Ladies and gentlemen, thank you for standing by, and welcome to the ASM International First Quarter 2020 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer I must also advise you that this conference is being recorded today. And now I would like to hand the conference over to your speaker today, Victor Barena. Please go ahead.
Thank you, Sarah. ASM issued its Q1 2020 results last evening at 6 Central European Time. For those of you who have not yet seen the press release, it is accessible on our website, eezam.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 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.
With that, I'll turn the call over to Chuck Dovare, President and CEO of A. V. O. M. A.
Chuck? Thank you, Victor, and thanks to everyone for attending our Q1 2020 results conference call. First of all, I very much hope that all of you and your families are healthy and safe in these uncertain times. We also have our CFO, Peter van Beaumont on the virtual call today. And we all dialed in from home like probably most of you today.
I'll start with an update on the impact of and our response to the global COVID-nineteen outbreak, which of course is on the top of our mind. Then Peter will discuss 2 specific topics, ASMI's recent new CEO announcement and the dividend proposal. And subsequently, I will review our Q1 results. And after that, we will conduct as usual our Q and A session. So on the COVID-nineteen update, as this COVID-nineteen outbreak has been rapidly evolving, we found ourselves in unprecedented times.
Across the world, the pandemics severely affected our lives, our communities, society and our economies. Our thoughts go out to everyone whose health has been impacted by the illness and to those in the front lines combating this. The health and safety of our employees, their families and of the employees working for our customers and other partners has always been our key priority. Safety is a core company value. And over the last many years, we made substantial investments to further strengthen our safety organization and procedures.
From the onset of the COVID-nineteen outbreak, we closely monitored the situation and implemented all necessary measures, local government guidelines and orders and industry best practices to minimize the risk for our people and to do our part to slow the spread of the disease while safeguarding business continuity. Measures included for instance enabling of home working for all of our employees where there is no direct need to be at the office. Lab, where there is no need to be in the office, lab or factory. Implementation of split shift work in essential areas enhanced cleaning protocols and of course restriction of non essential travel. I'm extremely proud of how our ASM employees and our partners have responded to this rapidly evolving crisis.
All of us quickly adapted and found new ways to stay connected and to maintain the ASM team spirit. While putting the health and safety of all of us first, our team showed strong commitment and creativity to make sure we continue to serve our customers in the best possible ways. Even with all these measures, we have been able to continue our daily operations with only limited impact on productivity. While the bottlenecks in the Chinese and U. S.
Supply chain only had a limited overall impact, the measures taken by the Malaysian government and recently the Singapore government had and have a bigger impact. These measures are leading to reduced business activities creating shortages and delays for specific components at our Malaysian suppliers. Moreover, it also affected part of the workforce in our Singapore facility, where our employees who live in Malaysia were not able to come to work. We like our critical suppliers received exemptions in both countries as semiconductor was marked as an essential industry. Although these exemptions will allow us to continue our manufacturing operations in Singapore, the measures as taken will have impact on our ability to deliver all the required products.
A further consequence of the containment measures in Singapore is also that construction work on our new manufacturing site has been temporarily halted. We now expect the new facility in Singapore to be completed in Q3 instead of at the end of Q2. Our global operations team and the rest of ASM did an amazing job. By detailed planning and constant tracking of potential bottlenecks, maintaining close contacts with suppliers and customers and looking for alternative solutions and workarounds in case of component delays, our team has managed to ship almost all of the tools to our customers as planned within the Q1. If we look at customer demand, the impact of the pandemic has so far been limited.
Demand remained solid in the quarter and we did not experience any meaningful order push outs or cancellations. Customers have continued to execute their planned investments in the new nodes and they continue to invest in new technology development. I will now hand over to Peter, who will address the recent CEO announcement and dividend proposal. Peter?
Thanks, Joc. On March 23, the company announced Benjamin Low as the new CEO. ESM's Supervisory Board selected Mr. Low after a thorough search process. We are very pleased to propose it to the shareholders meetings shareholders meeting on May 18.
As you know, Giug del Prado will step down as CEO at the AGM. We announced that already last September. And after that, Benjamin Lowe will take over as the new CEO. He brings a vast international experience in senior management and executive roles in the semiconductor His most recent position was at VAT, an important supplier in our industry, where he was responsible for global sales and marketing. And recently, he has been on the Board of a number of companies, and earlier, he was also a Board member of Semichina.
The second topic that I will discuss is our dividend proposal. With our Q4 results, we announced the proposed dividend payment of a total €3 per share consisting of a regular dividend of €1.50 per share that was up 50% compared to last year plus a special dividend of €1.50 Of the total dividend of €3 per share, already €1 was paid as an interim dividend last November. With the publication of our AGM agenda on April 6, we confirmed this dividend proposal. Our policy has always been to maintain a strong balance sheet that allows us to invest in the growth of our company. This is the key priority, while using excess cash for the benefit of our shareholders.
