Q4 2023 ASML Holding NV Earnings Call

January 24, 2024

Subtitles by the Amara.org community

Okay.

Good day and thank you for standing by. Welcome to the ASML 2023 4th Quarter and 4th Year Financial Results Conference Call on January 24th, 2024. At this time, all participants are in a listen-only mode. After the speaker's introduction, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Skip Miller. Please go ahead.

Good day, and thank you for standing by welcome to the ASML 2023 fourth quarter and full year financial results Conference call on January 24th 2024. At this time all participants are in a listen only mode. After the Speakers' introduction that there'll be a question and answer session.

I'll ask a question during the session you will need to press star one on your telephone you will then have an automated message advising your hand is raised to withdraw your question. Please press star one on one again. Please be advised that today's conference is being recorded I would now like to turn the conference over to Mr. Scott Skip Miller. Please go.

Go ahead.

Skip Miller: Thank you, Operator. Welcome, everyone.

Thank you operator.

Welcome everyone.

Skip Miller: This is Skip Miller, Vice President of Investor Relations at ASML.

This is skip Miller, Vice President of Investor Relations at ASML.

Speaker Change: Joining me today on the call are ASML CEO Peter Wennink and our CFO Roger Dassen. The subject of today's call is ASML's 2023 fourth quarter and full year results.

Speaker Change: Joining me today on the call are asking all CEO, Peter <unk> and our CFO Roger Dassen. The subject of today's call is Asml's 2023 fourth quarter and full year results.

Speaker Change: The length of this call will be 60 minutes and questions will be taken in the order that they are

Speaker Change: The length of this call will be 60 minutes and questions will be taken the order that they are received.

Speaker Change: This call is also being broadcast live over the internet at asml.com.

Speaker Change: This call is also being broadcast live over the Internet.

Speaker Change: A transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call.

Speaker Change: Smell dot com.

Speaker Change: A transcript of management's opening remarks, and a replay of the call will be available on our website. Shortly following the conclusion of this call.

Speaker Change: Before we begin, I'd like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities law.

Before we begin I'd like to caution listeners that comments made by management. During this conference call will include forward looking statements within the meaning of the federal Securities laws.

Speaker Change: These four looking statements involve material risks and uncertainties.

Speaker Change: These forward looking statements involve material risks and uncertainties.

Speaker Change: For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and the presentation found on our website at asml.com and in ASML's annual report on Form 20F and other documents as filed with the Securities and Exchange Commission.

Speaker Change: For a discussion of risk factors I encourage you to review the Safe Harbor statement contained in today's press release and presentation found on our website at ASML Dot com and in Asml's annual report on form 20-F, and other documents as filed with the Securities and Exchange Commission.

Skip Miller: With that, I'd like to turn the call over to Peter Wennink for a brief introduction. Thank you, Skip. Welcome, everyone, and thank you for joining us for our fourth quarter and full year 2023 results conference.

Speaker Change: I'd like to turn the call over to Peter Winuk for a brief introduction.

Peter T. F. M. Wennink: Thank you skip welcome everyone and thank you for joining us for our fourth quarter and full year 2023 results conference call.

Peter T. F. M. Wennink: Before we begin the Q&A session, Roger and I would like to provide to you an overview and some commentary on the fourth quarter and the full year 2023, as well as provide our view of the coming quarter.

Speaker Change: Before we begin the Q&A session, Roger and I would like to provide you an overview and some commentary on the fourth quarter and full year 2023, as well as provide a review of the coming quarters and Rajiv will start with a review of our fourth quarter and full year 2023 financial performance with some added comments on our short term outlook and I will complete the introduction with.

Peter T. F. M. Wennink: And Roger will start with a review of our fourth quarter and full year 2023 financial performance with some added comments on our short-term outlook. And I will complete the introduction with some additional comments on the current business environment and on our future business.

Rajiv: Some additional comments on the current business environment.

Peter T. F. M. Wennink: Project

Rajiv: Our future business outlook.

Roger J.M. Dassen: Thank you Peter and welcome everyone. I will first review the fourth quarter and full year 2023 financial accomplishments and then provide guidance on the first quarter of 2024.

Speaker Change: Thank you Peter and welcome everyone I will first review of the fourth quarter and full year 2023 financial accomplishments and then provide guidance on the first quarter of 2024.

Roger J.M. Dassen: Let me start with our fourth water accomplishment.

Speaker Change: Let me start with our fourth quarter accomplishments net sales came in at $7 2 billion euros, which is just above our guidance primarily due to more installed base business.

Roger J.M. Dassen: Net sales came in at 7.2 billion euros, which is just above our guidance, primarily due to more installed baseboards.

Roger J.M. Dassen: We shipped 10 EUV systems and recognized €2.3 billion revenue from 13 systems this quarter.

Speaker Change: We shipped 10, <unk> systems and recognized $2 3 billion Euro revenue from 13 systems this quarter.

Roger J.M. Dassen: Net system sales of 5.7 billion euros which was mainly driven by logic at 63% with the remaining 37% coming from MSMEs.

Speaker Change: Net system sales of $5 7 billion euros, which was mainly driven by logic and 63% with the remaining 37% coming from memory.

Roger J.M. Dassen: Install base management sales for the quarter came in at 1.6 billion euros, which was higher than guided due to additional service and upgrades.

Speaker Change: Installed base management sales for the quarter came in at $1 6 billion euros, which was higher than guidance due to additional service and upgrade sales.

Roger J.M. Dassen: Growth margin for the quarter came in at 51.4%, which is above our guidance, primarily driven by installed basements.

Speaker Change: Gross margin for the quarter came in at 51, 4%, which is above our guidance, primarily driven by installed base business.

Roger J.M. Dassen: On operating expenses, R&D expenses came in at €1,041,000,000 and SG&A expenses came in at €284,000,000, both basically as guided.

Speaker Change: On operating expenses R&D expenses came in at 1.041 billion euros and SG&A expenses came in at 284 million euros, both basically as guidance.

Roger J.M. Dassen: Net income in Q4 was 2 billion euros representing 28.3% of net sales and resulting in an EPS of 5.21 euros.

Speaker Change: Net income in Q4 was 2 billion euros, representing 28, 3% of net sales and resulting in an EPS of five points to 21 euros.

Roger J.M. Dassen: Starting through the balance sheet.

Speaker Change: Turning to the balance sheet, we ended the fourth quarter with cash cash equivalents and short term investments at a level of 7 billion euros.

Roger J.M. Dassen: We're in the fourth quarter with cash, cash equivalents, and short-term investments at a level of 7 billion euros.

Roger J.M. Dassen: Moving to the order book, Q4 net system bookings came in at €9.2 billion, which is made up of €5.6 billion for EUV bookings and €3.6 billion for non-EUV bookings. These values also include inflation correction.

Speaker Change: Moving to the order book Q4 net system bookings came in at $9 2 billion euros, which is made up of $5 6 billion euros for EV bookings of $3 6 billion euros for non U E. Bookings. These values also include inflation corrections.

Roger J.M. Dassen: Net system bookings in the quarter are more balanced between logic and memory relative to past few quarters with logic at 53% of the bookings while memory accounted for the remaining 47%.

Speaker Change: And that system bookings in the quarter are more balanced between logic and memory relative to past few quarters with logic at 53% of the bookings while the memory accounted for the remaining 47%.

Roger J.M. Dassen: Looking at the full year, net sales grew 30% to 27.6 billion euros with a gross margin of 51.3%.

Speaker Change: Looking at the full year net sales grew 30% to $27 6 billion euros with a gross margin of 51, 3%.

Roger J.M. Dassen: EUV system sales grew 30% to 9.1 billion euros realized from 53 systems, while in total we shipped 42 EUV systems in 2020.

EV system sales grew 30% to $9 1 billion euros realized from 53 systems, while the total we shipped 42 UV systems in 2023.

Roger J.M. Dassen: DPV system sales grew 60% to 12.3 billion euros.

Speaker Change: Okay.

Deep UV system sales grew 60% to $12 3 billion euros.

Roger J.M. Dassen: Our metrology and inspection system sales decreased 19% to 536 million euros.

Speaker Change: Our metrology and inspection system sales decreased 19% to 536 million euros.

Roger J.M. Dassen: Looking at the market segments for 2023, logic system revenue was 16 billion euros, which is a 60% increase from last year.

Speaker Change: Looking at the market segments for 2023.

Speaker Change: <unk> system revenue was 16 billion euros, which is a 60% increase from last year.

Roger J.M. Dassen: Memory system revenue was 6 billion euros, which is a 9% increase from last year.

Speaker Change: Memory system revenue was 6 billion euros, which is a 9% increase from last year installed base management sales was $5 6 billion euros, which is a 2% decrease compared to previous year.

Roger J.M. Dassen: Install base management sales was 5.6 billion euros which is a two percent decrease compared to previous

Roger J.M. Dassen: At the end of 2023, we finished with a backlog of 39 billion euros.

Speaker Change: At the end of 2023, we finished with a backlog of 39 billion euros.

Roger J.M. Dassen: Our R&D spending increased to €4 billion in 2023 as we continue to invest in innovation across the globe.

Speaker Change: Our R&D spending increased to 4 billion euros in 2023, as we continue to invest in innovation across.

Roger J.M. Dassen: or full product portfolio.

Speaker Change: Our full product portfolio.

Roger J.M. Dassen: Overall, R&D investments as a percentage of 2023 sales were about 14%.

Speaker Change: Overall R&D investments as a percentage of 2023 sales were about 14%.

Roger J.M. Dassen: As G&A increased to 1.1 billion euros in 2023, which was about 4% of the total,

Speaker Change: SG&A increased to $1 1 billion euros in 2023, which was about 4% of sales.

Roger J.M. Dassen: Net income for the full year was 7.8 billion euros, 28.4% of net sales, resulting in an EPS of 19.91 euros.

Speaker Change: Net income for the full year was $7 8 billion euros 28, 4% of net sales, resulting in an EPS of 19 point 91 euros.

Roger J.M. Dassen: We finished 2023 with a free cash flow generation of 3.2 billion euros.

Speaker Change: We finished 2023 with a free cash flow generation of $3 2 billion euros.

Roger J.M. Dassen: We return 3.3 billion euros to shareholders through a combination of dividends and share buybacks in 2020.

Speaker Change: We returned $3 3 billion euros to shareholders through a combination of dividends and share buybacks in 2023.

Roger J.M. Dassen: With that, I would like to turn to our expectations for the first quarter of 2024.

Speaker Change: With that I would like to turn to our expectations for the first quarter of 2024.

Roger J.M. Dassen: We expect Q1 net sales to be between €5 billion and €5.5 billion.

Speaker Change: We expect Q1 net sales to be between 5 billion euros and $5 5 billion euros.

Roger J.M. Dassen: We expect our Q1 installed base management sales to be around 1.3 billion euros.

Speaker Change: We expect our Q1 installed base management sales to be around $1 3 billion euros gross.

Roger J.M. Dassen: Gross margin for Q1 is expected to be between 48 and 49 percent.

Speaker Change: Gross margin for Q1 is expected to be between 48% and 49%.

Roger J.M. Dassen: Lower revenue and margin relative to Q4 is primarily driven by lower immersion volume along with an unfavorable change in product.

Speaker Change: Lower revenue and margin relative to Q4 is primarily driven by lower immersion volume along with an unfavorable change in product mix.

Speaker Change: In addition, we also expect lower EV volume and lower installed base business in Q1 relative to Q4.

Speaker Change: The relatively slow start to the year is a reflection of the current state of the industry coming out of a downturn.

Roger J.M. Dassen: As it relates to gross margin, I would like to make a few more comments on the 2024 margin drivers as well as our longer term ambitions of 54% to 56% by 2025.

Speaker Change: As it relates to gross margin I would like to make a few more comments on the 2020 margin drivers as well as our longer term ambitions of 54% to 56% by 2025.

Roger J.M. Dassen: We finished 2023 with a full year gross margin of 51.3% and there are a number of developments that could impact the gross margin in 2024.

Speaker Change: We finished 2023 with our full year gross margin of 51, 3% and there are a number of developments that could impact the gross margin in 2024.

Roger J.M. Dassen: For EUV, positive drivers include the higher AST of the 3800E as well as improving EUV service.

Speaker Change: For EV positive drivers include a higher ASP.

Speaker Change: Of the 3800 E as well as improving <unk> service margins with deep UV, we expect product mix to have a negative impact on margin in 2024.

Roger J.M. Dassen: For Deep UV, we expect product mix to have a negative impact on margins in 2022.

Roger J.M. Dassen: On our install-based business, we currently expect a similar gross margin as 2023, but the final impact will ultimately depend on the level of upgrades in 2024.

Speaker Change: On our installed base business. We currently expect a similar gross margin as 2023, but the final impact will ultimately depend on the level of upgrades in 2024.

Roger J.M. Dassen: And finally, as we have said before, we expect significant costs in 2024 related to the introduction of high NA and to the ramp of our capacity to 90 EUV, 600 DPV levels that we have talked about before, which will create pressure on the gross market.

Speaker Change: And finally as we have said before we expect significant costs in 2024 related to the introduction of heinie and to ramp of our capacity to 90, EV 600 deep UV levels that we have talked about before which will create pressure on the gross margin.

Roger J.M. Dassen: When we assess the combined effects of these different developments, we expect a slightly lower gross margin in 2024 compared to 2025.

Speaker Change: When we assess the combined effects of these different developments, we expect a slightly lower gross margin in 2024 compared to 2023.

Roger J.M. Dassen: We are still targeting our earlier communicated gross margin ambition of 54-56% by 2025.

Speaker Change: We are still targeting our earlier communicated gross margin ambition of 54% to 56% by 2025.

Roger J.M. Dassen: This increase in gross margin will be driven by a number of items.

Speaker Change: This increase in gross margin will be driven by a number of items first higher sales volume both in EV, mdpv, which improved fixed cost coverage.

Roger J.M. Dassen: First, higher sales volume, both in EUV and DPV, which improves fixed cost coverage.

Roger J.M. Dassen: Second, a move to a higher margin EUV 0.33 NA system, as the vast majority of systems in 2025 are planned to be 3800 EC.

Speaker Change: Second a move to a higher margin <unk> 33 in a system as the vast majority of systems. In 2025 are planned to be 3800 E systems.

Roger J.M. Dassen: Third, we expect reduced headwinds from capacity investments as we ramp volume, including high NAs.

Speaker Change: Third we expect reduced headwinds from capacity investments as we ramp volume, including <unk>.

Roger J.M. Dassen: Fourth, we will also be transitioning to a higher margin EUV high NA system, the 5200.

Speaker Change: Fourth we will also be transitioning to a higher margin <unk> system. The <unk> 202025.

Roger J.M. Dassen: in 2024.

Roger J.M. Dassen: Lastly, we expect our install-based business to have a positive impact on 2025 margins due to both improved EUV service margins as well as increased upgrade business volume.

Speaker Change: Lastly, we expect our installed base business to have a positive impact on 2025 margins due to both improved <unk> service margins as well as increased upgrade business volume.

Roger J.M. Dassen: The expected R&D expenses for Q1 are around €1.07 billion and SG&A is expected to be around €300 billion.

Speaker Change: The expected R&D expenses for Q1 around $1 7 billion euros, and SG&A is expected to be around 300 million euros.

Roger J.M. Dassen: Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%.

Speaker Change: Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%.

Roger J.M. Dassen: In Q4, ASML paid the second quarterly interim dividend of 1.45 euros per ordinary share.

Speaker Change: In Q4, ASML paid the second quarterly interim dividend of $1 45 per ordinary share ASML.

Roger J.M. Dassen: ASML intends to declare a total dividend for the year 2023 of 6.10 euros per ordinary share.

Speaker Change: ASML intends to declare a total dividend for the year 2023 of 610 euros per ordinary share.

Roger J.M. Dassen: The third interim dividend of 1.45 euros per ordinary share will be made payable on February 14, 2024.

Speaker Change: The third interim dividend of $1 45 per ordinary share will be payable on February 14 2024.

Roger J.M. Dassen: Recognizing this third interim dividend and the two interim dividends of 1.45 euros per ordinary share paid in 2023, this leads to a final dividend proposal to the general meeting of 1.75 euros per ordinary share.

Speaker Change: Recognizing this third interim dividend under two interim dividends of $1 45 per ordinary share paid in 2023. This leads to a final dividend proposal to the general meeting of $1 75 per ordinary share.

Roger J.M. Dassen: In Q4 2023, no shares were purchased.

Speaker Change: In Q4 2023, no shares were purchased.

Roger J.M. Dassen: With that, I would like to turn the call back over to Peter.

Speaker Change: With that I would like to turn the call back over to Peter.

Peter T. F. M. Wennink: Thank you Roger. As Roger has highlighted, we have another year of very strong growth in a very challenging environment. We finished the year with a solid backlog of 39 billion euros.

Peter T. F. M. Wennink: Thank you Roger.

Peter T. F. M. Wennink: As highlighted we had another year of very strong growth in a very challenging environment.

We finished the year with a solid backlog of 39 billion.

Peter T. F. M. Wennink: The uncertainty remains in the market due to a number of global macro concerns.

Peter T. F. M. Wennink: while the semiconductor industry is currently working through the bottom of the cycle.

Peter T. F. M. Wennink: While the semiconductor industry is currently working through the bottom of the cycle.

Peter T. F. M. Wennink: Our customers are still not certain on the shape or slope of the recovery this year, but there are some positive signs in the indicators that we have been monitoring.

Peter T. F. M. Wennink: Our customers are still not certain on the shape or slope of recovery. This year, but there are some positive signs in the indicators that we have been monitoring.

Peter T. F. M. Wennink: industry and market inventory levels continue to improve moving towards more healthy levels lithography tool utilization levels are still running lower than normal but are now improving in both logic and memory members

Peter T. F. M. Wennink: Industry end market inventory levels continue to improve moving towards more healthy levels, but historically tool utilization levels are still running lower than normal but are now improving in both logic and memory.

Peter T. F. M. Wennink: We expect utilization levels to continue to improve over the course of this year.

Peter T. F. M. Wennink: And lastly, as mentioned by Roger, we saw very strong order intake in the fourth quarter in support of future demand.

Peter T. F. M. Wennink: Lastly, as mentioned by Rajiv, we saw very strong order intake in the fourth quarter in support of future demand.

Peter T. F. M. Wennink: You'll be able to follow the curve of the industry recovery. We are looking at the combined demand for 'twenty 'twenty, four and 'twenty to 'twenty five.

Peter T. F. M. Wennink: As mentioned last quarter, we view 2024 as a transition year in preparation where do you expect that strong demand in 2025.

Peter T. F. M. Wennink: We therefore continue to make investment this year both in capacity ramp and in technology to be ready for the upturn in the science.

Peter T. F. M. Wennink: We therefore continue to make investment this year, both in capacity ramp and in technology to be ready for the upturn in the cycle.

Peter T. F. M. Wennink: Well we see some positive signs of recovery. We feel it might be a bit too early to change our perhaps conservative view as communicated last quarter and therefore still stay with our previously communicated expectation of 2024 revenue to be similar to 2022.

Peter T. F. M. Wennink: While we see some positive signs of recovery, we feel it might be a bit too early to change our perhaps conservative view as communicated last quarter and therefore still stay with our previously communicated expectation of 2020 for revenue to be similar to 2023.

Peter T. F. M. Wennink: Looking at the market segments, customers are indicating they are seeing healthy growth this year, primarily driven by AI-related demand for both logic and memory, but also expected from other end markets as inventory levels improve.

Looking at the market segments customers are indicating they are seeing healthy growth. This year, primarily driven by AI related demand for both logic and memory, but also expected from other end markets as inventory levels improve.

Peter T. F. M. Wennink: Coming off a very strong year in 2023, with 60% growth in logic revenue, we expect some pause in demand as customers digest the capacity additions while utilization levels improve.

Peter T. F. M. Wennink: And coming off a very strong year in 2023 with 60% growth in logic revenue, we expect some falls in demand as customers digest, the capacity additions and while utilization levels improve.

Peter T. F. M. Wennink: Based on current demand, we see lower logic revenue in 2024 versus 2022.

Peter T. F. M. Wennink: Based on current demand, we see lower logic revenue in 2024 versus 2023.

Peter T. F. M. Wennink: For memory, inventories are approaching normal levels and customers are expecting to see demand growth on a number of end markets this year.

Peter T. F. M. Wennink: For memory inventories are approaching normal levels and customers are expecting to see demand growth on a number of end markets. This year.

Peter T. F. M. Wennink: Lithol demand is primarily driven by PRAM technology node transitions in support of advanced memory such as DDR5 and HBM in support of AI-related demand.

Peter T. F. M. Wennink: So the math is primarily driven by DRAM technology node transitions in support of advanced memory, such as <unk> and HBM in support of AI related demand.

Operator: Subtitles by the Amara.org community Good day, and thank you for standing by. Welcome to the ASML 2023 4th Quarter and 4th Year Financial Results Conference Call on January 24th, 2024. At this time, all participants are in a listen-only mode.

Peter T. F. M. Wennink: We currently see revenue growth in our 2024 memory business versus 2020.

Peter T. F. M. Wennink: We currently see revenue growth in our 2024 memory business versus 23, 3%.

