Thank you, operator. Welcome, everyone. I'm joined here today by our CEO, Benjamin Lowe and our CFO, Paul Verhaagen. ASMI issued its 2nd quarter 2021 results yesterday evening at 6 p. M.
Central European Time. For those of you who have not yet seen the press release, it is available on our website, asm.com, along with our latest investor presentation. As always, we remind you that this conference call may contain information relating to ASM's future business and results in addition to historical information. For more information on the risk factors related to such forward looking statements, please refer to our company's press releases, reports and financial statements, which are available on our website. And with that, I'll turn the call over to Benjamin Lowe, CEO of ASMI.
Thank you, Victor, and thanks To everyone for attending our Q2 2021 results conference call. I hope you are all safe and well. I'm happy that we are joined today on the call for the first time by Paul Verhagen. As most of you know, Paul has joined our company as a new CFO as of last June. We are very fortunate to have him on the team.
Paul comes to us with a lot of experience as the CFO of a Dutch listed company and will play a major role in our company's operations and growth going forward. Next, I want to update you on our plans for our Investor Day on 28th September. As the Themba, as the COVID-nineteen situation continues to be uncertain and also in view of the recent rise in COVID cases in Europe and other parts of the world, we will take a decision on the format of the event at the latest in the first half of September. We will host our Investor Day either in the form of an in person event in London or Amsterdam or as a fully virtual event if it would not be possible to host an in person event. We hope to see many of you then in person or virtually.
The agenda for today's call is as follows. Paul will first review our Q2 financial results. I will then continue with a discussion of the market trends and the outlook followed by our usual Q and A session. Paul, over to you.
Okay. Thank you, Benjamin, and it's a pleasure to be here. Maybe let me first briefly introduce myself. As Espenio already said, before joining ASM, I was a member of Management Board and CFO at Dutch listed Fugro, which is the world's largest geodata specialist. And before that, I worked 24 years at Philips in various financial management and CFO roles in display components in healthcare, Consumer Electronics and Philips Lighting.
And my time with Philips also provided me with the opportunity to live and work in many places Taiwan mainly China, Hong Kong and the U. S. And now being a few months in the company with ASM That has confirmed me in my view that ASM is a great and highly innovative company that is focused on fast growing segments of the semiconductor equipment market with tremendous opportunities ahead. I also look forward to meeting many of you at the call today at our Investor Day or as part of our regular roadshow meetings. So let's now go to the financial results.
In the Q2 of 2021, our revenue increased to €412,000,000 up 4% from the Q1. Compared to the Q2 of last year, revenue increased 29% at constant currencies and 20% on a reported Revenues in the quarter was a touch above the top end of our previous guidance of €390,000,000 to €410,000,000 Service and spares grew slightly, up 3% at constant currencies and decreased 1% year on year on a reported basis. Here it should be noted that the Q2 of last year was particularly Strong for service and spares in part because COVID related uncertainty led customers to ordering additional spares as a safety buffer in that quarter. Our equipment revenue in the 2nd quarter increased 36% at constant currencies Year on year 27% is reported and were primarily driven by strong ALD sales. By industry segment, revenue in the 2nd quarter was led by foundry, followed by memory and then logic.
Combined logicfoundry sales decreased sequentially, but were still very strong and continued to account for the largest part of sales. Memory sales reached a quarterly high following a strong order intake in Q1, we have the 3 d NAND sales slightly larger than DRAM. Gross margin amounts to 48.1% in the 2nd quarter, in line with the indications that we provided last quarter. While slightly down from 94.5 percent or 49.5 percent in the Q1. The gross margin in the second quarter was still at a very solid level and again supported by a positive mix.
Looking at the second half year, we continue to expect that compared to the high level in the first half, the gross margin will be somewhat impacted by a higher number of evaluation tool sales. As explained in previous calls, The sale of an evaluation tool is a positive forward sale indicator as it typically takes place upon successful completion of the evaluation, but it tends to have a negative impact on the gross margin in the quarter in which the sale of the evaluation tool is recorded. SG and A expenses increased by 15% compared to the relatively lower level in the Q1 and increased by 12% year on year. As a percentage of sales, SG and A expense decreased from 12% in Q2 of last year to 11% in the same period this year. The R and D expenses on a reported basis increased by 10% compared to Q1 and dropped by 8% year on year.
The decrease compared to Q2 last year was fully explained by lower impairment charges, which dropped from €5,000,000 to €1,000,000 and higher capitalization, which increased from €16,000,000 to €20,000,000 So excluding impairments and IFRS effects, the underlying R and D increased by 12% year on year. And the operating profit in the 2nd quarter increased 35% year on year and decreased slightly compared to Q1. Below the operating line, results include a small currency translation loss of €2,000,000 And this compares to a translation gain of €16,000,000 in the 1st quarter and a translation of €6,000,000 in the same quarter last year. As a reminder, we hold the largest part of our cash balance in U. S.
Dollars and the currency translation differences are included and our financial results. Then some info on ASMPT. Results from investments, which reflects 25% share of the net earnings from Asian PT increased to €16,000,000 in the 2nd quarter, up from $11,000,000 in the Q1 and up from $7,000,000 in the Q2 of last year. ASMPT reported sales of $667,000,000 up 19% to Q1 and up 38% from Q2 last year. Bookings amounted to $943,000,000 in the quarter, down 7% sequentially and up 140% year on year.
