Thank you for standing by. Welcome to the ASML 2021 third quarter financial results conference call on October 20th, 2021. Throughout today's introduction, all participants will be in listen-only mode. 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 a question, please press zero two at any time during the call. If any participant has difficulty hearing the conference, please press star zero for operator assistance. I'd now like to turn the 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 are ASML CEO Peter Wennink, and our CFO, Roger Dassen. The subject of today's call is ASML's 2021 third 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 the 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, and thank you for joining us for our Q3 2021 results conference call. I hope all of you and your families are still healthy and safe. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the third quarter, as well as provide our view on the coming quarters. Roger will start with a review of our Q3 2021 financial performance, with added comments on our short-term outlook, and I will complete the introduction with some additional comments on the current business environment and on our future business outlook. Roger, if you will. Thank you, Peter, and welcome everyone. I will first review the third quarter financial accomplishments and then provide guidance on the fourth quarter of 2021. We had a record quarter on a number of fronts, including total revenue, EUV system revenue, and net income. Net sales came in within guidance at EUR 5.2 billion. We shipped 13 EUV systems and recognized EUR 2.2 billion revenue from 15 systems this quarter. Net system sales of EUR 4.1 billion was again more weighted towards logic at 61%, with the remaining 39% from memory. The continued strength in logic drives both DUV and EUV revenue. The memory business is mainly driven by DRAM. Installed Base Management sales for the quarter came in at EUR 1.1 billion above guidance due to increased upgrade and service business. Gross margin for the quarter was 51.7% and was within guidance. On operating expenses, R&D expenses came in at EUR 609 million, which was below our guidance due to several one-off effects in the quarter. SG&A expenses at EUR 183 million was basically at guidance. Net income in Q3 was EUR 1.7 billion, representing 33.2% of net sales and resulting in an EPS of EUR 4.27. Turning to the balance sheet. We ended the third quarter with cash equivalents, and short-term investments at a level of EUR 4.5 billion. Moving to the order book, Q3 net system bookings came in at EUR 6.2 billion, including EUR 2.9 billion for EUV systems. Order intake was largely driven by logic, with 84% of the bookings both from DUV and EUV, with memory accounting for the remaining 16%. With that, I would like to turn to our expectations for the fourth quarter of 2021. We expect Q4 total net sales to be between EUR 4.9 billion and EUR 5.2 billion. There are some items to note that are expected to delay revenue from Q4 2021 into Q1 2022. In the process of increasing capacity, we experienced some issues regarding materials shortage in our supply chain. In addition, we experienced issues in the startup of our new logistics center. These two issues have largely been addressed for this year's output but resulted in a late start on the assembly of a number of systems. In this high-demand environment, our customers are requesting fast shipments or no factory acceptance test in order to bring systems into production as quickly as possible. While the impact on the third quarter was relatively small, the late starts, combined with the fast shipments, are expected to have an impact on the revenue to be recognized in the fourth quarter, which is included in our guidance. We're still on track to achieve revenue growth approaching 35% for the full year. We expect our Q4 Installed Base Management sales to be around EUR 1.1 billion. Gross margin for Q4 is expected to be between 51% and 52%, with an expected gross margin of around 52% for the full year. The expected R&D expenses for Q4 are around EUR 670 million, and SG&A is expected to come in at around EUR 195 million. Our estimated 2021 annualized effective tax rate is expected to be around 15%. The interim dividend for 2021 will be EUR 1.80 per ordinary share. The ex-dividend date, as well as the fixing date for the euro-U.S. dollar conversion, will be November 2nd, 2021, and the record date will be November 3rd, 2021. The dividend will be made payable on November 12th, 2021. In Q3 2021, ASML purchased 3.6 million shares for a total amount of around EUR 2.4 billion under the current and previous program. With that, I would like to turn the call back over to Peter. Thank you, Roger. As Roger has highlighted, we had a record quarter on both sales and profitability. We're seeing continued strong demand from our customers across all market segments, from both advanced and mature nodes, driving demand across our entire product portfolio. We had a total backlog of EUR 19.6 billion, including EUV of EUR 11.6 billion, which is a reflection of the very healthy market environment we're in today, and fully covers the planned EUV output for 2022 and the beginning of 2023. While it is a bit too early to provide specific guidance for 2022, we expect the end market trends we have highlighted throughout 2021 to continue into next year. These end market trends are driving strong demand across all market segments and across our entire technology portfolio. We continue to increase our capacity for all of our products to meet customer capacity and technology requirements. In logic, strong end market demand continues as part of the ongoing digital transformation. The broadening application space with distributed computing across the IoT landscape not only drives the demand for leading-edge nodes, but also creates significant demand for mature nodes as an integral part of the growing digital infrastructure. We expect continued growth in our logic business as customer demand remains strong for both advanced and mature nodes. In memory, we also