Thank you for standing by. Welcome to the ASML 2021 first quarter financial results conference call on April 21st, 2021. Throughout today's introduction, all participants will be in listen-only mode, and after ASML's introduction, there will be an opportunity to ask questions. If you'd like to ask a question, please press zero one to register. If you'd like to withdraw your question, please press zero two at anytime during the call. Your questions will be answered in the order that they are received. If any participants has difficuly hearing the conference, please press star zero for operator's assistance. I would now like to turn the conference call over to Mr. Skip Miller. Please go ahead, sir. Thank you, operator. Welcome everyone. This is Skip Miller, Vice President of Investor Relations at ASML. Joining me today on the call is ASML CEO, Peter Wennink, and our CFO, Roger Dassen. The subject of today's call is ASML's 2021 first quarter results. The length of this call will be 60 minutes, and questions will be taken in the order that they are received. This call is also being broadcast live over the internet at asml.com. A transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call. Before we begin, I'd like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation found on our website at asml.com, and in ASML's annual report on Form 20-F and other documents as filed with the Securities and Exchange Commission. With that, I'd like to turn the call over to Peter Wennink for a brief introduction. Thank you, Skip. Welcome, everyone. Thank you for joining us for our Q1 2021 results conference call. I hope all of you and your families are healthy and safe. Before we begin the question- and- answer session, Roger and I would like to provide an overview and some commentary on the first quarter, as well as provide our view of the coming quarters. Roger will start with a review of our Q1 2021 financial performance, with added comments on our short-term outlook. I will complete the introduction with some additional comments on the current business environment and our future business outlook. Roger. Thank you, Peter. Welcome, everyone. I will first review the first quarter financial accomplishments and then provide guidance on the second quarter of 2021. Net sales came in above guidance at EUR 4.4 billion, primarily due to higher installed base business from upgrades. We shipped nine EUV systems and recognized EUR 1.1 billion revenue from seven systems this quarter. Due to the delay in one of our customers' roadmaps, we jointly decided to buy back two of their new systems and ship these to another customer this year. This was accounted for as a revenue reversal in Q1 2021. For the system shipped in Q4 2020 with a new configuration, we were able to complete site acceptance and recognized revenue this quarter. We also shipped one system this quarter without factory acceptance testing, so revenue will be recognized in the subsequent quarter after a customer site acceptance. Again, the net result is seven EUV revenue systems in Q1. Net system sales of EUR 3.1 billion was again more weighted towards logic at 78%, with the remaining 22% from memory. The strength in logic drives both Deep UV and EUV revenue. The memory business is mainly driven by DRAM. Installed base management sales for the quarter came in at EUR 1.2 billion above guidance due to increased upgrade business as customers pull forward software upgrades that can quickly increase productivity of systems in this high semiconductor demand environment. Gross margin for the quarter was 53.9% and was above guidance due primarily to the additional software upgrade business. On operating expenses, R&D expenses came in at EUR 623 million and SG&A expenses at EUR 168 million, which was slightly above our guidance. Net income in Q1 was EUR 1.3 billion, representing 30.5% of net sales and resulting in an EPS of EUR 3.21. Turning to the balance sheet, we ended the first quarter with cash equivalents, and short-term investments at a level of EUR 4.7 billion. Moving to the order book, Q1 net system bookings came in at EUR 4.7 billion, including EUR 2.3 billion for EUV systems and another strong quarter of Deep UV demand. Order intake was largely driven by logic with 76% of bookings, primarily due to EUV order intake, with memory accounting for the remaining 24%. With that, I would like to turn to our expectations for the second quarter of 2021. We expect Q2 total net sales to be between EUR 4 billion and EUR 4.1 billion. The directionally lower guidance is primarily due to shipments in the quarter, both EUV and Deep UV, that will not receive factory acceptance testing due to customers' desire to bring systems to production as quickly as possible. Therefore, we will recognize revenue in subsequent quarters after completion of acceptance testing at customer sites. In addition, the installed base business is expected to be lower in Q2 versus Q1 as customers pulled forward installation of productivity software upgrades to quickly increase wafer capacity. We expect our Q2 installed base management sales to be around EUR 900 million. Gross margin for Q2 is expected to be around 49%. The lower gross margin quarter-on-quarter is mainly due to delayed revenue from immersion systems that we plan to ship without factory acceptance testing, as well as lower installed base management sales versus Q1. Expected R&D expenses for Q2 are EUR 650 million, and SG&A is expected to come in at EUR 175 million, reflecting a continued investment in the future growth of the company. In support of our aggressive product roadmaps and opportunity to fill in some of our high-value product developments, we plan to increase our R&D investments, primarily in EUV, via increased development capacity. Furthermore, this increase will allow us to compensate for remote work impacts. We don't expect this increase to scale at the same level as our revised revenue increase, with R&D expenses for 2021 around 14%-15% of sales. We expect SG&A to remain around 4% of sales for 2021. Our estimated 2021 annualized effective tax rate is expected to be between 14% and 15%. As mentioned last quarter, ASML intends to declare a total dividend with respect to 2020 of EUR 2.75 per ordinary share. This is a 