Now going back to the ASM consolidated results. So the ASM orders in the 2nd quarter were €516,000,000 up 26% from the 1st quarter and up 73% from Q2 last year. As we already preannounced on July 1, The order intake clearly exceeded the guidance that we provided with our Q1 results, which was in the range of €410,000,000 to €430,000,000 The upside was largely driven by customers in the LogicFoundry segment putting in orders into Q2 that were previously mainly expected to be received in Q3. Looking at the breakdown in bookings by industry segments, foundry represented again the largest segment in the 2nd quarter followed by logic and then memory. Combined logicfoundry bookings surged to a new quarterly record level in Q2, substantially above the previous record of Q1 last year.
Memory bookings decreased slightly compared to the record level in Q1, but were still at a very solid level and for the larger part driven by DRAM. Now turning to the balance sheet. We ended the quarter with €465,000,000 in cash, down from €498,000,000 in the previous quarter. The drop in the quarter was due to almost €100,000,000 dividends paid to ASMI shareholders, which was in part offset by free cash flow of €69,000,000 positive including €22,000,000 in dividends received from ASMPT. Free cash flow in Q2 was driven by continued strong level of profitability and partly offset by an outflow for working capital of €38,000,000 And working capital increased because of the higher activity level and the back end loaded sales in the Q2.
The underlying quality of working capital continued to be healthy. CapEx in the first half was €22,000,000 We still expect CapEx for the full year to be in a range of €60,000,000 to €80,000,000 driven by increased spending on the expansion and upgrading of our R and Then regarding share buyback. Yesterday, we announced the start of the new €100,000,000 program as of today, 28th July. An authorization for this buyback program was announced on the 20th April. In addition, The earlier announced cancellation of 500,000 treasury shares became effective on July 21st.
And with that, I would like to hand the call back to Benjamin.
Thank you, Paul. Let's now look in more detail at Trends in our markets. If we look at the market environment, 2021 is shaping up to be a strong growth year for the semiconductor industry. End market demand remained brisk across the board in the first half of this year with inventories at low levels and several parts of the market impacted by shortages. The semiconductor market is now expected to grow by more than 20% in 2021.
Expectations for WFE, our wafer fab equipment market, have also further increased. We now expect WFE spending in U. S. Dollar terms to grow by a high 20s to low 30s percentage this Looking at the WFE market by segment, logicfoundry spending remained strong in the first half as customers continue to build out capacity for multiyear growth drivers such as 5 gs and high performance computing. In foundry, which is our largest segment, the majority of investments continue to be focused on advanced nodes, 7 nanometer, 5 nanometer capacity additions in the Q2.
In Advanced Logic, investments were mainly related to 10 nanometer capacity extensions. These are areas where ASM has strong share of wallet. We project logicfoundry to remain very strong in the second half of twenty twenty one, supported by continued spending on the current advanced notes. In addition, we expect the contribution from the first investments in the next node in the LogicFoundry segment to increase in the second half of this year and going into 2022. As highlighted at previous occasions, we expect that the upcoming node in the combined logicfoundry segment will drive a further meaningful double digit growth in our served available market.
In memory, equipment demand was also robust in the first half On the back of solid increases in key end markets such as PCs, game consoles, 5 gs smartphones and data centers, conditions also started to become tight in parts of the memory market. As Paul just mentioned, we achieved record high memory sales in the Q2, although it should be mentioned that memory is still a smaller part of our revenue. In 3 d NAND, we have been gradually increasing our presence and we benefited from overall healthy spending levels in the first half of the year. In DRAM, the adoption of high k ALD in the periphery, as we discussed earlier, continues to be a solid driver for ASM. Last year, we had our first contribution and this year in 2021, the Hi ks metal gate application will already account for a sizable part of our DRAM sales.
In memory, overall demand is expected to remain pretty healthy in the second half and especially supported by DRAM. We also previously touched on the recovery of the analog power market. This market suffered from the impact of COVID-nineteen last year, but near the end of last year, we saw the market recovery. This recovery has continued through the first half of this year and we expect to see a meaningful increase in sales from this market for the full year. Next, I will provide an update on the supply chain and capacity situation.
In terms of our manufacturing capacity, we now have the benefit of our new and expanded facility in Singapore, which has proven to be well timed. After the transfer was completed earlier this year, Q2 was the 1st full quarter with our new facility up and running. As discussed in previous calls, this has significantly expanded our manufacturing capacity and also gives us additional flexibility to meet future growth. Since we move into the new facility, we have been steadily increasing headcount to increase the output. Next, the supply chain situation.
Against the backdrop of strong customer demand and growth across the broader industry, supply chain conditions further tightened during the quarter. This was further impacted by new lockdown measures in the last couple of months in Southeast Asia following a worsening of the COVID situation since last April, including in Malaysia, which is an important part of the supply chains in our industry. Our global ops Team did a great job in the Q2 in close cooperation with our supply chain partners and customers. As a result, In the Q2, we were largely able to mitigate the impact of supply chain constraints, for instance, by having ordered earlier than usual as part of our learnings from the COVID-nineteen disruption of the Q2 of last year. As a result, we were still able to meet our customer requirements and to deliver a strong financial performance in the quarter.
