Good day, and thank you for standing by. Welcome to the ASM International Q2 2022 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you'll need to press star one on your telephone. You will then hear an automated message advising that your hand is raised. I would now like to hand over to the speaker, Mr. Victor Bareño. Please go ahead. Thank you, operator, and welcome everyone. I'm joined here today by our CEO, Benjamin Loh, and our CFO, Paul Verhagen. ASMI issued its second quarter 2022 results yesterday at 6:00 P.M. Central European Time. The press release is available on our website, asm.com, along with our Q2 investor presentation. As always, we remind you that this conference call may contain information relating to ASM's future business and results. For more information on risk factors related to such forward-looking statements, please refer to our company's press releases and financial reports, which are available on our website. With that, I'll turn the call over to Benjamin Loh, CEO of ASMI. Thank you, Victor, and thanks to everyone for attending our second quarter 2022 results conference call. I hope you're all safe and well. Before moving on to the second quarter results, let me first comment on the takeover of LPE that we announced a couple of days ago. We are very excited that we reached an agreement to acquire this company. LPE has a great team with a strong innovation focus and will allow us to enter the high-growth silicon carbide market. LPE was founded some 50 years ago and has always focused on epitaxy solutions for the power electronics market. Traditionally, LPE was mainly active in silicon Epi, but in recent years, the company has gained a leading position in the fast-growing silicon carbide Epi market. Silicon carbide is a semiconductor material that, compared to silicon, offers a much higher power efficiency, especially at higher voltages. The benefits of silicon carbide are particularly relevant for power electronics in electric vehicles, where silicon carbide devices enable an extended range for the same battery capacity, faster charging times, and lower costs. EV is the key end market application driver for the silicon carbide device market, which according to third-party research firms, is expected to grow from some EUR 1 billion last year to more than EUR 6 billion by 2027. Epitaxy is an important step in the manufacturing of silicon carbide devices. Based on the strong increase in required wafer capacity, we expect the global demand for silicon carbide Epi tools will increase by a CAGR of more than 25% in the period from 2021 till 2025. LPE is very well positioned to benefit from the expected strong growth in demand. It offers very competitive 150 mm silicon carbide tools, which are used in manufacturing by several customers. It has also developed a 200mm tool, which is in evaluations with multiple customers. Driven by strong demand for silicon carbide and successful customer penetrations, LPE is experiencing substantial growth with expected revenue increasing to more than EUR 100 million in 2023, and with the largest part coming from silicon carbide Epi. The acquisition of LPE fits perfectly with our strategy and positioning. While the advanced nodes part of the market is the main driver for ASM, we have also built a strong position in the niche markets of power, analog, and wafer manufacturers. In Epi for power electronics, we have so far been focused on silicon epitaxy tools. LPE's advanced silicon carbide tools, therefore, complement our offering very well. We expect to drive further growth and drive value creation in LPE's business by leveraging our strong customer base in power electronics and further differentiate LPE's tools on the back of ASM's strength in areas such as 200mm platform expertise, process control technology, and cost of ownership. We also see opportunities for synergies in leveraging ASM's scale and capabilities in manufacturing, supply chain management, and our global service network. In short, with the acquisition of LPE, we expect to add a very attractive and high-growth business to our portfolio. Next, I would like to highlight the appointment of Hichem M'Saad as a third member of the Management Board as approved by the shareholders meeting last May. As most of you know, Hichem M'Saad has been instrumental in many of ASM's successful new product introductions in the last years. In his new role as CTO, he will play an even more important role in the further expansion of our company. The agenda for the rest of today's call is as follows. Paul will discuss the financial details of the LPE acquisition and review our second quarter results. I will then continue with a discussion of the market trends and our outlook, followed by Q&A. Paul, over to you. Thank you, Benjamin, and also thank you all for joining today's call. As Benjamin already said, first some financial details on the acquisition of LPE. We will pay for the acquisition with a combination of EUR 283 million in cash. Approximately 631,000 ASM shares. The cash will be financed out of our cash balance, and the share part representing 1.3% of ASM's total share count consists of 580,000 treasury shares and approximately 51,000 newly issued shares. In addition, we'll pay earn-outs of up to EUR 100 million, depending on certain performance metrics over a two-year period. The earn-outs will be exclusively paid in cash. LPE's revenue for 2023 is expected to be more than EUR 100 million, as already mentioned by Benjamin, and this represents substantial growth compared to recent years. LPE is profitable and expected to contribute to our net earnings from day one. We are not providing details on LPE's margins, but their profitability matches nicely with our mid-term guidance for ASM's profitability. Let's now continue with a review of our Q2 results. In the second quarter, our revenue increased to EUR 560 million, up 8% from the first quarter. Compared to the second quarter of last year, revenue increased 30% at constant currency, then 36% on a reported basis. Revenue in the quarter was at the higher end of our guidance of EUR 540 million-EUR 570 million. Spares and service revenue grew 14% year-on-year at constant currencies and accounted for 16% of total sales. Our equipment revenue in the second quarter increased 33%, driven by strong ALD sales, which continued to account for more than half of our equipment revenue. In terms of customer segments, revenue in the second quarter was led by Foundry, which surpassed the record level in Q3 last year. Logic was the second-largest segment, with revenue strongly up year-on-year and compared to Q1. The combination of Logic and Foundry continued to account for the largest part of our sales, driven by advanced node spending. Memory sales decreased both compared to Q1 and year-on-year, mainly explained by the phasing of investments. 