ASMI continues to invest in innovation and expansion, sharpens sustainability focus, and delivers strong growth.
Read more Read moreFind out more about our key performance in financials, people and planet.
Our aim is to create long-term value for all stakeholders.
Sustainability is an integral part of our Growth through Innovation strategy.
Our people are our key asset. Our role is to create an inclusive workplace and culture.
Benjamin Loh
Chairman of the Mananagement Board,
President and Chief Executive Officer
Benjamin Loh
President and Chief Executive Officer
As COVID-19 continued to impact each of us in 2021, the health and safety of our people remained our biggest priority. ASMI not only delivered strong financial results, but also took important steps forward in strengthening our position as an innovation leader and expanding our growth potential. The year began on an optimistic note, with the belief that vaccines would help control the pandemic and some normality would resume.
As COVID-19 continued to impact each of us in 2021, the health and safety of our people remained our biggest priority. ASMI not only delivered strong financial results, but also took important steps forward in strengthening our position as an innovation leader and expanding our growth potential. The year began on an optimistic note, with the belief that vaccines would help control the pandemic and some normality would resume.
But as 2021 unfolded, and new variants drove further COVID-19 waves, uncertainty and disruption persisted. We experienced the deep impact of the pandemic on our lives, communities, and world economies. At ASMI, we continued to prioritize the health and safety of our people, business partners, and communities. Throughout 2021 and at the start of 2022, we continued with our robust control measures, travel restrictions, and work-from-home protocols.
I am proud of our people, and how they all pulled together as one ASMI team – putting health and safety first, while serving our customers in the best possible way. Thank you to all our employees for a great effort, and for showing your resilience and relentless commitment.
Accelerated digitalization has driven strong growth in the semiconductor industry. The global semiconductor end market increased 24% in 2021, exceeding the US$500 billion level for the first time. The pandemic triggered structural changes in how we communicate, consume, and work. Semiconductors provide key building blocks for the digitalization trend, and the continued build out of IT infrastructure. The surge in demand that started in 2020 and sped up in 2021 has been outstripping supply, despite sector-wide efforts to boost output and capacity. This resulted in shortages and increased lead times in many parts of the chip markets. This, in turn, has driven further investments in capacity. It has also highlighted the increased importance of the semiconductor industry in today’s world.
The wafer fab equipment (WFE) market increased strongly with a mid-to-high 30’s percentage in 2021. We benefited from strong demand across the board. In terms of customer segments, our sales were driven by foundry, followed by memory, and then logic. The combined logic/foundry segment remained the key driver for ASMI. This was fueled by our customers’ substantial investments in leading-edge manufacturing capacity, to meet growing demand for high-end computing and 5G smartphones. We continued to benefit from substantial increases in the ALD requirement in the most advanced logic/foundry nodes, resulting in share of wallet gains for our company. During the year, we further expanded our R&D engagements for the next nodes, and we won several new key applications. We also saw the first meaningful bookings in the second half of 2021 for the upcoming node transition, which, for most of our key logic/foundry customers, is expected to go into high-volume manufacturing in the second half of 2022 and into 2023. We expect the number of ALD layers to show strong double-digit percentage growth in the next node. This will provide us with further opportunities for share of wallet increases with key logic/foundry customers.
Against a backdrop of healthy spending trends in memory, we achieved a significant increase in our sales to memory customers in 2021. A key driver for our memory business has been the adoption of high-k metal gate ALD in DRAM. This is a key technology that enables greater power efficiency and improved performance of cutting-edge DRAM devices. We have strong engagements for several other new applications, both in DRAM and 3D-NAND, which we expect will increase our memory position in coming years.
Growth in WFE spending on the trailing-edge technology nodes in 2021 is also worth noting. This was driven by strong end-market demand and capacity shortages. In this market, we have a number of solid positions in niche segments, particularly in the power, analog and wafer-maker segments, even though ASMI in total derives most of its sales from the most advanced node spending. Analog/power demand, which has a relatively higher exposure to the automotive and industrial markets, rebounded strongly in 2021 following the drop in 2020.
