In a year underscored by COVID-19, ASMI delivered a strong financial performance and made important progress in many strategic areas. Our focus on the health and safety of our people has always been our key priority. Read more
President and Chief Executive Officer
President and Chief Executive Officer
In a year underscored by COVID-19, our first priority was the safety of our employees, while we continued to serve our customers in the best possible ways. ASMI again delivered strong financial results and achieved progress in key strategic areas.Read more View less
2020 was an unprecedented year as the COVID-19 pandemic severely affected our lives, our
communities, and world economies. The health and safety of our employees, their families, and of
the employees working for our customers and other business partners has always been our key
priority. From the onset of the pandemic, we implemented all necessary measures, government
guidelines and industry best practices to minimize the risks for our people and partners.
Measures included working from home for our employees wherever possible, implementation of
split-shift work in essential areas, enhanced cleaning protocols, and of course, restriction of
non-essential travel. During the year, demand for our products remained strong as our customers
continued to invest in advanced node capacity and in new technology development. I am impressed
by the way ASMI’s employees, while putting the health of all of us first, showed their
commitment and creativity to make sure we continue to serve our customers in the best possible
ways, such as the use of smart technologies to work remotely on our customers’ tools. I want to
thank all our employees for their great commitment and teamwork during this unprecedented year.
For me personally, it has also been a challenging time, having assumed the role of CEO in mid-May, in the midst of the pandemic. Though it was difficult, I have been able to adapt to an entirely new way of working, meeting many ASMI colleagues remotely and also having most of my first customer interactions remotely. As vaccinations start to happen worldwide, I am cautiously optimistic that the pandemic will be under control sometime this year and I look forward to being able to meet our colleagues, shareholders, and partners in person.
As markets were upended by the impact of lockdown measures and border closures, the global
economy showed a sharp drop in 2020. Certain parts of the semiconductor market, such as the
automotive and industrial end markets, were negatively affected, but the overall semiconductor
market showed a resilient performance. Key drivers were investments in for instance PCs, data
centers and communications infrastructure to support demand related to work-from-home and remote
learning. In the broader society, the pandemic accelerated the trend of digitalization. We are
proud to be part of an industry that contributed to the key technologies that have helped people
stay connected with family and friends during these periods of lockdown, schools continuing
online lessons, and businesses maintaining operations.
The semiconductor market finished the year with a robust growth of 7%. The wafer fab equipment (WFE) market grew at mid-to-high teens percentage year-on-year. Our customers continued to invest in leading edge manufacturing capacity. Logic/foundry demand showed a solid increase, driven by spending on the most advanced nodes of 10nm and below. While the outlook for the memory market was initially impacted by weakness and inventory corrections in parts of the end markets, equipment spending showed a healthy increase for the full year.
Our revenue increased by 18% in 2020, the fourth consecutive year of double-digit growth. The
logic/foundry sector continued to be the key driver for us in 2020. Demand was geared towards
the most advanced nodes. This benefited ASMI as the number of ALD layers in the most advanced
logic/foundry nodes has increased substantially compared to the previous nodes, fueling strong
share of wallet gains. By customer segment, revenue was again led by foundry, followed by logic.
After already doubling in 2019, our revenue in the foundry segment grew again strongly by double
digits in 2020. In memory – the third largest segment – our revenue showed a healthy
double-digit increase, driven primarily by a strong increase in our DRAM revenue, where we
benefited from the first meaningful adoption of new non-patterning ALD solutions.
In terms of product lines, revenue was led by very strong double-digit growth in our ALD business, which continued to represent more than half of our equipment revenue in 2020. After strong increases in previous years, momentum in our combined other products – epitaxy, PECVD and vertical furnaces – slowed down in 2020. This is explained by the relatively higher exposure of these product lines to the analog/power markets, which were in turn impacted by the weakness in the automotive and industrial markets earlier in 2020. Recently, demand in analog/power has shown the first signs of recovery. In 2020, our spares & services business delivered an outstanding performance, increasing revenue by 29%. To a smaller extent, this growth was driven by customers increasing inventories in response to the COVID-19-related supply chain challenges, especially in the second quarter of the year. For the most part, we benefited from the solid increase in our installed base in recent years as well as the first contribution from our investments in new outcome-based services. Spares & services accounted for 21% of total revenue in 2020.
