ASML Holding N.V. (ASML) Earnings Call Transcript & Summary

Thank you. Welcome, everyone, to ASML's 2022 Investor Day. I am Skip Miller, Head of Investor Relations. I want to thank you all who have made the journey over here to Veldhoven, and it's so nice to see many of you in person. It's been a long while. And for those joining on the webcast, good morning, good afternoon, good evening. As far as -- before we go through the agenda, I would like to first maybe walk through some of the housekeeping items. First, safety. The exit is here in the back. Regarding restrooms, they're over on this side on the next floor up. And if you would please put your phone on silent or airplane mode now, just a reminder, to avoid any interruptions. Presentations that will be given today will be posted on the website at the end of the day. And regarding Q&A, we're going to have 2 things here. First, for those here in the audience, when we get to Q&A, raise your hand, we'll have people in the aisle who have microphones. You'll come down, get a chance to ask questions. And we'll try to mix some in for those joining on the webcast there, you should see on your screen an area where you can ask a question during the presentation. Please submit your questions. We will take those and we will weave those in as part of the Q&A session. If you could, you don't need to, but if you could leave your contact information, in case we don't get to your question, we can address it a follow-up from IR team. So with that, I'd like to move to the agenda. Today, we will first have our CEO, Peter Wennink, who will talk about the end markets, wafer demand and what we are going to do in terms of capacity. Followed by our CFO, Roger Dassen, who will talk about the financial model, business model. Peter will wrap up closing around 3 p.m. We'll take a 30-minute break, and then we'll move to the Q&A session. We'll have members, 6 members of our ASML management team will join and will be here to address QA. So we'll have an hour time there. So we will wrap up the formal program at 4:30 p.m. As far as those that are in the audience, we will then have a review the agenda after Q&A that will take us through a dinner at 8 p.m. Okay. So now before I start, of course, we have to read all this. So if you had read along with me, no, I won't make you do that. But before we begin, I would like to remind everyone that comments made by management during the event will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in our press release and presentation, which will be posted on our website at asml.com. Now as it's been over 4 years for many of you, and some of you may not have even been here, but those that were here back in 2018, as you came in, you probably looked and said, wow, this place has really grown. You see a lot more people. So before we start with Peter's presentation, we'd like to do a quick intro video just to show kind of where we've come from, how we've evolved and how this place has grown as we prepare for the expansion and future growth of this company. [Presentation]

