Notes to the reader

UNROUNDED FIGURES

Amounts in the Annual Report may not add up due to rounding differences. The total

amounts may therefore deviate from the sum of the parts. Percentage changes are based

on the unrounded figures.

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Introduction

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ASM delivered a strong performance yet again in 2022. Sales increased by 33% at constant currencies, despite challenging supply-chain conditions, and a weakening economic outlook in the second half of the year. We made good progress against our strategic targets, continuing to invest in the growth of our business and further expanding our engagements with key customers for new applications.

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I want to thank all our people at ASM as they went again the extra mile to meet our customers’ requirements, and contributed to another successful year for our company.

WFE increased again but impacted by slowing
end-markets

The semiconductor market began the year with the expectation of continued solid growth, following strong demand in 2021. But momentum slowed down in several segments during the year. The war in Ukraine, rising inflation and interest rates, and a drop in consumer spending started to impact the smartphone and PC markets. This triggered slowing demand and significant inventory corrections in parts of the market. For the full year 2022, the semiconductor market grew by just 5%, down from approximately 25% growth in 2021.

The wafer fab equipment (WFE) market increased by a high single-digit percentage in 2022, but started to slow down in the course of the year. It was impacted by the weakening semiconductor end-markets, combined with persistent supply-chain constraints. Logic/foundry WFE continued to grow in 2022, driven by advanced nodes investments, while memory WFE, particularly impacted by the weakness in PCs and smartphones, dropped.

Strong financial performance

Against this backdrop, our company yet again delivered a very solid performance in 2022. Revenue increased by 33% at constant currencies to a record high of €2.4 billion, our sixth consecutive year of double-digit growth. With equipment revenue growth of 38% at constant currencies – despite difficult supply-chain conditions throughout the year – ASM clearly outperformed the WFE market.

Operating profit grew by a solid 29%, even with a substantial increase in operating expenses as we stepped up R&D and further strengthened our organization. Excluding the cash used for acquisitions, free cash flow increased by 43% to €381 million. Our company’s financial position remained strong.

Our ALD business continued to be a key growth driver, accounting for more than half our equipment sales. ALD benefited from solid logic/foundry spending on the most advanced nodes, while we also won important new applications in the memory segment. Epi, our second-largest product line after ALD, was our fastest-growing business in 2022. After announcing our second Intrepid ES customer in 2021, we continued to work towards new customer selections in 2022, expanding our

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position in the advanced CMOS epitaxy market. In the power, analog and wafer market, we also had solid momentum, supported by our new Intrepid ESA tool for 300mm Epi applications. We believe we’re on track to double our Epi market share from 15% in 2020 to at least 30% by 2025. In vertical furnaces and PECVD, our strategy is to invest selectively. A great example of this is SONORA, our new 300mm vertical furnace platform that we introduced last July. We’ve already booked multiple new wins for SONORA, and expect a solid revenue contribution in 2023.

Acquisitions of Reno and LPE

Another highlight was our two acquisitions in 2022. In March, we announced the acquisition of Reno Sub-Systems, a US-based supplier of RF matching subsystems. Reno’s high-performance RF matching networks and RF generators will enhance our plasma products. In July, we announced the acquisition of LPE, an Italian-based supplier of silicon carbide (SiC) epitaxy systems. SiC is a high-growth market with particularly strong demand in power electronics for electric vehicles (EV), given that it offers higher efficiency, and so extended range or smaller battery size. We expect LPE to generate revenue in excess of €130 million in 2023, up from more than €100 million previously expected. The acquisition of LPE fits perfectly with our strategy and positioning. We expect to drive growth in LPE’s business by leveraging our strong customer base in power electronics. We also aim to further differentiate LPE’s tools on the back of our strengths in areas such as 200mm platform expertise, process chemistries, and cost of ownership. In addition, we see opportunities for synergies in leveraging ASM’s scale and capabilities in areas such as supply-chain management, and our global-service network.

As far as our M&A strategy is concerned, we will continue to scan the market for other acquisition opportunities that could further strengthen our position in the deposition equipment market and drive additional growth.

“The acquisition of LPE fits perfectly with our strategy and positioning.”

Growing in all customers segments

Logic/foundry continued to be our largest customer segment. Leading customers continued to invest in advanced node capacity to prepare for the new end-market products that will be introduced in 2023 and beyond. In the newest logic/foundry node, which some of our customers were ramping into high-volume manufacturing by the end of 2022, the number of ALD layers and applications has

increased by a strong double-digit percentage. We saw strong traction in R&D engagement and evaluations, especially in ALD and Epi, for the next logic/foundry technology nodes.

Our memory business also delivered solid double-digit growth, driven in particular by 3D-NAND, and despite the slowdown in market conditions in the second half of the year. Demand continued to be strong for ALD high-k metal gate in advanced DRAM devices, in which we believe we have a leading share. In 3D-NAND, we successfully gained a number of new positions for our advanced ALD gap-fill solutions, driving record-high order intake for us in this segment in 2022. At 19% of equipment sales in 2022, memory is still the smaller part of our business. We are working with customers in R&D on several new opportunities, as we remain focused on further strengthening our position in the memory market in coming years.

In the mature node part of the market, we are mainly active in the niche segments of power, analog and wafer manufacturers, with our vertical furnace and part of our epitaxy portfolio. From a smaller base, this part of our business has expanded significantly over the past few years, and is contributing more and more to overall growth for ASM. Next to solid market increases, our growth in the power, analog and wafer segment has been fueled by successful new products, such as Intrepid ESA, and the A400 DUO, our 200mm vertical furnace. With the addition of LPE, we have further strengthened our position in the power segment.

Successfully navigating challenging
supply-chain conditions

A key challenge of the year was the tight supply-chain situation, while at the same time our customers’ demand continued to increase significantly. Supply-chain conditions remained tight throughout the year, particularly in the first three quarters. This resulted in extended lead times and a shortage of materials and components for various parts in our tools, with legacy semiconductors being one of the most critical examples. I’m impressed by our team’s execution and dedication, in close collaboration with our suppliers, in meeting our customers’ requirements. Also, supported by earlier actions such as qualification of additional suppliers and maintaining strategic inventories, we were able to grow our shipments quarter to quarter, and reach record-high sales in 2022.

Regarding our own manufacturing capacity, we benefited from timely investments in our new and expanded facility in Singapore, celebrating the official opening in March 2022. Including the second manufacturing floor in this facility, completed in January 2023, we have boosted our global capacity by 3x compared to 2020.

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Investing in the growth of our business

Next to the increase in our manufacturing capacity, we also invested in further upgrading and expanding our R&D facilities. We increased our headcount in R&D by 49%. The number of R&D engagements with customers reached a new record-high in 2022. A key focus in our R&D engagements was the transition in the logic/foundry sector from FinFET to gate-all-around (GAA) device architecture. We expect this transition to result in significant increases in ALD and Epi requirements. As growth opportunities in the mid-term continue to increase, we plan to further increase R&D spending in 2023. In 2022, we also invested in strengthening our organization in many other areas, such as customer field support, IT, supply chain, and HR.

To support growth beyond our mid-term guidance we need to further expand our innovation and manufacturing infrastructure. In February 2023, we announced our intention to significantly increase our R&D and manufacturing facility in Korea. We are also exploring options to expand our activities in Phoenix, Arizona, and in Europe.

People are our biggest asset

We continue to invest in the growth, engagement, and development of our people. We increased the total headcount by 29% to 4,258 in 2022, despite a continuing tight labor market. I am particularly pleased with the progress on our Diversity & inclusion (D&I) agenda, as the number of female employees increased to 17% of total at the end of 2022, up from 15% in 2021. Our core
values are We Care, We Innovate, We Deliver – they are central to all we do at ASM and a cornerstone of our culture. In 2022, we continued to take steps to further embed these values throughout the organization. Safety remains our highest priority. We strengthened our safety culture and contributed meaningfully to the safety of our value-chain partners.

Sustainability highlights

In 2022, we continued our focus on sustainability, one of the key pillars of our strategy. After announcing our Net Zero emissions by 2035 target (all scopes) in September 2021, we took an important next step by submitting our Net Zero measurements and targets for Scope 1, 2, and 3 GHG emissions to the Science Based Targets initiative (SBTi) in December 2022. The SBTi is recognized as the leading body for validation of net-zero targets, and this validation is currently scheduled to start in H2 2023. ASM became a founding member of the new Semiconductor Climate Consortium (SCC), playing a key role in its creation, and ASM has now also been elected

as the SCC’s first Chair. One of our key circularity programs is the reuse of packaging. In close coordination with our partners in the value chain, we more than doubled the reuse of shipping materials in 2022. In short, we stepped up our investments in sustainability and have been making great strides in the past few years. It is good to see that our increased focus on sustainability has been reflected in improved ESG ratings, such as with S&P CSA and MSCI, as well as industry accolades.

“In 2022, we continued with our focus on sustainability and took important next steps.”

Trade wars and Chips Acts impacting our industry

Several ‘Chips Acts’ were proposed and passed in 2022, such as those in the US, Europe and Japan, as governments around the world work to build and strengthen their domestic chip industries. This reflects the growing importance of semiconductors in our society. Several of our customers have announced plans to expand their overseas manufacturing footprint, a response to their customers’ demand for more geographically diversified supply in view of geopolitical tensions and recent supply-chain disruptions. We expect these investments to start contributing to WFE spending in 2023.

At the same time, geopolitical tensions have triggered new export controls, which negatively impacted the WFE market in 2022. The new US export controls that came into force last October also affected our company. With the 2022 Q3 earnings, we conservatively reduced our backlog with all orders for fabs in the Chinese market that could be impacted by the new export restrictions. And at the end of November, we reported our updated assessment that an expected 15%-25% of our sales in the Chinese market would be negatively impacted. Despite an impact in the fourth quarter, we were still able to book solid growth in our equipment sales from China in 2022, which accounted for 16% of our total sales in 2022. This growth was mainly driven by the mature node segments of power, analog and wafer manufacturers in China, which have not been meaningfully impacted by the recent changes in export controls.

Outlook 2023

Looking at 2023, the global semiconductor market is forecast to contract by some 5% with continued inventory corrections in the first half of the year and a reduced economic outlook. Looking at WFE, logic/foundry spending on the most advanced nodes and automotive-related power/analog demand is expected to remain resilient in 2023. The reduction in memory spending is expected to continue in 2023, while demand for trailing-edge nodes in logic/foundry, especially consumer related, is expected to soften. In total, the WFE market is forecasted to drop by a mid-to-high teens percentage in 2023, a level that we expect to outperform, supported by our strong positions in the leading-edge logic/foundry market, and also by the momentum of newly introduced product and applications. ASM started 2023 with a record-high order backlog of €1.7 billion. On a currency comparable level, we expect revenue for Q1 of €660-700 million, with a slight increase in Q2 revenue compared to this level. Based on the current visibility, we expect revenue in the second half of 2023 to remain at a healthy level, albeit somewhat lower than in the first half of 2023.

“The number of R&D engagements with customers reached a new record-high in 2022.”

Long-term prospects continue to be bright

Looking at the longer term, we believe the prospects for ASM continue to be bright. Despite the slowdown in 2023, the structural drivers for our industry are still very much intact. Third-party research firms continue to expect the semiconductor market to grow to more than $1 trillion by the early 2030s. Semiconductors have become essential in all aspects of life, and help to create new applications such as in cloud computing, artificial intelligence (AI), and the electrification of cars. Our customers continue to invest in the development of faster and more power-efficient
next-generation semiconductors. These will require further scaling, new device architectures such as GAA, and the introduction of new materials – all of which will drive further demand for our advanced deposition technologies, in particular ALD and Epi. We believe ASM is well positioned to deliver a continued healthy performance.

March 2, 2023

Benjamin Loh

President and Chief Executive Officer

ASM International Annual Report 2022

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2. Highlights 2022

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We are ASM, a leading player in advanced technologies in the semiconductor equipment market

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OUR GLOBAL FOOTPRINT

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Epi

Our second-largest product line is Epi, the process of depositing highly controlled silicon-based crystalline films. It is one of the fastest-growing segments in the deposition market. The number of Epi steps is increasing as logic/foundry customers move to smaller nodes, and mobile applications and electric vehicles need more powerful devices.

