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[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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DOUG J. DUNN
PRESIDENT &
CHIEF EXECUTIVE OFFICER
ASML
RUSSELL G. WEINSTOCK
CHIEF FINANCIAL OFFICER
SVG
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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<PAGE> 3
"SAFE HARBOR" STATEMENT UNDER THE U.S. PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995:
THIS PRESS RELEASE CONTAINS CERTAIN "FORWARD-LOOKING" STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND ARE NATURALLY
SUBJECT TO UNCERTAINTY AND CHANGES IN CIRCUMSTANCES. ACTUAL RESULTS MAY VARY
MATERIALLY FROM THE EXPECTATIONS CONTAINED HEREIN. THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN INCLUDE STATEMENTS ABOUT FUTURE FINANCIAL AND
OPERATING RESULTS AND BENEFITS OF THE PENDING MERGER BETWEEN ASML AND SVG.
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DESCRIBED HEREIN INCLUDE: THE INABILITY TO OBTAIN REGULATORY APPROVALS; ACTIONS
OF THE US, FOREIGN AND LOCAL GOVERNMENTS; THE INABILITY TO SUCCESSFULLY
INTEGRATE THE BUSINESSES OF ASML AND SVG; COSTS RELATED TO THE MERGER; LABOR
INTEGRATION ISSUES; THE ECONOMIC ENVIRONMENT OF THE SEMICONDUCTOR INDUSTRY; AND
THE GENERAL ECONOMIC ENVIRONMENT. MORE DETAILED INFORMATION ABOUT THESE FACTORS
IS SET FORTH IN THE REPORTS FILED BY ASML AND SVG WITH THE SECURITIES AND
EXCHANGE COMMISSION. NEITHER ASML NOR SVG IS UNDER ANY OBLIGATION TO (AND
EXPRESSLY DISCLAIMS ANY SUCH OBLIGATION TO) UPDATE OR ALTER ITS FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
IN CONNECTION WITH THE PROPOSED TRANSACTION, ASML WILL FILE A REGISTRATION
STATEMENT ON FORM F-4 AND SVG WILL FILE A PROXY STATEMENT-PROSPECTUS, EACH WITH
THE SECURITIES AND EXCHANGE COMMISSION. INVESTORS AND SECURITY HOLDERS ARE
ADVISED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT-PROSPECTUS
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE REGISTRATION
STATEMENT AND THE PROXY STATEMENT-PROSPECTUS (WHEN AVAILABLE) AND OTHER
DOCUMENTS FILED BY ASML AND SVG WITH THE SECURITIES AND EXCHANGE COMMISSION AT
THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. FREE
COPIES OF THE REGISTRATION STATEMENT (WHEN AVAILABLE) AND OTHER DOCUMENTS FILED
BY ASML WITH THE SEC MAY ALSO BE OBTAINED FROM ASML BY DIRECTING A REQUEST TO
ASML, ATTENTION: FRANKI D'HOORE (+31 40) 268-3938. FREE COPIES OF THE PROXY
STATEMENT-PROSPECTUS (WHEN AVAILABLE) AND OTHER DOCUMENTS FILED BY SVG WITH THE
SEC MAY ALSO BE OBTAINED FROM SVG BY DIRECTING A REQUEST TO SVG, ATTENTION:
MANAGER OF INVESTOR RELATIONS (408) 467-5870.
SVG AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO BE PARTICIPANTS IN
THE SOLICITATION OF PROXIES FROM SVG STOCKHOLDERS IN FAVOR OF THE MERGER. THESE
DIRECTORS AND EXECUTIVE OFFICERS INCLUDE THE FOLLOWING: MICHAEL J. ATTARDO,
PAPKEN S. DER TOROSSIAN, WILLIAM A. HIGHTOWER, WILLIAM L. MARTIN, NAM P. SUH,
LAWRENCE TOMLINSON, RUSSELL G. WEINSTOCK, JOHN SHAMALY, JEFFREY M. KOWALSKI AND
BORIS LIPKIN. COLLECTIVELY, AS OF SEPTEMBER 29, 2000, THE DIRECTORS AND
EXECUTIVE OFFICERS OF SVG MAY BE DEEMED TO BENEFICIALLY OWN APPROXIMATELY 5% OF
THE OUTSTANDING SHARES OF SVG COMMON STOCK. INVESTORS AND SECURITY HOLDERS MAY
OBTAIN ADDITIONAL INFORMATION REGARDING THE INTERESTS OF THE PARTICIPANTS BY
READING THE REGISTRATION STATEMENT AND PROXY STATEMENT-PROSPECTUS WHEN IT
BECOMES AVAILABLE.
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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ASML MISSION STATEMENT
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PROVIDE LEADING EDGE IMAGING
SOLUTIONS TO CONTINUOUSLY IMPROVE
CUSTOMERS' GLOBAL COMPETITIVENESS
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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TABLE OF CONTENTS
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- TRANSACTION SUMMARY
- STRATEGIC BENEFITS
- COMBINED COMPANY OVERVIEW
- ASML OVERVIEW
- SVG OVERVIEW
- KEY MANAGEMENT AND SUMMARY HIGHLIGHTS
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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TRANSACTION SUMMARY
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MERGER SUMMARY
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STRUCTURE: TAX FREE, STOCK-FOR-STOCK MERGER
EXCHANGE RATIO: 1.286 SHARES OF ASML FOR EACH SHARE OF SVG
MANAGEMENT: DOUG J. DUNN - PRESIDENT & CEO
PETER T.F.M. WENNINK - EVP & CFO
MARTIN A. VAN DEN BRINK - EVP
NICO I. M. HERMANS - EVP
DAVE P. CHAVOUSTIE - EVP
ACCOUNTING: POOLING-OF-INTERESTS
CONDITIONS: SVG STOCKHOLDER AND REGULATORY APPROVAL
TARGET CLOSING: FIRST SIX MONTHS OF 2001
COMPANY NAME: ASML
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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MERGER HIGHLIGHTS
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- CREATES THE #1 PROVIDER OF PHOTOLITHOGRAPHY EQUIPMENT
- COMBINES ASML'S LEADING EDGE VOLUME PRODUCTION TECHNOLOGY WITH
SVG'S EARLY INTRODUCTION CAPABILITIES
- JOINT R&D EFFORT ENABLES COMBINED COMPANY TO LEVERAGE SIGNIFICANT
FUTURE R&D INVESTMENTS AND ACCELERATE DEVELOPMENT OF NEXT GENERATION
TECHNOLOGY
- COMBINES THE STRONG OPTICAL EXPERTISE OF ASML'S STRATEGIC PARTNER,
CARL ZEISS, AND SVG'S SIGNIFICANT EXPERTISE IN PROJECTION OPTICS
- EXPANDS THE US CUSTOMER BASE
- EXPANDS ASML'S PRODUCT OFFERINGS TO INCLUDE PHOTORESIST TRACK AND
THERMAL PRODUCT LINES
- MINIMAL CUSTOMER OVERLAP CREATES STRONG REVENUE SYNERGIES
- IMMEDIATELY ACCRETIVE TO ASML'S EARNINGS, PRE-SYNERGIES
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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COMBINES TWO HIGH GROWTH COMPANIES
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ASML
ANNUAL SALES (EUR MM)
Graph depicting ASML annual sales figures:
<TABLE>
<S> <C>
December 1998 EUR 779,000,000
December 1999 EUR 1,197,000,000
LTM(b) EUR 1,761,000,000
</TABLE>
SVG(a)
ANNUAL SALES ($ MM)
Graph depicting SVG annual sales figures:
<TABLE>
<S> <C>
December 1998 $ 505,000,000
December 1999 $ 568,000,000
LTM(b) $ 792,000,000
</TABLE>
(a) SVG numbers are calendarized to reflect a December year-end.
(b) Last twelve months ended June 30, 2000.
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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STRONG HISTORICAL OPERATING RESULTS
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LTM SALES LTM EBIT(a)(b)
(BACKLOG AS OF JUNE 30, 2000(a)) (IN MILLIONS)
(IN MILLIONS)
Graph depicting backlogs of the last twelve months ended June 30, 2000:
<TABLE>
<S> <C>
ASML EUR 1,761,000,000
SVG $ 792,000,000
PRO FORMA $ 2,551,000,000(c)
</TABLE>
Graph depicting EBIT of the last twelve months ended June 30, 2000:
<TABLE>
<S> <C>
ASML EUR 325,000,000
SVG $ 44,000,000
PRO FORMA EUR 369,000,000(c)
</TABLE>
(a) Last twelve months ended June 30, 2000.
(b) Excludes synergies.
(c) SVG numbers converted from US dollars to Euros using 1.0023 US$/EUR
exchange ratio (average ratio for the twelve-month period ended
June 30, 2000).
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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COMBINED BUSINESS MIX OVERVIEW
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ASML LTM SALES
Graph depicting sales of ASML for the last twelve months ended June 30, 2000
[GRAPH]
EUR 1,761,000,000 100% from Lithography
SGV LTM SALES
[GRAPH]
Graph depicting sales of SVG for the last twelve months ended June 30, 2000 of
$792,000,000:
Lithography 52.4%
Thermal 34.9%
Track 12.7%
PRO FORMA LTM SALES(a)
Graph depicting Pro Forma sales for the last twelve months ended June 30, 2000
of EUR 2,551,000,000:
Lithography 85.3%
Thermal 10.8%
Track 3.9%
(a) SVG numbers converted from US dollars to Euros using 1.0023 US$/EUR
exchange ratio (average ratio for the twelve-month period ended
June 30, 2000).
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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IN A HIGH GROWTH INDUSTRY
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Arrow Pointed up to the right on graph for 1999 to 2002 (EST) which shows a CAGR
= 34.5%
Graph depicting estimated worldwide semiconductor equipment sales in
billions of dollars:
<TABLE>
<S> <C>
1992 $ 8,000,000,000
1993 $11,000,000,000
1994 $15,000,000,000
1995 $25,000,000,000
1996 $26,000,000,000
1997 $28,000,000,000
1998 $22,000,000,000
1999 $26,000,000,000
2000 (projected) $43,000,000,000
2001 (projected) $55,000,000,000
2002 (projected) $62,000,000,000
</TABLE>
[PERFORMANCE GRAPH]
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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STRATEGIC BENEFITS
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<PAGE> 14
TRANSACTION ENHANCES ASML's INDUSTRY LEADERSHIP
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LEADING COMPREHENSIVE
TECHNOLOGY PRODUCT
OFFERING
ASML
THE LEADING PROVIDER
OF PHOTOLITHOGRAPHY
EQUIPMENT
ENHANCED DIVERSIFIED
CAPACITY BLUE-CHIP
CUSTOMER BASE
WELL POSITIONED
FOR NEXT
GENERATION
LITHOGRAPHY
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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STRATEGIC BENEFITS
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<TABLE>
<S> <C> <C>
TECHNOLOGY --> - ADDS SVG's PROPRIETARY MIRROR-BASED
LEADERSHIP (REFLECTIVE) OPTICAL DESIGNS
- ADDS SVG's MICRASCAN AND TRACK
CLUSTER CAPABILITY
COMPREHENSIVE --> - ADDITION OF TRACK AND THERMAL
PRODUCT OFFERING CAPABILITIES
- OPPORTUNITY TO INTEGRATE
PHOTOLITHOGRAPHY AND TRACK SYSTEMS
ENHANCED --> - LEVERAGES SVG's CUSTOMER
CUSTOMER BASE RELATIONSHIPS
- PROVIDES ADDITIONAL KEY CUSTOMER
RELATIONSHIPS, INCLUDING IN JAPAN
REVENUE AND COST --> - SIGNIFICANT CROSS-SELLING AND CUSTOMER
SYNERGIES SUPPORT OPPORTUNITIES
- LEVERAGES R&D EXPENDITURES FOR FUTURE
GENERATION LITHOGRAPHY SUCH AS 157nm
AND EUV
</TABLE>
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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MARKET TRENDS
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[GRAPH]
Graph showing the approximate percentage of the market captured by ASML, Canon,
Nikon, SVG, Others and Pro Forma combined from 1993 to 1999 (percentages
estimated).
<TABLE>
<CAPTION>
ASML Canon Nikon SVG Others PF Combined
<S> <C> <C> <C> <C> <C> <C>
1993 16% 25% 51% 3% 5% 18%
1994 15% 26% 55% 1% 3% 16%
1995 15% 29% 49% 3% 4% 18%
1996 20% 24% 48% 4% 4% 24%
1997 25% 23% 44% 5% 3% 30%
1998 29% 21% 43% 6% 1% 36%
1999 35% 17% 36% 8% 4% 43%
</TABLE>
SOURCE: DATAQUEST AS OF MAY 2000 AND ASML.
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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COMBINED COMPANY OVERVIEW
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<PAGE> 18
PRO FORMA FINANCIALS PRE-SYNERGIES
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<TABLE>
<CAPTION>
LTM ENDING PRO
JUNE 30, 2000 ASML SVG SVG(a) FORMA(b)
(EUR MM) ($ MM) (EUR MM) (EUR MM)
<S> <C> <C> <C> <C>
SALES EUR 1,761 $792 EUR 790(c) EUR 2,551
GROSS PROFIT 675 268(c) 268 943
EBIT 325 44 44 369
NET INCOME 222 33 33 255
</TABLE>
(A) SVG NUMBERS CONVERTED FROM US DOLLARS TO EUROS USING A 1.0023 US$/EUR
EXCHANGE RATIO (AVERAGE RATIO FOR THE TWELVE-MONTH PERIOD ENDED JUNE 30,
2000).
(B) PRO FORMA FINANCIALS DO NOT REFLECT THE ADJUSTMENTS NECESSARY UNDER
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. SUCH ADJUSTMENT WILL BE REFLECTED
IN THE PRO FORMA FINANCIALS TO BE INCLUDED IN THE PROXY
STATEMENT-PROSPECTUS AND THE F-4 FOR THE TRANSACTION.
(C) SVG GROSS PROFIT RESTATED IN LINE WITH ASML's REPORTING BY ADJUSTING FOR
WARRANTY AND SERVICE EXPENSE OF $69.3 MM WHICH IS RECORDED BELOW GROSS
PROFIT IN SVG's REPORTING.
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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<TABLE>
PRO FORMA BALANCE SHEET(a)
=========================================================================================
<CAPTION>
ASML SVG SVG(b) PRO FORMA(c)
JUNE 30, 2000 (EUR MM) ($ MM) (EUR MM) (EUR MM)
------------- -------- ------ -------- ------------
<S> <C> <C> <C> <C>
Assets
Cash and Cash Equivalents EUR 866(d) $156 EUR 164 EUR 1,030
Accounts Receivable 499 188 196 695
Inventories 457 249 261 718
Other Assets 70 49 51 121
Intangible Assets 19 2 2 21
Property, Plant and Equipment 209 194 203 412
--------- ---- ------- ---------
Total Assets EUR 2,120 $838 EUR 877 EUR 2,997
Liabilities and Shareholders' Equity
Current Liabilities EUR 421 $201 EUR 210 EUR 631
Convertible Subordinated Bonds 814 0 0 814
Debt 0 27 29 29
Other Long-Term Liabilities 0 10 11 11
Shareholders' Equity 771 600 627 1,398
Minority Interest 114(d) 0 0 114
--------- ---- ------- ---------
Total Liabilities and
Shareholders' Equity EUR 2,120 $838 EUR 877 EUR 2,997
</TABLE>
(a) Pro Forma Balance Sheet is not adjusted for expected transaction expenses of
$25 to $30 MM.
(b) SVG numbers converted from US dollars to Euros using a 0.9556 US$/EUR
exchange ratio (exchange ratio as of June 30, 2000).
(c) Pro Forma financials do not reflect the adjustments necessary under
Generally Accepted Accounting Principles. Such adjustment will be reflected
in the Pro Forma financials to be included in the proxy statement-prospectus
and the F-4 for the transaction.
(d) ASML cash and cash equivalents contains EUR 114 MM of restricted cash
related to a structured financing subsidiary.
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 20
SALES BREAKDOWN PER REGION
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ASML FY 1999
[GRAPH]
Graph depicting sales of ASML for fiscal year 1999 of EUR 1,197,500,000:
<TABLE>
<S> <C>
USA 35%
KOREA 27%
TAIWAN 24%
EUROPE 13%
ROW 1%
</TABLE>
SVG FY 1999(a)
[GRAPH]
Graph depicting sales of SVG for fiscal year 1999 of $473,700,000 (EUR
429,600,000):
<TABLE>
<S> <C>
USA 68%
ROW 14%
ISRAEL 11%
IRELAND 4%
FRANCE 3%
</TABLE>
(a) SVG numbers converted from US dollars to Euros using a 1.1027 US$/EUR
exchange ratio (average ratio for the twelve-month period ended
September 30, 1999).
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 21
COMBINED EMPLOYEE MIX AS OF JUNE 30, 2000
===============================================================================
<TABLE>
<CAPTION>
ASML SVG PRO FORMA
------ ----- ---------
<S> <C> <C> <C>
Customer Support 1,113 829 1,942
Marketing & Technology 1,148 445 1,593
Operations & Goodsflow 828 1,719 2,547
Other 629 596 1,225
------ ----- ---------
Total 3,718 3,589 7,307
Lithography 1,537
Track 456
Thermal 894
Corp., Tinsley, Int., and Temp. 702
-----
Total 3,589
</TABLE>
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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PRODUCTION FACILITIES
================================================================================
<TABLE>
<S> <C> <C> <C>
SVG LOCATION DIVISION ASML LOCATION
-------------- ----------- -----------------
WILTON, CT LITHOGRAPHY VELDHOVEN, NL (2)
RIDGEFIELD, CT LITHOGRAPHY
[BACKGROUND WORLD MAP]
SVG LOCATION DIVISION
----------------- --------
SCOTTS VALLEY, CA THERMAL
ORANGE, CA THERMAL
SAN JOSE, CA TRACK
RICHMOND, CA TINSLEY
</TABLE>
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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[ASML LOGO]
================================================================================
OVERVIEW
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LITHOGRAPHY: THE ENABLING TECHNOLOGY
================================================================================
ASML's continuous innovation of this enabling technology
provides our customers with the competitive edge
|X| LITHOGRAPHY IS THE MOST CRITICAL AND
COMPLEX STEP IN MANUFACTURING ICs
[PHOTO] [Three-dimensional
picture of a Lithography
machine projecting
patterns on a wafer]
|X| LITHOGRAPHY PROJECTS MICROSCOPIC
PATTERNS ON THE WAFER TO BUILD THE
ELECTRIC CIRCUITRY THAT FORMS THE IC
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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ASML'S INDUSTRY LEADING PRODUCTS
================================================================================
[PHOTO] [PHOTO]
Picture of a three-dimensional Picture of a three-dimensional
cut-away view of the inside cut-away view of the inside
of the PAS 5500 Scanner. of the TWINSCAN.