Supply chain conditions continue to be tight with lockdown measures in Southeast Asia continuing into the Q3 so far. As we mentioned in the press release, continued tight supply chain conditions are reflected in our sales guidance for the 3rd quarter and they are also expected to have some impact in the 4th quarter, although we do expect the 4th quarter sales to increase compared to the level in the 3rd quarter. Moving on to the longer term outlook. If we then take a look at the longer term trends, The outlook continues to be very positive. The accelerated trend of digitalization coupled with secular trends such as in 5 gs, Artificial Intelligence and Edge Computing is driving ever increasing demand for advanced semiconductors, not only in terms of volume, but also for faster and more power efficient semiconductor devices.
This creates lots of opportunities for ASM. We will talk more about our long term expectations at our Investor Day, but it is clear that ALD and epi will continue to be key growth markets for us. In logicfoundry, an important driver in the next years will be the transition from FinFET to gate all around. Epi is a key enabling technology to create the nanosheets, the heart of the gate all around transistor structures. We believe we are well positioned to increase our share in the transition to gate all around, underlined by our new Epi customer win that we announced last quarter.
Also in ALD, we expect that gate all of our will require many new applications and we are heavily engaged with all of the leading customers. Memory is another growth area for ASM as ALD is a key technology to address increasing complexity and the need for new materials in both DRAM and 3 d NAND. Based on our R and D engagements and our first Production tool of record wins. We are confident about a meaningful further increase in our memory position as our customers transition to the next and next, next note starting in 2022, 2023. Next, I would like to highlight the launch of our IntraPit ESA tool that we announced a couple of weeks ago.
In the FDA market, we addressed 2 segments. Advanced CMOS represents the largest growth opportunity. Since the launch of our Intrepid ES tool some years ago, we have made substantial inroads in this market. And again, we are extremely pleased that we recently added a new customer for an advanced gate all around application. The other segment is that of analog power and wafer manufacturers.
It is a smaller market segment, but it represents a meaningful part of ASM's epi sales as of today. Manufactured and older technology nodes, this market offers healthy growth prospects driven by, for instance, electric vehicles, The Internet of Things and opportunities in China. With the launch of our new tool, the Intrepid ESA, We will now offer the benefits of our IntraPit tool, which is high productivity and improved film performance also to customers in the 300 millimeter power analog and wafer maker markets. Now Now let us look at the guidance that we have issued with our Q2 press release. For the Q3, on a currency comparable level, we expect sales of €400,000,000 to €430,000,000 3rd quarter bookings on a currency comparable level expected to be in the range of €510,000,000 to €530,000,000 and also include orders that are planned to be shipped in 2022.
Continued tight supply chain conditions are reflected in our sales guidance for the Q3 And based on the current visibility, also expected to have some impact in the Q4, although we do expect 4th quarter sales to increase compared to the level in the 3rd quarter. With that, we have finished our introduction. Let us now move on to the Q and A.
We'd like to ask you to please limit your questions to not more than 2 at a time, so that everyone has a chance to ask a question. All right, operator, we are ready for the first question please.
And your first question comes from the line of Stefan Howari from ODDO. Your line is open. Please ask your question.
Yes. Good afternoon. So I will limit myself to only 2 questions. The first one is about the tightness in the Supply chain, so you said that you intend to mitigate the impact on Q2. Could you help us quantify Hi.
How much it does impact your Q3 guidance? And how much upside can you see on Q4 If the COVID-nineteen situation in Asia was improving? That's the first question. And the second question is about Gross margin, so you have confirmed that the gross margin in H2 will be down compared to H1 because Of the commercialization of the evaluation tool, how much are we talking about? Are we getting back below 45% Or are we just talking about a couple of points?
Thank you very much.
Thank you, Stefan. I will answer the question regarding the Supply chain and then I will let Paul explain to you about the gross margins. So jumping into the Supply chain, maybe it's a good thing to start by maybe explaining that. We actually do a lot of So what we do in our manufacturing facilities is primarily what you call final assembly and So we outsource a lot to contract manufacturers that build the modules, subsystems for us. But of course, we also buy from Component suppliers.
And we have seen that supply chain has been tight as we enter into 20 And the worsening COVID situation in Southeast Asia did not help that. In fact, a couple of months ago, We ended up or we saw in some countries lockdowns or what they call especially in Malaysia movement control orders being implemented. Now what that really means is that a lot of our suppliers have been forced to cut back on the amount For the number of people that they can send back to or allow in their factories. So for example, in Malaysia, a lot of our suppliers are now working with just 60% And of course, with a 60% headcount, you're going to see a Decrease in output. For us, we have actually taken some learnings from COVID-nineteen from The Q2 of last year.
So we have implemented a couple of things. One was to try to order earlier Than usual. That's the first one. 2nd one was to try to look for alternative suppliers. And both of those I think are Actually helping to mitigate some of the risks that we see in the current supply chain.