In terms of product lines, revenue was again led by very solid double-digit growth in our ALD business, which continued to represent more than half our equipment revenue. Epi, our second-largest product line, also showed very strong growth on the back of robust demand in the advanced CMOS market, and the rebound in the analog/power segments. An important achievement in 2021 was the second customer win for our Intrepid ES tool, in the advanced CMOS market for an advanced gate-all-around application. We also launched the new Intrepid ESA. This makes the substantial performance and cost-of-ownership benefits of the Intrepid available for 300mm applications in the analog, power and wafer-maker markets.
We invest selectively in our PECVD and vertical furnace product lines. Noteworthy in 2021 is the contribution of the A400 DUO, our high-productivity 200mm vertical furnace. Introduced in 2019, this is now having great success, including several new customer wins in China.
Our spares & services business delivered a solid performance, with 16% higher revenue. The sales increase in 2021 moderated compared to the 29% growth in 2020, in part due to the impact of customers investing in higher inventories of spares in 2020 in the face of COVID-19-related disruptions of global supply chains and logistics. Our new, innovative outcome-based services had strong traction. We booked multiple contracts for our so-called Complete Kit Management (CKM), and spares-as-a-service offerings. These are creating value for our customers by reducing costs and increasing uptime of our equipment.
COVID-19 continued to create challenges in our operations, especially supply chain. In terms of our capacity, we benefited from our investment in the new manufacturing facility in Singapore. This provided us with the flexibility to meet increased demand. Since completion at the end of 2020, we have steadily been increasing headcount to raise output. In September 2021, we announced that we had started the design work on the second manufacturing floor within this new facility, aiming to be production ready by early 2023. This will result in a further substantial capacity boost.
In supply chain, the situation was already tight as we entered 2021, and constraints increased in the second half of the year. This included the impact of the lockdown measures, resulting in reduced factory outputs – in Southeast Asia, and especially Malaysia – which is an important link in the supply chains in our industry. Building on the learnings from COVID-19-related disruptions in 2020, we took several actions to mitigate the impact. This included maintaining higher buffer inventories, and qualifying new suppliers. We were still able to meet our customer requirements. We achieved quarter-on-quarter record-high sales thanks to very strong execution by our team, and outstanding support and commitment from our supply chain partners.
This was also the year we substantially stepped up our sustainability ambitions. Our focus is on long-term sustainable value creation for all our stakeholders. Building on a solid foundation of achievements in sustainability, we are now taking important steps forward as we strive to make a positive impact in the world. In 2021, we defined our key sustainability focus areas and priorities for 2021-2025 in key environmental, social, and governance areas. These are well-aligned with our strategy and the priorities of our key stakeholders.
Our priorities include: continuing our relentless focus on safety leadership; development of our people and culture; reductions in our environmental footprint; ensuring a responsible supply chain, and continued strengthening of governance, including cybersecurity and IP protection. An important step in 2021 was the announcement of our target to achieve Net Zero emissions, including Scope 3, by 2035. In 2021, we transitioned most of our key sites to electricity from renewable sources, in line with the commitment we made last September. We believe we remain on track to achieve our target for 100% electricity from renewable sources for all our sites by 2024, with an estimated 90% reduction in our Scope 1 and 2 greenhouse gas (GHG) emissions relative to 2020.
One of our key focus areas in sustainability is people. We aim to create a safe and inspiring workplace of inclusion and diversity, where our employees can unleash their potential. In 2021, we launched ConvERGe – our new employee resource group – on International Women’s Day. We have set a target to increase the percentage of women working at ASMI from 15% in 2021 to 20% by 2025. As part of our aim to build a strong and unified culture, we launched our core values – We Care, We Innovate, We Deliver – defining who we are at ASMI, and what we stand for. We stepped up our internal communications, and implemented improvement actions following our earlier engagement survey. These steps are essential to making us attractive as an employer. The war for talent is fierce, especially in the semiconductor sector, and we need to significantly grow our workforce to execute our growth ambitions. We stepped up our talent-recruitment initiatives and benchmarked our global rewards and employee-benefits programs. In 2021, we succeeded in welcoming a record-high number of new colleagues, and grew our total number of employees by 28% to 3,312.
