ASML International N.V. Annual Report 2020

FY2020 Annual Report · ASML International N.V.

Loading PDF…

Annual
Report

2020’20

ASML ANNUAL REPORT 2020
Contents

2020 at a glance
Interview with our CEO
2020 Highlights
Business as (un)usual

5
7
8

Who we are and what we do
Our company
Our products and services
Our markets
Semiconductor industry trends and opportunities
How we create value
Our strategy

What we achieved in 2020
Technology and innovation ecosystem
Our people
Our supply chain
Circular economy
Climate and energy

CFO financial review
Financial performance
Financing policy
Tax policy
Long-term growth opportunities

How we manage risk
How we manage risk
Risk factors
Responsible business

10
14
17
18
22
24

27
39
53
59
65

74
80
82
84

86
91
99

Leadership and governance
Corporate governance
Message from the Chair of our Supervisory Board
Supervisory Board report
Remuneration report

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements

Non-financial statements
Assurance Report of the Independent Auditor
About the non-financial information
Non-financial indicators
Materiality: assessing our impact
Stakeholder engagement

105
118
119
134

147
149
150
151
152
153
154

200
202
204
219
222

225
248
256

Other appendices
Definitions
Exhibit index

A definition or explanation of abbreviations, technical terms and other terms used throughout this Annual Report can be found in the chapter
Definitions. In some cases numbers have been rounded for readers’ convenience.

This report comprises regulated information within the meaning of articles 1:1 and 5:25c of the Dutch Financial Markets Supervision Act (Wet op
het Financieel Toezicht).

In this report the name ‘ASML’ is sometimes used for convenience in contexts where reference is made to ASML Holding N.V. and/or any of its
subsidiaries, as the context may require.

ASML ANNUAL REPORT 2020Special note regarding forward-looking
statements
In addition to historical information, this Annual Report
contains statements relating to our future business and / or
results. These statements include certain projections,
business trends and other matters that are "forward-
looking" within the meaning of the Private Securities
Litigation Reform Act of 1995. You can generally identify
these statements by the use of words like "may", "will",
"could", "should", "project", "believe", "anticipate",
"expect", "plan", "estimate", "forecast", "potential",
"intend", "continue" and variations of these words or
comparable words. They appear in a number of places
throughout this Annual Report and include statements with
respect to our expected trends and outlook, strategies,
corporate priorities, expected semiconductor industry
trends and 2024 market opportunities and roadmap,
expected trends in markets served by our customers,
expected market growth and drivers of such trends and
growth, expected financial results, including expected
sales, EUV revenue, service revenue, expected trends in
working capital, gross margin, capital expenditures
including expected capital expenditures, R&D and SG&A
expenses, cash conversion cycle, target and expected
effective annualized tax rate, sales targets and outlook for
2021 and other statements under "-Trend Information",
annual revenue opportunity and potential and growth
outlook for 2025, expected growth in 2021, expected
continued growth in free cash flow generation, investments
in the future and cash returned to shareholders, our
Strengths, Weaknesses, Opportunities and Threats
(SWOT), expected demand for upgrades, semiconductor
industry dynamics and industry opportunities, expected
trends in customer demand and demand for particular
systems and upgrades and expected trends in end
markets, including Memory, Logic and Foundry, including
the continuation of investment by Logic customers in
ramping new nodes and stronger lithography demand from
memory customers, expected benefits of High-NA and
planned target to start shipment of High-NA systems and
high-volume production of systems using High-NA by
2025, 2024 market opportunities for semiconductor
industry end markets, expected innovation drivers,
expected drivers of long-term stakeholder value, expected
trends in DUV systems revenue, expected DUV sales and
the expectation that DUV will continue to drive value for our
customers and be used in production in most layers of
their chips, expected benefits of Holistic Lithography and
expected installed based management revenues, our
supply chain strategies and goals, customer, partner and
industry roadmaps, ASML’s applications business,

expected development of High-NA and its benefits,
including the expected timing for development of future
generation EUV systems, expected growth in EUV revenue
the expected benefits of the indirect interest in Carl Zeiss
SMT GmbH and the acquisition of Berliner Glas, expected
EUV margins and margin improvement in our systems and
service via cost reduction and value delivery, expected
productivity and benefits of our tools, systems, and
projects, EUV productivity targets and goals, potential
future innovations and system performance, expected
shipments of our tools and systems, including demand for
and timing of shipments, statements with respect to DUV
and EUV competitiveness, the development of EUV
technology and EUV industrialization, expected
productivity upgrade releases, enabling high-volume
production of next generation chips and expected designs
of such chips and their benefits, and revenue recognition,
predicted growth in wafer production, sustainability targets,
goals and strategies, shrink being a key driver supporting
innovation and providing long-term industry growth,
lithography enabling affordable shrink and delivering value
to customers, sustainability strategy, goals and targets,
including circular procurement goals, targeted greenhouse
gas emission and waste reduction and recycling initiatives
and investments, repair center expansion and targets, our
expectation of the continuation of Moore’s Law and that
EUV will continue to enable Moore’s Law and drive long-
term value for ASML well beyond the current decade, tax
strategy, capital allocation policy, dividend policy, our
expectation to continue to return cash to our shareholders
through share buybacks and dividends including our
proposed dividend for 2020 and statements relating to our
share buyback program for 2020-2022, and statements
with respect to the expected impact of accounting
standards.

These forward-looking statements are not historical facts,
but rather are based on current expectations, estimates,
assumptions and projections about the business and our
future financial results and readers should not place undue
reliance on them. Forward-looking statements do not
guarantee future performance, and actual results may differ
materially from projected results as a result of certain risks,
and uncertainties. These risks and uncertainties include,
without limitation, those described under How we manage
risk - Risk factors. These forward-looking statements are
made only as of the date of this Annual Report. We do not
undertake to update or revise the forward-looking
statements, whether as a result of new information, future
events or otherwise.

ASML ANNUAL REPORT 20202020 at
a glance

ASML ANNUAL REPORT 2020Interview with
our CEO

Peter Wennink, Chief Executive Officer

How do you look back on 2020?
It was a year that affected us all due to the global
COVID-19 pandemic. The impact has been widely felt
across societies and families, as well as in the ASML
community. But it was also a year that brought new
learnings. For me personally, for instance, if you'd asked
me 12 months ago if I could lead a company of over
28,000 people of which over 80% were at home, I would
have said: “Are you out of your mind? Of course that won't
work!" But this is what happened in 2020 – and it has
worked. We even managed to close the acquisition of
Berliner Glas Group, and welcomed around 1,600 new
colleagues into ASML.

While recognizing fully the severity of the pandemic, I also
see 2020 as a year that underlined the importance of our
work at ASML. Around the world people were abruptly
confined to their homes and forced to work from their
study, kitchen or bedroom. What was remarkable is that
despite this widespread working from home, few
companies experienced productivity loss.

And let's not forget the many colleagues in our factories,
and those who went to customers' factories and worked
under very difficult conditions. Those who had to take long-
distance trips to serve our customers were quarantined for
weeks and forced to stay in their hotel rooms. Their
dedication is nothing short of amazing and reflects the true
ASML spirit. For those who had to work from home, the
trust we put in their hands was returned with incredible
flexibility and commitment. We even had to urge our
colleagues to take breaks to stay physically and mentally
fit. All of this was possible because the digital tools that the
high-tech industry has developed over the past two
decades proved sufficiently mature to support individuals
and, even more importantly, collaboration in virtual teams.
ASML systems have contributed significantly to advance
and make affordable the necessary electronic building
blocks for this digital transformation.

What were the main factors behind ASML’s strong
performance in such a challenging year?
The global economic consequences of COVID-19 had a
limited impact on ASML' results. Declining consumer
spending on smartphones and automotive was offset by
increasing investments in 'working-from-home' electronics,
datacenters and the communications network
infrastructure needed to support an economy where data is
an important driver of economic value and productivity.

ASML does not produce these electronic devices or the
software and digital services that run over them, but our
systems are essential to manufacture the semiconductors
that power this ecosystem. ASML and other
semiconductor equipment peers are an integral part of this
global electronic ecosystem of many dozens of companies
that generates $400 billion worth of annual taxable profit. It
is the strong performance of our entire ecosystem that
powered the demand for our products and services this
year, and enabled us to deliver record results.

What were your customers' priorities in 2020?
We divide our customers into two main market segments.
First, the customers who produce Logic chips, who kept
their steady pace of increasing investments in new
production nodes. This explains the increasing demand for
our most-advanced EUV systems, which customers need
for the ramp of 5 nm chip production and the preparation
for 3 nm chips. These advanced chips, the size of a
thumbnail, contain up to a dozen billion transistors, which
will power the latest and greatest smartphones, computers
and other data-processing devices.

Second, the market segment of customers who produce
Memory chips, who started the year in a 'wait and see'
mode, but showed signs of recovery throughout the year.
The Memory segment routinely experiences supply and
demand swings, which you need to visualize as a
continuously upward swinging trend.

During 2020, we collaborated closely with our partners in
the supply chain to ensure we could continue to
manufacture and ship systems to our customers. The
situation was very dynamic and I am impressed with the
way that we managed to deal with the many challenges.
This is how, collectively, we limited the impact of COVID-19
on our company. We kept up our strong financial
performance and we were able to continue to return capital
through dividends and share buybacks.

The underlying growth in Memory 'bit' demand is the result
of continuously rising data traffic that needs to be stored
on servers and consumer devices. Our customers can
meet this increase largely by shrinking the size of the
memory transistors on their chips. They do this by adding
more advanced ASML systems to make the smallest
features on the chip even smaller. If the global economy is
strong or when new data-hungry applications are
introduced, the demand for Memory rises even faster. In

ASML ANNUAL REPORT 2020this case, the Memory makers need to add new production
lines or even entirely new fabs. To support the projected bit
growth, we expect that customers will need to add more
capacity, as observed in our Q4 results.

What do you expect for 2021?
The digital transformation and wider technology trends
significantly shape our roadmap and are driving our
industry forward. Our Logic customers are very clear that
they will continue their investments in ramping new, more
advanced nodes. The pace will depend on the health of the
global economy, and even more so on the value provided
by the electronics and semiconductor industries, which are
enabling the world's digital transformation. For the Memory
segment, demand did not outpace supply in 2020, due to
COVID-19 uncertainty. Based on our customers’
comments at the end of 2020, and improving market
conditions, we expect to see stronger lithography demand
from Memory customers in 2021 versus 2020.

Another significant revenue stream comes from service
and upgrades of ASML systems installed at our customers’
fabs. We expect our service revenue to grow with a
growing installed base, whereas our upgrade business is
more dependent on the release of new upgrades and the
interest and capability of our customers.

In summary, although we are currently going through a
period of near-term uncertainty, the outlook for 2021 is
positive, and the long-term demand drivers have only
increased confidence in our future sustainable growth
outlook towards 2025.

Does anything stand in the way of that optimistic view?
When I am asked what the future holds, my first response
is that of course there are many uncertainties in today's
world. We don't know what the effects of the COVID-19
crisis will be. In addition, geopolitical tensions and export
control issues could have a significant impact on our
industry. Looking specifically at our company, short-term
business cycles and fluctuations in the global economy
may have an impact on our business performance, even
when the long-term megatrends provide us with a solid
foundation. Most important is that we continue to put the
customer at the heart of our business. Listening to the
customer may sound obvious, but having direct interaction
and communication with our customers is no longer
possible for all ASML employees. We are making an extra
effort to bring the voice of our customers to all ASML
employees, through the online and off-line channels at our
disposal.

Everyone at ASML is constantly reminded of the reality that
ASML systems are at the heart of our customers’ fabs, and
in many cases our systems are even at the heart of our
customers’ business strategies. This is a tremendous
responsibility that should weigh heavily on all our
shoulders. This feeling of responsibility and humility starts
with the people who design and develop new systems and
solutions. It continues with the folks who assemble the
systems in our factories and our service engineers in the
field. It is carried all the way to our office staff who provide
support to their colleagues around the world. As long as
we cherish this 'customer-centricity', we will continue to
deserve the trust that our customers have put in us.

How would you describe ASML’s footprint in the
broader society?
It's clear there is increasing interest in companies’
ecological and social footprints. We continue to apply
corporate responsibility standards in the pursuit of our
business ambitions. Our innovation ecosystem, energy-
efficient products, circular use of materials and a
responsible supply chain are our key sustainability
priorities. These are vital for the long-term success of our
business and long-term value we create for all our
stakeholders.

“Although we are currently
going through a period of
near-term uncertainty, the
outlook for 2021 is positive.”

We continue to accelerate talent development and we
promote a diverse and inclusive workplace that drives
creativity and new ideas. We also drive collaborative
innovation in environmentally friendly solutions for our
customers. We are strongly committed to ethical business
behavior, and we play an active role in promoting high
standards of business conduct across the value chain.
Outside the walls of our organization, we are committed to
supporting schools with science, technology, engineering
and math (STEM) subjects, particularly among female
students, to support children and young adults to unlock
their potential.

Do ASML’s customers demand different things now
than they did in the past?
Our customers run very tight operations in gigantic fabs
worth tens of billions of euros. A small disruption in the
production process can disrupt their supply of chips for
weeks. This means that the quality and availability of ASML
systems are more important than ever before. In addition,
as our industry grows, the impact that we and our
customers have on our societies and communities also
grows. All our customers have ambitious sustainability
targets and they expect ASML to help them achieve those
targets by, for instance, reducing energy consumption and
also by being a responsible employer and good corporate
citizen.

We welcome these ambitions, because they align perfectly
with our purpose, our vision and our values.

Please scan the
QR-code in order
to read more
information on
our website.

ASML ANNUAL REPORT 20202020 Highlights

Financial

Total net sales
€14.0bn
(€11.8bn in 2019)

Gross margin
48.6%
(44.7% in 2019)

Net income
€3.6bn
(€2.6bn in 2019)

Free cash flow
€3.6bn
(€2.4bn in 2019)

Dividend per share
€2.75
(€2.40 in 2019)

(proposed)

Net income per share
€8.49
(€6.16 in 2019)

Operational

Lithography systems sold
258
(229 in 2019)

Customer support
4.5m hours
(3.8m hours in 2019)

R&D expenses
€2.2bn
(€2.0bn in 2019)

IP portfolio
>14,100 patents
(>13,700 patents in 2019)

emissions footprint Waste intensity

CO2
15.4 kt
(22.2 kt in 2019)

scope 1 & 2

360 kg
(417 kg in 2019)

per €m revenue

Material recycling rate
85%
(80% in 2019)

Systems refurbished
31
(26 in 2019)

Social

Total employees
28,073 FTE
(24,900 FTE in 2019)

Engagement score
80%
(77% in 2019)

Attrition rate
3.8%
(4.3% in 2019)

Nationalities
120
(118 in 2019)

Community engagement
€4.0m
(€4.9m in 2019)

ASML Foundation
projects supported
22
(17 projects in 2019)

Startups and scaleups
in-kind support
1,550 hours
(1,300 hours in 2019)

COVID-19 donations
€2.7m

Governance

Supervisory Board
100%
(100% in 2019)

independent

Supervisory Board
diversity
33%
(38% in 2019)

female members

Corporate Governance
100%
(100% in 2019)

compliant

Annual General
Meeting resolutions
98.4%
(98.6% in 2019)

average votes For

ASML ANNUAL REPORT 2020

Business as (un)usual: how
COVID-19 shaped 2020

• With every local lockdown and travel restriction that

came into effect, we challenged ourselves and others
to come up with creative ways to do our work and fulfil
our obligations. Our can-do mentality was evident in so
many ways.

• Our ability to collaborate proved to be extremely
valuable in these times. We were not in the crisis
alone, and we made sure our partners, customers and
colleagues knew we supported them.

• We united in our care for our colleagues, suppliers,

customers and communities. Colleagues around the
world went above and beyond to provide support at all
levels. This included voluntarily going into quarantine
far from home to support a customer, to delivering
critical medical equipment and protective clothing to
organizations in need.

Prioritizing our colleagues, their families
and our business
Throughout the year, our people were our top priority:
keeping them safe by creating a secure workplace,
providing mental and physical health support, and staying
in close contact even when working remotely.
Undoubtedly, this experience has made us stronger as a
global team.

Then, although it was not always easy, we were able to
continue to run our business and serve our customers. Our
operational capabilities returned to normal in the second
quarter. We were able to source the modules and parts for
our products, complete installs and upgrades, and service
our customers across the globe.

One of ASML’s strengths as a company has always been
that its people pull together when we need to most. The
past year certainly stands as testimony to this strength.

In every part of the world, the entire year was
dominated by COVID-19, a novel virus that in
the blink of an eye changed the world we live in.
It affected how we lived, interacted with each
other, and worked – in every country, region,
village and community. Businesses and entire
industries had to adapt to a new situation
overnight, and many struggled to stay afloat.
Countries came to a complete standstill, and
there were uncountable stories of personal
tragedy. This was a year where people had to
pull together in unprecedented ways to tackle
the pandemic.

Of course, our company was impacted by the pandemic
too, and in this Annual Report, we will describe its effect on
our organization, the challenges we faced, and how we
overcame these to continue to run our business.

Two priorities
At ASML, as with many other companies, there was an
intense period at the start of the year when we had to
introduce, develop and communicate our crisis-
management measures. In a very short time, we moved
from a policy of 'stay home if you have flu-like symptoms'
to 'stay at home, period'. Fortunately, and in accordance
with strict safety measures, our colleagues working directly
in the production of our scanners, in the clean rooms,
logistics or other supporting departments were able to
continue their work in otherwise deserted locations.

We have two very clear priorities in our crisis response and
communications, then and now. Our number one priority is
to ensure the health and safety of our people and their
families. The second priority is to ensure business
continuity: manufacture our products, provide service to
our customers, and develop future products according to
our roadmap.

In all our health and safety measures, we follow the
guidelines of the World Health Organization and local
health authorities. And although we developed an ASML-
specific policy worldwide, we follow national government
measures in the regions where we operate.

Challenge, Collaborate, Care
We know that COVID-19 is not behind us, but looking back
on 2020, we can say we have delivered on our priorities.

We have also learned how important ASML’s company
values are, and why we need them now more than ever.
When the future is uncertain and there are no easy
answers, these values of Challenge, Collaborate and Care
have and will provide a strong foundation for everything we
do. In 2020, we really lived our values, and they united us
in many ways. They are our DNA. For example:

ASML ANNUAL REPORT 2020Who we are
and what we do

ASML ANNUAL REPORT 2020Our company

We are a global innovation leader in the chip industry. We provide chipmakers with hardware,
software and services to mass produce patterns on silicon through lithography. What we do
increases the value and lowers the cost of a chip, which advances us all towards a smarter,
more connected world.

1984

Year founded

>60

Locations across
3 continents, headquartered
in the Netherlands

28,073

Total employees
12,918 in operations
10,543 in R&D
3,020 in sales and support
1,592 Berliner Glas1

€14.0bn

Net sales
€11.8bn Asia
€1.7bn US
€0.5bn EMEA

1 Berliner Glas Group has been reflected throughout this report, with the exception of our non-financial reporting.

Our purpose
For all the ways we have moved forward as a society, the
world faces crucial challenges for the future. We must
change how we think and act on themes that impact
everyone, like energy use, climate change, mobility and
access to healthcare and nutrition.

At ASML, we believe that the chip industry is in a unique
position to help tackle these challenges. From artificial
intelligence (AI) to a vast internet of things (IoT), microchips
are at the heart of modern technology. So whether it’s
transitioning to sustainable energy, improving global health,
increasing the safety and efficiency of transport, tackling
pollution, bridging the digital divide, or feeding eight billion
people without exhausting the earth’s resources, our vision
is that we will enable the groundbreaking technology that
will help solve some of humanity’s toughest challenges.

As the innovation leader that makes vital systems for chip
manufacturing, we are proud to not only be a part of these
solutions, but also the ones who are making them possible.
We can only play this role if we continue to challenge the
status quo, tap into the collective knowledge of our global
ecosystem and create an environment where people can
contribute, learn and grow. At ASML, we believe our
purpose is to unlock the potential of people and society by
pushing technology to new limits.

The long-term growth of the semiconductor industry is
based on the principle that the energy, cost and time
required for electronic computations can be reduced by
shrinking transistors on microchips. One of the main
drivers of shrink is the resolution that systems can achieve,
which is mainly determined by the wavelength of the light
used and the numerical aperture of the optics. A shorter
wavelength – like a finer brush used for painting – can print
smaller features. A larger numerical aperture can focus the

light more tightly, which also leads to better resolution. To
enable shrink, what we do – lithography – is key.

As such, we are a focused supplier of holistic lithography
solutions to all of the world’s major chipmakers. Our
mission, together with our partners, is to provide leading
patterning solutions that drive the advancement of
microchips. Through our sustained investment in, and
dedication to, research and development, we innovate at
least at the same pace as our customers. We put our
innovations in the hands of chipmakers as quickly as
possible by engineering in parallel, not sequentially, while
ensuring their quality, reliability, manufacturability, and
serviceability.

Our core values
To help solve humanity’s toughest challenges while at the
same time addressing our own, we must continue to
amplify ASML's core values that created our success –
Challenge, Collaborate, Care.

We challenge
We challenge boundaries, question the status quo and
stand up for the ideas we believe in. We’re comfortable with
discussion and debate, because it is often inherent to
stress-testing and championing an idea. This is what
enables us to push technology forward, keep things simple
and do things with care and attention. We always challenge
ourselves to add value for our customer, ensuring we
continually improve across key aspects, like safety, quality,
efficiency and cost.

We collaborate
As a system architect and system integrator, we collaborate
to tap into our collective potential. Together with our
partners in our ecosystem, we expand our knowledge and

ASML ANNUAL REPORT 2020skills, learn from each other, and share approaches to
deliver the best results. What we do is unique, and we
need each other to make it possible. As we continue to
grow and our ecosystem of partners expands, this
collaborative mindset becomes even more essential to
success.

We care
As we push technology further together, we have to do so
with care. As an industry leader, we realize our impact
extends from people, to society, to the planet. We care not
only for those we work with, but for our customers,
suppliers, the world we live in, and the communities where
we do business. We believe in integrity and respect for
people and their human rights. We take personal
responsibility to create a safe, inclusive and trusting
environment where people from all backgrounds are
encouraged and enabled to speak up, contribute, learn,
make mistakes, and grow. We also take care to create
clarity in how we organize ourselves to achieve our goals,
making sure we have a clear framework for what we do
and how we do it.

These values will help our company and our employees to
make smart decisions that will benefit all stakeholders. Our
values and purpose, together with the great responsibility
we have as an industry leader, make us keenly optimistic
for the future.

Where we come from
Our company was founded in 1984 in Eindhoven under the
name of ASM Lithography, a joint venture between Philips
and ASM International. As they moved into their new space
near the Philips factories at Strijp-T in Eindhoven, our first
employees could never have imagined that in just three
decades, ASML would be a global innovation leader.

We’ve grown from our humble beginnings to a global force
through relentless focus on innovation, sheer customer
focus through tough times, and a willingness to rely on
others to come to a better result.

Although we’re constantly looking to the future, where we
have come from is just as important to us as we evolve.
These pioneering behaviors have been key to our success
over the past 36 years, and they’ve become even more
important to us as we continue to define our purpose and
articulate the values that underpin everything we do.
Understanding what made us successful in the past will
help us maintain our success in the future.

What guides us
Innovation is rarely a straight line. We've always known that
it takes laser focus, multidisciplinary teamwork and a keen
eye for how we can best help our customers. And even
then, we've had to show grit. It took a decade of tenacity
to get our technology off the ground. We've cared for this
company like it was our own, and are proudly committed
to its success. We believed then as we do now that even
the biggest challenge can be overcome by chipping away,
if necessary with hundreds of people over many years.

We also learned to rely on others to come to a better result
– without losing focus. That meant expanding our own
knowledge and skills by building an ecosystem of expert
suppliers, strategic partners, academia and service
providers. We also acquired leading companies with
unique technologies that strengthened our ability to deliver
better solutions to our customers. We started to see
ourselves as architects and integrators, inspiring our
partners to innovate on the cutting edge of engineering
while sharing risk and reward. And like us, some of our
earliest customers are now leaders in the chip industry.

We are geared towards providing long-term value to our
customers and other stakeholders. Our direct value chain
consists of our R&D partners, supply chain and customers,
as well as our own manufacturing and service activities.
Together we enable product and service manufactures, so-
called Original Equipment Manufacturers (OEMs), and
Original Design Manufacturers (ODMs), to create end-use
devices and services for the consumer market.

Our position in the semiconductor industry

Suppliers
Research partners

Development &
engineering partners

Supply chain (Tier-1)

Supply chain (N-tier)

ASML
Lithography equipment
manufacturer

Customers
Foundries and IDMs
(semiconductor
manufacturers)

Semiconductor design

Manufacturers
Devices and software
(OEMs and ODMs)

Consumers
End-use products
and services

ASML ANNUAL REPORT 2020The role of lithography
Lithography is a driving force in the creation of more powerful, faster and cheaper chips. Today’s most advanced
processors, based on the Logic N5 node, contain billions of transistors. But shrinking transistors further is becoming
increasingly difficult. We aren’t as close to the fundamental limits of physics as some would think. Next-generation chip
designs will include more advanced materials, new packaging technologies, and more complex 3D designs, which will
create the electronics of the future.

The manufacturing of chips becomes increasingly complex as semiconductor feature sizes shrink, while the imperative to
mass produce at the right cost remains. Our holistic lithography product portfolio helps to optimize production and enable
affordable shrink by integrating lithography systems with computational modeling, as well as metrology and inspection
solutions. Our computational models enable our customers to optimize their mask design and tape-out time. This works
through mask-correction software to prepare and modify the design for optimized exposures, while the inspection
solutions help in analyzing and controlling the manufacturing process in real time.

A lithography system is essentially a projection system. Light is projected through a blueprint of the pattern that will be
printed (known as a ‘mask’ or ‘reticle’). With the pattern encoded in the light, the system’s optics shrink and focus the
pattern onto a photosensitive silicon wafer. After the pattern is printed, the system moves the wafer slightly and makes
another copy on the wafer.

This process is repeated until the wafer is covered in patterns, completing one layer of the wafer’s chips. To make an entire
microchip, this process is repeated layer after layer, stacking the patterns to create an integrated circuit (IC). The simplest
chips have around 10 layers, while the most complex can have over 150 layers. The size of the features to be printed
varies depending on the layer, which means that different types of lithography systems are used for different layers – our
latest-generation EUV systems for the most critical layers with the smallest features to ArF, KrF, and i-line DUV systems for
less critical layers with larger features.

Semiconductor manufacturing process

Computational lithography

Lithography

Metrology & inspection

Optical proximity
correction

Source mask
optimization

Optical

E-beam

Photoresist
coating
Covering the wafer
with unexposed
photoresist

Exposure
Using light in
lithography systems
to make a pattern
in the photoresist

Baking and
developing
Leaving the chip
pattern as a photoresist
mask on the wafer

Deposition
Adding a new layer of
silicon or other materials
over the wafer

Repeat process to add each additional layer

Etching
Remove materials
unprotected by the
wafer resist mask
using chemicals or
a plasma

Removing
photoresist

Ion implantation
Embed impurity atoms into
areas unprotected by resist,
changing parameters of the
semiconductor material

ASML ANNUAL REPORT 2020Rayleigh's equation that drives Moore’s
Law
Moore’s Law, a prediction made over half a century ago,
set the pace for our industry. Gordon Moore predicted that
computing would dramatically increase in power, and
decrease in relative cost, at an exponential pace. In other
words, the number of transistors (tiny electrical switches)
on an integrated circuit will double every two to three years
at the same cost. This opens up two options to make
microchips faster and more powerful: by using the same
number of transistors on a chip at half the cost, or by
doubling the number of transistors at the same cost. Even
today the power of this prediction is the fundamental
principle of the semiconductor industry and the driving
force for innovations that benefit our daily lives.

• NA is the numerical aperture, indicating the entrance
angle of the light and with larger NA lenses/ mirrors
smaller structures can be printed. Besides larger
lenses ASML increased the NA of our ArF systems by
maintaining a thin film of water between the last lens
element and the wafer, using the breaking index of the
water to increase the NA (so called immersion systems).
After the wavelength step to EUV, ASML is developing
the next generation EUV systems, called high-NA where
we push the NA from 0.33 to 0.55.

• k1 is a factor relating to optical and process

optimizations. Together with our computational
lithography and patterning control software solutions we
provide the control loops for our customers to optimize
their mask designs and illumination conditions.

At ASML, our job is to help the industry continue Moore’s
Law. Our goal has always been to reduce the critical
dimension (CD) – the smallest structure that a lithography
system can print. This is defined by Rayleigh’s criterion, the
equation on which all our innovation is based:

CD = k1 x

• λ (lambda) is the wavelength of the light source

• CD is the critical dimension, a measure of how small the
smallest structures are that the lithography system can
print.
λ
used and the smaller the wavelength the smaller the
structures that can be printed. Our deep ultraviolet
(DUV) lithography systems, known as the industry
workhorse, dive deep into the UV light spectrum to print
the tiny features that form the basis of the microchip.
Over the years ASML made several wavelength steps
and our DUV lithography systems range from 365 nm
(i-line), 248 nm (KrF) to 193 nm (ArF). With the extreme
ultraviolet (EUV) systems, we provide highest-resolution
lithography in high-volume manufacturing, as these
systems make a major step in wavelength as with
EUV tin plasma we generate EUV light which has a
wavelength of just 13.5 nm.

ASML's goal has always been to reduce the critical
dimension. By reducing the wavelength and increasing the
numerical aperture, our systems can print IC structures in
increasingly smaller feature sizes. If our customers can
print smaller structures, the chips can be smaller and the
cost per transistor become cheaper, which in turn makes it
more profitable for our customers.

Extending Moore’s Law is becoming increasingly complex
and costly. What will always be needed is a way to mass
produce IC designs at the right cost. That’s where the full
scope of ASML’s product portfolio will continue to play a
big role to ensure affordable transistor shrink. We continue
to push our entire system portfolio to new productivity
levels and imaging performance. Our EUV and High-NA
lithography will enable tomorrow’s most advanced chips. In
our computational lithography solutions, we’re bringing
machine learning and big data to the forefront in predicting
both lithography and metrology processes with 100%
accuracy. Finally, we have developed an entirely new class
of e-beam inspection systems to help our customers
control defectivity in manufacturing in next-generation chip
nodes, as those smaller structures can hardly be detected
with optical inspection.

ASML ANNUAL REPORT 2020Our products and services

The semiconductor industry is driven by
affordable scaling (the ability to make smaller
transistors at the right price). This in turn is
powered by ASML’s holistic lithography product
portfolio. We provide our customers with a suite
of patterning solutions to mass produce
patterns on silicon, allowing them to increase
the value and lower the cost of a chip. Our
portfolio is aligned with industry trends and our
customers’ product roadmaps, which require
lithography-enabled shrink beyond the current
decade.

We continue to push our lithography systems to new levels
of productivity and imaging performance so that
chipmakers can continue to shrink nodes. However, as
shrink continues, our customers face unprecedented
engineering, material, structural and manufacturing
difficulties. Our holistic lithography solutions integrate
products from across our portfolio to help address these
challenges. We help customers achieve their pattern fidelity
requirements through increased control over the quality
and consistency of the patterns being printed on the chip
with our metrology and inspection systems and
computational lithography solutions. In addition, we
support our growing installed base with best-in-class
customer support. Our highly differentiated solutions
provide unique value drivers for our customers and ASML,
working together to ensure affordable shrink.

Extreme ultraviolet (EUV) lithography
systems
More than two decades ago we started with the
development of EUV technology. For sure it was "no walk
in the park" and since the start we invested more than €6
billion in R&D, as well as acquired Cymer to accelerate
EUV source technology, and helped to solve several
technical challenges to enable the EUV infrastructure to
meet our customers high-volume manufacturing
requirements. This partially explains why ASML is the
world’s only manufacturer of EUV lithography systems.

Our EUV platform extends our customers’ Logic and
Memory roadmaps by delivering resolution improvements,
state-of-the-art overlay performance and year-on-year cost
reductions. EUV lithography uses light with a wavelength of
just 13.5 nm. This is a reduction of almost 15 times
compared to the other lithography solution in advanced
chipmaking, deep ultraviolet (DUV) lithography, which uses
193 nm light. This allows our customers to use EUV single
exposure instead of very complex multiple-patterning ArF
immersion exposures, and allows them to further shrink the
structures. Our EUV product roadmap is intended to drive
affordable scaling to 2030 and beyond.

TWINSCAN NXE:3400C is our latest-generation EUV
lithography system. It combines productivity, highest
resolution, state-of-the-art overlay and focus performance,
while also improving availability. Our next EUV model on
this platform, the NXE:3600D, is planned for delivery in

mid-2021 and will provide further productivity gains plus a
significant improvement in overlay.

TWINSCAN NXE:3400C

High-NA
We are also developing the next generation of EUV
lithography systems with a higher numerical aperture (NA),
known as High-NA technology. Our customers have
ordered R&D system to evaluate the high-volume
production opportunities in the 2025 time frame. This
technology will enable geometric chip scaling beyond the
current decade, offering resolution and overlay capability
that is 70% better than our current EUV platform.

Deep ultraviolet (DUV) lithography
systems
Although EUV is entering the high-volume manufacturing
era, DUV lithography still produces the majority of layers in
a customer device today and will remain important for
future devices. Therefore, ASML continues to develop DUV
systems to improve value for our customers. We offer
immersion and dry lithography solutions that help
manufacture a broad range of semiconductor nodes and
technologies. Our DUV immersion and dry systems lead
the industry in productivity, imaging and overlay
performance for high-volume manufacturing of the most
advanced Logic and Memory chips, while continuing to
deliver value for the matured nodes.

Immersion systems
An enhancement to ArF lithography, immersion lithography
maintains a thin film of water between the last lens element
and the wafer, increasing NA and improving resolution to
support further shrink. Our immersion systems are suitable
for both single exposure and multiple-patterning
lithography, and can be used in seamless combination with
EUV systems to print different layers of the same chip.

TWINSCAN NXT:2050i is our current state-of-the-art
immersion system and is being ramped up in high-volume
manufacturing of the 5 nm Logic and third generation of 10
nm DRAM nodes. The NXT:2050i is based on a new
version of the NXT platform, which includes new
developments in the reticle stage, wafer stage, projection
lens, and exposure laser. Thanks to these innovations, the
system delivers better overlay control at higher productivity
than its predecessor.

ASML ANNUAL REPORT 2020Metrology and inspection systems
Delivering speed and accuracy, our metrology and
inspection portfolio covers every step of the manufacturing
process, from R&D to mass production. The information
captured through our metrology and inspections systems
helps us to control the thousands of knobs in the scanner
to enlarge the process window and improve yield for our
customers. Together with our computational lithography
and patterning-control software solutions, these systems
help chipmakers achieve the highest yield and best
performance in mass production.

Optical metrology and inspection
Our YieldStar optical metrology solutions can quickly and
accurately measure the quality of patterns on the wafer.

YieldStar 385H offers the latest in-resist post lithography
overlay and focus metrology, with enhanced throughput
and accuracy. Overlay, how well one layer is aligned to its
previous layer, is becoming more important as structures
get smaller and error tolerance reduces. Compared to
previous systems, key enhancements include a faster
stage and faster wavelength changing. This enables highly
accurate overlay measurements and tool matching using
multiple wavelengths without impacting throughput.

YieldStar 385H

YieldStar 1375F is the only optical tool on the market for
fast, accurate in-device overlay and metrology. Capable of
measuring multiple layers at once, it helps customers
improve yield through post-etch process control.

E-beam metrology and inspection
Our HMI e-beam solutions allow customers to locate and
analyze individual chip defects amid billions of printed
features, extending the possibilities for process control.
Historically, e-beam solutions were too slow to monitor
volume production processes. However, ASML has made
progress in various methods for increasing the throughput
of e-beam systems.

Our pattern fidelity metrology option draws data from a
wide variety of sources, analyzing it using predictive
models to identify hotspots where defects are most

TWINSCAN NXT:2050i

Dry systems
Our portfolio of dry systems offers tool types for all
wavelengths currently used in the semiconductor industry,
from i-line using 365 nm wavelength, KrF using 248 nm
and ArF using light of 193 nm supporting the continued
progress to enable shrink.

TWINSCAN NXT:1470 is our latest dry ArF lithography
system. It is also the first dry NXT system, building on our
successful immersion platform, and delivers improvements
in matched machine overlay, productivity and its footprint
in the fab.

TWINSCAN XT:860M is our most popular KrF system,
supporting high-volume 200 mm and 300 mm wafer
production at and below 110 nm resolution. For more
critical KrF layers, the higher-NA TWINSCAN XT:1060K is
our most advanced KrF lithography system, and offers
best-in-class resolution and overlay.

TWINSCAN XT:400L is our latest i-line lithography system,
printing features down to a resolution of 220 nm for 200
mm and 300 mm wafer production.

TWINSCAN NXT:1470

ASML ANNUAL REPORT 2020
probable or most critical. This insight is used to guide the
e-beam inspection system and optimize scan strategies,
increasing the effective productivity.

In addition, in 2020 we shipped the first multiple e-beam
(multibeam) inspection system. The HMI eScan 1000
demonstrated successful multibeam operation,
simultaneously scanning with nine beams. It increases
throughput by up to 600% compared to single e-beam
systems, thus reducing the cost of inspection.

eScan 1000

Computational lithography
Our computational lithography and software solutions
revolve around creating applications that enhance the
setup of the lithography system so chipmakers can print
exactly what they want to print. Accurate simulation
models of the lithography process are a foundational
element for all these applications. These models
represent a wide variety of physical and chemical

effects. Machine learning solutions are now broadly used in
the simulation models as well as in the applications.

Managing our installed base systems
The installed base of ASML systems continues to grow,
with many systems finding second or even third lives at
new owners in new markets and applications. To provide
all our customers with the best possible value proposition,
we offer an extensive Installed Base Management portfolio,
including a wide range of service and upgrade options.

We develop and sell product options and enhancements
designed to improve throughput, patterning performance
and overlay. Through field-upgrade packages, it is possible
to upgrade older systems to newer models in the field. This
enables customers to optimize their cost of ownership over
the system’s lifetime.

Meanwhile, our Mature Products and Services (MPS)
business refurbishes used lithography equipment and
offers associated services. We focus on the refurbishment
of three product families: the ‘classic’ PAS 5500, the first
generation AT systems, and the early generation NXT and
XT systems. We are investing to be able to extend the
lifetime of the PAS platform until at least 2030.

Customer support
We support our customers with a broad range of
applications, services, and technical support products to
maintain and enhance our systems' performance. We have
more than 6,200 customer support employees, including
service engineers and applications specialists, who work to
ensure the systems in our customers’ fabs run at the
highest levels of predictability and availability. We offer 24/7
support, next-day parts delivery, an easy, centralized
customer portal, and training for customer engineers.

Visit www.asml.com for more product details and
specifications.

ASML ANNUAL REPORT 2020
Our markets

Our customers are the world’s leading microchip
manufacturers, and our success is inextricably linked
with theirs. We design our machines based on their
input, engage in helping them achieve their technology
and cost roadmaps, and work together to make sure
our machines are running smoothly in their fabs.

Our customers can be grouped into Memory and Logic
chipmakers.

Memory chips can store a large amount of data in a very
small area. They are used in an increasing variety of
electronic products like servers, data centers,
smartphones, high-performance computing, automotive or
personal computers, and other communication devices.
There are two main classes of Memory: NAND and DRAM.

With NAND chips, data can be stored even when a device
is powered off. DRAM memory is used to efficiently provide
data to the processor. These DRAM and NAND chips are
typically made in dedicated Memory-chip factories.

Logic chips, which process information in electronic
devices, are produced by two groups of manufacturers.
The first group, known as integrated device manufacturers

(IDM), designs and manufactures Logic chips. The second
group comprises contract manufacturers known as
foundries. Foundry manufacturers produce chips for
‘fabless’ companies, which focus only on chip design and
distribution, but do not manufacture themselves.

Both Logic and Memory chips can vary greatly in
complexity and capability. For example, the most
advanced chips are powering leading-edge technology in
artificial intelligence (AI), big data and automotive
technology, while the simpler, low-cost chips are
integrating sensing capabilities in everyday technology to
create a vast IoT.

The chip market has grown by 5% per year on average
over the past 20 years, but the factors driving this growth
have radically changed. In the 1990s, personal computers
(PCs), both desktops and later laptops, drove chip
demand. In the first decade of this century, the market
driver evolved from PCs to smartphones. These in turn
produced new market drivers, data centers and cloud
solutions, where data from PCs and smartphones is
routed, processed and stored with the extensive use of
specialized Logic chips, in combination with DRAM, NAND
and HDD storage.

ASML ANNUAL REPORT 2020Semiconductor industry
trends and opportunities

Technology is evolving fast, and the next level of computing is dawning. The era of mobile
computing – where you bring the computer with you – is evolving towards immersive ‘ubiquitous
computing’, with computing power available wherever you go.

The transition to ubiquitous computing is enabled by what has been termed the ‘artificial intelligence of things’ (AIoT). AIoT
is a smart and connected network of devices that seamlessly communicate over powerful 5G networks, allowing us to
unleash the power of data better and faster than ever. This combination of artificial intelligence (AI) technologies with the
internet of things (IoT) infrastructure will achieve more efficient IoT operations, improve human-to-machine interactions,
and enhance data management and analytics. The potential of AIoT will gradually open up as IoT and AI increasingly
intertwine, facilitated by 5G. The vast amount of data that people can access, and the insights this provides, will fuel
semiconductor business growth and transformation.

There are around 40 billion connected devices currently in use, with more being added every second. This number is
expected to increase to 350 billion devices by 2030. Connected IoT devices are expected to create up to 175 ZB
(zettabyte) of data per year by 2025. In other words, one zettabyte (1021 byte) equals a trillion gigabytes, and to download
175 ZB data with average current internet connection speed would take one person 1.8 billion years. This big data will
need to become fast data to allow for ubiquitous computing as we move towards ‘edge’ computing, where processing is
brought as close to the source of data as possible, rather than in the cloud.

Semiconductor-enabled computing trends
Moore's Law is the guiding principle for the semiconductor industry, the motor driving the industry to transit from mobile
computing to ubiquitous computing. This amplification continues to expand, facilitating three major trends in computing:
applications, data and algorithms.

Applications

Moore’s Law
Performance
Cost

Algorithms

Data

Applications
• Autonomous decisions
• Immersive resolution
• On-device artificial intelligence
• Virtual / augmented reality

Data
• 5G connectivity
• Real-time latency
• Growing data volumes

Algorithms
• From big data to value
• Enhanced processing
• Deep learning

These three trends supports several segments and
applications, such as:

Smart home
Smart home devices such as thermostats, lights and smart
TVs learn a user’s habits to provide automated home
support for everyday tasks. Applications: energy efficiency,
safety, entertainment, access control and personal comfort.

Smart industry
Smart industry devices use real-time data analytics and
machine-to-machine sensors to optimize processes. Data
generated from these devices helps foresee bottlenecks,
preventing errors and injuries. Applications: autonomous
manufacturing robots, automated supply chain
management and predictive sensors.

Smart city
Smart cities that integrated all levels of municipal services.
Applications: open data for better urban planning,
optimized energy consumption and increased public safety
through smart traffic surveillance.

5G connectivity
5G enables a new kind of network that is designed to
connect virtually everyone and everything together
including machines, objects, and devices. It empowers
new user experiences and connects new industries.

Wearables
Wearable devices continuously monitor and track user
preferences and habits. Applications include fitness and
health trackers, heart-rate monitoring and wireless
headphones.

ASML ANNUAL REPORT 2020Self-driving cars
These supercomputers on wheels are enabled by
electronics and semiconductors. Autonomous vehicles
offer ADAS (Advanced Driver Assistance Systems) features
that reduce accidents and casualties and allow us to stay
connected continuously through infotainment systems.

Autonomous robotics
A new generation of lightweight robots fitted with smart
sensors enables humans and machines to collaborate
closely and safely. Smart robots that are connected to a
greater network can benefit from big data and collective
learning making it possible to reduce manufacturing costs
and improve quality of products.

Mixed reality
Combining augmented reality and virtual reality technology
will bring together the real world and digital elements and
create the next-level user experience with potential
applications in education and training, healthcare,
entertainment. For example, imagine you can interact with
your teacher and co-students as if you are in the class-
room, but this time from your living room.

Predictive healthcare
Using devices connected to patients (bracelets, watches,
and more) allows us to collect data on the health status of
patients to diagnose disease in advance, provide treatment
(even remotely), and prevent critical situations. When
joining forces with AI, machine learning can save lives.

Semiconductor industry opportunities
Semiconductor technology plays a crucial part in shaping the interconnected and intelligent network future, and end
markets continue to grow. The overview below shows the current market size and market opportunity for the entire
industry based on external research of market outlook.

Market

Smartphone

Personal computing

Consumer electronics

Automotive

Industrial electronics

Wired and wireless infrastructure

Servers, datacenters and storage

Key driver

Continued refresh of all semiconductor content
including image sensors
High-end compute and Memory, fast
conversion to SSD
Legacy products and packaged ICs. Advanced
ICs in add-ons
Strong IC content growth: GPU, sensors, V2X
communication sensing
High-end compute for AI on big data and
sensors
Devices for fast data processing, modem, base-
station infrastructure refresh
High processor and Memory growth, hardware
accelerations including GPU

2019 market
size ($bn)

2024 market
opportunity
($bn)

CAGR (%)

106

155

419

102

598

7.9%

2.8%

7.7%

9.5%

7.8%

5.5%

10.6%

7.3%

ASML ANNUAL REPORT 2020Semiconductor industry dynamics
Several factors are shaping the semiconductor industry landscape. These are some of the major trends driving industry
development, today and tomorrow.

Rising consumer demand
The convergence of wireless communication, telecom, media and cloud via connected devices continues to drive demand
for advanced semiconductors across the globe. Growing populations and urbanization are creating increasing demand for
advanced consumer electronic devices. Microchips are at the heart of these devices. Significant growth drivers of the
emerging technologies are demanding new and advanced chips that are specifically designed for a wave of new
applications. Read more in: Semiconductor industry trends and opportunities, Customer intimacy

Global race for talent
Highly skilled people with a technical background are scarce in the labor market and competition is growing. Top-tier
talent select their employer of choice, not the other way around. The global race for talent is becoming more crucial as the
industry competes for a small pool of scientists, engineers and software developers with the skill set to develop innovative
solutions.

Companies are trying to staff up for growth, but the high-tech resource pool is shallow. The number of STEM jobs is
projected to grow significantly, but it is challenging to fill these given the shortage of qualified candidates. Retaining talent
has become crucial for tech companies. Read more in: Our people

Global geopolitics
The current trade environment presents significant challenges for the global semiconductor industry, and trade tensions
and increased protectionism are likely to continue. US authorities took steps that further restrict US chipmakers and other
companies from doing business with China. These actions are impacting the semiconductor industry’s ability to conduct
business in the global marketplace.

The industry is being forced to manage trading costs. Ultimately, this could be passed on to the end-market resulting in an
increase of prices of devices. Besides the financial implication, trade tensions and protectionism also introduce significant
complexity throughout the supply chain and its processes. This is forcing the industry to relook at its global supply
chain. Read more in: Our supply chain, How we manage risk, Risk factors

Expanding R&D costs
In the rapidly evolving semiconductor industry, access to the latest technologies, chip designs and manufacturing
processes is the basis for competition. R&D is an ever bigger priority and expense. Chipmakers are faced with supporting
applications and end markets that are becoming increasingly complex. Traditional semiconductor companies are
challenged to diversify their portfolio, due to the rise of tech platform companies moving to in-house chip design.

In addition, the incremental costs of executing innovation are rising, requiring higher levels of R&D investments to achieve
the same goals. Getting products to the market faster is essential – or the chipmakers risk missing the boat. As a result,
there is increased pressure to get solutions to the customers early. Read more in: Technology & innovation ecosystem, Risk factors,
Financial performance

Changing landscape
To capitalize the convergence of mega trends such as AI, IoT, 5G and autonomous vehicles, the industry is investing
significant amounts in assets that can unlock value across the portfolio.

The global semiconductor industry has shown tremendous growth in recent years and this is set to continue. It is
refocusing on increasing scale and proficiency in core competences as well as expanding into new capabilities and new
markets. Mergers, acquisitions and joint ventures are expected to be key parts of the chip-market strategy, with deals
focusing on emerging technologies. Read more in: Semiconductor industry trends and opportunities, Our supply chain and Risk factors

Taking action on climate change
Climate change is an urgent matter around the world. It is a global challenge that requires global responsibility to limit a
temperature rise to well below 2°C. Our industry has a role to play.

The semiconductor manufacturing process consumes large volumes of energy and water resources. Driving Moore’s Law
in enabling shrink and, at the same time, improving computing power and storage capacity, fuels the demand for these
resources. New architectures and a new way of looking at the entire ecosystem will be required to enhance energy and
water-resource efficiency.

To meet these challenges, the semiconductor industry has to reduce power consumption. With data centers consuming
about 10% of the world’s electric power, it touches the boundaries of scale. Taking action on climate change is a moral
imperative. Read more in: Climate and energy

ASML ANNUAL REPORT 2020SWOT analysis
Acting on the global trends and developments in the semiconductor industry and in society is an important factor in the
success of our business, as well as in creating value for our stakeholders. Using these external and internal factors, as well
as current and future potential, we have evaluated our company's competitive position in the environment we operate in.
The following table provides a brief overview of our strengths, weaknesses, opportunities and threats (SWOT). More
information on how we manage the topic can be found in the reference sections.

Strengths +

Weaknesses —

• Technology leadership
(Read more in: Our products and services, Technology and innovation ecosystem)

• Fast-growing workforce
(Read more in: Our people, How we manage risk)

• Market leadership
(Read more in: Our products and services, Our markets, Customer intimacy)

• Limited cost leadership advantage
(Read more in: Operational excellence, CFO financial review, How we manage risk)

• Collaborative & enduring innovation
(Read more in: Technology and innovation ecosystem)

• Increasing complexity of our products and technology
(Read more in: How we manage risk)

• World-class workforce with 'can-do' mentality
(Read more in: Our core values, Our people)

• Strong financial position
(Read more in: 2020 Highlights, Financial performance)

Opportunities ä

Threats æ

• Ride the tech megatrends
(Read more in: Semiconductor industry trends and opportunities, Our strategy)

• Geopolitical tensions
(Read more in: Semiconductor industry dynamics, How we manage risk)

• Holistic lithography portfolio expansion
(Read more in: Our products and services, Our strategy)

• Supply chain disruption
(Read more in: Our supply chain, How we manage risk)

• Emergence of new customers in semiconductor industry
(Read more in: Semiconductor industry dynamics)

• IP Technology leadership pressure
(Read more: in How we manage risk)

• Raising brand awareness
(Read more in: Our people)

• Competition for market share
(Read more in: How we manage risk)

• Increasing sustainability drive
(Read more in: Our strategy, Circular economy, Climate and energy)

• Competition for talent
(Read more in: Semiconductor industry dynamics, Our people, How we manage risk)

• Narrow customer base
(Read more in: Customer intimacy, How we manage risk)

• Outbreaks and the consequences of climate change
(Read more in: Business as (un)usual, How we manage risk, Climate and energy)

ASML ANNUAL REPORT 2020How we create value

Supplier value
As we grow and our innovations enter ever-higher levels of
complexity, we want our suppliers to grow with us. We
innovate together with our supplier network, sharing
knowledge and tapping into each other’s technology
expertise. Long-term relations, close cooperation and
transparency with our suppliers are key to our success.

Employee value
Our workforce has grown steeply in recent years. In the
past five years, we have created around 12,000 jobs in the
communities where we operate. For example, with
14,269 employees in Veldhoven (our headquarters) we are
a major employer in the community. We are a proud
employer of 120 nationalities, allowing for diverse points of
view in our quest to develop the best ideas. Developing our
people is crucial to the sustained success of our business,
so we invest in their career development and well-being.