SILICON CARBIDE EPITAXY

Our newest product line is SiC epitaxy. This came about through ASM’s acquisition in Q4 2022 of LPE, the Italy-based maker of epitaxial reactors for SiC and silicon. The SiC epitaxy equipment market is expanding fast due to the growing electrification of the automotive industry, with vehicle power electronics transitioning from silicon to SiC-based materials. SiC devices allow electric vehicles to have greater driving range and faster charging times. Our SiC tools use an epitaxy process to deposit the SiC materials, either on bare substrates or as part of the transistor device fabrication process.

PECVD AND VERTICAL FURNACES

The relatively large size of the PECVD and vertical furnace segments makes these markets attractive to ASM. In recent years, we have seen solid increases in the total revenue of these two combined product lines.

SERVICE AND SPARE PARTS

Technical service and spare parts are important product offerings for our business. For speedy availability, our global service teams are based close to our customers at regional and local service centers. We are expanding our offering with new outcome-based services.

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Continuously developing and maintaining strong relationships underpins mutual progress, and ASM engages with our customers throughout our organization. Our account teams are close to our customers’ fabs for day-to-day interaction in sales, product and process support, spare parts, etc. Our product development and technical product-support groups, meanwhile, engage with customers on issues in manufacturing, product-improvement projects, joint development programs, and discussions about requirements for next-generation technology roadmaps.

Periodic customer and ASM executive meetings serve to strengthen our business relationships and share commitments.

ASM is focusing on strengthening our quality organization and processes to support our product performance, customers’ goals in fab operations, and efficiencies. In 2022, we made further investments, expanding our Quality team and its capabilities.

We serve society by helping our customers produce chips for the advanced electronics that deliver improvements and opportunities across many aspects of our lives. While doing so, we work at the edge of what is technologically possible, creating an attractive professional and learning environment for our employees, and generating long-term value for all our stakeholders.

We engage with – and are responsive and committed to addressing – the broad range of our customers’ sustainability expectations, including detailed inquiries and periodic audits. To expand our contribution and impact, we collaborate with our customers on sustainability topics wherever possible.

Customer recognition

In 2022, several key customers recognized ASM for equipment performance and support:

•A key customer in Taiwan presented us with several ‘Excellent Supplier’ awards for product performance and improvements to ALD systems.

•A large customer in South Korea honored us with awards for ‘Best Collaboration in 2022’, relating to ALD and Epi process development, and continuous support overall during the year.

•In April, Intel presented ASM with its ‘Valued Supplier Award’ in the Intel EPIC Supplier Program. This recognizes supplier partners that represent Intel’s standard of excellence.

•A leading memory customer in Taiwan rewarded our service team with its ‘Top Supplier Award in Safety’ for annual safety performance – the third year in a row that ASM has received this award. This underlines how we value safety, and focus on improving it, both in our teams and in working with customers.

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Semiconductor manufacturing involves a wide range of technical disciplines, including physics, electronics, chemistry, plasma generation, gas-flow dynamics, optics, and metrology. Hundreds or even up to more than a thousand chips are processed at the same time on each wafer, depending on the type of device.

There are many steps to fabricating a semiconductor chip, involving various types
of wafer-processing equipment. These include:

•Deposition of thin-film layers on the starting wafer

•Photolithography to create patterns

•Etching to remove material

•Deposition of thin-film layers

•Planarization, cleaning and thermal treatments

ASM’s systems are designed for deposition processes where thin films, or layers, of various materials are grown or deposited onto the wafer. Many different thin-film layers are deposited to complete the full sequence of process steps to make a chip. After testing the individual circuits to make sure they are performing correctly, the individual chips on the wafer are separated and packaged in a protective housing. Ultimately, they will become part of a set of semiconductor chips on circuit boards within an electronic product.

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solutions continues to grow, we remain focused on supporting our customers, leveraging ASM’s strong track record of innovation in materials, hardware, and process technologies. We enable their roadmaps, which are focused on accelerating technology, improving manufacturing efficiencies, optimizing costs, and sustainability.

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4.5 Our product technologies

Our products include wafer-processing systems for ALD, Epi, PECVD and vertical furnaces. Now, by acquiring LPE, we also have SiC epitaxy tools. We continuously drive innovation of our products and services to address our customers’ technology needs, and the industry’s focus on reducing costs and improving its environmental footprint. Our development programs aim to increase throughput, make our equipment more reliable, improve yield in our customers’ manufacturing line, reduce energy and resource intensity, and cost of ownership. Our customers benefit from lower operating costs, as many of our products use the same parts and consumables, while a common control architecture improves ease of use.

Our single-wafer tools are designed for use on a common platform architecture. The XP platform is a high-productivity, common 300mm single-wafer platform that can be configured with up to four process modules. The XP platform enables high-volume multi-chamber parallel processing or the integration of sequential process steps on one platform. Our XP8 platform follows the basic architectural standards of the XP. But it offers even higher productivity with up to 16 chambers integrated on a single-wafer platform with a relatively small footprint. The XP8 platform can be configured with four dual-chamber modules (DCM), enabling up to eight integrated chambers, or with four quad chamber modules (QCM) for up to 16 integrated chambers on the same platform.

ALD

ASM is the leader in the fast-growing single-wafer ALD market – with a market share of around mid-50s percentage (source: ASM estimates, Investor Day 2021). Using ALD technology, we can scale devices to smaller dimensions while reducing the power consumption of transistors. This helps the industry follow Moore’s Law, and create smaller, more powerful semiconductors. ALD allows us to deposit thin films, atom by atom, on silicon wafers. This means we can deliver atomic-scale thickness control, high-quality deposition film properties, and large area uniformity. Such precision allows us to use materials that could not previously be considered, and develop 3D structures vital to the future of electronics. 3D technology provides several benefits, including saving space while delivering chips with higher performance that consume less power.

Many new applications are emerging where ALD is the technology of choice. Indeed, in some cases it is the only solution able to meet the challenging technology requirements. For example, ALD high-k gates are now in production for high-performance DRAM devices. We are seeing customers wanting more ALD applications for each new technology node, driving high growth in the ALD equipment market. New applications include high-k metal gates for gate-all-around (GAA) transistors, high aspect ratio gap-fill, underlayers for EUV lithography, metals, selective ALD, and others.

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ASM has the broadest portfolio of ALD products with innovative ALD reactor designs. Our strength in chemistries and applications using new materials means our customers can meet advanced node technology challenges. We offer systems capable of thermal ALD and plasma ALD. In PEALD, plasma is used to provide the reaction energy for the process, enabling us to use lower temperatures for low-thermal budget applications. This technology was originally introduced in DRAM and planar NAND flash manufacturing for spacer-defined double patterning (SDDP).

Acquisition of Reno Sub-Systems

In 2022, ASM acquired Reno Sub-Systems Inc., a supplier of high-performance RF matching networks and RF generators. RF power is used to generate gaseous plasma in various semiconductor manufacturing processes. Today’s complex devices require precise control

over the RF power delivered to the plasma reaction chamber, especially when depositing material on atomic scale. Reno’s EVC (Electronically Variable Capacitor) technology provides sub-millisecond control over RF power delivery, improving throughput and quality of the deposited film. EVC technology, embedded in ASM’s deposition equipment, is an enabler for next generation devices.

On our XP platform, we offer Pulsar and EmerALD single-chamber ALD process modules for high-k dielectric and metal gate films respectively. The Synergis ALD tool uses the XP8 platform with DCM modules, and leverages the core technologies from our Pulsar and EmerALD ALD products for high-productivity thermal ALD applications. Synergis is available for a range of films, including high-k metal oxides, metal nitrides, and metals.

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Also on the XP8 common platform architecture, we offer PEALD processes for a wide range of applications. The Eagle XP8 uses DCM module configurations for high-productivity silicon oxides, metal oxides, and nitrides. Our XP8 QCM tool offers PEALD processing on quad chamber modules for very high productivity. A wide range of silicon oxide and silicon nitride process applications are available with the QCM tool. Our XP8 QCM tool excels in the 3D-NAND high aspect ratio dielectric gap-fill application. This is where silicon oxide films are deposited void-free in deep trenches that are up to 100 times deeper than their width. In 2022, we introduced TENZA ALD, an innovative process technology that provides great film quality, conformal coverage through the full trench, and the highest productivity in its class.

EPITAXY (Epi)

Epi is used for depositing precisely controlled crystalline silicon-based layers, a critical process technology for creating advanced transistors and memories. ASM has the number two share in the Epi equipment market, and we saw solid growth in our 2022 Epi revenues. We gained an additional key customer win in 2021 for advanced node transistor applications. Also, one of our strengths in Epi is in the growing analog/power segment.

Our most advanced Epi tool is the Intrepid ES for transistor applications, using our XP platform to configure up to four Intrepid reactors on the same tool. Temperature control is extremely important in Epi reactors. We have developed new methods of temperature control in our Intrepid ES Epi tool that enable improved film performance and repeatability in volume production. Intrepid’s closed-loop reactor temperature control brings enhanced stability in production. VERACE-CL is Intrepid’s new multi-point pyrometer-based temperature-measurement system that further improves temperature control performance.

For enhanced Epi film performance, we offer the Previum process module, a pre-deposition wafer surface clean technology, integrated with Intrepid epitaxy process modules. The surface clean process is used prior to the epitaxy deposition to create a pristine silicon surface for defect-free epitaxy film deposition. This is critical for achieving the most advanced node transistor-performance requirements.

For silicon-based analog/power devices and wafer-manufacturing applications, we offer our Intrepid ESA tool for 300mm silicon-based epitaxy. The Intrepid reactor architecture allows for thick Epi deposition in a single pass, a significant productivity benefit for our power and wafer customers. For 200mm epitaxy applications, still relatively significant in the analog/power market, we offer the Epsilon 2000 tool.

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SILICON CARBIDE (SiC) EPITAXY

SiC is ASM’s newest product line, following our acquisition of LPE. The SiC epitaxy equipment market is growing fast due to the growing electrification of the automotive industry. SiC devices provide greater battery life and a longer range for EVs. Because of its wide band gap, SiC is highly efficient at high voltages, offering higher power efficiency, increased power density resulting in reduced component weight and size, and faster battery-charging times.

With Italian-based LPE, ASM now has a solid position in the SiC epitaxy market, and we plan to further strengthen the SiC product offerings by drawing on our global engineering, quality, supply-chain, and customer-support capabilities. Our SiC tools use an epitaxy process to deposit the SiC materials on either bare substrates or as part of the transistor device fabrication process. The ASM SiC tool portfolio includes the PE106A and PE108, single-wafer epitaxy tools for 150mm and 200mm respectively. For higher productivity, we also offer the PE208 dual chamber 200mm tool. The transition to 200mm SiC is a major technology inflection, which positions single wafer reactors like ASM’s particularly well since thickness and material uniformity control is more challenging at 200mm.

PECVD AND VERTICAL FURNACES

ASM is also active in the vertical furnace and plasma-enhanced CVD (PECVD) market segments. While these are each large segments, we are focused on niche portions of the market.

Vertical furnaces use a batch configuration. This means a large number of wafers are processed at the same time for productivity and cost savings. We design our furnace tools with dual-batch reactors for even more productivity. A wide range of process applications are available on our furnace tools, including LPCVD, oxidation, diffusion and cure.

Our furnace tools include the new SONORA vertical furnace launched in 2022 for 300mm logic/foundry and memory applications, as well as 300mm analog/power. SONORA deliveries have begun to multiple customers globally, among them leaders in advanced logic, and power device manufacturing. We also offer the A400 DUO vertical furnace for 200mm and smaller wafers, targeting analog/power, RF, and MEMS applications. The A400 DUO has achieved significant wins in the China market.

In PECVD, our key position is on low-k for advanced logic interconnects. PECVD processes are offered on our high-productivity XP8 platform. Our Dragon XP8 PECVD tool addresses a broad range of dielectric films for various low-temperature deposition applications, such as interconnect layers, passivation layers, and etch stop layers.