3D- NAND accounts for the largest part of Memory sales in the quarter. Gross margin amounts to 47.5% in Q2, slightly down from 47.8% in the first quarter and 48.1% in the second quarter of last year. The variations in the gross margin are mainly explained by application mix. SG&A expenses increased by 47% year-on-year on a reported basis, and 41% at constant currencies. The increase in SG&A in Q2 was mainly driven by employee expenses, including related expenses such as travel. Our recruitment efforts were again successful, with the total ASM headcount at the end of June up 37% year-on-year. We continue to invest to support the growth of our company. The sequential increase in SG&A compared to Q1 was somewhat higher, including the annual compensation adjustments that took place in the beginning of the quarter in April. For the remainder of the year, we expect a gradual increase in SG&A from quarter to quarter. Net R&D expenses increased 51% year-on-year, and on a reported basis, 46% at constant currencies. Below the operating line, results include the currency translation gain of EUR 26 million, mainly reflecting the appreciation of the US dollar. This compares to a translation gain of EUR 9 million in Q1 and a loss of EUR 2 million in the second quarter last year. Let me switch now for a second to ASMPT. Our income from investments in associates, which reflects our 25% share of the net earnings from ASMPT, increased to EUR 23 million in the second quarter, up from EUR 20 million in the first quarter and also up from EUR 16 million in the second quarter of last year. ASMPT reported Q2 sales of $664 million, down 2% compared to Q1 and about unchanged compared to Q2 last year. Bookings amounted to $593 million in the quarter, down 34% sequentially and down 37% year-over-year. Now I will turn back to ASM's consolidated results. I mean, our new orders in the second quarter hit a record high level of EUR 943 million, up 83% from Q2 last year as reported, and 73% up 73% at constant currencies. The order intake was led by record high ALD bookings, and we also booked record high orders in Epi. The order intake was driven by broad-based demand with a new quarterly record for the Logic Foundry segment, with strength in Foundry and also record high bookings in 3D- NAND and in DRAM. Foundry represented again the largest segment in the second quarter, followed by Memory and then Logic. Now turning to the balance sheet. In Q2, we generated a healthy free cash flow of EUR 121 million, including ASMPT dividends of EUR 32 million, which was offset by a cash outflow of EUR 122 million related to the payment of dividends. As a result, we ended the quarter with a largely unchanged cash position of EUR 552 million. Free cash for the quarter was supported by continued strong profitability. Cash outflow for working capital increased EUR 43 million, mainly due to higher inventories. This is in part explained by a policy to maintain higher levels of buffer inventories for critical materials due to supply chain constraints. CapEx in Q2 was EUR 16 million and EUR 43 million in the first half. We still expect CapEx for the full year of 2022 to be at the high end of the range of our midterm target of EUR 60 million-EUR 100 million annually. Note that we've not yet started the share buyback that we announced earlier this year. In view of cash outflow for the acquisition of Reno Sub-Systems in Q1 and the dividend payments in Q2, as well as the announcement of the LPE acquisition, we still intend to execute the program within the previously announced 2022/2023 time frame. With that, I hand back the call to Benjamin. Thank you, Paul. Let's now look in more detail at the trends in our markets. In the course of the second quarter, parts of the semiconductor market, especially PCs and smartphones, started to weaken, in part impacted by rising inflation and interest rates, geopolitical tensions, and concerns about the economic outlook. Growth in other segments, in particular data centers, automotive and industrial, remain solid. On balance, growth in the semiconductor market is still expected to be positive this year, but not as strong as expected earlier in the year. Looking at the wafer fab equivalent market or WFE, demand remains strong and broad-based in the second quarter. For the full year, WFE is on track to increase by a mid- to high-teens%, as we communicated earlier, although it is now likely that growth will be more towards the lower end of this range due to industry-wide supply chain constraints. Our company booked record high orders in the second quarter, and as Paul just mentioned, for a big part driven by the Logic Foundry segment. The leading Foundry and Logic customers are currently preparing the ramp of their new technology nodes. These most advanced nodes that will move into high volume manufacturing in the second half of this year and into 2023, accounted for the largest part of order intake in Logic Foundry in the second quarter. We have secured many new ALD layers and applications in this transition, consistent with our previous projections for a strong double-digit increase. Our customers are investing in leading-edge capacity to accommodate new products to be introduced in 2023 in structural growth segments such as high-performance computing. We are currently not seeing a change in this trend. Logic Foundry demand in the advanced node remains strong. Looking a bit further out, we remain strongly engaged with leading customers in the development of gate-all-around ALD and Epi applications. This will be the next major inflection in Logic F oundry, which, as discussed on previous occasions, will drive a strong increase in our addressable ALD and Epi markets. In DRAM and 3D- NAND, we also booked record high orders in the second quarter. While general visibility in Memory spending always tends to be a bit shorter, it is important to note that