Societal value
With our continuous innovations, we enable new
technology that supports the growth and transformation of
the semiconductor industry, using artificial intelligence to
offer new applications and services to address society’s
needs. Through our innovation ecosystem we nurture
innovation by giving back to society, such as sharing our
expertise with universities and research institutes,
supporting young tech companies, and promoting STEM
education worldwide. We also develop groundbreaking
technology to reinforce our innovation footprint and
minimize our environmental footprint. We do this by
minimizing waste, maximizing the value of material we use,
and taking every step possible to lower our carbon
footprint.

Sustainable impact
We believe the chip industry is in a unique position to
tackle socioeconomic and environmental challenges. We
focus on challenges and sustainability areas most relevant
to our stakeholders and on which ASML can have the
greatest impact in the long term. (Read more in: Materiality
assessment, SWOT analysis). We focus on those United
Nations Sustainable Development Goals on which ASML
can make a real difference.

The success of our business depends on strong,
sustainable relationships with all stakeholders in the
value chain to achieve the desired innovations in
semiconductor technology. We use input from
stakeholders and trends in our industry and society to
develop our strategy, our products and services. We
define our stakeholders as our shareholders,
customers, suppliers, employees and the society we
operate in.

We use the model of the International Integrated Reporting
Council (IIRC) to optimize our long-term stakeholder value
and sustainable impact. Below, we have concretized:
1. The capital inputs we use for our products and services;
2. The long-term value we create for our stakeholders;
3. The broader impact we generate towards the United

Nations Sustainable Development Goals.

Capital inputs
We use various forms of capital to manufacture our
products, which we define as follows:
• Financial capital: these are the funds available to ASML
• Manufacturing capital: our human-created and

production-oriented equipment and tools

• Intellectual capital: our investment in R&D to determine

our competitive advantage

• Human capital: the capabilities, knowledge, skills and

experience of our employees

• Social capital: the high-tech ecosystem and

partnerships we create

• Natural capital: the natural resources we use and energy

we consume

We aim to use these forms of capital in the most effective
way to generate long-term value for all of our stakeholders.

Long-term stakeholder value
Our core values - Challenge, Collaborate, Care - are a key
contributor to our culture aimed at long-term value creation
and as such an important enabler in the execution of our
strategy. Read more in: Our core values, Our people. We
define our long-term value for all our stakeholders as
follows:

Shareholder value
Our large and sustained investments in research and
development to execute our business strategy enable us to
maintain our position as a leader in holistic lithography. Our
innovations contribute to the long-term growth of the
semiconductor industry, which benefits our solid financial
performance and capital return policy.

Customer value
As one of the world’s leading manufacturers of chip-
making equipment, we invest in innovations that enable the
continued shrink of microchips. With EUV and the next
generation of EUV, High-NA, we secure the continuation of
Moore’s Law. This allows our customers to develop ever-
more powerful chips for new applications and devices. At
the same time we help our customers to reduce their costs
and environmental footprint by embedding circularity
principles in our products.

ASML ANNUAL REPORT 2020Capital
resources

(actuals 2019)

Financial
€13.9bn
(€12.6bn)
Total shareholders'
equity

€4.7bn
Long-term debt

(€3.1bn)

Manufacturing

€7.2bn
(€6.5bn)
Total cost of sales

(7)

8
Manufacturing sites

12,918 FTE
Employees in
operations

(11,886 FTE)

Intellectual

€2.2bn
R&D expenses

(€2.0bn)

4
(4)
R&D sites

10,543 FTE
Employees in R&D

(10,166 FTE)

Human
28,073 FTE
Total employees

(€24,900 FTE)

(€19m)

€12m
Training and
development

120
Nationalities

(118)

Social
€0.9m
ASML Foundation

(€1.5m)

€3.1m
Community outreach

(€3.4m)

Nurture high-tech
ecosystem

Natural
1,412 TJ
(1,367 TJ)
Energy consumption

Committed to
circular economy

Our purpose

Unlocking the potential of
people and society by pushing
technology to new limits

Our strategy

Strengthen customer trust

Holistic lithography
and applications

DUV competitiveness

EUV industrialization

High-NA

2020
outcome

(actuals 2019)

Financial

€2.75
(€2.40)
Proposed annualized
dividend per share

(€2.6bn)

€3.6bn
Net income
€8.49
EPS

(€6.16)

Manufacturing
€14.0bn
Total net sales

(€11.8bn)

(229)

258
Lithography
systems sold
48.6%
Gross margin

(44.7%)

Intellectual

>14,100
Patent portfolio

(>13,700)

(€843m)

€785m
IP & developed
technology value

Human
80%
Employee
engagement score

(77%)

(3)

5
Employer brand
ranking listing

3.8%
Attrition

(4.3%)

(17)

Social
22
Projects supported
through ASML
Foundation

Promoted STEM
education

1,550 hrs
(1,300 hrs)
Startups and scaleups
in-kind support

Natural
85%
(80%)
Material recycling rate

-30.8%
(-32.5%)
scope 1 and 2
CO2
net footprint decreased

360 kg
(417 kg)
Waste generated
per €m revenue

Value
created

Sustainable
impact

Shareholder value

Long-term
organic growth

Customer value
Continuing
Moore’s Law
and lower energy
consumption

Supplier value

Contributing to
new technology
and circular
economy

Employee value
Sustainable
employment in
the community

Societal value

Enabling new
technological
advancement

ASML ANNUAL REPORT 2020

Our strategy

The long-term growth of the semiconductor industry is
based on the principle that the power, cost and time
required for every computation on a digital electronic
device can be reduced by shrinking the density of
transistors on microchips. ASML invests in a
technology-based innovation roadmap that enables the
continued shrink of microchips by enhancing resolution
with EUV and High-NA, together with the holistic
scaling of overlay and pattern fidelity control. To
achieve this we also invest in continuing innovations in
DUV, Metrology and Inspection technology, to
supplement the power of EUV-led shrink. This is how
we pursue our long-term strategic vision.

To enable ‘edge’ – which brings computation and data
storage closer to the location where it is needed – our
customers continue to invest in developing more advanced
semiconductor processes to create more powerful Logic
and Memory microchips. At the same time, these also
need to be more energy-efficient and cost-effective.

For the next decade, the semiconductor industry roadmap
fires on three cylinders:
• 3D integrated circuits enabling better performance,

power, form factor and functionality

• Geometric scaling to reduce cost
• Domain-specific architecture driven by energy efficiency

Geometric scaling (shrink) is a key industry driver
supporting innovation and providing long-term industry
growth. Our guiding principle is continuing Moore’s Law
towards ever-smaller, cheaper, more powerful and energy-
efficient semiconductors. To enable shrink, lithography is
key, as the process is used to pattern the structures on a
microchip.

We innovate across our entire product portfolio at the same
pace as our customers through large and sustained
investment in research and development. To accelerate our
product development, we engineer in parallel, not
sequentially, all the while guarding the product’s quality,
reliability, manufacturability and serviceability. This enables
us to get our innovations into the hands of chipmakers
faster. We collaborate with chipmakers to understand how
our technology best fits their needs, including their
challenges and visions of the future. It is through this
collaboration and trust that we can build for today and
develop for tomorrow.

Five pillars of our core strategy
To realize our long-term strategic vision within the semiconductor industry, we continue to drive our core strategy, which
we define around five major pillars: Strengthen customer trust, holistic lithography and applications, DUV competitiveness,
EUV industrialization and High-NA.

Strengthen
customer trust

Enhance operational excellence capabilities by focusing
on our customers’ needs to improve cost of ownership and
deliver future nodes. Deliver on our commitment to
accelerate improvements in our sustainability performance.

Holistic lithography
and application

Strengthen our leadership position in in-device metrology,
enabling high-order overlay correction. Secure a winning
position in pattern fidelity control and combine this with
superior computational lithography.

DUV
competitiveness

Continue our innovation leadership, driving DUV
to the highest level of performance by expanding our
installed base and through continuous improvement
and operational excellence.

EUV
industrialization

Secure high-volume manufacturing and improve cost
effectiveness for our customers by enhancing the value
of EUV technology for future nodes down to the 2 nm
Logic node.

High-NA

Enable next-generation geometric shrink by extending
our 0.33 NA product portfolio to enable High-NA EUV
at the 2 nm Logic node, followed by Memory nodes at
comparable density.

ASML ANNUAL REPORT 2020Five sustainability areas
At the same time, we want to ensure a sustainable impact while providing the best value for our stakeholders – today and
in the future. Staying focused on what matters for our business and stakeholders is the cornerstone of our strategy.
Through a materiality assessment, we identify and assess the topics most relevant to our stakeholders and which sustain
ASML's long-term business growth. (Read more in: Materiality - assessing our impact)

We are committed to sustainability. To accelerate our sustainability performance, we focus on five strategic areas of
sustainability, to create long-term value for our stakeholders, shape a sustainable future, and contribute to the United
Nations Sustainable Development Goals.

Innovation
ecosystem

We don't innovate in isolation to ensure the fast pace
of innovation in our value chain. We develop technology
together with the help of our partners and collaborative
knowledge network.

People

Empowering individuals for the collective good
to ensure our employees are proud to work for us
and engaged with our ambitions as a company.

Responsible
supply chain

Setting the bar higher for our world-class supplier
network to achieve the innovations we strive for,
by ensuring we conduct our business in a sustainable
and responsible manner.

Circular
economy

Climate
& energy

Minimizing waste, maximizing resources to extract the
maximum value from the materials we use and repurpose
our products across their life cycles.

Taking every step to lower our footprint to achieve zero
emissions across our operations. While increasing
productivity of our products, we are also working towards
enhancing the energy efficiency of our products.

ASML ANNUAL REPORT 2020What we
achieved
in 2020

ASML ANNUAL REPORT 2020Technology and
innovation ecosystem

We don’t innovate in isolation to ensure the fast pace of innovation in our value chain.
We develop technology together with the help of our partners and collaborative
knowledge network.

26,000,000

Wafers produced by
EUV installed base

€2.2bn

R&D expenses

1,550 hours

Support to high-tech
startups and scaleups

€28.5m

Contribution to four
EU research projects

How we innovate
Our ability to innovate is crucial to our business success.
Through our innovations, we help our customers achieve
their goals and realize new technology and applications.
We have a solid system in place to manage and enhance
innovation, achieving significant breakthroughs in recent
years.

Innovation through collaboration
We innovate through partnerships. Our innovation
philosophy is one where we see ourselves as architects
and integrators, working with partners in an innovation
ecosystem. We develop our technology in close
collaboration with our customers to ensure we build today
what they need tomorrow. Our machines are developed
based on their input, and we engage closely with them to
help achieve technology and cost roadmaps.

In the same way, we work closely with our suppliers,
trusting them to manufacture parts and modules for our
systems. Many of them are deeply involved in developing
new technology and achieving the innovations we seek.
With some of these so-called ‘farmout suppliers’, we work
as co-investors.

For example, we’ve been in partnership with Carl Zeiss AG
for over three decades. This partnership runs according to
the principle of ‘two companies, one business’ working
together to drive operational excellence. To accelerate
innovation in High-NA technology, we hold an interest in
and support Carl Zeiss SMT in R&D and other capital
investments for the design of optical columns in our
lithography systems.

We co-develop expertise within a wide network of
technology partners, such as universities and research
institutions. Some of our partners include imec in Belgium,
the technical universities in Twente, Delft and Eindhoven in
the Netherlands, and the Advanced Research Center for

Nanolithography (ARCNL), also in the Netherlands. In 2020,
as in previous years, these partnerships delivered good
results.

EUV research leads to unexpected discovery

Research by R&D partners we collaborate with has
delivered numerous breakthroughs that have helped
us innovate. Some of these findings surprise even the
greatest experts. This was the case when Oscar Versolato,
group leader and head of department at the Advanced
Research Center for Nanolithography (ARCNL), and his
team took a closer look at the EUV light that plays a key
role in our EUV systems.

EUV light is generated when a minuscule drop of tin is
heated to a temperature of up to 400,000° Celsius. As
the tin is heated, the electrons circle in a larger orbit than
under normal circumstances. When these electrons return
from their so-called ‘excited state’ to an orbit closer to
the atom’s nucleus, energy is released in the form of light
of several wavelengths, one of which is EUV radiation.
Fundamental research by ARCNL found that many more
electrons than thought, including those in even wider
orbits, can contribute to EUV light. With this better
understanding of how the process works, we might be
able to further optimize EUV sources in the future.

Since its start in 2014, ARCNL developed towards a
mature research institute. With funding from UVA, VU,
NWO and ASML this institute conducts fundamental
research, focusing on the physics and chemistry that are
important in current and future key technologies within
nanolithography and its application within the
semiconductor industry. In 2020, we enhanced our
collaboration with ARCNL and a close interaction is now
established on all topics ARCNL is working on.

ASML ANNUAL REPORT 2020One of the innovation highlights from our partners in 2020
was the breakthrough imec achieved in printing narrow
pitch lines. Using ASML’s NXE:3400B system and
combining advanced imaging schemes, innovative resist
and optimized settings in its cleanroom, imec
demonstrated how our system is capable of printing lines
at 24 nm pitch in a single exposure step. This innovation
will enable imec and its partners that specialize in resist
and patterning to help develop and test resist materials
that will support the introduction of ASML’s next-generation
EUV chip-manufacturing systems, our High-NA platform.

We collaborate with, among others, a colleague
semiconductor equipment company Lam Research (US) to
further improve our EUV technology. In 2020, Lam
introduced a new dry photoresist technology for EUV
patterning that offers significant improvement in EUV
lithography resolution, productivity and yield. This new
technology will enable lower dose and increased
resolution. By using five to 10 times less raw materials,
Lam’s dry resist approach generates significant savings for
customers on running costs, while delivering a more
sustainable use of our EUV technology.

In our innovation ecosystem, long-term collaboration is
based on trust. We share both risk and reward and work
hard at developing long-term relationships with our
partners, listening to each other and pushing each other to
continuously innovate. This collaborative approach allows
us to accelerate innovation. It also provides us with access
to a large leading-edge knowledge base across a wide
range of technologies.

Pioneering smart algorithms in imaging

As lithography systems continue to push the edge of
chip-manufacturing technology, YieldStar’s metrology
performance must keep up – and one way to do
that, ASML Fellow Arie den Boef believes, is moving
metrology’s imaging from advanced optics to smart
algorithms.

Arie, who first led the development of YieldStar, heads
a small group from the Vrije Universiteit in Amsterdam
and ARCNL that conducts fundamental research in
computational imaging. The team seeks to create a
metrology system that tackles these challenges cost-
effectively, with higher productivity and accuracy.

Computational imaging may help achieve the quality of
optical imaging that metrology will soon need, the team
believes. But instead of using an advanced and costly
optical design, this technology would use only simple
optical elements such as a compact sensor and single
lens. The result: performance that would be impossible
with classical optical design methods.

Managing innovation
Every day, more than 10,000 of the brightest minds in R&D
take on the exciting challenge to innovate the most
advanced lithography systems in the world. We manage
this process by balancing our customers’ needs, product
capabilities and technology solutions. To stay ahead, we
invest heavily in R&D. In 2020, we spent €2.2 billion on
R&D, compared to €2.0 billion in 2019.

Our Research department’s focus is to generate and
explore ideas and demonstrate their feasibility in the long
term. The department also helps to find technological
solutions to challenges in our products and applications
that have moved into development.

Our researchers continuously scout for technological
innovations and solutions – within the semiconductor
industry and beyond – to assess if they can be applied in
ASML’s technology roadmap to support our customers to
drive the semiconductor device roadmap. We encourage
our experts to build a wide network in the broader
technology space.

The constant stream of new ideas is crucial to fill our
technology pipeline that flows through the so-called
‘innovation funnel’. Here we select new ideas that have the
potential to advance our products and customer
application. Ideas that successfully pass the ‘proof of
concept’ stage in our Research department are transferred
to the Development & Engineering (D&E) department. D&E
takes them on into our Product Generation Process (PGP)
for product development. We then build and test system
prototypes in the necessary environments. Prototypes that
pass these tests may eventually lead to new product
releases.

Technology Conference rewards imagination

In 2020, the ASML Technology Conference went
virtual for the first time in its history and attracted a
record number of attendants. This unique 21st edition
allowed employees across the globe to listen to keynote
speeches and gain insights about key technical projects
across all R&D competencies

Our Poster Award ceremony, which honors employees
with the most imaginative presentation demonstrating
their contribution to technological advancements,
continued this year. More than 300 teams submitted
posters. The results were as follows:

Best Innovation: ‘Frequency encoding technique and its
applications’. The team developed a solution for current
inconsistencies in particle detection and sizing for DUV
and EUV systems by using a projector as an illuminator
to facilitate inspection while reducing false alarms.

Best Customer Solution: ‘Integrated overlay control
solution to reduce rework by 100%’. The team designed
a solution to meet the 2.5 nm overlay in EUV machines.

ASML ANNUAL REPORT 2020Innovation funnel

Research department

D&E department

Ideation
Scout for ideas

Selection
Fill the research
pipeline

Research
Assess
feasibility

Development
Design and engineer

ASML
product
Integrate
and deliver

Our D&E engineers drive our machines forward by creating
new components or subsystems, integrating them into the
functional system, or developing new applications to help
move the industry forward.

In D&E, we work on a multitude of advanced optical and
mechatronic modules, along with application software,
data science and operating systems. D&E innovates with a
strong focus on time-to-market, often starting new system
development before the previous generation has even
reached the customer. Teams in D&E have extensive
contact with leading research institutes, keeping up to date
with the latest developments in their respective fields.

Innovation achievements
We continue to make solid progress in EUV. For example,
in 2020 we successfully introduced a new vacuum
chamber for the EUV light production, the so-called
modular vessel. The success of this breakthrough modular
vessel project was due to close collaboration with
customers, technology partners and suppliers, and a
dedicated effort to integrate competences.

This new modular vessel solves the issue of lengthy
system downtimes when parts were virtually inaccessible
leading to long down time of the EUV machine during
regular maintenance requirements. Next to the new vessel
architecture, the tin droplet generation and positioning
received a complete design overhaul to enable the supply
of tin to be refilled while the EUV source remains
operational. This eliminated the need for a costly operation
in terms of time, effort and man-hours. While systems
without inline refill like the S3-GWE vessel need to shut
down weekly for a six-hour tin refill, for systems with a
modular vessel, the inline refill is a major time-saver
improving availability and increasing value to the customer.

In 2020, we shipped our first HMI eScan 1000, an
innovative inspection tool to detect defects on wafers. The
eScan 1000 is 600% faster than previous e-beam wafer

inspection tools, thanks to its multibeam technology, high-
speed wafer stages, and advanced computational
algorithms. The tool can scan those areas on a wafer
where critical defects are most likely. It detects electrical
and patterning defects down to 10 nm.

An important achievement in our DUV technology was the
shipment of our first NXT:2050i system. The scanner is
equipped with the new XLR 960ix laser developed by
Cymer, an ASML company. This scanner is based on
improvement in so-called ‘speckle’ performance, and
moves both overlay and productivity forward significantly.
The NXT:2050i enables the next-generation DRAM nodes,
and is also crucial in meeting future requirements in Logic
chip production.

The first shipment of our NXT:1470 was another milestone
in DUV. It is the first lithography system that produces more
than 300 wafers per hour. The NXT:1470 is also the first
‘dry’ DUV system based on our NXT platform, which was
previously used for immersion products only.

Innovation pipeline
To nurture innovation by our future talent pool and to fuel
the innovation pipeline we collaborate and establish
partnerships with various universities and institutes. This
collaboration allows us to accelerate innovation and gives
us access to a large pool of research scientists, high-tech
students, and academics. It also presents opportunities for
scouting new talent. In these partnerships, ASML provides
financial support and shares knowledge.

In 2020, we continued our close involvement in the High
Tech Systems Center (HTSC), set up by Eindhoven
University of Technology (TU/e) to facilitate fundamental
research with a focus on understanding the needs of the
mechatronics and mechanical engineering industry. Since
its launch three and a half years ago, the HTSC has
supported the start of several new projects broadening the
scope of our cooperation with TU/e towards electrostatic

ASML ANNUAL REPORT 2020fundamentals and new developments in optical design. At
the moment the strong cooperation between ASML and
TU/e is evident through, among other things, the more than
30 PhD positions in which we, as an industrial party, are
currently involved.

ASML also works with the Eindhoven Artificial Intelligence
Systems Institute (EAISI), set up by the TU/e to make the
Brainport region of Eindhoven a center for the application
of AI in engineering. EAISI focuses on the use of data and
algorithms in machines, such as robots and autonomous
cars.

We are involved in the multidisciplinary project Eindhoven
Engine, which accelerates innovation in the Brainport
region. High-tech students, scientists and academics from
a wide variety of disciplines cooperate with business-
oriented partners to share knowledge. They also draw on
the benefits offered by multidisciplinary collaboration in
working toward identifying new and timely technology-
based solutions.

We have a long lasting cooperation with Delft University of
Technology (TU/Delft). For example, ASML is participating
in the Imsys-3D program, a public-private partnership to
create next-generation high-performance motion systems.
The goal of this project is to use innovative computer
algorithms to design optimal shape and dynamic
properties of modules in our lithography machines, which
can then be 3D-printed, offering never before realized
efficiency.

We also cooperate with LINX (Lensless Imaging of 3D
Nanostructures using Soft X-Rays), a collaboration
between Dutch universities and both national and
international industrial partners.

With the University of Twente we have, among others, a
strong cooperation with the XUV Optics Industrial Focus
Group at the MESA+ Institute for Nanotechnology. In 2020
we extended the cooperation contract with this group for
another 4 years. We work together on high-tech optical
applications of thin films. These industrial applications
require fundamental physical insights to further boost
performance of coating materials in a harsh EUV
environment.

Collaborating with R&D partners
We monitor the level of engagement with our innovation
ecosystem by measuring our investments in R&D partners.
This includes investments in suppliers that innovate and
help us develop system parts or modules. We also
measure the degree to which we invite external technology
experts to share competencies with us by the number of
R&D partner agencies we engage with.

Our collaboration with and investment in our wide network
of R&D partners enables us to share our expertise with the
ecosystem. Together we build a strong knowledge network
to create technological solutions that society can tap into.
In our shared projects, partners in the ecosystem take
responsibility for their own areas of expertise and invest in
these to advance their own businesses.

We also cooperate with partners in research and innovation
projects subsidized by the European Union. Horizon 2020,
the EU’s program for financing European research and
innovation projects, aims to secure Europe's global
competitiveness through innovation breakthroughs,
discoveries and world-firsts. It also seeks to drive
economic growth and create jobs. In 2019, we participated
in four EU subsidy projects: TAKE5, TAKEMI5, TAPES3 and
Pin3s. In 2020, we successfully completed TAKEMI5. Its
objective is to discover, develop and demonstrate
lithographic, metrology, process and integration
technologies enabling module integration for the 5 nm
node.

Partnering in EU research projects

Together with a group of European companies and
research institutes, we run collaborative subsidy projects
aimed at advancing IC technology for the next node via
the program called 'More Moore'. For example, we are
leading the three-year PIn3S research pilot project into 3
nm semiconductor technology. It is due to be completed
in 2022. The European Union is contributing up to €30
million of the total cost of €141.6 million for this project,
as part of its objective to strengthen the European
high-tech industry. Our partners in the project include
Prodrive, Reden, Sioux CCM, Solmates, Thermo Fisher
Scientific (FEI), TU Delft, the University of Twente, VDL
ETG, imec, NOVA, KLA and Applied Materials. The PIn3S
project will form the basis for innovations yet to come,
enabling solutions that address societal challenges in
communication, mobility, healthcare, security, energy,
and safety and security.

PIn3S is by far the largest of 11 research projects
launched under the umbrella of the program ‘Electronic
Components & Systems for European leadership’
(Ecsel). Ecsel is a so-called joint undertaking, a public-
private partnership established in 2014 by the European
Union. It receives €1.17 billion in subsidies from the
EU’s Horizon 2020 program. National and regional
governments and project participants supplement this
subsidy by about €5 billion. This money will be spent
on research and innovation in nanoelectronics, cyber
technology and system-integration technologies.

ASML ANNUAL REPORT 2020We have clear systems and processes in place to support
our approach to product safety. When we start designing
our systems, our safety engineers conduct an initial Safety
Risk Assessment (SRA). They take nine key risk areas into
account that we have identified, and alert risk experts if
they believe designs might pose a safety risk. Our product
designers are trained to identify any safety issues in the
early stages of the design process.

In each subsequent stage of the product lifecycle, we
evaluate product safety. We track any reported product-
related incidents – including supply chain incidents –
through our incident-reporting system. Every year, we
provide management with a product-safety review, where
we report any product-safety incidents of the past year. In
2020, as in previous years, we are proud to say there were
no recordable incidents caused by our equipment.

EUV modular vessel: high-pressure gas
systems safety test

Before an EUV S3-modular vessel system can be
shipped to South Korea, an inspector from the South
Korean gas and safety authorities must verify the high-
pressure gas system by proof-testing in the Veldhoven
cleanroom. Travel restrictions during COVID-19 meant
this step risked severely delaying clearance for shipment.
Instead, a cross-sector team from ASML was able to
demonstrate the high-pressure compliance of the EUV
S3-MV system, with South Korean authorities and
the customer viewing a live feed from the cleanroom.
Afterwards, serial numbers of the manufacturing record
book were checked and validated by showing the parts
in the system to verify that the manufacturing record
book matched the hardware in the system. With no
deviations found and good results on the pressure proof
test, the authorities approved the system, enabling
clearance for shipment of the second S3-MV system to
South Korea.

In 2020, ASML began coordinating a new EU collaboration
project, called IT2, aimed at exploring, developing and
demonstrating the technology options needed to realize 2
nm CMOS Logic IC technology. This will extend the scaled
semiconductor technology roadmap to the next node in
accordance with Moore’s Law, and further support leading-
edge manufacturing. The three-year program is valued at
more than €90 million. Project activities cover the creation
of lithography equipment, processes and modules, and
metrology tools capable of creating and dealing with new 2
nm node 3D structures, defect analysis, overlay
improvement and feature size reductions.

Our contribution for 2020 is nearly €28.5 million. In most of
these projects, we work with universities, research and
technology institutes and other high-tech companies to
help enable the industry to move towards next-generation
technology. The projects in the series are built around three
main pillars: lithography, metrology and process
development. It is mutually beneficial to support the
companies around us that provide us with what we need.
We push these projects and involve our ecosystem
because it is important for us to build together.

By collaborating in European projects, ASML and its
partners play a role in giving the region a degree of
sovereignty by driving and accelerating fundamental
research and groundbreaking innovation in Europe. This
collaboration also generates significant business value,
fuels job creation, and creates knowledge. This is borne
out of, for example, the increasing number of patent
requests per year, both for ASML and the other members
in the various consortia, which reflects the success of the
collaborations.

Product safety
We want to innovate, but always with safety top of mind.
It’s our duty to provide a safe work environment at all
times. In our products and processes, we think about how
to supply machines where all safety risks are mitigated to
guarantee a safe place to work and deliver accordingly. We
do this at every stage of a product lifecycle: research,
development, production, transport, installation,
maintenance, upgrades and decommissioning. And we
make sure we cover all our stakeholder groups, including
employees, customers, suppliers, contractors and visitors.

How we manage product safety
Safe products start with good design. As part of this
philosophy, we try to eliminate the human factor as much
as possible. We emphasize safety by design in hardware
followed by safety by procedure. Prevention is key. We
seek to ensure all the products and tools we develop
comply with the world’s most stringent product safety
regulations, and legislation applicable to the countries
where we do business. In some cases, where there are no
safety precautions available to address potential hazards,
we develop our own precautions for the tools and products
we develop at ASML.

We create safe products through our technical capabilities
and design to guard against the human factor becoming a
risk factor. One example of this is the way we interlock
laser-beam activities to limit our employees' exposure to
dangerous laser beams. This helps prevent workplace
activities from turning into potential accidents.

ASML ANNUAL REPORT 2020As we have grown, so has our product complexity and the
number of geographical locations we operate in, and
therefore it is becoming more complex to assess which
safety legislation and regulations apply to our products and
tools. At the same time, it is also more complex to
determine the rules and procedures we need to follow to
demonstrate this compliance. Some of our technology is
so innovative and new that it is not always immediately
clear which regulatory regime applies.

In 2020, we launched a legislation and compliance project
in our D&E department. Through this project, we are further
improving our ability to assess which legislation and
regulations apply in each country we operate in, how to
interpret them, and demonstrate how our products and
tools comply. As always, we provide safety documents for
our machines – including the results of the safety tests of
parts, and the machines’ functioning – taking regulatory
requirements into account. In some cases, government
regulations stipulate that safety tests must be conducted in
the presence of a licensed inspector. This presented
several challenges due to global travel restrictions and
quarantine measurements.

The legislation and compliance project has led to updates
of the Safety System Performance Specification (Safety
SPS) – the list of safety and compliance requirements our
D&E department maintains for our products and tools. The
Safety SPS is formally updated every three years and on
an ongoing basis for changes in relevant legislation.

Ensuring safety compliance

Our D&E safety competence leads are on hand to
provide thorough knowledge about the way of working
and design rules around specific safety hazards. The
products and tools we develop comply with the EU
Safety Directives and semiconductor industry guidelines
(SEMI S2) to ensure product safety is taken into account
at all times. These guidelines are incorporated in the
Safety System Performance Specification (Safety SPS).
We also take into account customer-specific safety
guidelines.

We are SEMI S2 compliant for every product type
shipped. In 2020, a report confirming SEMI S2
compliance was available for every product type we
shipped. We also have a CE declaration of conformity for
all ASML products and tools.

In 2020, we continued to run pilot projects aimed at
ensuring our suppliers are abreast of all relevant safety
specifications. The legislation and compliance project has
led to updates of the Safety SPS, the list of safety and
compliance requirements our D&E department maintains
for our products and tools. We share this information with
our suppliers prior to them manufacturing the parts,
modules and/or tools for us. We expect our suppliers to
also provide safety-related data and supporting
documentation for the parts or tools they make for us. We
screen suppliers to assess how they are meeting these
safety requirements.

We completed a project aimed at adopting best practices
related to the shipping of dangerous goods. This resulted
in, among other things, the appointment of a specialist

dedicated to the technical competence ‘dangerous goods’.
We focused on increasing our knowledge of the thousands
of potentially hazardous items we produce and ship
worldwide every year. By identifying at an early stage which
materials are hazardous, we can take measures for their
safe handling and transportation in time, and with more
efficiency.

RoHS and REACH
We are committed to complying with EU guidelines for
handling hazardous materials and chemicals, the so-called
RoHS directive and the REACH regulation, even though the
products we manufacture are currently excluded from the
RoHS directive. We aim to, whenever possible, reduce and
eliminate any use of hazardous substances and replace
non-compliant parts with RoHS-compliant alternatives.

REACH regulations are ever changing, which presents a
potential challenge. Each year, there are new additions to
the hazardous substances list. As ASML machines consist
of thousands of parts not manufactured at ASML locations,
we need to keep in very close communication with our
suppliers to identify the Substances of Very High Concern
(SVHC) content of our products. However, our huge
supplier portfolio and six-monthly updates of the SVHC list
means this process is challenging. Currently, there are
more than 250 hazardous chemicals that need to be
assessed.

In 2020, our D&E department launched a project to update
our REACH policy and further embed REACH compliance
in D&E’s operations at all our locations and in our
worldwide supply chain. Our REACH project, which will
continue in 2021, includes training stakeholders to
familiarize them with REACH requirements. The project
also aims to align our policy and procedures with new EU
legislation and the EU ‘SCIP’ database of hazardous
materials.

Supporting startups and scaleups
We are now 36 years old, but it’s our startup mentality –
one that is innovative, adaptable and purpose-driven – that
has helped us grow into the multinational company we are
today. We believe an inclusive and sustainable innovation
ecosystem can unleash dynamic and competitive
technologies that provide new solutions to society’s
challenges. To nurture innovation by new generations of
technological talents, we also recognize that our expertise
is valuable in supporting entrepreneurs and startups.

We make use of our experts’ in-depth competencies and
knowledge to support startups and scaleups. By fostering
entrepreneurship, we aim to help these young enterprises
excel and grow. What we share is based on what we are
good at, like building complex manufacturing systems.
This is where we can play a role and make a difference.

Sharing our expertise is a way to strengthen our regional
high-tech ecosystem. This region has a competitive edge
globally, and we need to make sure we maintain this
position. Building a strong regional foundation benefits not
just ASML and associated partners, but also other
companies and organizations. It also helps attract a broad
base of talent to the region.

ASML ANNUAL REPORT 2020Our employees benefit from the work with startups too.
Placing our people into startup teams during certain
phases of programs is a way to further develop
entrepreneurial thinking within our company.

In 2020, we provided around 1,550 hours of support to
high-tech startups and scaleups. The total value of our in-
kind support is around €0.6 million.

ASML as a venture-builder
Through the Eindhoven Startup Alliance, we have
supported startups and scaleups in their various stages
over the years in collaboration with other tech-minded
peers from our region. In 2020, we further developed and
mapped out a new focus area started in 2019: becoming a
startup venture-builder.

Every startup goes through similar phases as it strives to
become the next world-class company: 'Dream' (ambition),
'Stand' (idea), 'Step' (problem statement and solution) and
'Walk' (value proposition). Each individual phase of this life
cycle presents unique challenges. Through sharing our
expertise, together with HighTechXL, we aim to support
startups along their journey. We monitor and assess their
maturity through objective assessment and a set of
deliverables per KPI, such as business model, finance,
technology, sustainability and execution skills.

After successful completion of phase 'Walk', the startup
evolves to a scaleup, ready to generate its first revenue and
seeking ways to expand to a mature business model. We
offer support to scaleups. By providing them access into
our ecosystem and sharing our knowledge, together with
the Make Next Platform, we help them grow into a
sustainable company.

Insights we’ve gained in recent years showed that our past
successes were based on working with scaled-up startups
with a ‘deep tech’ component, and that these were difficult
to find. The solution was to build our own in partnership
with other technology providers. In 2019, we chose a
promising – existing but innovative – technology, and
selected a team of experts from the region to build a
startup company based on this licensed technology (Read
more in: Incooling combating waste heat).

In 2020, we further developed this initiative, reaching
agreements with several companies and organizations,
including TNO, imec, the European Space Agency and
Fraunhofer, to work together to build new deep-tech
companies. This shift in focus takes the existing high-tech
startup accelerator HighTechXL, in which we have been a
partner since its launch in 2016, and moves it into the next
development phase.

ASML was involved in two HighTechXL FasTrackathons in
2020, focused on deep-tech venture building. Teams made
up of around 16 different nationalities, and different ages,
backgrounds, skills and competencies, came together to
explore synergies and work towards bringing new
companies to fruition.

In March, the FasTrackathon had to move online. The
event was recreated as a virtual hackathon while keeping
the collaboration philosophy of the original – introductions,
team familiarizations, brainstorming, business plans and,
finally, the pitches that are the first step toward strangers
becoming effective startup teams.

Although we gained momentum with our new approach in
2020, progress was hampered. We had to organize
ourselves offline, with associated challenges around
communications and logistics. And while the spend rate of
startup companies is relatively low, some ran into financial
difficulty. ASML helped to arrange funding and subsidies
for some of these. Overall, many startups had to rearrange
their priorities.

Incooling combating waste heat

Established with ASML’s support at the start of 2019,
Incooling uses cooling technology developed by CERN,
the European Organization for Nuclear Research,
to address one of the datacenter industry's major
challenges: waste heat. It is predicted that by 2025 no
less than 20% of global energy consumption will be
consumed by datacenters. A large part of this energy is
needed for cooling. This produces 1.9 gigatons of CO2
(equivalent to the annual emissions of the aviation and
shipping industry combined). Incooling has developed
highly efficient cooling systems that in the future will offer
datacenters higher performance against substantially
lower energy consumption.

This young venture has accelerated in a very short
period of time and, with ASML’s collaboration, has
been recognized with the first CoSta* Award for the
most successful and impactful innovative collaboration
between a corporate and a startup. The award
acknowledges the wide-ranging support offered by
ASML in helping the young company establish itself and
tap into the fast-moving innovation ecosystem.

*The CoSta program of Dutch employers alliance VNO-
NCW and MKB Nederland was set up to stimulate
cooperation between corporates and startups.

Eindhoven Startup Alliance
Over the years, we’ve provided in-kind support to new
companies at different stages of development. For
startups that have moved beyond the stage of an idea, we
offer support through two initiatives: the Eindhoven Startup
Alliance, together with HighTechXL, and the Make Next
Platform.

We set up the Eindhoven Startup Alliance in 2016 with six
tech-minded peers from the region to boost innovation and
entrepreneurship in the Eindhoven Brainport area. The
alliance facilitates collaboration between multinational
corporations, SMEs, research institutes and government. It
supports promising new companies with the aim of
accelerating their development and strengthening the
ecosystem for high-tech manufacturing in the region.

Since its inception, the Eindhoven Startup Alliance has built
a portfolio of about 70 startups. Of these, more than 60%
are still in business, while about 16% have achieved the
steep growth envisioned by the alliance and as such have
been awarded the alliance’s ‘Star’ status. A supported
high-tech start-up is assumed to have reached 'Star Level'
once it's business value has multiplied by more than 10
times.

In 2019, the alliance narrowed its focus to those startups
that build business cases on the most complex types of

ASML ANNUAL REPORT 2020high-tech technology, a category the alliance dubbed
‘deep-tech’. Supporting startups that work with these
sophisticated technologies creates more value for alliance
partners and the Eindhoven region. In 2020, we moved
forward with this new focus area.

The Eindhoven Startup Alliance had a total of eight
companies using a licensed technology in the pipeline at
year-end 2020. Our goal over the next five years is to
establish about 45 startup companies through the alliance
based on this technology licensing model. Our own target
is to help at least 20% of startups reach the ‘Star’ level.

We encourage ASML staff to join alliance projects and help
startups by sharing their expertise, which also benefits our
innovation and business processes. Not only do our
experts gain knowledge about new technologies, they also
get the opportunity to experience the different stages of a
young company’s evolution – from developing a product
proposition to going to market and needing to find
customers. We believe this makes our top experts better
leaders and all-rounders.

Make Next Platform
We set up the Make Next Platform to help young
technology companies that have moved beyond the
startup phase and are ready to expand. This platform
provides the future generation of tech companies with a
unique opportunity to gain access to the networks,
knowledge and expertise of the leading Dutch companies
in the technology industry.

These companies, so-called scaleups, face challenges
such as finding the funding needed to grow, knowing how
to target new customer groups, and recruiting new
employees with the right skills. Through exchange of best
practices, business experience and coaching, the Make
Next Platform partners aim to support them in their
development to become global players by giving them
access to the inside networks.

Together with ASML, the Make Next Platform partners
include, for example, the engineering company Huisman,
airport logistics specialist Vanderlande, and aerospace,
defense, public transport and security-systems specialist
Thales NL.

The Dutch non-profit Stichting Technology Rating provides
due diligence services that help the Make Next Platform
select companies it wants to support.

In 2020, support for scaleups took a different form. There
was a more focused and urgent need for funding to see
companies through the lockdown period. In some cases,
ASML and the CEOs of founding companies arranged
letters of support for the companies we support.

One of the scaleups we supported in 2020 was Medtech
company IME Medical Electrospinning, which was
admitted to the Make Next platform in March. The
company is a global leader in electrospun medical devices
and regenerative medicine. IME has developed the
revolutionary MediSpin® XL platform for large-scale
industrial production of reproducible and scalable fiber-
based scaffolds for medical devices. The platform ensures
control of the crucial parameters of the electrospinning
process, leading to identical and consistent end-products.
It also allows for non-stop production, while safeguarding

the structure of the fibers and thus the quality of the
medical mesh.

We also supported the Enschede startup Sound Energy,
which has developed a sustainable machine that can cool
industrial processes with sound waves using residual heat.
In this way, the company creates an air conditioner that
uses hardly any electricity. And for large factories and
ships, its Thermo Acoustic Energy Converter can save up
to 88% energy.

ASML Makers Award
We support new companies at different stages of
development. For those seeking to transform a high-tech
idea into a business case, we offer help in kind. ASML
experts make themselves available for an agreed number
of hours to share knowledge and experience with these
startups. We provide this support to winners of our ASML
Makers Award. These are usually university students or
young scholars who successfully pitched an as-yet
embryonic high-tech innovation or prototypes.

In 2020, we granted the ASML Makers Award to a team of
students from TU/e for their business case on a ‘Bicycle
lighting solution’, aimed at encouraging cyclists to use
bicycle lights by designing an easy-to-use product. The
small, pocketable bicycle light is easily attachable to a
keychain, so reducing the chance of loss and theft.

ASML ANNUAL REPORT 2020Technology and innovation ecosystem KPIs
The table below shows the key performance indicators (KPIs) and the related 2025 targets. In 2019, we adopted a new
sustainability strategy – as a result no comparative results for 2018 are available for new performance indicators. See Non-
financial statements - Non-financial indicators for our performance indicators (PIs) and related results.

KPI

R&D expenses (€, in billions)
Investment in R&D partners (€, in billions)

Number of R&D partner agencies

Startups reached Star level from total startups supported (in %)

Number of scale up companies supported (in #)

2018

1.6
—

—

2019

2.0
0.5

144

17%

2020

Target 2025

2.2
0.6

130

16%

n/a
n/a

n/a

> 20%

Contributing to the Sustainable Development Goals
Our ambitions, commitments and programs as described in this chapter contribute to the following SDGs. For more
information on the performance, see section Non-financial statements - Non-financial indicators.

SDG target

SDG target 9.1 - Develop quality, reliable, sustainable and resilient infrastructure,
including regional and transborder infrastructure, to support economic
development and human well-being, with a focus on affordable and equitable
access for all.

How we measure our performance

• Supporting startups to Star level
• Supporting scaleup projects
• Collaboration in EU projects

SDG target 9.4 - By 2030, upgrade infrastructure and retrofit industries to make
them sustainable, with increased resource-use efficiency and greater adoption of
clean and environmentally sound technologies and industrial processes, with all
countries taking action in accordance with their respective capabilities.

• Collaboration with research partners
• Energy efficiency of our products measured per

wafer pass

SDG target 9.5 - Enhance scientific research, upgrade technological capabilities
of industrial sectors in all countries, in particular developing countries. For
developing countries, this includes, by 2030, encouraging innovation and
increasing the number of research and development workers per one million
people, as well as public and private research and development spending.

Investments in R&D

•
• Collaboration with R&D partner agencies

ASML ANNUAL REPORT 2020Customer intimacy
As one of the world’s leading manufacturers of chipmaking
equipment, we enable our customers to create the patterns
that define the electronic circuits on a chip. Our customers
are the world’s leading microchip manufacturers, and our
success is inextricably linked with theirs.

As ASML matures and grows, our innovations lead to more
sophisticated solutions and interactions with our
customers. As customer requirements become more
complex, it takes longer to align, so we need to start earlier.
Transparency is key in this process, and our customer
intimacy strategy supports this.

We collaborate with our customers to understand how our
technology best fits their needs and challenges. For this
reason, we engage with our customers at all levels:
building partnerships, sharing knowledge and risks, and
aligning our investments in innovation. We develop our
solutions based on their input, engage in helping them
achieve their technology and cost roadmaps, and work
together, often literally in the same team, to make sure our
solutions match.

In 2020, the global COVID-19 pandemic shaped our
approach to how we continue to support our customers. It
drove us to devise creative support solutions and
collaborate with our customers in a number of different
ways, to make sure we could serve them around the globe
without significant interruption.

From the start, our account teams stayed in constant
communication with the regions affected by the pandemic
as it unfolded. In alignment with our corporate crisis team,
we ramped up our customer communications, providing
more frequent status updates, usually through weekly or
bi-weekly calls.

It’s crucial to be in a true partnership with our customers,
to share in the risks and rewards of what we do. Trust and
a shared vision are at the heart of this.

Staying close to our customer
To support and sustain our partnerships with customers,
we have a structure of customer interactions across
various channels in the organization, including, for
example, customer alignment meetings. Here, members of
our Board of Management, senior managers and customer
representatives come together to make sure our product
development plans are in line with their business goals and
needs.

We run regular customer alignment meetings with our key
customers. These meetings include our Executive Review
Meetings, at which members of our senior management
team and Board of Management discuss business and
strategies with customers; Technology Review Meetings, at
which our senior technology experts and CTO discuss
technology plans and requirements with customers, and
Operational Review Meetings, where we review topics
related to our customers’ operational activities.

Despite travel restrictions, mandatory quarantine and
manpower constraints, and thanks to our collaborative
efforts across the company and our business partners, we
were able to prevent any major impact on our customer
business requirements. Customers around the world have
recognized our additional support efforts and interventions
during the pandemic. We were presented with several
‘customer awards’ in recognition of our rapid response to
customers' needs and good overall customer service.

We have a dedicated Sales and Customer Management
department, which is responsible for building and
maintaining our customer relationships and ensuring all
relevant ASML departments contribute to meeting their
needs. We market and sell our products directly to our
customers, without agencies or other intermediaries. Our
account managers, field and application engineers, and
service and technical support specialists are located
throughout Asia, the US and Europe.

Augmented reality enables remote support

Continuous customer support

As we responded to the unique situations present in
2020, our new ability to provide remote support became
a game-changer. A cross-functional team used gaming-
inspired augmented reality (AR) to turn a potential
problem – delays in providing customer support – into
a new opportunity, ushering in a new era of remote
support.

We developed an AR solution using Microsoft 3D
HoloLens headsets that allows subject-matter experts to
enter customer cleanrooms virtually to both troubleshoot
and complete service actions. Using AR, we are now
able to have our top experts support our machines from
anywhere in the world.

Achieving customer intimacy
To us, customer intimacy is about the entire customer
relationship across all channels, from the early stages of
innovation onwards. We aim to foster loyalty, advocacy and
continuous engagement with the goal of achieving
complete customer satisfaction.

Our customer support engineers have gone above
and beyond to continue supporting our customers
throughout the COVID-19 pandemic, including the use
of ASML’s remote service capability: Basic Remote
Equipment Support (BRES). BRES allows engineers
to check error logs, diagnostic reports, and even ‘see’
a machine screen remotely in certain locations. Our
customer support team relied heavily on this capability
to solve machine issues quickly – without any face-to-
face interaction. It also allowed specialists from other
locations to provide support.

Another focus area is training – boosting the capabilities of
the local customer service teams as well as enhancing
local technical expertise. The travel restrictions, among
others, highlighted just how essential the need is for well-
trained engineers in the regions where we operate.

We opened two EUV technology training centers in 2020,
one in Hwasung in South Korea and one in Tainan in
Taiwan. Bringing service engineers up to speed on our
technology is critical to the industrialization of EUV. The
EUV training center enables both ASML and our customers
to train EUV engineers locally in a safe and cost-effective
way.

ASML ANNUAL REPORT 2020The new training center in Tainan features live EUV
machine modules and comprehensive training courses to
train EUV engineers for EUV customers, including EUV
machine operating practice in the cleanroom.

Measuring our approach
Our Voice of the Customer program helps ensure our
employees hear firsthand about our customers’ needs and
challenges. This is especially important for employees
without direct access to customers. To reach as many of
our people as possible, the program makes use of different
channels of communication: live presentations and Q&As
with senior customer representatives, recorded customer
interviews, online articles, and personal engagement with
customer representatives based near our offices in
Veldhoven. In 2020, travel restrictions and other mitigation
measures related to COVID-19 limited our in-person
interactions.

Our account teams adapted quickly, introducing alternative
solutions such as more local Voice of the Customer
initiatives and remote customer interviews. Local account
and support teams visited our customers at their locations,
interviewed them on video, and then shared feedback with
teams at ASML. Except for live presentations with a bigger
audience, we could adhere to our regular schedule of
interactions throughout the year.

Another valuable customer feedback tool is our biennial
Customer Feedback Survey, which asks our customers to
rate our performance. We also use this opportunity to
collect open feedback. The direct ratings and frank
comments provide valuable insight into customers’
successes and challenges. It presents them with questions
on the most important areas of improvement for our
account teams and business sectors.

Customer intimacy KPIs

KPI

Overall Loyalty Score (Customer Feedback Survey)
VLSI Survey results
Large suppliers of chipmaking equipment - score (scale 0 to 10)

Suppliers of Fab equipment - score (scale 0 to 10)
Technical leadership for lithography equipment - score (scale 0 to 10)

We ran the survey in 2020, and drawing on the results,
identified improvement areas. Common themes include
driving timely solutions to structural problems, improving
quality and cost of ownership. We shared these findings
with business sectors and other relevant internal
stakeholders.

We also set ourselves a target of achieving a top-three
ranking among large suppliers of semiconductor
equipment. The VLSI research annual Customer
Satisfaction Survey benchmarks the performance of
suppliers across the semiconductor industry. The 2020
VLSI research Customer Satisfaction Survey saw us
achieve our highest-ever score, with an average rating of
9.3 out of 10, up from 9.2 in 2019. We've maintained our
position in the top three overall ‘Large Suppliers of
Chipmaking Equipment’ and also top three individual
categories: ‘Best Suppliers of Fab Equipment’, ‘Wafer to
Foundation Chipmakers’, and ‘Wafer Fabrication
Equipment to Specialty Chipmakers’.

In line with our business strategy, we continued in 2020 to
work towards securing our full product portfolio that will
sustain our company into the future. This includes bringing
EUV to high-volume manufacturing at customer sites, and
securing our products in the mature markets and installed
base and service offering.

Our product portfolio is aligned to industry trends and our
customers’ detailed product roadmaps, which require
lithography-enabled solutions. Our strategy is clearly
resonating with our customers. They are showing their trust
in us by investing in our newest technology, supporting the
industry driver of shrink beyond the current decade.

2018

73.3%

9.1

9.1
9.6

2019

n/a

9.2

9.2
9.6

2020

72.6%

9.3

9.3
9.7

ASML ANNUAL REPORT 2020Operational excellence
ASML has achieved strong growth over the past few years,
thanks to groundbreaking innovations and technology
leadership. We’ve introduced several generations of
cutting-edge chipmaking systems and built a strong
market position in the semiconductor equipment
manufacturing industry. As we mature as a company and
build on this position, we are putting effort into ways to
continuously improve the customer experience and help
customers reduce the cost of ownership. Customers look
at both the cost of the systems and running costs. As
such, improving quality requires an end-to-end approach.
We need to look at the whole chain to identify the real
issues and find solutions. We seek to combine our
innovation power with operational excellence.

Our New Enterprise program
The strong growth in our business operations and the
evolution of the company drove us to review our work
practices and determine where we can increase efficiency
in our operational processes to improve the customer
experience and unlock business value. We put ample effort
in reshaping our processes and IT landscape. The Our New
Enterprise (ONE) program is centered on improving our
business processes and IT enterprise management
system. It builds on the steps taken in recent years to
improve our IT systems, which were built in the 1990s and
not optimized for tailored customer solutions. This is a
multi-year program, with the rollout being done in phases.

The ONE program addresses the complex processes that
have resulted from a fragmented application landscape
with numerous customized applications. The aim is to
ensure flexibility while introducing standardization. ONE will
enable ASML to function in a more unified and efficient
way by simplifying processes to ensure a future-proof and
more sustainable system. The program adopts a cross-
sector, company-wide, and end-to-end approach that will
enable us to deliver higher business value for our
stakeholders, which we define as:

• Shareholders: Increased competitiveness of our

products and services

• Customers: Increased performance and reliable product
life-cycle management of our products and services
• Suppliers: Stable and clear requirements on parts, tools,

and timing through decoupled planning
• Employees: Empowered through simplified,
standardized, and cross-sector operations

Quality culture
ASML is committed to providing a high level of customer
satisfaction by delivering top-quality, sustainable products
and services that consistently meet, or exceed, our
customers’ expectations. Quality and operational
excellence are essential elements of our technology
leadership. This leadership is reinforced by a company-
wide quality culture that creates an environment to excel.
Together with our suppliers and partners, we ensure high-
level performance for our products and services. As a
learning organization, we continuously improve our
offerings and processes.