Our company again delivered strong financial results in 2021. Revenue increased 30% to €1.7 billion, our fifth consecutive year of double-digit growth. The gross margin improved from 47.0% to 47.9%. Net R&D increased by 9% and SG&A expenses by 20%. Our operating result grew about 50%, with the operating margin improving from 24.6% to 28.4%.
The income related to our 25% stake in ASMPT increased to €87 million from €45 million in 2020. This result excludes the amortization of intangible assets related to ASMPT.
Free cash flow more than doubled from €120 million in 2020 to €266 million in 2021. This increase was driven by the strong improvement in profitability, with working capital under control, and despite higher income tax paid. CapEx additions amounted to €79 million in 2021, with a significant part spent on expanding and upgrading our R&D lab facilities. In 2021, we also reconfirmed the key elements of our capital allocation policy. Investment in the growth of our company and maintaining a strong financial position remain the priority. Our commitment to pay a sustainable dividend and use any excess cash for the benefit of our shareholders is unchanged.
In 2021, ASMI returned €237 million to shareholders in the form of dividend and share buybacks, up from €165 million in the previous year. We will propose a dividend of €2.50 per share to be paid over 2021, up 25% from €2.00 last year.
Long-term prospects look bright. Data-intensive end-market applications, such as artificial intelligence and cloud computing, will drive investments in faster and more power-efficient semiconductors. At our Investor Day in September 2021, we outlined how we are going to drive growth through innovation. ALD and Epi will be critical technologies to enable the inflections on our customers’ roadmaps, particularly the increasing adoption of 3D structures and new materials, coupled with traditional scaling. We believe our company is well positioned to benefit due to unique strengths. These include our networked R&D model, early customer engagements, vast experience in ALD materials, and a broad portfolio of ALD solutions.
We expect ALD to remain one of the fastest-growing segments of the WFE market, with a CAGR of 16% to 20% in the years to 2025*. In ALD, we aim to maintain a leading market share in excess of 55% by 2025. This is based on continued leadership in the logic/foundry space, and an increase in our ALD memory share. We project the Epi market to increase with a CAGR of 13% to 18% in the years to 2025*. We target our Epi market share to increase from about 15% last year to more than 30% by 2025. A key inflection will be gate-all-around (GAA), a new and advanced transistor architecture that is expected to further increase the need for both Epi and ALD.
In our vertical furnace and PECVD product lines, we target selective growth. Our spares & service business is further contributing to ASMI’s growth, as we are moving to outcome-based services.
At our Investor Day, we also committed to 2025 financial targets. We aim to grow our revenue with a CAGR of 16% to 21% in the next five years*. We target solid gross margin in a range of 46%-50% and operating margin of 26% to 31% in 2021-2025.
Our industry entered 2022 with strong momentum. The global economy is forecast to show further solid improvement this year, despite risks related to the pandemic, including a continuing impact on the supply chain, geopolitical tensions, and inflationary pressures. Capacity shortages mean that part of the demand in 2021 has carried over into 2022.
The WFE market is expected to increase by a mid to high teens percentage in 2022. Solid spending is expected for the logic/foundry segment, driven by the combination of ongoing capacity additions as well as investments in next node initial capacity. While the memory market remains dependent on supply-demand developments, spending in 2022 is likely to be supported by expansion projects and investments in the new nodes.
Supported by a record high order backlog at the end of Q4, ASMI has started the year on a strong footing. Looking at the first half of the year of 2022, supply chain conditions are expected to remain tight. For Q1, on a currency comparable level, we expect revenue of €500-530 million, with a further steady increase in Q2 revenue compared to Q1. Based on the current visibility, we expect revenue in the second half of 2022 to be higher than the level in the first half. We expect to outperform the WFE market in 2022.
