ASM International N.V.

Thank you, operator. Welcome, everyone.

I'm joined here today by our CEO, Benjamin Loh; and our CFO, Peter van Bommel. ASMI issued its fourth quarter 2020 results yesterday evening at 6:00 p.m.

Central European time. For those of you who have not yet seen the press release, it is available on our website, asm.com, together 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 Benjamin Loh, President and CEO of ASMI.

Thank you, Victor. And thanks to everyone for attending our fourth quarter 2020 results conference call.

I hope you and your families are all healthy and safe. Let me start with some highlights.

We record high sales and bookings. ASM delivered again a strong performance in the fourth quarter.

For the full year our sales increased by 18% the fourth consecutive year of double digit growth. The pandemic turn 2020 into a tough year for all of us.

And while customer demand remains strong throughout the year. It created challenging operating conditions for our employees.

I want to thank each and every one of the ASM team for their tremendous dedication and teamwork in 2020. Next, I'll also like to point to the announcement that we made last month that Mr.

Paul Verhagen will be proposed as new CFO and board member. He will succeed Peter van Bommel, who will retire the upcoming AGM as previously announced.

We are very pleased that Paul agreed to join ASM; he has a strong reputation and brings a wealth of experience. In addition, we also want to inform you about our plan to hold ASM first Investor Day later this year, on September 28, please save the date.

By that time, hopefully we can meet again in person. The agenda for the rest of today's call is as follows.

Peter will review our fourth quarter and full year financial results. I will then continue with a discussion of the market trends and outlook followed by the Q&A.

With that over to you, Peter.

Thank you, Benjamin. In the fourth quarter of 2020, our revenue increase to EUR 347 million, which is up 10% from the third quarter and up slightly from the fourth quarter of 2019.

In comparing with the 2019 numbers and I make an adjustment for EUR 159 million settlement proceeds that they are included in our financial reserves that year. Revenue came in at the higher end of our fourth quarter guidance of EUR 330 to EUR 350 million.

Currencies had a negative impact over fourth quarter revenue for 5% year-on-year. As a reminder, ASM's currency exposure is fairly balanced between both revenues and costs.

That means that currency effects for us are largely translational in their nature. Equipment sales in the fourth quarter increased 14% from the third quarter.

Spares and services were slightly lower sequentially, but increased 29% year-on-year and accounted for approximately 21% of our total sales. By industry segment, revenue in the fourth quarter was again led by foundry followed by memory and then logic.

Logic sales decreased sequentially but were still at a solid level. Foundry sales increased to a new record high in the quarter.

The memory segment was relatively steady compared to the third quarter with DRAM decreasing somewhat compared to the high level in the third quarter and then showing a solid uptick. In line with our earlier indications, the gross margin decreased to 45.2% in the fourth quarter, which is down from the almost 50% that we reach in the third quarter.

As we explained last quarter, the third quarter margin was exceptionally high due to an unusually strong sales mix. However, for the next couple of quarters, we anticipate again a relatively favorable sales mix, and as a consequence, gross margins to be above of the mid-40s percentage level.

Below the operational line, results included the currency translation loss of EUR 50 million which is mainly explained by the depreciation of the US dollars compared to the end of the third quarter. As we discussed at earlier occasions, we hold the largest part for cash in US dollars and the currency translation differences are included in our results.

Our new orders in the fourth quarter increased only to EUR 379 million, which is up 25% from the third quarter, and up slightly year-on-year. The order intake was above a guidance of EUR 340 to EUR 360 million.

Looking at a breakdown in bookings by industry segments; foundry represented again largest shipments in the fourth quarter, followed by logic and then memory. The foundry bookings decrease compared to the record high in the third quarter, which remains at a very strong levels.

Logic showed a strong uptick compared to the third quarter. And memory orders were also up strongly both in DRAM and in NAND.

The agreement book is in the fourth quarter were led by very high ALD orders compared to relatively low levels earlier in 2020. We also saw strong uptick in epi bookings in the fourth quarter.

Let's now have a closer look at ASMPT; the normalized results from investments, which reflect a share of the net earnings from ASMPT increase to EUR 27 million in the fourth quarter, versus the EUR 6 million that we had in the third quarter. The fourth quarter results includes its book gain related to the joint venture into which they entered for the materials business, which is partly offset by provision related to the streamlining of their portfolio.