In light of the increased economic uncertainty due to the COVID-nineteen pandemic, we did a detailed analysis, stress testing our financial position in different scenarios. We concluded that our balance sheet provides sufficient strength to both continue our planned investments and expenses and to proceed with the earlier committed dividends. The strength of ASM's financial position was again demonstrated by our performance in the Q1. We ended the quarter with a strong cash position of €529,000,000 up from €498,000,000 at the end of December. We generated a solid free cash flow of €41,000,000 in the Q1, almost doubling compared to the level in the same quarter of last year.
Free cash flow was driven by the increased level of profitability and partly offset by €12,000,000 cash outflow for working capital and CapEx of €24,000,000 The CapEx was relatively high as part of the payments for a new facility in Singapore. That part of the payments partly shifted from the Q4 last year to the Q1 of this year. That's what we discussed already in our previous earnings call. In Q1, we also spent still €4,000,000 to complete the €100,000,000 share buyback program, of which most was already spent in the Q4. As announced with the Q4 results, we also will start with a new share buyback program.
We are currently in the final phase of the preparation work and plan to start this program shortly. In light of the COVID-nineteen related uncertainties, we plan to execute this program at a lower speed than the last ones that we did. With that, I will hand the call back to Chuck.
Okay. Thank you, Peter. And I will now continue with a review of our financial results. In comparing with the previous quarter, I will exclude the gain from the arbitration settlement, which as a reminder impacted our 4th quarter results last year with a positive amount of €56,000,000 In the Q1 of 2020, revenue amounted to 3 €25,000,000 a strong increase of 31% compared to the first quarter of last year and a decrease of 6% compared to the record high level in the 4th quarter. Revenue in the quarter was above the midpoint of our guidance, which was a range of between €310,000,000 330,000,000 Service and spare sales grew by 7% year on year and represented 17% of total sales.
Equipment sales increased by 37% year on year and was led by strong growth in our ALD product line, while the combination of the other product lines also showed again a double digit increase. By industry segment, revenue in the Q1 was led by foundry with sales somewhat lower sequentially, but still at the 2nd highest quarterly level in our history. 2nd largest segment was logic with revenue increasing to a record high in the Q1. 3rd was Memory, with sales relatively stable compared to the Q4. Gross margin was 44.5 percent in the 1st quarter, up from 43.6% in the 4th quarter and the highest level in the last 13 quarters.
The improvement was driven by mix effects and cost reductions related to the installation of new products introduced in earlier periods and despite some inefficiencies and higher costs due to disruptions in logistics and the supply chain. SG and A expenses decreased slightly compared to Q4. Excluding the higher cost in Q4 for short term incentive programs, SG and A was relatively stable in Q1. R and D expenses dropped by 15%, 1 5% compared to the 4th quarter. But excluding the one off impairment in Q4, R and D would have been stable.
Operating profit was up slightly compared to Q4, leading to an operating result percentage of 24% in the Q1, which is a new record high for the company. Below the operating line results included a currency translation gain of €12,000,000 mainly explained by the appreciation of the U. S. Dollar in the quarter. This compares with a translation loss of €14,000,000 in the 4th quarter.
Income tax of €13,000,000 euros was up significantly compared to €2,000,000 in the year ago period. Due to the exhaustion of our tax losses in the Netherlands last year as explained in previous calls. Let's now briefly look at ASMPT. Results from investments, which reflects our 25% share of the net earnings from ASMPT, dropped to €1,000,000 in the 1st quarter, down from €6,000,000 in the 4th quarter and down from €3,000,000 in the Q1 of last year. In the Q1 of this year, ASMPT reported sales of US434 $1,000,000 down 24% compared to Q4 and down 8% from Q1 last year.
Plant shutdowns particularly in China due to the COVID-nineteen, had a negative impact, but sales in Q1 still reached the higher end of ASMPT's guidance and the net profit was better than the loss that the company had forecasted. Bookings strongly increased to US669 $1,000,000 in the quarter, up 50% sequentially and up 45% year on year. Okay. Now turning back to ASMI's consolidated operations. ASMI's net earnings on a net normalized basis amounted to €78,000,000 in the first quarter.
Our new orders in the Q1 were €333,000,000 down 11% from the 4th quarter, but up 42% year on year. Orders slightly exceeded our guidance, which was also a range of between €310,000,000 €330,000,000 Equipment orders were led by our ALD product line, which increased to a record high level in Q1. Looking at the breakdown in bookings by industry segment, foundry represented the largest segment in the Q1. Foundry bookings increased strongly compared to the Q4 to a new record high. The largest foundry customer continued to account for the biggest part, but other foundry customers also had meaningful contribution this quarter.
Logic was the 2nd largest segment with bookings somewhat lower than in Q4, but still at a very healthy level. Memory represented the 3rd segment. Bookings in both DRAM and 3 d NAND were relatively stable compared to Q4. Last but not least, in terms of geographic breakdown, we saw a strongly increased contribution from Chinese customers in terms of both sales and bookings. In the Q1, we booked multiple tool orders, particularly in our ALD product line from several Chinese customers.
