Over the course of 50 years we have grown to become a global company that develops innovative solutions for our customers, and manages the best interests of our investors, our employees, society and other stakeholders. Read on to discover what we achieved in 2018.
The demand for smaller, faster and cheaper semiconductor chips continues to rise, driven by advancements in cloud computing, artificial intelligence, smartphones and the Internet of Things.
Our technology is the first step towards making it all possible, as our R&D investment in new materials, new products and new processes means we can help our customers develop their technology roadmap, and further extend Moore’s Law.
In 2018, this led to the introduction of the Synergis ALD tool, which leverages the core technologies from our Pulsar and EmerALD ALD products for high productivity thermal ALD applications. The new Synergis tool allows us to address more ALD applications and therefore increases our served market. Together with our other products and services, this contributed to our strong financial results, which included:
We operate in a fast-paced industry that continues to reshape the world, and our innovative technology enables the semiconductor industry to achieve advancements in computing, communications, energy, transportation, medicine and beyond.
To ensure that we can continue to make a difference to our customers, employees, and company stakeholders, in 2018 we concentrated on the following three key elements of our strategy.
In addition to our fundamental R&D efforts, we continuously expand and deepen our strategic cooperation with key customers, suppliers, chemical manufacturers, and research institutes. This approach enables us to remain innovative and swiftly meet the changing demands of our customers.
We are a key player in the deposition equipment segments for ALD and epitaxy, and a focused niche player for PECVD and vertical furnaces. As a leader in the segment, ALD has turned into a key growth driver for our business, from which we support virtually all of the leading customers in the semiconductor industry. Our newest ALD tool, Synergis, is designed to address a wide range of existing and new ALD applications, effectively increasing the market we serve.
In addition to our internal optimization programs, we are working with our suppliers to improve fundamental quality through statistical methods and process controls. In addition to addressing the technology needs of our customers, we also focus on further increasing equipment throughput and equipment reliability, thereby lowering the cost per wafer of our wafer processing systems.
In 2018, we achieved revenue growth of 11% reaching a record high revenue of €818 million, with sales increasing mainly in the logic, DRAM and analog segments. By industry segment, our 2018 revenue stream was led by memory, closely followed by the logic and foundry segments.
While our ALD product lines continued to be our key sales driver in 2018, accounting for more than half of total equipment revenue, our other product lines also contributed strongly. In our epitaxy product line we increased sales, following the strong growth we achieved in 2017, and we saw additional sales increases in PECVD and vertical furnaces.
Our industry experienced continued growth in 2018, with worldwide semiconductor industry sales increasing by around 14%. This was driven by high memory prices and broad-based electronics demand for cloud services, mobile devices, automotive and industrial applications. These drivers helped the wafer fab equipment market grow by around 10% in 2018.
Our 2018 sales grew to record levels, reaching €818 million. ALD continued to be the key driver, although the other product lines also made a strong contribution.
We benefited from a further increase in wafer fab equipment spending following the very strong market growth in 2017. Our operating profit increased to €124.3 million from €113.2 million in 2017, while the operating profit margin remained stable.
New bookings increased by 22% in 2018 to €942 million, with equipment bookings for ASMI as a whole led by logic, followed by foundry and then memory. Total research and development (R&D) expenses, excluding impairment charges, decreased by 1% in 2018 compared to 2017, mainly as a result of higher capitalization of development expenses.
Our 2018 sales grew to record levels, reaching €818 million. ALD continued to be the key driver, although the other product lines also made a strong contribution.
We benefited from a further increase in wafer fab equipment spending following the very strong market growth in 2017. Our operating profit increased to €124.3 million from €113.2 million in 2017, while the operating profit margin remained stable.
New bookings increased by 22% in 2018 to €942 million, with equipment bookings for ASMI as a whole led by logic, followed by foundry and then memory. Total research and development (R&D) expenses, excluding impairment charges, decreased by 1% in 2018 compared to 2017, mainly as a result of higher capitalization of development expenses.
During 2018, we returned approximately €607 million to shareholders in the form of dividends, share buybacks and the capital return. This was up from €281 million in 2017 and €140 million in 2016.