The aim of our quality culture is to shorten Time to Mature
Yield and ensure end-to-end quality of our products and
services in several ways:

• First Time Right: Apply risk management processes on
products and execution to minimize the impact for our
customers.

• Zero defect: Embed controls to guarantee adherence to

our policies, processes and procedures.
• Zero repeat: Learn from failures and prevent

reoccurrence, driving structural improvement in our
products, services and processes.

We have established a Quality Program Review Board,
chaired by our Chief Operating Officer (COO), tasked with
steering and monitoring on quality. We are also committed
to internationally recognized quality management systems
and standards. Our quality-management system complies
with the ISO 9001:2015 standard, and in November 2020
we again received third-party re-certification for the next
three years. This demonstrates our robust quality
governance, effective quality management system, and
quality compliance across the company.

Training from ZEISS

The ZEISS projection lenses in our DUV systems are
usually serviced on-site by ZEISS engineers traveling
from South Korea, Taiwan, the US and Germany. To
make sure we could continue to service our customers
efficiently, especially in the face of travel restrictions, our
customer service engineers looked for ways to reduce
the need for on-site support from ZEISS.

And they found a way: by freeing up machine time
and having a resident ZEISS engineer train local CS
engineers from China, Japan and Singapore in the
TWINSCAN factory in Veldhoven, local ASML engineers
are now able to cover those locations. With local ZEISS
engineers continuing to cover South Korea, Taiwan, the
US and Europe, support has increased on critical-service
actions from less than 70% to more than 90% coverage.

ASML ANNUAL REPORT 2020Our people

Empowering individuals for the collective good to ensure
ouremployees are proud to work for us and engaged with
our ambitions as a company.

80%
Employee engagement score

3.8%
Attrition rate

€4m
Community engagement

(listings)

5
Employer brand ranking
4 Netherlands
22 Taiwan
24 South Korea
99 US
168 China

Every day, our employees come together to unlock the
potential of each nanometer to break new ground. Without
our diverse and highly educated workforce, we wouldn’t be
able to push the limits of technology. Therefore, we want to
offer our people the best possible employee experience at
all our sites, enabling them to develop their talent, feel
respected and work to the best of their abilities. Providing
the best possible employee experience enables us to
attract and retain the best talent.

Strengthening our company culture
ASML’s workforce has grown steeply in recent years. This
strong growth in total workforce, the large number of new
employees, and the evolution of the company has driven
us to review what we stand for as a company and
determine how we can help our people embrace our values
and familiarize themselves with our strategy and purpose.
We need to provide a unified direction and anchor ASML’s
identity deep in the organization.

In 2020, we were faced with an unprecedented global
crisis, the effects of which reached into every corner of our
lives and across every aspect of our business. From one
day to the next, we had to change how we were used to
doing things. From a people perspective, we had to
transform how we organized ourselves, our way of
working, our day-to-day lives at ASML, and how we
attracted new talent to the company.

Operationally, we were able to continue with our business
activities and priorities, but the way we worked, learned
and interacted with each other and our stakeholders
changed significantly. This was challenging, but there have
been positive outcomes, such as new ways of working, the
ability to collaborate remotely and, in some cases, faster
progress with some of our plans.

Our primary goal is to make sure, as best as we can, that
our colleagues and their families around the world stay
safe. Our second goal is to make sure we continue to serve
our customers. As an employer, we provide a safe work
environment, but we rely on our employees to take
personal responsibility to protect themselves and those
around them, both at work and in their personal lives. And
at all times, we follow government guidelines.

Gradually, we will work on defining how to resume regular
business activities. We were and still are in different phases
of these priorities in the countries and regions where we
operate.

Given the significant number of new employees who have
joined the company in recent years, we need to be even
more explicit about what we stand for, articulating the
values that should guide the way we work together. Based
on employee feedback, we’ve developed a representative
set of values: Challenge, Collaborate and Care. These
values ensure we are all working from a commonly
understood base that can be applied across our
organization, and guide us in our dealings with colleagues,
customers, suppliers, shareholders and the communities
we serve. (Read more in: Who we are and what we do -
Our core values).

In 2020, with our refreshed company purpose and values
statement in place, we focused on further deploying our
culture and values framework, and implementing our
values in our day-to-day work.

One of the ways we did this was to set up a Culture
Ambassadors workgroup. This network of 120 cultural
ambassadors from all levels of the organization has been
tasked with helping leaders and employees anchor our
corporate values and behaviors in daily routines. Their role
is to understand the values, live them by example, and
connect with others in the organization to promote them.
We see them as multiplicators within ASML, to help embed
our culture and way of thinking. This process of embedding
our values is an ongoing journey, but we will make good
progress if we can begin to apply them every day.

ASML ANNUAL REPORT 2020Employee engagement
Employee engagement is critical to the performance of our
organization and our long-term success as a company.
Boosting engagement depends on a wide variety of factors
and activities, such as talent attraction and retention,
onboarding experience, leadership, learning and
development and labor practices.

Our we@ASML employee engagement survey is a crucial
tool for collecting and measuring employee feedback. The
insights our survey provides enable us to improve the
employee experience and work on our policies and
processes. Our ambition is to have a highly engaged
workforce. We set ourselves the target of achieving an
employee engagement score that is at least on a par with
our peers.

We are proud of the progress we made on this in the
challenging context of 2020. Our overall employee
engagement level is high, up from 77%
in 2019 to 80% in 2020 – 7% above our external global
benchmark of 73%. We have shown improvement on
topics such as quality, well-being, inclusiveness, and
customer focus. Also impacting this upward trend is our
positive response to COVID-19, which external research
shows influences company engagement scores.

We still see clear differences in engagement levels, across
regions and departments. And while the three priority areas
from we@ASML 2019 – ‘Enabling Processes’, ‘Cross-team
Collaboration’ and ‘Clarity of Expectations’ – have all
improved significantly this year, they are still top of the
agenda, as we still score well below the external
benchmark. For example, following on from issues raised
in the 2019 we@ASML feedback, the Brion executive team

launched a new virtual event – known as Product Day in
the US and Product Week in China – to better enable
cross-team collaboration. Through these events,
employees were able to quickly learn about products,
share in customer successes, and foster collaboration to
inspire new ideas.

How we grew in 2020
We hired 1,932 new payroll employees in 2020, growing
our workforce to 26,481 FTE at year-end, excluding the
almost 1,600 FTE joining from the Berliner Glas acquisition.
This is a sharp increase compared to the 14,681 FTEs we
employed in 2015.

Our attrition rate – the percentage of employees leaving our
company – was significantly below that of our industry,
meaning we again met our target. After a few years of
modest increase – though always remaining well below
that of our industry – our attrition rate significantly
decreased in 2020, standing at 3.8% versus 4.3% in 2019.

This shows that our efforts to create a unique employee
experience, our employee engagement programs, and our
onboarding of new employees are paying off. Of course, in
2020 this was also shaped by the COVID-19 pandemic,
which may have resulted in people being less inclined to
look for other jobs.

While attrition can open up a knowledge gap in the
company, we also view it as an opportunity to bring in new
talent and enhance existing talent. We strive for a healthy
attrition rate, currently aiming for between 3.0% and 8.0%.
For high performers, our target is to have a rate 50% lower
than the overall attrition rate target. The attrition rate of our
high performers was 1.7% in 2020, outperforming our
target.

Our workforce trend

30,000

25,000

)

E
T
F
(

s
e
e
y
o
p
m
E

20,000

15,000

10,000

5,000

3,203

20,044

2,997

16,219

2,513

2,656

12,168

13,991

1,681

1,399

23,219

25,082

2015

2016

2017

2018

2019

2020

Payroll employees (FTE)

Temporary employees (FTE)

Attrition rate %

The 2020 FTEs in the chart above do not include the FTEs acquired through the acquisition of Berliner Glas Group.

t
t
r
i
t
i
o
n

r
a
t
e
%

ASML ANNUAL REPORT 2020

Building a strong talent pool
In an innovative, high-tech, fast-changing industry, it’s vital
to strengthen and continuously invest in our talent pool to
anticipate evolving business requirements and
developments in the labor market. We empower our
employees to develop their talent, pursue their career
ambitions and to thrive. We strongly believe that personal
development works best when our employees can invest in
themselves. At ASML, we give employees the time,
opportunity and support, while they put in the effort,
passion and drive needed to enhance their development.
We offer tailor-made training and development programs to
help grow the highly skilled professionals we employ at
ASML.

Training
To maintain our technological leadership and pace of
innovation, we need to ensure the right knowledge is
available to our people at the right time. To do this, we
have our own technical development centers in-house for
our D&E, customer support, and manufacturing employees
to tailor training to the specific technical needs of these
departments.

Most of our trainings take place on the job, given the
nature of our innovative business and co-value creation.
Overall, we are promoting the 70-20-10 approach for
learning interventions, meaning that 70% is on the job
learning, 20% is through coaching, and 10% is learning
through training courses. The average number of training
hours in this last category, including development
programs, was 28 hours per employee in 2020.

In addition, we started working on redesigning specific
development programs to establish an effective mix
between remote and in-person training, addressing how
we can bring people from different locations together, and
how to make training more digestible for online purposes.

Career development opportunities
Developing our people is crucial to the sustained success
of our business. Employee development is never a straight
line as employees are at different stages in their employee
journey and have different needs. We offer various career
paths and have various tools in place to support our
employees’ career navigation.

We are continuously looking into ways to improve how we
can help employees identify opportunities for professional
development within ASML.

In 2020, we started the discussion and thinking process
around how our performance management approach and
philosophy can better align with our refreshed culture and
values. This forms part of a broader look at the future of
performance management in the company. We know that if
we want to deploy our culture and values in a certain way,
we need to weave it into certain processes, including
performance management, which we will start doing in
2021. Together with our executive committee, we started
defining how to do this more fundamentally in coming
years, looking ahead to a proposed go-live date for a new
performance management approach in 2022.

EUV training centers open in Asia

With the world’s largest installed base of EUV systems,
Asia leads the way in EUV adoption. Getting service
engineers up to speed on this technology is critical not
only to ensure they can service this fast-moving location,
but also to the overall industrialization of EUV – which
is why ASML has opened new EUV training centers in
Tainan (Taiwan) and Hwasung (South Korea) in 2020.

It can take more than a year for an EUV engineer to
develop the skills needed to work independently. With
these long development times and ongoing travel
uncertainties caused by the COVID-19 pandemic, these
EUV training centers enable ASML and our customers to
train engineers locally in a safe and cost-effective way,
bringing EUV knowledge to where it is needed most.

In 2020, we increased virtual training. We had been looking
into adopting this over time but accelerated our efforts due
to COVID-19. We dedicated a lot of time and effort to
adapting this training during the year. There were some
challenges as it was not possible to make all our training
virtual.

For example, we postponed some of the development
activities that have a strong networking component to
them, ones where we needed to bring different sectors and
countries together. Due to travel restrictions and different
time zones, these activities were not viable.

ASML ANNUAL REPORT 2020Strengthening our leadership
To remain a market leader, we must provide unified direction. This means we need authentic leadership to give our
people a clear picture of where ASML is heading. As our company grows, so does the need for clarity around roles and
expectations. Leaders need to play a part here in providing role clarity for employees, as well as being clear about their
own roles and responsibilities. We need to formulate and capture this more clearly so our people can better understand
what is expected of them. In response, we started to develop a Leadership Framework in 2020, which will set out clear
guidelines of what we expect from our leaders.

Leadership framework

Role
Model

• Live the values
• Self-develop & renew
• Show courage
• Personal well-being

Business
Leader

• Own your content
• Act end-to-end
• Build stakeholder relations
• Display business acumen

e l

o d

Role M

Challenge

Collaborate

Care

r
e
d
a

P e o ple Le

Coach

• Connect
• Enable
• Develop
• Trust

People
Leader

• Create the setting
• Adapt the situation
• Share vision & set direction
• Make it happen

The framework outlines and clarifies a leader’s role in
business leadership, role-modeling the values within the
company, and what it means to be a people manager and
coach for employees. This Leadership Framework was
officially launched in October 2020 at ASML’s Annual
Global Leadership Conference, attended by around 3,000
leaders and people managers within ASML.

At the same time, we are deploying behavioral
competencies to inspire and enable personal development.
We have leadership programs where we fast-track the
careers of our most promising managers through our
Potential Acceleration Program. These programs ensure
our managers are aware of what’s expected of them, and
help them develop the skills and competencies they need
to become better leaders.

Onboarding as a joint effort
As our global workforce grows exponentially, onboarding
has become one of our key priorities.

A positive onboarding experience builds a sense of
connection, helps employees fit in quickly, and boosts
retention. We believe onboarding is a joint effort, driven by
everyone. It is now two and a half years since our new
onboarding program started, and the benefits of an aligned
and improved onboarding experience are clear. We have
decreased new hire attrition by 20% and pulse surveys
show a 6% increase in how new hires positively rate their
onboarding experience. More importantly, new colleagues
have indicated a positive increase of 11% in how
supported they felt by managers during their onboarding
period.

Onboarding at ASML looked very different in 2020: the
hiring managers and the new employees needed to adjust

to a completely new way of doing things, yet pulled
together to replace first-person interactions. To give new
colleagues the best possible start, hiring managers and HR
teams across the globe created a virtual onboarding
experience. Previously, in-person elements like our
Onboarding Day connected new colleagues with each
other to learn more about all aspects of ASML. For now,
they take place completely online, with teams finding
creative virtual ways to make new colleagues feel welcome
and part of their teams. Campus walkabouts for new hires
at Veldhoven were adapted to a virtual setting, including
gamification elements.

We began developing virtual games and business
simulation tools to make onboarding more fun and
efficient. Sectors, business lines and functions also
continue to build on our global onboarding initiatives,
making sure we’re providing one consistent experience
across the company, further tailored to the various
departments.

In 2020, we finalized all the building blocks of the program,
bringing it to the framework stage.

Strong employer branding
With the demand for top-tier talent increasing year-on-year,
employer branding is a vital strategy to ensure ASML gets
its share of this talent. Our strong growth means we need
to hire large numbers of employees. Highly skilled people
with a technical background are scarce in the labor market
and competition is growing. We see that top-tier talent
selects their employer of choice, not the other way around.
This is a general development of employees choosing their
future employer, and it’s important for employees that a
potential employer has a proper value proposition.

ASML ANNUAL REPORT 2020

Developed in 2019, our employee value proposition defines
who we are, what we stand for, and how we create a
unique employee experience. It forms the basis of our
recruitment strategy and Labor Market Communication
program. In 2020, our Labor Market Communication team
took feedback from this new employee value proposition
and translated it into tailored strategies in the countries
where we operate.

We view recruitment as an ongoing process, and
continuously seek to improve and professionalize how we
go about it. We use this information to fine-tune our target
audiences and recruitment efforts.

More than ever, the internet is the optimal platform to
communicate. Our labor market communications team is
continuously working to optimize how we reach, inform
and engage our target audiences online. To leverage
recruitment efforts, we facilitate job postings and manage
ASML’s presence on online social network channels. We
also promote the ASML employer brand through online
advertising.

We continue to improve our employer brand and values
on our corporate website, creating a better understanding
of what we do and what we stand for as an employer. We
measure how ASML is perceived by external audiences –
and potential employees in particular – by monitoring our
position in an independent external employer-branding
ranking. We have defined targets for the different local
labor markets on our positioning by 2025. See Our people
KPIs

Our efforts have been positively received. For example, in
June 2020, ASML was named the winner of 2020 Top
Graduate Employers of China by recruiters 51job.com and
yingjiesheng.com. The award recognized ASML's long-
term campus recruitment plan as being a vital part of our
HR strategy. ASML has recruited college graduates for
many years, supported dynamic campus talk and science
knowledge sharing events, and earned broad recognition
and a positive reputation among students.

In 2020, restrictions on travel and large group gatherings
limited our ability to meet future talent in person. Various
planned activities were either postponed or adapted to a
virtual space.

Recruitment campaign goes virtual in Taiwan

An example of our online recruitment efforts is in Taiwan
where, to support customer production, our team
showed some real agility and adaptability. ASML Taiwan
took part in a virtual press conference hosted by one
of the most influential career websites in Taiwan. ASML
Taiwan’s Senior HR Manager was invited to the press
conference and interacted with the press through a
smartphone.

ASML also hosted online career talks. With all
physical events being cancelled, our Taiwan Labor
Communications team found new ways to proactively
approach prospective talents by shifting all career-
oriented communications events online. Following
successful collaboration across different sectors, ASML
Career Talk LIVE was born.

Promoting diversity and inclusion
We believe a diverse and inclusive workforce provides the
necessary mix of voices and points of view required to
develop the best solutions and ideas for how we innovate
to drive our business forward. We know a great idea can
come from anyone, so we foster a culture where different
identities, backgrounds, talents and passions are valued
and celebrated. With employees from 120 different
nationalities, we're proud of our diversity, and believe it
makes us stronger.

Our Code of Conduct is our guiding principle to ensure all
employees are treated fairly and equally without
discrimination. We are committed to equal opportunities,
regardless of gender, age, religion, nationality, sexual
orientation, and so on. By putting the right person into the
right position, we enable our employees to contribute to
the company where they are most needed, and which
allows them to develop with the company. Our Ethics
Office and Liaisons, as well as a third-party Speak Up
Service, ensures we uphold and correct any potential
issues to maintain and protect an inclusive environment.
Additionally, our corporate values further embed respect
for our people and their differences within daily work
experiences and interpersonal interactions.

In 2020, we made progress in gender diversity among all
employees and senior management. Female employees
now make up 17% of our workforce worldwide, having
gradually moved up from 10% in 2010. We deploy many
initiatives to promote STEM (science, technology,
engineering and math) education among the future female
talent pool. However, the effect of these initiatives takes
many years to become visible in our performance. In
addition, looking at the dynamics of our workforce, nearly
90% of job positions are STEM related, while peers in the
high-tech industry have more diverse, non-STEM related
job positions. Overall, the global STEM talent pool is scarce
and it is even more challenging to recruit female talent. Our
female senior management teams moved up from 9.6% in
2019 to 10.5% in 2020 to include greater gender diversity.
Yet we still have work to do in this area.

Gender diversity is a general concern in the technology
industry. Historically, there is a lower ratio of women
compared to men in technology and science-related
studies. Although ASML continuously seeks to recruit and
retain women in our workforce, male candidates still make

ASML ANNUAL REPORT 2020up most of the labor market in STEM (science, technology,
engineering, and mathematics) fields. Aiming to close the
gender gap in STEM across the world, we continue to
implement organizational strategies to recruit, retain and
empower women at ASML. To increase the number of
females in our future talent pool, we run an intensive
technology promotion program to foster interest among
young girls. We also raise awareness of career prospects in
a sector offering many development opportunities. Still, we
need to improve our gender diversity, and we see an
effective gender policy as a challenge. See Non-financial
statements - Non-financial indicators for details on
Diversity & inclusion.

In 2020, we worked on developing and formalizing our
approach to diversity and inclusion.

To foster greater understanding and inclusion across our
diverse populations, we have employee network groups –
like Pink ASML to promote LGBTI people. We are a
member of the Workplace Pride organization, which is an
international platform for LGBTI inclusion at work. We also
promote the inclusion of people with disabilities and other
characteristics protected by law. Although we have worked
a lot on this, we have not reached the level of integration
we’d like to see. This remains one of our challenges.

Regional achievements
Supported by managers and leaders, 39 female engineers
from ASML’s Taiwan Applications team gathered in
Taichung in June to celebrate International Women in
Engineering Day. This dedicated annual event encourages
female engineers to learn, share and support each other in
the workplace. It also serves as an international awareness
campaign to raise the profile of women in engineering and
focus attention on career opportunities.

In the US, we established an ASML US Diversity Council in
2020. This will serve as an advisory board and govern
diversity and inclusion (D&I) programs, such as employee
resource/affinity groups, diversity events, recognition and
education across the US. It will consist of a group of
leaders who act on behalf of ASML to develop and drive
our D&I programs. The council will help ensure strategic
accountability for results, provide governance and
oversight on diversity efforts, and support company-wide
communication on progress.

Building on the experiences in US we will install a Global
D&I council. Like in the US, this council will consist of a
group of leaders who act on behalf of ASML to develop
and drive our D&I programs. The council will help ensure
strategic accountability for results, provide governance and
oversight on diversity efforts, and support company-wide
communication on progress.

Although data shows we are improving, we are aware of
certain areas where we need to improve, such as the
percentage of female managers. Therefore, we will focus
on improving ASML' attractiveness for female talents, and
will set realistic objectives for improvement per sector. Also
next year we will use more data to see where we still need
to improve. and also use focus groups to learn more about
what is behind the numbers.

We will also prepare a more detailed action plan to set
minorities up for success, through actions such as
sponsorship, mentoring and training on unconscious bias
or managing diverse teams.

Fair remuneration
We want our remuneration to be fair and balanced. In our
remuneration policy, we are committed to gender equality
and we strive for global consistency while respecting what
is common practice in local markets. We continuously
review how our remuneration compares to the market
benchmark for technology professionals in each region
where we operate and, where necessary, make changes to
our remuneration policies and levels. Each year, we analyze
paid salaries for gender disparity. In 2020, as in previous
years, we found no major differences in these salaries. See
Non-financial statements - Non-financial indicators for
details on gender payment.

Living wage
At ASML, we are committed to meeting adequate living-
wage requirements, meaning that employees earn salaries
that meet their and their families' basic needs, but also
provides some discretionary income. Our company has a
predominantly highly educated workforce with relatively
high levels of remuneration. In 2020, we conducted an
analysis of how our lowest base salary compared to the
local minimum wage and local ‘living wage’ in the countries
and regions where we operate. We did not detect any
gaps. On average, our salaries are significantly above local
living wage.

Labor relations
We want to provide fair labor conditions and social
protection for all our employees, regardless of their location
and whether they are on a fixed or temporary contract.

We support the principles of the International Labor
Organization (ILO) and we respect the rights of all
employees to form and join trade unions of their own
choosing, to bargain collectively and to engage in peaceful
assembly.

We strive to comply with the relevant legislations in every
country we operate in. In those countries where we have
employee representation, we engage in regular dialogue
with the different organizations representing our
employees. In these conversations, topics are put forward
and discussed by both the company and the employee
representatives.

We do not have operations in countries where the freedom
of association and collective bargaining for ASML
employees is restricted.

In the Netherlands, we have requested dispensation from
the Metalektro Collective Labor Agreement (CLA) in order
to develop our own CLA. Our unique position in the global
market, our size and growth as well as our very unique
group of employees, the large range of competencies and
activities we bring together to deliver our products have
created a need for our own direction in labor conditions.
The purpose of a future ASML CLA is to offer a set of labor
conditions that match the diversity and needs of all our
employees.

The new CLA will be developed in close collaboration with
the unions represented in the Metalektro. Once we have
our new CLA in place, we will continue to work with the
unions regarding labor conditions within the framework of
our own CLA and maintain our active membership in
various labor organizations, such as FME and PME.

ASML ANNUAL REPORT 2020Ensuring employee safety
At ASML, safety is not just a priority – it’s a core value. We
owe our employees and others working for us a safe
working environment. We do everything in our power
therefore to provide injury-free and healthy working
conditions for everyone on our premises and ensure all our
operations are safe and secure. This includes employees,
contractors, suppliers, customers, and visitors. We count
on each other – every one of us working at and for ASML –
to share this commitment.

Our employee and product safety commitment is captured
in our Sustainability Policy, which applies to ASML
worldwide. In addition, our ASML Environment, Health and
Safety Guide aims to provide practical, useful and essential
Environment, Health and Safety (EHS) information for our
employees, contractors, and any other parties working for
us. The guide explains our aims and objectives, and clearly
describes the rules and policies we follow. It’s designed to
create awareness and ownership.

We provide employees with EHS training to raise their
awareness, encourage responsible behavior and familiarize
them with EHS standards. For more information on product
safety see What we achieved in 2020 - Technology and
innovation ecosystem - Product safety.

Our highest level of preparedness is represented by
ASML’s crisis management plan, which was crucial and
effective in responding to the COVID-19 pandemic. A
hotline with global coverage was established to provide
instant support for our employees. At site level, ASML has
documented emergency response procedures in place for
each ASML location.

Ensuring health and safety is our first priority. Experiencing
COVID-19 like symptoms can be a cause for anxiety and
worry. Testing is an important measure in controlling the
spread of the virus. The waiting times for regular tests via
the public health services (GGD) were long, and we
therefore sought a solution to help our employees. In the
Netherlands we offered voluntary COVID-19 tests to our
employees and their direct family members. These tests
were performed by an authorized external provider, using
test-sets that are high quality and compliant with all
applicable laws, regulations and guidelines. Privacy is
guaranteed during the performance of the tests organized
by ASML.

The pandemic had no impact on EHS performance and
initiatives. Operations continued and internal EHS audits
were performed remotely.

Our approach to employee safety
We take responsibility for protecting our employees by
making ASML a safe place to work. EHS is crucial to
creating a safe and trusted working environment. We
believe that all work-related injuries and occupational
illnesses are preventable. As such, we are working towards
a long-term ambition of zero injuries and work-related
illnesses.

Our target is to prevent occupational health and safety
incidents. To benchmark our performance against industry
standards, we use a targeted recordable injury rate of 0.25,
which represents world-class performance. But our
ongoing ambition is zero, and this drives our continuous
improvement in processes, working conditions and

employee behavior. We use the highest possible
professional standards, and continuous improvement is a
key principle of our management system.

We are committed to a well-established EHS management
system. Our EHS management system is based on the ISO
45001 and complies with these requirements. We ensure
continuous improvement through internal EHS audits.

Incident management and risk management are key
elements of our EHS management system. This process
ensures we not only record incidents and injuries but also
cases where we have unsafe situations or near-misses.
These allow us to address high-risk situations before they
can turn into actual incidents, and cause injuries to our
employees. We investigate all incidents and near-misses to
determine the root cause and take corrective action to
prevent them from recurring or occurring in the future.

It’s impossible to completely eradicate risk, but we can
work proactively at all levels to identify potential issues or
concerns in the workplace and develop measures towards
reducing these. We believe we need to do everything within
our reach to minimize risk, and that it is our responsibility to
provide our people with the right protection, procedures
and processes to keep them safe.

Five life-saving rules

The dynamic nature of ASML’s business today –
continuous technology and product innovation, rapid
growth, many new colleagues and geographic expansion
– brings opportunity, but also potential safety risk.
Our lithography platforms, in particular, are becoming
bigger and more complex, with a growing number of
components presenting potential safety hazards that can
lead to severe or even fatal injuries.

We introduced five safety rules to not only ensure
our employees are prepared for these hazards, but
also to create a safer workplace and enhance our
safety performance. Underpinning each safety rule is
a high-potential safety risk, meaning these rules have
the greatest potential to prevent serious injuries and
fatalities. Everyone should adhere to these rules knowing
that in the event of a threat or breach, the work must
stop with the full support of management.

1. Verify isolation and lockout before beginning work
2. Get authorization before entering a confined space
3. Take precautions while moving heavy loads
4. Protect yourself while working at height
5. Drive safely

Respecting and adhering to these rules could not only
save lives, but also make us collectively more aware of
safety risks across our organization. The rules apply to
everyone, and we require everyone to know them, even
when they don’t directly apply in daily activities.

Managing a safe workplace
To ensure that we implement our EHS guidelines
effectively, we have a safety program in place. ASML’s
Board has appointed the Chief Operating Officer (COO) as
the lead for the EHS management system. We’ve also

ASML ANNUAL REPORT 2020established a Corporate EHS Committee to oversee and
approve ASML EHS strategy. Our line managers are
responsible for day-to-day EHS management. Our EHS
Competence Center gathers the best practices and defines
the EHS standards for ASML, helping our managers to
implement these standards at the workplace.

To improve our EHS performance, we encourage our
employees to speak up whenever they encounter safety
risks. Every employee is empowered to stop working if
they feel unsafe. Together with their manager and EHS
expert, a safe way of working will be defined, so the work
can resume.

We conduct regular hazard and risk evaluations, with a
focus on preventing employees’ potential exposure to
hazards such as chemicals, fire, radiation, mechanical
handling, and ergonomic risks. These provide us with
further insights into the main hazard and risk areas at
ASML. We can then take appropriate action to mitigate
these risks.

Stepping up to the next level

Implementing standardized EHS processes and systems
alone is not enough to prevent accidents when working
to deliver our customer commitments under stressful
conditions. We also need to increase our maturity in the
way we approach safety as a whole.

We are well underway in our journey towards a stronger,
more proactive safety culture across ASML. We have
conducted a company-wide safety-culture survey to
measure our current position on the safety culture
maturity ladder across all sectors, and to benchmark
ourselves within our industry.

The overall outcome of the survey provides us with
insights on how to reach the next level of maturity
towards an independent safety culture. We are deploying
initiatives and focus on creating awareness to accelerate
and embed the independent safety culture at ASML.

How we did in 2020
At ASML, it is standard practice to inform our employees
and anyone else accessing our premises and customer
sites independently – including contractors and suppliers –
about our safety culture requirements and to raise
awareness around these. Training is one of the ways we
prepare and inform our people about this safety culture. In
2019, we updated our EHS Fundamentals training, tailoring
it to the needs of our people. The EHS training features
real-world situations. It is compulsory for everyone working
at ASML.

We updated our EHS Fundamentals with training focused
on our five new life-saving rules. Introduced and rolled out
in 2020, we view these as a step forward towards an
independent safety culture. By December, 94.4% percent
of eligible candidates had completed this mandatory
training.

Our recordable incident rate decreased to 0.18 in 2020
(0.28 in 2019), outperforming industry benchmark of 0.25.
The main reason for this decrease is the absence of office
related injuries due to the work at home policy in 2020. In
2020, we continued our efforts to reinforce our safety
culture program. As in previous years, we did not record
any work-related fatalities or permanent disabilities. We
register EHS-related incidents in line with the US
Occupational Health and Safety Act.

ASML Taiwan wins 2020 CHR award

ASML Taiwan won the 2020 Corporate Health
Responsibility (CHR) award, becoming the only company
from the semiconductor industry in Taiwan to ever win
this prestigious award. Presented by Commonwealth
Media Group, the award received more than 200 entries,
compared to 168 in 2019. Participation was open to a
broad range of industries in Taiwan – from insurance
to banking, car components and even aerospace
companies – and corporations were scored on criteria
including awareness, activities, aliment, assistance, and
epidemic-prevention measurement.

ASML ANNUAL REPORT 2020Community engagement
As a global technology leader and employer, we are also part of the communities where we operate. Being part of a
community means not only caring for our own employees but also looking out for those beyond our organization. We
foster close community ties and encourage our employees to get involved and do their part as well. ASML needs the
support of the community to be successful and will earn that support if ASML lets the community benefit from its
presence and is considerate of the community's needs.

Our community engagement program, which falls under our CEO's area of responsibility, is built on three pillars where
ASML has competence and can create impact:
1. Culture
2. Local outreach
3. Education

The total amount of cash commitments and in-kind support that ASML spent on charities, community engagement,
organizations, and our own ASML Foundation in 2020 was around €4.0 million. In addition, our social community support
during the pandemic amounted to €2.7 million.

Culture
Culture is the invisible bond that ties the people of a community together. To strengthen that bond, ASML
supports initiatives and organizations that are vital for the community’s culture and help open them up for
newcomers and the underprivileged. We focus on cultural icons in our communities: organizations and
initiatives with significant importance to society, and with an impact and reach that goes beyond the local
community.

Key programs

Region

Results 2020

Supporting cultural
landmarks

Netherlands

In Nuenen, one of the towns in the Brainport Eindhoven region where the famous painter
Vincent Van Gogh created some of his breakthrough work in the late 1800s, we are
initiating the realization of 'Vincent's Lightlab' within the planned expansion of the Vincentre
Museum. Visitors will be able to learn more about light and how Van Gogh experimented
with it in his paintings.

Muziekgebouw Eindhoven: supporting the main concert hall in the Brainport Eindhoven
region and co-organizing events and programs that target diverse audiences. Every year,
ASML organizes a music festival, 'ASML on stage', for employees and their family and
friends. The festival covers all kind of music styles, from hard rock to classical music, from
folk to dance. Despite the fact that we had to postpone the tradition to 2021, we organized
an ASML on Stage 2020 virtual quiz event. Around 39 teams took part, from Asia, the US
and the Netherlands – roughly 600 streams!

Van Gogh Museum Amsterdam: partnership to support the work of Van Gogh who was a
child of the southern Dutch province of Brabant where ASML is located. ASML contributes
research to safeguard Vincent’s work for the future. We are running education programs
together with the museum aimed at students and the underprivileged.

Through the Brainport National Action Agenda, we support initiatives related to sports,
culture and education.

We support an alternative edition of GLOW – Next Generation project – where school
children can follow workshops on how to 'make light' and how to communicate via Morse
code, using this light.

Sustainable transport
and ensure the region is
accessible for all

Netherlands We aim to significantly reduce the number of cars on our campus at Veldhoven. We

encourage our employees to use public transportation, and we also actively promote the
use of (e-)bikes for a healthy commute.

ASML ANNUAL REPORT 2020Local outreach
We support local initiatives and organizations that are vital for our communities and that connect the
people in our communities. Together with ASML employees we contribute and make these initiatives
attractive and accessible and pay special attention to stimulate integration, promote diversity and
empower the underprivileged.

Key programs

Region

Results 2020

Employee Volunteering
program

Worldwide

Promote vitality

Netherlands

Charity

Netherlands

We encourage our employees to work one day per year as volunteers to lend a helping
hand. Due to the COVID-19 crisis, the number of volunteering hours decreased significantly
this year to 1,333 hours versus 7,500 last year. A good example of an alternative activity
that was done despite COVID-19, was an online hackathon to help develop a new website
for an NGO. Other activities included the collection of winter coats for people in need, and
of Christmas presents for children from financially disadvantaged families.

Partnership with Dutch first-division football club PSV Eindhoven (European champions
of 1988). Long-term commitment, together with other large companies in the Brainport
Eindhoven region, to support PSV - the community’s favorite and most successful sports
institution. This includes putting the spotlight on the region by marketing Brainport on
the team jersey (a world first in professional football). We also run an integrated program
with the other partners to promote vitality for all citizens in the community. ASML donates
tickets from our sponsorship allocation to families who are not able to afford to attend PSV
matches.

Brainport Eindhoven & PSV jointly launched an online platform aimed at inspiring and
motivating everyone in the Brainport region in the area of health and well-being. We shared
our knowledge and expertise around seven well-being themes: setting goals, exercise,
nutrition, sleep, energy and time management, social environment and relaxation. The aim
is to create a vital and healthy region for all.

ASML is a longstanding donor of the Voedselbank Eindhoven. In addition this year, we
donated 400 tickets for five matches of PSV's home games to the Voedselbanken and
Leger des Heils (the shelter organization). We also supported the Ronald McDonald House
in Veldhoven.

Brainport partners and PSV established the Brainport Eindhoven Partner Fund, with the
aim of working together to find solutions to urgent societal problems in the region. This new
charity foundation will help to improve the lives of disadvantaged residents in the Brainport
area. The fund will unite parties in a joint approach to several urgent societal challenges,
such as poverty, vitality, unemployment, opportunities for children, and social cohesion.

We donated $10,000 to Big Brothers Big Sisters of San Diego which creates a donor
and volunteer-supported mentoring network that makes meaningful, monitored matches
between adult volunteers and children, ages 7-18, in communities across the country. It
develops positive relationships that have a direct and lasting effect on the lives of young
people.

We donated $10,000 to Alpha Project, which serves over 4,000 men, women and children
in San Diego through activities such as affordable housing, residential substance abuse
treatment, supporting housing for people with special needs, basic and emergency
services for the homeless, transportation assistance, mental health counseling,
employment training, outreach and community services.

ASML ANNUAL REPORT 2020Education
ASML recognizes the need to prepare people of all ages for an increasingly digital future,
and specifically the importance of STEM (Science, Technology, Engineering and
Mathematics) competences to help all children reach their potential. We organize and
sponsor numerous initiatives that aim to share our enthusiasm for and expertise in
technology to inspire all generations. We partner with multiple organizations and
educational events that promote opportunities and potential of careers in technology. Our
employees act as role models and guides for these initiatives.

We execute our education programs through the following:

1. The Education team works closely with schools and education programs in the communities where ASML has

operations. The Education team provides hands-on support and coordinates a network of ASML volunteers (our so-
called ASML ambassadors) who visit schools and events, and support children and schools in their curricula, some as
part-time ('hybrid') teachers, some as tutors of disadvantaged children, and some as technology and STEM promoters.
Our intensive STEM education program aims to boost interest in technology among young people and increase the
local and regional talent pool. We also raise awareness of career prospects in a sector offering many development
opportunities.

2. The ASML Foundation is an independent foundation, but has strong ties to ASML. It operates at arm’s length and has
its own board and budget. It aims to increase the self-sufficiency of disadvantaged children around the world through
educational initiatives that develop their talent and help unlock their potential. For more, see section ASML Foundation.

Key programs

Region

Results 2020

Promote STEM
initiatives worldwide

Netherlands

Asia

To address the shortage of STEM teachers, we created the hybrid teaching program. We’re
not only growing our number of technology ambassadors but also enabling 100 engineers
in the Netherlands to become part-time or ‘hybrid’ teachers, paid by ASML. We plan to
expand it to the US and Asia.
We also partner with multiple educational events that promote opportunities and potential
of careers in technology, such as Dutch Technology Week (DTW) and FIRST.
As an example, we distributed 5,000 Blink Bug build your own bug kits to elementary
schools in the Brainport Eindhoven region to get kids connected to technology.

ASML San Diego supported the EXPO Day where employees helped promote STEM
education at Petco Park during the San Diego Festival of Science & Engineering by
showing kids how to program robots.

In Shanghai, ASML supported the 2nd ASML Youth Maker and Hacker Science &
Technology Innovation. Some 80 school children from 15 elementary and secondary
schools took part in the contest. The contest was designed to promote science education
and inspire more students to choose STEM in their future education and careers.

We joined hands with Yuan T. Lee Science Education to launch a three-year 'ASML Taiwan
Science Rooting Project'. The project consists of a three-year seed teacher-training
program planned for three schools, funded by the ASML Foundation. It is estimated that
more than 1,500 Taiwanese students will learn basic scientific knowledge through hands-
on experience over the next three years.

STEM education
program

Netherlands

In the Eindhoven area, ASML participated in a mini edition of the Night of the Nerds online
event during Dutch Technology Week (DTW). An online offering for secondary school
students was set up to create awareness around technology and technology studies.

Asia

ASML is proud to sponsor the Taiwan Railways Fair of Popular Science. This national
project, held by the Ministry of Science and Technology, aims to inspire and engage more
than 9,000 primary school students from 23 cities in Taiwan. We cooperated with 80 SPIE/
OSA Student Chapters from six universities in Taiwan to host a unique Optical Sciences
train cabin.

ASML ANNUAL REPORT 2020ASML Foundation
The ASML Foundation, which funds projects to improve the lives of young
people with inclusive, quality education, is our charity of choice. In 2020,
the Foundation donated around €1 million, supporting 22 projects in 11
countries. Although closely linked to our company, the ASML Foundation
operates independently. Over the last three years, we have reached over
17,000 children.

Through funding and partnerships, the ASML Foundation aims to help disadvantaged children become more self-
sufficient by supporting educational initiatives that develop their talent and unlock their potential. We promote the
sustainable development of less-privileged children around the world by supporting inclusive and quality education for all
and promoting lifelong learning. By doing this, we aim to make a sustainable impact on SGD 4 Quality Education, and
contribute to SDG 5 (Gender Equality) and SDG 10 (Reduce Inequalities).

We want to make a difference in the community in the locations where we operate. As such, we mainly support projects
and initiatives in ASML countries in Asia, Europe and the US. These projects address the specific needs in that region. In
the US, for example, projects focus mainly on preventing school dropouts in less-privileged areas, and on promoting
STEM, especially for girls. Projects in Asia differ per country. In developing areas in Asia, for example, there is a focus on
education for girls to reduce inequality and also to prevent child marriages. In China, the focus is on STEM for girls in rural
areas. In Europe and in the Netherlands, the foundation focuses on education for disadvantaged children, and children
lacking in education, providing help that suits their specific needs. Tackling illiteracy in the Brainport region also became a
key focus area for the ASML Foundation in 2020.

ASML employees support the ASML Foundation financially when they purchase goods from the ASML employee store
and through donations. ASML Foundation is also responsible for ASML’s volunteering program: it coordinates the
volunteering activities and keeps track of the volunteering hours that ASML employees contribute to education initiatives
and other causes. ASML employees are allowed to take eight hours per year to do volunteer work; many volunteers also
donate their own time.

In 2020, we maintained our focus on education, as well as helping and financially supported our current partners needing
to, for example, convert education efforts from physical classes to virtual learning.

Examples of projects supported in 2020

STEM - Girls Can Do It
(China)

Trudo Weekend School
(Netherlands)

The STEM - Girls Can Do It project focuses on young people – especially girls – in rural China, near ASML’s
offices in Chengdu and Xi’an. It aims to promote more gender-balanced STEM education. The project
will expose about 1,200 young people, of which 70% are girls, to STEM, and teach them coding and
programming. Employees from the local ASML offices have been actively involved in the partnership as
volunteers, hosting, for example, in-person events at ASML’s offices, and involving female engineers as
role models. We are planning to continue this volunteer partnership through an online program to enable
interaction with the girls.

In the Netherlands, the ASML Foundation has adopted a class of students for three years through Trudo
Weekend school, located in the Brainport region. Trudo Weekend school is a ‘school’ for children, aged
10-14, from lower socioeconomic neighborhoods in Eindhoven who are motivated to invest in themselves.
The school offers these children the opportunity to reach their potential by attending classes every Sunday
for three years. The program covers science, society, culture and art education, as well as interpersonal and
social skills. We also provided the children in their final year with laptops, needed when starting secondary
schooling.

Girls Inc. of the PNW-
Portland, OR
(US)

In Portland, Oregon, near our offices in Hillsboro, we are supporting the girls-empowerment NGO Portland
Girls Inc. We fund a five-year program that supports girls from disadvantaged backgrounds and focuses
on instilling an interest in STEM. In addition, we are making progress in launching a volunteering program
involving ASML employees, including female engineers, who will give of their time as role models and
mentors. The ASML Foundation is currently supporting 125 girls for a five-year period.

Friendship Bangladesh
(Bangladesh)

Friendship Bangladesh provides access to healthcare, education and other necessities to people –
especially children – in the country's remote northern island region. As there are few to no qualified teachers
available, the Friendship Secondary Education Program, supported by the ASML Foundation, provides
education to children in these remote communities through ICT. Thousands of hours of educational videos
were made by highly qualified teachers living in Dhaka. The program also serves a secondary purpose: it
gives girls from underserved communities an alternative to early marriage by enabling them to continue
their education. The Foundation has supported Friendship Bangladesh since 2015 and funded their digital
education pilot. It has been so successful that during the lockdown period, the Bangladeshi government
reached out to Friendship Bangladesh for help and insight into best practices for online learning. In this way,
Friendship Bangladesh was able to expand its scope to state schools, YouTube, and television.

ASML ANNUAL REPORT 2020TechMeUp
(Netherlands)

Together with many technology education providers, we decided to support TechMeUp. Its purpose is
to make education accessible to everyone. The organization aims to invest in people's opportunities by
providing interest-free loans to support those who would like or need to retrain for a job in technology, but
don’t have the means to do so. These loans need to be repaid in monthly installments once the student has
found a job.

For more information, visit www.asmlfoundation.org

Supporting communities during COVID-19 pandemic
The COVID-19 pandemic affected every age group, and every aspect of the lives and the world we live in -
health, education, work, and so on. It is our duty to reach out and help our communities, and we're
committed to supporting them during the pandemic. ASML also supports the coordinated actions of the
national and regional authorities, as well as the efforts of other local organizations.

Our support area Region

Examples

Medical supplies

Netherlands

Asia

April 2020 - We used our network to ensure the shipment of more than 300,000 face masks
to hospitals and other care institutions. Together with our logistic partners, we helped with
the shipment of two face-mask production machines to a Dutch supplier to boost face-
mask production.

April 2020 - We donated 200 care packages to medical frontline workers.

April 2020 - We donated $250,000 worth of critical personal protective equipment to
several Connecticut hospitals. To help with humanitarian activities in California, we donated
300 face masks to first responders of the California Army National Guard.

Education support

Netherlands

March 2020 - We provided 500 laptops to help ensure that students in the Brainport
Eindhoven region could continue their schooling online.

Asia

May 2020 - Since 2017, ASML Korea employees have hosted several science events for
children from disadvantages backgrounds. This year, the Science Camp Korea program
went online so the science camps could continue.

Engineering support

Netherlands

May 2020 - We made a €100,000 donation into a small start-up relief fund, in partnership
with Brainport partners and the province. The Bright Move fund provides financial support.

Social support

Netherlands

Asia

April 2020 - We donated 400 tablets to nursing homes in the Brainport Eindhoven region.
We also donated ‘hero hospital gowns’ to the children's wards of four hospitals, in
collaboration with PSV and Brainport Eindhoven.

November - December 2020 - ASML Singapore donated over €900,000 to the following
five Singaporean charities: Children’s Aid Society; SPD (door-to-door transport services
for the disabled); AMKFSC Community Services; Food from the heart; Metta Welfare
Association.

March - June 2020 - In San Diego, employees and family/friends took part in a bike tour
and raised $5,000 for Multiple Sclerosis research and funding. In the spring of 2020, the
Silicon Valley and Wilton teams organized virtual food drives for local food banks during the
pandemic. Between the two drives, they donated a total of $39,000 to help families in need.
We have donated €5,000 to Food bank San Diego.

ASML ANNUAL REPORT 2020Our people KPIs
The table below shows the key performance indicators (KPIs) and the related 2025 targets. In 2019, we adopted a new
sustainability strategy - as a result no comparative results for 2018 are available for new performance indicators. See Non-
financial statements - Non-financial indicators for our performance indicators (PIs) and related results.

KPI

Engagement score We@ASML survey 1

Employer brand ranking 2
Netherlands

US
China

Taiwan
South Korea

2018

—

—
—

2019

77%

—

—
19

2020

Target 2025

80% Be on par with peers

99
168

22
24

Top 10

Top 75

Top 100

Top 20
Top 20

In 2019, we redesigned our employee engagement survey (previously me@ASML) and changed the frequency from every 18 months to annual.

1.
2. Employer brand ranking from Universum: engineering students.

SDG target

SDG target 4.3 - By 2030, ensure equal access for all women and men to
affordable and quality technical, vocational and tertiary education, including
university

SDG target 4.4 - By 2030, substantially increase the number of youth and
adults who have relevant skills, including technical and vocational skills, for
employment, decent jobs and entrepreneurship

SDG target 4.5 - By 2030, eliminate gender disparities in education and ensure
equal access to all levels of education and vocational training for the vulnerable,
including persons with disabilities, indigenous peoples and children in vulnerable
situations

How we measure our performance

• Employee training and development indicators
• Diversity indicators

• Community involvement and technology

promotions

• Scholarships granted

• ASML Foundation projects

SDG target 8.1 - Sustain per capita economic growth in accordance with
national circumstances and, in particular, at least 7% gross domestic product
growth per annum in the least developed countries

• Financial performance

SDG target 8.2 - Achieve higher levels of economic productivity through
diversification, technological upgrading and innovation, including through a
focus on high value-added and labor-intensive sectors

• Human capital return on investment
• Employee engagement score

SDG target 8.5 - By 2030, achieve full and productive employment and decent
work for all women and men, including for young people and persons with
disabilities, and equal pay for work of equal value

• Workforce data including diversity and inclusion
• Fair remuneration pay ratio

SDG target 8.6 - By 2020, substantially reduce the proportion of youth not in
employment, education or training

• Employee attrition rate
• New hires

SDG target 8.8 - Protect labor rights and promote safe and secure working
environments for all workers, including migrant workers, in particular women
migrants, and those in precarious employment

• Employee safety indicators

ASML ANNUAL REPORT 2020Our supply chain

Setting the bar higher for our world-class supplier network to achieve
the innovations we strive for, by ensuring we conduct our business
in a sustainable and responsible manner.

€7.6bn

Total sourcing spend
40% Netherlands
39% EMEA (excl NL)
15% North America
6% Asia

4,750

Total suppliers
1,475 Netherlands
700 EMEA (excl NL)
1,275 North America
1,300 Asia

88%

Completion of
RBA self-assessment
questionnaire by
key suppliers

Supplier overall
score 'high risk' on
sustainability (RBA)
and ASML assessment

At ASML, we rely heavily on our supplier network to
achieve the innovations we strive for. Our goal is to ensure
we get the products, materials and services we need to
meet our short- and long-term needs. This supports our
operations from the earliest moment of development to the
end-of-life stages of our systems.

ASML invests considerable resources to develop and
introduce new systems and system enhancements, such
as EUV lithography, e-beam metrology and holistic
lithography. As these are complex technologies, ASML
focuses on a high value-added integration role to maximize
the total system competence and shorten cycle times. To
enable this focus on system-integration, ASML relies on an
extensive supply base of around 780 Product Related (PR)
suppliers and around 3,970 Non-Product Related (NPR)
suppliers. Long-term relations, close cooperation and
transparency with suppliers and partners are key to
success.

Our supply landscape
With around 4,750 suppliers in our total supplier base, we
distinguish between product-related and non-product
related suppliers. Product-related suppliers provide
materials, equipment, parts and tools used directly to
produce our systems. This category comprises 780
suppliers and represents the highest percentage of our
procurement volume, accounting for 68% of our total
spend. From this total number of product-related suppliers,
188 suppliers are critical suppliers, accountable for 95% of
the product-related spend.

Non product-related suppliers are goods and services
suppliers, providing products and services supporting our
operations, varying from temporary labor to logistics and
from cafeteria services to IT services. With around 3,970
suppliers, this group represents nearly 85% of our total
supplier base in terms of the number of suppliers.

We invest in developing our supply landscape to help
suppliers meet our requirements with regard to quality,
logistics, technology, cost and sustainability. Our supply

chain strategy includes six priorities regarding the
capabilities of our suppliers and how we work with them:
we enable the product roadmap through the development
and maintenance of best-in-class competencies and
capabilities; efficient and dedicated operations that enable
cost-per-wafer economics for our customers, having
resilient suppliers able to adjust to volatile market cycles;
close cooperation to secure early supplier involvement in
the new product introduction process; a commitment to
quality and expectation that our suppliers will proactively
invest in and maintain a state-of the-art quality
management system, and active contribution to our
sustainability strategy.

ASML acquisition of Berliner Glas Group
On October 30, 2020, ASML acquired all shares of Berliner
Glas Group, a key supplier to ASML for many years.
Berliner Glas Group is one of the world’s leading providers
of optical key components, assemblies and systems, high-
quality refined technical glass as well as glass touch
assemblies. Berliner Glas Group is headquartered in Berlin
and has facilities at five locations throughout Germany,
Switzerland and China. With the acquisition of Berliner Glas
Group, we acquired technical capabilities that are critical to
secure the future roadmap for our EUV and DUV products
and will provide increased value to ASML's customers
through strengthened collaboration and bundling our
competences to accelerate our innovation.

Sourcing and supply chain strategy
ASML's continued growth, in combination with our
ambitions, requires us to significantly improve our key
business processes. To help achieve our strategic
objectives, we decided to combine the activities of
Strategic Sourcing & Procurement and Supply Chain
Management into a single new sector, called Sourcing and
Supply Chain (S&SC). This took effect on May 1, 2020. Jan
Keller, a member of the ASML's Executive Committee and
of the Operations Management Team, was appointed
Executive Vice-President to lead this new sector. The aim
of this new organization is to deliver the best possible
supply chain for ASML, to have one ASML voice for our

ASML ANNUAL REPORT 2020suppliers, and united representation within ASML to secure
preconditions for suppliers' quality, logistics, technology,
cost and sustainability (QLTCS) performance.