First of all, I'd like to reiterate what you just said, it's great to see you all. I mean, I've just met a couple of old friends, people that we've been seeing for the last decades and have been following ASML pretty closely, and have also seen the growth of the company over the last decades. Why is this introduction video important because actually it shows growth. And growth is particularly important because it will drive what we will do in the next decade and beyond. And I'm going to talk a bit about what we see and probably managing the obvious from time to time because when I talk about these developments that we all know of, but we try to somehow translate that into the business that we're in and what ultimately is the demand for wafers because we're a semiconductor equipment company and we process wafers. And ultimately, that's the driver for the size of the company and the volume and growth. So I'm going to talk about megatrends. And this is the way you say, hey, Peter please move on, I'd like to see the numbers. But I'm going to give you some numbers in that sense. And then we'll translate that into wafer demand and why we need that capacity. And then of course, Roger is going to translate that into things that you're really interested in that is the numbers. Now clearly, these global trends, I cannot repeat that enough. I mean trends that we are currently seeing, we didn't see a couple of years ago. People ask me the question, why didn't we see this massive and big demand on our products coming? Because we simply do not connect all the dots. And it's still a challenge today to keep connecting all the dots. But it's the value of Moore's Law, which is basically reducing the cost per function that will drive our business, and we'll create these building blocks for growth and for solving some of humanity's biggest challenges. And we are a strong believer in this. And Moore's Law is alive. It's still alive and kicking, and it's about the cost per function. And we all know if the chip gives you more functionality, more value, then it creates cost, we're going to create applications and solutions and that's happening. I mean things are actually happening across the globe, and we'll talk about those trends. But generally, if we go through it, we believe that it will translate into, let's say, a CAGR from 2020 to 2030 of around 9%. And that drives the increased demand for wafers, which if you translate that, it's about 6.5%. Now you can say, why isn't it 9%? Well, because of the value. The value, we think, will rise faster than the cost, which is reflected in the wafers. The values -- wafers will become more valuable. In order to do that, just in summary, the [ 90, 600, 20 ] is the number that we gave to you in April of this year, and we're going to reconfirm that throughout the meeting. So first, the Megatrends. Now -- and I talked about this. The connected world. We see a connection stepping up time and time again. It's smarter cities, it's in -- it's in the connecting of billions and billions of things, whether it's 40 billion or 300 billion, it's just rising and growing faster than we anticipate. And it creates unprecedented data volumes. But something also happened. And I think it's the focus on climate change and resource scarcity, particularly through the last couple of years. And I think one of the areas where we underestimated the growth of semiconductors in this area because energy prices will go up. The demand for energy will go up. Renewables will become more important. We have to focus on waste and pollution. But as I will show later on some very good examples that semiconductors are going to make a big difference. And then also a very important trend, we'll have more people. So focus on life sciences and medical and health is going to be paramount. The organization is also accelerating. And now the last 2 points. I'm from a generation where actually, we were given the promise of the global village. And I had a discussion with the some young people that actually said, you guys screwed up your generation because you left us with all these problems. So listen, but our generation did create a global village. Our generation, my generation did create the Internet, did create global travel. I think this is -- and it gave us an enormous push in economic development and in innovation that will lead to, let's say, geopolitical discussions and the drive for technological sovereignty, which is going to be a very important driver for our business going forward. I will talk about that. So this is just translating into applications, connected world cloud, artificial intelligence, AI, edge computing, energy transition, energy transition and electrification. Now energy transition was not on our radar screen. It's one of those applications, one of those many dots that are created in the semiconductor space that we didn't have a good vision on but it's happening as we speak, it's going to be a significant driver. And of course, then the social and the economic shifts. It's just a different way of working health care and the sovereignty drive. Now on top of that, we see this driver for artificial intelligence. And it's not only in our systems, in our networks, it's not only in, let's say, the way that we compute, but it's also very much on device. So it's in the edge, it's in the cloud, it's in our networks, but it's also in individual device, where -- whether it's automotive or whether it's the smartphone, whether it's the PC, whether it's drone technology, whether -- these are applications that are -- that you will find in health and in life sciences, and you will have this application all needed this type of innovation. The artificial intelligence that is a big driver also for our industries. And I want to go into some detail on what I said earlier. I think the energy transition is something that surprised us for the last couple of -- and there is anecdotal evidence, we had a Chinese customer that actually was in our offices at the beginning of the year, and has said, basically, they were making very mature stuff. It was in power, in some analog products. And actually said, Peter, we need your help because we're going to build a 300-millimeter fab, 90 nanometers, 9-0. I said why do you need 300-millimeter fab for 90-nanometer? He said, well, it's because of automotive, power ICs, smart power ICs and the energy transition. And he started to talk about the energy transition that they needed and the semiconductors they need to make for mobile -- sorry, for wind and for solar. And he didn't even talk about the energy grid. And basically, this is some data that we got from some of our customers and some of other companies that is from Shell. It is an estimate that 1 megawatt of wind power will take EUR 3,000 worth of semiconductors and solar EUR 4,000. Now the question. What was the electricity needed in the world in 2019? It was about 24,000 terawatt hour. Now you can then calculate this and take the average of wind and solar. All the electricity you need in the world, which, of course, is not going to be the case, but it's going to be wind and solar. You come to significant numbers. Now the 24,000 was 21,000 3 years earlier, it was 2019, the 24,000. So now 2022, we're 3 years later, that will accelerate because of the consumption of electricity. Now if you then think about this, if all the electricity would be wind and solar, the massive amounts of semiconductors are actually needed. Now of course, there will be a mix. But it just shows you that are things that we haven't thought of and is particularly in the area of what we call mature or mainstream or specialty semiconductors. It's in power, power ICs, in analog, it's microcontrollers, it's sensors, optical sensors, nonoptical sensors. And then we see it on the consumption side. And this is data that Infineon shared also publicly said, the expectation is by 2030, 70% of the cars will be somehow related to an electrical vehicle. It could be hybrid, it could be high hybrids or low hybrids, it could be full electric. 70% of 100 million cars is 70 million cars, and it's more than $1,500 per vehicle in this decade. It could be the end of the decade, but you just do the math, and this is -- this is without -- this is on top of that, you have the ADAS, that is the advanced driver-assisted systems, that take massive amounts of semiconductors. We'll come to that later. So we actually see that back, and this is a slide that I borrowed from a good friend, Lars Reger, CTO of NXP Semiconductors. And I saw this slide when he was presenting on the IMEC Future Technology Conference. And the word in Europe was when it came to semiconductors and automotives, that's all 28-nanometer stuff and older. But this is what Lars presented. And this is across the entire product portfolio. And it's basically, it's about sensors and actuators that actually pick up the analog data out of -- from the sensors in the car. They basically compute this real-time close to the sensor and then bring it into the communication system of the car, so that it can be processed by the main microprocessor, which is 5-nanometer. Basically, it's what Oliver Zipse told. He said, Peter, we are a system in automotive will be one of the most advanced users of semiconductors in this decade. Now, geopolitics, and I've said it before, I mean, oil was always there until it wasn't and it was a strategic commodity. It was a strategic problem. And then certainly, we fast forward 2021 or 2020. And semiconductors have always been there until they weren't. And we certainly start to realize that there is a dependency created in those decades that countries and geopolitical systems don't like. So we see this push for technological sovereignty. I think we've just seen the beginning because if you think about the growth rate of the industry and you think about the geographical distribution of chip manufacturing, then if you want to create some level of technological sovereignty, and it doesn't mean that you need to do everything. You just need to stay relevant. Well, with that growth rate staying relevant, it means that you need to invest -- double up your investments as countries to make sure that you can stay relevant. And this is just the first phase. It will -- there will be more coming. And having said that, do we need it? All right. There's a question we sometimes get from politicians when I talk to politicians and said, why would we do this? Why would we in Europe or in the U.S., have these chips sets? Because the profitability of the ecosystem -- and this is a slide I always like to use. It's the 50 top technology companies in our ecosystem, which starts on the top with the equipment companies, and then we deliver our products to the chip makers and the chip makers to the smartphone and hardware makers, which actually ends up -- and basically, it's the cloud companies and it's the Microsoft's and the Alphabet's of this world. The EBIT in 2021, the combined EBIT of these 50 companies is $688 billion. Compound annual growth rate over the last 6 years of 19%. So the industry has more than sufficient means to pay for this expansion. So why then this government incentive systems. Well, at least, we tell the politicians that ask that question said, it is not about the fact that the industry cannot afford it, but the industry has a choice. It has a choice to build the next manufacturing expansion, whatever they want. And where from their point of view, it's the most efficient and the less risk, and that's where they currently have their ecosystem. So if you want to pick up and build an ecosystem, you're basically creating risks for these companies. And that means these companies need to be incentivized, you can call it on the noneconomical top of that risk. And this is why you need to step up. If you want to have within your geographical boundaries, you want to have advanced or mature semiconductor manufacturing, you better make sure that you provide them an incentive to take away part of that top economical risk, okay? So what does it mean? Do we have enough money? Yes, we do. And with that money, that innovation power, which is not only money, it's also the intellectual power. The road map is still very much there when this is -- we'll go into some detail, but both in Advanced Logic, in DRAM and in NAND, we have a very clear road map that extends to 2030 and in many cases beyond. And this is what we are discussing with our customers these days. Just to give you an example, this is logic. Actually, this is an IMEC slide, which IMEC, as you know, there's a lot of pretty competitive work with the leaders in the industry. And this is the road map. It actually goes to 2036. And when you look at the metal pitch, it actually scales down to 16 to 12, the half pitch, you can do the calculation, is low -- is single digits. And that is the pitch. That's not what we would call the lithography or let's say, the semiconductor node, and the node is expressed in a different nanometer term. And even if you go, for instance, from FinFET to CFET, go from around Nanosheets to Forksheets to CFETs, you basically talk about a sub 1-nanometer node as the nomenclature will be called, sub-1 nanometer. And that is real. This is what the research is currently working on. It's also true for DRAM. This is a slide of Kinam Kim about a year ago, less than a year ago. What you're seeing here is that the bit density will go up, and it also means that the design rules will keep shrinking, which actually means that the gigabyte density per chip will go up significantly almost exponentially. And this is a road map, which has been discussed with our customers in detail, but this is not just a presentation on an open forum. This is how we and our customers work together to make sure that we understand the requirements, it's not only the technical requirements, but also the economical requirements of what they are doing, yes? And this is where this collaboration model that we have with our customers is so critically important, that it's becoming even more important than ever before. It's also true for other parts of the industry, for instance, 3D NAND, it's the same thing. Now if you take it all together and then you go and say, so what does that mean for our business? What does that mean for the size of the business of our customers that ultimately are going to come to us to ask for machines. Well, if you then look at the industry analysts and the tech insights of whether it's McKinsey or it is semi, their estimate of the semiconductor industry is anywhere between 1 trillion to 1.3 trillion. But how does that then -- then we take the data and we split it over 7 segments, which is basically you probably know this if you've followed our Capital Markets Day before. When you look at the smartphone market, look at the personal computer market, consumer electronics, wired and wireless infrastructure and then the data center and service and in automotive and then industrial. And I'll talk about the industrial a little bit later. But you can actually see that on the top row, consumer, personal computing, smartphone, that's single-digit growth, yes. And it's data that we use from Research Institute until 2026, 2027, and we do some -- and we internally do some extrapolation also based on the discussion with our customers based on the road maps that we just saw. And then you see that there are 3 areas where we see double-digit growth. And that is in the server and the data center domain. Remember the AI slide that I showed you. It's very much about the cloud and the edge infrastructure that is going to drive this. And then Automotive. Well, talked about the automotive market and the fact that the electrification is going to see a significant jump up in terms of the use of semiconductors. If you look at the drivetrain and electric vehicle needs twice the number of semiconductor. And you don't talk about the advanced driver-assisted systems. That's all about safety. And that will be on top. So if you look at that, there's a significant double-digit growth in the automotive market. And it's also what we are seeing today where the automotive market, as you know, is still there are shortages in the automotive market because it grows fast so. And the last bucket is Industrial Electronics. Everything that we cannot put into these 6 buckets, go into bucket 7. And this is where we have these examples of the energy transition of life sciences. At the IMEC conference, for instance, we saw a presentation of a life science company that does DNA sequencing. They actually showed a chart that sequencing 1 DNA 25 years ago was $90 million. Now it's $600 with that new machine. And by the end of the decade, it will be less than $50. So that machine generates 20 gigabyte of data per day. So I think if you then think about -- that's in that bucket. We just talked about the electrification, and we talked about the energy transition and what is needed there. And we talked about industrial applications. I think our artificial intelligence, you will find very clearly, the biggest impact in industrial applications. Now for what it's worth, it's double-digit growth. I think it's conservative for the simple reason that we don't know. We don't know. We simply cannot connect all the dots. And those dots are being created because the value of Moore's Law is there. We're creating more value than we create cost with every new node. And then some intelligent company or a group of intelligent people is going to think of that -- of an application that we currently don't know of, that we cannot assess in terms of size and impact. It's basically the question you've been asking me for 25 years that Peter, what's the next killer application? And I said, same answer. I have no clue. And this is also what the CEO of one of our major customers told me when I said, why didn't you tell us you needed so much more mature tools. And he said, Peter, because we have no clue. And that's happening. And that's happening throughout the industry. Why? Because we are continuously creating value. And in that bucket, yes, we'll probably see the biggest surprises. But this is what we take. This is what we currently know. And we take those growth rates. And we then say, okay, what we at ASML take all that data taking those 7 buckets, what do we think? We think if we add it all up, certainly about a CAGR of 9%, and it's, well, pretty close to 1.1 trillion by 2030. This is how we look at the world at the end markets, in combination with the discussion we have with customers on their road maps. Now what does it do to wafer demand? Now I'm going to take you back to last year because one of your questions must be last year, you did the same tricks. You went through it, and you missed a couple of things. And we did. One thing I told you the impact of the energy transition, we didn't take into consideration the way we do it today. So last year, we actually said when you look 2020 as the base that by 2025 on Advanced Logic, we would probably add 130,000 wafer starts per month per year. That's this 0.13 on the top row. And on DRAM, we say it's about 80,000. And on NAND, it's about 100,000. And on mature logic, where we were most wrong, it was 200,000. So we said, well, by 2025, probably the industry needs to support the growth of our customers, which was the previous slide -- needs about 510,000 wafer starts -- 505,000 wafer starts. Now we're a year later, and we have to adjust a couple of things. They're predominantly in the logic space -- they're predominantly in Advanced Logic, and that is basically, it's the increase that we are currently seeing because we underestimated a couple of things. I'm going to go into some detail later on. But for instance, the focus on energy-efficient performance in high-end semiconductors, and I'll talk about that later, but it actually leads to a bigger die sizes. We were -- actually, we're now having insights into what these die sizes are going to look like, which is different than what we thought last year. But the biggest jump up was in mature logic. And it's actually where our biggest shortages are. Our shortage in KrF, are in i-line, are in dry ArF, it's a 15-year-old technology. This is where -- and why is that? Because everything I just talked about in terms of automotive, energy transition, it's not about 2-nanometer chips. This is about 28 nanometer 45 nanometer, 65 nanometer. It's about analog to digital chips. It's about power ICs, very important, smart power ICs. And then we have -- we're talking about microcontrollers, sensors, optical and non-opportunity. That's in that bucket. And this is where we did much more research and insight together with our customers, and this is where the biggest shortage is. Now when you then look at -- sorry, one back -- when you then look at what that means for 2020 -- '30, our compound annual growth rate in terms of wafer demand is then going up to 6.5% with -- in absolute terms, the biggest growth in the mature markets. So -- and it's driven by, like I said earlier, it's by energy-efficient focus on advanced semiconductors and it's a mature market, basically connecting more dots than we had sight on. And that's clear. And that's what we're seeing today also. I mean also for this year -- sorry, for 2023, next year, we have a significantly higher demand on our KrF and i-line and dry ArF output than we can make. So there's a significantly higher demand. So what are the changes there? And I want to go into a bit of detail there. And I want to start with the CMD of last year where basically we said we need -- for 2020 to 2025, we need 505,000 wafer starts per month additional capacity per year. And of that 505,000, I think, we were wrong in the advanced market simply because of market-driven growth, which is the server market, AR/VR market, which is basically a bigger market than we anticipated, which accounts for about 45,000 wafer starts increase. In the mature market, we were mostly wrong, which is basically industrial and automotive, which actually is -- and you can say, again, industrial, what is that? That is this basically a wide array of applications where we simply have not understood the demand of the market, 180,000 wafers starts is our calculation. So market-driven growth altogether is about 225,000 wafer starts additional from 2020 to 2030 in terms of wafer starts per month per year. Then there's the technology-driven growth, which is another 50,000 wafer starts. That has to do with the larger die sizes that I talked about. I'll give you an example a bit later. Now the advanced market is growing faster. And I think you clearly see it in the server -- in the server market, which is Gartner data, and the VR market. But I think more importantly, it's probably what TSMC showed. And actually, when you look at the smartphone and consumer market and you look at these little blocks on the left-hand side, and you say, for instance, sensors. Sensors is actually moving from 0.35 micron now up to 28 nanometer. And more bands and higher speed in smartphones and in the -- on the consumer side, also moves up from basically and -- from 65 nanometer to 6 nanometer, which is very clearly EUV territory. And the same is true for sound and image. So basically, what you are seeing is in those products, smartphone and consumer, there is a significant increase in technology innovations that need next nodes. And that's a driver that we now have better insights in. And that means that there is a higher demand for advanced semiconductors. And the mature market, the mature market that I talked about is a market that's very difficult to understand because it's so wide. And the energy transition, I talked about solar, I talked about wind. I didn't talk about the grid -- about the energy grid. Energy grid needs to be upgraded. It needs to be upgraded with microcontrollers with sensors. Basically because when you generate the electrons, you need to offload it to the grid. It's going to be a significant area where mature semiconductors are going to be used. But also on the consumer market, is also a TSMC slide. And when you later on look into the detail, you see that in all these areas, you see that the number of mature chips used in those applications are sometimes 20-fold higher in terms of units. And all this has to do with the smart cars. And when you look at the automotive and then look at the increase in low-end chips or mature chips that are used in a car, and you look at those 4 blocks, you can see that it's 10- to 20-fold increases of just mature semiconductors just for smart cars. And this is all data points up here about what do we see? I think this is an important slide. What we actually see is the mask sets that are being run through our systems, anything above 28-nanometer. 28, you can see it here. It's 40 nanometer, 65 nanometer and 90 nanometer to 130-nanometer to 0.13 micron. You can see the technology that is needed for it, which is in these green blocks. You've seen that over the last couple of years, we see a 40% increase in the number of mask sets. And every mask set is a product. So you see that instead of -- you can see in 2012, the dark blue line, which is 92 nanometer to 0.13 micron actually went down. But from 2015 onwards, you see a significant growth. And this is what we're continuously seeing. And this, by the way, has also been confirmed by some of the mask makers, that's an e-beam mask maker initiative but actually over a somewhat shorter period, so an increase of 48%. So actually, we are -- and that was in this mature market node area. And it is a clear proof that there are products being designed and being fed through the manufacturing system that we have no clue of. And we could, of course, seen this, but we didn't, and we didn't understand it, but it's happening, it's there. Now energy efficiency. Think -- we'd like to -- the point is, if you want to make the leading-edge device more energy efficient, you'd like to lower the [ clock speed ] . You basically like to run them at a lower voltage. But if you do that, their performance goes down. So how do you then level up to the performance? You include more transistors. But you've more transistors, you need more service area, which I think is very well depicted by this is black part of the slide, which is basically a slide from Apple. And if you -- it's probably difficult to read. But if you look at the left-hand side, you see the M1 chip. M1 chip basically has high performance and low energy usage. But then if you look at the size of those chips and look at the right-hand side, M1 chip is, by far, the biggest. So yes, you increase performance, you reduce energy usage, but there's 1 penalty and a penalty is size. So you need to have bigger die and to get those same units out, you need more wafers. And that's what we're seeing. So if you add it all up, this is again the slide 780,000 wafer starts per month per year. On top of that, there's a technological sovereignty and the foundry competition as a result of it because you will see that multiple companies or more companies are now going into the foundry market and the leading edge, and they were going to distribute across the globe that will lead to some level of efficiency -- inefficiency. And we assume that if you build across the industry, 10% inefficiency on the installed base -- on the installed base. Then you need about 150,000 wafer starts additional just to create 10% inefficiency, which is depicted on this slide. So to get to an installed wafer capacity, whereby we're able to deal with inefficiency as a result of the geopolitical situation, we need 10% more wafers. And that's 930,000 wafer starts per month per year increase. Can they afford it? I think, yes, they can. That's an earlier slide. But also these are the announced CapEx plans. We just add up for our 3 largest customers and see where it happens across the globe. Then this is $330 billion of announced fabs. I'm not spilling the beans. I mean this is just public information. That's the global capacity. So it's happening, and this is happening in different parts of the world, as you can see. And that could be a driver -- very likely is going to be a driver from some level of innovation. Now if you believe that 10% inefficiency is too high, you take 5%, which basically you divide 10 by 5 -- or by 2, and then you know what -- about the wafer capacity additions will be, if you want to take another number. But it's going to add to the wafer capacity that is needed in the industry. Inefficiency is unavoidable. So we need to expand capacity. I think if we want to grow, we need to expand capacity. And this is just -- we all need to realize that we see a very -- a strong long-term growth, we have to add capacity, which is going to be step functions like we're going from 375 DPV (sic) [ DUV ] to 600. We have to prepare for cyclicality because we don't predict cycles. Cycles happen because of all kinds of reasons. And of course, we don't want to balance the interest of our stakeholders, which, of course, includes very close contact with our customers, with our suppliers, with our investors, and with our people and with society. So how do we do that? Well, there's 2 ways to add wafer capacity, by just selling more machines. And if you compare the 600 systems per year with the year 2020, you see a 2.5x increase in DPV (sic) [ DUV ] and a 3x increase in EUV. So that's basically compared with the output 2020. On top of that, we see productivity increase with DPV (sic) [ DUV ]. We think we can have, on average, a 20% productivity increase, and with EUV, a 70% productivity increase, which actually gives you a wafer capacity increase in DPV (sic) [ DUV ] of about 3x and low-NA about 5x. And High-NA, this is the first of a kind of a new generation, we need those 20 systems or more than 20 systems in the time frame, 2027, 2028. We need to do this. So we're going to expand 65,000 square meters of manufacturing space, which will lead probably to an average CapEx investment of EUR 0.5 billion per year, which, by over 5 years, translate to about EUR 200 million of depreciation. You could say, if we're all wrong and we've all been dreaming and this growth will not happen, then we will be stuck with EUR 200 million of depreciation because of this expansion. I think that's bearable. I think it's also bearable in the supply chain, which we think need to invest about EUR 2 billion. But for them, of course, the math is about the same. Now to close off. As again, I hope I was clear on how we see the global trends that fuel semiconductor growth. It's across the entire space. It's in advanced, it's in mature, it's in memory, it's in logic. And that means that we believe that our customers' market could grow around 9% compound annual growth from 2020 to 2030, which needs about 6.5% CAGR growth of the wafers, which in order to be able to ship those machines, we need to up our capacity in DPV (sic) [ DUV ] from 365 to 600 and to 90 EUV systems and at least 20 High-NA systems. Okay. That was my part of the presentation. I talked about us, we should do it, but I know the question will also be what about your suppliers. And of course, Zeiss is our biggest supplier, our biggest partner. And we've asked Andreas Pecher, the CEO of Zeiss SMT and part of -- and a Board member of the Zeiss Holding company to just address us and to give us his view on, one, what is Zeiss doing and to how committed are they. Thank you. [Presentation]