expect to see continued growth of our business next year. Strong end market demand for servers and smartphones is the primary driver for memory demand next year, with some uncertainty on the demand picture for PCs. Litho tool utilization levels remain very high, and customers see demand bit growth in 2022 in the mid-to-high teens percentage for DRAM and around 30% for NAND. To meet demand for this expected bit growth, customers will need to add capacity as well as continue to make node migrations. As customers migrate to more advanced nodes, we also expect to see an increase in EUV demand for memory. For our installed base business, we see an opportunity for service growth next year as we continue to expand our installed base of our entire product portfolio, as well as the increased contribution of EUV service as this technology ramps in volume production. Driven by the expected continued shortage of semiconductor components, we also see an opportunity to grow our upgrade revenue further. This will depend, however, on our customers' willingness to take systems down to perform these upgrades amidst the strong demand cycle. To meet the strong demand across our entire product portfolio, we first of all are driving down our manufacturing cycle times and working with our supply chain to increase our output capability for EUV as well as DUV. As communicated during our Investor Day, we expect to increase unit output for DUV by approximately 1.5x and EUV over 2x by 2025, primarily through manufacturing capacity additions in our supply chain. At the same time, we are shipping higher productivity machines, which when taken into account with our higher unit output capacity plan, we expect an increase in effective wafer capacity for DUV of approximately 2x and for EUV over 3x by 2025. The actions in our supply chain to increase output have different time horizons to materialize, but we expect to see an impact of these actions starting this year and extending into next year. For EUV, we're still planning for a capacity of around 55 systems next year. These will all be 3600D systems, which deliver a 15%-20% higher productivity over the 3400C systems. For DUV, as mentioned last quarter, we are utilizing our safety stock this year to significantly increase DUV output, so we will not have this buffer inventory going into next year and will therefore need to rely on building additional capacity as just mentioned. We are actively working with our supply chain partners to increase our capacity next year, and the final output and mix will depend on our supply chain progress, although we currently believe we should be able to reach our 2021 shipment output. In summary, chip demand is very strong, and we are working to maximize output to meet customer demand. The secular growth trends as part of the digital transformation to a more connected world are fueling future demand across all market segments at both the advanced and the mature nodes, and we expect another year of healthy growth in 2022. Looking beyond next year, I would like to provide a quick summary of our Investor Day that we held last month, where we provided a longer-term view of our business and growth opportunities. Global mega trends in the electronics industry, supported by a highly profitable and innovative ecosystem, are expected to continue to fuel growth across the semiconductor market. Growth in semiconductor end markets and increasing lithography intensity are driving demand for our products and services. ASML's comprehensive product portfolio is aligned to our customers' roadmaps, delivering cost-effective solutions in support of all applications from leading-edge to mature nodes. Based on different market scenarios, we have an opportunity to reach an annual revenue in 2025 between approximately EUR 24 billion in a low market scenario and EUR 30 billion in high market scenario, with a gross margin in 2025 between approximately 54%-56%. We see significant growth opportunities beyond 2025. Using third-party research and applying our own market and customer intelligence, we expect our systems and installed base business to provide a comfortable annual revenue growth rate of around 11% for the period 2020-2030. We are continuously improving our performance on our ESG sustainability KPIs and are upgrading our ESG sustainability strategy to accelerate progress. Our industry can contribute significantly to cut global emissions by 15% in 2030. Our ESG sustainability strategy is focused on developing lithography technology to continue to produce microchips that are 3 x more energy efficient every two years, helping our customers and suppliers to minimize materials and energy required to produce advanced microchips, and driving a roadmap towards zero waste by 2030 and net zero value chain emissions by 2040. Our continued investments in technology leadership have created significant shareholder value. As outlined in our capital allocation strategy, we therefore expect to continue to return significant amounts of cash to our shareholders through a combination of growing dividends and share buybacks. In summary, we have increased and strong confidence in our long-term growth opportunities while we deliver significant value to all our stakeholders. With that, we would be happy to take your questions. Thank you, Roger and Peter. 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. Ladies and gentlemen, if you do wish to ask a question, please press zero one on your telephone keypads now. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will be a brief pause while we are registering your questions. Our first question comes from the line of Mehdi at SIG. Please go ahead. Your line is open. Yes, sir. Thanks for taking my question. Regarding some of the reasons for revenue shortfall that you highlighted, how should I think about just the overall 2021 revenue if there was no material shortage, if you didn't have to deal with capacity expansion, and if you didn't have to deal with revenue recognition? If you were to eliminate all of those three factors, how would the 2021 revenue look like? I have a follow-up. I think, Mehdi, the way to look at that is, in the upper limit, we still guide the same number that we guided before. You would have seen that, for instance, on the installed base business, we guide a number that is approximately EUR 300 million higher than the number that we guided the guide last time. That gives you a bit of an indication that is the number that somehow is shifting, if you like, from this year into Q1 of next year. That's the number to look at. Okay, great. A quick second follow-up. The EUR 19 billion of backlog that you recorded end of Q3 2021, could that be the near-term peak, especially in the context of your 2025 revenue target at the low end, starting with EUR 24 billion? We're four years away, so I would think that EUR 19 billion of backlog could be a near-term peak. I'm just trying to better understand how we would go from here. Any color would be great. Thank you. Yeah, Mehdi, a good question, but I think, like I said in my introductory comments, in a low market, we will be at the EUR 24 billion. With high market, we'll be at EUR 30 billion. That is basically what we are looking at. To take a backlog any moment in time is really a function of our shipment pattern, because we are shipping out of that backlog, but also the lumpiness with which our customers are going to give us orders. I wouldn't read too much into the EUR 19.6 billion other than that's a big number. That big number is actually because there is a shortage, and especially in the leading-edge equipment and other types of equipment. Yes, customers are ordering. 2022 for EUV is covered. We are booking into 2023. I think that it is more a function of the lumpiness of the order intake for our customers, their expansion plans, which between now and 2025 can be quite significant. Also taking into account the announcements of the new fabs, the drive for technological sovereignty, the geopolitical situation. There's many elements there that will drive our order intake. I would not think of this as a peak. I would just look at this as a point towards a significantly higher sales number by 2025. Great. Thank you. Thank you. Our next question comes from the line of John Pitzer at Credit Suisse. Please go ahead. Your line is open. Yeah, guys, thanks for letting me ask the question. Peter, I'm just kind of curious, when you look at the bookings number, the memory bookings kind of decelerated. Mainly a timing issue? Is there something more going on there? How does that kind of influence your view on 2022? I know you said that memory is still expected to be strong, but anything you can give us from a color perspective on the Q3 bookings would be great. I think it's basically a timing issue. We had stronger memory bookings in Q2. Now we have stronger logic bookings in Q3. Let's be honest, we have over EUR 6 billion of bookings, whereby our sales in Q3 were EUR 4 billion. I think the bookings number is pretty good. I think for 2022 on memory, I said it in my introductory comments. We feel good about 2022 because our customers feel good about 2022. Yes, there's been some concern about DRAM weakness. Our customers feel that that is not structural. There are all kinds of reasons why in certain segments there is a temporary weakness. They definitely see the need to add capacity, but also to do the node migrations. That means that we see continued growth next year. We're positive. Don't ask us to have a crystal ball on memory and DRAM pricing, what we do is that we listen very carefully to our customers and our customers' expansion plans and their optimism and their confidence that they need to expand. This is why we are optimistic also for growth next year. That's helpful. Peter, as you know, this industry either gives you high-class problems or low-class problems, and right now there's a lot of high-class problems out there. I'm kind of curious, can you help me better understand around your capacity expansion? To what extent is this the need to add fixed cost that you might have to carry through the inevitable cyclical correction when it comes? To what extent is this variable cost? I'd be curious both on kind of the 2022 capacity you're thinking about, but also importantly, the 2025 target as you talk about DUV and EUV production being up 1.5x and more than 2x. I also said in my statement that these capacity additions are largely focused on adding capacity in the supply chain. We are adding people, that is also clear. I think we hired this year with some attrition, but we probably hire between 6,000 and 7,000 people, so we are probably going to add about 4,500 - 5,000 people. That is of course fixed cost, but that is in R&D. That is not only in manufacturing capacity. It is in service, which of course, has to do with the higher business level. I think it is largely pressed, it is largely people, it is some CapEx, but not out of the ordinary. It is what we have planned. Started to plan this even last year and the year before. I do not think that is the major issue. It is really in the supply chain. You talked about the inevitable correction. We have corrections. We have always seen corrections in our industry. I'm not going to say that they're not there, but we have to look at some of the trends that we're also seeing. When we look at the announcement of the build-out of new capacity, it is also very much driven by, I would say, the geopolitical situation and governments looking at technological sovereignty, giving quite significant incentives. Just refer to the U.S. CHIPS Act, EUR 52 billion, of which EUR 40 billion is for basically to support expansion of capacity. That's going to happen over the next couple of years. It will take two to three years. Absent any fluctuations in the end amount, that's going to happen. I think, and that's what we believe, that adding that capacity is absolutely necessary because we do believe we see higher levels of equipment demand over the next two years. When this inevitable correction will come, I don't think it's likely it will come anywhere soon. That's helpful. Thank you, Peter. Thank you. Our next