Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the ASM first quarter 2026 earnings call. As a reminder, all participants are in listen-only mode, and after the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Victor Bareño, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good afternoon, and thank you for joining our Q1 earnings call. With me today are our CEO, Hichem M'Saad, and our CFO, Paul Verhagen. ASM issued its first quarter 2026 results yesterday at 6:00 P.M. Central European Time. For those of you who have not yet seen the press release, it is available on our website together with our latest investor presentation. As always, we remind you that today's conference call may contain forward-looking statements in addition to historical information. For more details on the risk factors relating to such forward-looking statements, please refer to our press releases and financial reports, all of which are available on our website. Please also note that during this call, we will refer to profitability metrics primarily on an adjusted basis. Reconciliation to reported numbers can be found in the press release and in the investor presentation.
With that, I'll now turn the call over to our CEO, Hichem M'Saad.
Thank you, Victor, and thanks to everyone for attending our first quarter 2026 results conference call. We'll follow the usual agenda for today's call. Paul will begin with a review of our first quarter financial results. I will then discuss market trends and our outlook, followed by the Q&A session. I will now turn it over to you, Paul.
Thank you, Hichem, and thanks to everyone for joining our call today. Let me first walk you through the Q1 financial results. Our revenue in the first quarter of 2026 amounted to EUR 863 million, which was at the high end of our guided range of EUR 830 million ±4%. On a constant currency basis, revenue increased by 16% year-on-year and by 26% compared to Q4 2025. Equipment sales increased by 14% at constant currency and were led by ALD. Spares and Services continued to deliver very strong performance with a 23% year-on-year growth at constant currency. This was the result of continued expansion of our outcome-based services and stronger spares demand in an environment of elevated fab utilization rates. In terms of customer segments, revenue was led by Logic Foundry, which accounted for the clear majority.
For the full year, advanced Logic Foundry sales are expected to show significant growth this year. However, due to quarterly phasing, they were down from the very strong first quarter last year. Mature Logic Foundry, for the largest part from customers in China, increased compared to Q1 last year and rebounded strongly compared to the relatively low level in Q4. Memory sales showed sequential growth compared to Q4 last year and are also expected to grow significantly for the full year, mainly in DRAM. Sales in the memory segment were predominantly driven by applications for high-performance DRAM in HBM-related applications. Sales in the Power/Analog/Wafer segment increased compared to the first quarter of last year, mostly in silicon-based solutions, but from a low base. Gross margin in the first quarter amounted to a strong 53.3%.
This was virtually unchanged compared to 53.4% in Q1 of last year, up from 49.8% in Q4. Gross margin was supported by a favorable product and customer mix, including increased sales contribution from China, which rebounded strongly compared to the lower level in Q4. The gross margin also benefited from a gradual impact from cost reduction programs that we have been implementing over the past few years. We expect the gross margin to be at the higher end of the target range of 47%-51% for the full year. SG&A expenses increased by 8% year-on-year at constant currency, mostly due to higher variable expenses, but dropped slightly as a percentage of sales, demonstrating our ongoing focus on cost control. For the full year, we continue to expect SG&A percentage of sales to drop below 9%. Net R&D increased 11% year-on-year at constant currency in Q1.
We continue to step up R&D investments to support customer transitions to next-generation nodes and to advance our expanding pipeline of opportunities. For the full year, we intend to keep the net R&D within our target range of a low double-digit percentage of revenue. Operating profit increased by a solid 21% year-on-year at constant currency, and the operating margin reached a new record of 33.1%. If you look at the main movements below the operating line, financial results included the currency translation gain of EUR 10 million in Q1 2026 compared to a translation loss of EUR 14 million in the first quarter of last year. As a reminder, we hold a large part of our cash in US dollars, and the related translation differences are included in our financial results.
Our share of income from investments, reflecting our stake of approximately 25% in ASMPT, amounted to EUR 7 million in the first quarter, up EUR 2 million in the year-ago period. Next, the balance sheet and cash flow. ASM's financial position remains solid, and we ended the quarter with a cash position of close to EUR 1 billion. Free cash flow was EUR 48 million negative, mainly reflecting a working capital outflow in a quarter marked by a sharp ramp in activity levels. Days of working capital increased to 69 at the end of March, up from 45 at the end of December. The main driver for the increase was higher accounts receivable due to strong sales increase compared to the relatively lower level in Q4, as well as back-end loaded distribution of sales within the quarter.
CapEx amounts to EUR 38 million in the first quarter, up from EUR 13 million in the same quarter of last year. For the full year, we expect CapEx to be around or to be somewhat above the higher end of the guided range of EUR 150 million-EUR 250 million, with the largest part related to the construction of our new site in Scottsdale, which remains on track for completion in Q1 2027. With that, I'll turn the call back over to Hichem.