The semiconductor industry is highly innovative and dynamic, and so are we. In all of the Zeiss semiconductor businesses, our technology road map supports the industry's growth and relentless innovation. These businesses comprise our mask solutions, process control solutions and at last, but not least, our optical systems for semiconductor manufacturing. 2022 marks the 25th year of the strategic partnership of ASML and Zeiss, and we have been working together since about 40 years. After all these years, our companies together are tackling the challenges, especially in demanding times like today. Looking at the growth of, for example, our headquarter in Oberkochen, Germany, one can already tell our success story. Starting with a few buildings on literally a greenfield, our current factory evolved. We are now further growing our capacities and ramping up with new buildings, machines as well as staff. Additional to our headquarters, we are also ramping up in all our German and international locations. The market demands this growth from us, and we work very closely with ASML and other customers to align our road maps on technology and capacity. Our aspiration is not only to be the technology leader, but also the growth leader, all this to support our customers. We need to ramp up in all dimensions, our infrastructure, our equipment and our supply chain. But we also need more educated and qualified employees, and we act fast on this. The development of our complex products takes time. For example, years from start of design to volume manufacturing, looking at High-NA, but also when it comes to DPV (sic) [ DUV ] . Speed is important, but at our extreme requirements, mirror precision in the picometer range and integration of highly complex mechatronic systems, it takes significant time and requires top talent from various technical competencies. It's our mission to keep the development lead times at an absolute minimum, and so we are ramping our R&D team as quickly as we can. Let me give you some insights on 3 of our dimensions. Strengthening our DPV lithography solutions is of critical importance to us, both by expanding our production capacities, and together with ASML, further improving our DPV products. Together with ASML, we are the sole providers of EUV lithography systems. We feel it is our responsibility to the industry and to the overall market to provide the required solutions at the required capacities as quickly as possible because only with these products, semiconductor manufacturing at the leading edge with highest productivity is possible. With High-NA, we will drive Moore's Law to the next level. The challenges with High-NA EUV mirrors are significantly larger and of higher complexity than conventional EUV mirrors. More complex manufacturing processes must be mastered. To tackle these challenges and to bring this new technology to market, the teams are working at full speed. Our strategic partnership with ASML has a strong foundation. We are confident in facing the challenges together and to meet the market's demands.

