Q1 2024 ASML Holding NV Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the ASML 2024 First Quarter Financial Results Conference call on April 17th, 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 that 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 call over to Mr. Skip Miller. Please go ahead.
Good day, and thank you for standing by welcome to the ASML 'twenty 'twenty four first quarter financial results Conference call on April 17th Twenty-twenty full at this time all participants are in a listen only mode. After the Speakers' introduction that there'll be a question and answer session.
To ask a question during the session you will need to press star one on your telephone you will then have an automated message advising Johan there's ways 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 call over to Mr. Skip Miller.
Skip Miller: Thank you, operator. Welcome everyone, this is Skip Miller, Vice President of Investor Relations at ASML. Joining me today on the call are our ASML CEO, Peter Wennink, our CFO, Roger Dassen, and our Chief Business Officer and incoming CEO, Christophe Fouquet. The subject of today's call is ASML's 2024 First Quarter Results. The length of this call will be 60 minutes, and questions will be taken in the order that they are received. This call is also being broadcast live over the internet at ASML.com.
Skip Miller: Please go ahead.
Skip Miller: Thank you operator welcome everyone. This is skip Miller, Vice President of Investor Relations at ASML joining.
Joining me today on the call are air Smells CEO, Peter Winuk, our CFO Roshi, Dawson, and our Chief business officer, and incoming CEO Christophe.
Skip Miller: The subject of today's call is air Smells 'twenty 'twenty four first quarter results.
Skip Miller: Length of this call will be 60 minutes and questions will be taken in the order that they are received this call.
Skip Miller: <unk> is also being broadcast live over the Internet at ASML Dot com.
Skip Miller: 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. 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 forward-looking statements involve material risks and uncertainty. 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.com and in ASML's annual report on Form 20-F 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.
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.
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 laws.
Skip Miller: These forward looking statements involve material risks and uncertainties.
Skip Miller: 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 Winter for a brief introduction.
Peter T. F. M. Wennink: Thank you, Skip. Welcome, everyone. And thank you for joining us for our first quarter 2024 results conference. Before we begin the Q&A session, Roger, Christophe, and I would like to provide an overview and some commentary on the first quarter of 2024, as well as provide our view of the coming quarters. Roger will start with a review of our first quarter 2024 financial performance with added comments on our short-term outlook, and I will briefly reflect on the current market environment and then hand over to Christophe to complete the introduction with some additional comments on the future business outlook.
Peter T. F. M. Wennink: Thank you skip welcome everyone and thank you for joining us for our first quarter 2024 results conference call.
Peter T. F. M. Wennink: Before we begin the Q&A session Roget, Christoph and I would like to provide an overview and some commentary on the first quarter of 2024 as well as provide our view of the coming quarters and Roger will start with a review of our first quarter 2034 financial performance with added comments on our short term outlook and I will briefly reflect on the current market environment, and then hand over to <unk>.
Peter T. F. M. Wennink: To complete the introduction with some additional comments on our future business outlook.
Roger J. M. Dassen: Thank you, Peter, and welcome, everyone. I will first review the first quarter of 2024 financial accomplishments and then provide guidance for the second quarter of 2024. Let me start with our first quarter account. Total net sales came in at 5.3 billion euros, at the midpoint of guidance. We shipped 12 EUV systems and recognized 1.8 billion euros in revenue from 11 systems this quarter. Net sales, net system sales of 4 billion euros, which were driven by logic at 63%, with the remaining 37% coming from memory, installed base management sales for the quarter came in at 1.3 billion euros, as guided. Growth Margin for the quarter came in at 51%, which was above our guidance, primarily driven by product mix, more immersion in the UV systems, and some one-offs.
Peter T. F. M. Wennink: Okay.
Roger: Thank you Peter and welcome everyone.
Roger: I will first review of the first quarter 2024 financial accomplishments and then provide guidance on the second quarter of 2024.
Roget: Let me start with our first quarter accomplishments total net sales came in at $5 3 billion euros at the midpoint of guidance.
We shipped well UV systems and recognized $1 8 billion euros revenue from 11 systems this quarter.
Roget: Net sales net system sales of 4 billion euros, which was driven by logic at 63% with the remaining 37% coming from memory.
Roget: Installed base management sales for the quarter came in at $1 3 billion euros as guidance.
Roget: Gross margin for the quarter came in at 51%, which is above our guidance, primarily driven by product mix more immersion in the UV systems and some one offs.
Roger J. M. Dassen: On operating expenses, R&D expenses came in at €1,032,000,000, and FG&A expenses came in at €273,000,000, both slightly lower than guided due to a shift in spend to later in the year. Net income in Q1 was 1.2 billion euros, representing 23.1% of total net sales and resulting in an EPS of 3.11. Turning to the balance sheet, we ended the first quarter with cash, cash equivalents, and short-term investments at a level of 5.4 billion euros, which is lower than the previous quarter.
Roget: On operating expenses R&D expenses came in at 1.032 billion euros and SG&A expenses came in at 273 million euros or slightly lower than guided due to a shift in spend to later in the year.
Roget: Net income in Q1 was $1 2 billion euros, representing 23, 1% of total net sales and resulting in an EPS of 311.
Roget: Turning to the balance sheet, we ended the first quarter with cash cash equivalents and short term investments at a level of $5 4 billion euros, which is lower than previous quarter.
Roger J. M. Dassen: We ended Q1 with negative free cash flow primarily driven by lower down payments and higher inventory relative to last quarter. In the current environment, as customers work to return to profitability and strengthen their cash positions, we continue to provide some support for our customers.
Roget: We ended Q1 with negative free cash flow, primarily driven by lower down payments and higher inventory relative to last quarter and the current environment as customers work to return to profitability and strengthened cash position. We continue to provide some support for our customers.
Roger J. M. Dassen: The higher inventory is a result of the increased material intake, including high volumes of A, as part of the planned capacity ramp in preparation for stronger demand next year. Moving to the order book, Q1 net system bookings came in at 3.6 billion euros, which is made up of 656 million euros for EV bookings and 2.9 billion euros for non-EV bookings. Net system bookings in the quarter were driven by memory at 59% and logic for the remaining 41% of the bookings.
Roget: The higher inventory as a result of the increased material intake, including hi, Nate as part of planned capacity ramp in preparation for stronger demand next year.
Moving to the order book Q1 net system bookings came in at $3 6 billion euros, which is made up of 656 million euros or EV bookings and $2 9 billion euros for non EV bookings.
Roget: Net system bookings in the quarter was driven by memory at 59% and logic for the remaining 41% of the bookings.
Roger J. M. Dassen: There is quite a bit of speculation around order numbers, so I will make a few comments here. In the past six months, we've had orders of almost 13 billion euros, which is quite significant. As we have said in the past, our order flow can be lumpy and may not be evenly distributed over the year.
Speaker Change: There is quite a bit of speculation around order numbers. So I will make a few comments here.
Speaker Change: In the past six months, we've had orders of almost 13 billion euros, which is quite significant.
Speaker Change: As we said on the past order flow can be lumpy.
Speaker Change: Not be evenly distributed over the year, although we don't guide orders and order rate a bit over 4 billion euros per quarter for the final three quarters of the year would provide full auto coverage at the end of 'twenty 'twenty four 'twenty five sales number that would be at the midpoint of our 2022 Investor day scenarios.
Roger J. M. Dassen: Although we don't guide orders, an order rate of a bit over 4 billion euros per quarter for the final three quarters of the year would provide full order coverage at the end of 2024 for a 2025 sales number that would be at the midpoint of our 2022 investor day scenario. At the end of Q1 2024, we finish with a backlog of around 38 billion euros. With that in mind, I would like to turn to our expectations for the second quarter of 2024.
Speaker Change: At the end of Q1 2024, we finished with a backlog of around 38 billion euros.
Speaker Change: With that I would like to turn to our expectations for the second quarter of 2024.
Roger J. M. Dassen: We expect Q2 total net sales to be between 5.7 billion euros and 6.2 billion euros. We expect our Q2 installed base management sales to be around 1.4 billion euros. The relatively low first half of the year, compared to the expected strong second half, is in line with the expected industry recovery from the dump.
Speaker Change: We expect Q2 total net sales to be between $5 7 billion euros and $6 2 billion euros.
Speaker Change: We expect our Q2 installed base management sales to be around $1 4 billion euros.
Speaker Change: Relatively low first half of the year compared to the expected strong second half is in line with the expected recovery from the downturn.
Roger J. M. Dassen: Gross margin for Q2 is expected to be between 50 and 51 percent. The expected R&D expenses for Q2 are around €1,070,000,000, and FG&A is expected to be around €295,000,000. Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%. In Q1, ASML paid a quarterly interim dividend of 1.45 euros per ordinary share. Recognizing the three interim dividends of 1.45 euros per ordinary share paid in 2023 and 2024, this leads to a final dividend proposal to the Annual General Meeting of 1.75 euros per ordinary share, which will result in a total dividend for the year 2023 of 6.10 euros per ordinary share, which is a 5.2 percent increase compared to 2020. In Q1 2024, we purchased around 0.5 million shares for a total amount of around 400 million With that, I would like to turn the call back over to Peter.
Speaker Change: Gross margin for Q2 is expected to be between 50 and 51%.
Speaker Change: The expected R&D expenses for Q2 are around $1 billion 17 billion euros, and SG&A is expected to be around 295 million euros.
Speaker Change: Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%.
Speaker Change: In Q1, a smell aid a quarterly interim dividend of 145 euros per ordinary share.
Speaker Change: Sure.
Speaker Change: Recognizing the three interim dividends of $1 45, Europe ordinary share paid in 2023 and 2024. This leads to a final dividend proposal to the annual general meeting of 175 year old per ordinary share, which will result in a total dividend for the year 2023 of $6 10 euros Board.
Speaker Change: <unk> share, which is a five 2% increase compared to 2022.
Speaker Change: In Q1, 2024, we purchased around <unk> five.
Speaker Change: <unk> 5 million shares for a total amount of around 400 million euros 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, a relatively slow Q1 start to the year is consistent with our guidance and expectations coming out of a downturn. Overall semiconductor inventory levels continue to improve, trending towards more healthy levels. We also see continued improvements in lithography tool utilization at both logic and memory customers, all in line with the industry's continued recovery from the downturn. Looking at the market segments, we see a similar environment as communicated last quarter with demand momentum from AI-related applications. However, memory demand is primarily driven by DRAM technology node transitions in support of advanced memories such as DDR5 and HBM.
Peter T. F. M. Wennink: Thank you Roger.
Peter T. F. M. Wennink: So Jay has highlighted it's a relatively slow Q1 start to the year is consistent with our guidance and expectations coming out of a downturn.
Peter T. F. M. Wennink: Overall semiconductor industry.
Peter T. F. M. Wennink: Sorry overall.
Peter T. F. M. Wennink: It looks like the inventory levels continue to improve turning towards more healthy levels. We also see continued improvements in lithography tool utilization at both logic and memory customers. All in line with the industry's continued recovery from the downturn.
