capacity for the 90 EUV and the 600 DUV, and that's the capacity that we're driving towards. Of course, we drive that for the medium and for the longer term. Any cyclicality that might be there and demand might be there. But one thing is for sure, we will need that capacity.

That were envisaging 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 debt capacity for the short term I mean, the capacity for the 90, <unk> and the 600 deep UV and that's the capacity that we're driving towards of course, we drive that for their for the 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 need to have capacity and maybe we don't need it and four for 2025, but we will need it and 26 are in China and on the customer capacity you are right I mean, we see a demand reduction.

Roger Dassen: Maybe we don't need it in full for 2025, but then we will need it in 2026 or in 2027.

Pieter Wennink: On the customer capacity, you are right. I mean, we see a demand reduction, again, above our build capacity. Yes, I think customers are reshuffling, retiming some of their capacity investment. Sure. Yeah. I mean, that's what they do. I mean, in the memory industry, some of our customers have actually said out there, "We're going to cut CapEx for this year." Yeah. All of us have said, "No, 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. If for whatever reason, the duration of the recession will extend to years, of course, we will, you know, see the effects. Yeah. But that's not what they currently think. At least that's our conclusion.

And all of US have 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 the if for whatever reason the duration of the recession will extends two years of course Rosemont, we will see the effects.

It is not what they currently think at least that's our conclusion and discussing with 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.

Toby Sterling: This question was really simple. I mean, I could look at the average sale prices, but selling prices for each type of machine. 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 and

In 2022 for 2023, he said I'm, saying I can't multiply 375 times X had you mean deep UV versus EV. Yeah. I mean, we said that said that EOG is going to grow a bit a bit harder faster than their dividend in an easy business. So easy you expect to be to grow by 40% in the non EV business by 30% yes.

Roger Dassen: You mean DUV versus EUV?

Toby Sterling: Yeah.

Roger Dassen: Yeah. I mean, we said that EUV is gonna grow a bit harder, faster than the non-EUV business. EUV, we expect to grow by 40% and the non-EUV business by 30%.

That gives you so the shift will be a little bit more towards E rate, which makes sense you know its the most expensive and that's where the capacity a lot of the capacity expansion that I showed you that through and trained 26 billion is about EV.

Toby Sterling: Yeah.

Roger Dassen: That gives you.

Toby Sterling: Yeah.

Pieter Wennink: The shift will be.

Roger Dassen: Yeah.

Pieter Wennink: 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-driven fabs. Yeah.

UV driven fabs.

Thanks for that Tony.

I have a question from Connie Chung Kris Bryant from Bloomberg opinion is the dry 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.

Pieter Wennink: Well, there are two sides to it. I think the positive side is it will create more capital inefficiency.

Capital inefficiency.

So capital inefficient means.

Monique Mols: Mm-hmm.

Hi.

Our capital allocation. So it's good for equipment makers, that's good there.

The bad thing is that if you. If you have this what you had more luxor hurdles into the system you have more friction and friction flipped a frictionless cost.

So yes, you have a higher level of business.

Monique Mols: Mm-hmm.

Pieter Wennink: Yes, you have a higher level of business, but it's not as efficient. That also is true for us. Yeah. It means that you will create higher cost. I think on balance, equipment companies will sell more machines.

It's not as efficient. So it's also 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.

That's you could say it's positive.

Monique Mols: Mm-hmm.

Pieter Wennink: That's it. On balance, you could say it's positive.

That's a bit selfish, yeah, I think so.

Monique Mols: Mm-hmm.

Pieter Wennink: It's a bit selfish.

Monique Mols: Yeah, I think so. Yeah. Hey, that was the question. Anyone here? Yeah, sure. Yeah.

But hey that asked the question anyone here.

Yeah.

Yes sure.

Yeah.

If nobody else has been no go ahead go ahead on.

Klaus-Max Smolka: If nobody else has been-

Monique Mols: No, go ahead. Go ahead.

On the <unk>.

Klaus-Max Smolka: On the talks in the US, when do we expect a decision which would help you assess the commercial ramifications?

Marks in the U S. When do we expect a decision.

Which would help U S.

Assess the commercial ramifications.

Yes, I think.

Got it because it's in the papers ended right about that.

Pieter Wennink: I think it's 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. The quicker you know where you are, the better it probably is. It's probably under high pressure. I mean, that's also what I read. We'll see, you know. 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 significant amount of time. You don't talk days or weeks, I think you talk months, yeah?

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.

You know where you are at or better it's probably years. So it's probably.

Under high pressure and I mean, that's also what I read so we'll see 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 in and working out the details will probably take significant amount of time. So you don't talk days or weeks I think it took months to really talk about the details of something like that to really understand.

Pieter Wennink: 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?

What does it mean, what other what are the ramifications of something like this and that.

Monique Mols: Mm-hmm.

Always take time, but I think we can safely say that the thing is under time pressure.

Pieter Wennink: That will always take, you know, time, but I think we can safely say that the thing is under time pressure. Yeah.

Hmm.

And maybe as an example, the October export controls.

Monique Mols: Mm-hmm. 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.

I think were still everyone in the industry is still trying to figure out what the details are and how to deal with that and that's absolutely true I think until the end of I think the hotels of this month there is a.

Pieter Wennink: Yeah. That's absolutely true. I think until the end of this month, there is, let's say, a, you know, feedback opportunity from-

Let's say a.

Feedback opportunity from the industry and industry participants on on what actually means so I think the.

Monique Mols: Mm-hmm.

Pieter Wennink: the industry and industry participants on what it actually means. I think the you know, final wording is still under you know, review. This is how these things go, you know? To really say we fully understand all the ramifications, and we can translate that into business plans, I think it's going to take some time.

If the final wording is still under review and as these things go.

So to really say, we fully understand all the ramifications or we can translate that into business plans.

I think it's going to take some time.

Yeah.

Okay question online computer will do you expect any very long term effects 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.

Monique Mols: Okay. Question online. Computable. Do you expect any very long-term effects 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 in,

Got it.

Anywhere in the world.

You cannot be naive on this you know when when when semiconductors ourselves pivotal and vital to it to a responsible economy and a responsible society and you can get hold of the semiconductors, you Gotta do it yourself and that's clear yeah. So I think that this will happen.

Pieter Wennink: Yeah.

Monique Mols: Anywhere in the world?

Pieter Wennink: You cannot be naïve 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.

Monique Mols: Mm-hmm.

Pieter Wennink: That's clear. I think this will happen. That's one of the consequences of not having this global, fluid, seamless ecosystem. It's going to develop themselves. Having said that, 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. The machine itself is not that complex. For lithography, we make a relatively simple process. We just blow light through a lens. We do this in a very complex machine.

That's the one of the consequences of not having this global fluids seamless ecosystem is gone to develop themselves, but having said that.

And I cannot speak from for our peers in the semiconductor equipment industry, but.

For ASML.

But in general I think.

There are there's a lot of equipment in the industry that is focusing on a very complex process that that that is that is inside the machine that 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.

Monique Mols: Mm-hmm.

Pieter Wennink: That's a bit different. This is why basically rebuilding a lithography industry, which, as it concerns ASML, consists of hundreds of suppliers-

Basically.

Rebuilding our lithography industry.

Which.

Monique Mols: Mm-hmm.

Pieter Wennink: that each of them are world-class in what they do. I just need to name TRUMPF, Zeiss, and VDL, and they're world-class in what they do. It's just three out of a couple of hundred, yeah? Now you need to basically get, it's not patents, it's know-how, it's people, it's the brains.

Basically get and there's not patents, it's knowhow it's people it's the brains.

You need to just take that and then.

Monique Mols: Mm-hmm.

Pieter Wennink: You need to just take that and then redo all of that, yeah? To come to the same conclusion. It took us 40 years.

Redo all of that to.

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 U S or in Korea or in rest of world for that matter. All laws of physics are all those are all the same but the accumulated knowhow with hundreds of companies, where we as a system architect as a system integrator bring it altogether.

Monique Mols: Mm.

Pieter Wennink: Yeah? 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. 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. I think, yes, of course, the efforts will be there.

That's a bit of a challenge so I think yes of course, the efforts will be there.

That's going to be massive challenge going forward, because it's not about ASML, it's about the ecosystem.

Monique Mols: Mm-hmm.

Pieter Wennink: It's going to be a massive challenge going forward, 'cause it's not about ASML, it's about the ecosystem.

The best Defense line that we have there obviously is to keep on innovating right I think that's critical.

Roger Dassen: I believe the best defense line that we have there obviously is to keep on innovating, right?

Monique Mols: Yeah.

Roger Dassen: I think that's critical as well.

Times, you've got the question ill with a market share that you have why don't you lay back and be a little slow.

Monique Mols: Front and center. Yeah.

We're as you could see we're investing very very significantly on our R&D roadmap and we truly believe that pushing down to accelerate there is the best potential defense into anyone trying to again get on par with our technology.

Pieter Wennink: Good point.

Roger Dassen: ... on our R&D roadmap. We truly believe that pushing down the accelerator there is the best potential defense against anyone, you know, trying to get on par with our technology.

There's got to be challenging.

Monique Mols: Yeah. You know, it's good to be challenged sometimes, huh?

As Atlas, absolutely true and I had a discussion with the foundries TSMC on what do you do when you have to think about competition coming from different areas as well as the one solution that you just have to go faster.

Pieter Wennink: 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 go, have to go faster.

And that's it. So this is also why.

Roger Dassen: That's it.

Pieter Wennink: That's it. This is also why, you know, you will see that we will invest, to your point. It's not only in capacity, which will of course have a temporary-

You will see that and we will invest to your point there is not only in capacity, which will of course have a temporary effect on your gross margin technology yourself in R&D, we will spend more on R&D, because we spent the R&D not for next year or for this year. We spent the R&D for the second half of the decade than the first half of the next decade.

