Good day, and welcome to the ASM International Q1 2018 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Victor Bareño. Please go ahead, sir.
Thank you, Allison. ASMI issued its 2018 Q1 results last evening. For those of you who have not seen the press release, it, along with our latest investor presentation, is accessible on our website, asm.com. We remind you that this conference call may contain information relating to ASM's future business or results, in addition to historical information. For more information on the risk factors related to such forward-looking statements, please refer to the company's press releases, reports, and financial statements, which are available on our website. With that, I will turn the call over to Chuck del Prado, President and CEO. Chuck?
Thank you, Victor. Thanks to everyone for attending our Q1 2018 results conference call and for your continuing interest in ASM International. Before I start with the review of the Q1 results, Peter van Bommel, our CFO, will first provide an explanation on a couple of changes in our accounting policies and reporting. Peter, go ahead.
Thanks, Chuck. IFRS 15 is the first change I will discuss. IFRS 15, which is redefining the way revenues have to be recognized, is, as you know, mandatory as of this year. For us, the largest impact is related to revenue from Japanese customers. Previously, recognition of revenue with Japanese customers took place on the moment that the customer accepted the tool. Under IFRS, this will be on the moment that we ship the tool. Hence, we will also, for Japanese customers, recognize sales a couple of months earlier as compared to the previous situation. For other geographies, as we explained in some of the earlier calls, revenue recognition took already place on the moment of shipment.
If you look at the impact from IFRS 15 in 2017, it varied from quarter to quarter, but for the full year, the impact was relatively limited, decreasing sales by about 1% and operating profit by 4%. In the annex of the press release, we have provided the restated profit and loss figures for the quarters and the full year 2017. The impact in 2017 was negative, as under IFRS 15, some revenue needed already to be recognized in prior periods. Note that these changes are, of course, non-cash. Another change in our reporting is that starting with the Q1 of 2018, we disclose the breakdown of our sales between spares and services on one hand, and the equipment sales on the other hand. Again, in the annex of the press release, we provided the comparable quarterly and full-year figures for 2017.
Spares and service is an important business line for our company, and it gives us the opportunity to provide additional value to our customers and to build stronger relationships with them. Last year, spares and services accounted for 22% of our total sales. Following solid double-digit growth in 2017, this business line grew by 10% in the Q1 of 2018 on a currency comparable level. That's primarily driven by the growth of the installed base of our equipment. We are investing in this activity to further enhance our capabilities to drive growth in the coming years.
Thank you, Peter. Let's now review our Q1 financial results. Revenue in the Q1 amounted to €159 million, an increase of 2% compared to the Q1 of last year, and a decrease of 12% compared to the Q4 of 2017, with both periods of last year on a restated basis. Revenue in the quarter was within our guidance, which was a range between €155 million-€175 million, albeit somewhat to the lower end, mainly related to some last-moment reschedules. Our ALD business was a key driver of revenue in the quarter. By industry segment, revenue was led by memory, in particular 3D NAND, followed by logic. The gross margin decreased to 37.8%, down from 39.6% in the Q4 and 43% in the Q1 of last year.
The negative impact from the new products in FE and PECVD moderated to 2% in the quarter, down from 3% in Q4 and 5% in Q3 of last year. Cost reduction programs are on track, and we expect the gross margin of the new products to improve further in the course of this year. In addition, the gross margin was negatively impacted by the sales mix of the existing products, which was less favorable during the quarter. As we explained on earlier occasions, the sales mix can vary from quarter to quarter, leading to fluctuations in the gross margin. Finally, the gross margin included higher costs related to preparations for higher activity levels, particularly in manufacturing and services. The effect of these higher costs and the sales mix was a bit more pronounced because of the relatively low sales level in Q1.
In Q2, we expect our gross margin to improve substantially compared to Q1, which will bring us back to our target range for gross margins of a low to mid-40s%. SG&A expenses increased by 9% compared to the previous quarter, which is mainly explained by costs associated with the patent litigation. R&D expenses increased by 2% compared to the Q4, whereby R&D cost decreased, offset by a lower capitalization of R&D as compared to Q4. Financing results in the Q4 included an EUR 8 million currency translation loss compared to a translation loss of EUR 5 million in the Q4, and EUR 7 million in the Q1 of last year. As a reminder, we keep a substantial part of our cash balances in US dollars, and the related translation differences are included in the financing result. Let's now look at ASMPT.
