ASM International NV Annual Report 2020

Plain-text annual report

ABOUT VALUE CREATION GOVERNANCE FINANCIAL STATEMENTS NON-FINANCIAL SUMMARY GENERAL INFORMATION 1 NOTES TO THE READER PDF/PRINTED VERSION This document is the PDF/printed version of ASM International N.V.’s 2020 Annual Report and has been prepared for ease of use. The 2020 Annual Report in European Single Electronic Reporting format (the ESEF reporting package) is the official version. The ESEF reporting package is available on the company’s website. In any case of discrepancies between this PDF version and the ESEF reporting package, the latter prevails. 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. ABOUT VALUE CREATION GOVERNANCE FINANCIAL STATEMENTS NON-FINANCIAL SUMMARY GENERAL INFORMATION 2 IN A YEAR UNDERSCORED BY COVID-19, ASMI DELIVERED A STRONG FINANCIAL PERFORMANCE AND MADE IMPORTANT PROGRESS IN MANY STRATEGIC AREAS. Our focus on the health and safety of our people has always been our key priority. The commitment and focus of our employees in challenging operating conditions created by COVID-19 enabled us to continue serving our customers in the best possible ways. Demand remained strong as our customers continued to invest in the most advanced technologies that will shape tomorrow’s advances in trends such as 5G, cloud computing, and autonomous driving. ASMI delivered its fourth consecutive year of double-digit revenue growth. We further strengthened our position as we significantly expanded our R&D engagements. Looking ahead, we will continue to invest in the potential of our company. ABOUT VALUE CREATION GOVERNANCE FINANCIAL STATEMENTS NON-FINANCIAL SUMMARY GENERAL INFORMATION 3 TABLE OF CONTENTS ABOUT MESSAGE FROM THE CEO ASMI AT A GLANCE STRATEGY KEY PERFORMANCE VALUE CREATION Long-term value creation Customers and products Employees Shareholders Society and planet Suppliers Interview with the CFO GOVERNANCE Corporate governance CSR governance Risk management Management Board Supervisory Board Supervisory Board report Remuneration report External auditor Declarations 4 5 9 15 19 21 22 24 32 39 51 56 62 65 66 69 74 80 82 87 90 97 98 FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of profit or loss Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements ASM INTERNATIONAL N.V. FINANCIAL STATEMENTS Company balance sheet Company statement of profit or loss Notes to the company financial statements INDEPENDENT AUDITOR’S REPORT NON-FINANCIAL SUMMARY Environmental footprint results 2016 to 2020 Non-financial performance summary GENERAL INFORMATION Product description Other information ESG/CSR data glossary and information Definitions and abbreviations Locations worldwide Safe harbor statement 99 100 100 101 102 103 104 105 147 147 148 149 155 162 163 164 166 167 169 171 174 176 178 About ABOUT 4 In a year underscored by the COVID-19 pandemic, in which we prioritized the health and safety of our employees, their families, and our stakeholders, we also continued to help our customers focus on building faster, cheaper, and increasingly powerful chips. Message from the CEO ASMI at a glance Strategy Key performance 5 9 15 19 PROPELLING DEMAND Our R&D investment in new materials, new products, and new processes means we can help our customers develop their technology roadmap and further extend Moore’s Law. STRONG RESULTS In 2020, we continued to further enhance our leading platforms and to grow the pipeline of new ALD applications, which represented more than half of our equipment revenue. Our spares & services business also delivered an outstanding performance, with a double-digit revenue increase compared to 2019. Together with our equipment business of our product lines, this contributed to a highly successful year, which included: › Revenue of €1,328 million; › Bookings of €1,314 million; › Operating result of €327 million; and › Free cash flow of €119 million. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEMessage from the CEO Message from the CEO 5 MESSAGE FROM THE CEO Benjamin Loh President and Chief Executive Officer In a year underscored by COVID-19, our first priority was the safety of our employees, while we continued to serve our customers in the best possible ways. ASMI again delivered strong financial results and achieved progress in key strategic areas. “ OUR KEY PRIORITY IS THE HEALTH AND SAFETY OF OUR EMPLOYEES.” INTRODUCTION 2020 was an unprecedented year as the COVID-19 pandemic severely affected our lives, our communities, and world economies. The health and safety of our employees, their families, and of the employees working for our customers and other business partners has always been our key priority. From the onset of the pandemic, we implemented all necessary measures, government guidelines and industry best practices to minimize the risks for our people and partners. Measures included working from home for our employees wherever possible, implementation of split-shift work in essential areas, enhanced cleaning protocols, and of course, restriction of non-essential travel. During the year, demand for our products remained strong as our customers continued to invest in advanced node capacity and in new technology development. I am impressed by the way ASMI’s employees, while putting the health of all of us first, showed their commitment and creativity to make sure we continue to serve our customers in the best possible ways, such as the use of smart technologies to work remotely on our customers’ tools. I want to thank all our employees for their great commitment and teamwork during this unprecedented year. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE6 For me personally, it has also been a challenging time, having assumed the role of CEO in mid-May, In terms of product lines, revenue was led by very strong double-digit growth in our ALD business, in the midst of the pandemic. Though it was difficult, I have been able to adapt to an entirely new which continued to represent more than half of our equipment revenue in 2020. After strong way of working, meeting many ASMI colleagues remotely and also having most of my first customer increases in previous years, momentum in our combined other products – epitaxy, PECVD and interactions remotely. As vaccinations start to happen worldwide, I am cautiously optimistic that vertical furnaces – slowed down in 2020. This is explained by the relatively higher exposure of these the pandemic will be under control sometime this year and I look forward to being able to meet product lines to the analog/power markets, which were in turn impacted by the weakness in the our colleagues, shareholders, and partners in person. automotive and industrial markets earlier in 2020. Recently, demand in analog/power has shown the first signs of recovery. MARKET DEVELOPMENT As markets were upended by the impact of lockdown measures and border closures, the global In 2020, our spares & services business delivered an outstanding performance, increasing revenue by 29%. To a smaller extent, this growth was driven by customers increasing inventories in response economy showed a sharp drop in 2020. Certain parts of the semiconductor market, such as the to the COVID-19-related supply chain challenges, especially in the second quarter of the year. For automotive and industrial end markets, were negatively affected, but the overall semiconductor the most part, we benefited from the solid increase in our installed base in recent years as well as the market showed a resilient performance. Key drivers were investments in for instance PCs, data first contribution from our investments in new outcome-based services. Spares & services accounted centers and communications infrastructure to support demand related to work-from-home and for 21% of total revenue in 2020. remote learning. In the broader society, the pandemic accelerated the trend of digitalization. We are proud to be part of an industry that contributed to the key technologies that have helped people stay connected with family and friends during these periods of lockdown, schools continuing online lessons, and businesses maintaining operations. “ A STRONG AREA OF GROWTH THIS YEAR HAS BEEN THE CHINESE MARKET.” The semiconductor market finished the year with a robust growth of 7%. The wafer fab equipment (WFE) market grew at mid-to-high teens percentage year-on-year. Our customers continued to invest CHINA A strong area of growth this year has been the Chinese market, for the broader WFE market and in leading edge manufacturing capacity. Logic/foundry demand showed a solid increase, driven by for ASMI. Our sales in China grew strongly in 2020 and contributed for the first time a double-digit spending on the most advanced nodes of 10nm and below. While the outlook for the memory market percentage of our total revenue. We benefited from the investments we made in recent years to was initially impacted by weakness and inventory corrections in parts of the end markets, equipment strengthen our position in this market. In addition, the portion spent by domestic chip manufacturers spending showed a healthy increase for the full year. on the more advanced nodes, albeit still the smaller part of total spending in China, showed a strong LOGIC/FOUNDRY AGAIN THE KEY DRIVER IN 2020 Our revenue increased by 18% in 2020, the fourth consecutive year of double-digit growth. The US export restrictions, our sales in China remained solid throughout the year. More importantly, we further broadened our customer base of domestic Chinese customers and booked new tool wins increase in 2020, playing to the strengths of our company. Despite the uncertainty related to new logic/foundry sector continued to be the key driver for us in 2020. Demand was geared towards the which we expect to contribute in 2021 and beyond. most advanced nodes. This benefited ASMI as the number of ALD layers in the most advanced logic/ foundry nodes has increased substantially compared to the previous nodes, fueling strong share of wallet gains. By customer segment, revenue was again led by foundry, followed by logic. After already NEW MANUFACTURING FACILITY IN SINGAPORE An important highlight in 2020 was the completion of our new state-of-the-art manufacturing facility doubling in 2019, our revenue in the foundry segment grew again strongly by double digits in 2020. in Singapore. After a delay caused by COVID-19, the facility was completed in the fourth quarter. In memory – the third largest segment – our revenue showed a healthy double-digit increase, driven In December we shipped our first tool from this facility and in the first quarter of 2021 we continue to primarily by a strong increase in our DRAM revenue, where we benefited from the first meaningful further transfer production to the new facility. Using the first phase of the new facility will increase our adoption of new non-patterning ALD solutions. manufacturing capacity substantially. It will also provide us with increased flexibility to deliver on our customer commitments. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE7 FINANCIAL PERFORMANCE ASMI delivered strong financial results in 2020. Revenue (excluding the settlement proceeds in 2019) in 2020 in this respect was the tool wins with leading memory customers for high-k metal gate applications in CMOS peripheral transistors in DRAM. This is a logic-like process in which we can increased 18% and reached a new record of €1.3 billion in 2020. For the fourth consecutive year, we leverage our significant experience built over the years in the logic/foundry sector. In addition, we increased our revenue by a double-digit percentage. Gross margins improved from 43% to 47%, in successfully engaged many customers with new applications, enabling us to grow even more in the part driven by efficiency improvements, and for another part due to positive mix effects, particularly memory market in the coming years. in the second and third quarters of the year. With operating expenses under control, operating result increased by nearly 50% in 2020. “ FOR THE FOURTH CONSECUTIVE YEAR, WE INCREASED OUR REVENUE BY A DOUBLE-DIGIT PERCENTAGE.” In 2020, we stepped up our capital expenditures (capex) to €95 million. Similar to 2019, a significant While growth in our epitaxy business slowed, we achieved solid progress in our R&D engagements with customers, working towards new tool-of-record selections for our Intrepid tool, which we expect will contribute to increased revenue and further market share gains in the coming years. “ WE REALIZED SOLID PROGRESS IN OUR R&D ENGAGEMENTS WITH CUSTOMERS.” portion of spending was related to our new manufacturing facility in Singapore. In addition, we In vertical furnaces and PECVD, we continue our strategy to invest in targeted niche opportunities, increased our spending as part of the initiatives we announced earlier in the year to expand and which we expect to drive additional revenue growth for our company in the coming years. upgrade our lab capabilities. Free cash flow amounted to a healthy level of €119 million, even though it was down from the level in 2019 due to the higher capex and an increase in working capital In spares & services we intend to further expand our offering of new outcome-based services, which requirements. Our financial position remained strong with €435 million in cash at the end of 2020. will help us to further strengthen our customer relationships and to drive solid growth in this part of Our policy to use excess cash for the benefit of our shareholder remained unchanged. In 2020, the business. ASMI distributed €165 million in cash to shareholders. Over the last three years we returned almost To make sure that ASMI is well prepared to tap into all the new opportunities, we will continue to €1 billion in cash to shareholders. During the AGM, we will propose a regular dividend of €2.00 per invest in the growth of our company. After an increase of 14% in 2020, we will continue further share to be paid over 2020, which is a 33% increase compared to the regular dividend of €1.50 per spending on R&D to develop the many new ALD applications that are on the industry’s roadmap. share paid over 2019. We expect capex to remain at a relatively higher level in 2021 on the back of continued R&D-related STRATEGIC DIRECTION UNCHANGED After I took over as CEO last May, it did not take me a lot of time to confirm, together with the rest of An important focus area is the reinforcement of our company culture. On the back of the recent the management team, that the strategic direction of ASMI is the right one. However, we identified substantial growth, approximately half of our workforce joined in the last three years. Nurturing our a number of areas where we need to further step up, to make sure we can capture the opportunities strengths such as our rich history, our technology focus and our global diversity, we will further build investments such as lab tools and advanced metrology equipment. in front of us. a unified culture, unique to ASMI and based on our core values: ‘We care, We innovate, We deliver’. We took the first actions last year, including a company-wide engagement survey, and we will take ALD continues to be a key growth market for ASMI. On the back of a significant double-digit revenue the next steps this year, including further strengthening our employee communications. Our people increase, we believe we maintained a strong leading position in 2020. We further expanded our are our key asset. We will only succeed when we create a workplace of inclusion and diversity in R&D engagements with key logic/foundry customers. We expect the number of ALD layers and which our employees have the opportunity to maximize their potential. application in the upcoming nodes to grow again by double-digit percentages. In addition, we remain strongly focused on expanding our position in the memory ALD market. An important achievement FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE8 ESG Our focus is on long-term sustainable value creation for all our stakeholders. During 2020 we LONG-TERM OUTLOOK We believe that prospects for ASMI remain strong on a longer-term basis. Semiconductor demand further stepped up our focus on environmental, social and governance (ESG). After many years is expected to be driven by key secular growth trends such as 5G, artificial intelligence, cloud and of engagement and commitment, ASMI officially became a member of the Responsible Business edge computing, and autonomous driving. Advanced semiconductor devices play a crucial role in Alliance (RBA) in 2020. We are a recognized leader in our industry in terms of our focus on health and enabling these multi-year industry drivers. 5G, for example, is expected to drive renewed growth in the safety. Over the last five years we significantly exceeded our targets for reduction in greenhouse gases smartphone market and new apps, driving a higher semiconductor content as compared to the 4G and water consumption, and, while falling short of the target, we also achieved a substantial increase smartphones. Another example is artificial intelligence. With explosive growth in data, machine learning in our diversion of landfill waste. We have also adopted a philosophy where our latest products have algorithms are ever more eager for faster, more powerful and power-efficient processors. been designed and developed with a reduction in consumption of gases and electrical power in mind as part of the overall industry trend towards making the manufacture of semiconductors more environmentally friendly. In addition to that we offer our customers refurbishment programs and upgrade kits to extend the lifetime of the existing tools. “ WE EXPECT ALD TO TURN EVEN MORE INTO A CORE TECHNOLOGY.” “ WE ARE A RECOGNIZED LEADER IN OUR INDUSTRY IN TERMS OF OUR FOCUS ON HEALTH AND SAFETY.” OUTLOOK 2021 Our industry has started the year in good shape. General expectations are that the global economy will show a recovery this year even though the pandemic continues to pose risks and may delay this While ALD has already moved into the mainstream in recent years, we expect ALD to turn even more into a core technology that will help our industry to keep pace with Moore’s Law. Increasing device complexity, new materials, and ever thinner films with higher required conformality will drive substantially higher demand for ALD in the medium term. Although I am still new in the company, I have been very impressed and excited by the opportunities that lie ahead and I am committed to continue to grow the company and build on the legacy that has been left for me by my predecessor, Chuck del Prado. recovery. In the semiconductor market, the strong momentum at the end of 2020 has continued into At the coming AGM, Jan Lobbezoo, after having served for three terms at the ASMI Supervisory Board the first part of 2021. The strength of the increase in demand has led to shortages in parts of the will retire. I would like to thank him for his wisdom, guidance and continuous support in the past market. Against this backdrop, WFE spending is again expected to show a mid-teens percentage 12 years. increase in 2021. Solid spending is expected for the logic/foundry segment, supported by strong demand for the current most advanced nodes. In addition, our customers in this segment continue Finally, I want to thank Peter van Bommel for his excellent contributions to ASMI. After 11 years as to show a healthy appetite for investing in the development of the next nodes. In the memory market, CFO and Member of the Management Board, Peter will retire at the upcoming AGM. He provided a further recovery in spending is expected. A recovery in key end markets such as smartphones, our company with a robust financial framework and played an important role in driving the strategic combined with the fact that capacity additions in recent years have generally been limited, are likely direction of ASMI. to result in improving supply-demand conditions in the memory segment. March 4, 2021 ASMI has also started 2021 on a strong footing. With the publication of our fourth quarter results at the end of February, we are on track for record revenue and bookings in the first quarter. Our guidance for the first and second quarters combined implies year-on-year revenue growth of 14% to 20% in the first half year. Benjamin Loh President and Chief Executive Officer FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEASMI at a glance ASMI at a glance 9 ASMI AT A GLANCE ASM International N.V. (ASMI) is a leading supplier of semiconductor wafer processing equipment and process solutions. Our customers include all of the top semiconductor device manufacturers in the world. Semiconductor chips sit at the heart of almost every electronic device we use today, and ASMI equipment is a key technology used to manufacture many of these chips. WHAT WE DO ASMI supplies wafer processing equipment to the leading semiconductor manufacturers. The total LOGIC, FOUNDRY AND MEMORY MARKETS The semiconductor market can be split into three primary segments: logic, foundry and memory. market for wafer fab equipment (WFE) amounted to US$63 billion in 2020 (Gartner, December 2020). Within wafer processing equipment, the major segments include lithography, etch & clean, deposition, ASMI supplies equipment to the leading semiconductor manufacturers in all of these segments: ›› The logic market is made up of manufacturers that create chips, such as microprocessors, that are and process diagnostics. Our focus is on deposition equipment, which comprises about a quarter of used to process data and are used in smartphones, laptops and computers; WFE. We are a key player in the deposition equipment segments for atomic layer deposition (ALD) ›› The foundry market consists of businesses that operate semiconductor fabrication plants and epitaxy, and a focused niche player for PECVD and vertical furnaces. to manufacture the designs of other so-called fabless semiconductor companies; and WAFER FAB EQUIPMENT in % 11 25 29 11 24 Lithography Etch & clean Deposition Process diagnostics Other wafer processes Source: Gartner, December 2020 ›› The memory market covers manufacturers that make chips that store information either temporarily, such as Dynamic Random Access Memory (DRAM), or permanently, such as NAND non-volatile memory. There are other smaller, yet still important market segments for which ASMI supplies equipment, such as analog and power. Analog and power semiconductors are devices used in a wide range of electronic systems for mobile products, automobiles, telecommunications, and other applications. Wafer manufacturing is another relatively small segment that we participate in, for the processing of bare silicon wafers before they are delivered to semiconductor fabs. Our customers’ goal is to build faster, cheaper, and increasingly more powerful semiconductors for each new technology node. We work closely with our customers to make this a reality, forging mutually beneficial partnerships to help develop their technology roadmap. Through our intensive R&D programs and customer co-development, we continuously improve and extend the capability At ASMI we design, manufacture, sell and service our deposition tools to supply our customers of our products and processes to meet these advanced technology roadmaps, increase productivity with advanced technologies for the production of semiconductor devices, or integrated circuits (ICs). and lower operating costs per wafer. The result is value creation for our customers. While doing so, Semiconductor ICs, or chips, are a key technology enabling the advanced electronic products used we work on the edge of what is technologically possible. This creates a very attractive professional by consumers and businesses everywhere. Our tools are used by semiconductor manufacturers in and learning environment for our employees and generates long-term value for all of our stakeholders. their wafer fabrication plants, or fabs. Furthermore, we provide maintenance service, spare parts, and We serve society by helping our customers to produce the chips needed for advanced electronics process support to our customers globally at their fabs, which typically operate on a 24-hour basis. that deliver a world of improvements and opportunities. The world around us shows an increasing need for the use of more applications and lower energy usage. For example, increasingly complex processor chips are used for artificial intelligence applications and advanced chips used in 5G mobile phones require lower power usage, for which our high-k ALD process is beneficial. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEBASICS OF SEMICONDUCTOR MANUFACTURING The process of making semiconductor chips at our customers' fabs is both highly complex and very to remove material and thermal treatments. Our systems are designed for deposition processes when thin films, or layers, of various materials are grown or deposited onto the wafer. Many different thin-film costly. Semiconductor fabs house a large set of wafer-processing equipment which perform a series layers are deposited to complete the full sequence of process steps necessary to manufacture a chip. of process steps on round silicon wafers, which are typically 300mm in diameter. The equipment is After testing the individual circuits to ensure correct performance, the chips on the wafer are separated operated in cleanrooms, which filter the air to avoid contamination from small particles that could and then packaged in a protective housing before ultimately becoming part of a set of semiconductor negatively affect the circuitry on the chips. chips on circuit boards within an electronic product. Many individual steps are performed using various types of wafer processing equipment to create ASMI is a key player in the ALD and epitaxy segments, and a niche player in vertical furnace and a semiconductor chip, including photolithographic patterning, depositing thin-film layers, etching PECVD. The characteristics of those activities are described in the following pages. 10 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE11 ALD ASMI has a leading position in ALD, which is our largest product line and continued to account for Atomic Layer Deposition ASMI first started developing ALD in 1999 through the acquisitions of Microchemistry, and more than half of our equipment revenue in 2020. ALD is the most advanced deposition method later Genitech (ASM Korea). Around 2007 we had our first breakthrough in mainstream available in the market and makes it possible to create ultra-thin films of exceptional material quality, semiconductor applications when a leading player in the logic segment introduced ALD into uniformity and conformality. high-volume manufacturing for high-k metal gate technology. Since then, the use of ALD has steadily increased to a multitude of different applications across the logic, foundry and ALD is expected to be the fastest growing deposition market segment for at least the coming memory segments. Over time, we have substantially expanded our position and we now 3-5 years. As the industry moves to smaller geometries, more complex device structures, and new supply our ALD solutions to all of the top 10 capital spenders in the semiconductor industry. materials, the need for more precise and conformal film deposition will further increase, which is expected to drive the growth of the ALD market. In recent years we have introduced two new ALD products, the Synergis thermal ALD tool and the XP8 QCM tool for plasma enhanced ALD applications. Both products offer a wide We are the leader in the logic/foundry segment of the ALD market and serve nearly the whole range of processes with high productivity. addressable market. In 2020, the transition to the most advanced 10nm node in logic and 5nm node in foundry has once more confirmed this position. At each new advanced technology node, ALD is a leading edge technology capable of depositing ultra-thin films of exceptional flatness, a substantially higher number of process steps use ALD, both for new applications and replacing material quality and uniformity. ALD allows us to deposit thin films atom-by-atom, meaning conventional deposition methods. we can deliver atomic-scale thickness control, high-quality deposition film properties, and large area uniformity, even on complicated features on the wafer, such as fins and deep Because we entered the ALD memory market at a later stage, the part of the addressable market trenches. Such precision enables us to use materials that previously could not be considered, we are serving is smaller. Despite this, we have leading positions in selected parts of this market. and develop 3D structures that are vital to the future of electronics. The ALD process is In DRAM, ALD requirements have been expanding from multi-patterning to new non-patterning a saturated surface-controlled layer-by-layer process where layers are formed during reaction applications. For example, technology challenges require ALD high-k layers for the control transistors cycles by alternately pulsing precursors and reactants, and purging with inert gas in between in the most advanced DRAMs. In 3D-NAND, the device complexity is increasing as the industry moves to higher stacks, such as the transition from 96 layer to 128 layers. This in turn will gradually increase the need for ALD. We are strongly focused on expanding our position by broadening our each pulse. Deposition thickness is precisely controlled by varying the number of cycles. ATOMIC LAYER DEPOSITION addressable market in ALD, including parts of the market that we previously did not address. Precursor ALD CYCLE Byproduct PURGE 1 4 PURGE Byproduct 2 Oxidant 3 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE12 EPITAXY We have a solid position in the market for epitaxy or Epi. Epitaxy is a process for depositing highly In PECVD, our key position is on low-k for advanced logic interconnects. Our PECVD processes are offered on our high-productivity XP8 platform and include a broad range of dielectric films for various controlled silicon-based crystalline films. It is one of the fastest growing parts of the deposition low temperature deposition applications such as interconnect layers, passivation layers, and etch market, with the number of Epi steps increasing as logic/foundry customers move to smaller nodes. stop layers. From a solid position in the niche market for power devices, we have successfully broadened our We invest selectively in the PECVD and vertical furnace markets. Combined with healthy development position in recent years in advanced-node CMOS applications, which represents the larger part of in the market segments that we address, we have seen solid revenue increases in recent years. the Epi market. Our Intrepid ES 300mm epitaxy tool, for advanced-node CMOS logic and memory applications, offers an innovative closed-loop reactor temperature control system enabling precise process control, high productivity, and low cost per wafer. THE WORLD AROUND US The world around us is digitalizing quickly, with our way of living and working becoming more and more dependent on technology. As society becomes increasingly automated and connected, we rely Intrepid ES was selected by a leading foundry customer for an Epi layer at the 7nm node, and its on a broad range of electronic devices to control our homes, offices, vehicles, and communications. use has expanded for multiple layers at the 5nm node. For improved epitaxy film performance, we Advanced semiconductors play a key role in creating this more digitized world. As a result, new end introduced the Previum process module, which is integrated together with Intrepid Epi process modules for pre-epi wafer surface cleaning. The surface clean process creates a pristine silicon surface for defect-free Epi films, critical for achieving the most advanced node transistor performance requirements. Epitaxy, alongside ALD, is an important growth engine in our portfolio. market products and applications are developing, including: ›› Mobile and cloud computing, and big data analysis; ›› Artificial intelligence; ›› Autonomous vehicles; ›› Internet of Things for smart connected devices; and ›› Ultrafast wideband communication networks (5G). PECVD AND VERTICAL FURNACES We hold niche positions in the PECVD and vertical furnace market segments. The relatively large size This connected and automated world is leading to a growing demand for massive amounts of data, requiring ever-greater computer processing power and storage, capable of analyzing and acting on the of these markets makes this part of the market attractive to ASMI. Vertical furnaces utilize a batch data quickly and effectively. Making this possible requires a constant increase in processing power of configuration, meaning a large number of wafers are processed simultaneously for productivity and semiconductor chips. And it is our technology that is playing a vital part in making it all possible. cost savings. Our furnace tools are designed with dual batch reactors for even more productivity. OUR POSITION IN THE INDUSTRY University research/R&D institutes Materials suppliers ASMI & other FAB equipment suppliers Semiconductor suppliers Semiconductor industry End consumers suppliErs EMPLOYEES INVESTORS CUSTOMERS SOCIETY FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE13 In 2020, the semiconductor industry was driven by a US$2.1 trillion global electronics industry (VLSI The world is more focused than ever on Environmental, Social and Corporate Governance (ESG) Research, December 2020) that required approximately US$381 billion of semiconductors ICs, and the way companies conduct business. Expectations across our landscape of stakeholders are which was up about 7% compared to 2019. The increased need for semiconductors was driven increasing. From our customers and shareholders, to our employees, our ESG conduct is increasingly by growing demand for data processing in the work-from-home economy, and by higher prices in important. These topics have our full attention and we are engaged with external stakeholders so memory devices, as the supply and demand of the memory market began to achieve a balance. that we have understood and incorporated them appropriately into what we do. In turn, the semiconductor industry supported the approximately US$90 billion semiconductor capital equipment industry, which supplies the required production systems and services. Wafer fab equipment spending was up about 18% in 2020, reaching US$62.7 billion (VLSI Research, December 2020), due to increased spending for advanced logic and foundry, as leading customers stepped up OUR PURPOSE It is our purpose to lead innovation for the semiconductor industry: ›› Our deposition technology helps our customers address their device and process development their spending on the most advanced nodes. China, in particular, showed solid spending growth challenges and as such is a key enabler of innovations in semiconductor technology; in 2020. ›› By partnering with our customers to develop new materials, processes, and technologies that support their roadmaps, we enable innovations in semiconductor technology which in turn help The constant drive for smaller, more powerful and more energy-efficient devices puts further pressure create new improved semiconductor devices; on our industry at each new technology node. Moving to new nodes is increasingly difficult, with challenges in new materials, new device architectures, and complex process steps, which are driving ›› By serving the leading chipmakers, we maintain an understanding of the important requirements of the next generation of device roadmaps, enabling us to develop value-added solutions to more ALD and epitaxy process steps. the industry’s critical issues, creating an attractive professional and learning environment for Consequently, we see that each new technology node requires increasing process equipment ›› Our key contribution to society at large is that our technology helps keep the industry roadmap investments. Because the semiconductor production market is so capital intensive, only a limited moving forward, driving innovation in the broader electronics markets; and number of companies are able to participate, meaning that our customer base has become ›› We strive to achieve this in a responsible way, aligned with the priorities of our stakeholders. smaller over time. It is only more recently that we have seen some new customers from China enter the semiconductor space, albeit not yet in the most advanced nodes. Our customers are This value creation benefits not only our customers and employees, but also businesses and increasingly dependent on the R&D investments and performance of their equipment suppliers. consumers that benefit from the resulting new products and available technologies used throughout Accordingly, we maintain a close, mutually beneficial business relationship with our customers, which society. And our value-added innovations create attractive possibilities for our suppliers and attractive our employees; includes a cooperative development environment, linking technology roadmaps and equipment returns for our shareholders. performance requirements. While the market has evolved to a smaller number of large semiconductor manufacturers, it is still highly global with major fabs, which we support throughout the US, Asia and Europe. Notably, the China region has become a significant growth area for new fab investments, for both domestic Chinese companies and also foreign companies building fabs there for the local market. To better serve the growing China market, we continue to increase our investment in people and support infrastructure in China. In 2020, our equipment revenue in China increased significantly, more than doubling from 2019. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCETHE WORLD IN WHICH WE OPERATE For a complete overview of all our locations, please visit our corporate website: www.asm.com. 14 RESEARCH FACILITIES Belgium - Leuven Finland - Helsinki BUSINESS UNIT AND PRODUCT RESEARCH AND DEVELOPMENT FACILITIES Japan - Tokyo The Netherlands - Almere South Korea - Dongtan US - Phoenix MANUFACTURING FACILITIES The Netherlands - Almere Singapore - Singapore South Korea - Dongtan CORPORATE, SALES AND SERVICE OFFICES China France Germany Ireland Israel Japan Malaysia The Netherlands Singapore Taiwan US FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE Strategy Strategy STRATEGY 15 We are an experienced innovation leader. This is the result of our focus on key issues and challenges within the semiconductor industry, enabling us to make a difference to our customers, employees, and other company stakeholders. While challenges and opportunities may change over time, we will continue to bring our breakthrough technologies into volume manufacturing, benefiting our customers, other stakeholders, and society overall. This enables us to act as a responsible citizen. MISSION VISION STRATEGY We aim to delight our customers, employees, shareholders, and society by driving innovation with new technologies, and delivering excellence with dependable products. By doing this, we will create new possibilities for everyone to learn, create, and share more of what they are passionate about. Our strategic objective is to realize profitable, sustainable growth by capitalizing on our innovative strength in deposition technologies and our strong relationships with key customers. We act thereby as a responsible citizen. Our mission is to provide our customers with the most advanced, cost- effective, and reliable products, service, and global support network in the semiconductor industry and beyond. We advance the adoption of our deposition technology platforms by developing new materials and process applications that support our customers’ long-term technology roadmaps. OUR STRENGTHS ›› We are a focused deposition equipment player in the semiconductor wafer fab equipment market. Our principal technologies are in ALD and Epi, in which we hold leading positions, and these play a critical role for our customers in enabling the transition to new device generations. Since 2010, we have increased our revenue by an annual average growth of 16%, ahead of the 7% compound annual growth rate shown by the broader wafer fab equipment (WFE) market in the same period. Our target is to continue outgrowing the WFE market over time, by leveraging our strong position in advanced nodes. By growing our revenue, we can further increase investments in R&D and create value for our stakeholders. ›› We have helped shape the industry by driving innovation through our collaborative R&D models, successfully delivering advanced new materials, new products and new processes to our customers. With R&D centers in six countries throughout the world, we are close to our customers and we have access to world-class professionals working in the semiconductor sector today. This R&D capability has resulted in a strong patent position, with 2,094 patents in force. ›› We have strong customer relationships with the leading semiconductor manufacturers. As we have expanded and deepened our R&D engagements with the chipmakers, we further improved our understanding of the key requirements of the next generation of device roadmaps, enabling us to develop value-added solutions to the industry’s critical technology issues. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 16 CHALLENGES ›› One challenge is the rising cost of advanced chip technologies. The continuation of Moore’s Law, whereby the number of transistors on a chip doubles every two years, is becoming increasingly ›› We need to strengthen our position in the memory market. While we have a strong position in the logic/foundry market, our position in the memory market is weaker. We are working on solutions difficult. Today, investments in new factories for the most advanced nodes amount to more than to enable us to serve a larger part of this market. US$10 billion. And the equipment costs for these advanced nodes are also increasing, which will place greater pressure on equipment manufacturers to create innovative solutions. Remaining at ›› As we focus on growth, and expand our position in the industry and our operations, our environmental footprint will grow. As a result, we are stepping up our efforts to increase the the forefront of technology developments is essential if we want to stay successful. efficiency of our products in terms of energy and chemical consumption, thereby supporting our ›› Another challenge are geopolitical risks. In the past, the success of the semiconductor industry was strongly tied to the success of all parties along the value chain. Innovations by equipment suppliers supported original solutions developed by chip manufacturers, which led to new customers' aim to minimize their environment footprint. ›› While the average incomes of many developing countries are increasing and leading to higher demands for end products that require semiconductors, we are aware that this will increase the opportunities for customers to take full advantage of these advanced chips. Geopolitical demand for more scarce resources and our obligation to responsibly source such resources. developments put this model at risk. We carefully review any potential impact such developments ›› Being able to attract and retain talented employees remains a key challenge as we focus on will have for us, while we seek to make use of any new opportunities such situations might offer. growing and strengthening our organization. 100,000,000,000 10,000,000,000 1,000,000,000 100,000,000 10,000,000 1,000,000 100,000 10,000 1,000 r o s s e c o r p o r c m i r e p s r o t s s n a r T i Decades ASMI’S TECHNOLOGIES ARE FOCUSED ON HELPING ENABLE OUR CUSTOMERS TO CONTINUE EXTENDING MOORE’S LAW 70’ 80’ 90’ 00’ 10’ 20’ FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE FIVE KEY ELEMENTS OF OUR STRATEGY: 17 INNOVATIVE STRENGTH OPERATIONAL EXCELLENCE EMPLOYEES MAINTAIN STRONG BALANCE SHEET RESPONSIBLE GROWTH We provide leading edge deposition equipment to the global semiconductor industry. As we further Epitaxy has become a second growth engine in our product portfolio. Our Intrepid product has expand our served available markets and expand on our positions in ALD and Epi, we aim to enabled us to make successful inroads in the advanced CMOS part of the Epi market. We are meaningfully outperform the broader WFE market in the 2021-2024 period. working in R&D on new Epi applications with multiple customers for the next nodes, which should contribute to further growth of our market share in the near future. In PECVD and vertical furnaces, Growing our ALD business remains a key priority. ALD will continue to grow as a core technology we want to further develop our current niche positions by addressing targeted growth opportunities. as our customers transition to the next nodes. Smaller geometries, increasing complexity, and new Vertical furnace applications for the analog market is an example of a niche position in which we have materials will require additional ALD process steps. We expect the ALD market to be the fastest been selectively investing. growing segment in the deposition market in the coming years. While maintaining our leading position in the logic/foundry segment, we are strongly focused on increasing our market share in the memory We also aim to accelerate growth in our spares & services business through continued expansion segment of the ALD market. Supported by a strong increase in our R&D engagements in DRAM and of our installed bases and expanding our offerings to include differentiated outcome-based 3D-NAND applications for the next nodes, we aim to meaningfully increase the contribution of our services. This will be in addition to our existing offering of spare parts, maintenance and support memory business over time. services. In this way, we aim to offer additional value to our customers and further strengthen our customer relationships. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE18 THE FIVE KEY ELEMENTS OF OUR STRATEGY ARE: INNOVATIVE STRENGTH EMPLOYEES The core element in our overall growth strategy is the continuous innovation which provides ASMI Our employees are our key asset. We strive to create a safe, inspiring and motivating workplace where with a leading technological competitive advantage. With R&D centers in six countries, we have all our employees have the opportunity to use their talents, excel and develop their potential as we work helped shape the industry by driving innovation through our collaborative R&D models, successfully together to deliver the cutting edge technologies of tomorrow. Following the rapid expansion in our delivering advanced new materials, new products, and new processes to our customers. Our R&D workforce, we have taken steps to further strengthen and unify our culture in which care, innovation and spending is targeted at the development of new materials and process solutions that enable delivery are our core values. We are improving our organization and processes to ensure we attract, retain additional applications, as well as continuous product improvements in performance, reliability and and develop the talent to further support ASMI’s growth. cost of ownership. We are also making capital investments in lab space and equipment to further expand our development capabilities in next-generation technologies. In addition to our internal R&D efforts, we are continuously expanding and deepening our strategic cooperation with key customers, suppliers, chemical manufacturers, and research institutes. This approach enables us to remain MAINTAIN STRONG BALANCE SHEET innovative and swiftly meet the changing demands of our customers. OPERATIONAL EXCELLENCE continue using excess cash flow for the benefit of our shareholders. By consistently following this policy, we have returned almost €1 billion to our shareholders over the last three years. We strive to maintain a strong balance sheet that allows us to continue investing in R&D. To this end, our target is to keep a minimum of €300 million in cash on our balance sheet. At the end of 2020, we had €435 million. Our company generated a healthy free cash flow of €119 million. We intend to While technology leadership remains crucial, operational excellence is 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 further improving the effectiveness and efficiency of our organization. Following our strong growth in recent years, we need to strengthen our organization and business RESPONSIBLE GROWTH processes in specific areas. For example, we will continue to step up our capabilities in engineering, ESG is an integral part of our growth strategy. Key focus areas are workforce diversity and inclusion, product lifecycle management (PLM) and order fulfillment. We aim to strengthen our new product further lowering the environmental footprint of our own operations, and promoting high ESG introductions’ processes to provide our customers with additional on-site support as the pace of standards among our suppliers. We are stepping up our efforts to increase the efficiency of our technological change continues to accelerate. products in terms of consumption of energy and chemicals, thereby supporting our customers in their focus to minimize their environment footprint. The next step in our company’s growth plans has been our investment in a new manufacturing facility in Singapore, which was completed at the end of 2020. This new facility doubles our production capacity, enables a more flexible manufacturing flow, and provides additional capacity for growth opportunities. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEKey performance Key performance KEY PERFORMANCE FINANCIAL KPIS IN 2020 Relative to 2019 19 BOOKINGS* EUR million REVENUE* EUR million GROSS MARGIN* in % 942 774 622 1,314 1,170 +12% 1,500 1,200 900 600 300 1,500 1,200 900 600 300 1,328 1,125 737 818 598 +18% 50 40 30 20 10 44.2 41.5 40.9 42.6 47.0 +4.4% POINTs 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 OPERATING RESULT* EUR million FREE CASH FLOW* EUR million CASH RETURNED TO SHAREHOLDERS EUR million 400 300 200 100 82 113 124 327 219 250 200 150 100 50 31 32 23 206 119 750 600 450 300 150 607 281 140 199 165 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 * Excluding proceeds from patent litigation and arbitration settlement in 2019. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE20 KEY PERFORMANCE NON-FINANCIAL KPIS IN 2020 Relative to 2019 EMPLOYEES HEADCOUNT PATENTS IN FORCE Global Injury and RECORDABLE RatEs 2,583 2,337 2,181 1,900 1,670 +11% 3,000 2,500 2,000 1,500 1,000 500 2,500 2,000 1,500 1,000 500 2,094 1,959 1,604 1,692 1,480 0.9 0.6 0.3 +7% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 0.63 0.62 0.55 0.34 0.26 0.42 0.18 0.17 0.58 0.23 2016 2017 2018 2019 2020 Recordable Injury Rate Injury Rate GREENHOUSE GAS (GHG) EMISSIONS (Absolute and normalized per R&D investment) WATER CONSUMPTION (Absolute and normalized per R&D investment) LANDFILL DIVERSION RATE (in %) 171 174 158 181 156 196 240 250 159 145 250 220 190 160 130 100 179 178 1,760 1,559 200 160 120 80 40 0 200 160 120 80 40 0 129 1,031 123 121 813 707 2,000 1,600 1,200 800 400 0 100 80 60 40 20 0 79 78 72 82 84 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Absolute Greenhouse Gas emissions (mtCO2e - Scope 1 + 2, x100) Intensity of mtCO2e/million EUR R&D investment Absolute water consumption (m3, x1,000) Intensity of m3/million EUR R&D investment FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEValue creation VALUE CREATION 21 We realized strong growth in 2020, with annual sales increasing by 18% to €1.3 billion. By industry segment, sales for the full year were led by the foundry segment, followed by logic and then memory. ALD THE KEY DRIVER Our ALD product lines enjoyed strong double-digit growth in 2020, with ALD continuing to represent more than half of our equipment revenue over the year. Our spares & services business increased by a solid 29%, while our other product lines, including epitaxy, were partially held back by lower demand in the analog/power market. MARKET DEVELOPMENT In 2020, markets were upended by the impact of lockdown measures and border closures, and the global economy showed a sharp drop. Certain areas of the semiconductor market, such as the Automotive and Industrial end markets, were negatively affected. However, the overall semiconductor market showed a resilient performance. Long-term value creation Customers and products Employees Shareholders Society and planet Suppliers Interview with the CFO 22 24 32 39 51 56 62 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCELong-term value creation Long-term value creation 22 LONG-TERM VALUE CREATION We create value through our technologies by enabling leading semiconductor and technology industry partners to deliver the world of tomorrow through our innovative processing solutions and equipment. We partner with our customers and stakeholders to develop new materials, processes, and technologies that support their technology roadmaps. The process solutions delivered on our equipment enable a range of technologies, such as more powerful microprocessors and higher density memory devices, all operating at lower power. Advancements that benefit society are increasingly dependent on capabilities derived from new semiconductor technologies. GREATER PERFORMANCE, REDUCED ENERGY CONSUMPTION Our advanced deposition technologies support cost-effective products enabling the electronic OUR BUSINESS MODEL We strive to create value for our company and all of our stakeholders. Our technology enables devices of the future – electronic devices that deliver ever-greater performance while using less precision deposition of thin films in various steps in the fabrication of semiconductor chips, helping energy. Higher performance translates into more processing power, while a lower energy requirement our customers build the most advanced chips used in the electronics systems throughout society. means smaller, longer-lasting, more efficient products. This means that electronics manufacturers To achieve this, we are working with our customers to develop innovative solutions, while constantly can further integrate smart technology into a wider range of products. For example, ASMI’s ALD and looking at what is best for our investors, our employees, society, and other stakeholders. Our products epitaxy tools are critical to creating high-performance transistors that can operate at lower power and process solutions benefit society by helping to enable a wide range of advanced integrated levels, a key enabler for products such as mobile phones, smart watches and fitness monitors, which circuit logic and memory chips used in most of the world’s electronic systems. Fundamental to our have substantial functionality in a small form factor with good battery life. model is R&D investment, including basic chemical, materials, and feasibility research, followed by This value creation benefits all of our stakeholders. Our employees enjoy the challenge of developing semiconductor process and equipment technology fields. We cooperate with research institutes and cutting-edge technology solutions, and the opportunity for career advancement. Our suppliers, in our customers to understand the technology roadmap challenges and to develop the appropriate addition to a higher activity level, also benefit from improved quality and efficiencies resulting from our process and equipment solutions required. Our manufacturing facilities allow us to deliver high-quality supplier process control program. Consumers benefit from the value added and the energy reduction systems on schedule so that our customers can ramp their fabrication plants. We support our possibilities provided by new electronic products that are enabled by advanced semiconductors. customers globally with process and equipment services, and spare parts. process and product developments. We aim to continuously recruit world-class technologists in the The widespread use of smartphones is a great example of this. Continuous advancements in microprocessors and memory chips empowers global consumers with extensive computing power that increasingly drive their daily activities, all from the palm of their hand. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEHOW WE CREATE VALUE 23 INPUTS HUMAN CAPITAL Employees 2,583 INTELLECTUAL CAPITAL R&D spending (EUR million) 172 FINANCIAL CAPITAL Equity (EUR million) 1,855 MANUFACTURING & SUPPLY CHAIN CAPITAL Material spending (EUR million) 555 CUSTOMERS EMPLOYEES INVESTORS SOCIETY SUPPLIERS 0.58 OUTPUTS HUMAN CAPITAL Injury rate OUR BUSINESS ASMI designs, manufactures, sells and services complex wafer processing equipment used in various steps in the fabrication of semiconductor integrated circuit chips. 2,094 INTELLECTUAL CAPITAL Patents in force 120 FINANCIAL CAPITAL Operating & investing cash flow (EUR million) 1,328 MANUFACTURING & SUPPLY CHAIN CAPITAL Revenue (EUR million) NATURAL CAPITAL Electric usage (KwH) 44,915,401 INNOVATIVE STRENGTH OPERATIONAL EXCELLENCE EMPLOYEES MAINTAIN STRONG BALANCE SHEET RESPONSIBLE GROWTH 24,977 NATURAL CAPITAL GHG emission scope 1&2 (mtCO2e) FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCECustomers and products Customers and products 24 CUSTOMERS AND PRODUCTS ASMI’s ALD, epitaxy, PECVD and vertical furnace systems are all used in the manufacturing process for the world’s most advanced semiconductor chips. These chips are used in a broad range of applications, including the latest smartphones, for servers in cloud computing, and to enable artificial intelligence algorithms. The semiconductor industry finds it increasingly difficult to achieve each subsequent technology node, resulting in the need for more advanced process steps and new materials. Our equipment is a key component in enabling the industry to advance its technology roadmap. SMALLER DEVICES The industry’s relentless push to follow Moore’s Law leads to the continuous demand for smaller, materials. Additionally, 3D-NAND non-volatile flash memory chips are today being manufactured with 128 transistors stacked in one vertical string. Such chips can store up to 512Gb/chip, and faster, and cheaper semiconductor components. The technologies required to achieve these similar to DRAM, chips are combined in one package to memory modules that can store up to 2TB. advancements are heavily dependent on equipment such as ASMI’s process tools. Our customers are already working on taller 3D-NAND structures. Today, our most advanced foundry customers manufacture semiconductor devices equivalent to the 5 nanometer node (one nanometer, or nm, is one billionth of a meter), typically in FinFET architecture connected with down to 15nm metal lines. Our customers are already qualifying and testing new critical processes to generate devices for the next nodes: 3nm and 2nm. While a new node is generally introduced every 2 years, it can be introduced even faster. In developing faster and smaller devices, our customers’ major technology requirements are: ›› Introduction of new thin-film materials and device designs needed for continued scaling; ›› Reliable manufacturing of taller and narrower 3D structures in devices; ›› Lithography of ever-smaller feature sizes, now much smaller than the wavelength of visible light; and ›› New manufacturing processes that reduce device variability and increase yield. At the same time, even more advanced devices are being developed in our customers’ laboratories and several collaborative research environments. These next-generation technology nodes are DEVELOPING NEW MATERIALS In order to meet our customers’ technology needs, we are developing many new materials, along increasing the demand for new materials and more complex process integration methods, driving with the deposition equipment capable of achieving performance specifications in high-volume more ALD and epitaxy process steps at each new node. manufacturing. For example, ALD technology is used to create ultra-thin films of exceptional material Our memory customers manufacture devices such as DRAM and 3D-NAND. Today DRAM chips quality, uniformity and conformality. with a memory capacity of 1Gb/chip are being manufactured, with line widths as small as 15nm. ALD of high-k dielectrics can improve the performance and reduce the power consumption of Several of these chips are combined in one package to produce 4Gb or 8Gb DRAM modules. These a device, thereby enhancing battery life. This same class of materials can also lead to larger charge DRAM chips contain very advanced vertical access transistors, and very tall capacitors with new storage in a smaller capacitor, critical for memories. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE25 In addition to the development of the high-k dielectric, there is a strong focus on new technologies one central handling platform. Two wafers are moved simultaneously into dual chamber modules and materials for the metal gate and capacitor electrodes, the gate sidewall passivation, and many (DCM), which approximately doubles the throughput compared to single-wafer movements. Eagle other applications. XP8 PEALD tools and Dragon XP8 PECVD tools are currently in high-volume manufacturing at logic and memory fabs worldwide, and demonstrate reliable advanced performance with high productivity. Plasma enhanced ALD (PEALD) is an important technology that enables precise deposition at very low temperatures. One application of PEALD is spacer defined multi-patterning, whereby the The Synergis ALD tool also uses the proven XP8 platform, and leverages the core technologies from deposition of a highly conformal oxide spacer enables the extension of existing optical lithography our Pulsar and EmerALD ALD products for high productivity thermal ALD applications. Furthermore, technology beyond its basic resolution limits. These spacers will continue to be used in combination our XP8 QCM tool enables even higher throughput by incorporating four chambers in the quad with EUV lithography, also to extend beyond its resolution limits. chamber module (QCM). With four QCMs attached to the XP8 platform, a total of 16 process OUR PRODUCTS Our products include wafer processing deposition systems for CVD, ALD, epitaxy, and diffusion/ reactors are configured on the same system. Our wide range of ALD and PEALD tools allow us to address more ALD applications, increasing the market we serve. These high productivity systems add substantial value to semiconductor fabs by reducing the cost per wafer for each processing step oxidation. We make two types of process tools: single-wafer and batch. The majority of our business used in the tools. comes from single-wafer tools, which are designed to process an individual wafer in each processing chamber on the tool. Our 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 In contrast, a batch tool is designed such that a large number of wafers are processed simultaneously processing or integration of sequential process steps on one platform. The XP common platform in a larger processing chamber. Batch tools typically achieve a higher throughput compared to single- benefits our customers through reduced operating costs, as many of our products use the same wafer tools. Our batch tools include the A412 vertical furnace for 300mm logic, foundry and memory parts and consumables, and a common control architecture improves ease of use. applications, and the A400 DUO vertical furnace for 200mm and smaller wafers, targeting power, analog, RF, and MEMS applications. On our XP platform, we offer Pulsar and EmerALD single chamber ALD process modules for high-k dielectric and metal gate processes respectively. Also available on the XP platform is the Intrepid Single-wafer tools typically achieve a higher level of process performance and control, especially for epitaxy tool and the Previum process module for integrated pre-deposition surface cleaning. Previum complex, critical applications, and a shorter cycle time. We work closely with our customers to meet surface cleaning enables optimal quality epitaxial depositions for advanced node channel and source/ their demands, and in recent years we have developed single-wafer tools with multiple chambers drain engineering applications. configured together in a compact way on a single platform. This approach offers the best of both worlds, combining high productivity and short cycle times, and a high level of performance. Our XP8 platform follows the basic architectural standards of the XP, but provides even higher productivity with up to 16 chambers integrated on a single-wafer platform with a relatively small To address the technology needs of our customers, the industry’s relentless drive to reduce costs footprint. The XP8 platform can be configured with four dual chamber modules (DCM) enabling up corresponds to significant spending on development programs that further increase throughput, to eight integrated chambers, or with four quad chamber modules (QCM) for up to 16 chambers on equipment reliability, and yield in our customers’ manufacturing line, and further lower the cost per the same platform. wafer of the wafer processing systems. Without continuous productivity improvements, the price of chips would continue to rise, driven by increasing capital intensity of each new technology node. With the XP8 common platform architecture, we offer a wide range of systems for ALD, PEALD, and PECVD applications. The Dragon XP8 for PECVD, Eagle XP8 for PEALD and Synergis for thermal An excellent example of high productivity is our XP8 platform, on which we offer ALD, PEALD and ALD all use DCM module configurations. Our XP8 QCM tool offers PEALD processing on quad PECVD processes. The XP8 incorporates eight process chambers in a compact configuration around chamber modules for very high productivity. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE26 CUSTOMER FEEDBACK Our focus is on providing customers with the best products and services, which are critical for market We do not allow our people to travel to areas where local policies fail to meet our own requirements, while in areas where constraints may be more stringent, we ensure our compliance. By year-end, success. During the year, we received awards from a number of key customers. we were not aware of having had a direct work-related spread of the virus. We also participated in SEMI’s COVID-19 workgroup with customers and peers in benchmarking and contributing efforts to In March 2020, ASMI was recognized by Intel as a recipient of a 2019 Preferred Quality Supplier drive improvements across the industry. (PQS) award. The PQS award recognizes companies like ASMI that Intel believes have relentlessly pursued excellence and conducted business with resolute professionalism. To qualify for the PQS status, suppliers must exceed high expectations and achieve uncompromising performance goals. BREAKTHROUGH TECHNOLOGIES Innovation is the growth engine that drives us forward. Our innovative culture has enabled us During the presentation, Intel highlighted our safe working environments and partnership, flexibility to become and remain a leading supplier of ALD equipment and process solutions for the and accountability in our support models. semiconductor industry. Today, our ALD process technology delivers the highest performance available to support the next generation of semiconductor devices. Our epitaxy products have also In November 2020, ASMI received the Contribution Award from Samsung for recognition of 30 years demonstrated solutions for our customers to achieve transistor channel performance at the most of dedicated support. ASMI also received various appreciation plaques from Samsung during 2020, advanced technology nodes. We are investing across our full product line spectrum to develop the including: ›› Best cooperation in foundry manufacturing technology in February; ›› Outstanding support to improve productivity in memory in May; and ›› Dedicated support for defect improvement in foundry in July. ASMI has also received an award for the #1 Safety Supplier in 2020 from a leading memory customer in Taiwan. CUSTOMER SAFETY – COVID-19 RESPONSE We recognize that safety at our customer sites is a shared experience. We engage with our key breakthrough technologies that drive growth for our company. INCREDIBLE PRECISION ALD allows us to deposit thin films atom-by-atom on silicon wafers, meaning we can deliver atomic-scale thickness control, high-quality deposition film properties, and large area uniformity. Such precision means we can use materials that previously could not be considered, and develop 3D structures that are vital to the future of electronics. 