question comes from the line of C.J. Muse at Evercore ISI. Yeah, good afternoon. Thank you for taking my question. I guess first question, Peter, you all have pretty much unprecedented visibility sitting here today. Obviously you've talked about adding 50% capacity on the DUV side, and that doesn't include any of the productivity benefits of the newer tools coming online. At the same time, end demand is robust, both leading and lagging. Curious, when do you think things will ease up for you? Because it certainly sounds like it may not happen in 2022. Could be pushed to 2023. Yeah. I know. That's a good comment, CJ. If you think about how we add capacity, is basically three ways. One is to work on cycle time and on efficiencies in your production manufacturing space. That's what we're all doing. Us and our suppliers are doing that, and I think that gives us a result that we can actually ship more now and, I would say the first half of next year. The second is you have to buy equipment and you have to hire people. That has a longer lead time. It has a lead time of 12 - 18 months before you really get output. There's the third layer, which basically, if you cannot put more people and more machines into the square footage that you have, you need to build, which is actually two to three years. Yeah? I think this is where we are today. Given what I said on the answer to the previous question, what I expect is that we will see building activity starting in the supply chain, because I think we need to add more capacity over the next two to three years, because the numbers that you quoted were for 2025. Yeah? It's going to be a gradual increase. One, by cycle time reduction and all the efficiencies with us and the supply chain. Two, more equipment, production equipment and people, which will have its effect in 2022, 2023. I think you will see indeed square footage being added in 2023, 2024. That's how we get to that 1.5 x and 2 x in terms of unit capacity increase. Of course, in the same timeframe, we will ship more productive tools. That of course will help to alleviate some of the wave of capacity shortages that we currently see. I hope that is clear. No, that's very helpful. I guess as my follow-on question and to follow on to John's earlier question around DRAM. You highlighted the very high utilization on the installed base and then a focus not only on node migration, but also the need to add capacity, yet at the same time, your memory backlog and orders decline sequentially. It certainly sounds like that's a place where you could start to see positive momentum and drive even further growth into 2022. I guess, how are you thinking about DRAM and the kind of timing of a potential inflection there for you guys? Thank you. I think, again, like I said, we listen carefully to our customers and we actually feel a significant level of confidence currently at our customers, all DRAM customers, that they must add capacity. They're talking about high to mid-teens bit growth. High teens, close to 20% bit growth would mean that we just look at the utilization at this moment in time, which is very high. We cannot support high teens bit growth with the current installed capacity. They need to add capacity. Yeah? I think when you think about DRAM and you think about the underlying, because DRAM is a derivative, memory is a derivative of the logical. When you see the very strong demand for logic, both at the leading edge and at the mature side, there is an effect on memory. There's an effect on performance memory and on storage memory. Looking at where we are today, the high utilization rates, let's assume that there's high teen bit growth. We need to add capacity. I fully understand the, let's say, positive momentum that our customers are seeing and the demand that they put on us for next year's shipments. Thank you. Thank you. Our next question comes from Krish Sankar of Cowen & Co. Please go ahead, your line is open. Hi, thanks for taking my question. I had two of them, too. First one, Peter, I understand you don't want to quantify next year, but when you look at your DUV sales, which has been very strong this year, is it fair to assume 2022 DUV sales should be higher than this year? Along the same thought process, how to think about install-based revenues in 2022 relative to this year? I had a quick follow-up. I think Roger, you can answer that. Yeah, Krish, if you look at that, I think what Peter said in the introduction to this call, I think what he said is, on the one hand, of course, additional capacity is being built. On the other hand, far as buffers that have been depleted this year in order to get to output need to be filled back. I think that was the basis for the statement that Peter made that our expectation is that next year we should see shipments at the level of this year for DUV. In terms of install base, you've seen in the Capital Markets Day, we're looking at a 12% CAGR until 2025 in install base. I think that is a pretty good proxy to look at the CAGR from this year into next year. Got it. Very helpful, Roger. Just as a follow-up for you kind of highlighted an earlier question, think of the push-out as roughly EUR 300 million. Is it fair to assume it's all DUV? Is it a combo of dry and KrF or is it all mostly immersion? It's a combination and it is DUV. The EUR 300 million that I'm talking about is DUV, and it's a combination of immersion and dry. Thank you. 