Good day, and welcome to the ASM International Q3 2016 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Victor Bareno. Please go ahead, sir.
Thank you, Siobhan. ASM issued its 2016 Q3 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. These forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements.
For more information on the risk factors that could affect results, please refer to the company's press releases, reports and financial statements, which are available on our website. And with that, I will now turn the call over to Chuck Delgado, President and CEO. Chuck? Thank you, Victor,
And thanks to everyone for attending our Q3 2016 results conference call and for your continued interest in the company. After a review of operations, Peter van Bommel, our CFO, will join me in answering your questions. First, I would like to thank you for the many messages of support we received following the death last month of our founder and former CEO, Arthur Del Prado. Arthur's energy and vision built this company. We are sure that the best way we all can remember him is to continue the great work that he started.
Again, thank you for your support. So let's now start with a review of our 3rd quarter financial results. Performance in the Q3 was in line with our expectations. Revenue in the quarter decreased by 11% compared to the Q3 of last year and increased by 4% from the Q2 of this year. At a level of €144,000,000 3rd quarter revenue was within our forecasted range of between €135,000,000 €150,000,000 Our ALD business was again the main driver.
By customer segment, revenue was led by Foundry followed by Logic. The strength in Foundry and Logic was driven by 10 nanometer investments. The gross margin remained at a solid level of 44 point 2%, up slightly from 43.8% in the 2nd quarter and 43.4% in the year ago period. SG and A expenses increased by 2% from the 2nd quarter and decreased by 11% year over year. Reported R and D expenses amounted to €24,000,000 in the quarter.
Amortization of capitalized development expenses amounted to 4,000,000 euros The total R and D expenditure adjusted for amortization and capitalization of development expenses amounted to €27,000,000 in the quarter, up 9% from the 2nd quarter and up 15% compared to the year ago quarter. The year on year growth in the total R and D expenditure is again explained by the increase in customer requests for new applications and engagements that we have experienced in the recent periods. Operating income amounted to €17,000,000 stable compared to the 2nd quarter and down from €31,000,000 in the Q3 of last year. Operating margin amounted to 12% in the quarter, almost flat compared to the 2nd quarter. Financing result in the quarter was €3,000,000 negative and consisted of a translation loss of a similar size, which was mainly related to movements in the U.
S. Dollar. In the Q2 of this year, the financing results still included a translation gain of €8,000,000 Results from investments, which reflects our share of approximately 39% in the net earnings of ASMPT, increased to €27,000,000 for the quarter, up from €16,000,000 in the 2nd quarter €9,000,000 in the year ago period. These figures exclude the ongoing amortization charge, which amounted to almost €7,000,000 in the 3rd quarter. For the full year, this charge is projected at €27,000,000 AsiaPT sales in the 3rd quarter increased to US541 million dollars up 14% from the Q2 of this year and up 29% from the Q3 last year.
ASMPT reported bookings of US436 $1,000,000 for the 3rd quarter, a decrease of 22% compared to the 2nd quarter and 14% higher than in the Q3 of last year. The quarter on quarter decrease reflects the seasonal correction in the back end industry. Now turning back to ASMI's consolidated operations. ASMI's net earnings on a normalized basis amounted to €40,000,000 in the third quarter, down slightly from €42,000,000 in the 2nd quarter and down from €50,000,000 in the Q3 of last year. The year on year decrease in net profits is explained by the drop in operating results and as well as lower financing results and lower taxes, which included a one off benefit of €9,000,000 in the year ago period and partly offset by higher results from investments.
New orders fell by 23% from the 2nd quarter to €123,000,000 in the 3rd quarter and were, as such, well within the range of the €100,000,000 to €130,000,000 range that we had guided for. Year on year, the drop in orders was 17%. Orders were for the largest part driven by our ALD business. Bookings were led by Foundry at a distance followed by memory and then logic. Compared to the previous quarter, foundry remained solid, memory was stable and logic decreased.