Thank you, Paul. Let's now continue with the review of the market trends. The first quarter again confirmed that AI is the main driver of semiconductor demand. Customers continued to add capacity to support the ongoing expansion of AI data centers and the broader infrastructure build-out. This is keeping demand strong in the areas where we are most exposed, especially logic foundry, and we saw this demand strengthening further during the quarter. We have also noted a continuing proliferation and diversification of the AI workloads into the CPU and the power markets. For this reason, we see AI driving strength in all segments of our business. Advanced logic foundry, mature logic foundry, memory, and especially DRAM, and to a lesser extent, power/analog/wafer market. Looking ahead, our strategic view remains unchanged. As AI adoption broadens and demand continues to scale, compute capacity is increasingly the limiting factor.
In semiconductors, this is translating into tighter capacity needs for advanced logic foundry and memory devices, driving higher investment intensity and increasing the urgency of tool deliveries. Against this backdrop, our focus is on execution as we continue to support our customers' expansion plans. The pace of demand is putting additional pressure on the supply chain, but so far, we have been able to manage these rising challenges in close cooperation with both suppliers and customers, reflected in the sharp step-up in our quarterly sales from EUR 700 million in Q4 of last year to a level approaching EUR 1 billion projected for Q2. Turning now to customer segments. Logic foundry again led our performance in Q1, supported by continued strength at the advanced nodes and a sequential rebound in mature logic foundry demand.
Our view is unchanged that Logic Foundry will be a strong driver of our sales in 2026 and also going into 2027. The structural outlook for this segment remains strong. AI-driven compute requirement and the ongoing shift to more complex 3D device architecture and new materials continue to increase ALD and Epitaxy intensity. As we progress through the year, we expect momentum to build further with ongoing capacity addition at the 2 nm technology node, accounting for the largest part of advanced Logic Foundry sales in 2026. This first generation of Gate-All-Around device technology is shaping up to be a large node, enabling new applications in high-performance compute, including AI, as well as advanced mobile and other leading applications. We continue to benefit from the step-up in our served available market at 2 nm, supported by a broadened position in epi and sustained strong market share in ALD.
In addition, we have seen a healthy uptick in demand related to the nodes from 3 nm to 7 nm, driven by Agentic AI. The demand is outstripping supply, which has led to renewed capacity investment. Looking ahead to the industry's next node transition to 1.4 nm, we expect pilot line investment to begin later this year. We are deeply engaged with key customers as they prepare for that transition, and we expect the first meaningful contribution to our sales in the second half of 2026. As we have highlighted before, we expect the SAM uplift of the 1.4 nm to be even larger than what we saw at 2 nm node. At 2 nm, the industry's main priority was to get the first-generation Gate-All-Around architecture into high-volume manufacturing. With Gate-All-Around now in production and ramping, customers have more room to include additional performance boosters.
For ASM, that translates into more functional layers in the transistor stack to further optimize power and performance, including additional dipole layers to enable multi-VT options. Alongside the higher SAM opportunity, we have already secured several key product penetrations, which supports our expectation for a higher ALD market share in the 1.4 nm node. Public disclosure from some leading customers suggests that the 1.4 nm node is designed to deliver clear improvement in performance, power efficiency, and density versus today's 2 nm node. This is well-aligned with ever-increasing AI token demand and the associated compute and power constraints in data centers. As our customers move towards higher volume manufacturing in 2027 and 2028, we expect 1.4 nm to become a meaningful driver for ASM. Next, looking at memory. Demand in Q1 was solid, with robust momentum in the most advanced DRAM technologies used in HBM-related applications.
Continued investment in AI infrastructure is keeping demand for high-performance memory strong and supporting ongoing expansion of advanced DRAM capacity. For the full year, we continue to expect healthy growth in our memory business. Looking further out, DRAM remains a meaningful and strategic opportunity for ASM. From a technology perspective, our customer R&D engagement in memory continue to expand, including development work around new ALD and EPI applications that support the transition to 4F² and very thin FeRAM. As we highlighted at Investor Day, the transition to 4F² is expected to drive a step-up in ALD and EPI intensity and expand our served available market by approximately $400 million-$450 million, based on 100K wafer start per month capacity. Turning over to power/analog/wafer market segment.
The contribution in Q1 remained relatively low, reflecting the soft market condition in broader parts of automotive and industrials. That said, we have seen some pockets of strength in selected areas, particularly in power applications for AI data centers. For 2026, our view is unchanged that this segment should recover gradually from a low base. We remain well-positioned to benefit once demand conditions improve more broadly. Moving on to China. The increase in Q1 was largely driven by the mature logic foundry segment, where we saw higher activity across a broader set of customers, reflecting improving market conditions and to a lesser extent, the power analog segment. In addition, I would like to highlight ASM's ongoing success in winning new positions, which also contributed to our strong performance in China. This demonstrated the continued competitiveness of our solution and the strength of our local team.
