ASM International N.V.

Victor Bareño - IR Chuck del Prado - President and CEO Peter van Bommel - CFO

Mathias Santos Silva - Morgan Stanley Nigel van Putten - ING Peter Olofsen - Kepler Cheuvreux Chetan Udeshi - JP Morgan Sandeep Deshpande - JP Morgan Tammy Qiu - Berenberg Richard Cloyd - Henderson David O’Connor - Exane

Thank you, Siobhan. ASM issued its 2016 Third 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 differ materially from those expressed or implied in such statements. 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.

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

Thank you, Victor. And thanks to everyone for attending our third quarter 2016 results conference call, and for your continued interest in the company.

After a review of operations, Peter van Bommel, our CFO, will join me in answering your questions. First, I would like to thank you for the many messages of support we received following the death last month of our founder and former CEO, Arthur del Prado.

Arthur’s energy and vision built this company. We are sure that the best way we all can remember him is to continue the great work that he started.

Again, thank you for your support. So, let’s now start with a review of our third quarter financial results.

Performance in the third quarter was in line with our expectations. Revenue in the quarter decreased by 11% compared to the third quarter of last year, and increased by 4% from the second quarter of this year.

At the level of €144 million, third quarter revenue was within our forecasted range of between €135 million and €150 million. Our ALD business was again the main driver.

By customer segment, revenue was led by foundry, followed by logic. The strength in foundry and logic was driven by 10 nanometer investment.

The gross margin remained at the solid level of 44.2%, up slightly from 43.8% in the second quarter and 43.4% in the year ago period. SG&A expenses increased by 2% from the second quarter and decreased by 11% year-over-year.

Reported R&D expenses amounted to €24 million in the quarter. Amortization of capitalized development expenses amounted to €4 million.

The total R&D expenditure, adjusted for amortization and capitalization of development expenses, amounted to €27 million in the quarter, up 9% from the second quarter and up 15% compared to the year ago quarter. The year-on-year growth in the total R&D expenditure is again explained by the increase in customer requests for new applications and engagements that we have experienced in the recent periods.

Operating income amounted to €17 million, stable compared to the second quarter and down from €31 million in the third quarter of last year. Operating margin amounted to 12% in the quarter, almost flat compared to the second quarter.

Financing result in the quarter was a €3 million negative, and consisted of a translation loss of a similar size, which was mainly related to movements in the U.S. dollar.

In the second quarter of this year, the financing result still included a translation gain of €8 million. Results from investment, which reflects our share of approximately 39% in the net earnings of ASMPT, increased to €27 million for the quarter, up from €16 million in the second quarter and €9 million in the year ago period.

[Technical Difficulty] on the ongoing amortization charge, which amounted to almost €7 million in the third quarter. For the full year, this charge is projected at €27 million.

ASMPT sales in the third quarter increased to $541 million, up 14% from the second quarter this year and up 29% from the third quarter last year. ASMPT reported bookings of $436 million for the third quarter, a decrease of 22% compared to the second quarter and 14% higher than in the third quarter of last year.

The quarter-on-quarter decrease reflects the seasonal correction in the back end industry. Now turning back to ASMI’s consolidated operations, ASMI’s net earnings on a normalized basis amounted to €40 million in the third quarter, down slightly from €42 million in the second quarter and down from €50 million in the third quarter of last year.

The year-on-year decrease in net profits is explained by the drop in operating result, and as well as a lower financing result and lower taxes, which included a one-off benefit of €9 million in the year ago period, and partly offset by higher results from investment. New orders fell by 23% from the second quarter to €123 million in the third quarter and were, as such, well within the range of the €100 million to €130 million range that we had guided for.

Year-on-year, the drop in orders was 17%. Orders were, for the largest part, driven by our ALD business.

Bookings were led by foundry, at a distance followed by memory and then logic. Compared to the previous quarter, foundry remained solid, memory was stable, and logic decreased.

Within memory, the mix of bookings shifted from DRAM towards 3D NAND in the third quarter. Now let’s turn to the balance sheet and cash flow.

At the end of September, the cash position decreased to €363 million, down from €370 million at the end of June and down from €447 million as per year end 2015. The decrease in cash position over the last three months was mainly the result of the cash used for share buybacks, partly offset by positive free cash flow, free cash generated during the quarter, as well as 15 million, 50 million dividend received from ASMPT.

