ASML Holding N.V.

, Q3 2024 Earnings Call, Oct 16, 2024

Good day, and thank you for standing by. Welcome to the ASML 2024 Third Quarter Financial Results
Conference Call on October 16, 2024. [Operator Instructions] Please be advised that today's conference is
being recorded.

I would now like to hand the conference call over to Mr. Skip Miller. Please go ahead.

Skip Miller

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, Christophe Fouquet; and our CFO, Roger Dassen. The subject o
today's call is ASML's 2024 third quarter results.

The length of this call will be 60 minutes, and the 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 ca
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 Christophe Fouquet for a brief introduction.

Christophe Fouquet

Thank you, Skip. Welcome, everyone, and thank you for joining us for our third quarter 2024 results
conference call. First, let me apologize for the confusion yesterday after the early publication of our press
release due to a technical error. Particularly given the serious nature of the key messages we wanted to
deliver and discuss with you, this was very unfortunate. Before we begin the Q&A session, Roger and I would
like to provide an overview and some commentaries on the third quarter 2024 as well as provide some
additional comments on the current business environment and on our future business outlook. Roger?

R.J.M. Dassen

Thank you, Christophe, and welcome, everyone. I will first review the third quarter 2024 financial
accomplishments and then provide guidance on the fourth quarter of 2024. Let me start with our third quart
accomplishments.

Total net sales came in at EUR 7.5 billion, which is above the high end of our guidance driven by more deep
UV system sales as well as higher Installed Base Management sales. Net system sales came in at EUR 5.9
billion, which is made up of EUR 2.1 billion of EUV sales and EUR 3.8 billion of non-EUV sales. Net system
sales was driven by Logic at 64% with the remaining 36% coming from Memory.

Installed Base Management sales for the quarter came in above guidance at EUR 1.54 billion due to higher
service and upgrade revenue. Gross margin for the quarter came in within guidance at 50.8%. On operating
expenses, R&D expenses came in slightly below guidance at EUR 1.06 billion, while SG&A expenses came in
as guided at EUR 297 million. Net income in Q3 was EUR 2.1 billion, representing 27.8% of total net sales and
resulting in an EPS of EUR 5.28.

Turning to the balance sheet. We ended the third quarter with cash, cash equivalents and short-term
investments at a level of EUR 5.0 billion, similar to last quarter. We ended Q3 with a free cash flow of EUR 53
million, which is somewhat improved relative to the last quarter. However, as mentioned last quarter, there
continued to be pressure on free cash flow. This is primarily due to a relatively low level of order intake, and
therefore, less down payments as well as a higher inventory level. The higher inventory is primarily attributab
to EUV, both High-NA and Low-NA, driven by longer lead times in the build cycle as well as inventory in
support of future ramp.

Moving to the order book. Q3 net system bookings came in at EUR 2.6 billion, which is made up of EUR 1.4
billion of EUV bookings and EUR 1.2 billion of non-EUV bookings. Net system bookings in the quarter was
more or less balanced between Memory at 54% and Logic at 46% of bookings. The relatively low order intake
is a reflection of the slow recovery in the traditional end markets as customers remained cautious in the
current environment.

At the end of Q3 2024, we finished with a backlog of over EUR 36 billion. With that, I would like to turn to our
expectations for the fourth quarter of 2024. We expect Q4 total net sales to be between EUR 8.8 billion and
EUR 9.2 billion. We expect our Q4 Installed Base Management sales to be around EUR 1.9 billion. Gross
margin for Q4 is expected to be between 49% and 50%.

And we'd like to make a few comments on the Q4 guidance. Net sales include the expected revenue
recognition of 2 High-NA systems. Installed Base Management revenue is higher than Q3, primarily as a resu
of achieving specific EUV performance milestones and some EUV productivity upgrades. Although Q4
revenue is higher than Q3, gross margin is expected to be slightly lower than Q3 as the positive impact from
the higher upgrade revenue is more than offset by the dilutive gross margin impact from the expected reven
recognition of the 2 High-NA systems.

For the quarter, the dilutive effect thereof on the gross margin is approximately 3.5%. Based on the Q4
guidance, we expect 2024 revenue at around EUR 28 billion with a gross margin of around 50.6%, which is
slightly lower than 2023, as expected. The expected R&D expenses for Q4 are around EUR 1.090 billion and
SG&A is expected to be around EUR 300 million. Our estimated 2024 annualized effective tax rate is expecte
to be between 16% and 17%. In Q3, ASML paid the first quarterly interim dividend over 2024 of EUR 1.52 per
ordinary share. The second quarterly interim dividend over 2024 will be EUR 1.52 per ordinary share and will
be made payable on November 7, 2024. In Q3 2024, no shares were purchased.

With that, I would like to turn the call back over to you, Christophe.