Based on current visibility, we expect sales in China to increase for the full year with a stronger contribution in the first half. Now, let's talk about Advanced packaging. As we have discussed during the Investor Day, we are looking into Advanced packaging as another midterm growth area for ASM. We believe that this market is ripe for disruptive solutions in new materials and interface engineering, playing into ASM's strengths. We are engaged with multiple customers on Advanced packaging, and we are seeing some encouraging traction for our innovative solutions. That brings me to the outlook. At current currency, we project revenue to increase in Q2 2026 to EUR 980 million ±5%, and we continue to expect revenue in the second half of 2026 to be higher than in the first half. As mentioned, China sales are expected to be first half weighted.
This means that our other business segments are expected to strengthen from the first to the second half, including continuous solid momentum in advanced logic foundry, higher sales in memory, and a gradual recovery in power analog. While it's too early to provide specific guidance for the full year, based on our guidance in Q2 and a further increase in the second half, it should be clear that 2026 is going to be a strong year for ASM. With that, we have finished our introduction.
Thank you, Hichem. Let's now move on to the Q&A. To ensure that everyone has an opportunity to participate, please limit your questions to no more than two at a time. Operator, we are ready for the first question, please.
Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. We will pause for a moment as participants are joining the queue. First question is from Andrew Gardiner, Citi.
Good afternoon, Hichem. Good afternoon, Paul. Thanks for taking the question. Hichem, if I could just sort of pick up on the point you were making at the end of your prepared comments there. You're saying you will have growth in the second half of the year versus the first half, but obviously the visibility isn't perfect to quantify it for us yet. Previously, you've been willing to talk about your performance relative to the wafer fab equipment market broadly, and that ASM would outperform that. Clearly, WFE expectations are moving quite rapidly as well at the moment. Could you give us an update on how you see the broader market in terms of WFE, and can you confirm that you will still outgrow that in 2026? Thank you.
Thank you very much for the question. Yes, we talked about that in our previous conference call that we're going to at least perform as good as the wafer fab equipment market or better. Yes, we have seen improvement in the WFE market. I mean, we follow very closely what Gartner and VLSI are talking about. We can reconfirm again that our growth in our market, in our revenue in 2026, will at least outgrow the WFE market again. As I mentioned, we see strength in the market and our revenue is strengthening, and we are very confident that we'll be able to at least grow at the WFE market or beat that in 2026.
Okay, thank you. Just a clarifying question, the point you were making on China, in the second half. Is that China down second half on first half, or down year on year? Or perhaps it's both?
No, I think China is really up year-over-year. What we talked about that we see right now, that China is lower in the second half of 2026 versus the first half of 2026. Saying this, and I want to repeat it again, China visibility is not the greatest, and we talked about it. Okay? From that point of view, if there's anything that second half China business that we see right now might also increase eventually. Right now what we see, very soundly, that the second half would be a little bit lower than the first half. Again, that might strengthen in the second half. We don't know.
Thank you very much. That's clear.
Next question is from Nigel van Putten, Morgan Stanley.
Hi, good afternoon. I want to follow up on a previous question on China. Perhaps for the full year, there is some limited visibility, but can you provide us a revenue or China revenue as a percentage of overall revenue for the first half at least, and how that maybe compares to the full year 2025 when you said it's going to be or it came in a little bit over 30%? That's my first question.
Hi, Nigel. Yeah, thank you for your question. Nigel, maybe there's a misunderstanding that's about the visibility, low visibility of China. Right now, okay, our visibility for 2026 is very good. Okay. China or no China, okay? Because, I mean, it's really clear everywhere in our market. Okay, so that's why we are really confident about the market. If there's anything in China, the revenue is going to increase further in second half. Okay? From where we see it right now. China business has been good, and we feel very confident about it.
Yeah. Sorry. Thanks.
Sorry, Nigel. Maybe to add what Hichem is saying, what we see indeed now, at this moment at least, is an accelerated demand. In China, we have a higher H1 expectation than H2, which might still change. We don't know, as Hichem already indicated. Possibly that is because of concerns on export controls. We don't know. One thing is for sure, that the overall sentiment is very good, like in the rest of world. Also AI-related. That in itself a positive too. We also won some more layers, which in itself is a positive. Yeah, there is clearly an acceleration going on, which of course customers don't tell us, but which could be triggered by concerns around export controls and how that will develop further, I think at this stage, nobody knows.
On the full year, based on everything we know today, I think the equipment revenue as a percentage of total sales will be similar to last year. Again, it's really too early to tell. This might change, because for all the reasons I've already mentioned.
