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.
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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 location included below is the principal place of business of the specified associates. There is no difference between the principal place of business and country of incorporation.
% Ownership December 31, | |||||
Name | Location | 2017 | 2018 | ||
Associates | |||||
Levitech BV | Almere, the Netherlands | 26.64% | 26.64% | ||
ASM Pacific Technology Ltd | Kwai Chung, Hong Kong, People’s Republic of China | 25.18% | 25.33% |
Levitech BV is valued at nil (2017: nil).
The changes in the investment in associates are as follows:
ASMPT | ||||||||
Net equity share | Other (in)tangible assets | Goodwill | Total ASMPT | |||||
Balance January 1, 2017 | 432,532 | 123,211 | 662,281 | 1,218,024 | ||||
Share in net earnings of investments in associates | 112,424 | – | – | 112,424 | ||||
Other comprehensive income of investments in associates | (2,580) | – | – | (2,580) | ||||
Carrying amount of the divestment | (169,675) | (34,557) | (217,321) | (421,553) | ||||
Amortization recognized (in)tangible assets | – | (22,811) | – | (22,811) | ||||
Dividends | (36,458) | – | – | (36,458) | ||||
Dilution ASMPT share to 25.18% | 1,491 | (112) | (773) | 606 | ||||
Foreign currency translation effect | (32,063) | (11,991) | (73,046) | (117,100) | ||||
Balance December 31, 2017 | 305,671 | 53,740 | 371,141 | 730,552 | ||||
Share in net earnings of investments in associates | 60,769 | – | – | 60,769 | ||||
Other comprehensive income of investments in associates | (1,161) | – | – | (1,161) | ||||
Reclassification | – | 14,587 | – | 14,587 | ||||
Amortization recognized (in)tangible assets | – | (12,333) | – | (12,333) | ||||
Dividends | (29,120) | – | – | (29,120) | ||||
Dilution ASMPT share to 25.33% | 489 | – | – | 489 | ||||
Foreign currency translation effect | 7,007 | 2,067 | 16,731 | 25,805 | ||||
Balance December 31, 2018 | 343,655 | 58,061 | 387,872 | 789,588 |
On March 15, 2013, the Company divested a controlling stake in its subsidiary ASM Pacific Technology Ltd (ASMPT). After the initial accounting of the sale transaction and related gains, future income from ASMPT was adjusted for the fair value adjustments arising from the basis differences as if a business combination had occurred under IFRS 3R, Business Combinations, i.e. a purchase price allocation (PPA).
The purchase of the associate has been recognized at fair value, being the value of the ASMPT shares on the day of closing of the purchase transaction. The composition of this fair value was determined through a PPA. The PPA resulted in the recognition of intangible assets for customer relationship, technology, trade name, product names and goodwill. For inventories and property, plant & equipment, a fair value adjustment was recognized.
The ASMPT investment is accounted for under the equity method on a go-forward basis. Equity method investments are tested for prolonged impairment. An investment is considered impaired if the fair value of the investment is less than its carrying value.
If the fair value of an investment is less than its carrying value at the balance sheet date, the Company determines whether the impairment is temporary or prolonged. The amount per share recognized as per December 31, 2018 under equity accounting amounts to HK$68.74, whereas the level 1 fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was HK$75.45 as per December 31, 2018. Management concluded that based on quantitative analysis no impairment of its share in ASMPT existed as per December 31, 2018.
In April 2017, the Company divested a 4.9% stake in ASMPT for the proceeds of €246 million. In November 2017, the Company divested a 9.1% stake for the proceeds of €445 million. The Company has accounted for the remaining stake as an associate because the Company continues to have significant influence in ASMPT. The Company was considered to have significant influence over this entity due to the fact that it had board representation.
2017 | ||
Proceeds of divestments | 690,660 | |
Plus: realized currency translation adjustment | 15,791 | |
Less: carrying amount of divestments | 421,553 | |
Gain recognized | 284,898 |
During the first half year of 2018, 4,657,600 common shares of ASMPT were canceled and our ownership increased to 25.47%. In December 2018, 2,245,900 common shares of ASMPT were issued, for cash at par value of HK$ 0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT. The shares issued under the plan in 2018 have diluted ASMI's ownership in ASMPT to 25.33% as of December 31, 2018.
Per December 31, 2018, the book value of our equity method investment in ASMPT was €790 million. The historical cost basis of our 25.33% share of net assets on the books of ASMPT under IFRS was €344 million as of December 31, 2018, resulting in a basis difference of €430 million. €58 million of this basis difference has been allocated to property, plant and equipment, and intangible assets. The remaining amount was allocated to equity method goodwill. Each individual, identifiable asset will periodically be reviewed for any indicators of potential impairment. We amortize the basis differences allocated to the assets on a straight-line basis, and include the impact within the results of our equity method investments. Amortization and depreciation are adjusted for related deferred tax impacts. Included in net income attributable to ASMI for 2018 was after-tax expense of €12 million, representing the depreciation and amortization of the basis differences.
The market value of our 25.33% investment in ASMPT on December 31, 2018 approximates €867 million.
Summarized 100% earnings information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate average 2018 1 HK$: €0.10816, for December 31, 2017: 1 HK$: €0.11378).
(HK$ million) | 2017 | 2018 | ||
Net sales | 17,523 | 19,551 | ||
Income before income tax | 3,274 | 2,973 | ||
Net earnings | 2,796 | 2,212 | ||
Other comprehensive income | 578 | (270) | ||
Total comprehensive income | 3,374 | 1,942 |
Summarized 100% statement of financial position information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate per December 31, 2018 was 1 HK$: €0.11151 for December 31, 2017: 1 HK$: €0.10670).
December 31, | ||||
(HK$ million) | 2017 | 2018 | ||
Current assets | 14,572 | 15,168 | ||
Non-current assets | 4,029 | 5,907 | ||
Current liabilities | 4,784 | 7,792 | ||
Non-current liabilities | 2,439 | 1,122 | ||
Equity | 11,377 | 12,161 |
Equity of ASMPT per December 31, 2018 translated into euros at a rate of 0.11151 was €1,356 million (our 25.33% share: €344 million).
The ASMPT Board is responsible for ongoing monitoring of the performance of the Back-end activities. The actual results of the Back-end operating unit are discussed with the ASMPT Audit Committee, which includes the representative of ASMI. The ASMI representative reports to the ASMI Management Board and the Audit Committee of ASMI on a quarterly basis.
Our share of income taxes incurred directly by the associates is reported in result from investments in associates and as such is not included in income taxes in our consolidated financial statements.