Excluding those one offs ASMPT's profit contribution grew to EUR 11 million in the quarter. ASMPT reported its quarterly sales of US $634 million, which is up 15% compared to the third quarter and 11% year-on-year, and also above the company's guidance.

In terms of order intake, ASMPT has a strong end of the year, with fourth quarter's bookings increasing to a record fourth quarter level of US $658 million, up 13% Q-on-Q and 48% year-on-year. For the full year 2020, ASMPT sales increased by 6% to approximately US $2.2 billion.

The net profits increased from US $80 million to US $210 million in 2020. Let's have a look on the 2020 results there before returning back to ASMI's consolidation operations and slightly over EUR 1.3 billion or net sales in 2020 increased 18%.

Equipment sales grew by 16%. Spares and services increased by solid 29% and represented 21% of total sales.

By product line sales were led by our ALD product line, which had an excellent year and continue to represent more than half of our equipment revenue in 2020. The gross margin in 2020 increased strongly from 42.6% in 2019 to 47%.

Apart from the positive mix effect in the second and the third quarter, the improvement was also driven by efficiency improvements. Operating expenses remain to the control during the year.

SG&A expenses increased by 6% and that increase was due to higher variable cost and specific investments and further strengthening of the organization. The total R&D expenses increased by 14%.

That's excluding the IFRS effects. The reported R&D increase by 25% and included higher impairment costs compared to 2019 and an increase in aromatization.

The operating profit for the year increased only by almost 50%, with the operating margin improving from 19.5% to 24.6%. Now turning to the balance sheet; we ended the quarter with EUR 435 million in cash, which was slightly up from the EUR 430 million at the end of the previous quarter.

We generated free cash flow of EUR 47 million in the fourth quarter. In addition, we spent close to EUR 30 million on share buybacks.

The free cash flow for the full year 2020 amounted to approximately EUR 120 million, which is down from slightly over the EUR 200 million that we had in 2019. A continued solid level of operating profits was offset by a few things.

First of all, an increased out flow of more than EUR 100 million for working capital, an increase in CapEx as we continue to invest in the growth of our company. The higher investments in the evaluation tools that we had in 2020 and negative currency effects.

Regarding the working capital, the increase in 2021 was largely explained by higher accounts receivable. This in turn is caused by the heavily back end load of sales in the fourth quarter.

The underlying quality however, remains healthy, illustrated by the lowest relative level offered use we ever recorded at the end of the year. The higher level of accounts receivable is largely a timing effect.

In the course of January, a big part of those receivables has already been collected. And for the first quarter as a whole, we expect the relative level of accounts receivable to decrease.

Inventories increased in the second quarter as part of our efforts to mitigate supply chain risks related to the pandemic. And in the fourth quarter our inventory position decreased and was largely normalized again.

In terms of CapEx, we spent EUR 93 million in 2020. This is up from the EUR 49 million in 2019.

A large part was again related to a new manufacturing facility in Singapore. In addition, as we already outlined with our third quarter results, we invested in the expansion and modernization of our R&D labs.

For 2021, we will maintain CapEx at a higher level due to the R&D lab related investments. In 2020, we returned approximately EUR 165 million in cash to our shareholders, of which EUR 67 million in the form of share buybacks and almost EUR 100 million in the form of dividends.

The EUR 100 million shares buy back program that we started in June last year was completed for 64% as of December 31 and for 94% at the end of last week. We will propose a regular dividend of EUR 2 per share to be paid over 2020.

This is a year-on-year increase of 33% compared to the Euro 1.50 we paid over 2019. And that's excluding the extraordinary dividends of last year.

Our policy to use excess cash for the benefit of share of our shareholders remains unchanged. With that I hand the call back over to Benjamin.

Thank you, Peter. Let's now look in more detail at the trends and in our markets.

Even though COVID-19 led to a sharp drop in GDP, the overall semiconductor market has been resilient and grew by 7% in 2020. As work from home and remote learning accelerated the digitalization trends in our society.

With a strong finish of the year, the wafer fab equipment market increased by a mid to high teens percentage in 2020. Both the logic foundry and the memory markets showed solid increases.