Continuously improving our suppliers’ performance and
capabilities is at the heart of our sourcing strategy. We have
a framework to communicate process requirements and
compliance expectations to suppliers. One example is our
supplier-profiling methodology, consisting of a supplier
performance dashboard, a supplier capability self-
assessment and a risk profile. The framework outlines our
approach to supplier management and development
towards the desired ASML supplier landscape. This
provides an enhanced knowledge base to improve our
dialogue with suppliers around their performance and
development potential.

ASML always strives to select the best supplier that meets
our requirements on all five capability dimensions. We
monitor supplier performance in terms of quality, logistics,
technology, cost and sustainability. When performance
drops below annually set thresholds and does not recover
upon request and within a reasonable time frame, ASML
will take action to secure reliable future supplies.

Critical EUV supplier back up and running after
lockdown

When one of our critical EUV suppliers had to lock
down their entire facility following California’s Shelter at
Home order (in March 2020), it threatened to severely
impact our supply chain. To reopen, our supplier, which
produces many of the essential assemblies for the
NXE top module, needed to establish that they are an
essential business supporting a critical infrastructure
industry and put in place all adequate measures to
secure a safe environment to their employees. They
managed to do this in only a few days, thanks to the
ASML Sourcing and Legal teams, which quickly gathered
the appropriate information.

With the facility now working again, our Supply Chain
Management team continues to closely monitor the
supply versus demand picture, expediting materials
where necessary so they do not constrain output. This
approach requires close daily cross-sector management
to avoid disruptions.

At the start of the COVID-19 crisis, we rapidly established
crisis management protocols. We created a global cross-
sector team tasked with securing continuity of supply. We
set up daily communication to inform our suppliers on
ASML's COVID-19 restrictions and requirements. The team
aimed to mitigate the impact of COVID-19 on suppliers by
identifying and implementing solutions to secure supply to
global ASML factories and field warehouses. The team
reviewed, on a daily basis, supply shortages or pending
restrictions that would affect our supply. We implemented
solutions in close collaboration with our suppliers where
required. Through the dedication of our suppliers and our
people, we experienced only temporary shortages, and
these were resolved before they could impact our 2020
output.

In 2019, we indicated that we would expand our Re-use
program. In 2020, we introduced a dedicated cross-sector

Re-use department, representing Factory, Customer
Support, S&SC, D&E, Program and Finance. This
department is hosted by Sourcing & Supply Chain. The Re-
use team will establish an end-to-end process that
supports the increase of parts, tools and packaging re-use,
set-up of local and global repair centers, and improve the
learning loop. Re-use strongly contributes to a circular
economy and the reduction of operating costs. For more
information, see Circular economy - Accelerating re-use of
parts, tools and packaging and materials.

Our risk-management approach
We rely on our suppliers to develop, manufacture and
deliver the innovative and unique parts used in our
lithography systems. Due to the highly specialized nature
of many of our parts and modules, as well as limited set
size, it is not always economical to source from more than
one supplier. Our sourcing strategy therefore (in many
cases) prescribes 'single sourcing, dual competence'. Our
reliance on single sourcing requires us to proactively
manage supplier performance and risk.

To that end, Sourcing conducts continuous performance
and risk management of the supply base with the purpose
to: i) Assure and improve performance, ii) Secure continuity
of supply, iii) Protect our intellectual property and maintain
a leading technology position, and iv) Prevent reputational
damage. Five risk domains are assessed (Calamity,
Ownership, Financial, IP & Information Security, and
Compliance). In cases where risk exceeds the agreed
threshold, mitigation measures are taken.

As suppliers operating in the same industry or market are
typically exposed to similar risk, we evaluate suppliers’ risk
and performance within the context of their supply market
category. We will adjust our category strategies where
required to meet ASML's short and long-term business
needs.

In 2020, we continued to focus on improving business-
recovery capabilities through the review of business-
continuity plans focusing on increasing the quality of
preventive measures and improving financial transparency
through more frequent assessment of financial health for
the most critical suppliers. In addition, we continued to
expand our information security and cyber-resilience
program with suppliers.

To improve business-recovery capabilities, we require
suppliers to have business-recovery capabilities in line with
the ISO 22301 standard. Supplier-recovery plans are
requested, evaluated and, where needed, improved to
prevent potential business disruptions. In 2020, we
included 188 business critical product-related suppliers in
our business-continuity program, and extended the scope
with 34 non-product related suppliers.

Suppliers with access to top secret information or with
privileged access to our IT systems are asked to improve
information security through the ISO 27001 standard. In
2020, we included 143 suppliers in our information security
program. ASML uses the ISO 27001 framework to support
suppliers in a standardized way in their efforts to raise
cyber resilience. Going forward, the maturity of our
ecosystem will be further reinforced by establishing a
'circle of trust', a network of suppliers that jointly embrace
the information security standards and raise their
performance against these standards.

ASML ANNUAL REPORT 2020Other examples of successful risk mitigations are: getting long-term supplier agreements (LTSAs) and/or continuous
supply agreements in place, ensuring the availability of IP in escrow, requiring suppliers to put their inventory in separate
locations, requiring suppliers to implement fire prevention controls, and increasing buffer stock. For a further description of
our risk management, see How we manage risk.

Building relationships through our Annual Suppliers’ Day

Our annual Suppliers’ Day helps us foster strong relationships with suppliers. To ensure we could continue to do so even with
COVID-19 restrictions, we organized a hybrid event, which featured a virtual event attended by over 250 supplier representatives
and a live event with 16 strategic suppliers.

The event was an opportunity for our suppliers to familiarize themselves with our strategy and targets through senior leadership
presentations. The live and virtual Q&A session allowed suppliers to pose questions to senior management, including our Chief
Strategy Officer and Chief Technology Officer.

During the cyber resilience satellite session, a total of 30 CIOs and IT directors of our suppliers discussed the increased focus
on cyber resilience, which has become a top priority for companies. The event closed with an awards presentation to recognize
several suppliers for their work with ASML, including two awards for valuable contributions to ASML’s circular-economy ambitions.

Responsible supply chain
At ASML, we are committed to conducting our business in a caring and accountable manner, and being recognized as a
responsible business partner.

RBA Code of Conduct commitment
Since 2011, we have been a member of the Responsible Business Alliance (RBA), the world’s largest industry coalition
dedicated to corporate social responsibility in global electronics supply chains. We have adopted the RBA Code of
Conduct (Code), which is a standard to ensure that working conditions in the electronics industry or industries in which
electronics is a key component and its supply chains are safe, that workers are treated with respect and dignity, and that
business operations are environmentally responsible and conducted ethically.

We promote the principles contained in the RBA Code to our suppliers and subcontractors, and expect key suppliers to
participate in this common effort, by acknowledging and adopting the RBA Code. We screen our supplier base on
sustainability performance using this standard from the RBA.

Standard

Labor

RBA Commitment
To uphold the human rights of all workers (direct and
indirect), and to treat them with dignity and respect as
understood by the international community, including the
International Labor Organization's (ILO) eight fundamental
conventions.

Number of high risks identified from RBA SAQ

2019 2020 Main gaps identified

• Own management system, but

not third-party verified

• No public reporting of labor

metrics

Health and Safety To minimizing the incidence of work-related injury

Environment

Ethics

and illness and to ensure a safe and healthy working
environment. Communication and education is essential
to identifying and solving health and safety issues in the
workplace.
Environmental responsibility is integral to producing
world-class products and services. Adverse effects on the
community, environment and natural resources are to be
minimized while safeguarding the health and safety of the
public.
To meet social responsibilities and to achieve success in
the industry, the highest standards of ethics should be
upheld, including but not limited to business integrity,
anti-bribery and corruption, antitrust and competition,
protecting privacy.

• Own management system, but

not third-party verified

• No public reporting of ethics-

related metrics

Members and participants are committed to establishing a management system to ensure:
• compliance with applicable laws, regulations and customer requirement;
• conformance with the Code standards;
•
• facilitate continual improvement.

identification and mitigation of operational risks; and

It is our policy to discuss all high-risk findings with the supplier in scope. In 2020, the RBA SAQ indicated a high risk on the
elements labor and ethics for one supplier. We evaluate all RBA SAQs, and based on this evaluation and engagement with
the supplier, we determined that the risk did not relate to actual breach or incident and no improvement plan was needed.

ASML ANNUAL REPORT 2020To underpin our commitment to a sustainable and resilient
supplier network, we expect our key suppliers and their
suppliers to comply with the RBA Code of Conduct as well.
This requirement is included in our long-term product-
related suppliers’ contracts. We encourage our suppliers to
develop their own sustainability strategies, policies and
processes, and actively pursue our suppliers’ adherence to
this code.

Sustainability risk approach
We assess compliance with the RBA Code of Conduct
through a risk-based approach. We scan all new suppliers
for potential high risks and work with them during the
onboarding process to remedy any issues we identify. We
expect our strategic and high-risk suppliers to complete
the RBA Self-Assessment Questionnaire (SAQ) each year
to validate their compliance with the RBA Code of Conduct
and to determine a supplier’s potential gaps in relation to
the standards set forth in the RBA Code of Conduct.

In general, the RBA SAQ results show a relatively low risk
level in our supply base, as most of our suppliers operate
in countries with a strong rule of law and are law abiding.

Managing high-risk suppliers
A key performance indicator of our approach to ensuring a
sustainable supply chain is the percentage of suppliers in
scope who complete the RBA SAQ. In 2020, we expanded
the scope of our RBA assessment to include non-product
related suppliers and high-risk regions covering 80% of our
total supply base spend. In 2020, 88% of the major
suppliers in scope completed this questionnaire. Our target
is to achieve a 90% completion rate by 2025, which puts
us well ahead of our ambitions. If a supplier does not
conform to our required standards, our policy is to discuss
mitigating measures. Our second key performance

indicator is to have 100% improvement plans in place for
high-risk suppliers, as identified by the RBA self-
assessment.

We also conduct supplier audits to address risks we
identify in our regular risk assessments. These audits
intend to verify supplier self-assessment and completion of
improvement plans. However, in 2020 we did not conduct
on-site supplier audits on sustainability criteria due to travel
limitations and the focus on securing continuity of our
supply chain as a result of the global impact of the
pandemic.

Assessing human-rights risks
Our robust risk-based assessment and audit process for
suppliers covers human rights issues. In our due diligence
process, we use the RBA Risk Assessment Platform to
identify inherent risks in labor (including human rights),
ethics, health & safety and environmental standards across
our full supply base. In the event of a medium or high risk
relating to labor being identified, we engage with the
supplier and conduct a more detailed analysis. For major
product-related and non-product related suppliers covering
80% of our spend, we expect them to complete the annual
RBA SAQ. This SAQ covers more than 400 risk elements
related to labor (including human rights), ethics,
environmental and safety factors, control elements and
management systems, including their performance. It helps
us to determine a supplier’s risk profile on sustainability.
When we identify compliance gaps, we engage with the
supplier to determine corrective action plan(s).

In the 2020 RBA SAQ program, we identified one supplier
with high risk on labor. This related to management
systems rather than actual breaches of human rights.

Total supply base 2020

€7.6bn total spend
4,749 suppliers

Suppliers
Product-related

68% of total spend

779

Suppliers

95% of PR spend

188

Due diligence
screening

Applied to total supply base
using RBA Risk Assessment
Platform

Supplier
risk profile
Applied to business-critical
suppliers of strategic
importance

RBA Self-assessment
questionnaire (SAQ)

Applied to major suppliers

Suppliers
Non-product related

32% of total spend

3,970

Suppliers

16% of NPR spend

82% of PR spend

27% of NPR spend

Suppliers

ASML ANNUAL REPORT 2020Circular procurement
As part of ASML’s commitment to enhancing sustainability,
we want to play our part in realizing a circular economy
model. We do this by reusing parts, increasing energy
efficiency in our processes, and reducing scrap where
possible. We see this as a responsibility to be shared
between ourselves and our customers and suppliers.

• The requirement for suppliers to comply with our policy

is included in our supplier Code of Conduct and supplier
handbook.

• We require our suppliers and sub-suppliers to have
relevant policies in place, and take due diligence
measures enabling us to investigate if products and
components supplied to us contain conflict minerals.

We comply with Section 1502 of the US Dodd-Frank Act
and its application rules from the US Securities and
Exchange Commission (SEC). We are committed to
publicly disclosing information related to the use of these
minerals in our products. For more information, see www.
asml.com for our Conflict Minerals Statement and Conflict
Minerals Report.

As we rely on our suppliers to develop, manufacture and
deliver the unique parts and modules used in our
lithography systems, the sourcing of these minerals goes
beyond our Tier 1 suppliers. There are several tiers of
suppliers between ASML and any smelter or refines of
conflict minerals, and even more when tracing a mineral all
the way back to the mines. This means that we do not
have a direct purchasing relationship with mines, smelters
or refiners.

Despite continuous efforts, we are unable to determine the
precise origin of the 3TG minerals included in our products.
This is due to several reasons: 3TG supply-chain
complexity, the number of tiers of suppliers to trace the
source, and the limited number of certified conflict-free
smelters for all conflict minerals. To obtain correct data
from our supply chain is a challenge, but we continue our
efforts in this regard. In 2020, we started a project to
refresh our responsible minerals sourcing policy and due
diligence processes. Although we are not subject to these
particular directives, we aim to incorporate EU regulations
concerning supply chain due-diligence obligations
regarding 3TG minerals.

Our procurement team plays an important role in
implementing circular economy principles by promoting
circular procurement at all times. We aim to raise
awareness of circularity among our procurement
managers, so they incorporate re-use and recycling in their
way of thinking and procurement practices.

Our ambition for 2025 is to increase our circular-
procurement practice. In 2020, we started a process of
defining key performance indicators to measure progress
in our circular procurement. The cross-sector Re-use
program in ASML aims to re-use parts and materials
valued around €75 million. A key development is the setup
of new circular processes and contracting with the majority
of our first-tier supply base and align incentives for
maximizing re-use value. Our focus for 2021 and beyond is
to further expand our circular-procurement efforts. For
more information about our approach to the circular
economy policy and programs, see What we achieved in
2020 - Circular economy.

Conflict minerals
Like many companies in the electronics industry, our
products contain minerals and metals essential to the
manufacturing process. Examples of these are tantalum,
tungsten, tin and gold (3TG), so-called conflict minerals.
Although we do not use a significant amount of these
minerals, we need certain 3TG minerals to make our
products, and for them to function. Gold, for example, is
used in coating critical electronic connectors, and tin is
used for welding electronic components and creating EUV
light.

At ASML, we are committed to a conflict-free minerals
policy regarding the responsible sourcing of materials in
our supply chain. We support international efforts to ensure
the mining and trading of 3TG minerals from high-risk
locations does not contribute to conditions of armed
conflict and/or serious human-rights abuses in the
Democratic Republic of the Congo (DRC) or its neighboring
countries. We have adopted a series of compliance
measures based on industry best practices. These include:

• ASML has established a due diligence process and
closely monitors the use of conflict minerals in our
supply chain.

• Our processes are based on the due diligence

framework set by the Organization for Economic
Cooperation and Development (OECD).

• We are a member of the Responsible Business Alliance
(RBA). As such, we support initiatives which foster
better working conditions and raw material production.

• We support the Responsible Minerals Initiative (RMI),

including the Responsible Minerals Assurance Process
(RMAP) and Global e-Sustainability Initiative (GeSI).
• Annually, we ask our suppliers in scope to complete
a Conflict Minerals Reporting Template (CMRT). This
allows us to validate compliance with our conflict-free
minerals sourcing policy.

ASML ANNUAL REPORT 2020Our supply chain KPIs
The table below shows the key performance indicators (KPIs) and the related 2025 targets. In 2019, we adopted a new
sustainability strategy – as a result no comparative results for 2018 are available for new performance indicators. See Non-
financial statements - Non-financial indicators for our performance indicators (PIs) and related results.

KPI
RBA self-assessment completed (in %) 1
Suppliers with high risk on sustainability elements evaluated and
follow-up agreed (in %) 2

2018
—
—

2019
78%
25%

2020
88%
0%

Target 2025
90%
100%

1. This indicator shows the percentage of major suppliers in scope that completed the annual RBA self-assessment questionnaire (SAQ).
2. One supplier was identified with a high risk on sustainability elements. Based on the evaluation of the risk no improvement plan is necessary.

SDG target

How we measure our performance

SDG target 8.8 - Protect labor rights and promote safe and secure working
environments for all workers, including migrant workers, in particular women
migrants, and those in precarious employment

• Compliance with RBA Code of Conduct
• RBA self-assessment questionnaire completion
• Suppliers with high risk on sustainability elements

SDG target 12.2 - By 2030, achieve the sustainable management and efficient
use of natural resources

evaluated and follow-up agreed

• Promote circular procurement

ASML ANNUAL REPORT 2020Circular economy

Minimizing waste, maximizing resources to extract the maximum
value from the materials we use and repurpose our products
across their life cycles.

360 kg

Waste generated
per €m revenue

85%

Material recycling rate

90%

ASML PAS 5500 systems still
in use (from total ever sold)

€1,151m

Value of parts re-used

As we move away from the linear ‘take, make, dispose’
model, we believe the circular economy is key to
ensuring the future success and competitiveness of the
semiconductor equipment industry.

this end, we also work closely with our value chain.
Transforming our economy to a circular model and
promoting a conducive mindset is the joint responsibility of
ASML, our customers and suppliers.

We are committed to minimizing waste and maximizing the
use of resources, and believe that by doing so we not only
limit our environmental impact but also generate business
value. The modular design of our products lets us extract
the most value we can from the materials we use, and
repurpose our products across their life cycles.

While continuously innovating, we also want to ensure the
increasingly sustainable use of materials across our
processes and value chain to reduce our environmental
footprint.

Our commitment
We are committed to circularity in our operations and our
products. We do this by responsibly managing waste
throughout our operations and maximizing the lifetime of
materials in our systems, so extending their lifespans. To

Given the modular designs of our products, we ensure that
those in use at our customers’ sites can be upgraded to a
higher performance level without having to replace the
entire product. After use in the most advanced chip-
making factories, we further extend the lifetime of our
products by refurbishing systems and repurposing them for
other customers and semiconductor environments.

Our initiatives in the service and upgrading of parts ensure
that modules can be restored to and qualified as ‘as-new’
for re-use within our systems. This re-use practice is
becoming increasingly important in our efforts to transition
to a circular business model. In 2020, we set up a specific
cross-sectoral Re-use department with full ownership of
this objective to broaden and accelerate initiatives to re-
use parts, tools, modules and packaging while reducing
our total operational cost.

ASML ANNUAL REPORT 2020Our circular economy approach

Re-use program

Waste recycling

Field repair

Modular system design

Field upgrades

Materials
Upstream

Parts supply
Upstream

ASML
Midstream

Customers
Downstream

Waste treatment
collectors
Downstream

Re-use program

Waste recycling

As-New program

Extending life of ASML systems

REduce

Re-use

REcycle

Reduce waste
Reducing our environmental footprint and managing our
waste – both from our operations and products – is key to
ASML’s circular economy approach and our sustainability
practices. There are several waste sources within our
operations: these include office, packaging, and hazardous
waste from the chemicals we use in our processes.
Another source is product waste from parts resulting from
upgrades or defective spare parts.

We highlight the environmental impact of waste in our
sustainability strategy for the period 2019-2025. Our target
is to reduce our ‘waste intensity’ – the amount of measured
waste in kg per € million revenue – by 50% compared to
baseline year 2019, and increase material recycling to 85%
by 2025. These targets include hazardous and non-
hazardous waste.

To achieve these targets, we are focusing on reusing parts
and components in our systems, packaging and tools,
non-product related waste such as IT hardware, office
materials, canteen waste and construction waste from our
real estate portfolio. We will also continue to carefully
monitor the hazardous waste we generate in our
manufacturing processes.

We are committed to reducing, reusing and recycling our
waste as much as possible, rather than sending it on to an
incineration plant or landfill. Based on Lansink’s Ladder
Waste hierarchy, we manage our waste through proper
classification, separation and safe disposal. For more
information on our re-use of parts and materials, read
in What we achieved in 2020 - Circular economy -
Accelerating re-use of parts, tools and packaging and
materials.

Reducing our environmental footprint is a shared
responsibility between our operations and supply chain. To
this end, we are raising awareness of our circular economy
principles with our procurement managers and engaging
with suppliers.

Waste-management challenges
Managing waste from our operations is a complex issue
and relies on having detailed and accurate insight into
waste streams to and from ASML. While we’ve developed
procedures to monitor and measure waste that leaves our
premises, including packaging materials and organic waste
from our cafeterias, it’s much harder to gain insight on the
waste streams of our customers.

Our focus in 2020 was to gain better insight into all relevant
waste streams, including assessing what happens with our
waste at customer sites. We also conducted a feasibility
study into whether it makes sense to send used packaging
back to our manufacturing sites for re-use, comparing the
carbon footprint of transporting this used packaging
against the environmental gain of re-using it. The study
showed that the weight of the packaging is the most
relevant environmental aspect during transportation. These
assessments led to a lifecycle assessment model for
calculating the impact of waste and waste-reduction
activities that we will start applying in 2021.

We use the European Union’s waste-classification system
to determine what constitutes waste. The COVID-19
pandemic led to waste reduction in our cafeteria as more
people were working from home. This waste category
represents just a small percentage of our overall waste
production, however, so the decrease did not significantly
change our overall waste generation.

Hazardous waste
We use hazardous substances to produce and operate our
products and systems. This makes us subject to a variety
of governmental regulations relating to environmental
protection (as well as employee and product health and
safety), including the transport, use, storage, discharge,
handling, emission, generation, and disposal of hazardous
substances.

Hazardous waste can include lamps, batteries, hazardous
liquids, empty packaging from hazardous materials, and

ASML ANNUAL REPORT 2020

cleaning wipes and filters. Liquids, including acetone and sulfuric acid, are among the most important of our waste
streams. Most of these materials are recovered through recycling. In 2020, we completed the first phase of an
investigation into solutions for sulfuric acid re-use. Based on this investigation, we’ve designed and built an installation for
pilot testing. We will conduct the second phase of the investigation and testing in 2021.

We are committed to reducing our hazardous waste, aiming to draw as much as possible from materials, and using no
more than we need. The scope of our 2025 target to cut our waste intensity by 50% includes both hazardous and non-
hazardous waste.

Waste-management initiatives
To achieve our target of cutting our waste per revenue by 50% by 2025, we plan to launch new initiatives in 2021. In 2020,
we achieved waste reduction through several ongoing programs as listed in the table below. One of these programs
consisted of a series of local waste-reduction initiatives, initiated by our employees, including plastic recycling, working
with re-usable gloves in cleanrooms, and reducing the number of single-use coffee cups.

Programs
Local waste-reduction
programs

Examples
• Reduce single-use coffee cups
• Plastic recycling
• Reusable cleanroom gloves

Circular IT Lifecycle

• After four years of use, all functioning computers and laptops are given a second life. Around 6,500

laptops, representing 64,000 kg materials, were re-used in 2020.

• Defective computers are recycled in clean, separated streams of recycled plastic, iron, steel, copper,

aluminum, glass, and precious metals. We recycled nearly 24,000 kg materials in 2020.

Real-estate portfolio
management

• BREEAM score ‘Excellent’ for Campus 2.0
• Recycling construction waste

Return4Re-use

• Re-use parts and transportation packaging. This program led to nearly 4,000,000 kg of materials re-used

in 2020.

• The Reclaim program at our facility in the US focuses on re-using a constant flow of returned parts. This
program includes design for reclaim, improving the ability to re-use and recondition the assemblies to
enable further increase of circularity of parts and materials, so it can either be re-used for spare parts
or incorporated into new system builds. This program has been successfully running for more than a
decade.

Flexible cleanrooms

• Our new ‘flex’ cleanrooms can move between locations and be assembled quickly, while providing
the same standards and performance as our current fixed cleanrooms. More than 95% of materials
in the flex cleanroom system are re-usable, and has a lifespan of >30 years. In 2020 we used the flex
cleanroom two times.

Accelerating re-use of parts, tools and packaging and materials
We are committed to re-using parts, tools and packaging whenever possible in our value chain to reduce and prevent
waste, reduce costs, and accelerate learning. Working together with our customers and suppliers, we aim to
remanufacture used system parts, re-using as if they were new parts and preventing unnecessary waste.

We strongly accelerated our efforts in 2020, working towards formalizing and structuring this process, with the long-term
ambition of having the circular use of parts fully embedded in our business by 2025. We extended the re-use policy to all
parts and tools, and created a dedicated cross-sector Re-use department to drive material re-use on a global scale. We
apply re-use to all product-related parts and materials that come back from the field, from well-functioning used parts, to
defective parts and unused parts. We include parts that we can repair, harvest, upgrade, downgrade, and parts that are
reusable as 'As-New' parts after qualification.

With an eye towards a more sustainable future, the department will increase our re-use efforts through their dedicated
groups for re-use in D&E, Sourcing & Supply Chain, Customer Support and the Factories, and dedicated repair centers in
Manufacturing and Customer Support. These will focus on extending local repair centers for service parts, tools and
materials, and set up global repair centers to repair field and factory materials and to function as repair competence
centers. Designing for re-use in the product design phase is also a key component of preventing waste and helps us
meet our long-term goals.

It is not only about making sure that the sectors learn how to re-use and prevent scrap, but also about teaching them how
to adopt re-use into their normal ways of working. The department’s end-goal is to ensure re-use is a default activity
across everything that we do. Our dedicated cross-sector leadership will report into sector heads, who in turn will report to
a newly set up Re-use Board, chaired by our Chief Operations Officer and our Chief Technology Officer.

ASML ANNUAL REPORT 2020Creating a learning organization
Learning is also an important aspect of our Re-use
department: by designing for re-use, and improving
processes, we aim to close the learning loop and ultimately
prevent waste in the future.

To achieve this, we need to leverage our organization to
start working on re-use everywhere, in both big and small
ways. For example, by replacing scrap beds in our
factories with what we now call ‘re-use collection corners’,
we encourage employees to think of used parts as having
potential rather than being seen as waste.

Our re-use ambitions require a change of mindset.
Communication is key to this, through a top-down and
bottom-up approach. Setting the right example, talking to
teams, attending all-hands meetings, leveraging our Re-
use representatives across the sectors, and providing
support where necessary. Senior management also play a
crucial role in getting the message across, both to their
internal colleagues and to our suppliers.

Customer Support triage process
In 2020, we added an important step – a Customer
Support triage process – to the steps we follow when
handling used parts. We piloted this in the field in South
Korea and in our factories in Veldhoven, and plan to roll this
out in 2021.

This triage involves a new process to deal with a part that
is not working, either because it’s worn out or defective. In
the past, our teams would evaluate what was wrong with
the part, note the results down through material
notifications, and, where appropriate, send it back to the
relevant suppliers.

The new focus is on processing the defective parts and
thinking more critically about their potential. For parts that
are not scrap, this means thinking about what we can do
with them, either repairing them locally or sending them to
the next level of triage.

Repair centers
We are increasing ASML’s re-use efforts by extending local
repair centers for service parts and materials, and setting
up global repair centers for factory materials.

We currently have local repair centers in South Korea and
Taiwan and will be rolling out to China in 2021. Our
ambition is to increase the re-use rate of our parts to 85%
by 2025.

One of the ways to achieve this is by establishing more
local repair centers, with each region getting its own. There
are several benefits to enabling ‘simple’ repair and re-use
activities in the field, including reduced logistics time,
prevention of stocking of parts, and reduction of our
environmental impact. We will also be setting up global
repair centers in each factory hub in Wilton, San Diego,
Linkou, and Veldhoven.

Our activities are closely linked to our supply chain. We are
efficient at shipping new parts to the field for service and
for new systems, but we need to place more attention on
improving the return flow. To tackle this, we have set up a
supply chain re-use team, which looks at re-use planning
and reverse logistics to improve the flow of the part. We
also operate a re-use supplier network, connecting with
suppliers on re-use.

Overall, ASML is taking ownership of repairs, not only
looking to the original owner, the supplier, but taking
ownership if a supplier is not able to carry out repairs.

Maintaining As-New quality
We set high quality standards on As-New parts and expect
suppliers to be involved to meet these standards. This
qualification standard and requirement is identical to new
parts, meaning that the same specifications, performance
requirements, warranty, and so on, apply. We allow our
customers to audit the quality of As-New modules.

Our ambition is to increase the usage of As-New modules
in our systems, to prevent unnecessary scrapping of well-
functioning parts and modules. In 2020, we took an
important step forward in our procedures by extending the
program to service parts, taking us into the next phase of
the As-New program.

We are in the process of adopting this next phase, but this
will take time given that the qualification standards and
requirements are identical to new parts. We are looking at
our processes critically with the aim of simplifying them
while still ensuring high-quality standards.

As-New has been well received by our business sectors.
There’s been an active pull on the program by the
manufacturing lines wanting to see more parts qualifying
for As-New.

As-New SMASH system

The first As-New SMASH pilot was successfully built
and shipped in mid-2020, a major milestone for both
the SMASH project and the overall As-New program.
SMASH is one of the advanced alignment sensors in our
scanners. Depending on the configuration, the recovery
value ranges from €35,000 to €60,000 per sensor.
Following a second pilot, this project moved to high-
volume manufacturing in Q3 2020.

The SMASH As-New project is an early pilot for our
As-New program, helping to define what is needed
to requalify a module. The Wilton cross-sector team,
including Optical Fabrication, Planning, Logistics,
Warehousing, Technicians, Production Engineering,
Product Lifecycle Management and D&E have worked
together to implement the As-New processes and
procedures over a two-year period.

ASML ANNUAL REPORT 2020Re-use challenges and roadmap
We made good strides on re-use and are committed to
continuing to reduce waste streams. To fully embed our
Re-use vision however, there are several challenges to
overcome and processes to be defined. These include:

• Configuration control: To re-use As-New parts in a

system requires traceability of those parts. This means
we need to be able to trace its history, where it comes
from, and know how many times it was used and
repaired.

• Organization: Across our operations, there are a variety
of separate processes related to return and re-use. Our
Re-use department has been tasked with addressing
this, with a spotlight on aligning the overall end-to-end
process flow.

• Repair engineering and processes: Part of our new

focus is to create awareness on design for re-usability,
and define processes around how to include re-use in
redesigns and engineering changes.

In 2020, we have also added re-use to the different
milestones in the product generation process (PGP). This
means that re-use requirements are now part of the design
specs. In the ramp-up phase, we want to plan with re-
usability in mind when we order new parts. And in the
volume release phase, we want to make sure the repair
procedures are also reduced for volume, and not just the
build procedures.

Lifetime extension of mature
products
Our refurbished products business, known as MPS (Mature
Products and Services), refurbishes and upgrades our
older lithography systems to extend their lives and offer
associated services. MPS’ customer base is wide and
active in a variety of markets, especially in the More than
Moore space.

MPS focuses on the refurbishment of three product
families: the ‘classic’ PAS 5500 (around 2,000 systems and
customers worldwide), the first generation TWINSCAN AT
systems, and the first generation TWINSCAN XT systems.
Given the growing market and wider application space of
our PAS platform, ASML will invest significantly to extend
the lifetime of our PAS platform to at least 2030. For
TWINSCANs, we focus on measures to proactively
manage the announced end of life by guaranteeing the
availability of spare parts through 2021, with a program to
extend that as long as possible on a best-effort basis.

We believe our approach supports our customers' ambition
to extend their installed base lifespan, draw the best value
from their capital, and underpins our broader circular
economy approach.

PAS platform and implantable devices

Lithography is applied in a wide range of life-changing
medical device research to manufacture implantable
devices. And more companies are getting active in this
market – one that is expected to reach more than one
million implants per year by 2030. These companies
are using our technology because of the superior stage
control for stitching accuracy, 3DAlign, and High Bow
Wafer handling in our design.

Among these are neuroprobes, that can interface with
a human brain. Neuroprobes are being manufactured
using a PAS 350 by a startup company that will mass
produce brain machine interfaces (BMI). BMIs use brain
activity to control external devices, that will help people
with paralysis and inventing new technologies that will
expand our abilities, our community and our world.

Life cycle management
Managing the continued availability of spare parts is key to
the extended lifetime service we offer. A well-maintained
ASML lithography system can last for decades and be
used by more than one fab. Many ASML lithography
systems start out in cutting-edge fabs – once that fab
needs to upgrade, the lithography systems are given a new
lease of life in a fab where the manufacturer requires
comparatively less sophisticated chips, such as
accelerometers or radiofrequency chips. Almost every
lithography system that we’ve ever shipped is still in use at
a customer fab today.

We are making significant investments to ensure continued
supply for our PAS platform, either through redesigns, a
parts harvesting strategy or finding an alternative with
same form, fit and function. If this does not work, we are
generally able to secure components through Last Time
Buy – a supplier's 'last call' for a part or component before
production switches to its successor. Over time, when that
is no longer workable, we redesign parts.

Additionally, we track the spare parts we have in our
portfolio, see how they are being used, and when we
expect to run out of these parts. For the PAS systems, we
use this information to update our priorities for redesigning
parts. For the AT systems, we try to continue supplying
parts by harvesting them from systems that are
decommissioned by our customers.

Customers are continuing to use the current PAS 5500
installed base to produce devices on 200 mm wafers and
below, and we foresee this demand growing. We set
ourselves the ambition and target to provide our customers
with a guaranteed service roadmap until at least 2030. To
this end, we guarantee our customers that all support, and
the necessary services and spare parts they need to
maintain their systems, will be available for at least the next
10 years.

ASML ANNUAL REPORT 2020Dedicated resources
MPS has a dedicated worldwide customer support network, which includes our own resources for field refurbishment and
D&E. Our competence center in Linkou, Taiwan, concentrates mature product knowledge in one place. We have more
than 250 specialized engineers in the field, working together with our customers.

Our service engineers are an integral part of our customer-engineering teams, which jointly execute service tasks, as well
as being specialized in the more complex service activities that take place less often.

These service engineers report back on what they see happening in the field. We use this intelligence to keep our
customers informed and establish if we need to devise a service product. Based on this, we continuously update our
redesign plans.

As ASML’s technology and innovations evolve, the servicing of 20-year-old systems, and older, calls for expertise that is
not always readily available. In some cases, customer and ASML engineers with PAS 5500 expertise are retiring, while,
internally, engineers are attracted to our newer technology. It can be a challenge to maintain the competence of PAS 5500
service engineers, with expertise on the PAS systems, in the field. We seek to achieve this by developing a knowledge
base, training and job rotation.

Ultimately, all ASML’s systems will become legacy products. So MPS is a key part of ASML’s offering, enabling our
customers to get the best value from their capital investment and at the same time support the circularity principles we
aspire to around the globe.

Circular economy KPIs
The table below shows the key performance indicators (KPIs) and the related 2025 targets. In 2019, we adopted a new
sustainability strategy - as a result no comparative results for 2018 are available for new performance indicators. See Non-
financial statements - Non-financial indicators for our performance indicators (PIs) and related results.

KPI

Total waste generated normalized to revenue (kg/Million €) 1

Material recycling (% of total waste) 1
ASML PAS5500 systems sold still in use (in %) 2

2018

—

—
—

2019

417

80%
90%

2020

Target 2025

360 -50% of 2019
baseline
85%
n/a

85%
90%

1. Construction waste is excluded from the calculation of this indicator, because this waste is not resulting from the daily operations of ASML. The amount of construction waste

tends to fluctuate over the years and can therefore make the trend of the indicator unclear.

2. Due to a definition change in 2020, the KPI is based on PAS5500 systems sold. For other PAS systems it is not possible to determine the status of use mainly because

service contracts have been terminated.

SDG target

How we measure our performance

SDG target 12.2 - By 2030, achieve the sustainable management and efficient
use of natural resources

• Material recovery
• Promote circular procurement

SDG target 12.4 - By 2020, achieve the environmentally sound management of
chemicals and all wastes throughout their life cycle, in accordance with agreed
international frameworks, and significantly reduce their release to air, water
and soil in order to minimize their adverse impacts on human health and the
environment

SDG target 12.5 - By 2030, substantially reduce waste generation through
prevention, reduction, recycling and re-use

• RoHS / REACH compliance of parts used

• Waste reduction
•

Increase re-use of parts and modules in our
products

• Lifetime extension of used systems
• Re-use of packaging

ASML ANNUAL REPORT 2020Climate and energy

We are taking every step to lower our footprint to achieve zero emissions
across our operations. While increasing productivity of our products,
we are also working towards enhancing the energy efficiency of our products.

1,412 TJ
Energy consumption

100%
Renewable electricity

-30.8%
Net emissions footprint
(scope 1 & 2)

per €m revenue

0.6 kt
Value chain emission intensity
(scope 3)

Climate change has become an urgent matter around the
world. It affects every country on every continent. It’s a
challenge that requires global responsibility to limit a
temperature rise worldwide to well below 2°C. It poses
risks, but also opportunities for all companies.

At ASML, we’re committed to decreasing our greenhouse
gas (GHG) emissions into the atmosphere and reducing
our carbon footprint across our operations, as well as in
our value chain by enhancing the energy efficiency of our
products and utility installations that operates our
manufacturing building and offices.

We aim to invent, develop and manufacture our products in
a more environmentally friendly way, striving to ensure that
our products are manufactured and can be operated
responsibly across their entire life cycle.

Our renewable energy strategy sets out our ambition to
achieve zero emissions across our operations. We aim at
optimizing the efficiency of our utility installations in our
buildings as well as our manufacturing process. While
we’re increasing the productivity of our products, we're
also working towards reducing their energy consumption
to enhance our energy efficiency.

Climate change risk and opportunities
Climate change is a global challenge that requires urgent
action by everyone. This also impacts ASML. We identify
and assess the impact of climate-related risks and
opportunities through an Enterprise Risk Management
model. We assess risks both top-down (company-level)
and bottom-up (organization and process-level). Read
more in: How we manage risk - How we manage risk, How
we manage risk - Risk factors.

We assess the risk related to climate change and its
impact, using the assessment guidelines of the Task Force
on Climate-related Financial Disclosures (TCFD). We
defined climate-related risks relevant to us, as well as risks
related to the transition to a lower-carbon economy. As
national governments respond to the threat of climate

change, political and regulatory risk increases. Our TCFD
Recommendations: climate-related disclosure is available
on www.asml.com.

We have seven manufacturing sites around the world.
Veldhoven is the largest of these, representing 76% of our
total gross greenhouse gas emissions (scope 1 and 2
emissions). A signatory to the Paris Agreement, the
Netherlands has set its goal to reduce emissions by 49% in
2030, and expects a considerable contribution from
industry to achieve this. Should carbon pricing be
implemented, the financial cost of our energy consumption
will increase.

The physical risks of climate change – e.g. extreme
weather conditions, chronic heat waves (drought) and the
rise of sea level (floods) – that could disrupt our operations
and/or damage our assets are evaluated regularly in our
Enterprise Risk Management process. The impact of these
risks is deemed limited, as our main facilities and suppliers
are not located in high-risk areas.

In addition, climate change may trigger issues concerning
the availability of natural resources, and energy or health
and safety matters. It may also indirectly impact the
political situation in a country, which may cause supply-
chain disruption in first tier and beyond. We see that these
risks already exist in our industry. We monitor these, as
changes can occur at any time.

With increased global awareness of climate change,
managing the environmental impact of products is a
concern for our customers and other stakeholders, and
their preference may shift towards lower carbon-footprint
products. While helping the semiconductor industry to
continue to realize Moore’s Law, we are committed to
taking every step to lower our carbon footprint.

To realize this, we have deployed a renewable energy
strategy to reduce exposure to dependency on fossil fuel
and enhanced energy efficiency in our operations by
optimizing our global real-estate portfolio and efficiency of

ASML ANNUAL REPORT 2020asset installations. Climate change and the increase in
outside temperature will also force us to monitor the
cooling capacity in our factory locations. If necessary, we
may need to install more efficient and effective cooling
systems, which will reduce overall energy consumption of
the installed cooling capacity.

We are committed to taking every step required to lower
our carbon footprint. Our sustainability strategy sets out
our ambition to achieve zero net emissions across our
operations by 2025. Read more in: Carbon footprint of our
operations.

Climate and energy is a major focus area in our
sustainability strategy to combat climate change. Being at
the front end of the semiconductor value chain, our direct
contribution and influence on low carbon end-use products
is indirectly visible. Nevertheless, we recognize our
responsibility in this entire value chain ecosystem. Read
more in: What guides us, The role of lithography.

By providing more innovative leading-edge lithography
systems to the IDMs and foundries, we contribute to a
more sustainable semiconductor production process (clean
tech). Besides the production process, our technology
enables our customers to design and manufacture more
powerful chips that consume less energy (low carbon) for
the end-markets. Not only are we focused on the end
products of our customers, we also a focus on energy
efficiency in their semiconductor manufacturing facilities.

Paris Agreement

The Netherlands is part of the UNFCCC and a signatory
to the Paris Agreement. The Paris Agreement’s central
aim is to strengthen the global response to the threat
of climate change by keeping a global temperature rise
this century well below 2°C above pre-industrial levels
and to pursue efforts to limit the temperature increase
even further to 1.5°C. The Dutch government has set
a goal to reduce its GHG emissions by 49% in 2030.
Dutch industry's ultimate aim is to be circular and to emit
virtually no greenhouse gas by 2050. Factories will then
run on sustainable electricity from the sun and wind, or
energy from geothermal energy, hydrogen and biogas.
By 2030, the industry must already emit considerably
less CO
full sustainability. Politicians can implement measures
to achieve these goals, such as implementing carbon-
pricing mechanisms to reduce GHG emissions.

That is an intermediate step on the way to

Energy efficiency of our products
Growing consumer demand for faster, ever-more
sophisticated devices in our increasingly interconnected
world fuels the need for constant innovation and
development in the semiconductor industry. Lithography is
one of the driving forces in creating more powerful, faster,
and cheaper chips. But just as the demand for enhanced
chip functionality increases, so does the complexity of our
lithography systems. Gross energy consumption of both
lithography-equipment manufacturers and chip
manufacturers is expected to rise, due to increasing IC
demand and energy consumption of the systems needed
to enable the production of higher-capability chips while
consuming less energy per chip while in use.

To enable this, chip manufacturers look to us to continue to
achieve lithography-enabled shrink with the aim of
producing higher-density chips. This translates into stricter
requirements for our systems, which means they use more
power to run. By increasing the productivity of ASML’s
lithography tools and with the higher resolution, more
products can be printed on a wafer. In addition, by
enhancing the resolution with EUV and High-NA, together
with scaling of overlay and pattern fidelity control, we
enhance energy efficiency of the produced chips while in
use.

Our ongoing challenge is to meet our customers’
expectations of increasing the performance of our products
while also reducing their energy consumption.

Our product-efficiency strategy
Our product-efficiency strategy is based on making our
systems more efficient and improving the conversion
efficiency of wall-plug power into EUV light, while ensuring
we use energy in the most efficient way. Our focus areas
include:

• Reduction of energy use per wafer output
• Responsible use of energy by committing to only using

the energy we need and eliminating waste

• Contributing to energy-efficient facilities by providing

more energy-efficient installation solutions

We want to increase throughput, both by increasing a
system’s source power and its efficiency by optimizing
sequences, control schemes and other components, such
as higher reflectivity mirrors and faster stages. The benefit
to our customers is the ability to produce more wafers per
day, as well as increasing capacity with the same number
of systems. This enables customers to increase
productivity without building a new fab, which translates
into less overall energy use. Most of these enhancements
are also offered as upgrades for the installed base tools.

A way to enhance energy efficiency in EUV relates to the
conversion efficiency of laser radiation into EUV. Most
energy is used in the conversion process, and it’s the key
focus area for our design efforts to make our systems more
efficient. If we can increase our conversion efficiency, we
can decrease a system’s energy consumption at constant
wafer output. Making this happen, while at the same time
limiting the energy loss by reducing the collector
degradation, pellicle transmission and mask defectivity are
the key challenges for our R&D teams.

Managing our energy efficiency
With our EUV systems now being used in high-volume
manufacturing at customer sites, reducing their energy use
has become a priority for us, our customers and suppliers.

In 2020, we measured the energy efficiency of our EUV
3400C, which showed significant improvement compared
to its predecessor, the EUV 3400B. The energy
consumption decreased from 1.4 MW to 1.3 MW thanks to
more energy-efficient prevac systems, while productivity at
30 mJ resist dose increased from 107 wafers per hour
(wph) in 2018 to 136 wph in 2020. We achieved a faster
run rate (higher throughput) for the system by significant
improvements in the transmission of the optical column
and improved wafer management, reducing the so-called
scanner overhead.

ASML ANNUAL REPORT 2020In 2020, we also completed a pilot project at our factory in
Veldhoven aimed at reducing the energy used for the
hydrogen abatement system. Our systems need hydrogen
for protecting the optics in the scanner and the EUV
source. We tested more efficient vacuum pumps that
remove hydrogen from our systems, so our customers can
install them as well.

We also found ways, together with suppliers, to use cooling
water of a higher temperature to remove the heat in the
lithography scanner and its source. This will reduce the
amount of energy needed to cool the system. In 2020, we
began investigating how this more energy-efficient cooling
method can be applied with the drive laser and started to
engage with our customers on it. As this involves
significant changes to the hardware of our suppliers and
installation in our customer fabs, this project is part of our
long-term plan to reduce the wall-plug power needed per
wafer pass by 60% by 2025 (baseline year 2018). If EUV
systems can operate in slightly higher temperatures, our
customers can save energy in cooling their factories.
Implementing energy-reduction and energy-efficiency
measures needs to be done carefully to limit the impact on
the uptime and productivity of our customers’ systems.

Energy-efficiency challenges
By 2025, we aim to reduce the energy use per wafer pass
of our future-generation NXE systems by 60% compared
to the previous model, the NXE:3400B (baseline 2018).

To achieve this, we need to overcome several strategic
technical challenges. These include: ways to create EUV
plasma in the most efficient way; developing materials and
coatings dealing with higher EUV intensities; and improving
the heat management of optical components, including the
heat management of the wafer itself, which heats up
through the exposure light during the production process.

These technical challenges are particularly tough to solve,
given that there is no precedent anywhere in the world. At
ASML, we need to find these solutions ourselves and this
type of experimentation presents all sorts of challenges.
Solving these challenges requires ongoing innovation and
relies heavily on the increased collaboration within our
ecosystem of customers, suppliers and knowledge
institutions.

EUV and energy use
EUV is characterized by single exposure. This means
several exposures can be replaced by one single exposure
(patterning of a chip). With EUV, the number of non-litho
processing steps can be reduced by up to three to five
times; this reduces the production cycle time significantly.
The fab also benefits from reduced energy use for the
deposition, etching and cleaning steps. Therefore, when
our customers use EUV systems to create faster and more
energy-efficient chips, the total energy consumption of the
fab might remain about the same as before, but with a
larger portion of the energy being used by (EUV)
lithography creating faster and more energy-efficient chips.

Our next-generation EUV systems, High-NA (0.55NA), will
enable further shrink and partly eliminate complicated
exposure schemes involving several 0.33NA exposures by
a single 0.55NA exposure. With High-NA, the number of
non-litho processing steps can therefore also be reduced.
This will effectively limit the energy consumption per wafer
further.

Inside a fab: take a closer look

A semiconductor fabrication plant, commonly known
as a fab, is a factory where devices such as integrated
circuit (IC) chips are manufactured. These are the chips
we find in everyday electrical and electronic devices.
The making of a semiconductor device involves a
multiple-step lithography sequence to create a pattern
in the photoresist, as well as chemical processing,
during which electronic circuits are gradually created
on a silicon wafer. These steps include etching, ion
implantation, deposition and photoresist coating.

ICs are made of layers, from about 0.005 to 0.1 mm
thick, that are built on the semiconductor substrate one
layer at a time, with perhaps 50 or more layers in a final
chip. After adding a layer, so-called deposition, the layer
is etched, using lines and geometric shapes in the exact
locations where the material is deposited.

The entire manufacturing process, from start to
packaged chips ready for shipment, takes six to eight
weeks. All fabrication takes place inside the cleanrooms
of these fabs. In more advanced semiconductor devices,
such as modern 7 nm nodes, fabrication can take
between 11-13 weeks on average.

The heart of a fab is the cleanroom, an area where
the environment is controlled to eliminate dust on a
nanoscale. All fabrication steps take place here. It also
houses the lithography system and other machinery
required for IC production. Under the desk floor is the so-
called sub fab, which contains auxiliary equipment such
as the drive laser. The utility fab – where the pumping
and abatement systems for vacuum and cooling are
located – is usually found one floor below this.

ASML ANNUAL REPORT 2020Preliminary results show that the total energy consumption of a patterning strategy with EUV is not necessarily higher than
that of the most complex multi-patterning DUV strategies.

The tables below provide an overview of our system performance achievements in terms of output and energy usage to
achieve this output.

Platform
System

Year of energy measurement
Energy consumption (in MW)

Throughput (wph)
Energy efficiency per wafer pass (in kWh)
Wafers per year

Platform
System

DUV
Immersion
NXT:2000i

2020
0.13 MW

275

0.51 kWh
2,409,000

NXT:2050i

2020
0.13 MW

295
0.45 kWh
2,584,200

XT:860M

2017
0.07 MW

240
0.28 kWh
2,102,400

DUV
Dry
XT:1460

2020
0.06 MW

209

0.27 kWh
1,830,840

NXT:1470

2020
0.11 MW

277

0.38 kWh
2,435,280

EUV
30 mJ/cm2 dose

YieldStar

NXT:1980Di

2015
0.13 MW

275
0.51 kWh
2,409,000

EUV
20 mJ/cm2
dose

NXE:3350B NXE:3400B NXE:3400C

YS350E

YS375F

Year of energy measurement

2015

2018

2020

2017

2019

Energy consumption (in MW)

1.15 MW

1.40 MW

1.31 MW

0.01 MW

Throughput (wph)
Energy efficiency per wafer pass (in kWh)

59
19.49 kWh

107
13.08 kWh

136
9.64 kWh

Wafers per year

516,840

937,320

1,191,360

n/a
n/a

n/a

Note: 'dose energy in mJ' refers to the power density per second of expose per cm2. The number of 'wafers per day' calculated assumes 100%
uptime and 100% utilization.

ASML ANNUAL REPORT 2020Carbon footprint of our operations
We are committed to minimizing our energy consumption, the environmental impact of our operations and our related
carbon footprint. We are doing this by enhancing the energy efficiency of our buildings and, where possible, shifting to
renewable energy. We also aim to reduce emissions in our value chain.

We manage the environmental impact of our activities through a strong governance structure, chaired by our Chief
Operating Officer, and our ISO14001 certified management system. This is further supported by ASML’s sustainability
strategy, and our Environmental Health and Safety (EHS) policy.

We review our environmental risks each year through our Enterprise Risk Management and business continuity processes.
Read more in: Howe we manage risk. We also assess the risks related to climate change, using the guidelines of the Task
Force on Climate-related Financial Disclosure (TCFD). Read more in: Climate change risk and opportunities. Our TCFD
disclosure document is available on www.asml.com.

Our Greenhouse Gas (GHG) emissions

Scope 1

Direct CO2 emissions
from our operations

Scope 2

Scope 3

Indirect emissions from energy
use across our operations

All other indirect emissions
in the value chain from make
and use of our products

Status 2020:
15 kilotonne

Target 2025:

Zero

Status 2020:
0 kilotonne

Target 2025:

Zero

Status 2020:
8,400 kilotonne

Target 2025:

Reduce intensity

Scope 1 emissions
Compared to our peers in the semiconductor industry, our
energy consumption and related carbon footprint is
relatively low. As a manufacturer of lithography equipment,
our main direct CO2 emissions come from the fossil fuels
we use in the testing phase after the assembly of our
immersion lithography systems. This means our
lithography systems do not run full field in our operations.

Scope 2 emissions
Electricity accounts for nearly 80% of the energy we use at
ASML. Most of our electricity consumption relates to the
manufacturing of chip-making equipment – from assembly
to testing lithography and other systems – and maintaining
consistent climate conditions, such as constant
temperature, humidity and air quality.