We will stay focused on further expanding our engagements with key customers. In 2022, we will also further invest in our business – to strengthen our position and tap into the many opportunities ahead of us. We also plan to report on our progress in sustainability, as we set further targets and undertake new initiatives in our key focus areas.
*Compared to the baseline year 2020 as presented during the Investor Day in September 2021.
March 3, 2022
Benjamin Loh
President and Chief Executive Officer
Paul Verhagen
Chief Financial Officer
Paul Verhagen took over as ASMI’s new Chief Financial Officer in June 2021. In the following interview Paul comments on the company’s positioning and opportunities. He also reviews ASMI’s financial performance in 2021 and discusses the capital allocation policy and investment priorities.
Paul Verhagen
Chief Financial Officer
Since joining ASMI, I have been particularly impressed by our company’s innovative strengths, and the strong growth opportunities ahead of us. In 2021, the semiconductor market increased 24% to more than US$500 billion, and is expected to grow to US$1 trillion by 2030. To enable new end-market applications in, for instance, artificial intelligence and 5G smartphones, our customers are investing in next-generation semiconductor technologies. ASMI is well placed to benefit from these trends. We are the leader in ALD, and have a growing position in Epi, which are critical technologies for our customers to transition to the next nodes.
It is important that we prepare our company for the next growth phase. We are expanding capacity, both for manufacturing and for our R&D lab facilities. We continue to increase our investments in R&D, for product innovation, and new applications. To support this, we need to step up our efforts in hiring new talent, and retaining our people by investing in their development.
It’s not easy, and we have stepped up investments in our People teams to support our recruitment needs. To give an example of the strong growth we’ve been experiencing: at year-end 2021, around a third of our employees had been at ASMI for less than a year. The war for talent in our industry is reaching new heights, particularly for engineers. All technology companies are fishing in the same pond. We have to make sure we stay competitive. As one of the effects of this, we expect to see some above-average wage inflation in the next year.
Our priority is always the health and safety of our people. In 2021, and as we entered 2022, we continue to take measures to minimize risk for our employees, customers and suppliers, and for the communities where we operate.
From a demand perspective, the pandemic continued to fuel work-from-home-related computing demands, and helped speed up digitalization trends in our economies and society. This, in turn, drove strong growth in our industry. COVID-19 continued to create challenges in our operations, particularly in our supply chain. The industry-wide spike in demand, and the impact from lockdowns and constraints, led to shortages and delays.
Supply conditions tightened further in the summer of 2021, due to COVID-related lockdown measures in Southeast Asia, where many suppliers in our industry are located. Thanks to close and proactive cooperation with our suppliers and customers, and our actions to maintain higher inventories and to qualify new suppliers, we were still able to deliver on our customer requirements, achieving record-high shipments and sales.
ASMI delivered very strong results. Our revenue increased by 34% at constant currencies to €1.7 billion, the fifth consecutive year of double-digit growth. Demand for wafer-fab equipment increased strongly and across the board. Our growth was also supported by share of wallet gains in the advanced logic/foundry nodes, our inroads in memory, and solid expansion in the analog/power wafer markets. At constant currencies, equipment sales increased by 38% year-on-year, driven by strong growth in our ALD and Epi product lines. Our spares & service sales were 18% higher (at constant currencies) in 2021, with an increased contribution from our new outcome-based services.
The gross margin increased from 47.0% in 2020 to 47.9% in 2021. Within the year, the gross margin moderated from 48.8% in the first half, which was supported by a relatively strong application mix, to 47.1% in the second half.
Gross R&D, excluding capitalization and amortization of development expenses, and impairments, increased by 20% in 2021. Net R&D increased by 9%, as capitalization increased and impairments decreased compared to 2020. As a percentage of revenue, net R&D expenses amounted to 8.7% in 2021, down from 10.5% in the previous year. The increase in R&D spending was somewhat below our target in the first half. In the course of 2021, we took steps to grow R&D at a faster rate, resulting in a higher increase in the second half. We aim for a further acceleration in R&D spending in 2022. Our mid-term target is high single to low double-digit investments in net R&D as a percentage of sales.
