ASML Holding(ASML) - 2023 Q4 - Annual Report

Financial Performance and Shareholder Returns - ASML's sales grew by 30% to €27.6 billion in 2023, with a gross margin of 51.3%[9] - The company returned €3.3 billion to shareholders through dividends and share buybacks[9] - ASML expects annual revenue between €30 billion and €40 billion in 2025 with a gross margin between 54% and 56%[181] - ASML projects annual revenue between €44 billion and €60 billion in 2030 with a gross margin between 56% and 60%[182] - ASML's total shareholders' equity at the end of 2023 was €16.2 billion, with a consolidated balance sheet total of €43.1 billion[199] Technological Advancements and Innovation - ASML shipped the first modules of the High NA EUV EXE:5000 system in 2023, marking a significant technological milestone[12] - ASML's TWINSCAN NXE:3600D, the latest-generation EUV 0.33 NA lithography system, achieved 100 shipments by June 2023, offering 15-20% increased productivity and 30% better overlay compared to its predecessor[60] - ASML is developing the next-generation EUV 0.55 NA (EXE platform) systems, with the first modules shipped for R&D purposes in 2023, aiming for higher-resolution patterning[62] - ASML's EUV NXE platform is designed to drive affordable scaling to 2030 and beyond, with improvements in resolution, productivity, and overlay performance[61] - ASML's holistic lithography approach integrates systems with computational tools, metrology, and process control software, optimizing chip production and enabling smaller chip features[54] - ASML's EUV lithography systems use light with a wavelength of 13.5 nm, enabling the printing of the smallest features on advanced microchips[58] - TWINSCAN NXT:2100i delivers 295 wafers-per-hour (wph) productivity with unprecedented overlay performance for sub-3 nm nodes[66] - TWINSCAN NXT:870 increases productivity from 260 wph to 330 wph, a 27% improvement, for high-volume 300 mm wafer production[67] - Transition from XT to NXT platform results in productivity gains: KrF 27% to 330 wph on NXT:870 and ArF 46% to 300 wph on NXT:1470[69] - YieldStar 500, launched in 2023, offers nanometer-level accuracy for overlay and focus measurements in high-volume manufacturing[75] - HMI eP5 e-beam metrology system provides world-class 1 nm resolution for critical dimension (CD) and EPE data monitoring[79] - Computational lithography uses machine-learning techniques to reduce development time and cost for optimizing chip patterns[84] - ASML's installed base management (IBM) portfolio includes service and upgrade options to optimize cost of ownership over system lifetime[83] - ASML's platform development approach updates all installed systems with a new software stack to streamline legacy code integration[98] - ASML invested €4.0 billion in R&D in 2023, representing a significant increase from €3.3 billion in 2022[117] - The first modules of the High NA EUV system, EXE:5000, were successfully shipped in 2023, with high-volume manufacturing expected to be operational by 2025[103][104] - ASML's R&D spending is targeted at 10-15% of revenue, with 10% allocated to explorative research to fill the innovation pipeline[113] - The company introduced a new software development methodology, including a "shift-left strategy" to improve quality and reduce unplanned production stoppages[101] - ASML's High NA EUV platform increases the numerical aperture from 0.33 to 0.55, enabling geometric chip scaling into the next decade[103] - ASML's innovation ecosystem involves over 15,500 engineers working on advanced lithography systems, supported by a strong network of customers, suppliers, and research partners[116][118] - ASML is focusing on 3D system integration and shrink to reduce costs and improve energy efficiency, particularly in Logic and Memory applications[112] - ASML's Hyper NA technology, with an NA higher than 0.7, is expected to become more visible around 2030, offering opportunities for Logic and DRAM applications[115] Market Trends and Industry Outlook - ASML ended 2023 with a backlog of €39.0 billion, indicating strong future demand[9] - Demand for DUV systems remained strong, particularly in China, where orders were backfilled for mature and mid-critical nodes[10][11] - The company expects strong growth in 2025 and 2026, driven by increasing demand for semiconductors, particularly in sectors like energy transition, electrification, and AI[23][24] - ASML is preparing for a significant number of new semiconductor fabs being built globally, which will require increased capacity and readiness[24] - The semiconductor industry is currently at the bottom of the cycle, with the downturn beginning in the second half of 2022, and recovery indicators showing positive signs[26] - The semiconductor industry is expected to double in size within the next decade compared to today[27] - ASML expects net sales in 2024 to be broadly in line with 2023, marking a year of transition and preparation for rapid growth[27] - The semiconductor market is expected to grow at a high single-digit compound annual growth rate, driven by trends such as generative AI, energy transition, and IoT[132] - The top three semiconductor manufacturers plan to invest over $300 billion in global capacity in the coming years[141] - ASML plans to increase annual capacity to 90 EUV 0.33 NA and 600 DUV systems by 2025-2026, and ramp up EUV 0.55 NA (High NA) capacity to 20 systems per year by 2027-2028[168] - The global semiconductor market is projected to resume growth after 2023, with a historical CAGR of 7% from 2012 to 2022[168] - In 2022, nearly 1.1 trillion chips were manufactured globally, feeding a $0.6 trillion industry[168] - The 2023 semiconductor market size for high-end compute and memory was $89 billion, with a projected 2025 market opportunity of $107 billion[167] - The automotive semiconductor market is one of the fastest-growing segments, driven by electrification and autonomy, with a 2023 market size of $74 billion and a projected 2025 opportunity of $94 billion[167][159] - Generative AI drove strong demand for GPU chips (Logic) and High-Bandwidth Memory (HBM) in 2023, though these products remain a small portion of the overall Logic and Memory market[175] - The energy transition is a key market driver, with semiconductors enabling the shift from fossil-based energy to renewable sources like wind and solar[157] Sustainability and ESG Strategy - ASML's ESG sustainability strategy, developed in 2022, was executed across the business in 2023, focusing on environmental, social, and governance elements[14][15] - ASML's R&D investments and sustainability efforts are aligned with global standards, including the EU's Corporate Sustainability Reporting Directive (CSRD)[29] - ASML focuses on energy efficiency, climate action, and a circular economy to minimize environmental impact while expanding computing power[192] - ASML's ESG sustainability strategy aligns with the United Nations' Sustainable Development Goals, aiming to create long-term sustainable value[190] Supply Chain and Operational Resilience - The company reshaped its sourcing and procurement organization to strengthen supply chain resilience[12] - ASML aims to secure unique supply chain capabilities to ensure business continuity and move toward adjacent business opportunities[186][188] - ASML has eight manufacturing sites globally, providing high-precision environments for assembling and delivering lithography systems[196] Customer Support and Collaboration - Customer support includes 24/7 assistance, next-day parts delivery, and specialized training for local field engineers[91] - ASML collaborates with customers to align innovation investments and address long-term challenges for the next 5-10 years[88] - The company signed a Memorandum of Understanding (MoU) with imec to intensify collaboration around High NA, including the installation of advanced equipment in Belgium[109] Export Control Regulations - The Dutch Government implemented new export control regulations on advanced semiconductor equipment, effective September 1, 2023, impacting ASML's shipments of NXT:2000, NXT:2050i, and NXT:2100i systems[141] - The US updated export control regulations in October 2023, restricting shipments of mature immersion lithography systems (NXT:1970 and NXT:1960) to certain customers in China[141] Workforce and Innovation Ecosystem - Around 40% of ASML's employees have been with the company for three years or less, reflecting significant recent hiring[27] - ASML's innovation ecosystem includes over 42,400 employees and key partners in the value chain, driving advancements in lithography, metrology, and inspection[195][198]