A strong area of growth this year has been the Chinese market, for the broader WFE market and for ASMI. Our sales in China grew strongly in 2020 and contributed for the first time a double-digit percentage of our total revenue. We benefited from the investments we made in recent years to strengthen our position in this market. In addition, the portion spent by domestic chip manufacturers on the more advanced nodes, albeit still the smaller part of total spending in China, showed a strong increase in 2020, playing to the strengths of our company. Despite the uncertainty related to new US export restrictions, our sales in China remained solid throughout the year. More importantly, we further broadened our customer base of domestic Chinese customers and booked new tool wins which we expect to contribute in 2021 and beyond.
An important highlight in 2020 was the completion of our new state-of-the-art manufacturing facility in Singapore. After a delay caused by COVID-19, the facility was completed in the fourth quarter. In December we shipped our first tool from this facility and in the first quarter of 2021 we continue to further transfer production to the new facility. Using the first phase of the new facility will increase our manufacturing capacity substantially. It will also provide us with increased flexibility to deliver on our customer commitments.
ASMI delivered strong financial results in 2020. Revenue (excluding the settlement proceeds in 2019) increased 18% and reached a new record of €1.3 billion in 2020. For the fourth consecutive year, we increased our revenue by a double-digit percentage. Gross margins improved from 43% to 47%, in part driven by efficiency improvements, and for another part due to positive mix effects, particularly in the second and third quarters of the year. With operating expenses under control, operating result increased by nearly 50% in 2020.
In 2020, we stepped up our capital expenditures (capex) to €95 million. Similar to 2019, a
significant portion of spending was related to our new manufacturing facility in Singapore. In
addition, we increased our spending as part of the initiatives we announced earlier in the year
to expand and upgrade our lab capabilities. Free cash flow amounted to a healthy level of €119
million, even though it was down from the level in 2019 due to the higher capex and an increase
in working capital requirements. Our financial position remained strong with €435 million in
cash at the end of 2020.
Our policy to use excess cash for the benefit of our shareholder remains unchanged. In 2020, ASMI distributed €165 million in cash to shareholders. Over the last three years we returned almost €1 billion in cash to shareholders. During the AGM, we will propose a regular dividend of €2.00 per share to be paid over 2020, which is a 33% increase compared to the regular dividend of €1.50 per share paid over 2019.
After I took over as CEO last May, it did not take me a lot of time to confirm, together with the
rest of the management team, that the strategic direction of ASMI is the right one. However, we
identified a number of areas where we need to further step up, to make sure we can capture the
opportunities in front of us.
ALD continues to be a key growth market for ASMI. On the back of a significant double-digit revenue increase, we believe we maintained a strong leading position in 2020. We further expanded our R&D engagements with key logic/foundry customers. We expect the number of ALD layers and applications in the upcoming nodes to grow again by double-digit percentages. In addition, we remain strongly focused on expanding our position in the memory ALD market. An important achievement in 2020 in this respect was the tool wins with leading memory customers for high-k metal gate applications in CMOS peripheral transistors in DRAM. This is a logic-like process in which we can leverage our significant experience built over the years in the logic/foundry sector. In addition, we successfully engaged many customers with new applications, enabling us to grow even more in the memory market in the coming years.
While growth in our epitaxy business slowed, we achieved solid progress in our R&D engagements
with customers, working towards new tool-of-record selections for our Intrepid tool, which we
expect will contribute to increased revenue and further market share gains in the coming years.
In vertical furnaces and PECVD, we continue our strategy to invest in targeted niche opportunities, which we expect to drive additional revenue growth for our company in the coming years.
In spares & services we intend to further expand our offering of new outcome-based services, which will help us to further strengthen our customer relationships and to drive solid growth in this part of the business.
To make sure that ASMI is well prepared to tap into all the new opportunities, we will continue to invest in the growth of our company. After an increase of 14% in 2020, we will continue further spending on R&D to develop the many new ALD applications that are on the industry’s roadmap. We expect capex to remain at a relatively higher level in 2021 on the back of continued R&D-related investments such as lab tools and advanced metrology equipment.