Roger Dassen: Yeah

Pieter Wennink: effect on your gross margin.

Roger Dassen: Technology also. Yeah.

Pieter Wennink: 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 second half of the decade and the first half of the next decade. This is where the R&D goes. Yeah.

This way the R&D goes yeah.

John .

There's a.

Monique Mols: John. So John Koch from Bloomberg.

So a chunk cost cuts from Bloomberg.

It's John <unk> from Merck.

John Koch: Yes. John Koch from Bloomberg. What do you see as the biggest challenge and risk of the US implementation of the CHIPS and Science Act?

You see as the biggest challenge and risk.

In the U S implementation of chips.

Chips and Science Act.

Well I think I think the biggest opportunity and let's talk about the opportunity first is.

Pieter Wennink: Well, I think the biggest opportunity, let's talk about the opportunity first, yeah, is that you will build a part of the semiconductor ecosystem capacity inside the United States. So it means that the geopolitical strategic dependence will of course go down. Yeah? 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, yeah? That art is mastered over the last 10, 20 years by the TSMCs and the Samsungs of this world, and also Intel. This is why you see the invitation almost.

Is that you will build a part of the semiconductor ecosystem capacity in inside the United States. So it means that the dependence the geopolitical strategic dependents, but of course go down yeah.

So that's why to do it I think the risk is that.

Both in the U S and in Europe for that matter.

<unk> experience and the knowledge that semiconductor makers have.

In bringing very advanced semiconductor manufacturing onto onto own soil.

He is highly complex, it's an art, yeah and that art has mastered over the last 10 20 years by the Tsmc's and assumptions of this world and also Intel but this is why you see the invitation.

Well you know it.

And if it's an invitation where the big carats here, which is called subsidy and investment support of governments, who bring dose those those companies with that particular competence yeah within their borders and this is exactly what's happening. This is why we had the Arizona fab opening of TSMC ultimately too fast 40 billion.

Pieter Wennink: Well, you know, it's an invitation with a big carrot, yeah? Which is called subsidy and investment support, yeah, of governments to bring those companies with that particular competence, yeah, within their borders. This is exactly what's happening. This is, you know, why we had the Arizona fab opening of TSMC. You know, ultimately 2 fabs, $40 billion of investments. But that's Taiwanese knowledge and, you 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, it also means that talent is a massive risk. You need to get the talent to actually do that. You cannot just, you know, draw everybody from Taiwan or from Korea to do that.

Of investments, but it's that's Taiwanese knowledge and know.

Now bringing that into your country.

And then then ramping this up in a way that you haven't been doing for the last 20 years and it also means that talent is a massive risk they need to get the talent that you can do that you cannot just.

Draw everybody from Taiwan or from Korea to integrate your talent pool, and that's a big challenge here.

Think that is.

That is a generic risk not only to the U S chipset, but also through the European chipset.

<unk>.

And that risk is also the single biggest opportunity because if you're able to do it and if you are able to build an ecosystem around that if you're able to make that the knowledge and the expertise in that ecosystem. If you were able to really create at on soil again in Europe , and the United States I think it's a major boost to your <unk>.

Roger Dassen: 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. It's the biggest risk. Are you able to attract that talent? But also, by far the biggest opportunity. It's not just about, you know, creating capacity, it's creating that knowledge infrastructure that will help you know, through the next and next-

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 you know through the through the next day the ecosystem. That's what that's the secret word you know you need to build those ecosystems because.

Pieter Wennink: The ecosystem.

Roger Dassen: Yeah.

Pieter Wennink: That's what it is. That's the secret word. You know, you need to build those ecosystems, 'cause if you look at where the biggest centers are of chip manufacturing, it's in Taiwan, around Hsinchu and Tainan. 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, yeah?

If you look at where the biggest centers are of chip manufacturing is in Taiwan around Hsinchu and Tainan and it's only does factories. It's it's the suppliers. It's the universities the knowledge institution their customers. It's that it's the part is the technology partners at the peers here and that's all there this ecosystem.

Roger Dassen: Mm-hmm.

Pieter Wennink: That's all there. That's the ecosystem, yeah? You see, if you find the same in Seoul and in Hwaseong, yeah? We 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 it's not just the money, throw the money at it, find a deserted air force base, you know, and just build a factory. No, you have to build an ecosystem, yeah?

If you find the same in Seoul and in Washington.

If you find the same in Silicon valley, but not manufacturing, but the rest is there you know.

You have to design companies. There. This is where it's not just the money throwing money at it find a deserted airplanes.

Force base and just build a buildup villa affected now you have to build an ecosystem.

Okay.

And we have time for one last question I have one online that's anyone's here up for it nope and we go to Switzerland noise here has tried to house again.

Monique Mols: Okay. We have time for one last question. I have one online, but if anyone's here up for it? Nope. We go to Switzerland. Neue Zürcher Zeitung. Again, it's not a financial question.

It's not a financial.

And it again [laughter] alright, I tried how.

Roger Dassen: The C word in it again.

Monique Mols: 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?

How did the U S restrictions on the involvement of U S persons and the Chinese semiconductor industry effect Asml's daily business if at all.

Currently not no because I mean, we have quite a significant workforce in China, which as you know.

Pieter Wennink: Currently not.

Monique Mols: No.

Pieter Wennink: Because, I mean, we have quite a significant workforce in China, which is, you know, non-US.

Non U S.

Both Chinese nationals and people from outside the U S. So that's not that's not the case now where we're a European company.

Monique Mols: Mm-hmm.

Pieter Wennink: That's both Chinese nationals and people from outside the US. That's not the case. Now, we're a European company, yeah?

So I mean, so we have European.

Monique Mols: Mm-hmm.

Pieter Wennink: I mean, we have European know-how in with people with European or non-US nationalities. That's less of an issue for us.

Knowhow in with people with European or with non U S. Nationality, so that it's less of an issue for us.

Yep.

One minute.

Monique Mols: Yeah. One minute. Last call. Yeah.

Cool Yeah of course.

Okay, Yeah, I follow up on that are you still able to.

Pieter Wennink: One question.

Monique Mols: Wouter.

[Analyst]: 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... I remember that-

Supplier Chinese customers with bars that are <unk>.

American made than European maybe because that's Uh huh.

Yeah.

Well.

That's not always possible so that would have an effect on the on the opera on the Operability of the installed of installed base, but again, where we're largely.

Pieter Wennink: Yeah.

[Analyst]: Well, it's

Pieter Wennink: That's not always possible, so that would have an effect on the operability of the installed base. Again, we're largely, you know, predominantly a European company with European technology. The parts are predominantly European. Here and there, yes, there are issues, yeah, that we need to deal with, you know, which actually means that some of the tools will then stop working. Yeah, but it's minimal right now. Yeah, that would be the consequence.

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 you, which actually means that some of the tools will then stop working.

It's minimal right now, but then that would be the consequence.

Okay, well, thank everyone for being here and I'd like to conclude this call. Thank you everyone online for for being with US and hopefully we'll see you next year. Thank.

[Analyst]: Thanks.

Monique Mols: 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. Thank you very much for your time.

Pieter Wennink: Thank you.

Roger Dassen: Thank you.

Pieter Wennink: Thank you very much for your time.

[music].

Two years of Covid. So it's nice to have a few journalists that we've known for so long here in the room. There are also people watching and following this past conference online. They are also allowed to ask questions. There is a form on the website just fill that out state. Your name annual publication name and then send it in and we are we hope to get an opportunity.

You got to come to your question.

My name is when he calls I always forget to introduce myself. My name is when he malls I am responsible for media relations at ASML and.

Monique Mols: I always forget to introduce myself. My name is Monique Mols. I am responsible for media relations at ASML. With me I have Pieter 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 has your interest. Let me invite Pieter Wennink to the floor, and we'll kick this off.

With me I have Peter winning CEO of Ace now and let's say he doesn't see F. O S. MAU and Dave will talk you through our financial results, but also developments around our industry that I'm. Sure also has your interest so let me invite Peter lending to the floor and we'll kick this off.

Thank you Dominic.

Welcome everybody and yes, you are right I mean, it's good to have people life here I would also people on the webcast.

Pieter Wennink: Thank you, Monique. Welcome everybody. Yes, you're right. I mean, it's good to have people live here, but also people on the webcast. I wanna 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. 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, you know, questions on are we 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.

I want to just talk about a few things key messages I think Monty industry. This state of the industry right now.

And then Rajiv will talk about the financials and the outlook and then we'll take the Q&A.

So our key messages.

Well in.

In fact, that's what we said we told you.

At the capital markets day, I think despite the fact that.

We're currently seeing is of course, a lot of turbulence.

Questions on the are we going to get a recession and if so how deep will it be and how long will it be.

The issue is on the geopolitical developments and export controls, there's a lot of uncertainties right now but.

Pieter Wennink: 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 2 years. We look 5 to 10 years ahead. Why is that? Because we're convinced that semiconductors are currently playing a critical role in economy and in day-to-day life. It will only increase. It will only need more semiconductor compute and storage power going forward. 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 fab, it will take 3 years. Then if you start...

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 10 years ahead.

And why is that because we are convinced that semiconductors are currently playing a critical role in the economy and indeed, they live it will only increase it will only only only need more semiconductor compute and storage power going going forward and as and this is why we strongly believe that we are.

Need to invest.

And our customers feel the same way they need to invest for the longer term and you have to remind you that we have to remind you that building a semiconductor fab or a factory fab.