Got it. That's really helpful. Now maybe switching to the advanced logic customers, which I understand are providing increased visibility, maybe 8 quarters on a rolling basis. Question would be, do you see any sort of broadening on the horizon? Sort of clear that the main customer remains very strong, but how are the other two doing maybe today, and how do you see that developing into the second half of the year? Thank you.
I think, Nigel, we're working right now with all customers in advanced node. For both the 2 nm node and 1.4 nm node. Then we see that Gate-All-Around is a technology that's going to be adopted by more customers. We feel very confident that's going to be the case. Of course, some customers have better yield or performance than the other ones. We think that Gate-All-Around is going to be really a broad technology node and for a variety of customers.
Right. Thank you very much.
Next question is from Didier Scemama, Bank of America.
Yes, good morning. Good afternoon, Hichem and Paul. Thank you for taking my question. Just a follow-up, actually, to the previous question on the broadening of the customer base in advanced logic. Obviously, your largest customer is doing terrific. On the two smaller ones, is that supposed or expected to strengthen in Q2 or is that more of an H2 driver? I've got a follow-up. Thank you.
Yeah, let me take that question. I think what I can say on that, I don't want to be specific on Q1 or Q2 or Q3. It boils down to customers, but what I can say is at least that based on the current visibility, that all those customers are expected to grow year-over-year. Of course, there is a significant difference with regard to the size of the various customers and the absolute amount of growth as a result of that. We expect all three for the logic part, all three of them to grow year-over-year.
Okay. Thank you. For my follow-up for Q2, would you expect China to be up sequentially or flat, or how should we think about that relative to your overall sequential growth guidance?
What we've said indeed is that for next quarter, we expect EUR 980 ±5%. We also said that for H1 we see an accelerated demand for China coming in for various reasons you already just discussed in the call before. I think it's reasonable to assume that also Q2, China will be pretty good.
Thank you. Should we expect therefore the growth margins in Q2 to remain at a sort of above the long-term guidance given the mix?
Yeah. You know that I'm not going to specifically guide on a quarterly basis for the margin, but the margin will be good. That I can say China is accretive, as you know. Also I think what is also not unimportant, I also want to highlight that, is that the other product mix that we've seen actually in the last few quarters has been very strong, so that also helps. Last but not least, the structural cost improvements that we're working on, which will every year add a little bit, also play a role. Having said that, yes, higher share of China typically is accretive. Yes.
Thank you, Didier.
Thank you so much. Very clear.
Next question is from François Bouvignies, UBS.
Thank you very much. I have a question for 2027. Actually, if we look at your 2026 growth drivers, if I look at the different drivers, I don't see much layers increasing 2026 as growth driver because I think it's mostly capacity. Gate-All-Around was already adding a lot of capacity last year. From a year-over-year point of view, you don't have a lot of incremental layers. Now, if you look at 2027, it looks like you will have a lot of layers opportunity that you laid out at your Capital Markets Day.
I was wondering if we think about this dynamic of layers increasing, is it fair to say that 2027, if we assume the same capacity increase at 2026, that should be a higher growth than 2026? You have more drivers on top of the capacity in 2027 than you had in 2026. Is that the right way to look at it? If you understand my question.
Yeah, I think we understand your question. I think it really depends on growth and demand from that point of view. As the technology node transitions from 2 nm to 1.4 nm, we see the adoption of 1.4 nm starting in the second half of 2026. We see the 1.4 nm buys to increase in 2027, for final production in the first half of 2028. With the 1.4 nm node, there is more ALD and more EPI. As we mentioned, these ALD and EPI layers are mainly in the front end of line for performance level. That's where we have a lot of strength, and that's where we're going to have many more ALD layers.
We are really very happy with the 1.4 nm transition, because of the higher ALD intensity. Also, we have more ALD layers in molybdenum. I think that as we mentioned in our last press release, that we are very happy to be in high volume production at the 2 nm node with our moly ALD. With the transition to the 1.4 nm, we also have one more process of record layer in molybdenum. Overall, the transition to 1.4 will be very accretive to us and we'll be very excited with that transition in the future.
The memory side? Yeah, go ahead, Paul. Sorry.
I think he said it, but I want to make it a little bit more explicit that just for you guys to be clear, that already in this year with the pilots for 1.4, which is also, of course, increased layers, as you know, we already see a very meaningful contribution of 1.4. That's not only in 2027, but it's already starting in 2026.
Good to know. Thank you for the color, Paul. Maybe, Hichem, you didn't address maybe the memory layers and maybe for 2027, and then you mentioned market share higher in A14. Can you maybe explain a bit the higher share here? Is it because just your time is getting higher than the others or you just have more layer than you expected or more than you had before?
