ASML

ASML Holding N.V. (ASML)

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ASML Holding N.V. (ASML)

UBS Global Technology and Services Conference

November 17, 2011 11:30 AM EST

Executives

Craig DeYoung – Vice President, Investor Relations

Pete Convertito – Investor Relations Manager - North America

Analysts

Unknown analysts.

Presentation

Moderator

Craig, thanks so much for coming. You probably – most of you know Craig DeYoung, Investor Relations at ASML, obviously one of our preferred stocks in Europe at the moment. Craig, over to you. Lots to talk about obviously, but maybe if you want to do a few introductory words.

Craig DeYoung

And I'll let you catch your breath. Never run upstairs with a CK.

Moderator

Thanks, no problem.

Craig DeYoung

Yes, thank you, everybody for joining this morning. What I'll probably do, I'll just do a real quick recap of our quarter and talk a little bit about our Q4 guidance and then we can – and I'll try to anticipate a few of your general questions and then we'll open it up to Q&A. I think we have about 30 minutes. So we posted a kind of modest €514 million in the fourth quarter. We had anticipated that somewhat, as we saw as the year has gone by, a diminishing demand almost across all the sectors and our customers of course are adjusting to that and trying to figure out what next year will hold for them for sure.

So we have guided bookings to be up. I will – we said to the next level if I remember correctly. But I said it would be modestly. It’s not going to be double or anything like that. We don’t anticipate that and Q4 orders are largely going to be driven by the sector leaders taking advantage, as leaders do, of the kind of weakened demand environment. And I’ll choose this time to say clearly that our customers are not discussing any overall and general capacity planning for next year.

So I think currently they just don’t know what next year is going to produce for them in terms of demand. But we do see the sector leaders in DRAM for example going to take and make strategic investments to try to differentiate themselves even further from their competition. We’ll see that with the DRAM leaders and with the foundry leader for sure. So what again is going to drive Q4 in the main is execution on these strategies that are largely independent of the overall demand environment and can even happen and be supported by a weaker environment.

Again the leaders will normally invest in downturns or in weakness to try to exaggerate the difference between them and their competition. So that’s what we’re seeing. If we look at the NAND, which is probably a clearer sector for ASML. So you may or may not be aware. We have an ability to model the scanner demand based on bit growth demand or bit supply growth actually. So in 2012 the expectation today by industry analysts and ASML uses industry analyst numbers. We don’t – we’re not good at forecasting what demands are going to be in our customers end markets. But we use industry analyst forecasts and today we expect, based on those forecasts, about 80% bit demand growth in 2012.

We’re able then to calculate based on the technology NODE transitions that are planned by the individual customers, how much of that bit demand or the bit supply can be gained by the shrinks alone, and then if any how much wafer capacity needs to be added. So if we assume the bit growth to be 80 and given the technology NODE transitions collectively in the NAND sector amongst the four customers, we calculate the bits can be grown by about 55% given those strengths, which means that the industry needs to add some additional wafer capacity to compensate the other 25%. And we estimate today that that would be nominally about 150,000 to 170,000 wafers starts.

So and that’s against an over 200,000 wafers started in this year to meet roughly the same bit growth given the technology NODE transitions. So we’ll see a somewhat similar situation in NAND next year. So we’ve got to get our arms around that. As I mentioned earlier, bit growth and DRAMs, DRAM can be based on the technology NODE transitions planned again by the collective DRAM customers to a level of about 40% and the current industry analyst forecasted bit demand growth next year is roughly 40%.

So if that demand level holds up, that means that we’ll have a reasonable supply-demand balance in bits provided just by the shrink plans of our customers today. So again then the question that remains today for us about 2012 is as I mentioned before, the overall capacity planning of the logic guys generally. So we’re going to have to wait and see a bit. Again we have a little bit of clarity on Q4 now in terms of order intake. The question is whether we’ll support a forecasted level of Q1 shipments that is actually above Q1 shipment levels and we have to wait and see whether those bookings come through to support that level or not. So it’s a bit of wait and see, although we have an idea what the range will be. But we have very, very little visibility into the order levels of Q1 at this point in time.

So I expect that our customers will wait in general for the holiday seasons around the world to sell through out of that before they can really understand what the volume requirements are for next year. So we’re kind of in a wait-and-see mode on that front.

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