Within memory, the mix of bookings shifted from DRAM towards 3 d NAND in the Q3. Now let's turn to the balance sheet and cash flow. The end of September, the cash position decreased to €363,000,000 down from €370,000,000 at the end of June and down from €447,000,000 as per year end 2015. The decrease in cash position over the last 3 months was mainly the result of the cash used for share buybacks, partly offset by positive free cash flow, free cash generated during the quarter as well as $50,000,000 dollars 50,000,000 dividend received from ASMPT. Net working capital decreased slightly from €130,000,000 at the end of June to €127,000,000 as per the end of September.
Outstanding days of working capital measured against quarterly sales decreased from 85 to 79 days. In the Q3, we spent €27,000,000 to repurchase approximately 800,000 of our own shares as part of the €100,000,000 share buyback program that we announced October last year. As of last week, we completed approximately 97% of the program, and the number of outstanding basic shares has decreased to approximately 60,000,000 shares at the end of September, down from 60.7 1,000,000 shares at the end of June and 61,900,000 shares at the end of the Q3 last year. So let's now make a few comments on the new share buyback program. With the Q3 earnings release, we announced the authorization of a new share buyback program for up to €50,000,000 of the company's common shares.
This program will be executed within the 20 sixteen-twenty 17 time frame. The new buyback follows on the €100,000,000 program that we announced with the Q3 results in 2015, and that is currently nearly completed. Year to date, we have returned slightly over €130,000,000 to shareholders through dividends and share repurchases, and this is up from €116,000,000 that we returned in the full year 2015. Our commitment remains unchanged to use excess cash for the benefit of our shareholders. Let's now have a look at the different trends that we see in the ALD market and how these fit into our outlook.
The Logic and Foundry segments are the key drivers for us this year. As we already highlighted in previous quarters, the transition to 10 nanometer shows an increase in the number of ALD layers for which we have been selected as compared to the previous 14 nanometersixteen nanometer generation. We expect to significantly grow our share of wallet within logic and foundry customers this year. While logic historically has been the strongest customer segment for ASM, we have built strong relationships in the foundry sector over the last several years. And with the 10 nanometer node, we are now further stepping up our penetration levels within leading foundry in a
significant way.
We expect to book record revenue in the foundry segment this year, up substantially from previous levels. In DRAM, we still expect spending to be down substantially in 2016 following strong spending levels in 2050. As we already highlighted with our Q2 results, recovery in DRAM spending has been pushed out and is not expected to occur before mid-twenty 17. Key driver will be the 1x technology node. We continue to be well positioned to serve the patterning requirements of our DRAM customers.
In NAND flash, as explained at earlier occasions, 2016 is a transition year for the single wafer ALD market. The mix of customer spending in NAND flash has almost entirely shifted in the course of 2016 from planar NAND to 3 d NAND, which means that the multiple patterning in planar NAND, which still had a healthy contribution in 2015 to ASM revenue, has almost completely disappeared. After increasing our focus on 3 d NAND in the past few years, we have made progress this year and achieved several production tool record selections, as we shared with you before. In the Q3, we booked multiple Atrium XP8-two orders for a number of ALD applications in 3 d NAND. This year, 2016, we will have the 1st revenue contribution from 3 d NAND, albeit still at relatively low levels.
We maintain our forecast that the single wafer ALD market will show a double digit percentage decline in 2016. This decline is a result of significant drops in the memory segment, both in DRAM and in the NAND flash, which are only partially offset by a substantial increase in the logicfoundry segment. While the overall single wafer ALD market has slowed this year, our positioning has remained strong, with our market share likely to be up somewhat in 2016. For next year, we expect a clear improvement for the LD market, driven by continued strength in logicfoundry, an increase in the contribution from new three d NAND applications and an anticipated recovery in DRAM spending not earlier than mid-twenty 17. Now turning to the longer term outlook for the single wafer ALD markets.