3D technology provides a number of real benefits, including saving space while delivering chips with higher performance that consume less power. customers through an innovative engagement called ‘Safety Leadership Collaborations’ to share and review data, including safety observations and incident reports. Through these engagements, we ALD – A DRIVER OF FUTURE GROWTH Our ALD technology is used to build integrated circuits for a wide range of leading edge products, emphasize a shared approach to safety and foster an atmosphere of continuous improvement. For including high-performance computers and smartphones. The results of ALD are visible everywhere example, we used data to identify opportunities for ergonomic improvement, and a joint ‘ergonomic in the world around us. task force’ has realized the improvement of multiple situations. This has reduced the risk of injury for staff using our equipment. ALD is also our basic platform for the development of a wide range of new materials. Our research centers across the globe are working on ALD, and we conduct joint research projects with the largest From the onset of the COVID-19 pandemic, we took a number of steps to protect our employees and independent research institute, imec. Taken together, this helps make ALD one of the principal drivers customers, while enabling the performance of our systems at our customer sites. We developed and for future growth in microelectronics. continually refined our own employee exposure control policies and procedures, and implemented approval processes for customer site visits, taking into account regional and customer fab-specific Through ALD, we can deposit new materials several atoms thick on semiconductor wafers, producing policies. ultra-thin films of exceptional quality and uniformity. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE27 In PEALD, plasma is used to provide the reaction energy for the process, enabling us to use lower Overall, we expect growth in our deposition technologies, including epitaxy for advanced transistors temperatures for low-thermal budget applications. This technology was introduced in DRAM and and PECVD for creating improved interconnects. Looking ahead, we will continue to develop planar NAND flash manufacturing for spacer-defined double patterning (SDDP), a technique that can the huge potential of our deposition technologies in support of the semiconductor industry, enabling reduce device dimensions, thereby postponing the need for new lithography technologies. the industry to support the future demands of consumers and businesses. Using ALD technology, we can scale devices to smaller dimensions while reducing the power consumption of transistors, all of which helps the industry follow Moore’s Law and create smaller, more powerful semiconductors. For advanced 3D memory applications, where devices are stacked vertically in high densities, ALD is critical for uniformly depositing films in deep trenches and over complicated features. Many new applications are emerging where ALD is the technology of choice, PRODUCT STEWARDSHIP Developing tools and processes more efficiently helps reduce electricity usage and we are working to achieve this in a variety of ways, including: ›› Designing our equipment to use less power when operating in our customers' fabs; ›› Developing process technologies that enable advanced semiconductor chips with lower power and in a number of cases the only solution that meets the challenging technology requirements. consumption; and We expect ALD to be one of the principal drivers of growth in microelectronics over the coming decade. We are seeing more ALD applications required by customers for each new technology node. ASMI has focused on reducing energy usage in its equipment by incorporating innovative design For example, compared to the 10nm node, there are more ALD layers used for 7nm processor changes in its newest products that dramatically reduce energy consumption for our customers, devices, and even more for 5nm. measured on a per wafer basis. ›› Reducing power usage in our own manufacturing and lab facilities. EPITAXY Epitaxy is a critical process technology for creating advanced transistors and memories. The epitaxy We have reduced energy consumption in our plasma-based equipment by improving plasma generation efficiency and decreasing plasma power leakage. We have also made improvements to process is used for depositing precisely controlled crystalline silicon-based layers that are important the insulation of gas lines, reactor walls and transfer chambers, resulting in lower thermal energy for semiconductor device electrical properties. In some cases, the epitaxy films incorporate dopant losses. We have reduced energy usage during system idle mode by reducing the power of vacuum atoms to achieve specific material properties. pumps. These efforts are ongoing, and together would result in a 16% reduction in power usage per wafer. So far, we have realized a power reduction of about 7% and the remainder will be achieved Epitaxy process temperature control is extremely important. We have developed new methods progressively as customer testing and validation takes place. of temperature control in our Intrepid ES epitaxy tool that enable improved film performance and repeatability in volume production. Furthermore, Intrepid’s closed-loop reactor temperature control Furthermore, we have designed new reactor technology that has led to a 27% energy reduction per enables enhanced stability in production. wafer in PECVD products. Our epitaxy reactor innovations have resulted in significant productivity enhancements in the process, generating a 30% reduction in energy usage per wafer. For enhanced epitaxy film performance, we introduced a pre-deposition wafer surface clean technology which is performed in our new Previum process module, integrated together with Intrepid Given the prevalence of semiconductor devices in today’s products, lower energy usage is a key epitaxy process modules. The surface clean process is used prior to the epitaxy deposition to achievement. Cloud data centers need to reduce their substantial power usage, while consumers create a pristine silicon surface for defect-free epitaxy film deposition, critical for achieving the most want to reduce the charging time of their mobile devices and see battery size continue to shrink. advanced node transistor performance requirements. ASMI’s technologies support these energy reduction goals. For example, our ALD high-k metal gate and epitaxy process technologies contribute towards reducing the operating voltage of advanced transistors, saving power on a wide scale as advanced devices proliferate globally. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE28 PRODUCT GOVERNANCE AND LIFECYCLE MANAGEMENT Focusing on product stewardship and product life cycle (PLC) management involves taking EXTENDING THE PRODUCT LIFE OF OUR SYSTEMS The market for our new systems continues to grow rapidly, driven primarily by customers' needs for responsibility to reduce the product’s environmental impact along its entire life cycle, from cradle-to- the latest technologies. While our primary focus is to serve and enable this market, many of our older grave. Ultimately, this approach enables us to make products more efficient and productive for our systems remain in full or partial use today. customers, while extending the products' useful life. Our product life cycle process follows the well-established construct of phase-gate product our customers. It is a market that we have been participating in selectively. Since the health of our development guided by several key inputs: ›› Our collective industry knowledge/experience and subject matter experts; ›› Industry/customer requirements and frameworks (such as customer purchase specifications and customers, in part, relies on the re-use of these assets, this is an area that we intend to increase our focus on. As we know our systems’ configuration details, applicability and ability to upgrade, we intend to take a more active position, with the aim of increasing our customers' success in the For systems no longer in use, an aftermarket exists in which these systems are re-used amongst business requirements); and ›› Industry regulations, standards, and guidelines. system aftermarket. Product-specific requirements realized from these inputs are documented in market requirement upgrade solutions for our installed base. We are actively working with customers to understand specifications (MRS), which are held as the objectives we need to meet through the product and implement improvement opportunities. In 2020, we saw a significant amount of system level development process. The MRS are updated continuously to capture changes to market conditions, refurbishment business and expect this to continue to grow in the future. For those systems not operating optimally, we have a group that works on refurbishment and regulations and standards, and related specifications. Governance is provided through key technical meetings (architecture reviews, design reviews and challenging aspect of this is supplying all the necessary parts to keep the systems running. While we validation reviews) and phase exit meetings through the various life cycle stages of the product. generally have a healthy supply of frequently used parts, there is typically not enough volume of less commonly used parts to sustain a supply chain. Additionally, parts tend to evolve to meet the more A key component of our customer service is ensuring older systems continue to operate. The most We maintain a global Quality Management certification, ISO9001-2015 relating to the scope: stringent needs of today's processes. Design, Sell, Make, Install, and Customer Support of Front-end Semiconductor Processing Equipment. This was re-certified on August 1, 2019. To help prevent this, we track parts that are becoming obsolete within our supply chain, actively seek to enable and qualify replacement parts that are available, and purchase and make available original parts to prevent disruption to our customers. REQUIREMENTS • Safety & Compliance • Functionality • Cost • Reliability CONCEPT & DESIGN VALIDATION • FMEA/what-if’s • Design for X (X=safety, functionality, cost, etc.) • Internal • 3rd party • Customer PRODUCT DEVELOPMENT RELEASE • Continuous improvement • Operations End oF LIFE • Asset disposition FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE29 SUSTAINABLE PARTS LIFE CYCLE Customers want parts that are long-lasting, increasing the output and lifetime of the system and reduce the cost of ownership. We have integrated technologies, such as soft remote plasma cleaning in place of in situ plasma cleaning, which help to extend the life of these parts. We have also The following are some of the key accomplishments in 2020 that have helped ensure the continued advancement in our programs: ›› Expanded product safety education: We launched new, customized ASMI product safety engineering introduction training classes to provide awareness of the latest compliance regulation created a team in our services organization that is focused on improving the intrinsic lifetime of parts. changes. We made a significant expansion to reach other cross-functional groups, resulting in This group focuses on expanding our supply footprint, both in terms of enabling replacement parts, 305 employees trained in 2020. Additionally, we expanded ASMI’s custom SEMI S2 training with customizable, low-volume suppliers of components that go obsolete, and in terms of repairing courses with over 70 real-life ASMI equipment examples on how to ensure proper design and refurbishing to extend the usable lifetime of the original components. These efforts help ensure compliance with the written regulations; the longevity of our systems, reduce the cost of ownership, and increase our competitiveness in the market, enabling us to achieve sustainable production and consumption. ›› Successful third party virtual safety audits during COVID-19 restrictions: We performed multiple first-of-a-kind ‘virtual’ third party audits in all regions globally, which required significant additional preparation and coordination as travel was restricted. Furthermore, the number of audits PRODUCT SAFETY AND GOVERNANCE Product safety is a core element of ASMI’s innovation process, and it is realized through the design, manufacturing, and ongoing support of our products. The requirements are defined and championed globally increased markedly due to rapid new product developments across all KPUs; and ›› Semiconductor industry product safety engineering leader: We developed and presented innovative new safety interlock design methodologies to the international semiconductor industry by the Product Safety Council, which includes engineers representing all of our design centers. forum (SESHA). We provided clear guidance on how to allow proper component selection if no These requirements are established in the PLC during the requirements phase, and include legislation component exists, meeting all design requirements. The virtual presentation was viewed by over and standards defined by the semiconductor industry and its customers. We verify that safety 300 professionals from semiconductor end users (ASMI customers), third party evaluators, requirements are met during the concept and design phases as part of safety risk assessments, sub-system and component suppliers, government agencies, universities, and even by ASMI’s and through independent third-party validations during the product validation phase. In addition, competitors. we integrate the identification of opportunities for safety design improvements into our global safety reporting system. This system enables our engineers and technicians who work with our equipment on a daily basis to report incidents, areas of concern, or opportunities for improvement. Corrective actions and lessons learned are captured, providing an invaluable link between the end user and the design process. Our stakeholders working with our equipment rely on this process of continual assessment, integration and improvement, to make sure they can safely work with our products. Driving innovationsRESEARCHINSTITUTIONS &UNIVERSITIES ASMITECHNOLOGYANDPRODUCTSCOMPUTINGSMARTCARSINTERNETOF THINGSARTIFICIALINTELLIGENCEADVANCEDIC CHIPSCHIPMANU-FACTURERSFINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE30 GLOBAL RESEARCH As a global company, we carry out research and development (R&D) across different continents, A corporate R&D group consisting mainly of resources in Leuven, Belgium and Helsinki, Finland addresses common needs for advanced process and materials development, and process integration giving us access to the smartest professionals working in the semiconductor sector today, and work for the advanced nodes that are 4-8 years out from initial production. Driving part of our new bringing our R&D closer to our customers. In our research centers in Belgium, Finland, Japan, the chemistry developments and initial selection in a lab on coupons in R&D systems rather than on full Netherlands, South Korea, and the United States, we are active at all stages of our innovations’ wafers in 300mm manufacturing systems, as well as extensive use of statistical methods and data life cycle, from developing the basic chemistry and materials to implementing improvements on our sciences, minimizes the number of experimental trials that are needed to conclude a development. equipment at our customers’ production sites. We also work with specialists across a wide array of This reduces energy and chemicals consumption, as well as silicon wafer usage. In addition we disciplines to develop our future products, including scientists from research institutes, universities improved the rigor in our R&D process with an improved tollgate (or stage gate) process, and various and suppliers. pipeline controls. This improves the effectiveness and efficiency of our R&D process, decreasing REGIONAL EXPERTISE WITH GLOBAL REACH Since our R&D activities are chiefly conducted in the principal semiconductor markets of the world, we are able to draw on innovative and technical capabilities internationally. Each geographical INITIATIVES WITH CUSTOMERS, INSTITUTES AND UNIVERSITIES We work with our customers to co-create and jointly develop technology roadmaps, to timely center provides expertise for specific products or technologies, and interacts with customers on develop the new processes and materials our customers need for their next-generation products. a global scale. This approach, combined with structured and managed interactions between the The diversity in collaborations, ranging from early research to pilot production, helps us reduce risk as individual centers, enables the efficient allocation of resources during product development and new early as possible in the innovation life cycle. waste in chemicals, materials, and test wafers. product introductions. Guided by our global product development policies, our local activities are directed towards arrangements with customers, suppliers, research institutes and universities. expanding and improving existing product lines to incorporate technology improvements and reduce product costs and total cost of ownership, as well as developing new products for existing and new We have specific bilateral research activities with several key academic groups at universities in markets. These activities require the application of physics, chemistry, materials science, electrical Asia, Europe, and North America, typically centered around our core R&D focus on new equipment, engineering, precision mechanical engineering, software engineering, and systems engineering. materials, and process developments. As part of our R&D activities, we are engaged on a global scale in various formal and informal GLOBAL PLATFORM ENGINEERING GROUP AND CORPORATE R&D A global platform engineering group addresses the needs for common platforms and software for the We contribute to several process and equipment development projects at the major Dutch technical universities through the Dutch NWO* funding organization in the domain TTW** (covering Applied various products in our product portfolio and across different key product units. This helps us drive and Engineering Sciences). And in Belgium, we participate in the industrial users group for several standardization of hardware and software through the organization. Standardization is helpful in projects supported by the Flemish funding organization VLAIO*** (Agency for Innovation and reducing costs and lead time as well as reducing waste. A broader use of common components Entrepreneurship). reduces the risk of inventory obsolescence. * NWO: Nederlandse Organisatie voor Wetenschappelijk Onderzoek ** TTW: Toegepaste en Technische Wetenschappen *** VLAIO: Vlaams Agentschap Innoveren & Ondernemen We participate in select publicly-funded programs to research and develop ‘More than Moore’ technologies, a strongly growing market of various types of analog chips which are not driven by the same Moore’s Law technology scaling inflections of mainstream logic and memory chips. We are also a member of AENEAS (Association for European NanoElectronics Activities), and participate in roadmap activities. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE31 And finally, we occasionally cooperate with other semiconductor capital equipment suppliers strengthening our IP generation process to be more efficient and improving interaction with the R&D in complementary fields in order to gain knowledge on the performance of our own deposition effort to capture opportunities earlier. processes, in cooperation with other processes, either in bilateral or consortia projects. We were engaged in several formal joint-development programs (JDPs) with customers for 300mm equipment are manufactured and/or sold. Our vision is to increase our value to our customers and applications of our products and were active in evaluations of our most advanced technologies with shareholders by using our IP in a way that differentiates our products, influences the market, and selected customers. The scope of these JDPs span many nodes, from the 5nm node currently in provides additional monetization opportunities. Our patents are usually registered in the principal countries where semiconductor devices or production, to well beyond the 2nm node for foundry, and the equivalent DRAM and 3D-NAND technology nodes. Intellectual property managers work at all of our major global R&D sites, where they capture patentable material resulting from our R&D activities. We now have 2,094 patents in force worldwide In 2017, we renewed our strategic R&D partnership with the Interuniversity Micro-Electronics Center protecting our various products. (imec) in Leuven, Belgium, extending into 2022. Essentially all of our 300mm products are involved in this partnership. From 2013 through 2020, we significantly expanded our partnership with additional PATENTS IN FORCE ALD, PEALD, epitaxy, and LPCVD capability. This gives us the opportunity to investigate, both jointly and independently, the integration of individual process steps in process modules and electrically active devices. We have partnered with imec since 1990, with significant on-site representation since 1994. 2,400 2,000 1,600 1,480 1,604 1,692 1,959 2,094 In December 2003, we commenced a five-year partnership with the University of Helsinki that aims to further develop ALD processes and chemistries. This partnership was extended in 2018 for a fourth five-year period extending into 2023. PATENTS & TRADEMARKS We expect new deposition technologies and chemistries to be a major driver for new intellectual 1,200 800 400 2016 2017 2018 2019 2020 property (IP) in the future. Patents give us a right to protect our products or aspects thereof, and We have registered a number of trademarks covering our product portfolio in the principal countries enable us to speak more openly about our inventions and share ideas in the marketplace that benefit our customers. We understand that a failure to adequately protect our IP and/or leakage of our IP could result in the loss of our competitive advantage and adversely impact our financial performance. We have therefore implemented a program that protects IP for us, our customers, our suppliers and our partners. We train all employees not only on the importance of IP protection, but also on how to recognize and report possible IP infringements. This training is provided to all new hires, and employees are given regular refresher trainings. In addition, and on an ongoing basis, we are where we do business: ›› ASM, the ASM International logo, Advance, Aurora, Axis, Dragon, Eagle, EmerALD, Epsilon, Intrepid, Previum, Pulsar, Silcore, XP, XP8 and Synergis are our registered trademarks. ›› The ASM Qualified Licensed Supplier logo, A400, A412, Loadstar, and NCP are our trademarks. ›› Drive Innovation. Deliver Excellence is our service mark. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEEmployees Employees EMPLOYEES 32 ASMI is focused on attracting, engaging, retaining, and developing talented people with targeted capabilities to achieve our longer-term strategic direction. Our people are part of an inclusive and diverse workforce, supported by a culture that is caring, innovative and driven to deliver. MISSION / VISION EMPLOYMENT BRAND STRATEGY Employee engagement & brand ambassadors PEOPLE • Behaviors • Knowledge • Skills Foster a collaborative and engaging culture Build and improve upon ASMI's diversity At ASMI, our team focuses on advancing technologies and unlocking possibilities to make the world a better place. Our people are our power, and we want to create a culture and workplace where everyone is inspired, is always developing, and is empowered to perform at their best. We want to be an employer of choice in our industry. To achieve this, we are continually focused on strengthening a number of areas. First, we are redefining our culture and reinforcing our leadership. Second, we are optimizing our organizational design and workforce planning. And finally, we ensure our people are kept informed through consistent and robust employee communications. Our main focus areas are: culture and leadership, organizational development and workforce planning, talent recruitment, retention and total rewards, and employee communications. CULTURE We aspire to be the employer of choice within the semiconductor industry. To achieve this, we are creating a distinct culture at ASMI, differentiating ourselves from our competitors. We are a global company with a diverse workforce, reflecting the locations where we are based, as well as our diversity in experience, positions, and backgrounds. ASMI is working to create a unified view of who we are and the way we work. To create a unique culture, we have taken many steps towards defining our employer brand: 'the Power of an Open Mind'. This unified culture will drive our behavior and differentiate ASMI by building on our unique strengths. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE33 GROWTH Opportunities for personal development are key to the success of the company and each individual EMPLOYEE COMMUNICATIONS We aim to provide a transparent, open, and engaging approach to our employee communications. employee. ASMI invests in its people and their ambitions. Sustainable long-term career prospects and development is reflected in the 10% jump in internal promotions in the last two years. In 2020, we increased employee communications further. In November, our internal CEO video In 2020, over 75% of our managers took part in virtual courses to help them advance their leadership experience between management and employees. The questions raised during these events help us skills and strengthen areas of professional interest. Collaboration, diversity, leadership, customers, to identify key themes and focus areas for future proactive communications. and teams are just some of the areas covered in these learning programs. The COVID-19 pandemic meant that all learning had to move online and we introduced a new EMPLOYEE BRANDING In 2020, we introduced 'the Power of an Open Mind', our employee value proposition (EVP). The EVP employee toolkit that complements the existing manager toolkit. Both toolkits are designed to help is designed to encompass ASMI’s ambitions, what we believe, who we are, and what we stand for. employees achieve success. It helps us to attract the best talent by building an employer brand that people aspire to work for. messages were relaunched in a new interactive digital format, allowing for a more interactive ASMI provides a clear view on career advancement in key technical job families. In 2020, we introduced global services & spares to our existing portfolio of defined job families. We have clear The concept was co-created with 120 employees, covering multiple geographies and business areas progression tracks for global products, research and development, and manufacturing. We aim to reflecting the diverse global structure of ASMI. provide clear paths for career progression for all roles for both managerial and technical positions, which will create a transparent, attractive proposition for present and potential talent. It was launched via an internal campaign, followed by training for all managers to cascade the And it also helps us to engage with our current employees. ENGAGEMENT SURVEY In 2020, we conducted a global employee survey to learn more about the engagement of all our employees. concept deeper into the organization. INCLUSION AND DIVERSITY In 2020, we conducted an internal inclusion and diversity health check. This study highlighted our current strengths, as well as areas for improvement. We are using these outcomes to further The response rate was high, illustrating how motivated our employees are to actively participate in prioritize initiatives, looking into creating a more inclusive company culture, and improving our talent shaping the future of ASMI. processes and people policies that will positively influence the attraction and retention of female A key outcome of the survey was that our employees recognize the strengths of ASMI: a strong customer focus and a results-driven culture. The survey also highlighted the need to further build internal communications, something that will be developed considerably in 2021 and which is further explained below. technical employees. SUSTAINABILITY: DIVERSITY PROGRAMS In accordance with the best practice provision 2.1.5 of the Dutch Corporate Governance Code, ASMI has formulated a Diversity Policy, which is published on our website. Diversity is considered in any event to consist of gender, specific knowledge, work background, nationality, age and ethnic The survey highlighted strengths and improvement areas of our current culture. We use the outcomes diversity, (technical) experience and skills. In 2020, more than 75% of ASMI’s people managers were to improve and strengthen our culture in 2021. trained as part of ASMI’s ‘the Power of an Open Mind’ EVP program. A key element of this training is ASMI’s focus on diversity. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE34 ASMI has a proven track record when it comes to equal pay – a common issue within the industry but a key component to any successful, fair, inclusive and diverse workforce. To be transparent ORGANIZATIONAL DESIGN AND WORKFORCE PLANNING Our process of succession and talent reviews is used to identify internal talent and current organization about the impact of our compensation programs, we assess the difference in gender compensation capabilities. Workforce planning reflects current and future growth expectations, enabling us to plan between our female and male employees. We look at the compensation ratio at management and towards a future-proof workforce for ASMI. non-management levels. The analysis is done by comparing the median compensation as a function of gender per job grade and per country, excluding the impact of job scope and country-specific compensation levels. HEADCOUNT DEVELOPMENT We recruited 545 people during the year, ranging from technicians building our products, service engineers delivering high-quality support to our clients, and people in R&D driving our innovations. In line with our previous findings in 2018 and 2019, our 2020 results did not show any significant Our total workforce, including temporary external workers, grew from 2,444 to 2,689, a total increase disparity between female and male compensation based on relative salary position (RSP) at the of 10%. different levels in our organization. ASMI pays its people in line with market expectations, a true living wage. Across 2020, our voluntary attrition rate was 8.3%. Our voluntary attrition rate has declined for the past Senior management / executives Middle management Non-management Total Median RSP 2019 (female/male) Median RSP 2020 (female/male) 108% 99% 102% 100% 103% 102% 100% 99% 3 years. WORKFORCE Employees Employees including temporary workers % Temporary workers Number of workers under CLA 2016 1,670 1,770 5.6% 207 2017 1,900 2,043 7.0% 224 TALENT RECRUITMENT, RETENTION AND TOTAL REWARD In 2020, we stepped up our activities to identify internal and external talent pipelines for our immediate workforce needs, whilst also looking to our future strategic workforce requirements. During succession and talent reviews, we identify the most talented leaders and experts who are % Workers under CLA 12.4% 11.8% Nationalities Male Female 29 85% 15% 29 85% 15% potential successors for critical positions and to staff new organizational capabilities. Externally, ASMI Voluntary attrition rate 7.1% 10.4% focuses on managing and maintaining relationships with promising candidates; when key positions 2018 2,181 2,327 6.3% 260 9.1% 29 85% 15% 9.9% 2019 2,337 2,444 4.4% 278 2020 2,583 2,689 3.9% 328 10.8% 11.7% 29 85% 15% 8.7% 40 85% 15% 8.3% are identified or become available, we are in a prime position as the employer of choice. This future- In 2020, our workforce continued to showcase our global nature, with 40 nationalities working at ASMI. forward focus on candidates allows us to build a steady talent pipeline. This diversity is reflected at site levels, meaning that it is normal to work with people from different nationalities on a daily basis. This international dimension is one of the reasons why people appreciate Next to our succession and talent review process, ASMI has a structured performance appraisal working for ASMI. As part of gender diversity, 15% of our workforce was female at year-end. and development process. This process supports management and employees in having ongoing key objectives and competencies discussions on a regular basis, resulting in concrete career development-related decisions. LIVING WAGE Our employees are paid above the local minimum wage. ASMI is actively engaged with outside organizations In 2020, we updated our set of ASMI leadership capabilities and profiles. This framework provides a to benchmark living wage best practices in line with the Anker methodology, which is a relevant survey common language when identifying leaders that potentially fill future requirements as defined by our practice for corporate organizations. The scope of the living wage survey includes most countries where we business strategy. For employees, it provides aspirational roles, ensures career development, and have ASMI employees or contractors. In 2020, we covered 13 countries, and we did not identify any cases creates future opportunities. across these countries where employee wages were below the agreed living wages. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE35 As a member of the Responsible Business Alliance (RBA), the world’s largest industry coalition dedicated to corporate social responsibility in global supply chains. In 2020, we co-sponsored an BUSINESS ETHICS As a follow-up to the Ethics Committee summits started in 2019, the Code of Business Ethics amendment to include living wage in the RBA Code of Conduct. Working with other RBA member was refreshed into the Code of Business Conduct (COBC) in 2020. ASMI’s COBC management companies, we proposed the formation of a living wage working group to study living wage best system includes 18 underlying policies including fair competition, gifts entertainment and hospitality, practices for use in complex, global supply chains. The working group proposal will go forward to the corruption and improper advantages and anti-fraud, and corruption. Board for review in 2021. WORKING HOURS AND DAYS The standard working week varies by region and country and is often dictated by local regulations and norms. One standard that is consistent across ASMI is aligned with the fundamental principle The refreshed COBC is more comprehensive and comes with trainings for all employees in multiple languages. The trainings are set to effectively influence desired conduct rather than merely reinforce rules. in the RBA Code of Conduct which limits working hours to 60 hours per week, or the local limit, At the same time, it further defines the consequences of such violations through our newly introduced whichever is lower, and working days to one day off in every seven, for hourly employees involved in disciplinary policy. All training is supported by a wealth of resources including a dedicated webpage the production of goods and services. There is allowance for emergency situations, such as when on ASMI’s intranet, reference material and tools for specific areas such as gifts and entertainment, COVID-19 impacted the globe and disrupted schedules with lockdowns and quarantines. ASMI the Whistleblower program and SpeakUp!. was able to perform within the RBA limits for both working hours and days despite the challenges presented by the crisis. We were able to achieve this because of our existing management framework The COBC continues to apply to our Supervisory Board and Management Board, as well as all our around the control of working hours. The performance to this criteria is a part of a corporate-level employees, consultants, contractors, temporary employees, and critical suppliers. dashboard and is monitored and reported closely to ensure compliance. GLOBAL EMPLOYMENT STANDARDS ASMI is dedicated to creating a safe and inclusive workspace for every individual. Our Global Our Global Employment Standards (GES) summarize our approach to respecting human rights throughout our global operations and supply chain. They are written with everyone in our value chain in mind. The GES reflect the principles laid out by the United Nations in the Guiding Principles on Employment Standards (GES) summarize our approach to respecting human rights throughout our Business and Human Rights, and support the RBA Code of Conduct framework, including prohibiting global operations. They are written with everyone in our value chain in mind. The GES reflect the the use of forced or involuntary labor, prohibiting the employment of child labor, and prohibiting principles laid out by the United Nations in the Guiding Principles on Business and Human Rights, discrimination or harassment. and support the RBA Code of Conduct framework, including the following: ›› Prohibit the use of forced or involuntary labor, including fees of any type to secure employment; ›› Prohibit the employment of child labor; ASMI policy specifically does not allow anyone under the age of 18 to be employed at ASMI; ›› Prohibit corporal punishment, threats of violence, or other forms of physical or verbal coercion or harassment. We believe that everyone deserves to work in an environment free of any threats to their human rights; and SPEAKING UP The SpeakUp! program enables employees, suppliers, customers, and any other stakeholder to report ethics issues, concerns or complaints anonymously and in their own language. Potential violations of our COBC can be reported through the SpeakUp! process, or directly to management, HR, or the Compliance Officer. When we receive complaints, these are investigated by the Ethics Committee. Independent of the way of reporting, our COBC includes a non-retaliation policy that ›› In 2020, we had no reports or evidence of any human rights violations or abuses within our global applies to any person making use of this process. hiring or employment practices. In 2020, five concerns were reported through our SpeakUp! system, while four cases were reported via other channels to the Ethics Committee. All incidents were fully investigated and, in those cases involving violations to the COBC, appropriate actions were taken. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE36 PRIVACY We have adopted and rolled out policies and privacy codes, and entered into agreements (including Across our operations, we have implemented proactive measures to reduce the risk of injury or incident, with our employees, our customers, and contract manufacturers and other suppliers. with third party processors) in our effort to protect the integrity and confidentiality of the data of our We instill this into our safety philosophies and culture, starting with our 6Es of Safety Leadership employees. The same applies with respect to the privacy of our customers and suppliers. framework, which empowers everyone to lead by example and through prevention. HEALTH & SAFETY ZERO HARM! is our safety objective and we review our incidents thoroughly to identify new The framework emphasizes empowering everyone for safety, proactive measures like education, and eliminating hazards, and evaluates performance through key performance indicators and risks and introduce mitigation plans to prevent future exposure. We have a robust Occupational employee surveys. Employees who demonstrate notable and scaled contributions for their role, Health & Safety management system in reference to leading international and regional standards. positive attributes, and leadership in safety can be nominated by peers for a global quarterly Safety Our management system is comprehensive in all aspects of policy, hazard identification, controls, Leadership Award. objectives and targets, training, communications, monitoring and measurement, reporting, corrective & preventive actions, strategic planning, and management reviews. The safety management system and programs for our Singapore manufacturing facility are certified to the Singapore bizSAFE Level 3 QUARTERLY SAFETY AWARD WINNERS accreditation. Our structured safety management system is approved by senior management, who not only set out our commitment to safety, but are actively engaged in and continuously informed on the progress and the priorities we must focus on toward ZERO HARM! BE SAFE SAFETY LEADERSHIP FRAMEWORK Q1 Q2 Technical Trainer For sustained commitment to safety education and setting expectations. Corporate R&D For exemplary safety leadership and dedication. Q3 Q4 Engineering Lead For exemplifying safety leadership in words and actions and proactively focusing on safety. Taiwan Service Team Exemplifying safety leadership with ASMI and customers. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE37 Our safety policy includes our commitment to engage in safety across our value chain. In 2020, our total injury rate showed an increase from 0.42 cases per 100 employees to 0.58 cases “ Aligned with our core value ‘Safety First and Everywhere’ and our guiding principle while many of the cases we saw in 2020 were minor injuries, such as a splinter or bumped knuckle, ‘Drive Innovation. Deliver Excellence.’, ASMI is committed to conducting business, we treat every one with the same resolve to eliminate. Our recordable injury rate, the measure of both in our own operations and throughout our supply chain, in a manner consistent more serious injuries, increased by two cases, resulting in a rate of 0.23 cases per 100 employees with the Responsible Business Alliance (RBA) principles to protect our employees, compared with a rate of 0.17 in 2019. We are strongly committed to reduce this in the years to customers, communities, shareholders and the environment.” come, and are setting appropriate objectives and taking active steps to enhance our overall Safety per 100 employees. This is the first substantial increase in 10 years. Our goal is ZERO HARM! and Management System toward that goal. We engage with customers and across the industry to strengthen safety partnerships. We are members of SESHA, an industry consortium focused on safety, health, and the environment, and are Global Injury and RECORDABLE RatEs (Case rate per 100 employees) working with key stakeholders toward improving industry shared learnings and safety improvements. 0.8 In addition, we have continued our innovative Safety Leadership Collaborations with key customers. This has led to the implementation of an ergonomic task force with one of our customers. After our safety observation data started showing opportunities for improvement, we worked with the customer to form the joint task force and by year-end, we had implemented 14 ergonomic projects, designs, and improvements. Contractors are critical to ASMI’s success, and their safety on our site is vital. Our Contractor Safety Programs include contractor company screening, individual contractor training and orientation to our sites and requirements, and administrative controls such as safety plans and work permits. We work with contractors while on our sites to ensure close coordination through Pre-Task Planning and Site Incident Prevention programs to minimize the risk of our operations impacting their tasks, and subsequently their safety, and vice-versa. 0.63 0.62 0.56 0.56 0.34 0.30 0.30 0.26 0.6 0.4 0.2 0.55 0.45 0.21 0.18 0.42 0.42 0.19 0.17 0.58 0.37 0.23 0.17 Our safety key performance measures are aligned with industry and peers and allow us to benchmark our performance year-on-year. The key measures include an overall injury rate indicator and a 2016 2017 2018 2019 2020 recordable injury rate indicator, which is an indicator of serious injuries requiring medical attention or days away from work. We have chosen to place emphasis on a total injury rate consistent with our goal of ZERO HARM! Placing emphasis on lost time or days-away rate, restricted time rates, or other measures of serious injury only is not consistent with our ambition to eliminate all injuries. We Recordable injury rate Injury rate Recordable target Injury target have found that transparently sharing even the mildest first aid injuries is the right approach for our As of year-end, there have been no work-related employee or contractor fatalities in 2020 at ASMI ambition. sites or relative to ASMI operations. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE38 EMPLOYEE COVID-19 RESPONSE The COVID-19 pandemic strongly impacted our way of working in 2020. ASMI banned travel to those regions initially affected by the end of January. Hygiene and screening measures were introduced across all sites globally in February, and a global travel restriction was issued in March. As we learned more about the spread of the virus, we maximized work from home globally, improved hygiene and control measures, and mandated social distancing at our sites for designated employees in March. To help with the work-from-home efforts, our IT organization held a series of training sessions on remote applications and tools in April and May. Our employees have responded with a demonstrated care for others throughout the entire pandemic period, following protocols at every step and reporting potential symptoms and close contacts, and staying at home until cleared to return. Throughout the progression of this pandemic, taking care of our employees has been at the front of our efforts. By April, we had developed and rolled out global human resources guidelines to managers and employees to help navigate these unprecedented times. ASMI focused on doing what was right for our employees. Policies allowed for employees to take time off when there was a need to care for a family member. When border crossing and travel were restricted, we established temporary housing for employees near our factories. Recruiting was not interrupted and we focused on virtual recruitment and onboarding. In Singapore, we implemented measures for our workers who have their homes in Malaysia but who, despite border closures due to country lockdowns, chose to continue to work in Singapore. Support measures included financial support for daily expenses, providing local accommodation, and assistance for foreign workers in finding local housing. ASMI worked to obtain all local ministry, trade, and industry approvals. Initially, employees were given hotel accommodation in safe spaces. As the pandemic progressed, we sourced more permanent housing. Smaller services, such as providing our employees with local SIM cards, were also swiftly rolled out, making communication with friends, family and colleagues easier. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEShareholders Shareholders SHAREHOLDERS 39 Our strategy aims to create sustainable value for all our stakeholders. As part of this strategy, we are committed to creating long-term shareholder value. This chapter provides information that is particularly relevant for shareholders and investors, including information related to the share listing and share price performance, dividends and share buybacks. Also discussed is the financial performance in 2020. Global economic growth turned negative in 2020, impacted by COVID-19 lockdown measures. Our company’s healthy financial performance has contributed to a strong share price performance However, wafer fab equipment spending increased as our customers continued to invest in leading in recent years. We continued to execute our policy of using excess cash for the benefit of edge semiconductor manufacturing capacity. 2020 was a strong growth year for ASMI. shareholders. During the 2010-2020 period, we returned close to €2 billion through dividends, share buybacks, return of capital, and buyback of convertible bonds. Alongside the excess cash generated Total revenue increased by 18%, excluding the settlement proceeds in 2019, driven by solid increases by our operations in 2017/2018, we also used approximately €0.7 billion proceeds of our reduced in our ALD business and our spares & services revenue. This marks the fourth consecutive year of shareholding in ASMPT from 39% to 25% in 2017 for share buybacks and a tax-efficient return double-digit top-line growth. of capital to shareholders. For 2020, we have increased the proposed regular dividend by 33% to €2.00 per share. ASMI has strongly outperformed the wafer fab equipment industry in recent years. In 2020, our gross margin improved to 47%, and with operating costs remaining under control, operating profit increased by 49% last year. We stepped up our investments as we completed our new manufacturing facility in Singapore and invested in the strengthening and expansion of R&D operations. Despite increased investments and higher working capital requirements, we generated a healthy free cash flow of €119 million in 2020. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEFINANCIAL RESULTS The following table shows the operating performance for 2020, versus 2019: The following table shows certain consolidated statement of profit or loss data as a percentage of net revenue for our operations for 2019 and 2020: 40 (EUR million) New orders Backlog Book-to-bill Revenue Gross profit Gross profit margin % Selling, general and administrative expenses Research and development expenses Operating result Operating margin % Financing income / (expense) Income taxes Net earnings before share in income of investments in associates Share in income of investments in associates Net earnings Net earnings per share, diluted Net earnings per share excluding amortization from the sale of ASMPT shares in 2013 2019 1) 1,328.9 351.2 1.0 1,283.9 638.5 49.7% (148.9) (110.8) 378.7 29.5% (0.3) (53.7) 324.8 4.2 329.0 €6.58 €6.86 2020 1,313.6 323.6 1.0 1,328.1 623.6 47.0% (157.4) (139) 327.1 24.6% (25) (48.7) 253.4 32.0 285.4 €5.78 €6.04 Change (1%) (8%) 3% (2%) 6% 25% (14%) (24.7) 5.0 (71.3) 27.8 (43.6) €(0.80) €(0.82) 1 Including proceeds from patent litigation and arbitration settlement in 2019. Revenue Cost of sales Gross profit Selling, general and administrative expenses Research and development expenses Operating result Net interest income (expense) Foreign currency exchange gains (losses) Share in income of investments in associates Earnings before income taxes Income taxes Net earnings from operations 2019 1) 100.0% (50.3%) 49.7% (11.6%) (8.6%) 29.5% – – 0.3% 29.8% (4.2%) 25.6% 2020 100.0% (53.0%) 47.0% (11.9%) (10.5%) 24.6% (0.1%) (1.7%) 2.4% 25.2% (3.7%) 21.5% 1 Including proceeds from patent litigation and arbitration settlement in 2019. REVENUE The revenue cycle from quotation to shipment for our Front-end equipment generally takes several months, depending on capacity utilization and the urgency of the order. On average, acceptance is obtained four months after shipment. The revenue cycle is longer for equipment that is installed at the customer’s site for evaluation prior to sale. The typical trial period ranges from six months to two years after installation. Our revenues are concentrated in Asia, the United States and Europe. The following table shows the geographic distribution of our revenue for 2019 and 2020: (EUR million) United States Europe Asia Total Year ended December 31, 2019 1) 2020 339.5 126.2 818.2 26.4% 9.8% 63.7% 333.0 141.3 853.8 25.1% 10.6% 64.3% 1,283.9 100.0% 1,328.1 100.0% 1 Including proceeds from patent litigation and arbitration settlement in 2019. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE A substantial portion of our revenue is earned by equipping new or upgraded fabrication plants where Following recent strong growth, the performance of our other product lines, including epitaxy, was device manufacturers are installing new fabrication lines. As a result, our revenue in this segment partially held back by lower demand in the analog/power market. While representing a smaller part tends to be uneven across customers and financial periods. Revenue from our ten largest customers of ASMI’s total revenue, the analog/power market is more exposed to industrial and automotive accounted for 82.2% and 85.1% of revenue in 2019 and 2020, respectively. The composition of our segments, which were negatively impacted by COVID-19 in 2020. ten largest customers changes from year to year. The largest customer accounted for more than 10% of revenue in 2019 and 2020. Year ended December 31, Spares & services revenue increased by 29%. This was driven by growth in the installed base of equipment in recent years as well as initial results from our increased focus on new value-added services. To a smaller extent, this growth was driven by customers increasing inventories in response 41 (EUR million) Equipment revenue Spares & service revenue Patent litigation & arbitration settlement 2019 909.5 215.2 159.2 1,051.5 276.6 – Total 1,283.9 1,328.1 2020 % Change to the COVID-19-related supply chain challenges, especially in the second quarter of the year. Spares 16% 29% n.a. 3% & services represented 21% of total revenue in 2020. Currency changes led to a 1% decrease in revenue compared to 2019, mainly due to the depreciation of the US dollar. Revenue growth driven by continued strong demand for leading edge technologies In terms of customer segments, revenue for the full year was led by the foundry segment, followed by logic and then memory. Revenue in the combined logic/foundry segment showed a healthy At slightly over €1.3 billion, our net revenue increased 18% compared to €1.1 billion in 2019, increase, driven by solid investments throughout the year in leading edge manufacturing capacity. We excluding the €159 million proceeds from patent litigation & arbitration settlements in that year. While continued to benefit from the significant increases in the number of ALD layers in the most advanced global economic growth turned negative in 2020, impacted by COVID-19 lockdown measures, the nodes compared to the previous nodes, supporting strong share of wallet gains for ASMI with the total wafer fab equipment market amounted to US$63 billion (Gartner, December 2020) compared to leading logic and foundry customers. Sales in the memory segment also showed a solid increase in US$54 billion in 2019 (Gartner, December 2019). This increase was particularly driven by continued 2020, led by DRAM customers. Aside from some recovery in overall spending, ASMI benefited from investments in leading edge semiconductor manufacturing capacity. As demand for advanced a first meaningful contribution from high-k ALD penetrations for the most advanced DRAM devices technologies remained strong throughout the year, the pandemic only had a limited impact on with multiple customers. ASMI’s revenue. In the second quarter, we faced bottlenecks in our manufacturing and logistical operations, especially in Malaysia and Singapore, due to lockdown measures, which impacted By geography, our revenues were led by the Asia region, with a growth of approximately 30% in 2020, several of our suppliers and led to shortages and delays for certain parts. In the third quarter, supply excluding the settlement proceeds in 2019. This was partially due to a solid increase in revenue from chain conditions returned largely to normal. Revenue in the second half was only modestly lower China which, for the first time, accounted for more than 10% of total revenue. compared to the level in the first half. Excluding the impact from currencies, revenue in the second half increased. Fourth quarter revenue reached a new record, at €347 million. Equipment revenue grew by 16% in 2020. This was driven by strong double-digit increases in our ALD product line, reflecting investments by our customers in the leading edge technology nodes. ALD continued to account for more than half of our total equipment revenue in 2020. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE42 The following table shows new orders levels and the backlog for 2019 and 2020: GROSS PROFIT MARGIN Total gross profit developed as follows: (EUR million) Backlog at the beginning of the year New orders Revenue FX-effect Backlog as per reporting date Book-to-bill ratio (new orders divided by net sales) Year ended December 31, 2019 1) 301.5 1,328.9 (1,283.9) 4.7 351.2 2020 351.2 1,313.6 (1,328.1) (13.1) 323.6 % Change 16% (1%) 3% (8%) 1.0 1.0 1 Including proceeds from patent litigation and arbitration settlement in 2019. (EUR million) Front-end Front-end, excluding patent litigation & arbitration settlement in 2019 Year ended December 31, Gross profit Gross profit margin 2019 638.5 2020 623.6 2019 49.7% 2020 47.0% Increase (decrease) percentage points (2.7) 479.3 623.6 42.6% 47.0% 4.4 The gross margin increased in 2020 from 42.6% (excluding patent litigation & arbitration settlement) to 47.0%. The gross margin was in part driven by an exceptionally strong revenue mix in second quarter and third quarter, which boosted the margin in those quarters to 48.3% and 49.9%, The backlog includes orders for which purchase orders or letters of intent have been accepted, respectively. In addition, the gross margin increased due to the effects of cost reduction programs typically for up to one year. Historically, orders have been subject to cancellation or rescheduling by and efficiency improvements. For instance, while we continued to incur costs related to new growth customers. In addition, orders have been subject to price negotiations and changes in specifications initiatives and product introductions, the related gross margin impact lessened compared to previous as a result of changes in customers’ requirements. Due to possible customer changes in delivery years on the back of the increased revenue level. schedules and requirements, and to cancellations of orders, our backlog at any particular date is not necessarily indicative of actual revenue for any subsequent period. Currency changes led to a decrease of 1% in gross profit compared to 2019. For the year in total, our new bookings increased by 12% in 2020 to €1,314 million, excluding the proceeds from the settlements in 2019. The book-to-bill, as measured by orders divided by revenue, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Total selling, general and administrative expenses developed as follows: was 1.0 in 2020. Equipment bookings were led by the foundry segment, followed by memory and logic. Bookings increased by 8% from the first half to the second half, reaching a new record quarterly high (excluding settlement gains) in the fourth quarter of 2020 at €379 million. We finished the year with an order backlog of €324 million compared to €351 million at the end of 2019. (EUR million) Front-end Year ended December 31, 2019 148.9 2020 157.4 % Change 6% Selling, general and administrative (SG&A) expenses increased by 6% in 2020 year-on-year. The increase was explained by targeted investments to strengthen the organization and higher variable compensation, and was partly offset by the absence of legal costs related to the patent litigation and arbitration case, which were still included in 2019. As a percentage of revenue, SG&A expenses in 2020 were 12%, down from 13% in 2019 (excluding the patent litigation & arbitration settlement). The impact of currency changes on SG&A expenses resulted in a decrease of 2% year-over-year. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE43 Year ended December 31, 2019 2020 % Change 224.4 159.2 (4.8) (0.1) 378.7 337.2 – (10.1) – 327.1 50% n.a. n.a. n.a. (14%) RESEARCH AND DEVELOPMENT EXPENSES Total research and development (R&D) expenses, including impairment, capitalization and OPERATING RESULT The operating result developed as follows: amortization of development expenses, increased by 25% in 2020 compared to the previous year due to increased activities. As a percentage of revenue, R&D expenses were approximately stable at 10%. Currency changes resulted in a 1% decrease in R&D expenses year-over-year. Total research and development expenses developed as follows: (EUR million) Front-end: Before special items Patent litigation & arbitration settlement (EUR million) Front-end: Research and development expenses Capitalization of development expenses Research and development grants and credits Amortization of capitalized development expenses Impairment of capitalized development expenses Total Year ended December 31, Impairment charges 2019 2020 % Change Restructuring expenses Including special items 150.7 (60.2) – 15.6 106.1 4.8 110.8 171.8 (64.1) – 21.2 128.9 10.1 139.0 14% 6% 36% 21% 25% Operating profit increased by 49% to €327.1 million, from €219.5 million in 2019 (excluding patent litigation & arbitration settlement), resulting in an operating profit margin of 24.6% (2019: 19.5%, excluding patent litigation & arbitration settlement). Impairment charges in 2020 and 2019 are related to capitalized development expenditures and assets. FINANCING COSTS Financing costs are mainly related to translation results. The translation results are mainly related Impairment of capitalized development expenses related primarily to the development of new to movements in the US dollar in the respective periods. A substantial part of our cash position is technology that is no longer in demand from customers. denominated in US dollars. 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 RESULTS FROM INVESTMENTS Results from investments, which primarily reflect our shareholding in ASMPT, increased to that meet customer requirements and obtain access to new technology and expertise. The costs €44.9 million from €18.0 million in 2019. These results exclude the amortization of intangible assets relating to prototypes and experimental models, which we may subsequently sell to customers, are related to ASMPT. During the year, our stake in ASMPT decreased slightly from 25.19% to 25.07%. charged to the cost of sales. Our R&D operations in the Netherlands, Belgium, and the United States receive research and Semiconductor Solutions increased 13.8% in 2020. Sales of SMT Solutions decreased by 4.2% for Total sales as reported by ASMPT increased by 6.3% to US$2.2 billion in 2020. Sales of the development grants and credits from various sources. the full year, and Materials increased 18%. ASMPT decreased gross margins from 34.8% to 32.5% in 2020. On a 100% basis, ASMPT increased net profits by 162%. For further information on ASMPT, please visit the website www.asmpacific.com. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE44 INCOME TAX The income tax expense of €48.7 million (2019: €53.7 million) reflects an effective tax rate of 14.6% STATEMENT OF FINANCIAL POSITION Working capital as at December 31, 2020 was €242.8 million (2019: €160.2 million). Working capital (2019: 14.0%). For further information on tax, see Note 22 to the consolidated financial statements. consists of: inventories, accounts receivable, other current assets, accounts payable, provision for NET EARNINGS Net earnings developed as follows: (EUR million) Front-end: Before special items Patent litigation & arbitration settlement Impairment charges Restructuring expenses Total Back-end: Investment in ASMPT Amortization other intangible assets from purchase price allocation Total Net earnings from operations Year ended December 31, warranty and accrued expenses and other payables. The number of outstanding days of working capital, measured against quarterly revenue, increased from 36 days as at December 31, 2019 to 63 days as at December 31, 2020. While our inventories decreased year-on-year from €173 million at the end of 2019 to €162 million at the end of 2020, our accounts receivable position increased from €200 million to €280 million. The percentage of overdue in accounts receivables decreased 2019 2020 Change year-on-year, reflecting the healthiness of this position. 170.5 159.2 (4.8) (0.1) 324.8 18.0 (13.8) 4.2 329.0 263.5 – (10.1) – 253.4 44.9 (12.9) 32.0 285.4 93.0 (159.2) (5.3) 0.1 (71.4) 26.9 0.9 27.8 (43.6) LIQUIDITY Our liquidity is affected by many factors, some of which are related to our ongoing operations while others are related to the semiconductor and semiconductor equipment industries, and to the economies of the countries in which 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 twelve months. On December 31, 2020, our principal sources of liquidity consisted of €435 million in cash and cash equivalents and €150 million in undrawn bank lines. 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. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 45 CASH FLOW The following table shows the cash flow statement: We generated cash from operating activities of €264.4 million in 2020 (2019: €488.9 million). We used €144.3 million cash in investing activities (2019: €79.2 million) and used €170.4 million in (EUR million) Net earnings from operations Adjustments to cash from operating activities: Depreciation, amortization and impairments Income tax Share in income of investments in associates Share-based compensation Non-cash financing costs Changes in other assets and liabilities: Accounts receivable Inventories Evaluation tools Accounts payable and accrued expenses Other assets Income tax paid Net cash from operating activities Capital expenditures (net) Capitalized development expenditure Purchase of intangible assets Dividend received from associates Net cash used in investing activities Payment of lease liabilities Purchase treasury shares Proceeds from issuance of treasury shares Dividend paid to shareholders ASMI Capital repayment 2019 1) 329.0 78.3 53.7 (4.2) 10.5 5.5 (23.9) 3.1 (13.7) 81.1 (24.3) (6.2) 488.9 (48.7) (60.2) (2.3) 32.0 (79.2) (12.0) (99.9) 6.8 (99.3) (1.1) 2020 285.4 89.0 48.7 (32.0) 12.8 11.0 (93.0) 0.5 (39.7) (12.7) 2.4 (8.0) 264.4 (93.1) (64.1) (3.2) 16.1 (144.3) (7.8) (66.7) 2.8 (98.7) – Net cash used in financing activities (205.7) (170.4) Foreign currency translation effect Total net cash provided / (used) 8.0 212.0 (12.3) (62.6) financing activities (2019: €205.7 million). DEBT We were debt-free as at December 31, 2020. The original maturity date of the credit commitment was December 16, 2021 and in 2018 and in 2019 we exercised the options to extend the date by one year. This means that the maturity date of the credit commitment of €150 million is now December 16, 2023. As per December 31, 2020, this facility was undrawn. The credit facility of €150 million includes two financial covenants: ›› Minimum consolidated tangible net worth; and ›› Consolidated total net debt/total equity ratio. These financial covenants are measured twice annually, on June 30 and December 31. We were in compliance with these financial covenants as per December 31, 2020. See Notes 11, 16, and 17 to the consolidated financial statements for more information on our funding, treasury policies and our long-term debt. ASMPT The assembly and packaging segment of our business is organized in ASM Pacific Technology Ltd (ASMPT). Net cash of our 25.07%-owned associate was €467.8 million on December 31, 2020. The cash resources and borrowing capacity of ASMPT are not available to our Front-end segment. Although two directors of ASMI are directors of ASMPT, ASMPT is under no obligation to declare dividends to shareholders or enter into transactions that are beneficial to us. As a substantial 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 2020 and 2019 were €16.1 million and €32.0 million, respectively. The market value of our 25.07% investment in ASMPT was approximately €1,108 million as per 1 Including proceeds from patent litigation and arbitration settlement in 2019. December 31, 2020. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE46 FINANCIAL RISK FACTORS We are exposed to market risks (including foreign exchange rate risk), credit risk, liquidity risk, and On December 31, 2020, we had 48,714,682 outstanding common shares excluding 1,082,712 treasury shares. This compared to 48,866,220 outstanding common shares and 2,431,174 treasury equity price risk. We may use forward exchange contracts to hedge foreign exchange risk. We do shares at year-end 2019. Besides the cancellation of 1.5 million treasury shares in July 2020, the not enter into financial instrument transactions for trading or speculative purposes. See Note 17 to change in the number of treasury shares in 2020 was the result of 508,685 repurchased shares and the consolidated financial statements for financial risk factors. 357,147 treasury shares that were used as part of share-based payments. OUTLOOK We have developed forecasts and projections of cash flows and liquidity needs for the upcoming year. On December 31, 2020, 48,438,605 of the outstanding common shares were registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V. and 276,077 were registered with our These take into account the current market conditions, reasonable possible changes in trading performance transfer agent in the United States, Citibank, NA, New York. based on such conditions, and our ability to modify our cost structure as a result of changing economic conditions and revenue levels. In the forecasts, we have also taken into account: the total cash balances amounting to €435 million on December 31, 2020; the ability to renew debt arrangements and to access SHARE LISTING ASMI's shares are listed on Euronext Amsterdam under the symbol ASM. As of March 23, 2020, additional indebtedness; and whether or not we will comply with our financial covenants. Based on this, we ASMI has been included in the AEX Index. The AEX consists of the 25 largest companies listed on believe that our cash on hand at the end of 2020 is adequate to fund our operations and our investments in Euronext Amsterdam as measured by free float-adjusted market cap. Previously, ASMI was included capital expenditures, and to fulfill our existing contractual obligations for the next twelve months. in the AMX midcap index. SHARE INFORMATION On December 31, 2020, the total number of issued common shares of ASMI amounted to 49,797,394 compared to 51,297,394 at year-end 2019. The decrease was the result of the cancellation of 1.5 million treasury shares that was approved by the Annual General Meeting of Shareholders (AGM) on May 18, 2020, and became effective on July 21, 2020. As per January 1: Issued shares Treasury shares Outstanding shares Changes during the year: Cancellation of treasury shares Share buybacks Treasury shares used for share-based performance programs As per December 31: Issued shares Treasury shares Outstanding shares 2019 2020 56,297,394 51,297,394 6,978,496 2,431,174 49,318,898 48,866,220 5,000,000 1,500,000 950,902 498,224 508,685 357,147 51,297,394 49,797,394 2,431,174 1,082,712 48,866,220 48,714,682 ASMI JOINED THE AEX INDEX IN 2020 Our NY Registry Shares have also been eligible since 2015 for trading on the over-the-counter (OTC) market in the United States under the symbol ASMIY (further information can be found on www.otcmarkets.com). FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE47 MARKET CAPITALIZATION The market capitalization of ASMI at year-end 2020 was €8,766 million, based on the closing share DIVIDENDS ASMI aims to pay a sustainable annual dividend. Annually, the Supervisory Board, upon proposal price of €179.95 at Euronext Amsterdam on December 31, 2020, and 48.7 million total outstanding of the Management Board, assesses the amount of dividend that will be proposed to the Annual shares per year-end. The market capitalization at year-end 2019 was €4,894 million. General Meeting of Shareholders (AGM). The decision that a dividend be proposed to the AGM SHARE PERFORMANCE On December 31, 2020, the closing price of ASMI’s shares on Euronext Amsterdam was €179.95. At the end of 2019, the closing price was €100.15. The highest closing share price during the year will be subject to the availability of distributable profits as well as retained earnings, and may be affected by our potential future funding requirements. Accordingly, dividend payments may fluctuate and could decline or be omitted in any year. was €179.95, on December 30, 2020, and the lowest was €59.18, on March 18, 2020. The average The proposed dividend over 2020 will mark the eleventh consecutive year that ASMI has paid daily trading volume of ASMI shares on Euronext Amsterdam in 2020 was 316,286. This compares a dividend. Our dividend has steadily increased over time. For 2010, the dividend was €0.40 per to an average daily volume of 224,790 in 2019. Euronext accounted for approximately 59% of total common share. Over 2011, 2012 and 2013, we paid a dividend of €0.50 per common share. trading in ASMI shares in 2020. The dividend increased to €0.60 over 2014, €0.70 over 2015 and 2016, €0.80 over 2017 and €1.00 per common share over 2018. Over 2019, we paid total dividends of €3.00 per common share, The graph below shows the performance of ASMI’s shares on Euronext. The total share return in this consisting of a regular dividend of €1.50 per share, and an extra-ordinary dividend also of €1.50 graph is the performance of the share including dividends paid and capital returned over the period. per share. SHARE PRICE PERFORMANCE AND TOTAL SHARE RETURN in % ASMI announced on February 25, 2021, that it would propose to the forthcoming Annual General Meeting of Shareholders (AGM) 2021, to declare a regular dividend of €2.00 per common share over 2020. The regular dividend increased 33% compared to the dividend paid over 2019. DIVIDEND PER SHARE IN EUR PAID OVER 2015 2016 2017 2018 2019 2020 Total return Share price performance 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.40 0.50 3.00 1.50 2.00 0.50 0.50 0.60 0.70 0.70 0.80 1.50 1.00 SHAREHOLDER RETURNS Over time, ASMI has returned significant amounts of cash in different forms to our shareholders, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* reflecting our policy to use excess cash for the benefit of our shareholders. In 2020, we returned * Proposed €165 million to our shareholders. This follows an amount of approximately €200 million returned to our shareholders in the form of dividends and share buybacks in 2019. During 2018, we returned €607 million to shareholders in the form of dividends, share buybacks, and a capital return. During the last three years, we have returned more than €0.9 billion in cash to shareholders. Extra-ordinary dividend Regular dividend 600 500 400 300 200 100 0 -100 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEDIVIDEND TIMETABLE ›› Ex-dividend date: May 19, 2021 ›› Record date: May 20, 2021 ›› Payment date: May 27, 2021 SHARE BUYBACK On February 25, 2020, ASMI announced that its Management Board authorized a new repurchase program of up to €100 million of the company's common shares within the 2020/2021 time frame. This buyback program is being executed by intermediaries and will end as soon as the aggregate purchase price of the common shares acquired by ASMI has reached €100 million. This repurchase program is part of ASMI's commitment to use excess cash for the benefit of its shareholders. As at January 29, 2021, the 2020/2021 program was 80% completed, with 559,197 shares repurchased at an average share price of €143.06. The 2020/2021 program is our seventh consecutive share buyback program. In addition to the 2019/2020 program the earlier programs included: ›› On June 5, 2018, ASMI announced the start of a share buyback program of ASMI’s common shares up to €250 million. This program followed on ASMI’s announcement on February 28, 2018, CUMULATIVE CASH RETURNED TO MARKET EUR million 2,000 1,750 1,500 1,250 1,000 750 500 250 0 48 Share buybacks Dividends Return of capital Buyback convertibles 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAPITAL REPAYMENT In 2013 and 2018, ASMI distributed cash to its shareholder through two capital repayments: ›› In August 2018, ASMI distributed €4.00 per common share to its shareholders through a tax-efficient repayment of capital, in addition to the regular dividend that year. The proposal for this capital repayment was initially announced on February 28, 2018, and approved by the AGM 2018; and that it intended to use €250 million of the proceeds of the partial sale of a stake of approximately 9% in ASMPT for a new share buyback program. The 2018 program started on June 6, 2018, and ›› In July 2013, ASMI distributed €4.25 per ordinary share to its shareholders. This followed on the sale of 12% of the total shares in ASMPT in March 2013. The extraordinary return of capital in 2013 ended on October 11, 2018. In total, 5,443,888 shares were repurchased at an average price of was in addition to the dividend paid that year. €45.92, including expenses, under the 2018 program; and ›› On April 24, 2017, ASMI announced that the proceeds of approximately €248 million of the partial secondary placement of shares of ASMPT were intended to be used for a new share buyback MAJOR SHAREHOLDERS Pursuant to the Dutch Financial Supervision Act (‘Wet op het financieel toezicht’ or ‘WFT’), legal program. The 2017/2018 €250 million program started on September 22, 2017, and ended on entities as well as natural persons must immediately notify the Dutch Authority for the Financial March 29, 2018. In total, we repurchased 4,353,292 shares at an average price of €57.43, Markets (AFM) when a shareholding equals or exceeds 3% of the issued capital. The AFM must be including expenses, under this program. notified again when this shareholding subsequently reaches, exceeds or falls below a threshold. This can be caused by the acquisition or disposal of shares by the shareholder or because the issued Information about earlier share buyback programs is available on our website. capital of the issuing institution is increased or decreased. Thresholds are: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75%, and 95%. The AFM incorporates the notifications in the public register, which is available on its website. Failure to disclose the shareholding qualifies as an offense, and may result in civil penalties, including suspension. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 49 The following table sets forth information with respect to the ownership of our common shares as of The graph below provides an overview of the shareholders' structure. February 1, 2021, by each beneficial owner known to us of more than 3% of our common shares: ASM International N.V. 2) Tokyo Electron Ltd. 3) Acadian Asset Management LLC. 4) Norges Bank 5) Goldman Sachs Group, Inc. 6) BlackRock, Inc 7) Number of Shares 1,166,601 2,699,000 1,584,172 1,544,287 1,502,758 1,500,180 Percent 1) 2.3% Number of voting rights – 5.4% 2,699,000 3.2% 825,936 3.1% 1,544,287 3.0% 1,502,758 3.0% 1,557,794 Percent 1) – 5.4% 1.7% 3.1% 3.0% 3.1% VOTING RIGHTS ASMI in % 5 2 3 3 3 1 Calculated on the basis of 49,797,394 issued common shares as of January 31, 2021, and without regard to options. 2 On January 31, 2021, ASMI held 1,166,601 ordinary shares in treasury. Treasury shares held by the company cannot 84 Tokyo Electron Ltd. Acadian Asset Management LLC. Norges Bank Goldman Sachs Group Inc. BlackRock, Inc. Rest of shareholders KEY FIGURES PER SHARE The table below shows the key figures per share and other relevant share data for the last three years. be voted on. 3 All of the 2,699,000 shares capital interest and voting rights of Tokyo Electron Ltd. are held directly actual. Based on the notification filed with the AFM on July 1, 2013. 4 All of the 1,584,172 shares capital interest and 825,936 voting rights of Acadian Asset Management LLC. are held directly actual. Based on the notification filed with the AFM on August 20, 2019. 5 All of the 1,544,287 shares capital interest and voting rights of Norges Bank are held directly actual. Based on the notification filed with the AFM on December 11, 2020. 6 Of Goldman Sachs Group, Inc.’s capital interest and voting rights 517,236 shares are held indirectly potential and 985,522 shares are held indirectly actual. Based on the notification filed with the AFM on January 28, 2021. 7 Of BlackRock, Inc.’s capital interest 1,493,750 shares are held indirectly actual and 6,430 shares are held indirectly potential. Of the voting rights, 1,551,364 are held indirectly actual and 6,430 indirectly potential. Based on the notification filed with the AFM on December 22, 2020. A 'beneficial owner' of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares (i) voting power which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power which includes the power to dispose, or to direct the disposition, of such security. In addition, a person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership of such security, as defined above, within 60 days, including but not limited to any right to acquire: (i) through the exercise of any option, warrant or right; (ii) through the conversion of a (EUR, except number of shares) Net earnings per share, diluted Normalized net earnings per share, diluted Dividend per share paid over Shareholders’ equity per share Issued shares year-end (thousand) Outstanding shares year-end (thousand) Average outstanding shares basic (thousand) Average outstanding shares diluted (thousand) security; or (iii) pursuant to the power to revoke, or pursuant to the automatic termination of, a trust, Closing share price Euronext Amsterdam discretionary account, or similar arrangement. Year-end High Low Market capitalization year-end (EUR million) 2018 2.96 3.19 0.80 33.28 56,297 49,319 52,432 53,110 36.20 62.62 33.90 1,785 2019 6.58 6.86 2.00 37.22 51,297 48,866 49,418 49,999 100.15 104.40 33.96 4,894 2020 5.78 6.04 3.00 38.07 49,797 48,715 48,907 49,359 179.95 179.95 59.18 8,766 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE50 OPEN DIALOG AND TIMELY INFORMATION We maintain an open dialog with our shareholders and investors. We provide the financial markets with accurate and timely information through, among others, press releases, our annual reports, quarterly earnings calls and webcasts, and investor meetings. As COVID-19 led to increased uncertainty about the broader economic outlook in 2020, we continued to keep the markets up to date through our press releases and maintained our active programs to meet with investors via various online platforms such as virtual investor conferences & roadshows. In 2020, we also held an increasing number of investor meetings focused on ESG-related topics. Investors can find up-to-date and comprehensive information about the company and our shares on our website. VICTOR BAREÑO Almere, the Netherlands T: +31 88 100 8500 E: victor.bareno@asm.com FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCESociety and planet Society and planet SOCIETY AND PLANET 51 Understanding our impact, increasing our value. We are aware of the impact we have as a company, and how this effects our value and society. We focus on key areas, including reducing greenhouse gases and water consumption, improving our recycling and reuse of raw materials, and focusing on responsibly designed and operated facilities. ENVIRONMENTAL FOOTPRINT: 2016 TO 2020 ASMI’s environmental policy is a key element of our corporate responsibility policy. It establishes our The scope of these objectives was our primary Engineering and Manufacturing sites in the Netherlands, Japan, South Korea, Singapore, and the US and is managed through our environmental commitment to reduce our environmental impact by setting the right objectives and continuously management system (EMS), which is ISO 14001 certified. This certification provides the assurance improving our management systems. We also recognize the inherent value of a circular economic to our stakeholders that we are committed to our goals. Our environmental targets are in support of framework for product stewardship. Through our system improvements, refurbishments, and UN Sustainable Development Goals (SDGs) 12 – Responsible Consumption and Production, and upgrades to extend the useful working life of the equipment, these areas are all high-value elements 13 – Climate Change. in the waste elimination hierarchy. In 2016, we initiated a five-year target cycle for reducing our environmental footprint in key areas annual assessment by the Carbon Disclosure Project (CDP), a non-profit that are applicable to our business and aligned with industry standards, including the Sustainability organization that runs the world’s leading environmental disclosure platform. Accounting Standards Board (SASB) standard for the semiconductor industry. We have reported through CDP since 2013 and our scores have improved as We transparently disclose our environmental impact by participating in the Our environmental targets for 2016-2020 were: ›› Reduce greenhouse gas emissions (Scope 1 and 2) by 5% per euro of research and development (R&D) investment below 2015 levels by 2020; we strive for greater transparency in our disclosures. In 2020, we disclosed information to CDP on ASMI’s global renewable energy purchases at key sites around the world as well as reporting on climate change and water security. ›› Reduce water withdrawn by 45% (up from initial target of 10%) per euro of R&D investment below With reference to science-based targets, we normalized our greenhouse gas (GHG) emission 2015 levels by 2020; ›› Divert more than 90% of all waste from landfill through recycle or reuse by 2020; and ›› All new construction projects to exceed the energy efficiency standards of local jurisdictions. reduction and our water consumption reduction objectives to the intensity of our research and development (R&D) spend. Our R&D operations are responsible for the majority of our utility consumption through equipment installations and supporting facility infrastructure, accounting for more than 81% of electrical consumption and almost 76% of water consumption. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 52 Our environmental targets and results for 2016-2020 are summarized in the table below. More detailed results may be found in the Non-financial summary tab. Objective Results Discussion Reduce greenhouse gas emissions by 5% per euro of research and development (R&D) investment below 2015 levels Achieved with 17.9% reduction Approximately 95% of our GHG emissions are a result of electrical consumption, and 81% of our electrical consumption is a result of R&D activities, and thus defines our intensity measurement. As our R&D activities have increased dramatically the past 5 years, our associated GHG emissions have not. Our efforts to maximize electrical efficiencies at our R&D sites, including cleanroom supporting infrastructure, contributed to this progress. Reduce water withdrawn by 45% (up from initial target of 10%) per euro of R&D investment below 2015 levels Achieved with 62.5% reduction In 2016, we identified that our Phoenix site accounted for approximately 84% of our absolute global water consumption, and was in a high risk area for water security. Water reuse to minimize effluents was not utilized like our other sites, and we built a wastewater reuse system that brought the Phoenix consumption rate down to 50% of our global absolute consumption. This not only reduced water consumption, but started reducing the overall water effluent to the treatment plant, placing a lower burden on utilities. We have received two recognition awards since implementing the reuse plant in 2018. Divert more than 90% of all waste from landfill through recycle or reuse Fell short Achieved 84% diversion Our Singapore plant accounts for approximately 70% of our global solid waste generated, and a majority of that is a result of production related packaging. Our packaging reuse program targeted a dramatic reduction in waste to landfill, and while we fell short of the 90% goal, we did increase our waste diversion by 29%. In Q4 2020, we came very close to the overall objective, achieving our highest quarterly diversion rate ever with 88% diversion. Our packaging reuse program will only continue to grow in the next few years. All new construction projects to exceed the energy efficiency standards of local jurisdictions Achieved Through the 5-year cycle, ASMI completed 2 significant construction projects in South Korea (2018) and Singapore (2020). In 2020, after sustaining impacts to the construction schedule due to the COVID-19 pandemic, we completed construction of, and commenced operations in, a new facility built to the BCA Green Mark Gold Plus certification standard in Singapore. The design and construction project exceeded the energy efficiency requirements. ENERGY AND EMISSIONS As approximately 95% of our Scope 1 and 2 emissions are attributable to electrical energy in our R&D labs globally, generates effluents that must be treated or removed from releasing to the air. This includes non-GHG emissions such as particulates or volatiles. ASMI has stringent air quality consumption, further conservation will not be enough. We will need to reduce the related emissions permits and criteria that we meet, and are continuously driving initiatives to improve our performance. through a combination of conservation and a greater use of renewable energy. In 2020, we engaged We closely monitor emissions and efficiencies of the air abatement systems, which remove GHG with leading external parties to find the right partner to further progress our GHG objectives, including and non-GHG effluents from gas exhaust. We have engaged experts in air abatement technology mapping and beginning to address Scope 3 emissions. to not only specify the best equipment for our new processes, but in one case opportunities for improvement were identified for approximately 10 abatement systems at one of our sites, further In 2020, approximately 9.4% of our electrical consumption was from renewable resources, which is reducing GHG and non-GHG emissions from existing processes. equivalent to approximately 16% of the available renewables on the market. We recently switched to using only renewable electricity at our corporate headquarters in Almere, the Netherlands, and are developing plans to increase the use of renewable energy at other locations. We will continue to WATER AND EFFLUENTS Water is a valuable resource, both for clean drinking water and for industry, and its availability is search for other ways to use renewable resources. impacted not only by increased global consumption but also by climate change. We must conserve and protect the security of water and for this reason ASMI strives to minimize its water consumption Our electrical sourcing accounts for the majority of air emissions associated with our operations and discharge wastewater responsibly so as not to contaminate water sources. Our corporate through GHG emissions. Consistent with our environmental policy, we also place significant focus on responsibility policy sets the commitment to minimize environmental impacts and strive toward ZERO improving all emissions associated with our operations. ASMI equipment, which is installed and used HARM!, which includes water conservation and controlling discharges and effluents. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE53 ASMI relies on good quality water for key functions in our equipment, both for cooling capacity as A key measure in this achievement was the installation of a water reuse system in Phoenix in 2018, well as for air emission abatement equipment, to predominantly support our R&D labs and activities. which maximizes the reuse of wastewater in our abatement systems. The ASM America site is The air abatement systems use water as a scrubbing mechanism to remove toxic, corrosive, and located in the Sonoran Desert, where temperatures average over 38°C in the summer and water is other process gases from being emitted to the air. This reduces the air emissions from our sites, both a scarce resource. In the two years since the system was implemented, ASM America was able to for greenhouse gases from process gases with warming potentials and for non-GHG air emissions conserve 58 million gallons of water. of other pollutants. The wastewater from the abatement systems is then managed according to local wastewater effluent management methods, including the proper characterization, treatment, control, and disposal. This method of control is adopted across the industry and protects the air while providing a path for proper wastewater effluent and related chemical wastes to be safely managed. There were no legal discharge violations for ASMI operations in 2020. ASMI has conducted water security risk assessments and reports publicly through the CDP water security disclosure report. According to the WRI aqueduct risk assessment, the baseline water stress risk rankings for the following regions in which ASMI has engineering and manufacturing operations are: Location Key Operations WRI Water Stress Ranking Almere, The Netherlands Special Projects Manufacturing Singapore Manufacturing Dongtan, South Korea Engineering, Manufacturing Tama, Japan Engineering Phoenix, Arizona, USA Engineering Low Low Medium-high Medium-high Extremely High EXTERNAL RECOGNITION ASMI’s water conservation efforts were recognized externally in early 2020 with the SRP Champions of Outstanding Water Efficiency Award and a highly regarded SEAL Environmental Initiative Award. WASTE MANAGEMENT AND RESOURCE USE We recognize our operations are dependent on natural capital and resources, and have assessed our consumption to prioritize our response. A majority of our resources use and solid waste is associated with the production of our products, and for that reason we have prioritized our focus on those operations consistent with our corporate responsibility policy. “ We are committed to conducting business, both in our own operations and throughout our supply chain to protect our employees, customers, communities, shareholders and the environment. Based on a risk assessment from this data, as well as where ASMI predominantly consumes water, in recent years we have prioritized our Phoenix facility for water reduction. As a result, over the We are committed to an innovative framework during the design, manufacture, distribution and support of our products that meets or exceeds all applicable past three years we have reduced our global water withdrawals by 30% at the sites included in the regulations in order to minimize environmental impact.” 2016-2020 environmental objective boundary. This reduction not only reduces the amount of water consumed, but because a large percentage of the water is used in the abatement and treatment of Following on from our successful 2018 pilot to reuse packaging materials with key suppliers, we our R&D processes, it reduces the overall effluent that must be treated and further reduces the load systematically grew the program to include 5 product platforms in 2020. Additionally, in 2020 we on utilities and treatment plants. At our Singapore manufacturing plant, we seek to maximize our successfully piloted the reuse of packaging materials with selected customers. This resulted in use of the processed wastewater, NEWater, for our operations, accounting for approximately 56% avoiding more than 41 metric tons of packaging waste in 2020. We continue to extend the program of water use in 2020. By maximizing this reclaimed wastewater from the Singapore utilities, we are to additional products, suppliers, and customers. Through 2020 we made steady progress toward contributing to and helping Singapore maintain its current Low WRI water stress ranking. our Landfill Diversion objectives, and although annually our achievement was 84%, throughout the year we were steadily progressing upward toward the objective of 90% through the year. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEOur R&D activities principally involve substances in gaseous form, and the reaction effluents of the deposition process are treated with leading-edge abatement to minimize the amount and constituents of resultant wastewater and air emissions. We ensure that our wastewater and air emissions are fully permitted and compliant with all local regulations. The amount of hazardous waste otherwise requiring disposal is minimal and managed responsibly and within compliance of all regulations and requirements. For example, our largest R&D site in Phoenix is a Very Small Quantity Generator (VSQG) under US waste management regulations, which indicates volumes generated are low enough that reporting and storage conditions required of small and large quantity generators are not applicable, nonetheless we maintain safe and secure storage of our wastes consistent with industry best practices. Additionally, our manufacturing operations involve negligible levels of chemical waste, which is properly managed per local regulatory requirements where they are generated. In 2020, there were no incidents of non-compliance with regard to waste management. RESPONSIBLE CONSTRUCTION We believe in our responsible growth as an organization and commit to aligning the construction of new facilities with a nationally recognized green building standards. In 2020, we opened a new facility in the Woodlands area of Singapore which was constructed to the BCA Gold Plus Standard. This is a building energy and environmental design standard, and is above the basic requirements of design currently required in Singapore. REUSE OF SHIPPING PACKAGING 54 LOOKING AHEAD: 2021 ONWARD There is considerable change in the world around us, in our stakeholder expectations, and in our own development. The ESG and our stakeholder landscapes and expectations have also changed and increased considerably in topics such as: ›› Climate change; ›› Resource conservation; ›› Human and social capitals like diversity and inclusion; ›› The expectations of our employees; and ›› Reporting and transparency. 41 METRIC TONS Reuse of shipping packaging helped avoid 41 metric tons of combined packaging waste in 2020 We have the ambition to further our progress and impact in the different geographies we operate. We aim to make meaningful contributions to our industry, to the communities where we operate, and to preserving our planet. For the forthcoming years, we will focus on broadening our sustainability and ESG goals to include: ›› Strengthening our connection to external stakeholders; ›› Growing our contributions to the safety of our industry; ›› Inspiring workplace of inclusion and diversity; ›› Offering our employees the opportunity to excel and to maximize their potential; ›› Contributing our share of progress to global society’s environmental challenges; FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE55 ›› Developing our climate resilience; ›› Advancing responsible sourcing; ›› Ensuring ethical treatment of people in our supply chain; ›› Engaging our employees in all aspects of our plans; ›› Growing contributions to our communities and industry; and ›› Providing transparent and insightful ESG reporting. sites, and have already converted our Almere headquarter building to 100% use of renewable energy. We are looking to the future for our next set of environmental objectives as part of the climate strategy and working to strengthen their alignment with global initiatives such as the UN Sustainable Development Goals (SDGs), the Task Force on Climate-related Financial Disclosure (TCFD), the Sustainability Accounting Standards Board (SASB), and the Science Based Target Initiative (SBTI). We are seeking opportunities to help strengthen the renewable market, and will look for sources that support future sources of renewables. As we develop our strategies, we are including all of our CLIMATE CHANGE Climate change is a significant issue facing the world today. During 2020, we have started to define operations in scope. a climate adaptation risk and opportunity assessment, complemented with external expert support, to conduct a comprehensive review for our sector, regions where we do business, and our supply COMMUNITY Colleagues in China teamed up with an NGO to provide essential resources to a school in desperate chain to identify the priority issues and opportunities that require further attention. The focus is not need of help. only on the physical risks of climate change, such as extreme weather and rising sea levels, but also on climate-related risks (such as regulatory compliance, supply chain disruption). We are now in our Over 50 employees of the ASM China team took part in the charitable project that saw over 2,000 process of the following: books and broadcast equipment donated to a school in a small village in the Gansu province. 1. Map and understand our key sites and key suppliers’ exposure to the physical effects of climate change, regulatory and financial impact of shifting to a low-carbon economy; The project came to life following the success of several smaller charitable events and the desire to 2. Identify the climate risks and opportunities related to various economic, regulatory, and climate contribute even further. The team collaborated with a local NGO to help children at Quanshui primary change scenarios; school in Baihe Town. 3. Develop methods to assess potential strategic, operational, and financial impacts; and 4. Identify and implement action plans to address these risks and opportunities. The school is made up of eight classes of children ‘left behind’ as their parents are migrant workers in big cities. Resources in the village are tight, despite several of the students receiving grants from the The scope of the assessment is ASM key sites and critical or strategic suppliers. Understanding government for their outstanding academic performance. Climate Adaptation Risk and Opportunities for our operations and supply chain are key to achieving After working with the headmaster, the following urgent needs were identified: climate resilience. 1. The books in the school library were decades old, in poor condition and outdated. They urgently We recognize that our climate strategy must also contribute to solving the climate change crisis, and 2. The school broadcast equipment had been in disrepair for many years and needed to be not only mitigate the risks and impacts to our operations, and we have taken steps in recent years, replaced, as the equipment is critical to learning. including the following to contribute to the impact on it. ›› GHG reductions and energy efficiency in our operations, such as replacing aging equipment; ›› Reduced energy consumption of our tools helping our customer to reduce their GHG emissions; and Over a month-long period, books were donated and bookshelves were purchased to create reading corners for each classroom, and monetary donations were collected. The books were delivered and the broadcast equipment was installed just before the end of 2020. In addition, the ASM China team ›› Water reduction in Phoenix, one of our locations most exposed to the effects of climate change. raised an extra RMB20,000 ($3,000) in funds for the school. needed updating; and With this view, we are developing our climate strategy to include transitioning to renewable energy. We In 2020, we donated to Terre des Hommes Netherlands, a non-profit organization that fights child have mapped the renewable electrical options available to us at our manufacturing and engineering exploitation. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCESuppliers Suppliers SUPPLIERS The complexity and technology needs of ASMI’s products continues to increase. Yet the time to market to introduce these products to our customers is continually shrinking. Engaging, developing and growing a robust supply chain is critical to compete in this challenging market. ASMI continues to drive a global, high-quality, technology-leading supply chain that can support business needs from New Product Introduction (NPI) through High Volume Manufacturing (HVM) and the Aftermarket. The focus on continuous improvement programs, new tools to improve processes, and adherence to changing policies and regulations are all part of how ASMI engages suppliers to enable it’s success. 56 GLOBAL SUPPLY CHAIN ASMI’s goal is to build a global, world-class supply chain that enables our company to produce ASMI is migrating from a supply chain that was geographically clustered around our global engineering centers to a more centralized supplier base that can support our technology, capacity the most technically advanced equipment in the market and provide our customers with the most and capability needs. This means driving our spend to suppliers who are in the right regions and technologically advanced products, services, and global support network, at a competitive cost of countries to support our cost and quality goals, are close to manufacturing centers, and can grow to ownership. keep pace with increasing demand. ASMI production activities focus on final assembly and hence rely on hundreds of suppliers across Part of our supply chain management strategy also includes consolidating our supply base so the globe to support the parts and services needed to produce our high-tech products. Having we have fewer suppliers to manage while building closer partnerships with targeted suppliers. a healthy supply chain is key to ensuring that ASMI can continue to challenge technical barriers and This strategy also supports our other goals of driving commonality of materials and parts across deliver high-quality products on time. our product groups, which will give us the ability to scale more easily, create leverage with suppliers, and create more flexibility by stocking fewer part numbers, as we continue to grow. We are moving With design centers and manufacturing sites spread over six countries and on three continents, it is to common metal materials for common parts, such as showerheads and chambers. Having fewer important to have suppliers who can support engineering locally as well as provide HVM parts and suppliers will also allow us to more easily share technology needs and get suppliers to engage services for manufacturing and spares. We focus on continuing to partner with the right suppliers who up-front in design for manufacturability opportunities. have the scope to meet our full range of support, capacity and technical needs. This includes using our global footprint to source based on best cost, quality and capacity to meet our growing demand. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCETHE DIVERSE NATURE AND COMPLEXITY OF ASMI’S SUPPLY CHAIN SYNERGIS ALD We are making an effort to increase our responsible business commitment with critical/strategic suppliers that acknowledge the RBA Code of Conduct and conduct their business in accordance with those principles. For the Synergis product we achieved a 94% spend percentage with those suppliers. 57 SYNERGIS part suppliers 113 Percent of supply chain spend with RBA Code of Conduct suppliers 94% Total number of RBA Code of Conduct suppliers 48 SYNERGIS ALD 600 62% Number of parts sourced from RBA Code of Conduct suppliers 14 SYNERGIS part countries of origin FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCERESPONSIBLE SUPPLY CHAIN We hold our suppliers to the same high standard as ourselves, by requiring that they follow and comply with the Responsible Business Alliance’s (RBA) Code of Conduct. Critical and strategic suppliers are asked to conduct a self-assurance process and set objectives for RBA Code acknowledgment, self-assessment, auditing, and corrective action processes that are consistent with RBA requirements. In 2020, 79% of suppliers completed the RBA Self-assessment questionnaire (RBA SAQ). The RBA Online platform has strict criteria for scoring questionnaires for supplier risk level. Suppliers that complete the RBA SAQ and self-assess as high risk will be audited to identify and resolve issues. Our critical and strategic supplier requirements include their commitment to: ›› The RBA Code of Conduct; ›› ASMI’s Corporate Responsibility policy; ›› ASMI’s Environmental Health and Safety policy; ›› ASMI’s Code of Business Conduct; ›› ASMI’s Intellectual Property policies; ›› Hazardous materials identification regulations; ›› Conflict materials identification and disclosure; and ›› Global trade compliance and export controls. 58 These requirements are outlined on our public supplier management web page: www.asm.com/about/supplier-management. SUPPLIER MANAGEMENT FOR THE LONG TERM We continue to pay close attention to critical and strategic supplier performance and adherence to quality-, environmental-, and RBA standards. We have increased the frequency of supplier audits, grown the number of supplier quarterly reviews, and revamped our supplier scorecards. Additionally, we have expanded our formal commodity management process by part families and added cross-functional participation from engineering and supplier development to ensure that the strategies put forth support the needs of the business units beyond the short term. We are continuing to strengthen our long-term relationships we have and are engaging industry leaders to further enable our growth trajectory. It is clear we can go faster together by partnering with the best suppliers in a given commodity or technology and have been able to accelerate our development through these supplier engagements. We also go beyond the RBA Code to partner with customers to map our contract manufacturer labor In 2020, ASMI held a virtual Supplier Day on December 9, 2020. We invited 70 suppliers from across sourcing process to prevent forced and bonded labor (FLBL). In 2020, we updated supplier maps the globe to join us for this event. We hold the Supplier Day annually with our key suppliers and it to include COVID-19 impacts on the migrant labor sourcing practices of our contract manufacturers. is an opportunity for us to share ASMI’s business strategies and priorities. This includes a focus on We completed mapping of key strategic suppliers’ foreign migrant workforce, including development key areas such as technology, quality expectations and growth that are important for suppliers to of action plans where risks may still exist. understand and support for ASMI to be successful. Through this event, suppliers were able to hear from our leadership team including the CEO, CVP of Operations, GM for PEALD and CVP of Spares SUPPLIER EXPECTATIONS We communicate our expectations and measure conformance to our expectations with our critical & services to foster better relationships between companies. Three supplier awards were presented during the day to recognize the suppliers’ high performance standards and outstanding support and strategic suppliers. This approach manages our supply chain risks by focusing on the areas of ASMI. where a majority of our materials come from and where spending occurs. Self-assessment questionnaire (SAQ)PHASE 2PHASE 1RiskassessmentPHASE 3Auditing/corrective actionsCRITICAL SUPPLIER CR STRATEGYRBACODE OF CONDUCTFINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE59 RISK ASSESSMENT We operate globally and have partnerships with suppliers from more than 20 countries across Asia, The quality and supply chain teams continuously evaluate all suppliers and select partners who demonstrate the right combination of technical ability and commercial commitment for our common North America, and Europe. We place high expectations on our supply chain when it comes to success. Technical capability assessments screen suppliers prior to selection, and process control operational flexibility and responsiveness, and together we must be prepared to respond quickly to a audits ensure that products are delivered to our requirements. ASMI has continued remotely auditing wide range of unplanned events. This requires working proactively with our supply chain partners to all of our supply base until COVID-19 restrictions allow on-site auditing to resume. ensure they are able to assess and manage risks. Our supply chain risk management process consists of a combination of critical and strategic data reviews culminating in corporate scorecard feedback. The PCS training ensures that supplier supplier risk assessments, supplier self-assessments, RBA audits, and training and capability- manufacturing processes are stable and documented. PCS also includes the standardization of building activities to help our supply chain be both resilient and responsible. In that process, we inspection methods and deployment of fixtures to guarantee global consistency. For key technology consider significant changes, challenges (such as COVID-19) or trends that are impacting our global suppliers delivering process critical parts, ASMI trains suppliers in statistical process control (SPC) to supply chain. Consideration is also given to other suppliers that we are actively developing or that reduce part-to-part variation. Once supplier manufacturing processes are ‘frozen’, suppliers review have key capabilities. SPC data in real time against established control limits to ensure that no excursions escape to our Suppliers are trained in process control systems (PCS) and have periodic quality performance and In addition to the aforementioned RBA Code and SAQ compliance, we actively engage our critical customers. and strategic suppliers to drive: ›› Business continuity planning; ›› Financial risk assessment; and ›› Strategic business reviews. In 2020, we increased the number of suppliers on our ASCENT program to further improve our supplier forecasting, collaboration, purchase order management and delivery commits. This is a big step forward for us in further automating and digitizing our supplier communication and setting in place the tools and access to real-time data to allow us to dramatically scale our business without significantly increasing resources while ensuring more access to real-time data. SUPPLIER DEVELOPMENT AND PERFORMANCE MANAGEMENT As geometries continue to shrink, the emphasis on key technology suppliers and process control ASMI will continue to build on the platform and will be digitizing more of our supplier communications becomes even greater. ASMI works cross-functionally to develop future product requirement and interactions. Things we will soon start adding to the ASCENT program include: first article roadmaps and develop supplier technical capabilities proactively. The focus on quality is to ensure inspection reports; statistical process control (SPC) reporting; secondary process controls; inventory that wafer processing environments satisfy our customers’ needs for greater process control, which sharing and forecast improvements. leads to higher yield rates. The operations engineering team continues to grow as a reflection of ASMI’s investment and (COVID-19 impact), make suppliers more accountable for quality and delivery performance, PCS commitment to total quality. The supplier technology team has added subject matter experts (SMEs) alignment, and ensure compliance to safety, environmental, RBA and other compliance items. The to define roadmaps and develop suppliers in thermal, quartz, ceramic and other key technology areas. scorecards also now account for long-term commercial and capacity commitments from suppliers. The supplier development and supplier quality engineering teams also continue to expand globally We have also segmented the scorecards by part families and are using the scoring to promote or near supplier and customer sites in order to control manufacturing processes, resolve issues quickly demote suppliers within our current segmentation and framework. In 2020, we also revamped and revised our supplier scorecard process to increase BCP visibility and communicate results. All three teams work with our engineering, manufacturing engineering and NPI teams to ensure that quality first mindset is designed into our products at every phase. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE60 A.S.C.E.N.T. ASMI SUPPLY CHAIN ENABLEMENT & TRANSFORMATION SUPPLY CHAIN SPEND BY REGION 4% EUROPE, MIDDLE EAST, AFRICA 21% NORTH AMERICA Automating and digitizing our supplier communication Develop tools and access to real-time data to dramatically scale our business Functionalities: Forecasting Collaboration Purchase order management On-time delivery First Article Inspection reports Statistical Process Control (SPC) reporting Secondary Process controls Inventory sharing and forecast improvements 75% ASIA PACIFIC BCP IN ACTION With the global pandemic affecting all countries where ASMI and its suppliers do business, 2020 was a time for ASMI to put its Business Continuity Plans (BCP) into action. Through strong, up- front planning and supplier engagement, we were able to absorb government-imposed restrictions due to COVID-19 in relatively good shape. While some supply chain delays were felt, especially from suppliers in countries which took shut down measures, overall ASMI was still able to meet its commitments to its customers. The ability to overcome this global phenomenon was largely due to our close relationship with key suppliers, dual sourcing capabilities, and strong understanding of potential risk and gaps that would put our tools at risk. Additionally, ASMI benefited from strong processes such as supplier risk monitoring, BCP tracking and executive alignment with suppliers. Constant reviews of country and supplier impacts for workers, continual review of priorities and supplier capabilities, and our focus on developing new avenues to meet our supply needs allowed us to keep up with business needs. The global pandemic also revealed some deeper levels of risk management to historical BCP. ASMI reached deep into the supply chain to uncover risk areas for even the most standard items and processes to ensure continuity of supply and put measures in place to secure – or mitigate – New additions these risks. These learnings on improving supplier risk management are included in our updated processes that govern supplier management and monitoring. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE61 CONFLICT MINERALS AND HUMAN RIGHTS Our programs focus on communicating our policy, training and surveying our critical suppliers, and collecting supply chain sourcing information on the sources of tin, tantalum, tungsten and gold RESPONSIBLE MINERALS SOURCING We require all of our suppliers to source tin, tantalum, tungsten and gold (3TGs) responsibly, and to (3TG) using the industry-standard RMI template, known as the Conflict Minerals Reporting Template (CMRT). We are looking for opportunities to apply responsible sourcing practices to other materials use certified conflict-free smelters using recognized certification organizations. Our goal is to trace that are critical to the semiconductor industry. We actively engage with critical suppliers and conduct 3TG sourcing by all of our critical and strategic suppliers, ensure they are using only certified conflict- due diligence based on OECD guidance. free smelters, and confirm that our sourcing funds do not finance conflict in the covered countries. Through active participation with RMI and the Responsible Labor Initiative (RLI), we monitor After we complete our due diligence survey, we carry out detailed data verification and analysis with developments on human rights and support programs to ensure the ethical treatment of labor. identified smelters, which our suppliers source from. This process establishes traceability to the smelters and confirms that the smelters identified are on the validated conflict-free smelters (CFS) ASMI was an early signatory of the Women’s Rights and Mining statement on gender-responsive due list published by the RMI. This helps us ensure that the products and components we source are diligence and human rights of women in mineral supply chains (womenandmining.org). DRC mineral conflict-free. Conflict minerals are those minerals mined in the Democratic Republic of Congo (DRC) or adjoining countries. Profits from the sale of these minerals may directly or indirectly benefit those involved in rebel conflicts and human rights violations. These minerals and the metals PLANNING FOR A BRIGHT FUTURE In 2021, ASMI will continue to invest in its people, tools, and supplier partnerships. This continuous created from them – tin, tantalum, tungsten, and gold – can make their way into the supply chains of investment is needed to meet not only our product needs, but also customer expectations. products used around the world, including the semiconductor industry. As a responsible member of Having parts within tolerance is no longer good enough. We need to work closely with suppliers the global community, we have a strong commitment to preventing human rights violations. to understand variance control within those tolerances and its impact on product performance. OUR APPROACH Our conflict minerals policy communicates our commitment to responsible sourcing. To enforce this Our focus will be on expanding variation control, improving our global footprint, and providing policy, we developed, and have been executing, our supply chain Conflict Minerals due diligence additional supply chain tools to increase automation and visibility. We will also continue to add to process annually since 2014 (ASMI conflict minerals policy). our growing supplier-facing technical teams, further evolve our part family strategies, improve Automating this feedback through various hardware and software investments is part of that growth. our new product engagement with suppliers, and update the strategies needed to support We joined, and are participating in, the widely-recognized Responsible Minerals Initiative (RMI). after-market growth. The RMI brings together the electronics, automotive, and other industries to jointly improve conditions in the extractives industry (www.conflictfreesourcing.org). ASMI will also continue to drive key supplier partnerships and engage industry-leading suppliers to help us achieve our technical and product needs. We ensure we have the right capabilities and We will continue our active participation in, and contribution to, the RMI and our engagement with capacities to support our future growth plans, putting the right supply chain structure and planning in other relevant stakeholders. These include the European Parliament and other international non- place now to allow for smooth future ramps. And of course, we will ensure we have the right process governmental organizations (NGOs) through our engagement with CFSI. Current information on controls to meet increasing customer and industry demands. the due diligence process and our policy can be found on our website in the supply chain section under corporate responsibility (www.asm.com/about/corporate-responsibility/supply-chain). In 2021, the European Union will introduce a regulation establishing supply chain due diligence obligations for importers, based in the EU, of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEInterview with the CFO Interview with the CFO INTERVIEW WITH THE CFO Peter A.M. van Bommel Chief Financial Officer 62 In the following interview Chief Financial Officer Peter van Bommel discusses some of the key financial topics that impacted the company in 2020 and comments on the policy for the use of cash. “ SALES INCREASED TO A NEW RECORD LEVEL OF 1.3 BILLION EUROS.” WHAT HAS BEEN THE EFFECT OF COVID-19, HAS IT IMPACTED ASMI’S FINANCIAL RESULTS IN 2020? Our key priority has been and continues to be the health and safety of our employees. In terms of our operations, the most significant impact of COVID-19 for us was in the second quarter. The lockdown measures in particularly Malaysia and Singapore in that quarter impacted several of our suppliers and led to shortages and delays for certain parts. In addition, the border closure with Malaysia prevented some of our employees from coming to work in our facility in Singapore. Despite these challenges, our team and our suppliers delivered a fantastic job and we succeeded in meeting customer demands. Towards the end of the second quarter, supply chain and logistical conditions started to improve as lockdown measures were gradually lifted across the globe. In the third quarter, supply chain conditions had largely normalized again. The lockdown measures in Singapore also led to a delay in the construction work on our new manufacturing facility, which we completed in the fourth quarter of 2020. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE63 From a demand perspective, COVID-19 did not have a negative impact in 2020, as our customers SG&A expenses increased 6% in 2020. The increase was driven by higher variable expenses. In continued to invest in the most advanced node capacity. While global economic growth dropped addition, we made investments in specific organizational processes, to prepare our company for the sharply and specific parts such as industrial and automotive end markets were impacted, the overall next phase of growth. We will continue these investments in 2021. semiconductor market showed a healthy increase of 7% in 2020. This increase was supported by work-from-home and learn-from-home related demand in areas such as PCs, data centers and Our operating profit increased strongly by 49%, with the operating margin improving from 19.5% network infrastructure. to 24.6%. HOW WOULD YOU DESCRIBE ASMI’S FINANCIAL PERFORMANCE IN 2020? While COVID-19 turned 2020 into a year with many challenges for all of us, our company again delivered a solid performance last year. Revenue (exclusive the IP settlements in 2019) increased by 18% to a new record level of €1.3 billion. We benefited in 2020 from strong investments in the most advanced nodes in logic/foundry, which Financial results were also impacted by negative currency effects, €23 million negative in 2020 compared to zero in 2019. We hold a large part of our cash balances in US dollars and the translation effects are included in the financial results. “ DURING 2020 WE FURTHER STEPPED UP OUR EFFORTS IN ESG REPORTING.” remains the most important driver for ASMI. Our ALD product line again recorded strong double-digit During 2020 we further stepped up our efforts in ESG reporting. In this Annual Report we expanded growth and continued to account for more than half of equipment revenue. Of note was also the on the initiatives we have taken in this field, such as on the projects to reduce our water consumption strong increase of 29% in our spares & services revenue, driven by increases in our installed base and to improve the energy efficiency of our tools. Further improvements in our ESG reporting will and the first results of our expansion into new outcome-based services. remain an important focus in the coming years. Our revenue increased despite a negative impact from currency changes, especially the depreciation of the US dollar. The impact from negative currency changes, to a large extent the depreciation of the US dollar, impacted particularly the latter part of the year. In the fourth quarter it negatively impacted revenue by 5% year-on-year. As our currency exposure is fairly similar for revenue and expenses, the impact is limited to translation effects. “ WE INCREASED R&D SPENDING BY 14% IN 2020.” THE GROSS MARGIN HAS STRONGLY INCREASED IN THE LAST COUPLE OF YEARS – WHAT CAN BE EXPECTED FOR THE COMING YEARS? Our gross margins increased in 2020 from 42.6% to 47.0%. This increase was in part driven by an exceptionally strong revenue mix in Q2 and Q3, which boosted the margin in those quarters to 48.3% and 49.9%, respectively. In addition, the gross margin was also supported by effects of cost reduction programs and efficiency improvements. Since we started to guide the market on gross margins, we only deviated a couple of times from our structural targets. At the end of 2017 and early 2018, our margins dipped below 40% due to the effects of new product introductions, including the On the back of an improving margin gross profit increased 30%. Note that these comparisons with launch of our Intrepid epitaxy tool that period. the previous year exclude the €159 million one-off settlement proceeds that positively impacted our results in 2019. In 2020, as just explained, the margin exceeded our targets in the second and third quarters on the back of an unusually strong revenue mix. We continuously focus on our efficiency programs. In 2020, We increased R&D spending by 14% in 2020. We will continue to drive R&D spending as we grow for instance, we took further steps to increase the efficiency of our supply chain. This should gradually our company. Including IFRS effects (capitalization, amortization and impairment), reported R&D lead to a further improvement in our average gross margin. At the same time it is important to stress increased by 25%, and included higher impairment costs compared to 2019 and an increase in that the leverage in our gross margin is relatively limited. We have a largely outsourced business amortization. model. We only do the final assembly and testing in-house and that means our fixed costs only FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE64 represent a smaller part of the total cost of goods sold. For the first quarters of 2021, we indicated to €100 million program was 64% completed. With the publication of our fourth quarter results on expect a gross margin of above the mid-40’s percentage on the back of a positive mix. February 25, 2021, we announced the proposal of a dividend of €2.00 per share to be paid over CAN YOU COMMENT ON THE DEVELOPMENT IN THE CASH FLOW IN 2020? Free cash flow was again healthy at €119 million, even though lower compared to €206 million in 2019. Improvements in profitability were largely offset by higher working capital requirements, an increase in capital expenditures and higher investments in evaluation tools. We stepped up capex from €49 million to €95 million. Similar to 2019 a significant portion of spending was related to our 2020. This is a 33% increase compared to the regular dividend of €1.50 paid over 2019 (excluding the extraordinary dividend of €1.50 per share). PETER, YOU WILL BE RETIRING AT THE UPCOMING AGM – HOW DO YOU LOOK BACK AT 11 YEARS AS CFO AT ASM INTERNATIONAL? When I started as CFO at ASMI in 2010, the semiconductor industry was recovering from the slump new manufacturing facility in Singapore. This has been an important investment. The facility was caused by the financial crisis. In that period, ASMI had just embarked on a restructuring program to completed in the fourth quarter and will substantially increase our manufacturing capacity. In addition, recover from a series of losses. In the subsequent years, we implemented further efficiency programs, we increased our spending as part of the initiatives we announced earlier in the year to expand and which brought ASMI to structurally higher gross margins. At the same time, as the semiconductor upgrade our R&D labs. For 2021, we will maintain capex at a higher level due to the lab-related industry moved to more advanced nodes, we substantially expanded our position in the growing ALD investments in measurement equipment and our own tools to facilitate new product opportunities. market. In the years that followed, we solidified our leadership and achieved all of the top-10 capex The working capital in 2020 showed a lower inventory development, despite the higher activity level. healthy cash flow, freeing up funds to reinvest in the growth of our company. An important event has While inventories increased in the second quarter, as we built up inventory of raw materials in view of also been the reduction in our stake in ASMPT. We keep a minority stake for strategic reasons but the COVID-19-related supply chain risks, by the end of the year our inventory levels were normalized the reductions in 2013 and again in 2017 helped to bring attention to the strong improvements in our again. The increase was due in full to higher accounts receivables. We expect this to reverse in the Front-end operations, which in turn drove substantial increases in our company’s value. spenders as customers. The increase in profitability and improvement in working capital generated a first quarter of 2021. The underlying quality of accounts receivables remained healthy as illustrated by the low percentage of receivables that are overdue at the end of the year. “ OUR NEW FACILITY IN SINGAPORE WILL SUBSTANTIALLY INCREASE OUR MANUFACTURING CAPACITY.” “ ASMI HAS SOLID OPPORTUNITIES FOR FURTHER GROWTH AHEAD.” Over the years, we built a strong financial framework and implemented significant improvements in our risk management systems and processes. I’m pleased that ASMI in the last eleven years only had to issue a profit warning once, and that was a positive one, in January 2020 when our order intake substantially exceeded the guidance that we had provided to the market. I’m also proud of the WHAT IS ASMI’S POLICY FOR THE USE OF EXCESS CASH? Our policy has been very consistent. We used excess cash for the benefit of shareholders. Since strong team we have built at ASMI over the years. We will only succeed when we all act together as one team. ASMI has solid opportunities for further growth ahead. In the fast changing semiconductor 2010, we have returned more than €1.9 billion in different forms to the financial markets. In 2020, sector, it is key to constantly strengthen our capabilities and drive investments in innovation to we distributed €165 million to our shareholders. After an interim dividend payment of €50 million tap into the tremendous opportunities ahead of us. I’m confident that ASMI is well positioned for in November 2019, we paid out an additional €25 million as a normal dividend, as well as an continued healthy growth. extraordinary dividend of €74 million in 2020. Besides that, we spent €67 million on share buybacks. In June 2020, we started our seventh share buyback program, and at the end of 2020, this FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEGOVERNANCE 65 CORPORATE GOVERNANCE At ASMI, we believe good corporate governance is a vital part of our culture, behavior and management, and aligns with our core values. Our corporate governance is supported by a strong focus on integrity, transparency, and clear and timely communication. At the same time, we endeavor to ensure that our policies and procedures comply with both applicable Dutch corporate governance requirements, and the relevant laws. TRANSPARENT PROCESSES Our corporate governance framework supports our business and meets the needs of our stakeholders. We achieve this by setting up transparent processes and following internal policies and procedures that comply with applicable Dutch corporate governance requirements. Corporate governance CSR governance Risk management Management Board Supervisory Board Supervisory Board report Remuneration report External auditor Declarations 66 69 74 80 82 87 90 97 98 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCECorporate governance Corporate governance 66 CORPORATE GOVERNANCE Good corporate governance is about applying sound business practices. At ASMI we do business in an ethical and transparent manner. We achieve this by setting up transparent processes and following internal policies and procedures that enable us to operate in the best interests of all our stakeholders, and which comply with applicable Dutch corporate governance requirements. Corporate governance-related documents are available on our website (www.asm.com/investors/ corporate-governance/policies), including: ›› Supervisory Board profile; ›› Supervisory Board rules; ›› Management Board rules; ›› Audit Committee charter; ›› Nomination, Selection and Remuneration Committee charter; ›› Remuneration policy; ›› Code of Business Conduct; ›› Whistleblower policy; ›› Anti-fraud policy; and ›› Rules concerning insider trading. HIGH STANDARD OF CORPORATE GOVERNANCE ASMI aspires to high standards of corporate governance and ethics practices. Sound corporate governance is a key component of our culture, behavior, and management, and this is consistent with our core values. Our corporate governance is supported by a strong focus on integrity, transparency, and clear and timely communication. We endeavor to ensure that our policies and procedures comply with both applicable Dutch corporate governance requirements, and all relevant laws. Furthermore, our corporate governance structure supports our business and meets the needs of our stakeholders. CORPORATE GOVERNANCE FRAMEWORK The corporate governance framework describes how ASMI’s strategy, mission, vision and objectives are embedded across the organization. Our Code of Business Conduct (COBC) sets clear standards in different areas of business life. It’s purpose is to provide a clear, strong, and consistent culture of ethics that applies to all who work at ASMI. ASMI’s policies and regulatory framework guide how we work. Key components are our financial, IT, product safety, environment, health and safety (EHS), compliance, corporate social responsibility, and business continuity frameworks. These are supported by transparency and accountability through our monthly business review cycle, our internal control framework, and our performance management cycle. Our risk management approach enables us to identify and manage the strategic, operational, financial, and compliance risks to which ASMI is exposed. In addition, it helps us develop even more effective and efficient operations and it promotes reliable financial reporting and compliance with laws and regulations, increasing transparency and accountability. missionOBJECTIVESVISIONSTRATEGY MANAGEMENT BOARD, SUPERVISORY BOARD AND COMMITTEESVALUES AND ETHICSPOLICIES & REGULATORY FRAMEWORKTRANSPARENCY ANDACCOUNTABILITY RISK AND PERFORMANCEMANAGEMENTMONITORING AND INTERNALCONTROLCORPORATE GOVERNANCE FRAMEWORKCORPORATEGOVERNANCEmissionOBJECTIVESVISIONSTRATEGY MANAGEMENT BOARD, SUPERVISORY BOARD AND COMMITTEESVALUES AND ETHICSPOLICIES & REGULATORY FRAMEWORKTRANSPARENCY ANDACCOUNTABILITY RISK AND PERFORMANCEMANAGEMENTMONITORING AND INTERNALCONTROLCORPORATE GOVERNANCE FRAMEWORKCORPORATEGOVERNANCEFINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE67 COMPANY STRUCTURE ASMI is a publicly listed company established under Dutch law. The company’s management ASMI SHARES ASMI's common stock trades on the Euronext Amsterdam Stock Exchange (symbol: ASM) and and supervision structure is organized in a two-tier system, comprising a Management Board, ASMI is required to comply with the Dutch Corporate Governance Code (the Code). ASMI common composed of executive directors, and a Supervisory Board, composed of non-executive directors. shares, which are held in the United States as New York Registry Shares, are eligible for trading on The company’s Management Board has ultimate responsibility for the overall management of ASMI. the OTC Market. The Management Board is supervised and advised by an independent Supervisory Board. The Management Board and the Supervisory Board are accountable to ASMI’s shareholders. ANNUAL GENERAL MEETING OF SHAREHOLDERS ASMI shareholders exercise their rights through Annual and Extraordinary General Meetings of FRONT-END OPERATIONS We conduct our Front-end business through wholly-owned subsidiaries, the most significant being Shareholders. ASMI is required to convene an Annual General Meeting of Shareholders (AGM) in the Netherlands each year, no later than six months after the end of the company’s financial year. ASM Front-end Manufacturing Singapore Pte Ltd (FEMS), located in Singapore; ASM Europe BV Additional Extraordinary General Meetings of Shareholders may be convened at any time by the (ASM Europe), located in the Netherlands; ASM America Inc (ASM America), located in the United Supervisory Board or the Management Board. States; ASM Japan KK (ASM Japan), located in Japan; and ASM Korea Ltd (ASM Korea), located in South Korea. The location of our facilities allows us to interact closely with customers in the world’s The convocation date is legally set at 42 days prior to the date of the AGM. major geographical market segments: Europe, the United States, and Asia. BACK-END OPERATIONS Our investment in ASM Pacific Technology (ASMPT) represents the Back-end business. The Back-end operations are conducted through facilities in Hong Kong, the People's Republic of China, Singapore, Malaysia, and Germany. Our shareholding per December 31, 2020 in ASMPT is 25.07%. ORGANIZATION STRUCTURE ASM INTERNATIONAL N.V. Headquarters: Almere, the Netherlands The record date is legally set at 28 days prior to the date of the AGM. Those who are registered as shareholders at the record date are entitled to attend the meeting and to exercise other shareholder rights. Shareholders may be represented by written proxy. PUBLICATION IN ENGLISH The Annual Report, the Financial statements and other regulated information such as defined in the Dutch Act on Financial Supervision ('Wet op het financieel toezicht'), will solely be published in English on the company's website (www.asm.com). The draft minutes of the AGM are available on the company's website no later than three months after the meeting. Shareholders may provide their comments in the subsequent three months. Thereafter, the minutes are adopted and published on the company's website (www.asm.com/ investors/investor-library). FRONT-END Wafer processing BACK-END Assembly & Packaging / 25.07% ownership ASM Paciﬁc Technology Ltd FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE68 2020 AGM OF ASMI ASMI held its AGM on May 18, 2020. In relation to the COVID-19 outbreak, the health risks and the STICHTING CONTINUÏTEIT AGREEMENT ASMI is party to an agreement with Stichting Continuïteit ASM International (Stichting), pursuant measures and restrictions imposed by the Dutch government, and on the basis of the Temporary Act to which the Stichting is granted an option to acquire up to a number of our preferred shares COVID-19, the meeting was virtual. Shareholders were given the opportunity to vote through two corresponding with a total par value equal to 50% of the par value of our common shares issued and means: (i) by providing – as in the previous AGMs – a power of attorney with voting instructions prior outstanding at the date of the exercise of the option. The Stichting is a non-membership organization to the AGM; and (ii) by voting electronically during the meeting. The attendance rate was 66.05% organized under Dutch law. The objective of the Stichting is to serve the interests of the company. of the total issued share capital of ASMI as per the registration date. In line with the ASMI Boards For that objective, the Stichting may, among other things, acquire, own, and vote on preferred shares recommendations, the shareholders approved all resolutions as proposed to the AGM. The voting in order to maintain our independence and/or continuity and/or identity. results and the minutes of the AGM are published on the company's website (www.asm.com/ investors/investor-library). VOTING RIGHTS In the AGM, each ordinary share with a nominal value of €0.04 entitles the holder to cast one vote, each financing preferred share with a nominal value of €40.00 entitles the holder to cast one The members of the Board of the Stichting are: ›› Dick Bouma (Chairman), Retired Chairman of the Board Pels Rijcken & Droogleever Fortuijn; ›› Rob Ruijter, former Chairman of the Supervisory Board Delta Lloyd; and ›› Rinze Veenenga Kingma, President Archeus Consulting BV. thousand votes, and each preferred share with a nominal value of €40.00 entitles the holder to cast The purpose of the above mentioned option is to protect the independence, the continuity and one thousand votes. Treasury shares held by the company cannot be voted on. The authorized the identity of ASMI against influences that are contrary to the interests of ASMI, its enterprise and capital of the company amounts to 82,500,000 common shares of €0.04 par value, 88,500 preferred the enterprises of its subsidiaries and all stakeholders. shares of €40 par value and 6,000 financing preferred shares of €40 par value. Per December 31, 2020, there were 49,797,394 common shares issued and fully paid. No preferred nor financing preferred shares were issued on December 31, 2020. Financing preferred shares are designed to allow ASMI to finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares. PREFERRED SHARES Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a preferred or financing preferred shareholder must obtain the approval of the company's Supervisory Board to transfer shares. If the approval is denied, the Supervisory Board will provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller within two months after the approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, POWERS The powers of the AGM are defined in our Articles of Association. The main powers of the shareholders are to: ›› Appoint, suspend, and dismiss members of the Management Board and Supervisory Board; ›› Approve the financial statements; ›› Declare dividends; ›› Discharge the Management Board and Supervisory Board from responsibility for the performance of their respective duties for the previous financial year; ›› Appoint the external auditors; ›› Approve amendments to the Articles of Association; ›› Authorize the Management Board to issue shares and grant subscriptions for shares; ›› Withdraw preemptive rights of shareholders upon issuance of shares; ›› Authorize the Management Board to withdraw preemptive rights of shareholders upon issuance of at which time the approval expires. shares; and ›› Authorize the Management Board to repurchase or cancel outstanding shares. Preferred shares are entitled to a cumulative preferred dividend based on the amount paid-up on such shares. Financing preferred shares are entitled to a cumulative dividend based on the par value and share premium paid on such shares. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCECSR governance CSR governance CSR GOVERNANCE For over 50 years we have helped the industry create smaller and more powerful microchips. Our focus is on continuing to help our customers achieve critical technology and productivity improvements and productivity improvements responsibly, striving to reduce our impact on the environment, and positively contributing to society. ASMI MISSION CR VISION CR STRATEGY areas, which constitutes the majority of our non-financial reporting, is further supported by policies, MANAGE ALL ASPECTS OF OUR BUSINESS RESPONSIBLY Our corporate responsibility (CR) policy establishes our commitment to and expectations regarding health and safety, the environment, labor, ethics, and supply chain management. Each of these 69 Our mission is to provide our customers with the most advanced, cost-effective, and reliable products, services and global support network in the semi conductor industry, and beyond. As a truly global citizen, our vision of ZERO HARM! means we strive to reduce our impact on the environment, and positively contribute to society. ›› ›› ›› Continue our strong focus on R&D and innovation to create value for society through technology. Manage all aspects of our business responsibly to meet or exceed stakeholder expectations. Hold our critical suppliers to the same standards that we hold ourselves to. programs, systems, and metrics to ensure that we meet our long-term objectives. The full text of our corporate responsibility policy is available on our website: www.asm.com/about/corporate-responsibility. The Management Board is responsible for the CR policy and is supported by the Corporate Vice President of Operational Excellence, who has overall responsibility for corporate responsibility. The CR team is responsible for establishing ASMI’s goals implementation plans, and monitoring the progress of our internal targets. We adopted the Responsible Business Alliance (RBA) Code as our code of conduct in 2012, and made it our supply chain code of conduct in 2014. We became a member of the RBA in 2020, further strengthening our commitment to ethical and responsible business practices. The RBA Code evolves, typically every three years, to cover the most recent developments in responsible business practices, and follows multiple international expectations and standards, including: ›› The OECD Guidelines for Multinational Enterprises; ›› The Universal Declaration of Human Rights; and ›› The ILO International Labor Standards and International Organization for Standardization (ISO). In 2020, we co-proposed with three other companies to add Living Wage as an amendment to the RBA Code of Conduct. While the proposed amendment was not adopted in the latest version of the Code, we will continue to work with the RBA and its members on this and other important topics affecting ESG across the industry. All key ASMI sites participated in the RBA Self-Assessment Questionnaire (SAQ) and were assessed as low risk. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE70 MATERIALITY ASSESSMENT Our materiality assessment process provides us with the opportunity to continually evaluate if our R&D investment, which result in patents and intellectual property, are assets protected by legal strategies and objectives are aligned with our stakeholders and overall importance to our business. agreements and information security systems. Protecting these investments help drive company Our process follows the sustainability materiality steps and matrix based on the Global Reporting financial health through product development and customer confidence. Initiative’s (GRI) G4 sustainability reporting framework. Our materiality assessment process engages select customers, investors, all of our employees, and key non-governmental organizations (NGOs). All aspects in the materiality assessment are monitored and rated with respect to current and future risks and global trends. For example, we recognize that climate change, resource conservation, and The aspects in the top-right of the chart below are referred to as ‘primary aspects’ in this report, and water management are critical aspects of preserving natural capital. Their inclusion means that we are considered strategic to our business. continue to strive for improvements with a positive environmental impact. 8 1 10 5 11 9 17 7 2 15 13 24 6 3 18 20 19 4 21 S R E D L O H E K A T S R U O O T E C N A T R O P M I 12 22 14 16 23 ECONOMIC SOCIAL 1 Company financial health 2 Innovation and R&D investment 7 Stakeholder engagement 8 The Code of Business Conduct (COBC) 3 Business risk and business continuity (BCP) 4 Product life cycle management 5 Protecting and using intellectual property 6 Maximize shareholder ROI 9 Customer partnership 10 Attracting, developing and retaining talent 11 Employee health and safety 12 Diversity 13 Employee relations and workplace vitality 14 Community engagement 15 IT security 16 Corporate philanthropy ENVIRONMENTAL 17 Product safety and environmental compliance 18 Supplier responsibility and RBA code of compliance 19 Supplier EHS (supply chain responsibility) 20 Hazardous substance management 21 Climate change (energy use and GHG reduction) 22 Recycling/reuse 23 Water usage/recycling 24 Product services and support RELEVANT IMPACT TO OUR BUSINESS Note: Those aspects in the top-right segment of the chart are referred to as ‘primary aspects’ in this report. Our materiality and risk assessment processes have led us to focus on issues that we can influence the most. Below are the five United Nation's Sustainable Development Goals (SDGs) that we have selected: FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 71 The table below provides an overview of the primary aspects and their related strategies. Primary aspects (reference chapter) ECONOMIC 1 Company financial health (Financial statements) 2 Innovation and R&D investment (Breakthrough technologies) 5 Protecting and using intellectual property (Risk management) SOCIAL 8 The Code of Business Conduct (COBC) (Employees) 9 Customer partnership (Customer feedback) 10 Attracting, developing, and retaining talent (Employees) 11 Worker health and safety (Employees) 15 IT security (Risk management) ENVIRONMENTAL ENVIRONMENTAL 17 Product safety and environmental compliance Our strategies Setting strategies, steering and controls New in 2020 Result/stakeholders’ impact ›› Realize profitable, sustainable growth through innovation ›› Maintain technology leadership in deposition ›› Invest in and develop new applications to support our customers with increasing technology requirements ›› Leverage our strong technology expertise to enhance customer/stakeholder relationships ›› Create a company culture and environment for innovation and patent creation with strong IP protection programs ›› Management meetings ›› Key customer meetings ›› Market assessments ›› Business unit/operational reviews ›› Technical steering meetings ›› IP reviews ›› Enhanced R&D tollgate process ›› Additional R&D pipeline controls to increase focus and ensure completeness of information ›› Further strengthened internal protection of IP by strengthening need-to-know assignment and controls ›› Improved marketing to better understand customer investment plans and industry trends ›› Increased R&D effectiveness, efficiency, and controls ›› Further improved IP protection ›› Customers able to meet their technology and operational objectives ›› We use performance evaluation, succession planning, and employee learning and development programs ›› Establish leadership academy to ensure our leadership pipeline and stay competitive in labor markets ›› We partner closely with select top universities globally for technology development and recruitment ›› Conduct business according to ethical and professional ›› Global EHS and Product Safety Leader teams ›› Global employee engagement ›› Global Human Resources ›› Global IT ›› Ethics Committee standards ›› Implement COBC, CR policy, and commitment to RBA Code of Conduct ›› Secure IT systems ›› COVID-19 pandemic response management ›› Ensuring safety and business to ensure safety and business continuity ›› Updated COBC and training to facilitate implementation ›› Launched ‘the Power of an Open Mind’ program and employee engagement survey ›› Raised vigilance, employee awareness to, and protections from phishing campaigns relating to COVID-19 and work from home situations ›› Enhanced critical applications and cloud security postures, and further improved capability toward zero-day attacks continuity ›› Strengthen business ethics and the Code of Business Conduct compliance ›› Meaningful further development of Human Capital ›› Increased IT and Cyber security and IP protection ›› Reduce overall risk of exposure with focus on high risk activities and functions, including labs, manufacturing and service ›› Product Compliance Team and embed requirements in KPUs and PLC ›› Safety leadership collaborations ›› Safety Steering Committee ›› Global EHS and Product Safety Leaders ›› Global Facilities teams ›› Product Life Cycle (PLC) process and governance ›› Key Product Units (KPU) engineering ›› Safety Incident Reporting (SIR) feedback mechanism ›› Further R&D lab, manufacturing, and service safety improvements ›› Further focus on product environmental impact improvement ›› Strengthened product safety governance ›› 3rd party support for product content screening ›› Recognized by key customers as an industry safety leader ›› Customer environmental impact reduction ›› Improved first-time-right product development compliance to standards ›› Reduced occupational hazard exposure FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE72 STAKEHOLDER ENGAGEMENT AND INDUSTRY ESG COLLABORATIONS We regularly engage with appropriate stakeholders to improve and mature as a business. The table below provides examples of how we consider stakeholder input and feedback to improve our strategies, objectives, and ultimately our performance. KEY STAKEHOLDER ENGAGEMENT METHODS AND BENEFITS Shareholder Customers Investors Employees Engagement method Feedback Outcome Direct customer meetings and supplier development sessions (recurring). Systematic inputs to improve the structural maturity and operational performance of the company. Higher scores on supplier maturity scales with key customers. Strengthens our policies, procedures, and activities. Direct meetings (recurring). Periodic surveys of all employees: Safety and CR/ESG. Increasing importance of CR/ESG. Insight to their priorities. Informing our current and future priorities and plans. Safety survey of R&D lab, manufacturing, and service personnel validates progress and identifies opportunities to further improve. Further improved safety culture dialogue. Better visibility of safety improvement projects. Increased action to address ergonomic risks. NGOs Direct meetings. Insight to their future priorities. Initiated Climate Adaptation Risk and Opportunity Assessment. Informing our future focus areas. Industry consortium and partners R&D partnership with imec University of Helsinki partnership. Cooperation and bilateral research activities. Additional ALD, PEALD, epitaxy and CVD capability. CR/ESG survey engages employees to understand their interests and priorities. Employees stated CR/ESG very important to them, and want to further engage. We engage with sustainable development non-governmental organizations (NGO) such as the As part of our transparency commitment within the RBA supply chain, in 2020 we hosted a customer Carbon Disclosure Project (CDP), a non-profit organization that helps companies and cities audit at our South Korea manufacturing and R&D site to assess site compliance to the RBA Code of document and disclose their environmental impacts, and the VBDO (Dutch Association of Investors Conduct. We passed the audit with no major findings. for Sustainable Development). We have participated in the Transparency Benchmark, a bi-annual assessment held amongst the largest companies in the Netherlands and aims to measure their Additionally, we have completed multiple customer and other parties’ ESG questionnaires and shared transparency in reporting on corporate social responsibility. The benchmark is used by the Dutch our CDP results with our RBA and non-RBA customers. Ministry of Economic Affairs to assess and drive adoption of sustainable investment best practices. In addition, we engage with prominent ESG leaders on the most important issues to influence collaborate with other organizations to broaden our influence and impact, and support our ambitions positive change, starting in our own industry. We collaborate with our key customers in developing to be an industry leader in sustainability. We also became a member of BSR, a leading global nonprofit organization, to establish new ways to our ESG roadmap, including being a select member of the key customer Corporate Responsibility Leader program and identification and elimination of forced labor/bonded labor in our global supply chain. In the past year, we partnered with both customers and competitors through the SEMI MOD Work Group to encourage and grow diversity of supply for the semiconductor industry. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 73 TAX PRINCIPLE We view tax as an integrated part of doing business and that tax should follow business. The TAX STRATEGY A tax control framework is in place. As part of this, we continuously monitor our tax positions and tax respective taxes are determined and paid in the countries where the respective value is created, developments. As part of ASMI’s tax strategy, the tax department recommends a balanced approach in accordance with all relevant rules and regulations. Reference is made to Note 22 of this Annual in the interest of all stakeholders, while adhering to ASMI’s tax policy and complying with all relevant Report in which the total tax paid in the Netherlands and abroad is reflected. Tax is among the tax laws and regulations. ASMI’s tax department is responsible for tax management and is supervised elements that we take into account while doing business, including the locally available tax incentives by the Management Board via the CFO, who discusses the tax strategy with the Audit Committee and exemptions. We seek to establish and maintain an open and constructive relationship with tax of the Supervisory Board. In line with our tax principles, we do not use artificial tax structures authorities in the countries in which we operate. A tangible example thereof would be the bilateral solely aimed at tax avoidance, nor do we use tax havens or non-cooperative jurisdictions to avoid advance tax agreements (BAPA) that have been concluded with tax authorities in significant countries. transparency on our tax position. ASMI proactively engages with tax authorities, and tax exposures We do not use artificial tax structures aimed at tax avoidance. We aim to follow both the letter as well (if any) are contained and under control. For specific transactions and/or a specific approach, for as the spirit of the law. example with respect to the application of the at arm’s length principle in transfer pricing matters, we may seek upfront certainty by requesting a tax ruling from the respective tax authority, as we believe We apply the arm’s length principle to determine transfer prices in accordance with domestic and such certainty is valuable for our stakeholders, including the respective tax authority. international rules and standards, such as the OECD guidelines for multinational enterprises. Our disclosures are made in accordance with the relevant local and/or international regulations and guidance, based on all the relevant facts and circumstances. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCERisk management Risk management 74 RISK MANAGEMENT In 2020, COVID-19 pandemic has shown that not all risks can be foreseen, reiterating the importance of a robust and proactive approach to risk management. Our internal risk management and control framework enables identification of risks that may impact us and opportunities that could enable further growth, and the ability to take initiatives accordingly. In addition to instilling a proactive methodology to monitor and act on key risks, we are more clearly aligning our top-down risk assessment to our business processes to enhance our risk management intrinsically. MANAGEMENT BOARD FIRST LINE OF DEFENSE SECOND LINE OF DEFENSE THIRD LINE OF DEFENSE OWNERSHIP & MANAGEMENT RISK & CONTROL FUNCTIONS INDEPENDENT OBJECTIVE ASSURANCE BUSINESS & OPERATIONS MANAGEMENT OVERSIGHT FUNCTIONS INTERNAL AUDIT RISK MANAGEMENT APPROACH ASMI’s risk management approach is based on the Committee of Sponsoring Organizations’ (COSO) reference model and is an integral part of our Corporate Governance Framework which, describes how our strategy, mission, vision, and objectives are embedded across the organization. The objective of the risk management approach is to identify and manage the strategic, operational, financial, and compliance risks to which ASMI is exposed. In addition, it enables us to improve effectiveness and efficiency in our operations and it promotes reliable financial reporting and compliance with laws and regulations. We assess the risks that could impact achievement of our strategic objectives annually at a consolidated level (top-down approach) and on a process level (bottom-up approach). If necessary, we implement countermeasures to mitigate the risks within the defined risk appetite, and integrate these countermeasures in our risk management and control framework. In addition, to proactively monitor and act on key risks as a result of COVID-19 in 2020, we further strengthened the alignment between the top-down risk assessment and our primary processes. We also continued our focus on enhancement of our bottom-up processes to identify process risks and mitigating actions. Business management provides the Management Board with an annual assurance letter regarding the reliability of their financial reporting, the effectiveness of their internal controls, risk management, and compliance with internal policies and laws and regulations. RISKASSESSMENTRISKMANAGEMENT STRATEGY &OBJECTIVESETTING RISK MANAGEMENT APPROACHMONITORINGACTIVITIESCONTROLACTIVITIESRISKRESPONSEFINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE75 Our risk management and internal control activities are organized through the three lines of defense The nature of the risk is a key determinant of our risk appetite: model; the Management Board is ultimately responsible for risk management and compliance in line with the risk appetite and is supported by: ›› First line of defense: Business and operations management owns and manages risk, which includes identifying, assessing, controlling, and mitigating risks; ›› Second line of defense: Oversight functions support business and operations management and help ensure that the risk and control procedures have effective metrics and are operating as intended; and ›› Third line of defense: Internal Audit provides independent objective assurance on the effectiveness of governance, risk management, and internal controls, including the manner in which business and operations management and the oversight functions manage and control risk. Internal Audit brings a systematic, disciplined approach to evaluate and improve the effectiveness STRATEGIC RISKS RISK APPETITE Strategic risks and opportunities may affect ASMI's strategic objectives. Strategic risks include economic, environmental and political developments, and the need to anticipate and respond in a timely manner to market circumstances. We are willing to accept reasonable risks in a responsible way to achieve our strategic ambitions and priorities. Innovation will drive future growth, and as a result we are willing to take a higher risk in our longer-term growth areas, such as ALD and epitaxy products. of risk management, control, and governance processes. OPERATIONAL RISKS RISK APPETITE RISK CULTURE ASMI strives for a culture of openness and transparency in which identified risks are disclosed proactively and unexpected events are reported as soon as they occur. Through the risk committee, periodic control self-assessments, and a focus on aligning our top-down risk assessment to our business processes, we are continually increasing risk awareness to make it an integral part of the company culture and our primary processes. Our Code of Business Conduct (COBC) applies to all ASMI employees and temporary staff, and describes how we work in an open, transparent, honest, and socially responsible way. The COBC was updated in 2020 and the effectiveness of, and compliance with, the Code is enabled through annual online training and assessed by actively detecting and investigating any alleged misconduct and taking appropriate disciplinary action if misconduct is substantiated. RISK APPETITE Undertaking business activity inevitably leads to taking risks. Each type of risk encountered is dealt with in a manner that matches the risk appetite established by the Management Board. Risk appetite is the level of risk we deem acceptable to achieve our objectives. ASMI’s risk appetite is primarily determined based on the defined and agreed strategic plan and the individual objectives within this plan. The risk appetite is further guided by our COBC as well as detailed policies and procedures. The risk appetite is the total residual impact of the risks that ASMI is willing to accept in the pursuit of its objectives. The risk appetite per objective or risk area is set annually by the Management Board and is evaluated on an ongoing basis as events occur throughout the year. Operational risks cover adverse developments resulting from internal processes, people, and systems, or from external events related to our business. We avoid risks that can negatively impact our operational goals while ensuring that our environmental, social, and corporate governance (ESG) commitments are met. ASMI has a very low risk tolerance related to people safety and product safety, and associated compliance risks. We strive for ZERO HARM! FINANCIAL RISKS RISK APPETITE Financial risks include risks related to accounting and reporting, tax, and other elements that impact our financial position. We avoid risks that could jeopardize the integrity of our reporting, and/or the financial sustainability of the company needed to achieve the objectives. COMPLIANCE RISKS RISK APPETITE Compliance risks consist of unanticipated failures to implement or comply with relevant laws and regulations. We strive for full compliance with our COBC and national and international laws and regulations of the markets in which we operate. We have a zero-tolerance approach to bribery and corruption, fraud, and all other forms of illegal misconduct. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE CONTROL EFFECTIVENESS STATEMENT The Management Board is responsible for ASMI’s internal risk management and control framework. All internal control systems, no matter how well designed and implemented, have inherent limitations. This system is designed to manage the main risks that may prevent ASMI from achieving its objectives. Even systems determined to be effective may not prevent or detect misstatements or fraud, and can The internal risk management and control framework, and the evaluation of the effectiveness of our only provide reasonable assurance with respect to disclosure and financial statement presentation internal controls and areas for improvement, are regularly discussed with the Audit Committee and and reporting. Additionally, projections of any evaluation of effectiveness to future periods are subject KPMG Accountants, our external auditor. The Audit Committee reports on these matters to the to the risk that controls may become inadequate due to changed conditions and that the degree of Supervisory Board. compliance with the policies or procedures may deteriorate. The Management Board conducted an assessment of the design and operating effectiveness of the In view of all of the above, the Management Board believes that it complies with the requirements of internal risk management and control framework. Based on this assessment and the current state of best practice provisions 1.2 and 1.4 of the Dutch Corporate Governance Code. 76 affairs, to the best of its knowledge and belief, the Management Board confirms that: ›› The internal risk management and control framework provides reasonable assurance for the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles; ›› The management report includes a fair review of the development and performance of the business, and the position of the company and the undertakings, included in the consolidation as a whole, as well as a description of the principal risks and uncertainties that the company faces; ›› There are no material risks or uncertainties that could reasonably be expected to have a material adverse effect on the continuity of ASMI’s operations in the coming twelve months; and ›› There is a reasonable expectation that ASMI will be able to continue its operations and meet its liabilities for at least twelve months, therefore it is appropriate to adopt the going concern basis in preparing the financial reporting. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCERISK CATEGORIES AND FACTORS The risks detailed below are material risks that could impact our ability to achieve our objectives. Some apparent. Our risk management approach enables us to monitor risks and risk development and take of these risks relate to our operational processes, while others relate to our business environment. It is appropriate action. In 2020, COVID-19 impacted our business processes, yet our business processes important to understand the nature of these risks, the impact they may have on our business, and the and people proved to be resilient and flexible in resolving the operational challenges that we faced, way these risks develop over time. These risks are not the only ones we face. Some risks may not yet particularly within health and safety, customer support, supply chain, and logistics. be known to us, and certain risks that we do not currently believe to be material could become material Our risk universe is the basis for our annual top down risk assessment, on the next pages the key risks in the future. In 2020, following the outbreak of the COVID-19 pandemic, this has become even more in our risk universe as well as the mitigating measures are described. 77 RISK UNIVERSE Changes in product demand & technology Competition 7 1 2 Cyclical nature of semiconductor market Climate change 6 3 Acquisitions International operations 5 4 Attract & retain employees STRATEGIC OPERATIONAL FINANCIAL COMPLIANCE Timeliness & quality of delivered product Supplier dependency 8 9 10 11 12 R&D program execution IT security breaches 13 Supplier performance Product safety & EHS Customer dependency Product life cycle management 14 15 16 17 18 Business process execution Unfavorable changes in tax laws/regulations Manufacturing disruption Changes in valuation of ASMPT Outsourcing Foreign currency Financial reporting Liquidity 19 20 21 22 23 24 Intellectual property Compliance to laws and regulations 25 26 Fraud FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE78 STRATEGIC RISKS MITIGATING MEASURES 1 Inability to respond to changes in product demand and technology change could result in decreased orders and financial loss and/or reputation damage. In addition to our continued focus on new product launches, our investments in R&D continues to increase. In order to ensure optimal return on investment we have further improved our R&D processes and teams as well as optimal cooperation with key stakeholders. COVID-19 has impacted demand from our end markets, and we successfully adopted to the changed demand. 2 Cyclical nature of the semiconductor market which leads to abrupt changes in demand resulting in fixed overheads during downturns or insufficient production capacity during upturns. We are investing in new production facilities. In addition we outsource generic manufacturing and are optimizing our primary processes to enhance scalability and elasticity. Our financial structure, including cash and a standby credit facility, is set up to further reduce downsides of this risk. 4 Inability to attract and retain qualified management, technical, sales and support employees could result in delayed product development, production and diversity of management resources. We focus on competitive compensation & benefit packages tailored to the regions we operate in. We have talent management and succession planning programs in place that consist of the leadership academy, talent succession reviews up to board level and help our managers to assess and strengthen the leadership pipeline. In 2020 we launched our Power of an Open Mind program and an engagement survey we strive to reach our talent and tend to their needs. 5 Failure to adequately identify and mitigate the risks arising from operating in an international context such as the political landscape, changes in legislation, instability, protectionism and cultural differences could impact our business. Our primary processes are set up to quickly understand, adapt to, and effectively apply international cultural and legal norms for doing Our primary processes are set up to quickly understand, adapt to, and effectively apply international cultural and legal norms for doing business. We have global reviews with each region specifically on these topics. business. We have global reviews with each region specifically on these topics. For example the geo political tensions have increased and may continue doing so. The US and other countries have imposed trade For example the geo political tensions have increased and may continue doing so. The US and other countries have imposed trade restrictions and specifically related to China. The US also took specific measures against certain Chinese specific parties. Some of these restrictions and specifically related to China. The US also took specific measures against certain Chinese specific parties. Some of these measures have as a result that for certain transactions – like deliveries of certain products and services – to certain customers now measures have as a result that for certain transactions – like deliveries of certain products and services – to certain customers now require an export license. Obtaining such licenses is not certain, may be difficult, and are time consuming. The implementation and require an export license. Obtaining such licenses is not certain, may be difficult, and are time consuming. The implementation and interpretation of these measures and regulations and future regulatory changes remains ongoing and the impact of the changes is not interpretation of these measures and regulations and future regulatory changes remains ongoing and the impact of the changes is not always certain, could affect the result of operations, and can increase compliance costs; although the impact is currently still regarded always certain, could affect the result of operations, and can increase compliance costs; although the impact is currently still regarded as relatively limited. Recently China also enacted several laws of which the consequences for the industry including ASMI are currently as relatively limited. Recently China also enacted several laws of which the consequences for the industry including ASMI are currently not yet known, but could in the future have an impact. Nonetheless ASMI strives to support and serve its worldwide customers to the not yet known, but could in the future have an impact. Nonetheless ASMI strives to support and serve its worldwide customers to the best of its ability while being compliant with laws and regulations set by the jurisdictions where we operate. best of its ability while being compliant with laws and regulations set by the jurisdictions where we operate. In 2020 we have have refreshed our COBC and the related e-learnings to further enhance understanding of how ASMI wants to achieve In 2020 we have have refreshed our COBC and the related e-learnings to further enhance understanding of how ASMI wants to achieve its business goals in an international context. its business goals in an international context. 6 Climate change can have a physical impact on our operations and can cause disruptions in our supply chain and markets. Business interruption policies and procedures are in place. In addition, we have further enhanced our corporate responsibility agenda based on the climate change risks with the aim to make a sustainable impact while leveraging our key strengths. OPERATIONAL RISKS MITIGATING MEASURES 9 Failure to deliver product of sufficient quality or on time resulting in financial loss due to penalties, rework and/or reduced future demand. We are continuously improving our quality assurance processes and controls to ensure consistent product quality. In addition to pro-actively managing the supply chain and logistical challenges, we have further enhanced our primary product development processes based on clear objective setting, risk identification and control gate reviews. We are also centralizing our quality organization to report directly to the CEO to bolster cross functional focus. Failure of suppliers to deliver resulting in financial loss due Failure of suppliers to deliver resulting in financial loss due to penalties, rework and/or reduced future demand. to penalties, rework and/or reduced future demand. Recovery plans are in place, and are continuously assessed and improved. In addition, we are further improving primary processes Recovery plans are in place, and are continuously assessed and improved. In addition, we are further improving primary processes related to regional supplier sourcing, demand planning, and import/export risks. related to regional supplier sourcing, demand planning, and import/export risks. 10 11 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 79 OPERATIONAL RISKS MITIGATING MEASURES 12 Dependence on a small number of large customers. Loss of a customer or significant reduction in demand could result in significant downturn of our financial results. We work pro-actively with our customers to respond to requests in a timely manner and strive to exceed expectations. We are diversifying our customer base by continued investments in the More than Moore and China markets. We are also putting significantly more focus on our large installed base business to help our customers get better long-term performance from our systems and diversify our revenue streams into more annuity-based opportunities. 13 IT security breaches including cyber attacks resulting in loss of technologies, innovations, IP and process data downtime or disruption of critical business operations. Any breach of our information systems could adversely affect our finances and operating results as well as our reputation. Our software development & production processes may introduce viruses in our tools. 15 Incidents and accidents threatening our ability to operate. An IT risk management framework including IT security management is in place in which we monitor threats and vulnerabilities, conduct cyber drills, perform gap assessments, apply remediation and identify improvement projects. The frameworks are supported by policies, processes and controls. In 2020, we raised vigilance on employee awareness through increased phishing campaigns relating to the COVID-19 pandemic and work from home situations, took steps to enhance the security posture of our critical applications, further improved our capability toward zero-day attacks and strengthened our cloud security posture. Our EHS organization is responsible for preventive and corrective action processes and the implementation of structural controls is driven within the processes. Safety is discussed in all key meetings. Safety leadership collaborations have been set up with key customers. Throughout the year 2020, our EHS team was instrumental in prioritizing health and safety. 17 Unsuccessful product life cycle management impacting Unsuccessful product life cycle management impacting margins, market share and inventory. margins, market share and inventory. We are driving continuous improvement across our product life cycle to ensure a smooth and integrated process. In 2020 we took We are driving continuous improvement across our product life cycle to ensure a smooth and integrated process. In 2020 we took important steps in our primary processes. We will continue to focus on this in 2021 to pro-actively meet or exceed (future) customer important steps in our primary processes. We will continue to focus on this in 2021 to pro-actively meet or exceed (future) customer needs and requests while improving internal process efficiency. needs and requests while improving internal process efficiency. FINANCIAL RISKS MITIGATING MEASURES 21 Financial reporting and/or the disclosures are not complete, inaccurate or not in accordance with laws & regulations resulting in reputational damage and/or financial loss. 22 Changes in valuation of ASMPT as a result of ineffective strategy definition and execution affecting our future financial position. A financial control framework is in place and we perform an annual fraud risk assessment and take follow up actions based on the outcome. We have Board representation in ASMPT, as two executive directors are non-executive directors at ASMPT. COMPLIANCE RISKS MITIGATING MEASURES 24 Failure to adequately protect our intellectual property and/or leakage of our IP. We regularly monitor the market and take steps, when appropriate, to ensure compliance with our intellectual property rights which may include various intellectual property related audits. In addition, control and governance frameworks are in place in our primary processes to establish, maintain and protect our intellectual property rights and minimize the risk of data leakage as far as possible. 25 Non-adherence to laws and regulations resulting in reputation damage and/or financial loss. We prepare, roll out and make available relevant policies and procedures which are regularly reviewed and audited. Key controls are embedded in our primary processes. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEManagement Board Management Board MANAGEMENT BOARD The Management Board, supervised and advised by the Supervisory Board, manages ASMI’s strategic, commercial, financial, and organizational matters, and appoints senior managers. The Supervisory Board supervises and advises the Management Board in the execution of its tasks and responsibilities, and establishes their individual remuneration within the boundaries of the remuneration policies approved by the Annual General Meeting of Shareholders and the recommendations by the Nomination, Selection and Remuneration Committee. Benjamin Loh Peter A.M. van Bommel 80 COMPOSITION OF THE MANAGEMENT BOARD BENJAMIN LOH – CEO Mr. Loh was appointed as Chairman of the Management Board and President and Chief Executive PETER A.M. VAN BOMMEL – CFO Mr. van Bommel was appointed as a member of the Management Board on July 1, 2010, and Officer on May 18, 2020, for a period of four years. became Chief Financial Officer on September 1, 2010. Mr. van Bommel was reappointed on May 28, 2018 for a period of four years. Mr. van Bommel has more than twenty years of experience in the Mr. Loh worked for Oerlikon Corporation from the late 1990s until 2005. He became senior vice electronics and semiconductor industry. He spent most of his career at Philips, which he joined in president in 2002 and was responsible for Asia until 2005. He then joined Veeco Instruments Inc., 1979. From the mid-1990s until 2005, he acted as CFO of several business units of the Philips an American thin-film process semiconductor equipment manufacturer, as senior vice president Group. Between 2006 and 2008, he was CFO at NXP, formerly Philips Semiconductors. He was CFO and general manager for Asia, before becoming executive vice president responsible for global of Odersun AG, a manufacturer of thin-film solar cells and modules until August 31, 2010. He holds field operations. In 2007, he moved to FEI Company as senior executive, holding various positions a Master’s degree in Economics from the Erasmus University Rotterdam, the Netherlands. responsible for sales and service, global business operations, and finally as chief operating officer. In 2015, Mr. Loh joined VAT Vacuum Valves, based in Switzerland, as executive vice president and Mr. van Bommel is a non-executive director of ASM Pacific Technologies, and until 2020 was member of the Group Management Board, where he was responsible for, and led, worldwide sales a member of the Supervisory Board of Royal KPN N.V. In 2019, Mr. van Bommel was re-appointed and marketing until late 2017. Mr. Loh is a non-executive director of ASM Pacific Technologies and in as a member of the Supervisory Board of Neways Electronics International N.V. Since May 2017, the past also held positions as non-executive director in several companies (Schneeberger, Schweiter Mr. van Bommel is an Executive Director of Stichting Bernhoven. Lastly, Mr. van Bommel was Technologies AG, and Liteq BV). He also was an advisory board member of Semi China. Mr. Loh has appointed a member of the Board of SES SA in April 2020. Mr. van Bommel is a Dutch national. a wealth of experience working in the electronics and semiconductor industry and vast experience as a leader. Mr. Loh has a bachelor's degree in electronic engineering from the Tohoku University in Japan. Mr. Loh is of Singaporean nationality, but has spent the last 30 years living mostly outside of Singapore in Japan, Hong Kong, China, the UK and the US. Mr. Loh is now based in Almere, the Netherlands. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE81 RESPONSIBILITIES In addition to the duties of the Management Board stipulated by law and our Articles of Association, CONFLICTS OF INTEREST Each Management Board member shall immediately report any potential conflict of interest to the the Management Board has the following responsibilities: ›› Achieving the aims, strategy, policy, and results of the company; ›› Managing the risks associated with the activities of the company; ›› Ensuring proper financing of the company; ›› Establishing and maintaining disclosure controls and procedures that ensure that all major financial information is known to the Management Board in order to ensure that the external financial reporting is achieved in a timely, complete, and accurate manner; and Chairman of the Supervisory Board and to the other Management Board members. In such cases, a Management Board member shall provide the Chairman of the Supervisory Board and the other Management Board members with all information relevant to the conflict, and follow the procedures as set out in the Management Board rules. APPOINTMENT, SUSPENSION, AND DISMISSAL The Annual General Meeting of Shareholders (AGM) appoints a Management Board member based ›› Determining relevant aspects and achieving aims relating to corporate social responsibility on a binding nomination drawn up by the Supervisory Board. The AGM may set aside a binding and sustainability. nomination by a resolution taken with an absolute majority of the votes cast, representing at least one third of the share capital. If such a binding nomination is set aside, a new binding nomination will be The Management Board is guided by the interests of the company, taking the interests of all drawn up by the Supervisory Board and submitted to a newly called General Meeting of Shareholders. stakeholders into consideration. The members of the Management Board are collectively responsible If this binding nomination is set aside, the General Meeting of Shareholders is free to appoint for managing the company. They are collectively and individually accountable to the Supervisory a Management Board member, but only with an absolute majority of the votes cast representing at Board and the Annual General Meeting of Shareholders for executing the Management Board’s least one third of our issued capital. A Management Board member may be suspended at any time responsibilities. The Management Board has the general authority to enter into binding agreements by the Supervisory Board. A Management Board member may, in accordance with a proposal by with third parties. The Management Board held various meetings throughout the year 2020. At least the Supervisory Board, be dismissed by the AGM through a majority vote. A resolution to suspend once a month, the Management Board meets to discuss and review the performance of the company. or to dismiss a member of the Management Board, other than in accordance with a proposal of RISK MANAGEMENT AND CONTROL FRAMEWORK The Management Board ensures that the company has an adequately functioning internal risk management and control framework. A comprehensive risk management and control framework, based on the ‘three lines of defense model’, has been established that allows the Audit Committee the Supervisory Board, shall require the affirmative vote of a majority of the votes cast at a meeting. The affirmative votes must represent at least one third of the issued capital. REMUNERATION For information regarding the remuneration of the Management Board, please see the and the Management Board a clear overview of the effectiveness of internal controls and risk remuneration policy posted on our website (www.asm.com/investors/corporate-governance/ management. This is explained in more detail in the risk management chapter. The Management supervisory-board/nomination-selection-and-remuneration-committee), the remuneration report, Board periodically discusses the internal risk management and control systems with the Supervisory which is included in this report, and Note 25 to the consolidated financial statements. Board and the Audit Committee. The Management Board provides the Supervisory Board with all information required for the fulfillment of their obligations and the exercise of their powers. The Management Board provides the Annual General Meeting of Shareholders with all information required for the fulfillment of its obligations and the exercise of its powers in a timely fashion. The Management Board is responsible for the quality and completeness of financial and other reports that are publicly disclosed by or on behalf of the company, including all reports and documents the company is required to file. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCESupervisory Board Supervisory Board SUPERVISORY BOARD The Supervisory Board oversees strategic and commercial policymaking by the Management Board and the way in which it manages and directs ASMI’s operations and affiliated/associated companies. Members of the Supervisory Board are appointed by the Annual General Meeting of Shareholders upon binding nomination by the Supervisory Board. 82 Mr. Lobbezoo was Executive Vice President and Chief Financial Officer of the semiconductor division of Royal Philips Electronics from 1994 to 2005. He was a member of the Board of Taiwan Semiconductor Manufacturing Company (TSMC) for 12 years until 2007 and remains its adviser, specifically in the areas of US corporate governance, international reporting, and financial review. Currently, Mr. Lobbezoo is also on the Supervisory Board of a small start-up company named VPI, which is active in development of medical software for surgery. He is furthermore Chairman of the Supervisory Board of Point One Innovation Investment Fund. He holds a Master’s degree in Business Economics from the Erasmus University Rotterdam, the Netherlands, and is a Dutch Registered Accountant (RA) and a member of the Dutch NBA. Mr. Lobbezoo is a Dutch national. Term Expires 2021 POSITION Nationality Year of Birth Initial Appointment Dutch 1946 2009 COMPOSITION Name Jan C. Lobbezoo Martin C.J. van Pernis Marc J.C. de Jong Didier R. Lamouche Monica de Virgiliis Chairman of the Supervisory Board Member of the Supervisory Board Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Stefanie Kahle-Galonske Member of the Dutch 1945 2010 2022 German and Swiss 1969 2017 2021 Dutch 1961 2018 2022 French 1959 2020 2024 MARTIN C.J. VAN PERNIS Member of the Supervisory Board Member of the Supervisory Board Italian and French 1967 2020 2024 Mr. van Pernis was elected as member of the Supervisory Board in May 2010 and was lastly reappointed on May 18, 2020, for a period of two years. JAN C. LOBBEZOO Chairman of the Supervisory Board Mr. van Pernis made a career at Siemens fulfilling several executive positions. He joined Siemens in 1971 and retired from the Siemens Group at the end of 2009 as Chairman of the Management Board of Siemens Nederland NV. Mr. van Pernis is currently Chairman of the Supervisory Boards of the Dutch listed companies Aalberts NV and CM.com. He is furthermore a member of the Supervisory Board of Optixolar/Coolback BV, and member of the Advisory Board of G4S Netherlands. Mr. Van Pernis was until May 2018 also Mr. Lobbezoo was elected as a member of the Supervisory Board in May 2009. He became Chairman Chairman of the Supervisory Board of Batenburg NV. of the Supervisory Board in July 2013 and was lastly reappointed as member and Chairman on May 22, 2017, for a period of four years. Mr. van Pernis studied electrical engineering at the Technical University Delft and Technical High School The Hague, the Netherlands, and law and economics at Erasmus University Rotterdam, the Netherlands. Mr. van Pernis is a Dutch national. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE83 STEFANIE KAHLE-GALONSKE Member of the Supervisory Board Mr. de Jong is currently member of the Supervisory Boards of Nissens A/S based in Denmark, Fiberline Composites A/S based in Denmark, and chairman of Sioux B.V., based in the Netherlands. Mr. de Jong holds a Master’s degree in Physics and Mathematics from the VU University of Amsterdam, the Netherlands, and a Master’s degree in Business Administration (executive program) from the Erasmus University Rotterdam, the Netherlands and Rochester, USA. Mr. de Jong is a Dutch national. Mrs. Kahle-Galonske was elected as a member of the Supervisory Board on May 22, 2017, for a period of four years. Since April 2016, Mrs. Kahle-Galonske is Group CFO of Egon Zehnder International in Zurich, Switzerland. From March 2013 till March 2016, she was CFO of Markem-Imaje at Dover Corporation based in Geneva, Switzerland. Between January 2007 and February 2012, she held various senior executive positions at NXP Semiconductors in France and the Netherlands. DIDIER R. LAMOUCHE Member of the Supervisory Board Mrs. Kahle-Galonske in the past served as non-executive board member of Micronas Semiconductors Mr. Lamouche was elected as a member of the Supervisory Board on May 18, 2020, for a period of in Switzerland and Nu-Tune Singapore. four years. Mrs. Kahle-Galonske graduated in Economics at the Ruhr-University of Bochum, Germany and is Mr. Lamouche was until the end of 2018 the CEO of IDEMIA (formerly Oberthur Technologies) a Certified Public Accountant (CPA) since 2002. Mrs. Kahle-Galonske is a German and Swiss national. which is the world leader in security and identity solutions. Prior to that he was the CEO of the MARC J.C. DE JONG Member of the Supervisory Board Mr. de Jong was elected as a member of the Supervisory Board on May 28, 2018, for a period of four years. Mr. de Jong was CEO of LM Wind Power A/S until April 2018. Before that he was the executive general manager of InnoMarket B.V. Prior thereto and until 2009 he was a member of the executive management team of NXP Semiconductors, after which he was until 2013 responsible at Philips Lighting for professional lighting solutions and at the same time member of the group management committee of Philips. Euronext listed Bull Group until 2010. And before that he had senior several executive positions in the semiconductor industry; latest as COO of ST Microelectronics and CEO of ST-Ericsson. Mr. Lamouche has been a non-executive at the Boards of Soitec and STMicoelectronics, and is currently Chairman of the Supervisory Board of Utimaco, a leader in the cybersecurity space, and non-executive Chairman of the Board at Quadient, a company listed on Euronext and active in Enterprise communication systems. He is a member of the Supervisory Board of Adecco since 2011 (listed on the SIX in Zurich). Mr. Lamouche graduated in 1981 from the Ecole Centrale de Lyon as an engineer, and has a PhD in semiconductor technology. Mr. Lamouche is a French national. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEMONICA DE VIRGILIIS Member of the Supervisory Board Mrs. de Virgiliis was elected as member of the Supervisory Board on May 18, 2020, for a period of four years. 84 THE IMPORTANCE OF DIVERSITY The Supervisory Board recognizes the value of diversity amongst the members of the Supervisory Board and the members of the Management Board. Diversity is considered in any event to consist of gender, specific knowledge, work background, nationality, age and ethnic diversity, (technical) experience, and skills. With respect to gender, we strive to have a composition of both the Supervisory Board and Management Board, representing at least 30% of the seats held by either gender at the same time. RESPONSIBILITIES The supervision over the policies of our Management Board and the general course of our business, Mrs. de Virgiliis fulfilled until mid-2019 the role of chief strategy officer of CEA, the French Atomic & and the related management actions, is entrusted to the Supervisory Board. In our two-tier structure Alternative Energy Commission. Preceding that she had senior executive positions at Octo Telematics, under applicable Dutch law, the Supervisory Board is a separate body independent from the Infineon Technologies, and a long career within ST Microelectronics fulfilling several senior executive Management Board. roles. She has recently founded Chapter Zero France, under the auspices of the World Economic Forum as a part of the global Climate Governance Initiative. The Supervisory Board supervises and advises the Management Board in executing its Mrs. de Virgiliis is currently a non-executive director at the Prysmian Group, a Milan listed company, and at Geodis, which is part of the SNCF Group. Mrs. de Virgiliis studied at the University of Turin (Politecnico di Torino) where she received her master’s degree in electronic engineering summa cum laude. She holds a dual nationality: Italian and French. responsibilities, particularly regarding: ›› Achievement of the company’s objectives; ›› Corporate strategy and the risks inherent in the business activities; ›› Structure and operation of the internal risk management and control systems; ›› Financial reporting process; ›› Compliance with legislation and regulations; ›› Relation of the company to its shareholders; and ›› Relevant aspects of corporate social responsibility. The Supervisory Board is responsible for monitoring and assessing its own performance. CONFLICTS OF INTEREST A Supervisory Board member facing a conflict of interest shall, in accordance with Article 13 of our Supervisory Board rules, inform the Chairman of the Supervisory Board immediately. The Chairman shall, if possible in consultation with the other members of the Supervisory Board, determine the course of action to be taken. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE85 APPOINTMENT In accordance with Dutch law and the Corporate Governance Code, the Supervisory Board has COMMITTEES In order to more efficiently fulfill its role and in compliance with the Corporate Governance Code, the drawn up a profile for its own composition. This Supervisory Board Profile is available on our website Supervisory Board has created two committees: the Audit Committee and the Nomination, Selection (www.asm.com/investors/corporate-governance/supervisory-board). For the selection of future and Remuneration Committee (NSR). members of the Supervisory Board, we will actively seek for candidates that support the realization of diversity on the earlier mentioned criteria. Any appointment or reappointment to the Supervisory Board COMMITTEES STRUCTURE AND MEMBER INFORMATION shall be based on the candidate’s match with the Supervisory Board Profile. For reappointment, the candidate’s performance during the previous period shall be taken into account. A Supervisory Board member who is available for reappointment must be interviewed by the Chairman of the Supervisory Board and the Chairman of the Nomination, Selection and Remuneration Committee. The Chairman of the Nomination, Selection and Remuneration Committee must be interviewed by the Chairman of the Supervisory Board. All members of the Supervisory Board follow an introduction program after Jan C. Lobbezoo their first appointment, in which financial and legal aspects as well as financial reporting and specific features of ASMI are discussed. Every year the training requirements are reviewed and discussed. Martin C.J. van Pernis Subsequently the training is organized. The Supervisory Board shall consist of at least three Stefanie Kahle-Galonske members. The members should operate independently of each other and within a good relationship of mutual trust. They should be experienced in the management of an international, publicly listed company, and have sufficient time available to fulfill the function of a Supervisory Board member. The Supervisory Board members appoint a Chairman from among themselves. The Supervisory Board is composed of six members. Marc J.C. de Jong Didier R. Lamouche Monica de Virgiliis Audit Committee Nomination, selection and remuneration Committee Supervisory Board All members of the Supervisory Board meet the required profile. Supervisory Board members serve in principle a four-year term and may be re-elected in line with article 2.2 of the Corporate Governance Code. REMUNERATION For information regarding the remuneration of the Supervisory Board, please see the remuneration Chairperson Member Financial expert AUDIT COMMITTEE The Audit Committee assists the Supervisory Board in its responsibility to oversee ASMI’s financing, financial statements, financial reporting process, and system of internal business controls and risk management. The Audit Committee advises the Supervisory Board for the nomination of the external report, which is included in our Annual Report 2020, and Note 25 to the consolidated financial auditor of the company. statements. The Audit Committee consists of: ›› Stefanie Kahle-Galonske (Chairwoman); ›› Jan Lobbezoo; ›› Marc de Jong; and ›› Monica de Virgiliis. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE86 The Audit Committee supervises the activities of the Management Board with respect to: ›› The structure and operation of the internal risk management and control systems, including NOMINATION, SELECTION AND REMUNERATION COMMITTEE The Nomination, Selection and Remuneration Committee (NSR) advises the Supervisory Board on supervision of the enforcement of the relevant legislation and regulations; matters relating to the selection and nomination of the members of the Management Board and ›› The role and functioning of internal audit; ›› Policy on tax structure; ›› The applications of information and communication technology; ›› Financing of the company; ›› Compliance with recommendations and observations of internal and external auditors; ›› Release of financial information; and ›› Relations with the external auditor, including, in particular, its independence, remuneration, and any non-audit services performed for the company. The Audit Committee meets periodically to: ›› Consider the adequacy of the internal control procedures; ›› Review the operating results with management and the independent auditors; ›› Review the scope and results of the audit with the independent auditors; ›› Review the scope and results of internal audits with internal audit; ›› Review performance evaluations relating to the auditor’s independence; ›› Review performance and services of the external auditor; and ›› Review adequateness of the financing structure and tax structure of the company. Supervisory Board. The NSR Committee further monitors and evaluates the remuneration policy for the Management Board. The NSR Committee consists of: ›› Martin van Pernis (Chairman); ›› Didier Lamouche; and ›› Jan Lobbezoo. The NSR Committee ensures that a competitive remuneration structure is provided by benchmarking with other multinational companies of comparable size and complexity operating in comparable geographical and industrial markets. The NSR Committee evaluates the achievement of performance criteria specified per Management Board member. After the evaluation, it recommends the level of remuneration to the Supervisory Board. On an annual basis, the NSR Committee reports to the Supervisory Board on the application of the remuneration policy in the previous year and recommends the remuneration policy and remuneration report for the following years. The Chief Executive Officer, Chief Financial Officer, Director Internal Audit, Corporate Director The Chief Executive Officer and the Corporate Vice President Global Human Resources are invited Group Control, and representatives of the external auditor are invited to, and also attend, the Audit to, and also attend, the NSR Committee meetings. Committee meetings. Mr. Lobbezoo, Chairman of the Supervisory Board, and Mrs. Kahle-Galonske, member of the Supervisory Board, are both members of the Audit Committee and are the Supervisory Board’s financial experts, taking into consideration their extensive financial background and experience. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCESupervisory Board report Supervisory Board report 87 SUPERVISORY BOARD REPORT During the year under review, the Supervisory Board performed its duties in accordance with applicable legislation and the Articles of Association of ASM International N.V., and supervised and advised the Management Board on an ongoing basis. FINANCIAL STATEMENTS We present the ASMI 2020 Annual Report in accordance with IFRS, as prepared by the Management Board and reviewed by the Supervisory Board. Our independent auditors, KPMG Accountants N.V., have audited these financial statements and issued an unqualified opinion. Their report appears on pages 155 to 161. All of the members of the Supervisory Board have signed the financial statements in respect of the financial year 2020. SUPERVISION Supervision of the Management Board, its policy decisions and actions are entrusted to the Supervisory Board. In accordance with Dutch law, the Supervisory Board is a separate body, independent of the Management Board. The Supervisory Board supervises and advises the Management Board in executing its responsibilities. The profile of the Supervisory Board describes Attendance to meetings in 2020 Committee Jan C. Lobbezoo Martin C.J. van Pernis Stefanie Kahle-Galonske Marc J.C. de Jong Didier R. Lamouche* Monica de Virgiliis* Ulrich H.R. Schumacher** Supervisory Board Audit Committee Nomination, Selection and Remuneration Committee (NSR) 8/8 8/8 7/8 8/8 3/4 4/4 3/4 4/4 n.a. 4/4 4/4 n.a. 2/2 n.a. 4/4 4/4 n.a. n.a. 2/2 n.a. 1/2 Attendance is expressed as the number of meetings attended out of the number of meetings eligible to be attended. * Appointed May 18, 2020. ** Stepped down at AGM 2020 on May 18, 2020. the range of expertise that should be represented within the Board. The procedures of the Supervisory In these meetings, the Boards discussed the strategy and the progress of implementation thereof, Board and the division of its duties are laid down in the Supervisory Board rules. Both documents the long-term and sustainable value creation, operations, business risks, and risk management, are available on our website www.asm.com (www.asm.com/investors/corporate-governance/ product and market developments, geopolitical tensions and the potential impact, the company’s supervisory-board). organization, and culture program, management and financial structure, and performance, including further profitability improvements. Other (recurring) topics were also addressed by the Supervisory MEETINGS OF THE SUPERVISORY BOARD During 2020, the Supervisory Board met with the Management Board on eight occasions. Jan Board such as the annual budget, the review of quarterly financial results, COVID-19, reports from the committees, and the preparation of the quarterly earnings press releases. The Supervisory Board Lobbezoo, Marc de Jong and Martin van Pernis attended all Supervisory Board meetings with also approved the dividend proposal as prepared by the Management Board and proposed (and the Management Board, while Stefanie Kahle-Galonske attended all meetings except one. Ulrich approved) at the AGM in 2020. Schumacher attended three out of the four meetings that took place before the May 18, 2020 AGM, when he retired from the Supervisory Board. After being appointed to the Supervisory Board at the One of the meetings was specifically earmarked to discuss with the Management Board the long-term May 18, 2020 AGM, Monica de Virgiliis attended all four meetings that took place since, while Didier strategy of the company, the planned implementation of it, and the risks attached to its realization. Lamouche attended three out of four meetings. In the long-term strategy meeting the Board discussed the semiconductor and semiconductor equipment market and outlook, the development of ASMI’s market share, the development of the competitive environment, technology and market trends, the progress with ASMI’s strategic priorities FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE88 and ASMI’s long-term revenue and profit or loss forecasts. Also, strategic initiatives to be considered was also proposed and approved to declare and pay an extra dividend of €1,50 per share; this as to improve the company’s long-term value creation strategy were discussed. Certain topics part of the company’s commitment to use excess cash for the benefit of its shareholders. discussed during the long-term strategy discussion will be followed up in subsequent meetings of In order to optimize the capital structure, it was proposed and agreed to decrease the issued share the Board during 2021. capital by withdrawing 1,500,000 (one and a half million) shares which the company holds in its own capital, by way of cancellation of treasury shares. In addition, the Supervisory Board reviewed and discussed the functioning of the Supervisory A new share buyback program was announced on June 2, 2020 for a total of €100 million; at the end Board, its committees, and its individual members through an internal assessment as conducted of December 2020 63% of the total program had been repurchased. by the members of the Supervisory Board. The composition, competencies and functioning of the Supervisory Board, as also described in the Supervisory Board profile, and its committees were part of the assessment, as well as the composition of the Management Board, their performance, and SUPERVISORY BOARD COMPOSITION The Supervisory Board is composed of six members. All six members are independent, in line with the performance of its individual members, and the relationship between the Supervisory Board and the Corporate Governance Code. During the AGM on May 18, 2020 Mr. Schumacher stepped down the Management Board. The conclusion of the assessment was that both the Supervisory Board as at the end of his final term and Mr. Lamouche and Mrs. de Virgillis were newly appointed. In addition, the Management Board function properly and effectively. at the forthcoming AGM on May 17, 2021, Mr Jan Lobbezoo, after having served for three terms of four years at the ASMI Board, will retire from the Supervisory Board. Due to COVID-19 and the travel restrictions, most Supervisory Board meetings in 2020 were held through video conference. In some instances the Dutch based members of the Supervisory Board gathered at the headquarters of ASMI using a video link to the foreign based members of the MANAGEMENT BOARD COMPOSITION The Management Board is composed of two members. During the May 18, 2020, AGM Mr. Chuck Supervisory Board. In addition to these meetings there were several informal meetings and telephone del Prado, retired as Chief Executive Officer, Chairman of the Management Board and President of calls between the Supervisory Board members and/or Management Board members. the company. On the same day, the AGM approved the nomination of Benjamin (G.L.) Loh as Chief DUTCH CORPORATE GOVERNANCE Included in the responsibilities of the Supervisory Board is to oversee the company’s compliance with Executive Officer, Chairman of the Management Board and President of the company, to succeed Chuck del Prado. On October 13, 2020, ASMI announced that Mr. Peter van Bommel, Chief Financial Officer and Member of the Management Board of the company, had notified the Supervisory Board corporate governance standards and best practices. The Supervisory Board is of the opinion that the of his wish to retire from the company at the next Annual General Meeting to be held on May 17, company complies with the Dutch Corporate Governance Code. 2021. On January 12, 2021, the Supervisory Board announced the nomination of Mr. P (Paul) A.H. SHAREHOLDERS In view of the restrictions caused by the COVID-19 pandemic, it was decided to change the set-up of Verhagen as CFO and Member of the Management Board of ASMI, succeeding Peter van Bommel. The shareholders will be asked to appoint Mr. Verhagen as Management Board member for a four-year term – starting at June 1, 2021 – at the Annual General Meeting of Shareholders on May the AGM of May 18 2020 into a complete virtual webcast meeting. This meant that shareholders could 17, 2021, after which the Supervisory Board will appoint Mr. Verhagen as the Chief Financial Officer. not attend the meeting in person, but only via a virtual webcast connection. Voting could be done by way of proxy before the meeting as well as voting during the meeting via the virtual application. Shareholders for last year’s AGM could email questions up to 3 days prior to the AGM which were DIVERSITY The Supervisory Board recognizes the value of diversity amongst the members of the Supervisory answered by ASMI and posted on our website prior to the AGM. Shareholders which had asked Board and the members of the Management Board as stated in the ASMI diversity policy. Diversity questions in this way were also entitled to ask follow up questions during the AGM. During the AGM, is considered in any event to consist of gender, specific knowledge, work background, nationality, the new amended company remuneration policy was approved and adopted by the shareholders. age and ethnic diversity, (technical) experience, and skills. We strive to have a composition with at A final regular dividend of €1,50 per common share was proposed and approved; of that, €1,00 per least 30% of the seats in the Management Board and Supervisory Board held by either gender. share was already paid as interim dividend in November 2019. In addition to the regular dividend it At the same time we aim for the best candidate taking into account the realization on the diversity FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE89 criteria and match with the Supervisory Board profile. Currently we have a 33% female representation in the Supervisory Board. In the case of open positions in the Supervisory Board or Management NOMINATION, SELECTION AND REMUNERATION COMMITTEE The role of the Nomination, Selection and Remuneration Committee (NSR) is described in its charter, Board, the Supervisory Board prepares a profile based on the required educational and professional which is available on the company’s website, www.asm.com. In general, the NSR Committee advises background and in the search will actively look for candidates that support the realization of diversity the Supervisory Board on matters relating to the selection and nomination of new Management Board on the earlier mentioned criteria. members, as well as the remuneration of the members of the Management Board. This Committee EDUCATION AND TRAINING As in every year, also in 2020 the Management Board and Supervisory Board discussed their In 2020, the NSR Committee held four meetings and multiple conference calls. The topics included education and training needs. Both boards – in addition to their regular meetings – committed one the selection and nomination of a new Chief Executive Officer, which resulted in the nomination by day to training. A focus for this year was on the latest developments in international remuneration the Supervisory Board of Benjamin Loh as CEO, President and Chief Executive Officer, succeeding for Supervisory Board and Management Board members, including the requirements of the Chuck del Prado. The topics also included the selection and nomination of a new Chief Financial Shareholder Rights Directive and the role of the Supervisory Board in the value creation process of Officer, which resulted in the nomination by the Supervisory Board of Paul A.H. Verhagen as Chief the organization. This training was given by legal experts in each of these fields. Financial Officer and member of the Management Board, succeeding Peter van Bommel. The topics discussed also included the remuneration of the individual members of the Management Board and consists of Messrs. van Pernis (Chairman), Lamouche and Lobbezoo. INDEPENDENCE The Supervisory Board is of the opinion that its current members are all independent as defined the succession planning of the Board. by the Dutch Corporate Governance Code. Neither the Chairman nor any other member of the The remuneration of the members of the Management Board is disclosed in Note 25 to the Supervisory Board is a former member of ASMI’s Management Board, or has another relationship consolidated financial statements of the Annual Report. The remuneration of the members of the with ASMI which can be judged ‘not independent’ of ASMI. Management Board during 2020 is fully in accordance with the remuneration policy. SUPERVISORY BOARD COMMITTEES AUDIT COMMITTEE The role of the Audit Committee is described in its charter, which is available on the company’s WORD OF THANKS We extend our gratitude and appreciation to ASMI employees worldwide for their many contributions and enduring commitment to the company. It is their commitment and determination that enabled us website (www.asm.com). The number of members of the Audit Committee increased in 2020 to make substantial progress in 2020. We recognize that the cumulative efforts of our workforce are from three to four, when Monica de Virgiliis joined the Audit Committee after her appointment to truly creating real value for all of our stakeholders. the Supervisory Board during the May 18, 2020 AGM. During the year, the Audit Committee met with the Management Board and KPMG Accountants, the company’s independent auditors, on four occasions. Audit Committee discussions included: the company’s financial reporting including the SUPERVISORY BOARD J.C. Lobbezoo, Chairman application of accounting principles; the company’s financial position and financing programs, and M.J.C. de Jong tax structure; the company’s internal risk management systems; effectiveness of internal controls; the S. Kahle-Galonske audit performed and its findings, the Annual Report and financial statements; and the budget and the D.R. Lamouche quarterly progress reports prepared by the Management Board. The internal auditor participated in M.C.J. van Pernis all four Audit Committee meetings, presenting her own actions and findings. On several occasions, M. de Virgiliis the Audit Committee met with KPMG Accountants, without the members of the Management Board present, to discuss several audit related topics. Furthermore, the Audit Committee discussed the Almere, the Netherlands auditor’s performance with the Management Board without KPMG Accountants present. March 4, 2021 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCERemuneration report Remuneration report 90 REMUNERATION REPORT This remuneration report is based on the remuneration policy of ASM International N.V. (ASMI), as presented to and adopted by the 2020 Annual General Meeting of Shareholders. INTRODUCTION ASM International N.V. (ASMI) is a leading supplier of semiconductor wafer processing equipment SHORT-TERM INCENTIVES (CASH BONUS) Each year, a short-term incentive can be earned, based on achieving specific challenging targets. and process solutions. Our customers include all the top semiconductor device manufacturers in These targets are based for 75% on company financial targets and for 25% on non-financial targets. the world. The on-target bonus percentage for the CEO is 100% of annual base salary, with a maximum pay- out of 150% of annual base salary. The on-target bonus percentage for the CFO is 75% of annual ASMI’s strategic objective is to realize profitable, sustainable growth by capitalizing on our innovative base salary, with a maximum pay-out of 125% of annual base salary. strength in deposition technologies and our strong relationships with key customers. We act thereby as a responsible citizen. LONG-TERM INCENTIVES OR SHARE-BASED REMUNERATION In the past, the members of the Management Board were eligible to receive stock options and To realize our strategy, we focus on five key elements: innovative strength, operational excellence, performance shares under the ASMI 2014 long-term incentive plan for members of the Management employees, strong balance sheet, and responsible growth. Board to focus on the long-term interest of the company. Stock options vest after three years subject The remuneration report complies with the requirements of the Corporate Governance Code and is subject to meeting certain conditions. The members of the Management Board are required to hold aligned with the new Dutch legal requirements following the implementation of the EU Shareholders’ the vested performance shares for an additional two years; however, they are allowed to sell a part Right Directive II. The remuneration policy 2020-2023 of ASMI was adopted by the Annual General of the unconditional shares after three years for tax purposes. Since 2018, no new grants of stock Meeting of Shareholders (AGM) on May 18, 2020, and was consistently implemented in 2020 with options have taken place. The next grant of restricted shares will take place in April 2021. The revised regard to all remuneration elements. remuneration policy as approved by the AGM on May 18, 2020 no longer allows for stock option to continued employment and expire after seven years. Performance shares vest after three years grants moving forward. The main changes of the Management Board remuneration policy compared to the previous version have been explained during the 2020 AGM meeting and relate to: (1) the peer group change, due The long-term incentive scheme has the following main features. to AEX-listed peer companies being reviewed and expanded compared to High Tech and Semicon companies in the US and Europe region (total of 21 peer companies); (2) switch to performance shares as only remaining long-term incentive component (which had been in practice since 2018); and (3) the change of the maximum level of long-term incentive awards, based upon an extensive STOCK OPTIONS ›› Since 2018, stock options are no longer granted; ›› Options granted earlier are unconditional. 100% of the options which have been granted will benchmarking. become exercisable after three years; and The 2020 remuneration report refers to the remuneration policy of ASMI which can be found at: trading days preceding the granting of the option and including the date of granting. ›› The exercise price is equal to the average closing price on Euronext of ASMI shares during the five www.asm.com/investors/corporate-governance/supervisory-board/nomination-selection-and- remuneration-committee FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE91 OUTSTANDING OPTIONS The following table shows the outstanding options to purchase ASMI common shares held by current/former members of the Management Board, and changes in such holdings during 2020: Year of grant Vesting date Outstanding January 1, 2020 Granted in 2020 Exercised in 2020 2) Outstanding December 31, 2020 Exercise price End date P.A.M. van Bommel 1) P.A.M. van Bommel 1) P.A.M. van Bommel 1) C.D. del Prado 1) 3) C.D. del Prado 1) 3) C.D. del Prado 1) 3) C.D. del Prado 1) 3) Total 2015 2016 2017 2013 2015 2016 2017 April 24, 2018 April 22, 2019 April 21, 2020 December 31, 2016 April 24, 2018 April 22, 2019 April 21, 2020 15,910 22,833 8,937 81,680 30,548 45,293 18,249 223,450 – – – – – – – – – – – (81,680) – – – 15,910 22,833 8,937 – 30,548 45,293 18,249 €40.62 €34.06 €47.33 April 24, 2022 April 22, 2023 April 21, 2024 €21.79 December 31, 2020 €40.62 €34.06 €47.33 April 24, 2022 April 22, 2023 April 21, 2024 (81,680) 141,770 1 Options are granted for a term of seven years and become exercisable after a three-year vesting period. 2 Options of C.D. del Prado were exercised on August 6, 2020 at an average share price of €130.13. 3 Former CEO till May 18, 2020. PERFORMANCE SHARES The CEO and CFO are eligible to receive performance shares under the ‘ASMI N.V. 2014 long-term In order to show longer-term commitment to ASMI and align with shareholder interests, the CEO and CFO are required to hold the vested performance shares for two years (‘Holding Period’) after incentive plan for members of the Management Board’ to focus on the long-term interest of the vesting date. At year-end 2020, the three-year performance period of the performance shares the company. granted to the members of the Management Board on April 20, 2018, was completed. Based on the achievement of the performance criteria, the realization percentage is 150%. This leads to the The number of performance shares granted for on-target performance will be determined after the following vesting of the performance shares on April 21, 2021. performance year by the Supervisory Board, and relates to revenue growth compared to market and average EBIT percentage measured over a three-year performance period. ASMI applies a face value approach to define the number of shares to be granted. The award date is immediately following the date of announcement of the first quarter financial results in April for the year in which the award G.L. Loh P.A.M. van Bommel takes place. Performance Shares Vested – 13,512 The target level of the LTI is set at 165% of the annual base salary for the CEO and 125% for the In 2020 all outstanding conditional shares granted to the previous CEO in 2018, respectively 2019, CFO. This change has been adopted in the new remuneration policy, applicable as of 2020 up vested at grant level on retirement date (18,843 and respectively 15,582 shares). to 2023. The maximum number of shares that will be granted in case of out-performance of the predetermined performance indicators is 150% of the number at on-target performance. The number of shares granted will be zero in case none of the targets are met. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 92 For 2020, the Supervisory Board awarded the following amounts: ›› The previous CEO, Mr. del Prado, decided to step down per May 18, 2020, and therefore no value has been awarded in 2020; and ›› The Supervisory Board decided to award the following value to Mr. Loh, current CEO: €1,039,500 and Mr. van Bommel, CFO: €567,996, based on the renewed remuneration policy 2020. OUTSTANDING PERFORMANCE SHARES The following table shows the outstanding performance shares granted to members of the Management Board in 2020 and held by members of the Management Board per December 31, 2020: Grant date Status Number of shares at grant date Performance adjustment Vested in 2020 Outstanding December 31, 2020 Fair value at grant date Vesting date End of Holding period G.L. Loh 1) July 29, 2020 Conditional P.A.M. van Bommel April 21, 2017 Unconditional P.A.M. van Bommel April 20, 2018 Conditional P.A.M. van Bommel April 25, 2019 Conditional P.A.M. van Bommel April 22, 2020 Conditional C.D. del Prado 2) C.D. del Prado 2) C.D. del Prado 2) Total April 21, 2017 Unconditional April 20, 2018 Unconditional April 25, 2019 Unconditional 1 New CEO since May 18, 2020. 2 Former CEO till May 18, 2020. Holding obligation lapsed as of retirement. 8,087 6,234 9,008 7,343 5,559 12,730 18,843 15,582 83,386 – 1,790 – – – 3,656 – – – (8,024) – – – (16,386) (18,843) (15,582) 8,087 – 9,008 7,343 5,559 – – – €123.31 July 29, 2023 July 29, 2025 €47.52 April 21, 2020 April 21, 2022 €45.71 April 20, 2021 April 20, 2023 €57.84 April 25, 2022 April 25, 2024 €100.09 April 22, 2023 April 22, 2025 €47.52 April 21, 2020 May 18, 2020 €45.71 April 20, 2021 May 18, 2020 €57.84 April 25, 2022 May 18, 2020 5,446 (58,835) 29,997 The shares will become unconditional after three years, depending on the achievement of predetermined targets. The financial targets to be achieved are measured over a three-year PENSION ARRANGEMENT As of 2015, the members of the Management Board no longer participate in the industry-wide pension performance period and relate to revenue growth compared to market and an average EBIT fund. They are offered participation in a defined contribution plan for their salary up to €110,111. For percentage performance measure. The Management Board members will hold the unconditional their salary above €110,111, the members of the Management Board are compensated with an shares for at least an additional two years; however, they are allowed to sell a part of the unconditional amount equal to the employer pension contribution. The members of the Management Board have shares after three years for tax purposes. the option to participate in a net pension plan offered by the company or to have the compensation paid out in cash. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE93 TOTAL REMUNERATION OF MANAGEMENT BOARD The following table provides an overview of the 2020 remuneration elements in € thousands of both CEO and CFO as recognized by the company. During the year 2020, a CEO change was announced and approved by the AGM on May 18, 2020. 1 2 3 4 5 6 Fixed Remuneration (K€) Variable Remuneration (K€) Base Salary Fringe Benefits Short-term cash incentive (STI) Share-based payment expenses 3) Other 4) (K€) Pension expense (K€) Total Remuneration (K€) NAME OF DIRECTOR, POSITION 2019 2020 2019 2020 2019 2020 2019 G.L. Loh 1) P.A.M. van Bommel C.D. del Prado 2) Total – 441 702 393 454 267 – 40 77 36 39 28 1,143 1,114 117 103 – 551 1,053 1,604 448 452 293 – 413 855 1,193 1,268 2020 141 505 1,158 1,804 2019 2020 2019 2020 2019 – – – – – – 2,400 2,400 – 91 124 215 69 95 52 216 – 1,536 2,811 4,347 2020 1,087 1,545 4,198 6,830 Proportion of fixed and variable remuneration 2019 –% 59% 47% 2020 85% 61% 24% 1 New CEO since May 18, 2020, Annualized Base Salary 2020 €630. 2 Former CEO till May 18, 2020, Annualized Base Salary 2020 €702. 3 These amounts represent the vesting expenses related to the financial year. 4 Represents an additional payroll tax payable by the company due to vesting of granted shares in previous years related to the retirement of a member of the Management Board subject to article 32bb of the Dutch Wage Tax Act. 1. Fixed remuneration The on-target bonus percentage for the CEO is 100% of the annual base salary, with a maximum Base salary. This is the fixed annual gross base salary. A salary increase of 3% has been implemented pay-out of 150% of the annual base salary. For the year 2020, the CEO realized overall an over- as of January 1, 2020, in line with normal market movement in the Netherlands. achievement on STI (mix of below target, above target and stretch on company financial targets and Fringe benefits. This represents the value of benefits and perquisites awarded, such as company car, representation and expense allowance, premium for health and disability insurance, as well as social The on-target bonus percentage for the CFO is 75% of annual base salary, with a maximum pay-out mix of at target and stretch on non-financial targets). security contributions. 2. Variable remuneration of 125% of annual base salary. For 2020, the CFO realized overall an over-achievement on STI (same outcome as CEO on company financial targets and in addition stretch on non-financial targets). Short-term cash Incentive (STI). Each year, a short-term incentive can be earned, based on achieving Share-based payment or long-term incentives. This is a multi-year variable payment of which the specific challenging targets. The short-term incentive recognizes three levels: threshold, on target, value is the value of a performance share award that has become unconditional after a performance and stretch. Threshold levels for both the CEO and CFO are set at 70% of the on-target level, while period of three years. The unconditional award is the result of targets on revenue growth compared stretch targets are set at 140% of the on-target level. If the actual realization is between threshold to market and average EBIT. and on-target or between on-target and stretch, the payout will be based upon the relative deviation against these levels. The targets are 75% based on company financial targets (equally divided 3. Other items between revenue, EBIT, and free cash flow) and 25% based on non-financial targets. Non-recurring items, which represents in 2020 an additional payroll tax to the company due to vesting of already granted shares in previous years related to the retirement of a member of the Management Board subject to article 32bb of the Dutch Wage Tax Act. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE94 4. Pension expense As is mentioned in the contracts of the members of the Management Board, in the case of termination As of 2015, members of the Management Board no longer participate in the industry-wide pension of the contract on behalf of the company, the members of the Management Board are eligible for a fund. They opt to participate in a defined contribution plan for their salary up to €110,111. The severance payment of a maximum one-year annual gross base salary. company reimburses an amount equal to the employer pension contribution for their salary above €110,111. The CEO and CFO opt either to participate in a net pension plan offered by the company or to have the cost for participating paid out directly. The pension contributions vary from 7.2% CLAW BACK AND ULTIMUM REMEDIUM In exceptional circumstances, the Supervisory Board will have the discretionary authority to recover to 28.4% of the pensionable salary, depending on age. The members of the Management Board any amount of paid bonus and awarded shares, if evidence shows payments and awards have been contribute 4.6% of the pensionable salary and ASMI pays the remaining part. There are no awarded based on incorrect financial or other data (claw back). arrangements regarding early retirement. 5. Total remuneration If a variable component conditionally awarded in a previous financial year would, in the opinion of the Supervisory Board, produce an unfair result due to extraordinary circumstances during the period Value equals sum of 1, 2, 3 and 4 as described above. in which the predetermined indicators have been or should have been achieved, the Supervisory Board has the authority to adjust the value of bonus and shares downwards or upwards (ultimum 6. Proportion of fixed and variable remuneration remedium). Relative proportion of fixed remuneration: By dividing the sum of fixed components: column 1 and the fixed part of pension expense presented in column 4 by the amount of total remuneration (column The NSR Committee concluded for 2020 that no circumstances have been identified that result in 5), multiplied by 100%. any adjustments or claw back of variable remuneration. Relative proportion of variable remuneration: By dividing the sum of the variable components (columns 2, 3 and the variable part of the pension expense in column 4, if any) by the amount of total remuneration (column 5), multiplied by 100%. EMPLOYMENT CONTRACTS / SERVICE AGREEMENTS The CEO and CFO have a written contract with ASMI or one of its related subsidiaries, in accordance with Dutch law, for four years: ›› Mr. C.D. del Prado, started May 18, 2006; in May 2018, Mr. del Prado was reappointed for a new term of 4 years. Mr. del Prado decided to step down per May 18, 2020 and his employment with ASMI ended on May 18, 2020; ›› Mr. G.L. Loh, started May 18, 2020, and was appointed for a term of 4 years based on a service agreement; and ›› Mr. P.A.M. van Bommel, started July 1, 2010; in May 2018, Mr. van Bommel was reappointed for a new term of 4 years. On October 13, 2020, it was announced that Mr. van Bommel informed the company of his intention to step down from his role as of May 17, 2021. COMPLIANCE TO REMUNERATION POLICY AND LONG-TERM PERFORMANCE The Supervisory Board reviewed the remuneration policy in 2020 leading to the presentation of the revised policy to the Annual General Meeting of Shareholders on May 18, 2020, which approved the proposal, as applicable as of 2020. An analysis of different scenarios was included in this review. The purpose of the remuneration policy for the members of the Management Board of ASMI is to provide compensation that: ›› Motivates and rewards executives in both the Management Board and Supervisory Board with a balanced and competitive remuneration, in sync with role and responsibilities; ›› Allows ASMI to attract, reward and retain highly qualified executives with the required background, skills and experience to implement the strategy of ASMI in a highly competitive global industry; ›› Ensures that short-term operational results and long-term sustainable value creation are balanced; and ›› Is transparent, fair and reasonable, and aligns the interests of ASMI, shareholders and other stakeholders in the medium- and long-term to deliver sustainable performance in line with the For future new appointments to the Management Board, the term of the appointment will also be set strategy, purpose and values of ASMI. at four years. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE95 DEROGATIONS FROM REMUNERATION POLICY The Supervisory Board has not derogated or deviated from the remuneration policy. ASMI does not provide any loans, advanced payments, deposits or related guarantees to the CEO, CFO or Supervisory Board. COMPARATIVE INFORMATION ON THE CHANGE OF REMUNERATION AND COMPANY PERFORMANCE Annual Change 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 Information regarding 2020 Management Board Remuneration G.L. Loh, CEO (as of May 18) P.A.M. van Bommel, CFO C.D. del Prado, CEO (until May 18) Company Performance Front-end Sales Front-end EBIT Free Cash flow Qualitative/Non-Financial Strategic Objectives/Targets –% 89% 93% 89% 79% 8% 96% –% 107% 112% 123% 133% 463% 113% –% 101% 105% 111% 119% 125% 103% –% 123% 124% 157% 171% 488% 128% –% 101% 64% Former CEO retired May 18, 2020 103% 142% 53% 88% Average remuneration on a full-time equivalent basis of employees (K€) Average remuneration of employees CEO pay ratio 2016 2017 2018 2019 2020 75 23 78 25 75 27 85 31 88 27 Increase % average remuneration: 14% and increase # of employees: 11% The ratio of the CEO remuneration and the average remuneration of all other employees (the pay ratio) The 2020 ASMI remuneration report considers the draft guidelines to specify the standardized is calculated by dividing the remuneration of the CEO by the average remuneration of all employees. presentation of the remuneration report as stated in the Directive 2007/36EC of the European The remuneration of the CEO is the total of annualized base salary and bonus of the new CEO as Parliament, and amended by Directive (EU) 2017/828, Article 9b (6). well as share-based payment (extrapolated to regular annual accrual). The average remuneration of all employees is calculated by dividing the total personnel costs (wage and salaries and share-based This report is the remuneration report required in accordance with article 2:135b of the Dutch Civil payments) minus the remuneration of the CEO, by the total number of employees. The pay ratio is in Code and the Dutch Corporate Governance Code. line with anticipated internal development of pay levels. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEREMUNERATION OF THE SUPERVISORY BOARD The 2020 remuneration report refers to the remuneration policy of ASMI which can be found at: www.asm.com/investors/corporate-governance/supervisory-board/nomination-selection-and- Any recommended changes to the remuneration of the members of the Supervisory Board will be submitted to the AGM for approval. remuneration-committee The remuneration of members of the Supervisory Board was most recently revised during the 2018 The following table sets forth information concerning all remuneration (base compensation, no bonuses or pensions were paid) from the company (including its subsidiaries) for services in all No stock options or performance shares have been granted to members of the Supervisory Board. capacities to all current and former members of the Supervisory Board of the company: Annual General Meeting of Shareholders. 96 Year ended December 31, Annual fee Committee fee Total remuneration 2019 2020 2019 2020 2019 2020 70.0 50.0 50.0 50.0 50.0 – – 70.0 50.0 19.1 50.0 50.0 31.0 31.0 13.5 8.5 6.0 10.0 7.5 – – 13.5 8.5 2.3 10.0 7.5 3.7 4.7 83.5 58.5 56.0 60.0 57.5 – – 83.5 58.5 21.4 60.0 57.5 34.7 35.7 270.0 301.1 45.5 50.2 315.5 351.3 Supervisory Board: J.C. Lobbezoo M.C.J. van Pernis U.H.R. Schumacher 1) S. Kahle-Galonske M.J.C. de Jong D.R. Lamouche 2) M. de Virgiliis 2) TOTAL 1 Period to May 18, 2020. 2 Period as of May 18, 2020. Annual change 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 Supervisory Board Remuneration J.M.R. Danneels H.W. Kreutzer J.C. Lobbezoo M.C.J. van Pernis U.H.R. Schumacher S. Kahle-Galonske M.J.C. de Jong D.R. Lamouche M. de Virgiliis 40% 100% 100% 100% 100% –% –% –% –% –% 100% 100% 100% 100% –% –% –% –% –% 41% 112% 107% 107% 183% –% –% –% –% –% 106% 104% 105% 107% 169% –% –% –% –% 100% 100% 38% 100% 100% –% –% FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEExternal auditor External auditor 97 EXTERNAL AUDITOR In accordance with Dutch law, ASMI’s external auditor is appointed by the Annual General Meeting of Shareholders and is nominated for appointment by the Supervisory Board upon advice from the Audit Committee and the Management Board. Our current external auditor, KPMG, was reappointed as external auditor by the 2020 Annual General Meeting of Shareholders (AGM) for the reporting year 2020. The external auditor is present at our AGM to respond to questions, if any, from the shareholders about the auditor’s report on the financial statements. TAX SERVICES The Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total for identified services related to tax matters. Additional services exceeding the specified pre- The Audit Committee has determined that the provision of services by KPMG and its member firms approved limits, or involving service types not included in the pre-approved list, require specific Audit is compatible with maintaining KPMG’s independence. All audit and permitted non-audit services Committee approval. provided by KPMG and its member firms during 2020 were pre-approved by the Audit Committee. AUDIT COMMITTEE POLICIES AND PROCEDURES The Audit Committee has adopted the following policies and procedures for pre-approval of all audit OTHER SERVICES In the case of specified services for which utilizing our external auditor creates efficiencies, minimizes disruption or preserves confidentiality, or for which management has determined that our external and permitted non-audit services provided by our external auditor. auditor possesses unique or superior qualifications to provide such services, the Audit Committee AUDIT SERVICES Management submits to the Audit Committee for pre-approval the scope and estimated fees for specific services directly related to performing the independent audit of our statutory and consolidated financial statements for the current year. AUDIT-RELATED SERVICES The Audit Committee may pre-approve expenditures up to a specified amount for services included in identified service categories that are related extensions of audit services and are logically performed by the auditors. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval. may pre-approve expenditures up to a specified amount per engagement and in total. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEDeclarations Declarations DECLARATIONS 98 COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE The Dutch Corporate Governance Code was last amended on December 8, 2016. As of 2018, CORPORATE GOVERNANCE STATEMENT ASMI complies with the Corporate Governance Code. All required information is part of this Annual Dutch listed companies are required to report on compliance with the revised Code. The full text of Report. the Dutch Corporate Governance Code can be found on the website of the Monitoring Commission Corporate Governance Code (www.mccg.nl). Corporate governance-related documents are available on our website. These include, amongst ASMI applies the relevant principles and best practices of the revised Code applicable to Committee charter, the Nomination, Selection and Remuneration Committee charter, the COBC, the company, to the Management Board, and to the Supervisory Board, in the manner set out in the whistleblower policy, the anti-fraud policy, the rules concerning Insider Trading, the remuneration the Corporate Governance section, as long as it does not entail disclosure of commercially sensitive policy, diversity policy, and policy regarding communications and bilateral contacts with shareholders. others, the Supervisory Board profile, Supervisory Board rules, Management Board rules, the Audit information, as accepted under the Code. ASMI agrees with principle 3.2.3 of the Code that in most circumstances a maximum severance ARTICLE 10 EU TAKEOVER DIRECTIVE DECREE The Management Board states that the information required under Article 10 of the EU Takeover payment of one year for Management Board members is appropriate. However, we want to reserve Directive Decree is disclosed herein to the extent that it is applicable to ASMI. the right to agree to different amounts in case we deem this to be required by the circumstances. Any deviations will be disclosed. RESPONSIBILITY STATEMENT The members of the Management Board state that, to the best of their knowledge, the statutory financial statements prepared in accordance with IFRS-EU and Title 9 of part 2 of the Dutch Civil Code as included in this Annual Report 2020 provide a true and fair view of the assets, liabilities, financial position, and results of the company and its subsidiaries included in the consolidated statements, and that the management report provides a true and fair view of the position and the business of the company and its subsidiaries, and the Annual Report 2020 provides a description of the principal risks and uncertainties that the company faces. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEFINANCIAL STATEMENTS 99 FINANCIAL STATEMENTS In 2020, revenue grew by 18% excluding the settlement proceeds in 2019 and reached a new record of €1.3 billion. ALD continued our key driver and our spares & services business delivered an outstanding performance. Operating result increased to €327.1 million from €219.6 million in 2019 excluding the settlement proceeds. OTHER DEVELOPMENTS New bookings increased by 12% in 2020 to €1,314 million, excluding the proceeds from the settlements in 2019. Equipment bookings were led by the foundry segment, followed by memory and logic. Total research and development (R&D) expenses, including impairment, capitalization and amortization of development expenses, increased by 25% in 2020 compared to the previous year due to higher activities. Consolidated financial statements Consolidated statement of profit or loss Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements ASM International N.V. financial statements Company balance sheet Company statement of profit or loss Notes to the company financial statements Independent auditor’s report 100 100 101 102 103 104 105 147 147 148 149 155 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEConsolidated financial statements Consolidated statement of profit or loss Consolidated financial statements Consolidated statement of profit or loss 100 CONSOLIDATED STATEMENT OF PROFIT OR LOSS (EUR thousand, except per share data) Revenue Cost of sales Gross profit Operating expenses: Selling, general and administrative Research and development Total operating expenses Result from operations Finance income Finance expense Foreign currency exchange loss Share in income of investments in associates Result before income taxes Income taxes Net earnings from operations, attributable to common shareholders Per share data Basic net earnings per share (EUR): From operations Diluted net earnings per share (EUR): From operations Weighted average number of shares (thousand): Basic Diluted The notes on the following pages are an integral part of these consolidated financial statements. Year ended December 31, Notes 2019 2020 21 23 23 23 17 6 22 24 1,283,860 1,328,122 (645,396) 638,464 (148,929) (110,846) (704,553) 623,569 (157,424) (139,002) (259,775) (296,426) 378,689 1,639 (1,766) (146) 4,247 382,663 (53,650) 329,013 6.66 6.58 49,418 49,999 327,143 141 (2,008) (23,157) 31,950 334,069 (48,673) 285,396 5.84 5.78 48,907 49,359 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE Consolidated statement of comprehensive income Consolidated statement of comprehensive income 101 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR thousand) Net earnings from operations, attributable to common shareholders Other comprehensive income, net of income tax Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligation Share of other comprehensive income (loss) investments in associates Items that may be subsequently reclassified to profit or loss: Foreign currency translation effect Other comprehensive income for the year, net of income tax Notes Year ended December 31, 2019 329,013 2020 285,396 13 6 (103) (3,991) (4,094) 31,427 31,427 27,333 374 (2,296) (1,922) (98,833) (98,833) (100,755) Total comprehensive income, attributable to common shareholders 12 356,346 184,641 The notes on the following pages are an integral part of these consolidated financial statements. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE Consolidated statement of financial position Consolidated statement of financial position CONSOLIDATED STATEMENT OF FINANCIAL POSITION 102 (EUR thousand) Assets Right-of-use assets Property, plant and equipment Goodwill Other intangible assets Investments in associates Deferred tax assets Other non-current assets Evaluation tools at customers Employee benefits (pension assets) Total non-current assets Inventories Accounts receivable Income taxes receivable Other current assets Cash and cash equivalents Total current assets Total assets Equity and liabilities Equity Accrued expenses and other payables (lease liabilities) Deferred tax liabilities Total non-current liabilities Accounts payable Provision for warranty Income taxes payable Accrued expenses and other payables Total current liabilities Total liabilities Total equity and liabilities The notes on the following pages are an integral part of these consolidated financial statements. December 31, Notes 2019 2020 2 3 4 5 6 22 7 13 8 9 22 10 11 12 22 14 22 15 27,547 164,863 11,270 189,224 778,268 3,064 7,780 47,247 579 23,387 213,967 11,270 209,924 742,714 196 6,590 69,474 1,431 1,229,842 1,278,953 173,189 199,535 1,220 73,479 497,874 945,297 162,199 280,061 553 72,945 435,228 950,986 2,175,139 2,229,939 1,818,651 1,854,724 15,774 20,136 35,910 119,712 16,424 34,599 149,843 320,578 356,488 13,045 21,892 34,937 124,507 18,987 67,857 128,927 340,278 375,215 2,175,139 2,229,939 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE Consolidated statement of changes in equity Consolidated statement of changes in equity 103 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR thousand except for share data) Balance as of January 1, 2019 Net earnings Other comprehensive income Total comprehensive income Dividend paid to common shareholders Capital repayment Compensation expense share-based payments Exercise stock options out of treasury shares Vesting restricted shares out of treasury shares Purchase of common shares Cancellation of common shares out of treasury shares Other movements in investments in associates: Dilution Balance as of December 31, 2019 Net earnings Other comprehensive income Total comprehensive income Dividend paid to common shareholders Capital repayment Compensation expense share-based payments Exercise stock options out of treasury shares Vesting restricted shares out of treasury shares Purchase of common shares Cancellation of common shares out of treasury shares Other movements in investments in associates: Dilution Balance as of December 31, 2020 Notes Number of common shares outstanding Common shares Capital in excess of par value Treasury shares at cost Retained earnings Other reserves 1) Total equity 49,318,898 2,252 50,902 (328,010) 1,816,941 99,607 1,641,692 12 13 13 13 12 12 6 12 13 13 13 12 12 6 — — — — — — 316,028 182,196 (950,902) — — 48,866,220 — — — — — — 127,324 229,823 (508,685) — — 48,714,682 — — — — — — — — — (200) — 2,052 — — — — — — — — — (60) — 1,992 — — — — (1,144) 10,538 (8,056) (8,564) — — — — — — — — — 14,823 8,564 (100,131) 235,047 329,013 — 329,013 (99,299) — — — — — (234,847) — 3,882 — 27,333 27,333 — — — — — — — — 329,013 27,333 356,346 (99,299) (1,144) 10,538 6,767 — (100,131) — 3,882 43,676 (169,707) 1,815,690 126,940 1,818,651 285,396 — 285,396 — (100,755) (100,755) 285,396 (100,755) 184,641 — — — — — — 8,697 16,043 (67,505) 107,510 (98,688) — — — — — (107,450) — — — — — 12,792 (5,923) (16,043) — — — — — — — — — — — (98,688) — 12,792 2,774 — (67,505) — 2,059 — 2,059 34,502 (104,962) 1,897,007 26,185 1,854,724 1 Other reserves consist of the currency translation reserve, remeasurement on net defined benefit and the reserve for proportionate share in other comprehensive income investments in associates. See Note 12. The notes on the following pages are an integral part of these consolidated financial statements. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEConsolidated statement of cash flows Consolidated statement of cash flows 104 CONSOLIDATED STATEMENT OF CASH FLOWS (EUR thousand) Cash flows from operating activities Net earnings from operations Adjustments to reconcile net earnings to net cash from operating activities Depreciation, amortization and impairments Share-based compensation Non-cash costs Non-cash interest Share in income of investments in associates Income tax Changes in assets and liabilities Accounts receivable Inventories Evaluation tools Other assets Accounts payable and accrued expenses Income tax paid Net cash from operating activities Cash flows from investing activities Capital expenditures Proceeds from sale of property, plant and equipment Capitalized development expenditure Purchase of intangible assets Dividend received from associates Net cash used in investing activities Cash flows from financing activities Payment of lease liabilities Purchase of treasury shares ASMI Proceeds from issuance of treasury shares Dividends to common shareholders of ASMI Capital repayment Net cash used in financing activities Foreign currency translation effect on cash and cash equivalents Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The notes on the following pages are an integral part of these consolidated financial statements. Year ended December 31, Notes 2019 2020 329,013 285,396 2,3,5,7 13 6 22 7 3 3 5 5 6 2 12 13 11 11 78,321 10,538 4,884 593 (4,247) 53,650 (23,937) 3,058 (13,670) (24,280) 81,134 (6,186) 89,029 12,792 10,435 561 (31,950) 48,673 (93,000) 498 (39,710) 2,379 (12,695) (8,055) 488,871 264,353 (48,707) 28 (60,202) (2,320) 31,960 (79,241) (12,048) (99,929) 6,767 (99,298) (1,144) (205,652) 7,989 211,967 285,907 497,874 (95,441) 2,348 (64,126) (3,230) 16,142 (144,307) (7,819) (66,715) 2,774 (98,688) — (170,448) (12,244) (62,646) 497,874 435,228 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE Notes to the consolidated financial statements Notes to the consolidated financial statements 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. GENERAL INFORMATION/SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PREPARATION The consolidated financial statements have been prepared under the historical cost convention, unless otherwise indicated. The company applies the going concern basis in preparing its GENERAL INFORMATION ASM International N.V. (ASMI, or the company) is a Dutch public liability company domiciled in consolidated financial statements. the Netherlands with its principal operations in Europe, the United States of America and Asia. Historical cost is generally based on the fair value of the consideration given in exchange for goods The company dedicates its resources to the research, development, manufacturing, marketing and and services. servicing of equipment and materials used to produce mainly semiconductor devices. The company is registered at Versterkerstraat 8, 1322 AP Almere, the Netherlands. A number of the company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The company's shares are listed for trading on the Euronext Amsterdam Stock Exchange (symbol ASM). The accompanying consolidated financial statements include the financial statements of transaction between market participants at the measurement date, regardless of whether that price ASM International N.V. and its consolidated subsidiaries (together also referred to as ASMI, or the is directly observable or estimated using another valuation technique. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly company). ASMI's subsidiaries are listed in Note 28 and associates are listed in Note 6. BASIS FOR ACCOUNTING The consolidated financial statements for the year ended December 31, 2020 have been prepared party information, such as broker quotes or pricing services, is used to measure fair values, the company assesses and documents the evidence obtained from the third parties to support the in accordance with International Financial Reporting Standards (IFRS) as adopted by the European conclusion that such valuations meet the requirements of IFRS, including the level in the fair value Union and also comply with the financial reporting requirements included in Section 362(9) of Part 9, hierarchy in which such valuations should be classified. The company has an established approach with respect to the measurement of fair values. If third- Book 2 of the Dutch Civil Code. The consolidated financial statements have been prepared by the Management Board of the company and authorized for issue on March 4, 2021 and will be submitted for adoption to the Annual General Meeting of Shareholders (AGM) on May 17, 2021. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: ›› Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. ›› Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The consolidated financial statements will be filed with the AFM and at the Trade Register of the ›› Level 3: inputs for the asset or liability that are not based on observable market data (unobservable Chamber of Commerce in Almere, the Netherlands within eight days of adoption by the 2021 AGM. inputs). FUNCTIONAL AND PRESENTATION CURRENCY The consolidated financial statements are presented in Euros (EUR), which is the company's If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the functional currency. All amounts have been rounded to the nearest thousand, unless otherwise fair value hierarchy as the lowest level input that is significant to the entire measurement. indicated. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE106 Further information about the assumptions made in measuring fair values is included in the following to events and conditions that may cast significant doubt on ASMI’s ability to continue as a Notes: ›› Note 13 - Employee benefits; and ›› Note 17 - Financial instruments and financial risk management. going concern. CRITICAL ACCOUNTING POLICIES A critical accounting policy is defined as one that is both material to the presentation of ASMI’s USE OF ESTIMATES AND JUDGMENTS In preparing these consolidated financial statements, management has made judgments, estimates consolidated financial statements and that requires management to make difficult, subjective or complex judgments that could have a material effect on ASMI’s financial condition or results of and assumptions about the carrying amounts of assets and liabilities that are not readily apparent operations. Specifically, these policies have the following attributes: (1) ASMI is required to make from other sources. The estimates and associated assumptions are based on historical experience assumptions about matters that are highly uncertain at the time of the estimate; and (2) different and other factors that are considered to be relevant. Actual results may differ from these estimates. estimates ASMI could reasonably have used, or changes in the estimate that are reasonably likely to Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are occur, could have a material effect on ASMI’s financial condition or results of operations. recognized prospectively. Information about assumptions and estimation uncertainties that have a significant risk of resulting certainty. ASMI bases its estimates on historical experience and on various other assumptions in a material adjustment to the carrying amounts of assets and liabilities within the year ended believed to be applicable and reasonable under the circumstances. These estimates may change Estimates and assumptions about future events and their effects cannot be determined with December 31, 2020 is included in the following Notes: ›› Notes 3, 5, 6 and 7 - Valuation of non-financial assets; ›› Note 8 - Valuation of allowance for obsolescence inventories; and ›› Note 22 - Valuation of deferred tax assets. as new events occur, as additional information is obtained, and as ASMI’s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Based on a critical assessment of its accounting policies and the COVID-19 As the COVID-19 outbreak started to expand over the world in the first quarter of 2020, various underlying judgments and uncertainties affecting the application of those policies, management believes that ASMI’s consolidated financial statements are fairly stated in accordance with IFRS, countries took drastic measures like lockdowns and closure of borders. ASMI’s operations were and provide a meaningful presentation of ASMI’s financial condition and results of operations. An affected by this. It caused disruptions to our supply chain as borders were closed and goods and analysis of specific sensitivity to changes of estimates and assumptions is included in the Notes to people could not move. The lockdowns resulted in lower capacity at our suppliers but also at our the (consolidated) financial statements. own operations in Singapore. Towards the end of the second quarter, the situation started to improve as lockdown measures and transport restrictions were gradually lifted in especially Asia Pacific and Europe. During 2020, the performance of the company was not materially impacted by COVID-19. Total revenue was 3% above the level of last year and excluding proceeds resulting from the patent litigation & arbitration settlements (€159 million) in 2019 the revenue increased with 18% compared to prior year. Based on our impairments tests performed at year-end 2020, we concluded that even with a significant negative scenario, the recoverable amounts for our non-current assets exceeded the carrying amounts. Management has concluded that there are no material uncertainties related Management believes that the following accounting policies are critical: ›› revenue recognition; ›› inventories; ›› evaluation of long-lived assets for impairment; ›› evaluation of investments in associates for impairment; ›› intangible assets for capitalization and for impairment; and ›› income taxes. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE107 CHANGES IN ACCOUNTING POLICIES Application of new and revised International Financial Reporting Standards (IFRS) Subsidiaries Subsidiaries are entities controlled by the company. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until New and amended IFRS Standards that are effective for the current year the date on which control ceases. Amendments to IFRS 3 ‘Definition of a Business', amendments to IFRS 9, IAS 39 and IFRS 7 ‘Interest Rate Benchmark Reform', amendments to IAS 1 and IAS 8 ‘Definition of Material' and ‘Amendments Interests in equity-accounted investees to References to the Conceptual Framework in IFRS Standards' are effective on January 1, 2020. The company’s interests in equity-accounted investees comprise investments in associates. These changes have been assessed for their potential impact and do not have a material effect on the company's consolidated financial statements. Associates are those entities in which the company has significant influence, but not control or joint ACCOUNTING POLICIES The company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements. Consolidation control, over the financial and operating policies. Interests in associates are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Upon acquisition of the investment in an associate, any excess of the cost of the investment over the company’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included in the carrying The consolidated financial statements include the accounts of ASMI and all of its subsidiaries where amount of the investment. ASMI holds a controlling interest. Non-controlling interest is disclosed separately, where appropriate, in the consolidated financial statements. Control is achieved when ASMI has: ›› the power over an investee; ›› exposure, or rights, to variable returns from its involvement with the investee; and ›› the ability to use its power over the investee to affect the amount of the investor's returns. Subsequent to initial recognition, the consolidated financial statements include the company's share of the profit or loss and other comprehensive income (OCI) of equity-accounted investees, until the date on which significant influence ceases. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses arising from intra- group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted ASMI reassesses whether or not it controls an investee if facts and circumstances indicate that there investees are eliminated against the investment to the extent of the company’s interest in the investee. are changes to one or more of the three elements of control listed above. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there As from the date these criteria are met, financial data of the relevant subsidiary are included in the consolidation and deconsolidated from the date on which ASMI's control ceases. Foreign currency translation is no evidence of impairment. Loss of control The individual financial statements of each group entity are presented in their local functional currency. For the purpose of the consolidated financial statements, the results and financial position of each Upon loss of control, ASMI derecognizes the assets and liabilities of the subsidiary. Any surplus entity is expressed in euros, which is ASMI's functional currency and the presentation currency for or deficit arising on the loss of control is recognized in profit or loss. If ASMI retains any interest the consolidated financial statements. in this subsidiary, then such interest is measured at fair value at the date on which control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE108 Foreign currency transactions The Back-end segment is still reported as a separate segment after the company ceased control on In preparing the financial statements of the individual entities, transactions in foreign currencies March 15, 2013, since the full results of the Back-end segment are continued to be reviewed by our are recorded at the exchange rates on the date of the transactions. At each balance sheet date, Chief Operating Decision Maker (CODM). monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are Accordingly, the asset and profit or loss information regarding the operations that comprise the translated at the rates prevailing on the date when the fair value was determined. segment are disclosed. The full financial results are reviewed by the CODM, the external reporting of Exchange rate differences arising on the settlement of monetary items, and on the translation of is reconciled to the corresponding amounts reported in the consolidated financial statements, monetary items, are recognized in the consolidated statement of profit or loss in the period in which eliminations are reflected in the reconciling column for amounts reported in excess of those amounts the segment is on an equity method investment basis. The total of all segments' financial amounts they arise. Exchange rate differences arising on the translation of non-monetary items carried at reflected in the consolidated financial statements. fair value are recognized in the consolidated statement of profit or loss for the period except for differences arising on the translation of non-monetary items in respect of which gains and losses are The Front-end segment manufactures and sells equipment used in wafer processing, encompassing recognized directly in equity. Foreign operations the fabrication steps in which silicon wafers are layered with semiconductor devices. The segment is a product-driven organizational unit comprised of manufacturing, service, and sales operations in Europe, the United States, Japan, South Korea and Southeast Asia. For the purpose of presenting consolidated financial statements, assets and liabilities of foreign operations are translated into euros at the exchange rates at the reporting date. The income and The Back-end segment manufactures and sells equipment and materials used in assembly and expenses of foreign operations are translated into euros at the exchange rates at the dates of packaging, encompassing the processes in which silicon wafers are separated into individual circuits the transactions. and subsequently assembled, packaged and tested. The segment is organized in ASM Pacific Technology Ltd, in which the company holds a 25.07% interest, whilst the remaining shares are listed Foreign currency differences are recognized in OCI and accumulated in the translation reserve, on the Stock Exchange of Hong Kong. except to the extent that the translation difference is allocated to non-controlling interest. Property, plant and equipment When a foreign operation is disposed of in its entirety or partially such that control or significant Items of property, plant and equipment are measured at cost, less accumulated depreciation and any influence is lost, the cumulative amount in the translation reserve related to that foreign operation is accumulated impairment losses. reclassified to profit or loss as part of the gain or loss on disposal. If the company disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount If significant parts of an item of property, plant and equipment have different useful lives, then they are is reattributed to non-controlling interest. When the company disposes of only part of an associate accounted for as separate items (major components) of property, plant and equipment. while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss. Segment reporting Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. The estimated useful lives, residual values and depreciation The company organizes its activities in two operating segments, Front-end and Back-end. method are reviewed at the end of each reporting period, with the effect of any changes in estimate Operating segments are reported in a manner consistent with the internal reporting provided to accounted for on a prospective basis. the Chief Executive Officer (CEO), which is the CODM. Operating segments are in line with the reporting segments. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE109 The estimated useful lives of property, plant and equipment for current and comparative periods are Other intangible assets as follows: Building and leasehold improvements Machinery equipment Furniture and fixtures and other equipment Other intangible assets include capitalized development expenses, software, purchased technology, and remaining other intangible assets. Other intangible assets that are acquired by the company with finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses. 1-25 years 2-10 years 2-10 years Expenditure on research activities is recognized in profit or loss as incurred. An item of property, plant and equipment is recognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on disposal of an In determining the capitalization of development expenses, the company makes estimates and item of property, plant and equipment is recognized in profit or loss. assumptions based on expected future economic benefits generated by products that are the result Intangible assets Goodwill The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Transaction costs are expensed as incurred. Goodwill represents the excess of the costs of an acquisition over the fair value of the amounts assigned to assets acquired and liabilities incurred or assumed of the acquired subsidiary at the date of these development expenses. Other important estimates and assumptions are the required internal rate of return, the distinction between research, development and high-volume manufacturing, and the estimated useful life. Development expenses are capitalized when all of the following criteria are demonstrated: ›› the technical feasibility of completing the intangible asset so that it will be available for use or sale; ›› its intention to complete the intangible asset and use or sell it; ›› its ability to use or sell the intangible asset; ›› how the intangible asset will generate probable future economic benefits; ›› the availability of adequate technical, financial and other resources to complete the development of acquisition. Goodwill on acquisition of subsidiaries is allocated to cash generating units (CGUs) and to use or sell the intangible asset; and for the purpose of impairment testing. The allocation is made to those CGUs that are expected to ›› its ability to reliably measure the expenditure attributable to the intangible asset during its benefit from the business combination in which the goodwill arose. Goodwill is tested for impairment development. annually and whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. If the recoverable amount of the CGU is less than the carrying The company capitalizes development expenses that meet the above-mentioned criteria in its amount of the unit, the impairment loss is recognized. An impairment loss recognized for goodwill is consolidated financial statements. Subsequent to initial recognition, internally-generated intangible not reversed in a subsequent period. Goodwill is stated at cost less accumulated impairment losses. assets are reported at cost less accumulated amortization and accumulated impairment losses, on The company’s goodwill arising on the acquisition of an associate is described in Note 6 'Investments in Associates'. the same basis as intangible assets that are acquired separately. Amortization of capitalized development expenses is calculated using the straight-line method over the estimated useful lives of the developed product. Amortization starts when the developed product is ready for its intended use. In the development cycle, this is when the product is transferred from the validation (beta) phase to high-volume manufacturing. Amortization method, useful life, and residual value are reviewed at each reporting date and adjusted if appropriate. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE110 The estimated useful lives of other intangible assets for current and comparative periods are as determination of whether an investment is impaired is made at the individual security level in each follows: Development cost Software Purchased technology and other intangible assets 5 years 3 years 5-7 years Investments in associates Investments in associates are investments in entities in which ASMI can exert significant influence reporting period. Evaluation tools at customers Evaluation tools at customers are systems generally delivered to customers under evaluation and include substantial customization by our engineers and R&D staff in the field. Evaluation tools are recorded at cost and depreciated using the straight-line method over their estimated useful life of five years, or their shorter economic life. The depreciation expenses are reported as cost of sales. but which ASMI does not control, generally having between 20% and 50% of the voting rights. On final written technical acceptance and purchase order from the customer, the purchase These entities are accounted for using the equity method and are initially recognized at cost. consideration is recognized as revenue at a point in time and the carrying value of the evaluation Dividend income from the company’s associated companies is recognized when the right to receive system is recognized as cost of sales. In the circumstance that the system is returned, at the end of payment is established. Their carrying value includes goodwill identified upon acquisition, net of any the evaluation period, a detailed impairment review takes place, and future sales opportunities and accumulated impairment. additional costs are identified. It is only when the fair value is below the carrying value of the evaluation tool that an additional depreciation is recognized. The remaining carrying value is recognized as When ASMI’s share of losses in an associate equals or exceeds its interest in the associate, including finished goods in inventories. any other receivables for which settlement is neither planned nor likely to occur in the foreseeable future, ASMI does not recognize further losses, unless ASMI has obligations to or made payments on Inventories behalf of the associate. Inventories are stated at the lower of cost or net realizable value. The cost of inventories is based on the first-in, first-out principle. Costs include net prices paid for materials purchased, charges for At each reporting date, the company determines if there is any objective evidence that the associate freight and custom duties, production labor costs and factory overhead. Allowances are made for is impaired. An impairment, being the difference between the recoverable amount of the associate slow-moving, obsolete or unsellable inventory. and its carrying value, is recognized in the consolidated statement of profit or loss. ASMI does not separately test associates' underlying assets for impairment. However, ASMI as the expected market value of the inventory. We regularly evaluate the value of our inventory of recognizes its share of any impairment charge recorded by an investee and considers the effect, if components and raw materials, work in progress, and finished goods, based on a combination of any, of the impairment on the basis difference in the assets giving rise to the investee’s impairment factors including the following: forecasted sales, historical usage, product end of life cycle, estimated charge. A loss in value of an investment which is significant or prolonged will be recognized. current and future market values, service inventory requirements, and new product introductions, as Significant is defined as at least 20% over an uninterrupted period of nine months, or more than 40% well as other factors. Purchasing requirements and alternative uses for the inventory are explored on the reporting date. Prolonged is defined as measured below cost for more than a year. within these processes to mitigate inventory exposure. We record write-downs for inventory based on the above factors and take into account worldwide quantities and demand into our analysis. Allowances for obsolescence of inventory are determined based on the expected demand as well Equity method investments are tested for prolonged decline in value. If the fair value of an investment is less than its carrying value, the company determines whether the decline in value is temporary or prolonged. A prolonged decline in value is measured as of a balance sheet date. If after a prior recognized impairment the fair value is more than its carrying value, this impairment is reversed. The FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE111 Financial instruments condition. An allowance for doubtful accounts is maintained for potential credit losses based upon The company classifies non-derivative financial assets into loans and receivables. The company management's assessment of the expected collectability of all accounts receivable. The allowance classifies non-derivative financial liabilities into other financial liabilities. for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making Non-derivative financial assets and financial liabilities – Recognition and derecognition this assessment, management takes into consideration any circumstances of which we are aware regarding a customer's inability to meet its financial obligations; and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the company's The company initially recognizes receivables on the date when they are originated. Receivables customers. comprise account (trade) and other receivables and cash and cash equivalents. Receivables are measured at amortized cost using the effective interest method, less any impairment. Financial The allowance is based on historical experience, credit evaluations, specific customer collection assets and financial liabilities are initially recognized on the trade date when the entity becomes a history and any customer-specific issues ASMI has identified. Changes in circumstances, such as party to the contractual provisions of the instrument. an unexpected adverse material change in a major customer’s ability to meet its financial obligation to ASMI or its payment trends, may require us to further adjust our estimates of the recoverability of The company derecognizes a financial asset when the contractual rights to the cash flows from the amounts due to ASMI, which could have an adverse material effect on ASMI’s financial condition and asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which results of operations. substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain Cash and cash equivalents control over the transferred asset. Any interest in such derecognized financial asset that is created or Cash and cash equivalents consist of deposits held at call with banks, investments in money retained by the company is recognized as a separate asset or liability. market funds that invest in debt securities of financial institutions, and other short-term highly liquid investments with original maturity of three months or less. Bank overdrafts are included in notes The company derecognizes a financial liability when its contractual obligations are discharged or payable to banks in current liabilities. cancelled, or expired. Non-derivative financial liabilities – Measurement Financial assets and financial liabilities are offset and the net amount presented in the statement of Other non-derivative financial liabilities are initially measured at fair value less any directly attributable financial position when, and only when, the company currently has a legally enforceable right to offset transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost the amounts and intends either to settle them on a net basis or to realize the asset and settle the using the effective interest method. liability simultaneously. Non-derivative financial assets – Measurement Share capital Ordinary shares Loans and receivables are initially measured at fair value plus any directly attributable transaction Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary costs. Subsequent to initial recognition, they are measured at amortized cost using the effective shares are recognized as a deduction from equity, net of any tax effects. interest method. Accounts receivable Preference share capital Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the A significant percentage of our accounts receivable is derived from revenue to a limited number of company’s option, and any dividends are discretionary. Discretionary dividends thereon are large multinational semiconductor device manufacturers located throughout the world. In order to recognized as distributions within equity upon approval by the company’s shareholders. monitor potential credit losses, we perform ongoing credit evaluations of our customers' financial FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE112 Preference share capital is classified as a financial liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Non-discretionary Impairment Non-derivative financial assets dividends thereon are recognized as interest expense in profit or loss as accrued. Financial assets not classified as at fair value through profit or loss, including an interest in an equity- accounted investee, are assessed at each reporting date to determine whether there is objective Repurchase and reissue of ordinary shares (treasury shares) evidence of impairment. When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are Objective evidence that financial assets are impaired includes default or delinquency by a debtor, classified as treasury shares and are presented in the treasury share reserve. When treasury shares restructuring of an amount due to the company on terms that the company would not consider are sold or reissued subsequently, the amount received is recognized as an increase in equity and otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment the resulting surplus or deficit on the transaction is presented in a non-distributable capital reserve. status of borrowers or issuers, the disappearance of an active market for a security because of financial difficulties, or observable data indicating that there is a measurable decrease in the expected Issuance of shares by an equity-accounted investee cash flows from a group of financial assets. The associate ASMPT yearly issues common shares pursuant to their employee share incentive scheme. The effect of these issuances is a dilution of the company's ownership in ASMPT. Loans and receivables The company recognizes the impact of these issuances directly into equity. The company considers evidence of impairment for these assets at both an individual asset and Comprehensive income a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred Comprehensive income consists of net earnings (loss) and other comprehensive income. Other but not yet individually identified. comprehensive income includes gains and losses that are not included in net earnings, but are recorded directly in equity. Provisions The impairment method for account receivables is described at Note 9 Accounts Receivable. Equity-accounted investees Provisions are recognized when the company has a present obligation (legal or constructive) as a An impairment loss in respect of an equity-accounted investee is measured by comparing the result of a past event, it is probable that the company will be required to settle the obligation, and a recoverable amount of the investment with its carrying amount. An impairment loss is recognized in reliable estimate can be made of the amount of the obligation. profit or loss, and is reversed if there has been a favorable change in the estimates used to determine Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Non-financial assets the recoverable amount. The unwinding of the discount is recognized as finance cost. At each reporting date, the company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE113 CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that Revenue streams are expected to benefit from the synergies of the combination. The company generates revenue primarily from the sales of equipment and sales of spares & services. The products and services described below by nature, can be part of both revenue streams. The The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less revenue streams are disclosed in Note 21 Revenue. costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of Nature of goods and services money and the risks specific to the asset or CGU. The following is a description of principal activities from which the group generates its revenue. An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount. Products and services Equipment Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been Installation recognized. Commitments and contingencies The company has various contractual obligations such as purchase commitments and commitments Spares for capital expenditure. These obligations are generally not recognized as liabilities on the company's statement of financial position but are disclosed in the Notes to the consolidated financial statements. Nature, timing of satisfaction of performance obligation and significant payment terms Revenue from equipment is recognized at a point in time when the performance obligation is satisfied, when control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. The total consideration of the contract is allocated between all distinct performance obligations in the contract based on their stand-alone selling prices. The stand-alone selling prices are mostly determined based on other stand-alone sales that are directly observable or based on the expected cost plus a margin approach. Any customer discounts and credits, within volume purchase agreements or bundled agreements, are considered as a reduction of the transaction price. The customer simultaneously consumes and receives the benefits provided by the performance of the installation. As such, transfer of control takes place over the period of installation from delivery through customer acceptance, measured on a straight-line basis, as our performance is satisfied evenly over this period of time. Revenue from spares is recognized at a point in time when the performance obligation is satisfied, when the control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. Any customer discounts and credits, within a volume purchase agreements, are considered as a reduction of the transaction price. Revenue recognition Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognizes revenue when it transfers control over a product or service to a customer. Depending on the contract, we obtain Revenue on royalties and licenses for technology included in equipment and/or spares The fixed price royalty is a right to use the licenses and revenue is recognized at a point in time that the license is transferred to the customer. For the sales-based royalty, the performance obligation is satisfied when the license is transferred to the customer. Given this is earlier than when the sales occur, revenue should be recognized when the sales occur. normally a right to payment for our equipment upon shipment and on completion of installation. Right Support services to payment for our spares and services occurs upon shipment or completion of the service unless described otherwise. The customer simultaneously consumes and receives the benefits provided by the performance of the support. For the majority of support services transfer of control takes place over the period of support. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE114 Cost of sales reasonably certain to exercise such options impacts the lease term, which significantly affects the Cost of sales comprises direct costs such as labor, materials, cost of warranty, depreciation, shipping amount of lease liabilities and right-of-use assets recognized. and handling costs, and related overhead costs. Cost of sales also includes depreciation expenses of evaluation tools at customers, royalty payments, and costs relating to prototype and experimental The company has applied the exception not to recognize right-of-use assets and lease liabilities for products, which the company may subsequently sell to customers. short-term leases (lease term of 12 months or less) and leases of low-value assets (up to the amount Warranty of €5 thousand asset value, such as water purifiers and air cleaners). The company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the We provide maintenance on our systems during the warranty period, on average one year. Costs lease term. of warranty include the cost of labor and material necessary to repair a product during the warranty period. We accrue for the estimated cost of the warranty on products shipped in a provision for Income tax warranty, upon recognition of the sale of the product. The costs are estimated based on historical Income tax expense comprises current and deferred tax. It is recognized in the statement of profit expenses incurred and on estimated future expenses related to current revenue, and are updated or loss except to the extent that it relates to a business combination, or items recognized directly in periodically. Actual warranty costs are charged against the provision for warranty. The actual warranty equity or in other comprehensive income. costs may differ from estimated warranty costs, and we adjust our provision for warranty accordingly. Future warranty costs may exceed our estimates, which could result in an increase of our cost Current tax of sales. Leases The current corporate income tax charge recognized in the consolidated statement of profit or loss is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the The company leases many assets, including land, buildings, houses, motor vehicles, machinery and amount for the current reporting period that the company expects to recover from or pay to the tax furniture. authorities. Current income tax related to items recognized directly in equity is recorded in equity and not in the consolidated statement of profit or loss. ASMI’s management periodically evaluates The company recognizes a right-of-use asset and a lease liability at the lease commencement date. positions taken in the tax returns regarding situations in which applicable tax regulations are subject The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated to interpretation, and establishes provisions when deemed appropriate. The amount of current tax depreciation and impairment losses, and adjusted for certain remeasurement of the lease liability. payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income tax, if any. Measurement of the tax payable or receivable for The lease liability is initially measured at the present value of the lease payments that are not paid at uncertain tax positions is based on management’s best estimate of the amount of tax benefit that will the commencement date, discounted using the company’s incremental borrowing rate. The lease be lost. Current tax also includes any tax arising from dividends and royalties. liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from Current tax assets and liabilities are offset only if certain criteria are met (IAS 12). a change in a rate or changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. Deferred tax The company has applied judgment to determine the lease term for some of the lease contracts assets and liabilities and their carrying values in ASMI’s consolidated statement of financial position. in which it is a lessee that includes renewal options. The assessment of whether the company is Deferred tax assets are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. Deferred tax assets are recognized only to the extent that Deferred income tax positions are recognized for temporary differences between the tax basis of FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE115 it is probable that future taxable profits will be available against which the temporary differences The company's employees in Japan participate in defined benefit plans. Pension costs in respect to can be utilized. Both the recognized and unrecognized deferred tax assets are reassessed at each this defined benefit plan are determined using the projected unit credit method. These costs primarily reporting date. Deferred tax assets are recorded for deductible temporary differences associated with represent the increase in the actuarial present value of the obligation for pension benefits based on investments in subsidiaries and are recorded only to the extent that it is probable that the temporary employee service during the year and the interest on this obligation in respect to employee service in differences will reverse in the foreseeable future, and taxable profit will be available against which the previous years, net of the expected return on plan assets. temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences except when they affect position an asset or a liability for the plan's over funded status or underfunded status respectively. neither the profit or loss reported in the consolidated statement of profit or loss nor the taxable profit Actuarial gains and losses are recognized when incurred. or loss. Also, no deferred tax liabilities are recorded for taxable temporary differences associated Obligations for contributions to defined contribution plans are expensed as the related service is with investments in subsidiaries when the timing of the reversal of the temporary differences can be provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a controlled and it is probable that the temporary differences will not reverse in the foreseeable future. reduction in future payments is available. For the defined benefit plan, the company recognizes in its consolidated statement of financial Deferred tax positions are stated at nominal value and are measured at the corporate income tax Share-based payments rates the company expects to be applicable in the year when the asset is realized or liability is settled The costs relating to employee stock options and shares (compensation expense) are recognized based on enacted or substantially enacted tax laws and reflects uncertainty related to income tax, based upon the grant date fair value of the stock options or the shares. The fair value at grant date if any. of employee stock options is estimated using a Black-Scholes option valuation model. This model Deferred income tax assets and liabilities are netted if there is a legally enforceable right to set off requires the use of assumptions including expected stock price volatility, the estimated life of each current tax assets against current tax liabilities, deferred income tax assets and deferred income tax award, and the estimated dividend yield. The risk-free interest rate used in the model is determined, liabilities related to income taxes levied by the same taxation authority on the same taxable entity, and based on a euro government bond with a life equal to the expected life of the options. The estimated there is an intention to settle on a net basis. fair value at grant date of shares is based on the share price of the ASMI share at grant date minus the discounted value of expected dividends during the vesting period. Retirement benefit costs The company has retirement plans covering substantially all employees. The principal plans are The grant date fair value of the stock options and shares is expensed on a straight-line basis over the defined contribution plans, except for the plans of the company's operations in the Netherlands vesting period, based on the company’s estimate of stock options and shares that will eventually vest. and Japan. The company's employees in the Netherlands participate in a multi-employer defined The impact of the true-up of the estimates is recognized in the consolidated statement of profit or benefit plan. Payments to defined contribution plans and the multi-employer plan are recognized as loss in the period in which the revision is determined. The total estimated share-based compensation an expense in the consolidated statement of profit or loss as they fall due. The company accounts for expense, determined under the fair value-based method is amortized proportionally over the option the multi-employer plan as if it were a defined contribution plan since the manager of the plan is not vesting periods. able to provide the company with the required company-specific information to enable the company to account for the plan as a defined benefit plan. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENOTE 2. RIGHT-OF-USE ASSETS The company leases many assets, including land, buildings, houses, motor vehicles, machinery and equipment. Leases typically run up to a period of 5 years, some with an option to renew the lease after the end of the non-cancelable period. Lease payments are renegotiated on a periodic basis; timing is dependent on the region and type of lease. The company has not entered into any sub-lease arrangements. Right-of-use assets (EUR thousand) Balance January 1, 2019 Additions Transfer from property, plant and equipment Modifications and reassessments Retirements Land and buildings Motor vehicles Other machinery and equipment 23,579 6,475 459 75 – 1,488 1,588 – 31 – Depreciation for the year (6,057) (1,008) Foreign currency translation effect Balance December 31, 2019 Additions Modifications and reassessments Retirements Depreciation for the year Foreign currency translation effect Balance December 31, 2020 518 25,049 3,100 551 – (6,285) (1,337) 21,078 43 2,142 1,359 (158) – (1,159) (36) 2,148 Total 25,687 8,079 459 82 – (7,333) 573 27,547 4,459 378 – (7,611) (1,386) 23,387 620 16 – (24) – (268) 12 356 – (15) – (167) (13) 161 Amounts recognized in profit or loss (EUR thousand) Leases under IFRS 16 Interest on lease liabilities Depreciation expenses Expenses relating to short-term leases Expenses relating to low-value leases Total Amounts recognized in statement of cash flows (EUR thousand) Total cash outflow for leases Extension options 116 2019 2020 586 7,333 329 16 8,264 561 7,611 254 16 8,442 2019 12,048 2020 7,819 The extension options held are exercisable only by the company and not by the lessors. The company assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The company reassesses whether it is reasonably certain to exercise the options at year-end for material lease components, if there is a significant event or significant changes in circumstances within its control. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE117 NOTE 3. PROPERTY, PLANT AND EQUIPMENT The changes in the amount of property, plant and equipment are as follows: Buildings and leasehold improvements Machinery and equipment Furniture and fixtures and other equipment Assets under construction Total At cost Balance January 1, 2019 Capital expenditures Disposals Transfer from assets under construction Transfer to right-of-use assets Foreign currency translation effect Balance December 31, 2019 Capital expenditures Disposals Transfer from assets under construction Transfer to intangible assets Foreign currency translation effect Balance December 31, 2020 Accumulated depreciation and impairment Balance January 1, 2019 Depreciation for the year Impairment charges Disposals Foreign currency translation effect Balance December 31, 2019 Depreciation for the year Impairment charges Disposals Foreign currency translation effect Balance December 31, 2020 Carrying amounts December 31, 2019 December 31, 2020 Useful lives in years 46,629 492 (5) 39,238 – 995 87,349 411 (196) 51,287 – (4,173) 134,678 29,033 3,936 – (2) 892 33,859 4,406 – (193) (1,974) 36,098 53,490 98,580 1-25 208,404 2,667 (2,985) 23,460 – 3,474 235,020 3,528 (23,378) 34,317 – (14,352) 235,135 137,347 27,090 – (2,964) 2,307 163,780 25,647 – (21,122) (10,056) 158,249 71,240 76,886 2-10 24,977 1,126 (86) 4,139 – 625 30,781 1,752 (3,196) 5,705 (92) (1,359) 33,591 19,283 2,303 – (82) 518 22,022 2,974 – (3,107) (927) 20,962 8,759 12,629 2-10 54,402 44,422 – (66,837) (459) (154) 334,412 48,707 (3,076) – (459) 4,940 31,374 384,524 89,750 – (91,309) – (3,943) 25,872 – – – – – – – – – – – 95,441 (26,770) – (92) (23,827) 429,276 185,663 33,329 – (3,048) 3,717 219,661 33,027 – (24,422) (12,957) 215,309 31,374 164,863 25,872 213,967 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENOTE 4. GOODWILL The carrying amount of the goodwill is related to acquisitions in the following cash-generating units: These estimates are consistent with the plans and estimated costs we use to manage the underlying business. We expect the demand for these technologies to continue beyond a period of five years ALD PEALD Total December 31, management concluded that as per December 31, 2020 the recoverable amount of the CGUs and therefore we have included perpetuity growth rates in our assumptions. Based on this analysis, 2019 2,611 8,659 11,270 2020 2,611 8,659 11,270 exceeded the carrying value. The excess was over 100% for each of the CGUs. Sensitivity analysis demonstrated that no reasonable possible change in estimated cash flows or the discount rate used in calculating the fair value would cause the carrying value of goodwill to exceed the fair value. For Back-end, goodwill is included in the investment value of ASMPT. For the impairment test, We perform an annual impairment test in the fourth quarter of each year or if events or changes reference is made to Note 6. 118 in circumstances indicate that the carrying amount of goodwill exceeds its recoverable amount. For the Front-end impairment test and the determination of the recoverable amount, a discounted future cash flow approach is used which makes use of our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. The material assumptions used for the discounted future cash flows of the cash-generating units (CGUs) are: ›› An average discount rate of 12.6% (2019: 13.3%) representing the pre-tax weighted average cost of capital; ›› External market segment data, historical data and strategic plans to estimate cash flow growth per product line; and ›› Cash flow calculations are limited to four years of cash flow; after these four years, perpetuity growth rates are set based on the market maturity of the products. For a maturing product, the perpetuity growth rates used are 1% or less, and for enabling technology products the rate used is 3% or less. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 119 NOTE 5. OTHER INTANGIBLE ASSETS Other intangible assets include capitalized development expenditure, software developed or purchased (including licenses) for internal use, and purchased technology from third parties. The changes in the amount of other intangible assets are as follows: Development costs Software Purchased technology and other intangible assets Total At cost Balance January 1, 2019 Additions Disposals Foreign currency translation effect Balance December 31, 2019 Additions Transfer from property, plant and equipment Disposals Foreign currency translation effect Balance December 31, 2020 Accumulated amortization and impairment losses Balance January 1, 2019 Amortization for the year Impairments Disposals Foreign currency translation effect Balance December 31, 2019 Amortization for the year Impairments Disposals Foreign currency translation effect Balance December 31, 2020 Carrying amounts December 31, 2019 December 31, 2020 231,944 60,202 – 3,722 295,868 64,126 – – (18,309) 341,685 91,562 15,597 4,755 – 1,458 113,372 21,187 10,126 – (7,319) 137,366 182,496 204,319 31,144 2,320 – 187 33,651 3,230 92 (3,459) (650) 32,864 22,574 4,521 – – 133 27,228 3,863 – (3,459) (353) 27,279 6,423 5,585 8,915 272,003 – – 62,522 – (31) 3,878 8,884 338,403 – – – 67,356 92 (3,459) (63) (19,022) 8,821 383,370 7,940 670 – – 122,076 20,788 4,755 – (31) 1,560 8,579 285 – – (63) 149,179 25,335 10,126 (3,459) (7,735) 8,801 173,446 305 189,224 20 209,924 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEWe perform an annual impairment test in the fourth quarter of each year or if events or changes in circumstances indicate that the carrying amount of development costs exceeds its recoverable NOTE 6. INVESTMENTS IN ASSOCIATES The location included below is the principal place of business of the specified associates. There is no amount. A discounted future cash flow approach is used which makes use of our estimates of future difference between the principal place of business and country of incorporation. revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. For the impairment test, reference is made to Note 4. Impairment charges on capitalized development costs are included in operating expenses under research and development. Impairment of capitalized development expenses primarily related to Name Associates Levitech BV development of new hardware for which customer demand has shifted out in time, new process ASM Pacific Technology Ltd technologies that were not successful, and purchased technology which became obsolete. LOCATION % Ownership December 31, 2019 2020 Almere, the Netherlands Kwai Chung, Hong Kong, People’s Republic of China 26.64% 26.64% 25.19% 25.07% The impairment charges for 2019 and 2020 related to customer-specific projects. Levitech BV is valued at nil (2019: nil). 120 Capitalized development costs are amortized over their estimated useful lives of five years. Amortization starts when the developed asset is ready for its intended use. For the company, this occurs when the application is transferred to high-volume manufacturing. Other intangible assets are amortized over their estimated useful lives of three to seven years. Estimated amortization expenses relating to other intangible assets are as follows: 2021 2022 2023 2024 2025 Years thereafter Amortization estimated Amortization not yet started Total carrying amounts Development costs 21,318 20,464 18,008 12,966 4,942 – 77,698 126,621 204,319 Software 2,174 1,816 1,595 – – – 5,585 – 5,585 Purchased technology and other intangible assets 10 10 – – – – 20 – 20 Total 23,502 22,290 19,603 12,966 4,942 – 83,303 126,621 209,924 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE121 The changes in the investment in associates are as follows: Balance January 1, 2019 Share in net earnings of investments in associates Other comprehensive income of investments in associates Amortization recognized (in)tangible assets Dividends Dilution ASMPT share to 25.19% Foreign currency translation effect Balance December 31, 2019 Share in net earnings of investments in associates Other comprehensive income of investments in associates Amortization recognized (in)tangible assets Dividends Dilution ASMPT share to 25.07% Foreign currency translation effect Balance December 31, 2020 Net equity share Other (in)tangible assets ASMPT 343,655 18,035 (3,991) – (31,960) 3,882 5,249 334,870 44,813 (2,296) – (16,142) 2,059 (16,216) 347,088 58,061 – – (13,788) – – 1,479 45,752 – – (12,863) – – (2,873) 30,016 Goodwill 387,872 – – – – – 9,774 397,646 – – – – – (32,036) 365,610 Total ASMPT 789,588 18,035 (3,991) (13,788) (31,960) 3,882 16,502 778,268 44,813 (2,296) (12,863) (16,142) 2,059 (51,125) 742,714 On March 15, 2013, the company divested a controlling stake in its subsidiary ASM Pacific The ASMPT investment is accounted for under the equity method on a go-forward basis. Equity Technology Ltd (ASMPT). After the initial accounting of the sale transaction and related gains, future method investments are tested for prolonged impairment. An investment is considered impaired if income from ASMPT was adjusted for the fair value adjustments arising from the basis differences the fair value of the investment is less than its carrying value. as if a business combination had occurred under IFRS 3R, Business Combinations, i.e. a purchase price allocation (PPA). If the fair value of an investment is less than its carrying value at the balance sheet date, the company determines whether the impairment is temporary or prolonged. The amount per share recognized The purchase of the associate has been recognized at fair value, being the value of the ASMPT as per December 31, 2020 under equity accounting amounts to HK$68.60, whereas the level 1 shares on the day of closing of the purchase transaction. The composition of this fair value was fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was determined through a PPA. The PPA resulted in the recognition of intangible assets for customer HK$102.30 as per December 31, 2020. Management concluded that based on quantitative analysis relationship, technology, trade name, product names, and goodwill. For inventories and property, no impairment of its share in ASMPT existed as per December 31, 2020. plant & equipment, a fair value adjustment was recognized. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE122 In December 2020, 1,900,600 common shares of ASMPT were issued, for cash at par value of Summarized 100% statement of financial position information for ASMPT equity method investment HK$0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT. The shares issued excluding basis adjustments (foreign currency exchange rate per December 31, 2020, was 1 HK$: under the plan in 2020 have diluted ASMI's ownership in ASMPT to 25.07% as of December 31, 2020. €0.10511 for December 31, 2019: 1 HK$: €0.11432). Per December 31, 2020, the book value of our equity method investment in ASMPT was €743 million. The historical cost basis of our 25.07% share of net assets on the books of ASMPT under IFRS was €347 million as of December 31, 2020, resulting in a basis difference of €396 million. €30 million of this basis difference has been allocated to property, plant and equipment, and intangible assets. The remaining amount was allocated to equity method goodwill. Each individual, identifiable asset will periodically be reviewed for any indicators of potential impairment. We amortize the basis differences allocated to the assets on a straight-line basis, and include the impact within the results of our equity method investments. Amortization and depreciation are adjusted for related deferred tax impacts. (HK$ million) Current assets Non-current assets Current liabilities Non-current liabilities Total equity December 31, 2019 13,381 7,464 4,432 4,781 11,632 2020 14,799 8,365 5,336 4,634 13,194 Included in net income attributable to ASMI for 2020 was an after-tax expense of €13 million, Shareholder’s equity of ASMPT per December 31, 2020 translated into euros at a rate of 0.10511 representing the depreciation and amortization of the basis differences. was €1,384 million (our 25.07% share: €347 million). The market value of our 25.07% investment in ASMPT on December 31, 2020 approximates The ASMPT Board is responsible for ongoing monitoring of the performance of the Back-end €1,108 million. activities. The actual results of the Back-end operating unit are discussed with the ASMPT Audit Committee, which includes the representative of ASMI. The ASMI representative reports to the ASMI Summarized 100% earnings information for ASMPT equity method investment excluding basis Management Board and the Audit Committee of ASMI on a quarterly basis. adjustments (foreign currency exchange rate average 2020 1 HK$: €0.11272, for December 31, 2019: 1 HK$: €0.11387). (HK$ million) Net sales Income before income tax Net earnings Other comprehensive income Total comprehensive income 2019 15,883 976 622 (169) 453 2020 16,887 1,857 1,631 370 2,001 Our share of income taxes incurred directly by the associates is reported in result from investments in associates and as such is not included in income taxes in our consolidated financial statements. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENOTE 7. EVALUATION TOOLS AT CUSTOMERS The changes in the amount of evaluation tools are as follows: NOTE 8. INVENTORIES Inventories consist of the following: At cost Balance at beginning of year Evaluation tools shipped Evaluation tools sold and returns Foreign currency translation effect Balance at end of year Accumulated depreciation Balance at beginning of year Depreciation for the year Evaluation tools sold and returns Foreign currency translation effect Balance at end of year Carrying amount at beginning of year Carrying amount at end of year Useful lives in years: December 31, 2019 2020 63,851 30,567 (22,327) 1,546 73,637 19,217 12,117 (5,431) 487 26,390 44,634 47,247 73,637 59,729 (26,420) (6,172) 100,774 26,390 12,930 (6,401) (1,619) 31,300 47,247 69,474 5 Components and raw materials Work in progress Finished goods Total inventories, gross Allowance for obsolescence Total inventories, net The changes in the allowance for obsolescence are as follows: Balance at beginning of year Charged to cost of sales Reversals Utilization of the provision Foreign currency translation effect Balance at end of year 123 December 31, 2019 111,609 53,673 20,434 185,716 (12,527) 173,189 December 31, 2019 (13,364) (4,748) 915 4,994 (324) 2020 118,849 39,925 17,902 176,676 (14,477) 162,199 2020 (12,527) (9,775) 830 6,200 795 (12,527) (14,477) Evaluation tools enable ASM to win new business and expand ASMI’s technological footprint by On December 31, 2020, our allowance for inventory obsolescence amounted to €14,477, which is penetration at new customers and with new applications. The year-on-year increase in evaluation 8.2% of total inventory. The major part of the allowance is related to components and raw materials. tools shipped to customer sites in 2020 is indicative of ASMI’s market growth ambitions and is a key The additions for the years 2019 and 2020 mainly relate to inventory items which ceased to be component in ASMI’s growth strategy. The majority of evaluation tools shipped to customers result in used due to technological developments and design changes which resulted in obsolescence of the sale of the tool. certain parts. The cost of inventories recognized as costs and included in cost of sales amounted to €554.8 million (2019: €510.2 million). FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 124 NOTE 9. ACCOUNTS RECEIVABLE A significant percentage of our accounts receivable is derived from sales to a limited number of Accounts receivable are impaired and provided for on an individual basis. As of December 31, 2020, accounts receivable of €31 million were past due but not impaired. These balances are still large multinational semiconductor device manufacturers located throughout the world. In order to considered to be recoverable because they relate to customers for whom there is neither recent monitor potential expected credit losses, we perform ongoing credit evaluations of our customers’ history of default nor expectation that this will incur. financial condition. The carrying amount of accounts receivable is as follows: Current Overdue <30 days Overdue 31-60 days Overdue 61-120 days Overdue >120 days Total For further information on credit risk see Note 17. December 31, NOTE 10. OTHER CURRENT ASSETS Other current assets consist of the following: 2019 171,866 19,977 2,076 1,599 4,017 2020 249,032 23,063 4,283 1,727 1,956 199,535 280,061 Prepayments VAT receivable Amounts to be invoiced Others Total December 31, 2019 14,795 15,067 37,679 5,938 73,479 2020 14,485 12,818 33,813 11,829 72,945 An allowance for doubtful accounts receivable is maintained for potential expected credit losses based upon management’s assessment of the expected collectability of all accounts receivable. The Amounts to be invoiced mainly relates to accrued revenue, reference to note 21 contract balances. allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which we are NOTE 11. CASH AND CASH EQUIVALENTS Cash and cash equivalents at December 31, 2020 include investments in money market funds that aware regarding a customer’s inability to meet its financial obligations, and our judgments as to potential invest in debt securities of financial institutions that have good credit rating and governments of prevailing economic conditions in the industry and their potential impact on the company’s customers. €9 million (2019: €10 million) and interest-bearing bank accounts of €426 million (2019: €484 million). COVID-19 did not have, and is not expected to have a significant impact on the customers in the At the end of 2020, no cash deposits with financial institutions were included in our cash position industry (see also note 1 COVID-19 paragraph), and hence on the allowance for doubtful accounts. (2019: €4 million). Our cash and cash equivalents are predominantly denominated in US dollars, and partly in euros, Singapore dollars, Korean won, and Japanese yen. The changes in the allowance for doubtful accounts receivable are as follows: Balance at beginning of year Charged to selling, general and administrative expenses Utilization of the provision Foreign currency translation effect Balance at end of year December 31, December 31, 2019). These guarantees mainly relate to lease and tax payments. Bank guarantees exist for an amount of €2.4 million at December 31, 2020 (€9.7 million as per 2019 (155) (154) 31 – (278) 2020 (278) (83) – – (361) Cash and cash equivalents have insignificant interest rate risk and remaining maturities of three months or less at the date of acquisition. Except for an amount of €4.1 million (2019: €5.8 million), no restrictions on usage of cash and cash equivalents exist. The carrying amount of these assets approximates to their fair value. The company has not recognized a provision for expected credit loss for cash and cash equivalents due to the insignificance of the amount. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE125 NOTE 12. EQUITY Our Management Board has the power to issue ordinary shares and (financing) preference shares Preferred shares are entitled to a cumulative preferred dividend based on the amount paid up on such shares. Financing preferred shares are entitled to a cumulative dividend based on the par value insofar as the Management Board has been authorized to do so by the Annual General Meeting of and share premium paid on such shares. Shareholders (AGM). The Management Board requires the approval of the Supervisory Board for such an issue. The authorization by the AGM can only be granted for a certain period. In the case As per December 31, 2020, no preferred shares and no financing preferred shares are issued. that the AGM has not authorized the Management Board to issue shares, the AGM shall have the power to issue shares. COMMON SHARES, PREFERRED AND FINANCING PREFERRED SHARES Following the amendment of the articles of association on August 3, 2018, the authorized capital of PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS On May 18, 2020, the AGM authorized the company, for an 18-month period, to be calculated from the date of the AGM, to repurchase its own shares up to 10% of the issued capital, at a price at least the company amounts to 82,500,000 common shares of €0.04 par value, 88,500 preferred shares of equal to the shares’ nominal value and at most a price equal to 110% of the shares' average closing €40 par value and 6,000 financing preferred shares of €40 par value. price according to the listing on the Euronext Amsterdam stock exchange during the five trading The AGM of May 18, 2020 approved the cancellation of 1,500,000 treasury shares and this cancellation became effective as per July 21, 2020. days preceding the purchase date. On July 23, 2019, ASMI announced a share buyback program to purchase up to an amount of €100 million of its own shares within the 2019-2020 time frame. The 2019 program started on As per December 31, 2020, 49,797,394 common shares with a nominal value of €0.04 each were November 1, 2019, and was completed on February 17, 2020. issued and fully paid up, of which 1,082,712 common shares are held by us in treasury. All shares have one vote per €0.04 par value. Treasury shares held by the company cannot be voted on. Of our 48,714,682 outstanding common shares at December 31, 2020, 48,438,605 are registered Period with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and 276,077 are registered with Share buyback program 2019-2020: our transfer agent in the United States, Citibank, NA, New York. Financing preferred shares are designed to allow ASMI to finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares. Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a preferred or financing preferred shareholder must obtain the approval of the company's Supervisory Board to transfer shares. If approval is denied, the Supervisory Board will provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller within two months after the approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, at which time the approval expires. November, 2019 December, 2019 January, 2020 February, 2020 Total Total number of shares purchased Average price paid per share (EUR) Cumulative number of shares purchased 639,665 313,237 22,661 8,716 984,279 €100.95 €101.67 €112.32 €118.61 €101.60 639,665 952,902 975,563 984,279 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE126 TREASURY SHARES On December 31, 2020, we had 48,714,682 outstanding common shares excluding 1,082,712 treasury shares. This compared to 48,866,220 outstanding common shares and 2,431,174 treasury shares at year-end 2019. Besides the cancellation of 1.5 million treasury shares in July 2020, the change in the number of treasury shares in 2020 was the result of 508,685 repurchased shares and 357,147 treasury shares that were used as part of share-based payments. On February 25, 2020, ASMI announced a share buyback program to purchase up to an amount of €100 million of its own shares within the 2020-2021 time frame. The 2020-2021 program started on June 2, 2020. Period Share buyback program 2020: June, 2020 July, 2020 August, 2020 September, 2020 October, 2020 November, 2020 December, 2020 Total Total number of shares purchased Average price paid per share (EUR) Cumulative number of shares purchased 57,700 21,648 66,086 140,736 34,118 102,020 58,500 480,808 €119.16 €144.31 €127.15 €121.74 €130.83 €135.72 €169.64 €132.63 57,700 79,348 145,434 286,170 320,288 422,308 480,808 As per January 1: Issued shares Treasury shares Outstanding shares Changes during the year: Cancellation of treasury shares Share buybacks Number of shares Balance at beginning of year Purchase common shares Exercise stock options out of treasury shares Vesting restricted shares out of treasury shares Cancellation treasury shares Balance at end of year Treasury shares Outstanding shares 2,431,174 48,866,220 508,685 (127,324) (229,823) (1,500,000) (508,685) 127,324 229,823 – 1,082,712 48,714,682 As per December 31: Issued shares Treasury shares Outstanding shares The following table shows the change in number of treasury shares and outstanding shares: Treasury shares used for share-based performance programs 2019 2020 56,297,394 51,297,394 6,978,496 2,431,174 49,318,898 48,866,220 5,000,000 1,500,000 950,902 498,224 508,685 357,147 51,297,394 49,797,394 2,431,174 1,082,712 48,866,220 48,714,682 RETAINED EARNINGS Distributions to common shareholders are limited to the extent the total amount of shareholders’ equity exceeds the amounts of nominal paid-in share capital (exclusive any share premium) and any ASMI intends to use part of the shares for commitments under the employee share-based reserves to be formed pursuant to law or the company’s Articles of Association. The amounts are compensation schemes and the performance shares and option program for the Management Board. derived from the Company financial statements of ASMI. The share buyback programs were executed by intermediaries through on-exchange purchases ASMI aims to pay a sustainable annual dividend. The Supervisory Board, upon proposal of the or through off-exchange trades. ASMI updated the markets on the progress of the share buyback Management Board, will annually assess the amount of dividend that will be proposed to the AGM. programs on a weekly basis. The decision that a dividend be proposed to the AGM will be subject to the availability of distributable profits as well as retained earnings and may be affected by our potential future funding requirements. The repurchase programs are part of ASMI's commitment to use excess cash for the benefit of its Accordingly, dividend payments may fluctuate and could decline or be omitted in any year. shareholders. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEOver 2019, we paid in total a dividend of €3.00 per common share consisting of a regular dividend NOTE 13. EMPLOYEE BENEFITS of €1.50 and an extraordinary dividend of €1.50. A final dividend of €2.00 (€0.50 regular and €1.50 extraordinary) was paid after the 2020 AGM in May 2020, and an interim dividend of €1.00 was paid in November 2019. We will propose to the forthcoming 2021 AGM to declare a regular dividend of €2.00 per share over 2020. PENSION PLANS The company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the company’s operations in the Netherlands and Japan. Results on dilution of investments in associates are accounted for directly in equity. For 2020 and 2019, these dilution results were €2,059 and €3,882, respectively. Multi-employer plan 127 OTHER RESERVES The changes in the amounts of other reserves are as follows: Proportionate share in other comprehensive income investments in associates 1) Remeasurement on net defined benefit Translation reserve Total other reserves Balance January 1, 2019 (6,217) (10) 105,834 99,607 Proportionate share in other comprehensive income investments in associates Remeasurement on net defined benefit Foreign currency translation effect on translation of foreign operations (3,991) – – – (103) – – (3,991) (103) – 31,427 31,427 Balance December 31, 2019 (10,208) (113) 137,261 126,940 Proportionate share in other comprehensive income investments in associates Remeasurement on net defined benefit Foreign currency translation effect on translation of foreign operations (2,296) – – Balance December 31, 2020 (12,504) – 374 – 261 – – (2,296) 374 There are 142 eligible employees in the Netherlands. These employees participate in a multi- employer union plan (Pensioenfonds van de Metalektro PME) determined in accordance with the collective bargaining agreements effective for the industry in which we operate. The current collective bargaining agreement ended on November 30, 2020, and there is no new collective bargaining agreement yet. This multi-employer union plan, accounted for as a defined contribution plan, covers approximately 1,390 companies and approximately 164,000 contributing members. Our contribution to the multi-employer union plan was less than five percent of the total contribution to the plan. The plan monitors its risks on a global basis, not by participating company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan’s assets to its obligations. As of January 1, 2015, new pension legislation has been enacted. This legislation results in, amongst others, an increase of legally required coverage levels. The coverage percentage is calculated by dividing the funds capital by the total sum of pension liabilities and is based on actual market interest rates. The coverage ratio as per December 31, 2020, of 97.2% (December 31, 2019: 98.7%) is calculated giving consideration to the pension legislation and is below the legally required level. We have however no obligation to pay off any deficits the pension fund may incur, nor do we have any claim to any potential surpluses. Every company participating in the PME contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same contribution rate. The premium 1 Proportionate share in other comprehensive income investments in associates, remeasurement on net defined benefit and translation reserve, items may be subsequently reclassified to profit or loss. employee’s average salary during employment. Our net periodic pension cost for this multi-employer union plan for any period is the amount of the required employer contribution for that period minus the employee contribution. (98,833) (98,833) 38,428 26,185 can fluctuate yearly based on the coverage ratio of the multi-employer union plan. For 2020, the contribution percentage was 26.412%. The pension rights of each employee are based upon the FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEDefined benefit plan The changes in defined benefit obligations and fair value of plan assets are as follows: 128 The company’s employees in Japan participate in a defined benefit plan. The company makes contributions to defined benefit plans in Japan that provide pension benefits for employees upon retirement. These are average-pay plans, based on the employees’ years of service and compensation near retirement. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out on December 31, 2020. The present value of the defined benefit obligation and the related current service cost and past service cost were measured using the projected unit credit method. Significant actuarial assumptions for the determination of the defined obligation are discount rate, future general salary increases, and future pension increases. The net liability (asset) of the plan developed as follows: Defined benefit obligations Fair value of plan assets Net liability (asset) for defined benefit plans December 31, 2019 11,446 12,025 (579) 2020 11,083 12,514 (1,431) Defined benefit obligations Balance January 1 Current service cost Interest on obligation Remeasurement result Benefits paid Foreign currency translation effect Balance December 31 Fair value of plan assets Balance January 1 Interest income Return on plan assets Company contribution Benefits paid Foreign currency translation effect Balance December 31 The defined benefit cost consists of the following: Current service cost Net interest cost Net defined benefit cost Remeasurement on net defined benefit for the year Remeasurement on net defined benefit Total defined benefit cost December 31, 2019 2020 10,502 11,446 828 53 277 (552) 338 928 28 (437) (470) (412) 11,446 11,083 10,726 12,025 57 175 1,273 (552) 346 31 61 1,333 (470) (466) 12,025 12,514 December 31, 2019 828 (4) 824 102 102 926 2020 928 (3) 925 (498) (498) 427 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 129 The assumptions in calculating the actuarial present value of benefit obligations and net periodic Retirement plan costs benefit cost are as follows: ASMI contributed €1,333 to the defined benefit plan in 2020 (€1,272 in 2019). The company expects to pay benefits for years subsequent to December 31, 2020 as follows: Discount rate for defined benefit obligations Discount rate for defined benefit cost 2019 0.25% 0.50% 2020 0.50% 0.25% Assumptions regarding life expectancy are based on mortality tables published in 2014 by the Ministry of Health, Labour and Welfare of Japan. 