ASM International (AS:ASMI) reported strong financial results for the fourth quarter of 2024, driven by robust revenue growth and innovations in semiconductor technology. The company's revenue reached €2.9 billion for the full year, marking a 12% increase at constant currencies. With an impressive InvestingPro Financial Health score of 3.28 (rated "GREAT") and a remarkable 183% one-year return, ASMI's stock saw a positive movement, reflecting investor confidence in its strategic direction.
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Key Takeaways
- Revenue for the full year 2024 increased by 12% at constant currencies.
- ASMI's gross margin improved to 50.5% from 49.3% in 2023.
- The semiconductor market recovery contributed to a 27% rise in Q4 revenue.
- Innovations in Gate-All-Around technology and ALD capabilities were emphasized.
- Stock price increased by 3.47%, indicating positive market sentiment.
Company Performance
ASMI demonstrated strong performance in 2024, with a significant 27% increase in Q4 revenue at constant currencies. The company's focus on advanced semiconductor technologies, such as Gate-All-Around (GAA) and Atomic Layer Deposition (ALD), has positioned it well amid a recovering semiconductor market. Latest data from InvestingPro shows an 18.08% revenue growth in the last twelve months, supported by strong industry recovery, with AI driving growth in data centers and a notable surge in memory market sales.
Financial Highlights
- Full year revenue: €2.9 billion, up 12% at constant currencies
- Q4 revenue: increased 27% at constant currencies
- Gross margin: improved to 50.5% from 49.3% in 2023
- Operating profit: increased 17%, with margin rising from 20.6% to 28%
- Free cash flow: rose 23% to €584 million
Outlook & Guidance
ASMI projects 2025 revenue between €3.2 billion and €3.6 billion, anticipating a substantial increase in Gate-All-Around sales and healthy memory sales, particularly in High Bandwidth (NASDAQ:BAND) Memory (HBM). The company expects R&D expenses to grow by 10-15% year-on-year, aligning with its commitment to innovation.
Executive Commentary
- "ALD is the new CVD," stated Hesham Masako, CEO, highlighting the strategic importance of ALD technology.
- "2025 is going to be a prime time for Gate-All-Around," added Masako, reflecting confidence in the company's technological advancements.
- "We are paranoid with competition," noted Paul de Haagen, CFO, underscoring the competitive landscape.
Risks and Challenges
- Supply chain disruptions could impact production timelines.
- Market saturation in key regions may limit growth potential.
- Macroeconomic pressures, such as currency fluctuations, could affect profitability.
- Evolving competition, particularly in China, poses a strategic challenge.
- Increasing R&D expenses may strain financial resources if not matched by revenue growth.
ASMI's strategic focus on cutting-edge semiconductor technologies and its robust financial performance in 2024 have positioned the company for continued success. However, it faces challenges in maintaining its competitive edge amid a dynamic market landscape.
Full transcript - Avino Silver & Gold Mines Ltd (ASM) Q4 2024:
Conference Operator: Good afternoon. This is the Coruscall Conference. Operator, welcome and thank you for joining the ASM International Fourth Quarter twenty twenty four Earnings Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.
At this time, I would like to turn the conference over to Mr. Victor Bareno, Head of Investor Relations. Please go ahead, sir.
Victor Bareno, Head of Investor Relations, ASM International: Thank you, operator. Good afternoon, and thank you for joining our Q4 earnings call. With me today are our CEO, Heshe Mursa and our CFO, Paul de Haagen. ASM issued its fourth quarter twenty twenty four results yesterday at 6PM Central European Time. For those of you who have not yet seen the press release, it is available on our website along with our latest investor presentation.
As always, we remind you that this conference call may contain information related to Azem'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 the company's press releases and financial reports, which are available on our website. Please further note that during this earnings call, we will reference profitability numbers primarily on an adjusted basis. Reconciliation
Hesham Masako, CEO, ASM International: with
Victor Bareno, Head of Investor Relations, ASM International: the reported financial numbers can be found in the press release and in the investor presentation. And with that, I will now turn the call over to our CEO, Hesham Masako.
Hesham Masako, CEO, ASM International: Thank you, Victor, and thanks to everyone for attending our earnings call. I'll start with few of the highlights. We delivered strong results in the fourth quarter with revenue growth of 27%. For the full year, our sales increased 12% ahead of WFE growth, marking our eighth consecutive year of double digit growth. Strategically, we booked solid progress in 2024 as we expanded our addressable market, in particular with the transition to gate all around and as we further expanded our R and D engagement with key customers.
I want to thank all our people for their relentless commitment and teamwork, which contributed to another successful year for ASM. The agenda for today's call is as usual. Paul will first review our financial results. I will then continue with the discussion of the market trends and outlook, followed by the Q and A session. Before handing over to Paul, I'm pleased to let you know that we will have our next Investor Day on September 23 this year in London.
Please mark your calendars. We hope to see many of you there. And with that, over to you,
Paul de Haagen, CFO, ASM International: Paul. Thank you, Hesham, and also thank you all for joining this call. Let me start with a review of our fourth quarter results. Revenue increased to 27% at constant currencies to million in the fourth quarter, and this was at the upper end of our guidance of million to million. By customer segment, equipment sales were led by foundry, followed by logic and then memory.
And combined logic foundry sales accounted for the larger part of the total and increased strongly, both year on year and compared to the third quarter. The increase was driven by gate all around related sales. Memory sales in the fourth quarter increased year on year, but were lower compared to the elevated level in Q3. Memory was again driven by HBM related DRAM sales. Power, analog and wafer sales remained soft and were sharply lower compared to the fourth quarter of 'twenty three.
