Thank you all for standing by, ladies and gentlemen. Welcome to today's ASM International Full Year 2020 Earnings Conference Call. At this time, all participants will be on a listen only mode. There will be a presentation followed by a question and answer session. Please be advised, call is being recorded.
I would now like to hand the call over to your first speaker, Mr. Victor Baretto. Thank you.
Thank you, operator. Welcome, everyone. I'm joined here today by our CEO, Benjamin Low and our CFO, Peter van Baumel. ASMI issued its Q4 2020 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, together 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 Ngo, President and CEO of ASMI.
Thank you, Victor, and thanks to everyone for Ending our Q4 2020 results conference call. I hope you and your families are all healthy and safe. Let me start with some highlights. With record high sales and bookings, ASM delivered again a strong performance in the 4th quarter. For the full year, our sales increased by 18%, the 4th consecutive year of double digit growth.
The pandemic turned 2020 into a tough year for all of us. And while customer demand remained strong throughout the year, It created challenging operating conditions for our employees. I want to thank each and every one of the ASM team for their tremendous dedication and teamwork in 2020. Next, I would also like to point to the announcement that we made last month That Mr. Paul Verhagen will be proposed as new CFO and Board Member.
He will succeed Peter Van Bommel, who will retire at the upcoming AGM as previously announced. We are very pleased that Paul agreed to join ASM. He has a strong reputation and brings a wealth of experience. In addition, we also want to inform you about our And to hold ASM's 1st Investor Day later this year on September 28. Please save the date.
By that time, hopefully, we can meet again in person. The agenda for the rest of today's call is as follows: Peter will review our Q4 and full year financial results. I will then continue with a discussion of the market trends and outlook, followed by the Q and A. With that, over to you, Peter.
Thank you, Benjamin. In the Q4 of 2020, our revenue increased to €347,000,000 which is up 10% from the 3rd quarter and up slightly from the Q4 of 2019. In comparing with the 2019 numbers, I make an adjustment for the €159,000,000 settlement proceeds that were included in our financial results that year. Revenue came in at the higher end of our 4th quarter guidance of €330,000,000 to €350,000,000 Currencies had a negative impact on the 4th quarter revenue of 5% year on year. As a reminder, ASM's currency exposure is fairly balanced between both revenues and costs.
That means that currency effects for us are largely Translational in nature. Equipment sales in the 4th quarter increased 14% from the 3rd quarter. Spares and Services were slightly lower sequentially, but increased 29% year on year and accounted for approximately 21% of our total sales. By industry segment, Revenue in the Q4 was again led by Foundry, followed by memory and then logic. Logic sales decreased sequentially, but we're still at a solid level.
Foundry sales increased to a new record high in the quarter. The memory segment was relatively steady compared to the 3rd quarter, with DRAM decreasing somewhat compared to the high level in the Q3 and NAND showing a solid uptick. In line with our earlier indications, The gross margin decreased to 45.2% in the 4th quarter, which is down from the almost 50% that we reached in the 3rd quarter. As we explained last quarter, the 3rd quarter margin was exceptionally high due to an unusually strong sales mix. However, for the next couple of quarters, we anticipate again a relatively favorable sales mix And as a consequence, gross margins to be above of the mid-40s percentage level.
Below the operational line, results included a currency translation loss of €15,000,000 which is mainly explained by the depreciation of the U. S. Dollars compared to the end of the Q3. As we discussed at earlier occasions, we hold the largest part of our cash in U. S.
Dollars and the currency translation differences included in our results. Our new orders in the 4th quarter increased strongly to €379,000,000 which is up 25% from the 3rd quarter and up slightly year on year. The order intake was above our guidance of €340,000,000 to €360,000,000 Looking at the breakdown in bookings by industry segment, Foundry represented again the largest segment in the 4th quarter followed by Logic and then Memory. The foundry bookings decreased compared to the record high in the 3rd quarter, which remained at very strong levels. Logic showed a strong uptick compared to the 3rd quarter, And memory orders were also up strongly, both in DRAM and in NAND.
The equipment bookings in the 4th quarter We're led by very high ALD orders. Compared to relatively low levels early in 2020, We also saw a strong uptick in epi bookings in the Q4. Let's now have a closer look at ASMPT. The normalized results from investments, which reflect the share of the net earnings from ASMPT, increased to €27,000,000 in the 4th quarter versus the €6,000,000 that we had in the 3rd quarter. The 4th quarter results included a book gain related to the joint venture into which they entered for their materials business, which is partly offset by a provision related to the streamlining of their portfolio.