Demand in logic foundry was for a large part driven by spending on the most advanced notes of 10 nanometer and below despite inventory corrections in parts of the market earlier in 2020, the memory market further recovered in the second half and memory equipment spending showed the healthy increase for the full year especially for 3D NAND. 2020 was also a year of strong progress for ASM, we booked our fourth consecutive year of double digit growth; in logic foundry our sales were driven by solid spending on leading capacity and the strong share of wallet gains that we have achieved in the most advanced notes.

Foundry continued to be the largest segment for us and grew by a strong double digit percentage in 2020 after already doubling in 2019. Logic was the second largest segment after strongly increasing in the previous year, sales was steady at a high level in 2020.

Looking at the next node for our logic foundry customers, we confirm that our served available market will further increase with a meaningful double digit percentage. And in view of our R&D engagement and tool selections so far, we expect to further increase our share of wallet with logic foundry customers transitioning to the next nodes.

Memory was the third largest segment in the quarter, the healthy double digit sales increase. While for the broader market, 3D-NAND was relatively stronger, we have relatively stronger growth in DRAM.

In 3D-NAND though, we have seen a strong uptick in bookings in the fourth quarter which we expect to be reflected in a healthy revenue increase in this segment in the first half of 2021. In DRAM, our sales were driven by the first tool wins with leading memory customers for high-k metal gate applications in high performance DRAM devices.

In memory in general, we remain strongly focused on substantially increasing our serve available market over time. Last year, we have seen a strong increase in our R&D engagements for the next and next -next nodes in both DRAM and 3D NAND.

For the shorter term, however, please keep in mind that our exposure to memory is still relatively modest, as logic foundry represents the larger part, and therefore the main driver of our sales. A strong area of growth this year has associated with the Chinese market, both for the broader WFE market and for ASL.

Our sales from China grew strongly in 2020 and contributed for the first time a double digit percentage of our total sales. The investments that we have made to strengthen our position in China in recent years started to pay off.

In addition, the path spanned by domestic chip manufacturers on relatively more advanced notes albeit still a minority of total spending in China, strongly increased last year. In addition, we further expanded our customer base in China last year.

In terms of products, 2020 was again a successful year for our ALD business with strong double digit growth, driven by logic foundry, and our inroads in DRAM. In our other product lines outside of ALD, momentum slowed somewhat in 2020, following the strong growth in the previous three years, as explained in earlier calls, this was caused by our relatively higher exposure in this product lines, especially epi to the power and along markets.

Power analog was one of the very few weak spots in 2020 as they are for large part driven by the automotive and industrial end markets, which were impacted by COVID Last year. Recently demand in the power analog has been picking up again.

In the fourth quarter, our epi bookings strongly increase compared to lower levels earlier in 2020. Driven by multiple intrepid product orders, as well as recovery in the power analog market.

From a strategic point of view, we believe we have made strong progress in strengthening our position in the epi market in 2020. We have been working towards new customer tool of record selections for our intrepidproduct, and we expect to increase our market share once these customers start investing in the next nodes.

I also like to highlight the very strong performance of our spares and service business in 2020. As already mentioned by Peter, this business grew sales by a solid 29% last year.

For small part -- 0for smaller part, growth in our space and service was driven by temporarily higher customer demand, mainly in second quarter due to COVID related supply chain risks. For the larger part, the drivers were the strong increases in the install base in recent years, as well as the first result of our investments in outcome based services.

Traction with customers is solid and we expect the contribution of these new value-added services to further increase in the forthcoming periods. An important highlight in 2020 was also our new state of the art manufacturing facility in Singapore.

After a delay caused by COVID-19, the facility was completed in the fourth quarter. In December, we shipped our first tool and we completed our move from the old facility to the new one in late January.

Using the first phase of the new facility will already increase our manufacturing capacity twofold as we discussed earlier. Looking at 2021, our industry has started the year in good shape.

In the semiconductor market, the strong momentum at the end of 2020 has continued into the first part of 2021. The strength of the increase in demand has led to shortages in parts of the market.

And against this backdrop, WFE spending is expected to increase by a mid teens percentage this year, solid spending is expected for logic foundry supported by continued strong demand for the most advanced nodes. In memory on the back of an expected rebound in key end markets such as smartphones, and following limited capacity addition in recent years, a further recovery in memory spending is projected in 2021.

A key priority for our company in 2021 will be to further drive our investments. To make sure we are going to benefit from all the opportunities in front of us.