Spares and service sales increased 49% year on year at constant currencies. The underlying trend continues to be healthy with steady increase in our outcome based services. Like in Q3, the BOSS trend growth in Q4 was in part explained by accelerated demand in China. In 2025, we expect growth in Spares and Services to return to a more normalized level. Please also note that starting in 2025, we've changed the reporting definition of spares and services.
Installation and qualification sales will be classified as spares and services sales instead of equipment sales. This change is to align with the internal organizational structure at ASM, and further details can be found in our press release. Gross margin of 50.3% in the fourth quarter of twenty twenty four was up from 49.4% in Q3 and 47.9% in Q4 of 'twenty three percent. The mix in the fourth quarter remained favorable, including a solid, though reduced contribution from China sales, both sequentially and compared to the fourth quarter of twenty twenty three. Net R and D expense in the fourth quarter increased year on year by 34% at constant currencies.
The increase in net R and D was higher than the increase in gross R and D due to accounting effects. As explained in previous quarters, several development projects entered the commercial release phase in 2024, triggering the start of amortization of the negative capitalized development expenses. SG and A expenses at constant currencies decreased 10% from Q4 twenty twenty three, reflecting ongoing cost control. Our new orders in the fourth quarter amounted to €731,000,000 up 8% year on year. Orders dropped by 12% compared to the level in Q3.
And this was in part explained by the effect of order pull ins from Q4 to Q3 as already communicated last quarter. Logic foundry accounted for the largest part of our Q4 orders and increased significantly compared to Q3. Gate all around orders increased to a very strong level as leading customers are preparing for the introduction of two nanometer volume manufacturing in 2025. Memory orders decreased compared to the relatively strong level in Q3, but they were still up substantially compared to Q4 'twenty three. Power and our grade four oils dropped to a fairly low level, reflecting the soft market conditions in this segment, including the silicon carbide market.
Let's now look at the full year results. At $2,900,000,000 our sales in '24 increased 12% at constant currencies to a new record high. In terms of customer segments, our total LogicFoundry sales increased slightly and continue to account for more than half of our equipment sales. Gate all round related sales increased substantially in the course of the year and represented a larger part of our logic foundry sales in 2024. Mature logic foundry sales decreased in 2024, particularly in the second half of the year.
In memory, our sales surged by more than 150%. This is compared to a fairly depressed level in 2023, and our sales dropped around 40%. DRAM accounted for the largest parts driven by very strong HBM related DRAM demand. Three d NAND sales approximately doubled in '24, but from a low base and represent a smaller part of our memory sales. As a percentage of equipment sales, total memory jumped from 11% in 2023 to 25% in 2024.
Power, analog and wafer sales dropped by a significant double digit percentage impacted by the ongoing cyclical downturn in this market. The drop in 2024 is compared to a strong level in 2023 when sales in this segment almost doubled. Our silicon carbide EPIS sales increased by mid single digit percentage in 2024. This is below our previous projections of double digit growth, but still a robust performance in view of the significant slowdown in this market. At constant currencies, our equipment sales increased by 9% in 2024.
We booked solid double digit growth in ALD, which accounted for clearly more than half of our equipment sales. We've increased the amount in both the logic, foundry and memory markets. Our spares and service sales increased 29% at constant currencies in 2024. Over the last four years, since we started to roll out outcome based service in 2020, we have increased our spares and service sales at an average annual rate of 19%. Gross margin for the year further improved from 49.3% in 2023 to 50.5%, mainly reflecting mix, including a continued substantial sales contribution from China.
For 2025, with the normalization in China sales, we expect the gross margin to return to the target range of 46% to 50%. Net R and D increased by 22% at constant currencies, reflecting a further increase
Hesham Masako, CEO, ASM International: in our customer R and
Paul de Haagen, CFO, ASM International: D engagements as well as the aforementioned accounting impact of higher amortization. As a percentage of sales, net R and D increased from 11.2% to 12.1% in 2024. For 2025, we expect net R and D to remain at the upper end of our target range of high single digit to low double digit as a percentage of sales or even slightly higher as earlier communicated. SG and A expenses increased 3% at constant currencies in 2024. The rate of increase in SG and A slowed down significantly compared to previous two years as additional investments we made to strengthen our organization were largely completed in 2023.
As a percentage of sales, SG and A decreased from 11.5% to 10.6% in 2024. And for next year or for this year for 2025, we expect SG and A to be at around similar levels and as a percentage of sales to decrease to a high single digit percentage. Operating profit increased 17% in 2024 with the operating margin improving from 20.6% to 28%. Results from investments largely reflecting our holding in ASMPT dropped from million in 2023 to million in 2024 due to the continued downturn in the back end markets. Now turning to the balance sheet.
ASM's financial position remains solid. We ended the year with a cash of €927,000,000 and no debt. Free cash flow increased 23% to $584,000,000 in 2024. This was mainly driven by improved profitability and deferred tax payments and despite slightly higher working capital and higher CapEx. Working capital increased from €425,000,000 to €447,000,000 with higher accounts receivables, partially offset by higher contract liabilities and accounts payable.
In terms of number of days, working capital dropped to 50, down from 60 at the end of twenty twenty three. And for 2025, we expect a return to the guided range of fifty five to seventy five days. CapEx increased to 168,000,000 in '24, up from 154,000,000 in 2023 and was within our annual guidance of 100,000,000 to $180,000,000 In 2024, our CapEx was primarily focused on R and D infrastructure, including a new Korean facility scheduled for completion in 2025 and the start of the investment program for our new R and D facility in Scottsdale, Arizona. 20 20 5 will be a year of continued investments as we further advance the upgrade plans for our R and D facilities. Regarding our cash flow outlook in 2025, it is important to note that the anticipated earn out payment of EUR 100,000,000 for LPE is previously disclosed at the Timex acquisition in 2022.
