November 16, 2017 / 9:14 AM / a month ago

ASML expects to announce new share buyback plan in January: CFO

BARCELONA (Reuters) - Dutch semiconductor equipment supplier ASML is currently buying back its own shares and expects to announce a new buyback program in January, its finance chief said on Thursday

Speaking at the Morgan Stanley European Technology, Media and Telecoms conference in Barcelona, Wolfgang Nickl also said that although memory chip firms were expanding rapidly, demand was as well, and he did not believe there was overcapacity.

The boom and high margins are one reason Chinese manufacturers are entering the market, and ASML expects to ship to five customers in China next year, two of them logic chip makers and three of them memory chip makers, he said.

ASML is one of the world’s two largest tool suppliers to semiconductor makers, and its share price is up 42 percent in the year to date. It is Europe’s second most valuable technology stock after software maker SAP.

As of the end of the third quarter, ASML had completed just 569 million euros of a 1.5 billion euro share buyback program that expires at the end of the year.

“At current levels, there is no consideration to stop buybacks .... It is a very good use of our cash. It is shareholder friendly,” Nickl said.

In China, Nickl said he saw the market as worth 3 billion euros in sales in the coming years, specifying that he meant native Chinese manufacturers and not the many big foreign chipmakers that already have facilities in China.

“Right now our memory customers, particularly in the DRAM space, have off the chart profitability,” he said, referring to the type of memory chip most commonly associated with personal computers.

Eventually the entry of Chinese and other manufacturers into that segment could lead to price pressure, he said, but that seemed several years away given the time it takes to build manufacturing capacity.

Discussing ASML’s newest line of lithography systems, which cost more than $100 million apiece, Nickl said the company expected to ship more than 20 in 2018 and targets 30 in 2019. In 2019, output will be limited by a production bottleneck.

“We are unclogging that bottleneck in 2020, where we should have 40 tools or so,” he said.

The new systems, called EUV systems because they use “Extreme Ultraviolet” light waves to help create the circuitry of modern chips, are seen as the centerpiece of the company’s profitability over the next decade.

Nickl said its new EUV line was close to breakeven and is targeting margins around 40 percent starting around 2020.

Reporting by Eric Auchard and Toby Sterling; Editing by Mark Potter

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