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 questions. I just want to go back on the discussion on DUV. Clearly your backlog has increased significantly. I'm trying to understand, I guess when you look at that relative to the capacity that you have in place manufacturing-wise, has your ability to fulfill that demand maybe extended into the second half of next year? I think last quarter we talked about maybe being able to kind of catch up to demand in the mid part of the year. Yeah. If I understand your question correctly, Joe, yeah, I think in that build of capacity that over time, which definitely next year, will of course become more visible throughout the year. It will be more visible in the second half of the year. That's also clear. Also because, Joe, what Roger said earlier, we've actually depleted our safety and buffer stock, so in 2021 to be able to supply our customers with everything that they wanted. You can only do that once, and then if you want to actually have the same shipment pattern in 2022, or let's say the same shipment output level as in 2022, as in 2021, you need to actually build that capacity, and that's what we're doing. I think you will see that, and as an answer to a previous question, when we think about 1.5 x DUV capacity, it will grow over time. There will be more people hired in our supply chain. They will buy more machines, which are actually doing, so this will come online as we go. Yeah, the assumption that our capacity capability in the second half of 2022 is higher than in the first half, that is a realistic one. Okay. That's helpful. Just a quick question on the puts and takes of gross margin this quarter. I think clearly install base management was ahead of plan and driven by upgrades, which I think a lot of those are software related that are higher margins. Were there some offsets there from just the higher supply chain or logistics costs we should be thinking about? No, not really. I think if you look at the gross margin, I think install base obviously is one element. I think clearly also on the immersion side, that was a positive in the gross margin if you compare Q3 to Q2. As we said before, in this quarter you saw a meaningful number of 2050s in there, and we said a 2050 was accretive to gross margin, so that's definitely a help. Also, more 3600Ds in there, although a little bit of that was offset by a slightly lower ASP than what you've seen in the past quarters on the 3400C. It's that combination that got you from the 50.9% gross margin that we had last quarter to the 51.7% this time. Thank you. Thank you. Our next question comes from the line of Aleksander Peterc of Société Générale. Please go ahead. Your line is open. Hi, good afternoon. Thanks for the question. I'd like to come back a little bit on service and tool options, which obviously have been very strong. You highlighted EUR 300 million additional revenue that is not on your guidance versus what you were saying three months ago. If you could tell us what is exactly driving this. Is it the additional demand for upgrades that you mentioned as a driver going forward? Is that already materializing in 2021? Thanks a lot. It is a combination of both the service revenue being high and us increasingly, we talked about that extensively in the Capital Markets Day, finding models with the customer to bring more value to the customer, and in that way, boosting, if you like, the service revenue. That's one dimension. Secondly, also upgrade potential. Everyone is screaming for capacity, and in that environment, if customers find a way to give us some machine time, or reversely, we find a way to do the upgrades without taking too much machine time, and that's what we're putting a lot of emphasis on to really make the upgrades demanding as little machine time as possible, then there is a lot of demand in this environment for upgrades. It's that combination that really has driven upgrades, as a matter of fact, throughout the entire year at this very high level. You might remember in Q1, we talked about a very high level of upgrades, and we talked about pull-ins and just signaling that we thought that that would be at the detriment of upgrades that would happen in the remainder of the year. That didn't happen. Also in the remainder of the year, upgrades were at a very high level because, again, we found ways with the customer to do it in a way that was not very intrusive, and therefore giving value to the customer with the upgrades without ruining their process for too long. Okay. Presumably, that then continues into 2022 as well, this trend. Yeah. That's true, but as Peter said, the customer continuously has to make this trade-off between even if it's a non-intrusive way, it still is days and sometimes weeks of machine time. They continuously have to make that trade-off. In all likelihood, if we look at the upgrades that we also make available next year, we think the upgrade business next year should also be pretty healthy. Excellent. Thanks. Thank you. Our next question comes from the line of Didier Scemama of Bank of America. Please go ahead. Your line is open. Didier. Thank you. Rather than me speaking on the inflection of the backlog or the near term, I just wanted to come back to the Capital Markets Day and just getting your clarification, or at least helping us understand two points. My first question is on 3D DRAM. Yeah. I'm sure you're fully aware that all your competitors or peers, I should say, are talking about 3D DRAM mid-2025, which sort of doesn't jive well with what Martin told us at the CMD, so wanted to understand your side of the equation. Yeah. I will come back for the second question after that. Yeah, Didier, that's a good question. When we talk about these things, I always try to look at reality, at the facts. The fact of the matter is that all our customers, our DRAM customers, are engaged with us on EUV, which actually, for some of the customers that also talk about 3D DRAM, and I'll talk about that a little bit later. I'll refer to that a little bit later. Actually see ramping up EUV in 2023- 2024, which is dimensional scaling. On top of that, we have very significant discussions with DRAM customers on High NA, which is the next level of dimensional scaling, and which actually they're asking for introduction at the same timing as we have logic High NA. That dimensional scaling is what they're doing. I can only refer to what a CTO of one of our largest DRAM customers said. The DRAM is talked about as a concept. That's what he said. It is written. Yeah. It's a concept. It's not enough to say, "Yes, I see it," enough to make it reality. That's how they think about this today. It's been in research for a long time. You might remember 3D XPoint, ReRAM, that's a 3D structure. Yeah. It's