SPARES & SERVICES

All of ASM’s technologies mentioned above come in the form of sophisticated and complex systems that ship to our worldwide customers. These are installed at their fabs, along with other similar systems used in series to create microchips.

Of course, our service capabilities and performance are a key factor in our customer’s equipment selection process. When customers choose ASM systems it is also based on how ASM’s systems have performed on a very limited scale – within our demo labs or during a single system evaluation at the customer site. Once they choose ASM to ramp into production, the customer trusts that our system will meet their needs and enable their success. Failing a customer during a production ramp would cause significant problems for them.

This is where ASM’s Global Services & Spares group (GSS) comes in. We work to make sure our systems are installed properly in the customer fab, are started up to make sure they perform as they should, and continue to run in production 24/7 for 20+ years, across tens to hundreds of such tools in the customer fabs, no matter where they are in the world.

In the past few years, GSS has grown its support beyond making sure trained maintenance staff and spare parts are available, and systems are running. Today, GSS provides what we call outcome-based services. Its aim is to draw out ever-greater performance from our installed base of systems, through engineering-based improvements to the parts and procedures we use. This can deliver improvements such as fewer defects, longer parts and system life, better film uniformities, more process repeatability, and, ultimately, lower operating costs for our customers.

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4.6 Our business model

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We are an innovation leader in the semiconductor industry. This is the result of our focus on key issues and challenges within the industry, enabling us to make a difference to and create value for our customers, employees, investors, and other company stakeholders, while we continue to bring our breakthrough technologies into volume manufacturing.

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In 2021, we took an essential step in defining who we are at ASM, and what we stand for, by launching our core values — We Care, We Innovate, We Deliver. In 2022, we continued to take steps to further embed these core values throughout the organization, top-down and bottom-up.

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5.2 External trends and challenges

•The digitalization of society is accelerating Technology is increasingly shaping how we live and work — and much of this technology is created with advanced semiconductors. As society becomes more automated and connected, we’re relying on a broad range of electronic devices to control our homes, offices, vehicles, and communications. Our connected world is leading to a growing demand for massive amounts of data. This needs ever-greater computer-processing power and storage, capable of analyzing and acting on the data quickly and effectively. The processing power of semiconductor chips must constantly increase to make this possible. ASM’s process equipment technology is key to making this happen.

•Rising complexity of chip technologies The continuation of Moore’s Law, which states that the number of transistors on a chip doubles every two years, is becoming increasingly difficult. The equipment costs for these advanced nodes are rising, which will place greater pressure on equipment manufacturers to create innovative solutions. At the same time, increasing complexity and smaller chip technology means more ALD and Epi steps. Being at the forefront of technology development is critical to continuing success.

•Attracting and retaining talented people We need the right people to grow and strengthen our organization, but there is increasing competition for highly skilled talent everywhere we operate. Without this talent, we will not be able to realize our strategy.

•Environmental footprint The semiconductor industry provides critical and enabling technology that contributes to society and is vital to progress in the world’s sustainability imperatives.

•However, the industry’s environmental footprint is significant and gaining more attention. Our customers place a high priority on their environmental performance and operational economics associated with their fabs. It is key to their decisions when choosing manufacturing equipment. The industry’s environmental footprint, and ASM’s role in it, is also a priority of our other stakeholders. Additionally, the EU Taxonomy, and the Corporate Sustainability Reporting Directive (CSRD) approved by the EU Council on November 28, 2022, bring further attention to this matter. We continue strengthening our team and global innovation and collaboration network, to improve the energy and resource efficiency of our products, and in turn, improve the environmental footprint of the industry.

•Geopolitical risk and shift in global supply In the past, the success of the semiconductor industry was strongly linked to the success of all parties along the value chain. Innovations by equipment suppliers supported state-of-the-art solutions developed by chip manufacturers. This led to new opportunities for customers to take advantage of these advanced chips. Geopolitical developments, such as trade restrictions, put this model at risk. Increasing awareness around the importance of a domestic semiconductor industry is leading to shifts in the industry’s global footprint. We carefully review any impact such developments may have for us, while taking advantage of new opportunities they may offer.

•Scarce resources The increased global demand for semiconductors is fueling the need for more scarce resources. Our obligation to responsibly source resources will drive us to continue our innovations around the development of new chemistries, the design and manufacture of our equipment, and our value-added services that can increase circularity.

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5.3 Key elements and enablers of our strategy

Our strategy is based on the following six strategic objectives:

Our ALD business is a key priority. We expect that ALD will continue to grow as a core technology as our customers transition to the next nodes. We also expect the ALD market to be the fastest-growing segment in the deposition market in coming years. We are focused on maintaining our leading position in the logic/foundry segment, and increasing our market share in memory. Supported by a strong increase in our R&D engagements in DRAM and 3D-NAND applications for the next nodes, we aim to meaningfully increase the contribution of our memory business over time. We estimate that the single-wafer ALD market will grow to US$3.1-3.7 billion in 2025. Our goal is to have a market share larger than 55% in 2025.

Epitaxy silicon has become a second growth engine in our product portfolio. Our Intrepid product has enabled us to make successful inroads in the advanced CMOS part of the Epi market, while increasing our presence in the analog/power market. In R&D, we are working with multiple customers on new Epi applications for the next nodes, which should further grow our market share. We estimate the Epi silicon market will increase from US$0.8 billion in 2020 to US$1.5-1.8 billion in 2025. We aim to have a market share of more than 30% by that time.

With the acquisition of LPE in 2022, we have entered the silicon carbide (SiC) epitaxy market, which complements our epitaxy silicon offerings. Silicon carbide devices are experiencing strong growth driven by the rapidly expanding market for electric vehicles. The global auto industry is investing significantly in chips made from silicon carbide. SiC devices offer higher power efficiency at high voltages, resulting in reduced component weight and size, as well as faster battery charging times. Consequently, we forecast demand for SiC epitaxy equipment to grow at a CAGR in excess of 25% from 2021 to 2025.

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In vertical furnaces (VF) and PECVD, we want to develop our niche positions through targeted growth opportunities. Vertical furnace applications for the analog/power market is an example of a niche position we have selectively been investing in.

We are growing our services and spares business faster by focusing on our differentiated outcome-based services. The Spares & Services group is expanding our engineering and surface-technology expertise and facilities. This will deliver a much better installed-base performance for our customers with a measurable impact on their profitability. These outcome-based services deliver a clear, quantifiable result at a much lower cost than the value brought to them.

ASM Spares & Services is focused on:

•Working with customers to understand their issues and opportunities in our systems

•Finding high-value / yield solutions

•Using design and engineering, along with strong supplier support, to lower operational costs for our customers, while a higher share of the customer wallet is put toward ASM’s outcome-based services.

Our focus on new outcome-based services has allowed us to grow our spares and services revenue at a higher rate than in the past, and at one that is higher than the growth rate of our installed base.

Our focus is to deliver long-term sustainable value creation for all our stakeholders and make a positive impact in the world. We aspire to be a sustainability leader in our industry, toward which these examples are indicative:  

•Our Net Zero by 2035 target (1.5°C, all scopes), which is among the most ambitious in our industry

•Our principal role in forming the Semiconductor Climate Consortium, joining as a founding member, and in January 2023, ASM was elected as Chair of the SCC’s Governing Council

•Key customers consistently recognizing and awarding ASM as an industry safety leader

•Improvement in key ESG ratings that reflect our underlying progress

We will continue to address key sustainability and ESG topics and opportunities that are in line with our strategy and informed by our stakeholder priorities.

Healthy profitability will allow us to continue investing in growth. To this end, we have drawn up our profitability targets for the period 2021-2025. We strive to achieve gross margins between 46% and 50%, and an operating margin of 26% to 31%, generating strong free cash flow.

Our five strategic enablers

To be able to realize our strategy and strategic objectives, we identified five critical enablers. All our activities are focused around these elements:

Our people are at the heart of our company’s success. We strive to create a safe, inclusive, inspiring, and motivating workplace where our employees are able to use their talents, excel, and develop their potential as we work together to deliver the cutting-edge technologies of tomorrow. As our workforce rapidly expands, we are focusing on strengthening ASM. This means developing our talent pool with more long-term career progression and training. It also means strengthening and unifying our ASM culture. Our core values – We Care, We Innovate, We Deliver – help us grow employee engagement, and shape an even more diverse and inclusive culture. This will support us in attracting, retaining, and developing the talent we need to support us as we grow.

The core part of our overall growth strategy is continuous innovation – this provides ASM with a leading technological competitive advantage. With R&D centers in seven countries, we have helped shape today’s leading-edge semiconductor products by driving innovation through our collaborative R&D models. We have successfully delivered advanced new materials, products, and processes to our customers. Our R&D spending is focused on developing new materials and process solutions that enable additional applications. Continuous product improvements in performance, reliability, and cost of ownership is key. We are also focused on improving the energy and resource efficiency of our products. In addition, we are making capital investments in lab space and equipment to further expand our development capabilities in next-generation technologies. As well as our internal R&D efforts, we are growing and deepening our strategic cooperation with key customers, suppliers, chemical manufacturers, and research institutes.

We have strong customer relationships with the leading semiconductor manufacturers, working closely together in the early stages of their device roadmaps. As we have expanded and deepened our R&D engagements with chipmakers, we have developed our understanding of the key requirements of the next generation of device roadmaps. This is enabling us to develop value-added solutions to the industry’s critical technology issues.

While technology leadership remains crucial, we see operational excellence as essential to further strengthen our future position. We aim to provide our customers with dependable, leading-edge products and services at a consistent performance level, while providing the best total cost of ownership. We continuously focus on making our organization even more effective and efficient. Following our strong growth in recent years, we need to strengthen our organization and business processes in specific areas. For example, we are stepping up our capabilities in engineering, product lifecycle management (PLM), and quality. We aim to strengthen our new product introduction processes to provide our customers with additional on-site support, as the pace of technological change continues to accelerate.

We strive to maintain a strong balance sheet that allows us to continue investing in R&D and in the growth of our company. To this end, our target is to increase the minimum amount of cash on our balance sheet from €300 million to €600 million in the period until 2025 (as announced at our Investor Day in September 2021). At the end of 2022, we had €419 million in cash and cash equivalents. ASM generated a healthy free cash flow of €381 million excluding acquisitions. We intend to continue paying a sustainable dividend, and use excess cash for the benefit of our shareholders through share buybacks.

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We have a fundamental responsibility to our stakeholders, and to the sustainability of our world. As such, sustainability is part of ASM’s strategy.

Our principal source of positive impact to society and the environment is through the innovation and technology we deliver to the industry, and which is the core of our sustainability focus. We aspire to be a sustainability leader in our industry and beyond. We aim to actively seek and be responsive to our stakeholder’s priorities. We align our strategy and stakeholder priorities, set ambitious goals informed by leading bodies and standards, strive for innovative solutions, collaborate to achieve positive impact beyond our scale, and measure and share our progress and challenges transparently.

Our efforts to accelerate sustainability are deeply interwoven into our long-term value creation for our stakeholders.

Our sustainability focus areas and priorities are informed by meaningful engagement with our stakeholders through our materiality assessment and ongoing stakeholder engagement, by in-house ESG expertise, and through the RBA Code of Conduct, the UN Global Compact, the UN Sustainable Development Goals, as well as other leading frameworks and bodies, and ultimately aligned with ASM’s strategy.

ASM joined the UN Global Compact in 2022, further reinforcing our commitment to responsible and sustainable business conduct.

We continue to align our policies and actions with leading bodies, standards, and emerging legislation and expectations, striving to remain at the forefront of sustainability requirements and expectations.

ASM supports the following United Nations Sustainable Development Goals (UN SDGs):

For additional information on our stakeholder engagement and materiality analysis, and our support of the RBA, the UN Global Compact, and the UN SDGs, see chapter ‘25 Other sustainability information’.

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ASM’s sustainability focus areas are Innovation, People, Planet, Responsible supply chain, and Sustainability governance.

Further information on each can be found in their respective sections of this report.