Christophe Fouquet

Thank you, Roger. As Roger highlighted, it was a solid financial quarter, but there were also a number of
market dynamics in the quarter. Starting with our technology. We continue to make good progress on both o
new EUV products. On our Low-NA technology, we continue to ramp the NXE:3800E system this quarter, with
EUV customers now rapidly shifting to this new model due to its higher performance, including over 37%
improvement in throughput compared to the NXE:3600D.

We have now demonstrated the full 220 wafer per hour throughput at a new record overlay in our factory, and
we are on track to deliver full specification system with new system shipments and upgrades from the
beginning of next year. As customer transition to the NXE:3800E, the majority of shipments in Q4 are the
NXE:3800E systems.
Regarding High-NA, the 2 shipped system are now exposing wafers at our customer, and we expect to
recognize the revenue from this system by the end of the year. The first system is in the process of being
shipped to a second major customer. Momentum continues to grow with around 10,000 wafers now expose
for multiple Logic and Memory customers using the High-NA system in the joint ASML-imec High-NA lab and
the systems in the field.

At the recent lithography conference, we published new High-NA data showing major performance benefits
imaging, overlay and contrast. Those benefits also indicate a significant cost reduction opportunities for bot
Logic and DRAM customers. As a reminder of the value High-NA provides, we have demonstrated the system
ability to print pictures at a resolution of 8-nanometer. Compared to a Low-NA system, this represents an
improvement to nearly 3x in transistor density per exposure. So all in all, we have seen continued momentum
on EUV technology, and we are progressing well relative to customer expectations.

With regards to market conditions, while we continue to view AI as a key driver of the industry recovery with
potential upside, we see other segments recovering more slowly than anticipated. The recovery will extend
well into 2025, which is leading to customer cautiousness and some pushouts in their investments. In Logic
the slow recovery of end markets, such as mobile and PC, together with specific competitive foundry
dynamics has resulted in a slower ramp of new nodes at certain customers who are, as a result, pushing out
some of their fabs and changing their litho demand timing.

In Memory, the slower market recovery is also resulting in limited capacity addition with the focus still on
technology transition, supporting the high-bandwidth memory and DDR5 AI-related demand. And finally, we
expect the China business to go back to a more normalized percentage of our business, in line with the
percentage of China business in our backlog.

In summary, while the long-term trends are still very strong and positive, the developments over the past few
months, combined with customer-specific circumstances, has led to a reduced gross curve in 2025 and an
overall reduction of our lithography demand. Due to these dynamics over the last quarter, we felt it would be
appropriate to make some comments on 2025 at this time versus waiting until our Investor Day next month.

With that, I will turn it back over to Roger.

R.J.M. Dassen

Thanks, Christophe. And as we discussed in our Investor Day in 2022, we provided market scenarios for 202
of between EUR 30 billion and EUR 40 billion, with a gross margin of between 54% and 56%. Based on the
recent market dynamics that Christophe just described, we now see 2025 revenue moving through the lower
half of the range, so between EUR 30 billion and EUR 35 billion. To a large extent, this is driven by a significan
reduction in our expected Low-NA shipments for 2025 to fewer than 50. We also now expect our China sales
to be around 20% of our total revenue next year, trending back towards our historical China percentage and i
line with its share of the backlog.

With regard to gross margin, one of the key drivers of the expected improvement was Low-NA, driven by both
an increase in the number of systems as well as a move to the higher-margin 3800E system. While the
improvement in gross margin for the 3800E has been achieved, the large reduction in EUV unit numbers for
next year is significantly margin dilutive in comparison to earlier expectations. Also, the reduction of our Chin
sales, which typically contain a high percentage of immersion sales, is dilutive to our gross margin. Therefor
based on the current outlook of lower revenue and the less favorable mix in comparison to the 2022 Investo
Day, we now expect a gross margin of between 51% and 53% in 2025.

In comparison to 2024, the 2025 gross margin is expected to benefit from the higher gross margin on the
3800E, gradual margin improvement on High-NA and the improvement in EUV service margin, but we'll also
see a dilutive margin effect of recognizing more High-NA tools in revenue. On operational expenses for 2025
we expect total OpEx to be at the upper end of the bandwidth of EUR 5.6 billion to EUR 6.1 billion, provided
during Investor Day in 2022. We will continue with our R&D road map as planned and have been able to
absorb the significant wage inflation effect since 2022 within the bandwidth.

With that, I once again hand it over to Christophe.

Christophe Fouquet

Thank you, Roger. As we look out longer term, consistent with what we have previously stated, the secular
growth drivers in the semiconductor end markets are still very much intact. AI, energy transition,
electrification, among other applications, continue to provide a very strong and very positive perspectives to
our industry and ASML business. The expanding application space, along with increasing lithography needs
on future technology nodes, drive demand for both advanced and mainstream nodes.