been around and it's been part of research and their thought process for a long while, but it's not there. What is there is dimensional scaling, where they engage with us quite significantly on High NA, which is the second half of this decade. That's reality. Now, having said that, you referred to some of our peers, and I've also seen the capital market presentations. My personal question is that it's a bit overhyped by our semiconductor equipment peers, which if I were them, I would probably do the same thing. It does not jive with what our customers are telling us. Mic dropped. Second question, going back to CMD as well, and this slide from Martin. There's been a lot of questions and debates with the investor community as to the 2 nm node and why there would be a flat EUV layer count. I think we all well understand the drop at 1.5 nm due to High NA, but maybe less so the 2 nm flat EUV layer count, and some are worried that this is due to gate-all-around. Can you just clarify that here you're talking about a node shrink with no EUV layer count increase, or is it in fact no shrink or no shrink from 3 nm- 2 nm, just as sort of a marketing name for gate-all-around? Yeah, I think, Didier, if you talk about Gate-all-around, first off, I think it's important to know that fundamentally, Gate-all-around or FinFET doesn't drive a difference in litho intensity. There is no fundamental shift in litho intensity if you move from one architecture, if you like, to the other. It is the case that customers look at a new node and say, "Is this a node where I'm going to combine device architecture innovation with significant shrink?" There you see, if you just look at the history, if you look at, for instance, FinFET, you saw that some customers decided to when they introduced the new device architecture to be very conservative on shrink. Some others didn't, and actually combined device architecture with the shrink. We've been conservative in our projection there. We know there is one large customer that, at this node that you're referring to, is indeed going to gate-all-around. You also know that another customer is actually doing that at a node before that. Therefore, the assumption that might, at that particular node, lead to a conservative estimate in terms of layer count. That's the background of that slide and that number. Fantastic. Thank you for the clarification. Thank you. Our next question comes from the line of Stéphane at ODDO BHF. Yes. Hello, good afternoon, everyone. Actually, I wanted to come back on your forecast for 55 EUV tools for next year. I understand it's a goal for production. Given the difficulties you are witnessing in the supply chain, like everyone else actually, how confident are you that you will be able to transform this production goal into revenue next year? Thank you. Yeah, that's a good question, Stéphane. We are encountering, just like any other industrial company and even in non-industrial companies, they're encountering issues with respect to component shortages, which is what we're also, not we personally, or as a company, but in our supply chain. Our supply chain does encounter these shortages, and of course, we need all the modules from our suppliers to make an EUV tool. Yes, this is a concern for I think everybody. The way that we deal with it is you have to think about is that if we identify, and that's what we do, together with our supply chain, we identify shortages of certain components. We actually are very active in, let's say, exchanging those shortages and the need for those components with our customers. Although these components are not supplied by the customers of our suppliers, but we are the customer, we are still, you could say, in between to make sure that we can highlight to our customers, the chip manufacturers, that they need to produce these chips because if we cannot get the modules, then we cannot make the machines so that the capacity shortage, that's obviously will stay as is. We need to add capacity and we need to ship machines to be able to deal with the current shortage. When we have those discussions with our chip-making customers, we get a lot of response, as you can imagine, because basically we want to ship our machines to their installed base. There is this loop that we are closing. Yeah? I think that is happening as we speak. Now, is there some delay? Yes, of course, there is a delay because there's communication between our suppliers, ASML, and the chip-making companies, and to see how we can close the loop. That leads to a delay, and this is a delay that we're seeing. I think in the end, we get it resolved. At least we get it resolved. That's why we are still confident that for 2022, we will be able to actually ship 55 units. Now, are there going to be some fast shipments by the end of the year depending on these, let's say, communication delays to get things resolved? Maybe. That's too early to tell, I think the 55 shipments, with our capability to be the intermediate between our supply chain and the chip makers, I think that's something that we feel comfortable with. Okay. Thank you. Looking still at 2022, about the gross margin evolution, what are the elements that we have to take into account when we try to model 2022 gross margin evolution, notably on the EUV services side, which has been at much lower profitability than the group? Yeah. I think the key things to look at, one you mentioned is EUV gross margin. I think we said that you should expect that continues to grow, until we reach around 50% in the 2024- 2025 timeframe. That's the number that we've given. We've also told you that we're approaching 30% this year. That's kind of the buildup that you see there. That's one element to consider there. I think a second element is the fact that next year is going to be 3600Ds only, right? You won't have Cs, you would only have Ds in next year. The third element is that you're going to see a little bit of impact on the 2050. The 2050 immersion tool, of course, will be more prevalent in next year than this year. Those, I would say, are probably the main