Net working capital decreased slightly from €130 million at the end of June to €127 million as per the end of September. Outstanding days of working capital measured against quarterly sales decreased from 85 to 79 days.

In the third quarter, we spent €27 million to repurchase approximately 800,000 of our own shares as part of the €100 million share buyback program that we announced October last year. As of last week, we completed approximately 97% of the program, and the number of outstanding basic shares had decreased to approximately 60 million shares at the end of September, down from 60.7 million shares at the end of June and 61.9 million shares at the end of the third quarter last year.

So, let’s now make a few comments on the new share buyback program. With the Q3 earnings release, we announced the authorization of a new share buyback program for up to €50 million of the company’s common shares.

This program will be executed within the 2016 or 2017 timeframe. The new buyback follows on the €100 million program that we announced with the Q3 results in 2015, and that is currently nearly completed.

Year to date, we have returned slightly over €130 million to shareholders through dividends and share repurchases. And this is up from €116 million that we returned in the full year 2015.

Our commitment remains unchanged to use excess cash for the benefit of our shareholders. Let’s now have a look at the different trends that we see in the ALD market and how these fit into our outlook.

The logic and foundry segments are the key drivers for us this year. As we already highlighted in previous quarter, the transition to 10 nanometer shows an increase in the number of ALD layers for which we have been selected as compared to the previous 14 nanometer 16 nanometer generation.

We expect to significantly grow our share of wallet within logic and foundry customers this year. While logic historically has been the strongest customer segment for ASM, we have built strong relationships in the foundry sector over the last several years.

And with the 10 nanometer node, we are now further stepping up our penetration levels within leading foundry in a significant way. We expect to book record revenue in the foundry segment this year, up substantially from previous levels.

In DRAM, we still expect spending to be down substantially in 2016, following strong spending levels in 2015. As we already highlighted with our Q2 results, a recovery in DRAM spending has been pushed out and is not expected to occur before mid 2017.

The key driver will be the 1X technology node. We continue to be well positioned to serve the patterning requirements of our DRAM customers.

In NAND flash, as explained on earlier occasions, 2016 is a transition year for the single wafer ALD market. The mix of customer spending in NAND flash has almost entirely shifted in the course of 2016 from planar NAND to 3D NAND, which means that the multiple patterning in planar NAND, which still had a healthy contribution in 2015 to ASM revenue, had almost completely disappeared.

After increasing our focus on 3D NAND in the past few years, we have made progress this year and achieved several production tool record selections, as we shared with you before. In the third quarter, we booked multiple A3M [ph] XP8 tool orders for a number of ALD applications in 3D NAND.

This year, 2016, we will have the first revenue contribution from 3D NAND, albeit still at relatively low levels. We maintain our forecast that the single wafer ALD market will show a double digit percentage decline in 2016.

This decline is a result of significant drops in the memory segment, both in the DRAM and in NAND flash, which are only partially offset by a substantial increase in the logic/foundry segment. While the overall single wafer ALD market has slowed this year, our positioning has remained strong, with our market share likely to be up somewhat in 2016.

For next year, we expect a clear improvement for the ALD market, driven by continued strength in logic/foundry, an increase in the contribution from new 3D NAND applications, and an anticipated recovery in DRAM spending not earlier than mid 2017. Now turning to the longer term outlook for the single wafer ALD market, the outlook for structural growth remains strongly driven by miniaturization and the introduction of new materials and new complex device architectures.

We still estimate that these markets, this market to double by the 2018, 2019 timeframe. Given the decline in the market in 2016, it is more likely that this will happen in 2019 than in 2018.

The logic and foundry sector continues to be a key contributor to the long term growth of the market. The complexity and low temperature requirements of advanced FinFET structures drive a strong increase in new ALD applications and layers.

In addition, ALD-based multiple patterning is a key enabler of the 10 nanometer transition and also the 7 nanometer node in logic/foundry, and the transition from 14/16 nanometer to 10 nanometer and 7 nanometer, over a multiyear period, will expand the single wafer ALD served available market in logic/foundry to more than double in total. In DRAM, we expect multiple patterning to remain a steady contributor for the coming technology transition.

In NAND, from a lower base in 2016, we foresee a steady increase in the number of single wafer ALD applications as customers transition to next generation higher stack 3D NAND devices in the coming years. In short, while the single wafer ALD market shows a decline in 2016, we expect the market to return to growth in 2017, and the prospects for longer term remain strong.