In terms of shareholder remuneration, we spent EUR $287,000,000 in cash on dividends and share buybacks in 2024. And with our Q4 press release, we announced a new share buyback program for an amount of €150,000,000 as well as proposed dividend of per share, up from in the prior year. And with that, I would like to hand back to Guishem.
Hesham Masako, CEO, ASM International: Thank you, Paul. Let's now review the trends in our markets. After the drop in 2023, the semiconductor end market recovered by 18% in 2024. This growth was however uneven with mixed dynamics across the different segments. AI has become the main driver of the semiconductor market, significantly boosting data center growth.
In 2024, other high volume end market segments such as PCs and smartphones remained relatively sluggish due to slow customer spending, economic uncertainty and ongoing geopolitical tensions. This picture in the end markets was also reflected in the spending patterns of our customers with good momentum in advanced technologies that enable AI, in particular, gate all around in logic foundry and high bandwidth memory, but softer trends in other parts of the market. In total, wafer fab equipment spending was up, but by a mid single digit percentage in 2024. Our leading edge logic foundry business accelerated in 2024. In the first part of the year, sales in this segment were still relatively slow, following the softer market condition in 2023.
In the second half of the year, leading edge logic concrete sales increased significantly, driven by investment in the new gates around two nanometer technology. That momentum continued in the fourth quarter with a further rise in gate all around orders and sales. The tools we are shipping now are predominantly in support to our customers' high volume manufacturing ramp in 2025. The two nanometer node offers significant improvement in device performance and power efficiency. Some of our customers have reported that we are seeing substantial demand for two nanometer from their own customers, including AI chipmakers and that capacity for the two nanometer node is expected to be larger than for three nanometer.
The transition from FinFET to Gateron has increased our addressable market with $400,000,000 based on 100 ks wafer start per month capacity. In addition, we believe we successfully maintained our leading share in ALD in this transition and we strengthened our position in silicon acid. While our total silicon epi sales decreased slightly in 2024 due to the downturn in the Power and Wafer segments, sales of our reduced pressure advanced and rapid ES platform increased substantially, reflecting our growing share in gate all around applications. There have been some further shifts in CapEx forecast among the customers in the leading edge logicfoundry segment. But overall, our forecast for a substantial increase in date all around related sales in 2025 is unchanged.
During 2024, we also expanded our R and D engagement with key logic foundry customers for the next version of Gate Alleron, including the 1.4 nanometer node. We expect innovation such as deck side power delivery, widening adoption of metal ALD and selected ALD to drive further increases in ALD intensity. Our memory business delivered an exceptional performance in 2024. High bandwidth related DRAM has become the main driver of the memory market. The high performance DRAM devices used in this HBM stacks require high k metal gate ALD technology in which ASM has a leading position.
In three d NAND, we benefited from technology driven demand for our ALD gap fill solution. But overall, the contribution of three d NAND continued to be relatively modest. In memory, we expect healthy sales in 2025, supported by continued solid demand for HBM related DRAM, although it's too early to tell if memory sales would be at the same very sound level of 2024. Other parts of the DRAM segment, as well as the three d NAND segment are likely to be subdued in 2025, in the absence of a more meaningful recovery in consumer related end markets such as PCs and smartphones. Longer term, the memory market remains a strategic growth area for ASM.
As the DRAM industry transitions to the next note, more logic like technology would be adopted, which plays to the strengths of ASM. In the new DRAM node, D1C or 1Gamma, we have increased our share of wallet with new ALD layers. We are working with leading customers on additional ALD and new FE layers that would be required in the next generation, such as vertical channel access transistor DRAM or 4F2. The power analog wafer market is still in a technical correction that started by the end of twenty twenty three. As the automotive and industrial end markets continue to be intact by soft demand and inventory correction, there are no signs that spending in this space will pick up anytime soon.
The moment that it will, ASM is well positioned to benefit. In the last few years, we have won several new customers and position in the silicon based power analog and wafer markets, including in China, especially on the back of new innovative products such as our Sonora vertical furnace and interpret ESA epi platform. In silicon carbide epitaxy, our sales increased by a mid single digit percentage in 2024 as just mentioned by Paul. We believe this is a better performance than the overall silicon carbide epi market, which significantly weakened in the course of the year. Our sales last year were supported by the new customer wins that we announced in 2023 and 2024.
While the outlook for 2025 has further weakened, we believe that the longer term prospects for the silicon carbide market remain positive. In addition, we are well placed to further expand our market share with the launch last September of the PE208, our new cluster system for 200 millimeter silicon carbide epi application, combining best in class field performance with a new high productivity dual chamber platform. Looking at China, the sales contribution was again strong in 2024. However, within the year, sales decreased in the second half and also from Q3 to Q4, down from an exceptional level in the first half. This was in line with our previous indication.
This lower demand is mainly due to several customers in metallurgic foundry in China entering a phase of digestion following the substantial new capacity investment that they made in 2023 and 2024. We expect the softening trend to continue in 2025 with sales in China down in the full year. We project equipment sales in China to represent a low to high twentieth percentage of ASM's total revenue in 2025. The impact from new U. S.