An important focus area is the reinforcement of our company culture. On the back of the recent substantial growth, approximately half of our workforce joined in the last three years. Nurturing our strengths such as our rich history, our technology focus and our global diversity, we will further build a unified culture, unique to ASMI and based on our core values: ‘We care, We innovate, We deliver’. We took the first actions last year, including a company-wide engagement survey, and we will take the next steps this year, including further strengthening our employee communications. Our people are our key asset. We will only succeed when we create a workplace of inclusion and diversity in which our employees have the opportunity to maximize their potential.
Our focus is on long-term sustainable value creation for all our stakeholders. During 2020 we further stepped up our focus on environmental, social and governance (ESG). After many years of engagement and commitment, ASMI officially became a member of the Responsible Business Alliance (RBA) in 2020. We are a recognized leader in our industry in terms of our focus on health and safety. Over the last five years we significantly exceeded our targets for reduction in greenhouse gases and water consumption, and, while falling short of the target, we also achieved a substantial increase in our diversion of landfill waste. We have also adopted a philosophy where our latest products have been designed and developed with a reduction in consumption of gases and electrical power in mind as part of the overall industry trend towards making the manufacture of semiconductors more environmentally friendly. In addition to that we offer our customers refurbishment programs and upgrade kits to extend the lifetime of the existing tools.
Our industry has started the year in good shape. General expectations are that the global economy
will show a recovery this year even though the pandemic continues to pose risks and may delay
this recovery. In the semiconductor market, the strong momentum at the end of 2020 has continued
into the first part of 2021. The strength of the increase in demand has led to shortages in
parts of the market. Against this backdrop, WFE spending is again expected to show a mid-teens
percentage increase in 2021. Solid spending is expected for the logic/foundry segment, supported
by strong demand for the current most advanced nodes. In addition, our customers in this segment
continue to show a healthy appetite for investing in the development of the next nodes. In the
memory market, a further recovery in spending is expected. A recovery in key end markets such as
smartphones, combined with the fact that capacity additions in recent years have generally been
limited, are likely to result in improving supply-demand conditions in the memory segment.
ASMI has also started 2021 on a strong footing. With the publication of our fourth quarter results at the end of February, we are on track for record revenue and bookings in the first quarter. Our guidance for the first and second quarters combined implies year-on-year revenue growth of 14% to 20% in the first half year.
We believe that prospects for ASMI remain strong on a longer-term basis. Semiconductor demand is expected to be driven by key secular growth trends such as 5G, artificial intelligence, cloud and edge computing, and autonomous driving. Advanced semiconductor devices play a crucial role in enabling these multi-year industry drivers. 5G, for example, is expected to drive renewed growth in the smartphone market and new apps, driving a higher semiconductor content as compared to the 4G smartphones. Another example is artificial intelligence. With explosive growth in data, machine learning algorithms are ever more eager for faster, more powerful and power-efficient processors.
While ALD has already moved into the mainstream in recent years, we expect ALD to turn even more
into a core technology that will help our industry to keep pace with Moore’s Law. Increasing
device complexity, new materials, and ever thinner films with higher required conformality will
drive substantially higher demand for ALD in the medium term.
Although I am still new in the company, I have been very impressed and excited by the opportunities that lie ahead and I am committed to continue to grow the company and build on the legacy that has been left for me by my predecessor, Chuck del Prado.
At the coming AGM, Jan Lobbezoo, after having served for three terms at the ASMI Supervisory Board will retire. I would like to thank him for his wisdom, guidance and continuous support in the past 12 years.
Finally, I want to thank Peter van Bommel for his excellent contributions to ASMI. After 11 years as CFO and Member of the Management Board, Peter will retire at the upcoming AGM. He provided our company with a robust financial framework and played an important role in driving the strategic direction of ASMI.
March 4, 2021
President and Chief Executive Officer
IN A YEAR UNDERSCORED BY COVID-19, ASMI DELIVERED A STRONG FINANCIAL PERFORMANCE AND MADE IMPORTANT PROGRESS IN MANY STRATEGIC AREAS.