The outlook for structural growth remains strong, driven by miniaturization and the introduction of new materials and new complex device architectures. We still estimate that this market to double by the 20 eighteen-twenty 19 time frame. Given the decline in the market in 2016, it is more likely that this will happen in 2019 than in 2018. The logic and foundry sector continues to be a key contributor to the long term growth of the market. The complexity and low temperature requirements of advanced infrastructures drive a strong increase in the new ALD applications and layers.
In addition, ALD based multiple patterning is a key enabler of the 10 nanometer transition and also of the 7 nanometer node in logicfoundry. In a transition from 14, 16 nanometer to 10 nanometer and 7 nanometer, over a multiyear period, we expand the single wafer ALD served available market in logicfoundry to more than double in total. In DRAM, we expect multiple patterning to remain a steady contributor for the coming technology transitions. In NAND, from a lower base in 2016, we foresee a steady increase in the number of single wafer ALD applications as customers transition to next generation higher stack 3 d NAND devices in the coming years. In short, while the single wafer ALD market shows a decline in 2016, we expect the market to return to growth in 2017, and the prospects for longer term remain strong.
Now let's look at our Q4 guidance as we communicated in our press release. For Q4, we expect sales between €150,000,000 170,000,000 while we expect an order intake of between €130,000,000 and €160,000,000 both on a currency comparable level. At this point, we are happy to answer any questions you may have.
We'd like to ask you to please limit your questions to not more than 2 at a time, so that everybody has a chance to ask a question. All right, Siobhan, we are ready for the first question.
Thank And we will take our first question from Mateusz Santoshlova from Morgan Stanley. Please go ahead.
Hello. Thank you for taking my questions. First of all, Chuck, would you say that the main difference in guidance is regarding DRAM being pushed out some next year? Or is something extra in here? And the second question, you gave some could you give some more color on 3 d NAND orders you received in the quarter?
What is the drivers for next year? Is it additional customers coming online? Or is it current customers ordering more tools? And also, is there any material difference profitability between 3 d NAND tools, planar NAND tools or DRAM tools? And we are all sorry to hear about the news about Arthur Del
Prado. Okay, Matthias. Okay, thank you for your last remark. Very much appreciate on behalf of the company. And yes, so on your questions, we'll do the margin question at the end, Peter.
So on yes, DRAM, yes, in general, Matthias, there's not really something extra that changed. It's just that while the pricing environment in DRAM has recently improved, current investment levels are just much lower at this moment than in 2014, 2015 time frame. And yes, as we already announced in our Q2 results, recovery in new investments has been pushed out to 20 17. And our current view is just based on the most recent visibility that we will see the impact from such a recovery not before halfway being into next year. And our forecast that forecast does include the assumption that there will, maybe in the initial capacity build at our customers, some reuse of existing capacity at certain customers before those specific customers will see resumption of new ALD tools.
So that's the big picture on DRAM. Yes, then on NAND, As we explained, yes, I think the main driver next year will be, for us, a higher volume of customers that we already are engaged with in the initial, let's say, pilot phase this year. I think more customers likely will come up to speed maybe towards the end of next year. But we do expect and we view 2016 as a transition year. As you know, multiple patterning in plain and NAND has almost completely disappeared.
And yes, single wafer ALD in general within 3 d NAND has so far been limited. But like we said in our introduction, in the Q3, we really booked multiple XP8-two orders for a number, really a number of ALD applications in 3 d NAND. And we do expect we project that a double digit growth in the 3 d NAND single wafer ALD market next year. And beyond that, with customers going to higher stacks, the ALD needs will further increase in subsequent device generations in the years beyond 2017. And then we expect also more customers engagement than today with our company.
Again, those programs are already we are already strongly engaged in R and D, but we're working for insertion of those applications in the nodes after next year. And so that's a little bit and that has to do with the fact that the level of engagement at this moment in time with the customer is different, is a difference based just on the specific technology and different architectures of the different customers. But we see a very meaningful future for 3 d NAND in single wafer ALD.