Now let’s look at our Q4 guidance as we communicated in our press release. For Q4, we expect sales between €150 million and €170 million, while we expect an order intake of between €130 million and €160 million, both on a currency comparable level.

At this point, we are happy to answer any questions you may have.

We’d like to ask you to please limit your questions to not more than two at a time so that everybody has a chance to ask a question. All right, Siobhan, we are ready for the first question.

First of all, Chuck, would you say that the main difference in guidance is regarding DRAM being pushed out some next year, or is it something extra in here? And the second question, could you give some more color on 3D NAND orders you received in the quarter?

What is the drivers for next year? Is it additional customers coming online, or is it current customers ordering more tools?

And also, is there any material difference in profitability between 3D NAND tools, planar NAND tools, or DRAM tools? And we are all sorry to hear about the news about Arthur del Prado.

Thank you.

Okay, Mathias. Okay, thank you for your last remark.

Very much appreciated on behalf of the company. And yes, so on your questions, we’ll do the margin question at the end, Peter.

So on, yes, DRAM, yes, in general, Mathias, there is not really something extra that changed. It’s just that, while the pricing environment in DRAM has recently improved, current investment levels are just much lower at this moment than in 2014, 2015 timeframe.

And yes, as we already announced in our Q2 results, recovery in new investments has been pushed out to 2017. And our current view is just based on the most recent visibility, that we will see the impact from such a recovery not before halfway being into next year.

And our forecast does include the assumption that there will -- may be, in the initial capacity built at our customers, some reuse of existing capacity at certain customers before those specific customers will see a resumption of new ALD tools. So, that’s the big picture on DRAM, yes.

Then on NAND, as we explained, yes, I think the main driver next year will be for us a higher volume of customers that we already are engaged with in the initial, let’s say, pilot phase this year. I think more customers likely will come up to speed maybe towards the end of next year.

But we do expect how we view 2016 as a transition year, to multiple patterning and planar NAND as almost completely disappeared. And yes, single wafer ALD in general within 3D NAND has so far been limited.

But like we said in our introduction, in the third quarter we really booked multiple XP8 tool orders for a number, really a number of ALD applications in 3D NAND. And we do expect, we project that double digit growth in the 3D NAND single wafer ALD market next year.

And beyond that, with customers going to higher stacks, the ALD niche will further increase in subsequent device generations in the years beyond 2017. And then we expect also more customers’ engagement than today with our company.

Again, those programs are already we are already strongly engaged in R&D, but we’re working for insertion of those applications in the nodes after next year. And so, that’s a little bit and that has to do with the fact that the level of engagement at this moment in time with the customer is different.

It differs based just on the specific technology and different architectures of the different customers. But we see a very meaningful future for 3D NAND in single wafer ALD.

Yes, your question with regard to the profitability of 3D NAND, DRAM, and planar NAND and the differences between there, they are all approximately at the same profit level. So, we do not see any big differences there.

A couple of questions on next year. So, DRAM is not expected to recover before the second half.

So, should we expect the first half of 2017 to still be stronger than the first half of 2016? Yes, and then I have a follow up.

Yes, Nigel, I understand that you would like to know that, but we for the moment only want to give some qualitative color on 2017 among the different segments. But it’s just a little bit too early to provide real quantitative guidance on the full first half because a lot is still happening in the market, again, with the different segments.

So, we would like to not do that because we prefer to give you an accurate guidance than having to correct that in two months from now. I hope you appreciate that.

Yes. Sure, fully understand.

And then a nonrelated question on sort of talk of consolidation in the sector. Could you comment on some speculation you are considering to maybe acquire a share or the entire semiconductor business of Hitachi Kokusai?

And more specifically, have you been in talks with the mother company, Hitachi Limited?

Yes, yes, yes. Well, this question was of course to be expected after so many articles that came up in the press.

But I trust you will understand that we, as a company, we don’t react on rumors in the market.

Good afternoon, gentlemen. Two questions from my side, first on logic/foundry.

Could you talk about the linearity of the logic/foundry, the nanometer ramp? You indicated it was a clear driver for sales in Q3.

Do you think it will be quite steady in coming quarters, or could there be some quarterly volatility as the clients digest some of the recently installed capacity? And the coming back on the earlier question on M&A, I understand you won’t comment on specific stories or rumors.

