Paul van Gerven
27 January 2020

Selling EUV scanners is quickly becoming ‘just another business’ for ASML. It will take another year or two before its profitability is up to ASML’s typical level, however.

It doesn’t take an accountant to spot a bit of an oddity in ASML’s 2019 results. The company’s sales grew from 10.9 billion euros in 2018 to 11.8 billion in 2019, yet the net income was the same – 2.6 billion. What gives? The main culprit, it turns out, is EUV. The share of the next-gen lithographic technique in ASML’s sales is growing, but EUV is not yet as profitable as the other activities.

ASML sold 18 EUV scanners in 2018 and 26 in 2019. As a share of system sales, revenue from EUV increased from 23 to 31 percent, and ASML now derives almost a quarter of its total revenue from EUV systems (apart from selling systems, ASML also gains revenue from what it calls ‘Installed base management’). The technology everybody had to wait so long for has finally blossomed into a ‘regular’ business.

Except for profitability, that is, which is still lagging. EUV gross margin increased from 20 percent in 2018 to 30 percent in 2019 and will continue to grow to an expected 40 percent this year. Only then will it start to approach ASML’s typical overall gross margin of 45-50 percent. And it will eventually match that, assures CFO Roger Dassen.

“You’ll see an increase in EUV gross margin every time we launch a new model,” explains Dassen. “Every time we do, we create so much more additional value for our customers that they’re willing to pay significantly more. If we can keep a good grip on cost at the same time, our gross margin will increase.”

Last year, ASML introduced the NXE:3400C, which at around 130 million euros a piece costs 30 percent more than its predecessor. The company shipped some units of it already, but the bulk will follow this year, hence the significantly higher gross margin for EUV in 2020 compared to 2019. In 2021, ASML will launch the NXE:3400C’s successor, increasing EUV profitability yet again.

EUV will constitute more than 75 percent of litho systems revenue by 2025, ASML expects. Source: ASML Investor Day 2018