Good day and thank you for standing by. Welcome to ASML 2024 First Quarter Financial Results Conference Call on April 17, 2024. At this time all participants are in a listen-only mode. After the speaker's introduction there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Skip Miller. Please go ahead.

Thank you, operator. Welcome, everyone. This is Skip Miller, Vice President of Investor Relations at ASML. Joining me today on the call are ASML's CEO, Peter Wennink; our CFO, Roger Dassen; and our Chief Business Officer and Incoming CEO, Christophe Fouquet. The subject of today's call is ASML's 2024 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, and thank you for joining us for our first quarter 2024 results conference call. Before we begin the Q&A session, Roger, Christophe, and I would like to provide an overview and some commentary on the first quarter 2024, as well as provide our view of the coming quarters. Roger will start with a review of our first quarter 2024 financial performance with added comments on our short-term outlook, and I will briefly reflect on the current market environment and then hand over to Christophe to complete the introduction with some additional comments on the future business outlook. Roger?

Thank you, Peter, and welcome everyone. I will first review the first quarter 2024 financial accomplishments and then provide guidance on the second quarter of 2024. Let me start with our first quarter accomplishments. Total net sales came in at EUR5.3 billion at the midpoint of guidance. We shipped 12 EUV systems and recognized EUR1.8 billion revenue from 11 systems this quarter. Net system sales reached EUR4 billion, driven by logic at 63%, with the remaining 37% coming from memory. Installed base management sales for the quarter came in at EUR1.3 billion as guided. Gross margin for the quarter stood at 51%, which is above our guidance, primarily driven by product mix or immersion in UV systems. On operating expenses, R&D expenses were EUR1.32 billion and SG&A expenses came in at EUR273 million, both slightly lower than guided due to a shift in spending to later in the year. Net income in Q1 was EUR1.2 billion, representing 23.1% of total net sales and resulting in an EPS of EUR3.11. Turning to the balance sheet, we ended the first quarter with cash, cash equivalents, and short-term investments at EUR5.4 billion, which is lower than the previous quarter. We ended Q1 with negative free cash flow, primarily driven by lower down payments and higher inventory relative to last quarter. In the current environment, as customers work to return to profitability and strengthen cash positions, we continue to provide some support for our customers. The higher inventory is a result of increased material intake, including High NA as part of planned capacity ramp in preparation for stronger demand next year. Moving to the order book, Q1 net system bookings came in at EUR3.6 billion, made up of EUR656 million for EUV bookings and EUR2.9 billion for non-EUV bookings. Net system bookings in the quarter were driven by memory at 59% and logic for the remaining 41% of the bookings. There is quite a bit of speculation around order numbers, so I will make a few comments here. In the past six months, we've had orders of almost EUR13 billion, which is quite significant. As we said in the past, our order flow can be lumpy and may not be evenly distributed over the year. Although we don't guide orders, an order rate a bit over EUR4 billion per quarter for the final three quarters of the year would provide full order coverage at the end of 2024 for a 2025 sales number that would be at the midpoint of our 2022 Investor Day scenarios. At the end of Q1 2024, we finished with a backlog of around EUR38 billion. With that, I would like to turn to our expectations for the second quarter of 2024. We expect Q2 total net sales to be between EUR5.7 billion and EUR6.2 billion. We expect our Q2 Installed Base Management sales to be around EUR1.4 billion. The relatively low first half of the year, compared to the expected strong second half, is in line with the expected industry recovery from the downturn. Gross margin for Q2 is expected to be between 50% and 51%. The expected R&D expenses for Q2 are around EUR1.70 billion, and SG&A is expected to be around EUR295 million. Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%. In Q1, ASML paid a quarterly interim dividend of EUR1.45 per ordinary share. Recognizing the three interim dividends of EUR1.45 per ordinary share paid in 2023 and 2024, this leads to a final dividend proposal to the annual general meeting of EUR1.75 per ordinary share, which will result in a total dividend for the year 2023 of EUR6.10 per ordinary share, which is a 5.2% increase compared to 2022. In Q1 2024, we purchased around 0.5 million shares for a total amount of around EUR400 million. With that, I would like to turn the call back over to Peter.

