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ASML Q4 results and 2017 outlook: 2016record sales/income and 18 EUV tools in backlog

user nl

Member
ASML Reports Record Full-Year 2016 Net Sales and Net Income - Orders for EUV Lithography Systems Show Strong Customer Commitment for Production Insertion
  • ASML took orders for six NXE:3400 Extreme Ultraviolet (EUV) systems in the fourth quarter, bringing the EUV backlog to 18 systems for a value of around EUR 2 billion

See full info here:
ASML: Press - Press ReleasesASML Reports Record Full-Year 2016 Net Sales and Net Income - Orders for EUV Lithography Systems Show Strong Customer Commitment for Production Insertion - Press ReleasesASML Reports Record Full-Year 2016 Net Sales and Net Income - Orders for EUV Lithography Systems Show Strong Customer Commitment for Production Insertion

"Regarding EUV, we executed on the customer-aligned productivity and availability targets, which gave customers the confidence to place a significant number of orders, leading to an EUV backlog of about EUR 2 billion. These orders show that they are committed to take EUV into production, and we expect that the first customers will start volume manufacturing with EUV at the 7 nanometer logic node and the mid-10 nanometer DRAM node. We are now moving to the next phase of EUV industrialization. We remain committed to deliver the performance requirements for customer volume manufacturing, while continuing to build up our manufacturing, supply chain and service capabilities," Wennink said.

User NL
 
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ASML also shipped 15 NXT:1980 (the leading edge immersion system) in the same quarter to support 10nm ramp and 7nm process development; a total of 38 such systems were shipped as reported for the previous quarter. Easy guesswork as to whom?
It's especially easy if you look at the region pie chart. In Q3 Taiwan accounted for 55% of all sales.
 
It's especially easy if you look at the region pie chart. In Q3 Taiwan accounted for 55% of all sales.

Yes, I checked the presentation file afterward, it states 46 total NXT:1980 shipped (vs. 4 EUV in 2016). The webpage summary is thus a little confusing. The pie charts do indeed make Taiwan the main suspect.
 
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I am guessing Intel is taking the plurality of the 2016 EUV backlog, they still have to work off their total order of 15.
 
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A quick question. ASML said the delivery of one EUV tool was delayed due to customer readiness. It was initially scheduled to be delivered in 2016 and now delayed to 2018 (with upgrade) per this customer's request. So which company is this one? Hynix or GlobalFoundries as I can guess?
 
Who is this? GF?

"I would also like to mention here, that one of the EUV systems that we expected to ship early this year postponed from Q4 last year due to a customer readiness issue, will not ship this year as originally planned. Due to other exonerating circumstances, this customer has now decided to place a system upgrade order for this tool and will take delivery of it in 2108, where it will add to two other systems at the customer site to be shipped this year."

ASML Holding's (ASML) CEO Peter Wennink on Q4 2016 Results - Earnings Call Transcript | Seeking Alpha


This is getting interesting....

It was my understanding that TSMC has four NXE:3400 systems running and two more on order? What about Intel, Samsung, and GF?

TSMC was the first one to say EUV would not be required at 7nm then Intel and GF followed suit. Samsung stayed with EUV at 7nm but is doing a full node at 10nm so 7nm is farther out. Now TSMC says EUV at 7nm mid point (2018/2019) but no word from Intel or GF? Will they do mid point EUV insertion or go full on EUV at 7nm?

It is also my understanding that TSMC will be doing limited EUV insertion at 7nm with a more aggressive approach at 5nm?
 
.........What about Intel, Samsung, and GF?

.................Now TSMC says EUV at 7nm mid point (2018/2019) but no word from Intel or GF? Will they do mid point EUV insertion or go full on EUV at 7nm?

From the analyst call I understand that 5 of the 6 newly ordered NXE3400 tools in 2016Q4 were part of a volume purchase agreement. Now I think only INTEL had a sort of volume purchase agreement (15 tools, of which some were still NXE3350)? So I would think those 5 tools ordered in Q4, together with some tools of the earlier ordered 12 NXE3400 already in the backlog are all for INTEL. The 6 ordered in Q4 were all for logic Wennink said. So INTEL seems to be gearing up for 7 nm EUV.

Wennink expects further volume purchase agreements hammered out in Q1/Q2 of 2017. Remember, the whole of ASML's production capacity of EUV tools in 2017 (12 new ones) is already sold out and 6 already of the 2018 capacity of 24 tools. In 2016 the time between order and working time in the fab was around 24 months, ASML wants to reduce that to about 18 months by the end of 2017. So if you want an EUV tool by 2H2018 working in your fab, you need to order it in 1H2017. I guess by the end of 1H2017, all 24 orders for EUV for 2018 delivery will be filled and some of the capacity of 2019 production (about 40 tools).