Peter T. F. M. Wennink: Turning to our businesses for EUV, we are expecting revenue growth in 2024, and we are planning to recognize revenue on a similar number of EUV low NA systems as 2023, which includes the fast shipments for 2023.

Peter T. F. M. Wennink: Turning to our businesses for <unk>, we are expecting revenue growth in 2024.

Operator: After the speaker's introduction, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Skip Miller.

Peter T. F. M. Wennink: We're planning to recognize revenue on a similar number of.

Lower ne systems estimated 23, which includes the fast shipments for 2023.

Peter T. F. M. Wennink: Although we plan a similar number of systems as 2023, we will have higher ASPs from the NXE 3800E systems, more weighted towards the second half of the year.

Peter T. F. M. Wennink: Although we plan a similar number of systems <unk> 'twenty three we will have higher asp's from the E. <unk> E systems more weighted towards the second half of the year.

Peter T. F. M. Wennink: In addition, we expect revenue from one or two INA

Peter T. F. M. Wennink: In addition, we expect revenue from one or two <unk>.

Skip Miller: Please go ahead. Thank you, Operator. Welcome, everyone. This is Skip Miller, Vice President of Investor Relations at ASML. Joining me today on the call are ASML CEO Peter Wennink and our CFO Roger Dassen. The subject of today's call is ASML's 2023 fourth quarter and full year results. The length of this call will be 60 minutes, and questions will be taken in the order that they are submitted. This call is also being broadcast live over the internet at asml.com. A transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call.

Peter T. F. M. Wennink: Based on the aforementioned, we expect our non-EUV business to be down in 2024, primarily driven by lower immersion sales relative to 2022.

Based on the aforementioned we expect our non <unk> business to be down in 2024, primarily driven by lower immersion sales relative to 2023.

Peter T. F. M. Wennink: For an in-school-based business, based on our view today, we expect a similar level of revenue compared to last year. As the recovery becomes more clear this year, customers may likely look to upgrade their systems in preparation for 2025, and this could provide future business opportunity this year.

Peter T. F. M. Wennink: For the installed base business based on our view today, we expect a similar level of revenue compared to last year, but as the recovery becomes more clear this year customers may likely look to upgrade their systems in preparation for 2025, and this could provide future business opportunity this year.

Peter T. F. M. Wennink: As a reflection of the current state of the industry coming out of a downturn and an expected recovery over the course of 2024, we expect a stronger second half relative to the first half of this year.

Peter T. F. M. Wennink: As a reflection of the current state of the industry coming out of a downturn.

Peter T. F. M. Wennink: <unk> recovery over the course of 2024, we expect a stronger second half relative to the first half of this year.

Skip Miller: Before we begin, I'd like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities law. These four forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and the presentation found on our website at asml.com and in ASML's annual report on Form 20F and other documents as filed with the Securities and Exchange Commission. With that, I'd like to turn the call over to Peter Wennink for a brief introduction. Thank you, Skip.

Peter T. F. M. Wennink: On the geopolitical front, as communicated earlier, we do not expect to get export licenses for our most advanced immersion systems, the NXT 2000 and up, for China in 2022.

On the geopolitical front as communicated earlier, we do not expect to get export licenses for our most advanced immersion systems to NXT 2000, and set up for China in 2024.

Peter T. F. M. Wennink: We have been in contact with the US government on their export control regulations announced in October last year and we can confirm the estimated financial impact as communicated in October.

Peter T. F. M. Wennink: We have been in contact with the U S government on their export control regulations announced in October last year, and we can confirm the estimated financial impact as communicated in October.

Peter T. F. M. Wennink: At that time, we stated the impact of the Dutch and the US export control regulations combined and the US export control regulations combined

Peter T. F. M. Wennink: At that time, we stated that the impact of the Dutch and the U S export control regulations combined <unk>.

Peter T. F. M. Wennink: This is 10 to 15% of our 2023 China system draft.

Peter T. F. M. Wennink: 10% to 50% of our 2023, China systems revenue.

Peter T. F. M. Wennink: This impact is based on our presumption that as of 2024 we will not obtain export licenses for NXT 2000 and up immersion systems to Chinese customers, and in the case of only a handful of Chinese fabs, this also includes NXT 1970 and 1980.

Peter T. F. M. Wennink: This impact is based on our presumption that as of 2024, we will not obtain export licenses for exited 2000 and up immersion systems to Chinese customers and indications are going to be a handful of Chinese fabs. There's also includes NXP 1970 in 1980 systems.

Peter T. F. M. Wennink: Welcome, everyone, and thank you for joining us for our fourth quarter and full year 2023 results conference. Before we begin the Q&A session, Roger and I would like to provide you with an overview and some commentary on the fourth quarter and the full year 2023, as well as provide our view of the coming quarter. Roger will start with a review of our fourth quarter and full year 2023 financial performance with some added comments on our short-term outlook, and I will complete the introduction with some additional comments on the current business environment and on our future business. Project, Thank you Peter and welcome everyone. I will first review the fourth quarter and full year 2023 financial accomplishments and then provide guidance for the first quarter of 2024. Let me start with our fourth water accomplishment.

Peter T. F. M. Wennink: While the export regulations had an impact on our business, we continue to see strong demand for mid-critical and mature nodes in China.

Peter T. F. M. Wennink: The export regulations had an impact on our business. We continue to see strong demand for mid critical in mature nodes in China.

Peter T. F. M. Wennink: Looking longer term?

Peter T. F. M. Wennink: Looking longer term.

Peter T. F. M. Wennink: While there are still significant uncertainties primarily driven by the macro environment, it appears we are passing through the bottom of this specific cycle and expect an industry recovery over the course of 2024.

Peter T. F. M. Wennink: There are still significant uncertainties, primarily driven by the macro environment.

Peter T. F. M. Wennink: First we are passing through the bottom of this specific cycle and expect an industry recovery over the course of 2024.

Peter T. F. M. Wennink: Based on discussions with our customers and supported by our strong backlog, we currently expect 2025 to be a strong year driven by a number of factors.

Peter T. F. M. Wennink: Based on discussions with our customers and supported by our strong backlog. We currently expect 2025 to be a strong year driven by a number of factors first the.

Peter T. F. M. Wennink: First

Peter T. F. M. Wennink: The secular growth drivers in the semiconductor and markets which we have previously discussed such as energy transition, electrification, and AI.

Roger J.M. Dassen: Net sales came in at 7.2 billion euros, which is just above our guidance, primarily due to more installed baseboards. We shipped 10 EUV systems and recognized €2.3 billion in revenue from 13 systems this quarter. Net system sales of 5.7 billion euros, which was mainly driven by logic at 63%, with the remaining 37% coming from MSMEs. Install base management sales for the quarter came in at 1.6 billion euros, which was higher than guided due to additional service and upgrades. Growth margin for the quarter came in at 51.4%, which is above our guidance, primarily driven by installed basements. On operating expenses, R&D expenses came in at €1,041,000,000, and SG&A expenses came in at €284,000,000, both basically as guided.

Peter T. F. M. Wennink: The secular growth drivers in the semiconductor end markets, which we have previously discussed such as energy transition rectification and AI.

Peter T. F. M. Wennink: The expanding application space, along with increasing lithography on future technology

Peter T. F. M. Wennink: The expanding application space, along with increasing lithography on future technology nodes drives demand for both advanced and mature nodes.

Peter T. F. M. Wennink: Drives demand for both advanced and mature now.

Peter T. F. M. Wennink: Second, the industry expects to be in the middle of a cyclical upturn in 2025.

Peter T. F. M. Wennink: Second the industry expects to be in the middle of a cyclical upturn in 2025.

Peter T. F. M. Wennink: And last, as mentioned earlier, we need to prepare for a significant number of new FABs that are being built across the globe, in some instances clearly supported by several government incentive plans.

Peter T. F. M. Wennink: And last as mentioned earlier, we need to prepare for a significant number of new fabs that are being built across the globe and services is clearly supported by several government incentive plans.

Peter T. F. M. Wennink: These FABs are spread geographically, are strategic for our customers, and are scheduled to take out...

Peter T. F. M. Wennink: These fabs are spread geographically are strategic for our customers and are scheduled to take out tools.

Peter T. F. M. Wennink: It is essential that we keep our focus on the future and build capacity in preparation for further long-term growth as we discussed in the market scenarios for 2025 and 2030 during our Investor Day in November 2022.

Peter T. F. M. Wennink: It is essential that we keep our focus on the future and build capacity in preparation for further long term growth as we discussed in the market scenarios, where 2025 and 2030 during our Investor day in November 2022.

Peter T. F. M. Wennink: We plan to update our view during our investor day this year on November 14, 2024.

Peter T. F. M. Wennink: We plan to update our view during our Investor day. This year on November 14 2000.

Roger J.M. Dassen: Net income in Q4 was 2 billion euros, representing 28.3% of net sales and resulting in an EPS of 5.21 euros. Starting with the balance sheet. We're in the fourth quarter with cash, cash equivalents, and short-term investments at a level of 7 billion euros. Moving to the order book, Q4 net system bookings came in at €9.2 billion, which is made up of €5.6 billion for EUV bookings and €3.6 billion for non-EUV bookings. These values also include inflation correction. Net system bookings in the quarter were more balanced between logic and memory relative to the past few quarters with logic at 53% of the bookings while memory accounted for the remaining 47%. Looking at the full year, net sales grew 30% to 27.6 billion euros, with a gross margin of 51.3%.

Peter T. F. M. Wennink: 2024.

Peter T. F. M. Wennink: In summary, although there are still near-term uncertainties, with a positive outlook trend, we clearly remain confident in a long-term growth opportunity, and with that, we'd be happy to take your questions.

Peter T. F. M. Wennink: In summary, although still near term uncertainties with a positive outlook trend, we clearly remain confident in our long term growth opportunity and with that we'd be happy to take your questions.

Speaker Change: Thank you Roger and Peter. The operator will instruct you momentarily on the protocol for the Q&A session.

Speaker Change: Thank you Roger and Peter the operator will instruct you momentarily on the protocol for the Q&A session.

Speaker Change: Beforehand, I'd like to ask that you kindly limit yourself to one question with one short follow-up if necessary.

Speaker Change: Beforehand, I would like to ask that you kindly limit yourself to one question with one short follow up if necessary.

Speaker Change: This will allow us to get to as many callers as possible.

Speaker Change: Now, operator, can we have your final instructions and then the first question?

Speaker Change: Now operator could we have your final instructions and then the first question. Please.

Speaker Change: Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again.

Speaker Change: We will now take the first question and the first question comes from the line of Mehdi Hosseini from Susquehanna. Please go ahead.

Speaker Change: We will now take the first question.

Speaker Change: The first question comes from the line of maybe.

Susquehanna: From Susquehanna. Please go ahead.

Mehdi Hosseini: Yes, thank you. Two follow-ups. Peter, you're talking about your view on 24 is still cautious, but you could always change it as the year progresses. Can you share with us the puts and take? What are the key areas that could actually give you confidence and help drive upside? And I have a follow-up. Yeah.

Susquehanna: Yes. Thank you two follow ups.

Roger J.M. Dassen: EUV system sales grew 30% to 9.1 billion euros realized from 53 systems, while in total, we shipped 42 EUV systems in 2020. DPV system sales grew 60% to 12.3 billion euros. Our metrology and inspection system sales decreased 19% to 536 million euros.

Susquehanna: You are talking about.

Susquehanna: Your view on 24 is due to cautious, but you could always change it as the year progresses can you.

Susquehanna: Share with us the puts and take what what are the key areas.

Susquehanna: Could actually.

Susquehanna: Give you confidence in and help drive the upside and I havent finalized yet.

Speaker Change: Okay, yeah, I think in the prepared, you know, remarks I already, you know, alluded to it, I think we will see, we are seeing the first signs, the positive signs of a recovery, which is basically, you know, the data we get on inventory levels, but also we see our utilization rates, you know, going up again, that in, and also in, you know,

Susquehanna: Yes, I think.

Susquehanna: <unk>.

Roger J.M. Dassen: Looking at the market segments for 2023, logic system revenue is 16 billion euros, which is a 60% increase from last year. Memory system revenue is 6 billion euros, which is a 9% increase from last year. Install base management sales were 5.6 billion euros, which is a two percent decrease compared to previous. At the end of 2023, we finished with a backlog of 39 billion euros. Our R&D spending increased to €4 billion in 2023 as we continue to invest in innovation across the globe, or full product portfolio. Overall, R&D investments as a percentage of 2023 sales were about 14%. As G&A increased to 1.1 billion euros in 2023, which was about 4% of the total, net income for the full year was 7.8 billion euros, 28.4% of net sales, resulting in an EPS of 19.91 euros. We finished 2023 with a free cash flow generation of 3.2 billion euros.

Susquehanna: Remarks site already.

Susquehanna: Alluded to it I think.

Susquehanna: We will see we are seeing the first signs of positive signs.

Susquehanna: A recovery, which is basically.

Susquehanna: The data we get on EBITDA levels, but also we see our utilization rates.

Susquehanna: Going up again.

Susquehanna: That also.

Susquehanna: Also in <unk>.

Speaker Change: The history is not only of the company, but of the industry means that if we're in a recovery cycle, you will see that continuing throughout the year, which means that 2025 could be the first full year of the recovery. Now, having said that...

Susquehanna: <unk> III is not only have the company built the industry means that they bring in a recovery cycle, you will see that continuing throughout the year, which means that 2025, it could be the first full year of recovery now having said that.

Speaker Change: To assess the slope of the recovery, we take a bit of a conservative view. That could, of course, change. So if the slope of the recovery is a bit faster than we think, then some of that 2025 business, which we're preparing, by the way, to ship, or at least to build in 2024, could actually be shipped in 2024. Now, I don't think it's going to be in the first half, but some of that, if you talk about, you know, key areas of potentially improvement, that could be an area seeing some pull-in for system shipments into 2024. What?

Susquehanna: To assess the slope of the recovery, we take a bit of a conservative view that could of course change. So if the slope of the recovery is a bit faster than we think that some of that 2025 business, which we are preparing by the way to a ship or at least to built in China.

Susquehanna: Good actually to ship.

Susquehanna: If any if any for now I don't think its going to be in the first half, but some of that if you talk about.

Roger J.M. Dassen: We will return 3.3 billion euros to shareholders through a combination of dividends and share buybacks in 2020. With that, I would like to turn to our expectations for the first quarter of 2024. We expect Q1 net sales to be between €5 billion and €5.5 billion. Additionally, we expect our Q1 installed base management sales to be around 1.3 billion euros. Gross margin for Q1 is expected to be between 48 and 49 percent. Lower revenue and margin relative to Q4 are primarily driven by lower immersion volume along with an unfavorable change in product.

Susquehanna: Our key areas of potential improvement that could be an area seeing some pull in for system shipments into 2021, too I think when that happens customers see it happening, but I also see that that might have some time to take advantage of the time before full utilization and do upgrades.

Speaker Change: Two, I think when that happens,

Speaker Change: Customers see it happening, but they also see that they might have some time to take advantage of the time before full utilization and do upgrades and actually install base business, which is generally high margin business.

Susquehanna: And actually installed base business, which is generally high margin business.

Speaker Change: I think those are the I think the two main areas where we see upside potential upset for 2020.

Susquehanna: I think those I think the two main areas, where we see upsides.

Susquehanna: For 2024.

Speaker Change: Okay, so it's not really driven by any particular in-market or application, it could be just a broad-based recovery that could give confidence to your customer and there will be some pull-ins, right? Yeah, that's always the case. I mean, you could argue, I mean, we've seen the focus on AI in the memory space.

Speaker Change: Okay. So it's not really driven by any particular end market applications could be just a broad base recovery that could give confidence to a customer and there will be some coolants right. Yes. That's.

Susquehanna: Always the case I mean, you could argue I mean, we are seeing the focus on.

Roger J.M. Dassen: In addition, we also expect lower EUV volume and lower installed base business in Q1 relative to Q4. The relatively slow start to the year is a reflection of the current state of the industry coming out of the downturn. As it relates to gross margin, I would like to make a few more comments on the 2024 margin drivers as well as our longer-term ambitions of 54% to 56% by 2025. We finished 2023 with a full-year gross margin of 51.3%, and there are a number of developments that could impact gross margin in 2024. For EUV, positive drivers include the higher AST of the 3800E as well as improved EUV service.

Susquehanna: AI in the memory space.

Speaker Change: Now, clearly that could happen, but I think it's generally the end markets that are reflective of, you know, where the recovery will take us in 2024. That will actually drive higher utilization of our tools and will mean pooling of those machines because customers don't want to miss the market up there. And I think it's all a bit of the same because the end markets ultimately will have to drive the recovery. And I think AI is now particularly something which could be on top of that because that's clearly a technology transition. We've already seen a very positive, you know, effect of that in our Q4 order.

Susquehanna: Now clearly that could happen, but I think it's generally the end markets that are reflective of where.

Susquehanna: The recovery.

Susquehanna: It will take us in 2024 that will actually drive higher utilization of our tools and will mean pooling of dose machines, because customers don't want to Miss the market up there and I think it's all a bit of the same because the market is ultimately we will have two well well well.

Susquehanna: I have to drive the recovery and I think AI is now, it's now, particularly something which could be on top of that because thats clearly a technology transition we've already already seen as a very positive effect.

Susquehanna: Effect of that in our Q4 order intake.

Speaker Change: If I may ask my follow-up, in the last capsule market day, you highlighted how DRAM could account for 30% of your EUV shipment in 2025. How does that transition look like? Maybe you can share with us the DRAM mix of EUV shipment in 2023, and how does the 2024 look like as we focus on a 30% target mix for 2025?

Speaker Change: So let me ask my follow up.

Roger J.M. Dassen: For Deep UV, we expect product mix to have a negative impact on margins in 2022. For our install-based business, we currently expect a similar gross margin in 2023, but the final impact will ultimately depend on the level of upgrades in 2024. And finally, as we have said before, we expect significant costs in 2024 related to the introduction of high NA and to the ramp of our capacity to 90 EUV and 600 DPV levels, which will create pressure on the gross market. When we assess the combined effects of these different developments, we expect a slightly lower gross margin in 2024 compared to 2025. We are still targeting our earlier communicated gross margin ambition of 54-56% by 2025. This increase in gross margin will be driven by a number of items. First, higher sales volume, both in EUV and DPV, which improves fixed cost coverage.

Speaker Change: And the last capital market day, you highlighted.

Speaker Change: DRAM could account for 30% of your <unk> shipment in 25, how does that.

Susquehanna: Transition looks like maybe you can share with us the DRAM mix of UV shipment in <unk>, three and how does the 24 looks like as we.

Susquehanna: Focus on the 30% target mix for 25.

Speaker Change: Well, in 23, our membership was lower than the 30% that you mentioned, but if you look at 25 and we also take into account what I just said about AI and the need for EUV in the DDR5 and in the HBM era, then, you know, the 30% is a very safe bet and could be on the conservatives.

Speaker Change: 23 of our membership is were lower than the 30% that you mentioned, but if you look at 25 and we also take into account what I, just said about AI and the need for <unk>.

Susquehanna: In the <unk> era.

Susquehanna: Then.

Susquehanna: The 30% is a very safe.

Susquehanna: It is a very safe and could be on the conservative side.

Speaker Change: Thank you.

Susquehanna: Thank you.

Speaker Change: We will now go to the next question.

Susquehanna: We will now go to the next question.

Speaker Change: and your next question

Speaker Change: And your next question comes from.

Speaker Change: Joe Quatrochi from Wells Fargo, please go ahead.

Speaker Change: From the line of Joe <unk> from Wells Fargo. Please go ahead.

Joe Quatrochi: Yeah, thanks for taking the question. I know you reported the orders for both low NA and high NA this quarter, but can you help us just kind of quantify that mix in the orders this quarter? I imagine that the high NA orders that you're receiving now are for deliveries that are beyond 2025 at this point.

Joe: Yes, thanks for taking the questions.

Joe: <unk> reported that orders for both low and high end of this quarter, but can you help us just kind of quantify.

Roger J.M. Dassen: Second, a move to a higher margin EUV 0.33 NA system, as the vast majority of systems in 2025 are planned to be 3800 EC. Third, we expect reduced headwinds from capacity investments as we ramp up volume, including high NAs. Fourth, we will also be transitioning to a higher margin EUV high NA system, the 5200, in 2024. Lastly, we expect our install-based business to have a positive impact on 2025 margins due to both improved EUV service margins as well as increased upgrade business volume. The expected R&D expenses for Q1 are around €1.07 billion, and SG&A is expected to be around €300 billion. Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%. In Q4, ASML paid the second quarterly interim dividend of 1.45 euros per ordinary share.

Speaker Change: That mix and the orders this quarter I imagine that the high enabled or is that youre receiving now are for deliveries that are beyond 2025 at this point.

Speaker Change: Yeah, Joe, as you know, we never disclose high NA orders and we do it for a good reason. I've said it before. The world is very small and high NA orders are something that is competitively sensitive for our customers. So that's why customers don't want us to be specific on high NA. I think it is fair to say that if you look at the $5.6 billion of order intake for EUV that we recorded in the Q4, obviously the high share of that is in low NA. That should be very clear. In terms of overall orders that we have for high NA, I think a couple of quarters ago we said it's now double digits. I think since then we had a few quarters where we added a couple. So I think that's what we're looking at. But the lion's share of the order intake in the quarter really was obviously for low NA.