Good afternoon, everyone. So we just saw the market opportunity. We just saw all the effort that is being put into this, both by ourselves, but also by size. So now indeed, let's look at what this is going to generate? What this is going to generate for us? How are we going to serve our customers and ultimately how is that going to result in the numbers that Peter already referred to, which, of course, is an important topic of conversation today. Before I do that, just a couple of things that we're going to review before actually going into the euro numbers. So first off, I think it's important to just look backwards, just a little bit, in terms of what are the investments that we made, how does that reflect in the historic performance of the company. Then I'm going to talk about our model. So how is the model? How do we make these different models in terms of potential scenarios for 2025 and for 2030? How do we do that? What's the methodology behind that? And then I'm going to borrow some of the work that Peter has shown in terms of how do we look at the markets, how do we look at the different technologies? How is the buildup there, et cetera, et cetera, in order to ultimately get you to does this mean for the different technologies that we have for DPV, for EUV, Low-NA and High-NA, for metrology and inspection. And how does that ultimately reflect in our P&L? And then finally, what are we going to do with the money. So the money that is being generated, how is that going to find its way back into the business? And what -- and in what fashion will it be distributed to shareholders. And then obviously, we're also going to talk about the new share buyback program that we intend to start today. So with that, let's go back in time a little bit and very, very briefly. This is the investments that we've made within ASML in the past couple of years starting in 2010. And what you see here is 3 type of investments, if you want to call it that. Obviously, the R&D expenditure that we have, which is the dark blue element of the bars. Then we have the CapEx, and a lot of the CapEx you would have seen if you are here at our premises. A lot of new buildings in comparison, the last time that we were able to see each other here in 2018 in person, and also quite a few cranes that are an indication for the CapEx that is underway. And then, of course, we did a number of acquisitions, acquisitions that are strategic, that we believe were strategic in order to accomplish the execution of our road map. The latest one of that being the acquisition of Berliner Glas, now ASML Berlin in 2020. So all of those investments and the execution of that road map, I think they've generated some pretty good results for the company. And all in all, if you go back again to 2010, you would see a CAGR around our EPS, around earnings per share of 18% driven by, obviously, growth, one of the key themes, obviously, of today. Growth in our revenue, you see revenue growth from EUR 4.5 billion in 2010 to around EUR 21 billion expected for this year. You see an increase in our gross margin, starting at 43% at 2010 going to 50% and up for last year and this year. And of course, also with the share buybacks, share buybacks that accounted for, I would say, about 2% out of the 18% in terms of the CAGR. So I think all in all, I think the road map execution that we've embarked on, I think has clearly produced results also financially for the company. And that's not gone unnoticed in the financial markets either. So if you look at the development of the shareholder value for ASML over this period, 2010 to 2022, it's been a very substantial generation of shareholder value. 24% CAGR in terms of total shareholder return which is north of what the semiconductor index, which is SOX index did and also substantially north of where the NASDAQ was. Some of you thought that the development of this curve was a little bit boring. The only way is up, obviously, this year created some interesting dynamics in there, as you can see. Obviously, as we've all witnessed. But we started calculating this by November 1, obviously, the past couple of days and past couple of weeks, have been pretty helpful again. But it's pretty clear the volatility that is there. No matter what it is, I think it's pretty plain to see that the performance of the company and the good results that the company has generated have also been reflected in the return to our shareholders. But all of that is history. And I think the question, obviously, is based on this and based on all the investments that have been made, but also the investments that we're embarking on, what does that mean for continued growth? And again, just to remind everyone how we do this, and the methodology has not changed. So the methodology that we use in order to come up with these different scenarios for 2025 and 2030 that methodology is unchanged in comparison to what we did last year and also unchanged in comparison to what we did in 2018 and the Capital Market Days before. Starting point is the end markets, as Peter just demonstrated, segmented into the 7 different segments. We then translate those end markets into wafer demand for all of those segments. And then wafer demand obviously spread for different nodes, right? So the different nodes in logic, in mature, in advanced, different nodes for DRAM, for NAND. And then we translate that in a very transparent way for you into the litho spend where we give you the litho spend for those different nodes. And that's the way how we come up with the different -- with the demand in terms of number of tools, obviously, recognizing the improvement in productivity that you've seen and that we expect to see in these tools. And then in addition to that, obviously, we have the installed base business, which is growing with the installed base, both based on service and based on upgrades. And that then gets us to different scenarios, a low market scenario and a high market scenario, both for '25 and for 2030. For 2030, that is new because you will recall that in the last Capital Markets Day, we only gave you a CAGR for 2030. We now believe that was appropriate also, given the better insights that we have, including better insights on what the technology sovereignty what that really does, we were able to now also give you scenarios for that year as well. So that's the methodology. I will skip through this because, in essence, these slides have been shared by Peter, but they are important just to follow the logic of the model that we have. So here, you see the developments in the end markets. Here you see the translation of that into the wafer capacity, the wafer starts per month, per year, as Peter just laid that out, adding up to the [ 930,000, including the 150,000 ] from the tax sovereignty and the foundry competition. And then here, you have the buildup of the technology, if you like, for the different nodes. This is unchanged in comparison to last year, right? So the composition per node in terms of what do we think is going to be done by High-NA, what's going to be done by 0.33 Low-NA, what's done by immersion, et cetera, et cetera. That composition has not changed for these. The only thing we did is, also in light of the fact that we now have these scenarios for 2030, we added a few nodes on the memory side, so both for DRAM and for NAND. But the composition and also the node-on-node growth as it is being projected here as a CAGR for this period, the 30% over 20% and over 10%, respectively, is unchanged. And here, we also, in light of the importance of the mature market and in light of the growth that we anticipate there, we also thought it was appropriate to give you some insight into the composition of the different nodes on the mature side. And here, you see that for some, the one you see here for a mature logic, analog and also on sensors, the 45-nanometer and also 40-nanometer, you see that, for instance, there is also immersion ArFi nodes are in there. And actually, they're a pretty substantial part of the total cost of lithography for those particular notes. So with that -- so with those building blocks and again, the majority of the building blocks, Peter has spent a lot of explaining those building blocks. What does that generates? So how does that translate into results for the company? And let's start with the installed base business. Installed base in 2020 started at EUR 3.7 billion. That was the starting point that we used in the Capital Markets Day of last year. So that block -- that dark blue block there or bar is the EUR 3.7 billion. And by 2025, we expected in the Capital Markets Day a midpoint for that of EUR 6.5 billion. But of course, we also realized that this year, we're already approaching EUR 5.7 billion for the installed base business. That's the expectation. So I think it is fair to assume growing it from EUR 3.7 billion to EUR 5.7 billion, in essence, in 2 years' time. I think it's fair to assume that the midpoint of EUR 6.5 billion that we have by 2025, is probably too conservative. On the back of a growth in the installed base and also on the back of our success, I would say, in providing upgrades, we thought it was appropriate to have that midpoint grow to 7 -- to EUR 7.5 billion. So here, you see that there is this growth. And as a result of that, you see the CAGR that we expected from 2020 to 2025 in the Capital Markets Day of last year, a CAGR of 12% for that 5-year period. We now expect that CAGR to be 15% at the midpoint, again, growing from EUR 3.7 billion in 2020, now to EUR 7.5 billion by 2025. And then the CAGR beyond that point, so the CAGR for the installed base business starting in 2025, all the way to 2030, we expect that to be at the same level, so at 10%, but obviously, off a higher base. And as a result of that, obviously, more growth. So that's the expectation that we have there. So what it ends up doing in terms of CAGR for the entire period, for the entire decade is that it would take the CAGR of 11% for the installed base business that we discussed with you last time, we expect that to go to 13%. In terms of systems, what is the -- what are the expectations for systems? And what we present to you here primarily for advanced logic for DRAM and for NAND. A lot of it is actually consistent with what we had last year, which tells you that the lion's share of the improvement in the numbers really comes from the increase, if you like, in end market demand. But there are a few changes here, and those changes are in the bold lettering in the boxes. So what are the key assumptions? First key assumption in terms of market share, that has not changed. So market share for EUV, obviously 100%, for immersion 90%, for the dry business 65%. Those were the same market share assumptions that we discussed last year. If we look at advanced logic and we look at the reference point, the reference point of 16 to 14-nanometer. That was [ 315,000 ] last year. We took that up to [ 350,000 ] for now because it's clear that our customers keep on adding also in those nodes because there is still demand in those nodes. So you really see nodes becoming bigger and bigger and bigger, sort of 14 to 16-nanometer node now is estimated at [ 350,000 ] as the starting point. In terms of the low and the high scenario, in terms of the node and no change, so every node after the 16, 14 nanometer, what happened there? Last year in 2021, we talked in the low scenario of minus 15%. And we really think on the back of what Peter showed in terms of the increase in end market demand and the increase in wafer start capacity that is needed, we took that down to minus 5%. So node over node minus 5%. Still negative in the low scenario, reflecting that, obviously, you get more bits with every new node, but taking that back from minus 15% to minus 5%. In the high scenario, we had 0% in the Capital Markets Day of last year. We now put it at 8% plus in -- for advanced logic. Again, reflecting the very significant demand that is clearly there as it relates to the advanced nodes in the high scenario. In terms of EUV exposures, in essence, no real change. So that is unchanged in comparison to what we had last year. In terms of DRAM, more or less the same. Also, the bit growth has not in the term that we're looking at here, 2025, 2030, that has not changed. So bit growth, low 15%, high 25%. The only thing we changed here is the assumption on wafer capacity conversion. That was a 70 -- that was a 60% to 70% in 2021. We took that to 70% to 80% for this time. And the background really is what we see our customers do. So we really see that our customers are making those technology transitions. It is affordable for them to go to a new technology transition to have more EUV, for instance, deployed in there. So we really see them see more and more capacity being turned on to the new technology. And there, we have 9 exposures, used to be 8, but of course, those 9 exposures would also include now in this model, High-NA exposures 1 to 2. As it relates to NAND, no real changes in the assumption. The only change there is that we actually took the high down. We took it down from 45% to 35%. And the reason there is that we do see that the transition -- technology transition is a bit slower. And as a result of that, we think the affordability of that becomes a little bit compromised and as a result of that, we took that back from 45% to 35%. So these are the main assumptions in the model as it relates to the system sales. So what does that all translate into for the different technologies and for the different system units that we have? So if we look at the screen here, there's a few conclusions that you can draw from that. As you see on High-NA, for 2025, we didn't change anything. And the reason we didn't change is it's consistent with what we discussed last year. Of course, there will be more shipments in 2025 than the 5 that we have here. But given the complexity of the delivery model behind High-NA and given the uncertainties that we have on revenue recognition, when exactly is the point that all it is there, that all of it has been tested. And that in fact, you can say that the system has met all the obligations that we have vis-a-vis the customer. We took a pretty conservative stance and we only have 5 systems in here that we recognize as revenue. And that assumption has not changed. Then if you go down, you see a big jump in the dry business. So both in the high scenario and the low scenario, you see that there is a big jump in the dry business. And of course, that is very much a reflection of what Peter has been talking about, about the mature technology and the huge increase in demand that we simply did not foresee to this extent last time that we discussed that. So hence, the big jump there. You also see quite a jump on the immersion technology. And immersion technology really benefits from two developments. Of course, on the one hand, on the advanced logic side. So immersion there is an important player, right? So the fact that you saw the significant increase on the back of artificial intelligence, automotive and what have you for the demand for advanced logic. Obviously, that is reflected in the immersion sales. But I also showed you that in a number of mature nodes, the 40-nanometer, 45-nanometer you actually saw there as well that immersion plays a significant role, right? So Immersion actually benefits from those two developments. And there you see that go up. You'll see EUV go up and on EUVs, you actually see two things. On the one hand, you see it going up from 70 to 80 in the high market scenario. Again, I suppose not a surprise because this benefits from a bunch of things. This benefits from the development on the advanced logic side that we just talked about. There's obviously also benefits from the tax sovereignty and the competition in the foundry business. So there, it's clear that, that benefits from those developments. You also see that the variability in EUV goes down, so if you look at the delta between the high scenario and the low scenario where you had a gap of 22, right, 70 minus 48, [ 4.33 ] you had that in the Capital Markets Day of last year. That is actually shrinking. And the reason it is, is that it's becoming clear that EUV is quite resilient also in less favorable market circumstance. So that's why the gap there actually increased -- decrease from last year to today on a -- actually, on a higher base. So that's the 2025 system developments as we see it. And if you then look into what that does in terms of the sales, it actually means that the high market scenario that we had last year in the Capital Markets Day has now actually become the low market scenario at EUR 30 billion. And then you see that we've now modeled a high market scenario there at EUR 40 billion, which is a reflection of the unit numbers, obviously, that you see there on the left-hand side, the metrology and inspection units that get added to that and obviously, installed base business that I talked about in my previous slide. So then fast forward to 2030. So what's the expectation for 2030? And if you look at that, then actually, what you see is, of course, there is a very big increase here on the basis of High-NA. Again, High-NA being a very significant enabler of the -- of our customers' road maps in the second half of this decade. And there you see High-NA in the high market scenario at a level of EUR 30 billion. And as you know, for High-NA already today with the tools that we're selling today, the north of EUR 350 million. So it's obvious that, that is a very significant driver of the top line by 2030. You see Low-NA sort of at the same level, both in the high scenario and in the low scenario. And you actually also see that there is still a bit of a dry and immersion, so a bit of a DUV that gets added to the capacity in the second half of this decade. So those are the main changes from 2025 to 2030. Again, please bear in mind that the tools that we're going to sell in 2030 are different tools from the tools that we're going to sell in 2025. So obviously, the productivity and all the specs of the 2030 tools are at a higher level. And of course, that should also translate into a better ASP for those tools in 2030 in comparison to 2025. And if you take the unit increase and the ASP increase into consideration, and of course, you take into consideration the fact that the installed base continues to grow, both for the service business and for the upgrade business, then you get to what you see here on the right-hand side of the screen, the total sales opportunity that you could model on the back of these scenarios and that gets you to the EUR 44 billion to EUR 60 billion opportunity that we see for ASML at that time frame. So if you try to analyze it, so where does it all come from? First off, the quick analysis from 2025 last year to 2025 this year. This is another cut at it. You see that the jump at midpoint EUR 27 billion that we had in the scenarios of last year to the midpoint that we have for the scenarios this year, you bridge EUR 27 billion to EUR 35 billion. You see $4 billion coming out of that from EUV. And that's units in particular, you see non-EUV accounting for EUR 3 billion, and you see the installed base businesses that I referred to jumping from EUR 6.5 billion to EUR 7.5 billion and that gives you EUR 1 billion delta there. So that's the way to come from the midpoint of last year to the midpoint of this year. If you then go to the 2030 projection. So how do you get from the midpoint EUR 35 billion for '25 to the midpoint EUR 52 billion in 2030, EUV is a very significant driver of that in EUR 10 billion. Of course, the lion's share of that, that's pretty obvious is the number of High-NA tools, right? That's the key driver there. But there's also an ASP increase because, as I mentioned to you earlier on, of course, the EUV tools that we're going to sell by 2030 have higher productivity, better overlay, et cetera, et cetera. As a result of that more value to our customers. And as a result of that will command higher ASPs than the tools that we're going to sell by 2025. Non-EUV business is going to chip in EUR 3 billion. As you saw, there is unit number increase there as well. But also there, you will see our continued -- the continued dividends, if you like, of the road map, where we do produce tools that have higher performance, as a result of that higher value to the customer and higher ASPs. And the installed base business at the midpoint gaining EUR 4 billion from '25 to 2030. So this is the way it's built up. If you look at the CAGR that we have there, you actually see that the CAGR for 2020 to 2025 grows from 14% to 20%. And then you see that the CAGR from '25 to 2030, we keep at 8%. But again, we keep it at 8%, but off a significantly higher base by 2025. Very often we get the question, so what does that mean for litho intensity? And that's a term that is being used, albeit in very different ways. As you know, ASML is not a fan of [ WOV ] because we think it's a lagging indicator. But what we would want to present to you is how do we see the litho sales in comparison to the semi sales. So that's the percentage that you see here. It's an interesting journey as you look at it historically, and the people that have been in this industry for a while, they will probably recognize a few things. They will probably remember when the market was very, very tough on the litho builders in 2009 of the financial crisis where the sales levels really plummeted in that period of time. But obviously, that also going up very, very quickly as soon as people started to realize, hang on, we've been too stringent here, there is a need for capacity. So new stuff needs to be added. And then you see the period of multi-patterning. You see the period of the conversion of 2D NAND to 3D NAND. So that's the period that you have here. And here, you see the period in fact of EUV, right, where EUV step-in and EUV really left to a situation where were multi-patterning was being replaced by single-patterning EUV. And as a result of that, you see the litho sales as a percentage of semi sales go up. So you see that at the lowest end of our estimates, you see that, that's sort of more or less neutral. So I would say, more or less a neutral or steady development from where that percentage is today. And that's for some analysts, that's the way some analysts are looking at it. That's the gray line that we referenced as external sources. Possible, but we think there are quite some reasons why we believe there is potential over that and why we believe there is potential to get to a continued increase of that line. And you see those on the left-hand side of the slide. First off, this market is clearly growing. The semi market is clearly growing. And obviously, you need to have your capacity in before the market grows, right? So you have that acceleration, if you like, of the capacity that needs to be added before it actually return to semi sales. So that element of acceleration, CapEx needs to be there before you can actually turn out the semi sales. Of course, that's one reason why we think there is reason for a continuation of that upward trend. The second element, we truly believe, and I think that is recognized by many analysts that the equipment portion within the overall CapEx is going to increase. And with high-NA, we believe within that envelope of equipment sales, we believe there is reason to believe and reason for positive momentum also for the litho business. So for that to be a percentage on a go-forward basis. That would be a second reason for -- to expect that increase. And then thirdly, the tax sovereignty trend leads to lower utilization. So that in and by itself is also a good reason to assume that there will be a continued move upwards of the litho sales in comparison to the semi sales. So how is all of that going to reflect? So we just looked at the top line. So how is all of that going to reflect into our overall financial model. Well, this is what we presented to you last time. So let's focus on the deltas for 2025. Of course, we did talk about the top line, so I won't spend too much time on that. You see that the gross margin, we've kept flat in comparison to last year. Some of you might say, well, wait a minute, if you increase your top line, shouldn't you expect a higher gross margin? But remember that the mix effect of having more dry business in there as having a detrimental effect. So on the one hand, of course, with a top line increase, you would expect an increase in the gross margin, but the mix effect of having more dry business in there probably takes it down a bit. So that's why we keep that at a 54% to 56% level. You see R&D here at the midpoint at both midpoints, midpoint R&D divided by midpoint of sales at around 13%, which is a number that you've probably seen before. You see SG&A at 3.7% of that top line at the midpoint, which is consistent with were had it last year. And then you see CapEx going up. This is the number that Peter shared with you. So we expect every year to have about EUR 500 million increase in CapEx. So that's the one you see there. And then you also see the effective tax rate going up a little bit as a result of some of the global tax debates that are going on. In terms of 2030, we talked about the top line. We do believe in 2030 that there is potential to further increase the value of our tools to customers. And as a result of that, also further increase our gross margin. And we believe the bandwidth there to look at would be in the 56% to 60% range. And why is that? It's because at that stage, we believe we've taken High-NA to such maturity that it will generate the gross margin that we think High-NA has potentially there. And as we also mentioned, also for EUV in particular, we do believe there is the potential to further drive the value of those tools for the customers. So that's why we think a 56% to 60% potential for gross margin would be there in that time frame. R&D midpoint, around 12%. SG&A at a certain point in time, you will get some leverage from there. So we think we can take that to 3% by 2030 away from the 4% that we had in 2021. And then you see the rest of the numbers there, essentially unchanged in comparison to 2025. Good question. Indeed, a good question, what about the uncertainties that we're in today? Because, of course, as Peter already mentioned it in his introduction, it is interesting to talk about growth, but we shouldn't forget that we're talking about significant growth opportunities medium term, longer term for ASML. But we should also recognize that the global economy is pretty unstable at this stage. So very good questions from some of you indeed is how do you deal with the flexibility around that. So if for whatever reason that growth doesn't manifest itself, the capacity that you've built is not being fully utilized, what does it do to you and what are the mechanisms that you have? What are the risks? Well, look at the forward statement that gives you all the risks that are out there. I advise you to take a good bottle of wine with you before you read it. But if you digest that, then you see all the risks. But in essence, if you think about it, of course, it's geopolitics. Of course, it's the global economy. And of course, there's a number of things that are under our control. How effective are we in getting to the ramp? How effective are we in pushing our road map in keeping our cost control, et cetera, et cetera? Those will ultimately be the things that determine our success in the marketplace and ultimately also the level of sales that we're going to have. If for whatever reason, we are looking at a down cycle. I think these are important numbers to share. On the one hand, we have the workforce. Workforce, most of our people are fixed, as you can see here, but we do have flexibility measures there. We do have what we call hour bank that also in the past has given us quite some flexibility in that regard. You see that more than 1/4 of our R&D expense is flexible, so that gives you some leeway. Very importantly, we have flexibility in our total cost of goods because as you see here, the total cost of goods, 82% of our cost of goods is actually materials that we source from outside. So there, of course, is flexibility. This is not flexibility you can drive to the extreme. I mean at the end of the day, our supply chain is very important to us. So there is no doubt in our mind that we need to take measures also in a downtime to keep our supply chain happy and alive. But it is clear that there is quite some flexibility in here. Also on the base of contracts, we have quite some room given our contracts to have flexibility with our suppliers. So I think this is a very important element for us to drive. But as I mentioned, it's important to make sure that all of our stakeholders even in more difficult times that we're able to satisfy their demands and safeguard their existence. And therefore, financial flexibility is another very important element for us. And I think that's a good segue into my final comment here, and that's about our capital return policy. Of course, in the days that we're going to enter into, the fact that we're growing our capacity, also the fact that we're looking at potentially slightly more volatile times, of course, it's important that we have a certain financial flexibility there. And I think you've seen us build that over the years. So we'll continue to do that. But we do believe that there will be sufficient and substantial money available to shareholders, available both for growing dividends, and that's been our policy. Our policy has not changed in comparison to last year. So there will be ample room for giving back money in terms of growing dividends. And also, there will be ample room, we believe, for share buybacks. Share buyback program that we've announced today is a 3-year program of EUR 12 billion, of which 2 million shares would be for employees and the rest would indeed be repurchased and would be canceled. So that's the program that we've announced today and that we will execute on starting today. Friends, with that, closing remarks. So investments create value. We've made investments, but I think it's also plain to see that those investments have generated significant returns for the company and for its stakeholders. Substantial growth in the markets, both end markets but also technology trends that we believe are significant and positive for us. Market opportunity, as I laid out, market opportunity for 2025 between EUR 30 billion and EUR 40 billion, for 2030 between EUR 44 billion and EUR 60 billion. And all of that, if executed well, will give us ample room to pay back money to our shareholders with growing dividends and with share buybacks. With that, thank you very much. And I'd like to hand over again to Peter for his closing comments.