Excluding those one offs, ASMPT's profit contribution grew to €11,000,000 in the quarter. ASMPT reported quarterly sales of US634 $1,000,000 which is up 15% compared to the 3rd quarter and up 11% year on year and also above the company's guidance. In terms of order intake, ASMPT has a strong end of the year with 4th quarter's bookings increasing to a record 4th quarter level of US658 $1,000,000 UP 13 percent Q on Q and 48% year on year. For the full year 2020, ASMPT sales increased by 6% to approximately US2.2 billion dollars The net profit increased from $80,000,000 to $210,000,000 in 2020. Let's have a look on the 2020 results and therefore we are turning back to ASMI's consolidation operations.
And slightly over €1,300,000,000 our net sales in 2020 increased 18%. Equipment sales grew by 16%. Spares and Services increased by a solid 29% and represented 21% of total sales. Our product line sales were led by our ALD product line, which had an excellent year and continue to represent more than half of our equipment revenue in 2020. The gross margin in 2020 increased strongly from 42.6 percent in 20.90 percent to 47%.
Apart From the positive mix effect in the second and the third quarter, the improvement was also driven by efficiency improvements. Operating expenses remained under control during the year. SG and A expenses increased by 6%, And that increase was due to higher variable costs and specific investments and further strengthening of the organization. The total R and D expenses increased by 14%. That's excluding the IFRS effects.
The reported R and D increased by 25% and included higher impairment costs compared to 2019 and an increase in amortization. The operating profit for the year increased strongly by almost 50% with the operating margin improving from 19.5% to 24.6%. Now turning to the balance sheet. We ended the quarter with €435,000,000 in cash, which was slightly up from the €430,000,000 at the end of the previous quarter. We generated Free cash flow of €47,000,000 in the 4th quarter.
In addition, we spent close to €30,000,000 on share buybacks. The free cash flow for the full year 2020 amounted to approximately €120,000,000 which is down from slightly over the €200,000,000 that we had in 2019. A continued solid level of operating profit was offset by a few things. First of all, An increased outflow of more than €100,000,000 for working capital an increase in CapEx As we continue to invest in the growth of our company, the higher investments in the evaluation tools that we had in 2020 and negative currency effects. Regarding the working capital, the increase in 2020 was largely Explained by higher accounts receivable.
This in turn is caused by the heavily back end loaded sales in the 4th quarter. The underlying quality, however, remains healthy, illustrated by the lowest relative level of overuse we ever recorded at the end of the year. The higher level of accounts receivable is largely a timing effect. In the course of January, a big part of those receivables has already been collected. And for the Q1 as a whole, We expect the relative level of accounts receivable to decrease.
Inventories increased in the 2nd quarter As part of our efforts to mitigate supply chain risks related to the pandemic and in the Q4, our inventory position decreased and was largely normalized again. In terms of CapEx, we spent €93,000,000 in 2020. This is up from the €49,000,000 in 2019. A large part was again related to our new manufacturing facility in Singapore. In addition, as we already outlined with our 3rd quarter results, We invested in the expansion and modernization of our R and D labs.
For 2021, We will maintain CapEx at a higher level due to the R and D lab related investments. In 2020, we returned approximately €165,000,000 in cash to our shareholders, of which €67,000,000 in the form of share buybacks and almost €100,000,000 in the form of dividends. The €100,000,000 share buyback program that we started in June last year was completed for 64% as of December 31 and for 94% at the end of last week. We will propose a regular dividend of €2 per share to be paid over 2020. This is a year on year increase of 33 Compared to the €150,000,000 we paid over €20.90 and that's excluding the extraordinary dividend of last year.
Our policy to use excess cash for the benefit of our shareholders remains unchanged. With that, I hand the call back over to Benjamin.
Thank you, Peter. Let's now look in more detail at the trends in our markets. Even though COVID-nineteen led to a sharp drop in GDP, the overall semiconductor market has been resilient and grew by 7% in 2020, as work from home and remote learning accelerated the digitization trends in our society. With a strong finish of the year, the wafer fab equipment market increased by a mid to high teens percentage in 2020. Both the logicfoundry and the memory markets showed solid increases.
Demand in logicfoundry was for a large part Driven by spending on the most advanced nodes of 10 nanometer and below, despite inventory corrections in parts of the markets earlier in 2020, The memory market further recovered in the second half and memory equipment spending showed a healthy increase for the full year especially for 3 d NAND. 2020 was also a year of strong progress for ASM. We booked our 4th consecutive year of double digit growth. In logicfoundry, our sales were driven by solid spending on leading capacity and the strong share of world gains that we have achieved in the most advanced nodes. Foundry continued to be the largest segment for us and grew by a strong double digit percentage In 2020, after already doubling in 2019, Logic was the 2nd largest segment.