The PAS 5500 Scanner TWINSCAN
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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ASML'S CORE COMPETENCIES DRIVE PRODUCTIVITY
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|X| FINE MECHANICS
} BEST SERVO CONTROL SYSTEMS/ STAGE TECHNOLOGY
} SUPERIOR SYNCHRONIZATION FOR REQUIRED IMAGING AND OVERLAY
[PHOTO]
PICTURE OF SERVO CONTROL SYSTEM APPARATUS PROJECTING PATTERNS ON
A WAFER.
|X| IMAGING SYSTEMS
} HIGH NUMERICAL APERTURE (NA) ZEISS REDUCTION LENSES
} HIGHEST THROUGHPUT OFF-AXIS ILLUMINATOR
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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ASML'S WORLD LEADING PRODUCTIVITY
ENABLING DEVICE SHRINKS WHILE MAINTAINING THROUGHPUT
================================================================================
FEATURES
|X| HIGHEST WAFERS PER HOUR
|X| LOWEST COST PER IMAGING LAYER
|X| SHORTEST LEAD TIME FROM ORDER TO VOLUME PRODUCTION
CUSTOMER BENEFITS
|X| SIGNIFICANT PRODUCTIVITY GAINS WITH FEWER LITHOGRAPHY SYSTEMS
|X| CAPITAL EXPENDITURES ARE REDUCED
|X| TIME TO MARKET
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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ASML BACKLOG END OF JUNE, 2000
================================================================================
207 systems
Total value:
EUR 1,248 MM
<TABLE>
<S> <C> <C> <C> <C> <C>
HI NA 1%
/300 2%
/550 2%
TAIWAN 38% /950 2% Logic + ASIC 33%
USA 26% I-Line 4% Foundry 32%
SINGAPORE 15% TWINSCAN 4% Memory 14%
EUROPE 14% /700 25% MPU + MCU 13%
ROW 5% /750 27% Other 7%
KOREA 2% /400 33% R&D 1%
</TABLE>
[PIE GRAPH] [PIE GRAPH] [PIE GRAPH]
Value per Region Value per type Value per IC Technology
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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[SILICON VALLEY GROUP LOGO]
================================================================================
OVERVIEW
================================================================================
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SVG OVERVIEW
================================================================================
|X| SVG, WHICH BEGAN OPERATIONS IN 1977, IS LOCATED IN SAN JOSE, CA, AND
CURRENTLY EMPLOYS 3,589 EMPLOYEES
|X| SVG IS A LEADING SUPPLIER OF ADVANCED WAFER PROCESSING EQUIPMENT. THE
COMPANY DESIGNS, MANUFACTURES, AND MARKETS TECHNICALLY SOPHISTICATED
EQUIPMENT USED IN PRIMARY STAGES OF SEMICONDUCTOR MANUFACTURING
|X| SVG HAS THREE PRINCIPAL PRODUCT GROUPS:
} SVG LITHOGRAPHY SYSTEMS: PHOTOLITHOGRAPHY EXPOSURE PRODUCTS
} SVG TRACK SYSTEMS: PHOTORESIST PROCESSING PRODUCTS
} SVG THERMAL SYSTEMS: OXIDATION/DIFFUSION, LOW-PRESSURE CHEMICAL
VAPOR DEPOSITION ("LPCVD") AND ATMOSPHERIC PRESSURE CHEMICAL
VAPOR DEPOSITION ("APCVD")
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 31
SVG OVERVIEW
================================================================================
LTM Sales (a)
[PIE GRAPH]
<TABLE>
<S> <C>
Lithography 52.4%
Thermal 34.9%
Track 12.7%
</TABLE>
LTM EBIT (a)
[PIE GRAPH]
<TABLE>
<S> <C>
Lithography 45.2%
Thermal 39.2%
Track 15.6%
</TABLE>
(a) Last twelve months ended June 30, 2000
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 32
SVG LITHOGRAPHY SYSTEMS: MAIN PRODUCTS
================================================================================
[PHOTO] Three-dimensional picture of a person in a sterile suit operating the
Microscan III+ machine.
Micrascan III+, QML/II+
|X| Provides 0.18 - 0.25 (mu)m resolution with superior critical dimension
("CD") control and overlay/matching
|X| KrF unnarrowed laser based system and broad band lens design
|X| Over 50 Microscan III+ systems shipped and over 100 QML/II+ shipped
[PHOTO] Three-dimensional picture of a Micrascan 193 machine.
Micrascan 193
|X| First production worthy 193mm machine in the industry
|X| Third generation ArF based system
|X| Builds on 5+ years of ArF scanner experience
|X| First 193 systems shipped in 1993
[PHOTO] Three-dimensional picture of Micralign 700 Series machine.
Micralign 700 Series
|X| 25 years of performance history
|X| 1(mu)m resolution
|X| Hg lamp source
|X| 0.17 numerical aperture
|X| Wafer size from 100mm to 150mm
|X| Installed base of almost 4,000 systems
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 33
SVG TRACK SYSTEMS: MAIN PRODUCTS
================================================================================
[PHOTO] Three-dimensional picture of the inside view of the 9X machine.
9X
|X| Development of the early 90's
|X| Large installed base
|X| Capacity buys for existing customer base
[PHOTO] Three-dimensional picture of a cut-away view of the inside of the
ProCell machine.
ProCell
|X| First true DUV-driven design (cluster vs. linear)
} Industry's only cluster design
} 200mm / 300mm bridge tool and 300mm footprint advantage
|X| Re-establishes SVG in the marketplace
|X| First system shipment in Q3 FY 2000 for production justification
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 34
SVG THERMAL SYSTEMS: MAIN PRODUCTS
================================================================================
[PHOTO] Three-dimensional picture (with cut-away) of the Xcelerate (RTP)
Machine.
Xcelerate (RTP)
|X| Stacked chambers and HCL compatible
|X| Single wafer furnace technology
|X| Compact system footprint
|X| High reliability robotic front end
|X| 200mm / 300mm capable
|X| Cluster tool with tube type isothermal chamber
[PHOTO] Three-dimensional picture of the AVP-8000/RVP 9000 machine (with
cutaways).
AVP-8000/RVP-9000
|X| Industry proven high throughput system
|X| Dual boat system eliminates wafer handling overhead
|X| Enhanced ramping capability
|X| Improved temperature control (model based) reduces cycle time
|X| Over 1,450 systems installed worldwide
|X| 300mm version of RVP systems being used in 300mm Pilot Line in Dresden
[PHOTO] Three-dimensional picture of the APNext Machine.
APNext
|X| Cluster tool APCVD
|X| Linear injection chamber with high throughout
|X| Vertical cluster platform
|X| Low chemical consumption and low maintenance
|X| Narrow deposition zones
|X| Eliminates nitrogen shield
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 35
================================================================================
KEY MANAGEMENT AND SUMMARY HIGHLIGHTS
================================================================================
<PAGE> 36
KEY MANAGEMENT
================================================================================
<TABLE>
<CAPTION>
NAME CURRENT ROLE
---- ------------
<S> <C>
Doug J. Dunn President & CEO, ASML
Peter T.F.M. Wennink EVP Finance & CFO, ASML
Martin A. van den Brink EVP Marketing & Technology, ASML
Nico I.M. Hermans EVP Worldwide Customer Support, ASML
Dave P. Chavoustie EVP Worldwide Sales, ASML
Papken S. Der Torossian Chairman & CEO, SVG
William A. Hightower President & COO, SVG
Russell G. Weinstock CFO of SVG
John Shamaly President of SVG Lithography
Boris Lipken Corporate VP & President of SVG Track
Jeffrey M. Kowalski President of SVG Thermal Systems
Steven L. Jensen VP Worldwide Sales & Marketing, SVG
</TABLE>
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 37
ASML MANAGEMENT BOARD
================================================================================
[FLOW CHART]
Martin A van der Brink, Marketing & Technology; Doug J. Dunn, Goodsflow; Nico
I.M. Hermans, Customer Support; and Dave P. Cahvoustie, Sales reporting to Doug
J. Dunn, Chief Executive Officer. Peter T.F.M. Wennink, Finance, reporting to
Doug J. Dunn, Chief Executive Officer
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
<PAGE> 38
SVG MANAGEMENT BOARD
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[FLOW CHART]
Larry Oh, Quality and Productivity; John Shamaly, Lithography; Boris Lipkin,
Track Systems, Jeffrey M. Kowalski, Thermal Systems and Bob Aronno, Tinsley
Division reporting to William A. Hightower, President and Chief Operating
Officer. Boris Likpkin, Human Resources; Russell G. Weinstock, Finance;
William A. Hightower, President and Chief Operating Officer; and Steven L.
Jensen, Worldwide Sales & Marketing reporting to Papken S. Der Torossian,
Chairman and Chief Executive Officer.
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SUMMARY HIGHLIGHTS
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|X| CREATES THE #1 PROVIDER OF PHOTOLITHOGRAPHY EQUIPMENT
|X| COMBINES ASML'S LEADING EDGE VOLUME PRODUCTION TECHNOLOGY WITH SVG'S
EARLY INTRODUCTION CAPABILITIES
|X| JOINT R&D EFFORT ENABLES COMBINED COMPANY TO LEVERAGE SIGNIFICANT FUTURE
R&D INVESTMENTS AND ACCELERATE DEVELOPMENT OF NEXT GENERATION TECHNOLOGY
|X| COMBINES THE STRONG OPTICAL EXPERTISE OF ASML'S STRATEGIC PARTNER, CARL
ZEISS, AND SVG'S SIGNIFICANT EXPERTISE IN PROJECTION OPTICS
|X| EXPANDS THE US CUSTOMER BASE
|X| EXPANDS ASML'S PRODUCT OFFERINGS TO INCLUDE PHOTORESIST TRACK AND
THERMAL PRODUCT LINES
|X| MINIMAL CUSTOMER OVERLAP CREATES STRONG REVENUE SYNERGIES
|X| IMMEDIATELY ACCRETIVE TO ASML'S EARNINGS, PRE-SYNERGIES
[ASML LOGO] [SILICON VALLEY GROUP LOGO]
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ASM LITHOGRAPHY & SILICON VALLEY GROUP
MODERATOR: DOUG DUNN
OCTOBER 2, 2000
10:00 AM CT
Operator: Good morning. Thank you for joining us on today's ASM Lithography and
Silicon Valley Group joint conference call. As a reminder, today's
conference is being recorded.
In a few moments, I'll be turning the call over to Mr. Doug Dunn, Chief
Executive Officer of ASM Lithography. Joining Mr. Dunn is Mr. Peter
Wennink, Chief Financial Officer of ASML, Mr. Papken Der Torossian,
Chief Executive Officer of SVG, and Mr. Russell Weinstock, Chief
Financial Officer of SVG.
Following the presentation, there will be an electronic question and
answer period. Now it is my pleasure to turn the call over to Mr. Dunn.
Mr. Dunn, please go ahead, sir.
Doug Dunn: Thanks, Andy. And good morning, ladies and gentlemen. It's a real
pleasure to be talking to you all this morning. I hear the number is
around 200. We had a 4 o'clock in the morning New York Time call to the
European investors. We had 160 there. So I guess the message is
spreading.
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The format will be, I will take you through some comments, take about 20
minutes or so. I'll be reading from some slides which are accessible on
the Web pages of both companies. And I guess you may have seen those.
At the end, Papken will just take over and have his comments for a few
minutes. And then we'll throw it open to questions.
As a matter of formality, I must remind you that there is a Safe Harbor
statement. It is long. And I won't read it out. But please be aware of
it and ensure that you understand it.
And having gone through that little tedious part, let's move on to the
main event. Okay, the merger summary, so we're bringing together here
ASML and SVG. And the structure of that is a tax-free stock-for-stock
merger. The exchange ratio is 1.286 shares of ASML for each share of
SVG. The accounting is a pooling of interest basis.
There are conditions, of course, because SVG stockholders require to
approve this, as do the US and European regulatory bodies who look at
antitrust and so on. And as far as ASML is concerned, because of the
size of the deal, we don't need shareholder approval.
The target closing - you know, we're in the hands here of government
bodies. And they're obviously hard to predict, especially with the US
elections looming. We believe four months is achievable. But it could be
as long as six months. And beyond six months, it gets pretty tedious.
So four to six months probably is the realistic time scale. If we can do
it quicker, then we'll do so. But that's not really in our hands. And
the company's name ultimately will be ASML.
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The highlights of the merger - and I've been told by Peter Wennink, who
some of you know, 44 times in the past five minutes I must mention the
word accretive. So lest I forget -- and I will not forget -- the deal is
accretive. It's accretive from the first day.
And that's before we take into account whatever synergies may exist
through the bringing together of the two companies. So it is an
accretive deal, and we therefore think, a good deal.
It does create, as a matter of fact, the Number 1 provider of
photolithography equipment in the industry. I think later on we have a
chart that shows our percentage market share would have been something
around 43% at the end of last year had we been combined at that point in
time.
Of course I have no idea what the market share changes have been during
this year. We won't know until next January. But anyway, for one brief
moment in time, we certainly were Number 1. And I anticipate we still
will be at the end of this year.
But that's not the reason for doing this. The main reason for this
merger and acquisition is to combine ASML's leading-edge volume
production technology with SVG's ability to introduce early high
technology capability products to the market. So we have in that sense
complementary skills here. And that's the vital message to understand.
So, you know, our modular design, our quick ramp to volume is one of the
hallmarks of ASML. SVG's ability to bring out early leading-edge
products is one of their claims to fame. And by combining both of these
two features, we end-up with a really powerful and compelling company.
It does mean that we'll be focusing the R&D efforts of both companies.
And by the way, there are no anticipated layoffs here. We're going to
still continue to expand in all the vital areas of R&D, production, and
customer support.
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And so we will ultimately, when we can get closer to SVG once this
stalling period is out of the way with, we will combine programs 157 and
beyond to ensure that we get shorter time to market with leading-edge
products.
Because as you well understand, those who come out first with
leading-edge products tend to gain the market share and have the
strongest base. So we intend to be first with new technology products.
And it will start with 157 and go on from there.
It does of course combine also the optically strong expertise of SVG
with that of our partner in optics, Carl Zeiss. And I think there you
have perhaps two of the premier optical technology bases in the world.
So getting those guys together is going to have, I think, some pretty
special results. And I'm looking forward to seeing how that enhances our
joint position beyond 193 nanometer -- so some really good
opportunities.
Also it won't have escaped your attention -- or if it has, then shame
upon you -- to realize that SVG has several good customers, one being
Intel, a company you may have heard of.
Now you're also aware that ASML doesn't supply to Intel. Now therefore
that does mean that we have the ability - we have the opportunity
rather, if we have the products and so on, to begin to convince Intel
perhaps that our product is worth trying.
So it also opens up the SVG customer base to ASML. And equally and
reciprocally, we open up our customer base to SVG. So there's, you know,
quite a complementary situation there.
It has the other virtue and feature of expanding ASML's product
offerings away from purely photolithography equipment into a very close
product, the track business of SVG, and also into
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the slightly more distant thermal business of SVG, slightly more distant
in that it doesn't actually border onto the photolith gear. But it's not
too far away. It's in the same fab.
And we are quite excited actually now that we've understood more of
SVG's business about the viability of both of those two divisions. The
track product is a radical new concept.
It's a cluster tool. It's a bridge tool for 200 and 300 millimeter. It's
got a very small footprint and a lot of extra features, which I think
makes it a compelling product. And I'm hoping that we can take advantage
of that product. It's newly introduced, first shipped in Q3 of last
year.
Peter Wennink: This year.
Doug Dunn: This year rather -- thank you, Peter. And the first results from
the early customers are pretty good.
Equally well, in the Thermal Division there are some good legacy
products, but also particularly new and exciting, a rapid thermal
processing tool which seems to have some good IP in there, a good
concept.
It's a low-cost - low value of ownership cost product using a different
concept to normal rapid thermal processing. And we believe also that's
kind of a nugget of gold that we can exploit.
So we did expand our product base within the semiconductor capital
equipment offering. There is many more customer overlap, as I've said.
And I'll repeat again for Peter's benefit, it is accretive to earnings,
even before synergies.
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Moving quickly on then to some numbers now, ASML's annual sales - and
I'll give you the last 12 months finishing with the June 30, 2000. Our
sales in euros were 1.76 billion euros. SVG's equivalent sales for the
same time period in dollars was $792 million.
That would therefore give us combined sales - pro forma sales to June 30
this year for 12 months of in euros 2.55 billion. And it would give an
EBIT in euros of 369 million. So that gives you an idea of the size and
scale of the company.
As you recognize, ASML's sales have been totally lithography. Therefore
our sales are 100% lithography sales. SVG, to give you a flavor of their
product split, tracking is around 13%, thermal around 35%, and litho
around 52% of their sales. And that totals, as I said, $792 million.
Yes, so the combined pro forma grouping would be 85% litho, 11% thermal,
and 4% track.
Just a word on the industry, because that's clearly - we're as good as
the health of our customers. And in my estimate, right now customers are
extremely healthy. If the loudness and the rudeness with which they
clamor for more products is anything to go by, they're very healthy
indeed. Certainly their vocal cords are pretty strong.
So they're still going at a good clip. We see no letup in the insatiable
demand from customers for products this year or next year. And now we're
under pressure even for 2002, which is on the one hand good news. I
think similar is true for SVG.
And from the capital equipment point-of-view, although Intel gave some
news last week which was slightly disappointing for a very brief moment
in time, just Q3, they did make the point that they intend to maintain
their cap ex spend, because they recognize that that short-term issue
will soon disappear and they're back on the treadmill again. So they're
still investing heavily.
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So we take a lot of heart from all of the signs from every customer, all
the blue chip accounts that we have -- and we now have them all, apart
from the Japanese -- that the industry is strong, vibrant, and really
pushing ahead.
The business we're in...
Man: Don't worry about it.
Doug Dunn: The business we're in is growing at, you know, growth rates of 50%
this year, and compounded for four or five years, around 30% plus. So
it's very healthy.
Moving on now to some of the benefits, and I've touched upon a few of
these in my introduction. For those who are following the slides here,
I'm on Slide 15 right now.
Benefits are - the strategic benefits are the technology leadership
issue. You know, in this high-tech business we're only as good as our
next product. All that's behind us is history. Our next product will
determine whether we have high market share gains or high market share
losses.
And bringing together SVG's proprietary mirror-based reflective optical
designs together with our own ((inaudible)) design refractive, I think
gives us the best possible hedging of bets. Whichever product is most
suitable, we will use. If they're both suitable for different
applications, we can also maximize our gains there.
Add to that SVG's Micrascan products, which are good legacy products,
and their tracked cluster capability, and it's a natural fit. We also
have therefore a comprehensive product offering with the addition of the
SVG range.
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And by the way, I'll pay tribute just now to the SVG performance on the
193 nanometer node. They've done an exceptionally good job in recovering
from a setback 1-1/4 years ago to being, you know, well thought of right
now with great products.
After that, the tracking and thermal products, which I, again, insist to
you are an important part of this deal. They're really going to be, I
think, winners for us, because they have some really creative and
different engineering which gives a different flavor to these products,
I think a compelling flavor. Add those together, and we have a very
comprehensive product offering.
The customer base is enhanced. As we mentioned, we can share their
customers, not the least of which is Intel. And they can share ours. And
there will be revenue and cost synergies.
Now this is not a cost-saving deal. I want to stress that point. This is
a deal about expanding the technology base more rapidly. But in the
process, we're going to uncover, I guess, some synergies. And if they're
there, we'll take advantage of them.
But perhaps more importantly, future expenditures will be reduced. And
we can achieve future product time scales more quickly by devoting twice
as many people or 1-1/2 times as many people behind the next-generation
technologies -- so, I think, a powerful message.
The next slide is Slide 16. You have to see it to talk through this
slide. But it shows the historical market share trends for all the major
players in this industry.
It shows Canon - I'll start with what was the biggest, with Nikon, which
came out at the end of last year with around 37% market share. ASML had
around 35% market share. Canon was just under 20% market share. And SVG
had risen to just under 10% market share.
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If you now do the quick mental exercise and add their 8% to our 35%, you
can see what it would have been had we done this deal nine months ago.
We'd have concluded the year with a 43% market share.
That's merely a factual statement. I don't make any great claims about
market share, because this isn't about market share primarily. It's
about getting to the market first with the next-generation products. And
then if you do a good job, you'll gain market share. It's all about
technology.