Our efforts are led by a Sustainability Leadership Council, comprised of those responsible for our sustainability focus areas and key related functions. The Council is chaired by the Corporate Vice President of Sustainability, and reports to the Management Board.

Our stakeholders place a high priority on the transparency and integrity of our disclosures, and their trust is of paramount importance. A considerable portion of our Annual Report contains non-financial and sustainability/ESG-related information. As such, continuing from our 2021 report, key non-financial aspects of this report receive limited assurance. The EU Corporate Sustainability Reporting Directive (CSRD) is recognized as a significant increase in requirements and expectations for EU listed companies. ASM aims to complete its fit/gap assessment of the CSRD and define its implementation roadmap within the first half of 2023. With the European Commission's approval of the CSRD in November 2022, limited assurance of non-financial information will become a requirement beginning in 2024.

2022 sustainability highlights include:

•Improving our gender diversity for female participation from 15% to 17% in 2022, and on track toward our 20% by 2025 target

•Our principal role in the formation of, as a Founding Member of the Semiconductor Climate Consortium (SCC), and in January 2023, ASM was elected to chair the SCC’s Governing Council

•Remaining on track to our target of 100% renewable electricity for our operations by 2024

•Submitting our Net Zero by 2035 measurements and targets to the Science Based Targets initiative (SBTi) for their subsequent validation in the course of 2023.

In 2022, ASM’s results improved across multiple ESG ratings. These rating results are captured in the infographic below. For additional information on the rating or how to interpret the results, see section ‘25 Other sustainability information’ in this Annual Report.

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We are committed to long-term sustainable value. We create value for all our stakeholders as we grow our business and develop leading-edge technologies, while accelerating our focus on sustainability.

Our mission is to enable our customers’ success. We focus on value creation for our customers, by continuously improving our products to support their technology roadmaps, to lower cost of ownership, and enable next-generation chips. Critical to our success is close and early collaboration with our customers, to make sure our products meet their requirements, with service teams for ongoing equipment and process support. To expand our contribution and impact, we collaborate with our customers on sustainability topics wherever possible. As an example, through innovation we aim to further improve the energy and resource efficiency of our products.

Our suppliers are key partners. As we grow our business, the opportunities for our suppliers increase. ASM continues to expand its global supply chain to support the need for technology, capacity, flexibility, and sustainability. Together with our suppliers, we can create positive impact for our stakeholders, the planet, and society overall – well beyond our individual scale. We strive to further build on a sustainable, responsible supply chain, with a focus on areas such as worker safety, environmental footprint, human rights, and supplier diversity.

We create value for our shareholders as we focus on long-term profitable growth. Leveraging our advanced technologies, our positions in fast-growing markets such as ALD, we aim to deliver revenue growth of on average 16%-21% in 2021-2025, with healthy operating margins of 26%-31%. We aim to maintain a strong financial position. Our key capital allocation priority is to invest in the growth of our business. We are committed to our sustainable dividend policy and to return excess cash to our shareholders in the form of share buybacks. Investors, like all our stakeholders, are increasingly focusing on ESG-related targets and performance.

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Our value creation model

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INTRODUCTION

ASM delivered a very solid performance yet again in 2022, our sixth year of double-digit growth. Our operating result grew by 29%, even as we stepped up our investments in R&D and strengthened the organization.

8.1 Performance review

Demand for our leading-edge products continued to be strong in 2022. Our new bookings increased by 44% to €3,153 million, reaching a new record level. New bookings grew by strong double-digit growth in all our product lines. The book-to-bill ratio, as measured by new orders divided by revenue, was 1.3 in 2022, in line with 2021. Equipment bookings continued to be driven by ALD, while we also achieved particularly strong growth in Epi bookings. Equipment bookings were led by foundry, followed by logic, and then memory. Bookings also increased strongly in the combined segments of power, analog, and wafer manufacturers.

Bookings were particularly strong in the first half of the year, reaching a record-high of €942 million in the second quarter, to some extent due to early ordering in view of the supply-chain constraints. In the third quarter, our order intake dropped. This included the negative impact of new export regulations issued by the US government on October 7, 2022, which led us to conservatively derisk our backlog by removing all potentially impacted orders. Following extensive clarifications and subsequent internal reviews, we rebooked part of these orders again in the fourth quarter. Orders in the fourth quarter increased to around €830 million, also driven by stronger-than-expected demand in the power, analog and wafer-maker segments, and extraordinarily high orders for LPE.

We finished the year with a backlog of €1,669 million, up sharply from €811 million at the end of 2021. This included a consolidation effect of €107 million for acquisitions, mainly related to LPE.

The following table shows the level of new orders and the backlog for 2021 and 2022:

The backlog includes orders for which purchase orders or letters of intent have been accepted, typically for up to one year. Historically, orders have been subject to cancellation or rescheduling by customers. In addition, orders have been subject to price negotiations and changes in specifications as a result of changes in customers’ requirements. Due to possible customer changes in delivery schedules and requirements, and to cancellations of orders, our backlog at any particular time does not necessarily indicate actual revenue for any subsequent period.

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The following table shows the operating performance for 2022 compared to 2021:

Revenue

The revenue cycle from production to shipment for our equipment generally takes several months. On average, acceptance is obtained four months after shipment. The revenue cycle is longer for equipment installed at the customer’s site for evaluation prior to sale. The typical trial period is six months to two years after installation.

Our revenue is concentrated in Asia, the United States, and Europe. The following table shows the geographic distribution of our revenue for 2021 and 2022:

A substantial portion of our revenue is earned by equipping new or upgraded fabrication plants where device manufacturers are installing new fabrication lines. As a result, our revenue in this segment tends to be uneven across customers and financial periods. Revenue from our 10 largest customers accounted for 78.9% and 77.8% of revenue in 2021 and 2022, respectively. The three largest customers accounted for around 57.6% of revenue in 2022 (2021: 59.4%). In 2022, we had two customers (2021: three customers) who contributed more than 10% of total revenue.

Total revenue grew by 39% year-on-year and by 33% at constant currencies. Equipment revenue accounted for 84% of total revenue. Equipment revenue grew by 44% in 2022, and by 38% at constant currencies. In terms of customer segments, equipment revenue was led in 2022 by foundry, followed by logic, and then memory. We booked strong double-digit revenue growth in all product lines. In 2022, our largest product line continued to be ALD, driven by strong demand in both the logic/foundry and memory market.

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ASM International Annual Report 2022

Epi, our second-largest product line, was our fastest-growing product line. Momentum continued to be strong in the advanced CMOS part of the market, and we also recorded significant growth in the power, analog and wafer manufacturer segments, also driven by our Intrepid ESA tool that we introduced in 2021.

Spares & Services revenue increased by 17% (16% in 2021), and by 11% at constant currencies. Growth is increasingly driven by strong momentum in our outcome-based services, with again multiple new contracts booked in 2022. Spares & Services represented 16% of total revenue in 2022, down from 19% in 2021, as the solid increase in Spares & Services was outpaced by even stronger growth in equipment revenue.

Gross profit margin

Total gross profit developed as follows:

The gross margin decreased from 47.9% in 2021 to 47.4% in 2022. As a reminder, the gross margin in 2021 was positively impacted by a relatively strong application mix in the first six months of the year. Currency changes led to an increase of 4% in gross profit compared to 2021.

Selling, general and administrative (SG&A) expenses

Total selling, general and administrative expenses developed as follows:

Selling, general and administrative (SG&A) expenses increased by 46% in 2022 year-on-year. Throughout 2022 we continued to invest in the strengthening of our organizational structure, expanding our headcount in areas such as customer support, IT, HR. The number of total people increased 29% year-on-year. The increase in SG&A expenses is also partly explained by higher wage inflation and variable compensation, as well as increase in travel costs.

As a percentage of revenue, SG&A expenses in 2022 were 11%, in line with 2021. The impact of currency changes on SG&A expenses resulted in an increase of 6% year-on-year.

Research and development (R&D) expenses

Gross R&D expenses, increased by 46% in 2022, compared to the previous year. The increase in R&D expenses was driven by increased headcount (up 49% in 2022) and employee-related expenses. The increase in expenses is driven by a substantial increase in the number of R&D projects and engagements with customers for new products and applications in the next technology nodes. Net R&D expenses increased 55% in 2022. The higher increase of net R&D expenses is caused by proportionally lower capitalization, and higher amortization of capitalized development expenses compared to 2021. As a percentage of revenue, net R&D was around 10% up from approximately 9% in 2021. Currency changes resulted in a 4% increase in R&D expenses year-on-year.

Total research and development expenses developed as follows:

We continue to invest strongly in R&D. As part of our R&D activities, we are engaged in various development programs with customers and research institutes. These allow us to develop products that meet customer requirements, and to gain access to new technology and expertise. The costs relating to prototypes and experimental models, which we may subsequently sell to customers, are charged to the cost of sales.

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Operating result

The operating result developed as follows:

Operating profit increased by 29% to €632 million, from €491 million in 2021, resulting in an operating profit margin of 26.2% (2021: 28.4%). The decrease in the operating margin was explained by the slightly lower gross margin and the increase in operating expenses. The impact of currency changes on operating result shows an increase of 4% year-on-year.

Financing costs

Financing costs are mainly related to translation results. Financing costs in 2022 included translation gains of €25 million, compared to translation gains of €34 million in 2021. The translation results are mainly related to movements in the US dollar in the respective periods. A substantial part of our cash position is denominated in US dollars.

Share in income of investments in associates

Share in income of investments in associates, which reflects our shareholding in ASMPT, decreased to €78 million from €87 million in 2021. This result exclude the amortization of intangible assets related to ASMPT and impairment. At the end of 2022, our stake in ASMPT amounted to 24.95% (2021: 24.96%). Net cash of our 24.95%-owned associate was €513 million on December 31, 2022. The cash resources and borrowing capacity of ASMPT are not available to ASM. For further information on ASMPT, please visit www.asmpacific.com.

Although two directors of ASM are non-executive directors of ASMPT, ASMPT is under no obligation to declare dividends to shareholders or enter into transactions that are beneficial to us. As a shareholder, we can participate in the shareholders’ approval of the payment of dividends, but cannot compel their payment or size. Cash dividends received from ASMPT during 2021 and 2022 were €36 million and €49 million, respectively.

Impairment (reversal) of investments in associates

ASM impaired its investment in associates (ASMPT) as disclosed in the third quarter 2022 results press release to account for the reduced market valuation of the stake in ASMPT. The impairment charge of €321 million is party recovered (€106 million) in the fourth quarter as a result of an increase in the recoverable amount (share price).The net impairment of investments in associates in the full year of 2022 amounts to a non-cash charge of €215 million.

This impairment (reversal) is in line with our accounting policy under which, at each reporting date, we will determine if there is any objective evidence for impairment. If the fair value of an investment is less than its carrying amount, the company determines whether the decline in value is significant or prolonged. The impairment charge will be subsequently reversed only to the extent that the recoverable amount of the investment increases.

Income tax

The income tax expense of €116 million (2021: €103 million) reflects an effective tax rate of 22.9% (2021: 17.2%). The effective tax rate, excluding the impairment on, and net income of our investment in ASMPT, for full year 2022 is 17.7% (2021: 19.6%). For further information on tax, see Note 22 to the consolidated financial statements.

Net earnings

Net earnings developed as follows:

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Non-current assets

Property, plant, and equipment increased by 21% year-on-year as a result of investments in our facilities such as in Phoenix, the US, and Tama, Japan, and the outfitting of the second floor in our manufacturing facility in Singapore.

As far as the increase in goodwill is concerned, €288 million of the €307 million increase is attributable to the acquisition of LPE, for which a total consideration of €545 million was transferred. For Reno Sub-Systems, ASM paid an amount of €41 million, of which €18 million was allocated to goodwill.

Other intangible assets increased by €371 million year-on-year mainly due to:

•Purchased technology acquired through the acquisition of Reno and LPE including amortization for €208 million;

•Other intangibles for €88 million, as a result of the identified intangibles as part of the acquisitions, and include customer relationships, order backlog, and trade name; and

•Capitalized development for €73 million, due to our continued investment in R&D.