Export control announced in December 2024 was in line with our assumption and is reflected in our projection for 2025. Next (LON:NXT), I'd like to highlight our progress in sustainability. In 2024, we published our climate transition plan. As a first milestone on our path to decarbonization, we achieved 100 renewable electricity in our worldwide operations. This contributed to a 25% to a 52% decrease in our combined scope one and two greenhouse gas emissions in 2024.
If we don't look at the longer term, the prospects for our company continue to be strong. Third party research forecasts the semiconductor market to reach $1,000,000,000,000 by the end of the decade, with AI being the key driver. Next, to growth in the data center segment, AI is expected to move in the coming years to edge devices like PCs, smartphone and industrial application, supporting growth in broader parts of the semiconductor market. As AI application demand higher performance and power efficiency, the need for advanced semiconductor devices will continue to rise. To enable these next generation devices, more three d structures and new materials are expected to be introduced.
This in turn will require more ALD and EPIS steps, increasing ASM addressable markets. Next to driving sales growth in the longer term, we remain focused on improving the efficiency of our organization and operations. Examples are ongoing digitalization of our business processes, as well as further streamlining of our supply chain and manufacturing operations. These multi year projects will help us to scale the organization in a cost efficient way and to support continued healthy profitability. Lastly, let's have a look at our guidance for this year.
Wafer fab equipment is forecasted to be slightly up and so far 2025 shows the same mix picture as last year. Growth in AI related segments is expected to remain robust, but visibility for any meaningful recovery in other segments is limited. The main area of growth for ASM in 2025 and for the broader wafer fab equipment market would be the ramp of gate around in the leading edge budget foundry segment as just discussed. In memory, we expect healthy sales in 2025, supported by solid demand for HBM related DRAM. Although it's too early to tell if memory sales will be at the same very strong level as in 2024.
In Power Analog, there are no signs of a recovery in the near term and the outlook for the silicon carbide market in 2025 has further weakened. Our China sales are expected to decrease in 2025. We confirm our targets for total revenue in a range of 3,200,000,000.0 to EUR 3,600,000,000.0 in 2025, but it's too early to be more specific. For the first quarter, at constant currency, we expect revenue to increase from the Q4 twenty twenty four level to a range of million to million. We expect revenue to increase from the Q4 twenty twenty four level to a range of million to EUR $850,000,000 with a projected further increase in Q2 compared to Q1.
With that, we have finished our prepared remarks. Let's now move on to the Q and A.
Victor Bareno, Head of Investor Relations, ASM International: We'd like to ask you to please limit your questions to not more than two at the time so that everyone has a chance to ask a question. Operator, we are ready for the first questions.
Conference Operator: Thank you. This is the Corozko conference. Operator, We will now begin the question and answer session. The first question is from Tammy Qui from Berenberg. So firstly, may I ask about China?
Have you seen any situation change over the past month, I. E, it becoming worse than you previously expected? Or do you see same situation as you have expected previously, I. E, revenue coming down, but it's not actually Chinese customer or pulling back spending?
Hesham Masako, CEO, ASM International: So I can take this question. I think our revenue projection in China doesn't change. We didn't see any meaningful change in the projection that we have made in the last few months. So business as usual for us.
Conference Operator: Okay. That's clear. And secondly, just want to confirm on GAA momentum for 2025. You mentioned that your second half visibility remains low. May I ask if your visibility on GAA for the full year is actually much higher than the other areas?
Because it seems to be that some customer may change their plan, but you have other customers who is willing to pick up?
Hesham Masako, CEO, ASM International: I think as we mentioned in our press release, we think that Gateron is strong in 2025. This is the year of HBM for Gateron and we see that continuing unabated. So we don't really see any change in the gate around. And 2025 is actually very strong in the two nanometer technology now.
Conference Operator: The next question is from Didier Simama, Bank of America.
Didier Simama, Analyst, Bank of America: Michel, I've got a question for you with regards to the order intake, perhaps how you feel about it for the first half. In order to reach the upper end of your range, do you feel like you need to secure a substantial increase in orders in Q1 or Q2 at the latest given your lead times? Or are are you fairly relaxed to hit the upper end of the range as you've got a funnel of opportunities into the second half? And I've got a quick follow-up.
Paul de Haagen, CFO, ASM International: Yes. Let me take that question, DJ. We have indeed seen our orders in Q4, which came down compared to Q3 as expected. As you know, we are already communicating Q3 that we saw some pull in also we are expecting Q4. But as you know, timing is always difficult to predict.
In addition to that, what we've seen is, of course, there's still a power wave for analog market that is very slow, as we said, sharp down, so that didn't really help. China is as expected, but still lower than what we saw in 2024. And so also that, of course, did not help Gate all around, as Hesham already mentioned, continue to be strong. And as you know, your question about Q1, Q2, we don't guide on orders. We stopped guiding on orders for a good reason, and it is simply because the timing of orders is sometimes it's bulky, sometimes it's not bulky.
We burned our fingers a few times, and we prefer not to do that again. So we will not you will not guide on Q1 and Q2.
Didier Simama, Analyst, Bank of America: Okay. Fair enough. My follow-up, it's talking about the opportunities for molybdenum. So clearly, you've got a big play in metallization going forward with molybdenum. And now we see effectively all your competitors talking about Moly being implemented, not just in Foundry Logic, but also in NAND and in DRAM.
So I just wondered if you could talk about how you see those opportunities playing out maybe in 'twenty five, 'twenty six, 'twenty seven? And also related to that for the new materials, we see also cobalt and the ruthenium being mentioned in replacement to tungsten and copper. So I just wondered if you think you could also capitalize on those opportunities. Thank you.