Thank you, Roger. As Roger highlighted, a relatively slow Q1 as the start to the year is consistent with our guidance and expectations coming out of the downturn. Overall semiconductor inventory levels continue to improve, trending towards more healthy levels. We also see continued improvements in lithography tool utilization at both logic and memory customers, all in line with the industry's continued recovery from the downturn. Looking at the market segments, we see a similar environment as communicated last quarter with demand momentum from AI-related applications. Memory demand is primarily driven by DRAM technology node transitions in support of advanced memories such as DDR5 and HBM. Logic customers continue to digest the significant capacity additions made over the past year. As many of you know, next week, April 24, is the General Meeting of shareholders and my last effective working day at ASML. Although this is not a big surprise anymore, it's still a significant event for me, Martin, and our families and it has been an enormous privilege to serve the company and its many stakeholders for so long. I have thoroughly enjoyed virtually every moment of it and the many interactions I have had with many of you, including these conference calls. I hope to see some of you someday and wish you all good health and prosperity. With that, I'd like to turn over to you, Christophe.

Thank you, Peter. First of all, thank you for the last 10 years leading ASML and making it the great company we know today. I think some of our audience have been with you for the 40-plus quarters you led as CEO, but probably not many for the nearly 100 quarterly calls over your past 25 years in ASML. I am sure everyone on the call will miss you as much as we all will at ASML. I am myself very honored and privileged to succeed Peter, and I am very much looking forward to working with all of you. As Peter mentioned, our view on the market segment for 2024 has not changed relative to what we stated last quarter. We expect memory revenue growth this year, primarily driven by technology transition in support of advanced memory technology. We see lower logic revenue this year relative to last year as customers digest litho capacity installed over the past year. Turning to our businesses. For EUV, we continue to expect revenue growth in 2024. We plan to recognize revenue on a similar number of EUV 0.33 NA systems as in 2023. In addition, we expect revenue from one to two High NA systems. On our 0.33 NA system, we shipped the first NXE:3800E this quarter for qualification at the customer. The NXE:3800E has the capability to deliver a significant increase in performance with a productivity of 220 wafers per hour, which is a 37% increase over the NXE:3600D in its final configuration. The NXE:3800E also brings imaging and overlay improvements, which will make it the future tool of choice for memory and logic advanced nodes. Those performance increases will deliver better value for our customers, including cost of ownership, and will translate into higher ASPs and improved margins for ASML. EUV customers plan to transition to the NXE:3800E this year. As a result, the majority of our low NA EUV shipments in the second half of the year will be this system. Regarding high NA or 0.55 NA EUV, we shipped our first system to a customer, and this system is currently under installation. We started to ship the second system this month, and its installation is also about to start. During the SPIE Industry Conference in February, we announced first light on our high NA system located in our joint ASML-imec High NA in Veldhoven. We have since achieved first images with a new record resolution below 10 nanometers and expect to start exposing wafers in the coming weeks. All High NA customers will use this system for early access to process development. The customer interest for our system lab is high as this system will help both our logic and memory customers prepare for High NA insertion into their roadmaps. Relative to 0.33 NA, the 0.55 NA system provides finer resolution enabling an almost 3 times increase in transistor density at a similar productivity in support of sub-2 nanometer logic and sub-10 nanometer DRAM nodes. We expect our non-EUV business to be down in 2024, primarily driven by lower emerging system sales relative to 2023. For our Installed Base business, based on our view today, we expect a similar level of revenue compared to last year. As the recovery becomes more clear this year, customers may look to upgrade their systems in preparation for 2025, which could provide future business opportunity this year. Our outlook for the full year is unchanged with similar revenue compared to 2023. In line with the industry's continued recovery from the downturn, we expect a stronger second half relative to the first half of the year. We view 2024 as a transition year and continue to make investments this year both in capacity ramp and in technology, to be ready for the upturn in the cycle. Looking longer term, while there are still significant uncertainties primarily driven by the macroenvironment, it appears we are passing through the bottom of this specific cycle, and we expect an industry recovery over the course of 2024. Based on discussions with our customers and supported by our strong backlog, we expect 2025 to be a strong year driven by a number of factors as mentioned last quarter. First, the secular growth driver in semiconductor end markets, which we have previously discussed, such as energy transition, electrification, and AI. The expanding application space, along with increasing lithography on future technology nodes, drive demand for both advanced and material nodes. Second, the industry expects to be in the middle of a cyclical upturn in 2025. And lastly, as mentioned earlier, we need to prepare for the significant number of new fabs that are being built across the globe, in some instances clearly supported by several government incentive plans. These fabs are spread geographically, are strategic for our customers, and are scheduled to take our tool. It is essential that we keep our focus on the future and build capacity in preparation for further long-term growth as we discussed in the market scenarios for 2025 and 2030 during our Investor Day in November 2022. We plan to update our view during our Investor Day this year on November 14, 2024. In summary, also there is near-term uncertainty. We remain confident in our long-term growth opportunity. With that, we will be happy to take your questions.