15% increase compared to the 2019 dividend. Recognizing the interim dividend of EUR 1.20 per ordinary share paid in November 2020, this leads to a final dividend proposal to the general meeting of EUR 1.55 per ordinary share. The 2021 annual general meeting of shareholders will take place on April 29th, 2021 in Veldhoven. In Q1 2021, ASML purchased 3.5 million shares under the 2020 through 2022 program for a total amount over EUR 1.6 billion. Our expected free cash flow generation enables the opportunity for continuation of significant share buybacks in the coming quarters, and we expect to complete the execution of our current share buyback program early. With that, I would like to turn the call back over to Peter. Thank you, Roger. As Roger highlighted, we had a very strong quarter in both sales and profitability, driven by continued strength in both logic and memory, as well as significant demand for upgrades as customers look to bring additional capacity online as quickly as possible. The additional upgrades consisted primarily of software-based productivity packages. We are seeing a significant increase in demand from our customers across all market segments and all nodes, mature and advanced, compared to three months ago, and we expect another very strong year with demand across our entire product portfolio. The steeper than expected recovery in demand for semiconductors, amplified by the COVID-induced lower investments of the industry in 2020, has created significant upside to demand over the past quarter. This more cyclical demand sits on top of the secular growth from the accelerated buildup of the worldwide digital infrastructure and is fueling demand not only for advanced and mature logic nodes, but also for memory. In logic, customers continue to see strong demand across a broad application space for both advanced node as well as mature nodes. In last quarter, we expected revenue from logic in 2021 to be up 10% year-on-year. However, we now expect logic to be up around 30% this year. In memory, the applications that are driving the strong logic demand are also fueling demand for memory. As we mentioned in earlier calls, the memory recovery started last year and continues to strengthen as customer plans to increase capacity is driving significant demand for our systems in the second half of the year. Compared to last quarter, where we expected revenue for memory in 2021 to be up 20% year-on-year, we now expect memory revenue to be up around 50% this year. On our installed base business, service revenue will continue to scale with the growing installed base and with increasing contribution from EUV services as these systems run more and more wafers in volume production. We are also supporting our customers with upgrades to maximize performance of their installed base. In order to meet the high demand in the current tight chip supply environment, customers are prioritizing software upgrades to quickly increase capacity, as reflected by our high upgrade number in Q1. Some hardware upgrades require extended machine time to be installed, and in the current high demand environment, customers will be less willing to take systems down, which has a dampening impact on the 2021 growth profile of hardware upgrades. We therefore still expect growth of our installed base business of around 10% this year, as mentioned last quarter. On EUV, we continue to see increasing customer confidence in this technology, which is translating to expanding layer counts in logic and increasing deployment of EUV in memory at multiple customers, evidenced by a number of customer announcements around increases in their CapEx plans, which will include spending on EUV for advanced nodes. To support the strong EUV demand, we are working to increase our output capability. At the same time, we are driving our product roadmap to produce higher productivity machines, which will increase the effective EUV capacity per system and the wafer output capacity of our customers. We plan to transition to the NXE:3600D system in the second half of the year, which will provide customers with a 15%-20% higher productivity compared to the NXE:3600C systems shipping in the first half of the year. Limited by the available modules and parts this year, we're still planning for growth of around 30% in EUV revenue this year. With the expanding adoption of EUV at our customers, we see increased demand building in 2022 and beyond. We are improving our manufacturing cycle time and are planning our supply chain for a capacity of around 55 systems next year. As a reminder, all of our planned shipments in 2022 will be NXE:3600D systems with the increased productivity capability. Our strengthened outlook on the year relative to last quarter is primarily driven by the demand for Deep UV systems. With increased demand on leading-edge nodes, as well as mature nodes running longer and ramping stronger, demand for our immersion and dry systems is stronger than ever. We have put in place plans to increase our Deep UV capacity to help meet our customers' increased demands. In our application business, as demand for scanners continues to increase, we expect a step-up in demand for our YieldStar metrology systems, particularly in logic. The newly released YieldStar 385 is beginning to ramp across our customer base as well. With the recovery in memory, specifically of 3D NAND, we expect a substantial increase in E-beam inspection revenue this year. For the industry at a high level, we see three trends driving considerable growth this year and in the years to come. The first trend, in the shorter term, there's a more cyclical, or you could say a catch-up driven demand from decisions made in 2022 due to the global pandemic. These shortages were initially evident in the automotive market, but more recently, there are also indications of supply tightness impacting other market segments. We expect this to drive considerable demand for lithography systems this year and into next year. The second is a secular growth trend driven by the digital transformation taking place as we become a more connected world across both people and machines. This transformation was further accelerated over the past year with the increased remote activity and reliance on technology to stay