Looking at the market segments, we see a similar environment as communicated last quarter with the mass momentum from AI related applications memory demand is primarily driven by DRAM technology node transitions in support of advanced memories, such as DDR five NH BM logic.
Peter T. F. M. Wennink: Logic customers continue to digest the significant capacity additions made over the past year. As many of you know, next week, April 24th, is the General Meeting of Shareholders and my last working day at ASML. Although this is not a big surprise anymore, it's still a big event for me, Martin, and our families. And it has been an enormous privilege to have been able to serve the company and its many stakeholders for so long.
Peter T. F. M. Wennink: Logic customers continue to digest, the significant capacity additions made over the last year over the past year.
Peter T. F. M. Wennink: As many of you know the next week or April 24th.
Peter T. F. M. Wennink: The general meeting of shareholders at my last effective working day at ASML. Although this is not a big surprise anymore.
Speaker Change: It's still a big event for me Martin and our families and it has been an enormous privilege of being able to serve the company and its many stakeholders for so long.
Peter T. F. M. Wennink: I have thoroughly enjoyed virtually every moment of it, and the many interactions I've had with many of you, including these conference calls, believe it or not. And I hope I will see some of you someday, sometime. I wish you all good health, a prosperous and happy life. And with that, I'd like to turn it over to you, Christophe.
Speaker Change: Surely enjoy it's virtually every moment of it and the many interactions I've had with many of you, including these conference calls believe it or not.
Speaker Change: And I hope I will see some of you someday sometime I wish you all good health, a prosperous and happy life.
Speaker Change: I'd like to turn it over to you Christophe.
Christophe D. Fouquet: Thank you, Peter. And, first of all, thank you for the last 10 years leading ASML and making it the great company we know today. I think some of our audience have been with you for the 40 plus quarters you led as CEO, but probably not many for the nearly 100 quarterly calls over your past 25 years at ASML. I am sure everyone on the call will miss you as much as we all will at ASML. I am very honored and privileged to succeed Peter, and I am very much looking forward to working with all of you.
Thank you Peter and first of all thank you for the last 10 years, leading a female and making it the great company, we know today.
Christophe: I think some of our audience have been with you for the 40 <unk> quarter as you lay the CEO, but probably not many for the 9100 quarterly calls, although youre past 25 years of nice to know.
Speaker Change: I'm sure everyone on the call, we'll Miss you as much as we all will at a minimum.
Speaker Change: I am myself, very annoyed and pre relates to succeed Peter and I'm very much looking forward to working with all of you.
Christophe D. Fouquet: As Peter mentioned, our view on the market segment for 2024 has not changed relative to what we stated last quarter. We expect memory revenue growth this year primarily driven by the technology transition in support of advanced memory technology. We see lower logic revenue this year relative to last year, as customers digest the lethal capacity installed over the past year. Turning to our businesses.
Speaker Change: As Peter mentioned, our view on the market segments for 2024.
Speaker Change: Relative to what we stated last quarter.
Speaker Change: We expect memory revenue growth this year, primarily driven by technology transition in support of advanced memory technology.
We see lower logic revenue this year relative to last year as customers Digest litho capacity installed over the past year.
Speaker Change: Turning to our businesses.
Christophe D. Fouquet: For EUV, we continue to expect revenue growth in 2024. We plan to recognize revenue on a similar number of EUV 0.33 in a system as in 2025. In addition, we expect revenue from one to two INS. On our 0.33 NX system, we shipped the first NXE3800E this quarter for qualification at the customer. The NXE3800E has the capability to deliver a significant increase in performance with a productivity of 220 Wh per hour, which is a 37% increase over the NXE3600D in its final configuration.
Speaker Change: For <unk>, we continue to expect revenue growth in 2024, we plan to recognize revenue on a similar number of EV <unk> 2023.
Speaker Change: In addition, we expect revenue from one to two <unk>.
Speaker Change: Oh, no voluntary fee NFC statement, we shipped the first E. <unk> E. This quarter for qualification of the customer.
Speaker Change: <unk> E <unk> E as the capability to deliver a significant increase in performance with a productivity of 220 with it per hours, which is a 37% increase over the Nx E 3600 D in each refinery configuration.
Christophe D. Fouquet: The NXE-1300E also brings imaging and overlay improvements, which will make it the future tool of choice for memory and logic advancement. Those performance increases will deliver better value for our customers, including cost of ownership, and will translate into higher ASPs and improved margins for ISF. EUB customers plan to transition to the NX-E3800E this year. As a result, the majority of our low NAEUV shipments in the second half of the year will be this system.
Speaker Change: The <unk> <unk> at the end of its E. Also brings imaging and overlay improvements, which will make it the future tool of choice for memory and logic advanced nodes.
Speaker Change: To support those performance increases will deliver better value for our customers, including cost of ownership and will translate into higher asp's and improved margins for isom. It.
Speaker Change: UE customer plan to transition to the index E 3800 this year.
Speaker Change: As a result, the majority of our low end <unk> shipments in the second half of the year would be the step.
Christophe D. Fouquet: Regarding INA or 0.55 NEUV, we shipped our first system to a customer, and this system is currently under installation. We started to ship the second system this month, and its installation is also about to start. During the SPIE Industry Conference in February, we announced first light on our INA system located in our joint ASML-IMEC INA lab in Wernicke. We have since achieved first images with a new record resolution below 10 nm and expect to start exposing wafers in the coming weeks.
Speaker Change: Regarding iron ore.
Speaker Change: Slide five any EV.
Speaker Change: We shipped our first step to a customer and <unk> currently under installation.
Speaker Change: We started to ship the second system this months and.
Speaker Change: Installation is also about to start.
Speaker Change: During the SBA industry conference in February we announced first slides on our <unk> located in our joint based email I make any lab environment.
Speaker Change: We have since achieved first images with a new record resolution below 10 nanometer and expect to start exposing wafers in the coming weeks.
Christophe D. Fouquet: All INA customers will use this system for early access to process development. The customer interest in our system lab is high as this system will help both our logic and memory customers prepare for INA insertion into their robots. Relative to 0.33NA, the 0.55NA system provides finer resolution, enabling an almost three times increase in transistor density at a similar productivity, in support of sub-2-nanometer logic and sub-10-nanometer DRAM logic
Speaker Change: Any customer will use the C stands for early access to process development.
Speaker Change: The customer interest for our system is high as this system will help boost our logic and memory customers prepare for <unk> insertion into their formats.
Speaker Change: Relative to <unk>, the 0.55, Nic's them provide final resolution, enabling and almost three times, increasing transistor density at similar productivity in support of sub 10 nanometer logic and sub 10 nanometer DRAM nodes.
Christophe D. Fouquet: We expect our non-EUV business to be done in 2024, primarily driven by lower emergent system failures relative to 2020. For our install-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 look to upgrade their systems in preparation for 2025, and this could provide future business opportunities. Our outlook for the full year is unchanged, with similar revenue compared to 2023.
Speaker Change: We expect our non <unk> business to be done in 2024, primarily driven by lower immersion system sales grew at 2% to 2023.
Speaker Change: For our installed base business based on our year to date, we expect a similar level of revenue compared to last year.
Speaker Change: As the recovery becomes more clear this year customer may look to upgrade their system in preparation for 2025, and this could provide future business opportunity this year.
Speaker Change: Our outlook for the full year is unchanged with similar revenue compared to $2 23.
Christophe D. Fouquet: In line with the industry's continued recovery from the downturn, we expect a stronger second half relative to the first half of the year. We view 2024 as a transition year and continue to make investment this year, both in capacity ramp-up and in technology to be ready for the upturn in the cycle. Looking longer term, while there are still significant uncertainties, primarily driven by the microenvironment, it appears we are passing through the bottom of this spectrographic cycle, and we expect an industry recovery over the course of 2024.
Speaker Change: In line with the industry continued recovery from the downturn, we expect a stronger second half relative to the first half of the year. We view 2024 is a transition year and continue to make investments this year, both in capacity ramp and in technology to be ready for the upturn in the cycle.
Speaker Change: Looking longer term, while they are still significant uncertainties, primarily driven by the macro environment. It appears we are passing through the bottom of this specific cycle and we expect an industry recovery over the course of 2024.
Christophe D. Fouquet: Based on our discussions with our customers and supported by our strong backlog, we expect 2025 to be a strong year driven by a number of factors, as mentioned last quarter. First, the secular growth driver in semiconductor end markets, which we have previously discussed, such as energy transition, electrification, and AI. The expanding application space, along with increasing lithography on future technology nodes, drive demand for both advanced and mature nodes.
Speaker Change: Based on the discussion with our customers and supporting our strong backlog, we expect 2025 to be a strong year driven by a number of factors as mentioned last quarter.
First the secular growth driver and semiconductor end markets, which we have previously discussed such as energy transition electrification and AI.
Speaker Change: The expanding application space, along with increasing the geography on future technology nodes drive demand for both advanced and mature nodes.
Christophe D. Fouquet: 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 the significant number of new fabs that are being built across the globe, in some instances clearly supported by several government incentive plans. These files are spread geographically, are strategic for our customers, and are scheduled to be taken out. It is essential that we keep our focus on the future and build capacity in preparation for further long-term growth, as we discuss in the market scenarios for 2025 and 2030 during our investor day in November 2021.
Second the industry expects to be in the middle of a cyclical upturn in 2025.
Speaker Change: And last as mentioned earlier, we need to prepare for the significant number of new Fabs that are being built across the globe in some instances clearly supported by several government incentive plans.
Speaker Change: These fabs are stretched geographically are strategic for our customer.
Speaker Change: Scheduled to take out too.
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.
Christophe D. Fouquet: We plan to update our view during our Investor Day this year on November 14, 2021. In summary, although there is near-term uncertainty, we remain confident in our long-term growth opportunities. With that, we would be happy to take your questions.
Speaker Change: We plan to update our view during our Investor day. This year on November 14 2024.
Speaker Change: In summary, also there is near term uncertainty we remain confident in our long term growth opportunity.
Speaker Change: With that we would be happy to take your questions.
Skip Miller: Thank you, Roger, Peter, and Christophe. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I'd like to ask you to kindly limit yourself to one question, with one short follow-up, if necessary. This will allow us to get to as many colors as possible. Also, as the CEO transition is planned next week, following the AGM on April 24th, Roger and Christophe will take the majority of the questions as it pertains to the forward-looking statements. Now, operator, could we take your final instructions and then the first question, please?
Speaker Change: Thank you Rajeev, Peter and Christophe the operator will instruct you momentarily on the protocol for the Q&A session.
Speaker Change: Before I hand, I'd like to ask 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 also as a CEO transition as planned next week. Following the AGM on April 24th Roget, and Christophe will take the majority of the questions as it pertains to the forward looking comments.
Speaker Change: Now operator could we take your final instructions and then the first question. Please.