Okay. Let's now look in more detail at the trends in our markets. According to forecast, the global economy is expected to move into a recession this year. Looking at the semiconductor end markets, segments such as automotive, smartphones and other segments related to consumer spending are expected to be down this year. Other parts of the semiconductor industry that support online communication, work from home and virtual learning have reported increased demand in the recent period, illustrated by, for instance, recent brisk demand in laptops, data centers and part of the communication infrastructure market.
If we look at expectations for the semiconductor wafer fab equipment market in total, VLSI Research recently lowered its forecast to a drop of 7% year on year due to the impact of the coronavirus. Earlier this year, it's still expected an of 5% for the year 2020. It is positive to see that in China and some countries in Europe, the growth curve of COVID-nineteen patients is flattening or even declining. However, it is obviously too early to tell when the pandemic will be under control and when restrictive measures can be reduced and how quickly and to what extent economic activity in the different parts of the world can be restarted again. This will be an important factor for the state of the semiconductor industry in the second half, and therefore also for, of course, the WFE outlook for the wafer fab equipment outlook.
Given this higher level of uncertainty, we decided as a company not to provide a forecast for WFE for the full year. Looking at the first half of twenty twenty, we believe the trend in WFE spending is holding up well. As I mentioned earlier, demand has been strong in the 1st part of the year, and we didn't see any meaningful order push outs or cancellations. And for the Q2, bookings are shaping up in line with our earlier expectations. Our bookings in the first half are for the largest part driven by strong demand in logicfoundry.
Spending in this segment is focused on the most advanced nodes capacity for new end market products that will enable multi year growth trends in for instance 5 gs, data centers and artificial intelligence. The Foundry segment was as mentioned our largest segment in the Q1 with the majority of investments focused on the advanced sub-ten nanometer nodes. In the Advanced Logic segment, meaningful investments in 10 nanometer capacity continued in the Q1. As we highlighted in previous calls, the role of ASM has substantially increased in these advanced nodes. The number of ALD layers in the current most advanced logic and foundry nodes has increased with a substantial double digit percentage compared to the previous technology nodes.
We have successfully maintained our leadership position in this space with as a result the strong recent increases in our share of wallet with the leading logic and foundry customers. Looking at the next nodes in logicfoundry, we expect the number of ALD layers to further increase. Step by step, we are also increasing our position in epitaxy, which is a market with strong long term growth prospects. The WV and ASM sales in the first half the year is also being supported by a healthy trend in the Chinese market, where domestic customers show strong commitment to invest in semiconductor manufacturing technology and capacity. We are benefiting from the investments that we made in previous years to strengthen our position in the strategic market and from the fact that some of these customers are now making more meaningful steps toward the technology nodes where ALD requirements start to become more critical.
Looking at the memory market and market dynamics end market dynamics looked healthy in the Q1. With parts of this market, such as in PCs and data centers supported by work from home related demand. Indicators such as memory device pricing also continued to develop favorably in the Q1. Following the substantial cuts in memory WFE spending in 2019, Spending in the memory segment has remained at a relatively modest level in the 1st part of the year. The outlook for second half recovery in memory spending, which was expected at the start of the year, still has, yes, some uncertainty.
While projects related to technology transitions are likely to continue, Investments in new capacity will likely depend on how supply demand conditions will develop in the rest of the year, which in turn will depend on the state of end market demand and of the global economy. As spending on the next memory generation picks generations picks up, we expect to strengthen our memory contribution. In DRAM, for instance, on the back of the non patterning ALD wins that we discussed last quarter, and longer term, step by step, we expect to improve our position in the memory ALD market as a whole. Looking at the analog market, expectations have weakened compared to a couple of months ago. While a much smaller part of our business, of course, the analog market is more exposed to segments that have seen recent weakening of end market demand such as in automotive.
While WFE for the second half of the year is difficult to predict, the lower term outlook for our industry looks strong. Our work with our customers on the next nodes has continued, reflecting continued commitment on the part of our customers to execute their technology roadmaps in the coming years. Based on the progress in our R and D engagement, we expect to see further increases in served available markets as customers transition to the next nodes. Digital technologies are increasingly important in supporting new ways of living and working. Today demonstrated by the work from home economy.
New more powerful and power efficient semiconductor devices will be essential in the development and growth of new end market applications such as in cloud computing, artificial intelligence and autonomous driving. For our customers to stay on Moore's Law, a growing number of process steps will require ALD and epitaxy deposition. Now let's look at the guidance we issued with our Q1 press release. For Q2, on a currency comparable level, we now expect sales of between €300,000,000 3.50,000,000 We slightly widened the range by reducing the lower end compared to the earlier indicated range of between €330,000,000 350,000,000 The widening of the range is fully attributable to the risk related to possible disruptions in our supply chain and logistical operations as a result of additional COVID-nineteen related actions taken by government so far. Q2 bookings on a currency comparable level are expected to be in the range between €280,000,000 310,000,000 On a personal note, finally as part of this introduction, as this will be my last earnings call with you all on the line, now a few words, yes, on a personal note.