Selling, general, and administrative (SG&A) expenses increased by 20% in absolute terms, and decreased as a percentage of revenue from 11.9% in 2020 to 11.0% in 2021. The increase in SG&A last year was in part due to the higher activity level, as well as increased investments in, for example, IT, and the strengthening of the Sales and Quality organization. We expect to increase these investments in 2022. Taking a mid-term view, we forecast the SG&A expenses as a percentage of sales to decline to high single-digit, as we benefit from operating leverage.
The operating result increased by about 50% to a new record level of €491 million, with the operating margin up from 24.6% in 2020 to 28.4%.
Income from ASMPT increased to €87 million from €45 million in 2020. This result excludes the amortization of intangible assets related to ASMPT.
In line with our earlier indications, the effective tax rate increased further to 17.2% in 2021, up from 14.6% in 2020. The increase in the tax rate is related to earlier exhaustion of net operating losses (NOLs).
Total net earnings increased by 73% to €495 million compared to last year.
I am pleased to say that we were able to offset the impact from increased energy and commodity prices by other savings in our cost of goods through commercial negotiations, value engineering, and increased efficiencies. It is too early to tell what the impact will be in 2022. But we stay focused on opportunities to offset further inflationary pressures, and remain committed to deliver healthy gross margins.
We made strong progress in several important areas. But if I have to choose two highlights, they’d be our increased sustainability focus and Investor Day. In 2021, we launched our new sustainability priorities 2021-2025: Innovation, People, Planet, Responsible Supply Chain, and Governance. In September, as a first significant step, we announced our ambition for net zero emissions by 2035. As part of this, we aim to achieve 100% renewable energy by 2024. We are currently preparing several new actions and targets in our other sustainability focus areas, and will report on our progress in upcoming periods.
Apart from our moral duty to do business in a responsible way and make a positive impact, I’m also convinced that companies that perform better in terms of sustainability are more likely to deliver stronger long-term financial results.
Also in September, we held our first Investor Day. An important goal of this event was to explain in more detail the technology inflections in our key markets. Also, how we expect to capture these market opportunities on the back of our Growth through Innovation strategy. We also presented 2025 financial targets. We expect our revenue to grow to €2.8-3.4 billion by 2025, an average annual growth of 16% to 21% compared to 2020. For 2021-2025, we target the gross margin to be in a range of 46%-50%, and the operating margin in a range of 26%-31%. Driven by strong revenue and solid profitability, we expect to generate a healthy free cash flow in 2021-2025.
Free cash flow more than doubled from €120 million in 2020 to €266 million in 2021. A key driver was the improvement in profitability. The cash outflow for working capital amounted to €68 million, and was mainly driven by the strongly increased activity level. The underlying quality remained healthy. In relative terms, working capital dropped to 58 days, down from 63 days the previous year. On a structural basis, we target days of working capital to be in a range of 55-75 days.
CapEx additions amounted to €79 million in 2021, with a significant part spent on expanding and upgrading our R&D lab facilities. These investments will continue in 2022. CapEx ended up lower than planned for. This was due to some carry-over from 2021 into 2022 as a result of COVID-19-related delays. CapEx dropped compared to €95 million in 2020, which included the completion of our new and significantly expanded Singapore manufacturing facility that year. As part of our 2021-2025 financial targets, we expect CapEx to be in a range of €60-100 million.
Cash spent on taxes increased substantially to €152 million in 2021. This is explained by the fact that we paid cash taxes in the Netherlands in 2021 with respect to the three years 2019, 2020 and the estimated preliminary tax for 2021.
Cash spent on taxes increased substantially to €152 million in 2021. Apart from the increase
in the tax rate, this is explained by the fact that we paid cash taxes in the Netherlands in 2021 for the years 2019, 2020 and part of 2021, which is related to the aforementioned exhaustion of net operating tax losses.
