ASM International N.V.

Victor Bareño - Investor Relations Chuck Del Prado - President and Chief Executive Officer Peter van Bommel - Chief Financial Officer

Peter Olofsen - Kepler Cheuvreux Mathias Santos Silva - Morgan Stanley Nigel van Putten - ING Philip Scholte - Kempen Marc Hesselink - ABN AMRO Tammy Qiu - Berenberg Jim Fontanelli - Arete Research Edwin de Jong - SNS

Thank you, Cleona. ASM issued its 2015 fourth quarter results last evening.

For those of you who have not seen the press release, it along with our latest investor presentation is accessible on our website, asm.com. We remind you that this conference call may contain information relating to ASM’s future business or results in addition to historical information.

These forward-looking statements involve risks and uncertainties that could cause actual results to vary materially from those expressed or implied in such statements. These include, without limitation, statements relating to revenues, margins, cost reduction programs, liquidity, breakeven levels, strategies and economic conditions.

For more information on the risk factors that could affect results, please refer to the company’s press releases, reports and financial statements, which are available on our website. All forward-looking statements are based on the information as of today, February 24, 2016 and the company assumes no obligation to update these statements.

And with that, I will now turn the call over to Chuck Del Prado, President and CEO.

Thank you, Victor. So I would like to welcome you all.

Thank you all for your presence in today’s call. Looking back to the year as a whole, 2015 was another year of healthy growth for ASMI.

For the third consecutive year, we grew our revenue by double-digits and outperformed the broader equipment industry. We continue to benefit from strong momentum in ALD, which is more and more a key technology for our customers in the scaling of semiconductor devices.

Profitability further improved even with the significant increase in R&D investments. Cash generation was again solid and allowed us to start another share buyback program.

On top of that, we announced our proposal to increase the dividend to €0.70 per share. The success in 2015 has been made possible by the continued dedication and hard work of our employees, for which I would like to thank all of them.

Let’s now review our fourth quarter and full year 2015 financial results, starting with the fourth quarter. Net sales in the fourth quarter came in at €145 million, down 11% from the third quarter, but up 16% compared to the fourth quarter of 2014.

As such, net sales were at the top end of the range that we had guided for. In terms of product lines, the key driver was again our ALD business.

By market segment, fourth quarter revenue was led by memory customers, followed by the foundry and then logic segments. The gross margin increased to 44.8% compared to 43.7% in the third quarter.

The lower activity level in the fourth quarter was more than offset by favorable mix effects. SG&A expenses decreased by 4% compared to the previous quarter.

As a reminder, in the third quarter, SG&A included close to €1 million in one-off items. R&D expenses increased by 22% compared to the third quarter.

Part of this increase is explained by one-off €3 million write-off of the remaining 450 millimeter assets. We generated an operating income of €12.5 million in the fourth quarter, down from €23 million in the third quarter and almost unchanged from €13 million in the fourth quarter of 2014.

Financing results in the quarter were €6 million positive and mainly consisted of a translation gain of similar size. As we discussed in earlier quarters, a substantial part of ASMI’s cash position is denominated in U.S.

dollar and the related translation differences are included in the financing results. In the third quarter, the financing results included a €3 million translation gain.

Tax in the fourth quarter has been positively impacted by €5 million in one-off benefits resulting from the recognition of a part of the tax losses that were incurred in the past in the Netherlands. That compares to a one-off tax benefit of €9 million that we reported for the third quarter.

Results from investments which reflects our share of approximately 40% of the net earnings from ASMPT, amounted to €2 million for the quarter, down from €8 million in the third quarter and €9 million in the fourth quarter of 2014. These figures exclude the ongoing amortization charge, which amounted to €7 million in the fourth quarter.

For 2016, this amortization charge is projected to be €28 million. Note that ASMPT’s net earnings in the fourth quarter were impacted by a few one-off items, including a restructuring charge of €3 million.

In the fourth quarter, ASMPT sales fell to HKD2.9 billion. This was 9% lower than the HKD3.2 billion reported in the third quarter, but better than what ASMPT had guided for.

Compared to the fourth quarter of 2014, sales decreased by 15%. ASMPT reported bookings of $381 million for the fourth quarter, up 11% year-on-year and flat compared to the third quarter and as such also better than earlier guidance.

Now, turning back to ASMI consolidated operations. ASMI’s net earnings on a normalized basis amounted to €25 million in the fourth quarter, down from €42 million in the third quarter and €27 million in the last quarter of 2014.

Our new orders in the fourth quarter amounted to €135 million, which was at the higher end of our guidance. Orders were 9% below the level of the third quarter and 12% lower than the fourth quarter of 2014.

ALD was again the key driver behind the overall order intake. Looking at the customer segments, equipment orders in the quarter were led by memory – by the memory segment, both DRAM and NAND flash, followed by foundry and logic.

Now, let’s discuss the full year results. Our net sales in 2015 increased by 23% on a reported basis to a new record high for our ASMI operations.

On a constant currency basis, our sales increased by 14%. This compares with a relatively flat development for the overall wafer fab equipment market in 2015.