Results from investments, which reflects our 25% share of the net earnings from ASMPT, amounted to EUR 60 million, up from EUR 14 million in the Q4, and down from EUR 35 million in the Q1 of last year. On 100% basis and excluding one-offs, the net result of ASMPT amounted to HKD 616 million in the quarter, up 16% compared to the Q4, and up 36% from the Q1 of last year. In the Q1, ASMPT reported sales of $556 million, up 3% compared to the Q4 of 2017, and 16% up from the same quarter last year. The latter compares favorably to ASMPT's Q1 guidance, which was for a year-on-year percentage increase of high single digits to low double-digit%.
ASMPT reported bookings of $754 million in the quarter, an increase of 52% compared to the Q4, and up 24% compared to the Q1 of last year. Bookings in the quarter represented a new record high and were driven by strong broad-based demand in both backend equipment and SMT solutions. Let's now turn back to ASMI's consolidated operations. ASMI's net earnings on a normalized basis amounted to EUR 19 million in the Q1, down from EUR 37 million, excluding the book profit of EUR 184 million on the sale of the 9% stake in ASMPT in the Q1. Our new orders in the Q1 were EUR 206 million, up 2% from the Q4 and up 1% year-on-year. Orders were at the higher end of our guidance, which was a range between EUR 190 million and EUR 210 million. Orders were mainly driven by our ALD business.
Looking at the breakdown in bookings by industry segment, logic represented the largest segment in the Q1, driven by advanced node investments. Logic was followed by DRAM and 3D NAND. Orders in the DRAM segment increased substantially compared to the Q1, mainly for ALD patterning tools and driven by customers' investments in new capacity. DRAM orders coming from a low base, were at the highest level in more than two years. Looking at the balance sheet and the cash flow, at the end of March, the cash position decreased to EUR 741 million, down from EUR 836 million at the end of December. We generated EUR 50 million in free cash flow.
Net working capital decreased to EUR 156 million, down from EUR 180 million at the end of the Q1, driven by the sequential decrease in revenue and account receivables, which were relatively high at the end of December, were collected during the quarter. In the Q1, we spent EUR 102 million to repurchase almost 1.8 million of our own shares. These repurchases were part of the 250 million share buyback program that started last September, and that was recently completed, to be specific, on March 29th. In total, we purchased more than 4.3 million shares under this program at an average price of slightly more than EUR 57 per share. With this program, we have returned in full the cash proceeds of the 5% stake in ASMPT that we sold in April of last year.
As most of the attendees on this call are probably aware, we sold another 9% stake last November for proceeds of approximately EUR 450 million. We are using the proceeds for a tax-efficient capital return of EUR 4 per share. This is subject to approval by our shareholders at the upcoming AGM that is scheduled for May 28th. Next to the recent redistribution of this EUR 4 per share, we intend to return the rest of the proceeds in the form of a new EUR 250 million share buyback program that we will launch later in the year. At the upcoming AGM, we also propose to the cancellation of 6 million shares that we currently hold in treasury. This will bring down the total issued number of shares by almost 10%.
Last but not least, as we also announced last February, we propose a 14% increase in dividend to EUR 0.80. This marks the eighth consecutive year that we pay a significant dividend to our shareholders. Okay, let's now have a more detailed look at the trends in our markets. 2018 is expected to be another growth year for our industry. If we look at the average forecast of market observers such as Gartner and VLSI Research, the WFE spending, or wafer fab equipment spending, is expected to increase by a high single-digit % in this year, following approximately 30% growth in 2017, or let's say, measured in U.S. dollar terms. In 2017, as you may know, WFE growth was primarily driven by 3D NAND and DRAM. This year, the key drivers of WFE growth are currently expected to be the DRAM and the logic segment.
Regarding the logic segment, we also would like to highlight here that we were recognized by Intel as a recipient of their Preferred Quality Supplier Awards, the so-called PQS Award, for our performance across 2017. We were handed this award in March of this year. This was the second PQS win for the company, and we are, of course, again, very honored to have received this prestigious award from Intel. In the foundry segment, most of the investments are currently focused on the 7 nanometer node, where customers are ramping volume manufacturing. Later in the year, the foundry customers are likely to make the first early-stage investments in the 5 nanometer node. As we discussed earlier, the single wafer ALD market opportunity in logic foundry has more than doubled in the past three to four years.