Working capital

Working capital increased from €316 million to €497 million. This was mainly driven by a substantial increase in inventories from €212 million at the end of 2021 to €538 million at the end of 2022. To increase our flexibility given the challenging supply-chain conditions, we increased our buffer inventories of critical parts and materials. Supply-chain constraints also resulted in higher inventories with tools waiting for missing parts.

Our accounts receivable position increased from €447 million to €581 million, reflecting the higher revenue level. The number of outstanding days of working capital, measured against quarterly revenue, increased from 58 days as at December 31, 2021 to 62 days as at December 31, 2022.

The working capital developed as follows:

Liquidity

We were debt-free as of December 31, 2022 (and 2021). Our principal sources of liquidity consisted of €419 million in cash and cash equivalents, and €150 million in undrawn bank lines. The company has a new revolving credit facility (RCF) since the end of May 2022 with improved terms and conditions compared to the previous one. The new facility has a tenor of five years with an option to extend up to two years. The facility amount is €150 million and it has an accordion option to increase the amount by €100 million. The facility also includes a financial covenant on the consolidated total net debt/total Shareholders’ equity ratio. This financial covenant is measured twice a year, on June 30 and December 31. We were compliant with this financial covenant on both measurement periods.

In 2023, ASM converted its revolving credit facility into a sustainability-linked RCF aligned with the Sustainability-Linked Loan Principles by the Loan Market Association. Under the terms of the facility, the interest rate is linked to the achievement of long-term sustainability goals targeting gender diversity, net zero, and value chain packaging reuse which are in line with ASM’s sustainability strategic focus. Achievement of these targets will impact the interest rate as the lenders will apply a discount on the existing margin or add a penalty to the existing margin depending on the sustainability achievement against the target. The original terms and conditions of the RCF remain in place.

For the most part, our cash and cash equivalents are not guaranteed by any governmental agency. We place our cash and cash equivalents with high-quality financial institutions to limit our credit risk exposure.

Our liquidity is affected by many factors. Some of these relate to our ongoing operations, such as the need to invest in R&D projects and expansion. Others are related to the semiconductor and semiconductor-equipment industries – for instance supply chain constraints and the phase of the industry cycle – and the economies of the countries where we operate. Although our cash requirements fluctuate based on the timing and extent of these factors, we believe that cash generated by operations – together with the liquidity provided by our existing cash resources and our financing arrangements – will be sufficient to fund working capital, capital expenditures, and other ongoing business requirements for at least the next 12 months.

See notes 11, 16, and 17 to the consolidated financial statements for more information on our funding, treasury policies, and long-term debt.

CASH FLOW

The following table shows the condensed cash flow statement:

We generated cash from operating activities of €541 million (2021: €381 million). We used €475 million cash in investing activities (2021: €114 million) and used €133 million in financing activities (2021: €240 million). Free cash flow excluding acquisitions amounted to €381 million (€266 million in 2021). Including acquisitions, free cash flow amounted to €67 million.

CapEx increased from €72 million in 2021 to €101 million in 2022, with a meaningful part spent on expanding and upgrading our R&D lab facilities and fitting out the second manufacturing floor of our facility in Singapore. This was in line with our earlier indication that CapEx in 2022 would be towards the higher end of the target range of €60-100 million.

FINANCIAL RISK FACTORS

We are exposed to market risks (including foreign exchange-rate risk), credit risk, liquidity risk, and equity price risk. We may use forward exchange contracts to hedge foreign-exchange risk. We do not enter into financial instrument transactions for trading or speculative purposes. See Note 17 to the consolidated financial statements for financial risk factors.

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ASM International Annual Report 2022

cash), and the acquisition of LPE with a combination of €283 million in cash, 631,154 ASM shares, and a conditional earn-out of maximum €100 million.

Second, it remains key for us to maintain a strong balance sheet. At the Investor Day in September 2021, we communicated that we intended to gradually increase our cash towards a target of €600 million, up from a cash target of €300 million in previous years, reflecting the increased size of our company.

Third, we remain committed to paying a sustainable dividend. With the publication of our Q4 2022 results on February 28, 2023, we announced a proposed dividend of €2.50 per share to be paid over 2022.

Finally, our policy regarding excess cash is unchanged: we continue to return excess cash to our shareholders in the form of share buybacks. Although not yet started, we still intend to execute in 2023 the buyback program of €100 million that we announced in February 2022.

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ASM International Annual Report 2022

In 2022, ASM delivered solid financial results yet again, with a 29% increase in operating profits. We also stepped up our spending to prepare ASM for the next growth phase. Our acquisition of Reno and LPE were among our highlights of the year. We believe we are on track to achieve our 2025 Growth through Innovation targets.

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Our sixth consecutive year of double-digit growth

ASM’s revenue increased by 33% at constant currencies to a new record-high of €2.4 billion, our sixth consecutive year of double-digit growth. Also at constant currencies, equipment sales increased by 38%, for the largest part driven by strong growth in our ALD and Epi product lines. Spares & Services sales continued its own solid growth again – 11% at constant currencies, including an increasing contribution from new outcome-based services.

Coming off strong growth of 25% in 2021, the semiconductor market increased a further 5% in 2022. The WFE market increased by a high single-digit percentage in 2022 (2021: approximately +40%). In the course of 2022, the economic outlook became more uncertain, given the war in Ukraine and sharp increases in inflation and interest rates. This resulted in weakening conditions in several parts of the semiconductor end markets, especially in PCs and smartphones. The memory segment was particularly affected by the end-market slowdown, which also led to a softening in our memory business in the second half of 2022. Our total exposure to memory is, however, still relatively limited at 19% of total equipment sales in 2022. The trend in the other segments – logic/foundry, as well as the power, analog and wafer-manufacturers segments – continued to be healthy throughout the year.

Despite the slowdown in the semiconductor end-market, we increased our revenue by 21% at constant currencies, from the first half to the second half of 2022. This increase was supported by a gradual easing of supply-chain constraints. As a result, we were able to convert more of our backlog, which had strongly increased in the first half due to strong customer demand and supply-chain constraints. We ended the year on a strong note, with record-high revenue of €725 million in Q4, exceeding our earlier guidance. This was driven by further improvement in the supply situation, and also reflected solid execution by our ASM team in close collaboration with suppliers and customers.

Acquisitions of Reno and LPE

The acquisitions of Reno Sub-Systems and LPE were important highlights for us in 2022. Reno will contribute to further improvement of our plasma products. In 2022, considering its smaller size, the impact on financial results was limited. With the takeover of LPE we have entered the silicon carbide epitaxy market, which is expected to grow by a CAGR of more than 25% in the coming

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years, driven by demand for electric vehicles. We paid for this acquisition with a combination of €283 million in cash and around 631,000 ASM shares (representing 1.3% of ASM’s total share count, and mostly consisting of 580,000 treasury shares). In addition, we will pay earn-outs of up to €100 million, depending on certain performance metrics over a two-year period. The earn-outs will be exclusively paid in cash. LPE is growing strongly, and is expected to generate revenue of more than €130 million in 2023, up from more than €100 million previously expected. Profitability of LPE is well in line with ASM’s own financial-target model. This is excluding integration-related costs and amortization of PPA, which was €8 million in Q4 2022 and is expected to be €46 million in 2023 (Reno and LPE combined). In addition, the earn-out will accrue under financial expenses for an annual amount of €10 million in 2023.

Impact of export controls

In the second half of 2022, our bookings and revenue were negatively impacted by new export controls announced by the US government in October. With our Q3 results, we announced that we conservatively debooked all potentially impacted orders, which contributed to a decrease in overall bookings in Q3 compared to the record high in Q2. Following further examination, we announced at the end of November that we expected these export controls to negatively impact 15% to 25% of our sales in the Chinese market. In Q4, we again rebooked part of the orders that we had debooked in Q3.

Managing the gross margin within the targeted range

Gross margin decreased slightly from 47.9% to 47.4% in 2022, which was mainly mix related. Cost inflation went up considerably, but we were able to manage it well last year. In 2022, particularly in the first half of the year, we succeeded in reducing, on average, the relative cost of goods of our tools. In the second half of the year, we gradually experienced an increase in cost of goods. For 2023, we project cost of goods to continue to increase. We have responded by continuing commercial price negotiations, and have increased focus on cost-reduction value engineering initiatives. In addition, we are passing on part of the higher costs in the pricing of our own products, also reflecting the higher value we create for our customers through, for instance, continuous improvement programs (CIP). This continues to be an important focus for us in 2023 to manage our gross margins. We remain committed to the targeted gross margin range of 46% to 50% (excluding PPA expense) for the period 2021-2025 that we communicated at our Investor Day. As always, in the shorter term from quarter to quarter, application mix is the main factor explaining the variations in the gross margin. In 2022, the quarterly gross margin fluctuated within a range of 46.4% (in Q4, and 46.9% excluding PPA expense) and 48.1% (in Q3).

Increasing R&D and SG&A in 2022

SG&A expenses increased by 46% in 2022. For the most part, this increase reflected strong growth in people (up 29% in 2022), with higher headcount in several areas, such as customer field support, IT, and supply chain. The increase was in part also explained by more competitive compensation benefits, both fixed and variable, and an increase in staff-related expense, such as travel. We also stepped up investments to grow in a sustainable manner, and we managed to get 75.6% of our total electricity consumption from renewable energy. Sustainability is one of the key elements of our strategy, and it is good to see that our increased focus in this area is being increasingly recognized. One example is the inclusion of ASM in the AEX ESG index last year. The increase in SG&A in 2022 also reflected our earlier decision to invest in strengthening the organization, and prepare for expected higher activity levels in coming years. Towards the end of the year, we completed most of these investments, and SG&A in Q4 stabilized quarter-to-quarter on a comparable basis, excluding LPE. For 2023, we expect the rate of the increase in SG&A to moderate significantly (excluding PPA expense), and to limit the overall increase in costs at a time of increasing economic uncertainty.

We increased net R&D expenses by 55%. An important reason was the 49% increase in headcount, more competitive benefits, both fixed and variable, and, more generally, a strong increase in the number of R&D projects. Net R&D grew somewhat faster than gross R&D (+46%), due to moderate growth in capitalization of development expenses (+25%). Net R&D grew slightly faster than revenue, and increased as a percentage of revenue from 9% in 2021 to 10%. This is in line with the projections we made at our Investor Day in 2021 to bring R&D to a range of a high single-digit to a low double-digit percentage of sales. R&D is our lifeline. In 2023, we project a further double-digit increase in net R&D expenses. This reflects a strongly increasing number of customer R&D engagements, and expanding opportunities for new applications in the next technology nodes, such as the inflection to the new gate-all-around (GAA) devices in logic/foundry.

Operating profit increased by 29% to €632 million. The operating margin decreased from 28% to 26% in 2022, due to the slight decrease in gross margin, and the increase in operating expenses. On a normalized basis, share in income of investments in associates, which reflect our 25% stake in ASMPT, decreased by 9%. In the third quarter of 2022, we also recognized a non-cash impairment charge of €321 million to account for the reduced market valuation of the stake in ASMPT. This impairment was partly reversed in the fourth quarter, leading to a net impairment charge of €215 million in full year 2022. Excluding the share in income of investments in associates and excluding the impairment of the ASMPT value, the effective tax rate amounted to 17.7% in 2022 (2021: 19.6%). Normalized net earnings increased by 24% to €627 million.

Healthy increase in free cash flow, continued strong financial position

Excluding €314 million in cash spent on acquisitions, we generated free cash flow of €381 million, up 43% from €266 million in 2021. The improvement was driven by improved underlying profitability, and in spite of an increased cash outflow for working capital and higher CapEx. Working capital increased from €316 million to €497 million. This was mainly driven by a substantial increase in inventories. To have more flexibility amid supply-chain conditions, we increased our buffer inventories of critical parts and materials. Supply-chain constraints also resulted in more of our tools waiting for missing parts before we could complete and ship them to customers. The increase in inventories was partly offset by an increase in short-term liabilities.