Over the 2010-2018 period, we returned more than €1.6 billion to the financial markets through dividends, share buybacks, return of capital, and buyback of convertible bonds.
Sae laccuptatur ad eum fugita alic tem sam aperum fugiatet harum inisin niscit ipid ut danto ipsam doloria sitas qui nobitaspe nos et, saniae receperatium laut ut quiscitae.
In 2018, we paid a dividend of €0.80 per common share and we will propose to the forthcoming AGM to declare a dividend of €1.00 per share for 2019. The proposed 2019 dividend will mark the ninth consecutive year that we have paid a dividend.
The components of income before income taxes consist of:
Year ended December 31, | ||||
2017 | 2018 | |||
The Netherlands | 381,618 | 75,833 | ||
Other countries | 75,419 | 96,736 | ||
Income before income taxes | 457,037 | 172,569 |
The income tax expense consists of:
Year ended December 31, | ||||
2017 | 2018 | |||
Current: | ||||
The Netherlands | (1,666) | (4,128) | ||
Other countries | (5,651) | (6,374) | ||
(7,317) | (10,502) | |||
Deferred: | ||||
The Netherlands | 2,812 | 1,944 | ||
Other countries | (130) | (6,878) | ||
Income tax expense | (4,635) | (15,436) |
The provisions for income taxes as shown in the consolidated statements of profit or loss differ from the amounts computed by applying the Dutch statutory income tax rate to earnings before taxes. A reconciliation of the provisions for income taxes and the amounts that would be computed using the Dutch statutory income tax rate is set forth as follows:
Year ended December 31, | ||||||||
2017 | 2018 | |||||||
Earnings before income taxes from continuing operations | 457,037 | 100.0% | 172,569 | 100.0% | ||||
Income tax provision based on Dutch statutory income tax rate | (114,259) | 25.0% | (43,142) | 25.0% | ||||
Non-deductible expenses | (2,998) | 0.7% | (5,432) | 3.1% | ||||
Foreign taxes at a rate other than the Dutch statutory rate | (885) | 0.2% | 3,738 | (2.2%) | ||||
Recognition of net operating losses | (2,905) | 0.6% | (27) | 0.0% | ||||
Utilization of net operating losses, previously not recognized | 4,394 | (1.0%) | 7,587 | (4.4%) | ||||
Non-taxable income 1 | 102,450 | (22.4%) | 20,612 | (11.9%) | ||||
Adjustments in respect of prior years' current taxes | (161) | 0.0% | (191) | 0.1% | ||||
Other 2 | 9,729 | (2.1%) | 1,419 | (0.8%) | ||||
Tax income / (expense) | (4,635) | 1.0% | (15,436) | 8.9% |
On June 8, 2009, the Singapore Economic Development Board (EDB) granted a Pioneer Certificate to ASM Front-end Manufacturing Singapore Pte Ltd (FEMS), a principal subsidiary of the Group, to the effect that profits arising from certain manufacturing activities by FEMS of Front-end equipment will in principle be exempted from tax for a period of 10 years effective from July 1, 2008, subject to fulfillment of certain criteria during the period. This exemption has been extended for a period of five years.
Since 2011 the Dutch statutory tax rate is 25%. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. The Company’s deferred tax assets and liabilities have been determined in accordance with these statutory income tax rates.
