Ladies and gentlemen, welcome to the VAT Q1 2025 Trading Update Conference Call. I'm Sandra, the call's operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Urs Gantner, CEO. Please go ahead, sir.
Ladies and gentlemen, good morning and welcome to VAT's Q1 2025 Trading Update Conference Call. With me this morning in Hague, in our freshly opened Innovation Center, are CFO Fabian Chiozza and our investor relations team with Michel Gerber and Christopher Bickley. After my introductory remarks, we will start the Q&A session. The call moderator will take your questions in the order you enter them. Let's start. We are pleased to connect with you again after the full year results event, March 4th. Following the full year results, we had great discussions during our Zurich and London roadshows with a focus on the technology and the anticipated shifts relevant to our business this year. Since then, I've spent a lot of time with customers, mainly in Asia, which is especially important during these times of uncertainty in our scene.
Our customers rely on us to be ready with our products and services in the location they need us, and with ever shorter lead times for engineering and new product introductions. Nothing has changed there. My takeaway from these discussions is that our customers are not changing their views or expectations about the ongoing technology transition and capacity expansion. However, a new arrival has become relevant: tariffs. Tariffs are likely to impact the demand for and pricing of consumer products. The exact magnitude is difficult to estimate right now. Nonetheless, the advancement of the next generation of chips, and thus VAT's core growth driver, is still in place. The overall demand for semiconductor chips and therefore for semiconductor production equipment remains consistent, but we have seen a slowdown in order intake of around 10% since the Q4.
This is due to the high level of uncertainties caused by the geopolitical situation and, for example, announcements of potential factory reshoring. The semiconductor supply chain is on a standby to serve where and what kind of demand will arise. Our customers are reflecting this situation as well, and lead times remain short. They expect us to remain on standby for deliveries. As we mentioned previously, we have seen a recovery for VAT from the bottom in 2023. The market seems to have plateaued in the past two years around a record wafer fab equipment of around $100 billion. It will be the mix of applications that will drive VAT's growth going forward.
The investment announcements by major hyperscalers for the reconfirmation of the previously made commitments is, in our view, a strong signal that AI will serve as a key driver of the technology transition and of investments in additional capacity. These long-term plans reaffirm that despite all these short-term obstacles, the semiconductor market continues to grow towards the $1 trillion mark by 2030. In the advanced industrial business, we have seen a slowdown in orders compared to Q4. Again, the volatility from uncertainty in global trade has been eating into the business. Furthermore, U.S.-based research institutions have been experiencing cuts to their funding. All this is expected to be temporary, and we have still expectations of a recovery and growth in our ADV business during this year. Global services complete the picture.
Demand for consumables and repairs remains at the same level as in the Q4, as fab utilization has gradually improved over the course of the year. The segment shortfall is due to the lower demand for refurbishments and upgrades, which, similar to the VAT, is related to uncertainty around investments in upgraded wafer fab equipment. Let me repeat what I said at the full year results in March around our expectations for 2025. First, the semiconductor market is doing well, as demonstrated by our 2024 results. We still expect 2025 and 2026 to be growth years for VAT. It's up to us in the industry to provide the latest chips to bring in the next generation of electronics while mitigating the developments in global trade. Second, we are progressing with our capacity and capabilities expansions.
In Hague, we just moved into the Innovation Center, a very impressive building where we will get our R&D capabilities running faster. Innovation is what our clients expect from us and what distinguishes us in the market. The third, the thesis of the $1 trillion semiconductor sales in 2030 is still intact. It's not even accelerated by additional AI investments in the years to come. The two nanometer adoption is in progress in logic. HBM capacities are fully booked in 2025, and our customers are preparing to introduce NAND chips with more than 200 layers. All of these trends require a shift in wafer fab equipment towards more leading edge with higher vacuum content . Let's turn to Q1 results that we published this morning. Q1 order intake of CHF 242 million represents a modest improvement on last year's Q1 numbers.