When I decided to step down as CEO last September, September 2019, I believe the timing was right because ASM is in good shape and therefore well positioned to undergo a change in leadership. Today, these unprecedented times have really tested our company and our team. Our response to the COVID-nineteen crisis has confirmed for me the strength and resilience of this company. Looking back at the last 12 years, I'm personally extremely proud of what we have achieved as one team. In 2,008, we had our first breakthrough in single wafer ALD.
Since then, we have built a leadership position in fast growing parts of the WFE market and achieved strong relationships with all of the top CapEx spenders in our industry. While staying true to our, let's say, inborn focus on innovation, over the years, we substantially stepped up also on our operational excellence and on the efficiency of our operations, very important. And bottom line to all of you is that since 2008, our front end sales have increased by a solid double digit compound revenue growth rate. We clearly crossed as a result the €1,000,000,000 mark top line in 2019 and we provided ASM with a very strong financial base. In short, ASM in my opinion is in a strong position today with a bright future ahead.
And there was I would like to thank you, our analysts and investors for your support, confidence and healthy challenging interaction throughout all those years that I have been able to interact with you. It has been a real pleasure engaging with you all. And of course, we are not going to close on this call at this moment. But at this moment, I would like to wish you all and your families a very healthy and prosperous future. Peter?
Chuck, yes, I would also like to take the opportunity to thank you on behalf of everyone at ASM for your tireless commitment and dedication during the last 12 years. Your leadership, vision and consistent execution and your talent to inspire and motivate have strongly contributed to the extraordinary success of ASM. This success is also reflected in the strong total returns of more than 20% annualized over the last decade and close to EUR 2,000,000,000 in cash that we returned to shareholders during this period.
Thank you, Peter. Very much appreciate it. Those nice words. And with that, we finished our introduction. And let's now of course like we always do move to our Q and A session for which both Peter and myself of course are available.
Victor?
We'd like to ask you to please limit your questions to not more than 2 at the time so that everyone has a chance to ask question. Okay. Operator, we are ready for the first question.
Your first question comes from the line of Achal Sultania from Credit Suisse. Your line is now open.
Hi, good afternoon. Two questions, if I may. First, on the epitaxy, clearly like you've been gaining a lot of market share along with market growth in that segment. Can you help us understand and maybe my impression was that most of your exposure is to 1 big customer in epitaxy. Can you help us understand what are you how are you seeing the traction with some of the other customers in that market?
And then secondly, on the second half, I guess, again, if I look at one of your largest customer in foundry, CapEx seems to be quite front end loaded this year. Clearly, it will see a slowdown as we go into the second half. So just trying to understand what are the puts and takes beyond that customer as we go into the second half? How should we think about business with in the memory and the logic part? Thank you.
And congrats, Chuck, for such a nice journey.
Okay. Achal, thank you. Okay. So yes, let me thank you for your questions. Okay.
First one, on Epi, yes, you were asking about traction broader than one customer. Well, of course, we yes, we have, of course, a time track record in the analog power market. So we have many customers in that space, in the analog power space. Of course, from a volume point of view, that has gone down in the recent quarters, but that will continue. In the mainstream CMOS space, indeed, we penetrated early 2017 with 1 leading Foundry customer initially and 7 technology nodes.
Later on, we expanded number of applications going into P5. And but in parallel, we have had R and D engagements with, let's say, more customers beyond that one customer. And of course, our what we shared on earlier occasions, it's clear that when we decided, made a strategic decision to get back into mainstream CMOS, our ambition was not just to get in with one customer and get in with that customer only with, let's say, a limited amount of applications. So our ambition goes much beyond where we are today. And also given the attractiveness of the Epi market and the compound annual growth rate of estimated compound annual growth rate for the Epi market in the years to come in logicfoundry, but of course, in the strongest way, but also in memory.
So as a result of that, we have started engagement, JVP engagement with other customers. And yes, we're looking forward, let's say, in the next 12 months or so to share with the market that we have made progress in that respect and that at some point in time some of those engagements will turn into high volume business also. But it's early too early to further elaborate on that than what I just shared. But we see tremendous opportunities in Epi to further grow our served available market the served available market for ASM in deposition. And again, especially, found logicfoundry because in FinFET, at first, we see further expansion of Epi.
But beyond FinFET, we see tremendous opportunities in gate all around also. But beyond logicfoundry into memory and also in atmospheric epi, we are more and more engaged. So it's a long answer on Epi, but I think it's worth it because it has become a very important second growth engine of the company. And as you may recall, it's now the on average, it has been the become now the 2nd largest product line on average besides ALB in the company. On average, not maybe every quarter, but on average.