our strong order momentum is to a large extent supported by the contribution of new ALD applications. In DRAM, we continue to benefit from the adoption of high-k metal gate, which is expected to drive further healthy demand. In 3D- NAND, we had a very strong increase in orders for a substantial part driven by ALD gapfill, reflecting our recent tool selections with leading customers. In this context, I would like to highlight our announcement of TENZA ALD for gapfill and liners at SEMICON West last week. It is a highly innovative process solution that we offer on our QCM platform and provides the best film quality, highest productivity, and lowest cost of ownership in this class, and is especially effective for complex, ultra-high aspect ratio structures, such as in the upcoming generation of 3D- NAND devices. At SEMICON West, we also announced the launch of our new 300 mm vertical furnace, Sonora. It is a completely new platform that offers substantial benefits compared to its predecessor, our A412 vertical furnace, such as 30% higher productivity, lower usage of energy and chemicals per wafer, and optimal film uniformity. Initially, we will target with Sonora our existing segments in the vertical furnace market, such as power analog and some parts of Logic. We believe Sonora also offers compelling advantages in advanced Logic Foundry and Memory applications. Lastly, looking at the power analog and wafer market segments, demand also continues to be strong. In this market, we are also benefiting from recent successful product introductions, such as our 200 mm vertical furnace, A400 Duo, and the Intrepid ESA for 300 mm power and analog applications. These segments are the smaller part of our revenue, but on the back of a very robust increase, we expect a meaningful contribution to our total top-line growth this year. Let's now have a look at the supply chain situation and the guidance that we provided for the rest of the year. In the second quarter, supply chain conditions continued to be challenging. Our global ops team went again the extra mile to meet customer requirements as best as possible, resulting in our second quarter sales reaching the higher end of our guidance. The improvement in supply constraints has been slower than expected, and as a consequence, we expect, again, an impact in the third quarter. While certain areas of the supply chain are gradually improving, for other parts, lead times continue to be extended with limited visibility for improvement in the next few months. We remain focused on mitigating the impact through early ordering and qualification of additional suppliers. We expect an increase in our third quarter sales and our guidance, as stated in our press release yesterday, is for a range of EUR 570 million-EUR 600 million. Supported by our record high order backlog of EUR 1.4 billion at the end of the second quarter, we still project an improvement in our sales in the second half compared to the first half. We continue to assume some improvement in the supply situation towards the end of the year, and based on that, we expect revenue in the fourth quarter to be higher than in the third quarter. Finally, as supply constraints will limit the extent of the increase in our shipments in the second half, we expect our order backlog to remain at an elevated level as we exit 2022. With that, we have finished our introduction. Let us 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 will have a chance to ask a question. Operator, we are ready for the first question. Can you please start the Q&A? Thank you. As a reminder, to ask a question, you'll need to slowly press star and one on your telephone and wait for your name to be announced. Once again, it's star and one on your telephone. Please stand by while we compile the Q&A roster. We are going to move to the first question. The first question come from the line of Adithya Metuku from Credit Suisse. Please ask your question. Yeah, good afternoon, gents, and congratulations on the stellar order book. I had a couple of questions. Firstly, just on the orders run rate, you know, that was a big surprise, a head-scratching surprise. Was there some kind of one-off in terms of the delivery of these orders? Has something changed with the delivery timing? Are you getting orders, you know, well in advance of, you know, three to six months delivery times? Any color you can provide there would be helpful. Looking forward, how do you expect the run rate to be for orders going forward? If this is the run rate that we should expect, then your midterm guidance will start to look very conservative. Any color you can provide around the order book and any one-offs in the order book would be very helpful. Secondly, just a quick question for Paul. I think you talked about SG&A trends in the second half of the year. I just wondered if you could also give us some color on what to expect for R&D in the second half of the year. That'll be super helpful. Thank you. Adi, thanks a lot. Maybe I'll answer the first question regarding the orders, the run rate, and, you know, maybe the outlook. Maybe just for clarification, if you look at the way that we report our orders, we only report, you know, orders that we have actual POs and that have to be delivered within the next 12 months. Actually, you know, the orders that we get, the significant high order intake of Q2, you know, all of them, if we can deliver, has to be delivered within the next 12 months. Is it a one-off? Actually, no. We, as we have shared in the commentary, we see very strong, you know, demand coming in from, especially Logic and Foundry. This is for the ramp of the next nodes, which is currently ongoing, which is gonna happen starting from the second half of this year, well into the next year. All the orders are actually going to fabs, you know, to be placed into high volume manufacturing. Do we see, again, you know, a lot of advanced orders? Again, no. You know, all the orders that we have reported, EUR 943 million, have to be delivered within the next 12 months. You know, I mean, the delivery dates requested by the customers are all within the next 12 months. Of course, depending on the supply chain situation, we will endeavor to do as much as we can, although it's a little bit tight now. Looking forward, we do not provide guidance on bookings or orders anymore since the beginning of