Operator: 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. We will now go to your first question. And your first question comes from the line of Krish Sankar from TD Cowan. Please go ahead.
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 you.
Speaker Change: Aimed to be announced to withdraw your question. Please press star one on one again.
Speaker Change: We will now go to your first question.
Speaker Change: And your first question comes from the line of Chris <unk> from TD Cowen. Please go ahead.
Krish Sankar: Hi, thanks for taking my question. And Peter, and I guess also Martin as well, thanks for everything over the years. You both will be missed for sure.
Chris: Yeah, Hi, Thanks for taking my question and Peter and I guess also from multinational thanks for everything over the year you bought there'll be missed for sure.
Roger J. M. Dassen: And then I guess my first question is for Roger. I understand bookings can be lumpy, but EUV orders were also down quite a lot in the March quarter. And you said that you need to hit over 4 billion run rate to hit the midpoint of calendar 25. But I'm just kind of curious, you know; there is an expectation that he should be better than the midpoint of next year's outlook for next year.
Chris:
Chris: And then I guess my first question for Rajiv I understand bookings can be lumpy.
Chris: But the EV orders were also down quite a lot in the March quarter.
Rajiv: And you said that you need to hit over 4 billion run rate to hit the midpoint of guidance to 25.
Speaker Change: But I'm just kind of curious.
Speaker Change: There was an expectation that he should be better than the midpoint of next year the.
Speaker Change: The outlook for next year.
Roger J. M. Dassen: Do we really need to see a pickup in EUV orders to really meet those calendar 25 outlooks? And where do you think that's going to come from mainly? Is it the foundry logic vertical? And also, just along the same path, how much of your memory bookings were from China?
Speaker Change: Do we really need to see a pickup in order to really meet the calendar 'twenty outlook, and where do you think thats going to come from mainly isn't the foundry logic vertical and also just along the same path.
How much of your memory bookings was from China, and then I had a follow up.
Roger J. M. Dassen: And a follow-up. Many questions in one question, Krish. Very well done. I'll try and answer them as best as I can.
Speaker Change: And the follow up many questions in one question, Chris very well, Doug I'll try and answer them I'll try and answer those as best as I can.
Roger J. M. Dassen: So yeah, Krish, I think you're absolutely right in our conclusion that the order intake is very lumpy. And I think that's what we've seen in the past. And we have been saying that for many, many years. We said it last time when the orders came in very high. We say it today when, you know, from the vantage point of some, the orders come in pretty low.
Chris: So I think youre absolutely right there in our conclusion that on the order intake is very lumpy and I think that's what we've seen in the past we have been saying that for many many years, we set out last time when the orders came in very high we say today one from the vantage point of some the orders come in at a pretty low and therefore, if you. If you look at the past six months combined Sierra here.
Roger J. M. Dassen: And therefore, you know, if you look at the past six months combined, you're looking at $13 billion, which is $6.5 billion a quarter, which we still do. We still believe it's pretty significant. When I talk about the $4 billion that we need in order to get to the midpoint of next year, I'm indeed talking about everything. So, of course, that also includes EUV.
Chris: Looking at 213 billion, which is $6 5 billion per quarter, which we still continue with the vape is pretty is pretty significant.
Chris: When I talk about the $4 billion that we need in order to get through the year to the midpoint of next year I am Indeed talking about everything so of course that also includes easy.
Roger J. M. Dassen: And I think, as many of you have probably recognized, if you, you know, look at the intake in the past couple of quarters and also in the past quarter, it's pretty clear that there are a few usual suspects absent from the order intake. And I think that's pretty clear, right? So if we look at the plans of some of our large customers and, you know, you talk about foundry, foundry indeed does come to mind in this discussion.
Chris: And I think as many of you probably recognize if you look at the intake in the past couple of quarters and also in the past quarter.
Chris: It's pretty clear that said there is a few there is a few.
Chris: Usual suspects.
Chris: Absent in the NDA and the order intake and I think that's pretty clear right. So if we look at said that if we look at the plans of some of our large large customers and you talk about foundry foundry and the does come to mind in this in this discussion if you look at the plans of the announced plans of some of our larger customers, it's pretty clear that in the next.
Roger J. M. Dassen: If you look at the plans and the announced plans of some of our larger customers, it's pretty clear that in the next couple of quarters, significant orders need to come in. So, and, you know, part of the $4 billion that you should see in order to get to this midpoint will indeed include orders from those customers. So again, the midpoint, does that mean that now all of a sudden we're guiding the midpoint? No, we're not.
Chris: Couple of quarters significant artists need to comment so.
Chris: Part of it.
Chris: Part of the $4 billion that said that you should see in order to get to this midpoint. Indeed have to include the orders from the from those from those customers.
Chris: So again the midpoint does that mean that now all of a sudden regarding mid point no. We're not as Peter It's very clearly said it on previous calls if we look at 2025, we're looking at a significant uptick we're not looking at the low end of the year of the update of the of the scenarios that we provided back in 2022.
Roger J. M. Dassen: As Peter has very clearly said on previous calls, if we look at 2025, we're looking at a significant uptick. We're not looking at the low end of the scenarios that we provided back in 2022. But, you know, we're not saying now that you need to look at the midpoint of the guidance. We just give you the math that is required in order to get to the midpoint of the guidance, but our expectation of a very strong recovery into 2025 has by no means changed.
Chris: We're not saying now you need to look at the midpoint of the guidance. We just give you the math that is required in order to get to the midpoint of the guidance, but our expectation of a very strong recovery into 2025 has by no means set by no means changed in terms of your questions on memory.
Roger J. M. Dassen: In terms of your questions on memory, and particularly on China, Krish, as you know, we typically do not disclose the geographic distribution of our order intake. Of course, there is a, I would say, healthy part in the order intake that is related to China. But you know, it's not like the order of intake is distributed over the globe.
Chris: Particularly then Dan on China Christian as you know, we typically do not disclose disclose the geographic distribution of our order intake of course, Sandra address a I would say a healthy art and the order intake that said.
Chris: That is related to China.
Chris: But it's not like.
Chris: The the order intake is distributed distributor over the over the globe, So they're very high.
Roger J. M. Dassen: So the very high, you know, so the very high... concentration that you saw in the sales for Q1, you don't see that back in the order intake. So the order intake is more distributed geographically than what you would see in the sales for Q1. Got it. Got it. Got it. Yes, thank you very much.
Chris: So the very high.
Chris: <unk>.
Concentration that you saw in the sales for Q1, you don't see that back in the <unk> and the order intake. So the order intake is more distributed geographically than what you would see in the sales for Q1.
Speaker Change: Got it covered.
Speaker Change: Sure.
Roger J. M. Dassen: And then just a very, very quick follow-up, and we really appreciate it. Obviously, with all these, you know, incremental news coming on US and Dutch rules and regulations, just curious, has that changed your view on what it means for your China sales? Three months ago, you said it had a 10 to 15% impact. Just want to see if there's any updated view on this. Thank you very much.
Speaker Change: Yes. Thank you very much and then just a very very quick follow up.
Speaker Change: Listen we appreciate it obviously with all these like incremental news coming on U S and Dutch rule.
Speaker Change: Rules and regulations, just curious has that changed your view on what it means for your China sales three months ago, you said, a 10% to 15% impact just wanted to see if there's any updated view on that thank you very much.
Roger J. M. Dassen: No, Krish, nothing has changed that. I mean, when we talked about a 10 to 15% increase, I think that was even longer, longer back when we made that comment. That was directly the consequence of the fact that we realized that this year, we would probably not get licenses to ship the latest generation of Immersionist. That was what that 10 to 15% comment was, it was related to, and was related to.
Speaker Change: No question nothing has changed that I mean, when we're talking about the 10% to 15% I think thats even longer longer back when we made a comment that was directly.
Speaker Change: The consequence of the fact that we realize that this year, we will we will probably not get licenses to ship. The latest generation of emergence. So that was what that 10% to 15% comment was it was related to it was related to our perspective has not has not changed the rules haven't changed of course. There is there is there is it continue to tick.
Roger J. M. Dassen: Our perspective has not changed. The rules haven't changed. Of course, there is, you know, there is continued discussion about export controls. The rules haven't changed, or our perspective on the year hasn't changed. We're still looking at a strong sales level for China for this for this year.
Speaker Change: The discussion on.
Speaker Change: On export controls the rules haven't changed our perspective on the year Hasnt changed were still looking at it a strong sales level for China for this for this year.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Tammy Qiu: We will now go to the next question and your next question. Coming from the line of Tammy Qiu from Berenberg, please go ahead.
Speaker Change: We will now go to the next question.
Speaker Change: And your next question.
Speaker Change: It comes from the line of Thomas <unk> from Baird. Please go ahead.
Roger J. M. Dassen: Okay, thank you for taking my question. So, the first one is on China. Can you talk about the Chinese business trend over the recent quarter, please? Because China has been really strong and there has always been concern that China may actually go to a capacity digesting period this year or later this year. Do you have any comment on China's trend, please? Then I have a follow-up.
Thomas: Okay. Thank you for taking my question.
Thomas: First one is on China. Please can you talk about China trying to over the recent court case, because China has been really strong and that has been always comes from.
Thomas: China May actually you guys have helped partly by Jeff. Thank you already in this year or later this year do you have any comment on China. Please that I have a follow up.
Roger J. M. Dassen: Yeah, I mean, China, relatively speaking, is high. But if you look at the absolute numbers, you would recognize that China is actually lower in Q1 than it was in Q4 of last year, right? So if you do the math, then China was at 1.9 billion in this quarter; it was at 2.2 billion last quarter.
Thomas: Yes.
Thomas: Relatively speaking is high but if you look at absolute numbers you would recognize that China is actually lower in Q1 than it was in Q4 of last year right. So.
Thomas: Because if you do the math then than China.
Thomas: It was $1 9 billion in this quarter. It was a $2 2 billion last quarter. So I think I think from that vantage point, it's gone down a bit, but it's still strong and the reason that China is strong.
Roger J. M. Dassen: So I think from that vantage point, it's gone down a bit, but it's still strong. And the reason that China is strong, you know, both in absolute terms and relative terms, is also because, you know, the rest of the world, the demand is, or at least the sales and the shipments in Q1 were relatively low, which was no surprise. I think it's very much in sync with our perspective on a market that is in recovery.
Thomas: Both in absolute terms on a relative terms is also because the rest of the world.
Thomas: Demand is or at least the of the sales in the shipments in Q1 were relatively low which was no surprise I think it's very much in sync with our perspective on that.
Thomas: On a market that is in recovery and a market being in a recovery means that customers are first driving up the utilization of their tools, which is exactly what they're doing and we noted that and FTE utilization comes to a certain points in time. They will start they will order and they will require shut and that is exactly why we've also said on the call that we believe that we're going to see momentum.