Okay. ALB slowdown. Yes, you related to a specific customer. Can you elaborate a little bit more what you mean because you related to one customer?
Yes, yes. Basically, I was saying that one of your key customers in the foundry, it seems their CapEx has been quite front end loaded this year. I guess Q1 was very high CapEx, which means that there will be a slowdown as we go through the year, especially in the second half. So I'm just trying to understand what are the some of the things that can be offsetting that customer slowdown, be it logic or be it memory? What are the things that can help you in the second half not to see a significant drop from H1?
Yes, yes, yes. Well, I think in general, if you look at an industry wide level, then logicfoundry spending, of course, is very solid in the first half. And it's a little too early to give, let's say, full guidance on the second half. But we have no indication at all, if you look at logicfoundry combined, that it will fall off a cliff in the second half. Absolutely not, again, based on the visibility today.
We see that our visibility now is that logic will continue to stay the spending of logic in our WFE market is expected to stay steady based on the strong demand for servers, data centers, PCs, high performance PCs. Foundry, yes, I think the foundry market, and that's a good thing there, is becoming broader. There are more foundries engaged now in the advanced nodes. So the foundry spending in the WFE market more and more is not only determined by, let's say, one leading player. You see that more than one other players are popping up.
And linked to that, China is also becoming more visible also maybe as a result of all the geopolitical developments in the world is becoming much more aggressive in spending also in the foundry space. And by now, of course, they also have come to the maturity level where they not only spend more, but they are able to spend in really the advanced nodes in nodes like 8, 7 nanometer. So that's on a high level. For ASM specifically, yes, we have seen in logic so far very steady spending in 10 nanometer and also initial clear spending in fourseven, development capacity spending in 7 nanometer. And we again, with the visibility today, we estimate that to stay steady throughout the year.
Foundry, again, we've seen more players now becoming visible. In the leading space, N5 demand has been very, very strong. Indeed, on the N5 space, first half spending could be stronger than the second half spending. That's maybe a fair observation or assessment with visibility today. Same time, N3 initial N3 spending, development spending, sorry, engineering line spending could very likely come up to speed in could become visible in the second half.
That's the visibility we have. And again, China is stepping up. I trust that provides you a little bit more color.
Yes. That's been really helpful. Thanks a lot, Jacques.
Yes. You're welcome.
Thank you. Your next question comes from the line of Nigel Van Putten from Kempen and Co. Please ask your question. Your line is open.
Thanks. Yes, also from my side, Chuck, I first wanted to congratulate you on a job well done, clearly leaving the company in excellent shape. So again, congratulations and all the best.
Thank you.
Then sure. Switching to the top line, maybe a bit of a follow-up. There's a lot of uncertainty ahead, but you've also mentioned some strong demand driver, I think investments in logic, 10 nanometer over 7, a Chinese foundry pickup and potentially also memory improving. So again, understanding there's a lot of uncertainty. Just from a company planning perspective, where do you expect the biggest potential delta in terms of these drivers?
Could you perhaps provide a bit more color? It was difficult to keep track.
So you need company specific or on a well, I on
a company specific industry.
Companies for sure, yes. Yes, especially for China. Yes. Okay. Well, I gave we I gave already some color on this triggered by the former question of your colleague on logicfoundry.
So I don't have there's not much to add to that really at this moment in time. I think when we talk when we also bring memory into the equation, then in memory, we in the first half, like we said in your introduction, first half is there's a reasonable contribution of memory. I think in on average, we expect the first half DRAM and 3 d NAND combined contribution to be somewhat similar to the second half of twenty nineteen. That's again a rough estimate based on what we know today. DRAM, of course, is stronger than 3 d NAND for us.
And in the second half of the year, yes, we said something about that already in the introduction. There are if you look at the industry as a whole, it's the visibility is still limited. But on the one hand, smartphones don't help the memory market to get into a strong recovery. On the other hand, data center demand, server demand, PC demand also support the memory market. So based on all of that and based on the feedback, the visibility we have from our customers so far, We expect now the second half for memory to be somewhat stronger than in the first half with DRAM again being stronger than 3 d NAND.
Maybe for the industry as a whole, 3 d NAND is expected to recover faster than DRAM. But as we shared before, for us, DRAM is stronger as a result of just some very good engagements that we have and also helped by the non patterning ALD wins that we shared with you and your colleagues on earlier occasions and that are going to become more visible in the P and L of this year. Yes, I think that's and of course, in memory, yes, we are heavily on to this year. We are working very, very hard. We are investing in many more initiatives to grow our served available markets in memory down the road.
And maybe we can get back to that on at a later moment in this call. Yes, that's the best we can do to answer you. But and again, China is on China itself, maybe that's the last part, Nigel, provide a little bit more color on the year. Q1 was already a record level. We achieved a record level in terms of revenue in China.