In the second quarter, I think We were basically able to mitigate most of the risks and we met customer, let's say requirements fully. In the Q3, we think that because of the continuing restrictions in some of these countries, we might See some impact and hence we have factored this into our Q3 guidance. As far as Q4 is concerned or the 4th quarter is concerned, we do see that perhaps if the The measures or the lockdown restrictions continue. This may also impact our revenue plans and that's the reason why we are giving are describing that in our guidance as well. Now coming back to the Q3, I think there will be some impact.
But by and large, We will still be able to meet, let's say, the requirements of our customers. We, of course, are continuing to work as much as We can with our suppliers to minimize any kind of risk and to actually make sure that There's not going to be any impact. Stefan, I think to your question on what is going to be, let's say, The outlook for the Q4 and so on. As we have given in our guidance, we do expect that the 4th quarter will be higher than the 3rd quarter. Depending on the let's say supply chain Conditions, it is at least it is at this moment a little bit difficult for us to quantify.
So we are from giving any kind of guidance as far as the Q4 is concerned, but we are confident that it will be higher than the 3rd I pass it now over to Paul for the gross margin, let's say, explanation.
Yes. Thank you, Benjamin. On your question on the gross margin, yes, you know margin is impacted by quite a few factors not only eval tools. Most important, of course, being the mix, in particular application mix as I think the company has communicated multiple So everything else equal, which of course will never be the case with Anyhow, if I would isolate the eval tools to your question, there could be indeed a few Vantage points impact, not larger than that. But of course, as I said already, there will also be other impacts Impacting the second half margin like product mix, currency maybe, etcetera and it could go Either way, but Evel Tools as such max a few percentage points.
And you expect,
I would say a degradation of the mix in the second half or you do not expect this degradation?
Yes. We're not guiding specifically on the mix as you know. We do guide on the revenue. We do guide on the order intake. So I'm not going to guide on the mix now if it would be more or less favorable.
But what we've said and I think there An implied message is that for the second half, we do expect the margin to be somewhat lower than the first half because of a larger Impact of eval tools.
A few percentage points. That's what you said, right? Okay. Thank you very much.
Thank you. And your next question comes from the line of Keegan Bryce from Barclays. Your line is open. Please ask your question.
Hey, guys. Thanks for taking the question. 2 from my side. The first one on Logic. I'm sure you've all seen that your Logic customer plans to reenter the foundry market and now are to aim for technological parity.
How do you feel about your position with that logic customer across both ALD and maybe potentially epitaxy? And what sort of gains are you expecting for 7 nanometer node or I guess what they now call for? And then for my second question, one of your peers has been talking up the industry's potential shift to 3 d DRAM. Do you have a view on whether the industry might go in that direction? And if it eventually does, what sort of gains in ALD would you likely expect to see?
Thank you.
Thanks. So on the first question that you have, we will not of course refer to Specifics, but I think we all saw the announcement and I think it provided a lot of color to the industry. With our logic customer, I would say that we are doing very well in terms of The ramp on the existing node and we also heavily engage with them on qualifying some of our solutions, both ALD and epitaxy for the next nodes. And as we have said, if you look at foundry versus For example, IDM is there a difference for us? It doesn't really make a lot of difference for us.
Our biggest, let's say, factor is that the demand for advanced semiconductors continue to be there, Because if that demand is there, it's either foundry that has to make it or it's IBM that has to make it. So on that note, I would say things are looking positive. On the 3 d DRAM or let's say the transition from planner to 3 d DRAM, I think by and large the market is coming to a consensus that at some point in time in the future, It's probably necessary to switch from planar to 3 d DRAM. Now timing of course is still a question mark. And in fact, it is expected that planar DRAM still has a couple of nodes to go before it runs out of And has to convert into a 3 d DRAM.
As far as we are concerned, this is still an early stage, But we are already engaged in discussions with some of the DRAM customers trying to find out what are their plans. And if they have, let's say, any specific milestone in mind, based on what we can see today, We think that the transition to 3 d DRAM could potentially also be Positive in terms of ALD usage, because you have more complicated, let's say, 3 d Structures you also have new materials being used and these are all good drivers of ALD usage. At the same time, We also feel or let's say potentially there could be an increase in epitax use and that is still being let's say worked out. I think over time, we will know more. But at this moment, generally, if the transition happens, we are prepared and we are positive.
Very clear. Thanks, Benjamin.
And next question comes from the line of Birgier Shimama from Bank of America. Please ask your question.
Yes. Good afternoon. Thanks for taking my question. Maybe a question first on Sort of your appraisal of gate around at this stage. Obviously, you are engaged with the first deployment and The first recipe on gatefold around production to leading foundry customer.
I wondered if you could share with us what you think The capacity needs are for that particular customer e. G. Are they only in the early phase of deployment of that technology? And perhaps if you could give us a sense of the applications that are supporting that Capacity ramp. And then related to that, so you touched on one of your Logic customers and you feel like you're quite comfortable with your portfolio addressing their gator rounds capabilities whenever that comes.
I just wondered As your other foundry customer, do you have a feel for where you might start to see orders For that particular recipe. And I've got a follow-up. Thank you.
Didier, thanks a lot. So in general, We are heavily engaged with all 3 logicfoundry customers in Guillermo Del Valle both in the ALB space and also in the epitaxy space. We announced last quarter that we already had the first win. As far as the game all around channel is concerned that we have been selected by 1 of the key as the production tool of record. For the other customers, of course, we are also heavily engaged trying to get our tool qualified and selected.