The transition to 10 nanometer in both logic and foundry was a particularly important inflection, which drove several new ALD applications. The 7 nanometer foundry node brought a further increase in ALD applications. We believe the upcoming node transition to 5 nanometer, with equipment investments to be made in 2019 and 2020, will be the next important inflection for our company, with, again, multiple new ALD applications. Based on the progress in our R&D engagements, we believe our company is well-positioned to capture a substantial part of these new opportunities. Let's now take a look at DRAM. In DRAM, customers are currently stepping up investments in new fab expansions. In line with our expectations, this is driving renewed demand for ALD patterning tools. As we explained on previous occasions, our DRAM customers mainly invested within existing fabs in the past several quarters.
This led to higher levels of reuse, which had a particularly negative impact on our ALD patterning tools business. As customers are now investing in new capacity again, our DRAM orders strongly rebounded in Q1 and compared to the relatively low levels in the previous quarters. Looking at the full year, we expect the DRAM contribution to our sales to increase markedly, although a return to the previous peak level of 2015 is not likely. In addition, we have been broadening our R&D scope in the DRAM ALD market. We invested, as we shared before, in new non-patenting applications, of which some are currently in the qualification phase at customers. First top line impact of these new applications is expected in the course of 2019. 3D NAND demand in the Q1 remained solid.
Looking at the broader WFE market, 3D NAND investments grew, as we all know, at a very high rate in 2017. It is likely that in 2018, growth in this segment, if any, will slow compared to 2017. Looking at 2018, we are focused on serving current demand at the 3D NAND manufacturers, and we're focused on expanding our R&D engagement for the upcoming device generations. The transition to even more complex, higher stack device generations will drive the need for an increasing number of single-wafer ALD applications. Longer term, we expect 3D NAND to stay an important contributor to the single-wafer ALD market. In addition, we target an increase in our SAM, in our served addressable market, in the 3D NAND market.
As we shared with you before, so far, we estimate that we are participating in a bit more than half of the addressable market within 3D NAND. We aim to increase this percentage as we develop new solutions and broaden our customer base in the 3D NAND market segment. Looking at our other product lines, beyond ALD, we continue to see good momentum in PECVD, in part driven by the customer win in 3D NAND that we announced last year. In epitaxy, we remain strongly focused on further broadening our position in the epi market down the road. Another area I would like to highlight is the development of our business in China. The wafer fab investment environment in China is strong right now, and ASM's business in China has good momentum.
This year, we expect our revenue from the China region, coming from a low base, to at least double compared to the 2017 level. Also, in terms of product lines, we expect several of our product lines to really contribute to that growth in China in this year. Now let's look at the guidance we issued with our Q1 press release. For Q2, on a currency comparable level, we expect sales between EUR 200 million-EUR 230 million, and we expect an order intake between EUR 160 million-EUR 200 million. As we shared in the press release, the broad ranges for Q2 on both sales and order intake reflect some uncertainty around the exact timing of individual tools. That's a short message on the guidance. At this point, like always, we are more than happy to answer any questions that you may have.
We'd like to ask you to please limit your questions to not more than two at a time, so that everybody has a chance to ask a question. All right, Allison, we are ready for the first question.
Thank you, sir. Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, that's star one to ask a question. We'll pause for just a moment to allow people an opportunity to signal. Our first question comes from the line of Sandeep Deshpande from JP Morgan. Please go ahead, sir.
Hi. Thank you for letting me on. My question is, in the H2 of the year, based on your current guidance from the market and on your Q2 guidance, you seem to be looking towards a much stronger revenue ramp. Could you possibly talk about what is the driver of this substantial ramp in the H2 of the year, and where these new tools are going to go into? Secondly, with regard to the Q1 margin in particular, Chuck, you've had very good record in terms of gross margin for many years now. Why is it that over the past year that you've had these stalls in terms of the gross margin getting impacted when you've had new product introductions in the past five years as well, when this did not happen? Thank you.