Hesham Masako, CEO, ASM International: So I'll take this question. What I can tell you is that, as we mentioned before, molybdenum is a new method for logic devices and memory devices. Our focus is actually in molybdenum is with the customer Logic, Foundry and DRAM. We engaged with many DRAM customers in Moledina. We have a very active program.
We have actually lots of engagements with many customers. And as a matter of fact, we're actually shipping tools in Moledina for HVM this year. So we are very much in working on molybdenum. We think that molybdenum is, like you mentioned, is a new metal. It's started in N2 right now as with a very small volume, but there are more and more applications as the technology, as the gate on our technology transition to the 1.4 nanometer node and eventually also to the one point zero nanometer technology node.
So you can see more and more molybdenum being run-in especially in large IC and DRAM in front end of line, in middle end of line and even in back end of line. Talking about your question about different metal, I think that's what you refer here like to about cobalt and ruthenium. What's going to happen in back end of line and metallization in the future is the end is the move from Damascene to metallization. So right now what you do, you deposit the direct rate and you etch and after that you deposit the metal. In the future, we're actually going back to the 1990s, whereby you deposit the metal and then you etch the metal and you deposit the low k dielectric between those metal.
So the new metals that's going to happen, part of it is actually going to be Resilium is one of the metal that's going to happen in this new metallization scheme. So yes, this is going to be around with ALD. It's going to happen in the future. And these are areas that we are also aware of and also working on. Thank you.
Didier Simama, Analyst, Bank of America: Thank you, Chet. Can I just have a tiny one on NAND? I think you didn't mention NAND. Is that because of the productivity limitation of your LDOAP tools?
Hesham Masako, CEO, ASM International: I think that for three d NAND, the what we think that in that market, there are some also molecule multiplication. We think in that market that the offering there can be either you can make the offering with the single wafer ALD, but also you can do the offering with a batch ALD. We think that that market will most likely transition to batch ALD in the future because of higher productivity and lower cost.
Didier Simama, Analyst, Bank of America: Makes sense. Thank you.
Conference Operator: The next question is from Sandeep Deshpande, JPMorgan. Please go ahead.
Sandeep Deshpande, Analyst, JPMorgan: Yes. Hi. Thank you for letting me on. My first question is regarding the one point six and one point four nanometer loads that you highlighted earlier, Logic. Are you in a position to say what revenue you can achieve for 100,000 wafers based on your wins in those nodes, like you've given that the two nanometer node $400,000,000 per 100,000 wafers.
So what kind of opportunities you won in those nodes, which will provide you the growth in 'twenty five 'twenty six and 'twenty seven onwards? And then I have one follow-up, please.
Hesham Masako, CEO, ASM International: Okay. Hi. To answer this question, I think we what we always say and that's really what's happening in the industry, as we transition from one technology node to the other, the LD intensity increases by double digits. So this is going to continue from the two nanometer node to the one point six and one point four nanometer node. So we see that continuing unabated.
And as I mentioned earlier, some of the ALD application actually is going to be in the backside power distribution network. And also I just talked a few minutes ago that ALD is going to molybdenum ALD, okay, is going to take more and more layers as we transition from N2 to N1.6 and N1.4. So we still see meaningful double digit increase in ALD intensity.
Sandeep Deshpande, Analyst, JPMorgan: And my follow-up, Hishab, is about memory. You've had this very strong growth in 2024 in the memory market. When we hear about the CapEx from the memory players this year, there seems to be more focus on building capacity rather building buildings rather than building putting equipment into those buildings. Is that likely to impact you in terms of your IK engagements in the DRAM market? Or do you expect to continue
Stephane Urie, Analyst, ODDO PHF: to see growth in the
Sandeep Deshpande, Analyst, JPMorgan: memory market in 2025?
Hesham Masako, CEO, ASM International: We expect to see growth in the high end of the memory market, in the high bandwidth memory, in the DDR5, in the DDR6, I think the high part of the memory the data memory is actually increasing unabated and we see there's a strong growth that we see and that's going to continue. And with it, we see more and more high k metal gate applications in that part of the market. So we are really upbeat about the high bandwidth memory of the DRAM market.
Conference Operator: The next question is from Nigel Van Putten, Morgan Stanley.
Nigel Van Putten, Analyst, Morgan Stanley: First, I have a follow-up on the services, Paul. You already addressed it in the prepared remarks, but just to make it a little bit more clear. When you say that growth will moderate, is that from the fourth quarter level? Or should we think about that being a sort of on a year on year basis, which kind of would imply that the next couple of quarters will be down compared to the fourth quarter? That will be my first question.
Paul de Haagen, CFO, ASM International: Yes. The question was on sorry, not the question you answered, it was in prepared remarks, and Nigel was on the full year. So for the full year, we expect a more normalized level of growth. We still expect some growth, but yes, we've seen pretty exceptional growth in 49%. You might agree that's not the standard growth that we will be able to achieve.
And yes, that had two reasons. So the one, CPM is continuing to do well. To be honest, the programs that we kicked off really start to get good traction. But also equally and maybe slightly more important, we saw an acceleration of parts in China. And that will also, in our view, normalize.
I'm not in position now to give you specific how this will evolve over the year. That's a little bit too early to tell.
Nigel Van Putten, Analyst, Morgan Stanley: Understood. And then next question would be on Advanced Logic Foundry where the GAA visibility is very strong. But can you provide some context how big a chunk of your total revenue coming out of Advanced Logic Foundry is GAA? Just to get a sense of the variability in that segment outside of GAA because in your press release it does seem to imply that there's changes going on, while at the same time, GAA has not changed. So I mean, yes, I'll leave it there.