Yes. What's the difference between the 1.4 nm node and the 2 nm node? They are both Gate-All-Around. For the 2 nm node, that's an architectural change. A customer didn't want to be very aggressive in putting many functional layers because of the change in architecture. Once we move to 1.4, they have added many goodies, which we call performance layers. Those layers are really mainly ALD layers. They are all in the front end of line where we play a significant. That's where our strength is. Yes. Definitely we see more ALD layers in 1.4 nm. Second thing, as you shrink, and with the Gate-All-Around structure, as you shrink, those layers become much more difficult because of the 3D nature and the shrinking.
With that, since every layer becomes much more difficult, that also slows down the process. With that, you need more equipment from that point of view. The other thing we see is that also there is a higher epitaxy intensity going forward. Overall, that's very positive.
Great. Thank you very much.
Thanks, François.
Next question is from Stéphane Houri of ODDO BHF.
Yes. Hello, good afternoon. I wanted to come back on the Q2 guidance, which is about EUR 100 million above what the consensus was expecting. I'm just trying to understand what led to this acceleration, if it's more advanced logic or memory, and if you could comment also on the lead time at the moment, if they are increasing and if there is difference between the two different segments. Thank you, and I have a follow-up.
I think that the acceleration is happening mainly in the 3 nm to 7 nm node in addition to the Gate-All-Around node. What we have seen lately is that Agentic AI is becoming more important. With that tends to favor using the CPU instead of GPU. The 3- to 7 nm node is really mainly driven with CPU. We see much more demand from our customer in that node. That's really happening super fast at this point in time. We also see strength in memory continuing. Overall, the market is really strong in the leading edge both logic and mainly logic. Foundry, that's really the highest part of the market. Second is really also DRAM is also increasing.
About the lead time? Sorry.
Regarding the lead time, lead time has increased because of the supply chain constraints right now. There's a huge demand everywhere. Yeah, the supply chain has increased, and that's really customer specific. We've been expecting that to happen. That's why we have increased our capacity from like EUR 700 million per quarter in Q4 of last year to about EUR 1 billion per quarter this year. It's going to continue to increase in the second half as we have mentioned.
Okay. That's exactly my follow-up. You're going to be at least EUR 1 billion per quarter in the second half run rate, and there's probably some additional growth coming in 2027, given what you said and what we see in the market. At what point will you fill all your plants and notably the Singapore plant, and that you will have to again increase the capacity?
I think our manufacturing capacity can take care of our business. I think we have extensive manufacturing capacity in Singapore and in Korea, so we're ready for much higher volume. I think that what's limiting, if there's any limit, is really the supply chain that's limiting the capacity than anything else. I think that we'll be able to manage that in the second half. That's why we're confident of increased volume in the second half of 2026.
Okay. Thank you very much.
Next question is from Sandeep Deshpande, JP Morgan.
Yeah. Hi. Thank you so much for letting me on. Maybe you can give a comment on what has changed in your customer behavior versus what you had seen from your customers the last time you reported your results. Has something substantially changed given your very strong guidance into the second quarter? I have a small follow-up.
Right. I think that the market is really strong all over. Has there been any significant change? I think the change that we have seen is really on the PC part, where for PC, on the CPU part where it used to be that AI mostly driven by GPU, but we see the CPU part becoming more important than before, and we see that the strength we see in the 3 nm to 7 nm node, which was not there before. That's really the strength we see. It's mainly the CPU-driven part for artificial intelligence.
Then, when you look at the WFE, you had said 15%-20% at last results. Given your guidance for the second quarter and your indication on the second half of the year, it looks like you're going to grow well over 20%. What is your perception of WFE at this point for this year? Despite your lower exposure in the memory market, you are growing incredibly well. Is this mainly associated with this second half ramp also, with the 1.4 nm where your content is growing, your number of layers you have is growing very substantially, so this is essentially share gain in the WFE market?
Yeah, let me take that, Sandeep. Yes, to give you a very short answer, that's part of it, absolutely. Also basically, I think as Hichem already said, but maybe in different words, we are firing on all cylinders. Every segment of the market is growing significantly. Advanced logic foundry, mature logic foundry, memory, of which in particular DRAM, we see high growth and even power with analog for power-related AI data center applications from a low base, but as a percentage, still high growth. Of course, also plus 1.4, that's where I started with at a decent amount for this year already. Yeah.
Thank you.
Next question is from Adithya Metuku, HSBC.
Yeah. Good afternoon, guys. Can you hear me?
Yes, please.
Yeah. Thank you. Thank you for taking my questions. First, I wanted to talk about 2027. I know you gave these targets of EUR 3.9 billion-EUR 4.6 billion top line at $125 billion WFE number. So call it EUR 4.2 billion midpoint. If you look at WFE numbers now, people are depending on whose numbers you take, 40%-50% higher than that $125 billion in 2027. So my first question is, should we assume that that EUR 4.2 billion could be maybe 40%-50% higher come 2027? What are the nuances we need to keep in mind when we think about where WFE is going and how your revenues might go in 2027? You've clearly talked about outperforming WFE. I presume that will continue. So just any pointers you can give around how we should think about these targets you gave at the CMD, 40% higher, 50% higher.