January 1, 2017 | Consolidated statement of profit or loss | Equity | Exchange differences | December 31, 2017 | ||||||
Deferred tax assets: | ||||||||||
Reserves and allowances | 2,134 | (169) | 366 | (30) | 2,301 | |||||
Depreciation | 2,856 | 4,156 | – | (261) | 6,751 | |||||
Recognition net operating losses | 7,257 | (2,771) | – | (60) | 4,426 | |||||
R&D tax credits | – | 2,733 | – | (162) | 2,571 | |||||
Other | 1,672 | 420 | – | (25) | 2,067 | |||||
Deferred tax assets | 13,919 | 4,369 | 366 | (538) | 18,116 | |||||
Deferred tax liabilities: | ||||||||||
Capitalized development expenses | (13,070) | (1,737) | – | 943 | (13,864) | |||||
Other | (48) | 50 | – | (2) | – | |||||
Deferred tax liabilities | (13,118) | (1,687) | – | 941 | (13,864) | |||||
Net deferred assets | 801 | 2,682 | 366 | 403 | 4,252 |
January 1, 2018 | Consolidated statement of profit or loss | Equity | Exchange differences | December 31, 2018 | ||||||
Deferred tax assets: | ||||||||||
Reserves and allowances | 2,301 | 4,467 | – | 176 | 6,944 | |||||
Depreciation | 6,751 | 3,843 | – | 270 | 10,864 | |||||
Recognition net operating losses | 4,426 | 2,545 | – | 19 | 6,990 | |||||
R&D tax credits | 2,571 | 11,401 | – | 32 | 14,004 | |||||
Other | 2,067 | (1,990) | – | 10 | 87 | |||||
Set-off tax | – | (27,277) | – | (296) | (27,573) | |||||
Deferred tax assets | 18,116 | (7,011) | – | 211 | 11,316 | |||||
Deferred tax liabilities: | ||||||||||
Capitalized development expenses | (13,864) | (19,097) | – | (622) | (33,583) | |||||
Other | – | (6,103) | – | (57) | (6,160) | |||||
Set-off tax | – | 27,277 | – | 296 | 27,573 | |||||
Deferred tax liabilities | (13,864) | 2,077 | – | (383) | (12,170) | |||||
Net deferred assets (liabilities) | 4,252 | (4,934) | – | (172) | (854) |
Based on tax filings, ASMI and its individual subsidiaries have net operating losses available at December 31, 2018 of €91,049 to reduce future income taxes, mainly in the Netherlands. The Company believes that realization of its deferred tax assets is partly dependent on the ability of the Company to generate taxable income in the future. Given the volatile nature of the semiconductor equipment industry, past experience, and the tax jurisdictions where the Company has net operating losses, the Company believes that there is currently sufficient evidence to recognize a deferred tax asset in the amount of €6,990. Deferred tax assets and/or liabilities for temporary differences are recognized in the Netherlands, United States, Japan, South Korea and Singapore.
Deferred tax assets have not been recognized in respect of the following items, because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom.
2018 | ||||
Gross amount | Tax effect | |||
Deductible temporary differences | 32,059 | 6,826 | ||
Tax losses | 57,084 | 11,736 | ||
Credits 1 | 15,121 | 15,121 | ||
Unrecognized deferred tax assets | 104,264 | 33,683 |
The amounts and expiration dates of the net operating losses for tax purposes are as follows:
Expiration year | Total of net operating losses for tax purposes | Net operating losses for tax purposes the Netherlands | Net operating losses for tax purposes other countries | |||
2019 | – | – | – | |||
2020 | 204 | – | 204 | |||
2021 | 48,307 | 48,307 | – | |||
2022 | 26,815 | 26,815 | – | |||
2023 | 16 | – | 16 | |||
2025 | 2,688 | – | 2,688 | |||
2026 | 7,249 | 7,249 | – | |||
2037 | 5,608 | – | 5,608 | |||
Unlimited | 162 | – | 162 | |||
Total | 91,049 | 82,371 | 8,678 |
A summary of open tax years by major jurisdiction is as follows:
Jurisdiction | ||
Japan | 2013-2018 | |
The Netherlands | 2014-2018 | |
Singapore | 2014-2018 | |
United States of America | 1999-2018 | |
South Korea | 2015-2018 |
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws. The Company’s estimate for the potential outcome of any unrecognized tax benefits is highly judgmental. Settlement of unrecognized tax benefits in a manner inconsistent with the Company’s expectations could have a material impact on the Company’s financial position, net earnings and cash flows. The Company is subject to tax audits in its major tax jurisdictions, and local tax authorities may challenge the positions taken by the Company.
The Company has not provided for deferred foreign withholding taxes, if any, on undistributed earnings of its foreign subsidiaries. At December 31, 2018, the undistributed earnings of subsidiaries, subject to withholding taxes, were approximately €57,048. These earnings could become subject to foreign withholding taxes if they were remitted as dividends and/or if the Company should sell its interest in the subsidiaries.