Group net sales came in just above the bottom of our guidance range for Q1 at CHF 275 million. Compared to Q1 last year, our semi sales were up 52%, which ties back to what I said previously. Our semi VAT business is doing well, but we are still anticipating growth to pick up from here. The significant U.S. dollar swings, especially against the Swiss franc, have only taken place in the past two weeks, which means we will talk about this at the half-year call, and thus the FX impact during Q1 was only around a negative 1%-2%. We maintain a healthy order book of CHF 339 million, which is 5% higher compared to last year and represents the book to bill of around 0.9x. This is below our expected book to bill over 1x in 2025.
Looking forward, we maintain our 2025 outlook that we expect market conditions to continue improving over the course of the years. We continue to expect better sales, EBITDA, EBITDA margin, net income, and free cash flow in 2025. I can only repeat my statement from our fiscal year results. The technology transition in 2025 is one of the key drivers of our business for this year, and based on our technology leadership in leading edge, we expect to benefit overproportionally from this transition. We have also spoken about increasing vacuum intensity. We still hold true as the increase in process depth will drive the overall required installed process chambers, which will increase the installed VAT content in the newer fabs and drive demand for our adjacencies.
In ADV, there is no change to our expectations, and a rebound in scientific instruments and in industrial application will drive demand for VAT products. We also anticipate further investment in fusion research and uranium enrichment. In global services, we expect upgrades and retrofits of existing fabs to pick up as fab utilization overall is high, and additional demand will drive upgrades. On tariffs, we are working with our customers to find solutions to the conundrum. VAT represents a small portion of the highly complex supply chain and remains mission-critical. Therefore, we believe the immediate impact is going to be limited at this stage. What is more difficult to anticipate is the impact on the overall consumer electronics market. We are set up to outpace the market growth anticipated for 2025 and beyond.
The mix is going to be very supportive, leading edge, deposition and edge tools, and our ability to service our customers globally. We are optimistic about the coming quarters, and for the second quarter of this year, despite the FX hit, we continue to expect sales of between CHF 260 million and CHF 290 million, which at the midpoint is in line with the full year consensus run rate. We will provide more details on our strategic focus and business drivers for the coming years at our capital markets day on May 20 at our new Innovation Center in Hague. Formal invitations to the event will go out soon. We plan to offer a plant and innovation center tour before diving into our strategy in the afternoon. This concludes my prepared introductory remarks, and we are now turning the call back to the operator for the Q&A session. Operator, please.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questions on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Mayhan Young, from Goldman Sachs. Please go ahead.
Thank you for taking that question. I have two questions. First of all, have you seen any potential pre-buy effects given there are potential sector tariffs on semiconductors upcoming according to your customer interactions? I'll ask the second one.
I think so far we have not seen that, but I think you are anticipating correctly. This could happen, but at the moment it is still too volatile and changing too fast that our customers would do such actions. They are also analyzing. Everybody is kind of analyzing the situation and finding the right measures to answer the new challenges.
Understood. The second question is on the advanced industrial rebound that you mentioned. How sensitive is the rebound assumption that you're having now to the macro development?
Yeah, that's also a very good question. I think here we need also a little bit of a quick poll on how the overall economy will evolve now and how the whole pricing overall will change. I think our advanced industrial business is heavily on energy. I think we still see positives that this will continue. Also on the scientific instruments that goes more also in the healthcare and all this. I do not expect that there will be a big pushback. Our footprint also in certain areas that are heavily impacted on the tariff is not that high. Overall in VAT, it is less than 20% what we send to the U.S. I think this is also for us, again, leveling out the impact.
Very helpful. Thank you very much.
The next question comes from Didier Scemama from Bank of America. Please go ahead.
Yes, good morning. Thank you for taking my question, gentlemen. I've got a couple. First, if you could give us an update on your business with the Chinese semi-cab vendors. Have you seen any changes in behavior, any pulling, any push-outs of any sort? If you could give us a quantification of the revenues coming from Chinese semi-cabs. I've got a follow-up. Thank you.