In 2022, our CapEx increased from €79 million to €101 million. This is in line with our earlier indication that CapEx would be towards the higher end of the target range, as some spending was carried over from 2021. It is also due to increased spending on the further expansion and upgrading of our R&D labs.

ASM’s financial position remained very strong, with €419 million at the end of 2022, and no debt. Cash decreased compared to €492 million at the end of 2021, explained by the cash spent on acquisitions and €122 million paid in dividends during 2022. At Investor Day in 2021, we said we would gradually increase our targeted cash position to €600 million.

Investing in the sustainable growth of our company

Our top priority in our capital allocation is investment in the sustainable growth of our company. That means spending on R&D, but also on CapEx, and on M&A if attractive opportunities arise as they did last year with Reno and LPE. For 2023, we are planning for CapEx of €150-200 million. This is significantly above the mid-term target of €60-100 million annually, and is explained by the further expansion of our innovation and manufacturing infrastructure that we are planning in the next few years. We completed the second manufacturing floor of our Singapore facility, which has substantially increased our flexibility in the near term. To support growth beyond our mid-term guidance, we require increased manufacturing and lab R&D capacity, and need to start preparing for this now. In February 2023, we announced our plan for an investment of around US$100 million, in the period up to 2025, to significantly increase our R&D and manufacturing facility in Korea. We are also exploring options to expand our activities in Phoenix, Arizona, and in Europe.

We remain committed to our sustainable dividend policy. With the publication of Q4 2022 results on February 28, 2023, we announced a proposed dividend of €2.50 per share for approval by the AGM on May 15, 2023. The €100 million share buyback for 2022-2023 that we announced in February 2022 was not started last year, due to the cash we spent on acquisitions in 2022. We plan to execute this buyback program in 2023.

On track for our Growth through Innovation targets

Underlined by our solid performance in 2022, we believe we are on track for our Growth through Innovation targets that we launched at our Investor Day in 2021. One of these targets is to grow revenue to a level of €2.8-3.4 billion by 2025, implying a CAGR of 16%-21% in the period 2020-2025. Important drivers to achieve this include continued growth in our ALD product line, and expansion and share gains in the Epi market. These targets exclude the acquisition of LPE. We are planning to have our next Investor Day in September 2023.

As we enter 2023, there is increasing uncertainty about the macroeconomy, and this is expected to impact the semiconductor market. WFE spending is forecasted to drop by a mid-to-high teens percentage in 2023. We feel confident about ASM’s positioning, however, on the back of our record-high order backlog, our strong share in the leading-edge logic/foundry market, our newly introduced products and applications, and supported by a very strong balance sheet. We expect that the investments we are planning for, combined with the strengths of our customer engagements, our talented people, and our innovation, will position ASM for continued healthy growth.

March 2, 2023

Paul Verhagen

Member of the Management Board and Chief Financial Officer

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Our R&D network is well suited to initiate and coordinate collaborations globally. In 2022, we significantly increased gross R&D spending by 46%, as we continued to execute on our roadmaps and opportunities in the next technology nodes. We grew the number of R&D employees from 649 to 965.

ALD materials. At Leuven, the focus is on application development through integration and device characterization of these new materials in structural and electrical test structures – making use of the imec infrastructure.

Our product-development sites each focus on a subset of products and technology. With the acquisition of LPE, we expanded our R&D footprint with a presence in Italy, focused on silicon carbide epitaxy.

We embed IP managers at each of these locations to make sure we actively capture and protect innovation that enables our technical leadership.

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9.2    Corporate research

GLOBAL RESEARCH AND ACHIEVEMENTS

In 2022, we significantly increased our capital investment related to R&D activities, and grew the number of R&D employees from 649 to 965, to accommodate the growing pipeline of new opportunities. These investments included demo, R&D, and metrology tools. We also have an expansion plan for our Helsinki R&D facilities, to increase our capability in materials development. To this end, we signed an agreement to lease cleanroom space for four years – starting in April 2023 – in an existing cleanroom facility, to bring in our latest ALD tools.

Our global R&D network is well suited to initiate and coordinate collaborations globally, and manage them centrally. Accordingly, as an integral part of our roadmap-driven R&D efforts, we have expanded our external R&D engagements with new collaborators.

In 2022, we signed a new strategic partnership – renewed for the fourth time – with the Interuniversity Microelectronics Center (imec) in Leuven, Belgium, the world-leading R&D institute in our industry. The partnership, which extends through 2025, significantly expands on the scope of our previous agreement, roughly doubling R&D spend over the next four years. As well as existing areas of collaboration, the new agreement includes taking part in a heterogeneous integration program at imec. The scope includes many of our state-of-the-art 300mm products, as well as work involving disruptive inflections in our industry that may materialize beyond 2026. The imec collaboration gives us the opportunity to investigate, both jointly and independently, the integration of individual process steps and new materials in electrically active devices. We have partnered with imec since 1990, with significant on-site representation since 1994.

In February 2022, we signed a new five-year agreement with the University of Helsinki to form and fund the Atomic Layer Deposition Center of Excellence (ALD CoE). This is a significant expansion of

the nearly two-decade collaboration with the university that first started in 2004. The ALD CoE will focus on research around ALD necessary for future semiconductor technologies. The ultimate aim is the design of new precursors, processes, and materials that will have great scientific and technical impact. We are co-located with the university, allowing for a close collaboration on creating new ALD chemistries and developing new materials deposited by ALD. The intended timeline to bring most of these targeted innovations into production is towards the end of our horizon of 2028, and beyond.

ASM joined the Semiconductor Research Corporation (SRC) program on Nanomanufacturing Processes starting in 2022. Through this membership, ASM gains access to and actively participates in forward-looking pre-competitive semiconductor research at leading universities around the world. Also, this membership creates direct access to graduate students as new hires who are highly qualified in ALD and other relevant areas of expertise. In 2022, we continued our joint development programs with IBM in their SUNY Albany research center, focusing on the Epi and ALD materials needed to enable future gate-all-around (GAA) device nodes.

Through our network, we collaborate with universities in several countries on a bilateral basis, including, among others, academic institutions in the Netherlands, Belgium, Finland, the United States, Canada, Japan, and South Korea.

We contribute to several process and equipment-development projects at the major Dutch technical universities through the Dutch NWO1 funding organization in the domain TTW2 (covering applied and engineering sciences). In Belgium, we take part in the industrial users group for several projects supported by the Flemish funding organization VLAIO3.

We applied for membership of the European Industrial Alliance for Processors and Semiconductor Technologies. Its two main objectives are to reinforce the European electronics design ecosystem, and establish the necessary manufacturing capacity along a twin track towards 16nm to 10nm, and below 5nm to 2nm, and beyond. We are discussing partnerships in projects related to the Important Project of Common European Interest (IPCEI) on Microelectronics and Communications Technology.

We take part in select publicly funded programs to research and develop ‘More than Moore’ technologies. This is a strongly growing market of various types of analog chips not driven by

the same Moore’s Law technology scaling inflections of mainstream logic and memory chips. We are also a member of the Association for European NanoElectronics Activities (AENEAS), and take part in roadmap activities.

We occasionally cooperate with other semiconductor capital equipment suppliers in complementary fields. Our aim is to learn more about how our own deposition processes perform, in cooperation with other processes, either in bilateral or consortia projects.

We continuously engage in formal joint-development programs (JDPs) with customers for 300mm applications of our products. We also actively evaluate our most advanced technologies with selected customers. The scope of these JDPs span many nodes – from the current node in production to N+2 and beyond nodes in logic, foundry, DRAM and 3D-NAND technologies. For the logic/foundry technologies, there is a significant increase in our engagements related to GAA devices as they get closer to HVM readiness.

The South Korean facility is one of our product R&D centers.

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9.3 Product development

GLOBAL PRODUCTS AND DEVELOPMENT

Our global product-development sites are centers of excellence for a subset of products and technology. The Phoenix location focuses on products for thermal ALD and Epi; Almere, the Netherlands, for vertical furnaces; Dongtan, South Korea, for PEALD; and Tama, Japan, for PECVD and PEALD, in collaboration with Dongtan. Through the acquisition of LPE in Q4 2022, we now also have R&D and product-development facilities focusing on silicon carbide epitaxy in Italy (Milan and Catania). While our advanced R&D sites focus on future technology needs, our key product units work with customers on the products and technology currently in volume manufacturing or to be used in manufacturing in less than six years’ time. The global platform engineering group addresses the need for common platforms and software for the various products in our product portfolio, and across different key-product units. This helps us drive the standardization of hardware and software throughout the organization.

We continuously drive innovation of our products and services to address the technology needs of our customers, and the industry’s focus on reducing costs and improving environmental footprint. Our development programs aim to increase throughput, equipment reliability, and yield in our customers’ manufacturing line, as well as lower the energy and resource intensity, and cost of ownership. Our customers benefit through reduced operating costs, as many of our products use the same parts and consumables, while a common control architecture improves ease of use.

To support our strong increases in the ALD and Epi growth markets, we invested further in modernizing the equipment base in our Phoenix R&D facility. This includes investments in more of the advanced metrology tools we use in our labs. We also expanded our Tama, Japan, R&D facility, and are planning to grow our Dongtan, Korea, R&D footprint.

IMPROVING COST OF OWNERSHIP AND TECHNICAL PERFORMANCE

Innovation in products and platform technology is one of ASM’s most important strengths, bringing continued improvements in technical performance and cost of ownership. In the following section, we highlight a few examples of the many innovations we introduced in our ALD and Epi products in 2022.

ALD

We optimize our ALD products and have introduced specific innovations for different applications.

For example, for metal oxides, we have developed a new reactor with the flexibility to deposit five, six, or even seven elements. This is important because new materials are driving Moore’s Law. This ability to mix and match different precursors allows us to develop new materials that are unknown to humanity right now. This has been an important factor in developing new ALD applications, such as for use in GAA.

Compared to the A412, the SONORA achieves 30% higher productivity and a 50% lower cycle time. The SONORA has been designed for productivity, reliability, and serviceability with advanced process controls. It was able to achieve 98% availability in HVM environment.

A SONORA tool in one of our training rooms.

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For all metal ALD applications, we have further developed and optimized a surface clean (SC) technology. This technology has been integrated on the same platform with the metal ALD reactors, so as not to break vacuum. SC reactors remove any impurities or moisture from the wafer surface prior to metal ALD deposition.

In memory devices, ALD has seen an increase in use for gap-fill applications. We are able to gap-fill high aspect ratio (>100:1) structures with our innovative TENZA ALD technology. Our ALD technology has been selected for use in several applications in 3D-NAND.

The majority of the ALD films are deposited on the XP8 platform in a dual-chamber module (DCM) or quad-chamber module (QCM) architecture, to improve productivity and reduce the cost of ownership.

Our ALD product portfolio expanded considerably in 2022, with a significant range of new applications. However, we kept the key advantages of our core reactor-design consistent, such as a small reactor volume. This allows for very fast cycling times and an ALD reactor design that provides excellent uniformity and homogeneity. We are able to purge the precursor very fast. This is important for gap-fill applications where it is challenging to purge out the precursor from the deep structures.

EPI

The reaction chamber design of our Epi tools includes several key innovations, important to providing optimal value to our customers as they transition to the next-generation device structures. One important example of an innovation we introduced in 2022 is VERACE-CL. In Italian, VERACE means ‘accurate’, while CL is closed loop. VERACE-CL is the industry’s first across-wafer direct temperature measurement and control system, which enables unmatched wafer-in-wafer and wafer-to-wafer uniformity. VERACE-CL is the only technique that can measure the actual wafer temperature. All previous techniques measure the susceptor temperature, on which the wafer sits and make a correlation to the wafer temperature. The ability to actually measure and control the wafer temperature makes for accurate matching. This allows thickness control one monolayer at a time, bringing important advantages such as in GAA nanosheet applications.

NEW PRODUCTS AND APPLICATIONS IN 2022

In 2022, ASM introduced new products, system upgrades, and many new applications. Most new process applications are customer specific, typically outcomes from our collaborative joint-development programs.

We launched our new SONORA vertical furnace at Semicon West 2022 for 300mm logic, foundry and memory applications, as well as for 300mm analog/power applications. SONORA is fully compatible with the original A412 furnace, so existing process recipes are easily transferred, accelerating system qualification and ramp-up.

