ASM International N.V.

Thank you, Sarah. ASM issued its first quarter 2020 results last evening at 6:00 p.m.

Central European Time. For those of you who have not yet seen the press release, it is accessible on our website asm.com, along with our latest investor presentation.

As always, we remind you that this conference call may contain information relating to ASM's future business and results in addition to historical information. For more information on the risk factors related to such forward-looking statements, please refer to our company's press releases, reports and financial statements, which are available on our website.

And with that, I'll turn the call over to Chuck del Prado, President and CEO of ASMI. Chuck?

Thank you, Victor, and thanks to everyone for attending our first quarter 2020 results conference call. First of all, I very much hope that all of you and your families are healthy and safe in these uncertain times.

We also have our CFO, Petrus van Bommel on the virtual call today. And, we all dialed in from home like probably most of you today.

I'll start with an update on the impact of and our response to the global COVID-19 outbreak, which of course is on the top of our minds, and then Petrus will discuss two specific topics. ASMI's recent new CEO announcement and the dividend proposal, and subsequently I will review our Q1 results, and after that we will conduct as usual, our Q&A session.

So, on the COVID-19 update, as this COVID-19 outbreak has been rapidly evolving, we found ourselves in unprecedented times. Across the world, the pandemic severely affected our lives, our communities, society and our economies.

Our thoughts go out to everyone whose health has been impacted by the illness and to those in the frontlines combating it. The health and safety of our employees, their families, and of the employees working for our customers and other partners has always been our key priority.

Safety is a core company value, and over the last many years, we made substantial investments to further strengthen our safety organization and procedures. From the onset of the COVID-19 outbreak, we closely monitor the situation and implemented full necessary measures, local government guidelines and orders and industry best practices to minimize the risk for our people and to do our part to slow the spread of the disease while safeguarding business continuity.

Measures included for instance, enabling of home working for all of our employees where there is no direct need to be at the office. Lab, where there is no need to be in the office lab or a factory.

Implementation of split shift work in essential areas, enhance cleaning protocols and of course restriction of non-essential travel. I'm extremely proud of how our ASM employees and our partners have responded to this rapidly evolving crisis.

All of us quickly adapted and found new ways to stay connected and to maintain the ASM team spirit, while putting the health and safety of all of us first, our team showed strong commitment and creativity to make sure we continue to serve our customers in the best possible ways. Even with all these measures, we have been able to continue our daily operations with this only limited impact on productivity, while the bottlenecks in the Chinese and U.S.

supply chain only had limited overall impact. The measures taken by the Malaysian government and recently the Singapore governments had and have a bigger impact.

These measures are leading to reduce business activities, creating shortages and delays for specific components at our Malaysian suppliers. Moreover, it also affected part of the workforce in our Singapore facility, where our employees who live in Malaysia were not able to come to work.

We, like our like our critical suppliers, received exemptions in both countries, as semiconductor was marked as an essential industry. Although, these exemptions will allow us to continue our manufacturing operations in Singapore, the measures has taken will have impact on our ability to deliver all the require products.

The further consequence of the containment measures in Singapore is also that construction work on our new manufacturing site as being temporarily halted. We now expect the new facility in Singapore to be completed in Q3 instead of at the end of Q2.

Our global operations team and the rest of ASM did an amazing job by detailed planning and constant tracking of potential bottlenecks, maintaining close contacts with suppliers and customers and looking for alternative solutions and workaround in case of component delays. Our team has managed to ship almost all of the tools to our customers as planned within the first quarter.

If we look at customer demand, the impact of the pandemic has so far being limited. Demand remained solid in the quarter and we did not experience any meaningful order push outs or cancellations.

Customers have continued to execute their planned investments in the new node and they continue to invest in new technology development. I will now hand over to Petrus who will address the recent CEO announcement and the dividend proposal.

Petrus?

Thanks Chuck. On March 23, the Company announced Benjamin Loh as the new CEO.

ASM’s Supervisory Board selected Mr. Loh after through search process.

We are very please to propose it to the Shareholders Meetings on May 18th. As you know, Chuck del Prado will set down as CEO at the AGM, he announced at very last September and also that's Benjamin Loh will take off as a new CEO.

He brings for us international experience of senior management and executive roles in the semiconductor industry. His most recent position was at VAT, an important supplier in our industry where he was responsible for global sales and marketing.

Recently, he has been on the board of a number of companies and earlier he was also a board member of SEMI China. The second topic that I will discuss is dividend proposal.

With our Q4 results, we have announced the proposed dividend payments of a total €3 per share, consisting of a regular dividend of €1.50 per share that was 50% compared to last year plus special dividends off €1.50. Of the total dividend of €3 per share, already €1 was paid as an interim dividend last November.