For the third consecutive year, we have grown our sales by solid double digits, and for the first time in 5 years, we have outperformed the market. Gross margin in 2015 improved by 120 basis points to more than 44% year-over-year.

Apart from positive mix effects during the year, we also benefited from ongoing efficiency improvements. As discussed at previous occasions, we started a number of efficiency programs in 2013, including new outsourcing initiatives and the migration of a large supply base to Asia.

Successful execution of these programs has contributed to an improved and competitive cost structure as well as structurally increased and more robust gross margins. Our target remains to run the operations at a gross margin percentage level of low to mid 40s, barring a market downturn, for which the target is high-30 levels of gross margin.

On a quarterly basis, gross margin will continue to be impacted by factors such as sales mix and utilization. SG&A expenses as a percentage of sales dropped from 15% in 2014 to 14% in 2015.

R&D spending, however, increased significantly from 12% to 14% of sales. Apart from currency effects and the one-off charges in the fourth quarter, we stepped up investments in R&D during the year in response to customer requests for new applications and engagements.

Operating profit improved from €91 million to €106 million. The operating margin remains relatively steady at 16%.

Results from investments on a normalized basis decreased, €61 million to €44 million. Sales of ASMPT decreased by 9% to HK$13 billion reflecting the slowdown of the back end equipment market and particularly the second half of the year.

Looking at our consolidated numbers again, normalized net earnings increased by 13% to €181 million for 2015. On a per share basis, normalized net earnings increased by 15% to €2.87.

Looking at our balance sheet and cash flow, at the end of December, cash amounted to €447 million, up from €428 million at the end of September. This increase is mainly explained by solid cash generation during the quarter and positive currency effects, in part offset by the share repurchases during the quarter.

At the end of December, net working capital stood at €111 million or slightly down from €113 million at the end of the third quarter. The number of outstanding days of working capital, measured against quarterly sales, increased from 63 days at the end of September to 69 days at the end of the fourth quarter but decreased compared to 78 days at the end of December one year earlier, December 2014.

Cash flow from operations amounted to €34 million during the fourth quarter. For the year as a whole, we generated €145 million in cash flow from operations, up from €110 million in 2014, driven by continued strong profitability, while working capital remained well under control.

Free cash flow increased by more than 30% to €103 million in 2015. During the year, we spent a total of €160 million on dividends and share buybacks together, up from approximately €60 million in 2014.

After the completion of the previous share buyback program earlier in 2015, we announced the authorization of a new buyback program last October for another €100 million as part of our continued commitment to use excess cash for the benefit of our shareholders. We started that program at the end of November and during the fourth quarter we spent approximately €9 million to repurchase some 250,000 of our own shares.

Including the share repurchases so far in the first quarter of this year, we have completed approximately 24% of the program as per the end of last week. As announced earlier, the buyback will end on completion of the program, but ultimately in November of this year.

And as a reminder, a weekly update of our share repurchases can be found on the ASMI website. During 2015, we paid a dividend of – as you know of €0.60 per share.

This year in 2016, as a reflection of our continued confidence in the sustainability of our profits, we will propose a dividend of €0.70 per share, an increase of 17%, for approval at the AGM in May. Let’s now briefly adjust – address the change to IFRS reporting, before moving – so up until 2015, ASMI has reported financial results according to both U.S.

GAAP and IFRS, with U.S. GAAP as the primary standard.

Starting in 2016, ASMI will switch to IFRS as its only reporting standard. The appendix of this – of the Q4 2015 press release shows a condensed P&L according to IFRS for the last eight quarters.

If any of you have questions about this change in reporting, Peter Van Bommel, who of course has joined me on this call, can further discuss this during the upcoming Q&A. So let’s now briefly talk about ALD.

2015 was another year of success for our ALD business. Despite moderating conditions in the broader market during the year, momentum in the ALD market was again solid.

On the back of a continued strong and leading position, we were able to take advantage of the growth in ALD demand, as evidenced by the double-digit growth in our net sales in 2015. ALD was again the key driver behind the growth in revenue last year.

ALD accounted for clearly more than half of our total equipment revenue in 2015. ALD is now firmly established as a key enabling technology.

In logic, foundry and memory, the leading customers in the world have already ramped several technology generations based on our ALD equipment. In the more recent years, we have also broadened our customer base beyond the traditional top three.

In 2015, looking at our total revenue base, we have again – we again had a growing contribution from the top 4 to top 10 customers, as some of these newer customers invested in our ALD systems in substantial volumes. In combination with the expanded client base, we have also achieved a more robust and balanced customer mix over the years.

Apart from the expanding our presence in the logic, foundry segment, we have built a much stronger exposure and customer relationships in the memory sector. Our ALD equipment is an enabling technology for spacer-defined multiple patterning and used by virtually all of the memory customers.

Equipment bookings in 2015 for our company as a whole were led by memory segment, followed by foundry and logic. Building out our leadership in ALD remains a key element in our strategy to grow our company.

As reflected by the increase in R&D spending in 2015, we continued to invest significant resources in further enhancing our leading platforms and to grow the pipeline of new ALD applications that will support our customers in transitioning to the future technology nodes. The structural growth prospects for the ALD market are strong.