this year. That probably suffice to say that we still see that order or demand is going to continue to be strong in this quarter. Got it. Just a quick clarification on that. Usually you used to say, you know, the timeline is 3-6 months for the orders in your order book. It looks like now you're saying it's 12 months, and so that time period seems to have gone up. Am I correct or has it always been 12 months? I think you know before all this you know COVID you know this ramp came up is correct. Our order lead time, or let's say our equipment lead time was probably in the range of 3-6 months. We have also shared that this is now significantly extended. The other thing is we do not just work with our customers based on you know actual purchase orders. In fact, for our largest customers, we work with them based on forecast. The purchase order is just the last part of the process where we actually book and report it. A lot of the times we already, for example, get forecasts from our customers, and we know what to expect, and we have to actually do some work in advance to ensure that we meet their forecast. Thank you. Very clear. Just on the OpEx, Paul, please. Yeah. Maybe first on SG&A. As you have seen, there was indeed a decent increase in Q2 compared to Q1, and that was to a reasonable extent related to the annual compensation cycle that we have. There is sometimes targeted, let's say merit increases for special groups, et cetera, based on benchmarks and based on retention and based on other reasons. April first is our annual round, basically for all the employees. That was a large part of the bump you saw in Q2. For Q3 and Q4, we expect a gradual increase. I still expect to be somewhat higher, but you should not expect a similar increase as you've seen in Q2 compared to Q1. R&D, I would expect to trend up faster than SG&A in Q3 and Q4. We are still investing in R&D to support the growth of the company. It's always a matter of whether or not we can get the people, et cetera, given the war for talent that is ongoing. I would expect the increase in R&D from quarter to quarter, so going into Q3 and then going into Q4, to be somewhat higher than the increase that you most likely will see in SG&A. I hope that gives you enough color for your Yes. Very clear. Analysis. Very clear. Thank you. Thank you, Adi. Can we move to the next question? Sure. We're going to take the next question. Please stand by. We have the next question coming from the line of Sandeep Deshpande. Please ask your question. Yeah. Hi. My first question is regarding the order book. Congratulations on the very strong order book. How much of these orders are to do with some of these new products or new layers that you have broken into, such as gate-all-around in the Logic space or gap fill in NAND or high-k in DRAM? I mean, how much of the order book would you say is from these next generation technologies, and how much is what was always, you know, I mean, the ongoing ASM business as such, really? I have one follow-up. Sure, Sandeep. Thanks for calling in. If we look at the very high orders in the second quarter, a lot of it was driven, first of all, by Logic and Foundry. You know, maybe to give you some color, of course, the current ramp in Logic and Foundry is at the most advanced nodes. You know, whether it's 3nm or, regardless of whether it's FinFET or gate-all-around, that is where it is driving most of the orders today. Now, of course, we do see orders also from some of the, let's say one N minus one node and so on, but it's primarily driven by the latest node that is being ramped up for high volume manufacturing. On the Memory side, I think we have also shared in our commentary that, first of all, we had record high orders in 3D- NAND. That is largely driven by, you know, the new customer selection wins that we have for gap fill, for ALD gapfill applications, because that's actually driving the need for more and more gap fill applications. Of course, in DRAM, you are absolutely correct, Sandeep. You know, a large part of it is driven by increasing adoption of high-k metal gate. Just one clarification there, Benjamin, which is, in terms of what you said about next generation node. Next generation node is 3nm, which is not a gate-all-around node. So, are you saying at this point, despite this very strong order intake, GAA is not very much significantly there in your order book? I think, Sandeep, we all know that, you know, the main bulk of 3nm is still on FinFET. There's a little bit of, you know, gate-all-around that has just started, but I think, you know, we all know that the volume is very, very small. Larger part of the drive is still coming from the traditional FinFET 3nm. Understood. One quick financial question. I mean, you've had these great orders and great sales growth. I mean, when you look at your sales growth in the first half, I mean, 34% year-on-year sales growth. I mean, normally in a tech company, sales, such sales growth will mean much more leverage. Unfortunately, when you look at your operating margin, I mean, that's up only 20% year-on-year. When will this? I mean, clearly there have been reasons which you've given in the past why this has happened. Will this change now going in the future, or you're still gonna remain at lower leverage as such? Yeah. Thanks for the question, Sandeep. I actually 100% agree with you that with the growth that you see, you would maybe expect in normal circumstances a larger expansion of margin. We are actually investing still in growth, which is also supported of course by the order book you've seen. What I can say is, of course, that our midterm guidance stays. Still definitely our plan with the growth that we anticipate for the years to come to get to high single digits for SG&A, which was around 12% in Q2, and to get to high single to low double for R&D. That didn't change. The benefit in particular in SG&A are still to come. Yeah, as we say in the Netherlands, the cost cut for the bath. The cost is ahead of the benefit. I don't know how you say it in English. That's what you see reflected in our results, but it will come. Thank you. Thank you, Sandeep, for your questions. Operator, can we move on to the next caller? Yes, we're going to move to the next question. Please stand by. We have the next questions coming from the line of Marc Hesselink from ING. Please ask your question. Yes. Thank