The publication of the AGM agenda on April 6, we confirmed this dividend proposal. Our policy has always been to maintain a strong balance sheet that allows us to address in the growth of our company.

This is the key priority by using excess cash for the benefits for shareholders. In light of the increased economic uncertainty due to the COVID-19 pandemic, we did a detailed analysis, stress testing our financial position in different scenarios.

We concluded that our balance sheet provides sufficient strength to both, continue or plan investments and expenses and to proceed that the earlier committed dividends. The strength of ASM’s financial position was again demonstrated by our performance in the first quarter.

We ended the quarter with a strong cash position of €529 million, up from €498 million at the end of December. We generated a solid free cash flow of €41 million for first quarter, almost doubling compared to the level in the same quarter of last year.

The free cash flow was driven by the increased level of profitability and partly offset by €12 million cash outflow for working capital and CapEx of €24 million. Our CapEx was relatively high as part of the payments for a new facility in Singapore and that statement partly shifted from the fourth quarter last year to the first quarter of this year.

That's what we discussed already in our previous earnings call. In Q1, we also spend still €4 million to complete the €100 million share buyback program of which most was already spent in the fourth quarter.

As announced in Q4 results, we also will start with a new share buyback program. We are currently in the final phase of the preparation work and plan to start this program shortly.

In light of the COVID-19 related uncertainties, we plan to execute this program at a lower speed than the last one that we did. With that, I will hand the call back to Chuck.

Okay. Thank you, Petrus, and I will now continue with review of our financial results.

In comparing with the previous quarter, I will exclude with the gain from the arbitration settlement, which as a reminder impacted our fourth quarter results last year with a positive amount of €56 million. In the first quarter of 2020, revenue amounted to €325 million, a strong increase of 31% compared to the first quarter of last year, and a decrease of 6% compared to the record high level in the fourth quarter.

Revenue in the quarter was above the midpoint of our guidance, which was a range of between €310 million and €330 million. Service and spare sales grew by 7% year-on-year and represented 17% of total sales.

Equipment sales increased by 37% year-on-year and was led by strong growth in our ALD product line, while the combination of the other product lines also showed again a double-digit increase. By industry segment, revenue in the first quarter was led by foundry with sales somewhat lower sequentially, but still at the second highest quarterly level in our history.

Second largest segment was logic with revenue increasing to a record high in the first quarter. Third was memory with sales relatively stable compared to the first quarter.

Gross margin was 44.5% in the first quarter, up from 43.6% in the fourth quarter and the highest level in the last 13 quarters. The improvement was driven by mixed effects and cost reductions related to the installation of new products introduced in current period and despite some inefficiencies and higher cost due to disruptions in logistics and the supply chain.

As G&A expenses decreased slightly compared to Q4, excluding the higher cost in Q4 for short-term incentive for programs, SG&A was relatively stable in Q1. R&D expenses dropped by 15% compared to the fourth quarter, but excluding the one-off impairment in Q4 R&D would have been stable.

Operating profit was up slightly compared to Q4 leading to an operating results percentage of 24% in the first quarter, which is a new record high for the Company. Below the operating line results included a currency translation gain of €12 million maybe explained by the appreciation of the U.S.

dollar in the quarter. This compares with the translation loss of €14 million in the fourth quarter.

Income tax of €13 million was up significantly compared to €2 million in the year ago period, due to the exhaustion of our tax losses in the Netherlands last year as explained in previous calls. Let's now briefly look at ASMPT.

Results from investments which reflect our 25% share of the net earnings share from ASMPT, dropped to €1 million in the first quarter down from €6 million in the fourth quarter and down from €3 million in the first quarter of last year. In the first quarter of this year, ASMPT reported sales of $434 million, down 24% compared to Q4 and down 8% from Q1 long last year.

Plant shutdowns particularly in China due to the COVID-19 had a negative impact, but sales in Q1 still reached the higher end or ASMPT’s guidance, and the net profit was better than the loss that the Company had forecasted. Bookings strongly increase to $669 million in a quarter, up 50% sequentially and up 45% year-over-year.

Okay, now turning back to ASMI’s consolidated operations, ASMI’s net earnings on a normalized basis amounted to €78 million in the first quarter. Our new orders in the first quarter were €333 million, down 11% from the fourth quarter, but up 42% year-on-year.

Orders slightly exceeded our guidance, which was also a range of between €310 million and €330 million. Equipment orders were led by our ALD product line, which increased to record high levels in Q1.

Looking at the breakdown and bookings by industry segment, foundry represented the largest segment in the first quarter. Foundry bookings increased strongly compared to the fourth quarter to a new record high.