Yes. Your question with regard to the profitability of V NAND, DRAM and planar NAND and the differences between there, they're all approximately at the same profit level. So we do not see any big differences there. And
we will take our next question from Nigel Van Putten from ING. Please go ahead.
Hi, good afternoon. A couple of questions on next year. So DRAM is not expected to recover before the second half. So should we expect the first half of twenty seventeen to still be stronger than the first half of twenty sixteen? And then I have a follow-up.
Nigel, I understand that you would like to know that, but we, for the moment, only want to give some qualitative color on 2017 among the different segments, but it's just a little bit too early to provide real quantitative guidance on the full first half because a lot is still happening in the market, again, within the different segments. So we would like to not do that because we prefer to give you an accurate guidance than having to correct that in 2 months from now. Hope you appreciate that.
Yes, sure. Fully understand. And then an unrelated question on sort of talk of consolidation in the sector. Could you comment on some speculations you're considering to maybe acquire a share or the entire semiconductor business of Hitachi Kokusai? And more specifically, have you been in talks with the mother company, Hitachi Limited?
Yes. Well, this question was, of course, to be expected after so many articles that came up in the press. But I trust you understand that we as a company, we don't react on rubles in the market.
Okay. Fully understand. Thanks.
Yes. You're welcome.
And our next question comes from Peter Olofsen from Kepler Cheuvreux. Please go ahead.
Good afternoon, gentlemen. Two questions from my side. First on logicfoundry. Could you talk about the linearity of the logic foundry 10 nanometer ramp? You indicated it was a clear driver for sales in Q3.
Do you think it will be quite steady in coming quarters? Or could there be some quarterly volatility as clients digest some of the recently installed capacity? And then coming back on the earlier question on M and A, I understand you won't comment on specific stories or rumors. But generally speaking, would you consider buying a business that derives a meaningful part of its revenues outside semiconductor equipment? And if you were to make an investment in the company, is it fair to assume that you would like to have control of this company and being able to integrate and consolidate it?
Or would you also be willing to acquire a minority stake in a company like you have in ASM Pacific?
Yes, yes, yes, Peter. Okay. Interesting questions, especially the second one. I'll comment on that in a minute. But on the first on the logicfoundry, linearity of ramp, yes, I think what we what I can say about it is that between the 2 segments, logic and foundry, there is a difference.
You saw initially that in the beginning of the year, Logic pushed harder in terms of, let's say, bookings. And you see that bookings basically were stronger, developed stronger for Foundry later on in the year. And as a result of that, also in terms of billings, the contribution later in the year of Foundry is stronger than that of Logic. And that determines also and we're closely looking now at how will that develop going into 2017. How will in foundry 10 nanometer continue its ramp?
How quickly will foundry really move on in preparing for 7 nanometer pilot and how much steam is there left or shown by logic going into 2017. And we hope to get better visibility on that in the coming months. So that's on that part. And then your second question, yes, again, in general applies the same answer as to Nigel that we don't react to great rumors in the market. What we can say to part of your question is that you said, well, how well does non semiconductor related business fit in your strategy.
On that part, we can say that we have always been a very focused company, focused on areas that we are good at. And that has brought us a lot of strong performance and shareholder appreciation. And we would like to stick to that formula. So I trust that, that answered that part of the question.
Yes, it does. Maybe coming back on the earlier question on logicfoundry. When it comes to this market, some of these customers are already talking about 7 nanometer. Do you think that will further increase your opportunity or addressable market for ALD? Or will it be broadly similar to 10 nanometer?
Will it broaden the possibility? The clear and short answer is yes, definitely.
Okay. Thank you. Thank you.
You're welcome.
And our next question comes from Chetan Udeshi from JPMorgan. Please go ahead.