But generally speaking, would you consider buying a business that derives a meaningful part of its revenues outside semiconductor equipment? And if you were to make an investment in a company, is it fair to assume that you would like to have control over this company and being able to integrate and consolidate it, or would you also be willing to acquire a minority stake in a company like you have in ASM Pacific?

Thank you.

Yes, yes, yes, Peter. Okay.

Well, interesting questions, especially the second one. I will comment on that in a minute.

But on the, first on the logic/foundry, linearity of ramp, yes, I think what I can say about it is that between the two segments, logic and foundry, there is a difference. You saw initially that -- in the beginning of the year logic pushed harder in terms of, let’s say, bookings.

And you see that bookings basically were stronger, developed stronger for foundry later on in the year. And as a result of that, also in terms of billings, the contribution later in the year for foundry is stronger than that of logic.

And that determines also, and we are closely looking now at how will that develop going into 2017. How will, in foundry, 10 nanometer continue its ramp?

How quickly will foundry really move on in preparing for a 7 nanometer pilot? And how much steam is there left or shown by logic going into 2017?

And we hope to get better visibility on that in the coming months. So, that’s on that part.

And then your second question, yes, again, in general applies the same answer as to Nigel, that we don’t react to great rumors in the market. What we can say to part of your question is that you said well, how well does a non-semiconductor related business fit in your strategy.

On that part, we can say that we have always been a very focused company, focused on areas that we are good at. And that has brought us a lot of strong performance and shareholder appreciation, and we would like to stick to that formula.

So, I trust that that answered that part of the question.

Yes, it does. Maybe coming back on the earlier question on logic foundry, when it comes to this market, some of these customers are already talking about 7 nanometer.

Do you think that that will further increase your opportunity or addressable market for ALD, or will it be broadly similar to 10 nanometer?

Will it broaden the possibility? The clear and short answer is yes, definitely.

Yes. Hi.

This is Sandeep Deshpande. Just a couple of questions, firstly regarding 3D NAND.

I’m sorry if I didn’t hear some of your earlier comments. But in the next generation 3D NAND where you say you’re going to begin to ship a little bit of volume in the fourth quarter, can you discuss what process are you supplying in the next generation 3D NAND, and why that was not there?

Are you replacing somebody else who was supplying that in 2D NAND, and how significant a supplier you can become of that process in the long run overall in 3D NAND, given that this is going to be the dominant NAND going forward? Secondly, Intel, which has been historically a big customer and yours and Micron, are also going to do 3D XPoint in the next few years.

As you exposed on 3D XPoint, which is potentially going to be another major memory in the market? Finally, regarding again on this M&A, I would ask a more philosophical question.

Is ASMI interested in being part of the consolidation in this industry, or as a consolidator or is it just that you will only buy small add-on things depending on your core businesses? Thank you.

Okay, Sandeep, clear. A few questions, so first on 3D NAND, yes.

So, it should be clear that our revenue participation -- the revenue contribution in 3D NAND this year has not only started in Q4. We have had some, let’s say, contribution from multiple customers in terms of bookings and revenue throughout the year.

It is, again, an issue or engagement with multiple customers as these customers go to their newest nodes and are, let’s say, improving their yields and before they go to higher volumes. So, that’s the engagement that is ongoing with, again, multiple customers.

And it’s on, just for them, new applications where they view single wafer ALD to really bring the right cost picture and also the right extendibility, from a technology and specs point of view, down the road. So, that triggered them to work with the leader in single wafer ALD.

But of course we also have to expand our relationships over time to companies that to all the players in the market, because we are not present at all the players in 3D NAND in, let’s say, pilot or high volume at this moment in time. So, there is a lot of potential, and we view our view is that the compound annual growth rate for the 3D NAND market space in single wafer ALD is going to be a double digit one in the coming years.

So, we view that it provides, if we execute well, a great growth potential for the company to develop our single wafer ALD market. But again, it will go gradually.

But in the end, we expect that it could represent a meaningful part of the single wafer ALD market. So, it’s not only Q4.

Maybe that came across wrongly. So, that’s on the 3D NAND part.

Then XPoint, we do have R&D engagement on XPoint already for quite some time. So, it’s now just waiting, like for our peers, for this device development really to hit the market, for our customers to find basically an end user market for this technology.