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

Pieter Wennink: Have to start planning it from day one, probably five, yeah? This is all about the longer term. When we look forward and look at the growth rates of you know, semiconductor sales, you'll see it later, I'll talk about it later, that we see a very significant upside for our customers and also for ASML. This is why we need to invest. 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 EUR 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 EUR 44 and 60 billion, between 56% and 60% gross margin.

So it is all about the longer term and when we look forward and you look at the growth rates.

Of <unk>.

Semiconductor sales.

You'll see it later I'll talk about later that we see a very significant upside for our customers and also for SME. This is why we need to invest.

And that's also why we believe there is an opportunity depending on different market scenarios are higher or lower market scenario that by 2025.

It will be anywhere between 30, and 40 billion in sales and we have between 54% to 56% gross margin, which will grow too.

70, 30, depending on the scenario between $44 60 billion between a 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 all profitable very profitable but of course, because we will grow that profitability will grow and I was also for our shareholders, there's going to be a significant return.

Pieter Wennink: 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're very profitable. 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, it's 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.

Now.

When we look at the industry.

Three major drivers I think it's still we all notice is connectivity.

It's got activity, where it's a cloud or the edge computing. It's all connected these things are not separate there is not.

There's not there's no centralized computing in the cloud without the decentralized computing at the edge, it's all connected and that's needed for to drive artificial intelligence and Hyperconnectivity now being supported by five G. But by the end of the decade, Google <unk>, So I'm going to be faster lower lower latency more bandwidth.

Pieter Wennink: It's all connected, and that's needed to drive artificial intelligence and the hyperconnectivity now being supported by 5G, but by the end of the decade, it will be 6G. Going to be faster, lower latency, more bandwidth. 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? Our last big driver is the social and the socioeconomic shifts.

And then there's other driver is called the climate change and the resource scarcity, I mean semiconductors will and won't going to show you. A couple of 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.

Asian.

And of course, how are we going to use our resources smarter.

And then the last big drivers of social and the social economic shifts I mean, yes with the pandemic.

Pieter Wennink: I mean, yes, with the pandemic has actually taught us to, you know, use different ways of working from home, but also, that this remote connectivity is extremely important also in areas of medical technology, for instance. Then we'll talk about it later. Technological sovereignty is a big driver for this socioeconomic shift. Okay, now just a couple of examples, just the energy transition. We believe it will be one of the main drivers the coming decades. It's about energy generation, it's about storage, about distribution, and it's about consumption of this electrical energy. Give you an example, if you want 1 MW of wind power, it needs about EUR 3,000 of semiconductors. And one megawatt of solar power want EUR 4,000.

That's it for us too.

Taught us to use different ways of working working from home.

But also.

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 social economic shift.

Okay.

All are examples because the energy transition we believe it will be one of the main drivers the coming decades.

It's it's about energy generation, it's about storage about distribution, it's about consumption of this electrical energy.

And.

Maybe give an example, if you want one megawatt of of a wind power it needs about 3000 euros of semiconductors.

And while megawatt of solar power 4000 euros, but if you think about that.

Pieter Wennink: 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. Then don't talk about the grid, about the smart grid that needs a lot of sensors and actuators and compute power. Yeah. And how do we use it? I mean, it's used in the electrification of our mobility. You know, the electric vehicle will at least use twice the number of semiconductors as compared to a combustion engine, yeah? I think the electric vehicles is not our numbers.

Gigantic increase in demand for electricity and the renewable energy coming from winter from so it just went in sort of general generation you can think about the enormous impact. This will have on semiconductor consumption and then I don't talk about the grid about the smart grid that needs.

Lot of sensors, and actuators and and compute power.

No.

And how do we use it I mean, it's it's using Indiana in the electrification of our mobility.

The electric.

We will at least at least use twice the number of semiconductors as compare to a combustion engine.

And I think the electric vehicles is not ours nobody does just that.

Estimate of one of our customers who was very very clearly involved in the electrification of the automotive industry is that at least it's over $500 per <unk>.

Pieter Wennink: It's just an, you know, estimate of one of our customers who is very clearly involved in the electrification of the automotive industries. At least it's over $1,500 per vehicle, and some even say over $2,000. 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 Lars Reger, he's the CTO of NXP Semiconductors. He actually showed this slide, and it shows that if you take a car, it consists of mature semiconductors. Here starts on left-hand side with 40nm. It's just the actuators. Picking up the sensor data.

And so I'm, even say over 2000.

So.

That's just one example, but it's also people.

We'll 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 from NXP is Las Vegas, the CTO of NXP. Similarly, actually showed this slide and it shows that if.

If you look if you take a car it consists of.

Mature semiconductors and his thoughts on the left side with 14 nanometers is just the accurate is picking up the sensor data, we're actually picking up the sensor data a semiconductor technology that is even older than 40 nanometer a lot all of them and then it needs to actually go through the central core of the car where it needs to be processed.

Pieter Wennink: Actually picking up the sensor data is semiconductor technology that is even older than 40nm, a lot older. Yeah? Then it needs to actually go to the central core of the car, where it needs to be processed very fast, yeah, high processing capacity, because the input of that first analog and then digital data into the car is massive. The 5nm chip doesn't work without the input. If the input cannot find a placeholder thing in the central computing engine, it doesn't work either. It's all connected. Mature and advanced semiconductors are part of a systemic approach, yeah, to a problem, which you will see with more increase in complexity, that the approaches will be more systemic. It means we don't only need advanced semiconductors, but very much we also need more and more mature semiconductors.

Three fast yeah, hi, pulsing high processing capacity, because the input of that first analog and digital data into the car is massive.

The five nanometer chip doesn't work without the input.

And if the input cannot find a placeholder.

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.

Two a problem, which you will see with more increase in complexity that the approaches will be more systemic.

We own don't only need advanced similar but very much we also need more and more mature semiconductors.

Now customers realize this Joe.

Let's take an example, our three major customers Intel.

Intel TSMC and assumptions they have announced fab.

Fab projects investment projects, well I do the math for you.

$326 billion announced $326 billion announced in new fab expansions and is not only leading edge is also mature.

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

Now if we then look at the total semiconductor market.

Pieter Wennink: 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, then and we look at the growth rates that we're currently seeing and the new areas of growth in connectivity, in the energy transition, let's say, as a result of the socioeconomic shifts, it's not a surprise that when you do the math, it's not only us, but different sources come to a semiconductor industry, the business of our customers, there will be anywhere between $1 trillion and $1.3 trillion, 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. Yeah?

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

In our day to day life.

Then we look at the growth rates that we're currently seeing in the new areas of growth and productivity in the energy transition.

Indeed, as I say as a result of the social economic shifts.

It's not a surprise that when you do the math, so I'm only us, but a different sources come to a semiconductor industry is in the business of our customers that will be anywhere between one and one three trillion, which is a doubling of where we are today.

Now the semiconductor industry. It took 40 years close to 50 years to grow to 600 billion dollar sales.

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

And as the Chairman said we have.

Pieter Wennink: This is the challenge that we have. What do we need to do? We need to build capacity because we need to scale. Yeah, we need to find talent around the world. We're investing in our production capacity and in our EUV factory here, our TWINSCAN 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. Yeah, our current build capacity, 375 deep UV systems. Well, we want to have 600 by 2025, 2026. We had last year a build capacity of around 50 units. This year, 60 units for EUV. We want to get to 90.

So what do we need to do.

We need to build capacity because.

Because we need to scale.

We need to find talent around the world.

And we are investing in our production capacity and in our EV factory here, our Princeton factory here.

Our our deep.

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.

And capacity needs.

Our current build capacity of 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 EV.

When I go to 90.

That's all needed to drive the growth of this industry and it also means we need to hire people.

Pieter Wennink: That's all needed to drive the growth of this industry and also means we need to hire people. Now we just this morning, I told there's a news agency that over the last 12 months, we received about 300,000 applications for a job at ASML. You hired close to 10,000 people, so we still have a choice. We now employ close to 40,000 people worldwide, of which 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 I need to onboard to make them effective. Big management challenge. Now, what do we do then on ESG? It's very important. We launched our ESG strategy last year. What do we do this year?

And are we.

Just this morning, I told there's a news agency that.

Over the last 12 months, we received about 300000 applications for a job at ASML.

What's your Hyatt close to 10000 people so.

So we still have a choice and.

And we now employ close to 40000 people worldwide.

Half here in the Netherlands.

That is going to be a constant challenge for us because we need to grow with the hydro people, that's warm, but I need to onboard and make them effective big management challenge.

Now so what do we do it on.

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 felt however, they want to go a one energy grid, which basically means we use concert we find places where we can transfer a waste heat, which you shouldn't.

Pieter Wennink: For instance, we have a good example. We connected all the buildings here in Veldhoven in what we call 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. Ultimately, we will save 70% gas in this site, which by the way, you've seen is a big site. 70% gas reduction. 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.

One of the buildings you could imagine this is waste heat in the factories and we used it to heat the buildings with ultimately we will save 70% gas.

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

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

In the infrastructure.

To basically make sure that all people in the community that we're working at as much as possible access to personal growth and can also benefit from the value that's being created.

I think also from a governance point of view, we're one of the founding members of this.

Semiconductor climates cold source, you, which was actually launched.

Couple of months ago, when it was opened by Al Gore.

We take our responsibility also as an industry.

Now geopolitics.

I'm really not going to get any questions on this so that's why.

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.

So that means everybody is now rethinking that he says what do we need to do we need to stay relevant we don't need to do everything ourselves, but we need to stay relevant so we need to push.

Pieter Wennink: 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. 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, you know, customers could talk with us and throughout the ecosystem very clearly about the roadmaps, about what needed to be done to drive innovation together.

The development of semiconductor manufacturing in our region rather the region is.

India, or the United States or Europe or Japan.

All governments are rethinking their semiconductor strategy.