This goes both ways for both Epi and ALD and the engagements that we have These three customers continues. In terms of timing or capacity, I think that's still left to Because at this stage, I think it's still to a large extent fine tuning the process and making sure that they have the right process integration yield and so on. So we will probably have Wait to see when they move this into high volume manufacturing. And I think when only when they do that then we will probably be able to see what kind of capacity that they are planning. So this information at present I think is still a question mark.
In terms of Again, our engagements with all the 3 major logicfoundry customers, we are actually very Encouraged. I think we have good momentum in both the epi and the ALD space. And as As we continue, we will probably see our served available market expand because we do believe that gate all around is going to lead to a fairly significant increase in usage of ALD and also at Taxi.
Yes. Very useful. Maybe just a quick follow-up in terms of Your comments on the WFE growing high-20s to low-30s in U. S. Dollars.
At least for the product part of the revenue, so minus services, would you expect to outperform that number in U. S. Dollars?
So if you look at what we have described in our press release, In the Q2, our equipment revenue actually compared to the year before grew by about 30 6% on a constant currency basis. That's for the Q2. And if we look at maybe The first half of this year versus the first half of last year, we also look at our equipment revenue growing at greater than 30% at constant currency. Now what Yes. We have actually, let's say, described is that we do believe that our 4th quarter revenue is going to be higher than our 3rd quarter revenue.
But at this moment, it's kind of Difficult for us to quantify that, because of the supply chain, let's say, restrictions. But if you look on the longer term, we are very confident of our ability to continue to maintain a leading share in logic and foundry Space, which is the fastest growing area for us also for our equipment sales. And we're also making significant inroads and progress in memory, which as Paul has mentioned earlier, the 2nd quarter memory sales was Highest in our company's history. So we continue to, let's say, grow significantly. And in the longer term, we do believe that we will outgrow the WFE Okay.
But we will not comment on the shorter term, let's say, question because of the uncertainty over the Q4, let's say, numbers.
Perfectly understandable. Thank you very much.
Thank you. And your next question comes from the line of Sandeep Deshpande from JPMorgan. Your line is open. Please ask your question.
Yes. Hi. Thanks for letting me on. My question is regarding your Epitaxy tools. When we look at your market share in Epitaxy, is still not moved very much.
You've announced various wins. So should we be expecting to see your epitaxy revenues and thus your Market share in epitaxy increased significantly over the next few years. And then secondly, in ALD, You've talked about wins for ALD within the gate stack. Have you engaged with customers beyond the gate stack in ALD? Thank you.
Sandeep, thanks a lot. On epitaxy, again, just to clarify, We have 2 parts of or we play in 2 parts of the market. 1, of course, is the advanced CMOS and the other part is in the power analog Space. Now in the advanced CMOS, we had our breakthrough to the biggest foundry at 7, now continuing into 5 And we will also continue probably into 3. And for the other 2 main logicfoundry customers, We have actually announced that we have been selected as the production tool of record for 1 of the customers as the channel for Gate Olavang.
So there we are making progress, but we probably will not see a significant growth in terms of revenue until they go into high volume manufacturing. Now having said that, with the other Two customers who where we are not in high volume manufacturing yet, we are very comfortable with the engagements that we have. I think the engagements are all positive and we do look forward to getting Events are all positive and we do look forward to getting selected and hopefully supporting them when they move into higher volume manufacturing. The other part of the epi market that we play in, which is a smaller part of our total market, but which is Still meaningful for us in terms of epi is the power analog and sensor market. That market actually was barely affected last Because of COVID-nineteen, we actually saw most of the investments are canceled after COVID hit.
But at the end of last year, the recovery started and the recovery actually has been continuing during the first half of this year. That part of the market is actually doing very well and we do expect that our sales from that part of Market will continue. Overall, when we look at both parts of the market that we are playing in, we do expect that we will continue to grow our Market share in the advanced CMOS space and also continue to leverage on our strengths in the power analog Sensor space. So longer term, we do expect that over the next couple of years, we will be able to grow our market share for the Epi The second question Sandeep I think that you have was beside the gate stack, do we make any penetration in terms of For ALD, the answer is yes. We are working very closely on various applications.
As I alluded to a little bit earlier, I think the transition from FinFET to Get All Round presents to us Significant opportunities because of the increasing epi and ALD usage. And we are engaged with all three customers on working on those kind of applications. Again, we need to get qualified, but we are confident of The engagements and then it's just a question of when they go into high volume manufacturing.
Thank you. Our next question comes from the line of Mark Heffelin from ING. Your line is open. Please ask your question.
Yes. Thank you. First, can you explain the phasing that you now see When orders come in and when you actually see that into the revenues. So see the order intake this quarter And also the guidance for next quarter, quite a lot higher than the revenues and what you guide for. How should I see that?
Is the order intake that you've seen is that was that exceptionally strong in these two quarters? Or is this something that this is above the €500,000,000 level that is something that you think can be sustainable? Only thing is then the moment it comes into your revenues is a bit further out than what you usually saw.