you. First question is on the supply chain. In the supply chain, do you see a particular bottlenecks, or is it more broad-based? If it's broad-based, how much is in your control to improve it over the coming quarters? Second question is, after the acquisition, what's now your appetite for additional M&A? Is it more you're looking to digest it first, or is it something that now that you've made these steps, you can do more of it in the future if you find the right match? Thank you, Marc. First of all, on the supply chain, I think we are still seeing, you know, the same bottlenecks. I would say the particular one is in, you know, chips. And you know, because of the shortage of certain chips, it actually impacts, you know, the what we call our sub-tier suppliers. Some of our module suppliers, for example, are unable to supply because they couldn't get the chips. Now, in terms of control, I would say we have very little control, although we are doing everything that we can. Some of the manufacturers of the chips, we already know who they are, and they are our customers. We have also gone, maybe for lack of a better description, begging for chips, you know, for allocation. So we do whatever we can. We just wanna make sure that we are able to get as much as possible so that we can meet the customer requirements. On M&A, you know, we have always had the same strategy that we will look at M&A, but it will be restricted or limited to what is our core strategy of deposition. We will continue to do that. LPE, of course, falls very nicely into the same area in two ways. One, it is in deposition. Two, it actually allows us to, you know, add value with, you know, a couple of things. Our epitaxy process control technologies. It also, you know, allows us to potentially leverage on, you know, the wider sales and service network that we have. Supply chain capabilities, manufacturing capabilities. You know, in terms of a good add to, you know, our portfolio, I would say there's probably, you know, a option that we came across, you know, until LPE, which we have, you know, signed the agreement. We are actually very excited with this and hopefully we get to close the deal as soon as possible. Okay, thanks. Maybe shortly on the supply chain. You're assuming that it will get a bit better over the two quarters, the coming quarters. How strong is your visibility on that? Because I think in this, what we've just seen in the second quarter is actually that it got quite a bit worse. How do you feel about visibility on that? Yeah. That is where, you know, we are trying to be a little bit cautious here. You know, some areas, you know, visibility is still very limited. Without that clear visibility, you know, it's difficult for us to try to make, you know, further quantification of, you know, how much revenue we'll be able to deliver. You are correct, Marc. Some areas, you know, visibility is still bad. We do think that some areas have improved. Hopefully, you know, those areas which still have limited visibility over the next couple of months, it will get better and, you know, help us to actually convert more of our backlog into revenue in the fourth quarter. Thanks, Marc. Operator, can we move on to the next question? Sure. We are going to take the next question. We have the next questions coming from Robert Sanders from Deutsche Bank. Please ask your question. Yeah. Hi, guys. Congrats on the quarter. I just wanted to ask a bit, a few questions about LPE. When we speak to LPE's customers, they say that the single chamber, single wafer approach is preferable for uniformity. You know, there are players doing planetary reactors that have big customers as well. Are you basically placing a bet on their approach on the single chamber, single wafer approach? That's the first question. The second question would be, you know, should we assume that because you've done this deal, that they are very well positioned at the top five players in silicon carbide for eight-inch? Obviously, they have STMicroelectronics, they have X-FAB Silicon Foundries, but you know, how are they positioned at the top five players today? Then the last question would just be: when you think about this market in silicon carbide, are you not a little bit concerned that there could be a China player that enters the market, like happened with AMEC, which obviously really hurt the LED market back, five or six years ago. I was just wondering, because LPE does have a lot of customers in China, I think. That's true, Robert. I'll try to answer the questions one at a time. I think the first question was single wafer versus planetary reactors. You know, based on very extensive studies that we have done, I think, you know, planetary reactors was more than sufficient, actually good, very good for high volume manufacturing, you know, up to 150mm form factors. As the industry is looking to transition to 200mm form factor, what we understand is that, or what we have found out is that, the planetary reactors or what you call the batch type of approach is losing steam because the performance is not good enough. You'll find that even some of the competitors of LPE, they are developing single wafer reactors at this moment. It looks like that is going to be the trend going forward, especially with the transition to 200mm form factor. That's one. In terms of you know the engagement at 200mm, I would say that LPE is very well engaged. We will not go into specific customer names, but they are in, I would say, a lot of engagements with quite a number of customers on either joint development or evaluations or doing demos, you know, on 200mm form factor. We are quite confident that these customers will also, you know, find that the performance of their single wafer reactor will be good and will hopefully adopt them for high volume manufacturing when the transition happens. China. China is interesting. Of course, when you look at the history of LED, you know, that's exactly what I think you are referring to, Robert, where the Chinese players basically, you know, dominated a large part of the LED, let's say, manufacturing equipment market. I think silicon carbide is a very much more different animal in the sense that it is a very difficult material. The process is also not easy. To try to copy is very difficult. I do believe that you know not just LPE, but maybe some of the other foreign