Yeah, China is the hot topic and the question, and I spent quite some time now after the March event we had in China met all the major customers and also a lot of new ones. China is really a very interesting business for us with the big companies you already know, but there are a lot of smaller companies also popping up here. I sense the situation in China is kind of completely decoupled what we are discussing here in the West. They have their clear mission. They want to achieve this self-sufficiency in China, not only in the chip manufacturing but also in the equipment. I think today or last year, the share of the self-sufficiency was around 20%, and this shows that there is huge potential for our customers in China to serve the domestic market going forward. This is also what we see.
They have to develop a lot of new products, tools, new applications, and there is, I always say, kind of a gold rush, engineering rush, that they have to come up with new solutions. It is very positive, and I really think it is kind of decoupled from all the geopolitics. They just have their own agenda, and Western suppliers as VAT, we can support that and also benefit from this situation.
Very clear. Thank you. Sorry, did you want to?
I'm sorry for the share. I think it was last year, it was roughly 30% of our total, and Q1 it was a little bit higher in the 33%-32% range.
Thank you. To come back to tariff on the second question, there are tariffs on Malaysia and in Switzerland, which are quite punchy. I think you've been giving us earlier your exposure to shipments to the U.S. of about 20%. Is that from Switzerland, or is it from Malaysia, or is that an average that we should use as a sort of bogey for the business?
Good morning, Didier. It's Fabian speaking. The 20% are the total shipments from both locations.
Okay. Brilliant. Thanks very much.
The next question comes from Joern Iffert from UBS. Please go ahead.
Hi, and thanks for taking my questions. The first one would be please on the order trends with high bandwidth memory capacity additions being in full swing. My question is, is this not something that is already supporting your order intake quite materially already today, and there's just some weakness in some other legacy CapEx materializing right now? This would be the first question, please.
Yeah, in your sense. I think we always have to distinguish if it's a build-out of capacity or also if it's tech transition, right, that they are just doing upgrades. Of course, the first step, they are doing tech transition, so they are upgrading the tools, reusing the tools they have before they go into further capacity expansion. This is certainly something that is holding back. As I also mentioned before, lead times are extremely short now, and everybody is kind of trying to reduce lead time and just deliver when they need and to not go into commitment for too long, long time. Since the situation is changing quite dramatically from day to day, I think this is this volatility we see, and everybody's holding back. Requests from our customers on lead times is extremely short, and this certainly reflects the situation.
Thank you. Maybe a second question as a kind of follow-up. I mean, when I step back three, four months ago, everybody was expecting some semi-wave equipment CapEx recovery or acceleration, to call it this, but already it was not happening. Now the world is likely looking for a more challenging macro picture versus two, three months ago. When you listen into your customers also at Applied and Lam, what do you hear? What is the trigger point actually which really gives you confidence that we have end market growth happening over the next one or two years on semi-wave equipment CapEx and not just maintaining in practice at this $95 billion or $100 billion run rate?
Yeah, that's certainly an interesting observation. In the past, we were always talking about the fast semi cycles, right, that the whole is here up and down in the three to five years. I think if you analyze data today, I would say we just are going in a three to four years cycle to the next plateau. Coming from the $30 billion to the $50 billion-$60 billion, and now we reached two years ago to $100 billion. Maybe we stay there this year and maybe slightly higher next year before the next big jump will happen. Potentially this will go to the $125 billion-$135 billion to achieve the next plateau. It is less about the swings in the wafer fab equipment . It is more about what kind of tools and the shifts within the wafer fab equipment that becomes more and more interesting.
We also try to elaborate that on our full year event, that there was quite a shift in the last year towards more lithography, and especially, let's say, the legacy lithography tools driven by China as well. What we anticipate now in 2025, this will level out again to the more depth and edge tools. As you in the right way asked before, the HBM and also the Gate-All-Around technology, they will require more and more the leading edge tool where our content will be at. I think this is the growth story. Even if the $100 billion wafer fab equipment will remain on that level, we are still in a position that we will outgrow the market. We will have this significant growth in 2025 through this technology shift in the wafer fab equipment .
Thanks a lot.
The next question comes from Sandeep Deshpande from JP Morgan. Please go ahead.