Roger J. M. Dassen: And a market being in recovery means that customers are first driving up the utilization of their tools, which is exactly what they're doing, and we know that. And if the utilization comes to a certain point, then they will start, they will order, and they will require shipments.
Thomas: Building up in the course of this year with a much stronger.
Second half as Peter I'll suggest just at a much stronger second half than first.
Roger J. M. Dassen: And that's exactly why we also said on the call that we believe that we're going to see momentum building up in the course of this year with a much stronger second half, as Peter also just said, a much stronger second half than the first half. So, you know, in terms of trends in China, a strong first quarter for sure, but not a record quarter, but a strong quarter. We expect China to continue to be strong this year. And obviously, also, you have to see that in relation to the rest of the world, which we believe is going to recover.
First half so in terms of trends in China.
Thomas: Strong strong first quarter for sure, but not a record a record quarter, but a strong quarter, we expect China to continue to be strong this year and obviously you also to the.
Thomas: Also.
Thomas: You have to see that in relation to the rest of the world that we believe is going to recover. We've also said on previous calls and I just want to reiterate that as if you look at the demand for China.
Thomas: The demand in China continues to be strong and that is related as we've said before.
Roger J. M. Dassen: We've also said on previous calls, and I just want to reiterate that, if you look at the demand for China, you know, the demand in China continues to be strong. And that is related, as we've said before, to the fact that the demand for mature technology continues to be strong. And I just point out what we said at Capital Markets Day in 2022. At Capital Markets Day in 2022, we said we believe every single year between 2022 and 2030, we believe 380k wafer starts in capacity needs to be added to mature.
Thomas: Two the fact that the.
Thomas: The demand for our mature technology continues to be strong and I just I just point out what we said at the capital markets day in 2022 capital markets Day in 2022, we said we believe every single year between 22 and 2030, we believe 380, K wafer starts and capacity needs to be added to mature.
Thomas: And if we look at what has happened last year.
Thomas: What has been out of in terms of in terms of that both in China and then the rest of the world. It's actually below that number so yes, China is strong.
Thomas: And of course, it's not just mature, but mature is a very significant part of flood for Chinese Adam is adding.
Roger J. M. Dassen: And if we look at what happened last year, you know, what has been added in terms of that both in China and in the rest of the world, it's actually below that number. So, yes, China is strong. And of course, it's not just mature, but mature is a very significant part of what China is adding. Yes, China is strong, but China is strong because they're, you know, adding capacity that we believe the world needs.
Thomas: Yes, China is strong, but China is strong because they are adding capacity that we believe the world needs and yes. As a result of this chinas share in global market share.
Over the years become that become larger than it is today to ourselves sufficiency will increase in comparison to today, but we believe that what China's adding today in terms of mature capacity is rational and is in line with the with our expectation of what capacity in mature and needs to be added in order to get to what the world needs.
Roger J. M. Dassen: And yes, as a result of this, China's share and global market share will, you know, become larger than it is today. And their self-sufficiency will increase in comparison to today. But, you know, we believe that what China is adding today in terms of mature capacity is rational and is in line with the expectation of what capacity and mature capacity needs to be added in order to get to what the world needs in the second half of the decade.
Thomas: Second half of the decade.
Okay. Thank you Roger and Rafa I have a follow up on <unk>.
Speaker Change: And two nanometer freedom on retail.
Eric: Eric Please thank you.
Speaker Change: You are expecting from Mafia quarter from foundry and logic customers.
Speaker Change: Can you share is that for three nanometer or two nanometer and what is the level of <unk>.
Lay accounts between those two because I do understand that potentially you guys have some.
Christophe D. Fouquet: Okay, thank you, Roger. And I have a follow-up question on the UV and 2 nanometer, and 3 nanometer areas, please. So you are expecting some massive order from Foundry and Logic, correct? Can you share if that's for three nanometers or two nanometers? And what is the level of EUV kind of layer count between those two? Because I do understand that potentially you can have some usage. So that may impair some two nanometer incremental demand because some three nanometers can be migrated or reused for two.
Eric: So that may impact two nanometer incremental demand.
Eric: Three nanometer can be migrated.
Speaker Change: Got you.
Speaker Change: Yes. So this is christophe here so maybe on your first question. So I think we mentioned a few times.
Christophe: Now that <unk>.
Customer, we're still logic customer foundry customer, we're still digesting digesting some of the <unk>.
The capacity that had put in place we have been referring to three and five nanometer.
Christophe: When we look for the two nanometer capacity.
Christophe D. Fouquet: Yeah, so this is Christophe here. So maybe on your first question, so I think we mentioned a few times now that customer, we're still a logic customer, foundry customer, we're still digesting, digesting, sorry, some of the capacity they had put in place. We were then referring to three and five nanometers. When we look forward, the two nanometer capacity still has to come, and I think, as you probably are aware, we expect the RAM for that technology to start sometime next year. So I think this will be the next probably wave of EUV orders. And this also goes back to the comment Roger made in answer to the first question.
Speaker Change: Still have to come and I think.
Speaker Change: As you mostly are aware of we expect the ramp for that technology to start sometime next year. So I think this will be the next.
Speaker Change: Most of them the wave of the <unk>.
Speaker Change: The order.
Speaker Change: So back to the comment you made in answer to the first question. So we're going to now focus when it comes to UV.
Speaker Change: And logic foundry, mostly to two nanometer order intake, which as always said should come in the next few months.
On the number of players so no change there I think we mentioned in the past that the.
Speaker Change: Lear UV layer or two nanometer is very similar to what we had on three nanometer pseudodementia is mostly a device transition as you know most customer a logic foundry customer will transition to Gaslog, Iran, which is a.
Christophe D. Fouquet: So we're going to now focus when it comes to EUV and logic foundry mostly on the two nanometer order in tech, which, as Roger said, should come in the next few months. On the number of layers, so no change there. I think we mentioned in the past that, you know, the UV layer for 2nm is very similar to what we had on 3nm. 2nm is mostly a device transition. As you know, most customers, logic only customers, will transition to gated all-around, which is, I would say, quite a complex move.
Speaker Change: I would say quite a complex move and as of reserves.
Speaker Change: The focus of the changes on that so.
Speaker Change: <unk> expectation, we have in terms of UV layer on two nanometer different from the one we have shared with you for quite a few months already now.
Speaker Change: Okay. Thank you Christopher.
Speaker Change: Pizza happy retirement, and thanks for being with us over the past 10 years.
Christopher: Youre welcome. Thank you.
Speaker Change: Thank you.
Speaker Change: We will now take the next question.
Christophe D. Fouquet: And as a resource, the focus of the change is on that. So all the expectations we have in terms of the UV layer at 2nm are not different from the one we have shared with you for quite a few months now.
Speaker Change: And your next question comes from the line of James <unk> from Wells Fargo. Please go ahead.
James: Yes. Thanks for taking the question I was curious as we think about the order book anything about filling out 2025.
Christophe D. Fouquet: Okay, thank you, Christopher. Peter, happy retirement and thanks for being with us over the past You're welcome.
James: The company has been very specific about pre building lowering a tools over the course of this year and into next year has that changed the way that your customers are thinking about their order cadence.
Peter T. F. M. Wennink: You're welcome. Thank you.
Joseph Michael Quatrochi: We will now take the next question. And your next question comes from the line of Joe Katracki from Wells Fargo. Please go ahead. Yeah, thanks for taking.
James: Well, I mean that would be a bit opportunistic on their side and I like to think of the relationship that we have with our customers.
Joseph Michael Quatrochi: Yeah, thanks for taking the question. I was curious, you know, as we think about the order book, and we think about filling out 2025, the company has been very specific about, you know, pre-building low in tools over the course of this year and into next year. Has that changed the way that your customers are thinking about their order cadence?
James: As much.
James: Much more one of partnership down one off transactional behavior. So no I don't think that necessarily has an impact.
James: Of course, as we said in previous calls in order to get as many <unk>.
James: As many degrees of flexibility that we have for next year that we will do some theres. Some pre building but of course, we do that in very close interaction with customers understanding what they need.
Roger J. M. Dassen: Well, I mean, that would be a bit opportunistic on their side, and I like to think of the relationship that we have with our customers as much, much, much more one of partnership than one of transactional behavior. So no, I don't think that necessarily has an impact.
James: And I think that's a big distinction that I think you need to draw on the one hand, we're having very intense interactions with customers to understand what they need and then you have field and actually the appeal process. As you probably will appreciate given the amount that we're talking about these days are pretty call. It your bureaucratic in formal processes, we're doing a lot.
Roger J. M. Dassen: You know, of course, you know, we said in previous calls that in order to get as many, you know, create as many degrees of flexibility that we have for next year, we will do some pre-building. But, of course, you know, we do that in very close interaction with customers, understanding what they need. And I think that's a big distinction that I think you need to draw, you know. I mean, on the one hand, we have very intense interactions with customers to understand what they need.
James: Governance governance.
James: Governance is necessary in order to get there that gets you to the lumpiness, but in the meantime, we have a pretty good understanding based on our interactions with customers what they really need so that's the.
James: That's I think.
James: It's the interaction with the customers.
James: The comfort that we get based on those conversations that ultimately drives our plans for the year that ultimately drives our plans for pre building much more so than whether or not an order is going to be received or not.
Roger J. M. Dassen: And then you have PO. And actually, the PO process, as you probably will appreciate, you know, given the amounts that we're talking about these days, is pretty, call it your bureaucratic and formal processes where there is a lot of governance, governance, you know, governance necessary in order to get there. That gets you to the lumpiness.
James: Nope.
Speaker Change: Speaking from experience over the last 25 years.
Speaker Change: Yeah.
Speaker Change: We are a transparent company. So it also means that we will build inventory.
Speaker Change: Airbus to prepare because our lead times are just so long.
Speaker Change: We inform you as our shareholders.
Peter T. F. M. Wennink: But in the meantime, we have a pretty good understanding, based on our interactions with customers, of what they really need. So that's, that's, I think, you know, it's the interaction with the customers. It's the comfort that we get based on those conversations that ultimately drives our plans for the year that ultimately drives our plans for pre-building much more so than whether or not an order is going to be received or not.
Speaker Change: On this and of course customers.
Speaker Change: And then we're in the midst of negotiations on final orders.
Speaker Change: And let's say on a commercial basis, which of course, if you put the two things together it might be that those orders back a little bit longer which is quite normal. So I think this is what we've seen before and we've seen it again.
Speaker Change: But again as Richard said earlier, you know if you.
Peter T. F. M. Wennink: And, you know, perhaps speaking from experience over the last 25 years, you know, We're a transparent company. So it also means that we will build inventory or work to prepare because our lead times are just so long, and we inform you as our shareholders on this and of course customers hear this and then we're in the midst of negotiations on final orders and let's say on a commercial basis which of course if you put the two things together it might be that those orders take a little bit longer which is quite normal you know so I think this is what we've seen before and we've seen it again but again as Roche said earlier you know if you believe 2025 and you know that if you want to buy an EUV tool there's only one phone number that you can actually dial then this will happen but this is just where we are in terms of our customers knowing that we're building because we want to make sure that we can ship to them and we have long lead times and their commercial efforts on the POs that will come.