Our focus on the health and safety of our people has always been our key priority. The commitment and focus of our employees in challenging operating conditions created by COVID-19 enabled us to continue serving our customers in the best possible ways. Demand remained strong as our customers continued to invest in the most advanced technologies that will shape tomorrow’s advances in trends such as 5G, cloud computing, and autonomous driving. ASMI delivered its fourth consecutive year of double-digit revenue growth. We further strengthened our position as we significantly expanded our R&D engagements.
Looking ahead, we will continue to invest in the potential of our company.
IN A YEAR UNDERSCORED BY COVID-19 ASMI DELIVERED A STRONG FINANCIAL PERFORMANCE AND MADE IMPORTANT PROGRESS IN MANY STRATEGIC AREAS.
Our focus on the health and safety of our people has always been our key priority. The commitment and focus of our employees in challenging operating conditions created by COVID-19 enabled us to continue serving our customers in the best possible ways. Demand remained strong as our customers continued to invest in the most advanced technologies that will shape tomorrow’s advances in trends such as 5G, cloud computing and autonomous driving. ASMI delivered its fourth consecutive year of double digit growth. We further strengthened our position as we significantly expanded our R&D engagements.
Looking ahead, we will continue to invest in the potential of our company.
* Excluding proceeds from patent litigation and arbitration settlement in 2019.
In 2020, we introduced 'The Power of an Open Mind', otherwise known as our Employee Value Proposition (EVP). Encompassing our ambitions, our beliefs, who we are and what we stand for, 'The Power of an Open Mind' is helping us to attract the best and brightest talent while unifying our current employees under a distinct belief and purpose. Co-created with ASMI employees, the proposition reflects the diverse global structure of the company. Following a successful launch, 'The Power of an Open Mind' is now being further embedded into the organization, playing a critical part in shaping a culture that will be truly unique to ASMI.
This year, ASMI conducted a global employee survey to measure the engagement of all our employees. Participation was high at 94%, highlighting the motivation our employees have to be actively involved in shaping the future of the company. Our employees recognize our strengths: a strong customer focus and a results-driven culture, and they have helped to identify a number of improvement areas. Over the second half of 2020 and into 2021 everyone at ASMI, from the boardroom to cleanrooms, are contributing to further shape their workplace, a culture unique to us as a company, and the future of ASMI.
Expansion of the ASMI family to nearly 2,600 people
ASMI is growing, evolving and innovating at a new and demanding speed. People are at the heart of everything we do at ASMI — they are our differentiating power. ASMI is focused on attracting, engaging, retaining and developing talented people with targeted capabilities to achieve our longer-term strategic direction. In 2020, our total workforce, including temp workers, grew from 2,337 persons to 2,583 persons. And this growth is not expected to slow down as we enter our next chapter. Which is why ASMI has doubled down on creating a work environment and company culture that both attracts and retains the best in the industry.
Highlights of our resilience and adaptability
We experienced an unprecedented year due to COVID-19, which required a quick and agile approach to keeping our people safe. We pride ourselves on safeguarding our employees’ well-being, and place this above all else. In 2020 we moved quickly to ensure our colleagues could continue to work, securing their livelihoods. We implemented a raft of support measures for those who worked abroad, including financial support for local daily expenses, sourcing semi-permanent housing, or offering relocation funds. This meant our colleagues continued to have a place to call home and security during this difficult time. Smaller services, such as providing them with local SIM cards, were also swiftly put in place, so that they could communicate with friends, family, and colleagues easier, and track and trace would be more efficient.
ALD technology and market leadership
ASMI has a leading position in atomic layer deposition (ALD). ALD is our largest product line and represents more than half of our equipment revenue in 2020. As the most advanced deposition method available in the market, ALD makes it possible to create ultra-thin films of exceptional material quality, uniformity and conformality. ALD is expected to be the fastest growing deposition market segment over the coming 3-5 years. As the industry moves to smaller geometries, more complex device structures, new materials and the need for more precise and conformal film deposition will further increase. This is expected to drive the growth of the ALD market. With ALD’s precision, we can use materials that previously could not be considered, and develop 3D structures that are vital to the future of electronics.
In support of the company’s growth plans, we recently opened new facilities for product and process R&D and manufacturing in Asia. In 2019, in Dongtan, South Korea we opened a new product development and manufacturing facility. And at the end of 2020 we completed construction of a new manufacturing building in Singapore. This facility, which began initial operations toward the end of 2020, will significantly increase our product manufacturing capacity, supporting our long-term growth expectations.