So the combined summary overview, again, just rushing through the
numbers a little bit -- sales in euros, 2-1/2 billion, slightly over;
gross profit in euros as a pro forma of sales, just under 1 billion, 940
million; EBIT at 369 billion; and a net income of 255 million euros --
so, I think, a strong basis for the new company to move forward.
The balance sheet shows total assets of 3 billion euros, I think, a
pretty healthy and strong balance sheet. If you have any questions, come
back at the end with those detailed questions.
Just as a matter of note, employees, which are a vital part of this
combination, ASML has around 3700 employees at this point in the year to
date, SVG around 3600, giving a total of 7300.
I'll preempt a question here. You may wonder why it is that for the
lower sales SVG had the more employees in the sense pro rata. The answer
is pretty straightforward.
They are a more vertically integrated company. We buy in 90% plus of our
cost of goods from chosen suppliers. Whereas SVG made more of their own.
So they therefore have a different balance of employees.
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We also show the breakdown between lithography track thermal for those
who wanted to tap into the Web page and see it. So a total of 7300
people will be hopefully motivated to work for the new corporation.
We have some unique features for both companies. And looking at it from
ASML's viewpoint for a moment, we have a much stronger base now in the
USA. As you know, we came out of the heart of Europe in the Netherlands.
Therefore our major industrial and technology centers have been in the
Netherlands.
We've now expanded dramatically in the USA with production facilities on
both coasts, the East and West Coast, which is great, and also with R&D
facilities - developments on both coasts also. So that's a powerful
message.
So we tap into the rich US technology base of SVG and their suppliers,
both technology partners like universities and research institutions and
also their suppliers of products and components. We tap into that rich
base.
We'll do more than tap into it, because that's kind of just
((inaudible)) from it. We'll add to it. We will - we are committed to
developing the R&D base in the USA and the production base in the USA.
So out of this will come a stronger USA position.
So for those in the antitrust arena who look at this quite carefully
from a strategic point-of-view, they need have no fear, because the
bringing together of these two technologies will further enhance the USA
capability in this arena and not at all weaken it.
So we end-up with - and of course reciprocally, SVG will have insight
into our production techniques, which are different from theirs with our
modular design, tap into our development
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capabilities, and tap into the associations we have in Europe with some
of the leading centers of high technology.
Just a quick overview on ASML, you know, our latest product is a 30
millimeter platform we call TWINSCAN. That has achieved in a few short
months great interest and demand from customers. We've announced some
customers. Others we can't announce yet.
I can humbly say -- and I say this humbly, because I'm sure that SVG
would have come along with their own great product had we given them a
bit longer -- but our product is in advance of theirs from a time
point-of-view. It's not a comment on the quality, merely on the
timeliness of it. And therefore, this will become the 30 millimeter
chosen platform for the future. Okay?
And you know our skills in ASML. We don't have optical skills. Zeiss has
those skills. But we do have the precision machining, the server
control, the software, the system integration capability, and the
manufacturing know-how to put together a lot of very advanced and
competitive systems. And we combine that with Zeiss for the optical
capability.
So our customers recognize ASML I think for high-volume capability in
machines outputted, and also high productivity for our customers in
wafers through the machines. It means they can have less machines, lower
capital expenditure, and lower cost per diem, and a shorter time to
market. They are the ASML kind of historical skills.
Just quickly on the backlog -- and you'll know these numbers from the
half-year results -- value per region, Taiwan is like just under 40% of
our backlog, US 26%. These are all pro forma. These are before we add
together SVG -- Singapore 15% now as Charter grows and others, European
14%, and the rest of the world 5%.
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By the way, I'll make the point that the backlog is lumpy in that it
changes dramatically between one month and the next. You know, if Micron
is bringing in a lot of business, then the USA and Memory goes big as
far - at the expense perhaps of Korea or Taiwan. And then a month later,
TSMC or Samsung come in. So this is a moving picture.
So read nothing into any changes here. It's just a matter of fact. And
value by technology, Logic and ASIC 33%, ((inaudible)) 32%, MPU and the
Micron ((inaudible)) 13%, and Memory 14%.
Again, that balance has shifted through the year only because of the
timing of when customers place orders. So we have a strong backlog, 207
systems at the half-year point. It's increased since then for ASML. I
think we're valued at 1.2 billion euros.
Quickly on SVG on here, my two colleagues will probably criticize my
lack of knowledge here. But I'll try anyway. I've got to become familiar
with the company. And Papken will interrupt and correct me when I'm
wrong.
SVG began as a combined operation in '77. Located in San Jose
California, it employs 3-1/2 thousand people. You know as well as I what
they do -- great technology, advanced wafer processing equipment, litho,
tracks, and thermal.
Their last 12-month sales -- litho was 52%, thermal 35%, and track 13%.
Their last 12-month EBIT was 45% litho, 39% thermal, and 15% track. And
that totaled, by the way, $44.1 million.
Their products, and again, Page 32 has some rather nice photographs. And
they have a rich heritage of - legacy of products here. They started off
a long time ago with the Micrascan products.
Papken Der Torossian: Micralign.
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Doug Dunn: Micralign rather, Micralign products, and have moved on to
Micrascan. So they're now providing both krypton fluoride and argon
fluoride solutions -- great products in their own right.
And their 193 product, I think, is worthy of note, because it really has
become an excellent product, certainly I would say comparable to the
goodness of ASML, and some may argue, better. I'm not entering that
discussion. But they're certainly comparable. So we have now two great
193 products to offer customers.
They also have their track system products. The one I referred to
earlier is called ProCell. It's the first true DUV-driven design. It's a
cluster tool. It's in fact the industry's only cluster tool so far.
It's a bridge tool for 200 and 300 millimeter. And it has a good 300
millimeter footprint. By that, I mean a small 300 millimeter footprint.
So it takes up less room in the fab than competing products.
And I think this reestablishes SVG after a couple of years of drought as
a leading supplier potentially in the track marketplace. First shipments
were made in Q3 of this year. And the first results sound very positive
from customers.
Moving on to thermal, the one that got my attention -- and maybe there's
more than one that should get my attention -- was their accelerated RTP,
rapid thermal processing product.
This is quite a different radical design compared to the competing
products. They use a different - a black-body radiator as a heat source
rather than an array of lamps. Therefore it's got a much lower cost of
ownership, much lower maintenance costs.
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It's a great product. It's compact and a small footprint, high
reliability. And again, it's 200 and 300 millimeter compatible. So we
feel that this is a worthy addition to the armory of the combined
company. As well as that, they have good APCVD and LPCVD products which
they ship to many customers.
I'm going to wrap-up in about one minute and then hand over to Papken.
Let me repeat again that it does create the Number 1 provider of photo
tools to the industry. That is a matter of fact.
But more importantly, it combines ASML's leading-edge volume production
technology with SVG's early introduction capabilities. You know, so that
has got a - is a good combination.
The joint R&D efforts enable both companies to stop competing, and
therefore slowing down in many ways by jointly - by separately
developing products. Now we can merge those groups together and
accelerate the programs. So this is an acceleration of R&D into
next-generation lithography.
Our partners at Carl Zeiss are enthusiastic about this deal. And we feel
that Carl Zeiss with their optical abilities and SVG with theirs through
(Tinsley) and the facilities here in Connecticut make a great
combination of highly skilled optical engineers.
It leverages our mutual customer base. And there's little overlap there.
It expands photolith into tracking and thermal products. And that's, I
think, good ultimately. And again, it is an accretive deal even before
we look at any synergies. And by now, I've said it three times, so Peter
must be at least happy.
Peter Wennink: Thank you, Doug.
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Doug Dunn: Gentlemen, thank you for listening to that kind of a monologue for
15 minutes. I'm going to pass it over now to Papken, who may want to
correct me on some of my comments about SVG and give his own view of
this deal from his perspective. Papken?
Papken Der Torossian: Thank you, Doug. I want to thank all of the participants
here who took the time today during the market opening and during the
market opening in America to really listen to our story.
Let me just say that we at SVG are - and Doug at ASML, both of us are
seeing very strong demand from our customers. And we are making this
public to all of you.
This is a very cyclical business. And we feel the cycle started about -
ramping-up about a year ago, and we have another couple of years to go
in this ramp. So from a timing standpoint, this is an excellent time for
us to get together to really combine our forces to meet our customer
demand.
Item 2, we have always said that we want to invest heavily in capital
and R&D to maintain SVG's leadership in the advanced lithography area.
And for last ten years, we have done that successfully. As Doug showed
you in the chart, we have achieved what I call a very healthy share in
the advanced lithography market.
During this time in the last 10 to 12 years, ASML had established a very
enviable position in broadening their global market reach, as well as
being the leading tool of steppers and scanners in the productivity
area. They have shown an excellent capability in lowering cycle times
and ramping-up advanced products.
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So I think that this combination can release some of that strong
manufacturing process know-how to really reduce the cycle and ramp-up
new advanced technologies to meet our customers' needs in the next
short-term and medium-term.
So we're very excited about that. And as Doug said, longer-term to meet
the challenges of our customers in the next generation for both the 157
and EUV, which is a $500 million to a $1 billion investment, as we have
made public to everybody, this will combine our resources and make our
customers happy.
And this is a case where one and one equals three. So we're very excited
about it. And we're here to answer any questions you have -- Doug and I,
as well as Peter and Russell, our financial experts. So thank you. We're
ready for questions.
Doug Dunn: Okay. Andy, over to you for questions.
Operator: Thank you. The question and answer session will be conducted
electronically. At this time if you'd like to ask a question, you may
signal by pressing the star key followed by the digit 1 on your
touch-tone telephone. Once again, that's star 1 if you'd like to ask a
question. And we'll pause for just a moment to assemble our question
roster.
We'll take our first question from David Wu with ABN AMRO.
David Wu: Well congratulations, Papken. It looks like it's a match made in
heaven.
Papken Der Torossian: Yes, I know. Thank you. Thank you, David. You have been
following the company a long time. And you are very expert on it. Thank
you.
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David Wu: This is a question actually asked of both gentlemen, because your
largest customer, Intel, I talked to their head of manufacturing
technology.
And he told me - I asked him about ASML, and Nikon, and SVG. And his
story to me is, when ASML is ready for production, they have already
well chosen their technology, therefore it's too late. And yet reading
between the lines, they're not too - they like to have a second source
in case there's a problem.
Now when you look at the surface of this combination, it says I have a
volume producer out of ASML and I have a leading-edge provider with SVG.
How do you get together and provide synergies so that Mr. Nikon's share
of that Santa Clara company goes drastically lower in the next round of
selection?
Doug Dunn: I mean, one way of doing that, David, is to merge resources and
buy the company. So that's one of the reasons behind it, one of the
reasons to exploit our technology into SVG and vice-versa. They have
also good technology.
But, you know, the real thrust of this is not in today's technology. We
will still make the same platforms we make today and so will SVG. The
real advantage comes to any customer -- and I'm not going to personalize
this into any customer -- at the 157 and beyond. There we absolutely
will combine platforms, have the same optics.
And hopefully by enjoying both resources and making the choices now,
because, you know, now is the time to choose the root for 157, not a
year from now. That's why the timing is so perfect.
If we choose that route now, choose it well, choose it carefully, and
focus both sets of engineers, both sides of the Atlantic to conquer that
node, then we'll get there early with the best products. And then every
customer will hopefully see that and take advantage of it.
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David Wu: And that is - what kind of timeframe will we be seeing products with
157 millimeters?
Doug Dunn: SVG has, I think, the claim to fame of being the first here with a
product in 2000?
Papken Der Torossian: ...two.
Man: We ship one - a mini-scanner this year.
Doug Dunn: A mini-scanner this year, and then 2002 for the - yes, so pretty
soon.
Papken Der Torossian: We have actually - I don't know how much of it is public.
But we have announced that we have orders for it from global leading
customers to deliver a full-scale machine in 2002. So this is something
that - obviously you know that we have a platform. We are working with
it. So...
Doug Dunn: I think Papken set me up here, by the way, fellows. That's very
((inaudible)). No, I'm joking there. So you can see that SVG is well
advanced with their products and really has a great ability to bring,
you know, a few leading-edge products out early.
But don't forget also -- I'll make this point very strongly, because
we're talking about next-generation technology -- we're not alone in
this business. There are two excellent competitors out there, one Nikon
and one Canon, who are absolutely determined to do a great job and do do
a great job.
We have absolute admiration for them. And therefore, you know, the
market is still well satisfied with two - with three strong competitors,
ourselves and SVG on the one hand, Nikon on the other, and Canon on the
third hand, if you have three hands.
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So that isn't going to go away. And that competitive thrust is going to
be even fiercer after this bringing together of resources. So there is a
lot of competition out there that we have great respect for.
Papken Der Torossian: But I do want to add - you know, being an engineer, I do
want to add a very important subject here. We are still early enough
where ASML's expertise in modular manufacturing can be effective in our
next-generation 157.
So really this is - you know, you cannot just build things faster.
You've got to design them now with modularity so you can get the cost
out. So we really are very excited.
That's why timing is so important.
Doug Dunn: Yes. And your next question? I think we've had enough of that one.
Papken Der Torossian: Yes, yes. Thanks.
Operator: We'll take our next question from Jay Deahna with Morgan Stanley Dean
Witter.
Doug Dunn: Hi, Jay.
Jay Deahna: Good morning. And congratulations to all parties. It sounds like
a good deal going forward.
My questions are first of all towards ASML. Doug, does ASML have plans
to ship any 193 nanometer lithography systems with (CAD-adaptic) lenses?
Doug Dunn: The honest answer today, Jay, is no. We have our platform, which
we intend to pursue because it's there, it exists. SVG has their
platform with the (CAD-adaptic) system. And then
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they will - we and they will continue shipping that also. We will
therefore have the choice of the two platforms in the field.
And what you will see, Jay, is that at 157 node, we all would agree that
some form of (CAD-adaptic) system is the way forward. And that's where
we'll convert it. So you'll see ASML's products still selling in the
market for many years to come alongside SVG's. And the conversions will
come with a (CAD-adaptic) solution of some type for 157.
Jay Deahna: Okay. Will SVG's 300 millimeter platform survive beyond 193 or
at 193?
Doug Dunn: You've used the word survive, which is an emotive question. I made
the comment earlier and I guess we've said that the 300 millimeter
platform of the future will be the TWINSCAN platform of ASML, because it
exists and is more advanced in time than the SVG version.
So there will be - and that's a good thing. I mean, it gives us a
natural breakpoint to converge the technology platforms. So I think
that's positive. And so to answer your question, in future years, the
300 millimeter platform of choice will be built around the ASML TWINSCAN
product.
Jay Deahna: Just two last quick ones, does SVG have any 300 millimeter
design wins?
Papken Der Torossian: Do we have any 300 millimeter design wins? The answer to
your question is yes.
We had it - well first of all, let me just paraphrase here. It's very
important to note that we are the 300 millimeter choice for the
((inaudible)) on our furnace. As well as, very importantly, we are the
choice for 300 millimeter.
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We are also - in Asia we are the 300 millimeter choice. We are also the
300 millimeter choice in our track system in Korea. This is something
that you should know.
And our new 193.75 ((inaudible)) machine -- ((inaudible)) we call it --
is what we call the 200/300 millimeter platform by itself. The same
machine can do both. And the customers can decide how to use it.
Jay Deahna: Right. I guess what I'm trying to figure-out is, has Intel
decided for sure that they're going to use your 300 millimeter platform?
Papken Der Torossian: I really think that for the specific answer to that
question you have to ask Intel. Our machine can do 200 and 300
millimeters. And, you know, our customers can use it any way they want.
Jay Deahna: Okay. So...
Doug Dunn: By the way, Jay, just let me clarify my point about our TWINSCAN
product. That is a platform. It carries the optics. The optics in fact
can be any solution.
As you know, it's quite a big beast. And therefore, there's room in
there for many things, including the Eiffel Tower. And so it will be
able to carry either the conventional refractive system that we use or
the conventional (CAD-adaptic) system of SVG.
Jay Deahna: Okay. That's great. And then in terms of the $100 million 193
nanometer order that SVG got for Intel, is that a 200 millimeter order?
Papken Der Torossian: That is - I will be very clear. That machine is a 200/300
millimeter platform. The customer can use it for 200 or 300 millimeter.
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And frankly, I cannot answer what they're going to do. You know, as you
know, the customers take the machine and push it to the limit. That
particular platform can do both. And I really think the customer can
decide what to do.
Jay Deahna: Okay. And then the final question is regarding the ProCell. Are
you going to aggressively pursue the spin-on-CVD market with that? Or
are you going to focus exclusively on photoresist deposition?
Doug Dunn: Jay, you know, as tribute to you, you're way ahead over here.
Clearly our first attack is going to be on photoresist applications.
But yes, spin-on applications also are relevant. And, believe me, if
we've got some good marketing guys here -- I'm sure there are in SVG --
then we'll push that application as well.
Jay Deahna: Okay, great. Thanks very much.
Doug Dunn: Thanks a lot, Jay.
Operator: We'll take our next question from Kathryn Buergert with CS First
Boston.
Kathryn Buergert: Yes, on the - again on the track, could you talk about the
synergies between the lithography and the new track tool and how soon
after the close you could expect to realize that?
Doug Dunn: Yes, it'll be at the - I'll attempt an answer here. But I'm not
the expert yet on tracks, and maybe never will be.
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The ProCell track was developed, I think, from a radical new concept,
Kathryn. And if you've seen the product, by the way, you'd understand
why I say that. It is quite a different looking machine.
And I think that's one of its winning features. It throws away the rule
book in many ways, and in the process, gets away with a lot of
preconceived ideas. It's therefore a radical and refreshing design,
small footprint, and very versatile.
Now it's being designed to be a stand-alone tool, not only integrated
with SVG litho equipment, so that it will stand alone and it can be
purely integrated. We will make sure it's integratable (sic) to our ASML
product also. But those designs were done in isolation.
Now the question now that we're asking internally -- and I don't have an
answer for you right now -- is, can we over time find benefits by simple
changes to our machine and simple changes to the ProCell tracks to
actually give the customer an advantage, in which case, we'll take
advantage of that.
But to say yes to that right now, I'd be - you know, I'd be misleading
you. I don't know. But that's one of the things we will look at
carefully, Kathy, in the first 12 months.
Kathryn Buergert: And just on the ramp as it stands stand-alone, what's the ramp
on the ProCell as it stands now?
Doug Dunn: I couldn't answer that question factually, other than to say that
the guys I've talked to - I'm very impressed with the team. I've gone on
a very, I think, proper course of -- because it's a new design --
careful introduction and measured introduction.
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So they are using it with selected customers to start with. They've got
good feedback on reliability and so on. They're building on any
improvements. And then when we get the you know, the go-ahead, the
thumbs-up, then we will take it into volume.
So it's a careful introduction is how I would describe it. But maybe
Russ can add some more quantifiable data there. I don't know.
Russell Weinstock: Yes. We've said before publicly that the period that we're in
now and probably through the first half of, I'll say what used to be our
fiscal year, starting in October that we're just entering into, is going
to be the seed unit populating time for ProCell, along with actually,
quite frankly, the thermal new products.
And we've - as Doug said, we've selected very carefully a number of
customers that can be populated with these machines, getting the good
feedback, and then translating that into volume production. I mean, we
do have a relatively, you know, concentrated base of that customer
supply. And I think we're increasing that as we go along month-by-month.
Kathryn Buergert: Okay. Thanks, Russ.
Operator: We'll take our next question from Ali Irani with CIBC World Markets.
Ali Irani: Good morning, gentlemen, and congratulations on a remarkable
transaction. I was hoping - of you could, clarify a little bit for us
about your comments on TWINSCAN being the only 300 millimeter platform.