Speaker Change: <unk>.
Speaker Change: If you believe 2025 and.
Speaker Change: You know that if you want to buy in the retool there's only one.
Speaker Change: One phone number that you can actually dial then that this will happen, but this is just where we are in the <unk>.
Speaker Change: All of our customers knowing that we are building because we want to make sure that we can.
Speaker Change: <unk>, we have long lead times and our commercial efforts on the appeals that will come.
Speaker Change: Thanks for that that's helpful color.
Speaker Change: As a follow up just on the on the memory orders that Youre seeing and just curious is that still more predicated on HBM building out capacity or do you maybe see some green shoots for call. It more the conventional DRAM demand.
Speaker Change: No I think the lion's share of the orders that we saw in memory in the last quarter really are still technology related right. So it's it's DDR five I'd say, it's HBM, that's what most of the orders that we saw are related to that.
Speaker Change: Perfect. Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: We will now go to the next question.
Roger J. M. Dassen: Thanks for that helpful color. As a follow-up on the memory orders that you're seeing, you know, just curious, is that still more predicated on, you know, HBM building out capacity, or have you maybe seen some green shoots for, call it, more conventional DRAM demand? No, I think the lion's share of the orders that we saw.
Speaker Change: And your next question.
Speaker Change: From the line of Francois.
Francois: <unk> from UBS. Please go ahead.
Francois: Thank you very much I mean first of all Peter Thank you.
Francois: I'm not sure we'll be Mr, finishing the investor community and thank you for that dialogue.
Francois: So.
Francois: And I look forward to more we start with Christoph.
Roger J. M. Dassen: No, I think the lion's share of the orders that we saw in memory in the last quarter really are still technology related, right? So it's DDR5, it's 8BM, that's what most of the orders that we saw are related to.
Christoph: So the first question I had just a bit on the on the lead times. So you mentioned that.
Christoph: The buildup of inventories does not impact so much three times, if I tried to read correctly.
Unknown Attendee: We will now go to the next question, and your next question comes from the line of Francois Bouvier from UBS. Please go ahead.
Christoph: And when you said last quarter, you said that you have 12 months or more than 12 months you've done on UV now when you look at 2025 targets all ranges.
Roger J. M. Dassen: So the first question I had is a bit on the lead times. So you mentioned that, you know, the buildup of inventory doesn't impact the lead times so much if I try to read correctly. And according to my calculation, I have around 30 EUV tools in the backlog for the next year or so, which means that you would need more than 40 EUV tools still to satisfy your revenues for 2025. So I'm just surprised, you know, the amount of EUV tools you need.
Christoph: You need to have like 17, more UV tools to get to this.
Christoph: Amit to high end and in cutting to my calculation.
Christoph: Have like around 30, UV tools in the backlog for next year or so.
Christoph: Which means that you would need more than 40, UV tools still to satisfy your revenues 45, So I'm just surprised.
<unk> you need.
Roger J. M. Dassen: And with 12 months more lead time, I would think it's a very dangerous game for your customers to wait until the last moment. So can you maybe help us clarify the fact that you probably need orders significantly in a short period of time and reconcile with the fact that you said in the next three quarters you need more than $4 billion, but it's going to be too late if it's Q3 or Q4 for EUV to get delivered in 2025, if you understand what I mean.
Christoph: And we just 12 months more lead times.
Christoph: I would think it's a very dangerous game for your customers to wait till the last moment.
Christoph: So can you maybe help us clarify.
Christoph: The fact that you probably need to orders significantly in a short period of time and if it comes to reconcile with the fact that you said in the next three quarters more.
Christoph: More than $4 billion.
Christoph: It's going to be too late Q3, or Q4 <unk> to get the telephony if you see what I mean.
Roger J. M. Dassen: Yeah, first of all, but it's a slightly different question, but essentially the question that we were just looking at, right? It's the same question that Joe was raising to a large extent. And I can just reiterate what I said there.
Speaker Change: Yes first of all of it.
Speaker Change: Slightly it's slightly different question, but essentially the question that we were just looking at it right. It's the same question that Joe will set that Joel with raising to a to a large extent and I can just reiterate what I said there of course with customers. We have a an ongoing dialogue on what they need and then Peter Peter said it.
Roger J. M. Dassen: Of course, with customers, we have an ongoing dialogue on what they need. And then, you know, Peter said it, there is a bureaucratic process, and there is some negotiation going on that will ultimately lead to the order being made. And then being translated into a PO, which, as you also know, these days comes with the obligation to pay money. And that's probably part of the reason why, you know, why customers, why some customers are, you know, postponing the placement of the order a little bit as well.
Speaker Change: There is a there is a bureaucratic process and there is some negotiation going on that will ultimately lead to.
Speaker Change: The order being to the order being made and then being translated into appeal. As you also know these days constantly the obligation to pay money and that's probably part of the reason why.
Speaker Change: Customers some customers are.
Speaker Change: Postponing the placement of the order a little bit as well.
Roger J. M. Dassen: But the reality is that we know quite well what customers want, and customers know it as well. So it's just a matter of those two worlds coming together and then ultimately leading to a purchase order. Is it a dangerous game on their side? I don't think so. I mean, as long as we have a very open dialogue with one another, I'm pretty sure that in the foreseeable future, you will see the translation of what we know is firm demand into orders. I'm quite confident of that.
Speaker Change: But the reality is that that we know quite well what customers want.
Speaker Change: And customers know it as well so it's just a matter of those two worlds coming together and then ultimately needed to appeal it.
Speaker Change: Is it a dangerous game on their side is a dangerous game on our side I don't think so I mean is it.
Long as we have a very open dialogue with one another and I'm pretty sure that that's.
Speaker Change: In the in the foreseeable future you will see the translation of what we know is firm demand into into orders I'm quite confident with that.
Roger J. M. Dassen: And if you believe the 2025 number, which we do, then there is a very high level of mutual dependency here. So that's why the game is not that dangerous.
Speaker Change: And if you believe that 2025 number which we do and it's a very high level of mutual dependency here so that is.
Speaker Change: So that's why the game is not that dangerous, we also need to China.
Roger J. M. Dassen: We also need each other.
Speaker Change: Makes sense. Thank you and maybe my follow up is on the <unk> I mean, you see we saw a couple of minutes tone in the last few quarters, you talked about the productivity and density improvements.
Roger J. M. Dassen: We saw a couple of millistones in the last few quarters. Christophe, you talked about productivity, I mean, density improvements.
Roger J. M. Dassen: You know, when we think about the lead times for high N.A., what are they today? And if we assume mass production in, let's say, 26, 27, should we expect some uptick in terms of orders for this, maybe in the next few quarters? And, you know, what's the key milestone you're still waiting for from a product point of view, and a technical point of view, to drive more adoption? Well, I think
Speaker Change: When we think about the lead times for <unk>.
Speaker Change: What is it today Andy question mass production in let's say 2006 2007.
Speaker Change: Should we expect some some uptick in terms of orders for this.
Maybe in the next few quarters.
Speaker Change: And what's what's the Cumulus ton youre still waiting for.
Speaker Change: From a product point of view technical point of view.
Speaker Change: To drive more adoption.
Speaker Change: Well, so I think a few <unk>.
Christophe D. Fouquet: Well, so I think a few key milestones. So the first one, I think we've been talking about it for a few quarters, is the fact that customers have been committing to UV INA with, you know, double digit, basically, units in our backlog. And they did that without even seeing one image from the tool. So I think this shows a bit the level of commitment and trust they have in our ability to bring new technology. Now, I mentioned the first image, 10 nanometers, you know, less than 10 nanometer resolution.
Speaker Change: A few key milestones the first one I think we have been talking about it for a few quarter is the fact that the customer have been committing to.
Speaker Change: Hi, Nate.
Speaker Change: With double digit.
Speaker Change: Basically unit backlog.
Speaker Change: And they have done that without even seeing one image from the tour. So I think this shows a bit to the level of commitment and trust. They have in our ability to bring new technology now I mentioned, the first image 10 nanometers lessened.
Speaker Change: Less than 10 nanometer resolution image.
Christophe D. Fouquet: This is a huge milestone for both our customer and ASML because this single image proves that the technology we've been developing for many, many years is working. And, you know, you cannot imagine how welcome that milestone was by both our customer and ourselves. It's very, very important.
Speaker Change: This is a huge milestone for both our customer and ASML because.
Speaker Change: This singular image prove that the technology, we have been developing for many many years is walking in.
Speaker Change: You cannot imagine now welcome that milestone was by both our customer and ourselves. So that's very very important.
Christophe D. Fouquet: Now, what's going to happen next is, since we can soon expose weather, every customer is going to come to see us here to get access to the tool we have in our lab and start to expose their own reticle so that they can decide for themselves exactly how to use the tool. And we expect that this work will lead at some point to, I would say, the next set of decisions on INA.
Speaker Change: Now what's going to happen next is since we can soon exposed with her.
Speaker Change: Every customer are going to come to see us here to get access to the tools, we have in our lab and start to expose their own <unk>. So that they can decide for themselves exactly how to use a tool and we expect that this walks will lead at some point too Nick.
Speaker Change: Next set of decision on 90 day.
Christophe D. Fouquet: So what's happened in the lab in the next few months, the work we'll be doing with all our customers, and I stress again, all our customers, I think is probably the most exciting milestone to come, and this will really help everyone to understand basically what's next for INA. But I cannot stress enough on how happy and excited that we've been able to generate those first images. You know, when you look at the undertaking of a technology like INA, for us, for our customers, this is a very, very important achievement. And again, in the next few months, we'll build on that.
Speaker Change: So what's happened in the lab in the next few months to work, we'll be doing with all our customer and I stress again all of our customer.
Speaker Change: <unk> is most probably the most.
Speaker Change: Exciting milestones to come.
Speaker Change: And this will really help everyone to understand basically what's next for Brian.
Speaker Change: I cannot stress enough on the hour so happy and excited that we have been able to generate those first images.
Speaker Change: When you look at the undertaking of particular Utica Anda for us for our customer base. This is a very very important achievement and again. The next few months, we will build on that.
Christopher James Muse: We will now go to the next question, and your next question comes from the line of CJ Muse from Cantor Fitzgerald. Please go ahead.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: I will now go to the next question.
Speaker Change: And your next question comes from the line of C. J Muse from Cantor Fitzgerald. Please go ahead.
Christopher James Muse: Yeah, thank you for taking my question. And Peter, a big congrats.
Speaker Change: Thank you for taking my question, Peter Big Congrats pleasure working with you and maybe if I could direct the last question.