connected. These secular trends are driven by expanding end-market applications such as 5G, AI, and high-performance computing. These and other mobile distributed applications drive demand for both advanced logic as well as more mature technology required for the services and applications that drive the growth of the digital infrastructure. Along with increased logic demand comes increased memory demand. This, in turn, drives demand across our entire product portfolio. The third trend, which we're starting to see now, and which we will likely continue to see longer term, is the desire for more technology sovereignty, which includes semiconductor and silicon-based technology, leading to a geographical decoupling as different governments put initiatives in place to localize supply chains and become more self-sufficient. This inevitably will create some level of inefficiency in the semiconductor supply chain and creates additional equipment demand as more fabs are strategically built across the globe. If you summarize the growth of the different segments and the trends just discussed, we now expect sales growth towards 30% this year. To achieve this growth, we are ramping up our capacity to support customer demand, resulting in a stronger second half. With the higher revenue and increased mix of Deep UV and upgrades, we now expect gross margins to be between 51% and 52% this year. For the industry as a whole, the long-term demand drivers only increase our confidence in our future growth outlook towards 2025, and we plan to provide an update on our 2025 scenarios at our Investor Day in September. With that, we'd be happy to take your questions. All right. Thank you, Peter and Roger. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I would like to ask that you kindly limit yourself to one question with one short follow-up if necessary. This will allow us to get to as many callers as possible. Now, operator, could we have your final instructions and then the first question, please? Thank you. At this time, we will begin the question- and- answer session. Again, if you have a question, please press zero one to register for question. To withdraw you, you can press zero two. If your speaking using speaker today, please lift your handset before making your selections. One moment to the first question. Our first question comes from the line of Mehdi Hosseini of SIG. Please go ahead. Your line is open. Yes, thanks for taking my question. I want to follow- up on the EUV revenue target for this year. I understand that you're keeping it unchanged at 30%, but in case you're able to improve the supply chain and availability of sub-component, could there be upside to the shipment even though you may not be able to recognize the revenue? I have a follow-up. Yeah, Mehdi. You just used two very important words, in case, which is the problem. Yes. because we said it last quarter. These are very long lead time items. A lens has a manufacturing cycle time, or I would say lead time of over 12 months. If we haven't ordered, the lens is not going to be there. I think when we look at capacity increase, we really need to look at next year. I think it's virtually impossible to get more out of 2021 as we have planned today. Really, that's why we also mentioned that working with our supply chain and looking at the demand next year, we are now planning. We haven't received full confirmation yet of the supply chain on it, but our focus is on the 55 systems next year. Bearing in mind also that, I think we said it before, customers are buying systems, but effectively they're buying wafer capacity. With next year, only 3600Ds, which already provides you with a 15%-20% productivity increase. If you multiply, let's take the average of 15%-20%, 17.5%, or let's say 18% extra productivity increase per system, then the 55 systems actually translate into 65 systems with 3400C productivity. This is the way that you need to look at it. Great. Thanks for the detail. A quick follow-up. As I think about beyond 2021 and your operating margin, could there be a scenario where your key customers would share some of the development costs associated with High NA, similar to what happened to EUV almost a decade ago, so that could also help drive overall operating margin to above 33%? Thank you. Well, I don't think it's likely because it's not necessary. When we go back almost a decade ago, our R&D expense at that time was EUR 600 million per year. When you looked at the size of the EUV program at that time, and still you need to consider that the entire Low NA EUV program will have cost more, if we all end it, than the High NA program. If you now look at it, then the relative effort to bring EUV to life was so large that it would have put a significant financial strain on the P&L of ASML, which of course we could not afford, which is not the case today. I think if you think about operating margins, it is more a matter of maturity of EUV, which will, of course, lead to better performing tools with higher productivity, with higher value. EUV service revenue that will grow going forward. I think those are the most important drivers for operating margin. Roger? Yeah, I agree. The gross margin components, I think, Peter, you just referenced them. It's the EUV ASP, and as a result of that, the EUV systems gross margin and the EUV service gross margin. Those are the major drivers on the gross margin side. I think, also in the introduction, we've been pretty clear on what the ambition is for OPEX. 14%-15% for R&D and 4% for SG&A. Our longer-term ambition, at least on the R&D side, is to try and model that back to around 13% over time. I think that's what we've stated before. In R&D. Yep. In R&D. Those are the major drivers, I would say, to get the operating margin further up. Yep. Thanks much. Thank you. Our next question comes from the line of Pierre Ferragu of New Street Research. Please go ahead. Your line is open. Hey, thank you. Can you hear me well? Very well. Good afternoon, Pierre. Great. Good afternoon, Peter. Thanks for the color on how you increase capacity for this year and next year. That's very clear. My question would be more, over two, three years, if I recall correctly, like my visit in winter in Veldhoven, you guys are set up to be able to