Am I to conclude from that that at 300 millimeters you will offer then a
choice of 248, 193, 157 whether it's your course lenses or Silicon
Valley Group's assemblies? But at 300 millimeter, there will be only one
platform offered in different configurations?
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Doug Dunn: For the high-volume production version of the future, I think
you've got it right there, Ali. But as Papken explained earlier, there
are some bridge tools, 200 and 300 millimeter tools existing already at
SVG, which are good tools. And if customers want them, then we're only
to welcome to - willing to make them and sell them.
But if you look into the medium and long-term future, the productivity
throughput of the TWINSCAN system is, I think, a compelling argument.
And that's where we'll finally migrate to. But we won't do that
overnight. I mean, you know, we have existing customers who want
existing products.
So - and yes, that's the platform with the twin-halide approach and
high-volume output. We'll - it is big enough to accept a variety of
optical solutions. And therefore, I could well imagine that an optical
solution which is good for one particular node from SVG could populate
the TWINSCAN platform and give an excellent product for customers.
Ali Irani: Additionally, looking at some of the supply issues that you've
talked about in the past limiting your capacity growth, will some of the
vertical integration of Silicon Valley Group provide you with resources
now to accelerate capacity build?
Or will you see some of the part manufacturing where you're now
outsourcing in Europe potentially finding a second source supply
internally within the Silicon Valley operations?
And finally, could you give us some color on the recent progress on the
RTP development please?
Doug Dunn: I'll attempt the first half of your question. And I'm not yet
sufficiently familiar to ((inaudible)) the second. Perhaps Papken will.
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Papken Der Torossian: Okay. You want to ((inaudible))?
Doug Dunn: No, why don't you do - right, do them both. Go ahead.
Papken Der Torossian: Okay. Let me tell you about the RTP. As we announced
earlier, we -- I think it was at Semicon -- we have, I think, six, now
close to eight customers are RTP.
In fact, we are limiting the number of customers because of our own
capability not only to supply, but to support the product, because
obviously we have to support the product, which is, by the way, an issue
here which is very important, which both Doug and I have thought about
-- the support issue of these products in the market place.
With the good strong technical support globally, it is going to be
something that we can really really, you know, build on together. And
that's a very important issue for our field engineers throughout the
world.
On the acceleration, as you know, we have said the cost of ownership of
this product with its innovative nature, with the ((inaudible)), without
being subjected to the ((inaudible)) of the wafer - ((inaudible))
changes of the wafer gives us tremendous uniformity on the wafer.
Plus it gives us a very fast track on the order of hundreds of
((inaudible)) per second. And that - the cost of ownership we are told
is about - for a four-stage machine is 1/4 to at least 1/8 of what we
can see what the other competitors are doing. And this, of course,
ultimately has to be shown in the customer as we ship the machines. So
we are very very excited about that product in the future.
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Doug Dunn: Now back to your issues of supply base and can we cross-fertilize
there, the answer is, I think, yes. I mean, I certainly hope so. And I
believe that to be the case.
You know, SVG has good internal capability. But also they're tapped into
the US supply base. And they understand it better than we do certainly.
We in Europe of course have a better understanding of the European
supply base. And, you know, it stands to reason that by looking at - by
expanding our supply base into - tapping into the SVG ones, we'll get
some benefits and vice-versa.
And yes, keeping the supplies growing with us has been one of our
fundamental problems this year. You know that, Ali. And that hasn't gone
away yet. And I'm hoping this will help put that to bed.
Although let's not kid ourselves. The designs of both sets of products
are now well established. And it takes any new supplier a significant
amount of time to tool-up for the new modules and to produce them at the
right quality, and right cost, and so on.
So I don't think that's going to benefit this year or next year, because
this deal won't go down for another four to six months yet. And it'll
take the rest of next year therefore to get the supply base sorted out
and maybe have some cross-fertilization. So the benefits are not going
to come through, I regret to say, until probably 2002.
Ali Irani: Thank you very much.
Doug Dunn: My pleasure.
Operator: We'll go next to Sue Billat with Robertson Stephens.
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Sue Billat: Yes. Congratulations again on an intriguing combination. It sounds
like it's great for both of you.
I had a question. You listed as one of the synergies the ability to ramp
manufacturing. And certainly we see that in the module design. And yet
your lead times - ASML's lead times are perhaps the longest in the
industry.
I just returned from Asia. And some customers told me they were
concerned. They had to buy from competitors. They just couldn't get
enough from you. So I wondered if you could with this additional
capability, can you give us an idea of how your ramps are going and
where you might be able to ramp?
I think you've advised most of us that through the third quarter of next
year, things are pretty well fixed. But how can you ramp higher? And
what are the bottlenecks, other than the obvious bottleneck of lenses?
And how might that grow as we get into 2002?
Doug Dunn: Yes. Thanks, Sue. Yes, you're right in your - some of your
assumptions there. I mean, no matter how we increase our supply, we seem
to be - we seem to have insatiable customers with appetites beyond our
capabilities at this point in time.
I guess that's a tribute to our product quality, by the way. But it's
also a frustration that we can't sell more because of these issues. But
we are selling a hell of lot, as you know.
As I explained, you know, to change the gear of suppliers onto a new
product is quite a long-term project. So it is not going to make any -
add any benefits to ASML or SVG through most of next year. Yes, there'll
be some small suppliers with some specialty components we can take
advantage of. But it won't tackle the major problems.
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And throughout next year we have, both of us, the dual task of
ramping-up new products -- because you always have, you know, a higher
level of problems than the existing products -- and also taking those
same suppliers to a higher level of capability for existing products.
And that's a hell of a challenge.
And this deal will ultimately provide, I think, SVG with the insight
into how developed how to develop - design and develop next-generation
systems to be more modular, and therefore to get to higher levels of
volume.
Because although you criticized, Sue, the fact we aren't getting enough
products to customers -- and I would accept that criticism -- we are
giving a hell of a lot, you know, in excess of 300 this year. And
therefore, it tells you that our modular design has got the best
abilities to ramp quickly.
Can it ramp quickly enough? Well clearly not. But at least it's doing a
pretty - you know, a pretty startling job there. And SVG, I think, will
benefit from that knowledge that they will gain from us. And if we can
take their level of output, which is going to be roughly 100 systems
next year...
Man: Right.
Doug Dunn: ...you know, to the one - to 200, 300 system level, then we'll have
done a pretty good job. So through the design process, by designing for
modular construction, we will get an increased capability in SVG as
well.
And, you know, we have to work with our suppliers and SVG's suppliers
now and take advantage of the supply base in the USA, which until now
we've frankly ignored, to increase the speed at which we can ramp-up. So
I think there are medium and long-term benefits, but no short-term
gains.
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Sue Billat: Okay. Thank you.
Doug Dunn: And don't forget, Sue, this is ((inaudible)) question. This is an R&D
driven initiative, because most of the advantages are going to come from
shortening those R&D cycle times on 157 and EUV.
Sue Billat: Yes.
Doug Dunn: And we have to decide on those technical solutions now. You know, now
is the time to resolve the tool configuration for 157, not a year from
now.
Operator: We'll take our next question from Min Pang with SG Cowen.
Min Pang: Okay. I've got a number of questions. First is, if you had to separate
the track and the thermal products from the core lithography business,
how much more or less accretive would this acquisition have been?
Doug Dunn: Wow, that's quite a question. I'll let the two highly paid and
capable finance guys here sweat over that for a minute or two. Just give
us a second.
Russell Weinstock: Why don't you go to your second question before...
Doug Dunn: Yes. Do you have some more we can - some easy ones for us?
Min Pang: All right.
Russell Weinstock: ((inaudible)) investment bankers involved in this valuation
in a minute.
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Min Pang: All right. A related question, Doug, I think to use your words, you'd
referred to the thermal business as being synergistically further
away...
Doug Dunn: Yes.
Min Pang: ...from the track and the litho.
Doug Dunn: Yes.
Min Pang: Going forward, how would you see yourselves bringing that product line
closer into synergy with the rest of your products? Is that going to be
an internal development process? Is it going to be more acquisitions?
How do you see that playing out?
Doug Dunn: Yes. You know, physically they're quite separate in the fab, as you
know. And therefore - and the closeness I referred to was the mechanical
closeness, I mean, trying to bolt onto the litho system. The thermal
products are several meters away, if not several tens of meters away.
And the synergies therefore - I don't recognize any yet in the product
sense of the word. But clearly we share common customers. We share a
common sales organization. We will share a common service organization.
That's very important. We can have common space holdings. And so they
the - and, you know, knowing your customers is important in this
business.
So they are the synergies I would look to from the thermal division. But
let's face it. Thermal will always be a little bit more separate than
tracks by virtue of the fact that it performs a different function in
the fab.
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Peter Wennink: On your question with respect to the accretive character of the
track and the thermal division, if you would take out track and thermal,
it would be less accretive to the total deal. So they do contribute a
relatively higher percentage of the earnings.
Min Pang: And can you...
Peter Wennink: ...be that much. But if you ask the question, will it go up or
will it go down, it will probably go down.
Min Pang: Okay. And can you quantify by how much?
Peter Wennink: Not exactly at this moment.
Min Pang: No, Min, I think...
Peter Wennink: We looked at the total group.
Russell Weinstock: Yes. Min, this is Russell. I think if you look at it and you
know, you know, SVG has three legs to its tool and, you know, how some
of those allocations and all the rest, you know, go back and forth
between the two, that's a pretty complicated question to get into.
I think on the Web you can see some of the numbers in terms of where the
EBIT numbers are being generated from. But I think there's some real
good value if you look at the whole entity in one piece.
Papken Der Torossian: You know, I do want to add something about this terminal.
Our terminal division has a very wide customer base throughout the
world, including Japan. And we do have - we have received many, several
actually, late supply orders from customers.
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And we feel that there's a melding of broad-based suppliers globally in
the lithography market. Together I think we can really add to each other
by basically cross-selling our products to the customers, which are not
necessarily the same.
So I really think that's going to add a lot. And we have a very good
executive running that division, Jeff (Kowalski), who's probably the
expert in the thermal issues. So we'll sell to the same customers. So
that's where we are.
Min Pang: Okay. And then finally related to that is, from the fact that you're
selling thermal products to Japan, could it be construed that this deal
will help ASML-SVG to sell lithography tools into Japan?
Doug Dunn: You know, the more contact you have with your customers, it's better,
clearly. So it's a small step in the right direction, a positive step in
the right direction, yes.
As you've recognized, we have not sold any tools yet into Japan. We
will, by the way. And we've prophetized that. And it will happen. But
also, this will help us, because it gives us a direct contact with
customers. And that always helps.
Min Pang: That's great. Thanks very much.
Doug Dunn: Thank you.
Operator: We'll take our next question from Tom Van Buskirk with Silverado
Capital Management.
Mr. Van Buskirk, your line is open.
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Doug Dunn: Hello? Hello?
Operator: We'll move on to Ed Kressler with Angelo Gordon.
Ed Kressler: Good morning. Congratulations.
Papken Der Torossian: Thank you.
Doug Dunn: Thanks.
Ed Kressler: Just in terms of the way that the deal is going to play-out, are
there any collars associate with the transaction?
Peter Wennink: No.
Ed Kressler: Any walk-away prices in terms of stock prices?
Doug Dunn: No.
Peter Wennink: No.
Ed Kressler: And then finally, in the merger agreement, is there anything
relating to - in the Material Adverse Change section if Intel should
decide that they don't like the deal and decided to cancel orders or
anything of the like that the deal would be canceled?
Doug Dunn: No.
Peter Wennink: Provisions like that are not there.
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Doug Dunn: We would not have entered into it if Intel would have had that view.
Peter Wennink: No.
Ed Kressler: Great, great. Last question, just in terms of potential antitrust
clearances, if either the EU or DOJ FTC comes back and determines that
there is a concentration here, do you have a plan in terms of what you
might be willing to divest? Or would you even consider divestiture in
that case?
Doug Dunn: No, we wouldn't consider divestiture. That's not in our thinking
right now. And I hope it never will be. I don't think - you know, yes,
you can never predict the FTC here.
But if you look at what they're trying to protect, it's the integrity of
the US technology base. We've made quite clear statements -- and we'll
back this up with lots of dollars -- that we intend to expand the US
technology and production base. And therefore, it enhances and not
depletes it. And that's the primary concern of the FTC.
I think Europe will be perhaps slightly less of a problem. I'm never
complacent here. But we have no intention whatsoever to divest anything
resulting from their investigations. We can convince them, we're pretty
sure, that this is a good and positive deal for the USA.
Ed Kressler: Terrific. Best of luck.
Doug Dunn: Thanks a lot.
Russell Weinstock: Thanks.
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Operator: We'll go next to Christine Lunday with Solid State Technology.
Christine Lunday: Hi. Thanks, sir, for taking my call. I think you've touched
somewhat on my question. But I'll ask it anyway. And then hopefully you
can expand a little bit further.
I'm wondering if you can talk a little bit about how you will combine
SVG's 157 and EUV programs? You've mentioned the discussion of the
modular design and helping that as far as, you know, being able to ramp
more quickly.
But I'm just wondering if you could explain a little bit further as to
what your thinking is on getting those programs really incorporated into
ASML and, you know, going forward, how that will play-out?
Doug Dunn: Well we - yes certainly. That's a good question. Thanks. The reason
this is important, by the way, is, you know, there are two issues on
these very exotic programs. One is the issue of the cost of the program.
And one is the time it takes to bring these to the market.
If you look at the cost to develop, over time you're going to spend up
to $1 billion or euros -- it doesn't matter which -- on each of these
programs, 157 and EUV. Each company would spend that naturally if it
were separate from the other.
And the challenges, the engineering challenges, the physics challenges,
are both the same. So we have sets of engineers potentially working on
the same products, spending $1 billion each the next three or four
years.
And what we are going to do now is bring those teams together and target
them to throw away any preconceptions and look analytically at which is
the best solution, and to spend the same
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amount of cash - maybe a bit less, but the same amount of cash with
twice the number of engineers committed to it to reduce that lead time.
And the primary issue to be resolved is the optical system. The rest of
it, you know, between the two of us, we have. We have great platforms.
And I've already mentioned about in the future the high-volume 300
millimeter platform will be the TWINSCAN offering from ASML. That's just
a fact of where we are today.
So the first thing we have to do is resolve which of the optical systems
is going to be give the customers the best imaging, performance,
overlay, and so on that we can provide.
And the time to decide that is now, because if we go down a twin-track
solution for too long, then essentially we're wasting 1/2 the resources.
And that we can't afford to do. So that decision needs to be taken now.
That's why the timing of this deal is serendipitous. And the market is
right for it. Both companies are mature enough to accept it. And the
timing of new technology has to be taken kind of now.
So we're going to spend a few months just analyzing each of us what
we're doing, where our programs are taking us, what are the pros and
cons of those programs.
And then we'll focus on one solution. And we'll get all of the combined
resources of both companies behind it. And we're going to blitz this
thing. And that's the primary advantage.
And that's - we must never lose sight of that single-minded
determination to accelerate the pace of technology to gain the necessary
customer acceptance. And by the way, by that technique, we will better
survive the next downturn if and when it comes.
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Christine Lunday: Okay. Thank you.
Doug Dunn: Thank you.
Operator: We'll take our next question from John Jacobson with Highfields
Capital.
Brian (Shoe): Hi. It's Brian (Shoe) from Highfields. Just to clarify, in terms
of the closing of the deal, you're expecting it to close sometime in the
first quarter of next year, is that correct?
Doug Dunn: Yes, we certainly hope so. It's not - as you know, it's not totally
under our control. We've been told by lawyers who want to make sure they
have a good income, I guess, that it'll take at least three to four
months, and could take as long as six months. Well they would say that,
wouldn't they? But we believe that's a realistic time. So I guess
towards the middle to end of first quarter next year.
Brian (Shoe): Okay. And you had mentioned there are no walk-away prices or
material adverse change. But are there any breakup fees associated with
the deal?
Russell Weinstock: Yes.
Brian (Shoe): Could you clarify on that?
Russell Weinstock: ...two percent.
Peter Wennink: Yes. It's around a $40 million level.
Brian (Shoe): A $40 million breakup fee, okay. Thank you.
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Doug Dunn: Thank you.
Operator: We'll take our next question from Michael Schechter with Mentor
Partners.
Michael Schechter: Just given the market shares that you've outlined, you know,
and given what the EU has been doing lately, I mean, where are you
getting the comfort that this is going to clear the EU? And can you be
more specific maybe on a more targeted market share and more targeted
products?
Doug Dunn: Yes. It's just kind of a bit difficult question in once sense though,
because, you know, I can forecast many things, including the weather
tomorrow, but I can't forecast what the irrational workings of
government minds will sometimes lead to us. I have a smile on my face.
You can't see the smile here.
I mean, looking at this objectively and trying to see the interests of
the EU and the interests of the USA government, I don't think there is
cause for great concern. There will certainly be a lot of questions. And
it is a key strategic technology. And I recognize both those things. But
we're not here destroying technology and making savings.
We're actually expanding the technology base for both Europe and the
USA, and doing it in the safest way we can think of. And that is by two
great companies combining their resources to ensure that both Europe and
the USA are strategically enhanced as a result of it.
So you asked the question, well what gives me confidence? Well my own
perspective clearly is biased. But I think it's an excellent deal for
both continents technically.
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And also the provisional inputs we've had from our advisors, they've
added a lot of questions. And they're quite right to ask those
questions. But we can actually accommodate those questions and give
compelling answers to resolve those issues.
Michael Schechter: Who are your antitrust advisors?
Doug Dunn: I'm not sure I want to give those names out just now actually. But we
do have some.
Michael Schechter: Can you be more specific where the direct overlap between the
two companies are on a more...
Doug Dunn: Direct overlap?
Michael Schechter: ...more direct competition?
Doug Dunn: Yes.
Peter Wennink: Can I come back to the first question? Because it relates to the
second one. I mean, if you look at the European field, if you look at
where ASML has been working, we've been working in the lithography
market.
If we take the lithography market that is served in Europe by the SVG
group and compare that to where we are there, there's not a significant
movement in the market share that we currently have.
So from a market competitive point-of-view, there is no reason why there
should - why it would be considered a significant change. It would be
the same market share percentage almost as we currently actually now
have on a stand-alone basis.
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So from a market competitive point-of-view, I don't see the impact
there. I can see an impact from a strategic point-of-view. And Doug
talked about that. So when you look at what I would say are the sheer
numbers, there is enough basis for the confidence.
Michael Schechter: I mean, do you consider it a world market? Or do you consider
it a regional market, you know, EU, Asia, ((inaudible))?
Doug Dunn: A world market.
Peter Wennink: Yes. But if you're talking about the European Union, and
specifically about the market conditions there, I mean, it's clear that
it doesn't change a lot.
Michael Schechter: Thank you.
Operator: We'll go next to Mark Fitzgerald with Bank of America Securities.
Mr. Fitzgerald, your line is open.
Papken Der Torossian: Hello, Mark.
Operator: We'll move on to Christina Osmnena with Needham & Company.
We'll go next to Gunnar Miller with Goldman Sachs.
Gunnar Miller: This may be a little bit of a mundane question. But I'm going to
assume that if the functional currency of SVG remains the dollar, that's
then going to be combined into the main entity.
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Two questions, are you going to be doing currency hedging? And Number 2,
you're still going to be reporting results on the half-year, correct?
Peter Wennink: Yes. The latter - the answer to your latter question is yes. The
answer on the first question is, as a result of this capital stake,
we're not going to hedge the financial interest that we as ASML Holding
have have in the US company.