Just have a sense of how big that potential variability is.
Paul de Haagen, CFO, ASM International: Yes. I think for this year, so for '25, I think we might even have said it, I'm not more 100% sure. But if you look at our total logic foundry sales, more than half will come from GEA. So it's a big year on year growth. As Sison already said, we're very positive about GEA.
And as I said, we expect more than half of the majority of total logitry that we come from K.
Hesham Masako, CEO, ASM International: One. Yes, I mean, if I add something to what Paul has mentioned. Like we have talked in our previous earnings talk, we said that 2025 is going to be a prime time for Gateron, and it's actually happening. Gaetzneron two nanometer technology node is in HVM, tools team ahead. But also we see that in 2025 that also there are some technology buys for next generation Gaetzneron like 1.4 nanometer.
So Gaetzalon does constitute over 50% of our logic foundry business right now.
Conference Operator: The next question The next question is from Jacob Bluestone, BNP Paribas (OTC:BNPQY).
Jacob Bluestone, Analyst, BNP Paribas: I was hoping you could maybe comment a little bit on how you've seen your market share evolve for ALD, just sort of any thoughts around how you think that will evolve from here? And then I've got a follow-up as well.
Hesham Masako, CEO, ASM International: So what's, like I mentioned in the press release right now in my prepared remarks, we think that our market share in ALD is very strong, continue to be strong in the transition to date on our technology.
Jacob Bluestone, Analyst, BNP Paribas: Right. And just a clarification on China. Is the decline, is that just purely digestion of inventory? Or is there anything embedded in your guidance regarding tariff and further restrictions? You mentioned that the latest round of restrictions were as expected, but do you expect anything more?
Paul de Haagen, CFO, ASM International: In the guidance that we've given for China, what is included there is what we call digestion of an exceptional level of revenue that we've seen in particular in the first half of the 'twenty four, but also still strong sales in the second half but lower than the first half, that's one. And two, as you know, I think on December 2, if I'm not mistaken, the new export controls also have an impact somewhat, which we anticipated. So also that is reflected in this guidance. What is not yet reflected is potential new restrictions because at this point in time, there was speculation if anything will happen, what will happen, if anything will happen. So that's not yet reflected in this guidance.
But the latest December 2024 restrictions have been taken into account in this guidance.
Conference Operator: Next question is from Francois Bouvigny, UBS.
Francois Bouvigny, Analyst, UBS: My first question is on the more longer term beyond 27% and ISML, one of your peers is talking about INA insertion in '27 and then from Us production a bit later on. And I was wondering if you could detail a bit the impact you think you could have this INA introduction. I assume that now you have a couple of layers using multi exposures for your ILD, which was not the case before. So I was wondering if we should expect some moderation of growth as high and A comes in. Of course, all else equal, you might have some other opportunities somewhere else.
But on the Advanced Logic side, I was wondering what do you think high and A could impact your high and A business on the growth rate?
Hesham Masako, CEO, ASM International: So I mean, what I can tell you here is that we see that as the technology knows the transition that both ALD and lessor are actually enabling the transition to the next generation. So we see high NA happening, but we'll also see more and more L D there actually taking place. So if there is one application that goes away from because of high NA production reduces the number of ALD layer, there are actually the complexity of the devices that are happening right now is actually giving rise to new selective ALD deposition market, which was not even present, which has actually more ALD than ever. So what I can tell you again is with the increased complexity, you need more litho and you need more ALD.
Francois Bouvigny, Analyst, UBS: Okay. So still net positive if I read correctly, Vijay?
Nigel Van Putten, Analyst, Morgan Stanley: Absolutely.
Francois Bouvigny, Analyst, UBS: And maybe the second question I have is very quick one is, you mentioned China as percentage of revenues will come down to low 20% to high 20% in '25 Could you disclose your 2024? How much is Russia China? Just to put into perspective.
Paul de Haagen, CFO, ASM International: Yes. Francois, I think you know the answer already. And you have given qualitative comments on our '24 exposure in China, exceptional in the first half and strong in the second half. We have also because of these export controls given some more guidance in 'twenty for 'twenty five, as you mentioned, the low to high 20s. And that's what I can confirm and share.
Francois Bouvigny, Analyst, UBS: Understood, Thank you very much.
Conference Operator: The next question is from Robert Sanders of Deutsche Bank. Please go ahead.
Sandeep Deshpande, Analyst, JPMorgan: Yes. Hi. Thanks for taking my question. You mentioned the services number in China.
Victor Bareno, Head of Investor Relations, ASM International0: Can you just give us a sense of how much sort of stockpiling of spare parts there is in China? And perhaps some stockpiling of your tools as well at Chinese fabs? And I have a follow-up.
Paul de Haagen, CFO, ASM International: Yes. If I would know, I might tell you, Rob, that I really don't know. So I don't know if there's a lot of parts piling, but you might expect there is some given this accelerated demand, of course, that is happening because you can imagine that the Chinese players are concerned given everything that's happening from a geopolitical point of view. In terms of equipment, yes, most of our equipment goes straight to fabs, sometimes not, but that's simply because fabs might not be fully ready yet or for other reasons. But the build will go straight into fabs.
So yes, I would not be able to give you more information on this at this point.
Hesham Masako, CEO, ASM International: Philip. Okay.
Victor Bareno, Head of Investor Relations, ASM International0: No worries. And just a question on backside power delivery. So if we see the power delivery network moving to a different way for effectively and scaling down at a much more aggressive feature side, What does that mean for the opportunity, whether it's metallization or anything else, relative to the transition to Gate all around? I mean, is a significant increase in opportunity? How should we think about it in terms of significance?