Thank you, Roger, Peter, and Christophe. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I would like to ask you if 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. Also, as the CEO transition is planned next week following the AGM on April 24, Roger and Christophe will take the majority of the questions as it pertains to the forward-looking comments. Now, operator, could we take your final instructions and then the first question, please?

Thank you. We will now go to your first question. And your first question comes from the line of Krish Sankar from TD Cowen. Please go ahead.

Hi, thanks for taking my question. And Peter, I guess also for Martin as well, thanks for everything over the years. You both will be missed for sure. And then I guess my first question is for Roger. I understand bookings can be lumpy, but the EUV orders were also down quite a lot in the March quarter. And you said that you need to hit over EUR4 billion run rate to hit the midpoint of calendar 2025. But I'm just kind of curious, there's an expectation that it should be better than the midpoint of next fiscal year. Do you really need significant EUV orders to meet those calendar 2025 outlooks? And where do you think that's going to come from mainly? Is it the foundry logic vertical? And also just along the same path, how much of your memory bookings was from China? And then I had a follow-up.

And a follow up. Many questions in one question, Krish. Very well done. I'll try and answer them as best as I can. But yes, Krish, I think you're absolutely right in our conclusion that indeed order intake is very lumpy. We've been saying that for many, many years. We said it last time when the orders came in very high. We say it today when from the vantage point of some, the orders come in pretty low. If you look at the past six months combined, you're looking at EUR13 billion, which is EUR6.5 billion per quarter, which we still continue. We still believe it's pretty significant. When I talk about the EUR4 billion needed to get to the midpoint of next year, I'm indeed talking about everything, so of course, that also includes EUV. And I think, as many of you have probably recognized, if you look at the intake in the past couple of quarters and also in the past quarter, it's pretty clear that there are a few usual suspects absent in the order intake. If we look at the plans of some of our large customers, particularly in the foundry sector, it's pretty clear that in the next couple of quarters, significant orders need to come in. Part of the EUR4 billion that you should see in order to get to this midpoint indeed has to include the orders from those customers. So again, this midpoint, does that mean that now all of a sudden, we're guiding midpoint? No, we're not. We're looking at a significant uptick in 2025, but we're not saying now you need to look at the midpoint of the guidance. In terms of your questions on memory and particularly then on China, of course, we typically do not disclose the geographic distribution of our order intake. But there is a healthy part in the order intake related to China, but it's not like the order intake is distributed over the globe. So the very high concentration that you saw in the sales for Q1, you don't see that reflected in the order intake. So the order intake is more distributed geographically than what you would see in the sales for Q1.

Got it. Yes, thank you very much. And just a very, very quick follow-up and really appreciate it. With all these incremental news coming on U.S. and Dutch rules and regulations. Just curious, has that changed your view on what it means for your China sales? Three months ago you said it was a 10% to 15% impact. Just want to see if there's any updated view on this. Thank you very much.