you know players or peers, they have good technology which you know they have developed over many, many years. It's not something which a Chinese competitor can just copy over a short period of time. I hope that answers your question, Robert. Yes. Thanks. Okay. Thanks, Robert. We are going to move to the next question. Please stand by. We have the next question from Maarten Verbeek from The IDEA!. Please ask your question. Good afternoon. It's Maarten Verbeek of The IDEA!. Firstly, question concerning your SG&A. When I analyze your SG&A cost and relate that to your midpoint of your 2025 sales target, then more or less you are already at your high single digit target for 2025, SG&A related to revenue. Since I don't project that SG&A will really come down, does this imply that you're now betting on the high end of your target for 2025? Thanks. Thanks for the question. The SG&A cost indeed is not likely to come down. I agree with that part of the analysis. With regard to the revenue, I stick obviously to the things that we have previously announced, which is the range of EUR 2.8-EUR 3.4. You can do the math. Our target is still to reach a high single-digit level of SG&A within that targeted midterm range that we have stated. Maybe to note, there's a few one-off costs. It's not the bulk of the increases, to be clear. Acquisition-related costs, obviously. A few more to come in the Q3, most likely. Still, the bulk is driven, as I communicated earlier, by the growth in headcount and employee-related expenses like IT, travel, et cetera. Yeah, that's where we stand on SG&A. Okay. At the end of the day, the math doesn't work out, so one of the three has to change in future, has to be different. Secondly, assuming that you will conclude the LPE acquisition, and you have mentioned it will generate more than EUR 100 million in 2023, and growth is some 25% going forward, that would imply that by 2025, it will have sales well ahead of EUR 150 million. When I would relate that to your estimates for the epitaxy market by 2025 of about EUR 1.5 billion-1.8 billion, LPE will have a market share of, let's say more or less 10%. Does this also imply that your target for 2025 would be a 40% market share in this market? I think there's probably some confusion here. When we shared with you know, everybody about our market share projections for epitaxy growing to you know between $1.5 billion-$1.8 billion by 2025, that was only referring to silicon epitaxy. Silicon carbide, because we were not a player at that point in time. Mm-hmm Last year when we did our investor day is not included. Now, if you look at silicon carbide epitaxy, of course, our projection is that it's going to grow at about 25% CAGR over the next couple of years. We do expect that the market or the size of the market is going to grow fairly nicely. I think we will probably, you know, want to do more work before we want to share projections or market share up to 2025. In any case, we'll probably do this, you know, after we have closed the deal and have much more insights, much more information. But we do expect that it is going to be a nice growth business for us. First of all, next year, getting to more than EUR 100 million, and hopefully allowing us to grow that, you know, at least at the same kind of growth that the equivalent market is going to grow, if not even higher, until 2025. We will provide more details of that. Okay, thank you very much. Thank you, Marc. Can we have the next. We are going to take the next question. Please stand by. We have the next question coming from the line of Janardan Menon from Jefferies. Please ask your question. Hi, good afternoon, and thanks for taking the question. Just two from me. One is, you know, when you say that you have a 12-month period to ship, the kind of orders you're taking in right now at, you know, more than EUR 900 million, and clearly the component shortages are, you know, not allowing you to go even to EUR 600 million at this point in time. Does that mean that you expect a significant improvement in the component supply situation, say in the first half of next year, which would, you know, sort of take your sales much higher than the current run rate, say to the EUR 700 million-EUR 800 million kind of range, so that you can meet some of these obligations within the next 12 months or so? That would be my first question. The second question is, you know, I agree that, you know, your run rate may not continue at EUR 900 million, but it you know, you're suggesting that it could stay strong. That sort of run rate, as the previous question was alluding to, is almost getting you to your 2025 target, annual target, if not going higher than that. I was just wondering from your own capacity standpoint, does this big inflection in orders mean that you have to reevaluate your capacity? You know, you're bringing on the second floor in Singapore next year. Is that coming on fast enough, and do you need to already think about another floor there to accommodate these kind of growth rates, assuming that, you know, you're going to address a growing market even beyond 2023 into 2024, 2025, et cetera? I just wanna know your thoughts on that as well. Thanks. Sure, Janardan. Maybe on the twelve months, you know, on how we report or how we book and report the orders. Yes, the requirement is that, if we were to book a PO, you know, it should be that the delivery of that equipment has to be within the next twelve months. Now, we would love to be able to ship everything. Unfortunately, with the supply chain constraints, we probably will have some which will not be possible. Now, having said that, it all depends on, you know, how the supply chain constraint situation, you know, develops. We are cautiously optimistic that as we get into the next year, hopefully things will improve significantly. That will allow us to convert more of the backlog that we have into revenue. Whether we see, you know, a significantly higher first half in 2023, I think some of it, you know, you can probably do the math because of the higher order backlog that we are now reaching. It is possible. You know, at this moment, given the lack of visibility that far into the supply chain, we are not able to quantify that. Secondly, on the run rate, we again hope, you know, that if this run rate is going to continue like this for the next couple of years, of