Q2 potentially more potentially can bring a new record in terms of China revenue looking at the historic performance in China and more and more driven by let's say, local investments. And we see in general an opportunity to year on year to make a big step in China compared to 2019. But again, that is all again, we consciously chose not to put this all into numbers and see how much something going down in one area and something going up elsewhere, what the net impact was because there are a lot of uncertainties in this market. But by providing this color, we would like to at least give you the impression that the company has so many opportunities. And it's just a matter of timing.
And we are engaged in so many areas. Okay. Timing wise, it maybe does not play out exactly the way we anticipate today. But if you look at the longer term story for this company, then we have so many opportunities to build.
Very helpful. Thanks. Maybe a quick follow-up rephrasing the question on China. In terms of similar nodes, similar capacity, you obviously have a very strong market position as the leading family player. How does that look in terms of production to those records at the Chinese foundry foundries, I must say?
Is that sort of similar then at a similar node? Or is there more competition because maybe they're still lagging a bit and competition has had the chance to maybe grab some more sort of record? How does that sort of compare
vis a vis? Yes. Okay. Well, we see in the foundry space, the logic foundry space, significant opportunity for growth. If your question is, is your penetration level in terms of amount of layers and participation the same as with, let's say, leading foundries elsewhere in the world where we so far have strong engagements with, no, then we are not there yet of course.
That take time. But the fact if you look at the growth opportunity we see this year then we don't need maybe that immediate same level of penetration to still make a big impact in that market on let's say within the foreseeable future. But of course, it will help us tremendously that we have such a strong reference base, let's say, close by in the same region.
Got it. Very helpful. Thanks.
Okay, Nigel. Thank you.
Thank you. And your next question comes from the line of Marc Hesselink from ING. Please ask your question. Your line is now open.
Yes. Thanks for taking the questions. First, on the what you're saying on the note transitions towards the end of the year, it was if I'm correct, it was always to be seen how much extra AOD demand that would drive those notices, how much extra layers you would win. It seems that you have a bit more visibility on that now. Could you share that how big the step up in ALD intensity is?
My second question is on the your visibility that you have on the supply chain at the moment. How deep in your supply chain can you look and how certain are you or how quickly can you react if you see that COVID-nineteen is impacting that? Also maybe a little bit to highlight that you're saying that you're seeing the impact on the supply chain, but actually in the numbers you don't really see it. But does that mean that without COVID-nineteen your revenues and your bookings would have been significantly higher in the Q1?
Thank you. Okay. All right. So the supply chain question, I will ask Peter to speak to that in as soon as I've answered the no transition question. So on the visibility, yes, visibility on the node transition, so we're basically asking if we are gaining share, expecting to gain share of wallet and then, let's say, market share or market share in going to new nodes in logicfoundry.
That's what you mean, right?
Yes, exactly. How many extra layers are there with your engines?
Yes. That's a little bit too early to tell still. Again, we have a very strong engagement with the key the leaders in both logic and foundry. We see an engagement clearly on more applications and more layers than, let's say in the current nodes and then the current N5 foundry node and the current N10 logic node. But it's just too early.
The development engagement and the early capacity they order there is not a guarantee for final selection. Sometimes they have they test out processes in parallel with some competitors. But we can say at the same time, you can say that if you look at the amount of money that is these days involved in bringing a new node to life, they don't waste their money. They try really carefully not to waste any dollar on wrong choices. So it gives at least an indication that we are on the right track.
But it's way too early to quantify that to you at this moment in time. But the answer is clear from a point we can we see a clear opportunity to increase layers, applications, share of wallet going to the next level that we cannot quantify at this moment.
So
and we see not only opportunities again in ALD, but also in the other product lines. We talked earlier a little bit about Epi, also but we also have vertical burns. We have PCVD, especially PCVD and Epi. We're looking at also the other product lines, how we can gain share. And a lot of programs are ongoing also beyond ALD.
And one of the questions that came up also ahead of this call was the number of EVELS that are out in the field. So some observation that the amount of eval, the activity on evaluation tools has increased significantly year on year, at least in the numbers. Yes, that is a clear reflection of the amount of joint development programs that we have ongoing in the field at this moment in time. And again, it's only it's a win win situation for both sides. And none of both the customer and the supplier cannot waste their money.
So both parties are very serious in when they engage on these things. So it also shows in a way that we are really working hard to further increase our served available market down the road for the company. And the interesting thing, it's maybe not specifically your question, but it's a good opportunity to share that. If you look at the amount of eval amount of eval tools is going to increase has been increasing significantly. And the percentage of memory exposure also the percentage of memory representation in the amount of evals is increasing significantly also.
And that's what we always have said. Over time, we want to increase our exposure in memory, especially in ALD. And eval picture is a reflection of all those efforts ongoing. Okay. So that was a long answer on your first question, Marc, a little bit beyond the question also.