In line with most of our industry peers, we continue to see AI as an upside and continue to watch carefully
how this will affect us on the short and in the long term. Despite some of the pushouts we have discussed, w
continue to prepare for a number of new fabs that are being built across the globe to address the future
demand and needs of the industry. Those fabs are spread geographically, are strategic for our customers an
are scheduled to take our system. We will therefore continue to build capacity in order to respond to the
demand increase that we expect throughout the remainder of this decade. We will provide a more detailed
assessment together with the scenarios of 2030 at our Investor Day on November 14, 2024. We look forward
to seeing you there.

With that, we will be happy to take your questions.

Skip Miller

Thank you, Roger and Christophe. The operator will instruct you momentarily on the protocol for the Q&A
session. [Operator Instructions] Now operator, could we have your final instructions and the first question,
please?

Operator

[Operator Instructions] And your first question the line of Joe Quatrochi from Wells Fargo.

Joseph Quatrochi

I wanted to kind of understand the change that you're talking about in terms of the China demand. What are
you seeing there that's causing that normalization? And then if we were to try to think about what, in your
2025 guide, you're implying for non-China DUV revenue, it seems like you're embedding a pretty significant
increase year-over-year. What's the underpinning driver of that?

R.J.M. Dassen

Thanks, Joe. So when it comes to China, I think it's a combination of two things. As we've said before, in the
past 2 years, we've been very much eating into our backlog for China, and that backlog has come to that leve
simply because in the years before that, we were -- we had a fairly low order fill rate for China. So as a result
that backlog built up in the past 2 years, because of the global market circumstances, we were able to delive
on that backlog. So that's why the China sales in 2023 and 2024 have been so high. So as a result of that, we
also indicated before that we expect at a certain point in time for that to normalize and that is, I think, what
you now see in the numbers. So that's one driver.

Secondly, I think we all read newspapers, right? We all see that there is speculation around export controls.
And also that is a driver for us to take a more cautious view on the China sales. So with that combined, we've
indicated that we believe the China sales for next year are going to go to, let's say, 20% of our expected sales
level for next year. When it comes to deep UV and the non-China part of the deep UV business, if you do the
math a little bit, our expectation is that the deep UV business next year will be lower than it is this year. So w
believe deep UV will go down a bit.

But you're right. I mean with the China business going down, as we've indicated, that means that the non-
China part of the deep UV business will go up. And the main reason is that if you look at the more advanced
nodes and if you do the math on the growth that you might anticipate in the EUV business for next year, you
will see that there is quite some growth there. In the combination of Low-NA and High-NA, you will see quite
some growth there. And I think what you're going to see is that the non-China part of the deep UV business i
sort of following that trend. So the attach rate, if you want to call it like that, of the deep UV business to the
EUV business will be kind of similar. So the growth rate you will see on EUV, you will sort of see back also in
the growth rate for the non-China part of the deep UV business.

Joseph Quatrochi

Got it. That's helpful. And then as a follow-up, I wanted to try to understand a little bit better the 2025 gross
margin guidance in the commentary. I can certainly appreciate the lower mix of Low-NA. But for total revenu
to still be kind of within the low end of the target range, I think it would still imply that your immersion
shipments maybe being down year-over-year, it sounds like still better than what you're thinking about from
the target model, which I think would be a positive for -- in terms of offsetting just some of the mix. So mayb
can you help us unpack that a little bit of just how do we think about like the immersion relative to what you
were thinking about at the Analyst Day in 2022 and that mix effect?

R.J.M. Dassen

Yes. So Joe, immersion in comparison to the Investor Day in 2022, I think there, you will see that immersion
not dramatically different from the expectations that we had in 2022. So I think the immersion expectation
has gone up a bit. But with everything I just told you, including our view on China, I think immersion has com
down a bit. And all in all, I think our immersion view is not dramatically different from what we held out at the
Investor Day. So the line, if you simply contrast the gross margin that we have that we now articulate for 202
and compare that to the gross margin that we articulated 3 years ago, it really is, to a very large extent, it is
driven by EUV.

And there are two elements in EUV that do this. One element is volume. So the volume that we have on EUV
now in our model with below 50 is substantially below the numbers that you saw in the Investor Day of
November '22. But there was also a mix effect in there, because in 2022, we were looking at the high end of
the mix, i.e., 3800 was going to dominate, and in fact we were expecting a few 4000s in there. And as a resu
of the dynamics in the market, you will actually see quite a few 3600s in there in 2025 as well. The 3800 will
dominate, but it will clearly be 3600s in there as well.

So there is also an ASP and gross margin mix effect in there. It's that combination of particularly a
significantly lower number of EUV units and also the mix effect in the EUV units that is primarily driving down
the gross margin expectation in comparison to what we were looking at in November of '22. And the unit
effect is, by far, the biggest effect in that explanation.
Operator

Your next question comes from the line of Didier Scemama from Bank of America.