Yes. Hi. This is Sandeep Deshpande. Just a couple of questions. Firstly, regarding 3 d NAND, I'm sorry if I didn't hear some of your earlier comments.
But in the next generation of 3 d NAND where you say you're going to begin to shift a little bit of volume in the Q4, Can you discuss what is it that you supply? What process are you supplying in the next generation three d NAND and why that was not there? Or are you replacing somebody else who was in overall in 3 d NAND given that this is going to be the dominant NAND going forward? Secondly, Intel, which has been historically a big customer of yours and Micron are also going to do 3 d Crosspoint in the next few years. Are you exposed on 3 d Crosspoint, which is potentially going to be another major memory in the market?
Finally, regarding again on this M and A, I would ask a more philosophical question. Is ASMI interested in being part of the consolidation in this industry or as a consolidator or consolidate or is it just that you will only buy small add on things depending on your core businesses? Thank you.
Okay, Sandeep, clear. A few questions. So first on 3 d NAND. Yes, so it should be clear that we our revenue participation the revenue contribution in 3 d NAND this year has not only started in Q4. We've had some, let's say, contribution from multiple customers in terms of bookings and revenue throughout the year.
It is, again, an initial engagement with multiple customers. As these customers go to their newest nodes and are, let's say, developing their improving their yields and before they go to higher volumes. So that's the engagement that is ongoing with, again, multiple customers. And it's on just for them new applications where they view single wafer ALD to really bring the right cost picture and also the right extensibility from a technology and specs point of view down the road. So that triggered them to work with the leader in single wafer ALD.
But of course, we also have to expand our relationships over time to companies that to all the players in the market because we are not present at all the players in 3 d NAND in, let's say, pilot or high volume at this moment in time. So there is a lot of potential. And we view our view is that the compound annual growth rate for the 3 d NAND market space in single wafer Ld is going to be a double digit one in the coming years. So we view that it provides, if we execute well, a great growth potential for the company to develop our single wafer ALD market. But again, it will go gradually.
But in the end, it's we expect that it could represent a meaningful part of the single wafer ALD market. So that's on so it's not only Q4. Maybe that came across wrongly. So that's on the 3 d NAND part. Then Crosspoint, we do have R and D engagement on Crosspoint already for quite some time.
So it's now just waiting like for our peers for this device development really to hit the market, for our customers to find basically an end user market for this technology. And as soon as that happens, we are ready. So we view that we are much our engagement in Crosspoint was there at the right time, while at 3d NAND initially, we were maybe a little bit late, and we are catching up now rapidly. But on Crosspoint, we don't view we are from the start, at least that's our assessment today. Again, execution still to be proven, but from an R and D point of view, that's the case.
So I trust that answers that part of the question. Then on the yes, sector consolidation, Sandeep, interesting one. Yes, of course, our key the key priority for the company is, of course, shareholder value creation. And we as management and the boards of the company jointly, we see tremendous opportunity to achieve this by continuing to execute on our growth strategy. And we believe as a company that we have the right portfolio and customer relationships in place to grow our business in the coming years.
So that is our primary focus, yes, not to be consolidated, but to grow ourselves against that backdrop, the backdrop of further consolidations and consolidation attempts in recent periods, we have only experienced we continue to experience strong pull from the top players, top customers in this industry to expand their engagement with us. And that's based on many aspects that they value in our company. So we believe customers appreciate ASM's position being a focused, differentiated and independent supplier of innovative technologies. And of course, it's important that we develop scale, but we see good opportunities to build scale. Again, always in with keeping in mind, of course, that key priority for us is shareholder value creation.
Yes, and then yes, and being a consolidator, in our role as a consolidator, yes, we've always told you on earlier occasions that acquisition opportunities, our primary objective is organic growth. There's a lot of opportunities there. But on the nonorganic part, it's an ongoing part of our strategic review process for years. And but it's not a goal in itself. Acquisitions have to make sense strategically.