And.

Wanted to go what are the consequences well.

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

Consolidated itself into a global collaboration networking ecosystem without borders without boundaries, which is.

Great advantages because now customers good 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.

Pieter Wennink: We have worked together with peers with peers to just make sure that we created processes that customers could use and actually created a semiconductor industry that innovated faster with very and almost 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, the bifurcation of the world into new socioeconomic 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.

With with best to just make sure that we created processes of customers could use and actually created a semiconductor industry that's innovated faster.

And almost unlimited.

Coordination with our academic partners and of course with suppliers in an open structure and open collaboration model to drive innovation.

That will be created.

And also by sharing risks and rewards now because of the you could say the bifurcation of the world.

Into new social economic blocks.

We had a significant impact.

That has on the way to 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.

At 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.

Pieter Wennink: 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. What does that mean if that happens? Well, you see that the chip availability could be reduced 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. Yeah. 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 know? 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.

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

Well you know she's here that the chip availability could be reduced.

Supply chain might get disrupted because in all 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 border lists ecosystem yeah.

Pieter Wennink: This borderless ecosystem now is a danger of creating hurdles. It will also have impact on the supply chain that 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. It also means that we will have a less efficient infrastructure. Costs will very likely go up. 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 into different socio-economic blocs, each with their own economic and political interest. That's where we are today, and happy to take some questions later on.

Now is a danger of creating hurdles.

It will also have.

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

Yeah.

Now it also means that.

Countries, we'll double down on investing in their own industry.

But 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 were facing but that's the result of let's say the realization that this ecosystem that we have built was almost seamless.

It's now indeed bifurcated in different social economic blocks each with their own.

Economic and political interest.

That's where we are today and happy to take some questions later on but Rajiv why don't you do the following and talk about something boring like financials. Thank you.

Pieter Wennink: Roger, why don't you do the following and talk about something boring like financials? Thank you.

How long.

This was a former CFO talking how about that.

Roger Dassen: I have one. This was a former CFO talking. How about that? It's a small step from US politics to U.S. GAAP, as I said yesterday. That's definitely here. Small step for a man, a giant leap for mankind. Here we are, financials. Q4 results of 2022, strong quarter all in all, if you look at the numbers. The net sales came in, you know, at the midpoint approximately of our guidance at EUR 6.4 billion, as you see here. You know, based on EUR 4.7 billion of system sales and EUR 1.7 billion of installed 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.

It's a small step from U S politics to U S. GAAP as I said it yesterday. So that's definitely here small step for man giant leap from Mannkind 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.

At the midpoint approximately a third of our guidance at 641 billion as you see here.

And based on $4 7 billion of system sales and $1 7 billion of installed base management sales that was pretty strong. We saw that there were quite some of the customers that actually do want upgrades to their to their system in Q4 actually a number of upgrades that were planned for Q1 of <unk>.

Roger Dassen: Actually, a number of upgrades that were planned for Q1 have actually been pulled into Q4, and that really beefed up the installed 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 installed 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 installed base management go up the way it went in this quarter, that also beefs up the gross margin. So that's what you see there.

<unk> been pulled into into Q4 and that really beefed up the installed base number for <unk> for Q4 gross margin are pretty strong at at 51.5%. We guide at 49% there wasn't one of them there, but again a major driver here is that same installed 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 installed base management to go up the way. It is the way. It went in this quarter that also beef up the gross margin. So that's what you. If that's what you see theyre operating margin of 33%.

Roger Dassen: Operating margin 33%, and then it goes all the way down to the numbers that you see here as net income, earnings, et cetera. Important to note, the net bookings, you know, 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 EUR 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 EUR 4.7 billion, that tells you that we're still adding to the order book.

And it goes all the way down to numbers that you see here as net income and earnings etc.

Important to note that bookings.

In spite of a inspite of.

Part 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 and because if you look at the $6 3 billion in net bookings number that you have here and you compare that to the first bullet well, we talk about net system sales of $4 seven.

That tells you that we're still adding to the to the order book and if we look at the order book today at over 40 billion. You are in fact looking at more than twice the expected system sales for this year and the order book, which is very very strong I would say included in the $6 three as we have it here three 4 billion for.

Roger Dassen: You know, if we look at the order book today at over EUR 40 billion, you're in fact looking at, you know, more than twice the expected system sales for this year in the order book, which is very strong, I would say. Included in the EUR 6.3 billion as we have it here, EUR 3.4 billion for EUV. If we look at the full year, a number of highlights that we would like to emphasize and share with you. Of course, first off, the sales growth. Sales growth of 14%, you know, for over 2021. Strong, you know, really strong demand, reflecting strong demand in all of our products. To EUR 21.2 billion, at 50.5% gross margin.

EV.

If we look at the full year, a number of highlights that we would like to emphasize that share with you of course first off the sales growth sales growth of 14, 14%.

For over 2021 strong.

Really strong demand, reflecting strong demand in all of our products.

To $21 2 billion at a 55% of gross our gross margin pretty strong net income of $5 6 billion and an EPS of 14 over 14 euros.

Roger Dassen: Pretty strong net income of EUR 5.6 billion at an EPS of 14, over EUR 14. Lithography, very strong once again, grew 12%, EUR 7 billion. Important to recognize what we have here. We recognized revenue for 40 tools, for 40 EUV tools. We actually shipped 54 tools. You know, 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 you know, some of the supply chain limitations that we had, we had to optimize the way we ship tools to our customers. That meant that, you know, 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.

Lithography very strong once again grew 12% a 7 billion, but important to recognize what we have here. We recognize revenue for 40 tools for 40 E V tools, we actually shipped 54 tools and I won't bother you with a with accounting rules all that all that much but the essence is because of the high demand for EV tools that we had.

In 2022, and you know 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 it didn't happen as a result of that we could only recognize revenue for 42 has been in essence, we shipped 54 tools that delta of 14 tools.

Roger Dassen: That delta of 14 tools is therefore not recognized in the growth number of 14% that you see for the full year. That will come in the course of this year. Important to note is that all 5 EUV customers actually have now placed High-NA orders. I think that really you know emphasizes the confidence that our customers have in the High-NA technology that really is going to get us you know into the second half of this decade. There you will see that High-NA will play a pivotal role both in high-end logic and also in the memory business. The DUV business continues to be very, very strong.

Is therefore not recognized in the growth number of 14% that you see for the full year, but that will come in in the course of this year of this year.

Into the second half of this of this decade and there you will see the tiny will play a pivotal role both in our in high end logic and also in the in the memory business.

Also the deep UV business continues to be very very strong in the back of some of the comments that Peter made in the mature business, but also India and the advanced their business grew 13% to $7 7 billion as he says he see here and this really reflects the continued capacity growth that Peter also showed you in the in the earlier slides.

Two new two new models for being introduced the <unk> the <unk> the new era of immersion system. The NXT 2100, and the the advanced dry system. The NXT eight to 870 also any application business strong growth, 28% to 660 million, so really firing on all cylinders there.

And there you see that we had quite a few new products that we were able to launch it.

Installed base business, we talked about that as a major driver for the growth and in Q4 very strong iron ore at $5 7 billion you know both based on service, but also on the on the demand from the from customers on upgrades to increase the productivity of the installed base that they already have.

Roger Dassen: Installed base business, we talked about that as a major driver for the growth in Q4. Very strong all in all at EUR 5.7 billion. You know, both based on service but also on the demand from customers on upgrades to increase the productivity of the installed base that they already have. Finally, in terms of capital return, you know, 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 dividend and share buybacks, we were able to return to shareholders an amount of EUR 7.2 billion. Very quickly, in terms of the sales breakdown, you see technology-wise, not a real big difference.

Yeah.

Very quickly in terms of the sales breakdown you see technology wise not a real big difference you see that you know that our debt to EV.

Roger Dassen: You see that, you know, that the EUV, the wet business, ArFi, et cetera, 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%, which might be a surprise to some because you know, some of our customers are, you know, clearly indicating the memory market in 2022 was down, also prices were down. This really tells you that, you know, the investments that our customers make in the memory business are strategic. They're really looking, you know, not at the demand in Q4 of 2022 or even the demand in Q1 of 2023.

What was down also prices were down, but it's really tells you that the.

The investments that our customers make in the memory business, our strategic so they're really looking not at the demand in Q4 of 'twenty, two or even the demand in Q1 of 'twenty three they really look at potential pick up in the second half of this of this of this year and they want to continue to make the investments. So we really see lithography investments as critical.

Roger Dassen: They really look at potential pickup in the H2 of this year, and they wanna continue to make the investments. They really see lithography investment as critical on their strategic roadmap, and that is reflected in the, you know, 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 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 we see here, memory strong growth. Logic continued strong growth.

On the strategic roadmap and that is reflected in the pickup of the of the memory business. There was a regional breakdown, it's it's more or less in line again with our with last year and in terms of the unit numbers you see a pick up from the 309 units in total in 2021 to 345 and this year.

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

Again, as we see here at memory strong growth logic continue to continued strong growth and then youll see this pickup of the installed base business that we already have talked about and it's interesting to see the the five years, our particularly the logic market has really really picked up on the on the on the back of the end use developments that Peter has been talking.

About.

If we then look at the boring numbers here.

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 is there has been hitting us in 2022 as it has been hitting everyone.

Not all of the inflation burden could be it could be passed on within the year within the ecosystem. So that's one driver, but secondly, and very importantly, we are investing in growth.

That said that that creates a bit of a burden on the on the gross margin. Nonetheless, if you take the longer term perspective, very healthy development on that 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 at the capital markets day.

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

The rest is just the translation of that into and through 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 and in in 'twenty, one and as I mentioned that led to an order book of over 40 billion.