The largest foundry customer continued to account for the biggest part with other foundry customers also had meaningful contribution this quarter. Logic was the second largest segment with bookings somewhat lower than in Q4, but still at a very healthy level.

Memory represented differ segment. Bookings in both DRAM and 3D NAND were relatively stable compared to Q4.

Last but not least in terms of geographic breakdown, we saw a strongly increased contribution from Chinese customers in terms of both sales and bookings. In the first quarter we booked multiple tool orders, particularly in our ALD product line from several Chinese customers.

Okay. Let's now look in more detail of the trends in our markets.

According to the forecast the global economy is expected to move into recession this year. Looking at the semiconductor end markets, segments such as automotive, smart phones and other segments related to consumer spending are expected to be down this year.

Other products of the semiconductor industry that support online communication, work from home and virtual learning have reported increased demand in the recent periods illustrated by for instance recent brisk demand in laptops, data centers and part of the communication infrastructure markets. If we look at expectations for the semiconductor wafer fab equipment markets in total, VLSI Research recently lowered its forecast to a drop of 7% year-on-year due to the impact of the coronavirus.

Earlier this year, it still expected an increase of 5% for the year 2020. It is positive to see that in China and some countries in Europe the growth curve of COVID-19 patients is flattening or even declining.

However, it is obviously too early to tell when the pandemic will be under control and when restrictive measures can be reduced and how quickly and to what extent economic activity in the different parts of the world can be restarted again. This will be an important factor for the state of the semiconductor industry in the second half and therefore also for of course, the WFE outlook for the wafer fab equipment outlook.

Given this higher level of uncertainty, we decided as a company not to provide a forecast for WFE for the full year. Looking at the first half of 2020, we believe the trend in WFE spending is holding up well.

As I mentioned earlier, demand has been strong in the first part of the year and we didn't see any meaningful orders putouts or cancellations. And for the second quarter bookings are shaping up in line with our earlier expectations.

Our bookings in the first half are for the largest part driven by strong demand in logic foundry. Spending in this segment is focused on the most advanced node and capacity for new and market products that will enable multiyear growth trends in for instance 5G, data centers and artificial intelligence.

The foundry segment was as mentioned our largest segment in the first quarter with the majority of investments focused on the advanced shop 10 nanometer node. In the advanced logic segment, meaningful investments in 10 nanometer capacity continued in the first quarter.

As we highlighted in previous calls, the role of ASM has substantially increased in these advanced nodes. The number of ALD layers in the current most advanced logic and foundry nodes has increased at a substantial double digit percentage compared to the previous technology nodes.

We have successfully maintained our leadership position in this space, which as a result, the strong reason to increases in our share of wallet with the leading logic and foundry customs. Looking at the next node in logic foundry, we expect the number of ALD layers to further increase.

Step by step, we’re also increasing our position in epitaxy, which is a market with strong long-term growth prospects. WFE and ASM sales in the first half of the year in special will be supported by a healthy trend in the Chinese market, where domestic customers show strong commitment to invest in semiconductor manufacturing technology and capacity.

We are benefiting from the investments that we make in previous years to strengthen our position in the strategic markets and from the fact that some of these customers are now making more meaningful steps to work the technology nodes where ALD requirements start to become more critical. Looking at the memory market and market dynamics -- end market dynamics look healthy in the first quarter with parts of these markets, such as in a PCs and data centers supported by work from home-related demand.

Indicators such as a memory device pricing also continue to develop favorably in the first quarter. Following the substantial cuts in memory WFE spending in 2019 and spending in the memory segment has remained at a relatively modest level in the first part of the year.

The outlook for second half recovery in memory spending, which was expected at the start of the year still has, yes, some uncertainty. While projects related to technology transitions are likely to continue, investments in new capacity will likely depends on how supply demand conditions will develop in the rest of the year, which in turn will depend on the state of end market demand and of the global economy.

Spending on the next memory generation peaks up, we expect to strengthen our memory contribution. In DRAM for instance on the back of the non-patenting ALD wins as we discussed last quarter, a longer term step-by-step we expect to improve our position in the memory via ALD market as a whole.

Looking at analog market, expectations have weakened compared to a couple of months ago. While a much smaller part of our business of course the analog market is more exposed to segments that have seen recent weakening of end market demands such as automotives.

While WFE for the second half of the year is difficult to predict, the longer term outlook for our industry looks strong. Our work with our customers on next node has a continued, reflecting continued commitment on the part of our customers to execute their technology roadmaps in the coming years.

Based on the progress in our R&D engagements, we expect to see further increases in our served available markets as customer transition to the next nodes. Digital technologies are increasingly important in supporting new ways of living and working.

Today, demonstrated by to work from home economy. New more powerful and power efficient semiconductor devices will be essential in the developments and growth of new end market applications such as in cloud computing -- cloud computing, artificial intelligence, and autonomous driving.