Didier Scemama

Yes. Roger or Christophe, I don't know, when you look at the cuts you've made to EUV shipments for next yea
call it, 20 to 25 Low-NA systems, how much of that do you think spills over to '26? And I've got a follow-up.

Christophe Fouquet

I think it's a difficult question, as you can imagine, because I think the feedback we have got from our
customer in the last few months, was about pushing out those tools. So I think you could say, mathematical
this move into 2026, I think that's the simple way to look at that. I think that we have to, of course, over time,
reconfirm the dynamic of the market, I will say, for the second half of '25 and '26.

So if you think about mathematically, we have talked about pushout because we really see our customers
delaying basically their fabs, we don't see customer basically changing their mind on those fabs. So that's w
we refer to pushout. Of course, '26 is an opportunity to see those tools back. But like I say, there's still a long
way until 2026, and we will continue to watch the market dynamic there.

Didier Scemama

Excellent. And a follow-up to that would be, how much of the pushout is a reflection of just the end demand
being poor versus maybe several of your customers struggling with process technology and attracting
effectively customers to justify the construction of those factories?

Christophe Fouquet

I think it's both. So it's a mix of that. I think that we mentioned the slower recovery first, because I think this
affects every single customer. So we are still quite optimistic about AI. I think today without AI, the market w
be very sad, if you ask me. But for the rest, I think our customer continues to confirm that when it comes to
mobile, when it comes to PC, when it comes to automotive, the recovery is not what I think everyone had
wished for. And that affect, I would say, a large part of our customer on all segments and application.

I think we also indeed mentioned as well some competitive dynamic on Logic. I think that also has been
expressed at length in the press in the last 3 months. I think that's not really new for you. And this also
contributed to some of the pushout. So I think those two things are really the two dynamics that have come
up in the last few months to a level where our customers basically started to really make, I would say, a
decision that were in line with their expectations, both on the total market but also maybe, in some cases, on
the share they may end up having in some of the Logic market.

Didier Scemama

Makes sense. And just a tiny follow-up to Roger, if I may. When you look at your IBM revenues in Q4, there is
big step-up. Can you give us a sense as to whether that's sort of a new normal? And especially, I'm thinking
about '25 in your guidance and coming back to the point that was raised earlier on the DUV revenues, which
are look optimistic. So is the Installed Base Management going to grow a lot in '25 and effectively picks up
the bottom a little bit from DUV?

R.J.M. Dassen

Yes, Didier, I wouldn't say that it's the new normal, as we also explained today in the -- earlier and also as we
explained in the video, there is clearly also a one-off effect in there, meeting a certain performance target. So
that was one reason that we expect that's a one-off effect, if you like, in the -- in what we see for Q4. That sai
we do believe that the Installed Base business, both on the service side and also on the upgrade side is goin
to grow in a quite healthy way to -- in 2025.

So yes, we do project that it will -- that there will be quite healthy growth in that. So there will be healthy
double-digit growth as we currently see it in the Installed Base Management in '25 in comparison to '24.

Operator

Your next question comes the line of Mehdi Hosseini from Susquehanna.

Mehdi Hosseini

Yes. First one for Christophe. I want to better understand the momentum with High-NA. I think at the SPIE
conference a couple of weeks ago, there was increased interest by your key customers for changes to the
reticle -- going to larger reticle size. And I want to better understand how you see that evolving or impacting
booking for High-NA. Or would the reticle or changes to reticle would cause any pushout as you try to book
5200? And I have a follow-up.

Christophe Fouquet

Yes. So I think the interest, you said it is increasing. And I think what you have seen at the conference is that
the initial data that have been shared on High-NA by ASML but also by some customers have been received
very positively because it shows significant performance improvement when it comes to imaging and some
good, very good cost opportunity on some of the layer for DRAM and Logic. So I think the interest is high
indeed and increasing.

The discussion on the 12-inch reticle is a bit a discussion about what else could we do in the future to furthe
improve the productivity of High-NA first and potentially other tool. So the conference you referred to is a bit
of a technical conference. So people like to discuss basically what could come next. It was a good
engagement. This was a sign indeed also of the fact that more customers start to count really on High-NA
into the future. And that time frame is not at all aligned with the 5000 or the 5200. So I think there's absolute
no connection between what we do with High-NA and what we may do in the future with the 12-inch etched
reticle.

To give you an idea, that discussion may become more concrete towards the end of the decade or the
beginning of the next one. So it's really a long-term technical discussion we have engaged with our custome
and we are happy to have the discussion with them because this can provide a significant productivity
improvement for High-NA but for lithography in general. But that's not for tomorrow, and therefore, this will in
no way impact our current discussion and business on High-NA.