User NL
 
From the analyst call I understand that 5 of the 6 newly ordered NXE3400 tools in 2016Q4 were part of a volume purchase agreement. Now I think only INTEL had a sort of volume purchase agreement (15 tools, of which some were still NXE3350)? So I would think those 5 tools ordered in Q4, together with some tools of the earlier ordered 12 NXE3400 already in the backlog are all for INTEL. The 6 ordered in Q4 were all for logic Wennink said. So INTEL seems to be gearing up for 7 nm EUV.

User NL

For the company which placed 5 new EUV orders last quarter, I would doubt that is Intel. ASML said in its conference call that the company has a quasi volume purchase agreement for the 5 tools. My understanding is that Intel has a "complete" agreement not a "quasi" one. So this 5 tools should go to somebody else, such as TSMC.
 
For the company which placed 5 new EUV orders last quarter, I would doubt that is Intel. ASML said in its conference call that the company has a quasi volume purchase agreement for the 5 tools. My understanding is that Intel has a "complete" agreement not a "quasi" one. So this 5 tools should go to somebody else, such as TSMC.

TSM 7, Intel 4, Samsung 3.... rumor has it. And GF is the customer who pushed their order out:

"I would also like to mention here, that one of the EUV systems that
we expected to ship early this year postponed from Q4 last year due
to a customer readiness issue, will not ship this year as originally
planned. Due to other exonerating circumstances, this customer has
now decided to place a system upgrade order for this tool and will
take delivery of it in 2108, where it will add to two other systems
at the customer site to be shipped this year."
 
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Here is Robert's note on the call:

ASML- Good current business plus better outlook-
ASML reported numbers easily beating analyst estimates for the December quarter and also issuing guidance beating current Q1 projections. Sales of Euro 1.9B and EPS of Euro 1.23 which beat by Euro 0.25.

Q1 outlook is for Euro 1.8B on gross margin of 47%.

Even more important 6 EUV orders were added to backlog bringing the total to 18 systems which is roughly the capacity of the number of systems able to be shipped in all of 2017- EUV is sold out for 2017....
HMI was a partial add to the quarter but not significant.

As the "buzz" builds, no one wants to get shut out -
Much like when rock concerts sell out, the fact that delivery slots for EUV tools is filling up likely contributes to the rush to order as no one wants to be shut out as EUV is not that far from going into production when we get to 5NM. Customers could accelerate orders as fear of being shut out drive them to place even more orders.

This "buzz" that is growing is obviously good going forward and helps clear some of the psychological hurdles of committing to EUV. It appears we are over the hump of wether or not EUV but now focusing on when and getting ready for it.

EUV Turned the corner in 2016-
We would agree with management that EUV "turned the corner" in 2016. We also sensed the change in the industry, during the year, which is why we turned to a positive stance on EUV in 2016. Although there is still a large amount of work to be done to get EUV into production it is clear that we are past major hurdles, with no "showstoppers", and, importantly, a known path to get there from here.

TSMC is the big near term driver-
As we have been saying for a while, foundry has been the incremental buyer pushing the industry over the top. TSMC has been on a spending spree. As pointed out in our last issue I think we will see TSMC trail off into H2 of 2017 but memory projects, especially those in China, have the potential to at least partially make up.

HMI & Zeiss investment support the "Ecosystem"-
We think ASML made a smart move with HMI as it will try to build a walled garden around the imaging cell in the fab. The Zeiss investment helps solidify the supply chain of the most critical component in building litho tools.

We would not be surprised to see further "filling in" of technology around the core of ASML's business to further solidify the ecosystem or supply chain.

Collateral Impact-
We had previewed last week that Q4 would be a blow out and Q1 guide would be good and ASML is a great start to reporting season. We think reports out of dep and etch will be even better as they are a shorter term indicator whereas litho systems and their orders tend to be numerically smoothed over a longer time horizon whereas dep and etch have tons of near term business for 10NM.

Lam should be the lead indicator of this as AMAT is behind by a month. KLAC should also outperform but not as much as Lam as yield management is also smoothed over a longer period (but not quite as long as litho). We would likely be a buyer of all three in front of their reports.

Obviously the whole semi-equipment industry will do well in the near term

The stock -
As you would have expected the stock of ASML saw a strong upward reaction due to the better than expected results. We think that this has likely set a new, higher floor under the stock that will solidify with the next step likely to $130-$140
 
TSM 7, Intel 4, Samsung 3.... rumor has it. And GF is the customer who pushed their order out:

"I would also like to mention here, that one of the EUV systems that
we expected to ship early this year postponed from Q4 last year due
to a customer readiness issue, will not ship this year as originally
planned. Due to other exonerating circumstances, this customer has
now decided to place a system upgrade order for this tool and will
take delivery of it in 2108, where it will add to two other systems
at the customer site to be shipped this year."

There's a fifth customer in there, from memory..but they obviously didn't order any in Q4.
 