course, we are gonna run out of space. Having said that, we have already taken a very proactive step in already expanding the second floor of our Singapore facility. With that expansion, we basically triple our manufacturing capacity compared to 2020. With that capacity, we are actually confident that we will be able to meet our revenue, our midterm revenue targets of EUR 2.8 billion-EUR 3.4 billion. You know, if we have to look at, you know, unless things grow so fast, much faster than we expect, then maybe we need to look at other options. At this moment, we are confident that, you know, based on the midterm revenue target of EUR 2.8-EUR 3.4, we have enough space, and we are fast enough because we already taken a proactive step to fit out the second floor, which will be completed by the beginning of next year. Understood. Thank you very much. Thank you. We are going to take the next question. The next question comes from the line of Didier Scemama from Bank of America. Please ask your question. Thank you very much. First of all, congratulations on this, extraordinary order intake and also congratulations on the acquisition of LPE. Looks like a very smart acquisition. Two questions, if I may. A lot of the good ones have already been asked. I just wondered if you could go back to the order intake, if you could, deconstruct that a little bit. I just wanted to understand, if you could give us a bit more color on the ALD, capital intensity at the 3nm node versus the 5nm node, if that's the major driver for the order intake beat. Then secondly, you know, the. It sounds like you are, like, sort of reaching new levels of order intake, and I wondered how much of that is driven by 3D- NAND and high-k metal gate. I guess related to that question is, I mean, should we start to think about ASMI also as a Memory player or is it too early to say it's still Foundry Logic building a small position for the time being in Memory? I've got a quick follow-up for Paul. Thank you. Didier, thanks for the congratulatory message. On the first question of the ALD capital or ALD intensity, I think what we have always shared, of course, is that when you move from one node to a smaller one, we do see a double-digit percentage increase. As we have also mentioned in our prepared, you know, remarks, that is one of the factors that is driving, of course, the higher bookings that we are seeing. Now, of course, there's also the level of investment which is very high now in Logic and Foundry. Again, you know, alluding to a previous comment, you see a lot of investments now into, for example, 3nm, which is the node that is being ramped in preparation also for next year's consumer end products. I think that is what is really driving it. ALD intensity, of course, is increasing, but it's also the volume of investments. On, you know, maybe let's say the breakdown and so on, we will not give that specifically by markets. Generally, you know, we have very broad-based good order intake. I think we also mentioned in the prepared remarks that we saw record order intake for 3D- NAND. I think this is due to the wins that we have had recently, especially in 3D- NAND for gap filler applications, which is becoming more and more important as the number of layers or number of pairs goes up. Demand, of course, with the increasing adoption of high-k metal gate. Now, having said that, I think we are doing you know what we have set out to do in terms of our strategy, and that is to you know slowly but surely increase our share in Memory. Having said that, the bigger part of our play is still in Logic and Foundry. That is still our main market. I think we'll leave it, you know, to you to figure out or to decide whether you wanna consider us as a Memory player. We will definitely continue to grow our Memory business, but the larger part of our business is still in Logic and Foundry. Okay, brilliant. Thanks for the color. I think Janardan tried to have a go, but I'll have a go as well. If you had all the capacity that you wanted, can you say what your orders might have been, A, and then, B, what your revenues might have been, in Q4? We will not quantify this, but you know, what we can say of course is you know, if we were to assume a hypothetical situation where we did not have supply chain issues, you know, revenues could be you know, significantly higher. How much we will not quantify that because as I said, we still have difficulty with limited visibility in some parts of the supply chain. What we can say for sure is that supply chain constraints is in fact limiting our ability to you know convert more of our backlog into revenue. All right. Thanks very much. Thank you, Didier. Can we have the next question? We are going to take the next question. Please stand by. We have the next questions coming from the line of Timm Schulze-Melander from Redburn. Please ask your question. Hi there. Thanks for taking my question. I had two, maybe one for Ben and one for Paul. Maybe just starting where sort of Didier left off. Did supply chain constraints limit the amount of orders that you recognized in 2Q? No. I think, you know, if you look at, for example, you know, maybe compared to some of our peers, our lead times are still relatively short. In that respect, you know, most of the orders that we get are actually for fairly near term, in fact, for delivery within the next 12 months. It was not like, you know, we were getting orders that were for delivery or 1.5 or 2 or 3 years out, and we were not, you know, getting those orders. The supply chain is really impacting our near-term, you know, delivery capabilities. That is the reason why, you see that, you know, revenue-wise, we have only been able to increase Q3 or third quarter, you know, not as much as we would have loved to. We do think that, with improving supply chain conditions, we should be able to have more revenue in the fourth quarter compared to what we have guided now for the third quarter. No, very clear. Just on those orders that you just got in, are you in any way restricted to developing second sources? Are there any conditions in those orders that limit you to your existing supply chain? I think we have been doing that, and in cooperation with, you know, also our customers. I think customers are actually today very much more understanding and helpful. Of course, we have to work with our suppliers, but a