do 60 EUV tools per year and 20 High NA EUV tools. When I took a shot at looking at how much would be needed over the next three, four years, I felt like this was actually a bit limited, and that you might actually need more capacity. I would love to hear your take on that. In the longer term, do you think it would make sense to think about increasing your overall capacity? If that's the case, what kind of lead times are we talking about for that kind of endeavor? I have a quick follow-up. Yeah. It's a very good question, Pierre. I think it's a long-term strategic question. Let me try to answer it this way. When I talked about the three trends that the company will have to face in terms of demand cycles, there's of course the shorter term, which you could say it's a catch-up of the lower level of investments we saw last year because of the pandemic, which you're catching up this year and I think throughout next year, or in any case, as a part of next year. There's the secular growth trend, which we have underestimated. As I think you can go back to the Capital Markets Day 2016 and 2018, I don't think we, at that moment in time, anticipated the strength of the Deep UV market as we see today. There's the third trend, which is basically the drive for technological sovereignty by different countries and different governments. Those are all, at this moment in time, those will be the drivers, but it's also difficult to really get a very clear view on this. Your question is, taking that into consideration, should you guys be looking at increasing your capacity beyond the magical 60 that we've always mentioned? Good question. I think this is actually the work that we're doing today. Yeah? Okay. We're looking at and say, "What if we need to do this?" Now the lead time. Now, if you have to build a complete new factory, let's take you need to build a new optics factory, then the lead time is two to three years. Because you need to build a factory, you need to procure the machines. Then, by the way, when it comes to optics manufacturing, you have to build those machines yourself because they're not available. That will be longer. There are other ways to increase capacity, and that's through cycle time reduction. That's through process optimization. It's this complexity of measures that we can take to see how we can drive the total capacity up, which by the way, all have lead times that are beyond the 55 units that we're planning for next year. It doesn't mean that it couldn't be higher in 2023 and 2024, but that's the work that we need to do today, which by the way, we are doing. That makes sense. A quick follow-up, very much related to that, you mentioned the geopolitical situation. When I look at the overall value chain and how much it depends on what's happening in Veldhoven on a single site where you assemble your tools, it's almost scary. It's a weak point for the global value chain and probably a place where your clients and governments are getting maybe a bit nervous about that. Do you have conversations with people around you about diversifying your sites and creating supply that would be less dependent on the Netherlands? Yeah, I think the situation of today is not very different than the situation five years ago. You can only argue that the realization of people is now different. It has never changed. Yes. It is what it is. The same can be said for our customers that are basically concentrated in one particular area, or some of our peers that with some of their production facilities, only make a couple of 100 tools per year in one or two single sites. It is the concentration of the semiconductor industry in different geographical areas that actually now starts to make governments think. It has never been an issue. It is only becoming an issue when this almost seamless ecosystem that has been built across many, many borders, that ecosystem is now being threatened, I would say, almost by blockages of that seamlessness. You get an issue. No, I think it is nothing different. It has always been this way, and especially over the last five years, I would say, this high concentration of leading-edge technology across the value chain. Given the geopolitical situation, people are more aware of it, and they start now thinking of levels of self-sufficiency that a couple of years ago, nobody thought of. Thanks, Peter. Thank you. Our next question comes from the line of Joe Quatrochi of Wells Fargo. Please go ahead, your line is open. Yeah. Thanks for taking the question. I was wondering if you could help us on the updated 2021 guidance. I think last quarter you had talked about there being potential upside from domestic China if we hadn't seen any change in the geopolitical situation or export controls. I was curious, can you help us understand, is that now included, that upside included? If so, how much is that? I think it's fair to say that that upside is now included in the numbers that we've given. It's clear, and Peter went through that also in the presentation at the beginning of this call, that we've revised upwards, if you like, the outlook for the full year. Further down into the year, we've now said, "This is how we look at the full year." Of course, still expecting that the regulatory situation remains a little bit the way it is today. Therefore, what previously was upside, and the way we talked about it as upside, has now really been included in that number. Remember last time, the expectation that we gave was that could be about EUR 600 million upside coming from China, and that number is now included in the, let's say, close to EUR 18 billion that we've now talked about. Yeah, if you then really want to think about risk profile, you can say, well, when the regulatory situation changes and you could not ship to China, when you look at the market situation today, which is quite different than three months ago, we would ship those systems somewhere else. Great. Just as a follow-up, I just want to make sure I understand. The two systems that you repurchased from a customer, those were on the EUV side, and then you plan to ship those this year? I guess if that's correct, is that embedded in the 30% EUV revenue growth? Yeah, it is. Yeah. You have a reversal in this quarter, and you will see it come