They have to strengthen our position in the market, and it needs to add long term profit growth and shareholder value. And in that respect, we look at things for years, and it can be skill related and it can be technology related. So I trust that answers your question, Sandy.
Thank you.
And our next question comes from Tammy Qiu from Berenberg.
Hi, thank you for taking my question. So the first question is that you have mentioned you are not penetrating in all the I'm just wondering is that because of their using alternative solution or are they just not reaching the level of 3 d NAND layer stack yet? And also you always mentioned that you are expecting to lose a little bit market share when more players try to join this AOD market. Just wondering for 7 nanometer compared to 10 nanometer, basically you will have more applications. But in combination with potential market share loss, do I see actually ALD demand going up or it's
going to be flat from node to node? Thank you.
Yes, Tammy, I was just checking with my colleagues here your first question because I could not fully understand it. Could you repeat it one more time?
Yes. Because you were saying you are not actually in all the 3 d NAND player currently based on your 3 d NAND capable AOD tool, right? So you still have further room to penetrate into more players?
Yes. I'm
just wondering the players that you are not dealing with, are they use basically your competitors' tools or is it simply the fact that they are not actually at the 64 layer, for example, 3 dBiopharm yet And therefore, they don't actually need your AOE tool for the time being.
Yes. It's just that yes, it's a good question. When the customers that we have limited engagement with currently in HVM, they started, let's say, they started development in 3 d NAND when, let's say, not too much single wafer related ALD capability was available in the market. Yes, if we would have been more focused on that market at that moment in time, we they might have we might have been able to develop the single wafer ALD market earlier in time. So of course, there are some competitors that have single wafer ALD business in 3 d NAND currently, but that is not the main reason.
In the earlier notes, it was solutions were found in a different way, but not through single wafer ALD. Okay. So I trust that answers your first question. We're more than happy, of course, to follow-up on that through Victor with you, if you would like to have more clarity there. And then on, yes, your question on market share development, logicfoundry towards 7 nanometer.
Yes, it is yes, we do see we do believe based on the strong engagements in R and D that we have with 7 nanometer potentials with 7 nanometer with customers that go prepare for 7 nanometer at this time that our penetration level could increase towards 7 nanometer. We have a good feel about that transition upcoming. And as a result of that, we think that the contribution in the future in 7 nanometers from logicfoundry to single wafer LD is going to increase. Yes, it's not maybe exactly in 6 months or in 12 months. But if you look at the contribution of the 7 nanometer node compared to the 10 nanometer node, then we strongly believe that the contribution of LogicFoundry in absolute terms will increase in a meaningful way.
I trust that answers your question.
Okay. Thank you.
Okay.
And our next question is from Richard Cloyd from Henderson. Please go ahead.
Hi, Chuck. Again, condolences. I was an extraordinary man. But I just wanted to ask you about the commentary on 2017. And I didn't want to overly read your statements like a Fed statement.
But going from a strong strong kind of recovery in 2017 to kind of clearly improved in 2017, did you kind of mean anything like that? And again, on the buyback, the fact that it's 50 rather than 100. And again, I think on both points, analysts have kind of been saying that are you meaning anything by those 2 bits?
Yes. Okay, Richard. Thank you for your words upfront. Very much appreciated. And so on the yes, 2017, yes, remarks, yes, the views that we have provided so far for next year are not really a quantified forecast.
We are confident and we try to get that across in everything we said so far. We are confident that the single wave ALD market will show a meaningful recovery in 20 17, but it's just a little bit too early to be more precise in quantifying this outlook. But yes, for the rest, we try to give you as much color as possible on the dynamics in the different customer segments. Again, repeating that on logicfoundry, we do expect spending in that segment to remain strong in next year, supported by continued 10 nanometer capacity ramp and also some early 7 nanometer spending. And it's still a little bit to be seen how quickly the transition between those two segments will go.