Yeah, hi. Thanks for letting me on. Two questions, if I may. I mean, in terms of the order intake in the first quarter, I mean, you've seen this weakening of the orders. I mean, is this because what is happening macroeconomically, or is it something else that you saw during the quarter which is making it happen? Also, your revenue in the first quarter was in the bottom end of the garden. Normally, I mean, you guys are pretty good in achieving what you have guided at the midpoint. Can you just give any indications of how it played out in the first quarter? I have a quick follow-up. Thanks.
Yeah, I think you gave the answer already in your question. Somehow, it is really this macroeconomic, this uncertainty that's coming in. It is not only one. It is several factors that play in here in the industry itself. Kind of the reshoring activities, not every company is in, let's say, in best shape or has some changes internally. Of course, also the geopolitics playing in here as well. Tariffs is one, but also the reshoring and every region, every country wants to have the chip manufacturing on its soil. That gives a lot of opportunities for sure. It is quite some great directions for the industry as well, but also a lot of uncertainties. As long as this is in this flow and changing that fast, everybody's kind of cautious and waiting until there is more security again.
My follow-up question would be on one we could have asked earlier, which was on the China percentage of your revenue in semiconductors. I mean, this 30% revenue that you're getting from China, I mean, the semi-cap companies in China do not have that sort of market share in the global semiconductor equipment market. Maybe how do you understand that share you have in revenue coming from the Chinese semiconductor equipment suppliers given this dynamic?
I think you have very, very long-term relationship as well here in China. Of course, just in the last year, China was growing that fast, but this is always building on a long-term good relationship with customers. I think if you have done your homework 20 years ago, and here I'm grateful for the former management as well, that they were wise enough to also start working with them and that kind of stay close to the customer, support them. That's very important, especially as the business at the first is not that attractive. It doesn't look that attractive that you are very close to them and support them. I think that's now where we benefit as well on this trusted long-term relationship. Of course, the technology they need. They are on a technology path now in China.
What they want to achieve in the next five years, the Western world maybe have done in the last 10 to 15 years. Coming from the 28-nanometer nodes and then down to the 7 or 5-nanometer. In China, this will go much faster. They will also have their challenges for sure. Not everything will go smooth, but they will find a way to sort of thin down on that roadmap. I think not only VAT, but also other suppliers, component suppliers will benefit from that since they deliver quality, proven quality products into China and support them partially on that journey.
Thank you.
The next question comes from Nabil Aziz from Redburn Atlantic . Please go ahead.
Hey, guys. Thanks for taking the questions. I had two questions, if I may. Firstly, just on Gate All Around. How's the supply chain looking in the Gate All Around ramp? For a ramp in the Q3, Q4, when do you expect to see orders pick up? Thanks.
Yeah, Gate All Around is certainly a very technology side very, very interesting. This goes into the 2-nanometer and in the next phase then also to the 1-nanometer where even more equipment will be required. What Gate All Around means is that there will be more process steps required to produce, to process the wafers, and a lot of more, for example, ALD or ALE process steps, leading edge process steps where VAT has also a higher share compared to the legacy tools. I think this is what we will benefit. The build-out will be certainly driven by one major fact, the leading one. If you see what kind of chips they are producing, we are really focusing always on the leading edge, and that build-out will happen.
There they have a very nice announcement about the spend they will have in the market this year. That is certainly what is driving that, and our customers will benefit from that with the leading edge tools, and VAT will benefit since we are qualified on these tools.
Okay, great. I guess my follow-up was just another one on China. ASML yesterday commented that China demand held up better than expected. I was just wondering how you see overall China WFE spending this year, whether you feel like it's trending better than expected, and whether you expect it to be relatively stable this year, fall small down this year. Thank you.
Yeah, of course, our business cannot be compared to the OEM business directly. Yes, China, we also anticipate that the wafer fab equipment overall will be reduced in China this year, let's say 20%, but will be still on a very high level. Even on this reduced wafer fab equipment , the domestic OEM will win. This is where we will grow in China through the domestic OEM.
Great. Thank you.