We will further increase R&D spending to develop the many new ALD applications that are on our customers' roadmap. In addition, as also mentioned by Peter, we will keep CapEx at higher level in 2021, to expand and modernize our R&D labs.

Investments will be for instance, in our own tools for customer demos, as well as advanced metrology tools that we use as part of our R&D processes. Longer term, prospects also look strong.

The mega trend of digitalization will fuel explosive growth in data and significant investments in key areas such as 5G, high performance computing and autonomous driving. Advanced semiconductors will play a key role to enable these trends such as in AI, where machine learning algorithms require ever faster and more power efficient processes.

AI will be a key technology to keep the industry of Moore's law. We expect that increasing device complexity, new materials and ever thinner films with higher require conformality will drive substantially higher demand for ALD in the medium term.

In the transition to gate-all-around transistors for instance ALD and also epi will be key enabling technologies. To sum up prospects are strong and ASM remains well positioned.

Now let us look at the guidance that we have issued as part of our Q4 press release. For Q1, on a currency comparable level, we expect revenue of EUR 380 to EUR 400 million while we expect our revenue in the second quarter to be at the same level.

For the first quarter bookings on a currency comparable level, we are also expecting this to be in the range of EUR 380 to EUR 400 million. With that we have finished our introduction.

Let's now move on to the Q&A.

We'd like to ask you to please limit your questions to not more than two at a time so that everyone has the opportunity to ask a question. All right.

Operator, we are ready for the first question.

Question just two from my side. I know maybe a little bit early to talk about full year guidance for 2021.

Would it be a reasonable assumption to sort of WFE? And then one quickly on 3D NAND, one of your largest competitors has been talking up their new [Gate field] ALD platform, to take you at industry moves 120 level plus.

Do you guys have similar capabilities? Could you kind of talk about tools?

And then sort of how do you feel about your competitive position in 3D-NAND more generally? Thanks guys.

Keagan, thanks for the questions. I think the first question was directed at how do we see ourselves for the full year whether we are going to outgrow the WFE market?

I think we -- as we have stated in our press release, we see at this moment a mid-teen growth in WFE. And we have guided very strong results for the first half of the year.

But I think it's a little bit early for us to say with any kind of color whether we will be able to outgrow the WFE market. So I think we should leave it at that.

On Gate field that's a good question. It's an ALD application that will become increasingly important as the number of layers in 3D-NAND increases.

And we especially this application is especially suited for ALD because you need very thin films with very high conformality. And we are engaged with I would say multiple 3D-NAND players trying to work together on the process and tried to qualify our tools.

That's it. Does it answer your question?

Yes, good afternoon. Thank you very much for taking my question.

Actually, I have a question on the evolution of the gross margin as you have stated that you will see better gross margin in the next quarter, which has already happened twice in 2020. So, can you explain why you have a better need?

Is it about spare parts and services? Or is it new tools that you are delivering or Epitaxy?

What is the question of mix here? And also, can you remind us going from five nanometer to three nanometer, what is the increase in ALD intensity that would help us to understand that the trajectory going forward.

Thank you very much.

Now, let me take that gross margin question first, yes, we have seen our gross margin much impacted by the development of the mix. So as we have explained earlier in the previous calls, the second and the third quarter were extremely strong, we have still a very healthy mix in the fourth quarter, however, a little bit less than in the second and third quarter.

And for the first and the second quarter, we see again, a stronger mix is what we have seen in the fourth quarter. Besides that, there is an underlying trend becoming visible that our efficiencies are improving.

So as a consequence of that, we see ourselves that on the one hand mix differences play an important role and will remain an important role. On the other hand, also, efficiency improvements are helping us also to bring our margins relatively on a better -- at better trends.

So that's the color that I can provide to this moment.

Okay, so can -- why don't you in fact, if it becomes structural upgrade your guidance, not saying it's 40 to 45 anymore, but maybe 45 to 50? If that's what it is becoming?

Yes, I think that's a good question and we will have a look at that.

And Stephane on the transition from five nanometer to three nanometer, I think what we are seeing is basically the same as what we have always been explained, when you see a no transition basically, we see a double digit percentage increase in the number of ALD layers for applications and we do not see anything that deviates from that. So, we are going to see when we move from five nanometer to three nanometer, a double digit percentage increase in ALD application.

Okay, and it does it actually follow the same trend?