Mehdi Hosseini
Okay. And then a quick follow-up for you and Roger. Where are we with internal capacity targets? And given
the updated '25 target, how do you see the capacity targets that you put out in '22 evolving? So where are we
today with DUV and EUV manufacturing capacity? And how are you managing the targets for additional
capacity that you put out back in '22?

Christophe Fouquet

Yes. So if you realize today, we have a lot of focus, of course, on 2025. I think what we say is that for next yea
with a slower recovery, the number of tools we will be -- [ had up shipping ] to our customer is mostly less tha
what we expected, both in Capital Market Day 2022 but also a few months ago. Now what I've also said in th
introduction is when we look at the long term, when we listen to our peers, I think that the bullishness about
the long-term opportunity of this market is strong. We share that, which means that at some point of time, th
need for more capacity will be there.

So what we do, we continue to execute on the long lead time items, things like building some equipment. On
the other hand, because the short-term market is a bit, I would say, softer than what we expected previously,
we are also slowing down basically any short-term investments. So when it comes to people, materials, et
cetera, et cetera, we don't have to do that today. We will do that when we have, again, visibility for a larger
demand. But the structure of our capability, we want to still drive because, I will say, when a recovery takes
more time to happen, if you believe on the long-term trajectory of the market, there's always a point where yo
have to deliver more tools, and we want to be ready for that as well.

Operator

And your next question comes from the line of Chris Caso, Wolfe Research.

Christopher Caso

My first question, I'd like to dig into a little bit more of what more specifically may have changed over the last
90 days? Because some of the things you referred to in China, the Memory spending, some Logic spending,
some of it, I think, was sort of known 90 days ago and some may be incremental. If I take each of those thre
and some of the fab pushouts that have come about that, how would you characterize the change in your
calendar '25 guidance among those three areas? Basically, what was new to you as compared to when we
had the last earnings call?

R.J.M. Dassen

Well, I think if you take the different pieces, I think when it comes to China, we already started to indicate in
the last call that, over time, we do see China trending towards a more normalized percentage. I think the
intensity also of the discussions in the press, including discussions on more export restrictions, I think have
driven us to more cautiousness when it comes to China. So that, I think, is really driven by developments in
the past couple of months.

I think when it comes to other customers, on previous calls, we've indicated that there was uncertainty. And
think what we see to a large extent is that part of that uncertainty has really materialized. So what became a
what was a question mark maybe a number of quarters ago has now become quite clear that a certain level
of demand from certain customers was -- is likely not going to happen. So that was the reason why we
decided to -- that we could no longer hold a large window of EUR 30 billion to EUR 40 billion at the -- in the
world. And that as a result of that, we needed to reduce that window to the lower half. I think that's, Chris, I
think the background of it, and that's what really changed. So it's the materialization of certain risks and
uncertainties that we talked about before that have driven us to this lower expectation.

Christopher Caso

Got it. That's helpful. And just as a follow-on with your comments on China. Of course, there haven't been ne
export restrictions announced. So is it correct to interpret your comments is that you're making some
judgment on what you think some of those restrictions, how that may affect revenue in '25 prior to those
being fully implemented? Is that correct interpretation?

R.J.M. Dassen

Yes. Chris, as you, we read newspapers and we see continued speculation on things that might happen. And
as a result of that, we've decided to take a more cautious view. And that indeed has resulted in -- is one of th
drivers. I mentioned the other driver as well. But the combination of China being -- us eating less and less int
the backlog of China and speculation around more export control restrictions, that has led us to the
conclusion that it is prudent to go back to this 20% for China, 20% of our total business.

Operator

And your next question comes from the line of Francois-Xavier Bouvignies from UBS.

Francois-Xavier Bouvignies

My first question is on the comment that you mentioned on the smartphone market and PCs and the market
is a bit slower. Versus 3 months ago, the smartphone market and PC is indeed slower, but the magnitude of
the revision of EUV of 15 to 20 is still quite big compared to the weakness of the market. So I was just comin
back, and it seems to be really 2 customers that's been well in the press having some issues. So we would
have thought that you would see some swap-out in the orders in terms of customers.

Did you see any signs of like upside risk into some orders, at least a bit offsetting or interest related to these
customer issues? Or is it is there a scenario that your customers gave you some too optimistic forecast in
light of a big shortage of EUV you had in recent years, and therefore, the swap-out will -- the swap will take
much longer than expected? I'm sorry for the long question as usual.

Christophe Fouquet

No, it's okay, Francois. Those are good questions. And I think you touched again on the two drivers that we
have seen changing our, I would say, demand expectation for next year. So the combination of the two, again
is important. And on the first one, I think you see yourself, as you mentioned, the recovery on mobile, PC to b
weaker than expected initially. This has an impact, I will say, on the capacity planning, but also maybe on the
expectation of capacity planning. So I think we used the word cautiousness a few times in the call. When yo
become cautious, I think this means you are careful on the short term, but also a bit on the midterm. So you
have a bit of a double hit, if you want, with cautiousness. So that's the first one.