Hesham Masako, CEO, ASM International: I think it's an increase. I don't call it significant if you ask me, but it's an increase, especially in metal ALD deposition. There's also some direct ALD there, but it's an increase, but I don't really call it as significant.
Victor Bareno, Head of Investor Relations, ASM International0: Got it. Thanks.
Conference Operator: The next question is from Stephane Urie, ODDO PHF. Please go ahead.
Stephane Urie, Analyst, ODDO PHF: Yes. Hello. Good afternoon. Thank you for taking my questions. The first one is on the guidance for the full year, the range of 3.2 to 3.6.
And I wanted to understand what are the assumptions that you took to maintain it. I understand that gate around is super strong still, but memory kind of flattish or maybe power analog down, silicon carbide down. So what will it take for you to be to have H2 that would be down compared to H1? And I'm asking that because if you do the math with the elements you've given, you should have it just takes a flat H2 to go to the middle of the range. So I'd like to understand how you build this one.
Thank you.
Hesham Masako, CEO, ASM International: I'll answer the question. I think to answer your question, I think the we kept our 3.2 to 3.6 range for 2025. I think that part of the uncertainty that we talked about is really that we don't see sign of recovery in the power wafer analog market. We mentioned that previously that the power and analog wafer market is very cyclical. It's usually cyclical.
It takes about eight quarters cyclicality. This time, it looks like maybe it's one more quarter or two more quarters. So it's actually longer cyclicality, but it's really within the range that we see what we see. We don't see a recovery in the second half of the market in second half of the year. You never know, but right now we don't see any sign of recovery.
The other thing part is really on silicon carbide. I mean, silicon carbide market is weaker than ever before. So that's also another uncertainty from that point of view. In memory, we have talked about memory earlier that we see that it's too early to tell if memory sales would be at the same very strong level of 2024. We see a very strong HBM memory strength in 2025.
But for commodity DRAM market, it's really too early to tell from that point of view. That's why we came up with we still continue with a range of 3.2 to 3.6.
Stephane Urie, Analyst, ODDO PHF: Okay. Thank you. And then I have a follow-up. It's about the OpEx in 2025. How did you see them evolving?
You grew a lot R and D, not too much SG and A. Are we still heading for the same trends in 2025?
Hesham Masako, CEO, ASM International: I think so. I think that we have a strong program to have a better efficiency to improve our business processes to incorporate digitalization and we reintroduced we're introducing S4HANA, we're introducing Teamcenter to really streamline our business processes. So I think that we have a strong focus to keep in our operations to make sure that we have we continue to run our operation very efficiently. So that will impact actually is going to impact it's a multiyear impact for the future. And we are very much committed to improve our top line revenue growth for many, many years in the future, but also we want to make sure that these growth is very profitable and that's what we're doing right now.
Stephane Urie, Analyst, ODDO PHF: And R and D specifically, sorry, are you talking about double digit growth still again? Sorry for interrupting you.
Paul de Haagen, CFO, ASM International: Maybe to add to that, Stefan, if you look at the growth R and D, maybe also to help you for your modeling, that is likely to expand 10% to 15% year on year. Net R and D will expand somewhat more, again, because of increased amortization. So the net R and D will increase faster like you've seen in 'twenty four than the gross R and D. So just I think a reasonable guidance for your modeling. And SG and A, we expect in absolute terms around the similar level as in 'twenty four.
And as a percentage of revenue, of course, it should come down to high single digits. The
Conference Operator: next question is from Aditya Metuku, HSBC.
Victor Bareno, Head of Investor Relations, ASM International1: Firstly, just on gate all around high volume manufacturing capacities being installed. I just wondered if you might be able to give some color on the tools you're shipping or you plan to ship in 2025. What level of gate all around capacities will that lead to an aggregate at the three customers that are meant to be ramping gate all around in 2025 based on the different discussions you've had with your customers so far? That's my first question, and I've got a follow-up.
Hesham Masako, CEO, ASM International: We believe that our winter capacity for two nanometer would be actually a significant number, but we are not commenting right now on specific numbers. As I mentioned, end markets continue to be actually very strong based on what we are hearing and leading customer are actually continuing in their HVMR. Our view for a substantial increase in gate to ground sales in 2025 has not changed from that point of view.
Victor Bareno, Head of Investor Relations, ASM International1: Okay, understood. And then secondly, on China, if I did my math correctly, I think China is close to 40% of your equipment revenue in 2024, similar to what we've seen at your peers. So now when I look at the news flow out of China, Nara is talking about shipping multiple high k ALD systems to multiple clients. And there seems to be a significant focus on developing CVD and furnaces from the likes of AMEC and NARA again. So I just wondered how do you see competition in China developing and should we be concerned about local players potentially gaining share from you?
Any thoughts there would be great.
Paul de Haagen, CFO, ASM International: Let me start and then Nishan can add to Aditya. You're right, Norway is growing steeply. Also in terms of revenue, you might have seen that, I don't know. Chinese competitors are clearly trying to catch up, which is logical given everything that is happening. For us, it is just competition that we have also with other players.
I mean, the key is to innovate, to be ahead of them and to lead. That's what we try that we will try compared to our Chinese competitors. We do the same with other competitors. So no real difference there. But yes, they are definitely catching up.
But yes, not to the extent where we are. I mean, they are still far behind us. But yes, we are paranoia. We always are paranoia with competition also with Chinese competition. So it just motivates us to go even faster with all kinds of innovation that we have in our pipeline.