After strongly increasing in the previous year, sales were steady at a high level in 2020. Looking at the next note for our logicfoundry customers, we confirm that our served available market will further increase with a meaningful double digit percentage. And in view of our R and D engagement and tool selection so far, We expect to further increase our share of wallet with logicfoundry customers transitioning to the next nodes. Memory was the 3rd largest segment and recorded a healthy double digit sales increase. While for the broader market, 3 d NAND was relatively stronger.
We had relatively stronger growth in DRAM. In 3 d NAND though, We have seen a strong uptick in bookings in the 4th quarter, which we expect to be reflected in a healthy revenue increase in this segment in the first half of twenty twenty one. In DRAM, our sales were driven by the first tool wins with leading memory customers for high ks metal gate applications in high performance DRAM devices. In memory in general, We remain strongly focused on substantially increasing our served available market over time. Last year, we have seen a Strong increase in our R and D engagements for the NEX and NEX NEX nodes in both DRAM and 3 d NAND.
For the shorter term, however, please keep in mind that our exposure to memory is still relatively modest as logicfoundry represents the larger part and therefore the main driver of our sales. A strong area of growth this year has also been the Chinese market, both for the broader WFE bucket and for ASM. Our sales from China grew strongly in 2020 and contributed for the first time a double digit percentage of our total sales. The investments that we have made to strengthen our position in China in recent years started to pay off. In addition, The part spent by domestic chip manufacturers on relatively more advanced nodes, albeit still a minority of total spending in China, strongly increased last year.
In addition, we further expanded our customer base in China last year. In terms of products, 2020 was again a successful year for our ALD business with strong double digit growth driven by logicfoundry and our inroads in DRAM. In our other product lines outside of ALD, Momentum slowed somewhat in 2020 following the strong growth in the previous 3 years. As explained in earlier calls, this was caused by our relatively higher exposure in this product lines, especially Epi, To the Power Analog Markets, Power Analog was one of the very few weak spots in 2020 As they are for a large part driven by the automotive and industrial end markets, which were impacted by COVID last year. Visually demand in the power analog has been picking up again.
In the Q4, our FE bookings strongly increased compared to lower levels earlier in 2020, driven by multiple Intrepid product orders as well as the recovery in the power analog market. From a strategic point of view, we believe We have made strong progress in strengthening our position in the epi market in 2020. We have been working towards new customer tool of record selections for our IntraPIC product and we expect to increase our market share once these customers start investing in the next node. I'd also like to highlight the very strong performance of our spares and service business in 2020. As already mentioned by Peter, This business grew sales by a solid 29% last year.
For smaller part, growth in our spares and service was driven by temporarily higher customer demand, mainly in Q2 due to COVID related supply chain risk. For the larger part, the drivers were the strong increases in the installed base in recent years as well as the first result of our investments in outcome based Services. Traction with customers is solid and we expect the contribution of these new value added Services to further increase in the forthcoming periods. An important highlight in 2020 was also our new state of the art manufacturing facility in Singapore. After a delay caused by COVID-nineteen, The facility was completed in the Q4.
In December, we shipped our first tool and we completed our move from the old facility to the new one in late January. Using the first phase of the new facility will already increase Our manufacturing capacity twofold as we discussed earlier. Looking at 2021, Our industry has started the year in good shape. In the semiconductor market, the strong momentum at the end of 2020 has continued into the 1st part of 2021. The strength of the increase in demand has led to shortages in parts of the market.
And against this backdrop, WFE spending is expected to increase by a mid teens percentage this year. Solid spending is expected for logicfoundry, supported by a continued strong demand for the most advanced nodes. In memory, on the back of an expected rebound in key end markets such as smartphones and following limited capacity addition in recent years, A further recovery in memory spending is projected in 2021. A key priority for our company in 2021 will be to further drive our investments to make sure we are going to benefit from all the opportunities in front of us. We will further increase R and D spending to develop the many new ALD applications that are on our customers' roadmaps.
In addition, as also mentioned by Peter, we will keep CapEx at higher level in 2021 to expand and modernize our R and D Labs. Investments will be for instance in our own tools for customer demos as well as advanced metrology tools that we use as part of our R and D processes. Longer term Prospects also look strong. The megatrend of digitalization will feel explosive growth in data and significant investments in key areas such as 5 gs, high performance computing and autonomous driving. Advanced Semiconductors will play a key role to enable these trends such as in AI where machine learning algorithms require Ever faster and more power efficient processes.