On the second one, I think we also mentioned some upside on AI, because we still believe that the overall
demand for those application is there, continue to increase. So if we look at the server demand, we see there
a very nice recovery. A lot of that has to do with AI application. So we talk about upside, which also means
that the overall dynamic of the market is still playing. And we felt the need to provide an update for next year
based on some of the development we have seen. I think in no way we are also saying that there is a
complete understanding of how the entire market will continue to play out in the next few months. So I think
on the second part of your question, I would say maybe this has not played out fully yet.

Francois-Xavier Bouvignies

Okay. And you would expect to happen then, I guess, to -- at some point will happen?

Christophe Fouquet

Well, I think if everyone -- and I think a lot of us still believe in a strong AI demand in the coming years, I think
that demand has to be fulfilled. Therefore, yes, I will say mostly, we will see some development also on that
front in the coming months.

Francois-Xavier Bouvignies

Okay. And maybe my follow-up would be on High-NA. I don't want you to spoil the Capital Markets Day, but
could you maybe give us an update on the High-NA now in terms of years of adoption, maybe Logic, Memory
Anything happening here versus maybe 3 months ago, 6 months ago since you passed the wafers?

Christophe Fouquet

Well, I think I said a few months ago that the period we are in, the months we are in will be important for the
data generation, generating data to our customer, our customers that have placed many order already on
High-NA for R&D. And when you generate data, you have two options. The data are bad and customer kind o
like it less. Or the data are good and they like it more. And I think we are more in the second situation today.

We continue to generate data. We talked about 10,000 wafer exposed. These are all to demonstrate basically
the performance of the tool, on Logic, Memory. And all of that is helping our customers to, I would say, to
make their plan of insertion and adoption, a bit more concrete and start to define some very specific
milestones. So this is a bit where we are. We are very happy with the progress on High-NA. We are very happ
with the performance. We are happy with the data, and we'll continue in the next few months to work with ou
customers to translate basically those initial good results into real, I would say, plan in their manufacturing
fabs.

Operator

Your next question comes from the line of Alexander Duval from Goldman Sachs.

Alexander Duval

I wondered if you could talk about what level of orders you need in the coming quarters to hit the new
midpoint of guidance. I think previously, you talked about EUR 6 billion of orders in the second half of this ye
to hit the prior midpoint. And now we've obviously seen EUR 2.5 billion in the quarter, but a lower target. So
how should we be thinking about this? And to what degree is there some wiggle room in the first quarter give
lead times potentially to still get orders, which could benefit 2025? That's my first question.
R.J.M. Dassen

Thanks, Alexander. So you're right. And I would say that in addition to what you observed in terms of the
overall order intake, it's also clear that, obviously, there has been some pushouts into 2026. So that's also
something that you should recognize, right, that orders that originally were provided to us as 2025 orders, an
the mix that we just discussed have been shifted into -- to beyond 2025. So that dynamic should also be
considered.

What we're looking at today, I would say, I think we're -- when it comes to EUV because, obviously, that is
relevant I think in this conversation. I think deep UV, given the significantly low order lead times is less
relevant here. But when it comes to EUV, at this stage, I think it's fair to say that we're sort of fully booked for
the low end of the guidance that we've provided. In order to get to the midpoint of the guidance, I would say
that we need another, let's say, EUR 2 billion in order to hit the midpoint of the guidance before the end of the
year. So EUR 2 billion should then come in this quarter.

When it comes to flexibility, I think there is some flexibility. So to the extent that orders would come in, in Q1,
think we would still probably be able to cater to those orders in 2025. I think we've built in sufficient flexibility
to create that.

Alexander Duval

Helpful. And maybe as a quick follow-up. We've had a number of investor questions about sort of lithography
intensity in the context of areas ramping like advanced packaging, advanced deposition, for example. Just
curious, to what degree you see that as having a structural impact on litho intensity? And to what degree doe
that matter in 2026 and beyond on the assumption that the semis market continues to grow over time?

Christophe Fouquet

Yes. So I think we would talk about that in the Capital Market Day in a few weeks from now, because those a
more longer-term considerations. So anything we discuss today, I think, is in no way related to those kind of,
would say, considerations. The whole discussion is really around the market dynamic. I think those question
are very good for our longer-term opportunities, and we will be spending quite some time discussing that in
the -- again, in the November meeting together.

Operator

Your next question comes from the line of Tammy Qiu from Berenberg.

Tammy Qiu

So the first one is on China. You mentioned that China is going to normalize from here because of different
reasons. Is it right to understand that the 2025 level of Chinese business will be the new baseline of China,
i.e., we shouldn't see another 20% or 30% decrease from here into 2026?