It will be accounted through the CTA account, the Currency Translation
Account, as part of the shareholders' equity.
Gunnar Miller: So it would be realistic to expect that we might have some - a
higher degree of fluctuation in the Interest and Other lines?
Peter Wennink: Well the degree of fluctuation you will see in that translation
from the dollar results of the SVG operation in the euro translation.
That's what you will see.
But if you look at what the - because the dollar remains the essential
currency of the SVG operations, what you will see is that the exposure
that we have is in the net investment that we as a holding company have
in the US company. And that will be translated back through the CTA
account into shareholders' equity.
So it doesn't really translate back into the income statement. The only
thing that you will see is the translation of the dollar sales and the
costs directly into the consolidated statement of operations.
Gunnar Miller: That's exactly what I wanted. Thank you.
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Peter Wennink: Okay.
Operator: We'll take our next question from Edward White with Lehman Brothers.
Edward White: ...in terms of the opportunity you see on the track business in
terms of providing an integrated solution?
Peter Wennink: Sorry. Could you repeat the question?
Doug Dunn: Repeat the question. Ed, repeat that please.
Edward White: Could you elaborate on the track business in terms of the
opportunity you see in providing an integrated solution?
Doug Dunn: Yes. I've tried my version of that. Maybe I'm going to pass it across
to Papken. He's done both tracks and litho for several years now. So
he's probably better qualified than me to answer the question. Papken?
Papken Der Torossian: You know, Ed, as you know, we have talked about the
photolithography cluster for almost ten years. And we have always
wondered why people have not really capitalized on that. Because as you
can see, if you can combine both together, you can have one controller.
We can actually reduce the time, especially with this new photoresist in
terms of exposure on that.
Now one of the problems we have at SVG is being only a leading-edge
supplier, not directly addressing the mass market of i-line and,
frankly, the (248-INA). We have never been able to take full advantage
of that.
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And I really think that this combination - we have had many customers
who are already telling us, I want you to work with ASML to really work
together. And I will not mention them right now. And I think being a
broad-range lithography supplier will give us a tremendous leg upward in
introducing these photolithography sectors going forward.
Doug Dunn: And just to finish-up from me -- that was a good answer from Papken
there -- I think it will result in a compelling cost of ownership
equation finally, because you can reduce the time overhead and also the
cost overhead by having two different systems, if you combine them more
into a cluster tool.
So the result is more wafers out per hour, less time wasted moving
wafers around, and potentially, lower cost of ownership also.
Edward White: Thank you.
Operator: We'll go next to Robert Maire with Bear Stearns.
Robert Maire: Yes, a couple questions. Number 1, one of the key issues in this
business has been availability of lenses and/or lens material.
Specifically on the lens material, you both have allocations for lens
material for the shorter wavelength type of machines that you will be
producing. How does this combination enhance that? And will there be any
reallocation of your materials that you have?
And could you tell us how Zeiss and the optical subdivision of SVG will
be sort of co-developing? Will you be perhaps developing lenses at the
SVG optical area for ASM? Or do you intend on keeping those operations
separate for the time being? Could you give us some more on that?
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Doug Dunn: Yes. That's quite a complex question you've asked there. I mean,
you're referring to calcium fluoride, as we all recognize, as being very
hard to produce in repeatable and reliable quantities with the right
characteristics. Of course that isn't changed by this process we're
going through today.
What it does do though is let both sides of the Atlantic - the technical
people look at the calcium fluoride requirement. And maybe from that
will come some interesting revelations that, you know, one side has
compared to the other.
It also means that we can go forward with the calcium fluoride suppliers
with a more compelling story that we are, you know, a bigger and even
more committed company to give them the reassurance to make the
investments to produce more of the difficult to produce stuff.
And we'll also we able to look at the comparison of optical designs,
because maybe some designs of, you know, SVG or ASML are more tolerant
to a different quality of calcium fluoride or less calcium fluoride. So
there are second-order benefits here. But I think fundamentally calcium
fluoride is going to be an issue for a little bit of time to come yet.
Man: ((inaudible)).
Doug Dunn: Yes. You asked the question about - on the back of - on the optical
side of it about whether Zeiss - you know, how do we combine the Zeiss
assets and those of SVG. I mean, right now, they're separated and will
continue with their own programs. And that will continue for existing
programs for a long time.
But I have said that at 157 and beyond 157 we're going to look at
methods to combine those programs. So you'll have, if you like, both
companies extending their existing products a long
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way into the future, and both companies making a contribution jointly to
the emergent technologies of 157 and EUV.
Robert Maire: Okay. And a follow-on question, I understand that you have the
blessings of Intel already on this proposal - on this proposed merger of
the two companies. Do you have any blessings from any governmental
agencies, specifically in the US?
As I understand it, things that can be linked to national defense go
through an agency going all the way up to the President, et cetera, et
cetera. And given that we're in an election year, have you had any
discussions with US governmental agencies for -- I wouldn't say
pre-approval -- but discussions seeking their acquiescence to this
transaction?
Doug Dunn: Sorry to disappoint you, but formally the answer is no. I personally
have had no discussions whatsoever. And in fact, the first they will
formally hear of this is today in the announcement. And we'll be filing
later this week. So that's the factual statements on that one.
So yes, we have had the chance to pre-discuss slightly with one or two
leading customers, but not with the government, certainly in a formal
way. And I've had no connection whatsoever.
Robert Maire: So I would assume that the blessing from Intel is something that
should help your discussions with governmental agencies.
Doug Dunn: I mean, I'm no expert here. But I - you know, I think if key
customers are supportive of the move, then it can only help in
explaining to the government agencies that this is not a threatening
position, but in fact an enhancing position. So yes, I believe that will
be helpful.
Robert Maire: Okay. And one final question, given that you'll now have
production in Europe and in the US, would it be your intent to bring the
SVG facilities into Connecticut into a more modular-like
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construction, or I should say, final assembly and test type of
methodology? And if so, over, you know, what period of time would we
expect that to occur?
Doug Dunn: Yes. The answer is kind of emotionally yes. Practically, you know, it
won't be easy, because we have existing designs and we have to continue
making those designs, we being SVG here.
But, you know, we're hoping to benefit reciprocally here. If we can
teach the SVG guys how to do something slightly better, well they'll be
very willing to pick it up, and vice-versa.
I don't think you're going to see any low-hanging early fruits on
modularity, because that comes in the designing phase of the product,
you know, when you first start a book - a pen to paper, so to speak.
Although it's on a screen these days. That's when you design in
modularity.
So that's going to come with next-generation tools. Existing tools may
benefit somewhat. But that's just kind of second-order benefit, not a
first-order benefit.
Robert Maire: Is there much commonality in sub-suppliers today?
Doug Dunn: I think not actually. Most of ours just by heritage are European,
ours being ASML. And most of the SVG ones by virtue of their heritage
are USA. And that's - I think that's a good thing, by the way, because
we can expose each other now to a different set of suppliers.
Robert Maire: Great. Congratulations again on the deal.
Doug Dunn: Thanks a lot.
Papken Der Torossian: Thank you, Robert.
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Operator: We'll go next to Chad Bennett with John G. Kinnard.
Chad Bennett: Yes, I just had a quick question. Could you expand a little bit
with regard to the track division? You talked about the benefits of an
integrated solution.
Could you tell me what the nature will be going forward of your
relationships with companies that have competing technology with track
and how you're going to - or kind of what your plan is going forward
with regards to other competing technologies?
Doug Dunn: Yes. You know, one thing we both would say here -- and SVG has been
the living proof of this -- that customers will want to choose their own
track suppliers. And they always will. And that's fine by me. And it's
fine by SVG as well.
So this does not mean that we have any way to, nor would we want to,
force down customers' throats something they don't want. If they want a
competing track, then that's fine. We will work with all track suppliers
to ensure that the interfaces are there so that any track will work
aggressively and well with any of our products.
And I'll just say we haven't had this problem before. SVG has. And
they're the living proof of how this can work. And they do sell tracks.
And they do sell systems that use other people's tracks. And that won't
change.
And if we can find by the techniques alluded to by Papken earlier to
reduce the overhead time and maybe the overhead cost by combining some
of the systems of the track and the litho tool together, then that may
give some advantage. But even then, if the customer prefers to go with a
different supplier, then so be it. We are very happy to accommodate
that.
Chad Bennett: Okay. Thanks.
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Operator: We'll go next to Jay Deahna with Morgan Stanley Dean Witter.
Jay Deahna: Hi. I just wanted a clarification on a couple of quick things. Doug,
is the SVG 193 (CAD-adaptic) lens structure going to be put on TWINSCAN?
Or is it just the 157 and beyond?
Doug Dunn: Yes. That's a question I actually can't answer, Jay, because honestly
I don't know. You know, as much as we've had a couple of weeks of
diligence here, we haven't gone into each other's bottom drawers
totally.
We're very open - the point is, we're very open here. And I don't know
the answer. And I guess in a few months experts will tell me the answer.
We're very open here.
We will choose the best solutions that there are. And if it happens to
be SVG's solution, great, you know, that proves how wise we were to buy
the company for the knockdown price of $1-1/2 billion.
And so I honestly can't answer, because I just don't know. But if it is
the preferred solution, Jay, believe me, we're not too - we're humble
enough to accept it, and we'll use it.
Russell Weinstock: And we will focus the next six months on that particular
issue.
Doug Dunn: Yes. That's going to be one of the investigative things we look into
-- really what is the advantage of our approach, the advantage of SVG's
approach, and ultimately, which will give the best result for the
customer? And whatever it is, we'll adopt it. Maybe it's a combined -
you know, kind of a merged approach. I don't know yet.
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Jay Deahna: Okay. And a follow-up for Peter, in terms of the comments that it's
accretive in 2001, is it accretive to consensus or what? And how
accretive is it?
Peter Wennink: It's accretive to consensus. And it's at least 5%.
Jay Deahna: Okay. And then the last question is - I'm not overly concerned about
antitrust-related approval. I'm just kind of curious. Papken, you've had
experience with the Department of Defense, the Pentagon, et cetera. It
seems to me, that would be the key hurdle -- any feelings on that?
Papken Der Torossian: Yes, I do. As a matter of fact, let me be very very direct
and specific that we have started this year to establish a strong
lithography base in the United States. And all our relationships and
discussions with ASML have been to really strengthen that exact
position.
As Doug mentioned, we're going to invest more in this tool. We're
((inaudible)) right now. In fact, this issue came up with the employees.
We're going to strengthen it and be the strongest global supplier for
our customers, which are, by the way, global with factories all over the
world. And that's our position right now.
Jay Deahna: Did you have any discussions with the DOD just to take their
temperature on it before you moved forward?
Papken Der Torossian: The answer is no.
Jay Deahna: Okay.
Papken Der Torossian: Because, you know, we have all these SEC rules
((inaudible)), we didn't discuss anything with anybody.
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So the only thing I can say is that ASML and SVG together will be one -
want to be Number 1. We want to be the Number 1 lithography supplier,
advanced, and total. And we think we're in a very good position to do so
with our strong US base and European base to supply global customers.
Jay Deahna: Sounds great. Congratulations again. And thanks a lot.
Doug Dunn: Okay.
Russell Weinstock: Thanks, Jay.
Doug Dunn: Thanks, Jay.
Operator: We'll take our next question from Tom Van Buskirk with Silverado
Capital Management.
Tom Van Buskirk: Hi. Perhaps this was asked before and I missed it. Do you know
whether you're going to require an approval at the EU level? Or is it
going to be in individual countries?
Papken Der Torossian: At the EU level.
Tom Van Buskirk: You will? Okay. Thank you.
Doug Dunn: And we'll file to both of those, to the EU and to the US, this week.
Operator: Gentlemen, at this time we have no further questions standing by. Mr.
Dunn, I'd like to turn the call back to you for any additional or
closing remarks.
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Doug Dunn: Okay. Well let me thank all of you guys and gals for spending your
time with us. You can't see our faces. We're an excited bunch of guys
here. We believe it really is a big step forward for the industry and
for both continents in fact, the European and the US continents.
And we are spending our time now - we're going to be talking to, as well
as the shareholders, also the employees. They're very important in this
process. So far, the reception has been very warm from employees. And
clearly we'll need to carry them with us, so we're focusing our time on
that one - on that issue.
You've heard me say three or four times the major benefits. I won't
repeat them again, not even for Peter's benefit. And we think it's a
great deal. And thanks for your time and interest. And we hope to prove
to you in the next year or two that this really is a good thing for all
of us. Thanks a lot for your time and goodbye.
END
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ASM LITHOGRAPHY & SILICON VALLEY GROUP
MODERATOR: DOUG DUNN
OCTOBER 2, 2000
3:00 A.M. CT
Operator: Good morning. Thank you for joining us on today's ASM Lithography and
Silicon Valley Group joint conference call. As a reminder, today's
conference is being recorded.
In a few moments, I will be turning the call over to Mr. Doug Dunn,
Chief Executive Officer of ASM Lithography. Joining Mr. Dunn is Mr.
Peter Wennick, Chief Financial Officer of ASML; Mr. Papken Der
Torossian, Chief Executive Officer of SVG; and Mr. Russell Weinstock,
Chief Financial Officer of SVG.
Following the presentations, there will be an electronic
question-and-answer period. Now, it is my pleasure to turn the call over
to Mr. Dunn. Mr. Dunn, please go ahead, sir.
Doug Dunn: Thank you, Wendy. Well, good morning, ladies and gentlemen. I can
tell you we have four gentlemen here very excited. We are so excited, in
fact, we emerged from our beds at 3:00 o'clock this morning just to
speak to you. So we can tell you how important - tells you how important
we feel this deal is - this conference is. And we want to share that
enthusiasm with you.
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One point of mention - there is a - the presentation on the Web. You may
be accessing it. I would draw your attention to the Safe Harbor
statement. I won't read it out to you this morning for brevity's sake,
but please ensure that you're aware of it.
Having said that, we'll move on to the meat of the discussion. Well, I
guess it's pretty straight forward so you can understand our excitement.
Today we announced that with a stock-for-stock merger we acquire the
assets of SVG.
So it is an exciting - I think for both parties - an exciting day, an
exciting transaction. Because it brings together the technology of ASML,
the technology of SVG, and creates a company that can really take that
technology forward and enhance the speed of technical development. And
thereby satisfy our customers.
Here's the deal's structure, to start with. It is a tax-free stock-for
-stock merger. The final exchange ratio is 1.286 shares of ASML for each
share of SVG. The accounting will be a pooling of interest. There are
conditions, SVG stockholders - and we require regulatory approval.
We estimate that the first six months of next year, of 2001, we'll see
that complete. And we will call the company ASML. A few of the
highlights, and as a matter of mathematical fact, if you add together
the market shares of both companies for the full year of 1999, it would
give us around 43 percent market share.
It's not possible for me to know this year what the market share numbers
will be. We're only half way through the year. But in fact, the market
share is not the important issue here. What is important is that we
bring together the complementary skills of both companies.
It combines ASML leading-edge volume production technology, with SVG's
early introduction capabilities. So their ability to get new technology
quickly to market in a prototype product, and
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our ability to turn those products into high-volume production products,
is one of the leading advantages to both parties.
It also means that joint R&D programs that we both are involved in - and
I might tell you these are heavy items in the way of spend - those R&D
programs we can now find ways to merge together to enhance the speed at
which we can bring on the new technology. And that's a very important
part of this deal.
It combines the strong optical capability of ASML's partner, (Carl
Zeiss), and SVG's equally strong expertise in the field of projection
optics. It also opens both of us up to a new range of customers. SVG is
very strong in the USA, with (amongst others) Intel as a prime customer.
And we have perhaps greater strength overseas. And it allows both
companies to look at that combined customer base.
It also expands for ASML their product offering. Because no longer are
we only a lithograph - lithography company, we now add to that the two
other divisions of SVG; that is, the track division and the thermal
division.
You can probably understand that the track division - since that
interfaces directly with the (Stepron) scanner - is a natural product
extension. The thermal products we're equally excited about, because
they have some new developments there which I think give a good
indication of the their future potential.
There is minimal customer overlap. The venture creates a company with
strong revenues. It's immediately accretive. And we say that without
having analyzed at all any of the synergies that will come into being
later on.
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So there are the highlights. If you look at the last 12 months sales of
ASML and SVG. And I'll give you, just to confuse you this time in the
morning, the European numbers - the ASML numbers in euros - 1.76,
rounding slightly there - billion euros. ASML - oh, sorry, SVG - 792 -
let's call that $800 million. You can see the last year's strength of
both companies. In all, we both grew substantially during the year 1999,
and this year, 2000.
Operating results for, again, the last 12 months. That's past 12 months
ending June 30, 2000. Sales of - combined sales therefore of 2.55
billion euros - it's now in euros. And an EBIT of 369 - I'm going to
call it 370 for roundness - 370 million euros. So good financial
performance, strong company resulting from this.
Just to put the divisions in perspective. Until this very day, ASML has
been 100 percent lithography sales. The last 12 months for SVG - that's
the 12 months ending 30th of June - lithography was 52.4 percent,
thermal 34.9, and track 12.7. Therefore, the combined company has litho
sales of 85 percent, thermal sales of 11 percent, and track sales of
four percent. I'm rounding here for brevity, but it's within .2 of a
percent. Giving a total sales of 2.55 billion euros.
A word on the industry. First of all, we're a - our health is a direct
function of the health of our customers, the semiconductor
manufacturers. They've been going through a period of unprecedented
growth for the past 12 - 18 months now. That is forecast by others
better than me, (DataQuest), (VeriSite), it continued unto 2003. We'll
see if that's right enough - I believe it is, by the way - the high
growth rate for our customers.
And that reflects in a high growth rate for the semiconductor capital
equipment sales. Which has been growing at - which will average around
34 percent, if you take into account the last year and the next couple
of years. So, a very high growth rate industry. Within that, lithography
makes a very important contribution. And by 2002 will achieve sales in
total - this is the industry, not just SVG and ASML - of about 8.5 to 9
billion euros.
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So, a strong industry. No sign yet of any slackening. I can say that as
a hard-pressed supplier of captive equipment, there is not a week goes
by, or even a day goes by these days, when a customer doesn't call me
for more product. So whatever you may hear and read, I can tell you
first-hand right now, that the insatiable appetite of our customers is
there.
It's strong, and they're increasingly aggressive as I have to struggle
to meet their requirements. So, - and the same, by the way, for SVG.
We're having a very good year this year and having strong pull from
their customers also. So the marketplace is probably as healthy as it's
been for the past 30, 40 years, in my opinion. And we look forward to
maybe two more years of good, solid growth. Perhaps then with one year
of consolidation.
This move consolidates ASML's position as a leading supplier of
(photolithic) equipment. We're actually quite candid here. We do face
serious and severe competition. We have out there two very famous,
famous companies -- Canon and Nikon - who are strong in this industry.
Technically strong, with good market share. And therefore, much as we
now perhaps are in the leading percentage terms, we're only as good as
our last product. And this whole industry is determined by your next
generation product. So this - bringing together these two great
companies, in fact enhances our ability to maintain our technological
lead. And I think that's a key element of this merger.
So we will have technology leadership, in our opinion. We will add SVG's
proprietary mirror-based optical designs to our own. Add together their
products - Microscan and (Track-lister) capability. We will have a
comprehensive product offering. We now will add to our lithography sales
that of the track products. And increasingly, the clustering of these
products together in a cell is becoming important. So we believe that
that's an important strategic addition to our product lineup.
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We also will have the ability to move into the thermal business, thermal
capital equipment business, and within the semiconductor industry. And
that has also got high growth. And there are some new single wafer
developments coming out, which will give, I think, a level playing field
for all of us to generate market share.