Mark, thanks. So maybe just a little bit of clarification first. We book the orders when we get the actual purchase order. And because of the timing of When our major customers actually release the paperwork or the purchase order, sometimes you get some fluctuations or some variations. In the Q2 as we have announced in our earlier press release, we saw customers placing orders Earlier some of them were expected in the Q3, but they decided to place them in the Q2.
We are not going to speculate on the motivations of our customers. But overall, it's positive for us because it gives us much more visibility what is going on to happen in the next quarter or next, next quarter. With our relatively shorter lead time compared to some of the other WFE equipment. We usually do not have a very long, let's say, visibility spanning several quarters. So this actually is a welcome thing for us.
This quarter, again, we are seeing that customers are trying to place orders earlier, hence the higher guidance as far as order intake is concerned. We do know that some of the orders may or some of the orders will end up as 2022 deliveries. Again, we will not speculate on the reasons or motivations behind that, but we are actually happy and positive that we are given more Visibility as far as what the planning is in terms of at least having visibility into the next 2 maybe even 3 quarters.
Okay. But then maybe to give a bit more feel for me. Is this Then this is a pull in of orders, so for example, the orders that you get it now in earlier, you won't get them into the future? Or do you believe that this above €500,000,000 level is sustainable for longer term given the growth of the market and your market share?
Mark, I think for the Q2 that as we have described, but there was a pull in. I think for the Q3, it's As I said, we're not going to speculate on motivations of our customers, but they seem to be placing orders a little bit earlier than usual. Whether we continue at this pace, whether it's going to be pull ins or whatever, I think We will not speculate as to what is going to happen in the Q4 and we will see how our customers react or behave. But at this moment, we cannot comment on that.
Okay. And then my second question is On your OpEx that increased a bit over the quarter. I can assume naturally with the growing revenue and also the outlook for the coming quarters, what do you expect there going forward? What kind of growth level is likely? And what kind of operational leverage should you therefore see?
Yes. Thanks for the question, Mark. This is Paul speaking. I think for OpEx, there's 2 things. 1, of course, is R and D, where, of course, we intend to continue investments in line With the growth of the company that's very important of course to maintain our maybe even reinforce our leading positions that we have.
For SG and A, I expect to grow that more moderately. So there we will see some productivity gains And you will see some benefits from operating leverage. And in the Investor Day, I might give some more I want to shed More light on that very likely. Then on the, let's say, manufacturing costs, as Benjamin already explained, We do mainly assembly. So the fixed cost part of our cost of goods is relatively low.
So there will be maybe a little bit of operating leverage, but not a lot because the vast majority is variable cost. It's an assembly organization and it's not a very high fixed cost type of organization. So we will see a little bit there, but don't Expect too much in the cost of goods sold.
Okay. And did the second quarter include some costs for that you had to counter all The supply chain constraints?
Yes. What we've seen in the second quarter is In terms of supply chain constraints, I think the key impact we've seen there is, let's say, phasing within the quarter. We communicated about the back end loaded sales, which partially was driven due to simply income material And the timing. And 2, yes, for certain parts, we had to divert to other suppliers to the extent released by customers. And that might have increased cost a little bit, but not a lot.
Overall, I think the cost is very well managed. I have not heard anything in that order. So I don't expect any material impact there in Q2. Otherwise, I would have been told, I'm pretty sure.
Okay. Thank you.
And next question comes from the line of Robert Sanders from Deutsche Bank. Your line is open. Please ask your question.
Yeah. Hi, good afternoon. Just one question. Just if you could Give us an update on the high k metal gate opportunity in DRAM. Has there been any developments there?
And second question related to this is will you at the Capital Markets Day give a served addressable market kind of Look for 2025, is that what we should expect? I'm assuming you're now going to have to roll in FP and a bunch of other things not just single wave ALD. Thanks.
Rob, thanks a lot. So on the first question regarding the high We are very let's say encouraged. I think what you see today in terms So let's say a high performance DRAM with the high gate metal gate, We are basically the tool of record. And originally, we kind of expected that high performance DRAM was just a DRAM was just a small portion of the overall DRAM market. But it looks like there's a lot of Increasing applications that requires a high performance DRAM.
So this year, we are very, let's say, encouraged with our sales for high ks metal gate applications in DRAM. And in fact, in the prepared remarks, that was one of the points that We made that our increasing DRAM sales this year is led by the high ks metal gate Applications. So that's going well for us. In terms of the addressable market over the next couple of years, yes, the quick answer is We hope to be able to share with everyone at our Investor Day a couple of things. 1, of course, would be The strategy of the company, the technology, maybe a little bit of explanation into how we See, note over note changes, transitions and so on.
And of course, we would We'd like to be able to give everybody a view of where we see ourselves growing over the couple of years. So we really hope to see everybody as many of you as possible either in life Virtually because we think that this would be very good for us to share with you in a more To all understand the more detailed information of our company.
Thanks Excellent.
Thank you. And your next question comes from the line of Tommy Kue from Berenberg. Your line is open. Please ask your question.
Okay. Thank you, guys. So I'm really wondering from a market share perspective, can you give us an idea? I know previously your market share was quite solid within foundry and logic market. And can you talk about has the dynamic actually changing with Gate all around seems to be a very good opportunity for everybody?