For our customers to stay on Moore's law, a growing number of process steps will require ALD and epitaxy deposition. Now let's look at the guidance we issued with our Q1 press release.

For Q2, on the currency comparable level, we now expect sales between €300 million and €350 million. We slightly divided the range by reducing the lower end compared to the earlier indicated range of between €330 million and €350 million.

And the widening of the range is fully attributable to the risks related to possible disruptions in our supply chain and logistics operations as a result of additional COVID-19 related actions taken by governments so far. Q2 bookings on a currency comparable level are expected to be in the range between €280 million and €310 million.

On a personal note, finally as part of this introduction, as this will be my last earnings call with you all on the line. Now a few words, and yes on a personal note, when I decided to step down as CEO last September, September 2019, I believe the timing was right.

Because ASM is in good shape and therefore well positioned to undergo a change in leadership. Today, these unprecedented times have really tested our company and our team.

Our response to the COVID-19 crisis has confirmed for me the strength and resilience of this company. Looking at that at the last 12-years, I'm personally extremely proud of what we have achieved as one team.

In 2008, we had our first breakthrough in single wafer ALD. Since then, we have built a leadership position in fast growing parts of the WFE market and achieved strong relationships with all of the top CapEx spenders in the industry.

While stay true to our, let's say, inborn focus and innovation. over the years we substantially step up and also on our operational excellence and on the efficiency of our operations, very important.

And bottom line to all of you is that, since 2008, our front-end sales have increased by a solid double digit compound annual growth rate. We clearly crossed the results and the €1 billion mark top line in 2019, and we provided ASM with the very strong financial base.

In short, ASM in my opinion is in a strong position today with a bright future ahead. And there was I would like to thank you our analysts and investors for your support, confidence and healthy challenging interactions throughout all those years that I have been able to interact with you.

It has been a real pleasure engaging with you all. And of course, we are not going to close on this call at this moment, but at this moment I would like to wish you all and your families a very healthy and prosperous future.

Petrus?

Chuck. Yes, I would also like to take the opportunity to thank you on behalf of everyone and ASM for your tireless commitment and dedication during the last 12 years.

Your leadership, vision and consistent execution and talent to inspire and motivate has strongly contributed to the extraordinary success of ASM. This success is also reflected in the strong total returns of more than 20% annualized over the last decade and close to €2 billion in cash that we returned to shareholder during this period.

Thank you, Petrus, very much appreciated those nice works. And with that, we finished our introduction and let’s now, of course, like we always do move to our Q&A session for which both, Petrus and myself of course are available.

Victor.

We'd like to ask you to please limit your questions to not more than two at a time, so that everyone has a chance to ask a question. Okay, operator, we are ready for the first question.

Hi, good afternoon. Two questions if I may, first on the epitaxy, clearly like you've been gaining a lot of market share along with market growth in that segment.

Can you help us understand and maybe I don't, my impression is that most of the, your exposure is to one big customer in epitaxy. Can you help us understand, what are you -- how are you seeing the traction with some of the other customers in that market?

And then secondly, on the second half, I guess, again, if I look at one of your largest customer in foundry CapEx seems to be quite front end loaded this year. Clearly, it was see a slowdown as we go into the second half.

So just trying to understand what are the puts and takes beyond that customer as we go into the second half? how should we think about business in the memory and the logic part.

Thank you. And congrats Chuck for such a nice journey.

Okay, Achal, thank you. Okay, so, yes, let me thank you for your questions.

Okay, first on epi, yes, you’re asking about traction broader than one customer. Well, of course, yes, we have of course a long low time track records in the analog power markets.

So, we have many customers in that space in the analog power space. Of course, from a volume point of view that has gone down in recent quarters, but that will continue.

In the mainstream CMOS space, indeed, we've penetrated early 2017 with one leading foundry customer initially and seven technology node. Later on, we expanded number of applications going into five.

And -- but in parallel, we had R&D engagements with, let’s say more customers beyond that one customer. And of course, what we shared on earlier occasions is clear that, when we decided, made a strategic decision to get back into mainstream CMOS.

Our ambition was not just to get in with one customer and get in with that customer only with only, let's say, limited amount of applications. Our ambition goes much beyond where we are today, also given the attractiveness of the epi markets and the compounded annual growth rate over -- the estimated compounded gross rates for the epi market in years to come.

And logic family, but of course in the strongest way, but it's in memory. So as a result of that, we have started engagement.

The engagement with all the customers, and we're looking forward, let's say in the next 12 months or so to share with the market that, we have made progress in that respect and that at some point in time some of those engagements will turn into high volume business also. But it's too early to further elaborate on that than what I just shared, but we see tremendous opportunities in EPI to further grow our share of available market -- the share of available markets for ASM in deposition.