Okay. Sandeep, thanks for your question. First of all, on H2 versus H1. Let me share that it's best to answer it by looking at the different industry segments. As we look at it now, as we look at our full year forecast, our current estimate is that for both logic and foundry, for example, Q1 is the weakest quarter of the year. That's one remark. Secondly, if you look at the different segments, we think that logic, the H2 will be stronger than the H1 in terms of this whole revenue. Foundry, we also think based on our current forecast, that foundry also H2 will be stronger than the H1. Thirdly, DRAM, we also think H2 will be stronger than the H1.
To repeat logic foundry, as we see it now, Q1 the weakest quarter of the year. For logic foundry and DRAM, we expect H2 to be stronger than the H1. The only area where we foresee now that the H2 will be weaker than the H1 in terms of revenue is 3D NAND. Of course, there are variations by quarter in the revenue outcomes. This is the big picture. That explains, I trust, your question. On the margin. Yeah, you're welcome. On the margin, Peter, I propose you answer that.
Yeah. Sandeep, it's a combination of a few things. First of all, I think we have explained in these calls already earlier that we were investing heavily in a section DCV, and that we had some initial impact of that on the gross margin. I think that is developing according to plan. We had negative impact of 5% in Q3 last year. It went to 3% in Q3, and in this case, this quarter it's 2%. When you would leave that out, you would be on a comparable level of 40%. What we always have said is that we expect our margins to be in the low to mid-40s. Why that range? That was mainly driven by the fact that we have certain products or certain applications for certain customers, which have either a higher margin or a lower margin.
While we have seen in the past period, that the lower-margin products were compensated by the higher-margin products. We have seen a very uneven distribution this quarter, and that had a one-time 2% impact on our sales mix. Of course, it's not a guarantee that mix will not in the coming quarters also sometimes be a bit lower because it's very strongly dependent. Hence, that was also the reason why we have always given that range of 40%-45% on those differences in product mix. The third one, which is also 2%, and that's also highly impacted by the fact that we have relatively lower sales, is that we are preparing ourselves for a much higher sales level.
When you look to the indications that we have provided, first of all, a range of EUR 200 million to EUR 230 million. Also an expectation that in Euro terms or market share the sales will grow for the year as a whole, above the high single-digit %. You need an organization which can cope with the sales level well above the EUR 200 million. Therefore we have made, especially in Q1, extra costs for training of advanced hiring of new R&D people and for extending our manufacturing activities.
That in combination with what already has been mentioned earlier, that we had some last-minute changes, which was leading to some substantial extra costs in our manufacturing organization. That has led to some inefficiencies as a result. That combination together led to a 2% decrease of our gross margin within the quarter. I said in the press release, we estimate a gross margin Q2 to show very substantial improvement and bringing it back again in the range of the low 40s% to mid-40s%. That's where we also aim to be in the rest of the year.
Thank you very much.
I hope that this gives you sufficient color.
Thank you.
Our next question comes from Peter Olofsen from Kepler Cheuvreux. Please go ahead.
Yes, thank you. Basically, two follow-ups from the earlier questions. For 3D NAND, you expect a weaker H2 compared with the H1. In that respect, could you talk about the progress on some of the opportunities, and vendor selections that you have been working on, especially for some of the new applications? As a follow-up on the gross margin discussion, could you shed some more light on the adverse mix in the existing products? Has it to do with the split between ALD and non-ALD, or is it more related to client segments like memory versus logic foundry? Thank you.
Peter, yeah. First on progress on vendor selection. Yeah, there has been some interest, especially on 96-stack, a new 3D NAND application. What we can say there, basically very short answer, we did ship another system. We received a PO, and we took revenue on another tool, this in Q1 for a specific leading 3D NAND customer. In that respect, we made a lot of progress with that customer. At the same time, given the fact that we think that the H2, the climate in 3D NAND, we expect to be somewhat weaker. We did not take into account currently, a steep ramp of revenue for those new applications. Again, not because of our performance, but because of lack of volume ramp at the customer. Sorry, go ahead, Peter Olofsen. Wait a minute. Peter Olofsen, you had an additional question?
Yeah. Is that because you expect the ramp to take place in 2019 rather than H2 this year?