Speaker Change: Yes, Joe as you know, we never disclose our high end <unk> orders and we do it for a good reason I've said it before the world is very small and <unk> orders or something that is competitive in a competitively sensitive for our customer. So that's why customers don't want us to be specific on the on highway.

Speaker Change: I think it is fair to say that if you look at the $5 6 billion of order intake for EV that we recorded in Q4, obviously the lions share of that is and isn't as unloading that that'd be that should be very clear in terms of.

Speaker Change: Overall orders that we have for <unk>.

I think couple of quarters ago, We said, it's down double digits I think since then we had a few quarters, where we added a couple so I think that said that's what we're that's what we're looking at but the lion's share of the of the order intake in the quarter really was re was RPC for furloughing.

Joe Quatrochi: Got it, that's helpful. And then just as a follow-up, can you give us a puts and takes on free cash flows quarter? I would have, I guess, thought that it might have been a bit higher given the record level of EVV orders and the associated partial down payments that are...

Speaker Change: Got it that's helpful. And then just as a follow up can you give us the puts and takes on free cash flow. This quarter I wonder if I just thought that it might have been a bit higher given the record level of EDI orders and the associated partial down payments that are.

Roger J.M. Dassen: ASML intends to declare a total dividend for the year 2023 of 6.10 euros per ordinary share. The third interim dividend of 1.45 euros per ordinary share will be made payable on February 14, 2024. Recognizing this third interim dividend and the two interim dividends of 1.45 euros per ordinary share paid in 2023, this leads to a final dividend proposal to the general meeting of 1.75 euros per ordinary share. In Q4 2023, no shares were purchased.

Joe Quatrochi: related to that so just any help you could give us on the free cash flow this

Speaker Change: Related to that just any help you can give us on free cash flow this quarter.

Speaker Change: Yeah, of course down payments were helpful, right? So as a result of that, you did see that in the second quarter, in the last quarter Q4, free cash flow was quite positive at $2.6 billion just for the quarter. Primarily driven, as you say, by down payments. But it's also fair to see that we are in ramping mode. We are preparing for a ramp in 2025 and that means we're taking in materials. We're building inventory for I&A, etc., etc. So I think on the inventory position, you would see that we're adding quite a bit. So that is obviously a negative, if you like, to the free cash flow. But still, overall, I think the $2.6 billion that we recorded in the last quarter, I think, was a healthy cash generation.

Speaker Change: Yes of course down payments for Alpha right. So as a result of that I do you did see that in the second quarter.

Speaker Change: And then last quarter Q4 free cash flow was was quite positive at $2 6 billion just for the for the quarter.

Speaker Change: Primarily driven as you say by a buy down payments, but it's also fair to see that we are in ramping mode. We.

Speaker Change: We are preparing for for a ramp in 2025 and that means we're taking in materials we're building.

Peter T. F. M. Wennink: With that, I would like to turn the call back over to Peter. Thank you, Roger. As Roger has highlighted, we had another year of very strong growth in a very challenging environment. We finished the year with a solid backlog of 39 billion euros.

Speaker Change: We're building inventory for ion E etcetera, etcetera. So I think on the inventory position you would see that that we're adding quite a bit so that is obviously.

Speaker Change: A negative if you'd like to the free cash flow, but still overall I think the $2 6 billion that we recorded in the last quarter I think was what was the <unk>.

Speaker Change: <unk>.

Speaker Change: What's a healthy cash your cash generation.

Peter T. F. M. Wennink: The uncertainty remains in the market due to a number of global macro concerns, while the semiconductor industry is currently working through the bottom of the cycle. Our customers are still not certain about the shape or slope of the recovery this year, but there are some positive signs in the indicators that we have been monitoring. Industry and market inventory levels continue to improve, moving towards more healthy levels; lithography tool utilization levels are still running lower than normal but are now improving in both logic and memory members. We expect utilization levels to continue to improve over the course of this year. And lastly, as mentioned by Roger, we saw a very strong order intake in the fourth quarter in support of future demand.

Speaker Change: Got it. Thank you.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Speaker Change: We'll now go to the next question.

Speaker Change: We will now go to the next question.

Speaker Change: And your next question comes from the line of Stphane Houri from OdoBHF. Please go ahead.

Speaker Change: And your next question.

Speaker Change: Comes from the line of.

Speaker Change: Stefan <unk> from <unk> BHF. Please go ahead.

Stphane Houri: Yes, good afternoon, thank you for taking my question. Actually, the question is about the 2025 acceleration. My feeling is that you sound a bit more, you know, comfortable on the fact that this strong acceleration is going to happen. And I remember you saying that you were targeting the middle of the range, but at the same time, I am sure you didn't miss this one. Consensus has come down really to the lower hand of the guidance for 2025. So can you maybe tell us if you are still targeting the middle of the range at least? And what do you need to see in terms of, you know, memory recovery, logic? All those coming through 2024 to, you know, to reassure on that. Thank you.

Speaker Change: Yes.

Stefan: Good afternoon. Thank you for taking my question actually the question is about the 2025 acceleration mice.

Stefan: My feeling is that you you sound a bit more.

Stefan: The control cable Onda on the fact that this strong explanation is going to happen and I remember you, saying that you were targeting the immediate other hand, but at the same time I am sure you didn't Miss this one concerns <unk> come down really to the lower end of the of the guidance for <unk>.

Peter T. F. M. Wennink: To be able to follow the curve of the industry recovery, we are looking at the combined demand for 2024 and 2025. As mentioned last quarter, we view 2024 as a transition year in preparation for the expected strong demand in 2025. We therefore continue to make investment this year both in capacity and in technology to be ready for the upturn in science. We see some positive signs of recovery.

Stefan: 25, so can you maybe tell us if you are targeting the middle of the range at least.

Stefan: And what do you need to see in terms of.

Stefan: No.

Stefan: Maria recovery logic.

Stefan: Orders coming.

Stefan: Through 2024, two to reassure all of that thank you.

Speaker Change: Yeah, you know, Stphane, yes, I mean, we feel a bit more comfortable on 2025 after having received 9.2 billion of orders, which especially in the EUV domain, it's focused on 2025. So I think you get the vote of confidence from our customers on what we thought was going to happen, which is always good. When you talk about the middle of the range, I said, my comment was that I thought the low end of the range was too conservative. That's what I said. I can make it the middle of the range or the high end of the range. It's your choice, but I'm not going to comment on that because, you know, that would give me in January 2024, the 24th of January, give you an outlook or give you guidance on 2025. I mean, it might be a bit early. But I do feel directionally that that's what I'm talking about. That's what I said. I said the low end I thought was too conservative because we do believe that 2025 is going to be a very strong year. Well, you know, the order intake actually gives us at least some level of confidence that that statement at that time.

Speaker Change: Yes, yes.

We feel a bit more comfortable.

Speaker Change: After having received $9 $2 billion of orders, which especially in the EV domain.

Peter T. F. M. Wennink: We feel it might be a bit too early to change our perhaps conservative view as communicated last quarter and therefore still stay with our previously communicated expectation of 2024 revenue being similar to 2022. Looking at the market segments, customers are indicating they are seeing healthy growth this year, primarily driven by AI-related demand for both logic and memory, but also expected from other end markets as inventory levels improve. Coming off a very strong year in 2023, with 60% growth in logic revenue, we expect some pause in demand as customers digest the capacity additions while utilization levels improve. Based on current demand, we see lower logic revenue in 2024 versus 2022. For memory, inventories are approaching normal levels, and customers are expecting to see demand growth on a number of end markets this year. Lithol demand is primarily driven by PRAM technology node transitions in support of advanced memory such as DDR5 and HBM in support of AI-related demand.

Speaker Change: It's a focus on 2025, so I think you get to a vote of confidence from our customers on what we thought was going to happen, which is always good.

Speaker Change: When you talk about the middle of the range I set my comment was that I thought the low end of the range was too conservative that's what I said I can make at the middle of the range or the high end of the range. It's your choice, but I'm not going to comment on that because.

Speaker Change: Well give me in January 2024.

Speaker Change: The 24th of January to give you an outlook are essentially give you guidance on 2025, I mean, it's it might be a bit early.

Speaker Change: So, but I do feel directionally that that's what I said is at the low end I thought it was too cold service. It because we do believe that 25 is going to be a very strong year well. The order intake actually gives us at least some level of confidence that that statement at that time.

Speaker Change: was actually

Speaker Change: quite good so I feel more comfortable yes that's absolutely true now if the recovery in 2025 is indeed what we expect yes we should see a further order flow in 2024. our lead time order lead time is 12 to 18 months so yes and that's what I also said last time you know if we're right on 2025 we need to see orders coming in in the first step of 2024. now we've seen a significant batch of those orders already coming in in q4 2023 so that's just just you know supports our assumptions

Speaker Change: I was actually.

Speaker Change: Quite good so I feel more comfortable yes, that's absolutely true now if the recovery in 2025 is indeed, what we expect yes, we should see a.

Speaker Change: A further order flow in 2024 hour.

Speaker Change: Lead time order lead time is 12 to 18 months. So yes, that's what I also said last time.

Peter T. F. M. Wennink: We currently see revenue growth in our 2024 memory business versus 2020. Turning to our businesses for EUV, we are expecting revenue growth in 2024, and we are planning to recognize revenue on a similar number of EUV low NA systems as in 2023, which includes the fast shipments for 2023. Although we plan a similar number of systems as 2023, we will have higher ASPs from the NXE 3800E systems, more weighted towards the second half of the year. In addition, we expect revenue from one or two INAs. Based on the aforementioned, we expect our non-EUV business to be down in 2024, primarily driven by lower immersion sales relative to 2022. For an in-school-based business, based on our view today, we expect a similar level of revenue compared to last year.

Speaker Change: If we're right on track for a five we need to see orders coming in in the first half of 2024 now we've seen a significant batch of those orders already coming in in Q4 2023.

Speaker Change: Yes.

Speaker Change: Supports our assumptions.

Speaker Change: So in that sense,

Speaker Change: In that sense.

Speaker Change: Now, to make a long story short, yes, I feel more comfortable, I think, with our colleagues.

Speaker Change: Well make a long story short, yes, I feel more comfortable I think with our colleagues.

Speaker Change: Okay, thank you. And regarding the memory market as a follow-up, is it really the start of the recovery of investment in memory or is it just all that is related to AI, DDR5, you know, HBM, or is it wider in your view?

Okay. Thank you and regarding the memory market is a follow up is it really the start of the recovery of investment in memory.

Speaker Change: Just.

Speaker Change: Oh that is related to AI DDR five HBM are wider in your view.

Speaker Change: Well, I think, you know, it's what we're seeing is, of course, the information coming off our tools that we see the utilization rates going up. That's one.

Speaker Change: Well I think.

Speaker Change: It's what we're seeing is of course, the information coming off of our tools that we see the utilization rates going up that's one.

Speaker Change: Clearly, there's also an element of technology transition.

Speaker Change: Clearly, there's also elements of technology transition.

Speaker Change: That's also clear. I think there's a bottleneck in the AI in making use of the full AI potential. DRAM is a bottleneck. The performance memory is a bottleneck. There are solutions, but they need a heck of a lot more HBM, and that's EUV. It's a bit of a mix. I mean, yes, you've gone through, I think, the bottom of this memory cycle with prices going up, utilizations increasing, and that combined with the technology transition driven by AI. That's a bit what we see today. So it's a combination of both.

Speaker Change: That's also clear I think as a bottleneck in the AI.

Speaker Change: In fact, making use of the full AI.

Speaker Change: Potential.

Speaker Change: DRAM is a bottleneck there performance memory is a bottleneck and there are solutions that they need a heck of a whole lot more HBM and thats.

Peter T. F. M. Wennink: As the recovery becomes more clear this year, customers may likely look to upgrade their systems in preparation for 2025, and this could provide future business opportunities this year. As a reflection of the current state of the industry coming out of a downturn and an expected recovery over the course of 2024, we expect a stronger second half relative to the first half of this year. On the geopolitical front, as communicated earlier, we do not expect to get export licenses for our most advanced immersion systems, the NXT 2000 and up, for China in 2022. We have been in contact with the US government on their export control regulations announced in October last year, and we can confirm the estimated financial impact as communicated in October.

Speaker Change: So it's a bit of a mix I mean, yes, you have gone through.

Speaker Change: The Baltimore as memory cycle with.

Speaker Change: Prices going up.

Speaker Change: Utilization is increasing.

Speaker Change: That combined with the technology transition driven by AI, that's a bit what we see today. So it's a combination of both.

Speaker Change: And I think that will continue.

Speaker Change: Good. Thank you, Peter.

Speaker Change: Okay. Thank you Peter.

Peter T. F. M. Wennink: Thank you.

Peter T. F. M. Wennink: We will now go to the next question.

Speaker Change: I will now go to the next question.

Speaker Change: And your next question comes from the line of Sarah Russo from Bernstein. Please go ahead.

Speaker Change: And your next question comes from the line of Sarah Let's say from Bernstein. Please go ahead.

Sarah Russo: Great, thanks for taking my question. So you've said you're expecting strong demand from China to continue in 2024. Is that expected to be sort of at the same level we've seen for the last few quarters where it's been exceptionally strong? Or is there some rebalancing you're expecting across global demand expected for later in the year as we get towards that growth expectation for 2025?

Sarah: Great. Thanks for taking my question. So you said youre expecting strong demand from China to continue in 2024.

Sarah: That expected to be sort of at the same level. We've seen for the last few quarters, where it's been exceptionally strong or is there some rebalancing youre expecting across global demand expected for later in the year as we get towards that growth expectation for 2025.

Peter T. F. M. Wennink: At that time, we stated the impact of the Dutch and the US export control regulations combined and the US export control regulations combined, which is 10 to 15% of our 2023 China system draft. This impact is based on our presumption that as of 2024, we will not obtain export licenses for NXT 2000 and up immersion systems to Chinese customers, and in the case of only a handful of Chinese fabs, this also includes NXT 1970 and 1980. While the export regulations had an impact on our business, we continue to see strong demand for mid-critical and mature nodes in China. Looking for something longer term?

Sarah: Kevin.

Speaker Change: Well, I mean, we're not going to be specific at the beginning of the year exactly on China, but I think, you know, a few data points that we want to share with you. First off, as we also said in the video, we do see the demand from China being very robust.

Kevin: Well I mean, we're not going to be specific at the beginning of the year exactly.

Kevin: On China, but I think.

A few a few data points that said that we want to share with you first off as we also said in the video we do see the demand from China being very robust second there is an impact obviously coming out of the export controls.

Speaker Change: Second, there is an impact, obviously, coming out of the export controls, and Peter just gave you that impact, the 10 to 15 percent.

Kevin: Peter just said just gave you that impact that 10 to 15 that 10% to 15%.

Speaker Change: So I think fundamentally, it's pretty clear that the China demand remains very strong. As we said before, it's primarily driven towards mature and mid-critical notes. I mean, that's what it's all for. It's a bit too early to speculate exactly how the China demand is going to pan out, because that's also dependent on how the demand for the rest of the world is going to pan out, because as you know from previous years, we have allocation questions, right? So for a number of tools, you know, we're still supply constrained, so there you have to determine where is the tool going, and that will only be known once you have a complete picture of all the demand on a global basis. So that's why it's too early to make, you know, specific predictions. Is China going to be a bit up? Is it going to be a bit down? But one thing is for sure, China will remain very strong in our numbers also in 2020.

Kevin: So I think fundamentally it's pretty clear that the China demand remains very strong as we said before it's primarily driven towards mature and unmet critical unmet critical notes I mean, thats what its all thats what its all four that's a bit too early to speculate exactly how the China demand is going to pan out because thats also dependent on how the demand from the rest of the world is going to.

Kevin: Pan out because as you know from previous years, we have allocation questions right. So for a number of tools, we're still supply constrained. So that you have to determine whereas the tool going and that will only be known once you have a complete picture of all the demand.

Peter T. F. M. Wennink: While there are still significant uncertainties, primarily driven by the macro environment, it appears we are passing through the bottom of this specific cycle and expect an industry recovery over the course of 2024. Based on discussions with our customers and supported by our strong backlog, we currently expect 2025 to be a strong year driven by a number of factors. First, secular growth drivers in the semiconductor and markets, which we have previously discussed, such as energy transition, electrification, and AI. The expanding application space, along with increasing lithography on future technology, drives demand for both advanced and mature now.

Kevin: On a global basis. So that's why it's too early to make specific predictions is china going to be a bit up isn't going to be <unk>, but one thing is for sure China will remain very strong and our numbers also in 2024.

Speaker Change: Great, that's really helpful. And maybe as a follow up, I understand that because in 2024, you're not expected to be capacity constrained, especially on the EUV side necessarily. Are you, if you're going to be pre-building, are you anticipating incurring additional costs around potentially holding those machines for any period of time? Or are you expecting those orders to materialize closer to when the machines would be ready? Or are there any other, is that sort of a drag on margin?

Speaker Change: Great. That's very helpful and maybe as a follow up I understand that because in 2024, you're not expected to be capacity constrained, especially on the <unk> side necessarily are you if youre going to be pre building are you anticipating incurring additional costs around potentially holding those machines for any period of time.

Speaker Change: Or are you expecting those orders to materialize closer to when the machines to be ready or are there any other sort of a drag on margins for 2024 that you are factoring in.

Peter T. F. M. Wennink: Second, the industry expects to be in the middle of a cyclical upturn in 2025. And last, as mentioned earlier, we need to prepare for a significant number of new FABs that are being built across the globe, in some instances clearly supported by several government incentive plans. These FABs are spread geographically, are strategic for our customers, and are scheduled to take out...

Speaker Change: and many more.

Speaker Change: No, I wouldn't say that the pre-building is going to be a drag on the gross margin because as a matter of fact, you know, what you're pre-building this year, most of the material that you have for the pre-building is already in, right? So I think from that vantage point, I think there is no big impact on either the cash flow or the gross margin. Of course, the question is you pre-build, but then, you know, back to Peter's point, you know, when Peter said in response to the question of the puts and takes from Mehdi on this year, of course, we currently look at pre-build. It could be that some of those are pulled into 2024. So I would look at a pre-build more as an opportunity than as a threat to the gross margin.

Speaker Change: No I wouldn't say that the pre building is going to be a drag on the gross margin because as a matter of fact, what youre pre building. This year most of the material that you that you have for the pre building is already in <unk>. So I think from that vantage point I think I think there is no big impact on either the cash flow or the growth of all the gross margin because the question is you pre build but then.

Speaker Change: Back to Peters point.

Speaker Change: Peter what are the in response to the question of the puts and takes from Mehdi on this year of course, we currently look at pre build it could be that some of those are pulled into into into 2024. So I would look at a pre built more as an opportunity and then as a threat to the to the gross margin.

Peter T. F. M. Wennink: It is essential that we keep our focus on the future and build capacity in preparation for further long-term growth, as we discussed in the market scenarios for 2025 and 2030 during our Investor Day in November 2022. We plan to update our view during our Investor Day this year on November 14, 2024. In summary, although there are still near-term uncertainties, with a positive outlook, we clearly remain confident in a long-term growth opportunity. With that, we'd be happy to take your questions. Thank you, Roger and Peter. The operator will instruct you momentarily on the protocol for the Q&A session.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you.

Speaker Change: We will now take the next question.

We will now take the next question.

Speaker Change: And your next question comes from the line of Francois Bovignier from UBS. Please go ahead.

Speaker Change: And your next question comes from the line of Francois <unk> from UBS. Please go ahead.

Francois A. Meunier: Thank you very much. So the first question, I wanted to come back a bit to Stphane's question on 2025. And you said, Peter, that you thought low-end was conservative for 2025. It was three months ago when you had the 5 million EUV bookings. And as you know very well, analysts, we are very good at extrapolating trends. So we were very skeptical about these targets after 500 million of EUV bookings. Now you come this quarter with indeed this huge booking number in terms of EUV, which basically puts you in a much better position into 2025. And indeed, you know, it's clearly supporting your comments three months ago. But I would like to know, you know, with this queue for orders, we know that it's very lumpy. You know, it's always moving from one quarter to another very significantly. To what extent queued for orders is a problem? Well, it's a pull-in effect. You know, in other words, do you see still healthy EUV activities? I don't expect, you know, the 5.6 billion every quarter. I'm not saying that. But do you see already in Q1 the activity of EUV fairly healthy and in Q2, or should we just expect Q4 as an exceptional and it will take a significant post? That's my first question.

Francois: Thank you very much. So the first question I wanted to come back of it to just one question.

Speaker Change: On the 2025, and you said Peter Thats you.

Speaker Change: <unk> was conservative for 2025 or three months ago.

Speaker Change: You had the $5 million EV bookings and as you know very well and that is we are very good like extrapolate extrapolating trends.

Skip Miller: Beforehand, I'd like to ask that you kindly limit yourself to one question and one short follow-up, if necessary. This will allow us to get to as many callers as possible. Now, operator, can we have your final instructions and then the first question? Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced.

So we were very skeptical of volatility.

Speaker Change: That's how it gets up to $500 million.

Speaker Change: Bookings this quarter was indeed.