And again, it’s especially logic foundry because in FinFet, at first, we see further expansion of epi. But beyond FinFet, we see tremendous opportunities in gate around those.

But logic foundry into memory and also in atmospheric epi, we are more and more engaged. So, it's a long answer epi, but I think it's really worth it because it has become a very important second growth engine of the Company.

And as you may recall, it's now -- on average, it has become now the second largest product line on average besides the ALD in the Company -- at on average, not maybe every quarter, but on average. Okay.

ALD slowdown, yes, related to a specific customer, can you elaborate a little bit more what you mean, because you relate it to one customer?

Yes, yes. Basically I was saying that, one of your key customers in the foundry it seems the CapEx has been quite front end loaded this year.

I guess Q1 was very high CapEx and which means that, there will be a slow down as you go through the year between the second half. So, I'm just trying to understand what are some of the things that can be that customer slowdown be it logic or be it memory?

What are the things that can help you in the second half, not to see a significant drop from H1?

Yes. Well, I think in general, if you look an industry-wide level then logic foundry spending of course is very solid in the first half.

And it’s a little too early to give a full guidance on the second half, but we have no indication at all. If you look at the logic foundry combined that, it will fall off a cliff in the second half, absolutely not again based on the visibility today.

We see that our visibility now is that logic will continue to stay the spending of logic in our WFE markets where it is expected to stay steady based on our the strong demand for servers, data centers, PCs, high performance PCs. Foundry, yes, I think the foundry market and that's a good thing there is becoming broader.

There are more foundries engaged now in the advanced node. So, the foundry spending in the WFE market more and more as node, wholly determined by let's say one leading player.

You see that, yes, more than one others players are popping up and the lead to that China is also becoming more visible, also maybe as a result of all the geopolitical developments in the world is becoming much more aggressive in spending also in the foundry space. And by now, of course, they also have come to the maturity level where they say not only spent more, but they are able to spend in really the advanced nodes in nodes like 8 to 7 nanometer.

So, that's on a high level for ASM specifically. Yes, we are seeing in logic.

So far very steady spending in 10-nanometer and also initial clear spending in for 7, development capacity spending in 7-nanometer, and we again with the visibility today, we estimate that to stay steady throughout the year. Foundry again, we have seen more players now are becoming visible.

In the leading space, leading space demand has been very, very strong. Indeed, in the N5 space, first half spending to be stronger than the second half spending, that's a maybe a fair of observation or assessment with the visibility today, same time and see initial M3 spending, developing spending for the engineering line spending could very likely come up to speed in -- could become visible in the second half.

That's the visibility we have, and again China is shaping up. I trust that provide you a little bit more color.

Yes. Also from my side, Chuck, I first wanted to congratulate on the job well done, clearly leaving the Company in excellent shape.

So again, congratulations and all the best. Switching to the top line.

Maybe a bit of a follow-up because there's a lot of uncertainty ahead, but you've also mentioned some some strong demand drivers. I think investments in logic, 10-nanometer, 7, a Chinese foundry pickup and potentially also memory improving.

So again, understanding there's a lot of uncertainty just from a company planning perspective, where do you expect the biggest potential delta in terms of these drivers? Could you perhaps provide a bit more color, if it's difficult to keep track?

So, you need company specific or on a…

Company specific, especially for China…

Yes, Okay. Well, I -- I gave already some color on this triggered by the former question to your collogue on logic foundries.

So, I don't have -- there's not much to add to depth really at this moment in time. I think when we talk -- we also bring memory into the equation then, in memory in the first half, like we said, into an introduction, first half is a reasonable contribution of memory.

I think in, on average, we expect the first half a DRAM and 3D NAND combined to contribution to be somewhat similar to the second half of 2019. That's again, but rough estimate based on what we know today.

DRAM of course is stronger than a 3D NAND for us. And in the second half of the year, yes, we said something about this already in the introduction there.

There, if you look at the industry as a whole, its, visibility is still limited with only one hand smart phones don't help the memory market to get into a strong recovery. On the other hand, data center demand, server demand, PC demand, also supports the memory market.

So based on all of that and based on the feedback, the visibility we have from our customers show far, we expect now the second half memory to be somewhat stronger than in the first half with DRAM, again being stronger 3D NAND, maybe for the industry as a whole three D3 NAND is expected to recover faster than DRAM. But as we share it before for us, DRAM is stronger as a result of some very good engagements that we have.

And also helped by the non-patenting ALD wins that we share with you and your collogues, on earlier occasions and that are going to become more visible in the P&L of this year. I think that's and of course in memory, yes, we are early on to this year, we are working very, very hard to -- we are investing in many more initiatives to grow or sheriffs available markets in memory down the road, and maybe we can get back to that late moment in this call.