R.J.M. Dassen

I think the 20% is what we consider to be a normal percentage of our business for China. So we would
assume that, that is a number that, also on a go-forward basis, we believe would be realistic for China. Of
course, subject to anything related to export controls and what have you, which is beyond our control. But
simply looking at the market, we believe that the China market structurally would be able to accommodate
about 20% of our revenue.

Tammy Qiu

Okay. And the follow-up I have is on the 2 large customer which pushed out their order in this quarter. So in
your 2025 number, on those 2 big customers, did you actually budgeted more [indiscernible] in there when yo
estimate your 2025 revenue? Or basically, you have taken the pushout from this quarter come out with the
2025 number. So therefore, we may actually subject to further pushout if they do another round in the next,
let's say, 2 quarters?

Skip Miller

Tammy, real quick to clarify. You said in 2025, we budgeted, what was that?

Tammy Qiu

So basically, I said when you're budgeting your 2025 revenue, when you give this new guidance range at
midpoint, EUR 32.5 billion. Did you actually budget additional cuts from those 2 big customers? Or you only
reflected the cut you have seen in this quarter?

R.J.M. Dassen

We've essentially -- Tammy, we've essentially taken the latest view that we've developed with that customer,
so you would appreciate -- with those customers. So you would -- and by the way, you talk about 2 customers
I think it's fair to say it's more than 2 customers, right? But what we've reflected in what we have now is the
latest status of the conversations with those customers. And that's what is in here. But you will also
appreciate that the closer you get to the year, the more firm those customers will be on their demand. So I
think what we're looking at for now is a pretty current and, I would say, accurate view of those customers of
what they need for next year as a baseline.

Operator

And the question comes from the line of C.J. Muse from Cantor Fitzgerald.

Christopher Muse

I guess first question, I was trying to dig a little bit deeper into China. You are guiding to 20% of revenues,
which basically suggests down 30% year-on-year. I'm curious, does that 20% reflect just normalization? Or ar
you taking certain precautions in terms of anticipated regulatory pressure? And if so, what kind of dollar
amount or percentage is reflected by maybe more cautious behavior as opposed to a change in end demand
trends?

R.J.M. Dassen
Yes. I think, C.J., I said it. The cautious view is for the two reasons. The cautious view is because as we said
before, we believe at a certain point in time, China will go to a more normalized level because we're not over-
delivering on their backlog. That's one. And second, I said, given the discussions that we also read in the
press, we've become a bit more cautious. To dissect that is impossible to do. So it's that combination that ha
given rise to our expectation of China being 20%, which is not too far away indeed from your 30% decline.

Christopher Muse

But I guess I'm trying to decipher why it's impossible. I mean obviously, you have a vision for end demand an
then you're taking a haircut to reflect maybe more conservatism. Is there a way to understand that haircut?

R.J.M. Dassen

It's related, C.J. So the two go hand in hand. So you cannot dissect that and I will not dissect that.

Christopher Muse

Okay. Maybe a bigger-picture question. In a world where 2 leading logic players are floundering, you really kin
of have 3 big EUV customers in TSMC, hynix and Micron. And just curious, as you think about kind of
monopoly versus monopsonist, are you thinking about changing your plan to prebuild? I would think that
pricing power and prebuilding don't go hand in hand. So would love to hear your kind of philosophy around
that.

Christophe Fouquet

Well, I think the one priority for us is to serve our customers, which means that whatever total demand our
customer will give us, we want to be able to honor that. And that's especially important to do that when you
are the single supplier of EUV tools. I think that's a responsibility we have. I think the discussion on prebuild
started when we saw a situation where we may not be able to meet the demand with the output of 1 year. An
then to be consistent with my previous point, prebuild in the lower year is a way to do that.

So this means also that this number of prebuild tool will, of course, evolve with the market situation. And if w
are in a situation where the market is low, we don't see the need to do that, except a specific request of our
customer. But what we have seen also in the past is that things tend to change. And I think the mix between
our customer is also evolving back and forth over time. So I think that's also something we keep in mind.

Operator

Your next question comes from the line of Sandeep Deshpande from JPMorgan.

Sandeep Deshpande

I want to go back to one of the early questions again. I mean in terms of your guidance for next year, I mean,
when we look at the numbers, it looks like your growth in DUV outside China is going to be incredibly strong.
mean -- and also, when I've looked at ASML for so many years, I mean, the view is that ASML, when you give
year guidance, you tend to be within that ballpark. You don't tend to be wrong in that, in those terms. So I
mean how confident do you feel that the DUV outside China is going to see significant growth next year, give
that DUV does tend to have shorter lead times than EUV? And I have one follow-up after that.
R.J.M. Dassen

Yes. So as I -- well, [ you caught it at an ] incredible growth. As I mentioned before, I think you're looking for th
non-Chinese part of the deep UV business. We're looking at about similar growth as we see it for EUV. So
leave it to your own imagination how you want to qualify that. But it is -- the two things go hand in hand. We
see quite a bit of deep UV demand also, particularly, I would say, on the leading nodes. So therefore, I think
assumptions on a strong correlation between capacity build on EUVs and capacity build on the non-Chinese
part of the DUV, I think that is a realistic assumption. So therefore, with that, very strong correlation as we se
it. We believe that the underpinning for that demand and for that demand increase, Sandeep, we believe is
robust.