I've got a follow-up.
Yeah, let me take that. Indeed, I think we said 3.8%-4.7% at CMD, where we assumed $120 billion WFE, which today's view is indeed significantly higher. There's one big difference. The assumption that we took at that time, which was somewhere in September last year, on the composition of the mix, is very different from what we see today. We had by far the largest part of the total WFE, basically logic foundry. While now the relative share of memory is significantly larger than what we assumed, and although we grow a lot in memory, but still our relative share of memory in our business is still relatively small. That's why you will not see the full benefit of that increased WFE dripping down into our numbers.
Having said that, based on everything we see today, we believe that 2027 will be a strong year, but adding 40% or 50%, I would not recommend you to do that. That would give some distorted figure. At the same time, it's a very wide range, yeah? EUR 3.8 billion-EUR 4.7 billion is almost a EUR 1 billion range. Also even within that range, there's still a lot of room to maneuver. More than that, at this stage, I don't like to say.
Got it. Okay, we'll leave 40% or 50% aside, go with 30% then. Thank you, Paul. Just a quick follow-up on the MATCH Act, can you give us some color on how you're thinking about any potential impact for you guys as you think about your China revenues? Any color you can give around how you might be affected. I know it's hard to quantify numbers, but any qualitative color would be great.
Yes. The MATCH Act indeed is being discussed as we speak. If it will happen or not is uncertain. It might or it might not. In what shape it will happen is also uncertain, because at the end of the day, it is important, literally the points and the commas are very important there, especially in relation to how to interpret what is exactly restricted. We are in discussion, of course, with relevant authorities, as you can imagine. It's very hard, and I would love, I could give you some more color to give decent color at this stage. Obviously, if something like that were to happen, it's not a positive. That might be clear. Yeah, how much? I'm really not in a position yet. It's literally too unclear, and too uncertain still on what might happen. I don't like to speculate on that.
Okay, no worries. Thank you.
Thanks, Adit.
Next question is from Tammy Qiu, Berenberg.
Hi, thank you for taking my question. The first one is regarding your very strong short-term momentum. You mentioned that just now it's all driven by the CPU-related incremental demand. I just want to confirm that, have you seen any customer from both logic and memory perspective pulling forward, i.e., asking you to accelerate the shipment of equipment because end market demand is coming so dramatic in the short term, so therefore it's like a pull forward from 2027 at all?
I think every customer wants the tools now instead of tomorrow. I think the demand is really high. For us, it's which customer we ship to first, then the other one. I think like we mentioned, we are fully booked for this year. From that point of view, we have a strong demand in all parts of our business, really. Every part of our business is very high demand. Yeah, we see customer demand is even increasing. Our book is full, so we have to do our best to be able to satisfy the demand that we're getting right now.
Okay, thank you. The second one is, last quarter we discussed that the 1.4 nm is mainly driven by one customer versus others having discussion with you, but still a bit distant away from pilot production, et cetera. I'm just wondering where is the status of those remaining customers? Are they getting closer to make a decision on pilot production or they're still further down the line?
As we mentioned that we are working with all customers to the 1.4 second generation or the 1.4 nm technology node, and we see that business strengthening in all the customers from that point of view. Some of them have a marginal increase and the others have a higher increase, but I don't want to speculate on which customer which, but we see at least a marginal strength in some and a significant strength in other customers. Saying this, I think more likely, like I mentioned, that the 1.4 nm would be more than one customer.
Just to confirm, have you seen any progress during the quarter? All of them have moved forward or just one of them moved forward comparing to last quarter?
Can you repeat your question, please?
Basically, the timeline of the 1.4 nm, last quarter you mentioned that one is active preparing for pilot production, remaining two is still in discussion only at this stage. I'm just wondering, this is three months after, have you actually seen other customer together with a leading customer all moved forward in their timeline for 1.4 nm or just one customer has moved forward instead of all three of them?
I'm going to repeat my answer. We see 1.4 nm strengthening broadly with some strengthening marginally in some customers and a significant increase in other customers.
Okay, thank you.
Thank you, Tammy.
Next question is from Jakob Bluestone, BNP Paribas.
Hi, good afternoon. Thanks for taking the question. Just want to come back to Adithya's question around your ability to sort of take part in growth in memory. My question is, when do you anticipate the transition to 4F² and FinFET for the cell periphery in DRAM to impact your revenues? Is this something that would impact in 2027? Is it 2028? Or do you think it's further out?