That's the best we can do to answer your. And again China, on China itself maybe that's the last part Nigel, to provide a little bit more color on.

The year Q1 was already a record level. You choose a record level in terms of revenue in China.

Q2 potentially can bring a new record in terms of China revenue looking at the historic performance in China and more and more driven by, let's say, local investments, and we see in general an opportunity to year-on-year to make a big step in China, compared to a 2019. But again, that is all, can we consciously chose not to put this all into numbers and see how much something's going down in one area and something going up elsewhere or what the net impact was because there are a lot of uncertainties in this market.

But by providing this color, we would like to at least give you the impression that, the Company has so many opportunities and it's just a matter of the timing and we are engaging in so many areas. Okay.

Timing-wise, it may be does not play out exactly the way we anticipate today. But if you look at the longer term story for this company, then we have so many opportunities.

Very helpful. Maybe a quick follow-up, rephrasing the question on China.

In terms of similar nodes, similar cities, you've obviously had a very strong market position at the leading foundry player. How does that look in terms of production to those records at the Chinese foundry -- foundries, I must say.

Is that sort of similar then at a similar node? Or is there more competition?

Because maybe they're still lagging a bit and competition has had the chance to maybe grab some more to the record. How does that sort of compare?

Yes. Okay, okay.

Well, we see in the foundry space, in the logic foundry space, a significant opportunity for growth. If your question is, is your penetration level in terms of amount of layers and participation the same, I would say, leading foundries elsewhere in the world where we so far have a strong engagements with?

No, then we are not there. Yes, of course that will take time.

But, the fact, if you look at the growth opportunity we see this year, then we don't need, maybe that's immediate same level of penetration to still make a big impact in that markets on let's say within a foreseeable future. But of course, it will help us tremendously as we have such a strong reference stage, let's say, close by in the same region.

Yes. Thanks for taking questions.

First, on the -- what you were saying on the node transitions towards the end of the year, and it was -- if I'm correct, it was almost to be seen how much extra ALD demand that we drive those nodes today? How much extra layer you would win?

And it seems that you have a bit more visibility on that now. Could you share that, how big perspective in ALD is?

And my second question is on the, the visibility you have on the supply chain at the moment. How deep in your supply chain can you look?

And how certain are you or how quickly can you react, if you see that COVID-19 is impacting that? And also a bit may, a little bit to highlight, you're saying that you see, the impact on the supply chain, but actually in the numbers you don’t really see it.

But does that mean that without COVID-19 your revenues and booking would have been significantly higher in the first quarter?

Alright. So, on the supply chain, my question, I will ask for Petrus to speak to that as soon as I've answered the node transition question.

So, on the visibility, yes, visibility on the node transition, you’re basically asking, if we are gaining share, expecting to gain share wallets, and then let's say, market share or mark share in going to new nodes and logic foundry. That's what you mean, right?

Yes, exactly. How many extra layers are there with your inventories?

Yes, that's a little bit too early to tell still. Can we have, we have a very strong engagement with the key leaders in both logic and foundry.

We see an engagement clearly on more applications and more layers then let's say, in the current nodes and then find that the current N5 foundry node and the current N10 logic node. But it's just too early, the development engagement and the earning capacity they order there is not guaranteed for final selection.

Sometimes, they have the test out the processes in parallel with some competitors. But we can say -- at the same time we can say that, if you look at the early amount of money that is these days involved in bringing new node to life, they don't waste their money.

They try and really carefully not to waste any dollar on wrong choices. So, it gives them at least an indication that we are on the right track, but it's way too early to quantify that to you at this moment in time.

But the answer is clear from a point, we can, we see a clear opportunity to increase layers, applications, shared wallets going to the next node that we cannot quantify at this moment. So, we see almost only opportunities again in ALD, but also in the other product lines.

We talked earlier a little bit about epi, also -- but we also have vertical fronts, we have PECVD, specially PECVD and epi, we’re looking at also the other product lines, how we can gain share? And a lot of programs are ongoing also beyond ALD.

And one off the questions that came up also out of this call as a number of evals that are out in the fields. So sort of observation that the amount of evals have, the activity and evaluation tools has increased significantly year-on-year and at least in the numbers.

So, that is a clear reflection of the amount of joined development that we have ongoing in the field at this moment in time. And again, it's only, it's a win-win situation for both sides, and none of, both the customer and/or the supplier cannot waste their money.

So both parties are very serious in, when they engage on these things. So, it also shows in a way that we are really working hard to further increase our served available markets, down the road for the Company.