Looking at the technology nodes that will move to HVM in 2016 and 2017, we are confident that the number of ALD process steps will show a healthy increase relative to the previous generations and that consequently the share of ALD of the total deposition equipment market will further increase. In logic and foundry, the transition to 10-nanometer node will be an important step in the expansion of the ALD market.

The combination of smaller geometries and the increased complexity means that, in these next generation FinFET devices, more deposition steps and more layers require single wafer ALD. As the 10-nanometer node in logic and foundry, the number of ALD applications for which we have been selected is significantly higher as compared to the previous 16-nanometer, 14-nanometer generations.

As we highlighted in the previous quarters, ALD-based multiple patterning is part of these new and significant opportunities at the 10-nanometer node. More of the critical patterning steps at 10-nanometer will require spacer-defined double patterning based on single-wafer/mini-batch ALD.

With the leverage of our strong track record in the memory market, where our equipment has already supported the ramp of several technology generations, we expect to benefit – we expect to benefit as our logic and foundry customers also expand their use of ALD-based multiple patterning. Multiple patterning also continues to be a key enabler for customers in the DRAM sector to transition to smaller geometries.

At the next technology node, the number of multiple patterning layers is expected to further increase. We are well placed to support our DRAM customers in their ever increasing technology and productivity requirements as soon as equipment demand for the 1x node starts to pick up.

In NAND flash, we have taken important steps in the past few years to strengthen our participation in next generations of 3D NAND device manufacturing. In the course of 2016, we expect to gradually increase the contribution from new 3D NAND applications.

Also, when taking a longer term view, we remain confident about the growth potential of the ALD market. As our customers move along Moore’s law, further miniaturization, introduction of new device architectures and new materials will only further increase the need for superior precision and conformality offered by ALD.

We still expect the ALD market to double in size in a 3 to 4-year period compared to the baseline in 2014. As a market leader, we believe our company has strong opportunities to benefit from continued solid growth in the ALD market.

Now, let’s briefly talk about the market environment. Looking back at 2015, conditions in the semiconductor end markets slowed down in the course of the year.

The market for wafer fab equipment ended the year relatively flat as compared to 2014. Following an uptick related to 14/16 nanometer in the first half of the year, wafer fab equipment spending in the logic/foundry segment was sequentially lower in the second half.

DRAM in the second half was lower following a very strong level of 20-nanometer spending in the first part of the year. For the year 2015 as a whole, the memory segment was the key driver for the WFE market.

Looking at 2016, at the current year, against the backdrop of an uncertain macroeconomic outlook, market research firms such as VLSI and Gartner are projecting the WFE market to be down by a low to mid single-digit percentage compared to 2015. Spending in the logic/foundry segment has the potential to increase in 2016.

Key driver in this segment will be the transition to the 10-nanometer node. While the visibility for the size of this ramp in logic/foundry going into the latter part of 2016 and into 2017 is still limited, investments in the near-term are picking up.

With the current limited visibility, DRAM industry spending is likely to be down a double-digit percentage compared to a strong level in 2015 according to the market research firms. NAND flash spending for the WFE market as a whole is likely to be up in 2016 with the mix further shifting to 3D NAND.

Now, let’s look at the guidance ASMI gave as part of our press release that we announced overnight. For Q1, we expect sales between €135 million and €145 million.

For Q2, we expect sales between €140 million and €150 million. And in line with our earlier views based on our current visibility, we expect 2016 to be more revenue back loaded.

The Q1 order intake is expected to be in a range of €150 million to €165 million. And all these outlook related figures are on a currency-comparable level.

At this point, Victor, I propose we take any questions the audience may have.

Yes, sure, okay. Alright, Cleona, we are ready for the first question.

Yes, good afternoon gentlemen. Maybe first, on ALD, could you maybe share your thoughts on the development of your market share in ALD both in 2015 and in 2016 how you see that developing?

And then somewhat related to that, a question on the outlook for the full year, your U.S. competitors in the deposition Lam and Applied have said that they are considering a kind of flattish wafer fab equipment market this year.

They should be able to show some sales growth and be able to outperform the market. Do you think you will be able to outperform the industry as well like you did in recent years?

And then my final question relates to China, it seems there is quite some investment activity in China. How does your positioning in China compare to other parts of the world?

And do you have the infrastructure in place there to support international customers that are looking to build their facilities in China or may we see some increase in OpEx as you expand your service and support staff in China? Thank you.

Yes, Peter. Okay, thanks for your questions.

So on market share, ALD, yes, I think our competitive – we are very confident we maintained a strong position in the ALD market. I think we are – as we shared with you before, we are really ready for the shift to 10-nanometer from 16, 14-nanometer in logic to 10-nanometer.

And we expect to strongly benefit from that. I think the – also, we are ready for several transitions in the memory market.

Well, we are very – we feel very, very good about our competitive position in the different markets. At the same time, as we have shared with you before, as the market grows from $600 million in 2014 as a baseline to north of $1.2 billion 3, 4 years later, likely our percentage market share in ALD may go down somewhat, but that is not something we are focused on.

As we said before, in the transition from 16, 14 to 10, we see that the number of applications that we are engaged in with our customers is going to increase in a significant way. Also, our engagement in V-NAND is really starting to take off coming from a very low level, but it’s starting to happen now.