large part of the work that we have to do is also with our customers and getting them to help us, you know, qualify and approve, you know, alternative suppliers. I think if that was not the case, things would actually be even more difficult. I think, you know, most of our customers today are willing to lend, you know, a helping hand and willing to offer us this help. I don't see any bottlenecks or any constraints in that area. Got it. Then just a quick follow-up for Paul, please. Two sort of housekeeping questions. The first is, you know, you obviously have visibility a quarter ahead, in terms of what you ship. Could you just let us know the application mix, you know, relative to Q2. Will that be flat or improve, or erode in Q3? Your revenue guidance, could you share with us what US dollar exchange rate that was struck at, please? Thank you. Yeah. Maybe the last one to start with. Basically, every time we provide guidance, we use the latest rate because, yeah, we're not gonna speculate on a lower, higher, stronger dollar-euro rate or whatever. We typically base on the current exchange rate, just to be clear. Coming back on the application mix, obviously we have a detailed plan and orders by customer, by product. As you know, I'm not gonna guide on mix because indirectly I would be guiding on margin. It's also difficult because there are at times still push out, pull in, so things can still change within the quarter. It's not like that it's already a given what the margin will be because of these type of dynamics. There can be unexpected decommitments from suppliers that can have, again, a change in the mix as a consequence thereof. But what we try to do, of course, is stay within our guidance, as we say every quarter. That might not help you a lot, this answer, but that's actually the best I can, like I give you. There is a lot of dynamics that go on, and if I would now say the mix is the same or better, then basically I'm saying the margin will be the same or better. That I simply cannot do given all the dynamics that we have to deal with. All right. Worth a try. Thank you. Yeah. Thank you, Tim. Can we please have the next question? We have the next question. Please stand by. We have the next question. It's coming from Adithya Metuku from Credit Suisse. Please ask your question. Yeah. Thank you, guys. Thanks for squeezing me in again. Just two questions. Just on the acquisition of LPE, have you looked into the probability of regulatory approvals? I understand LPE, you know, somebody tried to take it over previously, who wasn't domiciled in the EU, and that acquisition was rejected. Have you looked into that? That's the first question. Secondly, just on the supply constraints, are these chip supply constraints, do they have anything to do with any discontinued products? Is that why you're struggling to find supply in the market? Or is there some other thing that we need to be aware of? I'm just a bit surprised that these constraints are not easing given the weakness we're seeing in the consumer end market and given these chips are meant to be on lagging-edge nodes. Any color you can provide there would be helpful. Sure. First of all, on the acquisition of LPE and the regulatory approvals, of course, we have delved, you know, very much into that. We will of course need, you know, FDI approval from the Italian government. We will need, you know, antitrust, you know, approval from some other countries. But, you know, we are actually confident that we will be able to get this, you know, given the relatively limited impact that this is going to have. We are just working through the process and, you know, the process of getting the approvals have already started, so we are already engaged in that. On the chips, I don't think it is necessarily discontinuing products, but if you look at some of the older legacy chips, some of the manufacturers have for some time already been producing less and less of them. You know, because of this less and less of them, there is all of a sudden, you know, also having to meet demands from other areas, you know, whether it's from consumer or industrial and even to some extent, maybe automotive, that has created the shortage there. I agree with you, Adi, that hopefully with some of the easing in some of the markets for, let's say, demand for legacy chips, that hopefully this is going to result in, for example, not just ourselves but also some of our peers having a larger share of the, you know, the older chips that we need, actually for our equipment. Understood very clear. Thank you. Thank you, Adi. We are going to take the next question. Please stand by. We have the next questions coming from the line of Nigel van Putten from Kempen. Please ask your question. Hi. Good afternoon. Again, on the order intake, 'cause I understand visibility is still limited in some of, some parts of the market, and that may, yeah, sort of limit your willingness to talk about the current situation, especially relative to your medium-term guidance. I sort of sense that there is not a connect there yet. Let's assume then that spend on Foundry is unchanged next year. Should you see orders similar more to this quarter or last quarter? 'Cause it's quite a step change. Basically, is the current situation still exceptional and not to be repeated, or is this more in line with with sort of the current focus of the market into the next node? Nigel, I think it will really depend on how much, you know, the main Logic and Foundry players are going to invest in terms of adding capacity at the leading edge. That's one. We also see a lot of what you call technical buys happening for development. If we see that, you know, both of these are going to happen, continue to happen at a high level, we do expect that, potentially, you know, orders from the Logic and Foundry sector is going to continue to be strong. All right. That's actually very insightful. Thank you very much. Okay. Thank you, Nigel. As there are no further questions at this time, I will now hand back the call to Mr. Loh for final remarks. Sorry, and you know, thank you for calling in, you know, today. I was just trying to work through you know, the notes. Thank you again. Thanks for calling in. Stay safe, and goodbye to everybody. Ladies and gentlemen, that does conclude today's conference. Thank you for participating. You may now disconnect your lines.