And also, Eivat has been trying to go to this market using thermal tools as well. Is the market getting more competitive than it was Previously for you. And also for the memory market, you talked about the opportunity from high ks metal gauge DRAM. And also potentially, we may have Some new 3 d NAND application as well. Can you talk about what the competitive landscape in those markets?
Is that worse than what you are seeing in foundry and logic market
Tammy, thank you very much. The I think what we see Maybe let's talk about the logicfoundry market first, which is where we have a leading position. I think we do not see, for example, a significant increase in competitive pressures or anything. The competition has always been there. And we compete with them on new applications.
But we are actually very confident that we will continue to maintain our leading share or position in the logicfoundry market segment. Does gate all around have an impact? I think it's actually More a positive than anything for us because of the significant increase in usage of ALD, which we think that we Of course, still have to compete with our peers, but we are confident and comfortable and encouraged by the interactions The engagements that we have with the main logicfoundry customers. In terms of memory, as we said, The high k metal gate, the application is helping us to increase our sales in DRAM. But that is just the first of New ALD applications that has now been adopted and moved into high volume manufacturing.
We have over the last 2, 3 years been also working on other which hopefully becomes adopted and also move into high volume manufacturing in the 2022, 2023 time frame. Similarly, in 3 d NAND because of the higher stacks, higher spec ratios, material changes, We have been working for new ALD applications, which again, we hope over the next years this will become move into high volume manufacturing. Overall, we feel that we will be able to increase our share position in memory. And we think that some of these applications will in fact move into high volume manufacturing in the 2022 to 2023 time frame.
Okay. Cool. That's helpful. Thank you so much. And on the market share relating to Appy, you mentioned that since last quarter you'll be getting more market share with the Appy tool into new applications.
Can you share with us that are you getting the new market share because of your tool design is different from your Competitor or it's just because of the relationship is now mature?
I think We believe that we are winning business, because we have a superior solution that not only offers a better cost of ownership, but there are other elements in terms of performance uniformity layer to layer, For example, uniformity that we are able to provide a better solution to our customers than the competition. And this is the reason why we are increasingly being adopted. I do not believe that it is Just because of relationship. Relationship is important. But at the end of the day, I think our customers are savvy enough that Whatever selections that they make is going to be heavily based on merit and that is cost of ownership and performance.
Okay. Thank you.
And your next question comes from the line of Nigel Van And Pieten from Kempen, Johan Sopen. Please ask your question.
Thanks a lot. Good afternoon. I have a brief follow-up on the 2nd half impact from the evaluation tools. Now I can imagine that you don't see any negative impact from supply chain constraints to actually sort of Get these tools qualified. So could you maybe give us a bit more sense in terms of the actual amount?
I mean, I remember that these tools are sold at about 0% gross margin. So the more you sell, the lower gross margin is and there's maybe some phasing. I mean also the 3rd quarter Revenues now may be a bit lower. So if that chunk of evaluation tools would be relatively higher, then that would have a more Significant impact in the Q3. So actually long story short, could you maybe just provide the €1,000,000 Sales you expect from the evaluation tools in the Q3?
Nigel, first of all, good afternoon. And I need to maybe address a correction. The gross margin for eNotes is not 0%. It's some percentage. It's slightly or let's say lower than what we would normally sell, let's say, in terms of to our customers.
And the reason for that is when we decide on an Evo tool, the customer also has to invest in the Evaluation of the tools. So whether it's in term of fab space, sometimes they have to come up with the utilities and so on. It's actually a very much a joint effort from both sides from the equipment supplier and the customer. And because of that, we tend to offer to them at Slightly lower price when we put in an EBITL2. In terms of how much do we expect, I think this is I think which we at least I don't have a full number or an accurate number in my head.
But in the Q3, we do expect a larger number of eval tools to be completed. In other words, the evaluation to be completed and to be accepted. And that's when we have to book the tools as revenue at a slightly lower gross margin. And hence to Paul's Point that that will potentially have an impact on our overall Q3, let's say gross margin. But as we also have mentioned Before, the eval to completion of the eval tools, the evaluation is generally also a very They've signed that it has been accepted and the next step is it goes into high volume manufacturing.
Yes, yes, clearly, I mean that is understood. I think there's also going to be a positive cash flow effect if I'm not mistaken. It's just that I think Paul said The second half is going to be impacted. It now seems it's the bulk of it is going to be in the Q3. I'm just hope we don't get the press release and there's like a 42% gross margin.
We're trying to get ahead of that. Maybe just to help you clarify that also to the other participants in the call that I think we should expect A more significant impact Q3 relative to the Q4. Is that correct?
No. We have we will have the impact On the 3rd and the 4th quarter, so in the second half. Benjamin just zoomed in on the 3rd quarter because it's the next quarter of course We talk about, but there will be an impact for the second half. As I mentioned before, it will be maxed a few points. Everything else equal now, because again there's many Or factors that do have an impact on the margin, but it will be both in the Q3 and Q4.
That's the current expectation.
Okay. Thank you.
And your next question comes from the line of David O'Connor from Exane BNP Paribas. Your line is open. Please ask your question.