This is not, let's say, a hockey stick application. It's one layer, so revenue contribution will grow gradually. At the same time, indeed, I think that the contribution, we indeed think that more the benefit from volume at the customer, we indeed anticipate to see more in 2019 or at least earliest towards the end of this year. It's just a little bit depending on the visibility we have on that now. We don't count on a significant contribution from that application before the end of the year. That's the way we deal with it now in our own projections.
Okay. That's fair.
Yeah. Peter van Bommel, please go ahead.
Yeah. With regard to your question, Peter, about the gross margin at first mix, it has nothing to do with ALD versus normal ALD. It's application-related. We have certain configurations for certain customers which have lower margins and/or higher margins than the average. What I said earlier, normally you have a more balanced distribution than what we had this quarter. We have really a very imbalanced distribution. That was in combination with relatively low sales leading to that 2% impact on gross margin.
Okay, thanks for the clarification.
The next question comes from Robert Sanders from Deutsche Bank. Please go ahead.
Yeah, good afternoon. You talked about the expansion of Korea and Singapore, a new manufacturing facility in Singapore and a clean room in Korea. What kind of revenue level could you support when those investments have completed in middle of next year? Could you support in EUR revenue? What are you aiming to be able to support on an annual basis?
Yeah. Peter can address that question.
Yeah. We have not provided that detailed information. To give you a color, we have looked to a strategic plan for the next 3-5 years. We expect that it will be more than enough to have the growth for the next 5-10 years, to support that growth.
Got it. The second question, just a quick follow-up about 3D NAND. Why do you think H2 is a weaker environment than H1? One argument could be that yields are going up, therefore, spending. If supply goes up, therefore, people are a bit more conservative about spending. That's one argument. It could just be something else temporary, just because you have two big customers and maybe that's just a temporary issue there. Why do you think that is? We've heard other semi caps flag that 3D NAND is slowing a little bit in the H2. Why do you think that is? Thanks.
Yeah. Of course, we cannot give an answer, let's say, representing the customer. This is just, we try to work according to a very sophisticated forecasting system where we multiple quarters out forecast demand at those customers. This is what we see at this moment in time. With, let's say, among the leaders in 3D NAND. Maybe China is a little bit different. Let's say among the leaders in 3D NAND, this is the view we have at this moment in time. If your question is, could that change in 3-6 months from now? Yes, of course, it could change. For, let's say, the better. This is the assumption we took at this moment in time. Again, there is business, there is demand in the H2. In our current forecast, it's lower than in the H1.
Can I just squeeze in one more question just about the Gartner data that was out yesterday? I think it was yesterday on ALD. Could you just give us some commentary about that? I think Lam took a lot of share from a low base. How do you see that progressing into 2018 and 2019? What's your latest thoughts? Thanks.
Yeah. Indeed. You're referring to Gartner because, of course, earlier in the week, also, VLSI published a market share report. I think in the market share report of VLSI, our share, according to them, dropped by 9%. Gartner said that they estimate our share to drop by 10% in 2017. What we can say about those numbers, two individual views, is that based on our own assessment, we think that indeed our single-wafer ALD market share has gone down, as we already communicated with our Q4 results. Although we believe that the size of the market share decrease is slightly more moderate compared to what both of them estimated. We also in the past gave some color that the single-wafer ALD share, it decreased to a large extent because of the, let's say, the industry segment mix effects.
Next to, of course, broadening of the base of competitors. The industry segment-related mix effects also played an important role. To explain that, as you know, we have our strongest market share in logic foundry. The logic foundry part of the single-wafer ALD market was relatively stable last year, while most of the growth was, as you know, driven by memory, where our share is a healthy one, but clearly not as high as in logic foundry. That's basically, let's say, an explanation of the current numbers. Of course, we would like to emphasize in this call that we take these numbers seriously. We have a very strong focus on defending and expanding our position in the ALD market.
As we already talked about before, we see in logic foundry, we see very good opportunities to increase our share of wallet and to extend our leadership with the next node transitions that is upcoming as we go to 5 nanometer. Which gives us great opportunities. That's on logic foundry, especially on the foundry segment. Looking at 3D NAND, as we shared before, we target to increase our shares available market. Because right now, as we shared in the introduction, we focus on only a bit more than half of the single-wafer ALD market in 3D NAND. We are working hard on new solutions that will drive this share of the pie up in the coming years. Finally, in DRAM, as we also shared before there, we so far have targeted primarily the patterning market.