The next question comes from Michael Inauen from ZKB. Please go ahead.
Thank you very much. Good morning, everyone. Just two questions. First on the order intake Q1. How has it evolved actually month over month? Has it actually just basically stopped like a shock that we could have anticipated with the President of the U.S. just bringing up this tariff discussion to a new extreme level? Has it been okay at the start of the year and then basically dropped, I would say, a couple of weeks ago? That would be my first question. The second question would be, I mean, the discussion is obviously still ongoing on tariffs. There is a 90-day pause, but between the U.S. and China it is still escalating, I would say. What are your assumptions for VAT for a good outcome of these, and what would be actually a bad outcome for you going forward?
How should we look at these options that we have on the table here? This would be my two questions. Thank you.
Thank you, Michael, for the questions, and good morning again. On the, let's say, order pattern throughout Q1, I wouldn't see any specific driver here other than the genuine underlying demand. What you usually observe in a Q1 is that you have a slow start, you go into Chinese New Year, which usually has an effect on your Fed numbers, and March picks up. I think that has been not much different than what we have observed in the past. On the tariffs, the way I look at it is on our own plate and that we, let's say, symbiotically work with our customers on solutions and at the same time do everything possible to ensure that the tariff impact on our financials will be limited.
I think I'm not in a position at all to kind of now look in the crystal ball and anticipate what might happen. I think we on our side just need to be prepared and then react as we have done in the past and also going forward while staying very close with our customers and elaborating the solutions jointly.
Makes a lot of sense. Thanks, Fabian.
Pleasure.
The next question comes from Craig Abbott from Kepler Cheuvreux. Please go ahead.
Yes, good morning. Thank you. Yeah, I just wanted to, in the four-year conference call, you indicated that you felt quite comfortable with consensus top-line growth this year of around 20%. If I look at the midpoint of the Q2 sales outlook and I add that to the Q1 sales, it suggests nearly half of this has already been achieved in H1. You said from the beginning and also in the four-year conference call, you expect Q2 to be stronger with the ramp starting to pick up pace. I just wondered, given all the uncertainties that we've been talking about in the call, how comfortable you still feel with that? You suggested earlier in your comment that it was sort of trending in line with consensus. If you could just elaborate a bit on that.
It would nevertheless be fair to say visibility on this has maybe declined a bit. Just one really quick follow-up. Thank you.
Yeah, thanks for that question. I think I also tried to indicate that in my introductory remarks that we still are very positive that we can achieve not our guidance, but the consensus is that it's out in the market and that we are on the run right now to achieve that. Yes, the uncertainties, of course, they play in, but not only the tariffs or the reshoring. I think the industry itself, there is a demand will be there. Semiconductors are on the path to grow to this $1 trillion as well. Investment will be needed. The exact timing of the investment is always the big challenge, but certainly there will be major capacity expansion, especially new technology going forward already this year as announced by the big FAS and earlier this year. A big impact, of course, will also have the effect.
I think that's certainly something that's critical to us always being in the still major of our business in U.S. dollars and heavily impacted still on the Swiss franc. That's certainly something we have to watch carefully, but it's not completely in our hands. Thanks to our global footprint, we also started already in the past to balance that out that we are less dependent on that as well. Short term, still there might be a hit on that as I indicated as well. That's why the guidance, if you read that correctly, it's actually a growth, right? It's a growth in the Q2 if you would normalize that in the FX.
Thank you. That was going to be my follow-up, to what extent maybe the recent FX volatility has led to this wide guidance range on the sales for Q2. I appreciate you said you would give us more of an update with the half-year numbers, but that is the case, right? You sort of implied it.
Basically, what also might be that confirming actually this consensus for 2025 so far.
Yeah. Okay. Thank you very much.
Craig, maybe let me just add to that also for the benefit for the other participants. As we have informed earlier on, we have actually less than 2% of our sales are recognized in CHF. Therefore, in this utterly volatile environment with the intraday swings that we have observed over the recent days, we have chosen then also to expand this guidance range a little bit, which I believe is mindful at this point of time, but still implies some growth for Q2.