Speaker Change: <unk> booking number in terms of UV, which basically between a much better position.

Speaker Change: In 2025 and indeed.

Speaker Change: Kelly supporting your your comments three months ago.

Speaker Change: But I would like to know.

Speaker Change: Q4 orders, we know that is very lumpy.

Operator: To withdraw your question, please press star 1 and 1 again. We will now take the first question, and the first question comes from the line of Mehdi Hosseini from Susquehanna. Please go ahead. Yes, thank you. Two follow-ups. Peter, you're talking about your view on 24 is still cautious, but you could always change it as the year progresses. Can you share with us the puts and take? What are the key areas that could actually give you confidence and help drive upside?

Speaker Change: That it was moving from one quarter to another very significantly to what extent Q4 orders either pulling effect.

Speaker Change: Hey.

Speaker Change: Do you see.

Speaker Change: <unk> activities I don't expect you know the $5 6 billion every quarter im not saying that.

Speaker Change: Should we do you see already in Q1 the activity of <unk> in Q2 or should we just expect Q4 has an exceptional and it will take a significant post that's my first question.

Speaker Change: I think generally 9.2 billion is pretty exceptional because it was the highest order intake whatever so that's you don't think you're right or would not not expect to top that every quarter now I think

Speaker Change: Well I think generally a $9 2 billion is exceptional because it was the highest order intake or wherever so you.

Speaker Change: You don't think you are right or would not.

Speaker Change: Not expect to top that every quarter now I think.

Speaker Change: Yes, your analysts are very good at extrapolating trends, but I have to warn you that trends in EUV order intake in our business with a few customers might be a very tricky thing to do to actually try to, you know, extrapolate, which is proven by, you know, the order intake in Q3 and in Q4. It's lumpy, as you said. It has to do with a couple of things. I mean, in Q4, also clearly, as a part of the EUV order intake had to do with the obvious technology transitions needed in the DRM space to support AI. That will continue, but I think all in all, in 2025, when we look at a recovery of the cycle and have a full year recovery, on top of that, the new FABs, yes, we need to see a healthy order intake for EUV in the first half of this year, of, you know, 2024. Because, like I said earlier, we have 12 to 18 months orderly time, so that needs to happen, yeah? And I think this is what we need to see. And then,

Speaker Change: Yes.

The analyst.

And I have a follow-up. Yeah, Okay, yeah, in the prepared remarks, I already alluded to it, I think we are seeing the first signs, the positive signs of a recovery, which is basically, you know, the data we get on inventory levels, but also, we see our utilization rates, you know, going up again. That, and also, history means that if we're in a recovery cycle, you will see that continuing throughout the year, which means that 2025 could be Now, having said that... To assess the slope of the recovery, we take a bit of a conservative view. That could, of course, change.

Speaker Change: Very good.

Speaker Change: <unk> trends, but I have to warn you that trends.

<unk> order intake in our business with a few customers might be a very tricky thing to do to actually try to.

Speaker Change: Which actually proven by the order intake in Q3 and Q4 is lumpy as you said that it has to do with a couple of things I mean in Q4 also clearly.

Speaker Change: The.

Speaker Change: As a part of the order intake.

Speaker Change: Has to do with the obvious technology transitions needed interview aerospace to support AI.

Speaker Change: That will continue.

Speaker Change: But I think all in all in 2025, when we look at a recovery of the of these off of the cycle and have a full year recovery on top of that.

Speaker Change: The new Fabs.

Speaker Change: Yes, we need to see.

Speaker Change: Healthy order intake for EV in the first half of this year of 'twenty 'twenty four gross like I said earlier with 12 to 18 months or a lead time, so that needs to happen.

Speaker Change: And I think this is what we need to see and then.

Speaker Change: I don't think that Q4, yes, it was exceptionally high, it was a very good order intake, but for the good reasons. You know, it's basically moving the EV orders now into the 2025 delivery time frame. The orders that we're now getting is not for 2024, it's for 2025. So that will have to continue, and in my mind, will continue in the first half of 2024. So, yeah, may not be $9.2 billion again. In the Q1 2024, but yes, in the first half, we need to see healthy further order intake and to support our 2025 view. Absolutely.

Speaker Change: I don't think that Q4, yes.

Peter T. F. M. Wennink: So if the slope of the recovery is a bit faster than we think, then some of that 2025 business, which we're preparing, by the way, to ship, or at least to build in 2024, could actually be shipped in 2024. Now, I don't think it's going to be in the first half, but some of that, if you talk about, you know, key areas of potential improvement, that could be an area seeing some pull-in for system shipments into 2024. What?

Speaker Change: It was actually a pretty high was a very good order ethic before the good reasons.

Speaker Change: It's basically moving to EV orders now into the 2025 delivery timeframe or does that without getting us all for 2000, and then of course, we're trading 75. So.

Speaker Change: That will have to continue I knew in my mind will continue in the first half of 2024.

Speaker Change: So so yeah maybe.

Speaker Change: And there will be $9 2 billion again in the Q1 'twenty 'twenty four but yes were in the first half we need to see the healthy further order intake and to support our 2025 view absolutely.

Two, I think when that happens, customers see it happening, but they also see that they might have some time to take advantage of the time before full utilization and do upgrades and actually install base business, which is generally high-margin business. I think those are the two main areas where we see upside potential for 2020. Okay, so it's not really driven by any particular market or application; it could be just a broad-based recovery that could give confidence to your customers, and there will be some pull-ins, right? Yeah, that's always the case. I mean, you could argue, I mean, we've seen the focus on AI in the memory space.

Speaker Change: Great, thank you. And maybe a follow-up to that is the memory migration. I mean, this quarter, what is really outstanding is the split of memory, you know, within EUV, which is like 50%, I mean, roughly, which is, you know, very high compared to history. So to support exactly the migration you are describing. Now, we know that the memory market has low utilization rate right now, recovering, but still fairly low. So I would assume, I mean, to which extent, you know, given the low utilization, they can migrate more, you know, it's many offline tools, so they can migrate, spend a lot of time on it. And to which extent, you know, as utilization grows,

Speaker Change: Alright, Thank you and maybe a follow up to that migration.

Speaker Change: This quarter.

Speaker Change: Really outstanding is the split of memory.

Speaker Change: UV, which is like 50% roughly which is.

Very high compared to <unk> to support exactly to my question Youre, describing now we know Maury market is.

Speaker Change: As Louis utilization rate right now.

Speaker Change: Offering, but still fairly low.

Speaker Change: I would assume I mean can we to extent you know given the low utilization. They can migrate to more you know India. Its many offline tools. So they can migrate to spend a lot of time on it.

Speaker Change: And can we sustain to which extent agitation gross.

Speaker Change: They will put the brakes on the migration. Do you see what I mean?

Speaker Change: We put the brakes on the migration do you see what I mean.

Peter T. F. M. Wennink: Now, clearly, that could happen, but I think it's generally the end markets that are reflective of, you know, where the recovery will take us in 2024. That will actually drive higher utilization of our tools and will mean pooling of those machines because customers don't want to miss the market up there. And I think it's all a bit of the same because the end markets ultimately will have to drive the recovery. And I think AI is now particularly something which could be on top of that because that's clearly a technological transition.

Speaker Change: and many more.

Speaker Change: Yes.

Speaker Change: In other words, should we expect the memory as, you know, investing significantly right now, but then we'll slow down as, you know, the industry comes back? Or should we expect, you know, a fundamental line, growing line, because you have a lot of wafers to migrate anyway, and therefore we won't see so much lumpiness? Do you see what I mean?

Speaker Change: In other words should we expect the memory is.

Speaker Change: Investing significantly right now, but then we.

Speaker Change: We slow down as the industry comes back or should we expect you know a fundamental line growing line because you have a lot of wafers to migrate anyway, and therefore, we won't see so much lumpiness due to what I mean.

Speaker Change: Thank you.

Speaker Change: Not entirely, but I do believe that

Speaker Change: Good morning.

Speaker Change: But I do believe that.

Speaker Change: What is important to us, you look at these memory cycles as, you know, this game of chicken, you know, so it's, you build the capacity, there's always big step ups, the underlying growth pattern is also more regular, so you have these times where you have overcapacity, I think this is part of it, you know, today we are going through this cycle, we just see the utilization rates of our memory tools going up, yeah, I think EUV is always, in that sense, scarce, you don't buy, you know, loosely extra EUV systems in the memory space, that's always going to be the gating item, now if you then,

Speaker Change: What is important too as you look at these memory cycle says.

Speaker Change: This game of chicken in Arizona, you built a capacity is always a big step ups.

Speaker Change: <unk> line growth pattern is also a more regular so you have these times, where you have overcapacity I think this is this is part of it today, we are going through this the cycle, we just see the utilization rates of our memory tools growing up.

Peter T. F. M. Wennink: We've already seen a very positive, you know, effect of that in our Q4 order. If I may ask my follow-up question, on the last capsule market day, you highlighted how DRAM could account for 30% of your EUV shipment in 2025. What does that transition look like?

Speaker Change: I think.

Speaker Change: As always.

Speaker Change: And in that sense cash you don't buy.

Speaker Change: Loosely extra <unk> systems.

Speaker Change: The memory space is always going to be the gating the gating item.

Maybe you can share with us the DRAM mix of EUV shipments in 2023, and how does 2024 look like as we focus on a 30% target mix for 2025? Well, in 23, our membership was lower than the 30% that you mentioned, but if you look at 25 and we also take into account what I just said about AI and the need for EUV in the DDR5 and in the HBM era, then, you know, the 30% is a very safe bet and could be on the conservatives. Thank you. We will now go to the next question, and your next question, Joe Quatrochi from Wells Fargo, please go ahead. Yeah, thanks for taking the time to ask the question. I know you reported the orders for both low NA and high NA this quarter, but can you help us just kind of quantify that mix in the orders this quarter?

Speaker Change: come to the conclusion that you need more EUV because DDR5 and HBM is where the external demand is then you know it there's not much to migrate you just need more yeah so um and i think that's on the back of a of a cyclical recovery yeah because you know inventories uh are being consumed so um that migration having the the space to do migration yeah or the the that i don't see that it might be available in the non-EUV space but in the EUV space that is actually this you know scarce tool which which you won't have uh available in abundance and that tool will be the first to be fully utilized utilized

Dan.

Speaker Change: Going to the conclusion that you need more <unk>, because <unk> and HBM is where the extra demand is then.

Speaker Change: Theres not much Dubai, great you just need more yeah.

Speaker Change: And I think that's on the back of a cyclical.

Speaker Change: Cyclical recovery because inventories.

Speaker Change: Being.

Speaker Change: Filmed.

So.

Speaker Change: That migration having.

Roger J.M. Dassen: and HBM in support of AI-related demands. We currently see revenue growth in our 2024 memory business versus 2020. Turning to our businesses for EUV, we are expecting revenue growth in 2024, and we are planning to recognize revenue on a similar number of EUV low-ENA systems as in 2023, which includes the fast shipments for 2023. Although we plan a similar number of systems as in 2023, we will have higher ASPs from the NXE3800T systems, more weighted towards the second half of the year. In addition, we expect revenue from one or two high-end assets. Based on the aforementioned, we expect our non-EUV business to be down in 2024, primarily driven by lower immersion sales relative to 2020. For an install-based business, based on our view today, we expect a similar level of revenue compared to last year.

Speaker Change: The space to do migration.

Speaker Change: Or the.

Speaker Change: I don't see that it might be available in the non <unk> space, but in the EV space that is actually.

Speaker Change: Cash tool, which you won't have.

Speaker Change: Available in abundance and that tool will be the first to be fully utilized.

Speaker Change: So, um,

Speaker Change: So.

Speaker Change: I don't know, whether it's answering your question, but it just.

Speaker Change: Just trying to.

Speaker Change: Think of what you meant.

Speaker Change: Question, Matt, but I think the recovery in memory, a cyclical and on top of that I think we have the technology transition into <unk> and into HBM and that drives memory and I don't think its going to be.

I imagine that the high NA orders that you're receiving now are for deliveries that are beyond 2025 at this point. Yeah, Joe, as you know, we never disclose high NA orders, and we do it for a good reason. I've said it before.

Matt: Something that is very short lift I E one or two quarters. This will continue.

Speaker Change: Great, thank you.

Speaker Change: Alright, Thank you Peter.

Roger J.M. Dassen: The world is very small, and high NA orders are something that is competitively sensitive for our customers. So that's why customers don't want us to be specific about high NA. I think it is fair to say that if you look at the $5.6 billion of order intake for EUV that we recorded in Q4, obviously, a high share of that is in low NA. That should be very clear. In terms of overall orders that we have for high NA, I think a couple of quarters ago we said it was double digits. I think since then, we have had a few quarters where we added a couple.

Speaker Change: Thank you.

Speaker Change: We will now go to our next question.

We will now go to our next question.

Speaker Change: And the next question...

Roger J.M. Dassen: As the recovery becomes more clear this year, customers may likely look to upgrade their systems in preparation for 2025, and this could provide future business opportunities this year. As a reflection of the current state of the industry coming out of a downturn and an expected recovery over the course of 2024, we expect a stronger second half relative to the first half of this year. On the geopolitical front, as communicated earlier, we do not expect to get export licenses for our most advanced immersion systems, the NXT 2000 and up, for China in 2021. We have been in contact with the US government on their export control regulations announced in October last year, and we can confirm the estimated financial impact as communicated in October. At that time, we stated the impact of the Dutch and U.S. export control regulations combined.

Speaker Change: And the next question.

Speaker Change: This comes from the line of Tammy Qiu from Barenburg. Please go ahead.

Speaker Change: Comes from the line of Thomas <unk> from Diamondback. Please go ahead.

Tammy Qiu: Thank you for taking my question. So first one is on high NA. So there has been some concerns relating to high NA UV being too expensive to be used for things like 1.4 nanometer. So Peter, if you have any feedback on customers' current development process, I know it's still at early stage that high NA is going to be the best option when you go to 1.4 nanometer.

Thomas: Alright. Thank you for taking my question first one is on <unk>.

Speaker Change: Thanks, Tom.

Speaker Change: This conference relating to highlight being too expensive to be used for things like one four nanometer P.

Speaker Change: P. J, if you have any feedback from customers.

Speaker Change: Debottleneck closes and also at Eddie Thanks, Bob Hi, Nathan It could be the best option why you go to 1.4 nanometer.

Peter T. F. M. Wennink: Yeah, I think it's a good question because we always need to ask that question to ourselves and to the customer.

Speaker Change: Yes, I think.

So I think that's what we're looking at. But the lion's share of the order intake in the quarter really was obviously for low NA. Got it, that's helpful. And then, just as a follow-up, can you give us a puts and takes on free cash flows for the quarter? I would have, I guess, thought that it might have been a bit higher given the record level of EVV orders and the associated partial down payments that are related to that, so just any help you could give us on the free cash flow this, Yeah, of course, down payments were helpful, right?

Speaker Change: It's a good question because we're always there to answer our ASUR.

Speaker Change: Ask that question two hours to ourselves and to the customers whether we feel.

Peter T. F. M. Wennink: whether we feel that the next generation lithography tool is economic for our customers as you know Moore's Law is not a big law of economics now having said that there is no doubt in my mind now

Speaker Change: The next generation lithography tool is economic for our customers as you know Moore's law isn't that big of economics, now having said that there is no doubt in my mind.

Roger J.M. Dassen: This is 10-15% of our 2023 China system draft. This impact is based on our presumption that as of 2024, we will not obtain export licenses for NXT 2000 and up immersion systems to Chinese customers, and in the case of only a handful of Chinese fabs, this also includes NXT 1970 and 1980. While the export regulations had an impact on our business, we continue to see strong demand for mid-critical and mature notes in China. What are the longer term prospects?

Peter T. F. M. Wennink: That the high-end choice of all our customers that are using EUV is the right choice from an economic point of view.

Speaker Change: Now.

Speaker Change: The high end a choice of all of our customers that are using EV is the right George from an economic point of view.

Peter T. F. M. Wennink: We get that corroborated now very clearly to our customer contacts, yeah, and that used to be a question some time ago, but I think everything that we're currently seeing and also looking at alternative patterns of multi-patterning low and AUV, INA is very clearly the most cost-effective solution. I think that is also...

Speaker Change: We kept that corroborated now very clearly through our customer contacts.

Speaker Change: That used to be a question some time ago I think everything that we're currently seeing.

Roger J.M. Dassen: So as a result of that, you did see that in the second quarter, in the last quarter, Q4, free cash flow was quite positive at $2.6 billion just for the quarter, primarily driven, as you say, by down payments. But it's also fair to see that we are in ramping mode. We are preparing for a ramp in 2025, and that means we're taking in materials. We're building inventory for I&A, etc., etc. So I think based on the inventory position, you would see that we're adding quite a bit. So that is obviously a negative, if you like, to the free cash flow. But still, overall, I think the $2.6 billion that we recorded in the last quarter was a healthy cash generation. I got it.

Speaker Change: And also looking at alternative patterns or multi patterning LOE and <unk>.

Speaker Change: Hi, It is very clearly.

Roger J.M. Dassen: While there are still significant uncertainties, primarily driven by the macro environment, it appears we are passing through the bottom of this specific cycle and expect an industry recovery over the course of 2024. Based on discussions with our customers and supported by our strong backlog, we currently expect 2025 to be a strong year driven by a number of factors. First, secular growth drivers in the semiconductor and markets which we have previously discussed, such as energy transition, electrification, and AI. The expanding application space, along with increasing lithography on future technology, drives demands for both advanced and mature enough.

As a vertically the most cost effective solution I think that is also.

Peter T. F. M. Wennink: You know, driven by the answer that Roger gave, that he said, you know, we've had, he said,

Speaker Change: Yes.

Speaker Change: Driven by the answer that George I gave that is that you know we've had.

Peter T. F. M. Wennink: Last year, we have double-digit orders in the order book, and every quarter, you know, we confidently add a couple of those, you know. Those customers give us those orders because they do those calculations and they see this. So, yes, I can understand the question. I think our confidence that it's the most cost-effective solution, both in memory and logic, logic and memory, has only gone up. I think the commitment of customers is not just visible in the orders, but, for instance, also, as you saw, one of our customers has entered into a joint research center, which is really focused on this and on the utilization of I&A. So, I think that's another, you know, very strong underpinning of the fact that customers do believe that this is an important way forward. Absolutely. And I think the fact that our launching customer of, you know, I&A was very happy that we were shipping all the time. And the pressure that they rightfully put on us was also felt throughout our entire organization. We have to be on time because this is the tool that they need.

Speaker Change: Last year, we have double digit orders and the order book instead of every quarter.

Speaker Change: <unk>.

Speaker Change: We are comfortably add a couple of those.

Speaker Change: Sure.

Speaker Change: Customers gave us those orders because they do dose calculations and they see this so yes I can understand the question I think our confidence that it's the most cost effective solution, both in memory and logic logic and memory.

Roger J.M. Dassen: Second, the industry expects to be in the middle of a cyclical upturn in 2025. And last, as mentioned earlier, we need to prepare for a significant number of new fabs that are being built across the globe, in some instances clearly supported by several government incentive plans. These FABs are spread geographically, are strategic for our customers, and are scheduled to go out to. It is essential that we keep our focus on the future and build capacity in preparation for further long-term growth, as we discussed in the market scenarios for 2025 and 2030 during our Investor Day in November 2022. We plan to update our view during our Investor Day this year on November 14th, 2020. In summary, although there are still near-term uncertainties, with a positive outlook, we clearly remain confident in a long-term growth opportunity. With that, we'd be happy to take your questions. Thank you, Roger and Peter.

Speaker Change: Yes.

Speaker Change: He has only gone up.

Speaker Change: The commitment of customers, it's not just visible in the orders, but <unk> is also as you saw one of our customers has entered into.

Thank you. Thank you. We'll now go to the next question, and your next question comes from the line of Stphane Houri from OdoBHF. Please go ahead.

Speaker Change: Joined Research Center, which is really focused on the on the on this and on the utilization of <unk>. So I think thats another.

Speaker Change: Very strong underpinning of the fact that customers do believe that this is an important way forward, absolutely and I think.

Speaker Change: The fact that.

Speaker Change: Our our launch customer <unk> was very happy that we were shipping all the time and the pressure.

Yes, good afternoon, thank you for taking my question. Actually, the question is about the 2025 acceleration. My feeling is that you sound a bit more, you know, comfortable with the fact that this strong acceleration is going to happen. And I remember you saying that you were targeting the middle of the range, but at the same time, I am sure you didn't miss this one.

Speaker Change: They rightfully put on US was also felt throughout our entire organization, we would have to be on time, because this is the tool that they need.

Speaker Change: Amazing. Thank you. And also a follow-up regarding the memory adoption of

Speaker Change: Thank you and also a follow up regarding memory adoption of <unk>.

Speaker Change: So my understanding is that memory will be on low MA in UV for a few years. How would you view this high MA adoption timeline for memory versus 3D DRAM?

Speaker Change: The funding is mainly will be on.

Speaker Change: For a few years.

Speaker Change: As you review these high adoption timeline from memory.