back in the subsequent quarters. For the full year, it's neutral, right? It's neutral. It's- It's a wash. minus two and plus two. It's a wash. Perfect. Thank you. Thank you. Our next question comes from the line of Alexander Peterc of Societe Generale. Please go ahead. Your line is open. Yes. Hi, good afternoon, and thanks for taking my question. You gave us a pretty clear outlook on EUV for 2022. I just wondered about the longevity of this stronger cycle that you see in immersion and dry, because that's where all of the upgrade today is coming through for 2021. I'm just wondering, is all of that then carrying into 2022 as well? Then just very quickly, if you could also provide a quick comment on ASPs there again, very strong in this quarter, see if it puts and takes there. Thanks a lot. Roger will do the ASPs. Your question on the... Sustainability. on the sustainability. Especially Deep UV, and Apps. I think I said it as an answer on an earlier question. When we look at how we see the Deep UV market and the Apps market today as compared to three years ago, like 2018, I think we have a different view. That's driven by the fact that across our entire Deep UV portfolio, which is immersion and dry, we cannot fulfill the demand of our customers on time. That has to do with the fact that our analysis shows that with the combination of, let's say, advanced sensing technology, 5G, the ability to process all the data through high-performance compute, and that in a distributed fashion, basically, leading-edge compute also goes to the edge. I call that distributed systems. A distributed system is, for instance, a car, but it's also one of our inner machines in the field. That increasingly requires collection of data, transport of data, processing of data, not only through the most advanced high-performance compute, but as part of a distributed system. That system inevitably includes mature technology, which could be image sensors, power ICs, MEMS, analog solutions. It's the whole thing. That means if we would have an i-line system available today, it would be sold yesterday. It's everywhere. That has to do with the proliferation of chip technology and the distributed computing and the distributed systems that we are seeing. That is something that will not go away in our minds. This is why I said it also in my prepared remarks, that we are also planning and looking into what is the level of our Deep UV capacity increase that we need, both in mature and in immersion. It's going to be double-digit increase, as from where we are today. Now, how much can we stretch that or how much is needed? That's exactly what we're doing with EUV. We need to plan it with the supply chain. We need to go deeper into what it takes in terms of capacity lead time. Do they need to build square meters? Do they need to hire people? Is it going to be possible through cycle time reductions, through process optimization? This is the work that we're doing today. Because remember, five months ago, we were looking at a completely different world. This is a ramp-up, but we do believe that this has a long runway. Yeah. On the ASP for EUVs, it's well noted. You're absolutely right. This quarter in Q1, we're looking at an ASP for EUV of about EUR 160. Part of that is configuration. We've talked about that in the past. If you look at the last three quarters, we've consistently been looking at an ASP of around EUR 145, and this time it's a little bit up for another reason I'll come to in a moment. In fact, what you see is that, in fact, in the last year, we've been positively surprised by the options on the tool, the options that were ordered on the tool. As a result of that, the configuration was richer than anticipated. As a result of that, you've fairly consistently seen now that the ASP range is above the EUR 130 that we've talked about in the past, and you've fairly consistently seen EUR 145 or up. The reason that it's extra up this year. There's a few accounting things. We've talked about accounting for VPAs in the past. There's a few accounting reasons why it's higher, so why it's EUR 160 rather than EUR 145. The reality, just looking at the configuration that we've seen on the tools in the past couple of quarters, the EUR 145 anchor point for the ASP for EUV is probably the right way to go. I say that recognizing that this is about the last quarter that we're really looking at the large number of C's in the revenue. Thank you. Thank you. Our next question comes from the line of David Mulholland of UBS. Please go ahead. Your line is open. Hi. Thanks for taking the question. Just coming back on the EUV capacity increase and shifting to 55 tool capacity for next year. Obviously, there were some changes made last year that ended up limiting what potentially should have been higher shipments this year, and some of that probably kicks in next year. In your discussions with customers, Peter, just obviously there's a very, very strong cyclical tailwind to the industry today that's driving appetite for capacity increase, but EUV is on a very, very long-time horizon for customers, 18 months rather than six months planning. How do you feel like their assumptions have changed that's driving that upside? Is it primarily because of their confidence and penetration of EUV and higher layers? Or is there an element of actually just building bigger nodes now that's driving the need for more capacity at this point? I think, David, it's both. I want to refer to a comment that was made by the CEO of one of our large customers, that actually mentioned we're going to double the number of EUV layers on our next node. I think that's a trend that we are seeing simply because the advantages of EUV are not only, you could say, the pure economic cost per layer, because you can eliminate multiple patterning. It's also the electrical characteristics and the simplicity of the process. Lower width. That's one of them. There's many other side effects that actually lead people to go for EUV. Yes, it's higher layer counts. That's what we're seeing, which is true for memory and for logic. Also, when we talk to customers, they all talk about bigger nodes. It has to do with this secular trend number two that I talked about. Trend number three, the technological sovereignty, will