And in DRAM, as soon as the industry picks up again, going to new 1x nodes and starts to use even more multiple patterning, we are ready. We are ready to engage.

So from that point of view, we feel good about the competitive position, but at the same time, of course, we are dependent on, let’s say, the volume at which our customers are going to kick in these new nodes. And that will ultimately determine our top line and bottom line results for the company.

So looking at the WFE market as a whole, as we shared in our introduction, we do expect that the market is going to – the market as a whole looking at, let’s say, the industry analysts, they foresee that the market will go down somewhere between let’s say, well, basically with a low to mid single-digit percentage compared to 2015. And so that is the guideline we assume at this moment in time.

And our ambition in that respect has not changed, that our ambition is for this year – based on all the assumptions we have made for 2016, our ambition is to outgrow the market. And then on the China infrastructure, China, in general, you asked if we have the infrastructure.

Well, I think we have been asked before. I think there is one fab that has created a lot of attention on its refurb fab for V-NAND purposes and so on.

And we have basic activities there, but we will not necessarily benefit in the first phase, in that fab of CapEx expansion. And it just has to do with the fact that 4, 5 years ago, the company was less focused on V-NAND.

The last 2, 3 years that has changed significantly. And as a result of that, our V-NAND engagement on, let’s say transitions that are now ongoing to higher stacks.

And with new players, we are ready to engage. But on these older nodes, our benefit will be low.

And as such, we don’t foresee any challenges in terms of our infrastructure in China on the short-term. And there are other fabs, other memory fabs that have been there on DRAM and flash for a longer period of time that we have been engaging on for multiple years.

And there, we have a very healthy existing infrastructure, so also there, we don’t foresee any issues. I think that helps your question.

Yes, it does. Thank you.

Hello. Thank you for taking my questions.

So, strong gross margin performance, it surprised us to some extent, as you weren’t helped by the high level of top line growth as we saw earlier during the year. You say mix was beneficial.

Could you shed some light on what type of mix benefits you experienced in the quarter? And that also takes me to my second question, how do you view the competitive environment in each of the different application areas such as high-k metal gates, spacer-defined multiple patterning and ion doping?

Are there material differences to the competitive intensity? Thank you.

Yes, let me answer the question, first, of the gross margin. As what we have said in earlier calls, the gross margin is not dependent on the sort of business that we have.

So, it’s not product line driven, it’s more driven by the fact that certain applications for certain customers might have a higher margin or a lower margin and other things. So, in this quarter, we see two big benefits.

The one is the fact that our constant cost reduction efforts that we have taken now already for quite sometime, which Chuck was also referring to in his remarks, is improving. And that’s an important thing of course.

And on the other hand, we have seen that the mix in the products in combination with certain customers was a little bit better than what we have seen in previous quarters. So it’s fluctuating.

I think it’s relatively stable. It has been relatively stable during the year.

When you look to our gross margin developments in the course of 2015, then the fluctuation has been in that – has been around that 44% level, with an up of 1% and a down of 1% for each individual quarter. So, I think that’s the guidance in a good year that we have given earlier to the market, where we say, okay, in a good year, we expect low to mid 40s as a gross margin.

And I think that’s also reflected in the Q4 numbers.

Then on, yes, the competitive landscape, yes, we, of course, faced – as we have shared in earlier calls, we faced competition in each of the markets that we are engaging in. And yes, it’s just – so you mentioned high-k metal gates, you mentioned I think the patterning market.

And we have engagements in – of competition in all those markets. Yes, we know pretty well what our competitors – we tied to know and understand very well what our competitors are doing and anticipate and react on that in the best possible way.

And I don’t think our competitive position has materially changed over, let’s say, the last 6 months or so, so we are confident that on one hand, we know that competitors will take a share of our markets, of the markets that we engage in, but yes, our view is that we are confident that we definitely have the right products and road maps in place to – yes, to really grow based on the huge potential that the ALD market represents in the coming years. That’s what I would like to say in general.

We don’t comment on specific competitors and specific products, but I trust that this color provides you enough insight.

Thank you very much.

Hi, thank you. Good afternoon.

I have a question or more of a follow-up on your competitive positioning going towards the 10-nanometer. Where do you see most growth in a number of applications?

Is that more towards the front end of the line or more towards the back end of the line? And if we segment the market that way, how do you see relative positioning?

Could you repeat one more time the specifics of your question? We could not hear you completely.

Sorry. Yes, it’s from the 14-nanometer towards 10.

You talk about growth in applications. Do you see a difference between growth of application in the front end of the line, so more towards the gate or at the back end of the line?

And as a follow-up, do you see any difference in your relative positioning competitively if we segment the market that way?

Well, to start with the latter, I think in general our view is that our position is strengthening going from 16, 14 to 10 in logic/foundry. So, that answered the latter part of your question.

The first part of your question, I think what you can say is that in the FinFET device itself, the need for ALD is increasing, so in the device itself going from 16, 14 to 10. And at the same time, you see increased – as we shared I think before, also the patterning needs in single-wafer ALD is really there is increasing going from 16, 14 to 10.