So we feel very positive about all those divisions. It enhances our
customer base, and of course, it generates high revenues. And there will
be the potential in the future for cost synergies. If you're keeping
track with me, I'm on page 16 of the presentation on the Web page. And
that just shows the historical market share tends of all the key players
in the industry. Last year ASML reported to be around 35 percent market
share, according to (DataQuest). Nikon were a couple or three points
higher - 37, 38 percent.
Canon were around just in the 20 percent. And SVG had just under 10
percent. So if you do the mathematical sum for last year, you'll see a
market share of around 43 percent. But that was last year. And this is a
whole new year, and we don't yet know how that's going to work out.
Looking at the combined company overview, I'll just repeat again then
some of the sales headlines - some of the financial headlines. For the
last 12 months added together, it's 2.55 billion euros, with a gross
profit of just under a billion - 943, to be exact. An EBIT of 369, and a
net income of 255. Of course, ASML and SVG both contribute to those
numbers.
Balance sheet creates a company of total assets of around 3 billion -
2.997, to be accurate. I think a healthy balance sheet. And if you have
questions on that, we can come back to them later on.
Sales breakdown per region - just quickly refreshing you on ASML and SVG
separately. ASML's biggest region is the Asia region, with around 51, 52
percent of our total sales. Korea 27, Taiwan 24, and Singapore around
one. USA then 35 and Europe around 13 percent. And that reflects,
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to a large extent, with the exception of Japan, the semiconductor
manufacturing and delivery geography. So we're well balanced around the
world.
SVG has a high U.S. dominance, as you'll be aware, with 68 percent of
their sales in the USA. France and Ireland being their two European
conquests - seven percent, in total. Israel, 11 percent. And rest of
world is around 14 percent.
Moving on to facts and figures. Employees - ASML has currently around
3,700 - 3,718, to be precise - employees. SVG similar, 3,600, in round
figures. That gives a pro forma of 7,300.
And we have also on this page, if you look at the Web page, the split
between lithography, track, thermal and other parts of the
organizations. I'll let you browse through those at your leisure.
Clearly, because of the dominance of lithography sales, the other
dominance of people apply to them.
Geographically, for ASML certainly one of the benefits is that we gain a
stronger USA presence, both in manufacturing and technology. SVG, a U.S.
company, with a great presence, both on the East Coast and the West
Coast. And that's something that we've envied for some time. And now we
have that facility also. So we'll pick up their real estate and their
people, both here on the East Coast and also on the West Coast. And we
think that's a very, very positive move for ASML, who - we're very much
a European-centered company. This now expands our manufacturing and our
technology base to the USA, where of course, there's a different set of
suppliers that we can become familiar with.
There's a different pool of engineers to tap into. And it is our
intention to expand manufacturing and development in both the USA and in
Europe. So the USA will see increases in production and will see
increases in R&D, because of the bringing together of these two
companies. And by that process, we will better ensure that technology is
kept alive in both continents. And we
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believe that that's important, because semiconductor manufacturing is a
very strategic element of any economy. And the USA is perhaps one of the
beneficiaries of that. And it is our intention and firm wish to ensure
that technology gets continually stimulated and moved forward. This will
bring about an increase in the pace at which we can develop new
products. And a lot of those new products will be developed here in the
USA.
I'll very quickly look at ASML and SVG separately in non-financial
terms. Let me make the statement, however, that lithography - and I
don't say this in any respect claiming fame over tracks and thermal,
which play an important part. Lithography has always been acknowledged
as a key enabling element of the semiconductor industry. Without the
moves in lithography, you won't have the (high packing density) on the
chip. And you won't have an Internet, quite frankly. And you won't have
videophones in a year or two's time, either.
So this is the key building block that powers the semiconductor
industry, that powers the Internet revolution. ASML has developed
techniques of design, for modular design and manufacturing, that allows
us - has allowed us to convince customers to buy from us in increasing
numbers. Our capability is in the servo mechanism and the mechanics. And
we leave it to our partner, Carl Zeiss, to be the expert in optics.
We are the system integrator, and we are the guys who put together the
most productive tools in the world. And I say that with due humility,
because I'm looking at my SVG friends here. They have leading edge
technology; we perhaps have the advantage in the high productivity and
through-put.
And our latest product, the twin scan, which is the 300 millimeter
market, will become the platform of the future for both companies. We'll
migrate, over time, for 300 millimeters onto the twin scan platform. Of
course, I want to make that point that today and for the reasonably
foreseeable
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future, because of the backlog of orders that SVG have, we are fully
committed to supporting their product line.
And every customer that has a contract with us, and those who wish to
place orders with us, will find that we'll honor those contracts to the
best of our combined abilities. So the SVG products will continue in
their present form. It's only when you look forward to the next
generation technology, that you begin to see the ability to converge
platforms. So we're talking here maybe 1, 5, 7 nanometer and the UV. So
our core competence at ASML - fine mechanics, best of the control
systems, good stage technology, high resolution and imaging systems,
thanks to our partners in Carl Zeiss.
Result there for our customers get very high wafer-through (per out).
They get high productivity gains. And they're able to use less systems
because of the high through-put, and therefore, less floor space, and
therefore have a capital advantage. We also offer them short lead times
to volume production, which helps them in their ramp-up phase.
That's a real quick refreshment of our numbers at ASML. The backlog,
which is an important life sign, if you like, or health sign, of any
company. The backlog by region, in percentage terms. Taiwan, 30 percent;
USA, 26 percent; Europe, 14; Singapore, 15 - Singapore's now growing.
And I think that's quite a health backlog.
Yes, and as we go through this year, by the way, because these numbers
were the end of - were at June, 2000 - as we continue through the
quarter, the third quarter and fourth quarter, that backlog is growing.
If you look at our customer base, (not) now geographically - and the
backlog we had with our customers, and segregate our customers into the
memory guys, the Logic and ASIC guys, the microprocessor guys, and the
Foundry guys. Memory is about 14 percent today of our end-of-
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June backlog. Logic and ASIC is 33 percent; Foundry 32 percent;
microprocessor, microcontroller units around 13 percent.
Just as a kind of an aside comment here. You know, customers place
orders in lumpy installments. And therefore this ratio does change. And
the fact that memory is down to 14 percent is a function of the fact
that the Foundry guys, who have been really growing this year, came in
with some huge orders. And that boosted the percentage of the Foundry
orders. So that's merely a matter of fact at the end of the second
quarter.
I'm going to wrap up soon, but with an overview of SVG. And clearly, my
other two colleagues, Papken and Russell, are better equipped than me to
comment on this. But let's see if I can get at least some of the numbers
right. It proves I can read, at least.
SVG, which goes back to 1977, in fact, as a company, located in San
Jose, California. As I said, employs around 3,600 people. Is also a
leading supplier of advance (wafer) for processing equipment. I pay
tribute to their advanced technology in lithography. And I pay tribute
to their new concepts in both the track equipment and the thermal
processing equipment.
The company in fact designs, manufactures and markets very sophisticated
equipment. And it's used clearly in the primary stages of semiconductor
manufacturing. It has the three product groups I mentioned, the litho
system group, the track systems group, and the thermal systems group.
Looking at their last 12 month sales, 52.4 percent to be precise, came
from litho, 12.7 from track, and around 35 from thermal. Their EBIT,
slightly different balance, similar though. Forty-five percent from
litho, 16 percent from track and 40 - 39 percent from thermal.
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So, a total sales of 792 - now, we're talking millions of dollars - and
a total of $44 million for EBIT for the year ended June 30th of 2000.
They have a rich range of products. On page 32 you'll see some -
hopefully, some nice photographs of those. And it shows both their
legacy, their heritage of great products going for 25 years now. And
also, today and the future products, the Micrascan 193, which is being
very well received by the market. An excellent product. An advanced
product that allows our customers to really produce products at the
leading edge of the imaging revolution.
So they have a good range of litho products. And an equally compelling
new range of products in both track and thermal. I just mentioned their
latest track product, which has I think shipped only in the last
quarter. The first products.
It's called Procell - P-r-o-c-e-l-l. It's a very innovative design. It's
intended to be clustered with the litho (too), so it's no longer a
linear, in-out site type of property. It allows some corrective feedback
in the process.
And it's a bridge tool for both 200 millimeter products. I think it puts
SVG back in the marketplace with quite a bang, because this product has
a small physical footprint. It is well tuned to customer requirements
for 300 millimeter. And we feel quite excited about it. First customer
feedback - and it's a limited quantity of customers only so far - is
pretty positive.
Moving on to their thermal products. And here I'm no expert, but having
quickly reviewed their products, they have some good Legacy systems. And
I'm particularly impressed by their new RTP - rapid thermal processing -
product. Single wafer product, which is again, a new product.
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It's a radically new design. It uses some very interesting IP. And I
think it's going to achieve significant market share gains. So we're
very impressed also with their out-of-the-box thinking on new products
for both track and thermal systems.
Again, it's a bridge tool. It will do 220 millimeter products. And it's
a cluster tool. And has many exciting features that our customers, I
think, will appreciate.
OK. So I'm rapidly drawing to a close on the formal part of the
presentation. I'm getting some advice from one of my colleagues here.
Thank you. Just a quick word on the management team. Clearly because we
have to go through the process of approval, then essentially nothing
happens until that process is concluded. Which I again repeat, was
sometime in the first half of next year. Other than existing management,
then both parties will continue to give their absolute energy to
promoting both companies in the marketplace, to meeting customer
demands.
Of course, we'll be cooperating together on any important key issues.
But believe me, the management team of SVG, I think, are, to a man,
fully behind that. And two of them can speak for themselves shortly. But
even below these two heavyweights, we have an excellent group of people
who are committed to this merger. Who feel the compelling conviction
that it's the right thing for the industry and the right thing for
technology development. And the right thing for the USA technology base.
So we have, fortunately, so far at least - and I'm sure that will
continue - a very motivated group of people who will continue with the
tasks in hand.
And you can see the organizations of both companies on pages 37 and 38,
if you wish. I'm going to just I think at this point probably pass you
across to a gentleman that you're probably aware of also. Let me just
repeat therefore, we're excited by this. It's early morning, but our
enthusiasm I hope translates to you. It's a great coming together of two
companies with a great heritage.
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ASML came from Philips. A good technology base and they're doing an
excellent job in generating systems and gaining market share. SVG also
came from a heritage of other companies, joined together in '77. A great
company in (mid-to-excellent) technology. Also gaining market share.
The market itself is very buoyant and will remain buoyant for at least a
couple of years yet, so - according to the forecasters. And I tend to
believe that. Therefore it's a positive time to make this move. The
competition is very, very strong. We have fierce competition from Canon
and Nikon. We also have fierce competition from SVG for the next six
months, who'll continue pushing against us, I'm sure. Which allows at
least the technology bases of both companies to join together and be a
strong force for the future, emphasizing the commitment to the USA
technology base and the USA manufacturing base.
I'm therefore going to introduce my CEO colleague, Mr. Papken Der
Torossian. He will now give you his view, and I am not twisting his arm
on this deal. And after that, we can take any questions. Papken, over to
you.
Papken Der Torossian: Thank you. Thank you very much, Doug. And thank
you all for attending this early morning conference with us. As Chief
Executive and one of the largest shareholders of SVG, I can speak.
Individual shareholders say that this is a very exciting, really, merger
or acquisition by the two companies which are both growing.
And the timing is perfect, because the industry is on its - I would say,
first year of expansion. We're both under tremendous pressure by our
customers to deliver more advanced tools. We have (the long legs left)
for this industry and I really think it's perfect timing and perfect
opportunity for both companies. It's one of these cases when one and one
is definitely three. I'm very excited about this. And I think that under
the leadership of Doug Dunn, who's a very
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experienced global executive, who has great vision and experience in the
semiconductor industry, I think these two companies will do fine.
Doug Dunn: Thanks, Papken. Now I want to make a tribute also to the
leadership Papken's shown. Those who know the - and I come from many,
many, many years - more than I care to think about - in the
semiconductor industry - the companies Papken brought together under the
title SVG have a rich heritage. And I want to congratulate Papken for
having pulled together those mergers. And pulled off the difficult task
of making a viable company with one culture and one style from that kind
of a different starting point. So I'd like to thank him for his efforts
also over the years.
OK, I think we're probably over the formal parts. My two financial
colleagues, Russ from SVG, and Peter from ASML, are here sitting poised
also, in case you ask any of those tedious and difficult financial
questions.
Just in case you were a little bit confused by my opening statement, I
am sitting in New York, not in Europe. We are having this conference
therefore at 4:00 o'clock in the morning, our time. It's dark here, but
pleasant. And I walked from the hotel to this conference room and didn't
get mugged. So things are improving in New York, as well. Having said
that, Wendy, I'd like to throw it open to questions now.
Operator: Thank you, gentlemen. The question and answer session will be
conducted electronically. Anyone wishing to ask a question may do so by
pressing the star or asterisk key, followed by the digit one on your
telephone at this time. We will proceed in the order that you signal us,
and will take as many questions as time permits.
Once again, press star and then one if you do have a question. We'll
pause for just a moment.
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And our first question today will come from Kathryn Buergert, from CS
First Boston. Please go ahead.
Kathryn Buergert: Hi, and congratulations to you all on the combination. I guess
SVG has been making quite some penetration gains at 193. Do you foresee
this combination accelerating 193 sales? And what does it do to your
competitive position there, versus Nikon and Canon?
Doug Dunn: We're not going to fight to answer the questions here. By the way,
good morning, Kathy, and thanks for the question. It's, as usual, a good
question. It's right to the heart of the technology question here.
Papken and I won't fight on this, because I recognize the excellent job
they've done at 193. I also will give me some credit for the job we did
at 193 as well. And the good news is - the good news is, that if we look
at our output this year and Papken's output - and SVG's output this year
- customers still want some more.
So this year I think it won't do anything other than bring together for
review the technology developments for beyond 193. We are both committed
to supplying, to the best of our abilities, and right now we both supply
limited - the 193 products for existing and new customers.
I think, Kathy, the real - you'll see the real impetus from this merger
when we finally get together and the next few months out of the way. We
then look at 157 EUV. I think that's where we can really put the pedal
to the metal and make some really significant gains in technology and
march forward.
So 193, you know, good position we're both in. SVG's done a great job
there. And I must say, a fantastic job. We're going to enjoy selling
their products for many years to come yet, alongside our own. Customers
now will have a choice. And they will choose based on their merits for
the two companies. And the real benefit's going to come in the future.
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I'll just pass it across to Papken, who may want to contradict what I've
said. But I hope not!
Papken Der Torossian: No, Kathy, I think that is really an excellent question.
I'm sure many of the listeners want to see the answer. We have said
publicly that we are under tremendous pressure to increase the
production of the 193. We were correct in predicting that that is the
right physics to enter a product.
And I'm really, really looking forward to get some of the modular
expertise, modular production expertise and the tremendous ramping
capability that SVG brings, to really accelerate the production of our
193 to the marketplace. And I really think that that is an excitement.
I've talked to my people and they feel the same way.
Kathryn Buergert: So, am I - so you'll take both technologies forward at 193 and
combine the manufacturing expertise? Is that ... ?
Doug Dunn: Well, we'll take both forward at 193 from a product point of view.
You know, it would be unrealistic for me to say that in the short to
medium term we're going to combine any manufacturing. With expertise, we
can look at it. I mean, SVG have an excellent supply base in the USA.
As you know, Kathy, because you follow this very well, our supply base
has been a constant source of difficulty this year in keeping up with
the pace of our customers. So we can tap into the SVG supply base, and
equally well. Within Europe we have also some good suppliers, and SVG
can perhaps tap into those. So it may well be that we manage to overcome
some of these rather frustrating supply-base issues in the next six to
twelve months.
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But I think nothing will change, being frank about this, for the next
six months. We're both working as hard as we can around the clock to
spit these systems out. And there will be two 193 products for a long,
long, long, long time yet. That isn't our point of convergence. It's
after 193.
Kathryn Buergert: And when you talk about he supply base, are you - is that
Zeiss, more specifically?
Doug Dunn: No, it's not only Zeiss ...
Kathryn Buergert: On the lens side, I mean?
Doug Dunn: Oh, you're talking for ASML. Now I won't speak for issues of SVG.
I don't know them. From our supply base point of view it's not just us
Zeiss, no. It's integrated circuit suppliers, it's PCB suppliers, it's
... Yeah, Zeiss are also in there (as the new guy) struggling.
But on the positive side, it's not some people. Look, it's not the
(laser) guys. They're doing pretty well, so at least one or two parts of
the industry can keep up.
But I'm looking more to the - not to the optical supply base, because we
are both locked into our optical suppliers and that won't change for
193. I'm looking more at the mechanics and the PCB and the fine
machining companies. They're the ones that could help relieve some of
our bottlenecks, and possibly SVG's also.
Kathryn Buergert: OK. And one other question on the R&D. Does that continue at
the level of the sum of the two? Or is there some savings to be realized
there?
Doug Dunn: Right now, the sum of the two. I mean, there may be future
savings, if you see what I mean. Future costs we won't incur. But I've
stated already and this is really - you know, Kathy, that we're as good
as our last product, right? Or our next product. So the R&D investments
will
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continue in as vigorous a way as we can support and SVG can support,
until this thing finally is closed.
At that point in time, the combined R&D spending will continue in line
with requirements in budget. There'll be no cut back in R&D. There may
be some future production in future spend, but not on today's spend.
We're both struggling right now to find sufficient engineers to staff
the programs adequately. So that isn't going to change.
I mean, I'm hoping that this deal can even be more attractive to both
European engineers and American engineers. Because it brings two great
companies together and gives potential future employees a much richer
career base to build upon.
Papken Der Torossian: You know, Kathy, I don't want you to forget one very
important issue which I mentioned, the manufacturing process technology.
That really is a very strong asset of ASML in terms of the processes
involved to ramp up fast with a new technology product. That expertise,
which is intellectual property, which is - they have. Not just
engineering, which we expect to gain in the next six to twelve months to
ramp up 193. It's very important to satisfy our customers' needs.
Doug Dunn: Kathy, I think we've given you your prime time. Next question,
perhaps.
Operator: And moving on, we'll take a question from David Hoytema with ABN AMRO.
David Hoytema: Yeah, good morning, a very early morning. And congratulations.
Doug Dunn: Good morning, David.
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David Hoytema: A few questions. First of all, can you quantify perhaps - well,
I'm using the term synergies here, maybe it's not exactly the right
terming. But are there some costs to be cut, or are there maybe on the
sell side some synergies that you can actually quantify?
Maybe following along that, something on the larger the shareholders of
SVG? Could you perhaps name them? And more specifically, could you
mention if they are sort of cooperating or have committed themselves to
the deal?
And then, something on the thermal business? I gather that - that
business will sort of keep operating under the ASML name with a little
autonomy. Could you, sort of, say something on the longer term plans for
that business? Might it be possible that you would be consolidated in
the end, or give us some more feel there?
Doug Dunn: I'll answer the last question first, because it's fresh in my mind
and it's a very simple answer. The thermal business we have no intention
of de-consolidating. You say it will be operated autonomously. It will
be a separate division, because it has less synergies than with the
other two clearly. But we'll run it as a separate division. It will be
chartered, as it is today. Continue with ASML to develop the product.
And the latest one, the RTP product, is very, very good - to develop
that into a market-leading, world-winning product. And that is our only
focus and intention. We see it as being, if you like, an unexpected
bonus in this process. We were not sure of the products they have, but
this - this RTP looks very, very good.
So the people there will be challenged with still the same challenge
they have today. Take that product, do all the manufacturing and make it
a market leader. So we have no intention of de-consolidating. We're
committed to making these divisions work. And that's our full, vigorous,
full-blooded intent.