Peter T. F. M. Wennink: Consensus has come down really to the lower end of the guidance for 2025. So can you maybe tell us if you are still targeting the middle of the range, at least? And what do you need to see in terms of, you know, memory recovery, logic? All those coming through 2024 to, you know, reassure us on that. Thank you. Yeah, you know, Stphane, yes, I mean, we feel a bit more comfortable about 2025 after having received 9.2 billion orders, which, especially in the EUV domain, are focused on 2025. So I think you get a vote of confidence from our customers on what we think is going to happen, which is always good. When you talk about the middle of the range, I said, my comment was that I thought the low end of the range was too conservative. That's what I said. I can make it in the middle of the range or at the high end of the range.

Speaker Change: <unk>.

Speaker Change: Um...

Speaker Change: versus 3D DRAM.

Operator: The operator will instruct you momentarily on the protocol for the Q&A session. This will allow us to get to as many callers as possible. Operator, please give us your final instructions and then the first question. Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced.

Speaker Change: Versus <unk> DRAM.

Speaker Change: Yes, I mean, which one, which will come first?

Speaker Change: Yes.

Speaker Change: Which will come back.

Speaker Change: I don't think that's a question. I think HiNA will be introduced way before 3D DRM.

Speaker Change: Don't think Thats a question I think high and they will be introduced right before <unk> the DRAM.

Speaker Change: So it will just be introduced, and I think it will be introduced in about the same time frame as logic, so there's not a competing technology in that sense.

Speaker Change: So it will just be introduced and I think it will be.

Speaker Change: Introduced in about the same timeframe as.

Speaker Change: Logic.

Speaker Change: So theres not theres not a competing technology in that sense.

Speaker Change: And that's also clear in the order intake. So in the order intake that we see for HiNA, we equally see memory orders for HiNA as we see logic orders. So I think it is clear that customers are looking at the same time frame for the introduction of HiNA, both into logic and into memory. And not considering any trade-off against a 3D DRMA introduction. That's not on the roadmap.

Mehdi Hosseini: To withdraw your question, please press star 1 and 1 again. We will now take the first question, and the first question comes from the line of Mehdi Hosseini from Susquehanna. Please go ahead. Yes, thank you. Two follow-ups. Peter, you're talking about your view on 24 is still cautious, but you could always change it as the year progresses. Can you share with us the puts and take? What are the key areas that could actually give you confidence and help drive upside?

Speaker Change: So our point of view and that's also clear on the order intake and the order intake that we see for high <unk>.

Speaker Change: Equally see memory orders for high na as we see logic orders. So I think that is it is clear that customers are looking at the same time frame for the introduction of high any both into logic and into into memory.

Speaker Change: And not considering any trade off against the <unk> DRAM introduction thats not thats.

Speaker Change: Not all of the roadmap.

Speaker Change: Amazing. Thank you.

Speaker Change: Thank you.

Thank you.

Speaker Change: We will now go to the next question.

It's your choice, but I'm not going to comment on that because, you know, that would give me in January 2024, the 24th of January, give you an outlook or give you guidance on 2025. I mean, it might be a bit early. But I do feel directionally that that's what I'm talking about. That's what I said. I said the low end I thought was too conservative because we do believe that 2025 is going to be a very strong year. Well, you know, the order intake actually gives us at least some level of confidence that that statement at that time, was actually quite good so I feel more comfortable yes that's absolutely true now if the recovery in 2025 is indeed what we expect yes we should see a further order flow in 2024. our lead time order lead time is 12 to 18 months so yes and that's what I also said last time you know if we're right on 2025 we need to see orders coming in in the first step of 2024. now we've seen a significant batch of those orders already coming in in q4 2023 so that's just just you know supports our assumptions So in that sense, Now, to make a long story short, yes, I feel more comfortable, I think, with our colleagues.

Speaker Change: We will now go to the next question.

Speaker Change: And your next question comes from the line of

Speaker Change: And your next question comes from the line of.

Peter T. F. M. Wennink: And I have a follow-up. Yeah. Okay, yeah, in the prepared remarks, I already alluded to it, I think we will see, we are seeing the first signs, the positive signs of a recovery, which is basically, you know, the data we get on inventory levels, but also we see our utilization rates, you know, going up again. And also, the history, not only of the company, but of the industry, means that if we're in a recovery cycle, you will Now, having said that, to assess the slope of the recovery, we take a bit of a conservative view.

Speaker Change: Didier Sikama from Bank of America, please go ahead.

D C: D C cover from Bank of America. Please go ahead.

Speaker Change: Thank you, it's Didier from Bank of America. Thanks for taking my question. My first question, Peter, when we see this big wave of AI orders coming from the memory vendors and coming from foundries, I just wonder, related to your point earlier that HBM and DDR5 could drive an upside to that 30% contribution to EUV volumes in 2025. Do you think there is upside to your potential demand capacity limit? You've got like 75, 80 units from HBM first or from others?

D C: Yes. Thank you Robby <unk> from Bank of America. Thanks for taking my question. My first question Peter when we see this big wave of AI orders coming from demand Murray vendors and coming from foundries.

D C: Foundries.

D C: Wanda related to your point earlier that HBM and <unk> five.

D C: It.

D C: Could drive upside to that 30% contribution to the UV.

D C: In 2025 do you think there is upside to your potential demand capacity limits, you've got like 75 <unk> units.

D C: From from HBM first oil from others.

Speaker Change: That's a very good question.

Speaker Change: This is a very good question.

Peter T. F. M. Wennink: That's something that we need to consider very carefully. We've said our capacity build-out will be 90 EUV low-NA systems, 20 high-NA, whereby internally we are looking at that number as a kind of a base number. We're investigating whether that number should be higher. The question is whether 90 is going to be enough. Now, you have to realize we are selling wafer capacity, which is not only a function of the number of units, but also a function of the productivity

Peter T. F. M. Wennink: That could, of course, change. So if the slope of the recovery is a bit faster than we think, then some of that 2025 business, which we're preparing, by the way, to ship or at least to build in 2024, could actually be shipped in 2024. Now, I don't think it's going to be in the first half, but some of that, if you talk about, you know, key areas of potential improvement, that could be an area seeing some pull-in for system shipments into 2024. To think when that happens, customers see it happening, but they also see that they might have some time to take advantage of the time before full utilization and do upgrades and actually install base business, which is generally a Okay, so it's not really driven by any particular end market or application; it could be just a broad-based recovery that could give confidence to a customer, and there will be some pull-ins, right? Yeah, that's always the case. I mean, you could argue, I mean, we've seen the focus on AI in the memory space.

Speaker Change: That's something that we need to consider very carefully we have set our capacity build out will be 90, <unk> systems 20, IAA whereby internally we are looking at that number as it kind of a base number.

Speaker Change: We're investigating whether that number should be higher.

Speaker Change: The question is we had a 90 is going to be enough now.

Speaker Change: To realize we are.

Speaker Change: Selling wafer capacity, which is not only a function of the number of units, but also a function of the productivity.

Okay, thank you. And regarding the memory market, as a follow-up, is this really the start of the recovery in investment in memory, or is it just all that is related to AI, DDR5, you know, HBM, or is it wider in your view? Well, I think, you know, it's what we're seeing is, of course, the information coming off our tools that we see the utilization rates going up. That's one.

Peter T. F. M. Wennink: of those tools now we have a pretty aggressive roadmap for the productivity in terms of waivers per hour now so it's a complex question that you're asking but actually we need to look at this

Speaker Change: Of those tools now we have a pretty aggressive roadmap, Florida.

Speaker Change: Productivity in terms of wafers per hour.

Speaker Change: So it's a complex question that youre asking.

Speaker Change: Actually we need to look at this.

Peter T. F. M. Wennink: Especially against the, the, the, the...

Speaker Change: Especially against the.

Speaker Change: The.

Peter T. F. M. Wennink: The matter we're seeing for little requirements in the area of AI, whether it's HBM or whether it is, you know, logic, whether the number of units and the roadmap on productivity, which gives wafers, because the combination is wafer capacity, whether that is sufficient.

Speaker Change: The demand that we're seeing for.

Peter T. F. M. Wennink: Clearly, there's also an element of technology transition. That's also clear. I think there's a bottleneck in the AI in making use of the full AI potential. DRAM is a bottleneck. The performance memory is a bottleneck. There are solutions, but they need a heck of a lot more HBM, and that's EUV. It's a bit of a mix.

Speaker Change:

Speaker Change: Litho requirements in the area of AI, whether it's <unk> or whether it is logic, whether the number of units and the roadmap on productivity, which gives wafers because the combination as wafer capacity whether that is sufficient.

Peter T. F. M. Wennink: That is a constant thing we need to look at, and it's going to be something that I think is going to be very...

I mean, yes, you've gone through, I think, the bottom of this memory cycle with prices going up, utilization increasing, and that combined with the technology transition driven by AI. That's a bit what we see today. So it's a combination of both.

Speaker Change: That is a constant thing we have to look at it is going to be something that I think it is going to be very central when we do our.

Peter T. F. M. Wennink: Thank you very much. This is a longer term, and in that context, we absolutely, to Peter's point, we need to look at the ramifications of AIR, but they really are long term, and therefore will be addressed in our 2030 scenarios at the CAC in November.

Speaker Change: The capital markets day by the end of the year I think we're going to give you.

Peter T. F. M. Wennink: And I think that will continue. Good. Thank you, Peter.

Speaker Change: It also gives us a bit of time to actually.

Thank you. We will now go to the next question, and your next question comes from the line of Sarah Russo from Bernstein. Please go ahead.

Speaker Change: We engage with our customers to really understand those requirements and translate that into units and productivity. So good question Vijay, but I'll have to.

Peter T. F. M. Wennink: Now, clearly, that could happen, but I think it's generally the end markets that are reflective of where the recovery will take us in 2024. That will actually drive higher utilization of our tools and will mean pulling those machines because customers don't want to miss the market upturn. I think it's all a bit of the same because the end markets ultimately will have to drive the recovery.

Great, thanks for taking my question. So you've said you're expecting strong demand from China to continue in 2024. Is that expected to be sort of at the same level we've seen for the last few quarters, where it's been exceptionally strong?

Speaker Change: Refer to the capital markets day by the end of the year, where we're going to be a bit more detail, but this is exactly what we are now looking at because DJ Joseph pretty clear. This is not a 2490 596 question why does this business longer term.

Speaker Change: That context, we absolutely to Peter's point, we need to look at but rather ramifications of AAR, but they really are long term and therefore will be addressed in our 2030 scenarios at the FCC.

Roger J.M. Dassen: Or is there some rebalancing you're expecting across global demand expected for later in the year as we get towards that growth expectation for 2025? Well, I mean, we're not going to be specific at the beginning of the year exactly on China, but I think, you know, there are a few data points that we want to share with you. First off, as we also said in the video, we do see the demand from China being very robust. Second, there is an impact, obviously, coming out of the export controls, and Peter just gave you that impact, the 10 to 15 percent. So I think fundamentally, it's pretty clear that Chinese demand remains very strong. As we said before, it's primarily driven by mature and mid-critical notes. I mean, that's what it's all for.

Speaker Change: Super. Thanks very much. Maybe my follow-up is a follow-up to Tammy's question. I'm going to be – so on the high-end system bookings that you had this quarter, can you say whether you had more than one customer placing orders or not?

Speaker Change: Yes.

Speaker Change: Thanks, very much maybe of a photo of pizza photo up to Tommy's question.

Peter T. F. M. Wennink: And I think AI is now particularly something which could be on top of that because that's clearly a technology transition, but we've already seen a very positive effect of that in our Q4 order. If I may ask my follow-up question, at the last Capital Market Day, you highlighted how DRAM could account for 30% of your EUV shipment in 2025. What does that transition look like?

Speaker Change: I'm going to be so on the high end of system bookings that you had this quarter can you say, whether you had more than one customer placing orders or not.

Speaker Change: We could just say that all our customers have placed the order.

Speaker Change: We could just say that all our customers have placed orders, but not in the quarter to be.

Speaker Change: But not in the quarter, to be exact. We know all of them have placed orders in the double-digit units you talked about. I just wonder whether, because you made the point, Peter, that now you know from your customers' tests that high NA is more economical than low NA, and you know there was some...

Speaker Change: That would be helpful.

Speaker Change: And all of them are placed orders in the double digits and instead, you talked about I, just wonder whether because you made the point pizza that now you know from your customers test that tie in as more economical than lower there and you know there were some.

Speaker Change: Bloggers out there, you know, people who talk a lot, who said that hyena is not economical and just wonder whether you could break that bear case once and for all.

Speaker Change: Blow goes out there you know people talk a lot who said that Hyatt is not economical and so was just wondering whether you could break that best case once and for all.

Peter T. F. M. Wennink: Maybe you can share with us the DRAM mix of EUV shipments in 2023, and how does 2024 look like as we focus on a 30% target mix for 2025? Well, in 23, our membership was lower than the 30% that you mentioned, but if we look at 25, and we also take into account what I just said about AI and the need for EUV in the DDR5 and in the HBM era, then, you know, the 30% is a very safe bet and could be on the conservative side. Thank you.

It's a bit too early to speculate exactly how the Chinese demand is going to pan out, because that's also dependent on how the demand for the rest of the world is going to pan out, because as you know from previous years, we have allocation questions, right? So for a number of tools, you know, we're still supply constrained, so there you have to determine where the tool is going, and that will only be known once you have a complete picture of all the demand on a global basis. So that's why it's too early to make, you know, specific predictions. Is China going to be a bit higher? Is it going to be a bit down?

Speaker Change: Yeah, but DJ, I made it very clear earlier on the call why it is that we are not being, you know, very detailed on our comments on I&A. And I think for that precise reason, we're not going to give the color and context that you're looking for. I love it. It's very simple. Well, DJ, it's only a few tools. And as a customer, you know whether you did place your order or you didn't. So they actually make that very simple game. And then we get all these questions. And our sales force is already under pressure. And we don't want to put more pressure on these guys than necessary. But you've got an A for effort there, DJ, for sure. I appreciate it. Thank you so much. And Peter, I hope, do we hear you on the next earnings call or is that your last earnings call?

Speaker Change: Yes, T J I made it very clear earlier on the call why it is that we are not being very detailed on our comments on <unk> and I think for that precise reason, we're not going to give the color and context that you are looking for.

Speaker Change: It's very simply it's.

Speaker Change: It is only a few tools.

Speaker Change: And as a customer you know whether you did place the order or you didn't.

Speaker Change: It makes it very simple game and then we've got all these questions and our sales force is already under pressure and we don't want to put more pressure on these guys are necessary, but you've got a nasal efforts that JJ for sure.

Speaker Change: Appreciate it.

Speaker Change: Thank you so much and pita do we hear you on the next earnings call or is that Youre less lending school well.

Roger J.M. Dassen: But one thing is for sure, China will remain very strong in our numbers also in 2020. Great, that's really helpful. And maybe as a follow-up, I understand that because in 2024, you're not expected to be capacity constrained, especially on the EUV side. Are you, if you're going to be pre-building, are you anticipating incurring additional costs around potentially holding those machines for any period of time? Or are you expecting those orders to materialize closer to when the machines would be ready? Or are there any others? Is that sort of a drag on margin?

Speaker Change: Well, no, I think I will definitely be there. Whether I will talk a lot, I don't know, but you will hear me. I think you will, DJ. But you won't hear me laughing at some answers, but that's no, that's just kidding. No, it's going to be fun for you.

Pita: No I think I.

Speaker Change: I will definitely be to what I will talk a lot I don't know about you will here.

Joe Quatrochi: We will now go to the next question. And your next question... And that comes from the line of Joe Quatrochi from Wells Fargo. Please go ahead. Yeah, thanks for taking the question. I know you reported orders for both low NA and high NA this quarter, but can you help us just kind of quantify that mix in the orders this quarter? I imagine that the high NA orders that you're receiving now are for deliveries that are beyond 2025 at this point. Yeah, Joe. As you know, we never disclose Hyenae orders, and we do it for a good reason.

Speaker Change: I think it will be.

Speaker Change: But you know again lapping that Tom answers, but that's no that's fair.

Speaker Change: Got it.

Speaker Change: For you.

Speaker Change: Yeah, it's just going to be something, yeah. No, I will definitely be there also, but I think, you know, Christophe and Roger and myself will definitely do that, but I'm pretty sure that you want to hear Christophe also giving his view on what lies ahead.

Speaker Change: I was just going to be defensive.

Speaker Change: We'll definitely be there they also but I think yes.

Speaker Change: Crystal vans Roget and myself, we'll we'll definitely do that.

Speaker Change: Im pretty sure that you want to hit a crystal ball so giving his view on what lies ahead.

Speaker Change: Perfect. Thank you. Thank you very much.

Speaker Change: Perfect. Thank you. Thank you very much guys.

Speaker Change: Thank you.

Speaker Change: We will now go to the next question.

Speaker Change: Yes.

Speaker Change: We will now go to the next question.

and many more. No, I wouldn't say that the pre-building is going to be a drag on the gross margin because, as a matter of fact, you know, what you're pre-building this year, most of the material that you have for the pre-building is already in, right? So from that vantage point, I think there is no big impact on either the cash flow or the gross margin. Of course, the question is you pre-build, but then, you know, back to Peter's point, when Peter said in response to the question of the puts and takes from Mehdi this year, of course, we currently look at pre-build. It could be that some of those are pulled into 2024. So I would look at a pre-build more as an opportunity than as a threat to the gross margin. Great. Thank you very much.

Speaker Change: And the next question comes from the line of Andrew Gardiner from City. Please go ahead.

Speaker Change: And the next question comes from the line of Andrew Gardiner from Citi. Please go ahead.

Peter T. F. M. Wennink: I've said it before. The world is very small, and Hyenae orders are something that is competitively sensitive for our customers. So that's why customers don't want us to be specific about Hyenae.

Andrew M. Gardiner: Good afternoon, guys. Thanks for taking the question. You've spoken a lot about the 2025 outlook around the state of the cycle and process node development. We haven't spoken as much today on all of the new fabs that are being built around the world, so an unprecedented level of activity. And there has been various press at different points over the last however many quarters about...

Speaker Change: Yes.

Andrew M. Gardiner: Good afternoon, guys. Thanks for taking the question.

Andrew M. Gardiner: I kind of look at that the 2020 look around to take up the cycle and process development.

Andrew M. Gardiner: We haven't spoken as much today on the.

Andrew M. Gardiner: So all of the new Fabs that are being built around the world. So an unprecedented level of activity.

Peter T. F. M. Wennink: I think it is fair to say that if you look at the 5.6 billion in order intake for EUV that we recorded in Q4, obviously, a large share of that is in Lowinie. That should be very clear. In terms of overall orders that we have for Hyenae, I think a couple of quarters ago, we said it was now double digits. Thank you very much.

Andrew M. Gardiner: And there has been various press at different points over the last many quarters about.

Speaker Change: Thank you so much for joining us today. I think the longer term...

Andrew M. Gardiner: The delays and push outs and some challenges.

Andrew M. Gardiner: And in terms of labor, so chip Pac money that kind of thing.

Roger J.M. Dassen: Thank you. We will now take the next question, and your next question comes from the line of Francois Bovignier from UBS. Please go ahead.

Andrew M. Gardiner: Just wondering if you can give us an update in terms of your.

Andrew M. Gardiner: From your point of view and speaking with our customers have things been moving around at all in terms of the key customers and their plans for these new fabs in the tool installs or is it pretty rock solid from your point of view and therefore, an evident perhaps in that 9 billion yes.

Thank you very much. So the first question: I wanted to come back a bit to Stphane's question on 2025. And you said, Peter, that you thought the low-end was conservative for 2025. It was three months ago when you had the 5 million EUV bookings. And as you know very well, analysts, we are very good at extrapolating trends. So we were very skeptical about these targets after 500 million EUV bookings. Now you come this quarter with this huge booking number in terms of EUV, which basically puts you in a much better position into 2025. And, indeed, you know, it's clearly supporting your comments three months ago. But I would like to know, you know, with this queue for orders. We know that it's very lumpy. You know, it's always moving from one quarter to another very significantly. To what extent is queueing for orders a problem? Well, it's a pull-in effect.

Peter T. F. M. Wennink: And then just as a follow-up, can you give us the puts and takes on free cash flow this quarter? I would have, I guess, thought that it might have been a bit higher given the record level of EBV orders and the associated partial down payments that are coming in related to that. So any help you could give us on free cash flow would be helpful, right?

Speaker Change: Thank you, yes, I think I think a good question Andrew I think.

Speaker Change: I think the longer term.

Speaker Change: Let's say...

Speaker Change: Let's say.

Speaker Change: Positions that customers have taken are pretty rock solid. I think they will happen. Now, the question is about timing, and timing could be a function of, you know, the things that you just mentioned. I mean, is there enough, you know, capable resources, or are there enough capable resources? People, will permits and or, you know, all the things that are necessary like energy and water will all be available on time. Those are, you could say, tactical and operational considerations that are always there. Now, we have examples where we have, indeed, delays because of the things that you just mentioned. We also have examples where things are spot on time, you know, so it's really very dependent on the specific situation of a specific FAB. I think the intentions are very clear. We don't see any delay there. We could see operational or, you know, delays. That will push things back six months or nine months. That could happen. But, generally, those FABs are there. Those FABs are there in the U.S., they're in Japan, they're in Taiwan, they're in Korea, they're in China, they're in Europe. I mean, we don't see any indication or any customer messaging to us that those things won't happen. Yes, it could be some regional issues. But, yeah. But, you know, we also have some good examples. I'll give you Japan, for instance, you know. Things will happen on the dot, you know. So, that will probably also like to happen in Germany, you know. So, these are things that will happen. And in other areas, there might be more problems with, like you mentioned it, you know, water, energy, people, you know, building restrictions and stuff like that. But that's normal. That's our business.