just be a layer on top, which will not go away. Which will take time, it takes two to three years to build a semiconductor factory, and they put it into action. It is bigger nodes, it is strategic investments, it's higher layer counts, and this is what I, as an answer to a previous question, we all need to take this into consideration. Some of it we already saw coming, but what does it mean for our capacity needs beyond 2022? Which, by the way, some of that capacity, if that would be needed, would be the result of, like I said, process optimization, cycle time improvement, different work schedules, and potentially square meters. That could be. It's all of the above. Just one quick follow-up. Obviously, from a financial perspective, at some point in the near future, you need to start building those tools through the supply chain, given the lead times. Are you requiring customers to place deposits and make the financial commitments that you've been starting to make before any of those tools get built? Or is there an element still this year where you're going ahead and starting production before you've had firm deposit-associated orders from the customer? Yeah, David, the policy hasn't changed there, that means that when a customer has put in a PO, a down payment is required. I think we mentioned in the past that the amount of the PO is a little bit dependent on the moment where the order is being placed. The order is being placed nicely in line with the lead time, the down payment is lower than when it's placed a little bit later than that. You also know that the PO in and by itself is a bit of a non-event for us because we work so closely with the customer that we sort of understand what they're doing, what they want, and when they need it. The PO is a bit of a non-event for us. Yeah, the short answer is absolutely, there will be down payments in place at the moment of the PO. That's correct. Thanks. Thank you. Our next question comes from the line of CJ Muse at Evercore ISI. Please go ahead, your line is open. Yeah, good afternoon. Good morning. Thank you for taking the question. I guess first question, Peter, can you speak to the sustainability of memory? I think the headline above 50% might be a bit concerning. However, if I think about EUV in there as well as the strong pickup in EUV and voltage contrast imaging, it certainly looks like memory, X, those two things as tracking more like up 20%-25%. Would love to hear your thoughts on the moving parts there and how to think about sustainability into 2022. I think, for this year, it's not a surprise. You just need to go back to our conference calls the last two quarters, where we actually saw a recovery of especially DRAM starting and, I think I gave some color three months ago where I basically said, we had a decent shipment quarter in Q4 of last year, which basically goes into production in Q1. If you look at a bit growth of 20% this year, our calculations show that we're very quickly at the max output capacity of our DRAM customers in this year, where we would reach that pretty quick. We would need more capacity addition. That's exactly what we have seen. I think it's just the beginning. I think yes, it will move into next year. You've been around also long, in the memory business, yes, there is more tendency to have from time to time some overcapacity and some undercapacity. How long that will last, I don't know. Still, as a BM about it telling me, this secular trend, when there's such a high demand in logic, all this stuff doesn't only work with only logic. Also it's memory. It's going to be quite interesting to see how quickly the memory capacity will be added throughout this year, early next year, and what the underlying bit growth percentages will be. I think having said that, you know there's also memory is more cyclical than logic. Nothing that indicates to me at this moment in time that we are looking at building an overcapacity. There's just nothing I can see at this moment in time. We're just starting. Very helpful. Just a follow-up question on the DUV side of things. I think you guys have talked about growing your non-EUV tool business by about 40%. That's roughly EUR 7.7 billion this year. Is there a way to frame how much capacity you're planning to add on the non-EUV side relative to that EUR 7.7 billion, for us to kind of gauge what you're capable of into 2022 and beyond? Yeah. I think if we would calculate it the way that we would calculate about a product example, we would just be over EUR 8. EUR 8.2. About EUR 8.2. That's really stretching it, in terms of our production capacity this year. If we would have more capacity, we could probably do more, or very likely we would be able to do more. Your question really is answered in a sense that I already said in my prepared remark, we're looking at increasing our Deep UV capacity both dry, mature, and immersion. That's not going to be 5%. I mean, it's going to be double digit. That will take some further analysis of what needs to be done. Is it through optimization? Through things like process optimization and added workforce or cycle time reduction, or has it to do with square meter capacity, like factories? That is something that is under consideration today, and we're looking into that together with our supply chain. It's not so much for us, and it's really in the supply chain. The reason why I say this is because we believe that we need extra capacity. Yeah. It has to do with the underlying trends, the trends that I talked about earlier. Yeah, the 40% brings me, brings us to just over EUR 8. You have EUR 7.7, so you're a bit more conservative, but directionally it is correct, but this is the answer. Great. Thanks so much. Thank you. Our next question comes from the line of Andrew Gardiner at Barclays. Please go ahead. Your line is open. Good afternoon. Thanks for taking the question. Another one, Peter, on the sort of capacity planning issues that you guys have just been talking about. I'm wondering, given the changes that we've seen from a number of your lead customers, or at least the public announcements from your lead customers over the last three or four months, and the fact that you are now having to rethink the need for additional capacity expansion, whether it's your