elements to look into for the gross margin in 2022. You expect an improvement in gross margin, right? I think I only mentioned things that approve the gross margin. I think that's a reasonable assumption, but how much of that? Stay tuned, and in three months' time, we're going to give you more details on that. I think it is realistic to assume that you'll see an improvement based on the three drivers that I just mentioned. Thank you very much. Thank you. Our next question comes from the line of Pierre Ferragu of New Street Research. Please go ahead. Your line is open. Hi, guys. Thank you for taking my question, and apologies for imposing on you a third French accent in a row. I get it must be painful. I try to be as local as I can. We are used to French accents, Pierre, so it doesn't matter. As you know, we have two colleague board members who are French, so we're actually used to it. I do remember that, Peter. I have a pretty specific question. I hope it's the right forum to ask it. When we look like in logic and foundry, when your clients have moved to EUV, we've clearly seen that they've made a very full reuse of all their DUV tools, because EUV layers were basically added to the DUV layers of the previous node. The question I have is for your large IDM clients, logic clients, these guys have pushed DUV one step further than others with their 10 nm node, then as they move towards the node that they've renamed four, they're going to introduce EUV potentially in a more aggressive way. Replacing things they've done with DUV in the previous node with EUV, which kind of would mean that maybe they would be buying more EUV tools, in this transition, but also end up with excess DUV tools in the process. I was just wondering if that's the case, if you have visibility on that, and if it could impact at some point, for a short period of time, DUV demand. I think you are right that the number of EUV tools has gone up because EUV layers have gone up. We don't see any excess in DUV for a few reasons. One, the product that is currently being produced with those DUV layers is still in very high demand, and number two, if you're an IDM and you'd also like to move into the foundry space, you'd better make sure you have those tools. Foundry is not only about 7 nm, it's about 0.18 micron or even above that to 7 nm. It's the whole thing. I would definitely not get rid of that excess DUV. I would start using it. We haven't seen that, and it makes sense that we haven't seen it. Is that clear, Pierre? Yes. Thank you very much, Peter. Thank you. Our next question comes from the line of Sandeep Deshpande of JP Morgan. Please go ahead. Hi. Thanks for letting me on. Maybe I'll ask you just a question on the industry. Peter, you saw a very strong increase in your orders in this cycle in Q4 last year. You saw a big step up, and even today now, there are shortages in the semiconductor industry. Given that you have that visibility in terms of the wafers flowing through your equipment as such, have you seen additional wafers flowing today versus, say, Q4 last year through your equipment to say that there is much more capacity today versus in Q4 last year? Why are there such big supply chain bottlenecks, including for yourselves and for many others, and particularly related to the semiconductor industry? I have one quick follow-up. Sandeep, you've been around a long time, and you asked the million-dollar question. The real answer is we don't know. We have some indications and some ideas, and yes, you are absolutely right. The wafer out capacity today is a lot larger than it was in Q4 2020. That's true. Still, we see these shortages. I spoke to a very large customer and basically asked the same question, and they actually said, "Peter, we don't know either." Because somehow we haven't been able to connect all the dots that actually are the underlying drivers for this demand. There's some rumors out there that the brokers and the distributors are playing as a devious role here because they stock up all the inventory and drive up the prices, but I don't believe that that much. There will be some of it. Even for the very large customers, like the smartphone makers that are direct customers to the semiconductor makers, have nothing to do with the distributors, they are in shortage also. I think it is the underestimation of the very fast application of everything that has to do with mobility, sensor technology, IoT-type applications that we completely underestimated, that tens of thousands of companies are making use of the capabilities of the cloud, of the high-performance computing in the data centers or 5G, and they are creating solutions, services, product that actually need, in the end, the compute power of the data centers, but also, let's say the 90 nm and the 0.18 micron technology that's 20 years or 30 years old. This is what's happening today, and we haven't connected the dots. That's happening today because that's why you see it everywhere. Take a car. If you look at the number of sensors that are currently in an advanced driver-assisted system in a car, it just exploded. Yeah? They need an RF device, they need power IC, they need a microcontroller, and that's just a car, and it's everywhere. This is where I think we are struggling to really understand the issues. I know one thing, that the demand for mature, for DUV dry, has by far exceeded our expectations where we are today. Yes, some of it will be panic ordering by the customers of our customers. It's too big to just be panic ordering. There's this underlying trend that we really don't understand fully, and it's personal. I have the idea it's the culmination of the cloud, the high-power compute capabilities in the data centers, the fact that we're rolling out 5G, and the fact that we have this distributed computing field that is growing almost exponentially in terms of services and products. The latter, we don't fully understand. Unfortunately, our customers don't understand it either, as I was told. I'm sorry, I'm just going to add to the cloud of fog that we're going to be seeing, but I cannot give