2021 2022 2023 2024 2025 The main risk concerning the pension plan relates to the discount rate. The defined benefit obligation Aggregate for the years 2026-2030 is sensitive to a change in discount rates, a relative change of the discount rate of 25 basis points Total would have resulted in a change in the defined benefit obligation of -2.4% to 2.5%. Expected contribution defined benefit plan 433 806 745 507 256 5,366 8,113 The allocation of plan assets is as follows: Cash and cash equivalent Equity instruments Debt instruments Assets held by insurance company Total The company does not provide for any significant post-retirement benefits other than pensions. December 31, 2019 2020 147 1,938 1,279 8,661 1% 16% 11% 72% 191 1,904 1,276 9,143 2% 15% 10% 73% MANAGEMENT BOARD AND EMPLOYEE AND LONG-TERM INCENTIVE PLAN The company has adopted various share plans (e.g. stock option plans, a restricted share plan, and a performance share plan) and has entered into share agreements with the Management Board and various employees. Under the stock option plans, the Management Board and employees may purchase per the vesting date a specific number of shares of the company’s common stock at a 12,025 100% 12,514 100% certain price. Options are priced at market value in euros on the date of grant. Under the restricted share plan, employees receive per the vesting date a specific number of shares of the company’s The investment strategy is determined based on an asset-liability study in consultation with common stock. Under the performance share plan, the Management Board receives per the vesting investment advisors and within the boundaries given by the regulatory bodies for pension funds. date, and provided the performance criteria have been met, a specific number of shares of the Equity instruments consist primarily of publicly traded Japanese companies and common collective company’s common stock. funds. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded (level 1). Common collective funds are valued at the published Authority to issue options and shares price (level 1) per share multiplied by the number of shares held as of the measurement date. Debt By resolution of the Annual General Meeting of Shareholders (AGM) of May 18, 2020, the formal instruments consist of government bonds and are valued at the closing prices in the active markets authority to issue options and shares was allocated to the Management Board subject to the for identical assets (level 1). Assets held by the insurance company consist of bonds and loans, approval of the Supervisory Board. This authority is valid for 18 months and needs to be refreshed government securities and common collective funds. Corporate and government securities are by the 2021 AGM to allow the continued application of the long-term incentive (LTI) plans beyond valued by third-party pricing sources (level 2). Common collective funds are valued at the net asset November 18, 2021. value per share (level 2) multiplied by the number of shares held as of the measurement date. The plan assets do not include any of the company’s shares. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 130 The ASMI 2014 long-term incentive plan for employees (ELTI) is principally administered by the The following table is a summary of changes in options outstanding under the 2011 and previous Management Board and the ASMI 2014 long-term incentive plan for members of the Management long-term incentive plan: Board (MLTI) is principally administered by the Supervisory Board. This complies with applicable corporate governance standards. However, the Supervisory Board has no power to represent the company. For external purposes, the Management Board remains the competent body under both LTI plans. The LTI plans envisage that the Supervisory Board, or in the case of the ELTI the Balance January 1, 2019 Management Board with the approval of the Supervisory Board, will determine the number of options and shares to be granted to the Management Board members and to employees. Capital repayment On August 10, 2018, ASMI distributed €4.00 per common share to its shareholders through a Options forfeited Options expired Options exercised Balance December 31, 2019 tax efficient repayment of capital. The ex-date of the distribution was August 7, 2018. This capital Options forfeited repayment was approved by the 2018 AGM. The Management Board of ASMI and the Supervisory Options expired Board of ASMI decided to apply a theoretical adjustment ratio of 0.91821713 to the outstanding Options exercised options and restricted shares granted to employees including members of the Management Board. Balance December 31, 2020 Euro-plans Number of options Weighted average exercise price in € 451,170 (7,120) (3,267) (313,531) 127,252 – – (127,252) – 21.48 21.39 21.79 21.36 21.79 – – 21.79 – 2011 long-term incentive plan The total intrinsic value of options exercised was €2,774 for the year ended December 31, 2020 In 2011, a stock option plan was adopted. In this plan to limit potential dilution, the amount (2019: €6,767). In 2020, treasury shares have been sold for the exercise of 127,324 options. of outstanding (vested and non-vested) options granted to the Management Board and to other employees will not exceed 7.5% of the issued ordinary share capital of ASMI. The stock option plan On December 31, 2020, no options were outstanding or exercisable. 2011 consists of two sub-plans: the ASMI stock option plan for employees (ESOP) and the ASMI stock option plan for members of the Management Board (MSOP). At December 31, 2020, the aggregate intrinsic value of all options outstanding and exercisable under For employees and existing Management Board members, the grant date for all options granted is December 31 of the relevant year. In each of these situations, the three-year vesting period starts 2014 long-term incentive plan these plans is €0 (2019: €12,744). at the grant date. The exercise price in euros of all options issued under the ESOP and the MSOP In 2014, a new long-term incentive plan was adopted. In the new plan to limit potential dilution, the is determined on the basis of the market value of the ASMI shares at (i.e. immediately prior to) the amount of outstanding (vested and non-vested) options and shares granted to the Management grant date. The exercise period is four years starting at the third anniversary of the grant date. Board and to other employees will not exceed 5% of the issued ordinary share capital of ASMI. The new long-term incentive plan 2014 consists of two sub-plans: the ELTI and the MLTI. Options and performance shares are issued to Management Board members and restricted shares are issued to employees once per annum on the date following the publication of the first-quarter results of the relevant year. Possible grant to newly-hired employees can be issued once a quarter, on the date following the publication of the financial results of the relevant quarter. The number of options and shares outstanding under the long-term incentive plans or under any other plan or arrangement in aggregate may never exceed 5% of ASMI’s share capital. In accordance with the FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEASMI remuneration policy, an exception is made for a transition period of four years, during which the Options outstanding dilution may exceed 5% but will not exceed 7.5%. The following table is a summary of changes in options outstanding under the 2014 long-term 131 Performance and restricted shares outstanding The following table is a summary of changes in performance shares and restricted shares outstanding under the 2014 long-term incentive plan. Balance January 1, 2019 Shares granted, employees Number of performance shares Number of restricted shares 64,949 341,188 Fair value at grant date (weighted average) Status – 212,160 Unconditional Shares granted, Management Board 22,925 – Conditional Shares vested Shares forfeited Balance December 31, 2019 (11,660) (170,536) (6,474) (14,971) 69,740 367,841 Shares granted, employees – 150,686 Unconditional Shares granted, Management Board Shares granted, Management Board 13,646 5,446 – – Conditional Unconditional Shares vested Shares forfeited (58,835) (170,988) – (21,728) Balance December 31, 2020 29,997 325,811 €58.47 €57.84 €105.37 €113.85 €51.75 incentive plan. Balance January 1, 2015 Options granted, April 24, 2015 Balance December 31, 2015 Options granted, April 22, 2016 Balance December 31, 2016 Options granted, April 21, 2017 Balance December 31, 2017 Adjustment following capital repayment Balance December 31, 2018 In 2020, no options were granted. Number of options Exercise price in € Fair value at grant date – 42,659 42,659 62,555 105,214 24,963 130,177 11,593 141,770 44.24 €17.33 37.09 €12.64 51.55 €14.57 – – At December 31, 2020, the aggregate intrinsic value of all options outstanding under the 2014 long-term incentive plan is €25,512. Share-based payments expenses In 2020, treasury shares were sold for the vesting of 229,823 restricted shares. expensed on a straight-line basis over the vesting period, based on the company’s estimate of stock The grant date fair value of the stock options, the restricted shares and the performance shares is options, restricted shares, and performance shares that will eventually vest. The impact of the true-up of the estimates is recognized in the consolidated statement of profit or loss in the period in which the revision is determined. We recorded compensation expenses of €12,792 for 2020 (2019: €10,538). FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENOTE 14. PROVISION FOR WARRANTY The changes in the amount of provision for warranty are as follows: NOTE 15. ACCRUED EXPENSES AND OTHER PAYABLES Accrued expenses and other payables consist of the following: December 31, December 31, 132 2019 45,318 32,146 3,912 7,002 47,601 2,175 1,365 1,109 9,215 149,843 2020 50,637 46,999 991 6,221 4,137 6,010 1,228 – 12,704 128,927 Balance January 1 Charged to cost of sales Deductions Releases of expired warranty Foreign currency translation effect Balance December 31 2019 7,955 26,301 (12,232) (5,684) 84 16,424 2020 16,424 18,814 Personnel-related items Deferred revenue (14,115) Financing-related items (884) (1,252) 18,987 Current portion lease liabilities Advanced payments from customers Supplier-related items Marketing-related items R&D projects Other Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. Costs of warranty include the cost of labor and materials to repair a product during the warranty period. The main term of the warranty period is one year. Total accrued expenses and other payables The company accrues for the estimated cost of the warranty on its products shipped in the provision for warranty, upon recognition of the sale of the product. The costs are estimated based on actual Personnel-related items comprise accrued management bonuses, accrued vacation days, accrued historical expenses incurred and on estimated future expenses related to current revenue, and wage tax, social securities, and pension premiums. Deferred revenue consists of the revenue relating are updated periodically. Actual warranty costs are charged against the provision for warranty. to the undelivered elements of the arrangements, see Note 21 for more information. This part of The assumptions made in relation to the current period are consistent with those in the prior year. revenue is deferred at their relative selling prices until delivery of these elements. Other includes Factors that could impact the estimated claim information include the success of the group’s accruals for VAT, other taxes, and invoices to be received for goods and services. productivity and quality initiatives, as well as parts and labor costs. The main part of the claims is expected to be settled in the next financial year. NOTE 16. CREDIT FACILITY As per December 31, 2020, ASMI was debt-free. ASMI may borrow under separate short-term lines of credit with banks under an unsecured €150 million standby credit facility with a consortium of banks. Total short-term lines of credit amounted to €150 million on December 31, 2020. The amount outstanding as at December 31, 2020 was nil, so the undrawn portion totaled €150 million. The undrawn portion represents the company’s standby revolving credit facility of €150 million with a consortium of banks. The facility will be available through December 16, 2023. The credit facility of €150 million includes two financial covenants: ›› Minimum consolidated tangible net worth; and ›› Consolidated total net debt/total equity ratio. These financial covenants are measured twice each year, on June 30 and December 31. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 133 The minimum level of consolidated tangible net worth for the year ended December 31, 2020 required was €450 million, the consolidated tangible net worth as per that date was €1,238 million. NOTE 17. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT Consolidated tangible net worth is defined as the net assets, deducting any amount shown in respect of goodwill or other intangible assets (including any value arising from any valuation of ASMPT). FINANCIAL INSTRUMENTS Financial instruments include: Total equity is defined as the aggregate of: ›› the amounts paid up on the issued common shares; ›› share capital in excess of par value; ›› retained earnings; ›› accumulated other comprehensive income and loss; and ›› deducting any amount shown in respect of goodwill or other intangible assets. Financial assets: Cash and cash equivalents Accounts receivable Financial liabilities: Accounts payable December 31, 2019 2020 497,874 199,535 435,228 280,061 119,712 124,507 The net debt/total equity ratio should not exceed 1.5. For the year ended December 31, 2020, net cash was €435 million and total equity amounted to €1,855 million. The company is in compliance The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable with these financial covenants as of December 31, 2020. equal their fair values because of the short-term nature of these instruments. ASMI does not provide guarantees for borrowings of ASMPT and there are no guarantees from Gains or losses related to financial instruments are as follows: ASMPT to secure indebtedness of ASMI. Under the rules of the Stock Exchange of Hong Kong, ASMPT is precluded from providing loans and advances other than trade receivables in the normal course of business, to ASMI or its non-ASMPT subsidiaries. Interest income Interest expense Result from foreign currency exchange Addition to allowance for doubtful accounts receivable 2019 1,639 (1,766) (146) (154) 2020 141 (2,008) (23,157) (83) FINANCIAL RISK FACTORS ASMI is exposed to a number of risk factors: market risks (including foreign exchange risk), credit risk, liquidity risk, and equity price risk. The company may use forward exchange contracts to hedge its foreign exchange risk. The company does not enter into financial instrument transactions for trading or speculative purposes. Foreign exchange risk ASMI and its subsidiaries conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of the company (euro) or one of its subsidiaries conducting the business. The purpose of the company's foreign currency management FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 134 is to manage the effect of exchange rate fluctuations on income, expenses, cash flows, and assets swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains and liabilities denominated in selected foreign currencies, in particular denominated in US dollars. or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and We may use forward exchange contracts to hedge our foreign exchange risk of anticipated sales or changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the purchase transactions in the normal course of business which occur within the next twelve months, consolidated statement of profit or loss. Receivables and payables denominated in foreign currencies for which we have a firm commitment from a customer or to a supplier. The terms of these contracts are recorded at the exchange rate at the balance sheet date and gains and losses as a result of are consistent with the timing of the transactions being hedged. The hedges related to forecasted changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) transactions are designated and documented at the inception of the hedge as cash flow hedges, in the consolidated statement of profit or loss. and are evaluated for effectiveness on a quarterly basis. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income (loss) net of We do not use forward exchange contracts for trading or speculative purposes. Financial assets and taxes in equity, and is reclassified into earnings when the hedged transaction affects earnings. financial liabilities are recognized on the company's consolidated statement of financial position when Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. We record all derivatives, including To the extent that exchange rate fluctuations impact the value of the company’s investments in its forward exchange contracts, on the statement of financial position at fair value in accrued expenses foreign subsidiaries, they are not hedged. The cumulative effect of these fluctuations is separately and payables. Should contracts extend beyond one year, these are classified as long-term. reported in consolidated equity. Reference is made to Note 12. the company becomes a party to the contractual provisions of the instrument. Furthermore, we may manage the currency exposure of certain receivables and payables using Per December 31, 2019 and December 31, 2020, there were no forward exchange contracts derivative instruments, such as forward exchange contracts (fair value hedges) and currency outstanding. The foreign currency exchange results reported in 2020 are mainly translation results related to movements in the US dollar. A substantial part of ASMI’s cash position is denominated in US dollar. The following table analyzes the company’s exposure to currency risk in our major currencies. (thousand) Accounts receivable Cash and cash equivalents Accounts payable Total USD 170,904 412,773 (62,962) 520,715 2019 JPY 2,902,585 3,034,840 KRW 11,754,832 15,868,137 (3,347,833) (13,215,657) 2,589,592 14,407,312 December 31, SGD 357 45,262 (27,801) 17,818 USD 275,247 306,855 (72,087) 510,015 2020 JPY 4,019,525 2,142,789 KRW 1,551,385 35,060,828 (3,486,230) (16,031,125) 2,676,084 20,581,088 SGD 134 42,710 (28,875) 13,969 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 135 The following table analyzes the company’s sensitivity to a hypothetical 10% strengthening and 10% Our customers are semiconductor device manufacturers located throughout the world. We perform weakening of the US dollar, Singapore dollar, Korean won and Japanese yen against the euro as of ongoing credit evaluations of our customers' financial condition. We take additional measures to December 31, 2019 and December 31, 2020. This analysis includes foreign currency-denominated mitigate credit risk when considered appropriate by means of down payments or letters of credit. We monetary items and adjusts their translation at year-end for a 10% increase and 10% decrease generally do not require collateral or other security to support financial instruments with credit risk. against the euro. (EUR thousand) 10% increase of US dollar versus euro 10% decrease of US dollar versus euro 10% increase of Singapore dollar versus euro 10% decrease of Singapore dollar versus euro 10% increase of Korean won versus euro 10% decrease of Korean won versus euro 10% increase of Japanese yen versus euro 10% decrease of Japanese yen versus euro Impact on financial instruments exist for groups of customers or counterparties when they have similar economic characteristics Concentrations of credit risk (whether on- or off-balance sheet) that arise from financial instruments 2019 46,351 (46,351) 1,179 (1,179) 1,109 (1,109) 2,123 (2,123) 2020 41,563 (41,563) 861 (861) 1,544 (1,544) 2,117 (2,117) that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. We derive a significant percentage of our revenue from a small number of large customers. The ten largest customers accounted for approximately 85.1% of net revenue in 2020 (2019: 82.2%). The three largest customers accounted for approximately 59.1% of net revenue in 2020 (2019: 61.6% excluding the proceeds of the patent litigation and arbitration settlement). In 2020, we had three customers (2019: three customers) who contributed more than 10% of total net revenue. Revenue to these large customers also may fluctuate significantly from time to time depending on the timing and level of purchases by these customers. Significant orders from such customers may expose A hypothetical 10% strengthening or 10% weakening of any other currency against the euro as the company to a concentration of credit risk and difficulties in collecting amounts due, which could of December 31, 2019 and December 31, 2020 could have a material impact on net earnings for harm the company’s financial results. certain currencies. Interest risk We invest our cash and cash equivalents in short-term deposits, money market funds, and derivative instruments with high-rated financial institutions. We only enter into transactions with a limited We are exposed to interest rate risk through our cash deposits. The company does not enter into number of major financial institutions that have high credit ratings, and we closely monitor the financial instrument transactions for trading or speculative purposes, or to manage interest rate creditworthiness of our counterparties. Concentration risk is mitigated by not limiting the exposure to exposure. As per December 31, 2020, the company had no debt and was not exposed to interest a single counterparty. rate risk on borrowings. Credit risk The maximum credit exposure is equal to the carrying values of cash and cash equivalent, and accounts receivable. Financial instruments that potentially subject the company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and derivative instruments. These Liquidity risk instruments contain a risk of counterparties failing to discharge their obligations. We monitor Our policy is to maintain a strong capital base so as to maintain investor-, creditor- and market credit risk and manage credit risk exposure by type of financial instrument by assessing the confidence and to sustain future development of the business. creditworthiness of counterparties. We do not anticipate non-performance by counterparties, given their high creditworthiness. Our liquidity needs are affected by many factors, some of which are based on the normal ongoing operations of the business, and others that relate to the uncertainties of the global economy and the semiconductor industry. Although our cash requirements fluctuate based on the timing and extent of FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 136 these factors, we believe that cash generated from operations, together with our principal sources of Equity price risk liquidity, are sufficient to satisfy our current requirements, including our expected capital expenditures The shares of ASMPT, our 25.07% equity investment, are listed on the Hong Kong Stock Exchange. in 2021. If the fair value of an investment is less than its carrying value at the balance sheet date, the company determines whether the impairment is temporary or prolonged. The amount per share recognized We intend to return cash to our shareholders on a regular basis in the form of dividend payments as per December 31, 2020 under equity accounting amounts to HK$68.60, whereas the level 1 and, subject to our actual and anticipated liquidity requirements and other relevant factors, share fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was buybacks. HK$102.30. Management concluded that, based on quantitative analysis, no impairment of its share The following table summarizes the company’s contractual and other obligations as at December 31, 2020. Total Less than 1 year 1-5 years More than 5 years Accounts payable Income tax payable 124,507 124,507 67,857 67,857 Accrued expenses and other payables 122,706 122,706 Lease liabilities Pension liabilities Purchase obligations: 21,136 8,113 6,186 433 Purchase commitments to suppliers 186,119 183,949 Capital expenditure and other commitments 11,063 10,495 – – – 10,224 2,314 2,170 568 – – – 4,726 5,366 – – Total contractual obligations 541,501 516,133 15,276 10,092 in ASMPT existed as per December 31, 2020. NOTE 18. COMMITMENTS AND CONTINGENCIES Per December 31, 2020, the company entered into purchase commitments with suppliers in the amount of €183,949 for purchases within the next 12 months and €2,170 after 12 months. Commitments for capital expenditures and other commitments per December 31, 2020 were €10,495 within the next 12 months and €568 after 12 months. NOTE 19. LITIGATION ASMI is, and may become, a party to various legal proceedings incidental to its business. As is the case with other companies in similar industries, the company faces exposure from actual or potential claims and legal proceedings. Although the ultimate result of legal proceedings cannot be predicted, and in many events cannot be reasonably estimated, it is the opinion of the company’s management that the outcome of any claim which is currently pending, either individually or on a combined basis, will not have a material effect on the financial position of the company, its cash flows and result of operations. Total short-term lines of credit amounted to €150 million at December 31, 2020. The amount outstanding at December 31, 2020 was nil and the undrawn portion totaled €150 million. The NOTE 20. SEGMENT DISCLOSURE The company organizes its activities in two operating segments, Front-end and Back-end. Operating standby revolving credit facility of €150 million with a consortium of banks will be available through segments are reported in a manner consistent with the internal reporting provided to the Chief December 16, 2023. Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM). For the majority of purchase commitments, the company has flexible delivery schedules depending The Front-end segment manufactures and sells equipment used in wafer processing, encompassing on the market conditions, which allows the company, to a certain extent, to delay delivery beyond the fabrication steps in which silicon wafers are layered with semiconductor devices. The segment originally planned delivery schedules. is a product-driven organizational unit comprised of manufacturing, service, and sales operations in Europe, the United States, Japan, South Korea and Southeast Asia. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEThe Back-end segment manufactures and sells equipment and materials used in assembly and Accordingly, the asset and result information regarding the operations that comprise the segment are packaging, encompassing the processes in which silicon wafers are separated into individual circuits disclosed. The full financial results are reviewed by the CODM, the external reporting of the segment and subsequently assembled, packaged and tested. The segment is organized in ASM Pacific is on an equity method investment basis. The total of all segments' financial amounts is reconciled Technology Ltd, in which the company holds a substantial share of 25.07% interest, whilst the to the corresponding amounts reported in the consolidated financial statements, eliminations being remaining shares are listed on the Stock Exchange of Hong Kong. The segment’s main operations reflected in the reconciling column for amounts reported in excess of those amounts reflected in the are located in Hong Kong, the People’s Republic of China, Singapore, Malaysia and Germany. consolidated financial statements. The Back-end segment remains reported as a separate segment since the cease of control per March 15, 2013. Since that date, the segment is reported as an equity method investment as the CEO reviews this information as part of his CODM package. 137 Result from operations 378,689 143,402 (143,402) Revenue Gross profit Interest income Interest expense Foreign currency exchange gains (losses), net Result on investments in associates Income tax expense Net earnings Year ended December 31, 2019 Front-end Back-end 100% Deconsoli- dated Total Year ended December 31, 2020 Front-end Back-end 100% Deconsoli- dated Total 1,283,860 1,808,530 (1,808,530) 1,283,860 Revenue 1,328,122 1,903,447 (1,903,447) 1,328,122 638,464 628,979 (628,979) 2,694 (2,694) 1,639 (1,766) (146) – (24,495) (10,499) – 24,495 10,499 4,247 40,235 638,464 378,689 1,639 (1,766) (146) 4,247 Gross profit Result from operations Interest income Interest expense 623,569 617,869 (617,869) 327,143 235,501 (235,501) 141 2,220 (2,220) (2,008) (19,163) 623,569 327,143 141 (2,008) (23,157) 31,950 (48,673) 19,163 9,297 31,950 25,479 Foreign currency exchange gains (losses), net (23,157) (9,297) Result on investments in associates – – (53,650) (40,235) (53,650) Income tax expense (48,673) (25,479) 324,766 70,867 (66,620) 329,013 Net earnings 253,446 183,782 (151,832) 285,396 Cash flows from operating activities 488,871 322,659 (322,659) Cash flows from investing activities (111,201) (58,667) 90,627 488,871 (79,241) Cash flows from operating activities 264,353 301,737 (301,737) 264,353 Cash flows from investing activities (160,449) 35,149 (19,007) (144,307) Cash flows from financing activities (205,652) (220,373) 220,373 (205,652) Cash flows from financing activities (170,448) (109,260) 109,260 (170,448) Cash and cash equivalents 497,874 264,944 (264,944) Goodwill Other intangible assets Investments in associates Other identifiable assets Total assets Total debt Headcount 1) 11,270 119,791 (119,791) 189,224 136,050 (136,050) – – 778,268 698,503 1,862,303 (1,862,303) 497,874 11,270 189,224 778,268 698,503 Cash and cash equivalents 435,228 467,781 (467,781) Goodwill Other intangible assets Investments in associates Other identifiable assets 11,270 121,821 (121,821) 209,924 119,762 (119,762) – – 742,714 830,803 1,725,311 (1,725,311) 435,228 11,270 209,924 742,714 830,803 1,396,871 2,383,088 (1,604,820) 2,175,139 Total assets 1,487,225 2,434,675 (1,691,961) 2,229,939 – 377,802 (377,802) – Total debt – 513,938 (513,938) – 2,337 13,900 (13,900) 2,337 Headcount 1) 2,583 9,600 (9,600) 2,583 1 Headcount includes employees with a fixed contract, and excludes temporary workers. 1 Headcount includes employees with a fixed contract, and excludes temporary workers. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE138 The accounting policies used to measure the net earnings and total assets in each segment are Revenue stream consistent with those used in the consolidated financial statements. The measurement methods The company generates revenue primarily from the sales of equipment and sales of spares & services. used to determine reported segment earnings are consistently applied for all periods presented. The products and services described by nature in Note 1, can be part of all revenue streams. There were no asymmetrical allocations to segments. Geographical information is summarized as follows: (EUR thousand) Equipment revenue Year ended December 31, Spares & services revenue 2019 2020 Total Year ended December 31, 2019 2020 1,068,645 1,051,463 215,215 276,659 1,283,860 1,328,122 (EUR thousand) United States Europe Asia Total Revenue 339,463 126,203 818,194 1,283,860 Property, plant and equipment 52,453 10,516 101,894 164,863 Revenue 332,981 141,300 853,841 1,328,122 Property, plant and equipment 63,364 13,555 137,048 213,967 NOTE 21. REVENUE Geographical information is summarized as follows: (EUR thousand) United States Europe Asia Total Year ended December 31, 2019 2020 Revenue 339,463 126,203 818,194 Revenue 332,981 141,300 853,841 1,283,860 1,328,122 The proceeds resulting from the patent litigation & arbitration settlements (€159 million) in 2019 are included in the equipment revenue stream. We refer to our Annual Report of 2019 especially Note 19. Litigation. Total revenue increased by 18%, excluding the settlement proceeds in 2019, driven by solid increases in our ALD business and our spares & services revenue. Contract balances Accrued revenue Deferred revenue 2019 28,184 32,146 2020 33,813 46,999 The increase in the contract balances is the result of the higher activity level of the company. For geographical reporting, the revenue is attributed to the geographical location in which the to consideration for work completed and revenue recognized but not billed at the reporting date. The accrued revenue included in the 'Amounts to be invoiced' primarily relate to the company’s right customer's facilities are located. The accrued revenue is transferred to accounts receivables when the rights become unconditional. This usually occurs when the company issues an invoice to the customer. Deferred revenue relates to the advance consideration received from customers for which revenue is not yet recognized because the performance obligation has not been satisfied yet. Deferred revenue consists of the revenue relating to undelivered elements of the arrangement with customers. This part of the revenue is deferred at the transaction price allocated to the performance obligations until shipment. An amount of €23 million included in the deferred revenue at December 31, 2019, has been recognized in 2020. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE NOTE 22. INCOME TAXES Reconciliation of effective tax rate Amounts recognized in profit or loss The provisions for income taxes as shown in the consolidated statements of profit or loss differ from the amounts computed by applying the Dutch statutory income tax rate to earnings before taxes. The components of the result before income taxes consist of: A reconciliation of the provisions for income taxes and the amounts that would be computed using the Dutch statutory income tax rate is set forth as follows: 139 The Netherlands Other countries Result before income taxes The income tax expense consists of: Current: The Netherlands Other countries Deferred: The Netherlands Other countries Income tax expense Year ended December 31, 2019 261,942 120,721 382,663 2020 212,795 121,274 334,069 Year ended December 31, 2019 2020 (28,409) (9,011) (37,420) (6,860) (9,370) (53,650) (25,462) (17,754) (43,216) (3,348) (2,109) (48,673) Result before income taxes from continuing operations Income tax provision based on Dutch statutory income tax rate Non-deductible expenses Foreign taxes at a rate other than the Dutch statutory rate Recognition of net operating losses Utilization of net operating losses, previously not recognized Tax incentives and non-taxable income 1) Adjustments in respect of prior years' current taxes Other 2) Tax income / (expense) Year ended December 31, 2019 2020 382,663 100.0% 334,069 100.0% (95,666) (1,527) 5,365 – 22,569 21,626 (307) (5,710) (53,650) 25.0% 0.4% (83,517) (1,892) 25.0% 0.6% (1.4%) 5,575 (1.7%) – (5.9%) (5.7%) 0.1% 1.5% – – – – 24,961 (7.5%) 4,525 1,675 (1.4%) (0.5%) 14.0% (48,673) 14.6% 1 Non-taxable income consists of revenues deriving from the share in income of investments and associates which are exempted under the Dutch participation exemption. 2 Other mainly consists of tax credits, withholding taxes, changes in (enacted) tax laws and revaluation of certain assets. Tax incentives relate to the Netherlands (Innovation Box), Singapore (Pioneer Certificate) and South Korea. On June 8, 2009, the Singapore Economic Development Board (EDB) granted a Pioneer Certificate to ASM Front-end Manufacturing Singapore Pte Ltd (FEMS), a principal subsidiary of the Group, to the effect that profits arising from certain manufacturing activities by FEMS of Front-end equipment will in principle be exempted from tax for a period of 10 years effective from July 1, 2008, subject to fulfillment of certain criteria during the period. This exemption has been extended for a period of five years, until July 2023. The Dutch statutory tax rate is 25%. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. During 2020, there was no significant change in the statutory tax rates of the relevant jurisdictions. The company’s deferred tax assets and liabilities have been determined in accordance with these statutory income tax rates. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 140 Movement in deferred tax balances Right-of-use assets & lease liabilities Property plant and equipment Other intangible assets Evaluation tools Employee benefits Inventories Provision for warranty Accrued expenses Tax losses carried forward R&D tax credits Total deferred tax Right-of-use assets & lease liabilities Property plant and equipment Other intangible assets Evaluation tools Employee benefits Inventories Provision for warranty Accrued expenses Tax losses carried forward R&D tax credits Total deferred tax Net balance at January 1, 2019 Consolidated statement of profit and loss Equity Exchange differences Net balance at December 31, 2019 Deferred tax assets at December 31, 2019 Deferred tax liabilities at December 31, 2019 – 362 (28,175) 3,815 (131) 1,343 1,349 (411) 6,990 14,004 (854) 46 415 (8,279) (953) (187) (237) 1,889 1,782 (7,041) (3,665) (16,230) – – – – – – – (32) – – (32) (1) (6) (466) 131 (2) 37 (3) (49) 51 352 44 45 771 (36,920) 2,993 (320) 1,143 3,235 1,290 – 10,691 (17,072) – (8) 2,896 – – 114 – 62 – – 3,064 45 779 (39,816) 2,993 (320) 1,029 3,235 1,228 – 10,691 (20,136) Net balance at January 1, 2020 Consolidated statement of profit and loss Equity Exchange differences Net balance at December 31, 2020 Deferred tax assets at December 31, 2020 Deferred tax liabilities at December 31, 2020 45 771 (36,920) 2,993 (320) 1,143 3,235 1,290 – 10,691 (17,072) 51 (146) (8,065) 2,343 (131) (61) 830 2,012 – (2,290) (5,457) – – – – (112) – – – – – (112) (5) (72) 2,358 (136) 14 (81) (231) (54) – (848) 945 91 553 (42,627) 5,200 (549) 1,001 3,834 3,248 – 7,553 (21,696) – – – – – 134 – 62 – – 196 91 553 (42,627) 5,200 (549) 867 3,834 3,186 – 7,553 (21,892) Deferred tax assets and/or liabilities for temporary differences are recognized in the Netherlands, United States, Japan, South Korea and Singapore. ASMI and its individual subsidiaries fully utilized the net operating losses during 2019. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 141 Year ended December 31, 2019 510,211 227,727 73,566 4,755 53,128 25,443 10,341 2020 554,829 255,814 78,903 10,126 51,661 24,397 25,249 905,171 1,000,979 Year ended December 31, 2019 150,745 (60,202) 15,597 (49) 2020 171,842 (64,126) 21,187 (27) Unrecognized deferred tax assets The credits concern R&D credits generated in the US, in the state of Arizona. However, ASMI does not recognize these credits stemming from prior years due to the fact that utilization of prior-year credits is only possible if and when the credits generated in the current year are fully utilized. Given the level of R&D activity in the US, the company does not expect it could fully utilize the credits generated in the current year and, hence, does not expect to benefit from the available credits generated in prior years. NOTE 23. EXPENSES BY NATURE Expenses by nature were as follows: Materials and supplies Personnel expenses Credits Unrecognized deferred tax assets 2020 Depreciation and amortization Gross amount Tax effect Impairments 13,644 13,644 13,644 13,644 Other personnel-related expenses Professional fees Summary of open tax years A summary of open tax years by major jurisdiction is as follows: Jurisdiction Japan The Netherlands Singapore United States of America South Korea 2015 - 2020 2014 - 2020 2015 - 2020 2001 - 2020 2015 - 2020 The calculation of the company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws. The company’s estimate for the potential outcome of any unrecognized tax Other Total cost of sales, selling, general and administrative and research and development expenses Research and development consists of the following: Research and development expenses Capitalization of development expenses Amortization of capitalized development expenses Research and development grants and credits Total research and development expenses 106,091 128,876 benefits is highly judgmental. Settlement of unrecognized tax benefits in a manner inconsistent with Impairment of research and development related assets the company’s expectations could have a material impact on the company’s financial position, net Total earnings and cash flows. The company is subject to tax audits in its major tax jurisdictions, and local tax authorities may challenge the positions taken by the company. 4,755 110,846 10,126 139,002 The impairment expenses in 2019 and 2020 are related to customer-specific projects. Other taxes The company has not provided for deferred foreign withholding taxes, if any, on undistributed The company’s operations in the Netherlands, Belgium and the United States receive research and earnings of its foreign subsidiaries. At December 31, 2020, the undistributed earnings of subsidiaries, development grants and credits from various sources. subject to withholding taxes, were approximately €85,604. These earnings could become subject to foreign withholding taxes if they were remitted as dividends and/or if the company should sell its interest in the subsidiaries. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 142 Personnel expenses for employees were as follows: The number of employees, exclusive of temporary workers, by function at year-end was as follows: Wages and salaries Social security Pension expenses Share-based payment expenses Restructuring expenses Total December 31, December 31, 2019 191,459 17,214 8,408 10,538 108 2020 Per function 216,832 Research and development 17,200 8,948 12,792 Manufacturing Marketing and sales Customer service 42 Corporate and support functions 2019 612 484 275 779 187 2020 613 531 341 884 214 227,727 255,814 Total 2,337 2,583 Personnel expenses are included in cost of sales and in operating expenses in the consolidated statement of profit or loss. NOTE 24. EARNINGS PER SHARE Basic net earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding for that period. The number of employees, exclusive of temporary workers, by geographical area at year-end was The dilutive effect is calculated using the treasury stock method. The calculation of diluted net income as follows: Geographical location Europe: - the Netherlands - EMEA United States Japan South Korea Singapore Asia, other Total December 31, 2019 2020 145 203 639 271 280 474 325 146 221 714 283 302 524 393 2,337 2,583 per share assumes the exercise of options issued under our stock option plans (and the issuance of shares under our share plans) for periods in which exercises (or issuances) would have a dilutive effect. The calculation of basic and diluted net income per share attributable to common shareholders is based on the following data: Net earnings used for purposes of calculating net income per common share Net earnings from operations 329,013 285,396 December 31, 2019 2020 Basic weighted average number of shares outstanding during the year Effect of dilutive potential common shares from stock options and restricted shares Dilutive weighted average number of shares outstanding Basic net earnings per share: from operations Diluted net earnings per share: from operations 49,418 580 49,999 6.66 6.58 48,907 452 49,359 5.84 5.78 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 143 NOTE 25. BOARD REMUNERATION During 2020, the company considered the members of the Management Board and the Supervisory Board to be the key management personnel. Total remuneration for key management personnel NOTE 26. SHARE OWNERSHIP AND RELATED PARTY TRANSACTIONS The ownership or controlling interest of outstanding common shares of ASMI by members of the in 2020 amounts to €7,181 (2019: €4,663). ASMI does not provide any loans, deposits or related Management Board and Supervisory Board or members of their immediate family are as follows: guarantees to the members of the Management Board or the Supervisory Board. MANAGEMENT BOARD The remuneration of members of the Management Board has been determined by the Supervisory Board according to the following table that sets out information concerning all remuneration from the company (including its subsidiaries) for services in all capacities to all current members of the Management Board of the company. The remuneration of the Management Board consists of the remuneration of current and former managing directors. December 31, 2019 December 31, 2020 Shares owned Percentage of common shares outstanding Shares owned Percentage of common shares outstanding C.D. del Prado (member of the Management Board) 1) P.A.M. van Bommel (member of the Management Board) M.J.C. de Jong (member of the Supervisory Board) 827,696 1.69% – 22,137 4,050 0.05% 26,177 0.01% 4,050 – 0.05% 0.01% 1 This information is not disclosed for 2020 as Mr. del Prado had stepped down from the ASMI Board December 31, on May 18, 2020. The company has a related party relationship with its subsidiaries, equity-accounted investees, and members of the Supervisory Board and the Management Board. Related party transactions, if any, are conducted on an arm’s length basis with terms comparable to transactions with third parties. Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment 1) Total Management Board remuneration before additional payroll tax Other 2) Total Management Board remuneration 2019 2,864 215 – – 1,268 4,347 – 4,347 2020 2,410 216 – – 1,804 4,430 2,400 6,830 1 The amounts included for share-based payment in the total remuneration represent the vesting expenses related to the financial year. 2 Represents an additional payroll tax to the company due to vesting of already granted shares in previous years related to the retirement of a member of the Management Board subject to article 32bb of the Dutch Wage Tax Act. SUPERVISORY BOARD The total remuneration (base compensation, no bonuses or pensions were paid) from the company (including its subsidiaries) for services in all capacities to all current and former members of the Supervisory Board of the company in 2020 amounts to €351 (2019: €316). No stock options or performance shares have been granted to members of the Supervisory Board. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 144 NOTE 27. PRINCIPLE AUDITOR'S FEES AND SERVICES KPMG Accountants N.V. has served as our external auditor for the years 2020 and 2019. The Audit-related services The Audit Committee may pre-approve expenditures up to a specified amount for services included table sets out the aggregate fees for professional audit services and other services rendered by the in identified service categories that are related extensions of audit services and are logically performed external auditors and its member firms and/or affiliates in 2020 and 2019. The fees mentioned in by the auditors. Additional services exceeding the specified pre-approved limits require specific Audit the table for the audit of the financial statements 2020 (2019) relate to the total fees for the audit of Committee approval. the financial statements 2020 (2019), irrespective of whether the activities were performed during the financial year 2020 (2019). The following fees were charged by KPMG Accountants N.V. to the Tax services company, its subsidiaries and other consolidated companies, as referred to in Section 2:382a(1) and The Audit Committee may pre-approve expenditures up to a specified amount per engagement (2) of the Dutch Civil Code. and in total for identified services related to tax matters. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit fees Audit-related fees Tax fees Other fees Total 2019 2020 Audit Committee approval. KPMG Accountants NV KPMG network KPMG Total KPMG Accountants NV KPMG network KPMG Total 489 211 700 623 245 868 Other services – – – – – – – – – – – – – – – – – – 489 211 700 623 245 868 In the case of specified services for which utilizing our external auditor creates efficiencies, minimizes disruption, or preserves confidentiality, or for which management has determined that our external auditor possesses unique or superior qualifications to provide such services, the Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval. AUDIT COMMITTEE PRE-APPROVAL POLICIES The Audit Committee has determined that the provision of services by KPMG described in the preceding paragraphs is compatible with maintaining KPMG’s independence. All audit and permitted non-audit services provided by KPMG during 2020 were pre-approved by the Audit Committee. The Audit Committee has adopted the following policies and procedures for pre-approval of all audit and permitted non-audit services provided by our external auditor: Audit services Management submits to the Audit Committee for pre-approval the scope and estimated fees for specific services directly related to performing the independent audit of our consolidated financial statements for the current year. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE 145 NOTE 28. SUBSIDIARIES Unless otherwise indicated, these are, directly or indirectly, wholly-owned subsidiaries. The location included below is the principal place of business of the specified subsidiaries. There is no difference between the principal place of business and country of incorporation. Name Subsidiaries (consolidated) ASM Europe BV 1) ASM IP Holding BV 1) ASM Pacific Holding BV 1) 2) ASM Netherlands Holding BV 1) ASM United Kingdom Sales BV 1) ASM Germany Sales BV 1) ASM France SARL ASM Italia Srl ASM Belgium NV ASM Services and Support Ireland Ltd ASM Services and Support Israel Ltd ASM Microchemistry Oy ASM America Inc ASM NuTool Inc ASM Japan KK ASM Wafer Process Equipment Singapore Pte Ltd ASM Front-End Manufacturing Singapore Pte Ltd ASM Services & Support Malaysia SDN BHD LOCATION Almere, the Netherlands Almere, the Netherlands Almere, the Netherlands Almere, the Netherlands Almere, the Netherlands Almere, the Netherlands Crolles, France Milano, Italy Leuven, Belgium Dublin, Ireland Kiryat Gat, Israel Helsinki, Finland Phoenix, Arizona, United States of America Phoenix, Arizona, United States of America Tokyo, Japan Singapore Singapore Kulim, Malaysia ASM Korea Ltd Dongtan, South Korea ASM Front-End Sales & Services Taiwan Co Ltd Hsin-Chu, Taiwan ASM China Ltd Shanghai, People’s Republic of China ASM Wafer Process Equipment Ltd 3) Kwai Chung, Hong Kong, People’s Republic of China % Ownership December 31, 2019 2020 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% –% 1 For these subsidiaries, ASM International N.V. has filed statements at the Dutch Chamber of Commerce assuming joint and several liability in accordance with Article 403, Part 9 of Book 2 of the Dutch Civil Code. 2 ASM Pacific Holding BV holds 25.07% of the shares in ASM Pacific Technology Ltd. 3 ASM Wafer Process Equipment Ltd was liquidated on October 9, 2020. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENOTE 29. SUBSEQUENT EVENTS Subsequent events were evaluated up to March 4, 2021, which is the issuance date of this Annual SIGNING Almere, the Netherlands Report 2020. There are no subsequent events to report. March 4, 2021 146 SUPERVISORY BOARD J.C. Lobbezoo M.C.J. van Pernis M.J.C. de Jong S. Kahle-Galonske D.R. Lamouche M. de Virgiliis MANAGEMENT BOARD G.L. Loh P.A.M. van Bommel FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEASM International N.V. financial statements ASM International N.V. financial statements Company balance sheet Company balance sheet COMPANY BALANCE SHEET (before proposed appropriation of net earnings for the year) 147 (EUR thousand) Non-current assets Right-of-use assets Property, plant and equipment Goodwill Other intangible assets Investments in subsidiaries Loans to subsidiaries Other non-current assets Deferred tax assets Total non-current assets Current assets Loans to subsidiaries Amounts due from subsidiaries Other current assets Cash and cash equivalents Total current assets Total assets Equity Common shares Capital in excess of par value Treasury shares Legal reserves Translation reserve Other legal reserves Accumulated net earnings Net earnings current year Total equity Non-current liabilities Accrued expenses and other payables Total non-current liabilities Current liabilities Accounts payable Amounts due to subsidiaries Income tax payable Accrued expenses and other payables Total current liabilities Total liabilities Total equity and liabilities The notes on the following pages are an integral part of these company financial statements. Notes December 31, 2019 2020 2 3 3 3 6 4 170 250 11,270 3,691 1,662,442 45,377 6,354 5,709 1,735,263 2,123 73,098 526 21,192 96,939 172 148 11,270 197 1,831,446 39,689 6,166 — 1,889,088 2,071 71,562 685 — 74,318 1,832,202 1,963,406 2,052 43,676 (169,707) 126,940 932,105 554,572 329,013 5 1,818,651 6 7 52 52 428 4,034 — 9,037 13,499 13,551 1,992 34,502 (104,962) 26,185 908,910 702,701 285,396 1,854,724 69 69 295 49,950 52,714 5,654 108,613 108,682 1,832,202 1,963,406 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE Company statement of profit or loss Company statement of profit or loss COMPANY STATEMENT OF PROFIT OR LOSS 148 (EUR thousand) Operating expenses: Selling, general and administrative Research and development Total operating expenses Result from operations Finance income Finance expense Foreign currency exchange gain Result before income taxes Income taxes Net earnings from holding activities Net earnings from subsidiaries and associates Total net earnings The notes on the following pages are an integral part of these company financial statements. Year ended December 31, Notes 2019 2020 8 (33,361) (2,122) (35,483) (35,483) 4,964 (1,405) 6,874 (25,050) (5,400) (30,450) 359,463 329,013 (26,408) (4,074) (30,482) (30,482) 2,576 (1,211) 34,975 5,858 (2,325) 3,533 281,863 285,396 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENotes to the company financial statements Notes to the company financial statements 149 NOTES TO THE COMPANY FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ASM International N.V. (ASMI or the company) is a Dutch public liability company. Statutory seat: Corporate income tax The company is the head of the Dutch fiscal unity. The company recognizes the portion of corporate Versterkerstraat 8, 1322 AP Almere, the Netherlands. income tax that it would owe as an independent taxpayer, taking into account the allocation of the advantages of the fiscal unity. The description of our activities and our structure, as included in the Notes to the consolidated financial statements, also apply to the company financial statements. Settlement within the fiscal unity between the company and its subsidiaries takes place through The accompanying company financial statements are stated in thousands of euros unless otherwise indicated. current account positions. Participating interests in group companies Investments in subsidiaries are stated at net asset value as we effectively exercise influence of ACCOUNTING POLICIES APPLIED The financial statements of the company included in this section are prepared in accordance with significance over the operational and financial activities of these investments. The net asset value is determined on the basis of the EU-IFRS as applied in the preparation of the consolidated financial Part 9 of Book 2 of the Dutch Civil Code. Section 362 (8), Book 2, Dutch Civil Code, which allows statements. For a list of all subsidiaries, see Note 28 to the consolidated financial statements. companies that apply IFRS as endorsed by the European Union in their consolidated financial statements to use the same measurement principles in their company financial statements. The company has prepared these company financial statements using this provision. NOTE 2. GOODWILL Reference is made to Note 4 of the consolidated financial statements. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENOTE 3. INVESTMENTS AND LOANS TO SUBSIDIARIES Investments in subsidiaries Loans to subsidiaries Total NOTE 4. CASH AND CASH EQUIVALENTS The amounts of cash and cash equivalents are mainly related to the cash pool and in-house bank operated by the Company. At 31 December 2020, the cash pool and in-house bank arrangement Balance January 1, 2019 1,602,871 48,762 1,651,633 resulted in a liability which is recorded in amounts due to subsidiaries. 150 Net result of subsidiaries and associates Other comprehensive income investments Dividend received Repayment of loans Dilution Foreign currency translation effect Balance December 31, 2019 Net result of subsidiaries and associates Other comprehensive income investments Dividend received Repayment of loans Dilution Foreign currency translation effect Balance December 31, 2020 Loans due from subsidiaries – non-current portion Loans due from subsidiaries – current portion Total 359,463 (3,954) (330,399) – 3,882 30,579 – – – (2,164) – 902 359,463 (3,954) (330,399) (2,164) 3,882 31,481 1,662,442 47,500 1,709,942 281,863 (1,922) (16,961) – 2,059 (96,035) – – – (2,071) – 281,863 (1,922) (16,961) (2,071) 2,059 (3,669) (99,704) 1,831,446 41,760 1,873,206 December 31, 2019 45,377 2,123 47,500 2020 39,689 2,071 41,760 The interest on the loans due from subsidiaries is based on the Bank of America's prime rate plus two percent points. The repayment schedule of the loan is as follows: 24 annual installments of US$2 million, started December 31, 2018, followed by a final installment of US$5.3 million on December 31, 2043. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE NOTE 5. EQUITY The changes in equity are as follows: (EUR thousand) Balance as of January 1, 2019 Appropriation of net earnings: Components of comprehensive income Net earnings Other comprehensive income Total comprehensive income (loss) Dividend paid to common shareholders Capital repayment Compensation expense share-based payments Exercise stock options out of treasury shares Vesting restricted shares out of treasury shares Purchase of common shares Cancellation of common shares out of treasury shares Change in retained earnings subsidiaries Fair value accounting investments Capitalized development expenses subsidiaries Other movements in investments in associates: Dilution Balance as of December 31, 2019 Appropriation of net earnings Components of comprehensive income: Net earnings Other comprehensive income Total comprehensive income (loss) Dividend paid to common shareholders Capital repayment Compensation expense share-based payments Exercise stock options out of treasury shares Vesting restricted shares out of treasury shares Purchase of common shares Cancellation of common shares out of treasury shares Change in retained earnings subsidiaries Fair value accounting investments Capitalized development expenses subsidiaries Other movements in investments in associates: Dilution Balance as of December 31, 2020 Common shares Capital in excess of par value 2,252 50,902 Treasury shares (328,010) – – – – – – – – – – (200) – – – – – – – – – (1,144) 10,538 (8,056) (8,564) – – – – – – – – – – – – – 14,823 8,564 (100,131) 235,047 – – – – 2,052 43,676 (169,707) – – – – – – – – – – (60) – – – – – – – – – – 12,792 (5,923) (16,043) – – – – – – – – – – – – – 8,697 16,043 (67,505) 107,510 – – – – 1,992 34,502 (104,962) Accumulated net earnings Net earnings current year Legal reserves Translation reserve 99,607 Other legal reserves 886,151 773,657 157,133 – – – (99,299) – – – – – (234,847) (6,375) 2,535 (42,114) 3,882 554,572 329,013 – – – (98,688) – – – – – (107,450) (2,733) 47,772 (21,844) 2,059 702,701 157,133 (157,133) 329,013 – 329,013 – – – – – – – – – – – – – 27,333 27,333 – – – – – – – – – – – 329,013 (329,013) 285,396 – 285,396 126,940 – – (100,755) (100,755) – – – – – – – – – – – – – – – – – – – – – – 285,396 26,185 – – – – – – – – – – – 6,375 (2,535) 42,114 – 932,105 – – – – – – – – – – – 2,733 (47,772) 21,844 – 908,910 151 Total equity 1,641,692 – 329,013 27,333 356,346 (99,299) (1,144) 10,538 6,767 – (100,131) – – – – 3,882 1,818,651 – 285,396 (100,755) 184,641 (98,688) – 12,792 2,774 – (67,505) – – – – 2,059 1,854,724 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEChanges in other legal reserves in 2019 and 2020 were as follows: 152 COMMON SHARES, PREFERRED AND FINANCING PREFERRED SHARES Following the amendment of the articles of association on August 3, 2018, the authorized capital of the company amounts to 82,500,000 common shares of €0.04 par value, 88,500 preferred shares of €40 par value, and 6,000 financing preferred shares of €40 par value. The AGM of May 18, 2020, approved the cancellation of 1.5 million treasury shares. This became effective as per July 21, 2020. Balance as of January 1, 2019 Retained earnings subsidiaries and investments Fair value accounting investments As per December 31, 2020 49,797,394 common shares with a nominal value of €0.04 each were Development expenditures issued and fully paid up, of which 1,082,712 common shares are held by us in treasury. All shares Balance as of December 31, 2019 have one vote per €0.04 par value. Treasury shares held by the company cannot be voted on. Of our 48,714,682 outstanding common shares at December 31, 2020, 48,438,605 are registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and 276,077 are registered with our transfer agent in the United States, Citibank, NA, New York. Retained earnings subsidiaries and investments Fair value accounting investments Development expenditures Balance as of December 31, 2020 As at December 31, 2020, no preferred shares and no financing preferred shares are issued. Reserve for participating interests, regarding retained earnings Reserve for participating interests, regarding capitalized development expenses Other legal reserves 745,769 6,375 (2,535) – 749,609 2,733 (47,772) – 704,570 140,382 886,151 – – 6,375 (2,535) 42,114 42,114 182,496 932,105 – – 2,733 (47,772) 21,844 21,844 204,340 908,910 TREASURY SHARES With respect to treasury shares, reference is made to Note 12 to the consolidated financial statements. OTHER LEGAL RESERVES The other legal reserve for participating interests regarding retained earnings, which amounts to €704,570 (2019: €749,609), pertains to participating interests that are accounted for according to the equity accounting method. The reserve represents the difference between the participating interest retained earnings and direct changes in equity, as determined on the basis of the company's accounting policies, and the share thereof that the company may distribute. As to the latter share, this takes into account any profits that may not be distributed by participating interests that are Dutch limited companies based on the distribution tests to be performed by the management of those For more detailed information, reference is made to Note 12 to the consolidated financial statements. EMPLOYEE STOCK PLAN, OPTION PLAN AND EMPLOYEE RESTRICTED SHARES PLAN The company has adopted various stock option plans and restricted share plans, and has entered into related agreements with various employees. For detailed information, reference is made to Note 13 to the consolidated financial statements. APPROPRIATION OF RESULT It is proposed that net earnings for the year 2020 are carried to the accumulated net earnings. NOTE 6. AMOUNTS DUE FROM / TO SUBSIDIARIES The amounts due from subsidiaries are mainly related to the settlement of the income tax of the companies. The legal reserve is determined on an individual basis. Dutch fiscal unity. In accordance with applicable legal provisions, a legal reserve for the carrying amount of €204,340 The amounts due to subsidiaries are mainly related to the cash pool and in-house bank operated by (2019: €182,496) has been recognized for capitalized development costs. the company. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE153 NOTE 7. INCOME TAX PAYABLE The income tax payable reflects the amount due by the Dutch fiscal unity regarding the provisional NOTE 10. COMMITMENTS AND CONTINGENCIES With respect to certain Dutch subsidiaries, ASMI has assumed joint and several liability in accordance tax assessments for the years 2020 and 2019 as the company is severally liable for the tax payables with Article 403, Part 9 of Book 2 of the Dutch Civil Code. These Dutch subsidiaries are disclosed in of the Dutch fiscal unity. Note 28 of the consolidated financial statements. NOTE 8. EXPENSES BY NATURE Expenses by nature were as follows: Salaries and wages Depreciation and amortization Other personnel-related expenses Professional fees Other Total operating expenses Year ended December 31, 2019 7,515 4,918 5,195 14,835 3,020 35,483 2020 8,903 3,736 6,011 8,247 3,585 30,482 ASMI forms a fiscal unity (tax group for corporate income tax purposes) together with its Dutch subsidiaries for purposes of Dutch tax laws and is as such jointly and severally liable for the tax debts of the unity. The tax unity consists of ASM International N.V. and the following subsidiaries: ›› ASM Europe BV (operational company); ›› ASM IP Holding BV (operational company); ›› ASM Pacific Holding BV (holding company); ›› ASM Netherlands Holding BV (holding company); ›› ASM United Kingdom Sales BV (operational company); and ›› ASM Germany Sales BV (operational company). For VAT purposes in the Netherlands ASMI forms a fiscal unity together with ASM Europe BV and ASM IP Holding BV. NOTE 9. PERSONNEL EXPENSES The average number of employees of ASMI during 2020 was 24 (2019: 22). All employees have corporate and support functions and were based in the Netherlands. NOTE 11. SHARE OWNERSHIP OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD With respect to share ownership of the Management Board and Supervisory Board, reference is Salaries Social security charges Pension expenses Total Year ended December 31, made to Note 26 to the consolidated financial statements. 2019 6,616 290 609 7,515 2020 7,943 294 666 8,903 NOTE 12. AUDITOR'S FEES AND SERVICES For information regarding auditor's fees and services we refer to Note 27 to the consolidated financial statements. Further information concerning the number of employees can be found in Note 23 to the consolidated financial statements. For information on the parent company's defined benefit pension plan, the remuneration of the Management Board and the Supervisory Board, and the parent company's share-based compensation plans, see Notes 13 and 25 to the consolidated financial statements. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE NOTE 13. SUBSEQUENT EVENTS Subsequent events were evaluated up to March 4, 2021, which is the issuance date of this Annual SIGNING Almere, the Netherlands Report 2020. There are no subsequent events to report. March 4, 2021 154 SUPERVISORY BOARD J.C. Lobbezoo M.C.J. van Pernis M.J.C. de Jong S. Kahle-Galonske D.R. Lamouche M. de Virgiliis MANAGEMENT BOARD G.L. Loh P.A.M. van Bommel FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEIndependent auditor’s report Independent auditor’s report 155 INDEPENDENT AUDITOR’S REPORT To: the General Meeting of Shareholders and the Supervisory Board of ASM International N.V. Report on the audit of the financial statements 2020 included in the Annual Report Basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report. Our opinion In our opinion: We are independent of ASM International N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional - The accompanying consolidated financial statements give a true and fair view of the financial Accountants, a regulation with respect to independence) and other relevant independence position of ASM International N.V. as at December 31, 2020 and of its result and its cash flows regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- for the year then ended, in accordance with International Financial Reporting Standards as en beroepsregels accountants’ (VGBA, Dutch Code of Ethics). adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code; and We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis - The accompanying company financial statements give a true and fair view of the financial for our opinion. position of ASM International N.V. as at December 31, 2020 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. Audit approach What we have audited We have audited the financial statements 2020 of ASM International N.V. (the company) based in Almere, The Netherlands. The financial statements include the consolidated financial statements Summary Materiality and the company financial statements. The consolidated financial statements comprise: 1 The consolidated statement of financial position as at December 31, 2020; 2 The following consolidated statements for 2020: the statement of profit or loss, the statements of comprehensive income, changes in equity and cash flows; and 3 The notes comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise: 1 The company balance sheet as at December 31, 2020; 2 The company statement of profit or loss for 2020; and 3 The notes comprising a summary of the accounting policies and other explanatory information. Materiality of EUR 15 million 4.5% of result before income taxes Group audit 97% of total assets 93% of revenue Key audit matters Revenue recognition Accounting for capitalized development costs Opinion Unqualified FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE156 Materiality Based on our professional judgement we determined the materiality for the financial - Sent detailed instructions to all component auditors, including the significant areas that should be covered (which included the relevant risks of material misstatement detailed below) and set statements as a whole at EUR 15 million which represents 4.5% of result before income taxes out the information required to be reported to the group auditor. We performed file reviews of (2019: EUR 10 million which represents 4.5% of prior year result before income taxes adjusted components ASMPT (Hong Kong) and ASM Front-End Manufacturing Singapore Pte. Ltd. for non-recurring gain resulting from the Kokusai Settlements). The materiality is determined with (Singapore) and held various telephone calls with the auditors of the components, to discuss reference to result before income taxes. The increase of the materiality is primarily the result of the group audit, significant risks, audit approach and instructions, as well as the audit findings increased business operations and profitability. We consider result before income taxes as the and observations reported to the group auditor. most appropriate benchmark because the company is a profit oriented company and the key users of the financial statements are primarily focused on profit. We have also taken into account In view of restrictions on the movement of people across borders, and also within significantly misstatements and/or possible misstatements that in our opinion are material for the users of affected countries, we considered changes to the planned audit approach to evaluate the the financial statements for qualitative reasons. component auditors’ communications and the adequacy of their work. According to our original audit plan, we intended to visit the components in Hong Kong and Singapore to review We agreed with the Supervisory Board that misstatements in excess of EUR 750,000 and selected component auditor documentation. Due to the aforementioned restrictions, this was classification misstatements in excess of EUR 3,750,000 which are identified during the audit, not practicable in the current environment. As a result, we have requested those component would be reported to them, as well as smaller misstatements that in our view must be reported auditors to provide us with access to audit workpapers to perform these evaluations, subject to on qualitative grounds. Scope of the group audit ASM International N.V. is at the head of a group of components. The financial information of this local law and regulations. In addition, due to the inability to arrange in-person meetings with such component auditors, we have increased the use of alternative methods of communication with them, including through written instructions, exchange of emails and virtual meetings. group is included in the financial statements of ASM International N.V. By performing the procedures mentioned above at components, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence Our group audit mainly focused on significant components where account balances are of about the group’s financial information to provide an opinion about the financial statements. significant size, have significant risks of material misstatement to the group associated with them or are considered significant for other reasons. For the residual population not in scope we performed analytical procedures in order to corroborate that our scoping remained appropriate throughout the audit. We have: - Selected components for which an audit of the complete reporting package is performed and components for which an audit of specific items is performed. Furthermore, we have determined the nature and extent of the audit procedures that we perform at the group level and at the company’s Shared Service Center (“SSC”); - Performed procedures that cover the significant operations in Japan, Korea, the Netherlands, Singapore and the United States of America, all mainly through our audit procedures at the SSC, supplemented with local audits by KPMG member firms of specific items. In addition, we have made use of the work of non-KPMG member firm auditors of ASM Pacific Technology Ltd. (“ASMPT”) as part of our procedures that cover the (results from) investments in associates. The remaining balances are covered by additional procedures at group level; and FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE157 Our procedures as described above can be summarized as follows: The primary responsibility for the prevention and detection of fraud and non-compliance with Total assets 79% 18% 3% Audit of the complete reporting package Audit of specific items Covered by additional procedures at group level Revenue 86% 7% 7% Audit of the complete reporting package Audit of specific items Covered by additional procedures at group level laws and regulations lies with the Management Board, with oversight by the Supervisory Board. We refer to chapter Governance of the Annual Report where the Management Board included its risk assessment and where the Supervisory Board reflects on this assessment. Our risk assessment As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption. We, together with our forensics specialists, evaluated the fraud risk factors to consider whether those factors indicated a risk of material misstatement due to fraud. In addition, we performed procedures to obtain an understanding of the legal and regulatory frameworks that are applicable to the company and we inquired the Management Board as to whether the entity is in compliance with such laws and regulations and inspected correspondence, if any, with relevant licensing and regulatory authorities. The potential effect of the identified laws and regulations on the financial statements Our focus on the risk of fraud and non-compliance with laws and regulations varies considerably. Our objectives The objectives of our audit with respect to fraud and non-compliance with laws and regulations are: With respect to fraud: - To identify and assess the risks of material misstatement of the financial statements due Firstly, the company is subject to laws and regulations that directly affect the financial statements, including taxation and financial reporting (including related company legislation). We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items and therefore no additional audit response is necessary. to fraud; Secondly, the company is subject to many other laws and regulations where the consequences - To obtain sufficient appropriate audit evidence regarding the assessed risks of of non-compliance could have an indirect material effect on amounts recognized or disclosures material misstatement due to fraud, through designing and implementing appropriate provided in the financial statements, or both, for instance through the imposition of fines or audit responses; and litigation. We identified the following areas as those most likely to have such an indirect effect: - To respond appropriately to fraud or suspected fraud identified during the audit. - Trade sanctions and export controls laws and regulations (reflecting the company’s exposure With respect to non-compliance with laws and regulations: - Anti-bribery and corruption laws and regulations (reflecting the company’s significant and - To identify and assess the risk of material misstatement of the financial statements due geographically diverse operations). to non-compliance with laws and regulations; and - To obtain a high (but not absolute) level of assurance that the financial statements, taken To obtain a detailed understanding of the risk of non-compliance related to trade sanctions and as a whole, are free from material misstatement, whether due to fraud or error when export controls we have performed certain risk assessment procedures. considering the applicable legal and regulatory framework. to international trading restrictions); and FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE158 In accordance with the auditing standard we evaluated the following fraud and non-compliance - We obtained audit evidence regarding compliance with the provisions of those laws and risks that are relevant to our audit, including the relevant presumed risks: regulations generally recognized to have a direct effect on the determination of material - Revenue recognition, in relation to completeness of equipment sales in the cut-off period amounts and disclosures in the financial statements. of the financial year (a presumed risk); and - Management override of controls (a presumed risk). We do note that our audit is based on the procedures described in line with applicable auditing standards. In addition to the requirements of the auditing standards we have performed the We communicated the identified risks of fraud throughout our team and remained alert to any following additional procedures: indications of fraud and/or non-compliance throughout the audit. This included communication - We performed inquiries with management and inspection of documents related to country from the group to component audit teams of relevant risks of fraud and/or non-compliance specific sanctions and product lists to assess whether trade compliance and export controls with laws and regulations identified at group level. We communicated our risk assessment and are properly designed and implemented; and audit response to management and the Audit Committee of the Supervisory Board. Our audit - We obtained an understanding of the company’s assessment of cyber security business risks procedures differ from a specific forensic fraud investigation, which investigation often has a more and analyzed how the company respond to these cyber security business risks. in-depth character. Our response to the risks identified We performed the following audit procedures (not limited) to respond to the assessed risks: Our procedures to address identified risks of fraud resulted in a key audit matter. We refer to the key audit matter related to Revenue recognition. - We evaluated the design and the implementation of internal controls that mitigate fraud risks. We do note that our audit is not primarily designed to detect fraud and non-compliance with laws In case of internal control deficiencies, where we considered there would be opportunity for and regulations and that management is responsible for such internal control as management fraud, we performed supplemental detailed risk-based testing; determines is necessary to enable the preparation of the financial statements that are free from - We performed data analysis of high-risk journal entries and investigated journal entries debiting material misstatement, whether due to errors or fraud, including compliance with laws and revenue with an unexpected associated credit. Where we identified instances of unexpected regulations. journal entries or other risks through our data analytics, we performed additional audit procedures to address each identified risk. These procedures also included testing of The more distant non-compliance with indirect laws and regulations (irregularities) is from the transactions back to source information; events and transactions reflected in the financial statements, the less likely the inherently limited - Assessment of matters reported on the company’s incident register/whistleblowing procedures required by auditing standards would identify it. In addition, as with any audit, there and complaints procedures with the entity and results of management’s investigation remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, of such matters; intentional omissions, misrepresentations, or the override of internal controls. - With respect to the risk of fraud in revenue recognition we refer to the key audit matter ‘Revenue recognition’; - We incorporated elements of unpredictability in our audit by, among others, 1) performing audit procedures with specific focus on the equipment sales recorded in January 2021 to respond on the fraud risk concerning the completeness of equipment sales in the cut-off period and 2) investigating journal entries debiting revenue with an unexpected associated credit; - We considered the outcome of our other audit procedures and evaluated whether any findings or misstatements were indicative of fraud or non-compliance. If so, we re-evaluated our assessment of relevant risks and its resulting impact on our audit procedures; and FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE159 Our key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition Description As disclosed in note 1 to the consolidated financial statements, equipment sales is measured taking into account multiple element arrangements, for example a single sales transaction that combines the delivery of goods and rendering of (installation) services, as contracts with customers typically include separately identifiable components that are recognized based on the relative selling price. Furthermore, equipment sales is recognized when the customer obtains control of the products and services. We identified a cut-off risk that equipment sales could be misstated as a result of recognition in the Compared to last year the key audit matter with respect to the accounting for the investment incorrect period. This risk inherently includes the fraud risk that management deliberately understates in ASMPT (associate) is not identified. Based on our reassessment of the risk of material revenue, as management may feel pressure to achieve planned results (risk of fraud). We consider misstatement related to this account, we identified a limited degree of complexity and judgement revenue recognition a key audit matter, due to the thereto related risk of management override of required. Therefore we concluded to not identify the accounting for the investment in ASMPT controls, as well as the fraud risk concerning the completeness of equipment sales in the cut-off period (associate) as a key audit matter in the current year. of the financial year. Our response Our audit procedures to address this key audit matter included, among others: - Assessing the appropriateness of the company’s accounting policies relating to revenue recognition and assessing compliance with IFRS 15; - Evaluating the design and implementation of the company’s internal control in the sales process that would identify a misstatement as a result of revenue recognition in the incorrect accounting period; - Assessing the completeness of sales by selecting samples during the cut-off period, with specific focus on the sales recorded in January 2021, to agree the timing of revenue recognition to underlying supporting documents such as shipping documents; - Inquiring with management / those who have responsibilities for initiating, preparing or authorizing journal entries at period end whether there was inappropriate or unusual activity relating to the processing of journal entries and other adjustments during the period, identifying high-risk journal entries (such as journal entries debiting revenue with an unexpected associated credit) from the population of journal entries from the local ERP system with the involvement of our IT auditors and verifying the appropriateness of the identified high risk journal entries through verification with supporting documentation; and - Assessing the adequacy of the revenue disclosures included in note 1 and note 21 of the financial statements. Our observation The results of our procedures related to the revenue recognition of equipment sales are satisfactory. We consider the disclosure in note 1 and note 21 of the financial statements as adequate. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE160 Accounting for capitalized development costs Description Capitalized development costs are deemed to be significant to our audit, given the significance of the capitalized balance of EUR 204 million including additions of EUR 64 million in 2020, as We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. well as the specific criteria that have to be met for capitalization. This involves management By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the judgement on capitalized development costs not in use including the additions for the year, with Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less respect to technical feasibility, intention and ability to complete the intangible asset, the ability to than the scope of those performed in our audit of the financial statements. use or sell the asset, the generation of future economic benefits and the ability to measure the costs reliably. Our response Our audit approach includes the following procedures over capitalized development costs: - Assessing the appropriateness of the company’s accounting policies relating to internal and external cost capitalization and assess compliance with IFRS; - Evaluating the design and implementation of the company’s internal control in the R&D process that would identify a misstatement as an incorrect capitalization of development expense; The Management Board of the company is responsible for the preparation of the other information, including the information as required by Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements and ESEF Engagement We were engaged by the Annual General Meeting of Shareholders as auditor of ASM International N.V. on May 21, 2014, as of the audit for the year 2015 and have operated as - Challenging the key assumptions used, or judgments made, in capitalizing development costs, statutory auditor ever since that financial year. such as the technical feasibility, intention and ability to complete the intangible asset, the ability to use or sell the asset and generation of future economic benefits, the accuracy of costs included and the useful economic life attributed to the asset based on development plans, pre-orders and customer communications; and - Assessing the adequacy of the Other intangible assets disclosures included in note 5 of the financial statements. Our observation The results of our procedures related to the accounting for capitalized development costs are satisfactory. We consider the disclosure in note 5 of the financial statements as adequate. No prohibited non-audit services We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audits of public-interest entities. European Single Electronic Format (ESEF) ASM International N.V. has prepared its Annual Report in ESEF. The requirements for this format are set out in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (these requirements are hereinafter referred to as: the RTS on ESEF). Report on the other information included in the Annual Report In addition to the financial statements and our auditor’s report thereon, the Annual Report In our opinion, the Annual Report prepared in the XHTML format, including the partially tagged consolidated financial statements as included in the reporting package by ASM International N.V., contains other information. has been prepared in all material respects in accordance with the RTS on ESEF. Based on the following procedures performed, we conclude that the other information: Management is responsible for preparing the Annual Report including the financial statements in - Is consistent with the financial statements and does not contain material misstatements; and accordance with the RTS on ESEF, whereby management combines the various components into - Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code. a single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether the Annual Report in this reporting package, is in accordance with the RTS on ESEF. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE161 Our procedures taking into consideration Alert 43 of NBA (the Netherlands Institute of Chartered Accountants), included amongst others: Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit engagement in a manner that allows us to obtain - Obtaining an understanding of the entity’s financial reporting process, including the preparation sufficient and appropriate audit evidence for our opinion. of the reporting package; - Obtaining the reporting package and performing validations to determine whether the Our audit has been performed with a high, but not absolute, level of assurance, which means we reporting package containing the Inline XBRL instance document and the XBRL extension may not detect all material errors and fraud during our audit. taxonomy files have been prepared in accordance with the technical specifications as included in the RTS on ESEF; and Misstatements can arise from fraud or error and are considered material if, individually or in - Examining the information related to the consolidated financial statements in the reporting the aggregate, they could reasonably be expected to influence the economic decisions of users package to determine whether all required taggings have been applied and whether these are taken on the basis of these financial statements. The materiality affects the nature, timing and in accordance with the RTS on ESEF. extent of our audit procedures and the evaluation of the effect of identified misstatements on Description of responsibilities regarding the financial statements our opinion. Responsibilities of the Management Board and the Supervisory Board of the company for the financial statements The Management Board is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. A further description of our responsibilities for the audit of the financial statements is located at the website of de ‘Koninklijke Nederlandse Beroepsorganisatie van Accountants’ (NBA, Royal Netherlands Institute of Chartered Accountants) at: http://www.nba.nl/ENG_oob_01. This description forms part of our independent auditor’s report. Furthermore, the Management Board is responsible for such internal control as management Amstelveen, March 4, 2021 determines is necessary to enable the preparation of the financial statements that are free from KPMG Accountants N.V. material misstatement, whether due to fraud or error. F.A.M. Croiset van Uchelen RA As part of the preparation of the financial statements, the Management Board is responsible for Partner assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Management Board should prepare the financial statements using the going concern basis of accounting unless the Management Board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Management Board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements. The Supervisory Board is responsible for overseeing the company’s financial reporting process. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENON-FINANCIAL SUMMARY 162 NON-FINANCIAL SUMMARY Environmental footprint results 2016 to 2020 163 Non-financial performance summary 164 Our focus is on continuing to help our customers achieve critical technology and productivity improvements responsibly, and striving to reduce our impact on the environment and positively contributing to society while doing so. ENVIRONMENTAL FOOTPRINT Based on our environmental targets for 2016-2020, we managed to reduce our greenhouse gas emissions by 17.9% per euro of research and development (R&D) investment, compared to the baseline 2015 levels. We also reduced water withdrawn by 62.5% per euro of R&D investment, and by 30% in absolute terms, compared to baseline 2015 levels. FUTURE GOALS We have the ambition to further our progress and impact in the different geographies in which we operate. We aim to make meaningful contributions to our industry, to the communities where we operate, and to preserving our planet. In the coming years, we will focus on broadening our sustainability and ESG goals. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEEnvironmental footprint results 2016 to 2020 Environmental footprint results 2016 to 2020 163 ENVIRONMENTAL FOOTPRINT RESULTS 2016 TO 2020 GREENHOUSE GAS (GHG) EMISSIONS (per R&D investment) WATER CONSUMPTION (per R&D investment) LANDFILL DIVERSION RATE 177 168 145 1,886 Target 5 % Below 2015 baseline 17.9% Below 2015 baseline 1,037 Target 45% Below 2015 baseline 707 62.5% Below 2015 baseline 90% 65% 84% Target >90% Diversion 84% Diversion 2015 Baseline 2020 Target 2020 Completion 2015 Baseline 2020 Target 2020 Completion 2015 Baseline 2020 Target 2020 Completion Figures are mtCO2e/R&D investment EUR millions Figures are m3/R&D investment EUR millions Figures are percent solid waste landﬁll diversion GREENHOUSE GAS (GHG) EMISSIONS (Absolute and normalized per R&D investment) WATER CONSUMPTION (Absolute and normalized per R&D investment) LANDFILL DIVERSION RATE (in %) 196 181 174 177 163 250 220 190 160 130 100 240 250 145 200 160 120 80 40 0 200 1,886 160 173 179 178 120 80 40 0 129 123 121 707 2,000 1,600 1,200 800 400 0 2016 2017 2018 2015 Baseline 2019 2020 Completion 2015 Baseline 2016 2017 2018 2019 2020 Completion Absolute Greenhouse Gas emissions (mtCO2e - Scope 1 + 2, x100) Intensity of mtCO2e/million EUR R&D spend Absolute water consumption (m3, x1,000) Intensity of m3/million EUR R&D spend 79 78 82 84 72 65 100 80 60 40 20 0 2015 Baseline 2016 2017 2018 2019 2020 Completion FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCENon-financial performance summary Non-financial performance summary NON-FINANCIAL PERFORMANCE SUMMARY 164 CATEGORIES EMPLOYEES DIVERSITY & INCLUSION INDICATORS Employees Temporary workers New hires Employees Supervisory Board Management Board Gender pay ratio CEO pay ratio Nationalities Workforce split Foreign nationals workforce split OTHER SEGMENTATION Employees in R&D Employees covered by collective bargaining (only the Netherlands) Voluntary turnover rate Involuntary turnover rate % Performance management completion HEALTH AND SAFETY Injury rate TRAINING Recordable injury rate Lost Time Injury Rate (LTIR) Fatality rate Efforts to assess, monitor, reduce exposures Ethics training (bi-annual) Ethics training Technical training hours of ASMI employees Units or definition Number Number Number Male (% globally) Female (% globally) % Female/% Male % Female/% Male Female/Male (total) Number Asia US Europe Asia US Europe Percent Number Percent Percent Percent per 100 employees per 100 employees per 100 employees per 100 employees 2016 1,670 100 253 85% 15% 2017 1,900 143 487 85% 15% 0 / 100% 0 / 100% 20 / 80% 0 / 100% n.a. 23 29 50% 32% 18% 65% 22% 13% 27% 138 7.1% 10.5% 88.3% 0.63 0.34 0.29 0.00 n.a. 25 29 54% 29% 17% 65% 24% 11% 26% 141 10.4% 13.9% 87.1% 0.62 0.26 0.21 0.00 Qualitative See Health & safety, Employee section All employees New hire employees Hours annually 92.5% 87.0% 8,649 99.8% 99.7% 17,784 27 29 58% 26% 16% 65% 25% 10% 25% 149 9.9% 13.9% 92.6% 0.55 0.18 0.05 0.00 99.9% 100.0% 37,836 2018 2,181 146 659 85% 15% 2019 2,337 107 407 85% 15% 2020 Reference 2,583 Employees 106 515 85% Employees 15% Employees 20 / 80% 0 / 100% 101% 20 / 80% 0 / 100% 100% 33 / 67% Supervisory Board 0 / 100% Management Board Remuneration report Employees 99% 27 40 58% 28% 14% 59% (SASB) 29% (SASB) 12% (SASB) 24% 142 Note 13 of Consolidated statements 8.3% Employees 10.8% 98.8% 0.58 0.23 0.16 0.00 Employees Employees (SASB) 31 29 58% 27% 15% 60% 30% 10% 26% 143 8.7% 10.7% 98.0% 0.42 0.17 0.08 0.00 100.0% 100.0% 48,075 100.0% 99.2% 28,624 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCECATEGORIES INDICATORS Units or definition 2016 2017 2018 2019 2020 Reference ENVIRONMENTAL Electrical consumption kWh 31,814,761 33,011,075 35,878,759 43,401,473 44,915,401 (SASB) Grid electricity Renewable electrical Percent from grid Percentage renewable 100% 11.2% 100% 10.8% 100% 10.7% 100% 9.2% 100% (SASB) 9.4% Corporate social responsibility (SASB) Greenhouse gas (Scope 1 and 2) Absolute emissions Gross Global Scope 1 GHG emissions Gross Global Scope 2 GHG emissions Greenhouse gas (Scope 1 and 2) per R&D spend (Emission Intensity) mtCO2e mtCO2e mtCO2e mtCO2e/million EUR 17,371.1 18,083.2 19,562 24,031.9 24,976.9 339.8 17,031.3 169.2 419.2 17,664 158.5 508.4 920.8 987.0 (SASB) 19,053.6 23,111.1 23,989.9 156.1 159.5 145.4 Environment Water withdrawn absolute m3 178,670 177,913 129,243 122,505 121,434 Environment (SASB) 165 84.3% 81.4% 72.8% 52.8% 50.4% (SASB) Water withdrawn from water stressed regions Water intake per R&D spend (Water Intensity) Landfill diversion rate 1) ETHICS COMPLIANCE Reported confidential concerns via Speakup! Reported concerns from other channels Ethics related communications RBA Self Assessment rating Supplier spend by region Asia percent North America percent Europe percent RBA Code of Conduct acknowledgement Percentage RBA Self Assessment (SAQ) with low/medium risk Percentage RBA RISK ASSESSMENT SUPPLY CHAIN SUPPLY CHAIN (CRITICAL, STRATEGIC SUPPLIERS) Percent from high or extremely high water stress regions m3/million EUR % solid waste recycle or reuse Number Number Number RBA rating (corporate + all applicable facilities) 813 82% 5 2 0 707 Environment 84% Environment (SASB) Business ethics Business ethics 5 4 0 Low Low Low 1,760 1,559 1,031 72% 79% 78% 3 2 4 Low 68% 25% 7% n.a. 86% 1 5 3 Low 74% 20% 6% 85% 78% 1 4 2 71% 22% 7% 100% 100% 75% 20% 5% 100% 40% 1,959 0 75% Suppliers 21% 4% 100% Suppliers 77% Suppliers (SASB) 2,094 Customers and products 0 (SASB) MATERIAL SOURCING Description of the management of risks associated with the use of critical materials Qualitative See conflict minerals discussion in supply chain section INTELLECTUAL PROPERTY Patents in force Number Intellectual property protection & competitive behavior Monetary losses as a result of legal proceedings associated with anti-competitive behavior regulations 1,480 0 1,604 0 1,692 0 1 ASMI manufacturing generates very negligible hazardous waste and we do not manufacture chips/wafers. Our manufacturing waste is predominantly non-hazardous solid waste, thus solid waste is our waste management indicator. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEGENERAL INFORMATION 166 GENERAL INFORMATION Our products include wafer processing deposition systems for single-wafer ALD, PECVD, epitaxy and batch diffusion/furnace systems. We are active in two technology segments for atomic layer deposition (ALD) tools: thermal ALD and plasma enhanced ALD (PEALD). We are the leader in the logic/foundry segment of the ALD market and serve nearly the whole addressable market. Product description Other information 167 169 ESG/CSR data glossary and information 171 Definitions and abbreviations Locations worldwide Safe harbor statement 174 176 178 Within chemical vapor deposition (CVD) we also offer two types of tools: single-wafer plasma enhanced CVD (PECVD) and batch low pressure CVD (LPCVD). And we offer multiple types of tools for single-wafer epitaxy and batch diffusion furnace applications. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEProduct description Product description 167 PRODUCT DESCRIPTION Our products include wafer processing deposition systems for ALD, CVD, epitaxy, and batch diffusion/oxidation systems, and services and spare parts for these systems. PRODUCT APPLICATIONS AND DESCRIPTIONS ATOMIC LAYER DEPOSITION (ALD) ASMI offers ALD tools in two technology segments: thermal ALD and plasma enhanced ALD (PEALD). DEPOSITION APPLICATION ASMI PRODUCT PLATFORM ASMI PRODUCTS PROCESS APPLICATION Pulsar XP ALD system Pulsar XP is a 300mm thermal ALD tool designed for depositing extremely thin high-k dielectric materials required for advanced transistor gates and other applications. Pulsar is the benchmark ALD ALD XP 1) Pulsar XP ALD system EmerALD XP ALD system High-k gate dielectric Metal gate electrodes high-k gate dielectric tool for the industry. Up to four Pulsar process modules can be configured on XP8 1) Synergis ALD system a Pulsar XP system. EmerALD XP ALD system EmerALD XP is a 300mm thermal ALD tool designed for depositing metal gate layers for advanced high-k metal gate transistors and other applications. Up to four EmerALD process modules can be configured on an EmerALD XP system. Eagle XP8 PEALD system Eagle XP8 is a high-productivity 300mm tool for PEALD applications. The system can be configured with up to four dual chamber modules (DCM), enabling eight chambers in high-volume production within a very compact footprint. The system is capable of a broad range of dielectric PEALD processes, including low-temperature spacers for multiple patterning applications and low- temperature silicon nitride. Synergis ALD system Synergis is a high-productivity 300mm tool for thermal ALD applications. The system can be configured with up to four dual chamber modules (DCM), enabling eight chambers in high-volume production within a very compact footprint. The system is capable of depositing a broad range of thermal ALD films including metal oxides, metal nitrides, dielectrics, and pure metals. PEALD XP8 1) Eagle XP8 PEALD system XP8 QCM PEALD system PECVD XP8 1) Dragon XP8 PECVD system Metal oxides, Metal nitrides, Metals Multipatterning spacer Gate spacer Etch stop Gapfill Low-k and TEOS oxide Silicon nitride Diffusion Oxidation LPCVD ALD Epitaxy Vertical furnace A412 batch vertical furnace system A400 DUO batch vertical furnace system Diffusion, oxidation Polysilicon Silicon oxide/nitride Aluminum oxide XP 1) Intrepid ES epitaxy Epsilon Epsilon 2000 single-wafer epitaxy system Silicon channel Strain layer CMOS wafers Analog/power 1 The XP is our standard single-wafer processing platform designed to accommodate multiple process application modules with common platform standards. In 2012, ASMI launched the XP8 high-productivity platform for PECVD and PEALD, based on our common XP platform standard with an expanded configuration that enables integration of up to eight chambers on one wafer handling platform. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE168 XP8 QCM PEALD system Intrepid epitaxy system XP8 QCM is a 300mm tool for high-productivity PEALD applications. XP8 QCM allows for the Intrepid ES is a 300mm epitaxy tool using our XP platform, and is designed for depositing critical integration of up to four modules, each containing four process reactors, enabling 16 chambers transistor strain and channel layers. Processes include silicon (Si), silicon-germanium (SiGe), silicon- in high-volume production within a compact footprint. The system is capable of a broad range of carbon (SiC), and other silicon-based compounds. Up to four Intrepid process modules can be dielectric PEALD processes, including silicon oxide gapfill. configured on an Intrepid ES system. Batch vertical furnaces The Previum process module, which can be integrated with epitaxy modules on the Intrepid platform, is available for 300mm Epi applications that require pre-deposition surface cleaning, which improves The vertical furnaces offer the A412 for 300mm wafer processing and the A400 DUO for 200mm the performance of deposited films. Previum surface cleaning enables quality epitaxial depositions for and smaller wafers, and focuses on applications in the markets for power, analog, RF, and MEMS advanced node channel and source/drain engineering applications. devices. Various thermal ALD films can be deposited with the batch furnaces for high productivity. CHEMICAL VAPOR DEPOSITION (CVD) We offer two types of CVD tools: single-wafer plasma enhanced CVD (PECVD) and batch low pressure CVD (LPCVD). Dragon XP8 PECVD system Epsilon epitaxy system The Epsilon series is a single-wafer, single-chamber tool that deposits silicon-based materials for many applications, ranging from high-temperature silicon for wafer manufacturing, to low-temperature silicon for analog and power applications. Epsilon is the market leader for epitaxy applications in the analog and power devices market. DragonXP8 is a high-productivity 300mm tool for PECVD applications. The system can be configured with up to four dual chamber modules (DCM), enabling eight chambers in high-volume DIFFUSION AND OXIDATION We offer batch vertical furnace tools for diffusion and oxidation applications. production within a very compact footprint. Processes include a broad range of dielectric PECVD films for applications such as interconnect low-k dielectric layers, passivation layers, etch stop, and Batch vertical furnaces hardmask layers. Batch vertical furnaces The vertical furnaces offer the A412 for 300mm wafer processing and the A400 DUO for 200mm and smaller wafers, and focuses on applications in the markets for power, analog, RF, and MEMS devices. The new A400 DUO is compatible with the original A400, so existing process recipes can be The vertical furnaces offer the A412 for 300mm wafer processing and the A400 DUO for 200mm easily transferred, accelerating system acceptance for production. Atmospheric thermal applications and smaller wafers, and focuses on applications in the markets for power, analog, RF, and MEMS on the furnace include diffusion and activation of dopants, annealing to affect material properties by devices. The new A400 DUO is compatible with the original A400, so existing process recipes can heating to a specific temperature, and oxidation to form silicon oxide. be easily transferred, accelerating system acceptance for production. LPCVD applications on the furnace include polysilicon, silicon nitride, and silicon oxide. EPITAXY We offer two families of epitaxy tools: Intrepid and Epsilon. SERVICES AND SPARE PARTS Services and spare parts are important product offerings for our business. We provide service support to our customers with technical service personnel that is trained to maintain our systems at customers’ fabrication plants around the world. Our service teams are located at regional and local service centers to assure prompt availability. We sell spare parts for our equipment from parts stocks located at local distribution centers. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEOther information Other information 169 OTHER INFORMATION The additional information below includes a brief summary of the most significant provisions of our Articles of Association. INFORMATION ON THE PROVISIONS IN THE ARTICLES OF ASSOCIATION RELATING TO THE APPROPRIATION OF PROFIT The Articles of Association of ASM International N.V. (the company) provide the following with regard SPECIAL STATUTORY CONTROL RIGHTS Article 27 of the Articles of Association provides that each common share gives the right to cast one vote, each preferred financing share to cast one thousand votes, and each preferred share to cast to distribution of profit and can be summarized as follows: ›› From the profits, distributions shall in the first place, if possible, be made on the preferred shares equal to the EURIBOR rate for six months’ loans, increased by one and a half, on the paid-up one thousand votes. Article 29 of the Articles of Association provides that meetings of holders of preferred shares or amount which had to be paid on the preferred shares, weighted to the number of days to which of financing preferred shares shall be convened as often and insofar as a decision of the meeting this was applicable. If profits are insufficient, the dividend will be paid from the reserves with priority of holders of preferred shares or financing shares desires this, and furthermore as often as the over any dividends. If the reserves are insufficient, the dividend deficit has to be made up in future Management Board and or the Supervisory Board shall decide to hold such a meeting. At the years; meeting, resolutions will be passed with an absolute majority of the votes. In the event that there is a ›› Second, a dividend, if possible, is distributed on financing preferred shares. The dividend is a percentage of the par value, plus share premium paid, on the financing preferred shares. The tie of votes, no resolution will take effect. percentage is determined by the Management Board, subject to approval of the Supervisory The following resolutions and actions can only be taken on a proposal by the Management Board Board. The percentage is related to the average effective yield on government loans with a weighted average remaining term of no more than ten years, if necessary increased or decreased by no more than three percent, subject to the then prevailing market conditions. If profits are insufficient, the dividend shall be paid from the reserves. If the reserves are insufficient, the dividend and the Supervisory Board: ›› The amendment of the Articles of the company; and ›› The dissolution of the company. deficit has to be made up in future years; For the complete text, please see our website (www.asm.com/investors/corporate-governance/articles-of-association). ›› With the approval of the Supervisory Board, the Management Board will determine which part of the profit remaining after adoption of the provisions of the previous paragraphs will be reserved. The profit after reserving will be at the disposal of the Annual General Meeting of Shareholders; ›› The company may only make distributions to the shareholders and other persons entitled to profit insofar as its equity exceeds the amount of the paid-up and called amounts of the share capital increased with the reserves that must be kept by virtue of law; and ›› Article 33, paragraph 3 of the Articles of Association provides that dividend claims expire after the lapse of five years. For the full text, please see our website (www.asm.com/investors/corporate-governance/articles-of-association). FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCESTICHTING CONTINUÏTEIT ASM INTERNATIONAL The objective of Stichting Continuïteit ASM International (Stichting) is to serve the interests of the SUBSEQUENT EVENTS Subsequent events were evaluated up to March 4, 2021, which is the issuance date of this Annual company. To that objective, Stichting may, amongst others, acquire, own and vote on our preferred Report 2020. There are no subsequent events to report. shares in order to maintain our independence and/or continuity and/or identity. The members of the Board of Stichting are: ›› Dick Bouma (Chairman), Retired Chairman of the Board Pels Rijcken & Droogleever Fortuijn; ›› Rob Ruijter, former Chairman Supervisory Board Delta Lloyd; and ›› Rinze Veenenga Kingma, President Archeus Consulting BV. ANNUAL REPORT The Annual Report, prepared in accordance with International Financial Reporting Standards (IFRS), is available free of charge by writing to our corporate offices, sending an email to investor.relations@asm.com or downloading the file via our website. 170 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEESG/CSR data glossary and information ESG/CSR data glossary and information 171 ESG/CSR DATA GLOSSARY AND INFORMATION All boundary scopes are for ASMI Front-end unless noted. Indicators CDP CLIMATE ADAPTATION CLIMATE CHANGE CMRT CONFLICT MINERALS Definitions CDP is a not-for-profit charity running the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. Section covered Corporate responsibility Changes in company processes, practices, and structures to moderate potential damages or to benefit from opportunities associated with climate change. Corporate responsibility Climate change is a long-term change in the average weather patterns that have come to define Earth's local, regional and global climates. These changes have a broad range of observed effects upon the earth. Corporate responsibility The Conflict Free Sourcing Initiative (CFSI) Conflict Minerals Reporting Template (CMRT) is an industry widely adopted standard template used by companies to collect conflict minerals due diligence data. Suppliers Tin, Tantalum, Tungsten and gold (3TGs) containing mineral ores that originate in the Democratic Republic of the Congo or the 10 adjoining areas and are sold illicitly to fund armed conflict in the region. Suppliers CORPORATE SOCIAL RESPONSIBILITY (CSR) Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable – to itself, its stakeholders, and the public. Corporate responsibility CRITICAL AND STRATEGIC SUPPLIERS Suppliers that are determined to be critical or strategic to our business either because the business spends, or critical components or critical materials, or strategic technical partnership. Suppliers CRITICAL AND STRATEGIC SUPPLIER COMMITMENT % The percent of critical and strategic suppliers that have acknowledged their commitment to RBA code or whose code of conduct is assessed to be acceptable as it covers the similar principles of the RBA Code of Conduct. Suppliers CRITICAL SUPPLIERS’ LOW MEDIUM RISK RANK BASED ON SELF-ASSESSMENT QUESTIONNAIRE (SAQ) RESULT DATA NORMALIZATION (AS A FUNCTION OF R&D SPEND) The percent of critical supplies who completed the required Supplier Self-Assessment Questionnaire and resulted with low or medium risks. Suppliers Total power or water purchases divided by total number of millions of dollars in R&D spend during that calendar year. Corporate responsibility DRC The Democratic Republic of Congo. EHS: ENVIRONMENTAL, HEALTH & SAFETY Environmental, Health, and Safety is a general term used to refer to laws, rules, regulations, professions, programs, and workplace efforts to protect the health and safety of employees and the public as well as the environment from hazards associated with the workplace. EMPLOYEES BASED ON NATIONALITIES The number of nationalities of employees on the last reporting day of the period. EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS The percentage of employees that are covered by collective bargaining agreements per local labor requirement divided by the total number of employees at reporting year-end. Suppliers Corporate governance Employees Employees EMPLOYEES IN R&D The number of employees on the last day of the reporting period whose work is directly related to the research and development of the product during the reporting year. Employees ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) The three primary factors for measuring the sustainability and societal impact of a company and/or business. Corporate responsibility FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEIndicators Definitions ETHICS CONCERNS REPORTED FROM ANONYMOUS GLOBAL REPORTING PROGRAM SPEAKUP! The number of any ethics concerns reported by employees through our anonymous employee reporting channel SpeakUp!; that may be related to a potential violation of the Code of Business Conduct and Business Principles or Policies in the reporting year. 172 Section covered Corporate responsibility ETHICS CONCERNS REPORTED THROUGH OTHER CHANNELS The number of any ethics concerns reported by employees through other means including directly to management or the Compliance Officer, that may be related to a potential violation of the COBC Business Principles or Policies in the reporting year. Corporate governance FLBL: FORCED LABOR/BONDED LABOR Forced labor refers to situations in which persons are coerced to work through the use of violence or intimidation, or by more subtle means such as accumulated debt, retention of identity papers or threats of denunciation to immigration authorities. Bonded labor, also known as debt bondage and peonage, happens when people give themselves into slavery as security against a loan or when they inherit a debt from a relative. The cyclical process begins with a debt, whether acquired or inherited, that cannot be paid immediately. Suppliers FOREIGN NATIONAL A foreign national is any person who is not a national of a specific country. Employees GREENHOUSE GAS (GHG) EMISSIONS The number of metric tons of CO2 equivalent emissions including both the direct CO2 equivalent emissions (scope 1) and indirect CO2 equivalent emissions (scope 2) in the reporting period. Corporate responsibility GRI The Global Reporting Initiative is an international independent standards organization that helps businesses, governments and other organizations understand and communicate their impacts on issues such as climate change, human rights and corruption (www.globalreporting.org). Corporate responsibility HEALTH AND SAFETY Regulations and procedures intended to prevent accident or injury in workplaces or public environments. ILO: INTERNATIONAL LABOR ORGANIZATION The International Labor Organization (ILO) is a United Nations agency responsible for dealing with employment-related issues across the world, including employment standards and problems of exploitation. INJURY RATE ISO 14001 LANDFILL DIVERSION RATE LIVING WAGE The Injury Rate is a measure of all first aid or greater injuries per every 100 employees in reporting period. The ISO 14001 Environmental Management System (EMS) standard is an internationally recognized environmental management standard. The percentage of solid waste diverted from landfill via recycling and reuse efforts in the reporting period as generated at ASMI major Manufacturing, Engineering and R&D sites. A living wage is defined as the minimum income necessary for a worker to meet the basic needs of an average sized family, including food, housing, and other essential needs such as clothing. Corporate responsibility NGOS: NON-GOVERNMENT ORGANIZATIONS A nonprofit organization that operates independently of any government, typically one whose purpose is to address a social or political issue. Corporate responsibility NUMBER (#) OF EMPLOYEES COMPLETING BI-ANNUAL ETHICS TRAINING All employees completing the online compliance training courses bi-annually during our compliance month within the reporting year. We track # of employees and % of the total that completed the training. It is applicable to all employees. OECD Organization for Economic Cooperation and Development is an international organization helping governments tackle the economic, social and governance challenges of a globalized economy. It publishes guidance and frameworks such as OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Employees Suppliers PATENT FILINGS The total number of patent applications filed and applied with patent offices globally by ASMI for the invention described. Customers and products PRODUCT LIFECYCLE MANAGEMENT (PLM) Product lifecycle management (PLM) refers to the handling of a good as it moves through the typical stages of its product life: development and introduction, growth, maturity/stability, and decline. This handling involves both the manufacturing of the good and the marketing of it. Strategy Corporate responsibility Corporate responsibility Corporate responsibility Corporate responsibility Corporate responsibility FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE173 Indicators RBA Definitions Section covered RBA: Responsible Business Alliance – Industry coalition seeking to create a industry-wide standards on social, environmental and ethical issues in the industry supply chain. Rebranded from the Electronics Industry Citizenship Coalition (EICC) in October 2017. Suppliers RBA CODE OF CONDUCT The RBA Code of Conduct is a set of social, environmental and ethical industry standards for governing how companies conduct business. www.responsiblebusiness.org/code-of-conduct/ Suppliers RBA SELF ASSESSMENT QUESTIONNAIRE (RBA SAQ) Self-Assessment Questionnaire is one of the RBA’s standardized risk assessment tools that is useful for assessing a companies commitment to ethical business conduct and compliance with the RBA Code of Conduct. Suppliers RECORDABLE INJURY RATE The Recordable Injury Rate measures cases that require a response greater than first aid (or serious injuries) per 100 employees in reporting period. Employees REPORTED CONCERNS FROM ANONYMOUS GLOBAL REPORTING PROGRAM SPEAKUP! The number of questions, remarks and/or concerns reported to the Ethics Office related to a potential violation of the ASMI Code of Business Conduct and Business Policies via reporting tool SpeakUp! in the reporting period. RESPONSIBLE BUSINESS ALLIANCE (RBA) We adopted the industry standard RBA Code of Conduct. More detail about the code can be find at www.responsiblebusiness.org/standards/code-of-conduct/ RMI: RESPONSIBLE MINERALS INITIATIVE Responsible Minerals Initiative provides companies with tools and resources to make sourcing decisions that improve regulatory compliance and support responsible sourcing of minerals from conflict-affected and high-risk areas. Society Suppliers Suppliers SASB The Sustainability Accounting Standards Board (SASB) is an independent nonprofit organization that sets standards to guide the disclosure of financially material sustainability information by companies to their investors. www.sasb.org/about/ Corporate responsibility SCOPE 1 AND SCOPE 2 EMISSIONS Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Corporate responsibility SELF-ASSESSMENT QUESTIONNAIRE (SAQ) RISK RATING/RESULT We adopted the RBA standard tool for risk assessment Self-Assessment Questionnaire (SAQ) to assess our own and supply chain risk. This rate applies to our own operation SAQ results with our major sites. Suppliers SEMI SEMI MOD STAFF (EMPLOYEE) SUPPLY CHAIN SPEND BY REGION SUPPLY CHAIN SPENDS PER REGION (IN EURO AND %) TCFD UN SDG Global industry association representing the semiconductor manufacturing and design supply chain connecting over 2,400 member companies and 1.3M professionals worldwide. Corporate responsibility Semiconductor Manufacturing Ownership Diversity (SEMI MOD) is a special interest group dedicated to increasing the number of diverse owned and led suppliers serving the semiconductor industry. Corporate responsibility Staff (employee) is a person with a fixed contract, excluding temporary labor. Definition may be varied by country per local and country labor law. The number of employees at the last day of the reporting period. Total amount of Euro spent with our global suppliers for the materials, components and services that are used to produce our products and services for our customers and for non-product related products services that enable our operations globally in the reporting period. Employees Suppliers Total Euro amount we spent and equivalent to the % of total spends with suppliers by each region. Suppliers The Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) is a market-driven initiative, set up to develop a set of recommendations for voluntary and consistent climate-related financial risk disclosures in mainstream filings. Corporate responsibility United Nations Sustainable Development Goals. Corporate responsibility VOLUNTARY TURNOVER RATE The percentage of employees in a workforce that leave voluntarily during this reporting period. WATER CONSUMPTION ZERO HARM! The total amount of water consumption in cubic meters for the reporting period. Refers to ASMI striving to prevent harm to people, reduce our impact on the environment, and make positive contributions to society. Employees Society Employees FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEDefinitions and abbreviations Definitions and abbreviations 174 DEFINITIONS AND ABBREVIATIONS AENEAS: AENEAS is an association, established in 2006, providing unparalleled networking Epitaxy (Epi): Epitaxy is one of a portfolio of wafer processing technologies for which we provide opportunities, policy influence & supported access to funding to all types of RD&I participants in the equipment. The word comes from the Greek epi meaning above, and taxis meaning in an ordered field of micro- and nanoelectronics enabled components and systems. manner. It involves the deposition of silicon or silicon compounds to form layers that help to continue and perfect the crystal structure of the bare silicon wafer below. Epitaxy improves the electrical AGM: Annual General Meeting of Shareholders is the annual general meeting of shareholders. characteristics of the wafer surface, making it suitable for highly complex microprocessors and memory devices. Selective epitaxy is an epitaxy process that only deposits silicon or a silicon compound on ALD: Atomic Layer Deposition is a surface-controlled layer-by-layer process that results in the certain predetermined areas of the wafer. deposition of thin films, one atomic layer at a time. Layers are formed during reaction cycles by alternately pulsing precursors and reactants and purging with inert gas in between each pulse. FinFET: A Field Effect Transistor (FET) architecture that uses a raised channel, referred to as a fin, from source to drain. A finFET is considered a 3D transistor since the channel is in a vertical orientation. BCP: Business Continuity Plan. CONNECT: ASMI’s online internal communications platform. COBC: Code of Business Conduct. FMEA: Failure Mode Effects Analysis. GES: ASMI’s Global Employment Standards. IC: Integrated Circuit. COSO: The Committee of Sponsoring Organizations of the Treadway Commission is a joint initiative of five private-sector organizations that is dedicated to providing thought leadership through the IFRS: International Financial Reporting Standards. development of frameworks and guidance on enterprise risk management, internal control and fraud deterrence. imec: imec is an internationally renowned research institute that performs research in different fields of nanoelectronics. It is headquartered in Leuven, Belgium, and has offices in the Netherlands, Taiwan, CVD: Chemical vapor deposition is a chemical process used to produce high-quality, high- US, China, India, Nepal and Japan. performance, solid materials. The process is often used in the semiconductor industry to produce thin films. In typical CVD, the wafer (substrate) is exposed to one or more volatile precursors, which IoT: Internet of Things. then react and/or decompose on the substrate surface to produce the desired deposit. Frequently, volatile by-products are also produced, which are removed by gas flow through the reaction chamber. IP: Intellectual Property. DCM: Dual Chamber Module. LPCVD and oxidation/diffusion: Low pressure chemical vapor deposition (LPCVD) is a thermal process that deposits various films at low pressure. LPCVD processes include polysilicon, silicon DFX: Term used interchangeably, where the X is a variable which can have one of many possible nitride and silicon oxides. Diffusion (sometimes referred to as annealing) is a thermal treatment used values, such as design for manufacturability, power, variability, cost, yield, reliability, or sustainability to move dopants, or impurities, and make dopants introduced by ion implantation electrically active. (DFS). Oxidation forms a silicon oxide layer on the wafer’s surface, which acts as an insulating or protective DRAM: Dynamic Random Access Memory. layer over it. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCE175 NAND: A type of nonvolatile memory device technology which does not require power to retain its PLC: Product Life Cycle. data. NAND flash memory is used in mobile phones, USB memory drives, solid state drives and other electronic products. NCG: New College Graduate. R&D: Research and Development. SEMI: Semiconductor Equipment and Materials International is a global industry association of companies that provide equipment, materials and services for the manufacture of semiconductors, NWO: Nederlandse Organisatie voor Wetenschappelijk Onderzoek. photovoltaic panels, LED and flat panel displays, micro-electromechanical systems (MEMS), and PEALD: Plasma enhanced ALD uses specific chemical precursors just like in thermal ALD. However, it also makes use of cycling an RF-plasma to create the necessary chemical reactions in a highly TTW: Toegepaste en Technische Wetenschappen. related micro- and nanotechnologies. controlled manner. VLAIO: Vlaams Agentschap Innoveren & Ondernemen. PECVD: Plasma enhanced chemical vapor deposition is the CVD that utilizes plasma to enhance chemical reaction rates of the precursors. PECVD processing allows deposition at lower temperatures, which is often critical in the manufacture of semiconductors. The lower temperatures also allow for the deposition of organic coatings, such as plasma polymers, which have been used for nanoparticle surface functionalization. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCELocations worldwide Locations worldwide LOCATIONS WORLDWIDE EUROPE THE NETHERLANDS ASM International NV (HEADQUARTERS) Versterkerstraat 8 1322 AP Almere T: +31 88 100 8810 F: +31 88 100 8820 ASM Europe BV Versterkerstraat 8 1322 AP Almere T: +31 88 100 8711 F: +31 88 100 8710 ASM IP Holding BV Versterkerstraat 8 1322 AP Almere T: +31 88 100 8810 F: +31 88 100 8820 BELGIUM ASM Belgium NV Kapeldreef 75 3001 Leuven T: +32 16 28 1639 FINLAND ASM Microchemistry Oy Pietari Kalmin katu 3 F 2 00560 Helsinki T: +358 9 525 540 FRANCE ASM France SARL 223 Rue des Bécasses 38920 Crolles T: +33 4 7692 2824 F: +33 4 3892 0472 GERMANY ASM Germany Sales BV Bretonischer Ring 16 85630 Grasbrunn T: +49 89 462 36150 F: +49 89 462 36566 ASM Germany Sales BV Hohenbusch Markt 1 01108 Dresden T: +49 351 3238330 F: +49 351 3238332 176 NORTH AMERICA IRELAND ASM Services & Support Ireland Ltd UNITED STATES ASM America, Inc Unit 23, Hills Industrial Estate 3440 East University Drive Lucan, K78 P661 Co Dublin T: +353 1 621 9100 F: +353 1 628 0206 ISRAEL ASM Service & Support Israel Ltd 2 Hazaron St Kiryat-Gat 82109 T: +972 8 612 3077 Phoenix, AZ 85034 T: +1 602 470 5700 Regional Sales/Service Office 2083 East Hospitality Lane Suite 200 Boise, ID 83716 T: +1 208 424-9534 Regional Service Office 7235 NE Evergreen Parkway Suite 200 Hillsboro, OR 97124 T: +1 503 629 1360 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEASIA CHINA ASM China Ltd Room 201A, Building D Changtai Plaza 2889 Alley Jinke Road, Pudong Shanghai, China, 201203 T: +86 21 50 368 588 F: +86 21 50 368 878 JAPAN ASM Japan KK 23-1, 6-chome Nagayama Tama-shi Tokyo 206-0025 T: +81 42 337 6311 F: +81 42 389 7555 177 ASM Front-End Sales & Services Taiwan Co, Ltd Lin-Kuo Office 2F, No 50, Fuxing 3rd Rd Guishan Dist, Taoyuan City 333 T: +886 3 211 5279 F: +886 3 328 5358 ASM Front-End Sales & Services Taiwan Co, Ltd Tai-Chung Office Yokkaichi Service Center 3F, Kosco-Yokkaichi-Nishiura Building 5-10, 1-chome, Yasujima, Yokkaichi-shi SINGAPORE ASM Front-End Manufacturing Singapore Pte Ltd 4 Woodlands Height Singapore 737860 T: +65 6512 2922 F: +65 6512 2966 SOUTH KOREA ASM Korea Ltd Head Office Mie 510-0075 T: +81 59 340 6100 F: +81 59 340 6099 Hiroshima Service Center 402, Higashi-Hiroshima Sea Place 10-30, Saijosakae-machi Higashi-Hiroshima-shi Hiroshima 739-0015 T: +81 42 315 0195 MALAYSIA ASM Services & Support Malaysia Sdn Bhd 63-11, Dongtan Cheomdan Saneop 1-Ro Unit 6A, 6F, 168 Guoan Rd Hwaseong-Si Gyeonggi-Do, 18469 T: +82 31-5176-0000 TAIWAN ASM Front-End Sales & Services Taiwan Co, Ltd Hsin-Chu Office 2F-5, No 1, Jinshan 8th St East Dist, Hsinchu City 300 T: +886 3 666 7722 F: +886 3 564 8899 Xitun Dist, Taichung City 407 T: +886 4 2465 1086 F: +886 4 2463 3707 ASM Front-End Sales & Services Taiwan Co, Ltd Tai-Nan Office 3F., No. 3, Nanke 3rd Rd., Xinshi Dist., Tainan City 744, Taiwan T: +886 3 666 7722 F: +886 6 589 2710 Daini Technology Center Suite 17 and 18, First Floor Incubator Block, Kulim Techno Centre Kulim Hi-Tech Park 09000, Kulim Kedah Darul Aman T: +604 408 0140 7-2, 2-chome, Kurigi Asao-ku, Kawasaki-shi Kanagawa 215-0033 T: +81 44 712 3681 F: +81 44 712 3682 Kumamoto Service Center 3F, Mayfair-Suizenji 21-30, 1-chome, Suizenji Chuo-ku, Kumamoto-shi Kumamoto, 862-0950 T: +81 96 387 7300 FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCESafe harbor statement Safe harbor statement 178 SAFE HARBOR STATEMENT In addition to historical information, some of the information posted or referenced herein or on the website contains statements relating to our future business and/or results, including, among others, statements regarding future revenue, sales, income, expenditures, sufficiency of cash generated from operations, maintenance of interest in ASM Pacific Technology Ltd, business strategy, product development, product acceptance, market penetration, market demand, return on investment in new products, facility completion dates and product shipment dates, corporate transactions, restructurings, liquidity and financing matters, outlooks, and any other non-historical information. These statements include certain projections and business trends, which are ‘forward-looking’. We caution readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. You can identify forward looking statements by the use of words like ‘may’, ‘could’, ‘should’, ‘project’, ‘believe’, ‘anticipate’, ‘expect’, ‘plan’, ‘estimate’, ‘forecast’, ‘potential’, ‘intend’, ‘continue’, and variations of these words or comparable words. Forward-looking statements do not guarantee future performance and involve risks and uncertainties. You should be aware that our actual results may differ materially from those contained in the forward-looking statements as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, economic conditions and trends in the semiconductor industry and the duration of industry downturns, currency fluctuations, the timing of significant orders, market acceptance of new products, competitive factors, litigation involving intellectual property, shareholder or other issues, commercial and economic disruption due to natural disasters, terrorist activity, armed conflict or geopolitical tensions or political instability, changes in import/export regulations, epidemics and other risks indicated in our most recently filed Annual Report and other filings from time to time. The risks described are not the only ones. Some risks are not yet known and some that we do not currently believe to be material could later become material. Each of these risks could materially affect our business, revenues, income, assets, liquidity, and capital resources. All statements are made as of the date of posting unless otherwise noted, and we assume no obligation to update or revise any forward-looking statements to reflect future developments or circumstances. FINANCIAL STATEMENTSNON-FINANCIAL SUMMARYGENERAL INFORMATIONVALUE CREATIONABOUTGOVERNANCEASM International N.V. Versterkerstraat 8 1322 AP Almere The Netherlands

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