Okay, that's very helpful. Thank you.
The next question comes from Martin Jungfleisch from BNP Paribas. Please go ahead.
Yeah, good morning. I have two questions, please. First, I have some inventories. You mentioned that slightly higher than expected customer inventories and semi also contributed to slightly lower orders and sales in the first quarter. Could you point out any specific customer group that has seen elevated inventories and would you expect this headwind to sustain in the second quarter on orders and sales as well? That's the first question.
On inventory, I think it's not that it's not high, that the inventory goes just also kind of sometimes balancing out. When the customer takes the goods, this can have an impact on the finished good. Of course, in general, it's also that we also prepare, of course, to deliver, as we mentioned before, as well lead times are very short. You also have to be prepared to deliver fast, and then you also have to have long lead items in your inventory. In the end, it's all about the rebalancing.
Okay. Thank you. The second question is on adjacencies. Just if you could disclose the rough revenues and orders generated with adjacencies in the Q3, and if you could call out any specific applications or customer groups that are currently driving sales and orders for that.
Stanley, this is a very interesting question. I think we have the answer on that in our half-year quarter and not in the quarterly.
Okay. Fair enough. Thank you very much.
The next question comes from Michael Seus from Von Tobel. Please go ahead.
Yes, hi. Good morning, gentlemen. Just one question left for me, and I would like to come back on the tariffs. You say that you expect no material impact, but still you have these 20% sales into the U.S. I was just wondering how we should read that comment. Do you expect basically no tariffs, do you expect exemptions, or do you expect to pass the tariffs on? How should we understand the comment that there is no impact from tariffs on VAT?
I think the array of solutions is what you just introduced. Ultimately, as I said before, we're working closely with our customers on solutions to limit the impact. I think there's a range of mitigation elements in here which we will apply.
Okay. I think that goes in the same direction as what ASML, I think, also alluded to. Thank you for that.
Pleasure.
The next question comes from Laveridge Nate from Octavian. Please go ahead.
Morning, gentlemen. Thank you for taking my question. The first one would be on the book to bill. If we look at it, it's probably the lowest since a year and a half. What do you expect for the coming quarters? I mean, you have this historically heightened backlog, almost 40% of your sales. Could this go back to maybe 20% that we've seen pre-COVID? Maybe a bit more reserved order intake, but still strong sales, as maybe your guidance implies, at least on the upper end? That would be my first question.
Yeah, we expect that we go back to book to bill of around 1 in Q2.
Okay. Maybe in light of this, I mean, you have a CapEx guidance for CHF 90 million-CHF 100 million of capacity of CHF 1.5 billion. Maybe in the light of all these tariffs, I mean, are you maybe reconsidering some of these investments or maybe just your cost base, maybe some thoughts on that?
Of course. We are constantly reassessing our investment plans to cater for any potential uptick in demand. I would say we have set course strategically how we would like to expand our footprint, how we would also like to decouple the supply chains. I will give you an update on that in about a month from now. Overall, the game plan is unchanged. Also in light now of the currency development, which we have anticipated actually a long time ago, our natural hedging activities here will certainly also play in our favor with the footprint expansions which we are currently driving. Therefore, for me, it is not so much only about the capacity, but also about how we tactically, strategically operate our production footprint amidst all this geopolitical and macroeconomic uncertainties.
Okay. If I may, I mean, can we understand that maybe part of it will be going to China? I mean, if I speak maybe to some other companies, I heard that maybe China wants to have more manufacturing locally. I mean, you're now in Malaysia. I mean, is there any direction, any movement in that direction or part of that CapEx going there?
Again, I think it's not the moment now to question the footprint that we have currently established. I mean, we are consciously monitoring that. The observation that other companies are building kind of local production in China is also nothing new. This is something that we keep in our drawer that we're analyzing. At the given point of time, we would then also consider that. For the time being, what I would like to reiterate is that the two flagship sites that we are focusing on are going to be Switzerland and Malaysia, as per prior communication.
Okay. Thank you very much.
The next question comes from Jürgen Wagner from Stifel. Please go ahead.