Speaker Change: Physicians Thats got some have taken a pretty rock solid I think that will happen now. The question is about timing and timing can be a function of.

Peter T. F. M. Wennink: So as a result of that, you did see that in the second quarter, in the last quarter, Q4, free cash flow was quite positive, at 2.6 billion just for the quarter, primarily driven, as you say, by down payments. But it's also fair to see that, you know, we are in ramping mode; we are preparing for a ramp in 2025. And that means we're taking in materials, we're building inventory for I&A, etc, etc. So I think on the inventory position, you would see that we're adding quite a bit. So that is obviously a negative, if you like, to the free cash flow. But, you know, still overall, I think the 2.6 billion that we recorded in the last quarter was a healthy cash generation. I got it.

Speaker Change:

Speaker Change: The things that you just mentioned I mean is there.

Speaker Change: Enough.

Speaker Change: Yeah.

Speaker Change: Capable resources or the NFC capable resources people.

Speaker Change: We'll we'll permits and.

Speaker Change: Things that are necessary like energy and Walter will all be available on time. Those are you could say tactical and operational considerations that are always there now we have examples where we have indeed delays because of the things that you. Just mentioned we also have examples where thinks our spud all time so.

You know, in other words, do you still see healthy EUV activities? I don't expect, you know, the 5.6 billion every quarter. I'm not saying that.

Speaker Change: It's really very dependent on the specific situation of a specific fab.

Speaker Change: The intentions are very clear, we don't see any delay there we go.

Peter T. F. M. Wennink: But do you see already in Q1 the activity of EUV fairly healthy and in Q2, or should we just expect Q4 as exceptional, and it will take a significant post? That's my first question. I think, generally, 9.2 billion is pretty exceptional because it was the highest order intake ever, so you don't think you're right or would not expect to top that every quarter now. I think, Yes, your analysts are very good at extrapolating trends, but I have to warn you that trends in EUV order intake in our business with a few customers might be a very tricky thing to do to actually try to, you know, extrapolate, which It's lumpy, as you said.

Speaker Change: Seek operational loss.

Speaker Change: The latest.

Speaker Change: That will push things back six months or nine months that could happen.

But generally those fabs are there those steps are there in the U S or in Japan or in Taiwan.

Stphane Houri: Thank you. Thank you. We will now go to the next question. And your next question comes from the line of Stphane Houri from Odo BHS. Please go ahead. Yes, good afternoon.

Speaker Change: Taiwan and Korea, either in China or in.

Speaker Change: Europe I mean.

Speaker Change: We don't see any indication or any customer.

Speaker Change: Messaging to us that those things won't happen.

Peter T. F. M. Wennink: Thank you for taking my question. Actually, the question is about the 2025 acceleration. My feeling is that you sound a bit more, you know, comfortable with the fact that this strong acceleration is going to happen. And I remember you saying that you were targeting the middle of the range, but at the same time, and I'm sure you didn't miss this one, consensus has come down really to the lower hand of the guidance for 2025. So can you maybe tell us if you are still targeting the middle of the range, at least?

Speaker Change: Yes, it could be some regional issues.

Speaker Change: But we also have some good examples gives you in Japan for instance.

Speaker Change: This will happen on the dock.

Speaker Change: So that.

Speaker Change: And that will probably also like to happen in Germany.

Speaker Change: So these are things that will that will happen and in other areas that might be more problems with like you've mentioned it.

Speaker Change: Walter Energy.

It has to do with a couple of things. I mean, in Q4, also clearly, as a part of the EUV order intake, it had to do with the obvious technology transitions needed in the DRM space to support AI. That will continue, but I think all in all, in 2025, when we look at a recovery of the cycle and have a full year of recovery, on top of that, the new FABs, yes, we need to see a healthy order intake for EUV in the first half of this year, of, you know, 2024. Because, like I said earlier, we have 12 to 18 months of orderly time, so that needs to happen, yeah And I think this is what we need to see.

Speaker Change: People.

Speaker Change: Building restrictions and stuff like that but thats normal thats our business.

Speaker Change: Understood. Thank you. And then just a quick mathematics clarification, if I could. Did you say 38 or 39 billion euros worth of ending backlogs?

Speaker Change: Understood. Thank you and then just a quick mathematics clarification, if I could I think did you say 38 or 39 billion euros worth of ending backlog.

Peter T. F. M. Wennink: And what do you need to see in terms of, you know, memory, recovery, logic, orders coming through 2024 to, you know, reassure yourself on that? Thank you. Yeah, Stphane.

Speaker Change: 39 39 39 and so if we think of the guidance you guys have set for 24 um so the tool revenue within that

Speaker Change: 39, 39, 39, and so if we've taken the guidance you guys have set for 2004.

Speaker Change: The tool revenue within that.

Speaker Change: That implies that you've got about

Speaker Change: That implies that you've got at that Mig.

Speaker Change: NIG teams or so already booked for 2025. Is that a correct assumption?

Speaker Change: Mid teens, let's say already booked for 2025 is that a correct assumption.

Peter T. F. M. Wennink: Yes, I mean, we feel a bit more comfortable about 2025 after having received the 9.2 billion orders, which, especially in the EUV domain, are focused on 2025. So I think you get a vote of confidence from our customers on what we thought was going to happen, which is always good. When you talk about the middle of the range, I said, my comment was that I thought the low end of the range was too conservative. That's what I said. I can make it in the middle of the range or at the high end of the range.

Speaker Change: I think we're booking nicely into 2025, which also means that we need to still book a lot for the remainder of the year, but that's why we're still January 24th. We still have some time to go, but yes, we're booking nicely into 2025.

Speaker Change: I think.

Speaker Change: We're booking nicely into 2025 now.

Speaker Change: Which also means that we need to still book a lot for the remainder of the year, but that's why.

Speaker Change: Whereas we're still January 24th we reserve some time.

Speaker Change: Yes.

Speaker Change: We're booking nicely into 2025.

Speaker Change: Thank you. Especially for the UV. But when you say mid-teens, you do make the adjustment obviously for the installed base business, right, Andrew?

Peter T. F. M. Wennink: And then, I don't think that Q4, yes, it was exceptionally high, it was a very good order intake, but for good reasons. You know, it's basically moving the EV orders now into the 2025 delivery time frame. The orders that we're now getting are not for 2024; they're for 2025. So that will have to continue, and in my mind, will continue in the first half of 2024. So, yeah, it may not be $9.2 billion again.

Speaker Change: Thank you, especially for EV, but when you say mid teens, you do make the adjustment obviously for the installed base business right Andre.

Speaker Change: Yes.

Speaker Change: Okay, because that's obviously needs to be added. Then I get a bit higher than Matisse. That's okay.

Speaker Change: Yes.

Andre: Okay, because thats, obviously needs to be added.

Peter T. F. M. Wennink: It's your choice. But I'm not going to comment on that. Because, you know, that would give me, in January 2024, the 24th of January, give you an outlook or give you guidance on 2025. I mean, it might be a bit early.

A bit higher than mid teens, that's okay.

Andre: Yes.

Speaker Change: Thank you.

Speaker Change: We will now go to the next question.

Speaker Change: Yeah.

Speaker Change: and your next question comes from the line of

Speaker Change: And your next question comes from the line of.

Christopher J. Muse: CD Muse from Cantor Fitzgerald. Please go ahead.

C J Muse from Cantor Fitzgerald. Please go ahead.

Christopher J. Muse: Yeah, good afternoon. Thank you for taking the question. I just first question focused on memory. So,

Peter T. F. M. Wennink: And so, but I do feel directionally that that's what I said. I said the low end, which I thought was too conservative, because we do believe that 2025 is going to be a very strong year. Well, no, the order intake actually gives us at least some level of confidence that that statement, at that time, was actually Q&A Q&A Q&A Q&A. So, in that sense... Now, to make a long story short, yes, I feel more comfortable, I think, with our colleagues. Okay, thank you. And regarding the memory market, as a follow-up, is this really the start of the recovery of investment in memory, or is it just all that is related to AI, DDR5, you know, HBM, or is it wider in your view? Well, I think, you know, it's what we're seeing is, of course, the information coming off our tools that we see the utilization rates going up. That's one.

Speaker Change: Yes, good afternoon, and thank you for taking the question I guess first question.

In Q1 2024, but yes, in the first half, we need to see healthy further order intake to support our 2025 view. Absolutely. Great, thank you.

Speaker Change: Focused on memory so.

Christopher J. Muse: A couple parts here. Were you surprised that memory ended up 10% for you? And if you think about the magnitude of the record orders in the December quarter, can you kind of, you know, separate CXMP and Tueshore domestic China versus kind of the technology buys that you're seeing out of Korea and the US?

Speaker Change: A couple of parts here were you surprised that memory ended up 10% for you and if you think about.

Speaker Change: The magnitude of the record orders in the December quarter can you kind of separate.

Peter T. F. M. Wennink: And maybe a follow-up to that is the memory migration. I mean, this quarter, what is really outstanding is the split of memory, you know, within EUV, which is like 50%, I mean, roughly, which is, you know, very high compared to history. So to support exactly the migration you are describing. Now, we know that the memory market has a low utilization rate right now, recovering, but still fairly low. So I would assume, I mean, to which extent, you know, given the low utilization, they can migrate more. There are many offline tools, so they can migrate, spend a lot of time on it.

Speaker Change: <unk> into a sure.

Speaker Change: Domestic China versus kind of the technology buys that youre seeing out of Korea and the U S.

Speaker Change: Yeah, I think, you know, very easy answer. The technology buyers are dominant.

Speaker Change: Yes, I think very easy answer the technology buys subdominant, yeah. So.

Speaker Change: Yeah, so, and they're also very much focused on the technology transition, so EUV. And were we surprised?

Speaker Change: And they are also very much focused on the technology transitions so that.

Speaker Change: Our revenues were we surprised.

Speaker Change: I must be always saying yes, to a certain extent we were surprised.

Speaker Change: I must be honest, yes, we were surprised in the meetings, we've had with customers and especially the Americas and the leading edge memory customers.

Speaker Change: In the meetings we've had with customers, and especially the memory customers, the leading-edge memory customers,

Speaker Change: We were surprised about...

Speaker Change: We were surprised about.

Speaker Change: The technology requirements.

Speaker Change: All four.

Speaker Change: Um,

Speaker Change: Off.

Speaker Change: For Lithol, AUV specifically, and how it impacts, how important it is for the rollout and the ramp of the memory solutions for AI.

Speaker Change: For litho, <unk>, specifically and how it impacts how important it is for the rollout and the ramp of the memory solutions for AI.

And to which extent, you know, as utilization grows, they will put the brakes on the migration. Do you see what I mean? and many more.

Peter T. F. M. Wennink: Clearly, there's also an element of technology transition. That's also clear. I think there's a bottleneck in the AI. In making use of the full AI potential, DRAM is a bottleneck, performance memory is a bottleneck. And there are solutions, but they need a heck of a lot more HBM. And that's EUV. So it's a bit of a mix.

Peter T. F. M. Wennink: In other words, should we expect memory to invest significantly right now, but then we'll slow down as, you know, the industry comes back? Or should we expect, you know, a fundamental line, a growing line, because you have a lot of wafers to migrate anyway, and therefore we won't see so much lumpiness? Do you see what I mean?

Speaker Change: This is why we received more EUV orders than we anticipated.

Speaker Change: This is why we received more orders than we anticipated.

Speaker Change: Because it was obvious in the detailed discussions and the reviews we did with our customers that EUV is critical in that.

Speaker Change: Because it was obvious in the detailed discussions and reviews with our customers that EOG is critical in that sense.

Speaker Change: and that was a bit of a surprise.

Speaker Change: And that was a bit of a bit of a surprise.

Speaker Change: It's a positive surprise, but, you know, that's,

Speaker Change: A positive surprise.

Speaker Change: But.

Speaker Change: That's what we learned. So yeah, no surprise. Yes.

Speaker Change: That's.

Speaker Change: That's what we learned so yeah a surprise yes.

Thank you. Not entirely, but I do believe that, What is important to us, you look at these memory cycles as, you know, this game of chicken, you know, so it's, you build the capacity, there's always big step ups, the underlying growth pattern is also more regular, so you have these times where you have overcapacity, I think this is part of it, you know, today we are going through this cycle, we just see the utilization rates of our memory tools going up, yeah, I think EUV is always, in that sense, scarce, you don't buy, you know, loosely extra EUV systems in the memory space, that's always going to be the gating item, now if you then, come to the conclusion that you need more EUV because DDR5 and HBM is where the external demand is then you know it there's not much to migrate you just need more yeah so um and i think that's on the back of a of a cyclical recovery yeah because you know inventories uh are being consumed so um that migration having the the space to do migration yeah or the the that i don't see that it might be available in the non-EUV space but in the EUV space that is actually this you know scarce tool which which you won't have uh available in abundance and that tool will be the first to be fully utilized utilized So, um, Great, thank you. Thank you. We will now go to our next question. And the next question... This comes from the line of Tammy Qiu from Barenburg. Please go ahead. Thank you for taking my question. So first one is on high NA.

Speaker Change: Was that a function of EUV layer count or perhaps where they're repurposing equipment and so now they're realizing they need more footprint for EUV? No, it is layer count and imaging performance and that's what led to the surprise, the positive surprise, which immediately led to more orders.

Speaker Change: Yeah.

Speaker Change: Davidson.

Speaker Change: Sorry was that a function of VEB layer, count or perhaps where they are repurposing equipment and so now they're realizing they bought more footprint.

Peter T. F. M. Wennink: I mean, yes, you've gone through, I think, the bottom of this memory cycle, with, you know, prices going up, utilizations increasing, and that combined with the technology transition driven by AI. That's a bit what we see today. Yeah, so it's a combination of both, and I think that will continue. Good. Thank you, Peter.

Speaker Change: It is it is it is lay accounts and imaging performance and that's what that's what.

Speaker Change: Led to the surprise to the positive surprise, which.

Speaker Change: It led to more orders.

Speaker Change: Perfect. And just a quick follow-up on high N.A. Can you kind of update us on your planned shipments and revenue for calendar 25 and how you expect to kind of shrink that time frame between, you know, shipping and revenue? And as part of that number, how should we think about the overlay of memory adoption into 25, 26, 27?

Perfect and just a quick follow up on higher day can you kind of update us on your planned shipments and revenue for calendar 'twenty five and how you expect to kind of shrink that timeframe between.

Sarah Russo: Thank you. We will now go to the next question, and your next question comes from the line of Sarah Russo from Bernstein. Please go ahead.

Peter T. F. M. Wennink: Great, thanks for taking my question. So you've said you're expecting strong demand from China to continue in 2024. Is that expected to be sort of at the same level we've seen for the last few quarters, or has it been exceptionally strong?

Speaker Change: Shipping and revenue.

Speaker Change: And as part of that number how should we think about the overlay of memory adoption into 'twenty five 'twenty six 'twenty seven.

Speaker Change: Yes, so CJ, the revenue for 25, as you know, in the capital market today, we expect five systems in revenue, and that's still the way we look at it. There will be more shipments, but, you know, it's a bit too early to say how exactly is the revenue recognition going to work. As you know, we just chipped only the first modules of the first tool. So it's a bit early, but the five in revenue, that's still the way we look at it. In terms of the introduction of high NA into memory, I think that's consistent with what we had at an earlier question. We do see the timeframe of memory and logic adoption more or less in sync, so to us that is more or less the same thing.

Speaker Change: Yes C. J the revenue 425, as you know at our capital markets day.

Speaker Change: We expect to file systems and revenue and Thats still the way we look at it there will be more shipments.

Peter T. F. M. Wennink: Or is there some rebalancing you're expecting across global demand expected for later in the year as we get towards that growth expectation for 2025? Well, I mean, we're not going to be specific at the beginning of the year exactly on China. But I think, you know, there are a few data points that we want to share with you.

Speaker Change: It's a bit too early to say how exactly is the revenue recognition going to work as you know we just shipped the only the first module of the first so first of all that's a bit early but the five five and revenue that that's still the way we look at it in terms of the introduction of <unk> into memory I think thats consistent with what we had at the at an earlier question.

Speaker Change: We do see the timeframe of memory and logic adoption Moura.

Speaker Change: More or less so to us that is more or less the same timeframe.

Peter T. F. M. Wennink: First off, as we also said in the video, we do see the demand from China being very robust. Second, there is an impact, obviously, coming out of the export controls, and Peter just gave you that impact, the 10 to 15 percent. So I think fundamentally, it's pretty clear that Chinese demand remains very strong. As we said before, it's primarily driven towards mature and mid-critical nodes. I mean, that's what it's all for.

Speaker Change: Thanks so much.

Speaker Change: Thanks, so much.

Speaker Change: Thank you.

Speaker Change: Yeah, so we have time for one last question. If you were unable to get through on this call and still have questions, please feel free to contact the ASML Investor Relations Department with your questions.

Speaker Change: Yes, so we have to.

Speaker Change: For one last question. If you are unable to get through on this call and still have questions. Please feel free to contact the ASML Investor Relations Department with your question now operator May we have the last caller. Please.

So there have been some concerns relating to high NA UV being too expensive to be used for things like 1.4 nanometers. So Peter, if you have any feedback on customers' current development processes, I know it's still at an early stage that high NA is going to be the best option when you go to 1.4 nanometers. Yeah, I think it's a good question because we always need to ask that question to ourselves and to the customer, whether we feel that the next generation lithography tool is economical for our customers. As you know, Moore's Law is not a big law of economics. Now having said that, there is no doubt in my mind now that the high-end choice of all our customers that are using EUV is the right choice from an economic point of view. We get that corroborated now very clearly from our customer contacts, yeah, and that used to be a question some time ago, but I think everything that we're currently seeing and also looking at alternative patterns of multi-patterning low and AUV, INA is very clearly the most cost-effective solution.

Speaker Change: Now, operator, may we have the last caller?

Speaker Change: Thank you. We will now take the last question and the question comes from the line of Sandeep Deshpande from JP Morgan. Please go ahead.

Speaker Change: Thank you we will now take the last question and the question comes from the line of Sandeep Deshpande from Jpmorgan. Please go ahead.

Peter T. F. M. Wennink: It's a bit too early to speculate exactly how the Chinese demand is going to pan out, because that's also dependent on how the demand for the rest of the world is going to pan out. Because, as you know, from previous years, we have allocation questions, right? So for a number of tools, we're still supply constrained. So there you have to determine where the tool is going.

Sandeep Deshpande: Yeah, hi, thanks for letting me on. I have a question to follow up somewhat on Dedea's question. I mean, there is this bear case on high NA EUV. I mean, when you look at your 2030 guidance, you look at you're guiding to about 20 high NA EUV tools. But when you looked at, if you remember, when you had guided the initial ramp of EUV, you had talked about 50 plus tools. So is it that your guidance on high NA EUV on 2022 tools is a function of the throughput of the tool? Or is it a function on the adoption of the high NA EUV into lithography into semiconductor production? Because there is this, you know, emerging case of, you know, that ASML itself is not so bullish on the adoption of high NA EUV and have a quick follow up.

Sandeep Deshpande: Yeah, Hi, Thanks for letting me on.

Sandeep Deshpande: Have a question to follow up somewhat on DDS question.

Sandeep Deshpande: I mean, there is this bear case on hi, <unk> I mean, when you look at your <unk> guidance.

Sandeep Deshpande: Look at you're guiding to about 20 <unk> tools.

Sandeep Deshpande: When you look back if you remember when you had guided the initial ramp of <unk> you had talked about 50 plus tools. So easy that you are.

Peter T. F. M. Wennink: And that will only be known once you have a complete picture of all the demand on a global basis. So that's why it's too early to make, you know, specific predictions. Is China going to be a bit up? Is it going to be a bit down?

Speaker Change: Hi, Amy <unk> tools as a function of the throughput of the total or is it a function on the adoption of the <unk> into lithography into semiconductor production.

Peter T. F. M. Wennink: I think that is also... You know, driven by the answer that Roger gave, that he said, you know, we've had, he said, Last year, we had double-digit orders in the order book, and every quarter, you know, we confidently add a couple of those. Those customers give us those orders because they do those calculations, and they see this. So, yes, I can understand the question. But I think our confidence that it's the most cost-effective solution, both in memory and logic, logic, and memory, has only gone up. I think the commitment of customers is not just visible in the orders, but, for instance, also, as you saw, one of our customers has entered into a joint research center, which is really focused on this and on the utilization of I&A.

Peter T. F. M. Wennink: But one thing is for sure, China will remain very strong in our numbers also in 2020. Great, that's really helpful. And maybe as a follow-up, I understand that, because in 2024, you're not expected to be capacity constrained, especially on the EU side, necessarily. Are you, if you're going to be pre-building, are you anticipating incurring additional costs around potentially holding those machines for any period of time? Or are you expecting those orders to materialize closer to when the machines would be ready? Or are there any other? Is that sort of a drag on the margin?