Peter T. F. M. Wennink: It will be a pleasure working with you. And maybe I could direct the last question for you here at ASML, given your long experience. You know, as you look at, you know, the strong secular trends led by high-performance compute, you know, historically at the leading edge, it was led by Apple and Huawei and then, and then only Apple post the embargo. But now, given the performance power cost requirement, how are you seeing the trends on the high-performance compute side moving closer and closer to kind of being the pipe cleaner for the bleeding edge? And how does that impact your thinking of what kind of longer-term growth for leading edge workers will look like?
Speaker Change: For you here at ASML.
Given your long experience.
You look at the strong secular trends led by high performance compute historically at the leading edge was led by Apple and Huawei and then and then only Apple close the embargo, but now given the performance power cost requirement.
Peter T. F. M. Wennink: Are you seeing kind of the trends on the high performance compute side, moving closer and closer to kind of being the pipe cleaner for the bleeding edge and how does that impact your thinking of what kind of longer term growth for leading edge will look like.
Peter T. F. M. Wennink: Well, there were two questions. I answered the second one.
Speaker Change: Well I think it's two questions I'll answer the second one you are basically saying you know what will drive leading edge high performance compute but youre absolutely right I mean, when you when you think about high performance compute and especially in the context of AI.
Peter T. F. M. Wennink: You're basically saying, you know, what will drive leading-edge high-performance computing. But you're absolutely right. I mean, when you think about high-performance compute, and especially in the context of AI, and I've said this many, many times before, AI is driven by massive amounts of data, and also understanding the correlation between those data elements, and then, you know, overlaying that with smart software. But, and I also believe, actually what I'm seeing and what I'm hearing is that IoT in the industrial space will actually be an area where we will see a lot of AI applications.
Speaker Change: And I've said this many many times before AI is driven by massive amounts of data.
Speaker Change: And in about also understanding the.
Speaker Change: Correlation between dose data elements, and then overlaying that with smart software.
Speaker Change: Yes.
Speaker Change: And I also and also believe it's actually what I'm seeing and what I'm hearing is that Iot in the industrial space, where it should be and will be and will be an area, where we will see a lot of AI applications.
Peter T. F. M. Wennink: Well, in order to collect all kinds of examples, whether it's the car or whether it's life science, medical equipment, it's about sensing. And that is really the domain of mainstream semiconductors. I don't like the word, you know, mature, like it's something that is old-fashioned and you don't need it.
Speaker Change: In order to collect all that data you need sensors.
Speaker Change: Because you've got all kinds of.
Speaker Change: Examples whether it's the car or whether it's life science medical equipment, it's about sensing.
Speaker Change: And Thats that is really the domain of mainstream semiconductors I don't like that.
Speaker Change: That works.
Speaker Change: Mature like it's something which is old fashion, but you don't need it is mainstream and is critical and I.
Peter T. F. M. Wennink: It is mainstream, and it's critical in the, I would say, amalgamation of mainstream semiconductors and advanced semiconductors. And this is also why you cannot distinguish the growth of one against the other. I mean, you need both.
Speaker Change: I would say in the I would call an amalgamation of mainstream semiconductors and I would go advanced semiconductors and this is also why you cannot distinguish the growth of one against the other I mean do you need both.
Peter T. F. M. Wennink: And I think what you will see is that the growth of the industry and especially high-performance computing will be driven by the value that is going to be created. You know, cost is a significant issue, but Moore's Law is an empirical law of economics, and when you create more value for the transistor, the new transistor, the next generation transistor, then it costs, then you're going to grow. And you know, when you think about AI and we have some of these examples, and especially in the software space, where you see productivity, just calculated productivity at voltages of 30 to 50 percent, then the value of the next generation transistor will be huge.
Speaker Change: And I think what you will see is is that the growth of the industry and especially high performance compute will be driven by the value that is going to be created.
Speaker Change: Cost is a significant issue.
Speaker Change: Moore's law is not vehicle economics.
Speaker Change: When you create more value of the transistor the new transition to the next generation transistor. Then if costs. Then you are going to grow and when you think about AI.
Speaker Change: I mean, if some of these examples and especially <unk>.
Speaker Change: In the software space, where you see productivity.
Speaker Change: Calculated productivity as voltages of 30% to 50%.
Speaker Change: And the value of the next generation transmission will be huge now if you ask Peter what's going to be the next dealer application I am going to give you. The same answer as I gave you for the last 25 years and as I have no clue, but what I do know is that where the value of that transistor next generation transistor, whether it's and it's particularly different by high performance compute it's energy efficient.
Peter T. F. M. Wennink: Now, if you ask me, Peter, what's going to be the next scale of replication, I'm going to give you the same answer as I have given you for the last 25 years, and that's that I have no clue. But what I do know is that when the value of that transistor, the next generation transistor, whether it's, and it's particularly driven by high-performance computing, its energy-efficient performance, you know, if we bring that to life and we bring it to life to get away with our customers because we have high NA and potentially hyper NA, that them, The, you know, the, I would say, amalgamated, consolidated demand for also mainstream semiconductors will
Performance.
Speaker Change: If we bring that to life and we will bring it to life to get away our customers because we have high in a potentially a hybrid <unk>.
Speaker Change: Then.
Speaker Change: D D.
Speaker Change: I would say amalgamated consolidated demand for also <unk>.
Speaker Change: Semiconductors will go up.
Peter T. F. M. Wennink: So this is what I believe and this is what I see when I talk to customers and when I talk to real users of the value in the space. And this is why I'm so confident about the long-term future. And it's all connected. So you cannot distinguish.
Speaker Change: So this is this is what I believe and this is what I see when I talk to customers that I talked to actually users off the value in this space and this is why I'm. So confident about the long term future and is all connected so you cannot distinguish the two.
Roger J. M. Dassen: Very helpful, thank you. And Roger, a follow-up question on your backlog comment around the four billion plus required to hit the midpoint over the next three quarters. I guess as part of that, you know, if you had to think about, you know, the higher end of the range, I think that would add two plus per quarter. And then also, if I look at your backlog today, excluding INA, it's still sitting at roughly 18 months.
Speaker Change: Very helpful. Thank you Andrew.
Speaker Change: A follow up question on your backlog comment around the $4 billion was required to hit the mid point over the next three quarters.
Speaker Change: So as part of that.
Speaker Change: You had to think about.
The higher end of the range I think that would add two plus per quarter and then also if I look at your backlog today, excluding <unk>, it's still sitting at roughly 18 months and so obviously I would expect your backlog exiting 'twenty four to have tools that will be shipped in 2006. So.
Roger J. M. Dassen: And so obviously, you know, I would expect your backlog exiting 24 to have tools that will be shipped in 26. So, you know, is four billion the right number we should be thinking about for the next three quarters? Or should it be significantly higher?
Speaker Change: <unk> 4 billion the right number we should be taking them up for the next three quarters or should be should it be significantly higher.
Roger J. M. Dassen: So, if you're looking at the midpoint, it is $4 billion, and you shouldn't underestimate what we've already taken out for the post-25 period. And I'm sure you're all going to do the math, right, because it's not all that difficult to do the math, and then you're probably going to figure out that that's a pretty healthy number, and probably a number that maybe exceeds a little bit what you currently have in your models in terms of high-need, and that's okay.
Speaker Change: So if you are looking at the midpoint it as far as four 1 billion and you shouldn't underestimate what we've already in depth calculation taken out for the post 25 period.
Speaker Change: Im sure Youre, all going to do the math right because it's not it's not all that difficult to do the math and then you're probably going to figure out that thats, a pretty healthy number and probably a number that's maybe exceeds a little bit. What you currently have in your models in terms of highway and Thats. Okay.
Roger J. M. Dassen: But that's a calculation that I'll leave up to you to make, but that has clearly been recognized in our calculation. So, we've taken out whatever is for 25, and our focus of the $4 billion really is what pertains to 2025. And you know, to your question, you know, to your question, CJ, you know, if, if you're looking at the high end of the range, you know, there's a 5 billion Delta, last I saw, between 35 and 40.
Speaker Change: But thats a calculation that I'll leave up to you to make that there is clearly being recognized in our <unk> calculation. So we've taken out whatever is for is for 25 and our focus of the of the $1 billion really is.
Speaker Change: What pertains to two to 2000 22025.
And as you know for your question.
Speaker Change: To your question C J.
If youre looking at the high end of the range. There is a 5 billion Delta last I saw between 35 and.
Roger J. M. Dassen: And five divided by three gets you to 1.7. Right. So that's it. So then, then there would be 1.7 needed more in order to get to the high end of that bandwidth at the beginning of the year. Exactly, yeah.
Speaker Change: 45 divided by three gets you to $1 seven right.
Speaker Change: So then then there would be one 7%.
Speaker Change: Needed more in order to get through that to get to the high end of the of that bandwidth at the beginning of the year.
Speaker Change: Exactly yes.
Roger J. M. Dassen: 2036. Exactly, yeah.
Speaker Change: Thank you.
Speaker Change: Welcome.
Speaker Change: Thank you.
Alexander Duval: We'll now go to the next question, and your next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead.
We will now go to the next question.
Speaker Change: And your next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead.
Alexander Duval: Yes, hi everyone. Many thanks, Peter, for everything over the years.
Alexander Duval: Yes, hi, everyone. Many thanks Peter for everything.
Peter T. F. M. Wennink: I have one quick question and then a follow-up. The first is on Chinese services. We've seen a number of news articles talking about the US government asking the Dutch government to prevent the servicing of certain aspects of the installed base in China. I had a lot of investor questions on this and just wondered if you could provide any perspective on potential implications. Given, especially that tools don't work without services, is it fair to assume any ban would likely not encompass all China's services revenues?
Alexander Duval: One quick question and then a follow up the first is on China services.
Alexander Duval: You've seen a number of these articles talking about U S government asking the Dutch government to prevent servicing of certain aspects of the installed base in China.
Alexander Duval: <unk> had a lot of investor questions on this and just wondered if you could provide any perspective on potential implications.
Alexander Duval: Especially the tools don't work without services is it fair to assume any ban would likely not encompass all China services revenues and secondly on electrification you mentioned electrification could be a potential driver of litho demand we've seen a number of nice articles talking about the need for.
Peter T. F. M. Wennink: And secondly, on electrification, you mentioned that electrification could be a potential driver of litho demand. We've seen a number of news articles talking about the need for technology to help deal with strong EV-driven power needs in the grid, as well as AI server-driven demand. So I wondered if you could provide some context on what this means for longer-term litho demand. Many thanks.
To help deal with strong EV driven power needs in the grid as well as AI service driven demand.
Alexander Duval: Wondered if you could provide some context on what this means for longer term litho demand many thanks.
Peter T. F. M. Wennink: Yeah, I think on the Chinese services, yes, we're probably reading the same articles. So yeah, that has been a discussion between the two governments. And, you know, let it be a discussion between the two governments. I mean, of course, we're providing input; we're providing input on, you know, the size of the type of, you know, services. And I think it's all being taken into consideration to determine, in the end, what the real problem is.
Speaker Change: I think I think all the.