And as soon as that happens, we are ready. So, we view that we are much our engagement in XPoint was there at the right time, while on 3D NAND initially we were maybe a little bit late and we are catching up now rapidly.

But on XPoint, we don’t view we are from the start. At least that’s our assessment today.

Again, execution still to be proven, but from an R&D point of view that’s the case. So, I trust that answers that part of the question.

Then on the, yes, sector consolidation, Sandeep, interesting one. Yes, of course our key, the key priority for the company is, of course, shareholder value creation.

And we as management and the Boards of the company jointly, we see tremendous opportunity to achieve this by continuing to execute on our growth strategy. And we believe as a company that we have the right portfolio and customer relationships in place to grow our business in the coming years.

So, that is our primary focus, yes, not to be consolidated but to grow ourselves. Against that backdrop, the backdrop of further consolidations and consolidation attempts in recent periods, we have only experienced we continue to experience strong proof from the top players, top customers in this industry to expand their engagements with us.

And that’s based on many aspects that they value in our company. So, we believe customers appreciate ASM’s position, being a focused, differentiated, and independent supplier of innovative technologies.

And of course it’s important that we develop scale, but we see good opportunities to build scale, again, always keeping in mind, of course, that the key priority for us is shareholder value creation, yes? Yes, and being a consolidator, in our role as a consolidator, yes, we have always told you on earlier occasions that acquisition opportunities, our primary objective is organic growth.

There’s a lot of opportunities there. But on the nonorganic part, it’s an ongoing part of our strategic review process for years, but it’s not a goal in itself.

Acquisitions have to make sense strategically. They have to strengthen our position in the market, and it needs to add long term profit growth and shareholder value.

And in that respect, we look at things for years. And it can be scale related and it can be technology related.

So, I trust that answers your question, Sandeep.

Thank you.

Thank you for taking my questions. So, the first question is that you have mentioned you are not penetrating in all the 3D NAND customers yet.

I’m just wondering, is that because that they’re using alternative solutions or are they just not reaching the level of 3D NAND layer stack yet? And also, you always mention that you are expecting to lose a little bit of market share when more players try to join this ALD market.

Just wondering, for 7 nanometer compared to 10 nano, basically you will have more applications. But in combination with potential market share loss, do I see actually ALD demand going up, or it’s going to be flat from node to node?

Thank you.

Yes, Tammy, I was just checking with my colleagues here your first question, because I could not fully understand it. Could you repeat it one more time?

Yes, because you were saying you are not actually in all the 3D NAND players currently based on your 3D NAND capable ALD tool, right? So, you still have further room to penetrate into more players.

Yes, that’s right.

I’m just wondering, the players that you are not dealing with, they use basically your competitors’ tools, or it’s just simply the fact that they are not actually at the 64 layer, for example, 3D design yet, and therefore they don’t actually need your ALD tool for the time being?

Yes, it’s just that, yes, it’s a good question. When the customers that we have limited engagement with currently in HVM, they started, let’s say they started development in 3D NAND when, let’s say, not too much single wafer related to ALD capability was available in the market, yes?

If we would have been more focused on that market at that moment in time, they might have, we might have been able to develop the single wafer ALD market earlier in time. So, of course there are some competitors that have single wafer ALD business in 3D NAND currently, but that is not the main reason.

In the earlier nodes, it was -- solutions were found in a different way, but not through single wafer ALD, okay? So, I trust that answers your first question.

We’re more than happy, of course, to follow up on that through Victor with you if you would like more clarity there. And then, your question on market share development, logic/foundry towards 7 nanometer, yes, we do believe, based on the strong engagement in R&D that we have with 7 nanometer with customers that prepare for 7 nanometer at this time, that our penetration level could increase toward 7 nanometer.

We have a good view about that transition upcoming. And as a result of that, we think that the contribution in the future in 7 nanometer from logic/foundry to single wafer ALD is going to increase, yes?

It’s not maybe exactly in six months or in 12 months. But if you look at the contribution of the 7 nanometer node compared to the 10 nanometer node, then we strongly believe that the contribution of logic/foundry in absolute terms will increase in a meaningful way.

I trust that answers your question.

Hi, Chuck. And again, condolences.

He was an extraordinary man. But I just wanted to ask you about the commentary on 2017.