And the interesting thing, it's maybe not specifically your question, but it's a good opportunity to share that. If you look at the amount of the eval, a lot of eval tools is going to increase -- has been increasing significantly and the percentage of memory exposure.

Also as a percentage of memory representation in the amount of evals is increasing significantly also, and that’s what we always have said. Overtime, we want to increase our exposure in memory, especially in ALD, and eval picture is a reflection of all those efforts ongoing.

Okay. So, that was you’re a long answer on your first question, Marc, LITTLE bit beyond the question also.

But let's now move to supply chain. Petrus, can just fill in Marc on that part?

Yes. Marc, visibility of course one of the key issues that we have on this moment than we would have perfect visibility and our guidance would not have been that broad as far as sales concerned.

So, it's not demand driven, that's what we already have earlier indicated as Q1 sales as also for Q2. The key issue was, can we everything on boards?

We have decent insights, but you can imagine that this current circumstances where governments are taking actions from one day to the other day. And the impact there looking at the total value chain is fairly difficult to back that immediately.

I gave you some examples we have in Malaysia. We have several suppliers for lot of products.

There have been some of those products we saw that both of those suppliers were in Malaysia, on the moments that are restrictions there. Yes, of course that doesn’t help you in full in that moment.

So we worked very closely together with our suppliers. We work also very closely together with governments to ensure that we can get least possible off all activities deliver ultimately.

And so far that we're fairly well due to all the extra efforts that we did, but it's one of the key challenges also going into the second quarter now and our ability to deliver towards more of the high end of the range and towards more of the lower end of the range.

I would like to follow up on the evaluation tools. I mean, especially this quarter, we saw a significant ramp up of about €20 million investments in the valuation tools.

Okay, give us a bit more granularity on which applications you're seeing? You already mentioned memory, but which applications are you predominately targeting?

And also which regions are you deploying evaluation tools? And what's the impact of all the valuation tools on your gross margin?

And in relation to or as a follow-up on that one, your gross profit was very strong in the quarter, especially quarter-on-quarter significant increase despite the fact that your facility in Singapore is not fully up to speed yet. So, what's being driving this quarter-on-quarter improvement other than mix effects?

These were my first two questions. Thanks.

Okay. So the second one, and also the gross margin aspect of eval tools can be very well answered by Petrus, but on the first part, a little bit more granularity.

Yes, we really are seeing year-on-year significant increase in the number of eval tools that we have in the market. And a lot of those initiatives were already started up with customers in last year that you discussed on what programs to work, but it takes time to build the tools and ultimately install them.

It's just a little bit of a coincident that a lot of it came up to speed in the early part of this year. But as we shared earlier, a significant increase of tools installed in the field, it's a high double-digit percentage increase, very high double-digit percentage increases of the amount of tools in the fields.

And we see beyond, let's say a strong presence already last year in logic foundry and a further increase in that space. We see especially a significant increase in memory.

The percentage that we taken on memory is almost doubling compare to two last year. And again, it's further evidence of what we have always said that, we are very focused on aggressively increasing our share of available market in memory.

And we said, it will be a gradual process, it will not be a hockey stick effect and you won't see an immediate increase in presence in memory next year in 2021. It will grow gradually that I also said in the last call.

Three, four years from now, we predict that, our presence in memory will be meaningfully different compared to where the Company is today. And of course today, we have also a pretty decent presence, but this is not where we want to be three, four years from now.

So, that's on the market side of the eval tools. Petrus, can you further finalize the question on that part and then go to gross margin overall?

Yes. The two things, first of all, when you look to the impact on the gross margin of eval tools, we normally write-down our eval tools in five years.

So, then you have 20 million, you can make the calculations for yourself. And as a rule of thumb, besides the depreciation, we also have the support costs.

They are more or less equal to the depreciation costs. So, that gives you a good idea about what those of the extra impact is on the gross margin when we place approximately 20 million of eval tools at Christmas.

And your second question was the gross margin improvement Q-on-Q, and yes, we have seen quite decent improvements on the one hand, that's mix. I don't have to explain it a bit before the several times, but the impact of mix could be of course important.

The other thing that was also in Q4, they are lower than in previous quarters. And it was mainly driven by the fact that a lot of the newer products that we introduced in the of course 2019 are now installed for the third, fourth or fifth time.

And there we see that we are able to do that more efficient than and driving those efficiencies earlier than what we originally expected. So, that has also a positive contribution to the gross margin earlier than we anticipated and despite the fact that we don't have the benefit yet from the new factory in Singapore.

So, that will make the gross margin rather stainable from the current level and when Singapore ramps up, we could even see an improvement from the current levels. Is that my current understanding?

You always have the mix and mix is the biggest impact of course. So, but, yes we are pleased with how the gross margins develop, let me say that.