Yeah, I can take that question. Yeah, I think basically because I think last time already we mentioned that the pace of adoption customer by customer is different. There might be even a customer that might completely skip it. We don't know yet, but that's to be seen. I think for us, based on what we see and think we know today, I think you should take into account 2028 as the first year where we start to see a positive contribution related to 4F². Might come maybe a little bit earlier, I don't know yet, but I would
I mean, timeline is still a little bit uncertain and very different from customer to customer. Yeah, I think the best color I can give right now is in 28.
Yes. As to what Paul has mentioned here. We see a strength in memory, in 2026, also increasing for us in 2027 and beyond. The biggest increase for us will happen really in the movement to 4F², where we have more ALD layers and also more EPI intensity. Also we're seeing some customers putting in a peri-FinFET in their DRAM, in their roadmap. With that, we're working with them, and since we've been very prominent in our FinFET technology in logic, so we see some customers really pulling in that technology node. With that, we probably will get some more layers as customers put in their FinFET technology node. The biggest increase would be 2028 and beyond, but also we see some increase in 2027.
Understood. If I can just ask a quick follow-up as well. You've mentioned a few times the sort of pickup in 3 to 7 nm transition, and I don't know if you can give any color on whether that's at your largest customer or kind of more broad-based.
Which transition you're talking about, sorry?
3 to 7 nm.
Yeah, I think it's really broad-based. That's really broad-based. It's not only one customer, it's very broad-based.
Understood. Thank you.
Yes.
Next question is from Ruben Devos, Kepler Cheuvreux.
Yeah, good afternoon. I just had one on EPI and HBM. I believe you talked about significant EPI engagements with another HBM customer and expect good news this year. Of course, curious whether two months on, has anything firmed up on that additional qualification? Would that be, let's say, fully incremental to your memory plan in 2026?
Okay. Answering your question, yes, we talked about that and we are engaging with other customer on epitaxy. There's really nothing else to say right now, but we'll let you know if there's any news from that point of view. It's really working with customer on a couple of customers on epitaxy, and hopefully we can share some good news with you in the next investor call meeting.
Okay. Second one, really to just get a feel of maybe the aftermarket sales, right? I mean, you've had a stretch of very good performance in the last few quarters. Again, 23% up the past quarter. Outcome-based is about 25% of the mix. So it looks like, I mean, the target you set at the investor day of 12% CAGR is becoming more of a floor. I was curious whether you could talk a bit about, yeah, the extended visibility you might have now in aftermarket sales, and I can imagine a margin uplift to realize if you manage to make the transition more towards outcome-based. Also besides that, are you able to sort of have the customer pay more per tool for the servicing package in general?
I think that's for services market. Okay. What I mentioned, the services market is really good as you transition in a newer technology node. Because of process complexity, it's very important. Customers need more support from us and for the more advanced node. With the advanced node also, we see a transition to much tighter specification on wafer to wafer and also repeatability on chamber-to-chamber matching and also on system-to-system matching. With that, we have to provide a new solution to customers to improve their uptime and the availability. We think that the services business is going to increase in the future as you transition to tighter and tighter technology node. We see that happening in the area of automation, in the area of robotics, in the area of optics. Those are really the solution that we're providing our customers.
The growth is going to be good in that part of the market. You mentioned that 12% growth. To be honest with you, right now, every part of the market is growing a lot. This year the market is growing over 20%. I mean, latest, you see Gartner talking about 25%. Everything is great. I'm just spending my time, okay, to make sure that we can execute on getting customers the tools in time and make sure that the availability and the execution is top-notch.
Thank you very much.
Next question is from Timm Schulze-Melander, Rothschild & Co Redburn.
Hi there. Thanks very much for taking my question. First one for Hichem, please. Just looking at the technology execution and just trying to scale maybe how much
upside there is to that. If I look at your long-term revenue guide, the high-low range is 20%-25% between the low and the high. Obviously, part of that is the strength of the cycle, maybe part of that is also conversion of existing evaluations and layer wins. Maybe could you just share how much of that is upside potential from layer wins, so we can just think about that in the context of your go-forward revenues? I had a follow-up.
You said the percentage, I didn't hear you well on the percentage. Which percentage are you talking about, please?
Yeah. If we look at your EUR 3.8 billion-EUR 4.7 billion-
Okay
revenue guide. Part of that's going to be cyclical, part of that's going to be your execution in terms of technology wins. I'm just trying to think, is that half? Some kind of scale of that.
If you look into ASM as a business and where we are. One thing I can tell you, I'm really very excited about our technology road maps. I think that things are going in our direction. If you look into logic, you see more and more layers coming in with 2 nm and also with 1.4 nm. ALD intensity is increasing and EPI intensity is increasing, and we're leading share in that part of the market. If you look into memory is moving more and more into FinFET, more and more in 4F², which needs more EPI, needs more ALD. We're going to have more layers, and we feel very confident about it.