Sandeep Deshpande

And Roger, I mean, I guess on the same question. I mean in terms of your forecasting for '25, this is in line
with how you forecast in prior years, correct? So there's nothing different. Or do you think that this year -- is '2
looking something very dramatically different, and so you may have to change later or something like that?

R.J.M. Dassen

No, I think it's essentially the same. You could argue, Sandeep, that we're a bit early. And the reason that we'r
a bit early is because we believe, given the dynamics that Christophe talked about at the beginning, we believ
that the second or the high end of the bandwidth is not realistically in reach based on what we know today. S
that's the reason why we believe it was prudent to say we should be looking at the lower end. Of course, in th
next couple of months, we're going to once again talk to customers and listen to their plans, et cetera, et
cetera. But I think the way we're looking at next year and the work that we've done on that is not dramatically
different from what we've done in previous years.

Sandeep Deshpande

Okay. And one -- my second question is on High-NA. Christophe, I mean, there have been public comments b
one of your customers on High-NA. Clearly, the data which has been available at the last conference, that
High-NA seems to be pretty good. So my question is, are your top 3 customers all going to sign up for High-
NA quickly? Or is some of them going to delay like one of them did with EUV? And we know the
consequences of that, of course.

Christophe Fouquet

I think we've been consistent in the last few quarters mentioning that all our EUV customer had ordered a
High-NA tools. All our EUV customers have been engaged with us in the High-NA lab. So everyone is really
using this time to collect the data. So the data you may have a chance to see the one you referred to, I think,
also looked at seen by all customers. I think the engagement today on High-NA is really coming from all of o
EUV customer. And the timing they have in mind for insertion, for adoption, is still pretty much in line with
what we have discussed in the past. I think the good data we have been able to generate on the very first too
are just, if anything, supporting that approach.

Skip Miller
All right. We have time for one last question. If you were unable to get through on this call and still have
questions, please free to contact the ASML Investor Relations department with your question. Now operator
may we have the last caller, please?

Operator

And your final question comes from the line of Adithya Metuku from HSBC.

Adithya Metuku

So firstly, just a clarification. If I heard you correctly, you said the competitive dynamics between the Logic
players you pointed out earlier, you're saying that the problems with these -- that some of these customers
have led to downside risks crystallizing for 2025, but the upside risks from the share shifts between these
Logic customers haven't yet crystallized and are not yet in your assumptions for 2025. Is that right? Did I hea
that correctly?

Christophe Fouquet

Well, I think I would say the short answer is yes. And that's again why we referred to some upside on some
part of the market.

Adithya Metuku

Got it. So essentially, you're saying you're priced in caution for China, even though the -- we have no clarity on
export controls and how they'll develop, and then there could be upside risk from share shifts between Logic
customers into 2025.

And then maybe just as a follow-up on Low-NA EUV ASPs for Roger. When I take the numbers you're giving,
less than 50 Low-NA tools and 5 High-NA tools and the growth and DUV declining, so essentially, your EUV
has to grow quite significantly. But with the ASPs you've given for the 3800 machine and the mix shifts you're
still talking about for 2025 between 3600D and 3800E, it sounds like your Low-NA ASP has to be something
like EUR 240 million, and I'm not sure how I get to that number. I don't know if you can help me reconcile thos
figures, if possible. Apologies if the question isn't clear.

R.J.M. Dassen

Well, the question is clear, but your model isn't clear. So that's why it's difficult to reconcile it on this call,
Adithya. But by and large, I think you mentioned EUR 240 million, that would definitely be too high and that is
also not what we have in our numbers. So if we look at the ASP that I recognize or that we recognize in our
model to get you to the midpoint of the guidance, there is an ASP that is above EUR 200 million, but that's
definitely not at a EUR 240 million level.

So I think you might want to revisit that. I don't know exactly what you have on High-NA. So it's a matter of
really taking a thorough look at your model. On High-NA, you should have, at least for the 5200, you should
have an ASP of over EUR 350 million. So I don't know if you have that in there. But the ASP to work on for Low
NA would be north of EUR 200 million in the mix, but would be -- would definitely be lower than the EUR 240
million that you just quoted.
Skip Miller

All right. 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 would appreciate it. Thank you.

Operator

Thank you. This concludes the ASML 2024 Third Quarter Financial Results Conference Call. Thank you for
participating. You may now disconnect.