I would have to qualify your question based on whether it is three nanometer continuing FinFET, or whether it's three nanometer gate-all-around? I think the increased demand will probably come from gate-all-around because epi becomes a more key enabling technology when we move to gate-all-around.

Yes, Hi, good afternoon. Maybe the first question would just be on DRAM some of the logic like layers that you talked about in the past?

Can you confirm that the opportunity is a sort of similar size to what you saw with FinFET in terms of steps, but that it is a market considerably larger in capacity? So just trying to understand what's the opportunity here, but it sounds like could be potentially very large.

So it would be great to get an update here and then on the second question would just be on your China comment. Can you confirm you're still shipping to SMIC or you are not?

Thanks.

Thank you, Rob. On DRAM, as DRAM scales and becomes a smaller, I would say that, as we have always said, the layers become more logic like now whether they will become as big as FinFET.

I think that is still to be to be, let's say investigated, but we definitely see an increase in DRAM serve available market as they become smaller. So I hope that answers the first part of your question.

On China, we will refrain from commenting on customer specifics. But with the current US restrictions, the impact for us is limited, as we are still able to ship a majority of our product portfolio.

And it's only for a minority of our products, that we now have to apply for an export license. So we are still continuing to ship a lot of our products into China.

And for those that we need an export license, we follow the due process.

Thank you. So first question is just around Epitaxy.

Are you starting to see a trend towards greater dual sourcing when Epitaxy products which is supporting of growth outside of the shift towards gate-all-around as you just described? Obviously because you just described better order trends for epi in the last quarters.

And then the second question is just one timing, is it correct to assume from ASMI perspective that the customer spending related to industry entry is starting in the second half of 2021?

Thank you, Dominik. On the epi question; we cannot say for sure, whether the customers are doing dual sourcing, it could be, but what we do see is that when you move to gate-all-around for example, the conductor carrying channel, which was previously very much etch defined, is now epi defined and this is causing an increase in for example, the usage of Epitaxy on top of the normal less Epitaxy layers.

So, we think that, when we move to a gate-all-around, we will see increasing usage of epi applications, and of course, we engage with all the foundry customers' players to try to qualify our tools at this moment. In terms of entry of three nanometer timing, this I think is still open.

And I think we engage with our customers, some of them a little bit further than others. But we do think that at some point in time, they will go into high volume manufacturing for entry, whether it is going to be this year, next year, I think, that's up to them.

Hi, good afternoon, Benjamin and Peter. Maybe one follow up on the Epitaxy point, I think you mentioned very strong bookings number in Q4 from epi, which was driven by power coming back.

Can you also just help us understand as to how much of opportunity is still there for you in terms of getting traction with the broader customer base there in epi? We know that there are factors like gate-all-around in the future.

But if you just think about FinFET or DRAM, have you exhausted like where are you in the process of engaging with broader set of customers in that area? And is that opportunity still out there?

Or you're already working with a lot of those customers?

Thank you, Achal. Good question.

And the quick answer is absolutely not. So basically what we do is for the most advanced let say technology leading etch technology in our epi is useful high volume manufacturing, one of the foundries and essentially what we have been doing and continuing to do last year is engagements with other foundry logic players and also memory players to try to qualify our epi tools for the next and the next-next nodes.

So that's continuing. And when we see or when they went out to qualify adopted, and when they move into high volume manufacturing, I think that's where the opportunities would come for us and our serve available market should increase.

In terms of besides the leading logic foundry and memory players, epi also has a portion of their business in what is called the power analog segment. And of course in the earlier part of 2020, because that segment was heavily impacted by COVID-19.

You saw automotive, industrial applications all slowing down; the investments in that segment basically slowed down significantly. But recently we have been seeing, especially late Q4 early this year, that the power analog market is coming back and coming back in a very strong way.

And we have been getting quite some good order flow from that segment, which will translate into stronger epi revenue for us during the first half of this year.

Right. And thanks, Benjamin, and maybe a follow up on one of the questions that we keep getting asked is about clearly we are entering 2021 with a very strong WFE market outlook.

A lot of people believe that is there a risk that we see H1 as the peak of WFE? And then we go into second half with signs of slowdown?

I know it's difficult to talk about second half at this stage. But are you -- have you seen any signs of that?