And those are important – both important elements that contribute to the growth that we foresee in the level of penetration. And yes, does that answer your question?

Yes, it does. Thanks.

Maybe a quick follow-up, I know you don’t comment on the competitors, I think one has said that they now have the lowest cost of ownership. And the other said it’s 2 – it’s up to 4x faster.

So, I am not going to ask you to evaluate those claims, but do you have also a unique selling point along those lines?

I think, well, we have a unique selling point. I think yes, ultimately customers decide and only the numbers speak, yes.

So, as long as we – looking at that the number of applications that we are engaged in is growing from 16, 14 to 10 tells us that we are doing some things right in terms of providing unique technological solutions to the customers and at the same time, from a cost point of view, also serve their continuous drive for lower costs, because as Moore’s law continues, cost becomes increasingly important, but it’s not one or the other, both need to be addressed continuously by suppliers in maintaining a position at our customers. And that’s what we are working on day and night.

So, I think that’s the best answer we can give.

That’s very good. Thank you.

Okay. You are welcome.

Yes, good afternoon everybody. Two questions.

First, on ALD, can you maybe to give your best guess maybe about the size of the ALD market in 2015 versus the baseline 2014? And can you maybe talk a little bit about your view where you continue to say that you expect that ALD market to double in the next 3 or 4 years?

And what’s the – what could be a next trigger or what do you really need in order for that market to double in 3 years instead of 4 years? And my second question is on the transition to 3D NAND, you said that currently your involvement is actually quite limited.

Now, what is actually the real transition going on in that 3D NAND market that means that your involvement will be bigger? Is there a specific, yes, technology node or how do you say that, what could you – can mention on that?

Okay, okay. Thank you, Philip.

Yes, on the size, yes, we are looking at those. We are – actually, since the year has just ended, we are, of course, very well aware of our own numbers, but we are still waiting for more detailed numbers on the market as a whole, which we always compare with, let’s say, more independent agencies.

So, we are not ready to answer your question on the 2015 market as a whole from an absolute point of view. But what we can say, it’s really sort of double-digit percentage with which the market has grown year-on-year.

And as soon as we can, yes, provide an update on, let’s say, the 14 to – 14 baseline and the €600 million to €1.2 billion guidance that we gave to the market, we will do so. Yes.

So, we will try this year whether we can provide an update, but unfortunately, not at this moment in time. But clearly, the solid double-digit percentage growth has taken place in 2015.

So on, yes, 3D NAND, you’re asking what’s really ongoing there – going on there and what determines our growth. That’s how I perceive the question.

I just want to be very transparent on that. Again, until 3, 4 years ago, 4 years ago, we were not that focused on that market.

Let’s say, 2, 3 years ago, we really started to focus on that part of the memory market. And as you know, seeding efforts always take 2, 3 years at least in whatever market you are engaged.

And as a result of that, you see now that as of late 2015, revenue starts to kick in, in V-NAND. It was in a very modest way towards the end of last year and more meaningful contribution will start to develop in the course of 2016.

Again, that’s to do with our focus on that market and it has to do with that more than one player now, let’s say, starting to get up to speed in this market and also with, let’s say, higher stack solutions, where the technologies become more and more complex and where let’s say single-wafer ALD might be a more suitable solution than what – than the technologies they have been using so far. So, that’s how you should see it.

And that’s why the contribution to our P&L will gradually grow as our engagements strengthen. And they strengthen also based on the fact that we build relationships with these memory customers over time through our double patterning programs for – that we have had in place for multiple years through which these customers have got to know the company and have got to know the tools and the capabilities of this company in general.

So that’s how you should see this. And as a result of that, the earlier wafer fab that we talked about, we are not immediately engaged there, because we didn’t have the historic relationships.

And that’s just a fact whether we like it or not and I don’t want to be too secretive about that. Yes, so that’s what you have to take into account in your models.

Does that answer your question?

Absolutely. Thank you very much.

Okay, you are welcome.

Thank you. My first question is on the technology ramp of 10-nanometer in the second half of the year.

You are guiding to quite a strong order intake in the first quarter. Does it mean that the ramp will be relatively aggressive or do you expect it to be more gradual and then building up into 2017?

And the second question is your demand for ALD in medium term, now it seems that for 7-nanometer at least partly there will be multiple patterning. How does that relate to your guidance of the doubling of the market in the 3 to 4-year period?

How is EUV related into that guidance so that you include any multiple patterning on 7-nanometer? And then finally, on R&D investments, growing quite rapidly in the last year, what is your expectation going forward if you are building out the applications, will you continue to have to invest extra in R&D there?

Okay, okay. Marc, yes, thanks for your questions.

So, three questions, I will let R&D be answered by Peter. But first, on the other two questions, so 10-nanometer, yes, we think that our view now is that from a revenue point of view, likely there will be healthy contributions throughout the year in each quarter.

Again, that’s the visibility we now have. There will be healthy contributions throughout the year each quarter and not a hockey stick effect or so.

But secondly, the initial capacity that will be built in 2016 is just say the initial phase of wafer starts. And as far as we can see, again based on the visibility we have from customers, more significant wafer starts capacity will be built in 2017, of course, for our customers depending on their end user demand.