Do we need this?

I don't know. I don't know what you're going to do.

I don't think so. So I'm just going to give it back. So yes, closing comments. I mean, I'm not going to repeat what we said, not even in summary. The only thing I would like to actually say is that the first time that we did Analyst Days like this or Capital Market Days like this, I still remember that the company had EUR 3 billion in sales. We came out and we said, well, over a certain period of time, we can grow to EUR 5 billion and people laughed at us. And then we said we were at EUR 5 billion, and in a certain period of time we will be at EUR 10 billion and people laughed at us. And so it's not about -- and then we did it again and again. I think it's the fourth or the fifth time that we're doing this. Every time it just turns out that the industry grows faster than we think. And that is basically a structural -- that under-appreciation of the value of Moore's Law. And I said it before, I'm not going to answer any questions. I cannot answer questions where they used to be 20 years ago, they said Peter what's the next killer application, single? And I would say, what are the next killer applications, multiple? I have no clue. The only thing that we do know, and that's why these roadmap slides are so important and that's why the collaboration slides with our customers are so important that we do see a very clear road map that this technology can keep reducing the cost per function and that the functional increase in the minds of our customers is much bigger than the cost increase, which will create next-level applications, of which we have no knowledge of. And I think this is where we are today. I think we are highly confident in our technology roadmap. We didn't spend time on the technology roadmap this time. We also said we weren't going to do it. But I can tell you, and I think it's probably also part of the Q&A that we'll have later that our confidence in our technology road map has gone up, like it should go up with the type of R&D money that we spend together with our customers. And I can also say that the collaboration models with our customers, especially with the leading-edge customers, driving the road map has been better than ever before and closer than ever before. That's much more, let's say, knowledge sharing, transparency sharing. So we are more aware than ever what the challenges are and how we, as industry participants should manage this ecosystem. So having said that, it's very important basic conditions for our expectation that this industry will grow significantly. And yes, last year, you could say, when we did the Capital Markets Day 12 months ago, we started to prepare this 18 months ago. We are finding out every quarter, every year, new types of applications that are not only a leading edge. The biggest surprise [indiscernible] that was clear is also that we're seeing these applications that had to do with sensors, that has to do with actuators, that have to do with power management, have to do with energy transition with the big, big challenges and changes that we're currently seeing in society. I think we will play a pivotal role there together with our customers and together with our suppliers. This is why I was very happy with the contribution of Andreas Pecher from Carl Zeiss because they see the same thing. We are ready. We will grow and we'll grow significantly. But most importantly, I think this technology will provide building blocks, very important building books and sometimes cornerstones for the solutions that we need to together create to deal with some of these very large societal challenges. I would like to leave it with that and give the word to you Skip.

All right. Thank you, Peter. Thank you, Roger. So we now are going to take roughly a 30-minute break as we set up the Q&A panel. When we come back, we will have 6 members of ASML's management team, which we can then turn the questions over to you in the audience and also you online on the webcast. So if we could come back here at 3:30 p.m. CET, which is roughly 30 minutes from now, we'll start again and you on the webcast can take a break away from the screen. Thank you. [Break]

Welcome back. We have about -- I was told about 1,200 people online. So we'll be taking questions from the audience here as well as online. So joining us for the Q&A, a panel 6 of ASML's management team. Peter Wennink, you already have met. For those that are joining maybe from the webcast late, Peter Wennink, our CEO and President; Martin van den Brink, our CTO and President; Roger Dassen, our CFO; we have Christophe Fouquet, who is our Chief Business Officer; we have Frederic Schneider-Maunoury, who is our Chief Operations Officer; and lastly, Wayne Allan, who's our Chief Sourcing -- Strategic Sourcing and Procurement Officer. So welcome them, and let's start with Q&A from the audience.

Jerome Ramel, BNP Paribas Exane. Roger, I just wanted to come back to the slide you showed during the last Capital Market Day and today, the average between the high scenario and the low scenario of your EUV numbers because you said that the incremental in value is EUR 4 billion. But when I do the math, I find like 15 new EUV tools. So that's an average, which is in terms of ASP close to up to EUR 300 million and EUR 200 million. So I just wanted to double check the numbers, if I got it right?

I said primarily, right? So it's primarily driven by number of units, it's also rounded. So the 4 before you know it could be like 3.5. So I wouldn't adjust my ASPs the way you just did it in your mind. I think the ASPs that you have in your mind for 2025 are probably good. So the EUR 4 billion, I think the lion's share of that comes from unit numbers. You had the right number of units. I think it was 13, I think, on the net point. So then you multiply that with something that you probably have over low 200s somewhere. So that gives you a substantial part of that and then there is a little bit other in terms of ASP and then you get to what is probably closer to 3.5 than to 4. That's the way to get there.

Okay. Maybe just a quick follow-up for Peter. Peter, the slide you showed about the geopolitical potential upside, you just showed the plus, I would say. But is there any minus from China?

Well, I think this particular one geopolitically has to do largely with the drive of the governments around the globe to bring -- to reshore semiconductor manufacturing, which is in first instance, what we're seeing today is advanced. It's leading edge is EUV related, which has got nothing to do with China. So I think it is basically the -- currently announced, you can just look at the slide where we just added up all the announced fab projects of our three biggest customers, just three customers. It's more -- EUR 30 billion. And you see how it's spread around the globe. So it's basically -- there's a lot of what used to be Southeast Asia is now moving back to Europe and is going to the U.S. That doesn't necessarily include China. And if you say, fine, if the geopolitical situation is such that, which I would not expect, but that, for instance, China would absolutely be excluded from any growth then what I said earlier in my presentation is that demand is there. So those fabs will be built then somewhere else. So it could mean that there could be a temporary hiccup. But ultimately, those chips need to be made. And then you could argue, it is still as inefficient or perhaps even more inefficient than not less inefficient. So chips will be needed to the levels that we talked about and where they're being made is going to be a matter of time. And so it doesn't change the, let's say, the 2030 picture that much.

Next question. I just want to bounce back and forth up here between the side of the room.

It's Janardan Menon from Jefferies. Just two questions. One is on the technology road map, you have -- you've obviously got the High-NA coming out, but 0.55 NA is not really high in the broad scheme of things when you look at the historical trends of lithography. So can we assume that you're already working on a higher NA going up to presumably -- I mean you can take a non-immersion up to around 0.9. So would that be the direction of travel over the -- into the first half of the next decade? And associated with that, one thing that you didn't touch on the model was double-patterning on EUV. Are you completely excluding that possibility either at the 2-nanometer gate-all-around in 2025 before your High-NA goes in? Or beyond that as you go to 1.4 -- 1 nanometer before the end of the decade? And then Peter, the second question is what -- on your model and framework on the things like increasing die size and you've got the 50 additional with 50,000 wafers, does cost -- where does cost come into this picture? Clearly, to a certain extent, the cost part of Moore's Law hasn't progressed as well as it used to in the decades gone by. And the value of products is increasing. Does that get any pushback either from your direct customers, which I think perhaps you're not, but also from the end consumer because the product cost is also rising? And how does that fit into the whole equation?

I think Martin can talk about, okay, basically answer to your first question because I think the two questions that you combined as one question are related. Yes, on the value question because that's basically a value question, I would say Moore's Law is not only about cost. I mean it's a big law of economics and economics has two sides. It's cost and value. So to your point, if we keep increasing value, and I gave an example of the M1 Apple chip because what's the value there is the energy efficiency of that chip, while the performance is still high. So when that's the case, then that value -- and then ultimately, we and the end markets need to determine whether we think that, that value is good enough to buy the next-generation phone or buy the next-generation compute power. And I think that will drive it. And I think when you then look at this, yes, cost will go up, but it ultimately is the cost more than compensated by the value that we're willing to pay. And that's always been the case. And Janardan, you and I know each other for more than 20 years. I mean that's been the driver of the industry. So -- and now to now what we are seeing today is what -- this is why the sharing of the customer roadmap going forward what I mentioned is so important that for -- that until 2030 and beyond, there's this transparency and openness that will be absolutely needed with our customers. And they're willing to give to make sure that the economics still work because complexity will go up, and the flip side of complexity is cost to your point. So we have to make sure that, that cost per transistor, cost per bit, cost per whatever you want to express it in that, that cost can be compensated by more value. And this is exactly what we are doing with our customers, and they are doing with their customers. It's very integral, very integrated job that we have to do as an industry with our customers for the next decade and beyond. And that's happening today. Martin, do you want to take the first?