ALD will be a key technology to keep the industry on more slow. We expect that increasing device complexity, new materials and ever thinner films With higher required conformity will drive substantially higher demand for ALD in the medium term. In the transition to gate all around transistors for instance, ALD and also epi will be key enabling technologies. To sum up, prospects are strong and ASM remains well positioned. Now let us look at the guidance that we have issued as part of our Q4 press release.
For Q1 on a currency comparable level, we expect revenue of 3 and €80,000,000 to €400,000,000 while we expect our revenue in the second quarter to be at the same level. For the Q1 bookings on a currency comparable level, we are also expecting this to be in the range of €380,000,000 to €400,000,000 With that, we have finished our introduction. Let's now move on to the Q and A.
We'd like to ask you to please limit your All right, operator, we are ready for the first question.
Thank you. Thank you. The first question is from the line of Hagen Dries from Barclays. You may ask your question. Your line is now open.
Just 2 from my side. I know it may be a little bit early to talk about full year guidance for 2021, but Would it be a reasonable assumption to sort of model you outgrow in WFE? And then one quickly on 3 d NAND. 1 of your largest competitors has been talking up The new gap flow ALD platform, particularly as the industry moves to 128 layers plus, do you guys have the similar capabilities with your current platform of tools? And then sort of How do you feel about your competitive position in 3 d MAND more generally?
Thanks guys.
Stephen, thanks for the questions. I think the first question was directed at how do we see ourselves for the full year, whether we are going to outgrow the WFE market. I think we as we have stated in our press release, we see at this moment a mid teens growth in WFE And we have guided very strong results for the first half of the year, but I think it's a little bit early for us to say With any kind of color whether we will be able to outgrow the WFE market. So I think that we should leave it at that. On Getfield, that's a good question.
It's an ALD application that will become Increasingly important as the number of layers in 3 d NAND increases. And we Especially this application is especially suited for ALD because you need very thin films With very high conformality and we are engaged with, I would say, multiple 3 d NAND players Trying to work together on the process and trying to qualify our tools. Does that Ki Bin, sorry, does that answer your question?
Very clear. Thanks, Angel.
Thank you. We'll take our next question. It's from the line of Stephanie Hawrey from ODDO. Your line is open.
Yes. Good afternoon. Thank you very much for taking my question. Actually, I have a question On the evolution of the gross margin, as you have stated that you will see better gross margin in the next Quarter, it has already happened twice in 2020. So can you explain why you have a better mix?
Is it About spare parts and services? Or is it new tools that you are delivering or epipaxi? What is the question of mix here? And also, can you remind us, going from 5 nanometer to 3 nanometer, What is the increase in ALD intensity that would help us to understand the trajectory going forward? Thank you very much.
Yes. Let me take that gross margin question first. Yes, we have seen several our gross margin is still very much So impacted by the development of the mix. So as what we have Explained earlier in the previous calls, the second and the third quarter Extremely strong. We had still a very healthy mix in the 4th quarter, however, a little bit less than in the second than the third quarter.
And for the 1st and the second quarter, we see again a stronger mix as what we have seen in the 4th quarter. Beside that, there is an underlying trend becoming visible that our efficiencies are improving. So as a consequence of that, we see also that, on the one hand, mix differences play an important role and will remain an important role. On the other hand also, the efficiency improvements are helping us also to bring our margins relatively On a better at a better trend. So that's the color that I can provide on this one.
Okay. So can why don't you, in fact, if it becomes structural, upgrade your guidance, Not saying it's 40% to 45% anymore, but maybe 45% to 50% if that's what it is becoming.
Yes, I think that's a good question and we will have a look at that.
Okay. Stefan, on the transition from 5 nanometer to 3 nanometer, I think what we are seeing is It's basically the same as what we have always explained. When you see a node transition, basically, We see a double digit percentage increase in the number of ALD layers or applications, and we do not see That deviate from that. So we are going to see when we move from 5 nanometer to 3 nanometer, a double digit Percentage increase in the ALD applications.
Okay. And does APeTEXE follow the same trend?
I would have to qualify your question based on whether it is 3 nanometer continuing FinFET or whether it's 3 nanometer gate order valve. I think the increased demand will probably come from Gate All Around because Epi becomes a more key
Thank you. We'll take our next question. It's from the line of Robert Sanders from Deutsche Bank. You may ask your question.