And then on NAND flash, the contribution to the single wafer ALD market will show, it's our belief, a double digit increase in 2017 versus the lower base this year. And DRAM spending, yes, that is yes, we adjusted that our wording there a little bit. It's we expect now the recovery in 20 17 driven by 1x node nanometer investments to happen not before mid-twenty 17 and also taking some maybe some reuse of existing capacity into account by certain customers. But of course, yes, in DRAM segment, things could also change rapidly, but those are the assumptions we made. But this and again, we chose not to give a quantified forecast now because we rather give you an accurate one than a 2 preliminary one that we later on have to adjust.
And we rather stay with our track record of being as accurate as possible in our guidance to the market. So just to follow-up
on that. So the fact that on the last quarter, you strongly improved in 2017 and this quarter, you're saying clearly improved in 2017. I understand that you don't want to quantify it, but that's not a downticking in terms of your thinking about 2017 at all.
Yes. The only thing that I think on logicfoundry and 3 d NAND nothing changed. On DRAM, you noticed that we adjusted the wording somewhat that we said instead of in the course of 2017 that we now said not early than mid-twenty 17. We have been a little bit more so we've been a little bit more specific there. And that's the only adjustment compared to a few months ago.
Great. And then just on the buyback, why it's 50 this time and not the kind of €100,000,000 that we've seen in the past? Yes.
Let me give you that color.
What we always have said is that we want to keep approximately €300,000,000 of cash. That cash will be used for the benefit of our shareholders. When you look to the announcements that we have done in the previous years when we did the announcement in 20 14, going back to the 2 years, then we had €410,000,000 cash at the end of September on our balance sheet. Last year, that was EUR 428,000,000 so both cases justifying the EUR 100,000,000 At the end of this September this year, we had €363,000,000 of cash on the balance sheet. So we are simply following the same principle, and that led to the €50,000,000 So there's nothing more behind it.
Fantastic. Thank you for clarifying.
And our next
I have a couple of follow ups. First on the order book guidance. What explains the delta between the new orders for the current quarter? Because it seems a bit stronger. Does it reflect sort of ongoing strength in foundry?
Or is it maybe because of a meaningful pickup for 3 d NAND orders? And then another question. I mean, this year, I think there was some planar NAND orders multipathlete still. So should we look at NAND revenues in total to be higher next year compared to this year? Can you provide some color?
That will be very useful. Thanks.
Okay. Niall, on your first question, order book, yes, it's basically that order book is a little higher. It's just a mix of several items, among which the logicfoundry combined is a little higher. It's a little higher than Q3, but there are also a few other elements that contribute to the higher bookings in Q4. Then on the NAND, yes, our expectation is that now that NAND definitely contribution will be higher next year than this year.
Okay. Very useful. And then maybe a quick follow-up then towards 2019 with the doubling of the market. I mean, obviously, this year, the logicfoundry segment is the biggest by
a stretch, followed by, I
guess, still DRAM and then NAND. And how should we look at this mix in your modeling towards 2019 for the ALD market?
Yes. Yes. Yes. We if you look at the mix, of course, logicfoundry is going to be a very important contributor where we expect that single wafer ALD served available markets will already more than double in the transition going from 10 to 7 nanometer over a short period of time. And 3 d NAND applications that are expected to grow in the subsequent higher stack device generations.
Those are the relative the contribution in those two areas will definitely grow. And that combined with the fact that we do expect a DRAM contribution, especially the multi patterning in DRAM, that their contribution will remain steady in the coming years. Those elements are all taken into account in making our projection.
Okay, great. And then just on you said we're more than double from the 10 nanometer to the 7 nanometer node. Is that the number of applications? Or is that because maybe 10 nanometer is much smaller nodes than what the expectations are for 7 nanometer?
Yes. The more than doubling is a transition from 2016, 2014. To make sure that I stated that well from 16, 14 nanometer to 10 and 7. That's in that transition. That's where the doubling in the service available market is going to take place.