Great. Good afternoon. Thanks for squeezing me in here. Maybe one or two quick follow ups Benjamin from my side to previous questions. Just going back to the sustainability of this €500,000,000 kind of quarterly order level that we see now over Q2 and as you guided for Q3.
Just to clarify, are you indicating that we should not expect this level of orders beyond Q3 given that you suggest they stem from more pull ins? Or do you think the logic foundry market can strengthen further to sustain these level of orders? That's my first question. And then a quick one on the evaluation tool. Benjamin, can you give us any color on what types of applications or specifically tools are being used for at your customers?
Thank you.
Sure. I think as I have tried to explain, it's difficult for us to kind of give you any color as to the sustainability as you Call it of the order intake. We again will not speculate on the motivations of our But last quarter, we saw them placing orders earlier than usual than normal. And this quarter, again, we are Going to see them placing orders earlier than what they normally do. Now the good thing of course is it gives us a better visibility.
But at the same time, given our relatively short lead times, there is nothing to stop them from going back to placing orders We have a shorter lead time or they might continue doing this. And at the same time, it also depends The especially in the logicfoundry space, our customers' investment plans, I think a lot of these plans have been announced. And do we see them coming into, Let's say play when do we see them coming into play and when will we see them place orders? I think all those are, let's say, questions Vince, that we cannot give a definite answer now. And hence, we will continue to just monitor and react or adapt to whatever plans that our customers have and make sure that we support their requirements as much as possible in terms of how fast they want to place orders and how fast they want deliveries.
The question that you have on the evaluation tool, generally, if it's for an application that is already proven And already in high volume manufacturing, we do not do an evaluation with a new customer or an existing customer for that. So evaluations are usually done for only primarily new applications. And it's because part of it requires that we sort of work together with the customer to optimize develop and optimize also the process and sometimes even the hardware. So EL tools are usually in that sense targeted at the Next notes. So it's not for the current HVM note that is being ramped up, but for the next next notes.
Understood. Thank you.
Thank you very much. And your next Question comes from the line of Tim Schulz from Redburn. Your line is open. Please ask your question.
Hi there, Benjamin, Paul. Thank you for taking my question. Just one follow-up on this eval tool Question for the second half. Obviously, this is in some parts a normal course of business that you'll have eval tools being revenued in most Maybe stepping away from a euro value, could you just maybe just give us some color as to what the normal number of tools would be and how many Additional tools you would be seeing added on top of that into the second half? And then just on that Application question.
In the eval tools that you'll be putting through the revenue line in the second half, is there is it skewed more towards ALD or epi please?
So maybe because I don't have the actual number with me to be honest. As you correctly mentioned, during the normal course of business, we have e belt tools probably every quarter. And it's not planned in any form or shape or way, not by us or not by our customers, But we have a larger number than normal of eBell tools that will be completed in the 3rd and the 4th quarter. And this is the reason why we are kind of sharing this information with everyone. If you look at And this number is one that I remember.
If you look at our press release, we have at the end of the second quarter about €78,000,000 of eL tools on our books. I would say that The larger part, the majority of that is for ALD tools. There's probably a couple of Epi tools, But the big portion of that is primarily for epitaxy tools sorry ALD tools.
Got it. That's very helpful. Thank you.
And the final question will We have follow-up from Vigir Shimama from Bank of America. Please ask your question.
Thank you very much. I'll be very quick. First, Benjamin, a question on capacity requirements for the coming years and I guess related to that CapEx. So ASML have commented that demand for the UV tools is substantially higher than expected going forward. They're going to significantly increase capacity over the coming years in part because of sort of automotive application image sensors etcetera.
So I just wondered What are the implications for ASMI? Do you guys need to also add capacity or outsource more perhaps to get those modules off the ground and sustain that level of demand? And I've got a very timely follow-up on Gate All Around. Just wanted to clarify your opinion on Gate All Around and whether or not this has got any impact on the act on the number of EUV layers? Thank you.
First question on Fasti, as you probably know, we just moved into a new manufacturing facility in Singapore. So I would say in terms of timing, was very fortunate. At the same time, we are at this moment sufficient in terms of our internal capacity. Now over the next couple of years, do we need to add capacity? That has to be dependent on demand.
We have also shared that when you look at our new manufacturing facility in Singapore, there's actually two floors of Manufacturing space. And at this moment, we are only using one of them and that's sufficient for our current needs. When we need To go into the next level, again, will depend on demand. But at this moment, we are not planning to So in terms of capacity, even if demand should increase very significantly over the next, let's say, 18 to 24 We can expand fairly quickly. So internal capacity, we do not really have, let's say, Concerns.
Does gate all around have more impact on or let's say increases EUV or decreases EUV. I am actually not in a position to offer my opinion. But I think if you look at gate all around and it's another shrinkage scaling down, you probably have to find ways that you need to use EUV to achieve that. So my guess and again this is just my opinion you probably need more
Brilliant. Thank you so much and have a great day.
Thank you very much.
There are no further questions at this time. I'll hand back the call over to our CEO.
Thank you very much. I would like to thank everyone for your attendance Today, also on behalf of Paul and Victor, and I would like to, again, let everybody know that we are going At our Investor Day on 28th September. Although the format is not finalized, we hope to see as many of you as