We target a substantial increase in our relative shares available market, especially as we're going to address the non-patterning part of the market. Those are elements we all focus on to maintain our leadership in ALD. I trust that answers your question, Rob. Any further clarification you would like in this respect?
That was great. Thank you very much.
Okay, you're welcome.
Our next question comes from David O'Connor from Exane BNP Paribas.
Good morning, gentlemen. Thanks for taking my question. Maybe a couple of follow-ups on my side from previous questions. Firstly, just going back to the 3D NAND in the H2. Was your initial expectation that 3D NAND would be stronger in the H2? Now it seems to be that bit weaker.
Can you repeat the question? I did not fully understand what you meant. Sorry.
Yeah. Just going back to your previous comments, I think it was to Peter's question, about the H2 on 3D NAND. You now expect a weaker 3D NAND H2. Did you say that your previous expectation was that the H2 would be stronger in 3D NAND, and now you've seen a weakening of that based on what you're seeing at the major vendor where you have some new wins?
Yeah. I think maybe a couple of months ago, we might have thought that it would be a little bit more evenly distributed among the year. Indeed, our view has developed there. Based on at least our visibility, again, you have to compare that with visibility from peers. Our opinion is that the H2 likely is somewhat weaker than the H1. That's indeed a little bit more recent insight we developed.
Okay.
I don't think we thought that in the past, the H2 would be stronger than the H1. We just thought it would develop in an even pattern throughout the year. That view has been adjusted somewhat by us, and has been taken into account in our current projections for the remainder of the year.
Okay. On an overall level, across segments, would you say your view has strengthened about the H2 versus earlier in Q1?
You mean, across the board now, not 3D NAND specific?
No, just across the board.
Well, again, there are several dynamics between the different industry segments, that change every one or two months. Again, I think the best answer is that our outlook for the year, that we foresee the H2 to be stronger than the H1, and that we aim to outgrow the WFE market, assuming the WFE market will grow with a high single-digit %. That view has not changed.
Got it. Maybe another one on the WFE market. I see in your presentation, particularly slide six, you're quoting some of the Gartner numbers and looking at 2019, which is down double digits. Based on your discussions with customers, is that a view you subscribe to as well, or are you seeing a different kind of dynamic from your customer discussions? Thanks.
Well, we see a pretty strong downward correction in the current projections by industry watchers. So far, we don't fully see that back in our dialogue with customers. No. We see maybe some corrections in some parts of the memory market, not to the same extent that they forecast. Again, we're not saying that they are not right, because it's, of course, in this industry, way too early to say something for sure that much in advance. If you ask, do they already acknowledge these strong downward trends? The answer is no.
Okay, great. Maybe if I could squeeze one more in, again, a follow-up to previous questions on your share. Given all your investments currently on the 3D NAND side and the non-patterned DRAM, how much of the ALD market do you think you will ultimately address, say, in two years' time?
You mean how much of the TAM?
Yes.
Yeah. That's a good question. We have not specified those numbers in detail, but if you now look at the total TAM, the single wafer ALD TAM in 2017, as we are finalizing our own estimates of the size of the market, then we indeed don't address the full TAM. That's why we defined a few years ago that in several segments, especially in memory, but also in logic and foundry, that we want to increase our served available market. We have not finalized those projections, but of course, our target is that ultimately, we not only increase our served available market significantly in the coming years in this market, but that we also, as a percentage of the TAM, that we also increase the percentage that the SAM represents within the TAM in ALD.
It's too early to share any numbers with you, but that's what we are driving. That's exactly what we are driving. Of course, the most to gain is in the memory space. Also, again, in the logic foundry space, there is also, of course, from an absolute point of view, a lot to gain because, we currently still foresee that on average in the coming years, not maybe every 12 months, but on average, the logic foundry space, compared to DRAM specifically, compared to 3D NAND specifically, is going to be the biggest segment.
Thank you, David. Operator, can we have the next question?
Pardon me. The next question comes from Tammy Qiu from Berenberg. Please go ahead.