site or within the supply chain. I presume they're wanting it sooner rather than later, as always seems to be the way. Yet you've got fairly extensive lead times, particularly so for EUV, perhaps slightly less so for Deep UV in terms of building out this capacity. Are you getting better visibility today, in terms of what those customers are going to need looking out over the next three, four, five years in order to give you that confidence in making such a decision? It's a good question. I mean, also you've been around also. I mean, all these people have been around for a long time. When we under-invest, there's also going to be a knee-jerk reaction, like it always happens. This is more the shorter-term correction of a misplanning. That's happening today. That's what I call it's the trend number one. Clearly, customers understanding that our capacity lead times and our manufacturing lead times are long. They do share with us a longer-term vision. Now, not five years out, that's a bit too much to ask, but certainly two, three years out. I would say for 2022, 2023, we definitely have deep discussions about what they need in terms of expansion plans, in terms of what they see. When we talk about logic, the anticipated capacity ran in terms of the tape outs that they have on the shelves and that they see coming on N5 and N3. It is not just some pie in the sky thinking. It's real underlying discussion that they have with their customers and the design requirements that they get from an increasing customer base. Which has to do with high-power computer, with AI, and with all the applications that we talked about because of the whole digital transition. Yes, there is more visibility, to the point that the planning visibility is, I would say, deeper. This is also where we base our request to the supply chain on. It's on that discussion. Which is going to be a costly discussion because you don't add capacity for nothing. It's also true for our customers. It's going to be costly, but they've been very explicit to the outside world and to the media about what their plans are. It's well thought through based on what they see. Their customers and the customers of their customers tell them. This is why I talk about these three trends. This basically is the base for the visibility. How much it in the end will be, or we will need, there's always a risk of underestimation, but also risk of overestimation. That's what we need to take into consideration when we say what's wise. Then like I said, this is just something of the last three, four months, where it starts to accelerate. Give us a bit of time, and our suppliers particularly, to figure out what is wisdom. Thank you. Thank you, Peter, for that insight. Even if I think you did call me old at the outset there, I still appreciate the color. It's all relative, and from my perspective, you're very young. Thank you. Thank you. Our next question comes from the line of Krish Sankar of Cowen and Co. Please go ahead. Your line is open. Hi. Thanks for taking my question, Peter, and I've also been around quite a bit. Let me ask you two quick questions. Clearly a nice jump in EUV bookings in the March quarter. Can you give some color on how the EUV bookings are trending for the current quarter, and what is your EUV backlog in terms of units? I had a follow-up. Roger, do you want to do this? No, happy to take it. In terms of order book, the current backlog is EUR 7.4 billion for EUV. That's pretty strong and obviously also driven by significant intake in the last quarter. I'm not going to comment specifically on this quarter, but, in general, just listening to the commentary that we made on our expectations for next year, it's pretty clear that also for the next quarters, we do expect a healthy order intake for EUV, right? At this stage, EUR 7.4 billion, and if you do the math, what you think system business is going to be next year. If you translate that at the 55 capacity that we've been talking about, it's pretty clear that we're still looking at significant order intake expected for this quarter and for the next quarters. Got it. That's very helpful, Roger. Then just as a follow-up, Peter, I know you gave some color on the memory outlook for this year. Can you just give a little more insight in terms of how to think between DRAM and NAND in the context of your memory growth of 50% for this year? Yeah. It's an extension of what we said the previous two quarters. It is primarily driven by DRAM, but we also see that 3D NAND will follow. What we see is basically following the utilization of our tools in the field. That will follow. It is primarily driven this quarter, next quarter, and I think the majority of this year by DRAM. Thanks, Peter. Thank you. Our next question comes from the line of Alex Duval at Goldman Sachs. Please go ahead. Your line is open. Yes, hi there. Good afternoon. Congratulations on the results. Just had a quick question on EUV gross margins, and really the expected trajectory there. The gross margins towards the end of this year to be at good gross margin levels. I wondered if you could just talk through the drivers of improvement as we go towards the end of the year. You referenced, related to this, that you're seeing higher ASPs related to add-ons that people are buying for the C model. I was just wondering the extent that we see better-than-expected ASPs on the D model. Could that also be a gross margin booster for EUV maintenance? Yeah, Alex, at the beginning, you were a little bit hard to understand, but I think your question really was how do you expect the gross margin to further develop on EUV? As we mentioned before, we do expect in the second half with the introduction of the D model, we expect EUV systems gross margin to be at the level of the corporate gross margin. I can confirm that that's exactly what's going on. You are right that we did see a little bit of a reset on the ASP for the C model, right? We've been talking about EUR 130, but as I mentioned, the configuration quarter after quarter turned out to be richer than we previously anticipated. I think it's fair to say that the 10%-15% uptick that we've been talking about for the D model in comparison to the C model still holds, right? If you take the EUR 145-ish basis for the