Roger Dassen: The last one, just to emphasize, is the very, very strong net bookings for the year at over EUR 30 billion, already on the back of very, very strong order intake in twenty-one. As I mentioned, that led to an order book of over EUR 40 billion. I mentioned the return to the shareholders. 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 dividend, an increase of 5.5% towards EUR 5.80 per ordinary share dividend over 2022. That is the proposal.

I mentioned, the the return to the to the shareholders. So.

You know we had very strong share buybacks, Alaska last year also in terms of dividends. Once again, we are we are we present to the to the AGM and increase in the <unk> in dividends an increase of five 5% towards five point 80 euros per ordinary share dividend over 2022 and that is the that.

As the proposal.

And for the year in terms of share buyback. We in November introduced our new plan for $12 billion of share buybacks over a three year period.

Roger Dassen: For the you know, in terms of share buyback, we in November introduced our new plan for EUR 12 billion of share buybacks over a three-year period. In terms of outlook for the quarter, EUR 6.1 to 6.5 billion in terms of net sales, which is more or less in line with what we had in Q4. Installed base a little bit lower because as I mentioned to you, there was quite some pull-in with from customers into Q4, so that has a slightly negative effect on the installed base sales that we expect for Q1. That also has a slightly negative impact on the gross margin.

From customers into Q4, so that has a.

A slightly negative effect on the installed base that we installed base sales that we expect for for Q1 that also has a slightly negative impact on the on the gross margin although for the full year, we expect gross margin to be slightly up in comparison to the gross margin that we had for the full year 2022, R&D once again to step up to <unk>.

Roger Dassen: 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 EUR 965 million and SG&A commensurate with the growth of the company to EUR 285 million. Those are the key parameters for Q1. If we look at the full year, you know, we are looking for 2023 at an over 25% increase in terms of sales. That really tells you that, you know, in spite of some of the signs that you get, it is very clear that our customers are really looking at investments into their lithography as strategic investments. While it's clearly...

$965 million in SG&A commensurate with the growth of the company to 285. So those are the key parameters for Q1, 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 you know in spite of some of the someone's a science that you get and it's very clear that our customers are really looking at the investments into LER lithography as strategic investments and while its clearly you can clearly recognize that.

There are some end markets that are under pressure big end markets like like PC smartphones et cetera, you see that growth continues in other markets like in the auto market and I think the example that peer just gave you gave you both on electrification, but also a D. A S systems I think is a good example, there.

Roger Dassen: You can clearly recognize that there are some end markets that are under pressure, big end markets like PCs, smartphones, et cetera. 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. Clearly there is some, you know, some pressure, I would say, on some of our customers and some of the growth of our customers, particularly in the H1. Most of our customers, if you listen to their commentary, they expect the market to regain strength in the H2. Then the logic of our customers is pretty clear.

And then the logic of our customers, it's pretty clear they say, okay. So if the.

Roger Dassen: They say, Okay, so if the market, you know, 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. 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 ASML.

But 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 know 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 with any within one year, we will be too late to cater to the pick up 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 Ace now I mentioned the over $40 billion in terms of backlog a 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 at plants to ship 60, UV tools. This year and 375 of deep UV tools. So that gets you significantly north of the 300.

Roger Dassen: I mentioned the over EUR 40 billion in terms of backlog, very, very strong, a record number, there. 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 and 375 DUV tools. That gets you significantly north of the 345 lithography tools in total EUV and DUV combined that we had for 2022. EUV business year-on-year growth 40% is expected, 30% for the non-EUV business. The installed base 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.

Forty-five lithography tools in total UV Mdpv combined that we had for 2022.

With that Dear friends have come to the end of my presentation, and I hope Peter and when he can join us for Q&A, great timing of O'shea.

Roger Dassen: 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.

Monique Mols: Yeah. 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. I'm hoping to fix it as soon as we can. If you're-

I see we have some issues with our website. So the connectivity is not a good I think this is related to the general I T disturbances that are going on worldwide.

Hoping to get an update my ear, but let's just start here, hoping to fix it as soon as we can so if yours are important semiconductor.

Pieter Wennink: It shows how important semiconductors are. We all rely on it every day.

Yeah.

Every day, we don't blame it on the semiconductor.

Monique Mols: Yeah. Don't blame it on the semiconductors. We have a microphone here in the room. Kelsey Zegers will come to you if you indicated you have a question. Sander, my colleague, Sander Hoffman, is checking the website to see if there's any questions coming in through the website. Let's start off with the first one. State your name and your publication number, and then we'd be happy to answer your question so people can hear it.

So I'm, we have a microphone here in the room count TSA costs that will come to you. If you indicated you have a question.

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

Thank you very much at the CROSSMARK smolka of Oncotype the minor title.

Klaus-Max Smolka: Thank you very much. It's Klaus-Max Smolka of Frankfurter Allgemeine Zeitung in Germany.

Germany.

Could you elaborate a little on the communication between ASML and politics are wandered in political talks in what way is M. S. ASML getting involved specifically when the Dutch Prime Minister has talks in the U S. For example.

Monique Mols: Mm-hmm.

What's humming.

How many a ASML representatives will be part of the delegation and walked away when they communicate with politicians.

It can be very short on the on the content of the delegation I mean this is geopolitical is not geo business. So I think as there are no delegation members of ASML there because it's political.

Pieter Wennink: Well, it can be very short on the content of the delegation. I mean, this is geopolitical. It's not geobusiness. I think there are no delegation members of ASML there because it's political. Again, you know, 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." He wouldn't have no clue, 'cause 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's always been there.

And.

Can you know, 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 says tell me how the semiconductor industry works it wouldn't I have no clue.

Cause semiconductors, we're always there is like 97, three revisit that oil was always there and then it wasn't and then it became a strategic commodity fast forward 'twenty 'twenty. One semiconductor has always been there nobody needs to worry until they weren't.

Pieter Wennink: Nobody needed to worry until they weren't. We figured out there was a worldwide dependence on only a few countries. This is. It's only very recent. 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? Yeah. How does it work? 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 scenarios? That's our role. Yeah.

Figured out it wasn't it was a worldwide dependence on only a few countries. It's only very reasons. So our role is education.

Basically providing information data how does this industry work how is this global ecosystem connected.

And where are the interfaces between those.

Thesis.

And how does it work so if you think about.

Hum.

Bifurcation, but also of the world and the world, creating different sets of chips acts and think about export controls than our role is really to provide information any insight into what it means what are the consequences of certain scenarios.

That's our goal.

Then ultimately.

And this whole concept of National security and economic interest is something that is of a higher political nature that of course.

Pieter Wennink: 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 among themselves, what they want to do. Yeah. That's them. That's not us. This is our role. In your question, we're not part of the delegation, but we're definitely part of the discussion. Yeah. Our role is to provide that information and that insight. Good question.

Governments, each with their own views and and desires they need to they need to discuss this amongst themselves what they want to do.

And that's debt that's not us.

So it is our role so in your question, we're not part of the delegation for.

But we're definitely part of the discussion.

Yeah and I.

Our role is to provide that information and it inside.

Good question. Okay. Thank you I'm, just getting an update that there is a desert quite an issue with our website, so and we won't be able to get the.

And then the questions here from people online sorry about that where we're available after the press conference. Today. If you have any questions. We want to reach out to US. Please do to any of my team members.

Next question here.

Yeah.

Peter Hack: Hi. It's Peter Hack from Politico. I also had a question on export controls. We've seen last week there were discussions between Rutte and Biden. 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 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.

Pieter Wennink: Yes, I think and that's a good comment. 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, you know, the United States. He referred to several countries with several companies in a complex supply chain, which, you know, we need to look at, and the consequences of doing anything could be quite significant. He actually mentioned that. It's sensitive. I don't remember he came out of it and said, Oh, yeah, no, 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. You're absolutely right. I mean, it's what I tried to say.

Which we need to look at at and and the consequences of doing anything could be quite significantly actually mentioned that so it's it's sensitive.

You can sell if it seamless and you put locks into the system they need to understand what's what the consequences will be because you know did you just ask the automotive.

Customers you know how do you think about the.

Chip shortage try to still order a car and you'll find out that you're waiting time has more than 12 months breakeven even longer I don't know for sure because of the of the chip shortage is all connected. So this is why these are decisions that can have far reaching consequences for the worldwide ecosystem and the capacity in that <unk>.

Our system and the flow of semiconductors in the ecosystem.

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

I think I think this is what the Prime Minister said I think.

Pieter Wennink: I think this is what the Prime Minister said, and I think he has a point.

He has a point.

Okay next question.

Monique Mols: Okay, next question. Guys, you have to do this also for the people online. If you know anyone who's watching, open your chat.

I should have to do this also for the people online.

So if you know anyone who's watching open your chat.

Hum.

You have dwelled on the many drawbacks of the geopolitical situation, but to what extent are you sympathizer understand.

The concerns that the Americans have about China getting more as a male machines.

Well I think that concern is already that the Saudi there as you know our extreme ultraviolet machines UV are.

Pieter Wennink: Well, I think that concern is already there. As you know, our extreme ultraviolet machines, EUV, are under export control. So that's a fact. Of course, listen to the arguments, and the arguments are there. You know, these chips will be then used into military applications. But 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, yeah? But the military applications use rugged, very mature semiconductors. Yeah. The semiconductors are sometimes 10, 15, 20 years old, yeah, which are widely available across the globe, also in China.

Our under export control, so that says that its effect now.

Being able to make advanced semiconductors.

But the military applications use rugged very mature semiconductors.

Semiconductors over a 10 15 20 years old.

Which are.

Widely available across the globe also in China.

So tough to fuel a a a significant amount of of chips into a military complex.