Hesham Masako, CEO, ASM International: Yes. I mean, if I add to what Paul has just mentioned, yes, there's competition and so on, but also we continue in our innovation. We continue to compete in the Chinese market. We have developed the new products actually for the China market like in epi. We have introduced the Intrepid ESA, Atmospheric epi for power analog devices.
We also have released very successful product
Paul de Haagen, CFO, ASM International: for
Hesham Masako, CEO, ASM International: the China market, which is the Sonora vertical furnace, running many furnace application in actually in 300 millimeter. Even in 200 millimeter, we have our dual tool. So yes, I think we're competing to China. It's a market that's very competitive. But as long as we continue to innovate, we'll be able to be successful there too.
Conference Operator: The next question is from Tim Schulz, Melander, Redburn Atlantic.
Victor Bareno, Head of Investor Relations, ASM International2: Maybe the first one for Hesham, please, on Moly. I appreciate that it is very, very early, but maybe could you provide some qualitative commentary around sort of win rates and differentiators? And then I had a follow-up.
Hesham Masako, CEO, ASM International: So think molybdenum, as I mentioned, is a new metal. It's used in both memory and logic and foundry. There are many I mean, in molybdenum, there are many innovation that's happening in the process technology, in the chemistry, in the precursor, in productivity, in how you deliver the chemicals, etcetera, etcetera. So it's an AOV process, which we have lots of experience on how to make the process repeatable with very good performance. We really have a few wins in Molabdinov, which we're very excited about.
You're going to hear more about it in our investor meeting in September of this year. We have a very strong engagement and we're really excited about our engagement in Mali. Even in Iran, we have very upbeat about some of the interaction we have with our customers. So it's a new metal, it's a new metal, it's a new thing and this is disruptive and I think there's opportunity whenever to come in and with the innovative solution and we are excited in the engagement that we have so far.
Victor Bareno, Head of Investor Relations, ASM International2: Awesome. Okay. Look forward to hearing more about that at the CMD. Maybe just for Paul, a lot of color there on the operating expense lines, which is really helpful. Just in terms of modeling China in 4Q, are we close to the 25 corridor?
Paul de Haagen, CFO, ASM International: What do you mean? Sorry, are we close to the 25 corridor? What do you mean, Zem?
Victor Bareno, Head of Investor Relations, ASM International2: You guided a range for 25% in terms of China as a percent of sales. I'm just wondering, are we close to that in Q4?
Paul de Haagen, CFO, ASM International: Yes, nice try. So I can repeat the same answer I gave right before, Tim, but I think you know the answer. It was a strong good, but below Q3 and also below the same year as it's coming down. And as you know, also '25 compared to '24 is coming down. So I leave it to you to try to make sense of that.
I think what is more important is that going forward for this year, we guided low 20s to high 20s. So it should give you a reasonable good indication, which means, of course, that '24 was higher than that.
Victor Bareno, Head of Investor Relations, ASM International2: Got it. Worth a try. Thank you.
Paul de Haagen, CFO, ASM International: Thank you. And
Conference Operator: the last question comes from Mark Hesseling, ING. Please go ahead.
Victor Bareno, Head of Investor Relations, ASM International3: Yes. Thanks for taking the question. The first one is just reading through your press release and also the comments during the call today, I have the feeling that maybe the opportunities even accelerated a bit faster than what you have communicated before given the step up in the R and D, also especially in the fourth quarter and also the evaluation tools, again, moving up in the second half of the year, which typically is a good leading indicator. Is that true observation? Is that true?
Hesham Masako, CEO, ASM International: I think the what we can say that I think for us that we are looking into all new applications that's happening right now. I think the R and D spending is has accelerated. There are like we mentioned, there's more and more LD layer from one generation to the other. So by definition, you have to do more R and D to get those layers. And that's not I mean, if you do R and D right now, I mean, business is going to happen four years from now.
So it's not something that really is immediate from that point of view, because it takes a long time to develop the new processes, the new equipment for ALD. But that's an indication of our really strong belief and our in the ALD market growth into the future. And like we mentioned, ALD is the new CVD. We see that happening, replacing PVD layers, replacing even some CVD layers, But also, ALD is happening for the high aspect ratio growth, it's happening in backfire power distribution. So it's just normal.
As the ALD expands, the market expands, our R and D is to expand with it.
Victor Bareno, Head of Investor Relations, ASM International3: Okay, great. And then my final second question is on your cash returns. Given your sort of target cash level that you earlier communicated and the buyback you now started, it seems a bit smaller given buyback for the next year. Maybe your thoughts about that?
Hesham Masako, CEO, ASM International: I think my thoughts about that, I think that we're looking into our cash allocation strategy going forward. So it's something that we're looking into. And right now, I think that we didn't make any decision from that point of view. But what we really focus on, okay, how can we provide the best return to our shareholders and that's really our focus going forward.
Paul de Haagen, CFO, ASM International: And maybe to add to that, Mark, I mean, we have also done 1,000,000 earn high payments in 'twenty five, you should have that as well. We are expanding rapidly R and D infrastructure. As you know, we finished Korea. We started in Scottsdale. So there's a lot going on.
So yes, also for that part, we are maybe a little conservative. You might be right, I don't know. But you should take these two things also into account.
Conference Operator: Gentlemen, there are no more questions registered. I turn the conference back to you for any closing remarks.
Hesham Masako, CEO, ASM International: And I would like, lastly, I would like to thank you everyone for attending today's call. Also on behalf of Paul and Victor, we hope to meet with many of you at the upcoming investor events. Thanks again and goodbye.
Conference Operator: Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephone.
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