And that of course depends on macroeconomic demands for smartphones, etcetera, but that’s how we view it initial capacity being built in 2016, but for sure, assuming normal economic conditions that will not be the end of building 10-nanometer capacity this year on the contrary. Okay, so that’s on 10-nanometer.

Again, and that’s based on the visibility we have now. It could be that customers start to pull in demand or push out demand based on macroeconomic developments in the course of this year, but then we would update you of that in the course of this year.

So then on EUV patterning, whether that has an impact on the doubling of the market, that guidance that we provided compared to 2014? Well, the short answer is no.

We don’t foresee that, that has any impact on that prediction. That’s again based on our assessment today.

Then R&D?

Yes. When you look to R&D, I think a few things that I would like to give a little bit of color about.

That is, first of all, when you look in absolute terms, then you see that our R&D was increasing with €64 million to €95 million. So, that’s in absolute amount a substantial amount, nearly 50%.

And our two important differences in there, so, on the one hand, you have an impact of nearly €10 million simply due to currencies, so basically a dollar company which is reporting in euros. So, while our R&D is distributed, our resources are distributed all over the world, so the impact of a weakening of euro plays an important role.

Second thing is that we had, of course, in this quarter a one-off, so we decided based on the uncertainty around 450 millimeter to write-off the remaining part of the assets that we had in the 450-millimeter. When you exclude that, then you still have a substantial increase.

That increase is driven by what we mentioned in the earlier calls by – for big parts by the requirements of our customers. We see that more and more customers are attracted by our solutions.

We are serving the whole top 10. That requires – of course, you have to align their product – their process developments with our products, so that require more resources.

But moreover, we have seen in – during the year that they came back towards us and asked us to help them to explore more and more alternatives and more opportunities that they saw of using our equipment. That’s a long answer, but that drives that development and we expect that those requirements will increase in the forthcoming period.

And that is important, I think. On the same moment, we have indicated towards the market that we expect R&D to be in the low to mid-teens as a percentage of sales.

That’s still the goal that we are striving for. Again, that doesn’t mean that every quarter that, that will be exactly at that spot because you build up R&D not very quickly, you reduce it also not that very quickly.

But when you look at this over an annual level or a longer period of time then that is the goal of where we are striving for and what we are managing our company. I trust that, that gives you a little bit color on how R&D is developed.

Thanks.

Hi guys. Thank you for taking my question.

So firstly, I would like to get more on the funding on the 10-nanometer ramp-up, basically you have been saying that 2016 is only your initial phase for wafer start building. So does that mean if the trend does continue in ‘17 from order effective, we will see continuous order strength driven by 10-nanometer throughout ’16.

And another question is for Peter [ph] for Q2 revenue, the growth wasn’t significant if you compare it to the level of order expecting for Q1, so does that mean you are actually running at a lead time of more than three months, so hopefully we can see impressive revenue growth in second half from Q3 and throughout 2017 hopefully, is that correct understanding?

Well, yes. Thank you, Tammy for your question.

There are multiple questions in your comments. The best way to answer it is that you would like to get a little bit more color on 10-nanometer.

It is the case that we like to reiterate that we anticipate – we expect that indeed orders will continue to happen in 2017 related to the 10-nanometer ramp, assuming that the modest capacity that – there is a lot of noise in the background.

Yes. I can mute it.

Sorry.

Yes, please. Please do so.

Thank you. Alright.

So that’s more pleasant also for the rest of the audience. So 10-nanometer again, we foresee a steady contribution in revenue throughout the year based on the visibility we have from our customers now and we do expect that to continue into the next year.

And indeed, some orders may be placed ahead of time, but maybe you are referring also to the high level of orders in Q1 that we gave as the guidance compared to the guidance we gave on revenue for Q1. And yes, to explain that, a part of the bookings in Q1 are likely indeed for shipments in the second half, but another part of the upside, our bookings that are expected to immediately turn into revenue in Q1.

Yes, that’s a little bit of a mixed bag that we at least based on current visibility for the remainder of the quarter, foresee. Yes, I trust that, that answers your question.

So is it now, so correct to understand you are running basically three months’ lead time or slightly shorter?

Yes. It depends on the product and on the customer because some customers only provide us guidance and place the order and then immediately want the shipment.

And then others place way, way ahead of time. That really differs a lot by customer.

And that’s why sometimes we – yes, we also have to carefully choose our wording to give the right guidance to you as an audience.

Okay. Thank you, guys.

But in general, three months to four months max. In general that is the case, Tammy.

Okay. Thank you.

You are welcome.

Thank you. Good afternoon.

So I just wanted to follow-up, obviously you have covered some detail on the opportunities at 10-nanometer and how you see that ramp unfolding over the course of this year, I just wanted to dig into that a little bit. It looks at the moment certainly, that some 10-nanometer from a – certainly from a foundry perspective is going to be a short node akin to what we saw with 20-nanometers going to 14-nanometer, 16-nanometer.