Like from speaking to customers that is a risk that could eventually play out? Or is it too early to talk about the slowdown in second half?

I think for this call we were in kind of a fortunate position because we are reporting late. So we could also give you some color on what we see as far as maybe the next quarter is concerned.

So overall, again, we see a very strong and healthy first half. Is there anything to show or tell us that the second half may have a hiccup?

I would say at this moment, we do not see that but as to how big or how much the second half will be part is a little bit too early to say.

So Epitaxy because in the prepared remarks, you kind of indicated that when new customers start investing, you'll be part of that. So do you now have sort of have been qualified as to the record at new customers for the more events now?

Sorry, Nigel, can I ask which products are you referring to?

Sorry about that, Epitaxy.

Epitaxy, I think we are still in the process of doing that. And I think especially for the next nodes, I think a lot of the customers are still not that -- they have not finalized the full, let's say process.

So it will still take a little bit of time. But I think we are in good engagements with those customers.

And of course, we hope that eventually we will be adopted and when they move into high volume manufacturing, they will use our tools for mass production.

Got it. Thanks.

And then your comment about CapEx being elevated in 2021. Should we take the fourth quarter 2020 as sort of the base or are to be model that into the year.

I don't think that you should take the fourth quarter as the leading part. The fourth quarter was accumulation of a few things.

Benjamin already mentioned we were finalizing our Singapore building. So that's now done and we had already the initial investment in improving our lab environments.

So when you ask me it will be [Indiscernible] EUR 20 millions over the years that will be absolutely not the case, Nigel.

Okay, more towards maybe 2020, which I guess was already elevated. This would be helpful if you can slightly quantify that just more of a maintenance question anyway but because we could not have too high numbers there.

What we have said it will that it'll be somewhere between the EUR 60 million and the EUR 80 million.

Okay, sorry, I missed that. Thank you very much.

Good afternoon. Thank you.

And the first question is we've been over the last couple of quarters been talking about increased engagement on a number of products and we just this past epi, but I was wondering on some of the other products that you already move into being qualified. So maybe on the DRAM side, on the NAND side or maybe even on the [Indiscernible]

Mark thanks. So, of course, first of all, maybe let's talk about the memory parts of, in DRAM we started quite some time ago, we have been qualified for the high k-metal gate in the DRAM periphery transistor.

So right now, what you see for example and what is called in the industry as high performance DRAM. I think they are using our ALD for the mass for the high volume manufacturing.

Now, besides that, of course, we have been engaged in other layers or other applications that support for example, EUV transitioning to, also DRAM transitioning to EUV, because the EUV reduces the patterning by creates a lot of other layers to support the EUV and then we are engaged with that as well. And then of course, an earlier question was whether we are engaged in gate field and so on we do that and several other applications and mainly in memory we are looking at, next and next-next nodes, so I think the market or serve available market for us should increase from 2022 onwards.

Right now, we are just building our positions. In logic foundry 3D saw with three nanometer; we have always been engaged with the main foundry players with many different applications.

As I explained earlier, when you move from five to three, we see a double digit percentage increase in terms of ALD layers and applications, and we have been heavily engaged with that. And when they move into high volume manufacturing for three nanometer it should open up, new possibilities for us.

Okay, so does it imply that from the high number of evaluation tools that you have in the field, we have the most of those opportunities, you still need to be converted still in the engagement phase?

It depends, I cannot generalize. But what I can say is you're correct, you look at the higher or the significant increase in engagement of ALD tools on our balance sheet, at the end of 2020, compared to 2019.

Basically, that is telling you that we have a lot of engagements in the field. Some of them are more advanced, some of them, let's say early stage, but it's -- I cannot give you a generic comment as to whether some of them or at what stage they are because they are different stages.

And they vary also at different customers.

Okay, that's clear. Well, the question is on the Singapore facilities and you said you increase your capacity twofold.

And kind of I expect that it won't be capacity constrained from your side, but if you look at your supply chain, is it tight at the moment, it's more difficult to get everything in.

I would say that at this moment, we don't really feel that we are constrained by the supply chain. I think there's some tightness, that's probably true.

But there is nothing that is kind of hampering our ability to meet the requirements of our customers.

Hi. So I have an easy one here.

You haven't been talking about competitive position for a while now. So far my understanding a couple of semi equipment players have been looking at gate-all-around market.