And I didn’t want to overly read your statements like a Fed statement, but going from a very strong kind of recovery in 2017 to kind of clearly improved in 2017, did you kind of mean anything like that? And again, on the buyback, the fact that it’s €50 million rather than €100 million, again, I think on both points analysts have kind of been saying that are you meaning anything by those two bits?

Yes. Okay, Richard.

Thank you for your words up front. Very much appreciate it.

And so, on the, yes, 2017, remarks, yes, the views that we have provided so far for next year are -- yes, are not really a quantified forecast. We are confident, and we tried to get that across in everything we said so far.

We are confident that the single wafer ALD market will show a meaningful recovery in 2017, but it’s just a little bit too early to be more precise in quantifying this outlook. But, yes, for the rest, we tried to give you as much color as possible on the dynamics in the different customer segments.

Again repeating that on logic foundry, we do expect spending in that segment to remain strong next year, supported by continued 10 nanometer capacity ramp and also some earlier 7 nanometer spending. And it’s still a bit to be seen how quickly the transition between those two segments will go.

And then on NAND flash, the contribution to the single wafer ALD market will show, is our belief, a double digit increase in 2017 versus the lower base this year. And DRAM spending, yes, that is yes, we adjusted that, our wording there, a little bit.

We expect now the recovery in 2017 driven by 1X node nanometer investments to happen not before mid 2017, and also taking some maybe some reuse of existing capacity into account by certain customers. But, of course, yes, in DRAM segment things could also change rapidly, but those are the assumptions we made.

And again, we chose not to give a quantified forecast now because we’d rather give you an accurate one than a too preliminary one that we later on have to adjust. And we’d rather stay with our track record of being as accurate as possible in our guidance to the market.

But, sorry, just to follow up on that, so the fact that on the last quarter you used strongly improve in 2017 and this quarter you’re saying clearly improve in 2017, I understand that you don’t want to quantify it. But that’s not a down ticking in terms of your thinking about 2017 at all?

Yes, the only thing that I think on logic foundry and 3D NAND nothing changed. On DRAM, you noticed that we adjusted the wording somewhat, that we said instead of in the course of 2017, that we now said not earlier than mid 2017.

We have been a little bit more, so, we’ve been a little bit more specific there. And that’s the only adjustment compared to a few months ago.

Great. And then just on the buyback, why it’s 50 million this time and not kind of the 100 million that we’ve seen in the past.

Let me give you that color. What we always have said is that we want to keep approximately €300 million of cash, that excess cash will be used for the benefit of our shareholders.

When you look to the announcements that we have done in the previous years, when we did the announcement in 2014, going back two years, there we had €410 million at the end of September on the balance sheet. Last year that was 428, so the Board case is justifying the 100 million.

At the end of this September this year, we had 363 million of cash on the balance sheet. So, we are simply following the same principle, and that led to the 50 million.

So, there is nothing more behind it.

Fantastic. Thank you for clarifying.

Okay, Richard. Looking forward to staying in touch.

Thank you.

I have a couple of follow-ups. First, on the order book guidance, what explains the delta between the new orders for the current quarter because it seems a bit stronger?

Does it reflect the ongoing strength in foundry, or is it maybe because of a meaningful pick up for 3D NAND orders? And then another question.

I mean, this year I think there was some planar NAND orders, multiple patterning still. So, should we look at NAND revenues in total to be higher next year compared to this year?

Can you provide some color? That will be very useful.

Thanks.

Okay, Nigel. On your first question, order book, yes, it’s basically that the order book is a little higher.

It’s just a mix of several items, among which the logic/foundry combined is a little higher. It’s a little higher than Q3, but there are also a few other elements that contribute to the higher bookings in Q4.

Then on the NAND, yes, our expectation is now that NAND definitely, contribution will be higher next year than this year.

Okay, thanks; very useful. And then maybe a quick follow up then towards 2019 with the doubling of the market.

I mean, obviously this year the logic/foundry segment is the biggest by a stretch, followed by I guess still DRAM and then NAND. And how should we look at this mix in your modeling towards 2019 for the ALD market?

Yes, yes. Yes, we, if you look at the mix, of course logic/foundry is going to be a very important contributor, where we expect that the single wafer ALD served available market will already more than double in the transition, going from 10 to 7 nanometer over a certain period of time, and 3D NAND applications that are expected to grow in subsequent higher stack device generations.