C model, I think a low 10% increase over that in terms of ASP, I think is probably what you should be looking at for the ASP calculation. Of course, to the extent that that is better, that of course is also helpful a little bit on the gross margin side as well. Yeah. Although the D has also somewhat higher costs. Sure. Yeah. It's not 100% to the bottom line. Yeah. We have some higher costs. Yeah. the optics and also other parts. Correct. It will help. Great. Thanks. Thank you. Our next question comes from the line of Amit Harchandani of Citi. Please go ahead. Your line is open. Thank you. Hello, everyone. Amit Harchandani from Citi. My first question is on the topic of Deep UV. If I try to collate all the data points you've shared with us, is it fair for me to say you would expect Deep UV sales to be up year-on-year in 2022, given that you're just getting started in memory and cyclicality strength could persist into 2022? As a follow-up to that, if I may. You talked about building capacity for Deep UV. You are stretched at EUR 8 billion, and you talked about double digits, I think, earlier in the call. Is it fair to say that you would expect this EUR 8 billion to be exceeded or basically even a higher contribution from Deep UV, if not in 2022, then certainly beyond 2022? Thank you. You've listened carefully, Amit, and that is true. Everything you just said. Do we expect Deep UV sales to be up year- on- year? I don't know about the year that you are mentioning, but the fact that we are looking into increasing our Deep UV capacity means that we believe Deep UV sales will be up, and in what year? In, well, it's year- on- year. I think medium to long term, we have indeed reassessed the need for Deep UV capacity going forward. When you talk about capacity increase, you don't do this for one year. You do this because you feel medium to long term that is needed. Yes, and it also means that if we do that, and we say we'll be around EUR 8 billion this year on Deep UV, yes, then we would expect that would increase, because otherwise you don't need to build capacity, because we could do with what we have today. Okay. Thank you. I just wanted to clarify that. Yeah. If I may, very quickly, on geopolitics. We have heard a lot of noise. Based on what you have said today, it seems like you expect the whole geopolitical dynamic to be a net positive with maybe some downside risk to China potentially being offset by potential upside in Europe and the U.S. Is that a fair assessment? More broadly, what is the latest in your view versus what you shared with us end of January? Thank you. Yeah, I think Roger said it. He said, I think we are now where we are because we're through Q1. We're in Q2 now. We have included that EUR 600 million upside into the number that we gave you. We don't control the geopolitical situation and the lawmaking. Given the market situation where we are today, if some of that EUR 600 million would not be there because of geopolitical roadblocks, the demand is actually we will ship those systems somewhere else. If you look at how that affects shipments to China versus the longer-term geopolitical impact, it's just a matter of timing. Yeah? The first one could be short term this year. The others are definitely long term. Yeah? It is all about where do we build a new fab. Well, it takes two to three years. Yeah? You really look at adding capacity in the timeframe 2024, 2025. Yeah? It's where that capacity starts coming to the market. That's all a matter of different timing, different time perspective. Thank you, Peter. All right. We have time for one last quick question. If you were unable to get through on this call and still have questions, please feel free to contact ASML Investor Relation department with your question. Now, operator, may we have the last caller, please? Thank you. That is the line of Didier Scemama of Bank of America. Please go ahead. Your line is open. Thank you. Thanks for squeezing me in. Good afternoon, gentlemen. I think the most important question was just asked and answered. Thank you. I wanted to ask you a question about install base management for EUV. Peter, if you would like to maybe share with us what you think the sort of revenues could be for EUV install base this year. How you're thinking about the slope of growth over the coming five years. The sort of thing, we have a feel for the change in the mix towards sort of more recurring revenues install base. That would be great. Thank you. Yeah. On the more recurring side, I think what we've said in the past is that the way to model that for EUV is to take the ASP of a tool and take about 6% for that. When the tool is up and running at its envisaged capacity, you would have 6% of that ASP as the recurring revenue for service and maintenance for that tool. That excludes upgrades, but just for the regular service and maintenance, 6% of the ASP is what you would see there. Again, the assumption, tool needs to be up and running at the envisaged capacity, and it should be out of warranty. As long as the tool is in warranty, the number is a bit lower. That's really the way to model it. As it comes to upgrades, that's a little bit more difficult to do, right? Upgrades is lumpy. Upgrades is dependent on what the customer wants in terms of productivity gains, what they want to make available to us in terms of machine time. That's a little bit harder to predict. At least on the regular service and maintenance side, this is the way to model it. 6% of the ASP, once the tool is up and running and out of warranty. All right. Thank you. All right. Thank you. Thank you, Didier. Before we sign off, I'd like to remind you that our Investor Day will be September 29th, 2021. The event is currently planned to be held in London. We moved the date from June in hopes we can have a face-to-face meeting at the time. Of course, this will depend on the progress against the virus. More details will follow in due time. We do hope you'll be able to join us. Now, on behalf of ASML, I'd like to thank you all for joining us today. Operator, if you could formally conclude the call, I'd appreciate it. Thank you. Thank you. This concludes the ASML 2021 first quarter financial results conference call. Thank you for participating. You may now disconnect.