Customer technology engagements
With our customers, we co-create and jointly develop technology roadmaps so that we can develop the new processes and materials our customers need for their next generation products, when they need them. We engage in joint-development programs with many of our customers for a range of advanced applications to develop new processes and to optimize the performance of our products, typically at customer fabs. In 2020, we were also active in the evaluation of our most advanced technologies with selected customers. The diversity in collaborations, ranging from early research to pilot production, helps us reduce risk as early as possible in the innovation life cycle. As part of our R&D activities, we are engaged on a global scale in various formal and informal arrangements with customers, suppliers, research institutes and universities.
High productivity – XP8 QCM
The relentless drive of the industry to reduce cost drives our development programs that further increase the productivity of our equipment. Increasing equipment throughput is a major focus for lowering the cost per wafer of our customers’ wafer processing systems. High productivity is a significant advantage of our XP8 platform, on which we offer ALD, PEALD and PECVD processes. The XP8 incorporates eight process chambers in a compact configuration around one central handling platform. Two wafers are moved simultaneously into dual chamber modules (DCM), which approximately doubles the throughput compared to single-wafer movements. A further extension is our XP8 QCM tool which enables even higher throughput by incorporating four chambers in the quad chamber module (QCM). With four QCM’s attached to the XP8 platform, a total of 16 process reactors are configured on the same system.
ALD is a key growth driver
New market drivers such as 5G and artificial intelligence require ever faster and more power efficient semiconductor devices. ALD is a key technology that enables our customers to transition to the next semiconductor nodes. As a leader in this market, ALD has been a strong driver behind our sales. In 2020, we increased our revenue by 18%, supported by a strong double-digit increase in ALD equipment sales. Combined with an improvement in our gross margins and with operating costs under control, our operating profit increased by 49% in 2020 (excluding patent litigation and arbitration settlement in 2019).
Cash returns to shareholders
Our policy is to use excess cash for the benefit of our shareholders, and since 2010 we have returned more than €1.9 billion to the financial markets. In 2020 we started our seventh share buyback program, for an amount of €100 million, which was 64% completed by the end of the year. In addition, with the publication of our fourth quarter results at the end of February 2021, we announced a proposed regular dividend of €2.00 per share. This represents a 33% increase compared to the regular dividend of €1.50 paid over the previous year.
Our Corporate Responsibility (CR) policy establishes our commitment to and expectations regarding health and safety, the environment, labor, ethics, and supply chain management. Having adopted the Responsible Business Alliance (RBA) Code in 2012, in 2020 we became a member of the RBA to further strengthen our commitment to ethical business practices. We collaborate with key stakeholders including customers, industry consortia and NGOs in developing our Environmental, Social and Corporate Governance (ESG) roadmap. Those efforts include being a select member of a key customer Corporate Responsibility Leader program and identification and elimination of forced labor/bonded labor in our global supply chain. In the past year, we partnered with both customers and competitors through the SEMI MOD work group to encourage and grow diversity of supply for the semiconductor industry, and developed a 2021 to 2025 Corporate Responsibility Plan.
ASMI is committed to a vision of ZERO HARM! which means preventing harm through identifying hazards and risks and preventing exposures and incidents, through an integrated EHS and Product Safety management system. Our industry leading Safety Leadership Collaborations connect us with key customers in working together to achieve this vision, and in 2020 we received a #1 Safety Supplier award from a leading memory customer in Taiwan. As ASMI grows, we are proactively focusing on safety, and in our new facility in Singapore we have worked to introduce significant safety improvements.
Our Corporate Responsibility policy sets the commitment to minimize environmental impact and strive toward ZERO HARM! We are proud that we have managed to outperform our 2016 to 2020 Scope 1 and Scope 2 greenhouse gas (GHG) reduction and water conservation targets. We also managed to avoid more than 41 metric tons of solid waste through product packaging reuse, and have extended this program into 2021. During the year we received water conservation awards from SEAL and Phoenix Salt River Project (Arizona utility), while our new Singapore operations received BCA Green Mark Gold Plus certification.