Achieving energy efficiency
We view 2020 as a landmark year, achieving our goals set
out in our multi-year energy master plan for the period
2016-2020, and raised the bar for the next energy master
plan for 2021-2025. Despite the increase in number of
facility cleanrooms in recent years, we realized a 10%
energy saving compared to the 2015 energy-consumption
baseline. This translates to an achievement of 114 TJ
savings by year-end 2020, which is above our target of 111
TJ savings. We also reached our goal to use 100%
renewable electricity (scope 2). In doing so, we confirmed

our commitment to minimizing the impact of our activities
on the environment by reducing our environmental footprint
and extending our commitment to renewable energy.

Over the past 10 years, we have executed nearly 100
energy saving projects worth cumulatively over 260 TJ
savings, representing 28% of our energy footprint since
2010. Over the same period, our natural gas consumption
has dropped in absolute term from 382 TJ to 293 TJ as a
result of energy savings measures – and this despite the
growth and constructions of new facilities (cleanrooms and
offices).

Projects we have run over the past few years to achieve
further energy savings are, for example, more energy-
efficient technical installations and improvements in the
production process. These included measures such as the
recovery of exhaust heat, and efforts to reduce the energy
consumption of our cleanrooms, where maintaining the
right conditions is energy intensive. The projects were
completed and implemented in our operations in 2020,
with energy savings taking effect.

Following on from the closure of the energy master plan
2016-2020, we developed a Climate & Renewable Energy
Sustainability program 2021-2025. Our target is to achieve
carbon neutrality in our operations for both scope 1 and
scope 2. While developing this plan, we reassessed in

ASML ANNUAL REPORT 20202019 the scope of our energy and emissions reporting by
assessing materiality per real estate location, and the
environmental impact of activities at these locations.

From this assessment, we concluded we needed to
expand the scope of reporting in terms of active locations:
from four main manufacturing sites in the 2016-2020
reporting years, to all industrial sites and offices with more
than 250 FTEs. This will result in an increase in our
reporting from 20 locations in 2020 to 57 locations in 2021.
This will increase our scope of reporting to over 95% of our
worldwide CO2 emissions. One of the ambitions in the field
of emissions and energy is to achieve direct energy savings
of 100 TJ by 2025.

Renewable energy strategy
In 2020, we achieved our goal of using 100% renewable
electricity through a combination of buying green
electricity and financing renewable electricity-generating
projects. Our ambition is to increase the share of direct
green energy purchases (so-called bundled renewable
electricity) from renewable electricity produced close to our
premises in the Netherlands, and reduce the share of
certificates. For the US and Asia, our ambition is to
purchase renewable energy attribute certificates
(respectively RECs and I-RECs) and monitor the evolution
of the renewable in those countries.

All three hydro-energy plants in Norway that we co-
financed through our GO2 project over the past few years
were finalized and in operation in 2020. They generate
26,000 MWh of energy per year, which is fed into the Dutch
grid.

In 2021, we plan to install 4,700m2 solar panels on our
campus in Veldhoven, which are expected to provide the
equivalent of 3 TJ/yr capacity production.

Generating green electricity in Norway

Through the GO2 project, ASML has co-financed the
construction of three small hydropower plants in the
rugged countryside north and south of Bergen, Norway.
The Sandvik, Valdra and Nottveit installations are run-
of-river power plants, which capture energy from fast-
moving rivers and have a low local ecological impact.

The last of the three power plants, the Nottveit plant,
became operational in 2020. Together, the plants have a
production capacity of 26,000 MWh of green electricity
annually, which is fed into the NorNed cable between
Norway and the Netherlands.

Optimizing our real-estate portfolio
As we grow as a company, we strive to optimize our real-
estate portfolio. The marked increase in working from
home following Dutch containment measures also
prompted us to take a closer look at the need for office
space and determine whether we may need less space
than anticipated. Optimizing the use of every square meter
in our portfolio contributes to reducing our environmental
footprint: each square meter saved is a square meter we
don’t need to heat, cool, ventilate or light up.

When building new offices and manufacturing sites, we
take the opportunity to make our buildings as
environmentally sound as possible. With an eye on future
growth, for example, our new campus in Veldhoven is
designed with a strong sustainability focus. Its design and
use of materials will be assessed on sustainability
performance using BREEAM guidelines: we aim to achieve
a BREEAM score of ‘excellent’. From 2020 onwards, we
plan to adhere to BREEAM guidelines for all our new
buildings.

Reviewing our value-chain carbon
footprint
We recognize that environmental impact goes beyond our
operations. In general, most of the environmental impact of
energy consumption in our industry comes from the use of
products, and the greenhouse gas emissions in the
downstream and upstream value chain.

We use the guidance from the Greenhouse Gas Protocol –
the organization that provides widely used international
standards for emissions reporting – for the calculation of
these scope 3 emissions. In 2019, we conducted our first
inventory of scope 3 emissions. In 2020, we focused on
maturing the data used and parameter assumptions
applied.

Results shows that the indirect emissions (scope 3) from
upstream and downstream value chains account for
around 98% of the total emissions footprint (scope 1, 2
and 3). Of this, indirect emissions in the value chain, the
category ‘downstream' – use of sold products at our
customers’ sites – accounts for 60%, and the category
‘upstream' – emissions related to the goods and services
we buy – accounts for 30%. The remaining 10% of our
scope 3 emissions relates to, among other things, activities
linked to transportation, business travel, and commuting.

In 2020, we defined our scope 3 target for 2025. In this
process, we gave our best estimate for projecting
upstream and downstream emissions, guided by our
financial growth expectations. For more information, see
section Financial performance.

Taking into account the change in product mix (an increase
in units of EUV systems), and the fact that our output in
terms of unit product manufactured is expected to
increase, the overall emissions in the entire value chain is
expected to rise. By executing our sustainability strategy
successfully, we can reduce the intensity of our scope 3
carbon footprint. The intensity is measured by the total
scope 3 emissions (in kton) normalized to the total
revenues (in € million).

Recognizing that we depend on our suppliers, and that
most suppliers have not yet established greenhouse gas
inventory mechanisms, we also encourage our value chain
partners to work with us to jointly reduce greenhouse gas
emissions.

In 2020, we introduced rail freight for shipments to Asia to
reduce CO2 emissions and costs. As a result of global
travel restrictions, the number of business travel decreased
significantly in 2020.

ASML ANNUAL REPORT 2020)
t
k

n
i
(

n
o
s
s
m
e
G
H
G

Scope 3 emissions trend

14,000

12,000

10,000

8,000

6,000

4,000

2,000

3,900

400
2,200

2019

5,300

700
2,400

2020

7,600

1,000

3,300

2025 projection

Upstream (purchased goods & services)

Own operations related

Downstream (use of sold products)

Intensity rate

1.00

0.75

0.50

n
e
n
s
i
t
y

r
a
e

Rail transport, lower emissions

Our plan to introduce product transportation by rail
freight accelerated, resulting in the delivery of a ‘move
set’ (the packaging and tools needed to relocate a
machine) from Veldhoven to China by rail for the first
time.

Rail freight also debuted in Japan. Our supply chain team
ruled out ocean freight due to the lengthy six- to seven-
week travel time, but realized that a hybrid option –
including rail – was a significantly better alternative. The
goods traveled from the Netherlands to China by train,
from China to Japan by ship, and finally to the supplier’s
location by truck. The total transport time was three and
a half weeks.

Our environmental management system
We are committed to having an environmental
management system (EMS) in place that helps us monitor
our energy and emissions, improve performance, and
enhance efficiency. Our EMS is integrated into our
combined environmental, health and safety (EHS)
management system. All our facilities operate on the basis
of this EHS management system. Our EHS management
system is ISO:14001 certified, and structured in
accordance with ISO:45001 requirements. On November
2020 we received ISO:14001 re-certification for the next
three years. This certification gives our stakeholders
confidence in our commitment to achieving our
environmental goals.

We measure progress in our emissions reductions by
monitoring our scope 1, 2 and 3 emissions, representing
three key performance indicators. Our participation in the
annual assessment by the Carbon Disclosure Project,
(CDP) a non-profit global disclosure program, also helps
steer our environmental initiatives. Our score in the most
recent CDP Climate Change 2020 assessment is C, which
is the same level as the sector average.

In 2020, we received a fine for a missing environmental
permit for our facility in Beijing. We are in the process of
resolving the issue and obtaining the correct permit.
Nevertheless, no environmental incident occurred.

Water management
Semiconductor manufacturing processes use a lot of
water. It’s a scarce resource and availability is a global
challenge. Although water is an essential resource in the
semiconductor manufacturing process of our customers,
water use in our own operations is limited. ASML’s
products are designed to use water according to a ‘closed-
loop’ (recycling) system. The aim of using water in our
manufacturing process is to keep the system cool against
the heat released during the exposure process.

Water consumption at ASML is more than 20 times less
than most companies in the semiconductor industry.
Nevertheless, we promote the responsible use of water
throughout our company. Our water consumption in 2020
increased slightly to 860,000 cubic meters from 838,000
cubic meters in 2019, attributed to the expansion of the
manufacturing facility in Veldhoven and an increase in
product output. We use water from the municipal water
supply.

While disruptions in access to water may represent a
significant risk for some of our customers, water-related
risk for ASML is limited. We have seven manufacturing
sites, of which the four main facilities are Veldhoven (NL),
San Diego (US), Wilton (US), Linkou (TW). Our main
facilities are not located in water high or extreme stress
areas as classified by the World Resources Institute (WRI).
Our San Diego site, however, is in a region where access to
water can pose a risk. The other facilities are located in
Beijing (CN), Pyeongtaek (KO) and San Jose (US). Activities
in these locations relate to the assembly of modules for our
lithography systems.

ASML ANNUAL REPORT 2020

Climate and energy KPIs
The table below shows the key performance indicators (KPIs) and the related 2025 targets. In 2019, we adopted a new
sustainability strategy - as a result no comparative results for 2018 are available for new performance indicators. See Non-
financial statements - Non-financial indicators for our performance indicators (PIs) and related results.

KPI

System energy efficiency NXE:3x00 1
System

Throughput

Measured energy efficiency (kWh / wafer pass) 2

Renewable electricity (of total electricity purchased)

Renewable energy attributes (in kton)

Fossil fuels consumed (in TJ) by location
Veldhoven

Wilton

Linkou
San Diego

Total

CO2 footprint (in kt) - Gross 3,4
Scope 1 - Direct emissions from fossil fuels in our operations
Scope 2 - Indirect emissions from energy consumption
Scope 3 - Indirect emissions from total value chain
Total footprint (in kt) - Gross

CO2 footprint (in kt) - Net 3,4
Scope 1 - Direct emissions from fossil fuels in our operations
Scope 2 - Indirect emissions from energy consumption
Scope 3 - Indirect emissions from total value chain

Total footprint (in kt) - Net

2018

2019

2020

Target 2025

NXE:3400B

n/a

NXE: 3400C

107

13.1

86.3%

—

—
—

—

2018

17.5
133.0

150.5

2018

17.5
15.4

32.9

—

96.6%

137

159

111

—
46

316

2019

16.9
141.4
6,500.0
6,658.3

2019

16.9
5.3
6,500.0

6,522.2

136

9.6

-60% from
2018 baseline

100.0%

140

141

112

—
40

293

2020

Target 2025

15.4
139.8
8,400.0
8,555.2

2020
15.4

0
8,400.0

8,415.4

Target 2025

Zero
Zero
Reduce

1. The 2018 measurement of the NXE:3400B is the baseline for the KPI target. No new systems have been introduced in 2019.
2. System-energy efficiency is measured according to the SEMI S23 standard, and scaled to 100% availability of our systems.

3. Market-based conversion factors are used to calculate the scope 1 and scope 2 CO
emissions in kton. The consolidation approach of emissions: financial control (as outlined
2

in the ‘GHG Protocol Corporate Standard’).

4. The guidance from the Greenhouse Gas Protocol – the organization that provides widely used international standards for emissions reporting – is used for the

calculation of the scope 3 emissions.

Contributing to the Sustainable Development Goals
Our ambitions, commitments and programs as described in this chapter contribute to the following SDGs. For more
information on the performance, read Non-financial statements - Non-financial indicators.

SDG target
SDG target 13.1 - Strengthen resilience and adaptive capacity to climate-
related hazards and natural disasters in all countries

How we measure our performance
• Energy efficiency of our products measured per

wafer pass

• Renewable electricity strategy
• Scope 1 and 2 emissions
• Optimize real estate to enhance energy efficiency

ASML ANNUAL REPORT 2020CFO financial
review

ASML ANNUAL REPORT 2020Financial performance

Leading the semiconductor industry by innovation, we have the right tools
in place to execute our long-term financial strategy and expect to achieve
continued sustainable growth for the years ahead.

€14.0bn
Net sales
€11.8bn Asia
€1.7bn US
€0.5bn EMEA

48.6%
Gross margin

€2.3bn
Capital return
€1.2bn Share buyback
€1.1bn Dividend paid

€8.49
Earnings per share

mature nodes, due to further broadening of the application
space fueled by the global digital transition. Memory grew
by €0.5 billion, or 20%, relative to our 30% growth
expectations. While the growth related to the recovery of
the Memory market was substantial as customers saw
improving demand in data centers and consumer
electronics, it was lower than expected as customers'
allocation shifted more towards Logic throughout the year.
We expect this recovery in Memory to continue into 2021
as lithography tool utilization is already high, while
customers indicate inventory levels continue to come down
with expected further tightening of supply throughout the
year.

Net service and field option sales grew by €0.8 billion,
or 30%, relative to our 20% growth expectations, driven by
an increase in the sales of productivity and focus upgrade
packages, in combination with a growing installed base.
Our services and upgrades business will continue to scale
as our installed base grows, with increasing contribution
from EUV service revenue as these systems run more
wafers in volume manufacturing. We expect significant
demand for upgrades, as customers utilize upgrades to
increase capacity and improve imaging and overlay
performance required on future nodes.

Roger Dassen, Chief Financial Officer

This was a year where the world was consumed with
uncertainty caused by the COVID-19 pandemic. We have
experienced limited impact on our manufacturing
capability, although there have been additional challenges
with absenteeism, transportation and support logistics that
we have had to manage. Some of the quarantine
requirements have had an impact on our efficiency, while
travel restrictions posed challenges at times for our service
organization. Additionally, some of our suppliers
experienced temporary closures resulting from
governmental lockdowns in the first half of the year.
Despite all of these challenges, we successfully worked
with our customers and suppliers to find creative solutions
to support our operations.

Customer demand remained strong throughout the year,
seen through a strong order intake and record sales. Many
investments of our customers are strategic and support
their technology roadmaps. However, we did experience
some impact in parts of the year. In the first half of the year,
some customers asked us to expedite the delivery of EUV
systems by shipping the systems before the normal
Factory Acceptance Tests (FAT). This resulted in revenue
recognition being delayed from shipment until after a
successful Site Acceptance Test (SAT) at the customer site,
each of which was completed before the end of Q3.
Additionally, there have been some delays in fab readiness
at customers, which delays timing of our shipments.

We successfully navigated these challenges, resulting in
net sales growing by €2.2 billion in 2020 to €14.0 billion,
higher than we expected at the beginning of the year, as a
result of increased sales in the Logic market, Memory
market, as well as our installed base management
business. Logic grew by €0.8 billion, or 13%, compared to
flat initial expectations This was due to customers
continuing to see strong demand for both advanced and
mature nodes in support of the build-up of the digital
infrastructure, which includes secular growth drivers, such
as 5G, AI and high-performance compute. We expect
Logic demand to remain healthy for both leading edge and

ASML ANNUAL REPORT 2020In EUV, although our systems are still climbing the maturity
curve, we continue to see increased customer confidence
in the technology, which is translating into expanding layer
counts in Logic and initial deployment of EUV in Memory.
This led to EUV system revenue of €4.5 billion in 2020, an
increase of €1.7 billion compared to 2019. We successfully
increased our manufacturing output in 2020 to 35 systems,
however due to fab readiness of our customers, we
shipped 32 of these systems, recognizing revenue for 31
systems. The remaining 3 manufactured systems will ship
in early 2021.

In our DUV business, we shipped the first NXT:2050i and
NXT:1470 in 2020. The NXT:2050i is based on a new
version of the NXT platform, where the reticle stage, the
wafer stage, the projection lens and exposure laser all
contain performance enhancements. With these
innovations, the systems deliver increased customer value
via improved performance in overlay and productivity, and
are therefore critical in supporting their next node
introductions. The NXT:1470 is the first dry NXT system
building on the NXT immersion platform, enabling
significant improvements in matched machine overlay and
productivity. This will help our customers deal with the
increasing cost of complexity when introducing new nodes.
The higher output per fab area from an NXT system also
maximizes fab capacity and therefore improves customer
profitability.

Gross profit as a percentage of net sales increased from
44.7% in 2019 to 48.6% in 2020, mainly attributable to
expansion in our EUV profitability and growth in our service
and upgrade sales. We continue to drive profitability of our
EUV systems and service business, and as a result have
started to achieve over 40% system gross margin and
positive gross margin on our service business in 2020. We
will continue to drive margin improvement in both systems
and service via cost reduction and delivering more value
leading to higher selling prices. We expect EUV systems to
reach corporate gross margins in the course of 2021, while
we expect EUV service margins to improve towards
corporate margins over the coming years.

We continue to invest in the future of ASML, with a
significant increase in 2020 capital expenditures to
€1.0 billion. The increase is in line with our roadmap to
increase the value of EUV in high-volume manufacturing,
the development of High-NA, investments in capital
expenditures at our partner Carl Zeiss SMT, as well as
programs supporting our holistic lithography solutions in
DUV and Applications.

We incurred an increase in our effective tax rate to 13.7%,
which is more in line with our expected long-term effective
tax rate. Our effective tax rate was lower in 2019 due to
one-time restructuring benefits and US Tax Reform
regulations.

Liquidity and free cash flow were focus areas in 2020,
similar to 2019, however in 2020 we faced additional risk
and uncertainty due to the COVID-19 pandemic, which
forced us to implement various cash preservation
measures early in 2020 to mitigate this risk and uncertainty.
Apart from COVID-19 risk mitigation, we started to see the
benefits of our working capital improvement initiatives in
Q4 2020, allowing us to grow our free cash flow by €1.2
billion in 2020 in connection with our €1.0 billion increase in
net income. We achieved this growth while continuing to
invest significantly in capital expenditures and R&D in
support of our roadmap and planned capacity ramp, as
well as being able to return excess cash to our
shareholders through growing dividends and share
buybacks, totaling €2.3 billion this year. We expect strong
free cash flow, increasing investments in the future and
significant cash returned to shareholders for next year.

Overall, it was another strong year for ASML, driven by
continued strength in Logic, the start of a recovery in
Memory, growth in our installed base management, the
positive momentum in EUV, and sustained strength in our
DUV business. The expanding end-market applications
that fuel demand for both advanced and mature nodes
provide a sound basis for continued growth, and we
continue to be excited about the future.

ASML ANNUAL REPORT 2020ASML operations update on key performance indicators
The following table presents the KPIs used by our Board of Management and senior management to measure
performance. For our five-year financial summary, read Other appendices - Appendix - Selected financial data.

Year ended December 31 (€, in millions, unless otherwise indicated)

2019

2020

Sales
Total net sales

Increase in total net sales (%)

Net system sales

Net service and field option sales
Sales of lithography systems (in units) 2
Immersion systems recognized (in units)

EUV systems recognized (in units)

Profitability
Gross profit

Income from operations

Net income

Liquidity
Cash and cash equivalents

Short-term investments

Net cash provided by operating activities
Free cash flow 3

11,820.0

8.0

8,996.2

2,823.8

229

13,978.5

18.3

10,316.6

3,661.9

258

5,279.8

2,790.8

2,592.3

44.7

23.6

21.9

6,797.2

4,051.5

3,553.7

48.6

29.0

25.4

3,532.3

1,185.8

3,276.4
2,390.5

6,049.4

1,302.2

4,627.6
3,626.8

1. As a percentage of total net sales.
2. Lithography systems do not include metrology and inspection systems.
3. Free cash flow is a non-GAAP measure and is defined as net cash provided by operating activities (2020: €4,627.6 million and 2019: €3,276.4 million) minus purchase
of property, plant and equipment (2020: €962.0 million and 2019: €766.6 million) and purchase of intangible assets (2020: €38.8 million and 2019: €119.3 million). We
believe that free cash flow is an important liquidity metric for our investors, reflecting cash that is available for acquisitions, to repay debt and to return money to our
shareholders by means of dividends and share buybacks. Purchase of property, plant and equipment and purchase of intangible assets are deducted from net cash
provided by operating activities because these payments are necessary to support the maintenance and investments in our assets to maintain the current asset base.

Operating results of 2020 compared to 2019

Year ended December 31 (€, in millions)

Net system sales
Net service and field option sales

Total net sales

Cost of system sales
Cost of service and field option sales

Total cost of sales

2020

%1 % Change

2019

8,996.2
2,823.8

76.1
23.9

10,316.6
3,661.9

73.8
26.2

11,820.0 100.0

13,978.5 100.0

(4,676.2)
(1,864.0)

(39.6)
(15.8)

(5,169.3)
(2,012.0)

(37.0)
(14.4)

(6,540.2)

(55.3)

(7,181.3)

(51.4)

Gross profit

5,279.8

44.7

6,797.2

48.6

Research and development costs
Selling, general and administrative costs

Income from operations

Interest and other, net

Income before income taxes

Income tax expense

Income after income taxes

Profit from equity method investments

Net income

1. As a percentage of total net sales.

(1,968.5)
(520.5)

(16.7)
(4.4)

(2,200.8)
(544.9)

(15.7)
(3.9)

2,790.8

23.6

4,051.5

29.0

(25.0)

2,765.8

(191.7)

2,574.1

(0.2)

23.4

(1.6)

21.8

(34.9)

4,016.6

(551.5)

3,465.1

(0.2)

28.7

(3.9)

24.8

18.2

0.2

88.6

0.6

2,592.3

21.9

3,553.7

25.4

For a comparison of ASML’s operating results for the year ended December 31, 2019 with the year ended December 31,
2018, please see Item 5.A of ASML’s annual report on Form 20-F for the year ended December 31, 2019.

14.7
29.7

18.3

10.5
7.9

9.8

28.7

11.8
4.7

45.2

39.6

45.2

187.7

34.6

386.8

37.1

ASML ANNUAL REPORT 2020Total net sales and gross profit
We achieved another record year in 2020, with Total net sales increasing by €2,158.5 million, 18.3%, broken down as an
increase in Net system sales of 14.7%, and an increase in Net service and field options sales of 29.7% compared to 2019.

Revenue growth from each of the Logic and Memory markets, and our installed base

2020

2019

2018

€7,393

€6,565

€2,924

€3,662

€13,978
€13,978
€13,978

€2,431

€2,824

€11,820
€11,820
€11,820

€3,714

€4,545

€2,685

€10,944
€10,944
€10,944

Logic

Memory

Service and field options

We saw growth in both Logic and Memory markets, which is a reflection of our customers' drive to innovate and continue
to invest in future technology nodes. Logic demand for the most advanced lithography systems remains healthy, and
Memory demand picked up in 2020 after a decline in 2019. Customers have indicated they are seeing signs of recovery
driven by healthy demand in data centers and consumer electronics. Growing insertion of EUV into DRAM manufacturing
translated into recovery of the Memory market towards the second half of 2020.

Increase in net sales driven by growth in EUV and installed base management

€1,664

€26

€(791)

€11,820

€838

€13,978

€333

€13

€76

2019

EUV

ArFi

ArF dry

KrF

I-line

Metrology
&
Inspection

Service &
field
options

2020

The increase in Net sales is driven by EUV and Service and field options. We recognized revenue for 31 EUV systems in
2020 compared to 26 EUV systems in 2019. In addition to the higher number of units, the average selling prices in EUV
increased as a result of the transition to the high productivity NXE:3400C model.

In addition to the growth in EUV, Service and field options sales were also a key driver for our overall growth in net sales.
The increase is driven by an increase in the sales of productivity and focus upgrade packages, supported by a growing
installed base. EUV contributed in a more meaningful way to net service and field option sales as our installed base
continues to grow and our customers continue to run more EUV systems in their high volume production.

Our system sales across our DUV technologies increased from 203 units in 2019 to 227 units in 2020, however given the
mix of technologies, DUV Net sales decreased by €0.4 billion in 2020. We successfully introduced our NXT:2050i and
NXT:1470 in 2020, and DUV will continue to drive value for our customers and be used in production in most layers of their
chips.

Gross profit
Gross profit increased as a result of both an increase in
sales and profitability. Gross profit as a percentage of net
sales increased from 44.7% in 2019 to 48.6% in 2020,
mainly attributable to improvement in our EUV profitability
and growth in our service and upgrade sales. We continue
to drive profitability of our EUV systems and service
business through cost reduction and by delivering more
value for our customers.

€5,280

44.7%

2019

€6,797

48.6%

2020

Gross profit

Gross profit %

ASML ANNUAL REPORT 2020Research and development costs
R&D costs were €2,200.8 million in 2020 as compared to
€1,968.5 million in 2019. The increase is in line with our
roadmap to bring EUV to high-volume manufacturing, as
well as our continued investments into the future through
the development of High-NA. R&D costs for both 2020 and
2019 were primarily focused on programs supporting our
holistic lithography solutions in EUV, DUV and Applications.
In 2020, R&D activities mainly related to:

• EUV - Continued investments to increase the value of

EUV in high-volume manufacturing, the development of
the NXE:3600D, and further improving availability and
productivity of our installed base systems. In addition,
our roadmap includes High-NA, our next generation
0.55NA systems to support our customers with 2 nm
logic and beyond.

• DUV - The development of our latest-generation

immersion system NXT:2050i, as well as our latest
generation ArF dry system NXT:1470. In addition, we are
completing industrialization of new modules and further
improving our roadmaps on alignment/overlay and
productivity.

• Applications - HMI expansion, including multi-beam

introduction, and further development of YieldStar and
process window control solutions.

Selling, general and administrative costs
SG&A costs increased by 4.7% from 2019 to 2020 due to
an increase in the number of employees and investments
in digitalization to support our growth. However, our focus
on efficiency has led to a reduction of SG&A as a
percentage of net sales from 4.4% to 3.9%.

Income taxes
The effective tax rate increased to 13.7% of income before
income taxes in 2020, compared to 6.8% in 2019, in line
with our generally expected annualized rate. The lower rate
for 2019 was a result of discrete tax benefits relating to
restructuring of our HMI group companies and US Tax
Reform regulations.

Net income
Net income in 2020 amounted to €3,553.7 million,
or 25.4% of total net sales, representing €8.49 basic net
income per ordinary share, compared with net income in
2019 of €2,592.3 million, or 21.9% of total net sales,
representing €6.16 basic net income per ordinary share.

€1,969

16.7%

€2,201

15.7%

2019

2020

R&D costs

% of net sales

€521

4.4%

2019

€545

3.9%

2020

SG&A Costs

% of net sales

€552

13.7%

2020

€192

6.8%

2019

Income tax expense

ETR %

€6.16

421

2019

€8.49

418

2020

EPS

# of share (millions)

ASML ANNUAL REPORT 2020Cash flow analysis
This year has been exceptional for companies worldwide, including ASML. We faced increased risk and uncertainty,
especially in the first half of the year due to the COVID-19 pandemic. At that time, despite having a healthy balance sheet,
as well as flexibility in our cost structure, we felt it prudent to preserve cash to protect our own operations, but also in
order to be able to support our suppliers as best we can in these extraordinary circumstances. These measures included
the pause of our share buyback program in Q1, later resumed in Q4, as well as issuing €750 million of senior notes due in
2029 in May 2020 as part of our cash preservation measures. This offering was in addition to our previous issuance of
€750 million of senior notes due in 2030 in February 2020.

Free cash flow in 2020 increased by €1.2 billion, driven by an increase in Net income of €1.0 billion and improvements in
our working capital. Historically our EUV contracts did not include down payments, and actually provided extended
payment terms for customers, given the maturity curve of our EUV systems. Now we are moving into a direction where we
ask for down payments of EUV tools, reflecting the long lead times and early supply chain commitments that ASML has to
enter into. We have started to see the benefits of this in 2020, and expect further improvement in 2021.

We continue to heavily invest in our next generation technologies in order to secure future growth opportunities which
requires significant cash investment in net working capital, capital expenditures and R&D. However, our capital allocation
policy remains unchanged. Cash that will not be required to support the future growth of our business, will be returned to
our shareholders through growing dividends and share buybacks.

Year ended December 31 (€, in millions)

Cash and cash equivalents, beginning of period

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of changes in exchange rates on cash

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, end of period
Short-term investments

Cash and cash equivalents and short-term investments

Purchases of property, plant and equipment and intangible assets

Free cash flow

2019

3,121.1

3,276.4

(1,157.5)
(1,712.3)
4.6

411.2

3,532.3
1,185.8

4,718.1

(885.9)

2,390.5

2020

3,532.3

4,627.6

(1,352.2)
(753.0)
(5.3)

2,517.1

6,049.4
1,302.2

7,351.6

(1,000.8)

3,626.8

Net cash provided by (used in) operating activities
Net cash provided by operating activities in 2020 totaled €4.6 billion, an increase of €1.4 billion compared to 2019, which
is primarily due to an increase in Net income of €1.0 billion and improvements in working capital. These improvements can
primarily be seen through an increase in down payments from customers and a reduction of outstanding Accounts
receivable despite higher sales. This is partially offset by the increase in our Inventories to meet the upcoming customer
demand and increase in Finance receivables to provide customers systems with a free-use period before payment, either
for evaluation purposes or to support the capacity ramp-up of EUV as part of the early-insertion life cycle of the
technology. Cash provided from operating activities includes the sale of Accounts receivable through factoring
arrangements in 2020 totaling €2.2 billion, compared to €1.3 billion in 2019.

Net cash provided by (used in) investing activities
During 2020 we used €1.4 billion of Net cash for investing activities, mainly for purchasing €1.0 billion of Property, plant
and equipment and Intangible assets. In addition we acquired Berliner Glas, during the fourth quarter for a purchase price
of €257.1 million, having a net impact on our investing activities of €222.8 million after netting the cash received and
contingent consideration. The remaining activity is due to the timing of maturities and reinvestment of short-term
investments.

Net cash provided by (used in) financing activities
Net cash used in financing activities amounted to €0.8 billion in 2020. We continued to return a substantial amount of cash
to our shareholders as seen through the annual growth of our dividend, paid semi-annually totaling €1.1 billion in 2020, as
well as share buybacks made during the year of €1.2 billion. This cash used in financing activities is partially offset by the
completion of two bond offerings during 2020 for a total of €1.5 billion.

ASML ANNUAL REPORT 2020Financing policy

We continue to hold on to our long-held prudent financing
policy, which is based on three foundational elements:

• Liquidity: Maintain financial stability with a target to keep
our cash & cash equivalents, together with short-term
investments, above a minimum range of €2.0 to €2.5
billion

• Capital structure: Maintain a capital structure that
targets a solid investment grade credit rating

• Cash return: Provide a sustainable dividend per share
that will grow over time, paid semi-annually, while
returning excess cash to shareholders through share
buybacks or capital repayment

Liquidity
Our principal sources of liquidity consist of cash and cash
equivalents, short-term investments and available credit
facilities. In addition, we may from time to time raise
additional funding in debt and equity markets. We seek to
ensure that our principal sources of liquidity will be
sufficient to satisfy our liquidity requirements at all times.

Our liquidity needs are affected by many factors, some of
which are based on the normal ongoing operations of the
business, and others by the uncertainties of the global
economy, the bulky character of our business and the
specific characteristics of the semiconductor industry.
Although our cash requirements fluctuate based on the
timing and extent of these factors, we believe that cash
generated from operations, together with our other sources
of liquidity are sufficient to satisfy our expected
requirements, including our expected capital expenditures,
research and development expenses and debt servicing.

We invest our cash and cash equivalents and short-term
investments in short-term deposits with financial
institutions, governments and government related bodies
that have investment grade credit ratings and in money
market and other investment funds that invest in high-rated
short and medium-term debt securities. Our investments
are mainly denominated in euros and to some extent in US
dollars and Taiwanese dollars.

Year ended December 31 (€, in millions)

Deposits with financial institutions, governments and government related bodies
Investments in money market funds
Bank accounts

Cash and cash equivalents

Deposits with financial institutions, governments and government related bodies

Short-term investments

2019

434.8
2,139.7
957.8

3,532.3

1,185.8

2020

1,545.3
3,841.9
662.2

6,049.4

1,302.2

We maintain an available committed credit facility, with a group of banks, of €700.0 million, under which no amounts were
outstanding at the end of 2020 and 2019. This facility has a maturity date of July 2025 with an uncommitted 1-year
extension option. We further maintain a local uncommitted credit facility with a bank in China ensuring local liquidity and
operational requirements are met at all times, also given existing regulatory restrictions regarding flexible intercompany
funding.

Capital structure
Our objectives when managing our capital structure are to safeguard our ability to satisfy our capital providers by
maintaining a capital structure that ensures liquidity and supports a solid investment grade credit rating. The capital
structure includes both debt and the components of equity, in accordance with both US GAAP and EU-IFRS. The capital
structure is mainly altered by, among other things, adjusting the amount of dividends paid to shareholders, the amount of
share buybacks or capital repayment, and any changes in the level of debt. Our capital structure is formally reviewed with
the Supervisory Board each year in connection with our updated long term financial plan and relevant scenarios. The
outcome of this year’s review confirmed to maintain our historical financing policy in relation to our capital structure.

Our current credit rating from Moody’s is A3 (stable) and from Fitch is A- (stable), which is consistent with the credit ratings
as of December 31, 2019.

ASML ANNUAL REPORT 2020We have Eurobonds with an outstanding principal of €4.5 billion, having the following maturities:

Outstanding Eurobond Maturity Amounts

g
n
d
n
a
t
s
t
u
o
t
n
u
o
m
A

)
n
o

i
l
l
i

m
€

(

1.0

0.8

0.6

0.4

0.2

0.0

750

500

1,000

750

2022

2023

2024

2025

2026

2027

2028

2029

2030

Cash return policy
ASML aims to distribute a dividend that will be growing
over time, paid semi-annually. On an annual basis, the
Board of Management, upon prior approval from the
Supervisory Board, submits a proposal to the AGM with
respect to the amount of dividend to be declared with
respect to the prior year, taking into account any interim
dividend distributions. The dividend proposal in any given
year will be subject to availability of distributable profits,
retained earnings and cash, and may be affected by,
among other things, our view of potential future liquidity
requirements including for investments in production
capacity, working capital requirements, the funding of our
R&D programs and acquisition opportunities that may arise
from time to time. In addition to dividend payments, we
intend to return cash to our shareholders on a regular basis
through share buybacks or capital repayment, subject to
our actual and anticipated level of liquidity requirements
and other relevant factors.

ASML intends to declare a total dividend in respect of
2020 of €2.75 per ordinary share. Recognizing the interim
dividend of €1.20 per ordinary share paid in November
2020, this leads to a final dividend proposal to the General
Meeting of €1.55 per ordinary share. This is a 15% increase
compared to the 2019 total dividend of €2.40 per ordinary
share.

On January 22, 2020 we announced a new three year
share buyback program, to be executed within the 2020-
2022 time frame pursuant to which ASML expects to
purchase shares up to €6 billion, which includes a total of
up to 0.4 million shares to cover employee share plans.
ASML intends to cancel the remainder of the shares
repurchased.

This program was temporarily paused in the first quarter of
2020 in order to address the uncertainty related to
COVID-19, and subsequently resumed in the fourth quarter
of 2020. In 2020 we repurchased 3,908,429 shares (2019:
1,948,808 shares) for a total consideration of €1,207.5
million (2019: €410.0 million).

Dividend per share history
(Dividend for a year is paid in the subsequent year, except interim)

Cumulative capital returns
(Capital return is cumulative share buyback + dividend)

d
n
e
d
i
v
i
d
d
e
z
i
l
a
u
n
n
A

2.5

)

€

(

1.5

0.5

2.40

2.10

1.55

1.20

n
o

i
l
l
i

B
€

14
12
10
8
6
4
2
0

1.05

1.20

1.40

0.46

0.53

0.61

0.70

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2012

2013

2014

2015

2016

2017

2018

2019

2020

Up to
2011

Dividend paid

Dividend proposed

Share buyback

Dividend paid

ASML ANNUAL REPORT 2020

Tax policy

Our tax policy is an integral part of our
sustainability strategy, which in turn is part of
our business strategy. Tax is included in the
materiality assessment for sustainability
purposes and is an element of our Corporate
Citizenship (corporate social responsibility). The
taxes we pay are an important part of ASML’s
contribution to the economies we operate in.
Tax is of continued interest to our stakeholders,
so we strive for transparency in the way we
report and pay our taxes in accordance with the
letter and the spirit of tax laws and regulations.

Our policy is based on a well-defined set of principles and
internationally accepted standards. We support and adhere
to the principles on tax transparency and responsible tax
management as set out in the OECD Action Plan on Base
Erosion and Profit Shifting (BEPS) and the EU Anti-Tax
Avoidance Directives (ATAD I and II).

Tax governance
Our globally organized tax department is responsible for
tax management. It falls under the supervision of our Board
of Management via the CFO, who is ultimately responsible
for the tax strategy. Our integrated global tax department is
spread over three hubs in the three regions in which ASML
operates and aligns on cross-border tax matters. ASML’s
global tax department is well connected to ASML’s
operations worldwide. This helps to ensure compliance
with applicable local tax laws and regulations. Tax filing
obligations are monitored via a central tax compliance
dashboard. Controls are implemented and executed via
our SOx and Internal Control Frameworks.

The Audit Committee of the Supervisory Board (SB)
reviews our tax strategy and annually confers with our tax
professionals to discuss tax policies and the impact of tax
laws and regulations on ASML.

Our tax principles

Training programs are in place in order to ensure that
global tax department members stay aligned and up to
date with latest developments in the global tax landscape.
Additionally, tax department members regularly provide tax
awareness sessions for stakeholders from business and
other finance departments.

Our tax strategy
ASML aims to report on and pay taxes in accordance with
all relevant tax laws and regulations. We commit to not only
comply with the letter of these laws and regulations, but
also with their intent.

We aim to be clear about all aspects of our tax position and
to share these in a transparent manner, fostering a
relationship of honesty, transparency and trust with the tax
authorities. The latter is reflected in the number of bilateral
advance pricing agreements (BAPA) we have with the tax
authorities in our significant jurisdictions.

ASML’s technology is driving our profitability. Around
90% of our income is taxable in the Netherlands as most of
our value creation through research, design and
manufacturing activities is based there. The income from
other activities, such as regional equipment sales and after-
sales support, is subject to taxation in the countries where
these activities take place – the main ones being China,
South Korea, Taiwan and the US.

To drive innovation, Dutch corporate income tax law
provides for the so-called Innovation Box facility. Based on
this facility, qualified income associated with R&D is
subject to an effective tax rate of 7% (increased to 9% as
of 2021), as compared to the Dutch statutory rate of 25%.
For more information see note 21 in the Consolidated
financial statements.

We base our tax principles on our Code of Conduct. It guides us in how we report and pay tax in the countries we operate in.

• We act in accordance with the letter and the spirit of tax laws and regulations.

• We report taxable income in a jurisdiction commensurate with the added value of the business activities in that jurisdiction.

• ASML’s profit allocation methods are based on internationally accepted standards as published by the OECD, as well as relevant

rules and regulations in the local jurisdictions we operate in.

• We pursue an open and constructive dialogue with the tax authorities in the jurisdictions we operate in, based on mutual respect,
transparency and trust, disclosing all relevant facts and circumstances. We do not use tax structures intended for tax avoidance,
nor will we engage in the artificial transfer of profits to low tax jurisdictions.

• We do not use tax havens (as defined by the European Commission’s ‘blacklist’) for tax-avoidance purposes.

• We make tax disclosures in accordance with reporting requirements, US GAAP and IFRS.

ASML ANNUAL REPORT 2020Disclosures are provided in our financial statements and
cover tax payments in our main markets. We provide
country-by-country tax reporting in a transparent and
accurate manner to the tax authorities. A high level
overview of income taxes paid during 2020 is set out below
(in millions).

€395.7

€190.1

€64.4

Asia

United States

Europe

Risk profile
ASML is active in over 60 offices located in 16 countries.
The tax regulations in these countries are subject to
change, among others due to recent developments in the
international tax arena (e.g. BEPS 2.0). The tax regulations
are often complex and subject to interpretation. Failure to
comply with these tax regulations may lead to additional
tax assessments, including penalties.

ASML’s tax strategy is aimed at maintaining a low tax-risk
appetite, for which it has set up a comprehensive tax risk-
management framework. As such, via the organizational
structure of the global tax department, clear segregation of
roles and responsibilities as well as a strict internal review
and approval processes for tax filings, mitigates risks and
facilitates alignment with external parties.

Tax Risk Management framework
We aim to file all the required tax-relevant returns with the
appropriate tax authorities in a correct, timely and
complete manner. To ensure this happens, tax-compliance
& reporting processes are monitored through ASML’s
comprehensive corporate (SOx and Internal Control) and
tax control framework. The control frameworks are
regularly reviewed, tested and challenged by the ASML
Risk & Business Assurance department. Additionally, in
various areas automation is used for efficient and effective
monitoring of tax compliance obligations, validation of tax
relevant data and execution of tax compliance & reporting
processes. In these ways, we continue to focus on further
improvement and automation going forward.

We discuss potential tax risks and our tax positions with
the Audit Committee on a regular basis. Additionally, in the
Netherlands, we participate in a cooperative compliance
program with the Dutch tax authorities.

Internal control on tax reporting is included in the overall
internal control statement, which is part of the
management report on internal control over financial
reporting.

ASML ANNUAL REPORT 2020Long-term growth
opportunities

Trend information
We expect 2021 to be another growth year supported by
healthy Logic demand and growth in the Memory market.
The expected growth is primarily driven by increasing EUV
sales, as well as growth in our installed base business. The
positive industry momentum around innovation and
expanding new markets further strengthen our confidence
in the 2021 outlook and our 2025 growth scenarios.

Outlook 2025
In November 2018, we presented our long-term growth
opportunity up to 2025 in which we modeled revenue
scenarios within the context of different business
sensitivities. We recognize our growth opportunity is
primarily sensitive to market growth, with a projected
annual revenue for 2025 between €15 billion in a low-
market scenario and €24 billion in a high-market scenario.

Our next Investor Day is currently planned to take place on
June 23, 2021 in London, where we will update our 2025
expectations for the market developments since 2018.

Our revenue potential is primarily based on organic growth.
We continuously review our product roadmap and have,
from time to time, made focused acquisitions or equity
investments to enhance the industrial synergy of our
product offering. Based on such reviews and the
assessment of clear potential product and value synergies,
we may also evaluate and pursue focused merger and
acquisition activities in the future. Within this growth
ambition, we expect to continue to return significant
amounts of cash to our shareholders through a
combination of growing annualized dividends and share
buybacks.

In Logic, we see the major innovation drivers that fueled
increased demand for leading edge nodes in 2020,
continuing to drive demand in 2021. This is evident in
several customer announcements regarding ramp-up plans
for 7 and 5 nm nodes.

In Memory, customers have indicated systems are
operating at higher utilization levels. As customers are
making the technology transition to support projected
growth, additional capacity additions are expected to be
required. Subsequently, this is expected to trigger
equipment demand. As a result, it seems likely that we will
see stronger lithography equipment demand from the
Memory market in 2021.

Customers adopted EUV, and with increasing customer
confidence in EUV, this is translating into more layers in
their next nodes, for Logic production as well as the
adoption in Memory. We continue to see demand building
up for next years' shipments and expect a healthy order
flow to continue. Due to this demand increase, we expect
EUV revenue to increase around 30% in 2021.

We expect further growth in our Installed Base
Management business as the demand for services will
continue to expand as our installed base grows.
Additionally, we anticipate an increased contribution to
service sales from EUV as more and more systems start
running wafers in volume manufacturing, as well as expect
significant demand for upgrades, particularly in EUV, as
customers utilize upgrades as a quick way to increase
capacity.

Our expectations and guidance for the first quarter of 2021
can be summarized as follows:

• Total net sales of between €3.9 billion and €4.1 billion
• Gross margin of between 50% and 51%
• R&D costs of €620 million
• SG&A costs of €165 million
• Effective annualized tax rate of between 14% and 15%

The trends discussed above are subject to risks and
uncertainties. See Special note regarding forward-looking
statements.

ASML ANNUAL REPORT 2020How we
manage risk

ASML ANNUAL REPORT 2020How we manage risk

Dynamics in the global semiconductor industry present both opportunities and risks. ASML manages risk through
an Enterprise Risk Management (ERM) framework that integrates risk management into our daily business
activities and strategic planning.

Enterprise Risk Management
We deploy our ERM framework through a well-defined governance structure and a robust ERM process. The Risk and
Business Assurance function drives the ERM process and associated activities across ASML and its affiliates. It takes a
systematic approach to identify, manage and monitor risks in pursuit of our business objectives by setting standards and
enabling management to make ASML's governance, risk management, internal control and compliance more efficient and
effective. The function also helps to identify opportunities that allow us to achieve our objectives and enable continuous
sustainable growth.

ERM is a continuous process. Its related activities are periodically repeated to identify and address risks in a timely
fashion, and its results remain relevant for decision-making purposes. Our Vice President of Risk and Business Assurance
is responsible for leading the development and maintenance of the ERM framework and makes sure the ERM process is
carried out. ASML has adopted the ISO 31000:2018 standard as the foundation of its enterprise risk management. In
addition, the Vice President of Risk and Business Assurance, reporting to ASML's CFO, is responsible for leading the
security, and internal control function and for the development and maintenance of the compliance process.

Risk management governance structure

Supervisory Board

Audit Committee

Request to investigate
specific risk topics

• Bi-annual risk review
• Risk topics feedback

• Assertion on control effectiveness
• Quarterly progress reporting

Board of Management

Corporate Risk Committee
Risk oversight

Disclosure Committee
Internal Control Committee
Assess internal control over financial reporting

Risk appetite •

Risk management policy •
CRC sub-committees (governance) •

• Risk assessment results
• Risk response progress
• Incidents

• Control effectiveness

Risk owners

Supervisory Board and Audit Committee
The Supervisory Board provides independent oversight on management’s response to mitigating critical risk areas based
on regular risk reviews. The Supervisory Board’s Audit Committee provides independent oversight on the ERM process
and the timely follow-up on priority actions based on quarterly progress updates.

Board of Management
The Board of Management is responsible for managing the internal and external risks related to our business activities and
for making sure we comply with applicable legislation and regulations. The Board of Management has delegated its risk
oversight to ASML’s Corporate Risk Committee.

Corporate Risk Committee
The Corporate Risk Committee is a central risk oversight body, which reviews, manages and controls risks in the ASML
Risk Universe, including information security. It also approves the risk appetite, risk-management policies and risk-
mitigation strategies. The Corporate Risk Committee is chaired by the CFO and comprises senior management
representatives from all sectors at ASML, including the CEO, CSO and COO.

Disclosure Committee
The Disclosure Committee assists the Board of Management in overseeing ASML’s disclosure activities and compliance
with applicable disclosure requirements arising under Dutch and US law and applicable stock exchange rules, and other
regulatory requirements.

ASML ANNUAL REPORT 2020Internal Control Committee
The Internal Control Committee, which includes two members of the Disclosure Committee, advises the Disclosure
Committee and the CEO and CFO in their assessment of our internal control over financial reporting and disclosures,
under the Sarbanes-Oxley Act. The Chair of the Internal Control Committee updates the Audit Committee, the CEO and
CFO on the progress of this assessment. The Chair also includes this update in the report to the Audit Committee.

Risk owners
Risk owners monitor the development of risks in the ASML risk universe and drive risk response across the ASML
organization according to requirements that are defined by the Corporate Risk Committee.

ASML risk universe
The ASML risk universe is a consolidated overview of the risks that may have a material adverse effect in achieving our
business objectives. It consists of 38 risk categories grouped into six risk types. This allows us to have a consistent view
across ASML when assessing risks.

We take into account a broad range of internal and external information sources such as macroeconomic and industry
trends, relevant guidelines and legislation, and stakeholders’ needs and expectations in all areas. The risk universe is
reviewed, updated and approved on a yearly basis, or more frequently in case of significant internal and/or relevant
external developments.

ASML Risk Universe

Strategy and products

• Industry cycle risk
• Political risk
• Climate change risk

• Product portfolio risk
• Business model risk
• Merger & acquisition risk

• Competition risk
• Innovation risk
• Product stewardship risk

• Roadmap execution
• Intellectual property rights

Finance and
reporting

• Business planning risk
• Foreign exchange rate risk
• Liquidity risk
• Interest rate risk
• Capital availability risk
• Counterparty credit risk
• Shareholder activism risk
• Disclosure / external reporting risk

Partners

People

Operations

• Customer dependency risk
• Cost of ownership risk
• Product / service quality risk
• Supplier strategy &
performance risk
• Supply chain disruption risk

• Knowledge management risk
• Organizational effectiveness risk
• Human resource risk
• Labor condition risk

• Product industrialization risk
• Process effectiveness &
efficiency risk
• Safeguarding of assets risk
• Environment, health & safety risk
• Continuity of own operation risk
• Information security risk
• Information technology risk

Legal and compliance

• Legal liability risk

• Violation of laws & regulations risk

• Internal control / compliance risk

Enterprise Risk Management process
Our ERM process provides a holistic approach combining both top-down (company-level) and bottom-up (organization-
and process-level) perspectives. This helps us to ensure that risk identification, evaluation, and management are
performed at the right level.

The results from periodic risk-assessments and potential impact of external trends are captured in the ASML risk
landscape. As we operate in a dynamic environment, risk exposures are subject to change. The ASML risk landscape is
reviewed, updated and discussed by the Corporate Risk Committee each quarter.

The execution of the risk assessments is done according to the risk management plan and any additional engagement
approved by the Corporate Risk Committee. We define strategies to address relevant risks and take these into account
when we define the corporate priorities. ASML defines risk responses with the aim to mitigate the risks up to the level
defined by the risk appetite.

ASML ANNUAL REPORT 2020

Risk management process

Risk assessment

Risk response

Top-down risk assessment
Corporate Risk Committee / Risk owners / Emerging risks

Coordination and follow up
Risk owners

R
s
k
u
n
v
e
r
s
e

Risk identification

Risk appetite

Risk analysis

Risk evaluation

Risk
landscape

Risk treatment

g
n
i
t
r
o
p
e
R

Bottom-up risk assessment
Country / sector management

Execution
Action owners

Risk appetite
Our risk appetite depends on the nature of the risk. ASML’s risk appetite – the level of risk ASML is willing to accept to
achieve its objectives – may vary based on the specific risk and is divided in five levels: Averse, Prudent, Moderate, High
and Extensive. Our approach is geared towards mitigating the risks to the level defined in our risk appetite.

Risk type

Averse

Prudent

Moderate

High

Extensive

Strategy and product

Partners

People

Operations

Finance and reporting

Legal and compliance

ASML ANNUAL REPORT 2020
Risk developments
The table below presents examples of external developments that have affected the exposure of a series of risk categories
in 2020, including examples of our responses. The list of risks and risk responses below is not exhaustive.

COVID-19 pandemic

COVID-19 has spread globally, leading to quarantines, travel and workplace restrictions,
business shutdowns and restrictions, supply chain interruptions, labor shortages, changes of
legislation and overall economic and financial market instability.

The pandemic has a significant impact on the global economy. Going forward, there is
uncertainty on how the pandemic will develop, and its impact on global GDP development,
(end) markets, and our manufacturing capability and supply chain. The longer the pandemic
lasts, the greater the risks.