Those are, the contribution in those two areas, of those two areas, will definitely grow. And that combined with the fact that we do expect a DRAM contribution, especially the multi-patterning in DRAM, that their contribution will remain steady the coming years.

Those elements are all taken into account in making our projection.

Okay, great. And then just on, you said it will more than double from the 10 nanometer to the 7 nanometer node.

Is that the number of applications or is that because maybe 10 nanometers is much smaller nodes than what the expectations are for 7 nanometer?

Yes, the more than doubling is the transition from 16/14. To make sure that I stated that well, from 16/14 nanometer to 10 and 7.

Right, okay.

That’s in that transition. That’s where the doubling in the served available market is going to take place.

And in general, I think you can say that compared to, let’s say, the recent past, the contribution of logic/foundry in the single wafer ALD market is going to be much more important besides the other segments. I think in the past logic/foundry was a moderate contributor.

And their contribution is going to be way more significant in the coming years besides, again, a healthy gradual growth we expect in NAND through 3D NAND going to higher stacks, and the recovery of DRAM that we anticipate in the market as a whole. I trust that provides a little bit more color, Nigel.

Good morning, gentlemen. Thanks for taking my question.

A question, Chuck, on the 3D ramp up for the new applications. You mentioned, I think, in your opening remarks that these are dependent on the yield of customers.

So, do we need to see a significant step up in the 3D yields before we see some of these new applications or tools for these new applications, those orders come through? I just want to try and understand the risk of this NAND strength you’re expecting in 2017 from these new applications, that that could come later in 2017.

That’s my first question. And then second question, can you actually give us some more details on the new opportunity, the new -- the non-patterning opportunity in 3D NAND?

It seems quite hazy to me. I just wanted to try and drill down a bit and see what exactly kind of this application is.

And then maybe a third question, if I could squeeze in another one. Can you talk a small bit about your assumptions for tool reuse as you go -- as your customers move from that 10 nanometer to the 7 nanometer in foundry?

Thanks.

Yes, okay. On the yields, yes, we just made certain assumptions.

And we are making certain assumptions in our own forecasting, but we don’t want to elaborate too much on that because that’s customer sensitive information to the outside world. We’re just not allowed to do that.

So, I trust you respect that. And then on the non-patterning, David, on the non-patterning layers in 3D NAND, just to emphasize, basically everything -- well, maybe expect for one or two applications, but basically almost everything that we are working now on in 3D NAND is non-patterning related, yes, because in 2D NAND we relied on patterning.

In 3D NAND, we cannot rely on patterning at all. And so, we are showing and working customers what the benefits are from single wafer ALD, and non-patterning, really device related, structured layers.

So, that’s everything we do today. And as we tried to provide color in the introduction, there is engagement ongoing.

There is, with multiple customers now, multiple layers that are basically preparing for high volume now and in final fix as we speak. And we are also working with the same and other customers for future higher stack nodes for other applications.

And that either will -- that’s for future nodes towards the end of next year, going into 2018. Then on the reuse, reuse in logic foundry, yes, that is a possibility, and also our customers likely talk about that themselves.

And the level of reuse will depend on -- is determined by a few factors, likely. We cannot speak on behalf of our customers, of course, but we guess for them it’s important how ultimately the timing of the transition from 10 to 7 will go.

Will 10 last much longer or will 10 not last that long, as a result of which excess capacity can easier transition to 7 or will some of those end product demands some of the end product demands for both nodes coexist for some time? That all influences their ultimate reuse, so that’s one aspect which is still difficult to fully assess, but we assume some reuse.

But next to that, 7 nanometer likely will also use completely new applications that cannot be done with existing configurations, with existing 10 nanometer configurations. So, their reuse would not be applicable at all.

And all those elements we incorporate in our own models for next year and the years beyond.

Okay. Okay, understood.

And maybe if I could just have one follow up on DEM, I noticed you pushed out the from previously the doubling of the market from 2018 to 2019 to now more 2019. Just wondering what are your thoughts on that?

I mean, does EUV start to become a headwind for the logic foundry side of the business as this gets pushed out?

Well, if your question is was that an important factor in our models to make that statement, then the answer is no.

Well, on behalf of Peter and Victor also, thank you very much for attending today’s call, and thank you for your questions. And I trust we stay in touch on any follow up questions you may have.

So, thank you again, and have a good day. Thank you.