No, Krish, nothing has changed. When we talked about the 10% to 15%, that was directly related to the fact that we realized we will probably not get licenses to ship the latest generation of immersion tools. Our perspective has not changed. The rules haven't changed. Our perspective on the year hasn't changed. We're still looking at a strong sales level for China for this year.

Thank you. We will now go to the next question. And your next question comes from the line of Tammy Qiu from Berenberg. Please go ahead.

Hi, thank you for taking my question. So first one is on China, please. Can you talk about your China business trend over the recent quarter, please? Because China has been really strong, and there has always been concern that China may actually go to capacity just from impurity this year or later this year. Do you have any comments on China's trend, please? Then I have a follow-up.

Yes, I mean, China, relatively speaking, is high, but in absolute numbers, you would recognize that China is actually lower in Q1 than it was in Q4 of last year. So because if you do the math, then China was at EUR1.9 billion in this quarter. It was at EUR2.2 billion last quarter. So from that vantage point, it's gone down a bit, but it's still strong. The reason that China is strong both in absolute terms and relative terms is also because the rest of the world, the demand is, or at least the sales and the shipments in Q1 were relatively low, which was no surprise. I think it's very much in sync with our perspective on a market that is in recovery. A market being in recovery means that customers are first driving up the utilization of their tools, which is exactly what they're doing. If the utilization comes to a certain point, then they will start to order and will require shipments. That's exactly why we've also said on the call that we believe we're going to see momentum building up in the course of this year with a much stronger second half, as Peter also just mentioned. So, in terms of trends in China, a strong first quarter for sure, but not a record quarter, but a strong quarter. We expect China to continue to be strong this year. You have to see that in relation to the rest of the world that we believe is going to recover. We've also said on previous calls and I just want to reiterate that if you look at the demand for China, the demand in China continues to be strong. That is related to the fact that the demand for mature technology continues to be strong. We said during Capital Markets Day in 2022 that we believe that every single year between 2022 and 2030, we believe 380k wafer starts and capacity need to be added to mature. If we look at what has happened last year, what has been added in terms of that both in China and in the rest of the world, it's actually below that number. So, yes, China is strong. As a result of this, China's share in the global market share will over the years become larger than it is today. Their self-sufficiency will increase in comparison to today. We believe that what China is adding today in terms of mature capacity is rational and is in line with our expectation of what capacity and mature needs to be added in order to get to what the world needs in the second half of the decade.

Okay, thank you, Roger. I have a follow-up on the EUV and 2 nanometer, 3 nanometer area, please. So you are expecting some massive orders from foundry and logic customers. Can you share if that is for 3 nanometer or 2 nanometer? And what is the level of EUV kind of layer count between those two? I do understand that potentially you have some usage, so that may impair some 2 nanometer incremental demand because some 3 nanometer can be migrated or reused for 2.

Yeah, this is Christophe here. So maybe on your first question, we mentioned a few times that customers, especially logic and foundry customers, were still digesting some of the capacity they had put in place. We are referring to 3 nanometer and 5 nanometer. When we look for the 2 nanometer capacity, it still has to come, and I think, as you probably are aware, we expect the ramp for that technology to start sometime next year. This will be the next most probably wave of EUV order and this is also back to the comment Roger made in answer to the first question. We are going to focus on EUV and logic foundry, mostly on 2 nanometer order intake, which, as Roger said, should come in the next few months. As for the number of layers, there is no change there. We've mentioned in the past that the EUV layer for 2 nanometer is very similar to what we had on 3 nanometer. 2 nanometer is mostly a device transition. Most customers will transition to get all around, which is a quite complex move. As a result, the focus of the change is on that. All the expectations we have in terms of EUV layers on 2 nanometers are not different from what we have shared with you for quite a few months now.

Okay, thank you, Christophe. Peter, happy retirement, and thanks for being with us over the past 10 years.

You're welcome. Thank you.

Thank you. We will now take the next question. And your next question comes from the line of Joe Quatrochi from Wells Fargo. Please go ahead.

Yes, thanks for taking the questions. I was curious, as we think about the order book and we think about filling out 2025, the company has been very specific about pre-building low NA tools over the course of this year and into next year. Has that changed the way that your customers are thinking about their order cadence?