Pieter Wennink: To fuel a significant amount of chips into a military complex, yeah, a military machinery, you know. There's a significant amount of systems out there that are not advanced. They're mature. Yeah. It's already there. Now, having said that, of course, there is artificial intelligence, there's 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. It's also true for China. China is the biggest importer of chips on the planet. I mean, American chip companies, I don't know, it's public. They just look at their financial statements.

Motive.

Machinery, there's a significant amount of of systems out there that are.

Not advanced their mature.

Well known in China, They're made in Korea, and Taiwan in the United States and those chips.

Available for every <unk>.

End user end manufacturer on the planet Dubai.

It is also true for China, China buys as the biggest importer of chips on the planet.

And I mean.

American chip companies I don't know.

Public data just look at their financial statements just added five biggest.

Pieter Wennink: 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, yeah? Those chips, those advanced chips, they go into anything. Yeah. I don't know where, but they're being sold, so they probably end up somewhere. Yeah. I think this is the complexity, and this is also where the reference to the complexity was made. It's highly sensitive. Yeah. 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.

Chip manufacturers on the planet today in the United States that they sell 80 billion worth of chips.

China.

And just shows you how complex disease.

And so it's it's and those chips those advanced chips they go into anything.

I don't know, where but that means also that 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 situations and just say well that chip goes into a military application.

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 and through Whatsapp, but I saw someone wanting to ask a question there and kind of.

Can you can you give the microphone here. Thank you.

Monique Mols: Mike here.

If it was a possible Ben on the adjusted <unk> would be.

[Analyst]: Could you say what the influence of a possible ban on just the DUVs would be? If you not-

No that's it.

As to China, Yeah, I think that the fully depends on what the deal is.

Pieter Wennink: Oh, yeah. That's

[Analyst]: to sell DUVs to China.

Pieter Wennink: Yeah. I think that fully depends on what the deal is. You know? I think if they strike a deal, actually, we laid out in different scenarios what the potential consequences are. It's up to them to basically decide on the basis of that information. I cannot even give you that answer because I don't know what the outcome is. Yeah. That fully depends. Yeah. 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. Yeah. I'm not going to do that. Yeah. It's too sensitive.

If they strike a deal that we can actually we laid out on different scenarios of what the what the potential consequences. So it's up to them to the to basically decide on that basis over the information I cannot even give you that answer because you don't know what the outcome is.

That's really a defense and.

And and.

Okay.

I'm not even willing to speculate on this because this is so sensitive or I start speculating here.

I know, what's going to happen I would argue with you guys are going through right now so.

To do that.

It's too sensitive.

I just want to remind everyone that this annual report.

Monique Mols: I just wanna remind everyone that this is annual report, annual results. You are allowed to ask questions.

Don't yourself you you are allowed to ask questions.

Well I'll answer those.

Yeah.

Pieter Wennink: I will answer those questions. Yeah. You know, you're perfectly happy to ask anything.

Okay.

So absolutely clear about.

[Analyst]: Absolutely.

Pieter Wennink: You were so absolutely clear about what this is.

I can't imagine that the question is going to a different direct you I have one here that's sort of if it was a very brave guidance yeah Scott.

Monique Mols: Yeah.

Pieter Wennink: I can imagine that the question is going to a different direction.

Monique Mols: Yeah. I have one here through the web. Very brave.

Pieter Wennink: You can guide them, you know?

I would say from new Pentagon bravely broke through the barriers and she send us a message.

Monique Mols: Yeah, yeah.

[Analyst]: Yeah.

Monique Mols: Eva Schouten from NU.nl bravely broke through the barriers, and she sent us a message. She says, "Peter noted that too much export control will lead to fewer chips. Could you define too much? Where do you draw the line?

She says Peter noted that too much expert control will lead to fewer chips could you define too much.

Where do you draw the line that's exactly what I tried to say it depends on how how how deep those export controls I think export controls are legitimate.

Pieter Wennink: That's exactly what I tried to say. It depends on how deep those export controls. I think export controls are a legitimate instrument. I think that's clear. Yeah. It's how do you wanna use them.

Instrument I think that's clear yeah.

But it's how do you want to use them and if you overused them. It will have an effect on availability of mature chips, which are being used in military complex, but I used in a much larger way way way larger industrial complex, which is which is that.

Monique Mols: Mm-hmm.

Pieter Wennink: You know, 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, way larger industrial complex. Which is basically what we buy every day, you know, 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. You know? I think we also need to be careful.

Basically it was what we buy everyday from cars to washing machines to Pcs to smartphones to infrastructure.

Talking about the energy transition.

<unk> transitioned these massive amounts of semiconductor is massive.

So I think we also need to be careful that we don't have that debt instruments at a well meant yeah don't come to their own don't have a consequence that we all.

Monique Mols: Yeah.

Pieter Wennink: -that we don't-

Monique Mols: Yeah.

Pieter Wennink: That, you know, instruments that are well-meant, yeah, don't have a consequence that we all feel sorry about.

Sorry about that yeah.

So that's also the precision that.

Monique Mols: Yeah. That's also the precision that Mark referred to.

Marketing refreshment.

I saw Tony Yeah Tobey.

Pieter Wennink: Yeah.

Monique Mols: I saw Toby. Yeah.

Curling from Reuters not purely my question here, but.

Pieter Wennink: Toby.

Toby Sterling: Hi. Toby Sterling from Reuters. Not purely my question here, but it's financial, so there you go.

Its financials. So there you go.

Just I think the general ideas is a there is some skepticism about the weakness in the chip markets not having much of an effect on S. Now and I know you've explained a bit but maybe you could say.

Monique Mols: Yeah.

Toby Sterling: Just I think the general idea is there's some skepticism about you know the weakness in the chip markets not having much of an effect on ASML. I know you've explained it a bit.

Pieter Wennink: Yeah.

Toby Sterling: 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? Yeah. Could you break down your projections for DUV and EUV sales not by systems but by the number?

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 yet and could you break down your projections for D V and EV sales not by systems to buy it.

The number I think Rajiv and I think you've probably put it on the slides or we can refer to that for this year, but.

Pieter Wennink: Yeah, I think he probably put it on the slide, so we can refer to that for this year. You need to remember, we are not insulated from any macroeconomic events, and especially not when it's such a big inflation coming at us, and there's 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. You have to remember that we come out of a period like 2022, where we could hardly ship 55% of what our customers wanted.

You need to remember we are not.

Insulate it we're not from any.

Like 2022, where we could hardly hardly ship, 55% of our customers want it.

So and then 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.

Pieter Wennink: They want this because they know that these investments are long-term, so they want to have two years of lead time, and then they need to build factories, and it's gonna take time. They basically—we have this demand, which was significantly over our build capacity, which has come down. True. This is a reflection of what we see in the, in, you know, the market, but it's still quite a lot above our build capacity. That means our customers are actually saying, "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. Why would I cancel or push back those machines?

The base yet we have this debt this demand which was significantly over our build capacity, which has come down.

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

And that means our customers are actually saying well what I think the duration of this recession is significantly shorter than the lead time of your tools.

It also means that the recession will turn up into an upturn by that time I need your machines.

So why would I cancel a pushback those machines, if I do that I'm all about the duration is shorter than I think I'll be in the back of the line because these guys don't have enough capacity.

Pieter Wennink: 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.

This is and this is where we are.

Oh.

Toby Sterling: Yeah. Can I just ask you a follow-up? When somebody falls out of line, does it just simply go to the very next customer?

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.

Pieter Wennink: Absolutely. Because, you know, there is a shortage. If you said, "I don't need your machine," and your neighbor says, "Thank you, thank you, thank you very much," that's gone.

Nabors has thank you. Thank you. Thank you very much that's wrong, whereas the next stop so there'll be in terms of numbers for for F. R. E V. We're looking at 64 this year and 375 units for a for deep UV. Those those are the numbers.

Roger Dassen: Where's the next stop? Toby, in terms of numbers, for EUV, we're looking at 60 for this year and 375 units for DUV. Those are the numbers that we're envisaging for this year. What I think is important to note is that the capacity that we are building is not for the short term. We're not building that capacity for the short term. I mean, the capacity for the 90 EUV and the 600 DUV, and that's the capacity that we're driving towards, of course, we drive that for the medium and for the longer term. Any cyclicality that might be there and demand might be there. One thing is for sure, we will need that capacity.

That were 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 debt capacity for the short term I mean, the capacity for the 90, <unk> and the 600 deep UV and that's the capacity that we're driving towards of course, we drive that for their for the 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 need that capacity and maybe we don't need it and four for 2025, but we will need it and 26 are in China and on the customer capacity you are right I mean, we see a demand reduction.

Roger Dassen: Maybe we don't need it in full for 2025, but then we will need it in 2026 or in 2027.

Pieter Wennink: On the customer capacity, you are right. I mean, we see a demand reduction, again, above our build capacity. Yes, I think customers are reshuffling, retiming some of their capacity investment. Sure. Yeah. I mean, that's what they do. I mean, in the memory industry, some of our customers have actually said out there, "We're going to cut CapEx for this year." Yeah. And others have said, "No, 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. If for whatever reason, the duration of the recession will extend to years, of course, we will, you know, see the effects. Yeah. That's not what they currently think. At least that's our conclusion.

And all of US have 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 the if for whatever reason the duration of the recession will extend two years of course Rosemont, we will see the effects.

But it's not what they currently think at least that's our conclusion and discussing with 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, he said I'm, saying I can't multiply $3 75.

<unk> tons X had you mean deep UV versus EV.

Roger Dassen: You mean DUV versus EUV?

We said that said that EOG is going to grow a bit a bit harder and faster than their dividend in an easy business. So EV, we expect to be to grow by 40% in the non EV business by 30%. So that gives you. So the shift will be a little bit more towards E V, which makes sense you know its the most expensive and that's where the capacity a lot of the capacity expansion that I showed you.