Risk category

Industry cycle

•
• Continuity of own operation
• Supply chain disruption
• Environment, Health and Safety
• Human resource
• Process effectiveness and

efficiency

• Roadmap execution
Information security
•

Examples of such risks are:
• Our employees may face health risks associated with the COVID-19 pandemic.
• The COVID-19 pandemic has increased the level of remote working within our

organization, which impacts productivity, may delay our roadmap, increase the risks of
cybersecurity incidents and may impact our control environment.

• We are dependent on our suppliers, so disruptions to their operations as a result of the
COVID-19 pandemic impact us and our ability to produce, deliver and service tools.
• Market demand for semiconductors and therefore our tools and services can change.
• An important part of our business involves installing and servicing tools at customer

premises around the globe. Current travel restrictions impact that activity.

The full impact of this pandemic on ASML will depend on future developments. This includes
its continued severity, and the actions taken to contain the pandemic or address its impact
which are outside of our control.
So far, the COVID-19 pandemic had limited impact on our results of operations.

Risk response

• Set health and safety of our employees as our first priority and implement preventive measures globally
• Strong financial capabilities to react to a downturn
• Activation of business continuity management plan
• Active engagement with our critical suppliers and increased inventory
•
Implementation of virtual remote support solution on customer sites
• Measures implemented to facilitate (secure) remote working and to support the well-being of our employees

Increasing complexity of regulatory requirements

Risk category

Rules and regulations are becoming more complex, in particular those relating to trade,
national security, tax, exchange controls, reporting, anti-corruption laws, climate change, data
protection, product safety.
We are committed to full compliance with relevant laws and regulations.

• Violations of laws and regulations
• Product stewardship
• Environment health and safety

Risk response

• Code of Conduct and Business Principles
• Corporate policies such as Anti-bribery & corruption, Anti-fraud, Antitrust, Insider trading, Tax and Export control
• Speak Up policy and system
•
• Establishment of Privacy Office and implementation of personal data protection program including, among others, the following

Implementation of global compliance program

elements: governance, systems & procedures, disciplinary actions, audits.

ASML ANNUAL REPORT 2020
Geopolitical tensions

Export restrictions are rising and global trade is shifting from globalization to regionalization,
particularly between China and US. This may lead to a decoupled ecosystem. Trade and
export barriers have impacted our ability to sell and maintain systems to certain customers
and impact our business by limiting our ability to sell our products and services in certain
jurisdictions or to certain customers.

Geopolitical tensions also result in movement restrictions of the employees across countries.
Protectionism and bureaucracy are increasing, as well as restrictions impacting international
knowledge workers from certain countries, (e.g. restricted technology access, visa/travel
restrictions).

We aim to serve and support all our customers around the world to the best of our ability,
while being compliant with laws and regulations set by the jurisdictions where we operate.

Risk category

• Political
• Continuity of own operations
• Human resource
• Business model

Risk response

• Monitor geopolitical developments
• Apply for export licenses as required
• Comply with (existing and new) regulations
• Collaborate with peers in global advocacy

IP technology leadership pressure

There is an increased pressure on know-how and IP protection for ASML and its open
innovation partners. ASML’s existence is based on people and knowledge. Unauthorized
disclosure of information of ASML, its customers or suppliers may benefit competitors,
negatively affect ASML’s ability to file patents or affect cooperation with customers and
suppliers.

Risk category

Information security
Intellectual property rights

•
•
• Competition

We are experiencing an increasing number of cyberattacks on our information technology
systems as well as the information technology systems of our suppliers, customers and other
service providers.

We are committed to protect our information assets and those of our partners.

Risk response

• Establishment of an information security function and information security policy to implement controls to ensure authorized use of

information

• Significant increase of our information security investments (people, systems) and security roadmap to increase security of our

processes and systems

• Cyber Defense Center
• Security incident response procedure in place and tested at least annually
• Awareness and training programs
•
• Patents and relevant technical publications monitoring

IP rights management

ASML ANNUAL REPORT 2020

Risk factors

In conducting our business, we face many risks that
may interfere with our business objectives. It is
important to understand the nature of these risks. We
assess our risks by using the ASML risk universe,
consisting of six risk types (Strategy and Products,
Finance and reporting, Partners, People, Operations,
Legal and compliance). The risk categories related to
the Risk factors below. Any of these risks and events or
circumstances described therein may have a material
adverse effect on our business, financial condition,
results of operations and reputation. These risks are
not the only ones that we face. Some risks may not yet
be known to us, and certain risks we do not currently
believe to be material could become material in the
future. Many of the risks described below may be
exacerbated by the COVID-19 pandemic, global
measures taken in response, and any worsening of the
global business and economic conditions resulting
from the pandemic.

Strategy and products
Our future success depends on our ability to respond
timely to commercial and technological developments
in the semiconductor industry
Risk category: Business Model, Innovation

Our success in developing new technologies, products,
and in enhancing our existing products, depends on a
variety of factors. These include the success of our and our
suppliers’ R&D programs and the timely and successful
completion of product development and design relative to
competitors. Our business will suffer if the technologies we
pursue to assist our customers in producing smaller and
more energy-efficient chips are not as effective as those
developed by competitors, or if our customers do not
adopt technologies that we develop or adopt new
technological architectures that are less focused on
lithography products. The success of our EUV technology,
which we believe is critical for keeping pace with Moore’s
Law, remains dependent on continuing technical advances
by us and our suppliers. We invest considerable financial
and other resources to develop and introduce new
technologies, products and product enhancements. If we
are unsuccessful in developing (or if our customers do not
adopt) new technologies, products and product
enhancements such as High-NA and multi-beam, or if
competitors successfully introduce alternative technologies
or processes, our competitive position and business may
suffer, and we may be unable to recoup some or all of the
investments that we have made.

We may incur costs related to inventory obsolescence, as
a result of technological changes. Such costs may increase
as the complexity of technology increases.

Due to the highly complex nature and costs of our
systems, including newer technologies, our customers may
purchase existing technology systems rather than new
leading-edge systems, or may delay their investment in
new technology systems to the extent that such
investment is not economical or required given their
product cycles. Global economic conditions affect our

customers’ investment decisions, leading to uncertainties
on the timing around the introduction of and demand for
new leading-edge systems. Some of our customers have
experienced and may continue to experience delays in
implementing their product roadmaps. This increases the
risk of slowing down the overall transition period (or
cadence) for the introduction of new nodes, and therefore
new systems.

We are also dependent on our suppliers to maintain their
development roadmaps to enable us to introduce new
technologies on a timely basis. If they are unable to keep
pace, whether due to technological factors, lack of financial
resources, the impact of the COVID-19 pandemic or
otherwise, this could prevent us from meeting our
development roadmaps.

The success of new product introductions is uncertain
and depends on our ability to successfully execute our
R&D programs
Risk category: Roadmap execution, Innovation

Our lithography systems and applications have become
increasingly complex, and accordingly, the costs and time
period to develop new products and technologies have
increased. We expect such costs and time periods to
continue to increase. In particular, developing new
technology, such as High-NA and multi-beam, requires
significant R&D investments by us and our suppliers to
meet our and our customers’ technology demands. Our
suppliers may not have, or may not be willing to invest the
resources necessary to continue the (co-)development of
the new technologies to the extent that such investments
are necessary. This may result in ASML contributing funds
to such R&D programs or limiting the R&D investments that
we can undertake. Furthermore, if our R&D programs are
not successful in developing the desired new technology
on time or at all, we may be unsuccessful in introducing
new products and unable to recoup our R&D investments.

We face intense competition
Risk category: Competition

The lithography equipment industry is highly competitive.
Our competitiveness depends upon our ability to develop
new and enhanced lithography equipment, related
applications and services that are competitively priced and
introduced on a timely basis, as well as our ability to
protect and defend our intellectual property rights. We
compete primarily with Canon and Nikon in respect of DUV
systems. Both Canon and Nikon have substantial financial
resources and broad patent portfolios. Each continues to
offer products that compete directly with our DUV systems,
which may impact our sales or business. In addition,
adverse market conditions, industry overcapacity or a
decrease in the value of the Japanese yen in relation to the
euro, could further intensify price-based competition,
resulting in lower prices, and lower sales and margins.

We may also face competition from new competitors with
substantial financial resources, as well as competitors
driven by the ambition of self-sufficiency in the geopolitical
context. Furthermore, we face competition from alternative

ASML ANNUAL REPORT 2020technological solutions or semiconductor manufacturing
processes, particularly if we are unsuccessful in developing
new EUV technology, products and product enhancements
in a timely and cost competitive manner.

We also compete with providers of applications that
support or enhance complex patterning solutions, e.g.
Applied Materials Inc. and KLA-Tencor Corporation. These
applications effectively compete with our Applications
offering, which is a significant part of our business. The
competition we face in our applications business may be
higher than for our systems, as there are more competitors
and potential competitors in this market.

The semiconductor industry can be cyclical and we
may be adversely affected by any downturn
Risk category: Industry cycle risk

As a supplier to the global semiconductor industry, we are
subject to the industry’s business cycles, of which the
timing, duration and volatility are difficult to predict. The
semiconductor industry has historically been cyclical.
Newer entrants in the industry, including Chinese entrants,
could increase the risk of cyclicality in the future. Certain
key end-market customers – Memory and Logic – exhibit
different levels of cyclicality and different business cycles.
Sales of our lithography systems, services and other
holistic lithography products depend in large part upon the
level of capital expenditures by semiconductor
manufacturers. These in turn are influenced by industry
cycles and a range of competitive and market factors,
including semiconductor industry conditions and
prospects. The timing and magnitude of capital
expenditures of our customers also impact the available
production capacity of the industry to produce chips,
which can lead to imbalances in the supply and demand of
chips. Reductions or delays in capital expenditures by our
customers, including as a result of the COVID-19
pandemic, or incorrect assumptions by us about our
customers’ capital expenditures, could adversely impact
our business.

Our ability to maintain profitability in an industry downturn
will depend substantially on whether we are able to lower
our costs and break-even level, which is the level of sales
that we must reach in a year to have positive net income. If
sales decrease significantly as a result of an industry
downturn and we are unable to adjust our costs over the
same period, our net income may decline significantly or
we may suffer losses. Furthermore, as the value per system
increases and we have grown, and continue to grow, in
terms of employees, facilities and inventories, it may be
more difficult for us to reduce our costs to respond to an
industry downturn.

We derive most of our revenues from the sale of a
relatively small number of products
Risk category: Business model, Product portfolio

We derive most of our revenues from the sale of a relatively
small number of lithography systems: (258 units in 2020
and 229 units in 2019). As a result, the timing of shipments,
including any delays, and recognition of system sales for a
particular reporting period from a small number of systems
may have a material adverse effect on our business,
financial condition and results of operations in that period.
This risk is increasing due to the higher average sales price
of EUV systems as compared to DUV systems.

In addition, we aim to derive more revenue from servicing
and upgrading our installed base. However, we may not be
able to increase revenues to the extent we planned as, for
example, customers may perform more of these services
themselves or find other third party suppliers for that
service.

Failure to adequately protect the intellectual property
rights, trade secrets or other confidential information
could harm our business
Risk category: Intellectual property rights

We rely on intellectual property rights such as patents,
copyrights and trade secrets to protect our proprietary
technology and applications. However, we face the risk
that such measures could prove to be inadequate and we
could suffer material harm because, among other things:

• Intellectual property laws may not sufficiently support
our proprietary rights or may change in the future in a
manner adverse to us;

• Patent rights may not be granted or interpreted as we

expect;

• Patents will expire which may result in key technology

becoming widely available that may harm our
competitive position;

• The steps we take to prevent misappropriation or
infringement of our proprietary rights may not be
successful; and

• Third parties may be able to develop or obtain patents

for similar competing technology.

In addition, legal proceedings may be necessary to enforce
our intellectual property rights, to determine the validity and
scope of the proprietary rights of others, or to defend
against claims of infringement. Any such proceedings may
result in substantial costs and diversion of management
resources, and, if decided unfavorably to us, could result in
significant costs or have a significant impact on our
business.

We are increasingly subject to attempted misappropriation
attacks, including theft of our trade secrets, proprietary
customer data, intellectual property or other confidential
information by third parties or our own employees. For
example, in the past we have been subject to the
misappropriation of our software by certain employees.

Defending against intellectual property claims brought
by others could harm our business
Risk category: Intellectual property rights

In the course of our business, we are subject to claims by
third parties alleging that our products or processes
infringe upon their intellectual property rights. If successful,
such claims could limit or prohibit us from developing our
technology, manufacturing and selling our products.

In addition, our customers or suppliers may be subject to
claims of infringement from third parties, alleging that our
products used by such customers in the manufacturing of
semiconductor products and / or the processes relating to
the use of our products infringe on one or more patents
issued to such third parties. If such claims are successful,
we could be required to indemnify our customers or
suppliers for some or all of any losses incurred or damages
assessed against them as a result of such infringement.

ASML ANNUAL REPORT 2020We also may incur substantial licensing or settlement costs
to settle disputes or to potentially strengthen or expand our
intellectual property rights or limit our exposure to
intellectual property claims of third parties.

We were subject to a number of patent infringement claims
by Nikon between 2017 and 2019. While we settled the
litigation with Nikon in 2019, we continue to face the risk
that we may be subject to claims alleging the infringement
of others’ patents or intellectual property rights or involved
in patent litigation to defend our intellectual property rights.

Patent litigation is complex and may extend for a
protracted period of time, giving rise to the potential for
both substantial costs and diverting the attention of key
management and technical personnel. Potential adverse
outcomes from patent litigation may include payment of
significant monetary damages, injunctive relief prohibiting
our manufacturing, exporting or selling of products, and /
or settlement involving significant costs to be paid by us.

We are exposed to economic and political
developments in our international operations
Risk category: Political

Global trade issues and changes in and uncertainties with
respect to multilateral and bilateral treaties and trade
policies, including the ability to obtain required licenses and
approvals and the effects of trade sanctions, export
controls, tariffs and similar regulations and international
trade disputes, impact our ability to produce and deliver
our systems and services internationally.

Certain of our manufacturing facilities as well as customers
are located in Taiwan. Customers in Taiwan represented
33.8% of our 2020 total net sales and 45.3% of our 2019
total net sales. Taiwan has a unique international political
status. The People’s Republic of China asserts sovereignty
over Taiwan and does not recognize the legitimacy of the
Taiwanese government. Changes in relations between
Taiwan and the People’s Republic of China, Taiwanese
government policies, and other factors affecting Taiwan’s
political, economic or social environment could have a
material adverse effect on our business, financial condition
and results of operations. Furthermore, certain of our
facilities as well as customers are located in South Korea.
Customers in South Korea represented 29.7% of our 2020
total net sales and 18.6% of our 2019 total net sales. There
are tensions with the Democratic People’s Republic of
Korea (North Korea), which have existed since the division
of the Korean Peninsula following World War II. A
worsening of relations between those countries or the
outbreak of war on the Korean Peninsula could have a
material adverse effect on our business, financial condition
or results of operations.

We have a presence or do business in a number of
jurisdictions, including the People’s Republic of China and
Russia. In particular, our business in People’s Republic of
China has increased in recent years and is expected to
increase further. Such increased presence increases the
risks we face, including risks relating to compliance with
multilateral and bilateral treaties, delays in receipt of
appropriate permits, compliance with anti-corruption and
anti-bribery laws and regulations, our ability to effectively
manage and control our growing business, attracting and
retaining sufficiently qualified personnel, the protection of
our intellectual property and information technology

systems, and restrictions on repatriation of cash abroad.
For example, we have experienced, and are continuing to
experience, delays in processing work permits for foreign
nationals, which could potentially delay development and
support provided to customers.

The US administration has enacted trade measures,
including import tariffs and restrictions on conducting
business with certain Chinese entities, restricting our ability
to provide products and services to such entities without a
license. The list of Chinese entities impacted by trade
restrictions, as well as the export regulation requirements
are subject to change. Our business involves the sale of
systems and services to customers in a number of
countries, including China, where our business has grown
in recent years, and includes sensitive technologies that
may be the subject of increased export regulations,
policies or practices. These and further developments in
multilateral and bilateral treaties, national regulation, and
trade, national security and investment policies and
practices have affected and may further affect our
business, and the businesses of our suppliers and
customers. Such developments can impact our ability to
obtain necessary permits, including permits for use of US
technology and for employees producing and developing
such technology. Such developments could also lead to
long-term changes in global trade, competition and
technology supply chains, which could adversely affect our
business and growth prospects.

We may be unable to make desirable acquisitions or to
integrate successfully any businesses we acquire
Risk category: Merger & acquisition

From time to time we acquire, and may in the future
acquire, businesses or technologies to complement,
enhance or expand our current business or products or
that might otherwise offer us growth opportunities. For
example, we recently completed the acquisition of Berliner
Glas, a privately held manufacturer of ceramic and optical
modules to support the future roadmap for our EUV and
DUV products. Any such acquisitions could lead to failure
to achieve our financial or strategic objectives, to perform
as we plan or disrupt our ongoing business and adversely
impact our results of operations. Furthermore, our ability to
complete such transactions may be hindered by a number
of factors, including potential difficulties in obtaining
government approvals.

Any acquisition that we make could pose risks related to
the integration of the new business or technology with our
business and organization. We cannot be certain that we
will be able to achieve the benefits we expect from a
particular acquisition investment. Such transactions may
also strain our managerial and operational resources, as
the challenge of managing new operations may divert our
management from day-to-day operations of our existing
business. Furthermore, we may be unable to retain key
personnel of acquired businesses or may have difficulty
integrating employees, business systems, and technology.
The controls, processes and procedures of acquired
businesses may also not adequately ensure compliance
with laws and regulations, and we may fail to identify
compliance issues or liabilities.

In connection with acquisitions, anti-trust and national
security regulators have in the past and may in the future
impose conditions on us, including requirements to divest

ASML ANNUAL REPORT 2020assets or other conditions that could make it difficult for us
to integrate the businesses that we acquire. Furthermore,
as the industry is becoming more consolidated, anti-trust
and national-security clearances may become harder to
obtain, which could inhibit future desired acquisitions.

As a result of acquisitions, we have recorded, and may
continue to record, a significant amount of goodwill and
other intangible assets. Current accounting guidelines
require, at least annually and potentially more frequently,
assessment of whether there are indicators that the value
of goodwill or other intangible assets has been impaired.

We may not be able to achieve our Environmental,
Social, Governance (ESG) objectives or adapt and
respond timely to emerging ESG expectations and
regulations
Risk Category: Climate Change, Product Stewardship

Companies across all industries are facing increasing
scrutiny relating to their ESG policies. Investors and other
stakeholders are increasingly focused on ESG practices
and, in recent years, have placed increasing importance on
the implications and social cost of their investments. In
particular, within the semiconductor industry, there is focus
on contribution to society and minimizing environmental
and social impacts of products throughout all life cycle
stages. Failure to achieve our ESG objectives and meet the
emerging ESG expectations of our stakeholders could
negatively affect our brand, reputation and license to
operate, and may also increase our vulnerability to ESG-
related risks, such as risks associated with climate change
in the medium- to long-term. Furthermore, our ability to
achieve our product-related environmental objectives (such
as energy efficiency) may be affected by the complexity of
our technology and products, and the technological and
other capabilities of ourselves and our suppliers.

A global transition to a lower carbon economy and / or
climate change may result in the imposition of increased
environmental regulations that could lead to technology
restrictions, modification of product designs, an increase in
energy prices and the introduction of energy or carbon
taxes, pollution requirements, required remediation
equipment, or other requirements. A variety of regulatory
developments have been introduced that focus on
restricting or managing the emission of carbon dioxide,
methane and other greenhouse gases. This could result in
a need to purchase at higher costs new equipment or raw
materials with lower carbon footprints.

Finance and reporting
We are exposed to treasury risks, including liquidity
risk, interest rate risk, credit risk and foreign exchange
risk
Risk category: Liquidity, Interest rate, Counterparty credit, Foreign
exchange

We are a global company and are exposed to a variety of
financial risks, including liquidity risk, interest rate risk,
credit risk and foreign exchange risk.

Liquidity risk: Negative developments in our business or
global capital markets could affect our ability to meet our
financial obligations or to raise or re‐finance debt in the
capital or loan markets.

Interest rate risk: We are exposed to interest rate risks.
Our Eurobonds bear interest at fixed rates. Our cash and
investments as well as our revolving credit facility bear
interest at a floating rate. Failure to effectively hedge this
risk could impact our financial condition and results of
operation. In addition, we could experience an increase in
borrowing costs due to a ratings downgrade (or
expectation of a downgrade), developments in capital and
lending markets or developments in our businesses.

Counterparty credit risk: We are exposed to
counterparty credit risks, in particular with respect to
financial counterparties with whom we hold our cash
and investments as well as our customers. As a result
of our limited number of customers, credit risk on our
receivables is concentrated. Our three largest customers
(based on total net sales) accounted for €2,757.0 million,
or 80.1%, of accounts receivable and finance receivables
at December 31, 2020, compared with €2,191.8 million,
or 77.2%, at December 31, 2019. Accordingly, business
failure or insolvency of one of our main customers could
result in significant credit losses.

Currency risk: We are exposed to currency risks. Our
Financial Statements are expressed in euros. Accordingly,
our results of operations are exposed to fluctuations in
exchange rates between the euro and other currencies.
Changes in currency exchange rates can result in losses in
our Financial Statements. We are particularly exposed to
fluctuations in the exchange rates between the US dollar
and the euro, and to a lesser extent to the Japanese yen,
the South Korean won, the Taiwanese dollar and Chinese
yuan, in relation to the euro. We incur costs of sales
predominantly in euros with portions also denominated in
US and Taiwanese dollars. A small portion of our operating
results are driven by movements in currencies other than
the euro, US dollar, Japanese yen, South Korean won,
Taiwanese dollar or Chinese yuan.

In general, our customers run their businesses in US
dollars and therefore a weakening of the US dollar against
the euro might impact the ability or desire of our customers
to purchase our products at quoted prices.

ASML ANNUAL REPORT 2020Partners
Our success is highly dependent on the performance
of a limited number of critical suppliers of single-
source key components
Risk category: Supply chain disruption, Supplier strategy and
performance

We rely on outside vendors for components and
subassemblies used in our systems, including the design
thereof. These components and subassemblies are
obtained from a single supplier or a limited number of
suppliers. As our business has grown, our dependence on
single suppliers or a limited number of suppliers has
grown, as the highly specialized nature of many of our
components, particularly for EUV systems, means it is not
economical to source from more than one supplier. Our
sourcing strategy therefore (in many cases) prescribes
'single sourcing, dual competence'. Our reliance on a
limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required
components or subassemblies, in a timely manner or at all,
additional costs resulting from switching to alternate
suppliers and reduced control over pricing and quality.
Delays in supply of these components and subassemblies,
which could occur for a variety of reasons, such as
disruptions experienced by our suppliers, including work
stoppages, fire, cyberattacks, energy shortages, pandemic
outbreaks such as COVID-19, flooding or other natural
disasters, can lead to delays in delivery of our products
which would impact our business. For example, certain of
our suppliers experienced disruptions in their operations as
a result of COVID-19. A prolonged inability to obtain
adequate deliveries of components or subassemblies, or
any other circumstance that requires us to seek alternative
sources of supply, could significantly hinder our ability to
deliver our products in a timely manner, which could
damage relationships with our customers and materially
impact our business.

The number of lithography systems we are able to produce
may be limited by the production capacity of one of our
key suppliers, Carl Zeiss SMT GmbH, which is our sole
supplier of lenses, mirrors, illuminators, collectors and
other critical optical components (which we refer to as
optics). If Carl Zeiss SMT GmbH is unable to maintain and
increase production levels, we could be unable to fulfill
orders, which could have a material impact on our
business and damage relationships with our customers. If
Carl Zeiss SMT GmbH were to terminate its supply
relationship with us or if Carl Zeiss SMT GmbH is unable to
maintain production of optics over a prolonged period, we
would effectively cease to be able to conduct our business.

In addition, some of our key suppliers, including Carl Zeiss
SMT GmbH, have a limited number of manufacturing
facilities, the disruption of which may significantly and
adversely affect our production capacity.

Lead times in obtaining components have increased as our
products have become more complex, and a failure by us
to adequately predict demand for our systems or any
delays in the shipment of components can result in
insufficient supply of components, which can lead to
delays in delivery of our systems and can limit our
capabilities to react quickly to changing market conditions.
Conversely, a failure to predict demand could lead to
excess and obsolete inventory.

We are also dependent on suppliers to develop new
models and products and to meet our development
roadmaps. To the extent our suppliers do not meet our
requirements or timetable in product development, our
business could suffer.

A high percentage of net sales is derived from a few
customers
Risk category: Customer dependency

Historically, we have sold a substantial number of
lithography systems to a limited number of customers.
Customer concentration can increase because of
continuing consolidation in the semiconductor
manufacturing industry. In addition, although the
applications part of our holistic lithography solutions
constitutes an increasing portion of our revenue, a
significant portion of those customers are the same
customers as those of our systems. Consequently, while
the identity of our largest customers may vary from year to
year, sales may remain concentrated among relatively few
customers in any particular year. The recognized total net
sales to our largest customer from each year accounted
for €4,394.8 million, or 31.4% of total net sales in 2020,
compared with €4,688.6 million, or 39.7% of total net sales
in 2019 and €2,476.8 million, or 22.6% of total net sales in
2018. The loss of any significant customer or any
significant reduction or delay in orders by a significant
customer may have a material adverse effect on our
business, financial condition and results of operations.

People
Our business and future success depend on our ability
to manage the growth of our organization and attract
and retain a sufficient number of adequately educated
and skilled employees
Risk category: Human resource, Knowledge management,
Organizational effectiveness

Our business and future success significantly depends
upon our employees, including a large number of highly
qualified professionals, as well as our ability to attract and
retain employees. Competition for such personnel is
intense and has increased in recent years, and we may not
be able to continue to attract and retain such personnel.
Our R&D programs require a significant number of qualified
employees. If we are unable to attract sufficient numbers of
qualified employees, this could affect our ability to conduct
our R&D on a timely basis. In addition, if we lose key
employees or officers to retirement, illness or otherwise,
particularly a number of our highly qualified professionals
and / or senior management, we may not have sufficient
time to find a suitable replacement. Moreover, as a result of
the uniqueness and complexity of our technology, qualified
engineers capable of working on our systems are scarce
and generally not available (e.g. from other industries or
companies). As a result, we must educate and train our
employees to work on our systems. Therefore, a loss of a
number of key professionals and / or senior management
can be disruptive, costly and time consuming. Our R&D
activities with respect to new technology systems, such as
High-NA and for further development of EUV technology,
and our service activities have increased our need for
qualified personnel.

Furthermore, the increasing complexity of our products
results in a longer learning curve for new and existing

ASML ANNUAL REPORT 2020We are dependent on the continued operation of a
limited number of manufacturing facilities
Risk category: Continuity of own operation

All of our manufacturing activities, including subassembly,
final assembly and system testing, take place in cleanroom
facilities in Veldhoven, the Netherlands, in Berlin, Germany,
in Wilton, Connecticut, US and in San Diego and San Jose,
California, US, in Pyeongtaek, South Korea, in Beijing,
China, in Linkou and Tainan, Taiwan. These facilities may
be subject to disruption for a variety of reasons, including
work stoppages, fire, energy shortages, pandemic
outbreaks such as COVID-19, flooding or other disasters,
natural and otherwise. We cannot ensure that alternative
production capacity would be available if a major
disruption were to occur.

As our organization grows, we are not able to fully insure
our risk exposure. In addition, not all disasters are
insurable. As we are unable to duly insure against potential
losses, we are subject to the financial impact of uninsured
losses, which can have an adverse impact on our financial
condition and results of operation.

The nature of our operations exposes us to health,
safety, and environment risks
Risk category: Environment, health and safety

Hazardous substances are used in the production and
operation of our products and systems, which subjects us
to a variety of governmental regulations relating to
environmental protection, and employee and product
health and safety, including the transport, use, storage,
discharge, handling, emission, generation, and disposal of
toxic or other hazardous substances. In addition, operating
our systems (which use lasers and other potentially
hazardous systems) can be dangerous and can result in
injury. The failure to comply with current or future
regulations could result in substantial fines being imposed
on us, suspension of production, alteration of our
manufacturing and assembly and test processes, damage
to our reputation, and/or restrictions on our operations or
sale or other adverse consequences. Additionally, our
products have become increasingly complex. The
increasing complexity requires us to invest in continued
risk assessments and development of appropriate
preventative and protective measures for health and safety
for both our employees (in connection with the production
and installation of our systems and field options and
performance of our services) and our customers’
employees (in connection with the operation of our
systems). Our health and safety practices may not be
effective in mitigating all health and safety risks, including
such risks resulting from the COVID-19 pandemic. Failing
to comply with applicable regulations or the failure of our
implemented practices for customer and employee health
and safety could subject us to significant liabilities.

employees and suppliers leading to an inability to decrease
cycle times and may result in the occurrence of significant
additional costs. Our suppliers face similar risks in
attracting qualified employees, including attracting
employees in connection with R&D programs that will
support our R&D programs and technology developments.
To the extent that our suppliers are unable to attract
qualified employees, this could impact our R&D programs
or deliveries of components to us.

In recent years, our organization has grown significantly. As
a result of this growth in a short period of time, we may be
unable to effectively manage, monitor and control our
employees, facilities, operations and other resources.

Operations
We may face challenges in managing the
industrialization of our products and bringing them to
high-volume production
Risk category: Product industrialization

Bringing our products to high-volume production at a
value-based price and in a cost-effective manner, depends
on our ability to manage the industrialization of our
products and our ability to manage costs. Customer
acceptance of our products depends on performance of
our products in the field. As our products become more
complex, we face an increasing risk that products that we
develop may not meet development milestones or
specifications and that our products may not perform
according to specifications, including quality standards. If
our products do not perform according to specifications
and performance criteria or if quality or performance issues
arise, this may result in additional costs, reduced demand
for our products, and our customers being unable to meet
planned wafer capacity.

Transitioning our newly developed products to full-scale
production requires the expansion of our infrastructure,
including enhancing our manufacturing capabilities,
increasing supply of components and training qualified
personnel, and may also require our suppliers to expand
their infrastructure capabilities. If we or our suppliers are
unable to expand infrastructure as necessary, we may be
unable to introduce new technologies, products or product
enhancements or reach high-volume production of newly
developed products on a timely basis or at all.

New technologies might not have the same margins as
existing technologies and we might not be able to adjust
value-based pricing and or cost in an effective manner. In
addition, the introduction of new technologies, products or
product enhancements also impacts ASML’s liquidity, as
new products may have higher cycle times to produce
resulting in increased working capital needs. This impact
on liquidity increases as our products become more
complex and expensive.

The capability, capacity and costs associated with
providing the required customer support function to cover
the increasing number of shipments and servicing a
growing number of EUV systems that are operational in the
field could affect the timing of shipments, and the efficient
execution of maintenance, servicing and upgrades, which
is key to the systems continuing to achieve the required
productivity.

ASML ANNUAL REPORT 2020Cybersecurity and other security incidents, or other
disruptions in our information technology systems,
could materially adversely affect our business
operations
Risk category: Information security, Information technology

We rely on the accuracy, availability and security of our
information technology systems. Despite the measures
that we have implemented, including those related to
cybersecurity, our systems could be breached or damaged
by computer viruses and systems attacks, natural or man-
made incidents, disasters or unauthorized physical or
electronic access.

We are experiencing an increasing number of cyberattacks
on our information technology systems as well as the
information technology systems of our suppliers,
customers and other service providers, whose systems we
do not control. These attacks include malicious software
(malware), attempts to gain unauthorized access to data,
and other electronic security breaches of our information
technology systems. They also include the information
technology systems of our suppliers, customers and other
service providers that have led and could lead, for us, our
customers, suppliers or other business partners - including
R&D partners - to disruptions in critical systems,
unauthorized release, misappropriation, corruption or loss
of data or confidential information (including confidential
information relating to our customers, employees and
suppliers).

In addition, any system failure, accident or security breach
could result in business disruption, theft of our intellectual
property, trade secrets (including our proprietary
technology), unauthorized access to, or disclosure of,
customer, personnel, supplier or other confidential
information, corruption of our data or of our systems,
reputational damage or litigation. Furthermore, computer
viruses or other malware may harm our systems and
software and could be inadvertently transmitted to our
customers' systems and operations, which could result in
loss of customers or litigation. We may also be required to
incur significant costs to protect against or repair the
damage caused by these disruptions or security breaches
in the future, including, for example, rebuilding internal
systems, implementing additional threat protection
measures, providing modifications to our products and
services, defending against litigation, responding to
regulatory inquiries or actions, paying damages, or taking
other remedial steps with respect to third parties.

These cybersecurity threats are constantly evolving. We,
therefore, remain potentially vulnerable to additional known
or yet unknown threats, as in some instances, we, our
customers, and our suppliers may be unaware of an
incident or its magnitude and effects. We also face the risk
that we expose our customers to cybersecurity attacks
through the systems we deliver to our customers, including
in the form of malware or other types of attacks as
described above, which could harm our customers.
Furthermore, the COVID-19 pandemic has increased the
level of remote working within our organization, which
increases the risks of cybersecurity incidents.

In addition, from time to time, we implement updates to our
information technology systems and software, which can
disrupt or shutdown our information technology systems.
We may not be able to successfully launch and integrate

these new systems as planned without disruption to our
operations. For example, we are currently implementing a
new ERP system and infrastructure (ONE program). As a
result of this system implementation or otherwise, have
and could continue to experience disruptions in our
operations.

Legal and compliance
We are subject to increasingly complex regulatory and
compliance obligations
Risk category: Violation of laws and regulations

In recent years, our business has grown significantly in
terms of sales, operations, employees and our business
infrastructure. As a result, the complexity of complying with
rules and regulations has increased. Furthermore, as we
have expanded our business in countries where we did not
previously operate, we have become increasingly subject
to compliance with additional rules and regulations in such
jurisdictions, including anti-corruption, anti-bribery and
human rights standards, which can be complex. We are
also subject to investigations, audits and reviews by
authorities in such jurisdictions regarding compliance with
rules and regulations, including tax laws.

Furthermore, the existing rules and regulations that we are
subject to, including regulations relating to trade, national
security, tax, exchange controls, reporting, anti-corruption
laws, data protection, are becoming more complex and the
trade and national security environment has resulted in
increasing restrictions. We also face the risk that trade and
security regulations could limit our ability to sell our
products and services in certain jurisdictions.

Such changes in the regulation that applies to our business
can increase compliance costs and the risk of non-
compliance. Noncompliance can result in fines and
penalties and regulation could impact our ability to sell our
products and services.

Changes in taxation could affect our future profitability
Risk category: Violation of laws and regulations

We are subject to income taxes in the Netherlands and
numerous other jurisdictions. Our effective tax rate has
fluctuated in the past and may fluctuate in the future.

Changes in tax legislation in the countries where we
operate can affect our effective tax rate. For example, in
past years the OECD has implemented measures against
so-called Base Erosion and Profit Shifting or BEPS and is
currently working on additional proposals to avoid tax
evasion and enhance tax transparency. Based on the
BEPS reports the EU has proposed directives to counter
base erosion and profit shifting which in turn have resulted
in legislative proposals in EU member states. Similar
legislative initiatives inspired by the BEPS reports have
been taken in Asian jurisdictions in which we operate.
These initiatives have resulted in increased compliance
requirements for ASML.

In September 2020, the previously proposed reduction in
the general Dutch corporate income tax rate was reversed.
Furthermore, an increase from 7% to 9% as of 2021 to the
favorable Dutch corporate income tax rate for innovation
was adopted. We continuously monitor and assess the
impact of developments in tax legislation on ASML.

ASML ANNUAL REPORT 2020Changes to tax legislation of jurisdictions we operate in,
may adversely impact our tax position and consequently
our net income. Our worldwide effective tax rate is heavily
impacted by R&D incentives included in tax laws and
regulations in the countries we operate in. An example is
the so-called innovation box tax legislation in the
Netherlands (mentioned above). In case jurisdictions alter
their tax policies in this respect, this may have an adverse
effect on our worldwide effective tax rate. In addition,
jurisdictions levy corporate income tax at different rates.
The mix of our sales over the various jurisdictions in which
we operate may vary from year to year, resulting in a
different mix of corporate income tax rates applicable to
our profits, which can affect our worldwide effective tax
rate and adversely impact our net income.

Other risk factors
The COVID-19 pandemic may impact our operations
The COVID-19 pandemic and the measures implemented
to address this pandemic globally continue to impact our
business and our suppliers and customers. The pandemic
has already had a significant impact on the global
economy, which can potentially impact our end markets.
There is significant uncertainty about how the current
COVID-19 pandemic will impact global GDP development,
end markets, our manufacturing capability and supply
chain, and the longer this pandemic lasts the greater are
the risks. The full impact of this pandemic on ASML will
depend on future developments, including continued
severity of the COVID-19 pandemic, and the actions to
contain the outbreak or address its impact which are
outside of our control.

Restrictions on shareholder rights may dilute voting
power
Our Articles of Association provide that we are subject to
the provisions of Dutch law applicable to large
corporations, called 'structuurregime'. These provisions
have the effect of concentrating control over certain
corporate decisions and transactions in the hands of our
Supervisory Board. As a result, holders of ordinary shares

may have more difficulty in protecting their interests in the
face of actions by members of our Supervisory Board than
if we were incorporated in the US or another jurisdiction.

Our authorized share capital also includes a class of
cumulative preference shares and we have granted
Stichting Preferente Aandelen ASML, a Dutch foundation,
an option to acquire, at their nominal value of €0.09 per
share, such cumulative preference shares. Exercise of the
Preference Share Option would effectively dilute the voting
power of our outstanding ordinary shares by one-half,
which may discourage or significantly impede a third party
from acquiring a majority of our voting shares.

See Leadership and governance - Corporate governance -
Board of Management and Supervisory Board, and
Consolidated Financial Statements - Notes to the
Consolidated Financial Statements - Note 22 Shareholders’
equity.

We may not declare cash dividends and conduct share
buyback programs at all or in any particular amounts in
any given year
We aim to pay a semi-annual dividend that is growing (on
an annualized basis) over time, and we conduct share
buyback programs from time to time. The dividend
proposal and amount of share buybacks in any given year
will be subject to the availability of distributable profits,
retained earnings and cash, and may be affected by,
among other factors, the Board of Management’s views on
our potential future liquidity requirements, including for
investments in production capacity and working capital
requirements, the funding of our R&D programs and for
acquisition opportunities that may arise from time to time,
and by future changes in applicable income tax and
corporate laws. We may also suspend buyback programs
from time to time, which would reduce the amount of cash
we are able to return to shareholders. Accordingly, the
Board of Management may decide to propose not to pay a
dividend or pay a lower dividend and may suspend, adjust
the amount of or discontinue share buyback programs or
we may otherwise fail to complete buyback programs.

ASML ANNUAL REPORT 2020Responsible business

Our ethics governance consists of four levels:

1. Our Ethics Board, chaired by our CEO and reporting
to the Board of Management, is responsible for
policymaking and the supervision of ASML’s compliance
with legal and ethical requirements. The Ethics Board
meets regularly to give guidance on relevant issues.

2. Our Ethics Committee investigates significant
notifications about potential breaches of ASML's Code
of Conduct worldwide.

3. Our Ethics Office is responsible for overseeing
and implementing our Ethics program. All reports of
a possible breach of ASML's Code of Conduct are
screened by one of the Ethics Officers and all significant
reports are discussed with the Ethics Committee.

4. Our ethics organization includes employees who, in
addition to their regular roles at ASML, act as Ethics
Liaisons in all the countries we operate in. They serve as
trusted representatives, and act as the first local point
of contact for employees with questions and concerns
related to ethics.

As a member of the Responsible Business Alliance (RBA),
we have adopted the RBA Code of Conduct, which is a
common set of social, environmental and ethical industry
standards. Our Code is in line with the RBA Code of
Conduct. To reinforce our commitment to the supplier
network, we expect our key suppliers (representing around
80% of our total spend) and their suppliers to comply with
the RBA Code of Conduct and to develop their own
strategies, policies and processes to follow it. This
requirement is included in our long-term product-related
suppliers’ contracts. For more information, see What we
achieved in 2020 - Our supply chain.

We are a global leader in the semiconductor
industry. As the innovator that makes vital
systems for the chip industry, we have a
responsibility to lead by example. Our purpose
is clear, ‘to unlock the potential of people and
society by pushing technology to new limits’,
and we want our values to reflect in everything
we do to pursue our purpose. Anywhere we
operate, we believe that conducting our
business with honesty and acting with the
highest standards of integrity is essential to our
value creation for our stakeholder groups, and
the long-term success of our company.

We are committed to conducting our business in
compliance with applicable laws and regulations in all the
countries we operate in. We promote and uphold ethical
behavior, fostering a culture where speaking up is
encouraged and appreciated.

Guided by feedback from employees on ASML’s first-ever
Global Ethics Survey in 2019, we took the opportunity in
2020 to improve our ethics organization. Among other
activities, we set out to grow and professionalize our
network of Ethics Liaisons, highlight the role of the Ethics
Office, revise the Code of Conduct to align more clearly
with ASML’s values, and raise awareness around how the
company responds to questions related to ethics.

Business ethics and Code of
Conduct
We live our values – Challenge, Collaborate and Care – a
shared belief system at ASML that defines who we are.
These values are reflected in our Code of Conduct. It sets
clear expectations and guiding principles on the way we
conduct our business and serves to foster a culture of
integrity, ethics and respect. Together with a set of practical
guidelines, it helps our employees make smart decisions
that will benefit all stakeholders and puts integrity at the
center of what we do.

ASML relies heavily on the skills, commitment and behavior
of its employees for its continued success as a company,
and for its positive contribution to society. That’s why we
expect all employees to fully live up to the company’s
values and to act with integrity and respect at all times. We
ask all our employees to acknowledge our Code, and we
expect our business partners to respect our Code.

ASML ANNUAL REPORT 2020Our Code of Conduct principles

Our commitment

We respect people

We operate with
integrity

We commit to
safety and social
responsibility

ASML is committed to maintaining a safe and healthy working environment, respecting human
rights in line with international laws and regulations and industry standards such as the RBA Code of
Conduct. Diversity of cultures, education and talent makes us a stronger, more creative and innovative
company. By working together and using these values to guide us, we create an environment based
on mutual respect – one that leads to better results than any of us can achieve alone.

A strong culture of integrity and compliance underpins ASML’s business success. We define ‘integrity’
as acting with honesty, sincerity, care and reliability. Compliance not only means complying with laws
and regulations, but also with our high ethical standards. Our reputation for integrity is a valuable
asset. It is essential for us to demonstrate personal and business integrity at all times.

Technology reaches all parts of society. By helping to make chips more affordable and more
powerful, ASML has an important role to play – not only by reputation and results but in relation to
the environment too. This is why ASML is committed to conducting business responsibly, enabling
sustainable growth while fulfilling legal and moral obligations. We aim to achieve our business
objectives in a caring and responsible manner as outlined in the key principles.

We protect our assets ASML’s most valuable assets are its people and knowledge, both of which are highly valued and
protected. Our ‘assets’ include intellectual property (IP), which refers to intangible assets such as
technical know-how, products data, business data, and personal data, as well as physical assets such
as products, tooling, funds and computers for conducting ASML business. Our company expects
anyone entrusted with ASML assets to keep them safe from loss, damage, misuse or theft.

We encourage you
to communicate and
Speak Up

To fulfill our commitment to upholding the high standards of integrity described in this Code,
communication is key. We strive for a working environment that encourages open dialogue among
employees, as well as between employees and third parties, where employees feel comfortable
and respected, and that they can trust each other to do the right thing. If you observe or suspect a
violation, we encourage you to speak up.

Our Code of Conduct is available on our website (www.asml.com), our intranet and in our Employee app.

Promoting ethical behavior
We provide a dedicated Ethics Program, which offers the
necessary support, advice, training and communication to
enable employees and others to understand and follow our
Code. It does this by building awareness through various
communication channels to foster a culture of integrity. It
also helps create an open and honest culture where the
instinct to do the right thing, and to comply with the law
and ASML policies, is embedded across the organization.

Fostering a culture of integrity starts with management
setting the right example. To support managers to be
leaders who act with integrity, we’ve developed a practical
handbook with guidelines, tips about dealing with specific
situations, and tools they can use in daily operations.

In every location where we operate, we have Ethics
Liaisons. They serve as trusted representatives and act as
the first local point of contact for employees with questions
and concerns related to ethics. They support management
in managing ethical risks, and employees can go to them
to speak up in good faith.

In 2020, we developed a new ethics training curriculum,
which introduces and raises awareness about the Code
and related topics in an interactive and inspiring way. The
curriculum includes five modules for all employees, and a
separate module for managers that needs to be completed
over a period of two years. The modules cover our Code
and other compliance-related topics, and raise awareness
around the importance of ethical behavior and our Speak
Up policy. It also provides information and guidance on
dealing with topics such as personal relationships at work,
conflicts of interest, navigating cultural differences, and

ethical aspects around ancillary activities or other positions
outside of ASML.

The Ethics Program includes our annual Ethics Awareness
Week, where we address a specific theme around ethics.
In 2020, due to the volume of new information we wanted
to share with employees, we expanded the week-long
event, running a series of activities over the whole of
November. At this time, we launched the new Code and
the updated training curriculum.

The refreshed online training goes to all new employees
within the first three months of starting at ASML. The first
module covers the Code, and this will be followed by other
modules addressing different topics, as well as those
connected to the Code, over the next two years.

We also expanded our network of Ethics Liaisons globally
in 2020 (up to 55 from 42 in 2019), ensuring even more
global coverage. We also increased the number of areas
Ethics Liaisons come from, so encouraging people from all
over the business to become involved and increasing
diversity in this area.

Our liaisons were especially important during the
COVID-19 pandemic when travel was not possible. We
relied on them to keep channels of communication open
and to help us better understand the types of issues our
employees were facing across the globe. This, and growing
our capability in terms of Ethics Investigators – the people
looking into the most serious kinds of ethics complaints –
are just two of the ways we have been professionalizing the
Ethics Office.

100

ASML ANNUAL REPORT 2020Encouraging people to speak up
We encourage everyone, including external business
partners, such as suppliers, contractors and other workers,
to express, in good faith, any concerns they might have
regarding possible violations of our Code, our company’s
policies, or the law.

Anti-bribery and anti-corruption
The role of our Legal Compliance function is to make sure
we conduct business in compliance with all relevant
national and international laws and regulations, as well as
professional standards, accepted business practices and
our own internal standards.

Our Speak Up policy, which includes our Whistleblower
policy and our Ethics Investigation procedure, outlines the
steps employees are encouraged to take if they experience
or suspect a breach of our business ethics. These policies
and procedure reassure employees that they can report a
breach without fear of repercussions. For employees or
external stakeholders who prefer to remain anonymous, we
have a Speak Up system available to report breaches
anonymously. This is run by an independent, external
service company.

We look into all Speak Up messages. The role of the Ethics
Office is to assess each Speak Up message, and bring it to
the attention of the relevant employee, team or committee,
so that remediation actions can be taken by the
appropriate body.

We group Speak Up messages in three categories:
questions, concerns and complaints. With regard to
concerns and complaints, this could include a shortfall in a
procedure or a policy that is possibly not being applied as
it should be or has been misinterpreted. We discuss the
issue with the policy owner or those working in the
particular area as to how it could be better handled or
improved. A complaint is the most serious type of case the
Ethics Office deals with. To be categorized as a complaint,
there must be an alleged breach or a violation of the Code,
which cannot be resolved by line managers or HR.

If we reach the stage where an allegation remains beyond
this point, it is referred to our Ethics Committee, which
investigates significant cases of potential breaches of
ASML's Code worldwide. We have established an
Investigation Procedure policy, which describes the steps
to be followed in the event of an investigation into an ethics
complaint. This ensures ethics complaints are dealt with
fairly, independently, and in an impartial and unbiased
manner as set out in ASML’s Speak Up policy. The
investigation procedure has three phases – an initial review
phase, a fact-finding and assessment phase, and a
decision phase. The aim is to bring closure within two
months, and, once a decision is made, we are committed
to implementing an appropriate remedy.

We registered 229 Speak Up messages from employees in
2020. As in previous years, many of these related to issues
resulting from cultural differences, leading to discrimination,
and challenges with the style and language of
communication between employees. Other messages
concerned issues such as alleged bullying and conflicts of
interest, including, for example, if employees are allowed to
accept gifts from customers. We have looked into and
addressed all Speak Up messages.

As in previous years, we did not incur any fines for
breaches of ethical regulations.

Our Legal Compliance function oversees adherence to a
wide variety of regulatory compliance-related areas and
advises management about the regulatory framework,
including changes in legislation and regulations. Examples
of such regulatory compliance areas are our securities and
insider trading, competition law (antitrust), and anti-bribery
and anti-corruption. When needed, Legal Compliance
takes charge of any regulatory investigations.

We are committed to personal and business integrity and
avoiding improper influence on others or ourselves. In
2020, we have updated our Anti-bribery and anti-
corruption policy. Our Anti-bribery and anti-corruption
policy details our commitment and the measures we take
to prevent bribery and corruption at ASML. It also ensures
compliance with applicable laws prohibiting domestic and
foreign bribery and corruption as well as the ASML Code of
Conduct. For more information or download of the policy,
please visit www.asml.com.

There were no breaches of our Anti-bribery and anti-
corruption policy in the reporting year.

Competition Law Compliance policy
We are committed to the principles of fair competition and
fairness in dealing with our business partners, including
suppliers, co-developers, customers and other industry
peers. As such, ASML does not condone any form of
conduct that is considered illegal under applicable
competition laws or is contrary to our Code of Conduct.

Our Competition Law Compliance policy demonstrates our
ongoing commitment to ensuring compliance with
applicable competition laws and our Code of Conduct. For
more information or download of the policy, please visit
www.asml.com.

Privacy protection
We are committed to respecting and protecting the privacy
rights of employees, customers, suppliers and everyone
we do business with. Personal data is managed in a
professional, lawful and ethical way, in line with our Code
of Conduct and in compliance with applicable laws and
regulations.

We have technical and organizational measures in place to
prevent the accidental or unlawful destruction, loss,
alteration, unauthorized disclosure of, or access to
personal data. Our Privacy policy sets the minimum
requirements from the perspective of ASML as a global
organization. The policy is binding for all ASML employees
and applies to the processing of personal data of our staff,
job applicants and business partners such as customers,
suppliers, visitors and other individuals.

101

ASML ANNUAL REPORT 2020A dedicated privacy and personal data protection program
ensures we adhere to the ASML Privacy policy. Our privacy
program includes, among others, the following elements:

• Governance: At the senior management level, the

Corporate Risk Committee is responsible for oversight
of the topic of privacy, while the Privacy Office manages
the privacy framework and provides assistance and
guidance. Each employee is responsible for reading
and understanding the content and implications of the
Privacy policy.

• Systems and procedures: The Privacy Controls

framework consist of 130 privacy activities including
privacy impact assessments and data protection
impact assessments. The Privacy Controls framework is
included in our ERM process.

• Disciplinary actions: We investigate all incidents,

concerns and registered reports of potential breaches
that are registered in our Privacy portal as outlined in our
personal data breach procedure. We take appropriate
control measures and disciplinary actions to prevent
reoccurrence.

• Audit: Privacy is included in our internal audit program.
Our privacy notices for both business partners and
recruitment are derived from our Privacy policy. They
explain why personal data is collected and how ASML
uses it.

In 2020, we updated our Global Privacy Notices for
workers, job applicant, business partners and visitors. The
new privacy notices reflect the latest processing of
personal data within ASML, and meet both the
requirements of GDPR (Europe) and CCPA (US).

Respecting human rights
We conduct business on the basis of fairness, good faith,
and integrity and we expect the same from all those we
work with. To this end, we also believe that we have the
responsibility to respect human rights and contribute to
positive impact.