And they do have solutions, for example, selective etching and also ALD, can you help me understand what is dynamic of ALD tools, especially for gate-all-around for the future? Do you see any intensified competition try to address this new application or that's something you already got multiple design wins so everything can be safe.

Thank you, Tammy. Of course, when we go into a gate-all-around and there's a new requirements, new applications that are required.

And because gate-all-around is the next generation transistor architecture that perhaps could last, for the next decade, just like what the Internet has done, over the last decade, so, of course, I think everybody wants to try to get qualified, we have already been working with the key players, actually for quite some time. In fact, I would say that usually our evaluation, or let's say a process that we work with the customers is we work with them already two three years before this becomes a reality.

So in other words, for gate-all-around we have been engaged doing development work with them for quite some time. One of the areas that you have mentioned, as selective deposition which perhaps has been touted by some of our peers, it's of course, also an area that we are engaged with all the logic and foundry players.

So we are in the process of working together with them to define the requirements to meet their requirements and see whether this fits into the whole the overall process integration. I would say that by and large, most of the new, let's say, processes or applications that are required for gate all around, we have some kind of engagement already with the three major players, not 100%, but most of them.

Okay, that's helpful. And just to further to your point, you said that you've been engaging with the chip makers to see what their understanding and what their requirements.

There are different semi equipment companies in the US who offer both sides of the solution, are you from end selective etching and also ALD, so with them having both of the portfolio in house, will they be at a better position compared to you in terms of serving the new application, because of everyone has been trying to do their work? If they already know how the tools actually work together?

Isn't that advantage for them?

I think it depends on the application, in some areas, it's probably true that they have a small advantage because they don't have to wait for feedback from the customers to get the results, they can try to do this on their own, where else for us because we don't have the etch, we need to wait for that. But at the same time, we have alternative avenues to do that, for example, working closely with a research facility in Belgium and not all of the processes going forward is a straight what do you call etch deposition type of process, some of them is actually a little bit more complicated, and requires for example, cleaning, stuff like that, that we have actually develop ourselves.

So we are in the process of doing that. So we, I would say that the disadvantages is not big.

Great. Good afternoon.

Thanks for taking my questions. One or two follow ups on my side if I may, maybe Benjamin firstly on the guide; you are guide Q2 flat versus that Q1.

Are we hitting a plateau here, given the current wave of spending? Or do you think when you look at the order expectations, as you go from Q1 to Q2; you can continue to grow off these types of revenue levels?

That's my first question. And I have a follow up.

Okay. David, I think, as I said, this is -- these earnings are a little bit unusual because we are reporting quite late.

So we are already coming to the end of Q1. And because of that, we have I think so some visibility into how Q2 is going to develop.

And as what we have done in previous years, we always share this insight with the investors and the community, what we are seeing is that I think Q1 and Q2 will continue to be strong in terms of order demand, and also in terms of revenue. Do we see anything that says that Q2 is the peak?

In other words, do we see a fall off after Q2? I would say at this moment, that's not what we are seeing.

But is it going to go up significantly? I would say that's a little bit early to tell.

But at this moment, what we can say is Q2 is not, I don't think it's going to be the peak and you will see a follow up in Q3 onwards.

Okay, understood. That's quite helpful, Benjamin.

Thank you for that. And then maybe a follow up on the Opex maybe one for a Peter.

And Peter can you help quantify what kind of OpEx growth we should plug into the model for 2021? And also maybe related to that for Benjamin, you talked about investing further in R&D on the ALD side of things, can you maybe highlight just the key areas within ALD either applications or maybe some targets that you have there where exactly the spending is going within ALD for 2021?

Thank you.

Yes, let me answer the question first about the cost, you see two things, and yes this becomes awkward to answer highly likely because you might know that we are reporting the IFRS. So when you look to the R&D costs, then and when you look to our presentation, investor presentation, then we shows always what the R&D expenditures are, and the R&D expenses.

So the expenditures are gradually increasing here that's about Benjamin already mentioned in his prepared notes, we see a lot of opportunities in the different product lines where we are active. So that R&D expenditure is going to increase.

However, we have capitalized in the past quite a few of those projects and some of the older projects are now coming in a stage where you have to start amortizing them. So as a consequence of that, we expect that the amortization in the forthcoming periods is going to increase.