But let's now move to supply chain. Peter, can you fill in, Marc, on that part?
Yes. Yes. Marc, the visibility is, of course, one of the key issues that we have on this moment. Then we would have perfect visibility. Then our guidance would not have been that broad as far as sales is concerned.
So it's not demand driven. It's what we already have earlier indicated as well, Q1 sales as also for Q2. The key issue was can we get everything on board. We have decent insight, but you can imagine that in this current circumstances where governments are taking actions from one day to the other day, The impact there, looking at the total value chain, is very difficult to grab that immediately. I'll give you some examples.
We had in Malaysia. We have several suppliers for a lot of our products. But then for some of those products, we saw that both of those suppliers were in Malaysia. And on the moment that there were restrictions there, yes, of course, that doesn't help you in full on that moment. So we're working very closely together with our suppliers.
We work also very closely together with the governments to ensure that we can get as much possible of our activities delivered ultimately. And so far, that worked very well due to all the extra efforts that we did. But it's one of the key challenges also going into the Q2 now and our ability to deliver towards more of the high end of the range and towards more of the lower end of
range. Okay. Thank you. And then also from my side, Jurg, thanks for the cooperation over the last couple of years. Thanks.
Okay. Thank you, Marc. Same to you.
Thank you. And your next question comes from the line of Finn Kiely from ABN AMRO Bank. Please ask your question. Your line is open.
Yes. Good morning. Can you hear me?
Yes. We can hear you well, Vin.
Thank you. I would like to follow-up on the evaluation tools. I mean, especially this quarter, we saw a significant ramp up of about €20,000,000 investments in evaluation tools. Can you give us a bit more granularity on which applications you're seeing? You already mentioned memory, but which applications are you predominantly targeting?
And also which regions are you deploying these evaluation tools? And what's the impact of all these your gross profit was very strong. And as a follow-up on that one, your gross profit was very strong in the quarter, especially quarter on quarter, a significant increase despite the fact that your facility in Singapore is not fully up to speed yet. So what's been driving this quarter over quarter improvement other than mix effects? These were my first two questions.
Thanks.
Okay. So the second one and also the gross margin aspect of eval tools can be very well answered by Peter. But on the first part, a little bit more granularity. Yes, we really are seeing year on year significant increase in the number of eval tools that we have in the market. And a lot of those initiatives were already started up with customers last year that you discuss on what programs to work.
But it takes time to build the tools and ultimately install them. It's just, yes, a little bit of a coincidence that a lot of it came up to speed in the early part of this year. But as we shared earlier, it's a significant increase of the eval tools installed in the field. It's a high double digit percentage increase, very high double digit percentage increase of the amount of tools in the field. And we see beyond, let's say, a strong presence already last year in logicfoundry and a further increase in that space.
We see especially a significant increase in memory. The percentage representation of memory is almost doubling compared to last year. And again, it's further evidence of what we have always said that we are very focused on aggressively increasing our served available market in memory. And we said it will be a gradual process. It will not be a hockey stick effect and you won't see an immediate increase in presence in memory next year in 2021.
It will go gradually. But I've also said in the last call, 3, 4 years from now, we predict that our presence in memory will be meaningfully different compared to where the company is today. And of course today we have also a pretty decent presence, but this is not where we want to be 3, 4 years from now. So that's on the market side of the eval tools. Peter, can you further finalize the question on that part and then go to gross margin overall?
Yes. 2 things. First of all, when you look to the impact on the gross margin of the eval tools, we normally write down our eval tools in 5 years. So when you have €20,000,000 you can make the calculations for yourself. And as a rule of thumb, besides the depreciation, we also have the support cost.
They are more or less equal to the depreciation cost. So that gives you a good idea about what those what the extra impact is on the gross margin when we place approximately $20,000,000 of EVO tools at customers. Your second question was the gross margin improvement Q on Q. Yes, we have seen quite a decent improvement. On the one hand, that's mix.
I don't have to explain it. I did it already several times, but the impact of mix could be quarter on quarter. But the other thing was that also our INQ costs were lower than in the previous quarter. And it was mainly driven by the fact that a lot of the newer products that we introduced in the course of 2019 are now installed for the 3rd, 4th or 5th time. And there we see that we are able to do that more efficient and grabbing those efficiencies earlier than what we originally expected.
So that has also a positive contribution to the gross margin earlier than we anticipated and despite the fact that we don't have the benefit yet from the new factory in Singapore.
So that will make the gross margin rather sustainable from the current level. And when Singapore ramps up, we could even see an improvement from the current level. Is that my current understanding?
You always have the mix, and mix is the biggest impact, of course. So but yes, we are pleased with how the gross margin is developing. Let me say that back.
Very good. And then I've got a final question. If you look at your business mix, it's obviously quite difficult to have an indication what's going to happen in the second half. You're quite optimistic. Your memory business will grow.