And in general, I think you can say that compared to, let's say, the recent past, the contribution of logicfoundry in the single wafer ALD market is going to be much more important besides the other segments. I think in the past, logicfoundry was a moderate contributor, and their contribution is going to be way more significant in the coming years. Besides, again, a healthy gradual growth we expect in through 3 d NAND going to higher stacks and the recovery of DRAM that we anticipate in the market as a whole. I trust that that provides a little bit more color, Nigel.
Yes. Thank you very much for taking my questions. Yes. You're
And we will take our next question from David O'Connor from Exane. Please go ahead.
Good morning, gentlemen. Thanks for taking my question. Question, Chuck, on the 3 d ramp up for the new applications. You mentioned, I think, in your opening remarks that these are dependent on the yield of customers. So do we need to see a significant step up in the 3 d NAND yield before we see some of these new applications or tools for these new applications, those orders come through.
I just wanted to understand the risk of this NAND strength you're expecting in 2017 from these new applications that could come later in 2017? That's my first question. And then second question, can you actually give some more details on the new opportunity, the new the non patterning opportunity in 3 d NAND? It seems quite hazy to me. I just want to try and drill down a bit and see what exactly kind of this application is?
And then maybe a third question, if I could squeeze in another one. Can you talk a small bit about your assumptions for tool reuse as you go as your customers move from that 10 nanometer to the 7 nanometer in foundry? Thanks.
Okay. Yes. On the yields, yes, we just made certain assumptions. And we have we are making certain assumptions in our own forecasting, but we don't want to elaborate too much on that because that's customer sensitive information to the outside world. I it's just we're just not allowed to do that.
So I trust you, you respect that. And then on the non patterning, David, on the non patterning layers in 3 d NAND, just to emphasize, basically everything, well, maybe except for 1 or 2 applications, but basically almost everything that we are working now on in 3 d NAND is non patterning related, yes, because 2 d NAND, we relied on patterning. In 3 d NAND, we cannot rely on patterning at all. And so we are showing and working with customers what the benefits are from single wafer ALD and non patterning really device related structured layers. So that's everything we do today.
And as we try to provide color in the introduction, there is engagement ongoing. There is with multiple customers now, multiple layers that are basically preparing for high volume now in pilot phase as we speak. And we're also working with several with the same and other customers for future higher stack nodes for other applications. And that either will that for future nodes towards the end of next year going into 2018. Then on the reuse, reuse in logicfoundry, Yes, that is a possibility, and also our customers likely talk about that themselves.
And the level of reuse will depend on it's determined by a few factors likely. We cannot speak on behalf of our customers, of course, but we guess for them, it's important how ultimately the timing of the transition between from 10 to 7 will go. Will 10 last much longer? Or will 10 not last that long as a result of which excess capacity can easier transition to 7? Or will some of those end product demand, some of the end product demand for both nodes coexist for some time?
That all influences their ultimate reuse. So that's one aspect, which is still difficult to fully assess. But we assume some reuse. But next to that, 7 nanometer likely will also use completely new applications that cannot be done with existing configurations, with existing 10 nanometer configurations. So their reuse would not be applicable at all.
And then all those elements we incorporate in our own models for next year and the years beyond.
Okay, okay. Understood. And maybe if I could just have one follow-up on the I noticed you pushed out the from previously the doubling the market from 2018 2019 to now more 2019. Just wondering what are your thoughts on that? I mean, does EUV start to become a headwind for the logic foundry side of the business as we as this gets pushed out?
Well, if your question is, was that an important factor in our models to make that statement, then the answer is no.
As there are no further questions in the queue, I would now like to turn the call back to the speaker for any additional or closing remarks.
Okay. Well, on behalf of Peter and Victor, also thank you very much for attending today's call today's call and thank you for your questions. And I trust we stay in touch with on any follow-up questions you may have. So thank you again and have a good day. Thank you.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.