Very good, and then I've got a final question. If you look at your business mix, it's obviously quite difficult to have an indication what's going to happen in the second half, but you're quite optimistic, your memory business will grow, your logic business will at least not follow the clip but probably be stable as this foundry given your increasing exposure there to several clients.

To put it more differently in terms of your mix, what is your exposure to leading edge nodes in the revenues versus the more kind of, yes, if you will more cyclical bread and butter stuff?

I think we are -- and Pete you can add to this if you want to, but we are highly geared to the advanced node, very highly geared, especially at this moment. When we have for example, analog power, at the time when analog power was still much stronger, we presented in our numbers.

We had a broader distribution, but today its, most of it is advancement. Petrus, anything you want to add?

Yes, I mean the business in which are not that much of which only partly are in the advanced nodes is, of course, the furnace business. And part of the epitaxy business that Chuck already was referred to earlier, as especially the part, which is analog power related.

But by far, the majority of our sale is related to the more advanced nodes.

Yes. Hi, good afternoon and congrats again to Chuck on the very value creation since you have been CEO.

Can I ask relating to the CEO appointments, whether Ben will be based out of Singapore and Netherlands or the Netherlands? And relating to his appointments, I'm assuming you will conduct a strategic review over the first 12 months, and as is normal for any CEO.

And could you confirm that the stake in ASM Pacific would be something that would be under consideration for the next CEO? The reason I ask is because a lot of shareholders still not comfortable with the stake, and the share price of ASM specific hasn't gone off over the last five years.

So, I think it would be interesting just to kind of get a feel for whether that would be under bend remit for the first 12 months? Thank you.

Yes. Okay.

Well maybe the first part, he will be based in Netherlands, that is clearly headquarters of company in Netherlands. So, he is supposed to have his base working from the Netherlands.

On the second part of the question, Petrus, maybe you want to say something about it.

Yes, I think that's a good question to answer to ask the new CEO. So, that will be the chocking months.

But I mean the ASMPT stake is part and parcel of the reviews what we have done in the past year, so that will not change. So, we'll… [technical difficulty]

Petrus, you're fading out.

Sorry, I left it by saying, okay, the review of the ASMPT stake was always part and parcel of the strategic review that we’re doing -- that we’re doing. And I don't think that is still going to change.

So, it’s still remained part and parcel of the strategic review that we do regularly.

Got it. Thanks for that Petrus.

And just follow-up, just beyond that, the market share, your market share is now 57% in single-wafer ALD. And it does look like your competitors are falling away.

I mean AMAT now is a very small fraction of the market. And you're saying, you're taking a share in DRAM non-patenting.

So, how'd you think about your kind of market share objective from here, given you already gone from low 40s in 2018 to 57% in 2019, can you get up to 70? Is there any area you'd rather not participate in?

Thank you.

Yes, 70% that’d be great. Yes, that’d be great, but I think it's clear and by the way, whether it's 57% or 52%, it depends a little bit on what the assumption you make, I think the 57 number comes from Gartner and BFSI uses 52%.

It's basically they all have different methodologies and different parameters that they use to calculate the number of that, but it's clear to both and we can confirm that that we significantly gained market share, of course year-over-year in 2019. And having said that, it should be clear to everybody that of course short-term the market share, say, always part of, party function of mix of spending within the WFE market, between different industry segments; and for example, on the short-term memory would come back forcefully and the logic and foundry would go through a short pause, then our market share likely will go down because at least for that time being.

Because our as you all know, our market share historically in logic foundry is much higher than in memory. So, there will be swings on the short-term in that market share number, depending on the mix between industry sentiments.

On longer term, indeed, we are strongly focused on maintaining our leading market share position. And then, we do have fine not only of course further strengthening our position in logic and foundry by expanding our share in the market also there as we've touched on briefly, as we go to unsettling the logic and we go through foundry, we would like to further increase our share of wallet.

But of course a big three factors is in memory, and we touched on that on number of eval tools, number of JDPs ongoing, first evidence was known DRAM applications. Overtime, we are looking for a much bigger share of the market showing up in our P&L.

And as we will successful in executing on that in the next three, four years, then we will be in a good position to maintain a strong market share in a similar for ALD through the different, let say, mix cycles between industry segments, and we believe we are in a very good shape to make that happen. That's the best answer Rob to that first question.

Okay. No more questions.

Well then, again, thank you all for this good interaction today. And again, thank you all for a long time partnership from a former personal point of view.

And again, I trust the Company is in great shape going forward to share if your interest in the Company. And so, please keep following the Company very, very closely.

And again, I wish you and your families great health and prosperity in the future. Thank you again.

Thank you for your attendance today. Bye, bye.