Also at Semicon West, we introduced TENZA ALD, an innovative process technology that provides excellent film quality, conformal coverage through the full trench, and the highest productivity in its class. TENZA ALD enables a variety of silicon oxide applications for gap-fill, and liners for a range of structures in advanced transistors, memory devices, and interconnects.

Other recent new products include the Intrepid ESA 300mm epitaxy tool, introduced in 2021 for analog/power devices, and for epitaxial silicon wafers. Based on our Intrepid ES tool, the Intrepid ESA has innovative technologies and features that provide unmatched in-film performance and reactor availability, including for relatively thick Epi layers in power applications. The Intrepid ESA has been well received in the market, and we delivered more than 100 reactors.

In late 2019, we launched the new A400 DUO vertical furnace tool addressing 200mm applications for power, analog, RF and MEMS devices. The A400 DUO has been very successful with, in total, more than 150 reactors shipped.

INNOVATION IN SPARES & SERVICES

The technology-development team in Spares & Services has grown significantly in the past few years. Innovations are multiplying worldwide, many more are being developed, and patents are being filed. The focus of these innovations is on the parts making up our systems. We are developing these based on the key issues customers encounter as they use our systems in different ways and over long periods. We focus on how we innovate to overcome these issues, on making the system perform better on wafer (lower defects, better uniformity, etc.), and more consistently

over longer periods of uninterrupted use at lower costs. Primary focuses are on evolving the internal chamber part surfaces to make them more robust for our evolving uses, enabling the refurbishment and reuse of parts rather than replacing them, and making parts last longer. This results in lower costs and more product outs for our customers.

For services support, we make sure lessons do not need to be learned twice. We do this through a ‘Knowledge Net’ that captures, stores, and retrieves the information that allows our support to be as efficient as possible and resolve issues faster. And as part of Knowledge Net, we are developing AI / machine learning-based data capture and learning so we may understand how to make our tools operate most effectively to levels that were previously unobtainable. The effects of these efforts are outcomes to our customers delivering lower costs, higher device yields, and more output per system footprint in their fabs.

Our complete kit management (CKM) is one example of our new outcome-based service products developed in recent years – a service that aims to make the maintenance process faster, more efficient, and cost effective, through, among others, smart planning and proactive maintenance. Previously, system maintenance meant significant downtime – regularly, given the many different parts – which added to its operations costs. With CKM, we can combine the repair, replacement, and preventive maintenance of several different parts, resulting in a significant reduction in the time it takes for a system to be taken down for maintenance until it is back up and running. It also means more time between maintenance. It works in much the same way as pit stops do in F1 racing, where downtime is everything. Like pit stops that keep cars in the race through necessary maintenance stops, CKM aims to keep ASM’s systems on site at our customers running with the highest possible uptime. CKM also puts significant focus on reducing the carbon footprint of our maintenance through repairing, refurbishing, and cleaning used parts for reuse, rather than replacing with new parts. Uptake of CKM is on the rise for these reasons. In 2022, we booked new multi-year contracts again.

At ASM, we recognize the benefits of a circular economy and the importance of eco-design for addressing systemic issues like climate change, biodiversity loss, and pollution. Our innovation in spares and services strives to contribute to this need, working toward ensuring the materials throughout our machines are used in an optimal way.

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In April of 2022, we joined the imec Sustainable Semiconductor Technologies and Systems (SSTS) research program, which is aimed at reducing the semiconductor industry’s carbon footprint, and is consistent with our long-standing strategic partnership with imec. The imec SSTS program is strategic to our industry, and its charter is aligned with and supportive of our strategy and our Net Zero by 2035 target. Our ambition in all our sustainability efforts is to engage and collaborate with key partners, like imec, to make a positive impact in the world beyond our individual scale.

ENABLING MORE POWER-EFFICIENT CHIPS

Some of the materials and processes we work on with our customers enable more energy-efficient chips, with transistors and memory elements that consume less power per operation, and interconnect with lower power losses. In 2021, 2.1-2.4% of the world’s energy1 was already used for processing (1%) and communicating (1.1-1.4%) data across the internet, and in data centers. This energy use roughly doubles every three years, growing much faster than overall global energy use. New materials and process technologies developed by ASM help to reduce the power consumption in advanced semiconductor devices, while increasing their performance. For example, ALD gate dielectrics and new work function (WF) metals enabled reductions in gate leakage current by 1000x. ALD, due to its near-perfect conformality, also enabled the transition of device architectures from planar to 3D FinFET structures. FinFETs have a lower power consumption per operation than planar FETs.

Going forward, ALD and Epi processes will play a crucial role in the next device architecture migration from FinFET to GAA nanosheet transistors. Compared to FinFET, the GAA will consume less power per operation. The migration of DRAM periphery to high-k dielectric and metal gate significantly reduces its dynamic and static power consumption, just like it did for logic devices. Also, we expect that the new materials for memory that ASM is currently researching – such as phase-change materials and ferroelectric materials – will play a significant role in future energy-efficient memory devices, and energy-efficient AI architectures.

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PRODUCT SUSTAINABILITY AND ECO-DESIGN

Customer use of our products through their productive life represents the most significant portion of our greenhouse gas footprint (reported as Scope 3 Category 11 emissions). As such, progress here is vital in achieving our Net Zero by 2035 target. The main factors are process chemistries and supporting gases, and electricity consumption. As such, improving the energy and resource efficiency of our products, and speeding up customer adoption of renewable energy is paramount. To this end, we have included improvement in energy and resource efficiency in our plans for our Net Zero by 2035 target.

We design leading ASM products with a fundamental, innovation-driven, and intrinsic technology advantage in energy and resource efficiency, through which we drive continuous improvement. For example, optimizing chamber size and thermal efficiency, extending time between chamber maintenance, maximizing system throughput, and other aspects, creates a performance advantage. As a result, these products are already meeting our customer’s highest energy-efficiency rating. We believe ASM can continue to innovate and improve tool energy and resource efficiency.

In 2022, ASM increased its focus on eco-design in reducing the energy used and resources consumed across our product portfolio. Working closely with our customers, ASM has improved the wafer productivity of our tools. This not only reduces the energy consumption per process step per wafer, in terms of direct consumption of energy and gases, but also in terms of cost per square area per wafer and per cleanroom footprint. As an example, we improved the robotics and wafer handling of our leading XP8 ALD systems to increase wafer throughput by 15-20%. This increased the overall productivity of the system without compromising film quality. These innovations will be extended to HVM in 2023. In another case, we developed an improved load lock module for our atmospheric epitaxy systems, Intrepid ESA, used by customers in the power electronics space. This allows them to not only improve overall throughput but also be able to run smaller batches, increasing their overall factory productivity. This innovation will be extended to HVM in 2023.

In addition to productivity improvements, we have enhanced our methods for tracking, collecting, and analyzing the energy and resource consumption of our products using SEMI S23 guidelines and measurement protocols. This further improves our science and data-driven approach to reducing our consumption footprint. We have also increased the selection of green-certified components, initiated more collaborations with OEM suppliers, and continue to broaden our innovation network.

In line with our ambition to further accelerate sustainability, we have identified directions that will enable additional gains for new products. These include:

•Further innovation in wafer throughput;

•Compact chamber and system design to minimize cleanroom footprint;

•Advanced energy-saving states and implementing intelligent handshake with such equipment;

•Increasing innovation in and selection of high-efficiency components;

•Facilitating selection of greener supporting equipment by our customers;

•Further optimization of electricity, water, and gas flows to lower consumption without compromising film performance; and

•Circular product shipping container materials.

We believe these directions will enable us to meet or exceed industry targets in the near and longer term.

PRODUCT LIFECYCLE MANAGEMENT

Product stewardship and product lifecycle (PLC) management are the foundation of our product-development efforts. This involves in-depth understanding of our markets and the challenges our customers face, as well as the expectations of other stakeholders for responsible product-lifecycle management. Effectively translating these inputs into product development-program requirements helps us address our customers’ challenges, enable their roadmaps, and meet stakeholder expectations.

We examine the environmental impact of our products along their entire lifecycle, from ideation to end-of-life, looking for further eco-design opportunities to increase efficiency, circularity, and overall sustainability. Ultimately, this approach allows us to develop products more efficiently as well. It results in products that are more efficient and productive, with the aim of extending useful life and lowering lifecycle environmental impact.

Our product lifecycle process follows the well-established construct of phase-gate product development, guided by several key inputs:

a.Our collective industry knowledge/experience and subject-matter experts;

b.Industry/customer requirements and frameworks (such as customer-purchase specifications and business requirements); and

c.Industry regulations, standards, and guidelines.

We document the product development-program requirements from these inputs in market requirement specifications (MRS), which become the objectives we need to meet throughout the development process. The MRS are updated periodically to capture changes in market conditions, regulations and standards, and related requirements. Governance is provided through key technical and program execution (e.g. architecture, design, and validation reviews), and lifecycle phase exit meetings through the stages of the program.

ASM maintains a global1 ISO9001:2015 registration, relating to the scope ‘design, sell, make, install, and customer support of front-end semiconductor processing equipment’, which was recertified on August 1, 2022. The next recertification audit is in April 2025.

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9.5    Industry technology roadmap

At ASM, we believe that as long as there is growing demand for semiconductors, Moore’s Law – or at least a generalized version of it – will continue. Scaling of the smallest dimension through lithography is no longer enough to increase density and decrease cost-per-function. Increasingly, scaling is complemented with a move to the vertical dimension ‘3D’. A first example of this was the transition from 2D-NAND to 3D-NAND non-volatile memory with, currently, more than 128 transistors aligned vertically along a single vertical channel.

A second example of 3D is the GAA transistor, poised to take over in a few years, following five or more generations of FinFET. This stacks up to four channels on top of each other, significantly multiplying the current a particular transistor can carry. Simultaneously, this improves the control over that current. Third, chips are now stacked vertically in a package to reduce the package size and shorten the connection lengths between the chips. For example, a high-bandwidth DRAM device integrates a logic chip, formerly ‘the periphery’ in a single chip, with multiple vertically stacked memory arrays in a single package. And fourth, the difficulties in scaling the cost and size of a DRAM is expected to lead to a transition to stack transistors vertically in a 3D-DRAM beyond 2026.

ALD 

Due to its ability to create substantially uniform and high-quality layers of complex materials over 3D structures (‘conformality’) at relatively low temperature, the share of ALD (including PEALD) in the deposition market is expected to grow substantially with this trend towards 3D. On the one hand, existing technologies like LPCVD are being replaced by single-wafer ALD. On the other hand, new ALD processes will enable further changes in device architecture that will not be possible with other deposition technologies. New materials, such as better conductors and insulators, for example, will be needed to maintain adequate electrical performance. Materials need to be deposited in narrow, deep gaps, without any holes or seams. More and more of these critical process steps are expected to migrate towards ALD and PEALD.

Epi

The GAA transistors will rely on an epitaxial superlattice of as many as eight to 10 silicon and silicon-germanium layers. For 3D-DRAM, this superlattice is expected to be even taller – starting with around 64 layers. This is expected to scale quickly to even more layers. The new GAA transistors will also need new epitaxial contact layers, selectively grown bottom up with high doping. In addition, power electronics for, among others, EVs, will need thick epitaxial layers.

Overall, we believe ALD and Epi are the most important growth markets – at least in the next five years. Accordingly, we have focused most of our R&D spend on these technologies.

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Hichem M’Saad was appointed as ASM’s new Chief Technology Officer and a member of the Management Board in May 2022. In the interview below, Hichem shares some insights into technology trends in our industry, such as how new materials and 3D structures will drive increasing ALD adoption, the transition to gate-all-around in logic/foundry, and new applications in memory. He also comments on the contribution of product development to ASM’s Net Zero by 2035 ambition.

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Some would argue that Moore’s Law has come to an end. What’s your view?