Yes, hi, good afternoon. Maybe the first question would just be on DRAM, some of the logic like layers that you talked about in the past. Can you confirm that the opportunity is a sort of similar size to what you saw with FinFET in terms of steps, But that it is a market considerably larger in capacity. So just trying to understand what's the opportunity here, but it sounds like it could be Potentially very large, so it'd be great to get an update here. And then on the second question would just be on your China comment.
Can you confirm you're still shipping to SMIC or are you not? Thanks.
Thank you, Rob. On DRAM, as DRAM scales and becomes smaller, I would say that as we have always said, the layers become more logic like. Now whether they will become as big as FinFET, I think that is still to be, let's say, investigated. But we definitely see an increase in the DRAM serve available market as they become smaller. So I hope that answers the first part of your question.
On China, we will refrain from commenting on customer But with the current U. S. Restrictions, the impact for us is limited As we are still able to ship a majority of our product portfolio and it's only for a minority of our products That we now have to apply for an export license. So we are still continuing to ship a lot of our products into China. And for those that we need an export license, we follow the due process.
Thanks a lot.
Thank you. Our next question is from the line of Domenick Olyzeski from Morgan Stanley. Thank you.
So first question is just Around epitaxy, are you starting to see a trend towards greater dual sourcing on epitaxy products, which is supporting a growth Outside of the shift towards gate or around as you just described, obviously, because you just described better order trends for Epi in the last quarters? And then the second question is just more on timing. Is it correct to assume from ASMI's perspective that the customer spending related to Industry N3 starting in the second half of twenty twenty one.
Thank you, Dominic. On the Epi question, We cannot say for sure whether the customers are doing dual sourcing. It could be, but what we do see is that when you move to gate all around, For example, the conductor carrying channel, which was previously very much Edge Define is now Epi Define, and this is causing an increase in, for example, usage of epitaxy on top of the normal, Let's say, Epi taxi layers. So we think that when we move to get all around, we will see increasing Usage of Epi applications and of course, we engage with all the foundry Customers, players to try to qualify our tools at this moment. In terms of entry or 3 nanometer timing, this I think is still Open.
And I think we are engaged with our customers, some of them a little bit further than others. But we do think that at some point in time, they will go into high volume manufacturing for N3. Whether it is going to be this year, next year, I think that's up to them.
Thank you. Thank you. The next one is from the line of Arkal So, Tanya from Credit Suisse, you may ask your question.
Hi, good afternoon, Benjamin and Peter. Maybe one follow-up on the epitaxy point. I think you mentioned very strong bookings number in Q4 from Epi, which was driven by power coming back. Can you also just help us understand as to how much of opportunity is still there for you In terms of getting traction with a broader customer base there in Epi, we know that there are factors like gate all around in the future. But If you just think about FinFET or DRAM, have you exhausted like where are you in the process of Engaging with a broader set of customers in that area.
And is that opportunity still out there or you're already working with a lot of those customers?
Thank you, Acho. Good question. And the quick answer is absolutely not. So basically what we do is for the most advanced, let's say, technology leading edge technology, Our epi is used for high volume manufacturing at 1 of the foundries. And essentially what we have been doing and continuing to do Last year is engagements with other foundry, logic players and also Memory players to try to qualify our Epi tools for the next and the next next nodes.
So that's continuing. And when we see or when they when Altus qualified adopted and when they move into high volume manufacturing, I think that's where The opportunities will come for us and our served available market should increase. In terms of besides The leading logic, foundry and memory players, FPSO has a portion of their business in what is called the Power Analog segment. And of course, in the earlier part of 2020, because that segment was Heavily impacted by COVID-nineteen. You saw automotive, industrial applications all slowing down.
The investments in that segment basically slowed down significantly. But recently, we have been seeing, especially late Q4, early this year, that the power analog market is coming back And coming back in a fairly strong way, and we have been getting quite some good order flow from that segment, Which will translate into stronger IP revenue for us during the first half of this year.
Right.
And thanks, Benjamin. And maybe a follow-up on one of the questions that we keep getting asked is about Clearly, we are entering 2021 with a very strong WFE market outlook. A lot of people believe that is there a risk that we see H1 as a peak of WFE And then we go into second half with signs of slowdown. I know it's difficult to talk about second half at this stage, but Are you have you seen any signs of that, like from speaking to customers that, that is a risk that could eventually play out? Or is it too early to talk about the slowdown in second half?