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I'm going to let Russ comment on the SVG shareholders in a second. I
think you perhaps know them better than me certainly. I'll just go back
to the question on synergies. And I may ask Peter to contribute as well.
Just quickly from me, I repeat, we have not done this deal because of
cost savings today. OK? We've done this deal because it makes sense
industrially. It's got a lot of industrial logic behind it. And it
allows us to further accelerate the R&D development programs.
Rather than both of us spend a half a billion dollars on next generation
products, you know? Let us spend that one billion, the sum of the two,
but employ all the people. Not to repeat the process, but to accelerate
the process. That's the objective here.
If there are some synergistic cost-savings later on, we'll discover that
and take appropriate advantage of them. But that isn't the prime
intention. I don't think you can expect a lot of synergies to come out
of this in the short term.
What you can expect is that there'll be future costs which we would have
incurred, we won't have to incur. And accelerated programs. And by the
way, Peter might tell us there's some tax savings here, but he's the
expert and I'm not. So Peter, over to you.
Peter Wennick: Well, yeah, I have basically nothing to add to what you just
said, Doug. What I would like to stress is that, just like you said,
it's not done, this deal, because we could find easy short-term
cost-cuttings. That is not the objective of this deal. And of course, in
those places where we have two offices, it is probably very wise to move
into one. And things like that you will see.
So I - there's really nothing I can actually add to your statement,
Doug. Except perhaps that, when you look at the financials of this deal,
we have made it very clear that we wanted to come to a conclusion on
this transaction. And the assumption that without these possible cost
synergies, we wanted to have for the ASML shareholders a deal that was
accretive. And we - and that
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resulted in assigning the agreement yesterday evening. And we're
extremely well pleased that we both had our eyes on that particular goal.
Doug Dunn: In fact, Peter's so please, he' s still slightly drunk from the
champagne he had last night. Maybe it shows in his description. Makes
him more frank than perhaps he should be.
I`m going to introduce you to Russ, for a second because you asked about
the major SVG shareholders and I think Russ probably has a better handle
on that one than I have.
Russell Weinstock: Yeah. We have a very significant shareholder actually, here
in New York, Third Avenue Fund, and also share a very good (Clum)
investor in both companies, Capital Guardian Trust. And I would hope
that and feel very confident that these shareholders, along with both
ASML and the rest of the SVG shareholders are going to see the wisdom of
both the technical and the manufacturing capabilities that both
companies can have and put together two very strong companies that were
that way before this merger has started. And has created a tremendous
excitement within the SVG management and I believe also, the ASML
management.
So, we're going to see a very uniform and consolidated group of people
who are going to continue into the future, looking to make a combined
entity, a very strong and good growth oriented company.
David Hoytema: OK. Maybe, on the ((inaudible)) to the point. Has Intel also
given it's blessing to the deal?
Doug Dunn: I think first, my first honest reaction is you, you know, you
should talk to Intel on it together, comments on the deal, David.
Clearly, Intel are a major customer of SVG, not the only one, but perhaps
the biggest one they have certainly and (the) major one. They are - we
have taken the trouble to inform key customers of both companies of this
deal just now. So, they are aware of it
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and they - I believe they're supporting of it. And - but, any further on
that, you'll must ask them themselves.
David Hoytema: OK. And, if I still have time or if - well, ...
Male: Well, one last brief one please, David.
David Hoytema: OK. The quick one is one thing that strikes me is that SVG has,
sort of, doubled the amount of people in operations and goods flow than
ASML, with much less sales. Is there any particular reason there?
Doug Dunn: Yeah. (If you ask Pete), he can answer, but we - let me just have
a try. ((inaudible)). First of all, don't forget that we outsource a lot
of our production. SVG are vertically integrated. We are outsource
dominated. So therefore you'd expect more in their operations than ours.
That's neither good nor bad. It's just a fact, you know, and it works
well. Their gross margins (close to) 40 percent, so it's not bad.
Also, you mentioned services. So, that explains the operations issue.
(You get) service and so one. Let's be honest. It's one of our key
issues, bottleneck, we face at ASML, is recruitment of service people
around the world. So, bringing together the sales and service
organizations is actually, a positive thing because SVG have some highly
trained, specialty service guys out there. So do we. We always both (are
a bit) short of those key people. We're recruiting heavily just now and
not getting enough. And therefore, I think that's a positive. So, I
think - I think that's giving the balanced answer to your question,
David. I'll now move on to the next question.
David Hoytema: Thanks.
Male: Thank you.
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Operator: If your question has already been answered and you'd like to remove
yourself from the queue, please press the pound sign. And we do also ask
that you please limit yourself to one question for each time called upon
in the queue. Our next question will come from Ron Dennis, with Merrill
Lynch.
Ron Dennis: Hi Doug. Good morning.
Doug Dunn: Hi Ron. Hi.
Ron Dennis: Hi. Can you just go through your capacity expectations for SVG
and ASML for 2001, and what the combined company might produce?
Doug Dunn: Our number hasn't changed, Ron. I think we've been saying four to
- 400 to 440 systems for 2001. That hasn't changed because of this. And
we'd let the SVG answer that question, (how much) themselves. I think I
know the answer, but it's better it should come from them because
they're the management for the ((inaudible)). Certainly, they're a big
part of 2001, so they've got to make their own commitments to you. And
that's my (commitment), and there's no change for our number. Do you -
do you - Papken, or Russ, do you want to ...
Papken Der Torossian: I think that we have told publicly that we're trying to
ramp up our 193 production, which is our newest product. And we do
expect to continue that and this merger is going to help us ramp it up
very fast. We expect to do over 100 next year total, including 193.
That's probably the good answer.
Male: Yep.
Ron Dennis: OK. And Doug, what was it in particular that you liked about the
SVG technology?
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Doug Dunn: Yeah. It's good question because it gets to the heart of the
issue, the technology base. You know, we have great optical technology
in Carl Zeiss. But also, SVG, have great optical technology of their
own. And there's clear strength because the heart of the scanner, you
could say the beating heart, is the optical system. And we can never,
ever have enough expertise and capability in that area.
If you look at future programs, we're both spending significant number
on 157 and the EUV. At some point in the next few years, if we didn't
come together, we would both spend between half and one billion each on
those technologies. And that's the price to go into these new markets.
That's why it's a high value, threshold value to enter. By combining
these excellent groups of people on the east and west coasts of the USA
and within Europe, in our case, you have twice as many people roughly,
to pour onto the problem. Then you can, therefore, solve those huge
engineering and technical issues much more quickly.
So, that was - that was the primary attraction of this deal to me, quite
frankly. Add to that the fact that they have a different technology and
therefore, look at things from a different angle (to us). That's always
good, you know. To have two technology viewpoints on a subject can often
bear the final, best fruit. Add to that, our are manufacturing
capability and I think we can - I think, honestly - I don't believe we
can help SVG here. They were the two features of this deal which made it
look so compelling to all of us, including (SV) and (SL) management.
And I'm not going to go into details on technology because, you know, we
get into the issues of competing systems and different solutions. And
that isn't the point. To bring them together, to focus them, to give
them a common objective, takes the best of Europe, the best of the USA
and you're going to end up with a world beating technology solution, I
feel anyway.
Ron Dennis: OK. Thank you.
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Operator: And our next question will come from Gys Groenewegen, from Jeffries.
Gys Groenewegen: Hi Doug. Fantastic deal. Congratulations.
Doug Dunn: Thank you Gys.
Gys Groenewegen: To come back to the R&D: Could you tell us what basically,
will be a percentage of sale? I mean, you had something like, 40.6
percent in '99. What is it going to be for the combined group in 2001
and 2002.
Doug Dunn: For (SML), since, you know, just because we have to do the numbers
in our - we haven't got any numbers burned in our brains yet, as you can
understand. (SL) is going to be under 11 percent R&D for this year -
this year. And SVG, (are) now three slightly.
Russell Weinstock: It's ...
Doug Dunn: Russ will answer the question.
Russell Weinstock: It's in excess of 12 percent. It's probably closer in the 14
percent range.
Gys Groenewegen: OK.
Doug Dunn: So, the combined spend is going to be 12ish percent, which is, you
know, pretty healthy and pretty good. It's about - and it's in the right
ballpark for this industry. Ten to 15 percent is the range.
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Gys Groenewegen: OK. I would like to come back to basically, SVG's largest
client, Intel. How much is it of total sales, Intel?
Doug Dunn: SVG can answer this question better than I can.
Male: Intel is a customer of SVG who buys really, both our lithography
products and our photo resistor track products. It's in excess - it's
around 50 percent.
Gys Groenewegen: At 50 percent. You already mentioned that you couldn't
disclose anything about Intel. But, we have seen the problems, you know,
a couple of days ago with Intel. And I presume that there were a lot of
production problems with Intel because they couldn't increase their
output. Whatever was understood from ASML is that they have a machine
which can increase the output much easier than its competitors,
especially if we're going to the 300 millimeter area where, you know,
you have developed a new base, which I thought (Nikon) doesn't have.
What will be the consequences? Will - you know, is it likely to assume
that Intel would switch completely to ASML?
Male: No. The simple on that is no, they won't switch companies to (SML)?
Doug Dunn: They will in the sense that the company will call (SML), but they
won't switch their product. Which is the heart of your question. (I know
that). You know, Intel have an excellent policy of manufacturing. They
have always (commonly) known as a (company of exact) method. That means
that when they have good equipment, the perpetuate that manufacturing
design and buy more of the same good equipment.
So, the good news is that I think Intel have - see a lot of value in the
SVG products. They buy them and are very happy with those products. And
they will continue to buy those same products. Ultimately, as we
converge platforms in a few years time, then Intel and others will be
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given the chance to buy a technology platform, which contains the IP of
both (SML) and SVG. And that's again, the strength of this deal.
So you know, we see this as being good for the customers, continues the
same product base. They can always buy the (Legacy) products. As long as
they want to buy them, we'll make them. And in the future, we can give
an even better product by combing the rich strengths of SVG and our own.
Gys Groenewegen: That brings me to the last question. Do you have, you know,
(spare capacity to supply) Intel?
Doug Dunn: (Just a quick comment on Intel), by the way. I don't want to
comment on the reaction of the market, last week, to their results
because Intel are a great company, doing a fantastic job in going
through exceptional growth. It's the market that got it wrong, not
Intel.
But I would say this, in Intel's statements, they did say they would
maintain their capital spend. So you can see that, basically, this (as
being) temporary issue and nothing, at all, life-threatening. And
they're off with - still blazing ahead with their products and still
making the necessary investments to ensure their good, solid, successful
future.
I missed your last question, again.
Male: I asked you if you had spare capacity. (That if they were to order) from
you, that you were able to explain, a bit.
Doug Dunn: No. The quick answer to that is, and I regret saying this, is that
we are currently sold out, this year and the first half of next year.
Therefore, we have no spare capacity for any new customer, or even any
old customer who wants more, within - you know, maybe one or two, here
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and there. And I think the same is true for SVG, by the way. So we're
(enjoying), if that's the right word, high output and at maximum
capacity, currently. That also gives me the - and I'm sure, Pat, can
also, the heartache of customers who cry and bleed and, you know,
complain. As is their right. So it will not increment the capacity of
both companies. That's locked into the physical bricks-and-mortar and
supply base and people we have on board, right now.
Male: Thank you.
Doug Dunn: That's the last question from you. I think we have to move on to
the next questioner. Wendy, next question, please.
Operator: Thank you, sir.
Our next question will come from Marisa Baldo with SG Securities.
Marisa Baldo: Oh, yes. Good morning. I was ((inaudible)) most of my questions,
actually. One question on the customer base. You said that there was
little overlap. May I have any additional information regarding the
overlap in terms of customer base? And apart from Intel, what new
accounts does SVG bring to ASML customer base?
Doug Dunn: OK. When I say, a little overlap, meaning, primarily, the
lithography area. There is some overlap, obviously, but little, there.
And we've talked about the biggest customer SVG would (add), also. But I
- I mean, I'm, also, excited about the fact that SVG are benefiting
customers that we don't, currently, do business with, some of them in
Japan. ((inaudible)) with (Tracks) and with thermal products.
So I think, to me, this is an extra bonus in the deal. We've commented
that we're delighted to see the professional design of the (pro-sale)
(track system). We were very impressed the look of their
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new (RTP) products. And we're hoping that they will sell, well. And on
the customer base issue, they do have some products, sold in Japan. And
you know that Japan has been a difficult market for us to penetrate.
This will, I think, help us, somewhat, to penetrate the Japanese market.
Marisa Baldo: OK. Thank you very much and congratulations for the merger. And,
of course, for being up so early in the morning.
Doug Dunn: For you, it is my pleasure.
Operator: And our next question will come from Ian Davey with Goldman Sachs.
Male: Good morning, Ian.
Operator: Mr. Davey, your line is open. Please go ahead, sir.
Ian Davey: Just a couple of specifics about the deal, if I may.
Male: You, may.
Ian Davey: First of all, in the press release, it states that you will
receive the ASML local shares. Will, as a New York shareholder of SVG, I
receive the choice between either the local share or the New York? And
secondly, could you comment upon which government approvals are
absolutely necessary, in terms of antitrust approvals? Thank you.
Male: I think the press release says, ordinary shares. I don't - maybe you saw
a different version or ...
Ian Davey: Right. Well, ordinary shares, do you mean the Dutch, listed or
the New York registered?
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Male: There's no difference.
Ian Davey: OK.
Male: It's the - so those will be shares, also, registered, here. And ...
Ian Davey: OK.
Male: ... (I mean here), because I'm now in the U.S.
Ian Davey: OK. Perfect And if you could comment, perhaps, on the - any
antitrust issues that you see, forthcoming?
Male: Well, you know, any deals of a certain size in the U.S., go,
automatically go through scrutiny, quite appropriately, for antitrust.
So we'll go through that process. And we will be very full and open and
out with our comments to the FTC, on that. We have nothing to hide or
fear, here. We, therefore, expect they will be diligent, as is their
job, but they will give us a blessing. That is our considered opinion.
You know, if you look at what we're achieving, here. It's a positive for
the USA, also. Because we take a great company, SVG, with good
infrastructure, in the USA, but not one of the top-three, in the world.
Therefore, with limited market access, currently. And we take that
technology and we develop it further, here. We - you know, we invest in
the technology base, here, in the production base, here. And, therefore,
we build the infrastructure in the USA, of that strategic technology. It
is strategic and I recognize that and we enhance that, here. So I think,
from the anti - from the antitrust point of view, they'll ask all the
right questions and we can, I think, give them all the right answers.
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Ian Davey: Perfect. Thank you very much, gentlemen. Enjoy your morning.
Male: Thank you.
Operator: And now, we'll take a question from Nicholas Gaudois with Morgan
Stanley.
Nicholas Gaudois: Hi. Good morning and congratulations, again. Just a quick
question. In terms of product road map, or (likely product road map). Is
there any synergies to be expected? In (porting), for instance, your
(SML 20 ,millimeter) technology on to the (Micro Scan) ((inaudible))
technology, or vice versa ((inaudible)) I understand. But ((inaudible))
from SVG connect to the support ((inaudible)). Do you see any benefit in
combining the two technologies, there?
Doug Dunn: I think we've said, now - let me clear it up. We've said that (193
technology). In other words, is satisfied by products from both
companies with committed customers and orders. And therefore, we will
develop and progress, those two product lines in parallel. We have no
choice. They're both good products.
The convergence will come with next-generation technology, probably
based on our, that's the ASML 300 millimeter twin scan platform. Which
is slightly more developed than the SVG version and therefore, we can
take advantage of that fact and utilize it for the future. So
convergence will come, yes. But not at 193. It'll be beyond 193. 157
(and EUV) the two holy grails that we both seek, here. We'll, now, have
the chance of achieving those objectives, much earlier.
Nicholas Gaudois: Right. So 157 ((inaudible)) is really where it should happen,
yes?
Doug Dunn: Yes.
Nicholas Gaudois: Great. Thank you.
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Operator: And now, we'll take a question from Ben Lynch with Deutsche Banc.
Ben Lynch: Yes. Hi. I just wanted to clarify that last question. Just - it's
a half a question. And then, my real question which pertains to Intel.
Yes. You said, the bulk of the technology rationale is (157 nanometer
EUV). But could you say what current technology blocks, which are,
perhaps, being used in 193 (nanometer), which are not, necessarily,
relevant for 157, which are already being used, but are not 157
(nanometer) specific, will you also use, later on, from SVG, like the
((inaudible)) optical lenses, that sort of stuff.
Doug Dunn: Yes. Those - I mean, you kind of preempting the next 12 months'
work, or a few months work, certainly. Those - you know, as it happens,
we do have two, complimentary optical solutions, here. And neither was -
will profess to know which is going to be the best solution. Maybe it's
two solutions, (different application), by the way. And that is not a
decision we want to take, yet.
We want to enjoy the fact, now, that both companies, come together, can
pursue both technologies, both refractive and ((inaudible)), as long as
necessary, forever, if necessary, for the future. So we're not - it is
possible, clearly, to take their lens system and our hardware. But that
is not a forecast and that is not a prophecy. That's, merely, a matter
of fact
And I think we'll decide, over the next months, quarters, 12 months,
just where the better optical solution is, for the future. We think we
now have the right platform. And it will be our twin scan platform. And
we have to, now, conclude the development work on the optical solutions
and determine which one is best. Or, are they both, complimentary, and
exist side-by-side in future applications? We don't know that, yet, and
we won't know, for some months, yet, I'm afraid.
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Ben Lynch: Great. OK. That's that one. Then, just back to Intel. I mean, I
appreciate, on Intel, you have said that, well, they have their own view
on whether this is good, or bad, but I'm quite certain, Doug, given your
experience, that you will have done a lot of due diligence from a
company that's represented over 50 percent of SVG sales.
Based on that, what is your understanding of what this means to Intel?
You know, is Intel likely to be neutral on this? Is Intel likely to,
perhaps, accelerate its work with SVG-ASML combination? Are they going
to be, I guess, bringing you even closer into their EUV program, et
cetera? Obviously, you're not speaking for Intel. You're speaking for
the conclusions you've drawn from your own due diligence work.
Doug Dunn: Well, OK. I confess to doing nothing adequate due diligence with
Intel on this one, your right. I wouldn't do this without taking into
account, the views and feelings of SVG's largest customer. We've, also,
(to include) the customers, by the way. But staying with that one. And
again, I won't put words in the mouth of Intel. They're better equipped
to do that than I can. But, in general terms, they are supportive, not
neutral, but supportive, positive about this move.
They really have appreciated the close relationship with SVG. It has
given them, you know, let's face it, great business. And therefore, that
deep involvement of the two companies will continue, regardless of the
title of the company and that will be ASML (or) - but we'll certainly
want to maintain that relationship between engineers of SVG and Intel,
maintain that part of the relationship.
But also, expand upon it. Yes. We have - we believe we can add - also,
ASML can add value to that relationship and that's our intention, also.
So please call Intel if you have - want to get some direct quotes. But I
believe, from my discussions with them, they're very supportive of this.
We have absolutely committed, anyway, to supporting Intel in their
product requirements and technology developments, both on the behalf of
SVG and, of course, on the behalf ASML.
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Because we do have the - we are part of the (EUV), with them. So I say
no more about Intel. Give them a call, yourself, if you want more
clarification. Very supportive. We're going to commit - we have
committed to supporting them. Therefore, things, I think, can only get
better for all parties concerned.
Ben Lynch: Thank you. Thank you very much.
Operator: OK. Now, we'll take a question from Bert Siebrand with S&S Securities.