So I guess my question is do you think you will be able to carry your market share at 10-nanometer through to 7-nanometers or are you having to re-qualify and kind of renew the process of record at 7-nanometer versus 10-nanometer or is it a carry-through, the process at 10 to 7, and you’ll effectively keep your share at 10 through to 7? And then, secondly, at 7-nanometer and you will effectively keep your share at 10-nanometer through 7-nanometer.

And then secondly 7-nanometer you mentioned you didn’t think there was much change in your potential opportunity, whether EUV was incorporated in 7-nanometer or not. I just wanted to clarify why you thought that was the case.

I mean again I guess it looks increasingly likely that you would be wanting to use the 7-nanometers and will be introduced to 5-nanometer and that would significantly increase multiple patterning requirements at 7-nanometer. So I am interested to see why you don’t think the presence of EUV or not that 7-nanometer makes a difference to ALD penetration.

Okay. So Jim, okay.

So on – first, on a short node, well it’s clear that every customer decides at every node what the best set of applications and supplier platforms they need. So from that point of view, every node is a decision on its own.

But at the same time, it’s not very attractive for a customer to change at every node, every application from supplier A to supplier B, so that would also be very expensive, especially when the node is that short. Then they have to write off the equipment in a very, very short period of time.

So those things we all take into account in assessing our own chances. And our belief now is that we have a very good starting position going into 10-nanometer.

And as a result, also to build on that going to 7-nanometer regardless of how long that 10-nanometer node will be. Again we learn of course as we go into high volume and customers will learn also on our performance of our tools as they go into HVM with our tools.

But our current assessment is that we know what we are doing and that we can build on the strengths that we have developed going from 16-nanometer, 14-nanometer to 10-nanometer. Then on the EUV, at least your perception was that we try to say that there was no impact of EUV on ALD.

And that’s – I apologize if that has come across because that’s not what I meant to say. The question earlier was whether EUV would have any impact on the projections of the market going from €600 million to €1.2 billion in the next 3 years to 4 years with 2014 as a baseline.

And based on that, we said clearly no. Of course, when EUV comes it may have an impact on the market.

But what we have always – our view is that it will take a couple of years. It will take still quite a number of years before EUV will be out there in a real HVM mode with significant amount of layers.

And in the meantime, the patterning market will still grow in a significant way. So, that’s what you and we are taking into account into modeling our own opportunities in the coming years.

And secondly, that is the impact of EUV in the patterning market, but we also have a lot of applications in ALD not related to patterning at all. And those markets will only get fueled in a positive way to use ALD, because in those markets, EUV will accommodate Moore’s law to continue even longer in going to smaller geometries, which requires more ALD.

So, in those markets, it serves the interest of growing our market. I trust that, that answers your question.

Yes, thanks. Could I just follow-up just very quickly on that 10-nanometer point?

You mentioned there was a healthy increase in ALD use from 16, 14 down to 10, do you think you can give us a slightly more specific guide on what healthy means in terms of process step increase from 16, 14 down to 10 in logic?

Well, it’s way more than a handful.

That’s way more than a handful incrementally?

Yes, but that differs a little bit by customer. It differs – so not applications, but I am talking about layers, yes?

So, I should be clear, I am talking about layers, yes, not applications. But in terms of layers, it’s more than a handful of layers depending on what customer you talk about.

Great. That’s useful.

And if I may just one follow-up question on V-NAND, you mentioned kind of slow ramp of engagements into V-NAND over the course of this year. Obviously, if we look at the number of wafers being added in V-NAND this year, it’s significantly more than a slow creep.

I guess, we are going from 100,000 wafers to maybe 400,000 wafers over the course of 12 months. Is ASMI’s engagement specifically around one or two customers ramping within that overall wafer growth profile or is it about where your overall customer base is in terms of ramping through 32 to 48 layers and then maybe into 64 layers?

Is it more of a node-driven engagement or is it because as you mentioned specifically some customers are coming in late to V-NAND and they are only really starting to ramp in earnest this year?

It’s a combination of both.

Okay. And do you see any opportunity of increasing penetration into the Korean marketplace for V-NAND over the course of this year or is it going to be led outside of – is your specific growth going to be led outside of Korea by wafer additions from Toshiba and Micron?

We are, let’s say, the only thing I would like to say is that we are focused on every part of the world.

Okay, thank you.

Alright. You are welcome.

Good afternoon, gentlemen. A few questions left.

On non-ALD, the Epi and the furnace market, could you give some color on that and maybe if there are new applications there or some additional color, please? And then on ASMPT as you are now the major shareholder, of course, the contribution of ASMPT has decreased significantly.

What does that mean for the talks that you are having with management of ASMPT? Are you going to push for more cost savings, for instance or are you looking for new technologies that they have to develop or what is your position there?

And then finally on V-NAND, so you are coming up with new applications in the course of the year, how many kinds of machines should we think of? And finally, if you go from 32 layers to 64 layers in V-NAND, does that mean that you, for instance, need twice as many machines or how should we look at that?

Those were the questions.

Okay, let me see. So on V-NAND, you had two questions.

Okay. I am just writing down.

Okay, so three questions. I propose I give the PT question to – why don’t you start with PT, otherwise I talk all the time.

Let me give that information. I think, first of all, what happened with the PT numbers, I think to give you our perspective as a shareholder, with the announcement that you saw earlier today from their side.