I think for this call, we were in Kind of a fortunate position because we are reporting late. So we could also give you some color on what we see As far as maybe the next quarter is concerned. So overall, again, we see a very strong and healthy First half, is there anything to show or tell us that the second half may have a hiccup? I would say at this moment, we do not see that. But as to how big or how much the second half will be, For us, it's a little bit too early to say.
Yes, makes
sense. Thank you, Benjamin.
Thank you. The next question is from the line of Nigel Van Buren from Canton and Co. You may ask your question.
So, Apotaxy, because in the prepared remarks, you kind of indicated that when new customers start investing, You'll be part of that. So do you now have sort of have been qualified as a tool of record at new customers for the more advanced node?
Sorry, Nigel, can I ask which product are you referring to?
Sorry about epitaxy.
That's exactly okay. I think we are still in the process of doing that. And I think especially for the next nodes, I think a lot of the customers are still not that they have not finalized the full, let's say, process. So we will still take a little bit of time, but I think we are in a good engagement with those customers. And of course, we hope That eventually, we will be adopted.
And when they move into high volume manufacturing, they will use our tools for mass production.
Got it. Thanks. And then, Pinner, your comment about CapEx being elevated in 2021, should we take the Q4 2020 as sort of the base? Or how should we model that into the year?
I don't think that you should take the 4th quarter is the leading part. The 4th quarter was a cumulation of a few things. Benjamin already mentioned, we're Finalizing our Singapore building, so that's now done. And we had already the initial investments In improving our lab environment. So when you ask me, is there will be €820,000,000 for the year?
That will be absolutely not the case, Nigel.
Okay. More towards maybe 2020, which I guess was already elevated. Just It would be helpful if you can slightly quantify that. Just it's more of a maintenance question anyway, but it would be good to not have too high numbers there.
What we have said is that it will be somewhere between the €60,000,000 and
€80,000,000 Okay.
Sorry, I missed that. Thank you very much.
Our next question is from the line of Mark Haselink from
Good afternoon. Thank you. The first question is, we've been over the last couple of quarters been talking about Increased engagement on a number of products, and we just discussed Epi. But I was wondering on some of the other products, Did you already move into being qualified? So maybe on the DRAM side or on the NAND side or maybe even on the on N3?
Mark, thanks. So Of course, on the first of all, maybe let's talk about the memory part. In DRAM, we started quite some time ago. We have been qualified for the high ks metal gate In the DRAM periphery transistor, so right now what you see, for example, in what is called in the industry as High performance, DVAM. I think they are using our ALD to for the mass for the high volume manufacturing.
And besides that, of course, we have been engaged in other layers or other applications That support, for example, EUV transitioning to sorry DRAM transitioning to EUV Yes. Because EUV reduces the patterning but creates a lot of other layers to support the EUV, and then we are engaged with that as well. In NAND, of course, an earlier question was whether we are engaged in gap fill and so on, we do that and several other Applications and mainly in memory, we are looking at next and next, next nodes. So I think the market or the serve available market for us should increase from 2022 onwards. Right now, we are just building our positions.
In logicfoundry, 3 d sorry, at 3 nanometer, We have always been engaged with the main foundry players with many different applications. As I explained earlier, when you move from 5% to 3%, we see a double digit percentage increase In terms of ALD layers and applications, and we have been heavily engaged with that. And when they move into high volume manufacturing For 3 nanometer, it should open up new possibilities for us.
Okay. So does it imply that from the high number of evaluation tools that you have in the field, of the most of those Opportunities, you still need to be qualified, still in the engagement phase?
It depends. I cannot generalize, but What I can say is, you are correct. You look at the higher or the significant increase in engagement or eval tools On our balance sheet, at the end of 2020 compared to 2019, basically that is telling you that we have a lot of engagements in the field. Some of them are more advanced, some of them are, let's say, early stage. But it's I cannot give you a generic comment as to Whether some of them or at what stage they are because they are at different stages and they vary also at different customers.
Okay. That's clear. Well, the question is on the Singapore facility. You say you I appreciate your capacity twofold.
Yes.
And I expect that you won't be capacity Chris, from your side, but if you look at your supply chain, is it tight at the moment? Is it more difficult to get everything in?
I would say that at this moment, we don't really feel that we are constrained by the supply chain. I think there's some tightness, that's probably true, but there is nothing that is kind of hampering our ability to meet The requirements of our customers.
Okay, clear. Thank you.
Thank you. Our next question is from the line of Tammy Chewy from Berenberg. You may ask the question.