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We should know shortly but Wennink noted: "we continue to execute on mutually agreed performance milestones ... this resulted in customer decisions to allocate their most critical layers of the next generation nodes to EUV, beginning with the industry 7nm logic node." We will know more when TSM announces. But how long will EUV be useful beyond 7nm? Separately they still face ramping problems, as evidenced by their purchase of a minority stake in Carl Zeiss "for the purpose of not only securing the extension of EUV imaging technology, but also strengthening the current combined businesses ... to improve cooperation." This is of course what they had to do with Cymer. Any more flies in the ointment; pellicles or resists?
 
We should know shortly but Wennink noted: "we continue to execute on mutually agreed performance milestones ... this resulted in customer decisions to allocate their most critical layers of the next generation nodes to EUV, beginning with the industry 7nm logic node." We will know more when TSM announces. But how long will EUV be useful beyond 7nm? Separately they still face ramping problems, as evidenced by their purchase of a minority stake in Carl Zeiss "for the purpose of not only securing the extension of EUV imaging technology, but also strengthening the current combined businesses ... to improve cooperation." This is of course what they had to do with Cymer. Any more flies in the ointment; pellicles or resists?

Pellicles definitely under development for now. Resists absorb too little presently, so doses need to be much higher. The present 0.33 NA tool only has one node left on it, then they need the 0.5x NA tool with Zeiss. The status of actinic blank inspection is also not confirmed. I don't think it's happened, though necessary.
 
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Who is this? GF?

"I would also like to mention here, that one of the EUV systems that we expected to ship early this year postponed from Q4 last year due to a customer readiness issue, will not ship this year as originally planned. Due to other exonerating circumstances, this customer has now decided to place a system upgrade order for this tool and will take delivery of it in 2108, where it will add to two other systems at the customer site to be shipped this year."

ASML Holding's (ASML) CEO Peter Wennink on Q4 2016 Results - Earnings Call Transcript | Seeking Alpha


This is getting interesting....

It was my understanding that TSMC has four NXE:3400 systems running and two more on order? What about Intel, Samsung, and GF?

Is this the reason that the 3350 tool couldn't ship in 2016 and that when the APPC project never took off GF decided to take charge and upgrade it to 3400 for delivery in 2018? Note that the 2017 manufacturing capacity for 3400 was already fully booked, so GF (?) has to wait for this extra 3400 tool till 2018:

But Kelly acknowledged that the $500 million Advanced Patterning and Productivity Center (APPC)—the joint EUV research project with Globalfoundries that was announced last year—”never really got off the ground as announced.”

Future of Chip Research Group Questioned | EE Times

User NL
 
No one will do "full EUV" at any node. Even ASML management says "DUV will be with us forever. ... over the next 10 years or so it's going to be a very significant part of our business." In fact it appears that EUV production will be small. If you consider 125 wafers per hour over say an average of 30 operational machines in 2019 at 90% uptime, you get 81k wafers per day with only one layer at 100% yields according to my quick math. But they won't do one layer or get 100% yields. If they ship 12 machines in 2017 and 24 in 2018 including how many are out now (6 or so?) an average of 30 seems reasonable over 2019.
 
Thanks! The saying in software goes: "It is not the first 90% of the project that causes trouble, but the second 90%." These loose ends add up.
 
Thanks! The saying in software goes: "It is not the first 90% of the project that causes trouble, but the second 90%." These loose ends add up.

There is one more detail related to nxe:3400 only. It has 20% pupil fill ratio, which is an unprecedented restriction. While it may help to improve 32-36 nm pitches, it degrades the resolution of isolated features like gaps between line ends and irregular cuts/blocks/vias.
 
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Here is Robert's note on the call:

................................
Obviously the whole semi-equipment industry will do well in the near term

The stock -
As you would have expected the stock of ASML saw a strong upward reaction due to the better than expected results. We think that this has likely set a new, higher floor under the stock that will solidify with the next step likely to $130-$140

And here you can read some of the other Street analysts' view on ASML's call:

[h=1]ASML: Should You Buy This ‘Tsunami’ in Chip Equipment?[/h][h=3]
By Tiernan Ray
  • <small style="color: rgb(102, 102, 102); font-size: 1em; line-height: 1em;">January 19, 2017, 1:57 P.M. ET</small>

[/h]

Shares of chip equipment maker ASML Holding NV (ASML) are down 97 cents, or 1%, at $121.78, following yesterday’s 6% jump after the company beat Q4 expectations and forecast this quarter’s results higher as well.
The Street’s overall takeaway is that this is a turning point in the company’s long work to move forward “extreme ultra-violet lithography,” or “EUV,” tools for chip manufacturing.
There’s some debate, however, over whether or not to buy into that inflection.

ASML: Should You Buy This ‘Tsunami’ in Chip Equipment? - Tech Trader Daily - Barrons.com

User NL
 
In terms of number of backlog systems, immersion seems roughly at least 3x that of EUV (55 vs. 18), just based on Q3/Q4. And these EUV systems are still much lower throughput (85 WPH or 1500 wpd). So it looks to me multipatterning is still going strong, and it's still good for ASML.
 
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