Yeah, good morning. Thank you. If you look at potentially weaker macro, let's say later in 2025, how resilient would your service business be? You mentioned lead times are very short. Can you give us a number? Thank you.
First, to the lead time, of course, it's always depending on the product line. I think we are on a very low level in the 6-10 weeks. Meanwhile, it also depends if it's a high-volume product, a new product. I think lead time is especially required to be fast in new products as well. This is typical now in this race of technology as well that everybody has to be ready when the end users are requiring the new tools for the new processes. I think that's the biggest challenge in lead time also in connection to the engineering part.
The second one was. On the resilience of your service business.
Service connects to consumer. I think our service business is heavily connected, of course, to the flat utilization. I think that's the most important. For example, for the high-band memory, there is capacity booked for the whole year. That's certainly a positive sign. Also from other large fabs in the logic and in the foundry business, they are fully booked for the leading edge. This means they will certainly keep maintaining their tools and also do expansion. I think these are still the positive signs we see, especially also in Japan and Korea. We know that Korea, of course, is a typical semiconductor country. Japan not any more the number one many years back. They also are up in the service business quite a bit. Here, it's very important to stay very close to these customers, to the fabs, to serve them also globally.
I think that's also a strength of VAT, that these global customers can benefit from our global footprint.
Okay. Understood. Thank you.
The next question comes from Nigel van Putten from Morgan Stanley. Please go ahead.
Good morning. Just starting with a clarification. Last quarter, you said you're comfortable with consensus and explicitly said which is looking for 20%. When you're saying you're still comfortable with consensus today, to what number are you alluding to? I think you said before you analyzed in the second quarter, the first half will get you to consensus that implies 16-17% growth. Is that correct? I'm missing something here.
It's the same number, yeah.
Which number? Sorry, but can you just make that really clear?
I'm sure around 1,140. I mean, maybe there will be some adjustment to the consensus by you guys as of today. Of course, there's also a bit of FX consideration in there. We'll see.
Yeah, of course. Now, I'll tell you, the consensus for the Q4, I mean, consensus has since moved. And you've also provided an average compiled consensus, a median. We have Bloomberg visible as a consensus. It would just be helpful to just get the number because it's super using.
It's Bloomberg, and it was the 1140 back then.
1140 back then. You're still comfortable. Okay. That would imply sort of growth in the second half. You've mentioned FX, right? I mean, perhaps can you remind us sort of what the percentage is of sort of U.S. dollar in your sales mix, typically?
Yes. The U.S. dollar accounts for about 65% in our.
65, right? Yes. It is a strong consumption group to almost a double-digit headwind as of current levels. That is quite steep. Is there anything that is offsetting that in terms of you still being comfortable with that 20% growth into October here?
Yeah, but remember that in the sales recognition, you take the year-to-date average. We started quite high, still above 90. That takes quite a while up until this comes down. At this point of time, I would estimate, if we look at it on a like-for-like basis, that the FX impact full year is still below 5%.
Yeah, but strengthening into the second half. I'm just asking, specifically to the second half seems to imply then that growth from the first half, even though the macro situation, etc., is tricky. Given you tend to have quite short lead times, I'm just asking, is there anything that gives you confidence that the second half would indeed sort of grow both organically and even offset the FX sort of headwind that's going to strengthen the second half?
Yeah. We always have in our mind that the industry has this $100 billion wafer fab equipment. That's our assumption around that. As I mentioned, pointed out before, there will be a share on the leading edge as well. This is fueling our growth. Also mentioning before that the China people growth and China, even though the wafer fab is more there, our growth will be there as well. I think these come together. It's not one element, but the different elements that make us really positive that we will have this growth in 2025.
Yeah. It's hard to press the point, but I think this is indeed very consistent with what you said last quarter. Since then, we've seen the macro environment worsening. We've seen FX worsening. I'm saying you seem to have to fill a gap here. I'm just curious if there's anything specific you can point out that gives you the confidence to be able to.
Our confidence comes, of course, mainly on our customer talks, right? How we talk to their reference also then. That is the best what we can do. Now, our customers, they have their customers, and they are the big investors as well.