Hi, guys. So I have a easy one here. You haven't been talking about your competitive Position for a while now. So from my understanding, a couple of sand equipment players have been looking at this gate all around market And they do have solutions, for example, selective etching and also ALD. Can you help me understand what's the dynamic of The AOD tools, especially for gate over router for the future, do you see any intensified Competition trying to address this new application or that's something you already got multiple design wins, so everything can be safe?
Thank you, Tammy. Of course, when we go into gate all around and there's New requirements, new applications that are required and because Gate All Around It's the next generation transistor architecture that perhaps could last for the next decade, Just like what FinFET has done over the last decade. So of course, I think everybody wants to try to get qualified. We have already been working with the key players actually for quite some time. In fact, I would say that usually our evaluation or let's say a process that we work with the customers Yes, we work with them already 2, 3 years before this becomes a reality.
So in other words, forget all around, we have Engage doing development work with them for quite some time. One of the areas that you have mentioned As a selective deposition, which perhaps has been touted by some of our peers, it's of course also an area that we are Engage with all the logic and foundry players. So we are in the process of working together with them to define the requirements to meet their requirements and see whether this fits into the whole the overall process integration. I would say that by and large, most of the new, let's say, processes or applications that are required for gain over valve, We have some kind of engagement already with the 3 major players, not 100%, but most of them.
Okay. That's helpful. And just further to your point, you said that you've been engaging with the chipmakers to see what's their understanding and what's their requirement. There were different semi equipment companies in the U. S.
Who offer both side of the solution, I. E. From selective etching and also ALD. So with them having both of the portfolio in house, would they be at a better position compared to you in terms of Serving the new application because everyone has been trying to do their work. If they already know how the tools actually work together, isn't that an advantage for them?
I think it depends on the application. In some areas, it's probably True that they have a small advantage because they don't have to wait for feedback from the customers to get the results. They can try to do this on their own. Well, for us, Because we don't have the edge, we need to wait for that. But at the same time, we have alternative avenues to do that.
For example, working closely with a research facility in Belgium. And not all of the processes Going forward, it's a straight, what you call, edge deposition type of process. Some of them is actually a little bit more And requires, for example, cleaning, stuff like that, that we have actually Develop ourselves, so we are in the process of doing that. So we I would say that the disadvantage is not big.
Okay. Thank
you. Thank you. Our next question is from the line of David O'Connor from Exane BNP Paribas. Thank you.
Great. Good afternoon. Thanks for taking my questions. 1 or 2 Follow ups on my side, if I may. Maybe, Benjamin, firstly, on the guide, you're guiding Q2 flat versus Q1.
Are we hitting a plateau here given the current wave of spending? Or do you think when you look at the order expectations as you Go from Q1 to Q2, you can continue to grow off these type of revenue levels? That's my first question. And I have a follow-up.
Okay. David, I think, as I said, this is this earnings is a little bit unusual because we are reporting quite late. So we are already coming to the end of Q1. And because of that, we have, I think, also some Visibility into how Q2 is going to develop and as what we have done in previous years, we always Share this insight with the investors and the community. What we are seeing Is that I think Q1 and Q2 will continue to be strong in terms of order demand and also in terms of revenue.
Do we see anything that says that Q2 is the peak? In other words, do we see a fall off After Q2, I would say at this moment, that's not what we are seeing. But is it going to go up significantly? I would say that's a little bit early to tell. But at this moment, what we can say is Q2 is not I don't think it's going to be the peak and you will see a follow-up in Q3 onwards.
Okay, understood. That's quite helpful, Benjamin. Thank you for that. And then maybe a follow-up on the OpEx, maybe one for Peter. Peter, can you help quantify what kind of OpEx growth we should Plug into the model for 2021.
And also maybe related to that for Benjamin, you talked about investing further in R and D on the Can you maybe highlight just the key areas within ALD, either applications or maybe some Targets that you have there, where exactly the spending is going within ALD for 2021? Thank you.
Yes. Let me answer the question first about the cost. You see 2 things, yes? And yes, this It becomes an awkward answer, highly likely, because you might know that we are reporting under IFRS. So when you look to the R and D costs Then and when you look to our presentation investor presentation, then we show always what the R and D expenditures are And the R and D expenses, so the expenditures are gradually increasing, yes?
What Benjamin already mentioned in his prepared notes, We see a lot of opportunities in the different product lines where we are active. So that R and D expenditure is going to increase. However, we have capitalized in the past quite a few of those projects. And some of the older projects are now coming in a stage where you have to start amortizing them. So as a consequence of that, we expect that the amortization in the forthcoming period is going to increase.