Hi, thank you for taking my question. Firstly, it's again on DRAM. For next year, do you think it's mainly your customer investing in the old fab, or do you think it will be new capacity again? Also, the second question is on, in terms of the applications which are relevant to single wafer ALD, in which specific market are you patterning, non-patterning, or which application do you think you have the strongest market position and strongest market share?
On the latter question, I'm not very eager to answer that very specifically, Tammy. I understand you would like to know, I think in 2017, what is good to know is that clearly in 2017, the non-patterning part of the DRAM market was bigger than the patterning market, and meaningfully bigger in DRAM. In DRAM single wafer ALD. We're talking about DRAM single wafer ALD. That's even more is an indication that we should focus on that market. As we shared in the introduction, Tammy, we're working on several applications, and multiple applications. With some of those, we have clear engagements ongoing with customers, qualification, let's say, partnerships ongoing with customers. Some will go faster than others. We expect the first results in the P&L to become visible in 2019. That's on your second question.
On your first question, yeah, will DRAM expand in new fabs or in existing fabs in 2019? That's a difficult one. The only thing we can say is that it depends on two things. It depends on, let's say, the ASP development, supply-demand situation in DRAM by that time. That's one element, of course, that's going to be very relevant. Secondly, what also will be relevant is how the 3D NAND space at that time looks. Because if some customers, as you know, are active in both areas, and if the 3D NAND space is similar to as it is today, then they may be more inclined to invest the capacity in DRAM than when there is a huge surge again in 3D NAND, then they can make a choice. At least some of them can make a choice.
There are some vendors that only focus on 3D NAND. The elements that influence that decision varies a little bit by customer.
Okay. Can I squeeze in another one, just because you couldn't answer the second one? In China, the revenue you said is basically increasing significantly compared to the 2017 level. Do you know if that actually coming from the foundry logic space mainly, or the memory space?
It's a mix. I must say that, if you look a few years back, we were primarily focused on, let's say, the logic/foundry space of China. We have been working hard also to improve our infrastructure in China, and have made a lot of progress also in getting to know the players in memory. It will be a mix. Next to that, I think in general also, the More-than-Moore market, for example, is becoming, of course, more and more important. Of course, that also plays into China. Not only to China, it's across the board. It's a market that includes a wide range of devices, analog processors, MEMS sensors, power chips, you name it, that are being used in mobile, automotive, IoT. So we are more also focused on that part of the market, for example, also with our furnaces.
That also plays into it.
Okay. Thank you.
Yeah.
Thank you.
Okay. You're welcome, Tammy.
We have a follow-up question from Peter Olofsen from Kepler Cheuvreux. Please go ahead, Peter, your line is open.
Yes. Thank you. Looking at the SG&A line, there were some costs related to the patent disputes. Is there any news that you can share on these disputes? To what extent should we model additional costs in the coming quarters?
Let me take that question, Peter. As you know, we have four disputes at this moment. One is an arbitration case, which is related to a dispute that we have over the license that we agreed with Hitachi Kokusai for the period 2012 to 2017. We filed for arbitration there by the end of August, and there are three legal cases on this moment. While arbitration cases normally will last for, say, a year, legal cases in the U.S. can last for a more extended period of time. It's too early on this moment to say how much that exactly will cost and how much that you have to pencil in per quarter. For sure, this is not the last amount that we have to book under the legal costs related to these cases.
I said earlier, for us, protecting our strong IP position is very important, and we will diligently prosecute the cases, and we will vigorously defend against Hitachi Kokusai's claims.
Okay, there will likely be some cost, but difficult to quantify at this stage.
Difficult to quantify what the cost will be over which quarters, because it's also highly dependent on when exactly the preparation work for the legal case is started now, but when the hearings will be, that's not known yet.
Okay. Thank you.
Ladies and gentlemen, that concludes today's question and answer session. Mr. del Prado, I'd like to turn the conference back to you for any additional or closing remarks.
All right. I would like to thank you all, especially this late in the day. We apologize, especially for the Europeans, for the U.S. and people, it's different, but for the European that it was this late in the day and on Friday. Normally, we will have this call at least two hours earlier and sometimes also earlier in the week. Thanks anyway for your attendance and all your sharp questions. Feel free, of course, to touch base with us in the coming weeks with any further questions that you may have to make sure that everything is very clear. Thanks again, and enjoy the rest of your day. Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.