Speaker Change: Because there is this.

Speaker Change: <unk> case.

Speaker Change: Yes.

Speaker Change: He is not so bullish on the adoption of high any yet I have a quick follow up.

Speaker Change: Well, it is the latter. It has nothing to do with the productivity of the tool, although we will work on the productivity of the tool, which we always do to help our customers get costs. But it's basically the adoption of high-in-A lift-all because it's needed. It is needed when you look at the customer roadmaps and the customer designs. That's what they need from a cost point of view. So, you know, I don't know where the notion comes from that we at ASML…

Speaker Change: Well it is the latter yes. It has nothing to do with the productivity of the tool. Although we will work on the productivity overdue, which we always do to help our customers.

Speaker Change: Cost, but it's basically the adoption of high end a little because it is needed. It is needed in there when you look at the customer Roadmaps and the customer designs, that's what they need from a cost point of view so.

Speaker Change: I don't know where the notion comes from that we at ASML.

Speaker Change: are less

Speaker Change: Polish about HNA or the adoption of HNA. That's not the case.

Speaker Change: Less bullish about <unk> early adoption of high na is not the case.

Speaker Change: I think on the contrary we've seen in the end interactions with our customers

Speaker Change: Okay great.

Peter T. F. M. Wennink: Before that, you're factoring. No, I wouldn't say that the pre-building is going to be a drag on the gross margin because, as a matter of fact, what you're pre-building this year, most of the material that you have for the pre-building is already in, right? So from that vantage point, I think there is no big impact on either the cash flow or the gross margin. Of course, the question is, you pre-build, but then, you know, back to Peter's point, you know, in response to the question of the puts and takes from Mehdi this year, of course, we currently look at pre-build. It could be that some of those are pulled into 2024. So I would look at a pre-build more as an opportunity than as a threat to the gross. Great, thank you very much.

Speaker Change: I think on the contrary, we have seen in the end the interactions with our customers.

Speaker Change: that all our customers now are convinced that high NA is a more cost-effective solution as opposed to multiple patterning low NA.

Speaker Change: That all of our customers now are convinced that high in a more cost effective solution as opposed to multiple patterning low.

Speaker Change: So, yeah, I don't know how to answer it differently.

Speaker Change: So.

Yeah, I don't know how to answer it differently.

Roger J.M. Dassen: So, I think that's another very strong underpinning of the fact that customers do believe that this is an important way forward. Absolutely. And I think the fact that our launching customer, I&A, was very happy that we were shipping all the time. And the pressure that they rightfully put on us was also felt throughout our entire organization.

Speaker Change: Thanks, Peter. I mean, and then another quick follow-up. I mean, in terms of your optimism, I mean, clearly memory orders were much stronger than we expected in Q4, but there is all these new fabs which are going to be out, you know, built over the next two, three years. I mean, and your customers would have given you, you know, what you need to ship to those fabs, really. But do you expect, you know, to sign up to those logic-related, I mean, clearly memory is going to ramp, you've talked about it earlier, but do you expect to sign up to those logic-related fabs? But on the logic side, that those orders will be signed up in the next few quarters for 25 and 26?

Speaker Change: Thanks Peter.

Speaker Change: Another quick follow up I mean in terms of your optimism I mean, clearly memory orders were much stronger than we expected in Q4, but there is all these new fabs, which are going to be built over the next two three years.

Speaker Change: I mean on your customers would have given you.

Speaker Change: What do you need to ship to those to those fabs are centrally.

Peter T. F. M. Wennink: We have to be on time because this is the tool that they need. Amazing. Thank you. And also, a follow-up regarding the memory adoption rate. So my understanding is that memory will be on low MA in UV for a few years. How would you view this high MA adoption timeline for memory versus 3D DRAM? Um.., versus 3D DRAM. Yes, I mean, which one will come first?

Speaker Change: Do you expect to sign up.

Speaker Change: Logic related I mean, clearly memory is going to ramp you've talked about it earlier, but on the.

Speaker Change: Logic side that those all of those orders will be signed up in the next few quarters for 'twenty five and 'twenty six.

Peter T. F. M. Wennink: Thank you. We will now take the next question, and your next question comes from the line of Francois Bovignier from UBS. Please go ahead.

Speaker Change: Yes, I think certainly for 25. I think when we look at our large logic customers,

Speaker Change: Yes, I think certainly for 'twenty five.

Francois A. Meunier: Thank you very much. So the first question I wanted to come back a bit to Stphane's question on 2025, and you said to Peter that you thought the low-end was conservative for 2025. It was three months ago when you know you had the 5 million EUV bookings, and as you know very well, and at least we are very good at extrapolating trends, so we were very skeptical about these targets after 500 million EUV bookings. Now you come this quarter with indeed this huge booking number in terms of EUV, which basically puts you in a much better position into 2025 and, indeed, is clearly supporting your comments three months ago. But I would like to know, with these Q4 orders, we know that it's very lumpy. You know it's always moving from one quarter to another very significantly.

Speaker Change: I think when.

Speaker Change: When we look at our large logic customers. There are still some large customers that still be the order.

Speaker Change: There are still some large customers that still need to order, yeah? So, for 2025. It still has to come, yeah? Now, of course, we're in discussions, this is clear, but I mean, you could also say that, you know, some are not in the order book that definitely need to be there if they want to have tools in 2025.

I don't think that's a question. I think HiNA will be introduced way before 3D DRM. So it will just be introduced, and I think it will be introduced in about the same time frame as logic, so there's not a competing technology in that sense. And that's also clear in the order intake. So in the order intake that we see for HiNA, we equally see memory orders for HiNA as we see logic orders. So I think it is clear that customers are looking at the same time frame for the introduction of HiNA, both into logic and into memory. And not considering any trade-off against a 3D DRMA introduction.

Speaker Change: So for 2025 still has to come.

Speaker Change: Of course, we are in discussions it is clear that I mean.

Speaker Change: You could also say that our.

Speaker Change: Some are not in the order book that definitely need to be there if they want to have tools in FY 'twenty five.

Speaker Change: So, yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: This is something that you will see over the next couple of quarters. So just to clarify, Peter, what I'm trying to understand is you will get the orders in advance rather than, you know, terms, business orders that, you know, you sometimes recognize orders in the quarter, you ship, etc. But you are demanding that these customers sign orders, is that really? Yeah, I don't know. Let's be very clear. I mean, we will get those orders before we start shipping. I mean, that's clear. In the past, what we used to do, but now, that's true, you know, some time ago, and that is the advantage of being in this industry very long, so you have a good memory. In the past, we used to do this because, you know, we knew the customers were having actually opened the fat, the pedestals were there, and we were still negotiating some terms and conditions. There was largely on deep UV, which the tool price is, of course, lower. Now, you won't do that when your tools are, you know, 200 million euros or even 350 million euros. I mean, that's where the financial risk on both sides is a bit higher, so you want to get a little bit more certainty. So that practice might still be true for some, let's say,

Speaker Change: Yes.

Speaker Change: This is something that you will see over the next couple of quarters. So just to just to clarify Peter what is what I'm trying to understand is you.

We'll get the orders in advance of Andre Daniel Mcdonalds business orders that you sometimes recognize orders in the quarter you shipped et cetera, but you are demanding customer sign or does that really yeah I don't know.

Peter T. F. M. Wennink: That's not on the roadmap. Amazing. Thank you. Thank you. We will now go to the next question. And your next question comes from the line of, Didier Sikama from Bank of America, please go ahead. Thank you.

Speaker Change: I mean, we will get those orders before we start shipping I mean.

Speaker Change: That's clear in the past what we used to do now.

Thanks for taking my question. My first question, Peter, when we see this big wave of AI orders coming from memory vendors and coming from foundries, I just wonder, related to your point earlier that HBM and DDR5 could drive an upside to that 30% contribution to EUV volumes in 2025. Do you think there is an upside to your potential demand capacity limit? You've got like 75, 80 units from HBM first or from others?

Speaker Change: It is true sometime ago and that is the advantage of being in this industry very long. So we have a good memory.

Speaker Change: And the.

Speaker Change: As we did we used to do this because we knew the customers were.

Speaker Change: Having opened the fact, the pedestals, where there and we are still negotiating some terms and conditions. There was largely on deep UV, we shipped to prices of course lower now.

Peter T. F. M. Wennink: To what extent do you think Q4 orders are a pull-in effect? In other words, do you still see healthy EUV activities? I don't expect you to know the 5.6 billion every quarter.

Speaker Change: Do that when your tools are.

Speaker Change: The 200 million euros, or even the 350 million euros.

Peter T. F. M. Wennink: That's a very good question. That's something that we need to consider very carefully. We've said our capacity build-out will be 90 EUV low-NA systems and 20 high-NA, whereby internally we are looking at that number as a kind of a base number. We're investigating whether that number should be higher. The question is whether 90 is going to be enough.

Peter T. F. M. Wennink: I'm not saying that, but do you see already in Q1 the activity of EUV fairly healthy and in Q2 or should we just expect Q4 to be exceptional, and it will take a significant pulse? That's my first question. I think, generally, $9.2 billion is pretty exceptional because it was the highest order of intake ever. So you're right; I would not expect to top that every quarter. Yes, your analysts are very good at extrapolating trends, but I have to warn you that trends in EUV order intake in our business with a few customers might be a very tricky thing to do, to actually try to, you know, extrapolate, which is proven by, you know, the order intake in Q3 and in Q4. It's lumpy, as you said, and it has to do with a couple of things.

Speaker Change: That's where the financial risk on both sides is a bit higher so you want to get a little bit.

Speaker Change: With more certainty so that graph this might still be true for some let's say.

Speaker Change: I wouldn't even call it cheaper tools, you know, calling it a 70 or 80 million dollar tool a cheap tool is a bit of an anomaly, but I mean, but that's what happened that time, but I don't think with EUVs that's going to be the case.

Speaker Change: I wouldn't even call. It cheaper duals are calling another 70 or $80 million, we will achieve tools, there's a bit of an anomaly, but I mean, but that's what's happened that time, but I don't think that you went through the <unk>, that's going to be the case.

Speaker Change: Thank you so much Peter.

Speaker Change: okay thanks all right before we sign off i'd like to uh remind you and mentioned a few times that today and also in the video with roger earlier that we our investor day is currently planned to be held in veltoven on november 14th this year and we hope you'll all be able to join us

Peter T. F. M. Wennink: Okay. Thanks, Alright, before we sign off I'd like to remind you and mentioned a few times that today and also on the video with Roget earlier that we our Investor Day is currently planned to be held in <unk> on November 14th of this year and we hope you will all be able to join US now on behalf of ASML I would like to thank you all for joining us today.

Now, you have to realize we are selling wafer capacity, which is not only a function of the number of units but also a function of the productivity of those tools. Now, we have a pretty aggressive roadmap for the productivity in terms of wafers per hour. Now, so it's a complex question that you're asking, but actually, we need to look at this, especially against the, the, the, the... The matter we're seeing for little requirements in the area of AI, whether it's HBM or whether it is, you know, logic, whether the number of units and the roadmap for productivity, which gives wafers because the combination is wafer capacity, whether that is sufficient. That is a constant thing we need to look at, and it's going to be something that I think is going to be very... Thank you very much. This is the longer term, and in that context, absolutely, to Peter's point, we need to look at the ramifications of AIR, but they really are long term and therefore will be addressed in our 2030 scenarios at the CAC in November.

Speaker Change: Now on behalf of ASML, I'd like to thank you all for joining us today. Operator, if you could formally conclude the call, I'd appreciate it. Thank you.

Speaker Change: Operator, if you could formally conclude the call I'd appreciate it thank you.

Speaker Change: Thank you. This concludes the ASML 2023 fourth quarter and four-year financial results conference call. Thank you for participating. You may now disconnect.

Speaker Change: Thank you. This concludes the ASML 'twenty two 'twenty three fourth quarter and full year financial results Conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Peter T. F. M. Wennink: I mean, in Q4, also clearly, as a part of the EUV order intake, had to do with the obvious technology transitions needed in the DRAM space to support AI. That will continue, but I think overall, in 2025, when we look at a recovery of the cycle and have a full year recovery, on top of that, the new fabs, yes, we need to see a healthy order intake for EUVs in the first half of this year, in 2024. Because, like I said earlier, we have a 12 to 18 months order lead time, so that needs to happen, yeah? And I think this is what we need to see. And then...

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Hum.

Speaker Change: Okay.

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Speaker Change: Yes.

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Speaker Change: Okay.

Roger J.M. Dassen: Super. Thanks very much. Maybe my follow-up is a follow-up to Tammy's question. I'm going to be – so on the high-end system bookings that you had this quarter, can you say whether you had more than one customer placing orders or not? We could just say that all our customers placed orders. But not in the quarter, to be exact.

Speaker Change: Okay.

Speaker Change: [music].

Peter T. F. M. Wennink: I don't think that Q4, yes, it was exceptionally high, it was a very good order intake, but for good reasons, you know, it's basically moving the EV orders now into the 2025 delivery time frame. The orders that we're now getting are not for 2024; they're for 2025. So that will have to continue, and in my mind, will continue in the first half of 2024. So, yeah, may not be 9.2 billion again in Q1 2024, but yes, in the first half, we need to see healthy further order intake and to support our 2025 view absolutely. Great, thank you.

Speaker Change: Okay.

Speaker Change: [music].

We know all of them have placed orders for the double-digit units you talked about. I just wonder whether, because you made the point, Peter, that now you know from your customers' tests that high NA is more economical than low NA, and you know there were some... Bloggers out there, you know, people who talk a lot, who said that hyena is not economical, and I just wonder whether you could break that bear case once and for all. Yeah, but DJ, I made it very clear earlier in the call why it is that we are not being, you know, very detailed in our comments on I&A. And I think for that precise reason, we're not going to give you the color and context that you're looking for. I love it!

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Dan.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Sure.

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Speaker Change: Okay.

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Speaker Change: Okay.

Peter T. F. M. Wennink: And maybe a follow-up to that is the memory migration. I mean, this quarter, what is really outstanding is the split of memory, you know, within EUV, which is like 50%, I mean, roughly, which is, you know, very high compared to history. So to support exactly the migration you are describing. Now, we know that the memory market is at a low utilization rate right now, but it is recovering, but still fairly low. So I would assume, I mean, to which extent, you know, given the low utilization, they can migrate more, you know, they have, it's many offline tools, so they can migrate, spend a lot of time on it. And to which extent, to which extent, you know, agitation grows, they will put the brakes on the migration.

Speaker Change: [music].

Roger J.M. Dassen: It's very simple. Well, DJ, it's only a few tools. And as a customer, you know whether you have placed your order or you haven't. So they actually make that a very simple game.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

And then we get all these questions. And our sales force is already under pressure, and we don't want to put more pressure on these guys than necessary. But you've got an A for effort there, DJ, for sure.

Speaker Change: Okay.

Speaker Change: [music].

Peter T. F. M. Wennink: I appreciate it. Thank you so much. And Peter, I hope, do we hear you on the next earnings call, or is that your last earnings call? Well, no, I think I will definitely be there. Whether I will talk a lot, I don't know, but you will hear me. I think you will, DJ. But you won't hear me laughing at some answers, but that's not true, that's just kidding.

Speaker Change: Yes.

Speaker Change: Okay.

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Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

No, it's going to be fun for you. Yeah, it's just going to be something, yeah. No, I will definitely be there also, but I think, you know, Christophe, Roger, and myself will definitely do that, but I'm pretty sure that you want to hear Christophe also giving his view on what lies ahead. Perfect. Thank you. Thank you very much.

Peter T. F. M. Wennink: Do you see what I mean? Do you know the words? Should we expect memory to invest significantly right now, but then we will slow down as the industry comes back, or should we expect a fundamental line growing line because you have a lot of wafers to migrate anyway, and therefore we won't see so much lumpiness. Do you see what I mean? Not entirely, but I do believe that... What is important to us, you look at these memory cycles as, you know, this game of The underlying growth pattern is also more regular.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Dan.

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Speaker Change: Yes.

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Andrew M. Gardiner: Thank you. We will now go to the next question, and the next question comes from the line of Andrew Gardiner from City. Please go ahead.

Speaker Change: Yes.

Speaker Change: [music].

Andrew M. Gardiner: Good afternoon, guys. Thanks for taking the question. You've spoken a lot about the 2025 outlook for the state of the cycle and process node development. We haven't spoken as much today about all of the new fabs that are being built around the world, so an unprecedented level of activity. And there has been various press at different points over the last however many quarters about... Thank you so much for joining us today.

Speaker Change: Thank you for watching! Thank you for watching! Thank you for watching! Thank you for watching!

Speaker Change: Okay.

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Peter T. F. M. Wennink: So you have these times where you have overcapacity. I think this is, this is part of it. You know, today, we are going through this cycle; we just see the utilization rates of our memory tools going up. Yeah. I think EUV is always, in that sense, scarce.

Speaker Change: Okay.

Peter T. F. M. Wennink: I think in the longer term... Let's say... Positions that customers have taken are pretty rock solid. I think they will come to pass. Now, the question is about timing, and timing could be a function of, you know, the things that you just mentioned. I mean, is there enough, you know, capable resources, or are there not enough capable resources? People, will permits and or, you know, all the things that are necessary like energy and water will all be available on time?

Speaker Change: Okay.

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Peter T. F. M. Wennink: You don't buy, you know, loosely extra EUV systems in our memory space; that's always going to be the gating item. Now, if you then don't conclude that you need more EUV because DDR5 and HBM are where the extra demand is, then, you know, there's not much to migrate; you just need more. Yeah, and I think that's on the back of a cyclical recovery because, you know, inventories are being consumed. So that migration, having the space to do migration, yeah, or the other, I don't see that. It might be available in the non-EUV space, but in the EUV space, that is actually this, you know, scarce tool, which you won't have available in abundance, and that tool will be the first to be fully utilized.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Okay.

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Speaker Change: Okay.

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Andrew M. Gardiner: Those are, you could say, tactical and operational considerations that are always there. Now, we have examples where we have, indeed, delays because of the things that you just mentioned. We also have examples where things are spot on time, you know, so it's really very dependent on the specific situation of a specific FAB. I think the intentions are very clear. We don't see any delay there. We could see operational or, you know, delays. That will push things back six months or nine months. But that could happen. But, generally, those FABs are there. Those FABs are in the U.S., they're in Japan, they're in Taiwan, they're in Korea, they're in China, they're in Europe.

Speaker Change: Yes.

Speaker Change: Dan.

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Speaker Change: Yes.

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Yes.

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Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thank you for watching! Please subscribe to our channel!

Peter T. F. M. Wennink: So, I don't know whether it's answering your question, but I'm just trying to think of what you meant or what the question meant, but I think the recovery in memory is cyclical, and on top of that, I think we have the technology transition into DDR and into HBM, and that drives memory, and I don't think it's going to be something that is very short-lived, i.e. One or two quarters.

Okay.

Speaker Change: [music].

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Speaker Change: Yes.

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Speaker Change: Okay.

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Peter T. F. M. Wennink: I mean, we don't see any indication or any customer messaging to us that those things won't happen. Yes, it could be some regional issues. But, yeah. But, you know, we also have some good examples. I'll give you Japan, for instance.

Peter T. F. M. Wennink: All right, thank you. Thank you. We will now go to our next question. And the next question... That comes from the line of Tammy Qiu from Berenberg, please go ahead. Thank you for taking my question. So the first one is on high NA.

Andrew M. Gardiner: Things will happen on the dot, you know. So, that will probably also happen in Germany, you know. So, these are things that will happen. And in other areas, there might be more problems with, like you mentioned, water, energy, people, you know, building restrictions and stuff like that.

Peter T. F. M. Wennink: So there have been some concerns relating to high NA EUV being too expensive to be used for things like 1.4 nanometer. So Peter, if you have any feedback on customers' current development processes, I know it's still at an early stage, is high NA going to be the best option when you go to 1.4 nanometer? Yeah, I think it's a, it's a good question because we always need to answer or answer or ask that question to ourselves and to the customer, whether we feel that the next generation lithography tool is economical for our customers. As you know, Moore's Law is an empirical law of economics.

Peter T. F. M. Wennink: But that's normal. That's our business. Understandable. Thank you. And then just a quick math clarification, if I could.

Andrew M. Gardiner: Did you say 38 or 39 billion euros worth of ending backlogs? 39 39 39 and so if we think of the guidance you guys have set for 24 um, so the tool revenue within that, that implies that you've got about NIG teams or so already booked for 2025. Is that a correct assumption?

Peter T. F. M. Wennink: Now having said that, there is no doubt in my mind now that the high-end choice of all our customers that are using EUV is the right choice from an economic point of view. We get that corroborated now very clearly through our customer contact. Yeah, that used to be a question some time ago, but I think everything that we're currently seeing and also looking at alternative patterns of multi-patterning low NAE UV, high NAE is very clearly the most cost-effective solution.

Roger J.M. Dassen: I think we're booking nicely into 2025, which also means that we need to still book a lot for the remainder of the year, but that's why we're still January 24th. We still have some time to go, but yes, we're booking nicely into 2025. Thank you. Especially for the UV.

