ASML sees lithography market expansion in 2008

Despite estimates for 2008 growth, the semiconductor manufacturing equipment company's stock tumbles in trading.

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 1/16/2008

Joining chip giant Intel Corp in watching its share price fall based on less than stellar financial results, Veldhoven, the Netherlands-based ASML Holding NV’s stock dropped approximately 7% during Wednesday morning trading after the semiconductor manufacturing equipment company reported its Q4 2007 net sales dropped almost 10% year-over-year to $1.4 billion (973 million euros). 

However, sales were 3.5% higher sequentially from Q3 2007 net sales of $1.4 billion (940 million euros). Net sales for full-year 2007 were 5.9% above 2006 at a record high of $5.6 billion (3.8 billion euros).

Q4 net income was $302 million (206 million euros) or 21.2% of net sales, which was a new record for ASML, including income of $51.3 million (35 million euros) from a net tax benefit from the settlement of several tax contingencies. This compares with Q3 2007 net income of $246.3 million (168 million euros) or 17.9% of net sales, and compared to Q4 2006 net income of $302 million (206 million euros) or 19.3% of net sales.

Full-year 2007 record net income amounted to $1 billion (688 million euros) or 18.1% of net sales, up 10.1% versus 2006 net income of $916.2 million (625 million euros) or 17.4% of net sales.

Q4 net bookings valued at $1.2 billion (803 million euros) with 54 systems, including 45 new and 9 used systems, leading to an order backlog valued at $2.5 billion (1.7 billion euros) as of December 31, 2007.

“Even though the global semiconductor industry was under pressure in 2007, we confirmed the robustness of the company’s market position and managed to close the year with record sales and net income,” Eric Meurice, president and CEO of ASML, said in a statement regarding the results.

Indeed, leading semiconductor manufacturing equipment company Applied Materials has felt the crunch and announced Tuesday that it will cut 1,000 jobs to control costs.

“Unit demand for our systems remained stable in 2007 and in the fourth quarter. At the same time, the value of our systems increased as a result of product improvements throughout our portfolio and the need of our customers for leading-edge technology, specifically immersion,” Meurice continued.

The executive noted that customers have now processed more than 8 million wafers on ASML immersion machines, allowing more powerful chips.

“This strong year has allowed us to start expanding our production facilities and boost our research and development investments worldwide. Thanks to our relentless focus on execution we were able to return $2 billion (1.4 billion euros) excess cash to shareholders in 2007 alone,” he added.

Looking ahead to this year, the company said that within the current sentiment of global economic weakness, underlined by an overall 2008 semiconductor capital investment slowdown forecast by some analysts and customers, ASML believes it is still well positioned for robust revenues in the first half of this year.

“Indeed, with more than 60% of our large $2.5 billion (1.7 billion euros) backlog covered by immersion technology tools, and 26% of the backlog ordered by manufacturers of logic ICs, we have a relatively low exposure to the currently more volatile capital spend at second tier memory manufacturers,” Meurice asserted.

“Our successful immersion products cater to the swift technology transfers down to 4x-nm nodes, which are being executed with urgency by our customers to reach appropriate integration and cost targets that are needed in the current environment,” he said.

The company said it expects to nearly double its net sales from immersion systems in 2008 over 2007.

“Although independent market researchers still expect a double-digit increase in demand for integrated circuit units in 2008, which should translate into lithography market expansion in 2008, we are awaiting confirmation of this potential growth through the exact level of Q1 and Q2 bookings. We remain optimistic, in view of our customers’ large immersion technology needs, their high level of capacity utilization, and the current IC inventory levels in the market,” Meurice said.

ASML expects to ship 50 systems in Q1 with an average selling price of $27.7 million (18.9 million euros) for new systems and an average selling price for all systems of $23.9 million (16.3 million euros), which is 4 less systems booked than Q4 2007.