China services, yes.
We're probably reading the same articles.
Speaker Change: So yes, it's been a discussion between the two governments and.
Speaker Change: Let it be a discussion between the two governments.
Of course, we are providing input we're providing input.
Speaker Change: The size of the type of you know.
Speaker Change: Services, and I think as all being taken into consideration to determine in the end.
Speaker Change: Whats the real problem is and I think that is something which governments.
Peter T. F. M. Wennink: And I think that is something which governments will need to discuss because probably it's all going to be in their discussion of what they call the, you know, national security interest. So we just provided them with the information. And I think currently we have nothing that's, you know, stops us, you know, servicing the installed base in China today.
Speaker Change: We will need to discuss it because probably it's all going to be an in depth discussion on what that goal.
Speaker Change: In our National Security interest. So we just provided with the information and I think currently we have.
Speaker Change: There's nothing that stops.
Speaker Change: Stops us servicing the installed.
Speaker Change: <unk>.
Speaker Change: In China today.
Peter T. F. M. Wennink: On electrification, I think We've said this many times when we talked about the growth of the industry, and it also refers back to the question that CJ asked. Yes, the grid, the electrification, the building of the grid, the investments in renewable energy, and the investments in a smart grid will be a significant driver, is a significant driver for mainstream semiconductors. So that is indeed true; electrification, when you think about the vehicle, is also about mainstream semiconductors and advanced semiconductors. So yes, I mean, this is not a requirement or a request of one part of the industry; it's all connected. So you are indeed correct.
Speaker Change: On the electrification I think.
Speaker Change: We've said this many times when we talked about the growth of the industry.
Speaker Change: And it also refers back to the question that C. J S.
Speaker Change: Yes, the grid electrification to build off the grid the investments in renewable energy and industrial and smart grids will be a significant driver is a significant driver for mainstream semiconductors.
Speaker Change: So that.
Speaker Change: If you need to electrification or do you think about the vehicle is also about mainstream semiconductor and advanced semiconductors.
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: This is not a.
Speaker Change: A.
Speaker Change: Requirement or a request of one part of an industry. It's all connected so indeed correct I think this is what people now start.
Roger J. M. Dassen: I think this is what people are now starting to realize, that if we want to invest in renewable energy, let's take the Netherlands as a particular example, there's a significant investment in solar panels and in wind, which actually means that we need to upgrade the grid, and the grid needs to be smart because there's not going to be a constant supply of those electrons. So that needs to be managed. So there is a complete overhaul of the electric grid needed.
Speaker Change: To realize that if we want to invest in renewable energy it take the Netherlands.
Speaker Change: As a particular example, there is a significant investment in solar panels, and wind, where you're actually means that we need to upgrade the grid the grid needs to be smart because there.
Speaker Change: Thats not going to be a constant supply of those electrons so that needs to be managed shows a complete overhaul of the electric grid needed.
Roger J. M. Dassen: Yeah, that's absolutely true, and this is why we need more mainstream semiconductors. And we need a lot more of them. And Roche pointed out, you know, we said at a couple of markets in 2022, 380,000 waiver starts per year need to need to be added. Well, we didn't do that last year; we were lower than that. So we're running behind our own model. So I'm happy that, you know, around the world, investments in mainstream semiconductors take place because we need them.
Speaker Change: That's absolutely true and this is why we need more.
Speaker Change: Main stream semiconductors.
I read a lot more of them and reshaped pointed out.
Speaker Change: We said at the capital markets.
Speaker Change: 280000 wafer starts per year.
Speaker Change: We do need to be added.
Speaker Change: We didn't do that last year, we were lower than than that so if we're running behind our own model.
Speaker Change: So I'm happy that.
Speaker Change: Around the world investments at mainstream semiconductors take place because we need to and Alexandra. It's everywhere. So it's in the generation of our US Peter just set solar power plant milk, it's under distribution than it is under storage because that's another one right you need electricity at a point in time, when it's not being generated and its and the usage and like the EV. So it's everywhere and.
Roger J. M. Dassen: And Alexander, it's everywhere. So it's in the generation of power, as Peter just said, solar panels, windmills. It's in the distribution, the net. It's in the storage, because that's another one, right? You need electricity at a point in time when it's not being generated.
Roger J. M. Dassen: And it's in usage, you know, like the EV. So it's everywhere. And therefore, this was a very significant part, as Peter just said, of the 380 that we talked about. Of course, we'll review this again when November comes. But I think the world is clearly appreciating a little bit better by now how significant electrification is and what it does for the demand for mature chips. Thank you very much.
Speaker Change: Therefore, this was a very significant part as Peter just out of the 380 that we talked about of course, well reviewed as again when when when when November comps, but I think the world is clearly appreciating a little bit better by now how significantly.
Speaker Change: Electrification is and what it does for the for the demand for full mature chips.
Speaker Change: Thank you very much.
Christopher Caso: We will now go to the next question. And your next question... This comes from the line of Chris Caso from Wolf Research. Please go ahead.
Speaker Change: Thank you.
Speaker Change: We will now go to the next question.
Speaker Change: And your next question.
Speaker Change: Comes from the line of Chris <unk> from Wolfe Research. Please go ahead.
Christopher Caso: Thank you. Good morning.
Roger J. M. Dassen: My first question is regarding the guidance implied for the second half of this year, obviously expecting an acceleration in revenue. Can you give some detail on what you expect to lead that revenue growth in the second half? And specifically, on China, you characterize that as strong right now. Do you expect that to remain strong as you go into the second half?
Chris: Yes. Thank you good morning.
Chris: Our first question is regarding the guidance implied for the second half of this year, obviously, you're expecting an acceleration in revenue can you give some detail on what you expect to lead that revenue growth in the second half and specifically on China, you characterized that as strong right. Now would you expect that to remain strong as you go into the second half.
Roger J. M. Dassen: Yeah, so the second half, I think this is very much in line with the orders that we have today because, you know, we're fully booked for the year.
Chris: Yes.
Chris: Second half I think this is very much in line with the orders that we have today, because we are fully booked for the year. So so the shipment plans that we have and this is across the board. So this is this is.
Roger J. M. Dassen: So the shipment plans that we have, and this is across the board. So this is, you know, this is for some of the fab openings and some of the ramps that I think all of you are aware that have been scheduled for 2024, both in logic and in memory. So this really is across the board.
Chris: This is for some of the fab openings and some of the ramps that I think all of you are aware that had been scheduled for 2024, both in logic and in.
In memory. So that's really is across the board as you know there is we're fairly conservative I would say on the installed base business right. So the installed base business in the second half is only a little bit more than what we haven't done in the first half and I think that's that's still.
Roger J. M. Dassen: As you know, we're fairly conservative, I would say, on the install-based business, right? So the install-based business in the second half is only a little bit more than what we have in the first half. And I think that's, you know, there's still potential that I think there is for the year that we see an uptick in that number, particularly as it relates to the, you know, the potential for upgrades in the second half of the year, but it really is, I would say, across the board.
Chris: That I think the risk for the year that we see an uptick in that and that number, particularly as it relates to the potential for or upgrades in the second half of the year, but it really is very much I would say across the across the board.
Roger J. M. Dassen: And in terms of China, in terms of China, I think we already said that we expect China to continue to be quite strong. Of course, it depends a little bit on sales to the rest of the world. There are still some tools where we are supply constrained. So, you know, the demand composition could be such that there are some limitations to what we can ship to China. But normally, as we said, the demand for China is very strong. So there are all the reasons to expect the strong sales into China to continue for the rest of the year as well.
Chris: And then in terms of China in terms of China, I think we already said that we expect China to continue to be quite quite strong of course, it depends a little bit on.
Chris: On.
Chris: On the sales also through the rest of the world. There are still there are still some tools, where we are what we are supply constrained so.
Chris: The demand composition.
Chris: Could could be such that there are some limitations to what we can ship to China, but normally as we said the demand for China is very strong so.
Chris: All the reasons to expect to see the strong sales into China to continue for the rest of the year as well.
Roger J. M. Dassen: We are fully booked for 2024, and we are in the habit of actually shipping what we have booked. So there's little doubt in our minds that 2024 will just turn out the way that we gave you as an outlook.
Chris: No.
Chris: We are fully booked for 2024, and we are in the habit of actually shipping.
Chris: What we booked.
Chris: There's little doubt in our mind.
Chris: 24, we'll just turn out the way that way.
Chris: We gave you.
Chris: We have an outlook.
Roger J. M. Dassen: understood. And as a follow up, follow up is on memory. And you spoke last quarter, and the very strong bookings last quarter were a lot of, you know, technology buys on memory. To give you some sense of when you expect some of the follow through from perhaps some of the DPV orders that would, you know, supply capacity for memory. We've seen some green shoots in the memory market. Just curious what your customers are telling you regarding that capacity.
Speaker Change: Understood and as a follow up follow up is on memory and you spoke last quarter and the very strong bookings last quarter.
Speaker Change: Where a lot of technology buys on memory.
Speaker Change: Give you some sense on when you expect some of the follow through from perhaps some of the deep UV orders that would.
The supply capacity for memory, we've seen some green shoots in the memory market just interested what your customers are telling you regarding that capacity.
Roger J. M. Dassen: Well, it's very clear, as we mentioned before, that the utilization of memory is going up, and we've seen that now quite sustainably for quite a while, and if that is sustained, as we expect, as the market expects, as our customers expect, then you should see in the second half of this year that memory is not just, let's say, a technological transition, but it's also really the addition of bits. So that's, I think, very much in line with the current developments that we see in the market.
Speaker Change: But it's very clear as we mentioned before that the utilization of memory is going up and we've seen that now quite sustainably for quite a while and thats.
Speaker Change: If that if that is sustained as we expect as the market expects.
Speaker Change: Customers expect then you should see in the second half of this year you should see that memory is not just let's say technology transition, but it's also really the addition of a bit. So that's why I think very much in line with the current developments that we see in the market. So in the second half and one of the drivers why indeed, you see the step up from the.
Roger J. M. Dassen: So in the second half, and one of the drivers why, indeed, you see this step up from the second half to the first half is that you will see, you know, additional building of capacity in the memory market. Great.
Speaker Change: Second half to first half indeed is that you will see additional building out the capacity in the memory market.
Roger J. M. Dassen: Great. And you're saying that from a revenue standpoint, in addition to orders. I say that from a revenue standpoint, exactly right. From a revenue standpoint. Yes. Thank you.
Speaker Change: Great and just saying that from a revenue standpoint in addition to an order standpoint.
Speaker Change: I'd say that from a revenue standpoint, exactly right Cameron revenue standpoint, yes.
Speaker Change: Yes. Thank you.
Mehdi Hosseini: We will now go to the next question, and your next question comes from the line of Mehdi Hosseini from Susquehanna. Please go ahead.
Speaker Change: Thank you.
Speaker Change: We will now go to the next question.
Speaker Change: And your next question.