you as a very clear answer. Thanks, Peter. Just actually a follow-up from that, and then Didier's also previous questions on your Capital Markets Day. There were some investors disappointed about your longer-term guidance. Is it that your famous model is not factoring in some of these factors you mentioned earlier just now, and that is why you are guiding to what you are guiding in 2030, and maybe you will change that view over time? Your model is probably not taking into consideration some of these factors which have changed 2025 to such a large extent from your previous guidance, and then whereas 2030 is quite a long way away as yet. You're very perceptive. This is exactly the question I asked to our strategic marketing group and said, there are things going on. If our customers tell us we cannot connect the dots because we have this question mark, you can imagine that the question I asked to our strategic marketing group is, you need to find that level of information that will enable us to basically connect more dots and put that in the model. You're absolutely correct. Our model is based on what we know and what we know as historical trends, but our model is not built to actually predict the future. It can only predict the future based on the parameters that we know and that we have put in the model. The parameters that we don't know and that are changing the world as we speak are, of course, not in there. Yeah. That's exactly what I wanted our strategic marketing group to do. We told you what we know, not what some crystal ball might have told us. Sandeep, I think I made it perfectly clear when I introduced the model. I think the basis is an external source, right? It's external numbers in terms of where external sources see the semiconductor market go. You might look at it and say, "Hmm, we think it could grow faster based on the developments that we just talked about." That was the starting point. Then we also said that we had a number of estimates in there that some refer to as conservative, right? We talked about litho intensity being at the same level of 2025. Some say that's conservative. That's the assumption that we've applied. We've looked at a market share that doesn't move from 2025. Some people would say with the further advancement of EUV, High NA, et cetera, your market share should continue to grow in terms of the total share in the pie. I think we've given the assumptions. Some refer to those assumptions as conservative, but that's the background, and that's the basis for the model. They are all consequences of our understanding of what we currently see. I mean, we didn't see a specific reason to, what Roger said, to increase our market share or to increase the litho intensity much because there's so much going on, which we don't understand fully yet. It's nine years out. That's quite a long way out. Yes, you are right. I think in one or two years' time, we have some more intelligence. We can put it into our model parameters, and we'll probably see a different outcome. Thank you so much. Thank you. Our next- We have time. Go ahead, operator. We can get one more in. Okay. Thank you. That last question will come from the line of François Bouvignies of UBS. Please go ahead. Your line is open. Hi. Thank you very much, and sorry for the extra French accent. I just have two quick questions. The first one is maybe related to what you said, Peter, around what we don't understand about the demand. When I look at your China exposure, which is like 10% this quarter, 17% last quarter. If I assume that you don't have any EUV in China, from local base China, I'm talking. Yeah. Do you think, what is the risk that, with all that's going on in China in terms of uncertainty around procurement of tools in the future and also the local push, is there an effect of pulling, that you would expect maybe coming from China and is driving the demand particularly strong on the DUV side, obviously? I have a quick follow-up after. Yeah. That's a good question. I think generally I would say, our local Chinese customers follow their capacity expansion roadmap quite accurately. What we're seeing today is actually a result of what they told us also last year. Now, having said that, they're also reacting, of course, to the local chip shortage. Whenever they have an opportunity to put more machines into their factory, they will do that. I think for the large capacity expansion plans, they just follow plan. For the shorter term, anything that we can pull in, they ask for a pull-in. That is, I think, more driven by the current demand in the market than by any strategic reasoning. The strategic reasoning is more the total capacity that they want to build over the next couple of years. That actually has been pretty stable or pretty accurate also in terms of execution. Okay. Makes sense. Maybe the last one is on when you talk about the upgrades going into 2022, that may be strong depending on the downtime your customers are giving you. I imagine your customers today, they don't know how much downtime there will be in 2022 because who knows what's going to be the demand. Yeah. My question is, if we assume upgrades picking up next year, is there a risk to your DUV product shipments as well? As you know, you increase your capacity significantly, maybe in some cases with upgrades. How should we think about the relation between the two, your upgrades and your products? I think you really need to look at the upgrades as a kind of a fast incremental addition to your capacity. The machines that they're buying is really driven by the more medium to long-term view that they have on the capacity needs. I think one does not cannibalize the other in the demand situation where we are today. We need both. Okay. Thank you, Peter. All right. Thank you. If you were unable to get through on this call and still have questions, please feel free to contact the ASML Investor Relations department with your question. 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 third quarter financial results conference call. Thank you for participating. You may now disconnect.