If you look into power wafer analog, the power part of the market is the only part of the power wafer analog that's strong right now. That's being driven by data centers, power devices for data center. If the wafer part and the analog part goes up, it's going to be even accretive to us. The service business is also good. In the service business, we're going more and more automation, and we're really getting into even robotics and that customers and leading customer, we're even sending them okay, some robots to improve the system availability, and so on. If you look into advanced packaging, that's an area that we mentioned that we have entered last year. It's a new area for us.
I can tell you that we have so many, believe me, so many interactions with customers, and we have to prioritize which one to do. Some customers tell them, "Guys, we cannot really help you there." With the customers that we're really engaging right now, I can see that they really like to work with us as a company because we're looking into the advanced packaging to a different option. We're looking into that as, okay, what can we do to disrupt the technology? What can we do to provide a solution that's better than what it is right now? How can we put a solution okay, to make sure that, okay, we reduce the thermal mass on advanced packages. We're coming with a new material that improves thermal conductivity.
We're working with customer to make sure that we can seal the devices much better so there is no moisture going in the packages. We're working with customer to actually improve the speed of connection between one chip to the other one, working with them on some innovative photonic layers. I'm sure that with all of this really, I feel very confident where things are going to go from that point of view. Depending where the market is going to go, I'm very confident that we're going to at least match the WFE market growth or actually have a higher growth than WFE. It's a great time for ASM right now, and I see customers really want to work with us. I think our execution has improved. I think our competitiveness is getting even better than before. What can I tell you?
It's the best time to be in semiconductors right now.
A very impressive runway. Maybe just a quick follow-up for Paul, just some housekeeping, actually. You talked about rising utilization rates, but actually Q1 aftermarket sales were down sequentially. On your guide, I think last quarter, your guidance range was ±4%. This time you've widened that range to ±5%, which doesn't maybe sit that well with the sort of improving visibility. Just wondered if there's any color you could share in terms of what you're seeing. Thank you.
Yes. Actually the range is the one I think I referred to is related to supply chain challenges. So far, we've been able to manage it, but at the same time, we have to be on top of it to make sure that we get what we need, to deliver what we need as per our customers preferred, CRD, customer request date. That's a little bit where the range comes from, Tim. It's not so much demand, it's more what can we deliver on time given the supply chain constraints that so far are manageable again. Yeah, we have to be on top of it and nothing can go wrong there.
That's what was in the aftermarket in Q1, and maybe there's some catch-up in Q2?
I don't know if there's catch-up in Q2. I think we had a good Q1. I think we delivered more or less what we wanted to deliver, and we will probably do the same in Q2.
Great. Many thanks.
Thank you, Tim. We still have a number of participants in the queue, but we are running out of time, so let's take one final question. Operator, can we have the last caller?
Final question is from Javier Correonero, Morningstar Equity Research.
Hi. Good afternoon. Thanks for taking my question. In the interest of time, I will just ask one. Your Axus acquisition a few months ago, it's small, but I think there is a lot to unpack there when you think longer term. Axus is specialized in silicon carbide processing. I was wondering if you could explain a little bit more what's the rationale of the acquisition here. Is it more silicon carbide content as we move into the 800 volt data center? Or is it TSMC potentially adopting silicon carbide interposers in the next few years, or both? And of course, it is very early and it's a small acquisition, but do you have an estimate of what serviceable, addressable market this acquisition could open once it is properly integrated with ASM's other additions? Thank you.
Okay. Thank you very much for the question. Yeah, we have acquired this company called Axus Technology, which we're very excited about the acquisition in CMP. They have a very great CMP technology and very innovative, to be honest with you. Like we mentioned, we have acquired this for the advanced packaging market, because advanced packaging needs more and more CMP layer. Many more CMP layer. There's room for another player. Also, it's a technology that's all about interfaces, and I think that we do have some knowledge in interface engineering, so that we will be able to really put our footprint there. Also, CMP helps us with our new materials that we're developing for advanced packaging that I just talked about a few minutes ago. Because, I mean, you deposit the film, but also you need to CMP it.
We want to understand what's the interaction about the material that we're depositing, the new material that we're depositing, and the CMP, because CMP also has a slurry. With a slurry, that means we're talking about new chemicals and so on and so forth. That's really why we made that acquisition. We're working right now on developing the product for advanced packaging. It's going to increase our SAM, yeah, absolutely. It's going to increase our SAM, and we're in the process of doing R&D and so on in this part of the market.
Thank you.
Okay. That concludes the Q&A. Thank you all for attending our call today. Also, on behalf of Hichem and Paul, thank you. Goodbye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.