Online information source for semiconductor professionals

The deepening semiconductor downturn and significant reductions in capital spending has now impacted lithography equipment supplier, ASML. Eric Meurice, President and Chief Executive Officer of ASML (pictured) has announced that the company expects sales for the fourth quarter of 2008 to be significantly down compared to previous guidance issues in October. Sales are now expected to be in the range of €450 million and €500 million, compared to approximately €530 million. ASML has historically been conservative with its sales guidance.

Although ASML has followed many of the major equipment suppliers in lowering guidance for the fourth quarter, Meurice noted that sales for the first quarter of 2009 will be substantially lower than the current quarter and approximately 50% lower than the average of the financial sectors projections. Sales in the first quarter of 2009 are now expected to be between €180 million and €250 million. Financial analysts were expecting sales of approximately €500 million.

“Never before have we witnessed such a sharp and sudden fall-off in lithography system demand, triggered by an unprecedented mix of falling end-demand for semiconductors, weak memory prices and restricted access to capital for our customers,” said Eric Meurice, President and Chief Executive Officer of ASML. “This steep decline in our business activity is forcing us to adjust our organization in order to lower our cost base significantly by using the full flexibility of our business model, while maintaining our important strategic investments in research and development (R&D). Although painful for our stakeholders in the short term, the current effort offers ASML an opportunity to emerge healthier and fundamentally stronger when the overall semiconductor market recovers.”

ASML noted that it had experienced a sharp decline in new order bookings as well as push outs of existing orders. The company did not reveal whether it had also experienced order cancellations. ASML is a major supplier to the pure-play foundries and memory manufacturers and therefore has a high exposure to these sectors that are now cutting production and slashing capital spending plans for 2009.

The net result of the decline in orders will mean a significant fall in sales is expected through the first six months of 2009, according to ASML, though the company did not provide detailed projections, these are expected in January, 2009.

Operating cost reductions include a workforce reduction of more than 10 percent, equating to approximately 1,000 employees, though the majority of job losses are targeted at workers on temporary contracts. ASML has a wide ranging outsourcing business model.

Job losses are expected at its Veldhoven headquarters site, at our manufacturing site in Wilton, Connecticut, formally the headquarters of SVG. ASML is also closing its training site in Tempe, Arizona.

An impairment charge of between €120 million and €150 million will be incurred in the fourth quarter of 2008. Savings are expected to be in the region of €200 million annually.