Toby Sterling: Yeah.

Roger Dassen: Yeah. I mean, we said that EUV is gonna grow a bit harder, faster than the non-EUV business. EUV, we expect to grow by 40% and the non-EUV business by 30%.

Toby Sterling: Yeah.

Roger Dassen: That gives you.

Toby Sterling: Yeah.

Pieter Wennink: The shift will be.

Roger Dassen: Yeah.

Pieter Wennink: 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-driven fabs. Yeah.

The 326 billion is about EV.

UV driven fabs.

Thanks for that Tony.

Monique Mols: 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.

Pieter Wennink: Well, there are two sides to it. I think the positive side is it will create more capital efficiency.

Our capital inefficiency.

So our capital in the Fisherman's.

Monique Mols: Mm-hmm.

Pieter Wennink: A 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. Friction, the flip side of friction is cost.

Our capital allocation. So it's good for equipment makers that's good.

The bad thing is that if you. If you have this you have more luxor hurdles into the system you have more friction and friction flipped a frictionless cost.

So yes, you have a higher level of business.

Monique Mols: Mm-hmm.

It's it's it's not as efficient. So it's also 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.

That's you could say it's positive.

Monique Mols: Mm-hmm.

Pieter Wennink: That's it. On balance, you could say it's positive.

That's a bit selfish, yeah, I think so.

Monique Mols: Mm-hmm.

Pieter Wennink: It's a bit selfish.

Monique Mols: Yeah, I think so. Yeah. Hey, that was the question. Anyone here? Yeah, sure. Yeah.

But hey that asked the question anyone here.

Yeah.

Yes sure.

Yeah.

If nobody else has been no go ahead go ahead on.

Klaus-Max Smolka: If nobody else is, then.

Monique Mols: No, go ahead. Go ahead.

On the <unk>.

Klaus-Max Smolka: On the talks in the US, when do we expect a decision which would help you assess the commercial ramifications?

In the U S. When do you expect a decision.

Which would help U S.

Assess the commercial ramifications.

Yes, I think.

No I think that it's in the papers ended right about that.

Pieter Wennink: Yeah, I think it is. It's 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. The quicker you know where you are, the better it probably is. It's probably under high pressure. I mean, that's also what I read. We'll see, you know, and then. 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 significant amount of time. You don't talk days or weeks. I think you talk months. Yeah.

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.

You know where you are at or better it's probably years. So it's probably.

Under high pressure and I mean, that's also what I read so we'll see 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.

All of the details involved and working out the details will probably take significant amount of time. So you don't talk 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 other what are the ramifications of something like this.

Pieter Wennink: 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 always takes time, but I think we can safely say that the thing is under under time pressure.

Monique Mols: Mm-hmm.

Pieter Wennink: that will always take, you know, time. I think we can safely say that the thing is under time pressure. Yeah.

Yeah.

And maybe as an example, the October export controls.

Monique Mols: Mm-hmm. Now, maybe as an example, the October export controls, everyone in the industry is still trying to figure out what the details are and how to deal with that.

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 yes, that's absolutely true I think.

Pieter Wennink: Yeah. That's absolutely true. I think until the end of this month, there is a, let's say, you know, feedback opportunity from-

Till the end of I think they'll till end of this month there is a.

Let's say a.

Feedback opportunity from the industry and industry participants on on what actually means so I think the.

Monique Mols: Mm-hmm.

Pieter Wennink: The industry and industry participants on what it actually means. I think, you know, the final wording is still under, you know, review. It's how these things go. You know. To really say we fully understand all the ramifications, and we can translate that into business plans, I think it's going to take some time.

If the final wording is still under review and as these things go so to really say, we fully understand all the ramification of that you can translate that into business plans.

I think it's going to take some time.

Yeah.

Party in.

Anywhere in the world.

Pieter Wennink: Yeah.

You cannot be naive on this you know when when when semiconductors ourselves pivotal and vital to a responsible economy and a responsible society and you can get hold of the semiconductors, you Gotta do it yourself and that's clear.

Monique Mols: Anywhere in the world?

Pieter Wennink: 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.

So I think that this will happen.

Monique Mols: Mm-hmm.

Pieter Wennink: That's clear. Yeah. I think this will happen. That's one of the consequences of not having this global, fluid, seamless ecosystem. It's going to develop themselves. Having said that, 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. The machine itself is not that complex. Yeah? For lithography, we make a relatively simple process. We just blow light through a lens. Yeah? We do this in a very complex machine.

So one of the consequences of not having this global fluids seamless ecosystem.

Now on to develop themselves, but having said that.

And I cannot speak from for our peers in the semiconductor equipment industry, but.

For ASML.

But in general I think.

There are there's a lot of equipment in the industry that is focusing on a very complex process that that that is that is inside the machine that the machine itself.

It's 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.

Monique Mols: Mm-hmm.

Pieter Wennink: That's a bit different. This is why basically rebuilding a lithography industry, which as it concerns to ASML, consists of hundreds of suppliers-

Basically.

Rebuilding our lithography industry.

Which.

Monique Mols: Mm-hmm.

Pieter Wennink: That each of them are world-class in what they do. I just need to name TRUMPF, Zeiss, and VDL, and they're world-class in what they do. It's just three out of a couple of hundred. Yeah. Now you need to basically get. It's not patents, it's know-how, it's people, it's the brains.

Basically get and there's not patents know how it's people it's the brains.

You need to just take that.

Monique Mols: Mm-hmm.

Pieter Wennink: You need to just take that and then redo all of that, yeah, to come to the same conclusion. It took us 40 years.

And then.

Redo all of that too.

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 U S or in Korea or in retrofit for that matter. All laws of physics are all those are all the same but the accumulated knowhow with hundreds of companies, where we as a system architect as a system integrator bring it altogether.

Monique Mols: Mm.

That's a bit of a challenge so I think yes of course, the efforts will be there.

That's going to be massive challenge going forward, because it's not about ASML, it's about the ecosystem.

Monique Mols: Mm-hmm.

Pieter Wennink: It's going to be a massive challenge going forward, because it's not about ASML, it's about the ecosystem.

The best Defense line that we have there obviously is to keep on innovating right I think that's critical.

Roger Dassen: I believe the best defense line that we have there obviously is to keep on innovating, right?

Sometimes you get the question ill with a market share that you have a you know why don't you lay back and be a little slow.

Monique Mols: Yeah.

Roger Dassen: I think that's critical as well.

Monique Mols: Run faster. Yeah.

Roger Dassen: 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 slow? Well, we're not.

And 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 has the best potential defense into anyone trying to again get on par with our technology.

Pieter Wennink: Yeah.

Roger Dassen: As you could see, we're investing very, very significantly.

Pieter Wennink: Good point.

Roger Dassen: on our R&D roadmap. We truly believe that pushing down the accelerator there is the best potential defense against anyone, you know, trying to get on par with our technology.

There's going to be challenging.

Monique Mols: Yeah.

Pieter Wennink: Yeah.

Monique Mols: You know, it's good to be challenged sometimes, huh?

That's absolutely true and I had a discussion with the foundries TSMC on what do you do when you have to think about competition coming from different areas as well as a one solution you're just going to have to go faster.

So this is also why.

Roger Dassen: That's it.

Pieter Wennink: That's it. This is also why, you know, you will see that we will invest. To your point, it's not only in capacity, which will of course have a temporary-

You will you will see that and we will invest we appoint theres not only in capacity, which will of course have a temporary.

Effect on your gross margin technology yourself.

Roger Dassen: Yeah.

Pieter Wennink: effect on your gross margin.

R&D, we will spend more on all R&D, because we spent the R&D not for next year or for this year. We spent the R&D for the second half of the decade than the first half of the next decade. This with R&D goes yeah.

Roger Dassen: Technology also. Yeah.

John .

There's a.

Monique Mols: John, so John Koch from Bloomberg.

So a chunk of Koch from Bloomberg.

John courtroom with Merck, what do you see as the biggest challenge and risk.

John Koch: Yes. John Koch from Bloomberg. What do you see as the biggest challenge and risk in the US implementation of the CHIPS and Science Act?

In the U S implementation of chips.

Chips and Science Act.

Well I think I think the biggest opportunity and let's talk about the opportunity first.

Is that you will build a part of the semiconductor ecosystem capacity in inside the United States. So it means that the dependence the geopolitical strategic dependence will of course go down yeah.

So that's why to do it I think the risk is that.

Both in the U S and in Europe for that matter.

The experience and the knowledge that semiconductor makers have.

In bringing very advanced semiconductor manufacturing onto onto own soil.

Is highly complex, it's an art, yeah and that art has mastered over the last 10 20 years by the Tsmc's and assumptions of this world and also Intel but this is why you see the invitation.

Pieter Wennink: This is why you see the invitation almost, well, you know, it's an invitation with a big carrot, yeah? Which is called subsidy and investment support, yeah, of governments to bring those companies with that particular competence, yeah, within their borders. This is exactly what's happening. This is why we had the Arizona fab opening of TSMC. Ultimately 2 fabs, $40 billion of investments. That's Taiwanese knowledge and know-how. Bring that into your country and then ramping this 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 draw everybody from Taiwan or from Korea to do that.

Well you know it's.

It's an it's an expectation we have a big carats here, which is called subsidy and investment support of governments to bring those those those companies with that particular competence within their borders and this is exactly what's happening. This is why we had the Arizona fab opening of TSMC ultimately too fast 40 billion.

Of investments, but it's that's Taiwanese knowledge and you know.

Now bring that into your country.