Well, I mean, that would be a bit opportunistic on their side. I like to think of the relationship that we have with our customers as much more one-off partnership than one-off transactional behavior. So, I don't think that necessarily has an impact. Of course, we said in previous calls, in order to create as many degrees of flexibility as we have for next year, we will do some pre-building. But we do that in very close interaction with customers, understanding what they need, which I think is a big distinction. On the one hand, we’re having very intense interactions with customers to understand what they need. On the other hand, the PO process, which is pretty bureaucratic and formal, has a lot of governance necessary in order to get there. So that gets you to the lumpiness. We do have a pretty good understanding based on those conversations about what they really need. So that's what drives our plans for the year, that ultimately drives our plans for pre-building.

Yes. And perhaps speaking from experience over the last 25 years, we are a transparent company. So it also means that we will build inventory or work to prepare because our lead times are just so long. We inform you as our shareholders about this. And, of course, customers hear this and then we're in the midst of negotiations on final orders, which of course, if you put the two things together may lead to delays in the order placement, which is quite normal. But again, if you believe the 2025 projections, then you know that if you want to buy an EUV tool, there's only one phone number to dial. This will happen, but we are being prepared to ensure delivery.

Thanks for that. That's helpful color. As a follow-up, just on the memory orders that you're seeing. Just curious if that is still more predicated on HBM building out capacity or have you maybe seen some green shoots for conventional DRAM demand?

No, I think the lion's share of the orders that we saw in memory in the last quarter really are still technology-related. So, it's DDR5, it's APM—that's what most of the orders that we saw are related to.

Thank you. We will now go to the next question. And your next question comes from the line of Francois Bouvignies from UBS. Please go ahead.

Thank you very much. First of all, Peter, thank you a lot. You will be missed definitely in the investor community and thank you for the dialogue, that was very helpful. I look forward to working more with Christophe. The first question I had is a bit on the lead times. You mentioned that the buildup of inventory doesn't impact so much the lead times if I read correctly. And when you said last quarter, you mentioned that you have 12 months or more than 12 months lead time on EUV. Now, when you look at 2025 targets or ranges, you need to have like 70 more EUV tools to get to this mid to high end? According to my calculation, I have around 30 EUV tools in the backlog for next year, which means that you would need more than 40 EUV tools still to satisfy your revenues for 2025. I'm surprised by the number of EUV tools you need. With the 12-month lead times, it seems risky for your customers to wait until the last moment. Can you help clarify that?

First of all, it's a slightly different question, but essentially the question that we were just looking at. It's the same question that Joe was raising to an extent. Our ongoing dialogue with customers is all about understanding their needs. The PO process is bureaucratic and involves negotiations that delay order placements. However, we know quite well what customers want, and they know too. It's just a matter of those two worlds coming together and then ultimately leading to a PO. Is it a dangerous game for them? Not unless the dialogue continues openly. I don't foresee a risky situation as long as there is ongoing collaboration and mutual understanding.

If you believe the 2025 number, which we do, then it's a very high level of mutual dependency here. So, that's why the game is not that dangerous. We also need each other.

Makes sense. Thank you. My follow-up is on High NA. You see milestones in the last few quarters. Christophe, you talk about productivity and density improvements. When we think about the lead times for High NA, what is it today? If we assume mass production in '26 or '27, should we expect some uptick in orders for this maybe in the next few quarters? What's the cumulative tone you are still waiting for from a product point of view, technical point of view, to drive more adoption?

A few key milestones. The first one is that customers have been committing to EUV High NA with double-digit units in our backlog without even seeing one image from the tool. This shows a bit the level of commitment and trust they have in our ability to bring new technology. I mentioned the first image, a less than 10 nanometer resolution image. This is a huge milestone for both our customers and ASML, because this single image proved that the technology we have been developing for many years is working. The next step is for customers to come see us to get access to the tool in our lab to start exposing their own verticals. We expect this will lead to order decisions for High NA. We are excited to generate those first images. This is a very important achievement, and we look forward to the upcoming work with our customers.