So for In your calculations, you should take that into account. So our expenses R and D expenses We'll remain growing, but at the same sort of speed as what you might have seen in the past. But the impact of the profit and loss will be bigger simply due to the higher amortization. When you look to the SG and A expenses, there you have seen that we are gradually decreasing the So on the one hand, we see there some extra costs Which are related to strengthening our organization. On the other hand, the cost increase, Yes, which was in SG and A 6% last year, is more than offset by the sales increase of the 18% that we have reported.
So As a consequence of that, we expect that we will remain having leverage on SG and A over the
Maybe on your question on What are the new stuff in ALV that we are working on? David, I would really appreciate your understanding that I would I'd like to refrain from giving too much details because this is quite sensitive. But what I can say is that, for example, the question from Tammy of Berenberg, Where we were asked about selective deposition, that's definitely an area that, of course, that we are working on. I would say that a lot of the new ALD applications are what you would also call materials related because going forward, there's quite some new materials that Required and for that, we need to develop new processes to be able to deposit those materials. I hope that Suffices as an answer to you.
Yes. That's helpful, Benjamin. Thank you, guys.
The next question is from the line of Jim Fontanelli from Arete Research. Thank you.
Yes. Thank you. Hi, good afternoon. So just to try and reconcile maybe some of your comments at the start of the call versus Some of the answers you've given in the Q and A. You sounded relatively cautious at the start of the call understandably around Wanting to maybe define the sort of absolute revenue environment for the second half of the year, but you're also cautious around relative growth versus wider WFE.
And you've talked over the course of the call around analog epi recovering, Share gains in volume epi, ALD intensity increasing, obviously note to note in Foundry, which you know about, and maybe some wallet share gain in logic around ALD. All of that sounds like you should be much more comfortable around committing to outperformance versus WFE on a relative basis this year. And I'm just wondering what the where your relative lack of confidence comes from given the Picture you painted over the last sort of 40 minutes.
Good question, Jim. I don't think it's a lack of confidence. I think We have always been very careful with what we guide to the market. Maybe we are a little bit conservative in that sense, but I think it's also still early in the year Given that we are in February, I think we have a good view of the first half. Like I said earlier, I don't think we're going to see Things falling off a cliff or fall or any kind of fall off as we probably get into Q3 because it still looks healthy.
But from a full year perspective, I really think it's a little bit too early for us to say for sure.
Okay. That makes sense. And then maybe just a follow-up. I know you've answered a lot around the gate all around question. Just to understand, maybe relatively the opportunity.
So if we look at 3 nanometer FinFET versus, say, 3 3 nanometer, gate all around, wafer for wafer. Where do you think where would you place the relative ALD opportunity, FinFET versus gate all around, is that sort of double digit intensity increase in ALD for gate all around? Just very broadly, Where would you put that relative intensity? And if you could maybe concentrate that On the materials led opportunity in GATE All Round rather than capturing selective deposition, which is maybe a whole other separate segment?
Yes. I guess where you are trying to Figure out your question, Jim, is if you move from 5 nanometer FinFET to 3 nanometer FinFET, what is the Impact versus if you move from 5 nanometer FinFET to 3 nanometer gate all around, what is the impact?
Actually, sorry, just to clarify, I probably wasn't clear there. It looks like we're going to see Potentially a double stream of transistor design run at the same node, right? So we're going to see 3 nanometer FinFET In conjunction with 3 nanometer gate all around depending on the foundry and depending on timing. So we know 5 nanometer FinFET to 3 nanometer FinFET, we're going to see an increase in intensity. I was much more interested in relative intensity at the same node between FinFET and Gator Around.
I think what we can say in general Is that you see a double digit percentage increase in ALD applications, maybe a slightly more, Let's say, increase in the case of gate all around for Epi. But I would say that it's also very dependent on specific customer design because There's no one standard design rule. So there are some certain layers which may be used by one customer, which may not be used by the other. It's very difficult to give an apple to apple comparison. I think in general, when we move from a 5 nanometer to FinFET to 3 nanometer gigahertz, we do expect to see a continuation of the double digit percentage increase, Maybe slightly a little bit more epi.
I think that's what we can say at this moment.
Great. Thank you.
Thank you. And there are no further questions at this time. Please continue, Mr.
If there are no further questions, I would like to thank you all for your attendance today. Also on behalf of Peter and Victor, We look forward to seeing many of you in our upcoming virtual investor roadshows starting next week. Thank you again. Stay safe And goodbye.
Thank you. That concludes our conference for today. You may all disconnect. Thank you all for participating.