Andrew M. Gardiner: But when you say mid-teens, you do make the adjustment obviously for the installed base business, right, Andrew? Yes. Okay, because that obviously needs to be added. Then I get a bit higher than Matisse.

Peter T. F. M. Wennink: I think that is also driven by the answer that Roger gave, that he said, you know, we've had... Last year, we had double-digit orders in the order book, and every quarter, you know, we comfortably add a couple of those. Customers give us those orders because they do those calculations, and they see this. So, yes, I can understand the question. But I think our confidence that it's the most cost-effective solution, both in memory and logic, logic, and memory, has only gone up. I think the commitment of customers is not just visible in the orders, but, for instance, also, as you saw, one of our customers has entered into a joint research center, which is really focused on this and on the utilization of INA.

Roger J.M. Dassen: That's okay. Thank you. We will now go to the next question, and your next question comes from the line of "CD Muse" from Cantor Fitzgerald. Please go ahead.

Yeah, good afternoon. Thank you for taking the question. I just asked the first question focused on memory. So, there are a couple parts here. Were you surprised that memory ended up being 10% for you?

Peter T. F. M. Wennink: And if you think about the magnitude of the record orders in the December quarter, can you kind of, you know, separate CXMP and Tueshore domestic China versus kind of the technology buys that you're seeing out of Korea and the US? Yeah, I think, you know, very easy answer. The technology buyers are dominant. Yeah, so, and they're also very much focused on the technology transition, so EUV. And were we surprised?

Peter T. F. M. Wennink: So, I think that's another very strong underpinning of the fact that customers do believe that this is an important way forward. Absolutely, and I think the fact that our launching customer, INA, was very happy that we were shipping on time and the pressure that they rightfully put on us was also felt throughout our entire organization. We have to be on time because this is the tool that they need. Amazing.

I must always say yes, to a certain extent, we were surprised. In the meetings we've had with customers, and especially the memory customers, the leading-edge memory customers, we were surprised about... the technology requirements.

Peter T. F. M. Wennink: All four. Um, for Lithol, AUV specifically, and how it impacts how important it is for the rollout and the ramp of memory solutions for AI. This is why we received more EUV orders than we anticipated because it was obvious in the detailed discussions and the reviews we did with our customers that EUV is critical in that, and that was a bit of a surprise. It's a positive surprise, but, you know, that's what we learned.

Peter T. F. M. Wennink: Thank you. And also, a follow-up regarding the memory adoption timeline. So my understanding is that memory will be at low MAUV for a few years. How would you view this high MAUV adoption timeline for memory versus 3D DRAM? um, versus 3DDRAM.

Peter T. F. M. Wennink: Well, yes, I mean, which one will come first? I don't think that's a question. I think HiNA will be introduced way before 3DDRM. So it will just be introduced. And I think it will be introduced in about the same time frame as logic. So there's not a competing technology in that.

So yeah, no surprise. Yes. Was that a function of EUV layer count or perhaps where they're repurposing equipment, and now they're realizing they need more footprint for EUV? No, it is layer count and imaging performance, and that's what led to the surprise, the positive surprise, which immediately led to more orders. Perfect.

Roger J.M. Dassen: And just a quick follow-up on high N.A. Can you kind of update us on your planned shipments and revenue for calendar 25 and how you expect to kind of shrink that time frame between, you know, shipping and revenue? And as part of that number, how should we think about the overlay of memory adoption into 25, 26, 27?

Peter T. F. M. Wennink: And that's also clear in the order intake. So in the order intake that we see for HiNA, we, you know, we equally see memory orders for HiNA as we see logic orders. So I think that is clear that customers are looking at the same timeframe for the introduction of HiNA, both into logic and into memory, and not considering any trade-off against the 3D DRMA introduction.

Yes, so CJ, revenue for 25, as you know, in the capital market today, we expect five systems in revenue, and that's still the way we look at it. There will be more shipments, but, you know, it's a bit too early to say how exactly revenue recognition is going to work. As you know, we've just chipped the first modules of the first tool. So it's a bit early, but the five in revenue, that's still the way we look at it. In terms of the introduction of high NA into memory, I think that's consistent with what we had in an earlier question. We do see the timeframe of memory and logic adoption more or less in sync, so to us, that is more or less the same thing. Thanks so much.

Peter T. F. M. Wennink: That's not on the roadmap. Amazing, thank you. Thank you. We will now go to the next question. And your next question comes from the line of... Didier Sekama from Bank of America, please go ahead. Yes, thank you. It's Didier Sekama from Bank of America.

Thanks for taking my question. My first question, Peter, when we see this big wave of AI orders coming from memory vendors and coming from, you know, foundries, I just wondered, related to your point earlier that HBM and DDR5 could drive an upside to that 30% contribution to EUV volumes in 2025. Do you think there is an upside to your potential demand capacity limit? You've got like 75, 80 units from HBM first or from others.

Roger J.M. Dassen: Yeah, so we have time for one last question. If you were unable to get through on this call and still have questions, please feel free to contact the ASML Investor Relations Department with your questions. Now, operator, may we have the last caller?

Peter T. F. M. Wennink: That's a very good question. That's something that we need to consider very carefully. We've said our capacity build-out will be 90 EUV low-in-a systems and 20 high-in-a, whereby internally, we are looking at that number as a kind of a base number. We're investigating whether that number should be higher. The question is whether 90 is going to be enough. Now, you have to realize we are selling wafer capacity, which is not only a function of the number of units but also a function of productivity. All of those tools.

Sandeep Deshpande: Thank you. We will now take the last question, and the question comes from the line of Sandeep Deshpande from JP Morgan. Please go ahead.

Sandeep Deshpande: Yeah, hi, thanks for letting me on. I have a question to follow up somewhat on Dedea's question. I mean, there is this bear case on high NA EUV.

Peter T. F. M. Wennink: I mean, when you look at your 2030 guidance, you see that you're guiding to about 20 high NA EUV tools. But when you looked at, if you remember, when you guided the initial ramp of EUV, you had talked about 50 plus tools. So is it that your guidance on high NA EUV on 2022 tools is a function of the throughput of the tool? Or is it a function of the adoption of high NA EUV into lithography for semiconductor production? Because there is this, you know, emerging case of ASML itself not being so bullish on the adoption of high NA EUV and having a quick follow-up. Well, it is the latter.

Peter T. F. M. Wennink: Now we have a pretty aggressive road map for productivity in terms of waivers per hour. Now, so this is a complex question that you're asking me, but actually, we need to look at this. The math that we're seeing for lethal requirements in the area of AI, whether it's HBM or whether it's logic, whether the number of units and the roadmap for productivity, which gives wafers because the combination is wafer capacity, whether that is sufficient. That is a constant thing we need to look at, and it's going to be something that I think is going to be very important when we do our Capital Markets Day by the end of I think we're going to give you... that also gives us a bit of time to actually engage with our customers to really understand those requirements and translate that into units and productivity.

Sandeep Deshpande: It has nothing to do with the productivity of the tool, although we will work on the productivity of the tool, which we always do to help our customers get costs. But it's basically the adoption of high-in-A lift-all because it's needed. It is needed when you look at the customer roadmaps and the customer designs. That's what they need from a cost point of view. So, you know, I don't know where the notion comes from that we at ASML are less, Polish about HNA or the adoption of HNA. That's not the case. I think, on the contrary, we've seen in the end interactions with our customers that all our customers are now convinced that high NA is a more cost-effective solution as opposed to multiple patterning low NA.

Peter T. F. M. Wennink: So, good question, DJ, but I have to refer to Capital Markets Day by the end of the year, where we're going to be a bit more detailed, but this is exactly what we're now looking at. It's also pretty clear that this is not a 24, 25, or 26 question, right? This is longer term, and in that context, absolutely, to Peter's point, we need to look at the ramifications of AIR, but they really are long term and therefore will be addressed in our 2030 scenarios at the end of the year. Super, thanks very much.

Peter T. F. M. Wennink: So, yeah, I don't know how to answer it differently. Thanks, Peter. I mean, and then another quick follow-up. I mean, in terms of your optimism, I mean, clearly memory orders were much stronger than we expected in Q4, but there is all these new fabs which are going to be out, you know, built over the next two, three years. I mean, and your customers would have given you, you know, what you need to ship to those fabs, really.

Sandeep Deshpande: But do you expect, you know, to sign up for those logic-related, I mean, clearly memory is going to ramp, you've talked about it earlier, but do you expect to sign up for those logic-related fabs? But on the logic side, that those orders will be signed up in the next few quarters for 25 and 26? Yes, I think certainly for 25.

Peter T. F. M. Wennink: Maybe if I follow up, it's a follow up to Tammy's question. I'm going to be, so on the high-end system bookings that you had this quarter, can you say whether you had more than one customer placing orders or not? We could just say that all our customers placed orders.

Peter T. F. M. Wennink: I think when we look at our large logic customers, there are still some large customers that still need to order, yeah? So, for 2025, it still has to come, yeah?

Peter T. F. M. Wennink: But not in the quarter, to be... Well, not in the quarter, because that would be a lot more... We know, all of them have placed orders in the double digits, as you talked about. I just wonder whether, because you made the point, Peter, that now you know from your customers' tests that high N.A. is more economical than low N.A.

Sandeep Deshpande: Now, of course, we're in discussions, this is clear, but you could also say that, you know, some are not in the order book that definitely need to be there if they want to have tools in 2025. So, yeah. This is something that you will see over the next couple of quarters. So just to clarify, Peter, what I'm trying to understand is you will get the orders in advance rather than, you know, terms, business orders that, you know, you sometimes recognize orders in the quarter, you ship, etc. But you are demanding that these customers sign orders. Is that really? Yeah, I don't know.

Peter T. F. M. Wennink: and you know there were some bloggers out there, you know, people we talk to a lot who said that high-end is not economical and just wondered whether you could break that bear case once and for all. Yeah, but DJ, I made it very clear earlier in the call why it is that we are not being, you know, very detailed in our comments on INA. And I think for that precise reason, we're not going to give you the color and context that you're looking for. Okay. I love it!

Peter T. F. M. Wennink: It's very simple. It's, DJ, it's only a few tools. And as a customer, you know whether you have placed your order or you haven't. So they make that a very simple game.

Peter T. F. M. Wennink: And then we get all these questions. And our sales force is already under pressure, and we don't want to put more pressure on these guys than necessary. But you've got an A for effort, DJ, for sure.

Peter T. F. M. Wennink: Let's be very clear. I mean, we will get those orders before we start shipping. I mean, that's clear.

Sandeep Deshpande: In the past, what we used to do, but now, that's true, you know, some time ago, and that is the advantage of being in this industry very long; you have a good memory. In the past, we used to do this because, you know, we knew the customers were having actually opened the fat, the pedestals were there, and we were still negotiating some terms and conditions. There was largely on deep UV, which the tool price is, of course, lower. Now, you wouldn't do that when your tools are, you know, 200 million euros or even 350 million euros. I mean, that's where the financial risk on both sides is a bit higher, so you want to get a little bit more certainty.

Peter T. F. M. Wennink: I appreciate it. Thank you so much. And Peter, I hope, do we hear from you on the next earnings call, or is that your last earnings call? Well, no. I think I will definitely be the winner.

Peter T. F. M. Wennink: I will talk a lot. I don't know, but you will hear me. I think you will, DJ. But you can't hear me laughing at some answers. But that's no, that's no, that's just kidding. No, it's going to be good for you.

Peter T. F. M. Wennink: I will definitely be there, but I think Christophe and Roger and myself will definitely do that. But I'm pretty sure that you want to hear Christophe also giving his view on what lies ahead. Perfect, thank you, thank you very much. Thank you. We will now go to the next question. And the next question comes from the line of Andrew Gardiner from City. Please go ahead. Good afternoon, guys.

Andrew M. Gardiner: Thanks for taking the question. You've spoken a lot about the 2025 outlook for the state of the cycle and process node development. And we haven't spoken as much today about all of the new fabs that are being built around the world. So an unprecedented level of activity. And there has been various press at different points over the last however many quarters about Andrew Gardiner, John Pitzer, Mehdi Hosseini, Pierre Ferragni, Robert Sanders, Aleksander Peter Sultani, John Pitzer, Mehdi Hosseini, Craig DeYoung, Martin Brink. Let's see. The question is about timing, and timing could be a function of, you know, the things that you I mean, are there enough, you know, capable resources, or are there enough capable resources, people, or will permits and or, you know, all the things that are necessary, like energy and water, will all be available on time?

Peter T. F. M. Wennink: So that practice might still be true for some, let's say, I wouldn't even call it cheaper tools, you know, calling it a 70 or 80 million dollar tool a cheap tool is a bit of an anomaly, but I mean, but that's what happened that time, but I don't think with EUVs that's going to be the case, okay thanks all right before we sign off i'd like to uh remind you and mentioned a few times that today and also in the video with roger earlier that we our investor day is currently planned to be held in veltoven on november 14th this year and we hope you'll all be able to join us, Now on behalf of ASML, I'd like to thank you all for joining us today. Operator, if you could formally conclude the call, I'd appreciate it. Thank you. Thank you. This concludes the ASML 2023 fourth quarter and four-year financial results conference call. Thank you for participating. You may now disconnect.

Peter T. F. M. Wennink: Those are, you could say, tactical and operational considerations that are always there. Now, we have examples where we have, indeed, delays because of the things that you just mentioned. We also have examples where things are spot on time. You know, so it's really very dependent on the specific situation of a specific FAD. I think the intentions are very clear. We don't see any delay there. We could see operational or, you know, delays that will push things back six months or nine months. That could happen.

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Peter T. F. M. Wennink: But, generally, those FADs are there. Those FADs are in the U.S., they're in Japan, they're in Taiwan, Korea, China, Europe; we don't see any indication or any customer messaging to us that those things won't happen. Yes, there could be some regional issues, but we also have some good examples. I'll give you Japan, for instance. Things will happen, on the dot. That will probably also like to happen in Germany.

Peter T. F. M. Wennink: These are things that will happen, and in other areas, there might be more problems with, like you mentioned, water, energy, people, building restrictions, and stuff like that. But that's normal, that's our business. Okay. And then just a quick mathematics clarification, if I could. Did you say 38 or 39 billion euros worth of ending backlog? 39.

Peter T. F. M. Wennink: And so if we think of the guidance you guys have set for 24, the tool revenue within that, that implies that you've got a bad mid-teams or so already booked for 2025. Is that a correct assumption? I think, you know, we're booking nicely into 2025 now, which also means that we need to still book a lot for the remainder of the year. But that's why, you know, we're still January 24th. We still have some time to go.

Peter T. F. M. Wennink: But yes, we're booking nicely into 2025. Thank you. Especially for the UV.

Peter T. F. M. Wennink: But when you say mid-teens, you do make the adjustment, obviously, for the install-based business, right, Andrew? Yeah. Okay, because that obviously needs to be added. Then I get a bit higher than Matisse.

Peter T. F. M. Wennink: That's okay. Thank you. We will now go to the next question. And your next question comes from the line of... CD Muse from Cantos Fitzgerald. Please go ahead.

Christopher J. Muse: Yeah, good afternoon. Thank you for taking the question. I just asked the first question focused on memory.

Peter T. F. M. Wennink: So, there are a couple parts here. Were you surprised that memory ended up being 10% for you? And if you think about the magnitude of the record orders in the December quarter, can you kind of separate CXNP and Tuishou domestic China versus kind of the technology buys that you're seeing out of Korea and the U.S.? Yeah, I think, you know, very easy answer: the technology buys are dominant. Yeah. So they're also very much focused on the technology transition. So EUV. And we'll be surprised. I must honestly say yes to the certainty that we will be surprised.

Peter T. F. M. Wennink: In the meetings we've had with customers, and especially the memory customers, the leading-edge memory customers, we were surprised about the technology requirements for Little, AUV specifically, and how it impacts and how important it is for the rollout and the ramp of the memory solutions for AI. This is why we received more EUV orders than we anticipated because it was obvious in the detailed discussions and the reviews with it with our customers that EUV is critical in that sense. And that was a bit of a surprise.

Peter T. F. M. Wennink: There's a positive surprise, but you know that's what we learned. So yeah, a surprise, yes. Was that a function of EUV layer count or perhaps where they're repurposing equipment and now they're realizing they need more footprints for EUV? It was layer count and imaging performance, and that's what led to the surprise, the positive surprise, which immediately led to more orders.

Peter T. F. M. Wennink: Perfect. And just a quick follow-up on high N.A., can you kind of update us on your planned shipments and revenue for calendar 25 and how you expect to kind of shrink that time frame between, you know, shipping and revenue? And as part of that number, how should we think about the overlay of memory adoption into 25, 26, 27? Yes, so CJ, the revenue for 2025, as you know, at Capital Markets Day, we expect five systems in revenue, and that's still the way we look at it. There will be more shipments, but, you know, it's a bit too early to say how exactly revenue recognition is going to work because, as you know, we just shipped the first modules of the first tool.

Peter T. F. M. Wennink: So it's a bit early, but the five in revenue, that's still the way we look at it. In terms of the introduction of high NA into memory, I think that's consistent with what we had in an earlier question. We do see the time frame of memory and logic adoption more or less in sync, so to us that is more or less the same. Thanks so much.

Peter T. F. M. Wennink: Yeah, so we have time for one last question. If you are unable to get through on this call and still have questions, please feel free to contact the ASML Investor Relations Department with your question. Now, operator, may we have the last caller?

Sandeep Deshpande: Thank you. We will now take the last question, and the question comes from the line of Sandeep Deshpande from JP Morgan. Please go ahead.

Peter T. F. M. Wennink: Yeah, hi, thanks for letting me on. I have a question to follow up somewhat on the DDS question. I mean, there is this bear case on high NA EUV. I mean, when you look at your 2030 guidance, you see that you are guiding to about 20 high NA EUV tools. But when you looked at, if you remember when you guided the initial ramp of EUV, you talked about 50 plus tools. So is it that your guidance on high NA EUV on 20 tools is a function of the throughput of the tool? Or is it a function of the adoption of the high NA EUV into lithography into semiconductor production? Because there is this, you know, emerging case of that ASML itself is not so bullish on the adoption of high NA EUV and has a quick follow-up. Well, it is the latter. Yeah, it has nothing to do with the productivity of the tool, although we will work on the productivity of the tool, which we always do to help our customers, you know, get costs. But it's basically the adoption of high and a little because it's needed.

Peter T. F. M. Wennink: It is needed because when you look at the customer roadmaps and the customer designs, that's what they need from a cost point of view. So, you know, I don't know where the notion comes from that we at ASML are less. Polish about INA or the adoption of INA, that's not the case. I think, on the contrary, we've seen, at the end, the interactions with our customers, that all our customers are now convinced that high N.A. is a more cost-effective solution as opposed to multi-patterning low N.A.

Peter T. F. M. Wennink: So, yeah, I don't know how to answer it differently. Thanks Peter. I mean and then another quick follow-up I mean in terms of your optimism I mean clearly memory orders were much stronger than we expected in Q4 but there is all these new fabs which are going to be out you know built over the next two three years I mean and your customers would have given you ship you know what you need to ship to to those to those fabs as such really but do you expect you know to sign up those logic related I mean clearly memory is going to ramp you've talked about it earlier but but on the logic side that those or those orders will be signed up in the next few quarters for 25 and 26, Yes, I think certainly for 25. I think when we look at our large logic customers, There are still some large customers that still need to order for 2025. It still has to come.

Peter T. F. M. Wennink: Of course, we're in discussions, this is clear. But I mean, you could also say that some are not in the order book. They definitely need to be there if they want to have tools in 2025. So, yeah. This is something that you will see over the next couple of quarters. So just to clarify, Peter, what I'm trying to understand is you will get the orders in advance rather than, you know, terms, business orders that, you know, you sometimes recognize orders in the quarter, you ship, etc., but you are demanding that these customers sign orders, etc., really? Yeah, no, no, no.

Peter T. F. M. Wennink: Let's be very clear. I mean, we will get those orders before we start shipping. I mean, that's clear.

Peter T. F. M. Wennink: In the past, what we used to do, but now, that's true, you know, some time ago, and that is the advantage of being in this industry very long; you have a good memory. In the past, we used to do this because, you know, we knew the customers were having problems, actually opened the fat, the pedestals were there, and we were still negotiating some terms and conditions. But it was largely on DPV, where the tool price is, of course, lower. Now, you wouldn't do that when your tools are, you know, 200 million euros or even 350 million euros. I mean, that's where the financial risk on both sides is a bit higher, so you want to get a little bit more certainty. So that practice might still be true for some, let's say, 10 years. I wouldn't even call them cheaper tools; calling a 70 or 80 million dollar tool a cheap tool is a bit of an anomaly, but I mean, but that's what happened that time, but I don't think with EUVs that's going to be the case.

Peter T. F. M. Wennink: Thank you so much, Peter. Okay, thanks. All right, before we sign off, I'd like to remind you, as I mentioned a few times today and also in the video with Roger earlier, that our Investor Day is currently planned to be held in Velthoven on November 14th this year, and we hope you'll all be able to join us. Now, on behalf of ASML, I'd like to thank you all for joining us today. Operator, if you could formally conclude the call, I'd appreciate it. Thank you. Thank you. This concludes the ASML 2023 fourth quarter and four year financial results conference call. Thank you for participating. You may now disconnect. Thank you for watching!

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