We’re confident Moore’s Law is continuing, and we expect it to continue for at least the next decade – and likely longer than that. This will be driven by device and transistor innovations, enabled by new materials and full use of the third dimension (3D). We believe, too, that more functions per chip area can, and will be, integrated in the coming decade, and that we’ll need continuous innovation in semiconductor technologies to make this happen – not only in core logic and memory, but also in heterogeneous integration and advanced packaging.

In the past decade, device structures have been moving from 2D to 3D. For example, NAND has gone from 2D-NAND to 3D-NAND. DRAM today is still 2D-DRAM, but developments are on the way to develop 3D-DRAM. In logic, FinFET is moving to gate-all-around. Beyond GAA, CFET will take over as the new logic device structure. What’s common among all these technologies is that we’re going vertically.

How essential do you think ALD is in future nodes?

ALD becomes increasingly essential in future nodes, driven by the trend for thinner films, new materials, and vertical scaling. Because the ALD process is self-limiting, the film is deposited one monolayer at a time. By repeating the process, as many more layers as desired can be built up. Since such precision in layer thickness is impossible to achieve with other techniques – such as chemical vapor deposition – ALD is the only option available when the required layer thickness drops below a critical lower limit. Right now, we’re seeing many of the CVD layers transitioning to ALD. ALD is the new CVD.

As mentioned, innovation in new materials is driving Moore’s Law. And ALD is playing a significant role in developing new materials that are still unknown to us today. In fact, the self-limiting nature of the ALD process allows for the unprecedented development of new materials with a precise and

repeatable composition. Only ALD is uniquely qualified to deposit these materials with the precise composition and thickness-control necessary for advanced semiconductor devices.

As more device structures evolve into 3D, requirements for conformal layers with homogeneous film composition and excellent electrical and mechanical properties tend to favor ALD, due to its unique control and exceptional step coverage.

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Going forward, how do you see ASM and customers collaborating?

Our focus has always been on innovation and early customer engagement. Due to our market-share wins in the past few technology nodes for ALD and Epi, we’ve gained experience over several device generations in supporting tools in high-volume manufacturing. This experience includes a stronger focus on customer satisfaction. As a next step in our development as a close partner to our customers for new technology pathfinding, we recently made infrastructure investments by expanding the advanced metrology capability in our demo labs. This prepares us for even closer collaboration with our customers going forward.

“ALD adoption is still in its early innings
– ALD is the new CVD”

ASM has acquired LPE, the Italian manufacturer of epitaxy systems for silicon carbide (SiC). ASM has been active in silicon epitaxy for decades. What synergies exist between ASM’s silicon Epi experience and silicon carbide epitaxy?

LPE’s SiC reactor is enabling; it’s very similar to ASM’s cross-flow Intrepid ES reactor for silicon epitaxy, which has proven to be very successful in HVM. LPE’s reactor provides SiC epitaxial films with lowest defects, which is a key material property for SiC power devices to function optimally.

In terms of synergies, ASM will use its experience in manufacturing and servicing silicon epitaxy tools in HVM to strengthen that same capability for our SiC products and technology. ASM will also apply its experience in developing high-productivity tools for the silicon semiconductor market to make highly productive SiC products.

Customers are moving from FinFET to gate-all-around transistor architectures. What does this mean for ASM’s ALD opportunities?

In FinFET, ALD is used to homogeneously cover the fin structure on three sides with gate dielectric and metal. Moving to the GAA transistor structure, the gate dielectric and metals now need to completely envelope the channel on four sides, making the configuration truly 3D in a very tight space. ALD is the only deposition technique that still works there.

At the same time, due to requirements for increasing multiple switching voltages within devices, the amount of different applied combinations of dielectric materials and metals around the gate tends to increase. This directly drives additional deposition steps of films that remain in the device, as well as additional sacrificial deposition steps to shield areas where you want other variations of dielectric and metal combinations. All these deposition steps around the GAA structure have to be ALD. So, overall, the transition from FinFET to GAA represents more ALD opportunities.

ASM is aiming to strengthen its position in the memory sector. What are the new applications and inflections ASM is targeting?

In the past year, we’ve seen healthy revenue growth in the memory segment, which is being driven by ALD dielectric high aspect ratio gap-fills that require specific technologies. In 2022, we released the production-proven TENZA ALD for ultra-high aspect ratio (>100:1) gap-fill. Further in memory, we continue to be well positioned in the segment of patterning films, with new opportunities where continued scaling and the introduction of EUV drives new requirements.

And, of course, our strength in ALD high-k gate dielectrics used in logic transistors has enabled us to become a leader in this segment in memory as well, with DRAM manufacturers moving to use high-k gate dielectrics in access transistors for high-performance DRAM products.

ASM announced its target for Net Zero emissions by 2035. Can you, as CTO, tell us what this means for new product development?

It will mean requirements up-front for sustainability as part of design specifications, such as those for chemical consumption and energy usage, as well as driving suppliers to meet specific sustainability targets.

For existing products, it means, for example, executing projects like the reduction of system heat-losses, via new insulating materials. Another example is the improvement of the RF plasma efficiency of the plasma reactor, resulting in lower parasitic plasma and reduced energy losses.

An attractive aspect of the acquisition of Reno Sub-Systems has been the faster rate at which the electronically variable capacitor matching network matches the RF power, consequently leading to lower power losses.

You’ve been responsible for Global Products at ASM since 2015, before becoming CTO. What are some important achievements in this period?

The important achievements have been the various product launches: in 2017, the Intrepid ES epitaxy tool for advanced-node CMOS logic and memory; in 2018, Synergis, the high-productivity ALD tool utilizing ASM’s production-proven XP8 platform – for advanced-node logic and memory high-volume production applications; in 2019, the A400 DUO vertical furnace system with dual reactor chambers for 200mm wafers; in 2021, the Intrepid ESA epitaxy tool for power and analog devices, and for epitaxial silicon wafers. And in 2022, the SONORA vertical furnace system with dual reactor chambers for 300mm wafers.

The string of product introductions and their positive reception by the market are testament to our commitment to serve our customers with leading-edge innovative and competitive offerings.

“Our talented R&D people are
the innovation engine of ASM”

As CTO, you’re responsible for the technical product portfolio, future technologies, and innovation. How do you view the integration of research and product development at ASM in coming years?

Our talented R&D people are ASM’s innovation engine, and we aim to strengthen the cooperation between our employees in R&D and our products organization. The clear strategic intent is to speed up our rate of innovation, along with the development and productization of those innovations. We’d like our R&D people to have more exposure to our latest products, and leverage those products for the R&D of new materials and process technologies. The aim is to introduce these as high-volume manufacturing solutions for our customers as efficiently and speedily as possible.

March 2, 2023

Hichem M’Saad

Member of the Management Board and Chief Technology Officer

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‘Best people’ is one of ASM’s five strategic enablers, highlighting just how important our people are to us. Our company aspires to be the employer of choice for existing and future talents. We empower our people by helping them to develop, thrive and grow – unlocking their potential to be the best they can be while driving the success of our business and customers.

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ATTRACTING AND RETAINING TALENT

While building our employer brand, ASM’s total workforce grew from 3,312 to 4,258 people at the end of 2022. This is an increase of 29%, which is approximately similar to the growth in 2021. This number includes 139 temporary staff and around 100 people joining through the acquisitions of Reno and LPE. Voluntary attrition decreased slightly to 10.2%. We hired more than 1,450 new colleagues during the year – a new hiring record for ASM in a globally tight labor market.

These are some of our initiatives key to driving this growth:

•To attract talent, drive applications and boost awareness, we improved our recruitment marketing. For example, we expanded our career-fair footprint, and upgraded our marketing and media for further global activation.

•We focused on employer branding and employee storytelling across social media (e.g. LinkedIn, Glassdoor, WeChat, Facebook, Instagram)

•We continued investing in early-talent programs. This included developing a global graduate pilot program launched in the US at the end of 2022. Its focus is on fast-tracking graduates’ technical careers with business rotations and leadership development.

•We fostered strong partnership with industry associations. For example, we took part in the SEMI SEA 2022 conference in Malaysia and offered scholarship to students via Korea Semiconductor Industry Association. For additional information on how we give back, see section ‘10.3 Community’ of this chapter.

For hiring and gender diversity, we made progress in 2022, with 19% female new hires. This is a significant increase, coming from 2021 with 14% of female new hires. We attribute this to

Q&A with our Executive Committee members at the Thought Leadership Meeting in December 2022 in Arizona, US.

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the success of various partnerships and programs, such as those with the Society of Women Engineers and the diversity recruiting and retention platform PowerToFly.

Attracting and retaining talented people continues to be a priority, as we focus on growing and strengthening our organization to support ASM’s Growth through Innovation strategy.

To ensure the company’s continued success, and support our position as an attractive home for existing and future talent, we assessed our total rewards strategy in 2021. This diagnostic review focused mainly on global benchmarking and compensation programs. In 2022, the resulting recommendations led to progressive changes to our approach to compensation practices and policies. For further improvements, we conducted another benchmarking exercise in 2022, and reviewed employee benefits programs globally. These findings will drive further action planning around rewards in 2023.

These activities will make sure ASM keeps offering competitive pay, while helping to safeguard our people and their role in supporting the company.

CULTURE AND ENGAGEMENT

Strengthening our company culture makes us able to engage with and develop our people, drive collaboration, add value for our customers, and set us apart from the competition. In 2022, we continued our journey to define our culture and build on the foundation of our core values – We Care, We Innovate, We Deliver.

To help shape and embed our company culture, our leaders are key as role models and ambassadors. In 2022, we had two face-to-face meetings with our Thought Leadership

Team, discussing how our leaders can be more active in developing a workplace that fosters Accountability, Collaboration and Empowerment (ACE). To help set new standards, we identified high-performing teams and looked at how to share best practices across ASM.

In 2022, we held our biannual employee engagement survey. Highlights include a continued high participation rate of 89% and a 5% increase in the engagement score – for ASM overall, and across business units, service units and regions. All the survey items have increased ratings. Survey items that show the biggest improvement are recognition, manager feedback, and development reviews.

We continue to work on engagement action-planning with our managers and teams, prioritizing Accountability, Collaboration, and Empowerment (ACE).

LEADERSHIP AND DEVELOPMENT

To nurture our people and develop ASM as a home for top talent, we must develop their careers, supporting them to learn, grow and thrive. In managing our talent, we focus on our people’s strengths as well as their potential, tailoring our support where necessary. This means everyone has an opportunity to enhance their skills and develop their career.

In 2022, we kicked off a pilot on our talent marketplace, aimed at helping ASM’s people take ownership of their own career paths. This new platform, powered by AI, helps people identify possible career paths, learning opportunities, and internal job applications. In 2023, we will evaluate and extend this pilot.

Also, we continued to use the e-learning platform HMM (Harvard Manage Mentor) to connect with our people. Every month, we hosted the HMM café, with topics including project management

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and transparent communications. While continuing to foster a learning environment, we appreciate the increase in active learners (from 650 in 2021 to 1,352 in 2022), and time spent on learning (+154%).

We have identified specific positions critical to our continued success. These form a central part in our succession planning, a process that maps our internal talent against these positions. It means ASM has continuity in key positions, and helps us strengthen our internal talent pipeline.

While strengthening our talent and leadership pipeline for critical roles, we successfully ran our ‘Elevate Program’. This focuses on a global group of high-potential employees, empowering and preparing them to be future leaders. It is built around action-learning projects: this is about finding solutions to ASM-specific business challenges, while at the same time shaping the development of our future leaders.

With our managers playing a key role in living our culture each day, and driving engagement and development, we continue to strengthen the manager capability. To this end, we have already launched our BOOST program – designed for new managers – in Europe, Korea and Singapore. First-time managers transitioning from individual contributor to people manager often struggle to adapt to their new role. BOOST aims to flip the mindset of new managers to be geared towards managing people rather than managing tasks, and helps managers become effective leaders. We will continue to expand this program to other regions.

DIVERSITY & INCLUSION (D&I)

At ASM, we believe that diversity starts with our culture and core values: We care, We innovate, We deliver. Our award-winning employee value proposition – ‘Power of an Open Mind’ – reflects our ambition to grow employee engagement, develop our existing team members, and shape a diverse

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