Thank you very much.

Thank you. We will now go to the next question. And your next question comes from the line of C.J. Muse from Cantor Fitzgerald. Please go ahead.

Yes, thank you for taking my question. And Peter, big congrats. Pleasure working with you. If I could direct the last question to you, given your long experience, as you look at the strong secular trends led by high performance compute, historically at the leading edge, it was led by Apple and Huawei and then only Apple post the embargo. But now, given the performance power cost requirement, how are you seeing the trends on the high-performance compute side moving closer to being the pipe cleaner for the bleeding edge? How does that impact your thinking of the long-term growth for leading edge workers?

I think it's two questions, so I will answer the second one. High-performance compute is driven by massive amounts of data, which requires understanding the correlation between those data elements and overlaying that with smart software. AI is driven by massive data. I see IoT in industrial spaces as an area for AI applications. To collect all that data, you need sensors in various examples, whether it’s in cars or medical equipment; it's about sensing, which is the domain of mainstream semiconductors. This is crucial in the amalgamation of mainstream and advanced semiconductors. You cannot distinguish growth in one against the other. We expect that the industry's growth, especially in high-performance compute, will be driven by value. Cost is an issue; however, as noted, Moore's Law is an empirical economics. When you create more value with transistors, demand will grow.

Very helpful. Thank you. And Roger, a follow-up question on your backlog comment about the EUR4 billion plus required to hit the midpoint over the next three quarters. If I look at your backlog today, excluding High NA, it's around 18-months. I would expect your backlog exiting 2024 to have tools scheduled for '26. So is EUR4 billion the right number to think about for the next three quarters, or should it be significantly higher?

The midpoint is indeed EUR4 billion, and you shouldn't underestimate what we've taken out for the post-2025 period. That has clearly been recognized in our calculation. Clearly, the EUR4 billion reflects what is necessary for 2025. If you look at the high-end of the range, there's a EUR5 billion delta, where five divided by three equals 1.7. So if we needed to get to the high-end, we would need 1.7 billion more per quarter.

Yes, 2036.

Exactly.

Thank you. We will now go to the next question. And your next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead.

Hi, everyone. Many thanks, Peter, for everything over the years. I have one quick question and then a follow up. The first is on China services. We've seen several news articles discussing the U.S. government's request to the Dutch government to prevent servicing of certain aspects of the installed base in China. I had many investor questions about this and wondered if you could provide any perspective on potential implications. Given especially that tools don't work without services, is it fair to assume any ban wouldn't encompass all China services revenues?

Yes, I think on the China services, yes, we're probably reading the same articles. So, yes, that has been a discussion between the two governments. Let it be a discussion between the two governments. We are providing input on the size and type of services, and I think it's all being taken into consideration to determine what the real problem is. That is something which governments need to discuss because it's inherently related to their national security interests. Currently, there is nothing that stops us from servicing the installed base in China today.

Fascinating. Thank you very much.

Thank you. We will now go to the next question and your next question comes from the line of Chris Caso from Wolfe Research. Please go ahead.

Yes, thank you. Good morning. First question is regarding the guidance implied for the second half of this year, obviously expecting an acceleration in revenue. Can you give some detail on what you expect will lead that revenue growth in the second half? And specifically on China, you characterized that as strong right now. Do you expect that to remain strong as you go into the second half?

Yes, the second half expectation aligns with the orders we have today. We are fully booked for the year, so the shipment plans will reflect that across the board. This is particularly true for some of the fab openings and ramps that have been scheduled for 2024, both in logic and memory. We're also generally conservative regarding the Installed Base business. The Installed Base business in the second half is only a little bit more than what we have in the first half. There’s potential for an uptick in that number, particularly regarding possible upgrades in the second half. But it is very much across the board.

And in terms of China?

In terms of China, we expect China to continue to be quite strong. It depends slightly on sales to the rest of the world. There are still some tools where we have supply constraints, so the demand composition could limit shipments to China. But as stated, we expect strong sales into China to continue for the rest of the year.

