ASML Holding N.V. (ASML) Management Presents at Evercore ISI Inaugural TMT Conference (Transcript)

ASML Holding N.V. Conference Call Summary Company Overview - Company: ASML Holding N.V. (NASDAQ: ASML) - Event: Evercore ISI Inaugural TMT Conference - Date: June 8, 2021 - Participants: - Peter Convertito - Director, Investor Relations - C.J. Muse - Senior Analyst, Evercore ISI Key Industry Trends 1. Cyclical Trend: - Companies are looking to add capacity that was postponed during the pandemic, leading to increased demand for Deep UV tools [4] 2. Secular Trend: - Long-term drivers include 5G, AI, autonomous driving, and virtual reality, which are accelerating demand for high-performance computing and associated memory [5][6] - The pandemic has accelerated the shift towards a digital economy, enhancing the demand for edge computing and IoT devices [6] 3. Technological Sovereignty: - Countries like China, the U.S., and Europe are focusing on developing their own semiconductor capabilities, impacting long-term demand [7] Financial Outlook and Capacity 1. EUV Capacity: - ASML plans to generate EUR 5.8 billion in revenue from EUV tools this year, with an increase to support 55 systems next year [8] - Transitioning from 3400C to 3600D tools will result in a 15% increase in wafer output [8][9] 2. EUV Tool Output: - Next year’s output from 55 D tools will be equivalent to 65 C tools, enhancing customer value [9] 3. Memory Business Growth: - Memory sector is expected to grow from 10% to 20% of EUV business in 2022, driven by increased capacity utilization [15] Customer Relationships and Contracts 1. Long-term Agreements: - Customers are discussing longer-term spending plans, but the nature of agreements remains similar to past practices [11] - Increased commitments from customers are noted, particularly in down payments for tools [13] 2. Installed Base Management: - The Installed Base Management business is expected to grow at a 10% CAGR, with variations based on service and upgrade cycles [37][38] Gross Margin and Financial Performance 1. Gross Margin Expectations: - Non-EUV systems are expected to maintain low-to-mid 50% gross margins, while EUV margins are projected to rise from low 40% to around 50% as new tools are introduced [40][41] 2. Service Revenue: - EUV service revenues are expected to contribute 5% to 6% of the ASP per tool annually after the warranty period, enhancing overall gross margins [43] 3. Capital Return Policy: - ASML aims to maintain EUR 2.5 billion on hand, returning excess capital through dividends and share buybacks [45] Future Outlook 1. Technological Advancements: - Continued development in metrology and inspection technologies, with potential revenue growth from E-beam systems expected in 2023 [48] 2. Investor Day Insights: - Further discussions on capacity, demand trends, and technological advancements are anticipated during the upcoming Investor Day [46][48] Additional Insights - The transition to new technologies and the impact of supply chain constraints are critical factors influencing ASML's operational strategies [20][21] - The company is actively evaluating whether current demand trends are transient or indicative of a longer-term shift [20][34]