We used €237 million in cash for shareholder remuneration, up from €165 million in 2020, and consisting of €97 million for dividend and €140 million spent on share buybacks.
Our financial position remained strong. We ended 2021 with a cash position of €492 million, compared to €435 million the previous year.
No, the fundamentals of our capital allocation policy remain unchanged. The key priority for ASMI is to invest in the growth of our business. That means spending on CapEx and R&D, and also scanning the market for potential M&A opportunities. Next to that, it remains key for us to maintain a strong balance sheet. We intend to gradually increase towards a cash target of €600 million. This is up from a cash target of €300 million in earlier years, as we also communicated last September, and reflects the increased size of our company.
We remain committed to pay a sustainable dividend. With the publication of our Q4 2021 results on February 22, 2022, we announced a proposed dividend of €2.50 per share to be paid over 2021. This is a 25% increase, compared to the regular dividend of €2.00 paid over 2020.
Our policy regarding excess cash is also unchanged. We plan to return excess cash to our shareholders. Last December, we completed the €100 million share buyback program that started in July 2021. With the publication of our Q4 2021 results we announced a new €100 million buyback program, to be executed in the 2022-2023 timeframe.
In this fifth consecutive year of double-digit growth, we achieved strong expansion in logic/foundry and strengthened our position in the memory market, while working closely with customers to develop the key technologies for the next nodes.
We published our 2025 targets as part of our Growth through Innovation strategy. Prospects for our key ALD and Epi products are bright, enabling industry breakthroughs, such as the next-generation transistor architecture. Supported by increased investments in R&D, we aim to continue outpacing market growth.
We have reinforced our commitment to sustainability. In 2021, we took a next step by defining our sustainability priorities for the next horizon, including announcing our target to achieve Net Zero emissions by 2035.
People are our key asset. We are committed to creating a safe, inspiring, inclusive and diverse workplace where employees have the opportunity to maximize their potential.
With our technology, and underpinned by our values – We Care, We Innovate, We Deliver – we continue to help move the industry roadmap forward, driving innovation in the electronics market and improving people’s lives.
At ASMI, sustainability is about understanding our impact and increasing our value as an integral part of our business strategy.
Long-term sustainable value creation
Sustainability is an integral part of our Growth through Innovation strategy. In 2021, we defined our sustainability focus and priorities for the next horizon – the years 2021 to 2025, and beyond. These are: innovation, people, planet, responsible supply chain, and sustainability governance.
Tackling the climate crisis
In 2021, ASMI announced its target to achieve Net Zero emissions by 2035. This includes setting targets for Scopes 1, 2, and 3 GHG emissions, with the aim of reducing emissions as near to zero as possible.
A responsible supply chain
ASMI is committed to collaborating with suppliers to increase the impact of sustainability initiatives and recognize their success. In 2021, ASMI introduced its PRISM Sustainability Award, including Leadership and Innovation categories.
Our role is to create an inclusive workplace and culture that allows everyone to grow, thrive, and develop a fulfilling long-term career.
Our core values will help us grow employee engagement
We stepped up our internal communications, and implemented improvement actions following our earlier engagement survey. These steps are essential to making us attractive as an employer. We stepped up our talent-recruitment initiatives and benchmarked our global rewards and employee-benefits programs. In 2021 our total number of employees grew 28% to 3,312.
A place where everyone can be their whole self
In 2021 we launched ConvERGe, our new employee resource group, whose objectives are strongly linked to our ESG ambitions: drive an inclusive work culture; lead in gender pay equality; foster recruitment and retention of women across ASMI. ConvERGe is also committing to collaborating with our leadership team to target and drive for 20% women working at ASMI by 2025 (compared to 15% in 2021).
Long-term career progression is core to retaining our employees
We implemented a talent-management approach built around employees’ strengths. This provides tailored support and career development opportunities. In 2021, hundreds of our people were assessed, with actions designed to tap into their potential. This will continue into 2022, with individual development plans implemented for all employees.