Well, first of all, EUV double-patterning happens today. So you shouldn't look at double-patterning will it be used then or not be used, it all happens today. In fact, double-patterning started 50 years ago on immersion. And as of, let's say, 50 years ago, decoupled a bit the lithography capability, the machine versus the process complex [ to the customer ]. And it also is a way for us to measure what the affordability is for lithography when you start going into the next generation because a customer can stay with the existing generation and do double-patterning to the extreme, preventing the next generation coming in. And this is happening today. We are developing High-NA. High-NA is about to be launched around '24, '25. And that will be used for reducing the double-patterning EUV. And that -- so that means the value we can assign to the tool is depending how much cost attractive there is to short cut double-patterning. And something similar will happen moving forward. Now to put in mind around [indiscernible], 0.55 is High-NA because on an EUV system, it's pretty high. It's I think practically impossible to assume that they may go as high as we use on [ 193 ]. So when we talk to the next system, we not talk about High-NA but Hyper-NA, but then the question is what will happen after Hyper-NA, but the lenses becomes bigger and bigger and more costly, costly. So our cautious on the next step is that we have to make sure that whatever the next step is, it's more cost effective than maintaining using the current tools for double-patterning. So we are way more in a position than we were ever that we have to make sure the complexity and cost of the next generation remains attractive enough for the customer to replace double-patterning on the previous generation. And that means we're looking now for a possible next generation towards the end of this decennium, possibly in the first phase of the next decennium, so that's the time line we're looking for. And I think Roger has not included in his scenarios anything on that. So the major value proposition when it comes for the next years until 2030, is mainly our improvements we're going to make on the existing tools, which are also quite extensive. And that is, I think, assumed -- and you said it even in your presentation, you include productivity, major improvements in costs are rolled out both on 0.33 as High-NA, even prior for Hyper-NA will play a significant role. And of course, this is also not limited to EUV, it will also go along with EUV. I'm not sure if that captures the question you asked.

Just a quick follow-up, Roger. So on the model that you said going to what Martin said, is there double-patterning included when you say 80 EUV tools and things like that? Is there a double-patterning number included in that?

It's included in there.

Our customer are using it today. And what happened is, probably I should add [ love ] story is to shrink itself, right? If you look to the historic shrink and the density has been going down of up -- density goes up, dimensions go down. And we see today the density has been a combination of what we print on the wafer versus the process integration, the 3D integration, if you will, customers are able to do. And those two gives you still another decade of shrink. But the amount of shrink is reducing. So where it's also important to realize is that how far are we able to work with our customers on the visibility road map. Around the end of decennium, will there be still products out there, who take it. I think that part becomes clearer as more of we started interacting with customers and it becomes more visible. Same 10 years ago, when we followed the predevelopment High-NA, I didn't know that the DRAM and the logic would make use of it. But for now, I think has been expressed by everyone, it's a very sold entry both at memory as well as logic. But for the next NA tool, we still have to solidify that with customers, including the affordability and making sure we are able to adjust the complexity of a next-generation tool accordingly.

Sandeep at JPMorgan. Just quick question Peter, on the ASPs. Because I mean, your growth still recently was units were coming down and ASPs going up. And now that model has changed as such, really, given the demand environment as such. But how do you expect to 2030, the ASP trend on the tool, and what is -- could be driving it? Is it just going to be throughput Because, I mean, there is High-NA coming, but High-NA terms of volumes is not like how in terms of how EUV brought in the volume. And I have 1 follow-up for Roger. I mean, this year, we saw this big impact of inflation on your margin in the first half of the year. I mean we don't know what inflation is going to do if we are in a new world of continuing inflation, are you building into your model and particularly in your contracts with your customers, what will happen if this inflationary environment continues?

Let me first answer the question on the ASP. Yes, you are right that what we always said in the previous Capital Market Day is that there was a level of cannibalization that we expected when we introduced EUV that emerge would go down because some of the emergent layers would then double pattering -- multiple patterning layers would move to single layer EUV, which actually happened. What we didn't know is that -- and we didn't expect that the end markets, which we talked about, grew so fast. . It actually means we're shipping more immersion tools than ever. So ASP going up and volumes going down because now ASP is going up and volume going up, I think it's a better proposition by the way. So -- but that's -- so this is -- and that's driven by value. It's driven by productivity increases because it will lower the cost per wafer. And it is also driven by what Martin just said, if we can determine the value of the end product together with the customer and the customer customers, and we can control the economics whereby the value increase is higher than the cost increase, we go yes? And then there are the building blocks of the technology there, but we need to determine with the customer and especially on a hyper NA tool, that's still there. And we're working. This is why we need that close collaboration, but the way that we see it today is that the further shrink. The further productivity will lead to lower cost per whatever you want, function bit, which will then drive the top line of the company even faster than we thought.

The question on inflation that you raised. So you're right. I mean we're all taken by surprise, I think about the size of the impact of the inflation. So obviously, what we have in our long-term financial plans is that inflation plays a neutral role. How to do that? That means that you need to not just work with your customers and have in their contracts that they have to pay for whatever inflation is, but also work with your suppliers and see to what extent you can hedge the situation as best as possible. So that's what we're working, not just with customers and a new customer contracts, but also with our suppliers to make sure that the burden the flag of inflation is fairly distributed throughout the ecosystem. It's unfair to only be it passed on to us. It's unfair also, I would say, to only pass it on to the customer. So we need to have a fair distribution, but not I would say, the way we're having our negotiations now, I think it's fair to assume that the inflation should have a neutral impact on us on a go-forward basis.

All right. Thank you. I mean let's take 1 from the webcast here. This is Christoffer Martin, maybe, in Roger's presentation, High NA was projected to be deployed in DRAM. Does this use of High-NA, EUV for DRAM mean that 3D DRAM will not be in high-volume manufacturing before 2030.

Yes. So I think in Roger presentation, he highlighted the use of High-NA in DRAM as 1 of the change, in fact, compared to the message we gave last year. I think this is the result of the discussion we have with our DRAM customer. The reserves for a better understanding of their road map. At this point of time, I think there is a need for High-NA DRAM around 2024, '25 for insertion. And after that, basically, I would say, going into volume. So we are far more confident today from our line with our DRAM customer that High-NA will be used also for DRAM, which I think is mostly a new element compared to what we shared with you a year ago. So the answer to your question is, yes, this will mean that High-NA will be used in DRAM and the timing for volume, I think Martin already said it, we still look at 2024, '25.

Let's see what we're over here. Sorry. Yes, that if you -- luckily, we are looking into the light, so we don't feel all. After about the fifth roll up, I started losing it faces.

Tammy Qiu from Berenberg. So firstly, for Peter, from your note-to-note assumption, which is definitely way more positive than last year. What's the driver of that? Is this purely server? And what's your assumption there for the adoption of chiplet?

Well, I think it's a part of it. I mean, part of our model takes into account the architectural choices and the system integration choices that our customers make. So when we do the translation into a pretty detailed model, the translation of the demand and the road maps -- and the note-to-note roadmaps, and in the close discussion we have with our customers, we can actually assume a certain, a percentage of the wafers, which will -- or the devices that will ultimately be chiplet-based and others that will be just mono-based. So that's in the model. So it's in there. Now what the split is, I have the data exactly, but I don't think we should -- but it is in there. So based on the road maps of our customers and what we know of our customers, it's there.

Okay. And also for Martin, please. So Martin, may I ask you, do you believe in hyper NA firstly? And also from my contradiction -- because you definitely quoted from different presses, you have different opinion High-NA over time.

Yes, there has been -- I have been criticized by my colleagues giving an interview for a local newspaper on what my thinking on hyper NA is, and I was stone down a lot -- because -- and the reason is what I just explained that I think at ASML will more than before. We're way more cautious about the cost part and the complexity part of the machine. I think will go with -- 2.5 hours from now, you will see the things get bigger and bigger and bigger, and we have to be -- we have to more constraints so that we -- because the NA change will be relatively small. So if something happens, there's enough economic power. . Do I believe I will get there? The answer is yes. I always believe in technology. So I will believe we'll get there. But I think it was very useful and still -- I still of that opinion to say to the local environment where the suppliers are, be careful, we have to sort of hang on. Hyper NA comes whatever it takes, that will not be the case. We have to constrain ourselves and looking to cost-effective solutions in order to make sure that we be competitive to whatever alternative the customer has in terms of processing. And that includes double patterning previous generation tools.

Okay. And lastly, Martin, what will happened to ASML roadmap after you retire?

Now first of all, when that happens, I will probably not be there, and obviously, we'll have to give the answer what will happen after I left.

Thank you for taking my questions guys and thanks for putting on such a great event. You guys emphasized very heavily the industry roadmap and how much conviction you have in it. And it is a really special thing about your industry, how all participants do get aligned and onboard on exactly where the whole industry is heading exactly how ASML plays -- exactly the role ASML will play in that. For us, as the investing community, the public information we have available is more really about process nodes that have been announced by foundries already. And so for the next few years, it's clear exactly to us how foundries think about that and how processes should develop. Maybe beyond 2025 for the next 5, 10 years after that, Imec has a roadmap, RDS has a roadmap. But it's often less clear to us exactly how the -- well, not only exactly what the processes will be, but also how firm the industry is and exactly what the processes will be beyond just the fact that they'll keep advancing. So would love to kind of get your help understanding how tight do you feel on exactly how new processes will look beyond 2025, both in terms of like the process nodes that will advance, but also the litho intensity and litho need advancement beyond that. I know that's a bit of a [indiscernible] for his question, but would love to just get some of your thoughts to help us get our heads around a little bit more.

Well, probably we should share the question a bit amongst our team, but I'll -- let me start off this. If you remember, I believe 2 years ago, even I showed this roadmap, which I copied Mark [indiscernible] where he showed for the next 20 years, an exponential improvement of what he called energy-efficient performance, and that is done mainly through system innovation. And if you look to people like Intel, they show that the amount of transistor but chips per device -- integrated device. And I think what that expresses is the confidence of our customers' customers. That the enormous compute power will still have enough headroom to improve. And either we do that without shrink, and then the square meters will just simply explode or we do that with as much shrink as we can. And I think as long as our customers and the customers of our customers, being the fabulous guys, see sufficient innovations in the system on the system level, which I think we just start exploring it, meaning most of the time in chip -- the industry, it was mainly getting things to half and everything comes for free. So system innovation is starting over the last 50 years, but it will continue to grow as long as -- and as long, we have ideas to improve the system that will happen. And the value of that in terms of energy use of data centers, energy use of your phone and I would say the other way around, given the battery power is about the same. You will get more functionality for that same amount of power. That I think will be, in my belief, sufficient to keep this thing going for a while. And the only question is how far could we really participate in getting that cost down. And that is still an important role we play. And we very confident we can continue to play for another 10 years.

And I think basically what Martin's saying is what I've said earlier, as long as, yes, it's going to be more costly and it's got to be more complex. But if we can create the value and what it's basically saying is, is there going to be an end or a significant slowdown to the currently insatiable demand for compute power. If we see an end to compute power, then yes, of course, the -- why would you do this? There's nothing inside that actually points -- on the contrary, it points into the other direction. And when we think about the type of applications that we're currently thinking of and are on the horizon, that will do with AI and all the things that I talked about in my presentation. It needs more compute power, not less. And then is that compute power affordable that's end the question. And that's complexity and cost question, which we need to solve together with our customers. And geometrical scaling has always been 1 of the scaling engines. And it's more important than ever that the integration and the combination of the scaling engines, the system integration, together with our customers and the key players in this industry drive to indeed creating more value at lower cost per unit. And there's nothing in sight that we currently see neither at us [indiscernible] Martin, technically, I think hyper NA will happen, but again we then work it together with the customers. And by the way, the customers lately have proactively started asking questions about how...