Bert Siebrand: Yes. Good morning. Congratulations, as well, with this deal.
And most of my questions have been answered. Perhaps, two more. On the
government approvals, not talking about antitrust regulations. More
looking at the strategic importance of the technology, perhaps from a
defense industry's defense - Ministry of Defense perspective. What
feelings do you have that you are allowed to get access to SVG's
technology, from that perspective?
And then, second question on your future strategy. Are you going to make
more acquisitions, going to expand, more, outside the (lithography)
area?
Doug Dunns: OK. I guess I'm going to repeat myself, now, a little bit because
I've given all I can on the antitrust situation. And by the way, the
strategic nature of our products and its importance to the economy of
the USA, is all - is the reason why the (anti-trust) people want to look
at it. So it's all bound together.
I think, to answer your question - I've given the answer, I think. I
believe that - what are we doing, here? We're enhancing the technology,
base and the production base in the USA. I say that because we're going
to put more money into it, and not less. OK? So whatever plans SVG have,
right now, for their future technology development programs in the USA,
we will, at least, equal those.
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In fact, we will exceed them. So the USA need have no concern that the
technology base, here, will be eroded. The infrastructure, supporting
SVG, and in the future, supporting ASML, will be improved because of the
extra commitments we will make to the new product developments, here. I
think, therefore, from both a strategic point of view, strategic
technology point of view and from a straight, commerce point of view, it
has many positives. And I believe, on balance, the antitrust people will
look at all these issues you've raised on your question, there, and
conclude, with us, that this is a beneficial move forward.
Second question was?
Bert Siebrand: Second question on your future strategy, outside
(lithography).
Doug Dunn: Oh, yes. Well, you know, this is kind of a question, sometimes,
you ask, in many cases, I'm a man. Have I stopped beating my wife, yet?
Whatever I say, I'm going to be damned by it. But, you know, this
bringing together, is all the excitement I need in the medium -
short-medium term. If, after this, we enjoy the process and it goes as
well as we think it will, then, yes, we can look at other issues of
joint ventures, of mergers or acquisitions or whatever, partnerships,
whatever you want to call it. We have nothing in mind, today. I can say
that quite honestly and sincerely.
You know, this is, for us, a pretty big deal. We have to focus on it and
make it work. And we're going to pretty occupied for the next few hours,
if not months and quarters and years, in just making this thing work.
Because there is so much for us both to achieve, together. And
therefore, I have nothing else to add to the issue of strategy, other
than, we are looking at it, all the time. And the fact that we've done
one acquisition, clearly - this is our second, actually. The first one
was a very small one. Clearly indicates that we're in a mood to
supplement our skills when we see the right opportunity.
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Bert Siebrand: OK. Thank you.
Doug Dunn: For the rest, you'll have to wait. Next question?
Operator: Thank you.
The next question is from Charles Elliott with Goldman Sachs.
Charles Elliott: Good morning and congratulations. My main question is on the
R&D ratio. We were modeling that you would double your sales by '02,
given a fair wind for that year. But the R&D ratio for ASM Lithography
would stay up, 11 percent. Because there was so much spend to be done on
the (Twin Scan) and then, on EUV. Can we get some more leverage around
the R&D ratio for combined groups, so that your combined-on deal will go
up a lot, in absolute terms, by '02, from the current level, will allow
some leverage for the margins to improve.
Doug Dunn: Yes. Let me let Peter make a few comments, here, just to give you
a bit of a break from my voice. Over to Peter on this one.
Peter Wennick: Yes. We said that, indeed, Charles, that we would stick around
the 11 percent area. You have to remember that we also said that
next-generation lithography includes 1.7, the (Elith) joint venture that
is focused on the (E beam) - on the (E beam) solution. And the EUV
would, increasingly, be a bigger part of the R&D spending for the years
to come.
I think, in the year, 2002, when you talk to me about the EUV, you will
probably see the first significant spendings on EUV, starting. I think
that that if you would talk about the synergies, going forward, that
might be the first year that you would see that coming up. Whether that
will be significant, that really depends on how successful we will be of
combining the two technology bases, as Doug talked about, earlier. But
that would probably be the first year that we see
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something back. Yes. On how much that is, is still to be determined. And
it will include, also, this, you know, spending on the (157) program.
Charles Elliott: Thank you. And can I - sorry. Can I cheat and ask one more,
quick question? You say that the deal will be immediately earnings
accretive to ASML. Judging by everything that you've said, we really
should take the earnings estimates we've got for SVGI, the earnings
estimates for ASML, add them together and not allow any synergies for
'00 and, probably, very few for '01 ...
Male: Yes.
Charles Elliott: ... just because you're so busy.
Male: Yes.
Charles Elliott: Got it. Thank you.
Operator: And next, we'll move on to Ervin Shindell with Citadel Investments.
Ervin Shindell: Hi. Congratulations on the transaction. I was wondering, can
you take us through the steps - you said you hoped the deal will close
in about six months. What is the process? Do you need your own
shareholders approval, other than the SVG stockholder approval? And
also, are you going to need EU approval for the transaction?
Peter Wennick: We, at ASML, don't need shareholder approval because of the
amount of shares involved, here. SVG do. And that approval will be sough
as of starting today and I don't know the time scales, here. I've
forgotten, actually, the time scales involved, but there is a formal
time scale involved. And in parallel with that, the FTC will look at it,
from an antitrust point of view, as we've mentioned, earlier. And yes,
Europe, also, will - EU will, also, look at it from an antitrust
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point of view and begins, today, also. But the time scales - I think,
realistically, not less than four and, perhaps, four-to-six is the
realistic timeframe. Anything longer than that, it, you know, becomes a
bit arduous, but four-to-six months, I think, is the process and that's
driven by the U.S. antitrust requirements for due diligence and
answering their questions.
Ervin Shindell: Thank you.
Operator: And the next question comes from Svein Hogset with Goldman Sachs.
Svein Hogset: I had all my questions answered. Thank you.
Male: You can still congratulate us, at least, though.
Svein Hogset: Absolutely. Great year. Thank you.
Operator: And our next question will come from Joe Bloggs with Lehmans.
Joe Bloggs: Hi. Good morning. Congratulations on the deal, first of all.
Male: Thank you.
Joe Bloggs: My question, again, is a regulatory one. You said you meet FDC
and EU's approval. Any ideas on when you're going to be filing with EU?
Peter Wennick: I think, both, this week, actually. I'm no expert, here, and
we've got some highly-paid people who are experts. This week, I guess,
for both of them.
Joe Bloggs: This week. That's brilliant. Thanks a lot.
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Peter Wennick: Thank you.
Joe Bloggs: Sure.
Operator: And the next question is from Stefan Dittmar with Dresdner, Kleinwort
and Benson.
Stefan Dittmar: Yes. Good morning.
Male: Good morning, Stephan
Stefan Dittmar: You mentioned, earlier, that SVG has ((inaudible)). Do you this
change, in the future?
Male: I think we'll both change because of this, you know? I'd be crazy to say
that we'll stay exactly the same. We'll change and benefit from what we
learn from them and, vice versa. In the - if you think about your
question, for a second, here, Stephan, if we move to the (Twin Scan)
platform, ultimately, as that is the current intention, then that's
being designed with a modular concept, in mind. And therefore, SVG will
((inaudible)) of course. We'll be using that, also.
But the existing platforms of SVG will stay the same. If there's some
benefits from our modular thinking (and it turns out) we can help the
SVG manufacturing process, right now, then, clearly, we'll do that. But
that will all be designed to do one thing, create more output. So
there's no implication, here, that the vertical integration, if we move
slightly away from that, will have an impact on the obvious security.
Just the opposite.
I mean, we're going to be investing in the vertical integrated part of
SVG to ensure that they can, at least, come closer to the customer
requirements in volume. But ultimately, I take your point, kind of
sensible, here, that there will be - clearly, be changes to both
companies. And I think
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that's one benefit that we can bring to SVG, over time. But it will not
result in major cost reductions in synergy savings on today's cost pace.
Because that will grow anyway, just to keep pace with the volume
demands.
Stefan Dittmar: I didn't understand the Intel number was 1-5 or 5-0 percent?
Male: Five-zero.
Stefan Dittmar: Oh, OK.
Male: That was the Intel number. Right? You said?
Stefan Dittmar: Right. Yes. Thanks a lot.
Operator: And our next question will come from Marcus Reiche with Lehman
Brothers.
Marcus Reiche: Yes. Good morning, everyone. And congratulations on the
transactions - the transaction. Two questions from my side. First one is
regarding your competitors, your Japanese competitors. Any idea what
reaction you expect from them, in order to protect their franchise?
And the second question is, could you, perhaps, comment a bit on the
acquisition, or the merger ratio? What was the rationale for the price
you determined? Do you think it's an attractive price, or do you think
you paid full price? Would be grateful for a comment.
Doug Dunn: On the latter one. Because we're not going to tell you the
interesting hours, days (of) discussion we've had on this. Let's just
say there - all four of us are smiling, here. I think we all agree that,
you know, that justice was done, paid a full and fair price. But don't
forget, the - and then, yes, there was negotiated price. Always is. But
the real - I mean, we had to go through that
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process because that's our duty to shareholders and that was not that
painful, actually. Well intended, because we all recognize the advantage
the industry to the U.S. technology base and to our customers. And that
was what drove this one.
And maybe Peter wants to comment on this one, or not, I don't know. Or
Russ, for that matter, since it takes two to make a good marriage. So
Russ and Papken, could also comment.
Peter Wennick: I think you could say that we're paying, we think, a full and
fair price. And we also think -- and Doug, in the many answers that he
gave, it is clear that he feels that this is an outstanding opportunity
to continue to create a lot of value for the shareholders. And we also
said that this deal is accretive without planning any cost synergies. So
I think from that point of view, we achieved what we wanted when we
started this. And we're very happy. And you could look at this deal in
terms of, what is cheaper, what is not cheap. But I think that is not
the way we actually looked at this, because we feel that it is a very
sound basis to, you know, start creating extra shareholders' value, in
the future.
Marcus Reiche: Thanks.
Doug Dunn: Maybe Russ wants to make a comment?
Russell Weinstock: Yes. I think Doug and Peter said it very well. It has been an
interesting few weeks, I guess, and last night. But I think both sides
are pretty pleased with where we started. And I think that's what this
is, is a start. I think the value and the enhancement is all ahead of
us. And I think that's where we're all excited about. And what the
opportunities, for the new, combined company can bring to its
shareholders, its employees and its customers.
Marcus Reiche: OK. Thank you.
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Doug Dunn: Next question, Wendy.
Operator: OK. We'll take a follow-up question, now, from David Hoytema with ABN
AMRO.
David Hoytema: Yes. Sorry to bother you, again.
Doug Dunn: I expect it of you, David.
David Hoytema: But I, still, will congratulate you, again, with the brilliant
deal. The thing I want to ask is, something on the technology side. From
your previous presentations, I understand that you sort of have, you
know, road maps, your product road map. You have 157 scheduled for 2007.
It seems that you're more, and more focusing on this 157 issue.
Also, with your - with the construction that you announced, joining, in
July. I have, basically, two questions. First of all, do you think the
157 will reach to 15 nanometers line width? And I'm specifically asking
that of - because of two things.
First of all, it would seem that (Scalpel) is more and more a second
option, if you compare to (EUV). And the other thing is, from a
technological point of view, that if you do 157 - or, if you do 50
nanometers with 157, it'll be basically the first time that you go to a
third of your line - of your wave length with your - to your line width.
Could you comment on those issues, a bit?
Male: ((inaudible)) expert on 157 technology. But the time scale, you gave,
2007, I don't quite know where you got that from, actually. Certainly -
certainly - I mean, 157 is a technology. The first shipments will be for
other machines, within a couple of years.
David Hoytema: This -- probably I mean, commercial. This is from your
half-year presentation.
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Male: To the volume -- we'll be in a volume ...
David Hoytema: Yes.
Male: The manufacturing volume, integrated circuits, by the 2007. It begins
much earlier than that.
David Hoytema: Of course. I see.
Male: And let's be honest. If the benefits of this deal are as great as we
know them to be, then that will accelerate the 157 program. And so that
2007 date could become quite pedestrian, David. But I'm not going to
make any (commitments there) until we've actually sat down and reviewed
both programs, fully. So now, you mentioned the ability of 157 to result
down towards 50 nanometers. Yes. I mean, currently, we're operating at
half the wavelength of the light source. And with enhanced techniques in
processing and masks and better tools, as our platform and the combined
optics of Zeiss and SVG will, hopefully, give us, we can get down
towards a third of that. And that is the objective. So it is quite
conceivable, with all the tricks that are becoming apparent, now, that
157 could take us down the 50 nanometer point. Yes.
David Hoytema: Would that - I mean, would that render (Scalpel), sort of the
(second) option, if you compared it to EUV?
Male: You know, I'm not in a position, here, to know which is the first and
second option. And there has been some comment that - and we've made it.
I, also, made it, that you look at a (scattering electron) system and
you look at a (like, an optic) system. Although the 157 is pretty
short-wave optics, then they could serve complimentary markets has been
viewed that, perhaps the lower masked cost of the (EVU) technology could
satisfy some of the foundry guys, and (ASCI) guys.
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All that has to be proven, yet. We are-- we, at ASML will continue our
investments in one - in (electron beam) until the point to which it
either becomes viable, and we exploit it. Or it becomes less viable, and
that we discontinue it. So that point is not reached, yet. We don't know
that, yet. We're, therefore, in the good position, at least in the
short-term, medium-term of being able to (back) both horses and the
acquisition buyers of SVG does not destroy one of those horses. It's,
perhaps, a bit more impetus to EUV, but equally well, (Scalpel) program
((inaudible)) materials continues.
David Hoytema: OK. And (as applied to) Lucent, sort of, have you informed
them, previously, or ...
Doug Dunn: They're all aware, now. If nothing else, they've read the press,
this morning. But they were aware of, prior to this conference, starting
(in practice).
David Hoytema: OK. Thanks s lot.
Male: Papken actually wants to make a comment, here, also.
Papken Der Torossian: I want to make a comment. You know, being an engineer,
being in the technology business for all of my life, one of the things I
like to say, here, is that the tail does not wag the dog. We are the
experts in technology. But in the final analysis, our customers are
going to make the final decision. And I really think that's very
important. You really should ask our - the leading customers, like the
Intels, IBM, (Samsung), Lucent, those are the guys who are going to make
the decision.
David Hoytema: OK.
Male: Thank you for referring to me as the tail, Papken, I appreciate that.
Next question, please.
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Operator: And we also have a follow-up question from Ben Lynch with Deutsche
Banc.
Ben Lynch: Hello, again. Two questions, I think, for Papken, this time.
Let's just stay in the same theme as the last question. Papken, could
you give me a feel - and Doug (might not agree) entirely with this. In
what areas and to what extent, timing wise is SVG ahead of ASML,
currently, with regard to 157 nanometer and EUV? And I have a follow up.
Doug Dunn: I'll leave the room, for a moment, now, and then...
Ben Lynch: Yes, exactly.
Papken Der Torossian: Well, before - last week, I would have said that we are
ahead, six to 12 months. Today, (I would say that together), we're going
to be - together, equal.
Ben Lynch: So it's really six to 12 months. It's average of those two. OK.
Papken Der Torossian: (I think) bottom line is, we're working, diligently
working to satisfy our customers' needs. And the most important thing, I
think, is to focus on what we can do, together, for our customers.
That's really the focus (that I want).
Ben Lynch: OK. I mean it's very - you know, very easy and maybe you're
saying because we're just a bunch of financial analysts. It's very easy
to say, you know, SVG has got a lot (of possibility with the 157
nanometer EVU). There must be some specific aspect where you feel
there's going to greatest (complementarity) between - you know, because
you've both made (particular investments,) and particular progress, so
far.
Doug Dunn: Yes. Let Papken comment and I'll make a statement, also.
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Papken Der Torossian: I really want to - at the risk of repeating you, Doug did
start this conversation, this morning. And we - he and I fully agree on
this issue. He said it so eloquently, that we really are excellent- SVG
has shown in the last 10 years. We're excellent in introducing the
leading edge product. (I called a - I called, we're going there) and
build a missionaries and we build a lot of nice places and then - and SV
- and ASML has been very good at coming in and building shopping centers
and hotels, you know? So I really think the strength that we produce
((inaudible)) and ramping them in full production (of good, productive)
machines. This complimentary and very excited going to continue and give
us synergy.
Doug Dunn: And just - you know, we repeat ourselves, but just one comment on
157. Because that's where the benefits really start to show. You know, I
think we would all agree. We may not agree (the precise design) details.
But we all agree that the ((inaudible)) (optic) approach is the right
approach for 157. And therefore, you can see that we have - well, we
have skills in that area. SVG have great skills in that area. So there's
a lot of commonalties of interest, there, to pursue that - to bring
together, those skill sets and really make it work.
Ben Lynch: Right. OK.
Male: Does that answer your question, Ben?
Ben Lynch: Yes. That's (brilliant). And then, just the second question,
again. (Perhaps) - because I'm not so familiar with your company,
unfortunately. In the (Thermco) division, you've got various activities.
Could you, maybe, just very quickly, run us through your market position
in each of those activities, and who your main competitors are,
(actually)?
Papken Der Torossian: I'm very glad that you asked that question. The (Thermco)
division is headed by a very, very capable executive, (Jeff Kowalsky).
Who is, in my opinion, and I'm biased, probably the best (Thermco)
technologies - executive in the world. He has been the - had a lot of
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experience when customers. He has been leading this for the last ten
years). And the (Thermco) Division is growing very rapidly.
We have very broad customer base on the telco division. We have over 30
customers, worldwide, (Inferion), Motorola, IBM, ((inaudible)). What I'm
saying is that so we have the partnership with MIT, Massachusetts
Institute of Technology, in Boston, where we have developed some of this
((inaudible)) cost of ownership, which is one quarter to one-eighth of
the competitors.
So we are really, have a broad customer base, very strong technology,
very good customer relationships. And the acquisition, we made,
((inaudible)) also, is the lowest cost of ownership in (atmospheric
CVD). So I really think that this acquisition, not only will (we grow) a
broad range of customer base of telco, we'll get the ASML customer base.
And we'll be very excited in introducing both products to those
customers.
Ben Lynch: Yes, but like who -- you know, in (RAPP), in - ((inaudible)).
Papken Del Torossian: We have -- the ((inaudible)) products already has, I
think, six or eight customers, already signed up for the introduction.
And we're in the process of shipping that product for evaluation, in the
next six months.
Operator: Gentlemen, there are no further questions. At this time, I'll turn the
conference back over to you for any additional or closing remarks.
Doug Dunn: No. Just want to thank everyone for taking the time to be here and
ask (these searching) questions. Although, it's now, kind of, 5:30,
here, in the morning, here, we'd still excited by this. So we leave this
conference feeling very positive, very buoyant, very excited, looking
forward to developing our business, successfully, for the shareholders.
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Hold on.
Male: I want to make one comment, also, because, we talked to you -- on this
conference call, we talked about technology, about customers, about
shareholders. Let's not forget, perhaps, the most important set of
people that are here. And that is our employees and, today, Papken and I
begin the process of talking to the SVG employees to ensure that they
see the face of the (new) management, to understand our intentions and
are committed to being here.
So far, the ones we've talked to, and that's been a limited set, so far,
because of the confidentiality of this thing, have been very positive.
So it's our task, now, to ensure that we - our enthusiasm communicates
rapidly, (to all) employees.
So thank you for your time and I'm sure we'll talk, again.
Operator: That concludes today's conference. Thank you, everyone, for your
participation, today.
END
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