Speaker Change: It comes from the line of maybe Husseini from Susquehanna. Please go ahead.
Roger J. M. Dassen: Yes, thanks for taking my question. But before, Peter, I want to wish you the best of luck in your next endeavor and, hopefully, running into you at some airport lounge. And Christophe, I hope to see you more often in the U.S. Back to my question, I want to understand two things. First, what is the mix of backlog attributed to China, excluding EUV? And then, second question, Roger, can you update us on the NXV3800E? How was the throughput with the early system shipment in the first half? And how is it going to improve in the second half?
Husseini: Yes. Thanks.
Husseini: Thanks for taking my question, but before Peter wanted to wish.
Wish you best of luck in your next endeavor and hopefully starting to you at some.
Husseini: Some lounge at some airport lounge, and Christophe hope to see you more often in the U S back to my question.
Speaker Change: I wanted to understand two things first what is the mix of backlog from attributed to China. Excluding <unk> and then second question and Roger can you update us on and exceed 3800 E.
Speaker Change: How is the throughput.
Speaker Change: Early system shipments in the first half and.
Speaker Change: And how is it going to improve in the second half.
Roger J. M. Dassen: Yeah, so nice try Mehdi on China, but we're not disclosing that. We're not disclosing the composition of the backlog in a geographic sense. So we said before at some point that, you know, that the China You said at once that China was a little bit over 20% in the backlog and that as a result of that, no one should be surprised that the sales are around that percentage. That's not dramatically changed. So I think we're still in that ballpark, but we're not going to be very specific on that. But at least that gives you a bit of a ballpark.
Roger: Yes, so my.
Speaker Change: Primarily on China, but we're not disclosing that we're not disclosing the composition of the backlog in a geographic and a geographic sense. So we said before at some point that.
Speaker Change: The the China.
Speaker Change: We set it once that China was a little bit over 20% in the backlog and that is a result of that no one should be surprised that the sales.
Speaker Change: That percentage, that's not dramatically changed so I think we're still we're still in that and we're still in that ballpark, but we're not going to be very specific on that but at least that gives you a bit of a bit of a ballpark.
Roger J. M. Dassen: As we said at the introduction of the 3800, you know, we said before that this would come in full configuration in a couple of months' time. So in the second half, you know, we'll get it to 220 wafers per hour. Very quickly, it'll get to 195. So it's got several steps. So first, very rapidly getting it to 195 wafers per hour. And then, you know, the tools that are going to leave the factory somewhere in the second half or early in the second half of this year will be 220. And the ones that are still at 195 will get an upgrade such that I would say early next year, you'll see the entire fleet being at 220 wafers per hour. That's the plan, Mehdi.
Speaker Change: As we said on the introduction of the 3800.
Speaker Change: We said before that said that this will this will come in full configuration and a couple of months' time. So on the second half we'll get it to two to 220 wafers per hour very quickly it will get to 195. So so.
Speaker Change: Several steps so first very rapidly getting it to 195 wafers per hour and then the tools that are going to leave the factory somewhere in the second half early in the second half of this year will be two it's funny and the ones that are still at 195, well against that we'll get an upgrade such that I would say early in next year Youll CDN.
Speaker Change: Player fleet being being at 228 wafers per hour.
Speaker Change: That's the that's the bandwidth.
Roger J. M. Dassen: To what extent that improvement towards 200 is a factor or driver in driving that $4 billion plus per quarter new orders? And that's in the desert.
Speaker Change: To the extent that improvement towards 200.
Speaker Change: Factor or driver in.
Speaker Change: And driving that 4 billion plus per quarter of new orders.
Roger J. M. Dassen: In essence, it isn't. This is a revenue recognition thing, right? So we defer some of the revenue until the point in time where the ultimate configuration, i.e., the 220, is achieved. So there is a revenue recognition issue here. It's not a purchase order issue because the customer signed a purchase order for the tool at full spectrum.
Speaker Change: And as soon as it isn't.
Speaker Change: This is a revenue recognition thing right. So we'll defer some of the revenue until the point in time, where the where the ultimate configuration I needed to plenty is being is being achieved so there is a revenue recognition recognition issue here, it's not appeal issue because the customer signed a feel or the tool.
Speaker Change: That whole that flows back.
Speaker Change: Got it thank you.
Roger J. M. Dassen: Alright, so I think 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 questions. Now, operator, may we have the last caller, please?
Speaker Change: Youre welcome.
Speaker Change: Alright, So I think 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 ASML Investor Relations Department with your question now operator may we have the last caller. Please.
Operator: Thank you. We will now take the last question, and the question comes from the line of Didier Scemama from Bank of America. Please go ahead.
Speaker Change: Thank you we will now take the last question on the.
Speaker Change: The question comes from the line of did you say Mama from Bank of America. Please go ahead.
Didier Scemama: Yeah, good afternoon. Thank you for squeezing me in. And, you know, one congratulations. You know, Peter and Martin are listening.
Mama: Yes. Good afternoon. Thank you for squeezing me in.
Mama: Congratulations.
Mama: Peter.
Didier Scemama: Thank you so much for everything, really. It's been an amazing, you know, privilege for me to run the company for the last 24 years. And congratulations also to Christophe for the promotion to CEO.
Mama: Parties listening. Thank you so much for.
Mama: Everything really has been an amazing.
Speaker Change: Privilege for me to cover the company for the last 24 years and congratulations also to Christoph for the.
Christophe D. Fouquet: I've got one question on EUV and DRAM, if I may. The question is really, first of all, can you tell us, roughly speaking, of your way for capacity of the way for capacity deployed in the industry, how much has transitioned to EUV yet? And how much do you think that could evolve to as the industry adopts EUV for DDR5 and HBM? And then related to that, I think in the past, you had mentioned that over the longer term, I think 2030 was the sort of timeframe, you know, the EUV unit breakdown could be 70-30 between logic and memory or DRAM.
Speaker Change: On the promotion to CEO job I've got one question on the UV in DRAM, if I may.
Speaker Change: The question is really first of all can you tell us roughly speaking of your wafer capacity of the wafer capacity deployed in the industry, how much of the transition to yet.
And how much do you seeing that could evolve too.
Speaker Change: Tree adopt <unk> and HBM.
Speaker Change: And then related to that.
Speaker Change: I think in the past you had mentioned that over the longer term I think 2013 was the sort of timeframe.
Speaker Change: <unk> unique breakdowns could be 70, 30 between logic and memory DRAM do you think that the layer count increase with <unk>.
Christophe D. Fouquet: Do you think that the layer count increase we see with HBM could drive that to maybe a 50-50 sort of split over the course of the next, you know, five or 10 years? Thank you so much.
Speaker Change: Drive that too maybe at 50 50.
Speaker Change: Sort of split over the course of the next five or 10 years. Thank you so much.
Christophe D. Fouquet: This is Christophe here. I think your question about the exact capacity is quite difficult to answer. I don't think we have all the elements to answer it. To do that, what I can share with you is...
Speaker Change: This is christof, yes, I think your question about the exact capacity is quite difficult to answer I don't think we have all the elements to Hulu.
Christof: To do that with I can share with you is.
Christophe D. Fouquet: The trend we see on DRAM is basically for EUV, where our customer roadmap basically is calling for an increase node on node of the number of EUV layers. And I think we see that basically already for a few nodes. And that I think is because of the current visibility of the roadmap we have from our customers. So we see basically the number of layers continue to increase to execute on the DRAM roadmap. The high bandwidth memory doesn't change that dramatically because the device itself is very similar.
Christof: The trend we see on the on the on DRAM basically four four <unk>.
Christof: Sure.
Christof: Our customer roadmap basically is coding for an increase.
Christof: Node on node of the number of EV layers and I think we see that basically.
Christof: Already four four a few nodes.
Christof: And that I think is we use the.
Christof: The current visibility of.
Christof: The overlap we have from our customers. So we see basically the number of.
Christof: <unk> continued to increase to execute on the on the DRAM.
Christof: Our roadmap.
Christof: The high bandwidth memory doesn't change that dramatically because the device itself is.
Christophe D. Fouquet: What is changing is the ratio between array and logic, mostly, which typically calls for larger die and, therefore, more wafer capacity needs. So there you have a translation in volume, but that's not related to the number of EUV layers; that's more related to the number of wafers you will need to do a high bandwidth memory.
Christof: Its very similar what is changing is the ratio between the.
Christof: Iran logic, mostly which typically call for <unk>.
Christof: Larger.
Christof: Di and therefore more wafer capacity needs. So there you have a translation in volume, but thats not related to the to the number of UV layer. That's more related to the number of wafer you would need to do a high bandwidth memory.
Christophe D. Fouquet: And there again, as Roger mentioned before, we're still trying, and I think our customers are also still trying to understand exactly what the effect of high bandwidth memory will be on the overall capacity needs for DRAM in the next few months. But I think that the jury is still out on that, and we are working very hard on our side to try to understand it with the idea that when we come to all of you in November 2014, we will understand it a bit more. But I think it's a work in progress also on our customer side. It's also called the 70-30. [inaudible]
Christof: And there again I think I heard you mentioned it before we still trying I think our customer also still trying to understand exactly what would be the effect of high bandwidth memory on the overhaul capacity needs for DRAM in the well in the next few months, but I think that the jury is still out on that.
Christof: We're working very hard on our side to try to understand that.
Christof: With the idea that when we come to all of you in November 14, we understand that's a bit more but I think it's work in progress also on our customer side.
Christof: 70, 30, 70, 30 mix, yes, yes, yes.
Christof: Which is also true for the 70 30 mix because it's all connected.
Christof: Okay.
Christophe D. Fouquet: Thank you.
Speaker Change: Thank you so much.
Speaker Change: Yeah.
Skip Miller: As this will be the last quarterly call for Peter, I'd also like to take a moment to publicly state to Peter that, on behalf of the ASML IR team, it's been our extreme pleasure to have worked with you over many years. Thank you for your leadership. So many great memories and countless contributions to ASML.
Speaker Change: Alright.
Speaker Change: As this will be the last quarterly call for Peter I would also like to take a moment to publicly state that Peter that on behalf of the ASML IR team. It's been our extreme pleasure to have worked with you.
Speaker Change: Many years, Thank you for your leadership.
Speaker Change: So many great memories and countless contributions to ethanol.
Peter T. F. M. Wennink: Congratulations on your retirement. We wish you and your family all the best. That's absolutely clear. 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: Congratulations on your retirement wish you and your family all the best.
Speaker Change: I haven't done it without you guys.
Speaker Change: Absolutely clear error here.
Speaker Change: On behalf of ASML I would like to thank you all for joining US today, operator, if you could formally conclude the call I'd appreciate it. Thank you.
Operator: Thank you. This concludes the ASML 2024 First Quarter Financial Results Conference Call. Thank you for participating. You may now disconnect.
Thank you. This concludes the ASML 2020 full first quarter financial results Conference call. Thank you for participating you may now disconnect.
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