We are fully booked for 2024 and in the habit of shipping what we booked. So there's little doubt in our mind that 2024 will turn out the way we outlooked it.

Understood. As a follow-up on memory, you spoke last quarter about the strong bookings driven largely by technology buys on memory. Could you give a sense of when you expect follow-through from DPV orders that would support capacity for memory? We've seen some green shoots in the memory market and I’m curious what your customers are indicating regarding that capacity.

It's clear that memory utilization is increasing and it has been sustained for quite a while. We expect that in the second half of the year, we will not only see technology transition but also an increase in bits. That's a significant part of why we see a step up from the second half to the first half.

Thank you. We will now go to the next question. And your next question comes from the line of Mehdi Hosseini from Susquehanna. Please go ahead.

Yes, thanks for taking my question. But before I begin, Peter, I want to wish you the best of luck in your next endeavor and hope to run into you at some launch in April. And Christophe, I hope to see you more often in the U.S. Back to my question. I want to understand two things. First, what is the mix of backlog attributed to China excluding EUV? And then second question, Roger, can you update us on the NXE:3800E? How is the throughput with the early system shipment in the first half, and how is it going to improve in the second half?

Nice try, Mehdi, on China, but we're not disclosing that. We don't disclose the composition of the backlog in a geographic sense. We said that China was a little bit over 20% in the backlog, and that should not lead to any surprises. The sales reflect that percentage. As for the 3800, we previously indicated that it would come in full configuration in a couple of months. In the second half, we aim to get it to 220 wafers per hour. It will quickly reach 195. The systems leaving the factory in the second half will be 220, and those at 195 will get an upgrade by early next year.

To what extent is that improvement towards 200 a factor or driver in driving the EUR4 billion plus per quarter new orders?

It's more of a revenue recognition factor. We will defer some of the revenue until the full configuration i.e., EUR220 is achieved. It’s not a PO issue since the customer signed a PO for the tool at full spec.

I think we have time for one last question. If you're 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 operator, may we have the last caller, please?

Thank you. We will now take the last question. And the question comes from the line of Didier Scemama from Bank of America. Please go ahead.

Hey, good afternoon. Thank you for squeezing me in. Warm congratulations, Peter. Also, if Martin is listening, thank you for everything really. It's been an amazing privilege for me to cover the company for the last 24 years. Congratulations also to Christophe for the promotion to CEO job. I've got one question on EUV and DRAM, if I may. The question is really, first can you tell us, roughly speaking, of your wafer capacity deployed in the industry. How much has transitioned to EUV yet, and how much do you think that could evolve as the industry adopts EUV for DDR5 and HBM? Related to that, I think in the past you had mentioned that over the longer term, I think 2030 was the sort of timeframe, the EUV unique breakdown could be 70-30 between logic and memory or DRAM. Do you think that the layer count increase we see with HBM could drive that to maybe a 50-50 split over the course of the next five or 10 years? Thank you so much.

Hi, this is Christophe. Yes, the question about the exact capacity is quite difficult to answer. I don't think we have all the elements to do that. What I can share is the trend we see on DRAM, where our customers are calling for an increase node on node of the number of EUV layers. We've seen this development for a few nodes. The high bandwidth memory doesn't significantly change that because the device itself is very similar. What is changing is the ratio between the array and logic, which requires larger die and therefore more wafer capacity. We see a translation in volume, but that's not related to the number of EUV layers—that's more related to the number of wafers you will need to do high bandwidth memory. Again, we are working hard to understand this better with our customers, with the intention to provide you a clearer outlook in November.

The 70-30 mix will also hold true as it is all connected.

Thank you so much.

As this will be the last quarterly call for Peter, I'd like to take a moment to publicly state to Peter that on behalf of the ASML IR team, it's been our extreme pleasure to have worked with you over many years. Thank you for your leadership, so many great memories, and countless contributions to ASML. Congratulations on your retirement. We wish you and your family all the best.

I could have never done it without you guys. That's absolutely clear.

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 2024 first quarter financial results conference call. Thank you for participating. You may now disconnect.