And then then ramping this up in a way that you haven't been doing for the last 20 years. It also means that talent is a massive risk they need to get the talent that you can do that you cannot just.

Draw your body from Taiwan or from Korea to do that and integrate your talent pool, and that's a big challenge here.

Think that is.

That is a generic risk not only to the U S chips that closer to the European chipset.

<unk>.

And that risk is also the single biggest opportunity because if you're able to do it and if you are able to build an ecosystem around that if you're able to make that the knowledge and the expertise in that ecosystem. If you were able to really create at on soil again in Europe , and the United States I think it's a major boost to your <unk>.

To your competitiveness. So it's the biggest risks 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 you know through the food and external ecosystem. That's what that's the secret word you know you need to build those ecosystems because.

Pieter Wennink: The ecosystem. That's the secret word. You know, you need to build those ecosystems. 'Cause if you look at where the biggest centers are of chip manufacturing, it's in Taiwan, around Hsinchu and Tainan. It's not only those factories, it's the suppliers, it's the universities, the knowledge institution, the customers. It's the partners, the technology partners. It's the peers, yeah?

If you look at where the biggest centers are of chip manufacturing in Taiwan around Hsinchu and Tainan and it's only does factories. It's it's the suppliers. It's the universities the knowledge institution to customers is that it's the part of the technology partners. It's the Pearson that's all there this ecosystem.

Roger Dassen: Yeah.

Pieter Wennink: That's all there. That's the ecosystem, yeah? You see, if you find the same in Seoul and in Hwaseong, yeah? We find the same in Silicon Valley, but not manufacturing, but the rest is there, you know? You have the design companies there. So it's not just the money, throw the money at it, find a deserted air force base, and just build a factory. No, you have to build an ecosystem, yeah?

If you find the same in Seoul and in Washington.

If you find the same in Silicon valley, but not manufacturing, but the rest is there you know.

You have to design companies. There. This is where it's not just the money throw the money at it find a deserted airplanes are.

Force base and just build a bill that will affect it now you have to build that ecosystem.

Okay.

And we have time for one last question I have one online that's anyone's hear up floor. It nope and we go to Switzerland noise here has societal house again.

Monique Mols: Okay. We have time for one last question. I have one online, but if anyone's here up for it? Nope. We go to Switzerland. Neue Zürcher Zeitung. Again, it's not a financial question.

It's not a financial because you weren't added again [laughter] alright I tried.

Roger Dassen: The C word in it again.

Monique Mols: 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?

How did the U S restrictions on the involvement of U S persons and the Chinese semiconductor industry effect Asml's daily business. If at all are currently not no because I mean, we have quite a significant workforce in China, which as you know.

Pieter Wennink: Currently not.

Monique Mols: No.

Pieter Wennink: Because, I mean, we have quite a significant workforce in China, which is, you know, non-US.

Non U S.

Both Chinese nationals and people from outside the U S. So that's not that's not the case, we're a European company.

Monique Mols: Mm-hmm.

Pieter Wennink: That's both Chinese nationals and people from outside the US. That's not the case. Now, we're a European company, yeah?

So I mean, so we have European Knowhow.

Monique Mols: Mm-hmm.

Pieter Wennink: I mean, we have European know-how in with people with European or with non-US nationalities. That's less of an issue for us.

Knowhow in with people with European or with non U S. Nationality, so that it's less of an issue for us.

Yep.

One minute last cool yeah of course.

Monique Mols: Yeah. One minute. Last call. Yeah.

Pieter Wennink: One question.

Yes Hello.

Upon that are you still able to.

Monique Mols: Wouter.

[Analyst]: 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. I remember that

Supplier Chinese customers with bars that are <unk>.

American made than European maybe because that's Uh huh.

Yeah.

Well.

That's not always possible so that would have an effect on the on the Oprah on the Operability of the installed of the installed base, but again we are there.

Pieter Wennink: Yeah.

[Analyst]: Well, it's

Pieter Wennink: That's not always possible, so that would have an effect on the operability of the installed base. Again, we're largely, you know, predominantly a European company with European technology. The parts are predominantly European. Here and there, yes, there are issues, yeah, that we need to deal with, you know? Which actually means that some of the tools will then stop working. Yeah, but it's minimal right now. Yeah, that would be the consequence.

Largely.

It's minimal right now, but then there will be the consequence.

Okay, well, thank everyone for being here and I'd like to conclude this call. Thank you everyone online for for being with US and hopefully we'll see you next year. Thank.

[Analyst]: Thanks.

Monique Mols: 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. Thank you very much for your time.

Pieter Wennink: Thank you.

Roger Dassen: Thank you.

Pieter Wennink: Very much for your time.

[music].

Scott.

[music].

You got to come to your question.

My name as many malls I always forget to introduce myself. My name is when he malls I am responsible for media relations at ASML.

With me I have Peter winning CEO of Ace now and let's say he doesn't see F O of ethanol and Dave will talk you through our financial results, but also developments around our industry that I'm. Sure also has your interest so let me invite Peter lending to the floor and we'll kick this off.

Thank you Dominic.

Welcome everybody and yes, you are right I mean, it's good to have people life here I would also people on the webcast.

Pieter Wennink: Thank you, Monique. Welcome everybody. Yes, you're right. I mean, it's good to have people live here, but also people on the webcast. I wanna 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. 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. You know, it's questions on, are we going to get a recession? If so, how deep will it be, and how long will it be? Issues on geopolitical developments and export controls.

I want to just talk about a few things key messages I think Monty industry. This state of the industry right now.

And then Rajiv will talk about the financials and the outlook and then we'll take the Q&A.

So our key messages.

Well in.

In fact, that's what we said we told you.

At the capital markets day, I think despite the fact that.

We're currently seeing is of course, a lot of turbulence.

Questions on the are we going to get a recession and if so how deep will it be and how long will it be.

The issue is on the geopolitical developments and export controls, there's a lot of uncertainties right now but.

Pieter Wennink: 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 2 years. We look 5 to 10 years ahead. Why is that? Because we're 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 need more semiconductor compute and storage power going forward. 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 fab, you know, it will take 3 years.

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 10 years ahead.

Need to invest.

And our customers feel the same way they need to invest for the longer term and you have to remind you that we have to remind you that building a semiconductor fab or a factory fab.

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

Pieter Wennink: If you have to start planning it from day one, probably five, yeah? This is all about the longer term. When we look forward and look at the growth rates of semiconductor sales, you'll see it later, I'll talk about it later, that we see a very significant upside for our customers and also for ASML. This is why we need to invest. 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 EUR 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 EUR 44 and 60 billion, between 56% and 60% gross margin.

So it is all about the longer term and when we look forward and you look at the growth rates.

Of <unk>.

Semiconductor sales.

You'll see it later I'll talk about later that we see a very significant upside for our customers and also for SME. This is why we need to invest.

And that's also why we believe there is an opportunity depending on different market scenarios are higher or lower market scenario that by 2025.

It will be anywhere between 30, and 40 billion in sales and we have it in 54% to 56% gross margin, which will grow too.

70, 30, depending on the scenario between 44, and 60 billion between a 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 all profitable very profitable but of course, because we will grow that profitability will grow and I was also for our shareholders is going to be a significant return.

Pieter Wennink: 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're very profitable. Of course, because we will grow, that profitability will grow. 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.

Now.

When we look at the industry.

Three major drivers I think it's still we all notice is connectivity.

It's got activity, where it's a cloud or the edge computing. It's all connected these things are not separate there is not.

Theres not theres no centralized computing in the cloud without the decentralized computing at the edge, it's all connected and that's needed for to drive artificial intelligence and Hyperconnectivity now being supported by five G. But by the end of the decade, Google <unk>, So I'm going to be faster lower lower latency more bandwidth.

Pieter Wennink: That's needed for to drive artificial intelligence and the hyperconnectivity now being supported by 5G, but by the end of the decade, it will be 6G. It's going to be faster, lower latency, more bandwidth. Then there's other 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? Our last big driver is the social and the socioeconomic shifts. I mean, yes, with the pandemic has taught us, you know, to use different ways of working.

And then there's a lot of drivers called the climate change and the resource scarcity, I mean semiconductors will and won't going to show you a couple of 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.

Energy transition.

And of course, how are we going to use our resources smarter.

And then the last big drivers of social and the social economic shifts I mean, yes with the pandemic.

Thought us too.

Taught us to use different ways of working working from home.

But also that.

Pieter Wennink: Working from home, but also this remote connectivity is extremely important also in areas of medical technology, for instance. Then we'll talk about it later. Technological sovereignty is a big driver for this socioeconomic shift. Okay, now just a couple of examples. Just the energy transition, we believe it will be one of the main drivers the coming decades. It's about energy generation, it's about storage, about distribution, and it's about consumption of this electrical energy. Give you an example, if you want 1 MW of wind power, it needs about EUR 3,000 of semiconductors. And one MW of solar power needs EUR 4,000.

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 social economic shift.

Okay.

Couple of examples because the energy transition we believe we will be one of the main drivers the coming decades.

It's it's about energy generation, it's about storage about distribution, it's about consumption of this electrical energy.

<unk>.

Maybe give an example, if you want one megawatt of of the wind power it needs about 3000 euros of semiconductors.

And while megawatt of solar power 4000 euros, but if you think about the gigantic increase in demand for electricity.

Pieter Wennink: 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 a lot of sensors, and actuators and compute power. How do we use it? I mean, it's used in the electrification of our mobility. You know, the electric vehicle will at least use twice the power.

And the renewable energy coming from winter from so it just went in sort of general generation you can think about the enormous.

Impact this will 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 and compute power.

<unk>.

And how do we use it I mean, it's it's use Indiana in the electrification of our mobility.

The the you know that.

Electric vehicle will at least at least use twice.

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