We are committed to respecting universal human rights
and honoring the value of ethics as expressed in our Code
of Conduct. We support the principles laid down in the
OECD Guidelines for Multinational Enterprises, United
Nations Guiding Principles (UNGP) on Business and
Human Rights and those in the International Labor
Organization’s (ILO) Tripartite Declaration of Principles
concerning Multinational Enterprises and Social Policy. We
have established a Human Rights policy, which is publicly
available on www.asml.com.

Our Human Rights policy complements our ASML Code of
Conduct and the RBA Code of Conduct we adhere to. It
expresses our commitment to human rights and
responsible labor practice in our operations and our supply
chain. The Human Rights policy applies to ASML and its
subsidiaries anywhere in the world. The overall
responsibility for identifying and managing human rights
issues in our direct operations falls under the remit of our
Executive Vice President HR. Responsibility for human
rights in our supply chain falls under the remit of our
Executive Vice President & Chief Strategy Officer.

Defining salient human rights issues
Salient human rights issues are those human rights that are
at risk of the most severe negative impact through a

company's activities or business relationships. We
assessed possible impacts on people’s human rights
across our value chain. We focused our efforts on seeking
stakeholder input on the one hand and performing due
diligence in relation to our initial salient issues on the other
hand. Our commitments to address and engage actively in
our salient human rights issues are highlighted in our Code
of Conduct, Human Rights policy and RBA Code of
Conduct for suppliers. We identify and manage human
rights issues in various ways, for example stakeholder
engagement, internal human rights assessment in our
operations, and suppliers' due diligence and sustainability
risk management. Read more in: Responsible supply
chain).

We received no grievance on breaches on human rights in
2020.

Our operations
In 2019, we conducted a risk assessment to identify the
inherent risks related to human rights within our own
operations. The results of our analysis showed that the
inherent risk of human rights vulnerabilities in ASML's own
operations are working hours and overtime, health and
safety, and workplace harassment. The vulnerable rights-
holder groups identified within ASML are contractors,
ethnic minorities and migrant workers. In addition, we also
conduct internal EHS audits regularly. Read more in:
Ensuring employee safety.

Working hours and overtime
The standard weekly working hours in the locations where
we operate are on average 40 hours. Our company
standards are based on the International Labor Standards
of the International Labor Organization (the Forty-Hour
Week Convention) and the RBA norms. A workweek must
not exceed the maximum set by local law and a workweek
should not be more than 60 hours per week, including
overtime, except in an emergency or unusual situation. We
pay constant attention to protecting our employees from
working overtime during peak periods. As overtime
remains an important attention point for management, we
keep monitoring the use of overtime and take appropriate
measures to manage the situation.

Health and safety
It is our obligation to provide safe and healthy working
conditions for all our employees and others working on our
premises. In our products and processes, we think about
how to make ASML a safe place to work. We put
significant effort into creating awareness and to have a
proactive safety culture within ASML. Read more in:
Ensuring employee safety.

Workplace harassment
We are a global company with operations in more than 60
locations in 16 countries. We have a culturally diverse
workforce, employing 120 nationalities. This leads to a
higher inherent risk around the issue of workplace
harassment in human rights. Read more in: Encouraging
people to speak up, Promoting diversity and inclusion.
Through our Ethics Program, we raise awareness around
the importance of ethical behavior and our Speak Up
policy. It also provides information and guidance on dealing
with topics such as personal relationships at work, conflict
of interest, dealing with cultural differences, and ethical
aspects around ancillary activities or other positions
outside of ASML.

102

ASML ANNUAL REPORT 2020Our supply chain
We assess risks related to human rights in our supply chain
through a risk-based approach. In our due diligence
process, we use the RBA Risk Assessment Platform to
identify inherent risks in labor (including human rights),
ethics, health & safety and environmental standards
across our full supply base. In the event of a medium or
high risk relating to labor being identified, we engage with
the supplier and conduct a more detailed analysis. For
strategic suppliers covering around 80% of our product-
related spend, we expect them to complete the annual
RBA SAQ. This SAQ covers more than 400 risk elements
related to labor (including human rights), ethics,

environmental and safety factors, control elements and
management systems, including their performance. It helps
us to determine a supplier’s risk profile on sustainability.
When we identify compliance gaps, we engage with the
supplier to determine corrective action plan(s).

The salient issues we have defined relate to working
conditions (forced and bonded labor), health and safety,
and trade union rights. However, operating in the high-tech
industry the majority of our suppliers operate in countries
with a strong rule of law and are law abiding. We view this
inherent risk as low. Read more in: Responsible supply
chain.

103

ASML ANNUAL REPORT 2020Leadership
and governance

104

ASML ANNUAL REPORT 2020Corporate governance

We endorse the importance of good corporate
governance, of which independence,
accountability and transparency are the most
significant elements. These are also the
elements on which a relationship of trust
between us and our stakeholders can be built.

ASML Holding N.V. is a public limited liability company
operating under Dutch law. ASML’s shares are listed on
Euronext Amsterdam and NASDAQ.

We have a two-tier board structure, consisting of a Board
of Management responsible for managing the company,
and an independent Supervisory Board which supervises
and advises the Board of Management. For the fulfillment
of their duties, the two Boards are accountable to the
General Meeting, the corporate body representing our
shareholders.

Our governance structure is based on ASML’s articles of
association, Dutch corporate and securities laws and the
Dutch Corporate Governance Code. Because we are listed
on NASDAQ, we are also required to comply with the
Sarbanes-Oxley Act, the NASDAQ Listing Rules, and the
rules and regulations promulgated by the US Securities
and Exchange Committee.

ASML corporate governance structure

We are subject to the relevant provisions of Dutch law
applicable to large corporations (structuurregime). These
provisions have the effect of concentrating control over
certain corporate decisions and transactions in the hands
of the Supervisory Board. Procedures for the appointment
and dismissal of Board of management and Supervisory
Board members are based on the structuurregime.

This section of the report addresses our corporate
governance structure and the way ASML applies the
principles and best practices of the Dutch Corporate
Governance Code. It also provides information required by
the Decree adopting further rules related to the content of
the management report and the Decree implementing
Article 10 of the Takeover Directive.

In accordance with the Dutch Corporate Governance Code
(https://www.mccg.nl/english), other parts of this Annual
Report address our strategy and culture aimed at long-
term value creation, our values and Code of Conduct, as
well as the main features of our internal control and risk
management systems. See the Our strategy, How we
create value, Our company and How we manage
risk sections in this annual report.

Shareholders

Supervisory Board

Board of Management

Business lines

Business functions

Corporate functions

Employee support

Board of Management
ASML’s Board of Management is responsible for managing
ASML. Its responsibilities include establishing a position on
the relevance of long-term value creation for ASML and its
business, defining and deploying ASML’s strategy,
establishing and maintaining effective risk management
and control systems, managing the realization of ASML’s
operational and financial objectives and the corporate
social responsibility aspects relevant to ASML. In fulfilling
its management tasks and responsibilities, the Board of
Management is guided by the interests of ASML and its
business and takes into consideration the interests of our
stakeholders.

The current Board of Management is comprised of six
members. It has a dual leadership structure, under the
chairmanship of the President and CEO, and the vice
chairmanship of the President and Chief Technology

Officer. The Board of Management has adopted a division
of tasks, charging individual members with a specific part
of the managerial tasks, but the Board of Management
remains collectively responsible for the management of
ASML.

The Board of Management is supervised and advised by
the Supervisory Board. The Board of Management
provides the Supervisory Board with all the information, in
writing or otherwise, necessary for the Supervisory Board
to properly carry out its duties. Besides the information
provided in the regular meetings, the Board of
Management provides the Supervisory Board with regular
updates on developments relating to our business,
financials, operations, and industry developments in
general. Certain important decisions of the Board of
Management require the approval of the Supervisory
Board, see the Supervisory Board section of this Corporate
Governance chapter.

105

ASML ANNUAL REPORT 2020
Further information regarding the general responsibilities of
the Board of Management, the relationship with the
Supervisory Board and various stakeholders, the decision-
making process within the Board of Management, and the
logistics surrounding the meetings can be found in the
Board of Management’s rules of procedure. These are
published in the Governance section on our website.

Appointments
Members of the Board of Management are appointed by
the Supervisory Board on the recommendation of the
Selection and Nomination Committee and upon notification
to the General Meeting. Members of the Board of
Management are appointed for a term of four years.
Reappointment for consecutive four-year terms is possible.

Since 2013, the relationship between a member of the
Board of Management and a listed company can no longer
qualify as an employment relationship. All members of the
Board of Management who were appointed and

reappointed at the 2018 AGM are engaged by means of a
management services agreement for the duration of their
appointment.

The agreements between ASML and the Board of
Management members contain specific provisions
regarding severance payments. If ASML terminates the
agreement for reasons which are not exclusively or mainly
found in acts or omissions of the Board of Management
member, a severance payment not exceeding one year’s
base salary will be paid. Furthermore, current agreements
stipulate that a member of the Board of Management,
when giving notice of termination pursuant to a change of
control, will be entitled to a severance amount. Given that
such a resignation is specifically linked to a change of
control, ASML does not consider this provision a deviation
from the Code.

The Supervisory Board may suspend and dismiss
members of the Board of Management, but this can only
be done after consulting the General Meeting.

Peter T.F.M. Wennink (1957, Dutch)
President, Chief Executive Officer and Chair of Board of Management
Term expires 2022

Peter Wennink became President and CEO in 2013, having served as Executive VP,
CFO and member of the Board of Management since 1999. Peter was previously a
partner at Deloitte Accountants, focusing on the semiconductor industry. He has an
extensive background in finance and is a member of the Dutch Institute of
Registered Accountants. Peter was a member of the Advisory Board of the
Investment Committee of Stichting Pensioenfonds ABP until December 31, 2020.
He serves on the board of the FME-CWM, Peter is also a member of the board of
Captains of Industry Eindhoven Region and is Chair of the Eindhovensche
Fabrikantenkring and of the Supervisory Board of the Eindhoven University of
Technology. Furthermore Peter is a member of the Exchange Council of Euronext,
council member of Topconsortium voor 'Kennis en Innovatie' TKI HTS&M, member
of the Advisory Committee of the Dutch National Growth Fund and a member of
the Circle of Influence of Startup Delta.

Martin A. van den Brink (1957, Dutch)
President, Chief Technology Officer and Vice Chair of Board of Management
Term expires 2022

Martin van den Brink has been President and CTO of ASML since 2013. He joined
ASML at its founding in 1984, and for the next 11 years held various positions in
engineering. In 1995 he became Vice President Technology, and in 1999 was
appointed Executive Vice President Product & Technology and member of the
Board of Management. Martin holds a degree in Electrical Engineering from HTS
Arnhem (HAN University), as well as a degree in Physics (1984) from the University
of Twente. In 2012 the University of Amsterdam awarded him an honorary
doctorate in physics.

106

ASML ANNUAL REPORT 2020Roger J.M. Dassen (1965, Dutch)
Executive Vice President and Chief Financial Officer
Term expires 2022

Roger Dassen joined ASML in June 2018 and was appointed Executive Vice President
and CFO and member of the Board of Management at the AGM the same year. He
previously served as Global Vice Chair and member of the Executive Board of Deloitte
Touche Tohmatsu, having been CEO of Deloitte Holding. Roger holds a master’s in
Economics and Business Administration, a post-master’s in Auditing, and a PhD in
Business and Economics, all from the University of Maastricht. He is Professor of
Auditing at Vrije Universiteit Amsterdam, and sits on the Supervisory Board of the
Dutch National Bank. He is also the Chair of the Supervisory Board of Maastricht
University Medical Center+.

Frits J. van Hout (1960, Dutch)
Executive Vice President and Chief Strategy Officer
Term expires 2021

Frits van Hout was named Executive Vice President and Chief Strategy Officer in
2018. He joined ASML at its founding in 1984 and, after an eight-year absence,
returned in 2001 as Vice President Customer Support. He has served in several
executive positions and in 2009 joined the Board of Management. Frits holds two
master’s degrees: one in Theoretical Physics from Oxford University, the other in
Applied Physics from Eidgenössische Technische Hochschule, Zürich. He is a member
of the Board of the Stichting Brainport, the Eindhoven Region Economic Development
Board, and Stichting Continuiteit BE Semiconductor Industries, Deputy Chair of the
Supervisory Board of Aixtron SE, as well as a member of the Supervisory Board of
Bambi Belt Holding B.V and Stichting PhotonDelta.

Christophe D. Fouquet (1973, French)
Executive Vice President EUV
Term expires 2022

Christophe Fouquet was appointed Executive Vice President EUV and member of the
Board of Management in 2018. Since joining ASML in 2008, he has held several
positions, including Senior Director Marketing, Vice President Product Management,
and Executive Vice President Applications, a position he held from 2013 until 2018.
Prior to joining ASML, he worked for semiconductor equipment peers KLA Tencor and
Applied Materials. Christophe holds a master’s degree in Physics from the Institut
Polytechnique de Grenoble.

Frédéric J.M. Schneider-Maunoury (1961, French)
Executive Vice President and Chief Operations Officer
Term expires 2022

Frédéric Schneider-Maunoury has been Executive Vice President and Chief
Operations Officer since he joined ASML in 2009. He was appointed to the Board of
Management in 2010. Prior to joining ASML, Frédéric was Vice President Thermal
Products Manufacturing at power generation and rail transport equipment group
Alstom, having previously served as General Manager of that company’s Hydro
Business. Before joining Alstom, Frederic held various positions at the French Ministry
of Trade and Industry. He is a graduate of Ecole Polytechnique (1985) and Ecole
Nationale Supérieure des Mines (1988) in Paris.

107

ASML ANNUAL REPORT 2020Supervisory Board
Our Supervisory Board supervises the Board of
Management and the general course of affairs of ASML
and its subsidiaries. The Supervisory Board also supports
the Board of Management with advice. In fulfilling its role
and responsibilities, the Supervisory Board takes into
consideration the interests of ASML and its subsidiaries, as
well as the relevant interests of its stakeholders. In the two-
tier structure, the Supervisory Board is a separate and
independent body from the Board of Management and
from ASML. No member of the Supervisory Board
personally maintains a business relationship with ASML,
other than as a member of the Supervisory Board.

The Supervisory Board currently consists of nine members,
with the minimum being three.

In performing its task, the Supervisory Board focuses on,
inter alia, ASML’s corporate strategy aimed at long-term
value creation and the execution thereof, the staffing of and
succession planning for the Board of management, the
management of risks inherent to its business activities, the
financial reporting process, compliance with applicable
legislation and regulations, ASML’s culture and the
activities of the Board of Management in that regard, the
relationship with shareholders and other stakeholders, and
corporate social responsibility issues important for ASML.

Important management decisions, such as setting the
operational and financial objectives, the strategy designed
to achieve these objectives and the parameters to be
applied in relation thereto, major investments, budget and
the issue, repurchase and cancellation of shares, require
the Supervisory Board’s approval.

The Supervisory Board is governed by its rules of
procedure. Items covered in these rules include the
responsibilities of the Supervisory Board and its
committees, the composition of the Supervisory Board and
its committees, logistics surrounding the meetings, the
meeting attendance of members of the Supervisory Board,
the rotation schedule for these members and the
Committee charters. The Supervisory Board’s rules of
procedure and the committee charters are regularly
reviewed and, if needed, amended. The Audit Committee
charter is reviewed annually to check whether the charter
still complies with the applicable rules and regulations,
especially those relating to the Sarbanes-Oxley Act.

For detailed information on the meetings and activities of
the Supervisory Board in 2020, see Leadership and
governance - Supervisory Board report - Meetings and
attendance.

Appointments
The members of the Supervisory Board are appointed by
the General Meeting based on binding nominations
proposed by the Supervisory Board. When nominating
persons for (re)appointment, the Supervisory Board checks
whether the candidates fit the Supervisory Board's profile.
The profile is available in the Governance section of our
website. The General Meeting may reject binding
nominations of the Supervisory Board by way of a
resolution adopted with an absolute majority of the votes
cast, representing at least one-third of ASML’s outstanding
share capital. If the votes cast in favor of such a resolution
do not represent at least one-third of the total outstanding
capital, a new shareholders’ meeting can be convened, at
which the nomination can be overruled by an absolute
majority.

The Supervisory Board generally informs the General
Meeting and the Works Council about upcoming
retirements by rotation at the Annual General Meeting of
Shareholders (AGM) in the year preceding the actual
retirement(s) by rotation. This ensures they have sufficient
opportunity to recommend candidates for the upcoming
vacancies. The Supervisory Board has the right to reject
the proposed recommendations. Furthermore, the Works
Council has an enhanced right to make recommendations
for one-third of the members of the Supervisory Board.
This enhanced recommendation right implies that the
Supervisory Board may only reject the Works Council’s
recommendations in limited circumstances: (i) if the
relevant person is unsuitable or (ii) if the Supervisory Board
would not be duly composed if the recommended person
were appointed as Supervisory Board member.

Members of the Supervisory Board serve for a maximum
term of four years or a shorter period as per the
Supervisory Board’s rotation schedule. Supervisory Board
members are eligible for reappointment for another
maximum term of four years. After that, members may be
reappointed again for a maximum period of two years. This
appointment may be extended for a final term of no more
than two years. The rotation schedule is available in the
Governance section on our website.

If the General Meeting loses confidence in the Supervisory
Board, it may, by an absolute majority of the votes
representing at least one-third of the total outstanding
capital, withdraw its confidence in the Supervisory Board.
This resolution shall result in the immediate dismissal of the
entire Supervisory Board. In such case, the Enterprise
Chamber of the Amsterdam Court of Appeal shall appoint
one or more members to the Supervisory Board at the
request of the Board of Management.

Supervisory Board committees
The Supervisory Board, while retaining overall
responsibility, has assigned some of its tasks and
responsibilities to four committees: the Audit Committee,
the Remuneration Committee, the Selection and
Nomination Committee and the Technology Committee.
Further information on the Supervisory Board committees
can be found in the Supervisory Board report and in the
charters of the committees as posted on our website.

108

ASML ANNUAL REPORT 2020Gerard J. Kleisterlee (1946, Dutch)
Member of the Supervisory Board since 2015; second term expires in 2023
Chair of the Supervisory Board, Chair of the Selection and Nomination Committee and member of the
Technology Committee

Gerard Kleisterlee joined the Supervisory Board in 2015, and has been its Chair since
2016. He was President and CEO of the Board of Management of Royal Philips NV
from 2001 until 2011, having worked at the company since 1974. From 2011 to 2020,
he was Chair of the Board of Vodafone Group. He was also Deputy Chair and Senior
Independent Director of Royal Dutch Shell from 2010 until May 2020.

Antoinette (Annet) P. Aris (1958, Dutch)
Member of the Supervisory Board since 2015; third term expires in 2024
Member of Technology Committee and Selection and Nomination Committee

Annet Aris has been a member of the Supervisory Board since 2015. She is Senior
Affiliate Professor of Strategy at INSEAD business school, France, a position she has
held since 2003. From 1994 to 2003 she was a partner at McKinsey & Company in
Germany and from 2014-2019 she was the Non-Executive Director of Thomas Cook
Group. She also sits on the supervisory boards of Jungheinrich AG, Randstad Holding
NV and the Rabobank Group.

Clara (Carla) M.S. Smits-Nusteling (1966, Dutch)
Member of the Supervisory Board since 2013; second term expires in 2021
Chair of the Audit Committee

Carla Smits-Nusteling has served on the Supervisory Board since 2013. From 2009 to
2012, she was CFO and a member of the Board of Management of Royal KPN NV.
Prior to that, she held several management- finance- and business-related positions at
KPN and PostNL. Carla is also the Chair of the Board of Tele2, Non-Executive Director
of the Board of Directors of Nokia and Allegro EU and a member of the Management
Board of the Dutch foundation Stichting Continuiteit Ahold Delhaize. Since 2015 she
has been a lay judge at the Enterprise Court of the Amsterdam Court of Appeal.

Douglas A. Grose (1950, American)
Member of the Supervisory Board since 2013, second term expires 2021
Vice Chair of the Supervisory Board, Chair of the Technology Committee and member of the Selection
and Nomination Committee

Douglas Grose is Vice Chair of the Supervisory Board, having been appointed a
member of the Board in April 2013. Douglas was CEO of GlobalFoundries from 2009
until 2011. Previously, he served as Senior Vice President of Technology Development,
Manufacturing and Supply Chain for Advanced Micro Devices. He was also General
Manager of Technology Development and Manufacturing for the Systems and
Technology Group at IBM for 25 years. Douglas sits on the Board of Directors of SBA
Materials, and is President of the New York Center of Research, Economic
Advancement, Technology, Engineering and Science (NY CREATES).

Johannes (Hans) M.C. Stork (1954, American)
Member of the Supervisory Board since 2014; second term expires in 2022
Member of the Technology Committee and the Remuneration Committee

Hans Stork joined the Supervisory Board in 2014. He is Senior Vice President and
CTO of ON Semiconductor Corporation, a position he has held since 2011. Prior to
that, Hans held a range of senior positions, including Senior Manager at IBM
Corporation, Director of ULSI Research Lab at Hewlett Packard Company, Senior Vice
President and CTO of Texas Instruments, Inc and Group Vice President and CTO of
Applied Materials, Inc. He has also been a member of the Board of Sematech, and
currently sits on the Scientific Advisory Board of imec.

109

ASML ANNUAL REPORT 2020Mark. M.D. Durcan (1961, American)
Member of the Supervisory Board since 2020; first term expires in 2024
Member of the Technology Committee

Mark Durcan was appointed as a member the Supervisory Board in 2020, and sits on
the Technology Committee. From 2012 to 2017 he was CEO of Micron Technology,
Inc, having joined the company in 1984 and held various management positions
before being appointed as CEO. Furthermore Mark was director at Freescale
Semiconductor and MWI Veterinary Supply. Mark is a Non-Executive Director at
Advanced Micro Devices, Inc and Veoneer, a member of the board of
AmerisourceBergen Corporation, member of the board of trustees for Rice University
(Texas) and director at St. Luke's Health System (Idaho).

Terri L. Kelly (1961, American)
Member of the Supervisory Board since 2018; first term expires in 2022
Member of the Remuneration Committee

Terri Kelly has been a member of the Supervisory Board since 2018. Previously she
was President and Chief Executive Officer at W.L. Gore & Associates from 2005 until
2018, having worked at Gore since 1983 in various management roles. She also
served on Gore’s Board of Directors through July 2018. Terri is a Trustee of the
Nemours Foundation, Vice-Chair of the University of Delaware, and a Trustee of the
Unidel Foundation. She is also a member of the Board of Directors of United Rentals,
Inc.

Rolf-Dieter Schwalb (1952, German)
Member of the Supervisory Board since 2015; second term expires in 2023
Chair of the Remuneration Committee and member of the Audit Committee

Rolf-Dieter Schwalb has been a member of the Supervisory Board since 2015. He is
also Chair of the Remuneration Committee and a member of the Audit Committee. He
was CFO and member of the Board of Management of Royal DSM NV from 2006 to
2014. Prior to that, he was CFO and member of the Executive Board of Beiersdorf AG.
He also held a variety of management positions in Finance, IT and Internal Audit at
Beiersdorf AG and Procter & Gamble Co.

Warren D.A. East (1961, British)
Member of the Supervisory Board since 2020; first term expires in 2024
Member of the Audit Committee

Warren East became a member of the Supervisory Board in 2020, and also sits on the
Audit Committee. Warren has been CEO of Rolls-Royce Group Plc since 2015. He
spent his early career at Texas Instruments Ltd from 1985 to 1994. He then joined
ARM Holdings, Plc, where he held various management positions and was appointed
as its CEO from 2001 to 2013.

110

ASML ANNUAL REPORT 2020Other Board-related matters
The section below addresses a number of topics that apply
to both the Board of Management and the Supervisory
Board.

Remuneration and share ownership
The remuneration of the Board of Management is
determined by the Supervisory Board, on recommendation
of the Remuneration Committee, in accordance with the
Remuneration Policy adopted by the General Meeting. The
current Remuneration Policy was adopted by the General
Meeting in 2020.

The remuneration of the Supervisory Board is based on the
Remuneration Policy adopted by the General Meeting. The
current Remuneration Policy was adopted by the General
meeting in 2020. The remuneration of the Supervisory
Board is not dependent on our (financial) results. The
members of the Supervisory Board do not receive ASML
shares, or rights to acquire ASML shares, as part of their
remuneration.

Board of Management and Supervisory Board members
who acquire or have acquired ASML shares or rights to
acquire ASML shares must intend to keep these for long-
term investment only. In concluding transactions in ASML
shares, members of the Board of Management and the
Supervisory Board must comply with our Insider Trading
Rules. Any transactions in ASML shares performed by
members of the Board of Management and the
Supervisory Board are reported to the Dutch AFM. No
member of the Supervisory Board currently has any ASML
shares or rights to acquire ASML shares.

We will not and have not granted any personal loans,
guarantees, or the like to members of the Board of
Management and the Supervisory Board.

Our Articles of Association provide for the indemnification
of the members of the Board of Management and the
Supervisory Board against claims that are a direct result of
their tasks, provided that such claims are not attributable to
willful misconduct or intentional recklessness of the
respective member. We have also implemented the
indemnification of the members of the Board of
Management and the Supervisory Board by means of
separate indemnification agreements for each member.

Detailed information on the Board of Management’s and
the Supervisory Board’s remuneration can be found in
Leadership and governance - Remuneration report.

Diversity
Until January 1, 2020, Dutch legislation provided for
statutory provisions to ensure a balanced representation of
men and women on the management boards and
supervisory boards of companies governed by this
legislation. Balanced representation of men and women
was deemed to exist if at least 30% of the seats were filled
by men and at least 30% were filled by women. Within the
meaning of this legislation, our Supervisory Board currently
qualifies as balanced. No seats are taken by women on the
Board of Management, which, as a result, would not qualify
as balanced. Currently, new Dutch legislation is being
prepared aimed at improving gender diversity in listed
companies, among others by imposing a quota of at least
one-third for both women and men on supervisory boards.
We are closely monitoring developments in this area.

We recognize the importance of diversity and inclusion: a
diverse and inclusive workforce provides the necessary
mix of voices and points of view required to continue to
innovate and drive our business forward. Ensuring
balanced gender representation has proven to be
challenging in a technology environment such as the one
ASML operates in. Historically, there is a lower ratio of
women compared to men in technology and science-
related studies and the labor market in STEM (science,
technology, engineering, and mathematics) fields. We run
an intensive technology promotion program aimed at
getting women more interested in a career in science,
engineering and technology, and at the same time
increasing our future talent pool, so that more women will
be available in the future for technical positions and (senior)
management positions, including the Board of
Management. Given the specific nature of our industry, this
is a challenging and long-term process.

In 2020, we started the development of a detailed Diversity
& Inclusion strategy and action plan for the company, to
further enhance gender diversity as well as other
dimensions of diversity.

In 2020, we made progress in gender diversity among all
employees and senior management. Female employees
now make up 17% of our workforce worldwide, having
gradually moved up from 10% in 2010. The percentage of
women in senior management positions increased from
9.6% in 2019 to 10.5% in 2020 to include greater gender
diversity. Yet we still have work to do in this area. For more
information on our diversity and inclusion initiatives and
performance data, see What we achieved in 2020 - Our
people - Promoting diversity and inclusion and Non-
financial statements - Non-financial indicators - Our
people.

Conflict of interest
Conflicts of interest procedures are incorporated in both
the Board of Management’s and the Supervisory Board’s
rules of procedure. These procedures reflect Dutch law and
the principles and best practice provisions of the Code
with respect to conflicts of interest.

There have been no transactions in 2020, nor are there
currently any transactions, between ASML or any of
ASML’s subsidiaries, or any significant shareholder and any
member of the Board of Management, officer, Supervisory
Board member or any relative or spouse thereof, other than
ordinary course compensation arrangements.

Outside positions
Pursuant to Dutch legislation, a member of the Board of
Management may not be a Supervisory Board member in
more than two other large companies or large foundations,
as defined in Dutch law. A member of the Board of
Management may never be the Chair of a Supervisory
Board of a large company. Board of Management
members require prior approval from the Supervisory
Board before accepting of another large company or
foundation. Members of the Board of Management are also
required to notify the Supervisory Board of other important
functions held or to be held by them.

Dutch law stipulates that a supervisory board member may
not hold more than five Supervisory Board positions in
large companies or large foundations as defined in Dutch
law, with chairmanships counting double.

111

ASML ANNUAL REPORT 2020During the financial year 2020 all members of the Board of
Management and the Supervisory Board complied with the
requirements described above.

Shareholders and General Meeting
A General Meeting is held at least once a year and
generally takes place in Veldhoven, the Netherlands. The
agenda for the AGM typically includes the following topics:

• Discussion of the management report and the adoption
of the financial statements over the past financial year;
• Discussion of the dividend policy and approval of any

proposed dividends;

• Advisory vote on the Remuneration Report over the past

financial year;

• The discharge from liability of the members of the

Board of Management and the Supervisory Board for
the performance of their responsibilities in the previous
financial year;

• The limited authorization for the Board of Management
to issue (rights to) shares in ASML’s capital, and to
exclude preemptive rights for such issuances, as well as
to repurchase shares and to cancel shares
• Any other topics proposed by the Board of

Management, the Supervisory Board or shareholders
in accordance with Dutch law and the articles of
association.

Proposals placed on the agenda by the Supervisory Board,
the Board of Management, or by shareholders, provided
that they have submitted the proposals in accordance with
the applicable legal provisions, are discussed and resolved
upon. Shareholders representing at least 1.0% of ASML’s
outstanding share capital or representing a share value of
at least €50 million are entitled to place items on the
agenda of a General Meeting at the latest 60 days before
the date of the meeting.

Extraordinary general meetings may be held when
considered necessary by the Supervisory Board or Board
of Management. In addition, an extraordinary general
meeting must be held if one or more ordinary or cumulative
preference shareholders, who jointly represent at least 10%

of the issued share capital, make a written request to that
effect to the Supervisory Board and the Board of
Management. The request must specify in detail the
business to be dealt with.

Shareholders’ meetings are convened by public
announcement via the website of ASML no later than 42
days prior to the meeting, as stipulated by Dutch law. The
record date is set at the 28th day prior to the day of the
AGM. Persons who are registered as shareholders on the
record date are entitled to attend the meeting and to
exercise other shareholder rights.

The Board of Management and Supervisory Board provide
the shareholders with the information relevant to the topics
on the agenda by means of an explanation to the agenda
and other documents necessary or helpful for this purpose.
The agenda indicates which agenda items are voting items,
and which items are for discussion only. All documents
related to the General Meeting, including the agenda with
explanations, are posted on our website.

ASML shareholders may appoint a proxy who can vote on
their behalf at the AGM. We also use an internet proxy
voting system, facilitating shareholder participation without
having to attend in person. We also provide the option for
shareholders to issue voting proxies or voting instructions
to an independent civil law notary prior to the AGM. We do
not solicit from or nominate proxies for our shareholders.

Hybrid AGM

In view of the COVID-19 pandemic, we organized a hybrid
AGM in 2020, accommodating virtual attendance of the
AGM by enabling shareholders to follow the proceedings of
the meeting via webcast and to vote electronically during
the meeting. This opportunity to participate in the AGM
virtually was offered in addition to the existing possibilities
of attending and voting in person or voting in advance
via written or electronic proxy. As we highly value the
interaction with our shareholders, we invited shareholders
to submit questions about the agenda items prior to the
AGM and, in view of the unprecedented nature of the 2020
AGM, we also decided that follow-up questions in response
to the answers received, could be asked via the virtual
meeting platform. We received a total of 19 questions,
which were all answered during the AGM.

Resolutions are adopted by the General Meetings by an
absolute majority of the votes cast (except where a
different proportion of votes are required by the Articles of
Association or Dutch law), and there are generally no
quorum requirements applicable to such meetings.

Voting results from the AGM will be made available on our
website within 15 days of the meeting. The draft minutes of
the AGM are available on our website or on request no
later than three months after the meeting. Shareholders
have the opportunity to provide comments in the
subsequent three months, after which the minutes are
adopted by the Chairman and the Secretary of the
meeting. The adopted minutes are also available on our
website and on request.

112

ASML ANNUAL REPORT 2020Powers
In addition to the items submitted annually at the AGM, the
General Meeting also has other powers, with due
observance of the statutory provisions. These include
resolving:

• to amend the articles of association;
• to issue shares if and insofar as the Board of

Management has not been designated by the General
Meeting for this purpose;

• to adopt the Remuneration Policies for the members of
the Board of Management and the Supervisory Board.

(Proposed) amendments of the Articles of Association
require the approval of the Supervisory Board. A quorum
requirement applies for the general meeting at which an
amendment of the Articles of Association is proposed:
more than half of the issued share capital is required to be

represented; the proposal requires a voting majority of at
least three-fourths of the votes cast. If the quorum
requirement is not met, a subsequent general meeting shall
be convened, to be held within four weeks of the first
meeting. At this second meeting, the resolution can be
adopted with at least three-fourths of the votes cast,
irrespective of the share capital represented. If a resolution
to amend the Articles of Association is proposed by the
Board of Management, the resolution will be adopted with
an absolute majority of votes cast irrespective of the
represented share capital at the General Meeting.

A brief summary of the most significant provisions of our
Articles of Association is included as Exhibit 99.1 to our
form 6-K furnished to the SEC on February 8, 2013 (the
‘Articles of Association’), which is incorporated by
reference herein.

Share capital
ASML's authorized share capital amounts to €126.0 million and is divided into:

Type of shares

Cumulative preference shares
Ordinary shares

Ordinary shares B

Amount of shares
700,000,000
699,999,000
9,000

Nominal value Votes per share
9
€0.09 per share
9
€0.09 per share
1
€0.01 per share

The issued and fully paid up ordinary shares with a nominal value of €0.09 each were as follows:

Year ended December 31
Issued ordinary shares with nominal value of €0.09
Issued ordinary treasury shares with nominal value of €0.09

Total issued ordinary shares with nominal value of €0.09

2018
421,097,729

10,368,038
431,465,767

2019
419,810,706

5,848,998
425,659,704

2020
416,514,034

2,983,454
419,497,488

77,733,738 ordinary shares were held by 288 registered
holders with a registered address in the US. Since certain
of our ordinary shares were held by brokers and nominees,
the number of record holders in the US may not be
representative of the number of beneficial holders, or of
where the beneficial holders are resident.

A total of 96,566,077 depository receipts for ordinary
shares were issued at the launch of the CCIP. This number
has since decreased with the sell-down by the relevant
customers following expiry of the lock-up.

Each ordinary share consists of 900 fractional shares.
Fractional shares entitle the holder thereof to a fractional
dividend, but do not give entitlement to voting rights. Only
those persons who hold shares directly in the share register
in the Netherlands, held by us at our address at 5504 DR
Veldhoven, de Run 6501, the Netherlands, or in the New
York share register, held by JP Morgan Chase Bank, N.A.,
P.O. Box 64506, St. Paul, MN 55164-0506, United States,
can hold fractional shares. Shareholders who hold ordinary
shares through the deposit system under the Dutch
Securities Bank Giro Transactions Act maintained by the
Dutch central securities depository Euroclear Nederland or
through the Depository Trust Company cannot hold
fractional shares.

No ordinary shares B and no cumulative preference shares
have been issued.

Special voting rights, limitation voting rights and
transfers of shares
There are no special voting rights on the issued shares in
our share capital.

Certain voting restrictions apply in respect of ordinary
shares issued in connection with the customer co-
investment program, which ASML entered into in 2012 with
three key customers – Intel, TSMC and Samsung – to
accelerate ASML’s development of EUV. Under this
program, the participating customers funded certain
development programs and invested in ASML’s ordinary
shares. Currently, only one participating customer still
holds (directly or indirectly) ordinary shares. The voting
restrictions in respect of these ordinary shares are set out
in the underlying agreement between ASML and the
relevant customer.

There are currently no limitations, either under Dutch law or
in ASML’s Articles of Association, on the transfer of
ordinary shares in the share capital of ASML. Pursuant to
ASML’s Articles of Association, the Supervisory Board’s
approval shall be required for every transfer of cumulative
preference shares.

113

ASML ANNUAL REPORT 2020Issue and repurchase of (rights to) shares
Our Board of Management has the power to issue ordinary
shares and cumulative preference shares insofar as it has
been authorized to do so by the General Meeting. The
Board of Management requires approval of the Supervisory
Board for such an issue. The authorization by the General
Meeting can only be granted for a certain period not
exceeding five years and may be extended for no longer
than five years on each occasion. If the General Meeting
has not authorized the Board of Management to issue
shares, the General Meeting will be authorized to issue
shares on the Board of Management’s proposal, provided
that the Supervisory Board has approved such proposal.

Holders of ASML’s ordinary shares have a preemptive right,
in proportion to the aggregate nominal amount of the
ordinary shares held by them. This preemptive right may be
restricted or excluded. Holders of ordinary shares do not
have preemptive right with respect to any ordinary shares
issued for consideration other than cash or ordinary shares
issued to employees. If authorized for this purpose by the
General Meeting, the Board of Management has the power,
subject to approval of the Supervisory Board, to restrict or
exclude the preemptive rights of holders of ordinary shares.

2020 authorization to issue shares

At our 2020 AGM, the Board of Management was
authorized from April 22, 2020 through October 22, 2021,
subject to the approval of the Supervisory Board, to
issue shares and / or rights thereto representing up to a
maximum of 5% of our issued share capital at April 22,
2020, plus an additional 5% of our issued share capital
at April 22, 2020 that may be issued in connection with
mergers, acquisitions and / or (strategic) alliances. Our
shareholders also authorized the Board of Management
through October 22, 2021, subject to approval of the
Supervisory Board, to restrict or exclude preemptive rights
with respect to holders of ordinary shares up to a maximum
of 10% of our issued share capital.

We may repurchase our issued ordinary shares at any time,
subject to compliance with the requirements of Dutch law
and our Articles of Association. Any such repurchases are
subject to the approval of the Supervisory Board and the
authorization by the General Meeting, which authorization
may not be for more than 18 months.

2020 authorization to repurchase shares

At the 2020 AGM, the Board of Management was
authorized, subject to Supervisory Board approval, to
repurchase through October 22, 2021, up to a maximum of
two times 10% of our issued share capital at April 22, 2020,
at a price between the nominal value of the ordinary shares
purchased and 110% of the market price of these securities
on Euronext Amsterdam or NASDAQ.

For details on our share buyback program, see the
Consolidated Financial Statements - Note 22 Shareholders’
equity.

ASML Preference Shares Foundation
The ASML Preference Shares Foundation (Stichting
Preferente Aandelen ASML), a foundation organized under
Dutch law, has been granted an option right to acquire
preference shares in the share capital of ASML. The
Foundation may exercise the Preference Share Option in
situations where, in the opinion of the Foundation’s Board
of Directors, ASML’s interests, ASML’s business or the
interests of ASML’s stakeholders are at stake. This may be
the case if:

• a public bid for ASML’s shares is announced or made,
or there is a justified expectation that such a bid will be
made without any agreement having been reached with
ASML in relation to such a bid; or

• in the opinion of the Foundation’s Board of Directors,
the (attempted) exercise of the voting rights by one
shareholder or more shareholders, acting in concert,
is materially in conflict with ASML’s interests, ASML’s
business or ASML’s stakeholders.

Objectives of the Foundation
The Foundation’s objectives are to look after the interests
of ASML and the enterprises maintained by and/or
affiliated in a group with ASML, in such a way that the
interests of ASML, of those enterprises and of all parties
concerned are safeguarded in the best possible way, and
that influences in conflict with these interests, which might
affect the independence or the identity of ASML and those
companies, are deterred to the best of the Foundation’s
ability, and everything related to the above or possibly
conducive thereto. The Foundation aims to realize its
objects by acquiring and holding cumulative preference
shares in the capital of ASML and by exercising the rights
attached to these shares, particularly the voting rights.

The Preference Share Option
The Preference Share Option gives the Foundation the
right to acquire such number of cumulative preference
shares as the Foundation will require, provided that the
aggregate nominal value of such number of cumulative
preference shares shall not exceed the aggregate nominal
value of the ordinary shares issued at the time of exercise
of the Preference Share Option. The subscription price will
be equal to their nominal value. Only one-fourth of the
subscription price would be payable at the time of initial
issuance of the cumulative preference shares, with the
other three-fourths of the nominal value only being payable
when ASML calls up this amount. Exercise of the
preference share option could effectively dilute the voting
power of the outstanding ordinary shares by one-half.

Cancellation of cumulative preference shares
Cancellation and repayment of the issued cumulative
preference shares by ASML requires authorization by the
General Meeting, on a proposal to this effect made by the
Board of Management and approved by the Supervisory
Board. If the Preference Share Option is exercised and as a
result cumulative preference shares are issued, ASML will
initiate the repurchase or cancellation of all cumulative
preference shares held by the Foundation on the
Foundation’s request. In that case, ASML is obliged to
effect the repurchase and respective cancellation as soon
as possible. A cancellation will result in a repayment of the
amount paid and exemption from the obligation to pay up
on the cumulative preference shares. A repurchase of the
cumulative preference shares can only take place when
such shares are fully paid up.

114

ASML ANNUAL REPORT 2020If the Foundation does not request ASML to repurchase or cancel all cumulative preference shares held by the Foundation
within 20 months of issuance of these shares, we will be required to convene a General Meeting for the purpose of
deciding on a repurchase or cancellation of these shares.

Board of Directors
The Foundation is independent of ASML. The Board of Directors of the Foundation is composed of four independent
members from the Netherlands’ business and academic communities. The Foundation’s Board of Directors is composed
of the following members: Mr A.P.M. van der Poel, Mr S. Perrick, Mr A.H. Lundqvist and Mr. J. Streppel.

Other than the arrangements made with the Foundation as described above, ASML has not established any other anti-
takeover devices.

Major shareholders
The Dutch Act on the supervision of financial markets and US securities laws contain requirements regarding the
disclosure of capital interests and voting rights in listed companies. The following table sets forth the total number of
ordinary shares owned by each shareholder that reported to the Dutch AFM or the US SEC a beneficial ownership of
ordinary shares that is at least 3.0% (5.0%, in the case of the SEC) of our ordinary shares issued and outstanding. Also
included in the table below is the total number of ordinary shares owned by our members of the Board of Management as
of December 31, 2020. The information set out below with respect to shareholders is based on public filings with the SEC
and AFM as of January 31, 2021.

Capital Research and Management Company 1

BlackRock Inc. 2
Baillie Gifford & Co 3
Members of ASML’s current Board of Management (6 persons) 4,5

% of Class6

63,658,826

32,024,422

18,262,995
102,260

15.28%

7.69%

4.38%
0.02%

1. As reported to the AFM on February 28, 2020, Capital Research & Management Company ("CRMC") reports 572,929,434 voting rights, corresponding to 63,658,826 ordinary
shares (based on 9 votes per share), but do not report ownership rights related to those shares. Capital World Investors reported on a Schedule 13-G/A filed with the SEC
on February 14, 2020, that it is the beneficial owner of 34,865,768 shares of our ordinary shares as a result of its affiliation with CRMC. Capital International Investors, which
consists of Capital International Investors divisions of CRMC and Capital Bank and Trust Company, as well as the following CRMC subsidiaries: Capital International Limited,
Capital International Sarl, Capital International K.K. and Capital International, Inc, reported on a Schedule 13-G/A filed with the SEC on February 14, 2020 that it is the
beneficial owner of 21,988,261 of our ordinary shares. We believe that some or all of these shares are included within the shares reported to be owned by Capital Research
and Management Company, as set forth above.

2. Based solely on the Schedule 13-G/A filed by BlackRock Inc. with the SEC on January 29, 2021; BlackRock reports voting power with respect to 28,755,630 of these shares.
A public filing with the AFM on November 9, 2020 shows an aggregate indirect capital interest of 5.68% and voting rights of 6.92%, based on the total number of issued
shares and voting rights at that time.

3. A public filing with the AFM on October 1, 2019 shows Baillie Gifford & Co have 147,694,140 voting rights, corresponding to 18,262,995 shares (based on 9 votes per share),

but no ownership rights related to those shares.

4. Does not include unvested shares granted to members of the Board of Management. For further information see Leadership and governance - Remuneration report.
5. No shares are owned by members of the Supervisory Board.
6. As a percentage of the total number of ordinary shares issued and outstanding (416,514,034) as of December 31, 2020, which excludes 2,983,454 ordinary shares which have
been issued but are held in treasury by ASML. The share ownership percentages reported to the AFM are expressed as a percentage of the total number of ordinary shares
issued (including treasury stock) and accordingly, percentages reflected in this table may differ from percentages reported to the AFM.

115

ASML ANNUAL REPORT 2020Financial Reporting and Audit
ASML publishes, among others, the following annual
reports regarding the financial year 2020:

• The statutory Annual Report, prepared in accordance
with the requirements of Dutch law. The financial
statements included therein are prepared in accordance
with Part 9 of Book 2 of the Dutch Civil Code and EU-
IFRS;

• The Annual Report on Form 20-F, prepared in

accordance with the requirements of the Exchange Act.
The financial statements included therein are prepared
in conformity with US GAAP.

Both reports have the same qualitative base and describe
the same risk factors that are specific to the semiconductor
industry, ASML and ASML’s shares. We also provide
sensitivity analyses by providing:

• A narrative explanation of ASML’s financial statements;
• The context within which financial information should be

analyzed;

• Information about the quality, and variability, of our

earnings and cash flow.

With respect to the process of creating the Annual Report,
we have extensive guidelines for the content and layout of
our report. These guidelines are primarily based on the
applicable laws and regulations referred to above. With
respect to the preparation process of these and the other
financial reports, we apply internal procedures to safeguard
the completeness and accuracy of such information as
part of its disclosure controls and procedures. The
Disclosure Committee assists the Board of Management in
overseeing ASML’s disclosure activities and ensures
compliance with applicable disclosure requirements arising
under Dutch and US law, and other regulatory
requirements. These internal procedures are frequently
discussed by the Audit Committee and the Supervisory
Board. See also How we manage risk - Business risk and
continuity where ASML’s internal risk management and
control systems are discussed.

The Supervisory Board has reviewed and approved, and all
Supervisory Board members signed, ASML’s 2020 financial
statements as prepared by the Board of Management.
KPMG has duly examined our financial statements, and
the Auditor’s Report is included in the Consolidated
Financial Statements.

External Audit
In accordance with Dutch law, our external auditor is
appointed by the General Meeting, based on a nomination
for appointment by the Supervisory Board. The
Supervisory Board bases its nomination on the advice from
the Audit Committee and the Board of Management, who
annually provide a report to the Supervisory Board on the
performance of and relationship with the external auditor,
as well as its independence. ASML’s current external
auditor, KPMG, was first appointed by the General Meeting
in 2015 for the reporting year 2016, and has been
reappointed on a yearly basis since then. At the 2019
AGM, KPMG was appointed as the external auditor for the
reporting year 2020.

The Audit Committee reviews and approves the external
auditor’s audit plan for the audits planned during the

financial year. The audit plan also includes, among others,
the activities of the external auditor with respect to their
limited procedures on the quarterly results other than the
annual accounts. Proposed services may be preapproved
at the beginning of the year by the Audit Committee
(annual pre-approval) or may be pre-approved during the
year by the Audit Committee in case of a particular
engagement (specific pre-approval). The annual pre-
approval is based on a detailed, itemized list of services to
be provided, which is designed to ensure there is no
management discretion in determining whether a service
has been approved, and to ensure the Audit Committee is
informed of each service it is pre-approving.

Dutch and US rules require strict separation of audit and
advisory services for Dutch public-interest entities. Dutch
law prohibits the acceptance by the external auditor of
other services when an audit is performed. The Audit
Committee monitors compliance with Dutch and US rules
on services provided by the external auditor.

The remuneration of external auditor is approved by the
Audit Committee on behalf of the Supervisory Board, and
after consulting the Board of Management. As the Audit
Committee has the most relevant insight and experience in
this area, the Supervisory Board has delegated these
responsibilities to the Audit Committee. For more
information on principal accountant fees and services see
Other appendices - Appendix - Principal accountant fees
and services.

In principle, the external auditor attends all the Audit
Committee meetings. The external auditor’s findings are
discussed at these meetings. The Audit Committee reports
to the Supervisory Board on the topics discussed with the
external auditor, including the external auditor’s reports
with regard to the audit of the annual reports as well as the
content of the annual reports. Furthermore, the external
auditor also attends the Supervisory Board meeting in
which the annual external audit report is discussed. The
external auditor may also attend Supervisory Board
meetings in which the quarterly financial results are
discussed.

The Audit Committee is informed by the external auditor
without delay in case the external auditor would discover
irregularities in the content of the audit of the financial
reports.

The external auditor is present at our AGM to respond to
questions, if any, from the shareholders about the auditor’s
report on the Consolidated Financial Statements.

Internal Audit
The role of our Internal Audit function is to assess our
systems of internal controls by performing independent
procedures such as risk-based operational audits, IT audits
and compliance audits. The Internal Audit department
reports directly to the Audit Committee and the Board of
Management. The yearly Internal Audit plan is discussed
with and approved by the Audit Committee, the Board of
Management and the Supervisory Board. The follow-up on
the Internal Audit findings and progress made compared to
the plan are discussed on a quarterly basis with the Audit
Committee. The external auditor and Internal Audit
department have meetings on a regular basis.

116

ASML ANNUAL REPORT 2020Corporate Information
ASML Holding N.V. is a holding company that operates through its subsidiaries. We have operating subsidiaries in the
Netherlands, the United States, Italy, France, Germany, the United Kingdom, Ireland, Belgium, South Korea, Taiwan,
Singapore, China, Hong Kong, Japan, Malaysia and Israel. Our major operating subsidiaries, each of which is ultimately
wholly owned by ASML Holding N.V., are ASML Netherlands B.V., ASML Hong Kong Ltd. and ASML US LLC. See Exhibit
index - Exhibit 8.1 - List of main subsidiaries.

US Listing Requirements
As ASML's New York Shares are listed on NASDAQ Stock Market LLC (‘NASDAQ’), NASDAQ corporate governance
standards in principle apply to us. However, NASDAQ rules provide that foreign private issuers may follow home country
practice in lieu of the NASDAQ corporate governance standards subject to certain exceptions and except to the extent
that such exemptions would be contrary to US federal securities laws. Our corporate governance practices are primarily
based on Dutch requirements. The table below sets forth the practices followed by ASML in lieu of NASDAQ rules.

Quorum

ASML does not follow NASDAQ’s quorum requirements applicable to meetings of ordinary shareholders. In
accordance with Dutch law and generally accepted Dutch business practice, ASML’s Articles of Association
provide that there are no quorum requirements generally applicable to general meetings of shareholders.

Solicitation of proxies ASML does not follow NASDAQ’s requirements regarding the solicitation of proxies and the provision

Distribution Annual
Report

Equity compensation
arrangements

of proxy statements for general meetings of shareholders. ASML does furnish proxy statements
and solicit proxies for the General Meeting. Dutch corporate law sets a mandatory (participation
and voting) record date for Dutch listed companies at the 28th day prior to the date of the General
Meeting. Shareholders registered at such record date are entitled to attend and exercise their rights
as shareholders at the General Meeting, regardless of sale of shares after the record date.

ASML does not follow NASDAQ’s requirement regarding distribution to shareholders of copies of an
annual report containing audited Financial Statements prior to our AGM. The distribution of our Annual
Reports to shareholders is not required under Dutch corporate law or Dutch securities laws, or by Euronext
Amsterdam. Furthermore, it is generally accepted business practice for Dutch companies not to distribute
annual reports. In part, this is because the Dutch system of bearer shares has made it impractical to keep
a current list of holders of the bearer shares in order to distribute the annual reports. Instead, we make our
Annual Report available at our corporate head office in the Netherlands (and at the offices of our Dutch
listing agent as stated in the convening notice for the meeting) no later than 42 days prior to convocation
of the AGM. In addition, we post a copy of our Annual Reports on our Website prior to the AGM.