I think overall, it's just too early to judge all these developments. We alluded now several times to the uncertainty that we have. Let me also reiterate that we feel comfortable with the consensus, which points at about 20% growth. Where this whole FX situation is going to take us, I think we just have also here to drive a sight. At the next update, we'll tell you more. I think that's as much as we can say now, still reiterating the fact that we do see underlying growth also in the second half here, as you have rightly triangulated.
Got it. You said even on the year-to-date for your internal budgeting, I get that now. Looking at sort of margins, considering your mismatch between spending 65% of the dollar and obviously producing elsewhere, should we take that into account for gross margin, EBITDA forecast? Is there anything you can provide some rough color on in terms of the materiality of maybe not tariffs, but the FX on EBITDA margins?
I think we have our financial model quite comprehensively in place now, as you have seen also in recent years. We have not been vulnerable to an extreme extent to these FX swings. I think the same also applies going forward, where our hedging policy, both financial but also natural, will provide certain mitigation to these elements. Bottom line, I would also here not expect a material impact on the margin. We stay course.
Okay. Maybe lastly, on sort of 2026, I think you've mentioned sort of a change in the structure of the industry towards sort of moving from plateau to plateau. Is that what you're sort of implying for 2026, which is grow after current plateau? I guess no more cycles, but growing from at least a stable level and potentially see growth. Is that the best way to interpret that commentary?
I think it's relatively to say, but I think for 2026, the consensus here is that it will be around the 10% growth that the wafer fab equipment will get 110 in a positive scenario, maybe 115. That will be certainly something we are expecting. This also shows now, if you have now this plateau of 110 and have a readily growing with the shift, as I mentioned, towards more leading edge, this is the growth story that's underlying to our numbers.
Okay. Got it. Thank you very much.
The last question for today's call comes from Martin Marandon from Oddo BHF. Please go ahead.
Hi. Thanks for taking my question. The first one is on ALD. Could you give us maybe a bit more color on how ALD valves sales were picked up in Q1? And in the sequential decrease of orders in Q1 versus Q4, did ALD valves orders have decreased as well? Another quick follow-up.
We were talking about the advanced industrial. Is that correct?
No, I'm talking about the valves specifically for ALD application.
Of course, this is a new product in production, new products we are coming and bringing in. This is how it goes in the semiconductor industry. You start with lead customers to qualify that, develop the technology, the portfolio. It is a journey to go. We had fantastic spec points in the past, certainly on the leading edge, on the leading edge tools. It will take time, of course, until this will be in higher volume. That is why we always say this is kind of our horizon two initiatives. We are very proud on that. That is the engineering work, fantastic product going to the market. So far, we do not disclose numbers on individual product families.
Okay. Thank you. Maybe for my follow-up on China, on the broader view, what do you expect from China in 2025 and 2026 compared to maybe three months ago? Obviously, inventories to cost ratio seems quite high at Chinese equipment manufacturers, and now you have more tariff uncertainty. I was wondering if actually this geopolitical uncertainty could accelerate the decoupling of U.S. and China economies and actually make you more confident on the China business going forward?
Yeah. That's exactly the point. That's also how we estimate the situation. Already the sanctions, the technology sanction accelerated. Now the tariffs are the next accelerator for the self-sufficiency in China. I think that's a program they are running, and they will not stop that. Whatever the West is doing, it's not stopping them to achieve their goal towards self-sufficiency in chip manufacturing and also in the equipment.
Thank you very much.
Thank you very much. That was a long question, and we conclude our call here. We hope to see, of course, all of you at our Capital Markets Day on May 20 here in Hague. I think we have a very interesting program with factory tour, innovation center tour, and then, of course, the formal presentation from the afternoon. Invitations also with logistical details will go out soon. After the Easter break, you should look for this in your inbox. We are right at that. We hope to see all of you here in Hague. With that, thank you very much. For those of you who have a long Easter weekend ahead of them, wish you all the best there and have fun. It is time to market and talk to you on May 20th. Thank you.
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