They need some help, I guess...

That's also true. So it's there, yes? And that Imec is all pretty competitive. It's the industry working together to look at it at the feasibility.

That's super helpful. And just to round out the discussion. So when you look at the Imec roadmap, is there anything outside of what's under ASML's control, that is a potential risk to the roadmap? Like are there any things out there that you would worry about that are outside of ASML even?

There must be many. I should ask -- we should have a bigger panel then because there are many analysts that get in the way. But as a kind of the naive confidence that I have that an industry that has an earnings power of EUR 688 billion last year with [indiscernible] growth of 19% for the last 6 years, has won the money, but also the attractiveness for the brightest minds to find solutions as like people told us 15 years ago, you guys are completely irresponsible by stepping into EUV because it will never work and guess what?

It's Mehdi Hosseini from Susquehanna International and good to see Martin and the panel. And I want to go back to Martin. With 38 -- NXE:3800E coming out next year, should we expect to see incremental improvement in throughput, like starting from [1,800, 200 to 20 ]? Or is E going to come out with 220?

Well, I'm not sure that's public -- in terms of specification, but we are -- on EUV, we have a solid roadmap going to up to 400 wafers per hour over time. And beyond that, it's still exclude go beyond that. And we do that by major innovations in the optics because it has to deal with the amount of heat from the power. It has to do with the CO2 system, that means the whole drive laser. It has to do with the source itself, the plasma and the frequency of the droplets. And it has to do with just running faster at the stages. And we also have plans to improve the transmissions of our system. So we have major, let's say, a rich roadmap ahead in driving the productivity, which effectively drive down also the energy consumption per wafer as well as the cost.

But the public roadmap that is out there has 160 as you know, for the current tool, has 220 for the ultimate specification of the 3,800, but there will be in all likelihood an interim step of 190. .

And then just to note, given the incremental increase in EUV demand, how should I think about the compute and commercialization of like a pellicle enabling larger ASIC guys coming out, are we at the inflection point where there is really an inflection point in diversification, something on that?

So I think -- I mean, at least so far, the die size doesn't have any impact on the pellicle I think the 2 things are completely independent. I think the pellicle has been initially a very difficult topic for EUV because I think for a long time, we didn't know how to do it. And then for a long time, we knew how to do it, but we are not sure that this will survive the condition of volume manufacturing. I think at this point of time, the pellicle is available. It's being used or not depending on the layer, depending on the yield risk on the layer. And we are basically continuing to improve the performance of the pellicle. I think the biggest disadvantage of the pellicle was a loss of productivity, which we have been also improving over time. So we continue to work on that. We have a few challenges. One of it is to continue to increase the transmission to reduce the impact on productivity. And the other one is to make sure that as we increase the power of the system, the pellicle can deal with that. But I would say, at this point of time, this is more work we have to do than anything else. We don't have major concern about the pellicle. And to be honest, we're also working very hard with our customers to try to reduce the need for it as much as possible because there is an obvious productivity benefit.

Can I squeeze in 1 more for Peter. Your presentation on end market trend, they all had a dip in 2023 assumption and lower forecast for '23 compared to Capital Market Day '21. And I'm not asking for a '23 guide. But if I were to take that updated slide, should I assume that there is some sort of an air pocket with your customers, but they're going to continue with investments. So if there is a -- if the -- if your customers are going to see lower revenue, they're just going to have to find a way to continue the investment, they take a gross margin head, but they won't change their investment plan?

Yes. I think you always have these unpredictable events called cycles. Cycles are being -- root cause is always different. And in this particular case, so we can probably have a long discussion about what the major root cause are, but it is what it is. Also going forward, I mean -- and especially for 2020, we've, of course, included that because that looks like it's the reality of the day. Now of course, people say, well, you guys seem to be pretty optimistic on the fact that your business for next year is still pretty good while some of your peers say, "Oh it's pretty bad." But effectively, what it comes down to is that we have to conclude that the average customer or our customers' idea about the length, the potential length of the recession is shorter than the lead time of our tools, because that's what it is. Because if it's different, if they think that the recession will last much longer than the lead time of our tools, then they can start pushing back. But now you have the risk; if they don't believe that, and they think it might be shorter than lead time of our tools and we're pushing back, guess what? When upturn comes in the back of the role, and everybody knows because we've been pretty clear about this that the current demand that we have is higher than our build capacity. So this is the situation of today. And then you have, well, okay, do our customers that have the money to do it. Well, some do, some don't. And this is the situation where we are today. But the fact that if some of the machines are being pushed back in a cycle, there are other customers that will pick those machines up gladly. And this is where we are today. And that's why [indiscernible] without giving a guidance 2023, but that's a situation where we are. So really, I think it's driven by obviously, I cannot conclude anything else, then the idea that our customers talk about the length of a potential recession.

Yes. All right. Let me take a couple here from online because we're queuing up quite a few here. So for Wayne, maybe -- this is maybe more background from your past. But as your EUV installed base grows over the coming years, can you help us understand how customers would trade off improving productivity by upgrading system versus purchasing new? And is it similar to how we should think about -- how DPVs evolve. I think they're really just trying to understand how do customers think, so both from your CS and your prior costumer experience, how do you view?

Yes. I think, obviously, our customers would prefer to upgrade and not have to use up more fab space. So if we can provide an upgrade at a cost that allows the throughput to go up cheaper than buying a new tool. That's what our customers will prefer. I think at some point, if we're not able to provide an upgrade that is cheaper than buying a new tool, then the customers will continue to just add capacity. .

Okay. And then, Frederic, this 1 is on cycle time for EUV and DUV, both comments -- or question, anything you can comment on the current cycle time and/or some of the key challenges, both for DUV and EUV with respect to manufacturing cycle time.

Well, to phase the capacity that we need, we have all the engines working on one, of course, is permanent improvement on our cycle time, which are several factors, the factor which is to make sure that we have the parts on time with the right level of quality, and this is all the work that we do with our suppliers. On second, mainly with the engineering parts of the company to improve the minority the sequence. On year after year, we have close to a double-digit objective to reduce cycle time on all platforms. So of course, it's flattening a little with a machine that are more mature, but for a machine like the new machine EUV or tomorrow I&A, we are far more than double-digit objective of reduction cycle time year-to-year.

All right. Thank you. as go back to the top there. .

Good afternoon. Amit Harchandani from Citi. And 2 questions, if I may. My first question is with regards to capacity expansion as you go from doing less than 20 billion in sales to potentially up to 60 billion by 2030. Clearly so far Veldhoven has been the epicenter of your operations. But as you look to grow the company over the next 10 years, how are you thinking strategically about adding capacity? Would be looking to locations beyond Veldhoven to emerge system integration sites, particularly given this whole talk about reducing the risk profile within the supply chain and the broader sort of diversification, if I could call it, of chip manufacturing locations. So that would be my first question. And secondly, if I may, if I look at the lithography market longer term, you've clearly gone well past 90% market share, 95%, potentially even higher. How are you thinking at the opportunities beyond lithography? For example, we haven't talked a lot about metrology and inspection, but you're sitting on a lot of data that's coming out of your EUV machines. Strategically, how are you thinking at the world beyond lithography? Do you see more opportunities in process control, for example. So any thoughts on that would be appreciated?

I think Martin or Christophe can take. Chris, why don't you take the second question. On the first question, I think Roger showed it. I think 82% of our system cost is outsourced. So this question -- so we're a system integrator. And when we talk about the [ 9,620 ] plan from a system integration point of view, if -- like Frederic says, we're reducing the cycle time, we can probably do this here. Now there's another element why this site grows. I mean you've been here before, and this is like a mushroom in the fall. . It just keeps growing. So -- and why is that? Because we also need the R&D to it. Even with DPV, we're spending more R&D on DPV than ever before, it's still new product introduction, we call it NPI. So the biggest number of functional people here is the R&D people on this side. And they work very closely together with the integration people and not with the people who actually make the modules as 82% or 85% it depends on what type of -- in the supply chain. So your question really relates in our mind to the supply chain, where should we get our parts from, but the integration with the reduction of cycle time and the necessary closeness of the R&D people to continuously integrate together with the operations people, new product introduction. Let's take a deep UV KRF tool, KRF, 20, 25 years old technology. We put it on NXT, very high productivity tool. It's a new product and it means it's close -- it means the close vicinity of R&D and operations people to make it happen. Most of what we do is still NPI, new product introduction. And so from a system integration point of view, I don't see that quickly. I don't rule it out for the, lithography tools, but more importantly, where do we source. And I think this is also why Wayne will actually start looking at this at our strategic sourcing procurement officer, to say, okay, how do we manage that -- and I think Fredric said it, the output is not only [indiscernible] on time at the right quality and the right volume. We need to look at that when we look at diversification. And that is our supply chain able to follow us. And this is the kind of work that we're doing today.

Maybe we could add, Peter, but for the other factories where we produce modules in winter in San Diego and other one, we're increasing at the same speed even in terms of capacity and infrastructure.

I think we're also expanding where we are doing our sourcing. So we do a lot of the sourcing where we're doing manufacturing in the U.S. We are looking for local suppliers in the U.S. when we do manufacturing in Asia. We're looking for sourcing in Asia, more parts in Asia as well. .

And if you look at the unit numbers that we presented for 2030, even in the high case scenario, you would see that those unit numbers are still within the envelope of the 9600 that we're building here today. The only 1 that would exceed the medium-term ambition would be on high-NA, right, where we've talked about the medium-term ambition of 20. You would have seen it in the high market scenario that's higher than that. So their increased capacity would have to be built. But the -- for all the rest, the unit numbers fit within the envelope that we're currently building here. Chris you want to answer.

Yes, I think on the second question, I will maybe answer it a bit from a general point of view and then give you maybe a specific example. So I'd like to connect it to 1 of the previous questions. So there was a question about what tariffs the customer needs to get the roadmap going? And metrology inspection is absolutely critical to also advance in order for us to continue with litho. I think this is the reason why I think it's more than 10 years ago, I guess, Martin, we started to talk about holistic lithography, and at that point, we already believe that without metrology, with other data metrology will create and the use of this data on a scanner, there was no way we could deliver the process, performance of customer was asking or if we were trying to do that with the scanner, this will end up making extremely expensive machine. So I think we do think a lot about metrology and inspection. And if I had to give you maybe 1 specific example, I will take the one-off inspection. Inspection is needed to find defect that are related to the process customer are going to drive. Typically, you need to find effect that are 25% of the size of the pitch. Optical inspection today can find defect of about 12, 10 nanometer, if you push it, which means that the limitation of this will be around 40, 45-nanometer pitch. And today, we are beyond that. And this is why, as you know, we have acquired HMI a few years ago. We see a lot of, I would say, demand from our customers to use e-beam. So we have a good, what we call single e-beam business today. Customers are using those tools to start to do defect inspection at very, very slow speed, also metrology. And as you know, I think we have also announced that a few months ago, we started to work with our customer on multi-beam. We have -- at first 5x5 to let customer. This is very difficult. So this is another major endeavor we have taken upon in ASML. But the reason we do it is because we believe that we have to bring the productivity to e-beam in order to be able basically to find the defect customer we look at when they reach 20-nanometer pitch, for example, which is the kind of pitch High-NA is going to enable. So not only we look at it, but I think we invest also quite some time, some energy, I will say. And I see the results of that. If you look at the business, I think Roger has talked about is, this is still about more than 20% growth year-on-year in ASML. So that's also significant from a business point of view.

