| VELDHOVEN, The Netherlands
VELDHOVEN, The Netherlands ASML, the world's biggest manufacturer of tools for the semiconductor industry, gave an optimistic outlook for 2014, saying its investment in new technology crucial to making the smaller, smarter chips of the future was starting to pay off.
Shares in the Dutch company, which reported better-than-expected results on robust demand for the latest smartphones and tablets, shot up 7 percent on the reassurance that its investment in a technique using extreme ultraviolet (EUV) light, which has been beset by delays, was winning it orders.
The upbeat outlook also points to rising consumer appetite for the latest mobile gadgets in the face of a patchy economic environment. ASML's earnings are widely viewed as an indicator of the European technology sector's health.
ASML has invested heavily in EUV technology, buying Cymer Inc, a supplier of lithography light sources used to make chips, for $2.5 billion in October 2012 to speed up the development after it had suffered a string of setbacks.
"People were worried about EUV and delays, but this morning ASML came out and said they are on track so it's a relief," said Tammy Qiu, analyst at Berenberg, although she added that "EUV is still a work in progress."
The stock was up 7.6 percent at 67.89 euros at 1221 GMT, making it the top gainer in Europe.
ASML said on Wednesday that it has already shipped its first three EUV scanners and expected to deliver another eight this year.
"Expecting further improvements in system performance during the year, we are preparing for additional ... orders," Chief Executive Peter Wennink said in a statement.
The chip equipment maker reiterated its forecast for first-half sales of about 3 billion euros ($4.1 billion) excluding EUV, or roughly on a level with the sales in the second half of 2013, and said that each EUV system booked as revenue adds another 60-70 million euros to the figure.
It also predicted first-quarter sales of around 1.4 billion euros, including EUV.
ASML forecast a gross margin of around 42 percent in the first quarter, which it said would have been 1.9 percentage points higher were it not for an order for one EUV system for which it did not book a profit.
ASML's strong performance last year was driven by demand from logic customers which make microprocessors used in computers and mobile devices, and from DRAM - or Dynamic Random Access Memory - customers for mobile devices.
"The three main segments of our business - memory, logic or foundry, and the new microprocessors - all came together for the first time in a long time and they started to accelerate," Wennink said, adding that "All in all, it's a very solid basis for the full year".
It reported fourth-quarter net profit of 481 million euros on sales of 1.85 billion euros and said it intends to increase its dividend by 15 percent to 0.61 euros per share for 2013.
For the full year, net profit was 1.02 billion euros on sales of 5.25 billion euros.
Analysts in a Reuters poll had forecast a fourth-quarter net profit of 422 million euros on sales of 1.81 billion euros. They expect net profit of 1.49 billion euros in 2014 on sales of 6.63 billion euros.
ASML's shares have gained 24.6 percent over the past year, but are off their October 3 all-time high of 75.05 euros.
(Reporting by Sara Webb; Editing by Louise Heavens)