First of all, I think the view that I have provided is a little bit more optimistic than what we have seen in the past period. The results – the sales decreased in the fourth quarter, which by definition is their lowest quarter was slightly better than what they expected originally and also what the market was expecting.

And that is I think a very important thing. Their order intake was the highest ever that they have reached in the fourth quarter and they expect now that you have normally an uptake in the first quarter.

That indeed continues. I think also important to mention there is that the gross margin improved substantially.

They had a very weak third quarter. But when you look now to the fourth quarter, the uptake that they have despite the lower activity level that was nearly the highest that they had in 2015.

They announced some restructuring costs. So, while the results in itself were not that good, the bottom line results, they were basically related to a few things.

First of all, restructuring costs. Secondly, also due to the distribution of the sales, they have in the net income a relatively high tax rate this quarter.

So beside that, I think that the underlying quality of the results is improving. And I think that as a shareholder, as we look at it and that’s how – what are most important of all in this respect, I think is that the things are improving or at least becoming better than they were in the past quarters.

I trust that gives you a little bit of color, Edwin, how that we look at it.

And maybe a little additional one, how many times do you speak with management? Do you speak to them once a month or how does that work in your communication to them?

We speak on a regular basis with them. So we have, of course, the official board meetings with them, but we speak on a very regular basis with them.

Yes.

Very regularly. Okay.

So, then on Epi and vertical furnace, as you asked, well, yes, those product lines have really in a steady way contributed to – in a very steady and healthy way contributed to the 2015 growth of the company, really – like that’s really in a very steady way. And also from a profitability and a cash flow point of view, those two product lines have been contributing.

If you look, we are clearly investing in the specific areas of both product lines. And yes, we do expect to make progress to really grow our engagement in both product lines in specific areas of the market.

But it’s too early in the part of the R&D investments that we have been engaged on in 2015, being related also outside ALD to these product lines. And as soon as we – our view is that we are close to those new initiatives contributing to growth in the top line and the growth of our addressable market.

We will share it with you, but it’s just too early to do so. But it should be clear, healthy contribution from a profitability and cash flow point of view now.

And we are investing in specific areas in both of those product lines. So it’s just not a stable business without – where the product lines are treated as pure cash-outs.

That’s absolutely not the case. Okay?

That’s very clear. Yes.

Okay. Then on V-NAND, we had a number of tools in 2016.

The only thing I can say is that the revenue will be significantly higher. As we – again, with the visibility we have now than in 2015 for vertical NAND.

And we also – we do expect that the contribution in the second half will be bigger than in the first half for vertical NAND. That’s what I can say.

And then your question was also on, yes higher stacks. Yes, that’s interesting.

I think that’s too early to say. We are extensively engaged with multiple customers in qualifying for let’s say, the stacks they are working on.

And that is really by customer for a number of applications, so not one but a number of applications by customer. And I think it’s fair to say that we and the customers are learning how we can proliferate this technology further as we go to next technology nodes.

But I think it’s too early to say because, again, we are now in a phase of preparing for HVM of the current stack. So that’s too early to tell.

But I can guarantee you that we are doing all we can to of course, further penetrate into these markets as we really have learned a lot in the last 2 years, 3 years, starting from scratch in this part of the market.

Alright, thank you.

Yes. Thank you.

I wanted to clarify the outlook statement for the full year where you said that sales will be back-end loaded. So that means for 3D NAND, H2 will be better than H1 for 10-nanometer Logic/Foundry, it will become steady through the year and for DRAM at this moment, you don’t foresee a pickup in the second half, is that the way to look at it?

Yes, that’s a good question. I think the industry watchers think that year-on-year, there is a meaningful double-digit decline of the DRAM market.

For us, it’s too early to say whether the second half will be as weak as the first half in DRAM. That is for us – that’s still to be seen, yes.

Yes. Year-on-year that’s what the industry watchers look at, but how the second half of the year develops compared to the first half for DRAM, specifically for DRAM as you asked we – that’s too early to tell.

The only thing we can say is that we are ready with the right solutions to engage there as soon as the customers are ready to invest. And there is some contribution in the first half, I should say that.

But not at the level, let’s say what the industry is looking for. I trust that, that answers your question.

And also the second half again, this was – also you said – you made a certain assumption on logic/foundry. And well, you are making – you can make that assumption maybe on let’s say visibility on, let’s say, volume developed – modest volume developments in the 10-nanometer node, modest capacity development in the 10-nanometer node as the industry sees it now.

Most of that can change. Also their visibility is limited.

If volume there would be accelerated, then it could impact also the industry in the second half. But that’s really too early to tell.

As you know, in this industry things can change quickly in three months’ period of time.

Okay, thank you for the clarification.

Okay. You are welcome, Pete.

Okay. So, we had an extensive call, 1 hour and 15 minutes.

So, it’s clear that there were a lot of questions on your mind. Thank you for sharing those.

I trust that both of us, Peter and I were able to address as much as we can your questions. Please feel free to follow-up with us through Victor or through the road shows we have on any follow-up questions you may have.

So, final comment, thank you again for joining today and let’s stay in touch and have a very good day or evening. Thank you.