Your logic business will at least not fall over cliff, but probably be stable as is foundry given your increasing exposure there to several clients. To put it more differently in terms of your mix, what is your exposure to leading edge nodes in the revenues versus the more kind of, if you will, more cyclical bread and butter stuff,
if you get my the new question. Yes. I think we are and Peter you can add to that if you want to, but we are highly geared to the advanced nodes, very highly geared, especially at this moment. When we had, for example, analog power, and when analog at the time when analog power was still much stronger and we presented in our numbers, we had it was broader had a broader distribution. But today, it's most of it is advanced nodes.
Peter, anything you want to add?
Yes. I mean, the business which are not that much of which only partly are in the advanced nodes is, of course, the furnaces business and a part of the epi taxi business for Chipotle already was referring to earlier, especially the part which is analog power related. But by far, the majority of our sales is related to the more advanced nodes.
Thank you very much.
Okay, then. Thank you.
Thank you. And your next question comes from the line of Robert Sanders from Deutsche Bank. Please ask your question. Your line is now open.
Yes. Hi, there. And good afternoon and congrats again to Chuck on the Great Value creation since you've been CEO. Can I ask relating to the CEO appointment, whether Ben will be based out of Singapore and the Netherlands or the Netherlands? And relating to his appointment, I'm assuming he will conduct a strategic review over the 1st 12 months as is normal for any CEO.
Could you confirm that the stake in ASM Pacific would be something that would be under consideration for the next CEO? The reason I ask is because a lot of shareholders still are not comfortable with the stake and the share price of Asia Pacific hasn't gone up over the last 5 years. So I think it would be interesting just to kind of get a feel for whether that would be under Ben's remit for the 1st 12 months.
Thank you. Yes. Okay. Well, maybe the first part, you will be based in the Netherlands. That is clearly headquarters of companies in the Netherlands.
So he's supposed to have his base working from the Netherlands. On the second part of the question, Peter, maybe you want to say something about that.
Yes. I
think that's a good question to ask the new CEO, yes? So that will be the joking answer. But I mean, the ASMP3 stake is part of the past of all the reviews that we have done in
the past year. So that's a lot changed. Peter, you're fading out.
Sorry, I left it by saying, okay, the review of the ASMPT stake was always part and parcel of the strategic review that we are doing. And I don't think that that's still going change. So it will remain part and parcel of the strategic review that we do regularly.
Got it. Thanks for that Peter. And just follow-up, just beyond the market share. Your market share is now 57% in single wafer ALB. And it does look like your competitors are falling away.
I mean, AMAT now is a very small fraction of the market. And you're saying you're taking share in DRAM non patterning. So how do you think about your kind of market share objective from here, given you already gone from low 40s in 2018 to 57 in 2019? Can you get up to 70? Percent?
Is there any area you'd rather not participate in? Thank you.
Yes, yes, yes. 70%, that's that would be great. But I yes, it's that would be great. But I think it's clear, and by the way, whether it's 57% or 52%. It depends a little bit on what assumption you make.
I think the 57% number comes from Gartner and BLSI uses 52%. Basically, they all have different methodologies and different parameters that they use to calculate the number. But it's clear to both, and we can confirm that we significantly gained market share, of course, year on year in 2019. Having said that, it should be clear to everybody that, of course, short term, the market share is, say, always part of a partly a function of mix, mix of spending within the WFE market between different industry segments. And if, for example, on the short term, memory would come back forcefully and logicfoundry would go through a short pause, then our market share likely will go down because at least for that time being because our and as you all know, our market share historically in logicfoundry is much higher than in memory.
So there will be swings on the short term in that market share number depending on the mix between industry segments. Longer term, indeed, we are strongly focused on maintaining our leading market share position. And we do that by not only, of course, further strengthening our position in logic and foundry by expanding our served available market also there as we touched on briefly as we go to N7 logic and we go to N3 foundry. We would like to further increase our share of wallet. But of course, the big swing factor is in memory.
And we touched on that, the number of eval tools, number of JDPs ongoing, first evidence was non patenting DRAM applications. Over time, we are looking for much bigger served available market showing up in our P and L. And as we are successful in executing on that in the next 3, 4 years, then we will be in a good position to maintain strong market shares in single wafer ALD through the different, let's say, mix cycles between industry segments. And we believe we are in a very good shape to make that happen. That's the best answer, Rob, to Robert to that first to that question.
That was very helpful. Thanks a lot, Jack. You're welcome. Thank you.
Thank you. And I would now like to hand the call back to you, Jack. We have no more questions.
Okay. No more questions. Well, then again, thank you all for this good interaction today. And again, thank you all for a long time partnership on from a personal point of view. And again, I trust the company is in great shape going forward to serve your interest in the company.
And so please keep following the company very, very closely. And again, I wish you and your families great health and prosperity in the future. Thank you again. Thank you for your attendance today. Bye bye.
That does conclude your conference for today. Thank you all for participating.