So, for your calculations, you should take that into account. So our expenses, R&D expenses will remain growing, but at the same sort of speed you might have seen in the past, but the impact of the profit and loss will be biggest simply due to the high amortization.

When you look to the SG&A expenses, there you have seen that we are gradually decreasing the percentage of SG&A expenses over sales turnover in the past year. So on the one hand, we see that some extra costs, which are related to strengthening organization, on the other hand, the cost increase as which was an SG&A 6% last year is more than offset by the sales increase of the 18% that we have imported.

So, as a consequence of that, we expect that we will remain having leverage on SG&A of sales turn off.

Maybe on your question on what is the new stuff in ALD that we are working on? David, I would really appreciate your understanding that I would like to refrain from giving too much detail.

Because this is quite sensitive. But what I can say is that for example the question from Tammy of Berenberg, where we were asked about selective deposition.

That's definitely an area that, of course, we are working on, I would say that a lot of the new ALD applications, what you would also call them materials related, because, going forward, there's quite some new materials that are required. And for that we need to develop new processes to be able to deposit those materials.

I hope that suffices as an answer to you.

Yes, thank you. Hi.

Good afternoon. So if just to try and reconcile maybe some of your comments at the start of the call versus some of the answers you've given in the Q&A, you sounded relatively cautious at the start of call understandably, around wanting to maybe define the sort of absolute revenue environment for the second half of the year, but you're also cautious around relative growth versus widely WFE and you've talked over the course of the call around in analog FE recovering, share gains in volume FE, ALD intensity, increasing also [Indiscernible] to know the foundry, which we know about, and maybe some wallet share gain, in logic around ALD, all of that sounds like, you should be much more comfortable around committing to outperformance versus WFE on a relative basis this year.

And I'm just wondering what the, where you're -- where your relative lack of confidence comes from, given the picture you painted over the last 40 minutes?

Good question, Jim. I don't think it's a lack of confidence acting, we have always been very careful with what we guide to the market.

Maybe we are a little bit conservative in that sense. But I think it's also still early in the year, given that we are in February, I think we have a good view of the first half.

Like I said earlier, I don't think we're going to see things falling off a cliff or fall or any kind of fall off, as we probably get into Q3, because it still looks so healthy. But from a full year perspective, I really think it's a little bit too early for us to say for sure.

Okay, that makes sense. And then maybe just a follow up, I know, you've answered a lot around the gate-all- around question, just to understand, maybe relatively the opportunity.

So if we look at three nanometer FinFET let's say three nanometers gate-all-around, wafer to wafer. What do you think -- where would you place the relative ALD opportunity FinFET versus gate-all- around?

Is that sort of double digit intensity increase in ALD for gate-all- around just very broadly where would you put that relative intensity? And if you could, maybe concentrate that on the materials lead opportunity in gate-all- around rather than capturing selective deposition which is maybe a whole other separate segment?

Yes, I guess where you are trying to figure out all your questions, Jim, is if you move from five nanometer FinFET to three nanometer FinFET, what is the impact? Versus if you move from five nanometer FinFET to three nanometer gate-all-around what is the impact?

Actually, sorry, just to clarify I probably wasn't clear there. It looks like we're going to see potentially a double stream of transistor design run at the same node, right, so we're going to see three nanometer FinFET, here conjunction with three nanometer gate-all-around depending on the foundry and depending on timing, so we know five nanometer FinFET to three nanometer FinFET, we're going to see an increase in intensity, I was just much more interested in relative intensity at the same node, between FinFET and gate all around.

I think, what we can say in general is that you'll see a double digit percentage increase in ALD applications, maybe a slightly more, let's say, increase in the case of gate-all-around for epi. But I would say that it's also very dependent on specific customer design because there's no one standard design rule.

So there are some certain layers which may be used by one customer which may not be used by the other. So it's very difficult to give an apple-to-apple comparison.

I think in general, when we move from a five nanometer to FinFET to three nanometer get around, we do expect to see a continuation of the double digit percentage increase, maybe slightly, a little bit more epi. I think that's what we can say at this moment.

There are no further questions at this time. Please continue Mr.

Loh.

If there are no further questions, I would like to thank you all for your attendance today. Also, on behalf of Peter and Victor.

We look forward to seeing many of you in our upcoming virtual investor roadshows starting next week. Thank you again.

Stay safe and goodbye.