I'd like to add 1 more element is the so what everything you said is fine. The issue is that we're not just competing as a metrology company to another metrology company. It's very important that you capture that. It's metrology with the purpose -- the prime purpose and getting the whole little optimized, which we next to good metrology also the litho solutions. We talked about it a lot, but also the 1 not named is the computational part. The complexity which we have to connect the dots with these increased metrology versus the additional knobs on the [indiscernible] are exploring that on the EUV. For instance, this year, we're adding another innovation where we're able to modify the image so we can just increase the potential yield on the edge. You have that knob and now you have to have the measurement and modeling to make sure you make it right. So it's a whole connection between the free which we continue to believe is enabling for our customers to get the cost effective patterning.

Roger, maybe we have a couple on here on CapEx. So I'll try to cover it in 1 question. But first was a clarifying question was EUR 1.5 billion in CapEx per year a reasonable forecast going forward. And then of the CapEx required for the capacity expansion that Peter had in his material is there a way you can put any color on how that breaks out in terms of DPV, EUV and the significance there in terms of investment? .

Sure. So the EUR 1.5 billion indeed is the CapEx number that we're looking at for the next couple of years. Of course, it will be erratic, right? I mean it's clear that 1 year, it could be EUR 2 billion; the other year, it could be below EUR 1.5 billion, but we think on average for the years to come, we believe EUR 1.5 billion in CapEx is probably the right number. That's EUR 500 million more than we said last year. Last year, we were talking about EUR 1 billion, and that's also the calculation that Peter made when he talked about a EUR 2 billion extra. So that's 4 years of 500 million incremental CapEx. That's the whole background of that. And then in 2025, 2026, you get to the capacity level that we're envisaging. So that's, I think, the background on that number. In terms of distribution over DPUV versus EUV, I think the lion share is EUV, a lion share of the investment is EUV. So the CapEx needed to get to the DPV capacity at 600 is fairly moderate in comparison to EUV.

And then maybe 1 just for we're on Roger on gross margin. Will EUV be at the same level like non-EUV business or even above in 2030? And what are the inflation assumptions in your projections?

Yes. I think the inflation question, we already answered right? So inflation, we have to model in such a way that we distributed equally in the ecosystem. Ultimately, it shouldn't touch us. So therefore, I think inflation should be a neutral factor in our model. In terms of -- the first -- margins -- EUV Margins, yes I think we said at a certain point in time, we think that EUV margins and DPV margins are going to cross. I think we said that we probably are going to achieve that around the '24,'25 time frame. I think that's where we said that, that would happen. And then I think it's fair to assume that, that would be sustained that line, if you like, would probably be sustained until -- throughout the second half of this decade. And what that means is that if indeed, you are going to see improvement of the gross margin in the second half of this decade, which is what our model would suggest is possible. I don't think that, that would come from DPV. I think the lion's share debt should come from High-NA getting better gross margin because, obviously, in the first couple of years, the gross margin then will be under a bit of pressure. EUV obtaining better gross margins and the service margin continuing to make the improvement that we've seen.

Good afternoon, Lee Simpson, Morgan Stanley. I was struggling a little bit with the rationale for where the value growth was really coming from a sort of top-down perspective. And it was interesting you put up the 3% of sales as a litho-intensity metric. But then the delta seem to go to 5%, and it wasn't until Martin mentioned system innovation and Peter had said energy efficiency. So it almost feels as though for you guys, the delta and value is coming from delivering things into the systems integration or systems innovation field, and with doing so, can you help us understand who are you taking that value from? I mean who's lunch are you eating there?

Well, is historically, I think you can look at that -- historically, I think we demonstrated that with the introduction of EUV we were eating over someone else's lunch. And I think it's not too difficult to see. I mean 1 reason why litho intensity went up there is because we reduced the process complexity for the customer, because the customer could have multi-patterning, which obviously has a number of iterations in terms of the deposition edge and what have you, have that replaced by 1 step. And I think that's the contribution that EUV has given and continues to give. I think that's the contribution that High-NA is going to give. So it's the avoidance of process complexity that I think has increased that percentage for us. And my submission will be that, I think, also for the second half of this decade, that potential is still there.

And maybe just a quick 1 on margins. IBM puzzles me a little bit that it doesn't seem to demonstrably grow. There is a service element to this. There's a large installed base, and you would have thought I'd scale -- the margin structures would improve. Is there anything you can talk to how that could improve? Could we get to 60% margin in IBM by '25?

Well, I think the installed base margin has grown substantially in the past couple of years. I mean I've been with the company for 4.5 years now. And I recall that in the first year, we were looking at a gross margin of around 30% on the installed base business. I think if you look at our semi-annual report today, you would see mid-40s by now. So I think there is a significant improvement. What are the key engines to drive that? Of course, it's the upgrade business. And I think they're on the upgrade business, both on the software side and also some hardware upgrades. I think that's driven the percentage up, and there is reason to believe that, that potential will continue to be there. And also on the service side, I think the gross margin has gone up. Will it be north of the corporate gross margin, that's not what I would expect because there is always a break fixed type element in the service business, where I think it's hard to argue that, that should be at the corporate gross margin. So I think -- having it north of the corporate gross margin, I think, is a bit of a pipe dream. But driving your overall installed base margin to approximately that level of the corporate gross margin, I think, is a good ambition to have. And that means that in comparison to the gross margin that we showed in the first half, I think there is still some ambition left there.

CJ Muse with Evercore ISI. A couple of gross margin questions. You talked briefly about it, but would love to hit a little more in detail. So High-NA margins into '24, '25 evolutionary product, but obviously, the optics a lot more challenging. How should we think about gross margins entering the model in '24, '25. And then the aspirational 60% in 2030, you talked about bringing low NA and High-NA margins to be comparable to DUV. But are there other drivers that you need to get to that 60%? And I guess, could you speak to kind of the rank order of importance, whether it's lower cost of ownership, higher throughput, reduced depreciation, whatever is important. .

Yes. So first conceptual answer on High-NA in the '24, '25 time frame, and then I'll be a bit more precise as to what you could expect. Conceptually, I think it's important to recognize that we do not expect the type of development in gross margins that we had for low NA. And the reason there is that while High-NA is clearly not a walk in the park. And I think we're clearly going to see that in the video as well. I think it's also clear that a lot of the technology of High-NA is already leveraging technology in low NA. I mean it's -- there is not a different life source. You will see quite some commonality between parts between low NA and High-NA. So from that vantage point, I think the maturity of the product, I think, is probably at a higher level than what you saw at low NA. So I think that's an important point to recognize. That said, if you look at the shared numbers that we're looking at in the '24, '25 time frame, and if you recognize the preparation work that needs to be done in the factory in order to really prepare for a significant rollout of high-NA going forward, you have to hire a whole bunch of people, you have to have the tools in place, et cetera, et cetera, and then distributing that over a fairly short base. Of course, don't hold your breath for the gross margin in '24, '25. As a matter of fact, you could actually see that, that could be detrimental in that time frame to the gross margin, not because of issues in the maturity, but just because you have a lot of preparation work to do because you're driving that far more aggressive roadmap in the second half of the decade. So that's important to recognize. And you already see a little bit of that, right? Once in a while in the quarterly calls, I do tell you there's about a 1%, 1.5% gross margin depression as a result of high net preparatory work. And I would submit that, that would only go up in the years to come until you really see higher volumes of systems being recognized in revenue, let's say, from '26 onwards. So in terms of what needs to happen in order to get the gross margin to the 5660 bandwidth that indicated as an opportunity in -- by 2030. I think I just gave the key elements, right? So High-NA clearly is 1 and simply getting that to the corporate gross margin level. As I mentioned, I do think EUV still provides us with a lot of value to the customer as a result of that ASP and gross margin potential. So that should be a key driver there. For DPV, I would -- my expectation will be that we continue to have that at the current level. And then as I mentioned, I think there is still some potential in the service gross margin. So that's our -- those are the puts and takes, if you like, on gross margin, and that's the basis for the 56 to 60, CJ.

We have last -- 1 last question here. So Francois, if you can make it quick, 2 minutes.

So thank you very much, Martin, since you're here, and since we know that you are you believe in hyper NA that was very interesting. Can you talk about the readiness in more details on what kind of things you need to improve? What's sort of the bottlenecks in terms of cost that you have to improve on the different roadmaps? So just a bit more color on the readiness. And if we look at High-NA and EUV, the products were introduced like 5, 10 years before, the actual mass production. If we think about the Imec roadmap, it's like early 2030s. So should we expect like prepayment kind of or commitment from your customers time would be great? And the second question is, Peter, you -- asked you before this question about the capacity, a significant increase and about the supply chain. So having suppliers like -- is quite important. What about your partners like deposition, etching, do you see any bottleneck possible in a way that the others can't follow or because they have the different lead times of visibility than you, but not in terms of new fabs, it's the same lead times, it might create an issue on the upside. Just that's the 2 questions.

I think from our peers, I mean -- if the industry grows, I mean, they're perfectly happy to grow with us. And I think generally, their lead times are shorter, but they also need to prepare the capacity out there. I think -- so when you -- really, the issue is if you want to build out capacity and you think about the supply chain, as you just mentioned, it is do the suppliers have enough financial capability or capacity to actually build out the [ 90, 620 ]? I think generally, yes, there will be some, which have to really step up like written size, which we're going to do together, which we did in the past, sometimes these -- very expensive clean room facilities, as you saw in the video. They just go beyond what is reasonable for a supplier in this case because they have the most expensive module in our system. And then we do this together. So -- but I think in the ecosystem, I'm not concerned about the ecosystem. I think the capacity lead times there will be manageable, that will happen. On the other question was on, I think, hyper NA and prepayments and on what are the -- I'll leave it to Martin and to say, okay, what are the technical challenges that we have overcome? What is still out there? I think on prepayments, I mean, you see it in High-NA. We have High-NA, is not [indiscernible]. And we have the first prepayments and the down payments there because it's a massive investment. And it's just the customers contribution payment. So I think it's -- which is something which -- I think these technological developments are not only a matter of complexity as a matter of cost also, and this is something that you share, and this is what we are seeing today. So this is not new. It won't be the same with hyper NA I suppose.

A few comments. You'll not be able to cover the whole thing. But if you look to our EUV development, it has been an extremely rocky road from the initial EUV to what we have today. And when we start talking about High-NA, we thought we have to approve a number of things fundamentally. I mean, we start building EUV machines as long ago as 30 years ago, we are offered them to start making derivatives until we have made it stick in 2018. for High-NA, we had -- we built a whole experience and created an infrastructure and technology, which, in fact, prepared us to make a big step in an optics design and optics manufacturing and metrology to get us ready for the future. What we trying to do with hyper-NA is staying within the infrastructure we have, which is my cost comment. Now what you have to understand, if you build an optics with an NA or if you go with -- guys who are sitting [indiscernible] optics need to be bigger than the earth. So this is the fight against High-NA. So you need to get designs, which are compact enough so you can manufacture them and put them into the existing infrastructure. And this is our chance. So today, the fight is just with ourselves. But we're getting gradually into a situation where we're going to have to discuss customer discussions as well and say, well, this is what we could do and how would it fit and how would you plan this? Something we also have high-NA back -- if you remember the co-investment program in 2012, was a major team. We're sitting people like [ Bill Holton and Mark Bore ] discussing what it will be in 10 years' time. And how much -- what is affordability. Those things are likely to come in the coming years.

And I think what we are -- our conference level with hyper-NA from technology point of view has gone up. Why? Because to Martin's point, we've learned so much in the development of High-NA optics that actually gives us more confidence that we can also from a technical point of view, create optical systems that can actually touch on the NA target that we have in mind, which basically is the result of the discussion we have with customers, what do customers need to make this -- to basically make this economically feasible. It's why this collaboration is so critically important. And that's why it takes sometimes a decade before you get things done. When we talk about hyper NA now, will be introduced by the end of the decade, beginning of the next decade, it's quite normal.

All right. We're up against time. So I want to thank first off, all the ASML panel members here, the management team. Thank you for your questions, both from the webcast and the audience here. I'd like to formally close the Q&A session and today's investor event. If you're unable to get the question and answer, we can follow up through the Investor Relations team. Now on behalf of ASML, we want to thank you all for joining us today.

Thank you.