ASML does not follow NASDAQ’s requirement to obtain shareholder approval of stock option or purchase
plans or other equity compensation arrangements available to officers, directors or employees. It is not
required under Dutch law or generally accepted practice for Dutch companies to obtain shareholder
approval of equity compensation arrangements available to officers, directors or employees. The
General Meeting adopts the Remuneration Policy for the Board of Management, approves equity
compensation arrangements for the Board of Management and approves the remuneration for the
Supervisory Board. The Remuneration Committee evaluates the achievements of individual members
of the Board of Management with respect to the short and long-term quantitative performance, the full
Supervisory Board evaluates the quantitative performance criteria. Equity compensation arrangements for
employees are adopted by the Board of Management within limits approved by the General Meeting.

Compliance with the Corporate Governance Code
We closely follow the developments in the area of corporate governance and the applicability of the relevant corporate
governance rules for ASML. Any substantial changes to ASML’s corporate governance structure or application of the
Corporate Governance Code will be submitted to the General Meeting for discussion.

We are of the opinion that ASML fully complies with the Dutch Corporate Governance Code.

The Board of Management and the Supervisory Board,

Veldhoven, February 10, 2021

117

ASML ANNUAL REPORT 2020Message from the Chair of
our Supervisory Board

affordability and quality of lithography systems was a
specific focus area for the Supervisory Board, due to the
increasing technological complexity of the most advanced
systems. Combined with increasing focus on re-use and
the circular economy, we see improved performance on
long-term value creation, which serves not only customers,
but all ASML's stakeholders.

As a Supervisory Board we are convinced that ASML’s
focus on people and leadership development is critical to
its success as a fast growing organization. Therefore a lot
of attention was given to the new Leadership Framework,
which provides the instruments to help leaders grow their
skills and competences, and prepare for increasing
responsibilities.

Lastly, as if 2020 had not brought enough challenges, the
year also emerged as one with deteriorating geopolitical
relationships. The semiconductor industry is one of the
battlefields in a trade conflict between the world’s
superpowers. ASML’s position has always been clear: that
while the company always operates within applicable rules
and regulations, the world’s electronics ecosystem is best
served with a global and open market, where all players
can collaborate and compete on equal terms.

Such a global, open, high-tech industry delivers the fastest
innovation with the available resources in the ecosystem.
The significant R&D intensity of the semiconductor industry
is a clear incentive to avoid fragmentation. Unilateral trade
restrictions that were introduced in 2020 however may
eventually lead to such fragmentation with all its negative
consequences.

Despite some global geopolitical uncertainty and ongoing
efforts to overcome the COVID-19 crisis, the Supervisory
Board is nevertheless optimistic about ASML’s future and
we believe strongly that ASML has the right vision which is
to enable groundbreaking technology to solve some of
humanity’s toughest challenges and the right strategy to
support the global electronics ecosystem, delivering
positive outcomes for all its stakeholders.

Gerard Kleisterlee

Chair of the Supervisory Board

118

Gerard Kleisterlee, Chair of the Supervisory Board

Dear Stakeholder,

The year 2020 was extremely turbulent due the global
COVID-19 pandemic, yet ASML managed to move through
this period in a remarkably successful way. The
Supervisory Board wishes to commend all ASML
employees who supported each other in these difficult
times, and who remained committed to serving customers
around the world in the face of the most stringent
peacetime travel and contact restrictions. The Supervisory
Board members, too, experienced some of the challenges
faced by ASML employees. As with the hundreds of
colleagues who joined the company during the pandemic,
and had to be onboarded virtually, the Supervisory Board
welcomed two new board members we have yet to meet in
a physical setting.

ASML was well prepared when the crisis hit the global
stage early in 2020. It very quickly implemented a wide
range of measures to keep its people safe and support its
communities with protective equipment and
communication tools. We fully support ASML's unwavering
commitment to prioritize employee health and safety.

With employees safe and secure in the work place and at
home, ASML’s next priority was to support our customers
with their production plans despite the severe restrictions.
ASML employees worked miracles and overcame
obstacles every day, from solving supply chain bottlenecks,
to the introduction of augmented reality glasses that
enabled mid-level engineers to provide specialized support
in customer fabs. The ingenuity and flexibility of ASML
employees and our partners in the supply chain impressed
us all.

Additionally, it was also priority to continue ASML’s
ambitious technology development program. When looking
at the roadmap, the Supervisory Board was pleased to see
progress in improving maturity of the EUV scanner platform
and the advances in the development of the next-
generation EUV platform: the High-NA systems that will
first ship a few years from now. Keeping control of

ASML ANNUAL REPORT 2020Supervisory Board
Report

The Supervisory Board supervises and advises the Board of Management in performing its
management tasks and setting the direction for ASML, focusing on long-term and sustainable
value creation. The members of the Supervisory Board are fully independent.

9
Supervisory Board meetings

33%
Female members

97.8%
Attendance rate

4.8
Years average tenure

The Supervisory Board supervises and advises the Board
of Management in performing its management tasks and
setting the direction for ASML. The Supervisory Board
focuses on long-term and sustainable value creation, with
the goal to ensure that the Board of Management pursues
a strategy that secures its leading position as a supplier of
holistic lithography solutions to the semiconductor industry.
We uphold an appropriate system of checks and balances,
provide oversight, evaluate performance and give advice
where required or requested. Through good governance,
we help to ensure that ASML acts in the best interests of
the company and its stakeholders. In this Supervisory
Board Report, we report on our activities in 2020.

Our activities in 2020
The agenda of the Supervisory Board is driven by the
Strategic Priorities for ASML as agreed in the Annual
Strategy Review between the Supervisory Board and the
Board of Management and by our Annual Financial
Calendar. Recurring agenda items are developments in the
semiconductor market and the customer domain, financial
and operational performance and ASML's share price
development and investor perceptions. During 2020, the
(potential) impact of COVID-19 was also a recurring topic
of discussion.

Strategy review
During 2020, the Supervisory Board devoted a
considerable amount of time discussing strategic topics.
We performed the recurring annual review of ASML's
overall corporate strategy, the long-term financial plan and
the long-term plans of the EUV, DUV and Applications
business lines. Special attention was paid to the
introduction of 'strengthen customer trust' as a new,
overarching element of the corporate strategy, which we,
as a Supervisory Board, fully support. As part of the annual
strategy review we held dedicated break-out sessions to
discuss, from various perspectives, the strategic
challenges related to the current geopolitical situation.

External speakers were invited to provide their views on
this topic, allowing the Supervisory Board to take into
account various perspectives on this topic.

Besides the annual strategy review, strategic topics were
addressed throughout the year by means of deep dives,
allowing focused, in-depth review by the Supervisory
Board. Topics covered in deep dive sessions during 2020
include the Mature Products & Services strategy, the
Installed Base & Services strategy and the Data Policy.

The Supervisory Board also performed an in-depth review
of the High-NA program, looking at market and customer-
related aspects as well as the technological and
operational dimension of the program and the risks
associated with it. An external speaker was invited to
provide an outside-in view on High-NA, focusing on the
role of High-NA in driving Moore's Law and allowing the
development of ever-more powerful chips for new
applications and devices by our customers at reduced
cost. The Supervisory Board particularly focused on
aspects such as affordability and quality of the tools in view
of increasing complexity.

Financial review
We reviewed the annual and interim financial statements,
including non-financial information, the quarterly results
and accompanying press releases, as well as the
outcomes of the year-end US GAAP and EU-IFRS audits.

Given ASML's rapid growth, the Supervisory Board
suggested reviewing the process with the Board of
Management to discuss and agree on the annual plan, the
long-term financial plan as well as large R&D and CAPEX
plans, for which an additional Supervisory Board meeting
was convened.

As part of the financial updates, the Supervisory Board,
assisted by the Audit Committee, reviewed ASML's
financing and capital return policies. The Supervisory

119

ASML ANNUAL REPORT 2020Board approved the Board of Management’s proposals for
the 2020 interim dividend and discussed the 2020 final
dividend proposal, which will be submitted to the General
Meeting in April 2021. Furthermore, the Supervisory Board
approved the 2020-2022 share buyback program and
discussed the execution of the program with the Board of
Management on a quarterly basis. Lastly, the issuance of
two Eurobonds was approved by the Supervisory Board.

customers. We performed a post-acquisition review of
HMI, which ASML acquired in 2016. Though, due to
changed market circumstances, the acquisition business
plan had not been fully realized, the conclusion was that
value creation still could be achieved, as HMI, together
with other parts of ASML, will contribute to the building of a
comprehensive product roadmap for metrology and
inspection.

Risk management
As risk management is a key element of the Supervisory
Board’s responsibilities, we received periodic risk-
management updates during the year. Attention was paid
to the risk landscape and the developments in that area,
the risk appetite and the measures put in place by the
Board of Management to mitigate the critical risks. Special
attention was paid to the impact of the COVID-19
pandemic on ASML's risk landscape and the risk
responses defined by management. Bi-annually, specific
risk areas were reviewed in deep dive sessions. Topics
covered in 2020 include IT continuity, IT security, and
political risks in light of the global trade situation. For
further information on ASML's risk management, see the
section 'How we manage risk'.

People and organization
Given the significant growth of ASML in recent years,
people and organization continued to be an area of focus
for the Supervisory Board in 2020. On several occasions,
we were provided with updates in this area. We spent time
discussing the culture and values initiative, which was set-
up in 2019 and implemented in 2020, with the aim to
support the execution of ASML's strategy aimed at long-
term value creation for all stakeholders. We also reviewed
the ASML leadership framework and discussed the results
of the annual employee engagement survey. Furthermore,
the Supervisory Board, assisted by the Selection and
Nomination Committee, extensively discussed and
provided advice in respect of ASML's talent management
and people development program as well as succession
planning for the Board of Management and senior
management.

IT and Our New Enterprise (ONE)
As the pace of business and technology transformation
continue to accelerate, the importance of the IT strategy
within ASML increases. This led the Supervisory Board to
perform a review of ASML's IT strategy, focusing on both
the IT foundational services strategy and the initiatives
aimed at improving the business with IT.

On two occasions during 2020, the Board of Management
updated us on the status of the ONE program. ONE is
ASML’s transformation program dedicated to secure
configuration integrity over the life cycle of our customer
offerings while enhancing the business processes and
maintaining flexibility, with the support of its upgraded
backbone information system. We paid special attention to
the expected benefits and risks of the program, and
discussed with management the challenges related to it,
such as change management and business process
transformation.

We also paid attention to the sustainability strategy, not
only because sustainability is also a long-term qualitative
target for the Board of Management, but also because it is
now also covered in the corporate strategy as part of the
'strengthen customer trust' element. We are pleased with
the increasing focus on re-use and circular economy, which
contributes to ASML's performance on long-term value
creation, thereby serving customers as well as other
stakeholders.

The Supervisory Board also monitored compliance with
rules and regulations including the Dutch Corporate
Governance Code and reviewed the legal matters
overview.

As a Supervisory Board, we also extensively discussed our
own composition, profile and functioning, the composition
and functioning of its committees as well as the
composition and functioning of the Board of Management.
We also monitored the performance of the Board of
Management and decided on the Board of Management's
remuneration targets and target achievements. More
information can be found in the reports of the Selection
and Nomination Committee and the Remuneration
Committee.

There was one site visit in 2020: we visited the
Development and Engineering (D&E) sector at ASML's
headquarters, and were updated on how this sector is
organized and what the key priorities are. There was a
particular focus on the Product Generation Process and
the D&E operating model, which was amended to serve
the changing needs of ASML's customers and its business
lines.

COVID-19

As a Supervisory Board we closely monitored the
development of the COVID-19 pandemic and the
potential impact on our people, business and operations.
Management kept us informed during the scheduled
meetings, but we also received separate updates, informing
us about the main developments in our company, markets
and supply chain. We support management's approach,
choosing the health and safety of our people and their
families and business continuity as priorities, and we are
pleased to see that the values of Challenge, Collaborate
and Care served as a strong basis dealing with the
challenges of this pandemic. Looking back at 2020, while
we realize that COVID-19 is not behind us, we can say
management has delivered on its priorities.

Other topics
We discussed the acquisition of Berliner Glas, through
which ASML acquired technical capabilities that are
important to support the future roadmap for our EUV and
DUV products, providing increased value to ASML's

Meetings with the Works Council
A Supervisory Board delegation held two formal meetings
with the Works Council in 2020. We exchanged views on
ASML's strategy and priorities, including the continued
implementation of the EUV roadmap, the initiatives on

120

ASML ANNUAL REPORT 2020quality and cost reduction, the supply chain, management development and succession and the ONE program. The
culture and values initiative was also discussed, in particular how the Supervisory Board was involved and what the Board
sees as the main challenges for implementation. Another topic of discussion was the COVID-19 pandemic, its impact on
ASML in various areas, and the challenges of working from home, while at the same time maintaining the innovative nature
of ASML. The composition of the Supervisory Board and the Board of Management was discussed, especially the
increase of the number of Supervisory Board members to nine and the proposals for (re)appointment of Supervisory
Board members. The Works Council and Supervisory Board also discussed the Remuneration Policies for Board of
Management and Supervisory Board prior to submission to the General Meeting.

Topics overview 2020
Topics discussed at the Supervisory Board meetings are a combination of recurring topics and other topics that are
relevant during the year. Our recurring agenda topics are:

• Business performance
• Financial performance and financing
• Review of quarterly financial results, observations external auditor and press release
• Market situation
• Customer developments
• Investor perceptions and share price development
• Management development
• Committee reports
• Supervisory Board-only meeting

Other topics discussed during Supervisory Board meetings of 2020 included:

Q1 • 2019 Annual Results and Annual Report

• 2019 external audit report
• Capital return: final dividend 2019 and share buyback

program

• Remuneration Board of Management and Supervisory

Board

IT continuity

• Risk Management
•
• HR&O update: culture & values initiative
• Legal update
• M&A update
• HMI post-acquisition review
• Corporate Governance
• Composition Supervisory Board
• AGM agenda

Q3 • 2020 statutory interim report

• M&A update
• Strategy review, incl.
• Semiconductor industry outlook & ASML vision
• Long term strategy & technology roadmap
• Global trade situation and strategic implications

Q2 • Business Line Mature Products & Services

• HR&O update
• Risk Management update
• Global trade situation and strategic implications
•
IT strategy
IT security
•
• ONE Program
• AGM update

Q4 •

Installed Base and Services strategy

• Data Policy
• High-NA review
• Long-term financial plan
• Financing policy
• Annual plan 2021
• HR&O update: leadership framework
• ONE Program
• Board of Management and Supervisory Board

composition and evaluation

Meetings and attendance
The Supervisory Board meets at least four times per year in accordance with an annual meeting schedule and whenever
the Chairman, one or more of its members, or the Board of Management requests a meeting.

In 2020, the Supervisory Board held nine meetings. Of these meetings, one was held at the company's headquarters in
Veldhoven, one was held via telephone conference and seven meetings were held virtually. In addition to these meetings,
there were several informal meetings and telephone calls among Supervisory Board and/or Board of Management
members.

The Supervisory Board meetings and the Supervisory Board committee meetings are held over several days, ensuring
there is time for review and discussion. At each meeting, the Supervisory Board members discuss among themselves the
goals and outcome of the meeting, as well as topics such as the functioning and composition of the Supervisory Board
and the Board of Management. Also discussed during each meeting are the reports from the different Committees of the
Supervisory Board.

121

ASML ANNUAL REPORT 2020Virtual meetings

The majority of the Supervisory Board and Supervisory
Board committees meetings in 2020 were held virtually
due to the COVID-19 pandemic. To address the challenges
resulting from meeting virtually, various measures were
taken: we planned shorter meeting sessions spread over
more days; we held break-out sessions in smaller groups
to optimize interaction, and we also made use of video as
a means for meeting preparation, in addition to providing
written meeting documents. The Supervisory Board is
very positive about these virtual meetings and intends to
continue to use several of these measures going forward,
including when in-person meetings are possible again.

The Supervisory Board meetings and the meetings of the
four Supervisory Board committees were well attended, as
is shown in the table below.

In addition to the Supervisory Board members, the
members of the Board of Management are invited to the
Supervisory Board meetings. All Board of Management
members were present for the Supervisory Board meetings
in 2020. Members of senior management are regularly
invited to provide updates on topics within their area of
expertise. This gives the Supervisory Board the opportunity
to get acquainted with a variety of ASML managers, which
the Supervisory Board considers very useful in connection
with its talent management and succession planning
activities.

Supervisory Board meeting attendance overview

Name

Gerard Kleisterlee (Chair)

Annet Aris

Douglas Grose
Terri Kelly

Rolf-Dieter Schwalb

Carla Smits-Nusteling

Hans Stork

Mark Durcan1
Warren East2
Wolfgang Ziebart3

Supervisory
Board

Audit
Committee

Remuneration
Committee

Selection and
Nomination
Committee

Technology
Committee

8/9

9/9

9/9
9/9

9/9

6/6
5/6
4/4

8/9

n/a

n/a
n/a

9/9

n/a

n/a
5/6
4/4

n/a

n/a
5/5

5/5

n/a

5/5

n/a
n/a
n/a

6/6

6/6
n/a

n/a

n/a
n/a
n/a

5/5

5/5
n/a

n/a

5/5

3/3
n/a
3/3

1. Appointed at the AGM on April 22. 2020 also appointed as a member of the Technology Committee at the same date.
2. Appointed at the AGM on April 22. 2020 also appointed as a member of the Audit Committee at the same date.
3. Stepped down per the AGM on April 22, 2020.

122

ASML ANNUAL REPORT 2020Composition
The Supervisory Board determines the number of Supervisory Board members required to perform its functions, the
minimum being three members. The Supervisory Board currently consists of nine members. The Supervisory Board
attaches great importance to its composition, independence and diversity and strives to meet all the associated guidelines
and requirements. To ensure an appropriate and balanced composition, the Supervisory Board spends considerable time
on an ongoing basis discussing its profile, composition and rotation schedule.

Independence
In order to properly perform its tasks, the Supervisory Board considers it to be very important that its members are able to
act critically and independently of one another, the Board of Management and other stakeholders. The independence of
the Supervisory Board and its individual members is assessed on an annual basis. All current members of the Supervisory
Board are fully independent, as defined by the Dutch Corporate Governance Code, and have completed the annual
questionnaire addressing the relevant independence requirements.

Diversity
The current composition of ASML’s Supervisory Board is diverse in terms of gender, nationality, knowledge, experience
and background and has a suitable level of experience in the financial, economic, technological, social and legal aspects
of international business.

Supervisory Board skills matrix

Gerard
Kleisterlee
(Chair)

Annet
Aris

Douglas
Grose

Terri Kelly

Rolf-
Dieter
Schwalb

Carla
Smits-
Nusteling

Hans
Stork

Mark
Durcan

Warren
East

General skills
Executive board
member of (listed)
international company
Finance / governance

Remuneration
Human resources /
employee relations
IT / digital / cyber

ASML-specific skills
Semiconductor
ecosystem
Deep understanding
of semiconductor
technology
High-tech
manufacturing /
integrated supply
chain management
Business in Asia

Changes in composition in 2020
Per the 2020 AGM, the term of appointment of Annet Aris and Wolfgang Ziebart expired. Mr. Ziebart stepped down from
the Supervisory Board per the 2020 AGM, after 11 years of service. Ms. Aris made herself available for reappointment. In
addition to nominating persons for filling the vacancies arising due to the retirement by rotation of Ms. Aris and Mr. Ziebart,
the Supervisory Board decided to nominate another candidate for appointment to the Supervisory Board, thereby
increasing the number of members to nine. The Supervisory Board wanted to use the opportunity to add an additional
member with a background and experience in semiconductor technology, and the semiconductor industry in 2020,
anticipating the upcoming retirement of Mr. Grose in 2021. The Board's rotation schedule was also taken into account in
nominating an additional member. The Works Council of ASML Netherlands B.V. decided not to use its enhanced
recommendation right in respect of this appointment, because of the temporary nature of the increase in the number of
Supervisory Board members. At the 2020 AGM, Mark Durcan and Warren East were appointed for a term of four years.
Ms. Aris was reappointed for a term of four years; her reappointment was also based on the Works Council's enhanced
recommendation right.

Changes in composition in 2021
Per the 2021 AGM, the appointment terms of Carla Smits-Nusteling and Douglas Grose will expire. Both Supervisory
Board members have informed the Supervisory Board that they are not available for reappointment and will retire per the
2021 AGM, upon completion of their current term. The Supervisory Board extends its thanks to both Ms. Smits-Nusteling
and Mr. Grose for their valuable contribution over the past eight years, during which the Supervisory Board has greatly
benefited from their knowledge and experience.

123

ASML ANNUAL REPORT 2020As announced on January 20, 2021, the Supervisory Board
intends to nominate Ms. Birgit Conix for appointment as
member of the Supervisory Board effective from the 2021
AGM. In preparation for her appointment, Ms. Conix
attended a number of Supervisory Board meetings as an
observer in order to ensure a smooth onboarding. The
agenda and explanatory notes for the 2021 AGM will
contain further information about this intended nomination
for appointment.

For further information and background on the members of
the Supervisory Board, including details on nationality,
gender and age, please see the Supervisory Board
members’ information in Leadership and governance -
Corporate governance - Supervisory Board as well as the
Supervisory Board skills matrix.

Induction and training
We have a comprehensive induction program in place for
newly appointed Supervisory Board members, designed to
ensure that new members gain a good understanding of
our business and strategy, as well as the key risks we face.
The induction program includes meetings with other
Supervisory Board and Board of Management members, a
technology tutorial and detailed presentations by our
Business Lines, Sectors and Corporate departments. A site
visit and factory tour is also part of the induction program.
On joining the Supervisory Board, Mark Durcan and Warren
East followed an induction program, which was held fully
virtually.

The Supervisory Board is provided with regular updates on
a variety of topics, both in the plenary meetings and in the
meetings of the committees. During 2020, we also invited
external speakers on a number of occasions in order to
obtain outside-in views on topics such as geopolitics and
the value of new technologies such as High-NA for the
semiconductor industry.

Evaluation
The Supervisory Board greatly values the structural and
ongoing evaluation process as a means of ensuring
continuous improvement in our way of working. Each year,
the Supervisory Board, assisted by the Selection and
Nomination Committee, evaluates the composition,
competence and functioning of the Supervisory Board and
its committees, the relationship between the Supervisory
Board and the Board of Management, its committees, its
individual members, the chairs of both the Supervisory
Board and the committees, as well as the composition and
functioning of the Board of Management and its individual
members, and the education and training needs for the
Supervisory Board and Board of Management members.

In principle, the evaluation of the Supervisory Board is
performed once every three years by an external adviser; in
the other two years, the evaluation of the Supervisory
Board is performed by means of a self-assessment using a
written questionnaire, followed by one-on-one meetings
between the Chair and individual Supervisory Board
members.

The 2020 evaluation of the Supervisory Board and its
committees was performed through a web-based survey,
which was prepared by the Selection and Nomination
Committee. The chair of the committee also held meetings
with the individual Supervisory Board members. The
evaluation was centered around the following themes:
composition, stakeholder oversight, oversight of strategy,
risk management and succession planning, management
and focus of meetings and priorities for improvement. In
addition, the evaluation included a case study of how
effectively the Supervisory Board oversaw the Board of
Management in addressing the challenges of the
COVID-19 pandemic. An upward review by the Board of
Management was also part of the annual assessment.

The results of the Supervisory Board evaluation were
discussed in early 2021. The conclusion was that the
Supervisory Board and its committees continue to function
well. Suggestions to further improve the functioning of the
Supervisory Board include optimizing the meeting agenda
to ensure an appropriate balance between recurring items
and strategic topics, as well as the balance between
presentation and discussion during meetings, and
increasing the engagement with management and the
organization, also outside meetings. Important focus area
identified was the successful onboarding and integration of
new members, also in light of the challenges related to the
COVID-19 pandemic.

The Board of Management also conducted a self-
evaluation in 2020, focusing on the role, responsibilities
and functioning of the Board of Management collectively,
and on the functioning of the individual Board of
Management members. This self-evaluation was
performed in a number of separate sessions dedicated to
this topic. The self-evaluation was facilitated by the EVP
HR&O, who held interviews with the individual Board of
Management members in preparation for the discussion.
Themes addressed include the Board of Management's
strategic focus, stakeholder involvement, people &
organization, board dynamics and board organization. After
the discussion, a summary was prepared per theme with
items to be followed up on. Follow-up will take place in
several special Board of Management sessions planned
throughout 2021. The overall conclusion of the self-
evaluation was that ASML has a well-functioning Board of
Management. The self-evaluation was also discussed with
the Supervisory Board and its Selection and Nomination
Committee.

124

ASML ANNUAL REPORT 2020Supervisory Board Committees

The Supervisory Board has four standing committees, whose members are appointed by
the Supervisory Board from among its members. The full Supervisory Board remains responsible
for all decisions, even if prepared and taken by one of the Supervisory Board’s Committees.

members

3
Assisting in
overseeing the
integrity and quality
of our financial reporting
and the effectiveness
of risk management
and controls

members

3
Overseeing the
development and
implementation of the
Remuneration Policies,
in cooperation with
the Audit Committee and
Technology Committee

members

5
Providing advice with
respect to our
technology plans
required to execute
the business strategy

members

3
Assisting with the
preparation of the
selection criteria
and appointment
procedures for the
Supervisory Board and
Board of Management

The four committees of the Supervisory Board prepare the decision-making of the full Board. In the plenary Supervisory
Board meetings, the chairs of the committees report on the items discussed in the committee meetings. In addition, the
meeting documents and minutes of the committee meetings are available to all Supervisory Board members, enabling the
full Supervisory Board to make the appropriate decisions.

Audit Committee
The Audit Committee assists the Supervisory Board in overseeing the integrity and quality of our financial reporting and
the effectiveness of the internal risk management and internal control systems.

Members
• Carla Smits-Nusteling (Chair)
• Rolf-Dieter Schwalb
• Warren East

The members of the Audit Committee are all
independent members of the Supervisory Board.

The Supervisory Board has determined that both Ms. Smits-
Nusteling and Mr. Schwalb qualify as an Audit Committee
financial expert pursuant to Section 407 of the Sarbanes-
Oxley Act and Dutch statutory rules, taking into consideration
their extensive financial backgrounds and experience.

Main responsibilities

•

Integrity and quality of ASML's financial statements and related
non-financial disclosure and submitting proposals to ensure
such integrity;

• Accounting and financial reporting processes and the audits of

the financial statements;

• Effectiveness of our internal risk management and control

•

systems, including the compliance with the relevant legislation
and regulations, and the effect of codes of conduct;
Integrity and effectiveness of our system of disclosure controls
and procedures and our system of internal controls over
financial reporting;

• External Auditor’s qualifications, independence, performance

and determining its compensation; and

• Functioning of Internal Audit.

The Audit Committee is provided with all relevant information to be able to adequately and efficiently supervise the
preparation and disclosure of financial information. This includes information on the status and development of the
(semiconductor) market to be able to judge the outlook and budget for the next six to 12 months, the application of EU-
IFRS and US GAAP, the choice of accounting policies and the work of the internal and external auditor.

125

ASML ANNUAL REPORT 2020Audit Committee meetings in 2020
The Audit Committee meets at least four times a year and always before the publication of the quarterly, half-year and
annual financial results. In 2020, the Audit Committee held nine meetings.

Internal control update

Recurring agenda topics (quarterly)
• Financial update and financing
• Review of the quarterly financial results and press release
• Accounting update
•
• Observations External Auditor
• Risk and Internal Audit update
• Disclosure Committee report
• Legal matters report
• Ethics and compliance

Attendance

In addition to the Audit Committee members, the Chairman of
the Supervisory Board attends the Audit Committee meetings
whenever possible. The external auditor and the internal auditor
have a standing invitation for Audit Committee meetings and
attended all Audit Committee meetings in 2020. The CEO,
CFO, EVP Finance, Corporate Chief Accountant and the VP
Risk and Business Assurance are invited to the meetings.

The below overview provides a number of topics discussed during Audit Committee meetings in 2020, in addition to the
recurring agenda topics.

Q1 • 2019 Annual Report and financial statements US GAAP

and IFRS-EU

Q2 • COVID-19 update, with focus on cost control and cash

preservation

• Balance sheet review
• 2019 External audit report
• Capital return: final dividend 2019 and share buyback

• Approval external audit plan 2020
•
• Deep-dive: Process Improvement projects for revenue

Internal management letter follow-up

program

• Fraud-risk assessment
• Results of the External Auditor evaluation 2019
• Results Self-Evaluation Audit Committee
• Annual plans Risk and Internal Audit
• COVID-19 update, with focus on cost control and cash

preservation, and impact on financial results

Q3 • Deep-dive: Process Improvement projects for revenue

recognition (II/II)

• Review internal control framework
• Finance and IT transformation program

recognition (I/II)

• Compliance deep-dive
• Legal entity structure simplification
• Tax update

Q4 • Long-term financial plan
• Annual Plan 2021
• Financing Policy
• Deep-dive: revenue recognition accounting focus areas
• Compliance deep-dive
• External audit update
• Review rules of procedure Audit Committee
• Rotation Lead Audit Partner
• Process for the External Auditor evaluation

Financials
In 2020 the Audit Committee focused, among other things, on financial reporting, most particularly the review of ASML's
2020 Integrated and Interim Reports, including the annual and interim financial statements and non-financial information.
We also closely monitored the progress and discussed the outcomes of the year-end US GAAP and EU-IFRS audits. The
quarterly results and the accompanying press releases were reviewed before publication. The Audit Committee also
reviewed the press release issued on March 27, 2020 in which ASML updated the market on the expected Q1 2020
results, primarily related to the COVID-19 impact.

On a quarterly basis, the Audit Committee was provided accounting updates by the Corporate Chief Accountant,
highlighting the main accounting matters relevant for the quarter. Other important elements of the Audit Committee's
quarterly procedures were the discussion of the observations of the External Auditor in relation to the accounting matters,
as well as the report by the Disclosure Committee on the accuracy and completeness of the quarterly disclosures.
Throughout the year, specific accounting topics were addressed in deep dive sessions. Several sessions were dedicated
to revenue recognition, which has been identified as a critical audit matter. These sessions focused on aspects such as
focus areas and process improvement projects in respect of revenue recognition. An annual in-depth balance sheet review
was also performed.

The operational and financial short- and long-term performance of ASML was also discussed extensively, with a focus on
various performance scenarios and their impact on ASML’s results, cash generation, and financing and capital return
policies. A special meeting was organized to discuss the potential impact of the COVID-19 pandemic on ASML's
business, results and cash situation.

126

ASML ANNUAL REPORT 2020An area of attention for the Audit Committee in 2020 was
liquidity and free cash flow, due to the ongoing ramp-up of
EUV, and ASML's continued investment into the future,
which led to growth of net working capital and increased
R&D and capital expenditure spend.

the results of audits performed as well as the status of the
follow-up on action plans. The Audit Committee also
discussed the internal management letter and monitored
the follow-up by the Board of Management on the
recommendations made in the internal management letter.

The Audit Committee reviewed and provided the
Supervisory Board with advice regarding the long-term
financial plan, the financing of ASML and ASML’s capital
return policy. Specifically discussed were the dividend
policy and the proposed final dividend payment in respect
of the 2019 and 2020 financial years and the interim
dividend for the 2020. The 2020-2022 share buyback
program was discussed on a quarterly basis, focusing on
the desirability of issuing quarterly mandates in view of the
cash position and free cash flow of ASML, also taking into
account the potential impact of COVID-19. We also
discussed the issuance of two bond offerings during 2020
and provided the Supervisory Board with our
recommendations in this area.

Risk management and internal control
Throughout 2020, the Audit Committee closely monitored
risk management and the risk-management process,
including the timely follow-up of high-priority actions based
on quarterly progress updates. The Audit Committee
oversaw the annual internal control process. Focus was on
scoping, materiality levels, updates to the internal control
framework, the tests of design and effectiveness and
management's assessment of ASML's internal control over
financial reporting and disclosures. The observations made
by the Internal Auditor and the External Auditor on the
design and effectiveness of internal controls were also
discussed with the Audit Committee. In 2020, an in-depth
review was performed of ASML's internal control
framework, with focus on the level of automation of
controls.

Compliance and ethics
During 2020 we discussed ASML's compliance program
and performed detailed reviews of specific compliance
topics such as treasury compliance and customs
compliance. An annual fraud update was provided and
quarterly reports were given on the Ethics program,
including whistleblower reporting. The Audit Committee
was also involved in the update of our Code of Conduct
and business principles, which was implemented in
November 2020.

Internal audit
The Audit Committee reviewed the annual internal audit
plan, including the scope of the audit. The Audit
Committee was kept updated on the progress of the
internal audit activities on a quarterly basis and reviewed

External audit
The Audit Committee reviewed the 2020 external audit
plan, including scoping, materiality level and fees. It
monitored the progress of the external audit activities,
including review of the observations made in the quarterly
procedures and the audits performed at year-end. The
Audit Committee oversaw the follow-up by the Board of
Management on the control deficiencies reported by the
External Auditor in their periodic internal control update.
The Audit Committee confirms that the communication
over the 2020 financial year contained no significant items
that need to be mentioned in this report.

The Audit Committee also evaluated the performance of
the external auditor at the end of 2020, including a review
of their independence. The results of the evaluation have
led the Audit Committee to recommend to the Supervisory
Board to submit to the 2021 AGM a proposal to appoint
KPMG as the External Auditor for the reporting year 2022.

After completion of the 2020 audit, the current lead audit
partner will rotate off the ASML assignment. The Audit
Committee and the CFO have been involved in the
succession process of the new lead audit partner by
interviewing candidates and selecting the new lead partner,
as well as taking notice of the transition plan. As part of the
transition plan, the new lead audit partner joined the Audit
Committee meetings as an observer as of November 2020
to facilitate a smooth transition.

Other topics
Other topics discussed by the Audit Committee in 2020
were ASML’s tax policy and planning, the Finance and IT
transformation program, the project to simplify ASML's
legal entity structure and the quarterly legal matters
overviews.

The Audit Committee also performed an annual review and
update of its Rules of Procedure.

After most of the Audit Committee meetings, the internal
and external auditor each have a session with the Audit
Committee without management present to discuss their
views on the matters warranting the attention of the Audit
Committee. This may include their relationship with the
Audit Committee, the relationship with the Board of
Management, and any other matters deemed necessary to
be discussed. The Audit Committee also held regular one-
to-one meetings with the CFO.

127

ASML ANNUAL REPORT 2020Remuneration Committee
The Remuneration Committee advises the Supervisory Board, and prepares the Supervisory Board's resolutions with
respect to the remuneration of the Board of Management and the Supervisory Board.

Members
• Rolf-Dieter Schwalb (Chair);
• Terri Kelly;
• Hans Stork

Each member is an independent, non-executive member
of our Supervisory Board in accordance with the NASDAQ
Listing Rules. Mr. Schwalb is neither a former member
of our Board of Management, nor a member of the
management board of another company. Currently, no
member of the Remuneration Committee is a member of
the management board of another Dutch listed company.

Main responsibilities

• Overseeing the development and implementation of the
Remuneration Policy for the Board of Management and
preparing the Supervisory Board Remuneration Policy;

• Reviewing and proposing to the Supervisory Board corporate
goals and objectives relevant to the variable part of the Board
of Management’s remuneration;

• Carrying out scenario analyses of the possible financial

outcomes on the variable remuneration of meeting these goals,
as well as exceeding these goals, before proposing these
corporate goals and objectives to the Supervisory Board for
approval;

• Evaluating the performance of the members of the Board of
Management in view of those goals and objectives, and –
based on this evaluation – recommending to the Supervisory
Board appropriate compensation levels for the members of the
Board of Management.

Remuneration Committee meetings in 2020
The Remuneration Committee meets at least two times a year and more frequently when deemed necessary. In 2020, the
Remuneration Committee held five meetings.

Recurring agenda topics
• Remuneration of the Board of Management
• Remuneration of the Supervisory Board
• Update on performance on STI and LTI targets

Attendance

In addition to the Remuneration Committee members,
the Remuneration Committee generally invites the CEO,
the EVP HR&O, the Head of Compensation and Benefits
and in some instances also the CFO to attend (parts of)
its meetings. The Remuneration Committee’s external
advisor is also invited to attend the Remuneration
Committee meetings when deemed necessary.

The below overview provides details on the topics discussed during Remuneration Committee meetings in 2020.

• Base salary Board of Management 2020
• Short-term Incentive Plan: performance 2019, pay-

out 2019 and targets 2020

• Long-term Incentive Plan: share vesting

performance period 2017-2019, and conditional
grant and targets performance period 2020-2022
• Remuneration Policies Board of Management and

Supervisory Board

• Remuneration Report 2019
• Self-Evaluation Remuneration Committee

• Review reference group remuneration Board of

Management and benchmark approach
• Benchmark approach Supervisory Board

remuneration

• Results benchmark Board of Management

remuneration

• Results benchmark Supervisory Board remuneration
• Review investor and shareholder interest

organizations' feedback on Remuneration Report
2019

• Potential adjustments to Board of Management

Remuneration Policy

• Potential adjustments to Supervisory Board

Remuneration Policy

• Compliance Board of Management members with

share ownership guideline
• Budget for ASML Equity Plans
• Engagement of external auditor for agreed upon

procedures on remuneration

128

ASML ANNUAL REPORT 2020Remuneration Board of Management
In Q1 2020, the Remuneration Committee finalized the
adjustments to be made to the Remuneration Policy for the
Board of Management in light of the implementation of the
revised EU Shareholder Rights Directive. The adjusted
Remuneration Policy was submitted to and adopted by the
General Meeting on April 22, 2020.

In line with ASML's practice of benchmarking Board of
Management remuneration every two years, a benchmark
was performed in 2020 in order to assess the level of
competitiveness of the Board of Management's
remuneration. The Remuneration Committee also reviewed
the composition of the labor market reference group in
connection with the benchmark. Based on the outcome of
this review, the Supervisory Board intends to submit a
proposal for implementing some adjustments to the
Remuneration Policy for the Board of Management to the
2021 AGM. The proposed adjustments will be set out in
the convocation documents for the 2021 AGM, which will
be published in March 2021.

The Remuneration Committee made recommendations to
the Supervisory Board concerning the total remuneration
package of the Board of Management and the variable
remuneration consisting of a short term incentive in cash
and a long term incentive in shares. The Remuneration
Committee proposed 2020 targets for the Board of
Management's variable remuneration to the Supervisory
Board. During the year, the Remuneration Committee
closely monitored the Board of Management's
performance. It provided recommendations to the
Supervisory Board regarding the achievement of the 2020
targets and related compensation levels for the Board
of Management members. Special attention was paid to
the impact of the COVID-19 on ASML's performance and
the potential consequences for Board of Management
remuneration.

In proposing, and evaluating the Board of Management's
performance in relation to the corporate goals and
objectives for the variable remuneration of the Board of
Management members, the Remuneration Committee
closely cooperates with the Audit Committee and the
Technology Committee.

The Remuneration Committee has taken note of the views
of the individual members of the Board of Management
with regard to the amount and structure of their
remuneration.

The Remuneration Committee reviewed the shareholding
positions of the Board of Management members based
upon the share ownership guideline of the Remuneration
Policy.

The Remuneration Committee also reviewed the
Remuneration Report, which details the remuneration of
members of the Supervisory Board and the Board of
Management. As the 2019 Remuneration Report was
submitted to the 2020 AGM for an advisory vote, in line
with the new legal requirements resulting from the revised
EU Shareholder Rights Directive, the committee discussed
the result of the vote on this item: 93.78% of the votes
were cast in favor. The committee discussed the feedback
received from investors and shareholder interest
organizations on the Report. As a result of the discussion,
some enhancements were made to the 2020 Remuneration
Report, which is included in this Annual Report.

The Remuneration Committee engaged the external
auditor to perform certain agreed-upon procedures with
respect to the execution of the Remuneration Policy.

Remuneration Supervisory Board
In Q1 2020 the Remuneration Committee finalized the
Remuneration Policy for the Supervisory Board in order to
comply with the revised EU Shareholder Rights Directive.
The policy was submitted to and adopted by the General
Meeting on April 22, 2020.

The Remuneration Committee reviewed the reference
group for Supervisory Board remuneration and performed
a benchmark review in 2020. Based on this benchmark
review, the Supervisory Board intends to submit a proposal
for implementing some adjustments to the Remuneration
Policy for the Supervisory Board to the 2021 AGM. The
proposed adjustments will be set out in the convocation
documents for the 2021 AGM, which will be published in
March 2021.

For further details, see Leadership and governance -
Remuneration report

129

ASML ANNUAL REPORT 2020Selection and Nomination Committee
The Selection and Nomination Committee assists the Supervisory Board in relation to its responsibilities over the
composition and functioning of the Supervisory Board and the Board of Management and to the monitoring of corporate
governance developments.

Members
• Gerard Kleisterlee (Chair)
• Annet Aris
• Doug Grose

Each member is an independent, non-executive member of our
Supervisory Board in accordance with the NASDAQ Listing Rules.

Main responsibilities

• the preparation of the selection criteria and appointment
procedures for members of the Supervisory Board and
Board of Management, and the supervision of the Board
of Management's policy in relation to the selection and
appointment criteria for senior management;

• the periodical evaluation of the scope and composition of

the Board of Management and the Supervisory Board, and
proposing the profile of the Supervisory Board;

• the periodical evaluation of the functioning of the Board of

Management and the Supervisory Board, and their individual
members.

• the preparation of the Supervisory Board’s decisions for
appointing and reappointing members of the Board of
Management and proposing (re)appointments of members of
the Supervisory Board

• monitoring and discussing developments in corporate

governance.

Selection and Nomination Committee meetings
The Selection and Nomination Committee meets at least two times a year and more frequently when deemed necessary.
In 2020, the Selection and Nomination Committee held five meetings.

Recurring agenda topics
• Role, composition, functioning Board of Management
• Role, composition, functioning Supervisory Board
• Corporate governance

Attendance

Besides the Selection and Nomination Committee members,
the two Presidents and the EVP HRO are regularly invited
to attend (parts of) its meetings. An external advisors
is also invited to attend the Selection and Nomination
Committee meetings when deemed necessary.

The below overview provides details on the topics discussed during Remuneration Committee meetings in 2020.

1st
Half
Year

• Future composition Board of Management, incl.

diversity aspects, and succession pipeline

• Changes in composition Supervisory Board per

2020 AGM and nominations for (re)appointment of
Supervisory Board members

• Composition of the Supervisory Board committees

•

per 2020 AGM
Implementation revised Shareholder Rights Directive
and impact on ASML

2nd
Half
Year

• Future composition Board of Management, incl.

diversity aspects, and succession pipeline

• Composition Board of Management per 2021 AGM
• Changes in composition Supervisory Board per
2021 AGM and nomination for appointment of a
Supervisory Board member

• Composition of the Supervisory Board committees

per 2021 AGM

• Evaluation of the Supervisory Board and committees
• Consultation composition Board of Directors

Preference Shares Foundation per January 1, 2021

Composition, role and responsibilities Board of Management
In 2020 the Selection and Nomination Committee spent ample time to discuss the future composition, role and
responsibilities of the Board of Management, e.g. reviewing the talent bench, discussing career development of top talent
to prepare for future Board of Management roles. The committee also assessed the functioning of the Board of
Management and its individual members. For this purpose, the Chair held meetings with each individual Board of
Management member, the outcome of which was discussed with the Committee.

Frits van Hout will retire as member of ASML's Board of Management upon completion of his current appointment term,
which will end per the 2021 AGM. Frits van Hout first served with ASML from 1984 to 1992, later rejoining the company in
2001. He was appointed to the Board of Management in 2009, first serving as Chief Marketing Officer and later as Chief
Program Officer, where he successfully oversaw the development of the EUV business, bringing it to a level where EUV

130

ASML ANNUAL REPORT 2020was widely accepted as the next lithography platform for the semiconductor industry. In 2018, Frits van Hout became
Chief Strategy Officer, focusing on strategy and strategic supplier relations, which has grown in significance given the rise
of EUV and High-NA EUV as well as e-beam metrology and optical systems. The Supervisory Board wants to thank Frits
for his significant contribution to ASML’s growth and development.

ASML will not appoint a successor to Frits van Hout. As a result, the Board of Management will consist of five members
effective per the 2021 AGM. Frits van Hout's current responsibilities will be taken over by the remaining Board of
Management members, securing the uninterrupted execution of ASML’s strategy to reach its stated targets for
stakeholders.

Composition, role and responsibilities Supervisory Board
The Selection and Nomination Committee also extensively discussed the composition of the Supervisory Board. A
significant amount of time was spent discussing the Supervisory Board's rotation schedule, particularly the appointment
and reappointment of Supervisory Board members to fill vacancies both in the short and longer term. This resulted in
recommendations from the Selection and Nomination Committee to nominate two new members for appointment and
one current member for reappointment by the General Meeting in 2020. The Selection and Nomination Committee also
discussed the changes to its composition effective per the 2021 AGM and made a recommendation to the Supervisory
Board to nominate Birgit Conix as new Supervisory Board member. For further details, see Supervisory Board report -
composition, independence and diversity.

At the end of 2020 and early 2021, the Selection and Nomination Committee discussed the functioning of the individual
members of the Supervisory Board as well as the process and outcome of the Supervisory Board’s self-evaluation. For
further details on the self-evaluation, see Supervisory Board report - Evaluation.

Corporate Governance
As part of its responsibility to monitor corporate governance developments, the Selection and Nomination Committee
discussed, among other things, the revised EU Shareholder Rights Directive as implemented into Dutch law in December
2019, and the impact on ASML, the legislative and other developments in relation to diversity and the focus items of
investors and shareholder interest organizations.

Technology Committee
The Technology Committee advises the Supervisory Board with respect to our technology plans required to execute our
business strategy.

Members
• Doug Grose (Chair)
• Annet Aris
• Mark Durcan
• Gerard Kleisterlee
• Hans Stork

The Technology Committee is supported by external experts and
as experts from within ASML who act as advisers on the subjects
reviewed and discussed by this committee. External experts may
include representatives of customers, suppliers and partners
to increase the committee’s understanding of the technology
and research required to develop our leading-edge systems.

Main responsibilities

• Advising on technology trends, the study of potential alternative
strategies, the technology strategy, product roadmaps, required
technical resources and operational performance in R&D;

• Making recommendations to the Supervisory Board on

technology-related projects with respect to ASML’s competitive
position;

• Discussing the technology targets set to measure short- and

long-term performance as well as the achievements related to
these, and advising the Remuneration Committee on this topic.

131

ASML ANNUAL REPORT 2020Technology Committee meetings in 2020
In general, the Technology Committee meets at least two times a year and more frequently when deemed necessary. In
2020, the Technology Committee held five meetings.

Recurring agenda items
• Product Roadmap
• Progress Technology Leadership Index

Attendance
Besides the Technology Committee members, the committee's
external and internal advisors regularly attended committee
meetings. The advisers do not have voting rights.

In addition to the recurring agenda items, the Technology Committee also reviewed and discussed other matters in 2020.
Below table provides an overview of these topics.

• Performance evaluation and new targets related to

Technology Leadership Index

• Business Line review: EUV
• Era beyond High-NA
• Portfolio Research Department
• Self-Evaluation Technology Committee

• Business Line review: Applications
• Business Line review: DUV
• Business Line review: EUV

• Business Line review: DUV
• High-NA deep dive, incl. presentation from Zeiss

• No meetings

Review of technology programs
In 2020, the Technology Committee's primary focus was the execution and implementation of technology programs in
EUV, DUV and Applications. The Technology Committee was informed on and discussed the key challenges and
opportunities from a business and technology development perspective. Furthermore ASML’s product roadmaps and the
alignment thereof with customers' roadmaps were reviewed and discussed in depth. The Technology Committee provided
the Supervisory Board with advice in this area. The Technology Committee was also provided with an overview of the
current portfolio of ASML’s Research department. It discussed the research activities that are being conducted in support
of the current product roadmaps as well as activities for the era ‘beyond High-NA’. On EUV, special attention was paid to
further improving the operational performance of the EUV systems and execution of the roadmaps that have been
defined. In Q2 the Technology Committee specifically focused on the developments and achievements in the field of High-
NA. Special attention was paid to the accomplishments at Zeiss in the field of optics and interferometry. The Technology
Committee also discussed the value proposition of High-NA. With respect to DUV the focus was primarily on operational
excellence and improving competitiveness. In this respect the Technology Committee discussed the overall product
roadmap as well as the developments in the installed base management. On Applications, the developments on e-beam
metrology, computational lithography and patterning control were reviewed and discussed. In Q3 each Business Line
provided a complete overview of its roadmap in preparation of the strategy meeting of the full Supervisory Board. The
Technology Committee also discussed the technology targets and achievements related to our technology programs, and
provided the Remuneration Committee and the Supervisory Board with advice on this matter.

The Technology Committee’s in-depth technology discussions and the subsequent reporting on the main points of these
discussions in the full Supervisory Board increases the Supervisory Board’s understanding of our technology
requirements. It also enables the Supervisory Board to adequately supervise the strategic choices we face, including our
investment in R&D.

132

ASML ANNUAL REPORT 2020Financial Statements and Profit Allocation
The financial statements of ASML for the financial year 2020, as prepared by the Board of Management, have been
audited by KPMG Accountants N.V. All members of the Board of Management and the Supervisory Board have signed
these financial statements.

We recommend to shareholders that they adopt the 2020 financial statements. We also recommend that our shareholders
adopt the Board of Management's proposal to make a final dividend payment of €1.55 per ordinary share, which
together with the interim dividend of EUR 1.20 per ordinary share, leads to a total dividend of €2.75 per ordinary share in
respect of the 2020 financial year.

Finally, we would like to extend a word of thanks to the Board of Management and all ASML employees for their continued
commitment and hard work during this challenging year.

The Supervisory Board,

Gerard Kleisterlee, Chair
Douglas Grose, Vice Chair
Annet Aris
Mark Durcan
Warren East
Terri Kelly
Rolf-Dieter Schwalb
Carla Smits-Nusteling
Hans Stork

Veldhoven, February 10, 2021

133

ASML ANNUAL REPORT 2020Remuneration report

This report describes how the Remuneration Policies of the Board
of Management and the Supervisory Board were implemented in 2020.

€21.8m

Total remuneration of
the Board of Management

139.2%

Achieved of target

146.5%

Achieved of target

Internal pay ratio
(CEO versus average per FTE)

Message from the Chair of the Remuneration Committee

Dear stakeholder,

On behalf of the Remuneration Committee I am pleased to present the Remuneration Report, providing a summary of the
remuneration policies for the Board of Management and the Supervisory Board and an explanation about how they were
implemented in 2020.

Summary of 2020 performance
We started 2020 with a positive view on the year for all the different markets. During the first quarter, the COVID-19
pandemic began to affect our business. We were not able to ship our systems to either Wuhan or California and we had to
ship EUV systems without Factory Acceptance Test (FAT). This resulted in delays in revenue recognition.

On the full year we were able to execute our business activities with limited impact on our financials. Delayed revenue at
the start of the year could be recognized in later quarters and with the use of remote control activities, including
augmented reality, we were able to support our customers with the installs, upgrades and maintenance actions. We
continued to return capital to our shareholders by means of growing dividends and execution of our share buyback
program, which was paused in Q1 following the COVID-19 outbreak, but resumed in Q4, as part of our unchanged capital
return policy.

Decisions made in 2020
In 2020, we finalized the review of the remuneration policies for the Board of Management and Supervisory Board to
ensure compliance with the revised EU Shareholders Rights Directive, following its implementation in Dutch law on
December 1, 2019. We submitted adjusted remuneration policies to the AGM in 2020. These adjusted policies did not
contain substantive changes to the remuneration structure or elements; main changes related to better explaining how the
Remuneration Policies encourage behavior that is focused on the long-term interests and sustainability of ASML. In this
process, the Supervisory Board and the Remuneration Committee, advised by an external remuneration expert, took into
account the level of support in society and considered the external environment ASML operates in, the relevant statutory
provisions and provisions of the Dutch Corporate Governance Code, competitive market practice as well as the guidance
issued by organizations representing institutional shareholders and input from ASML’s major shareholders. The Works
Council issued a positive advice in respect of the Remuneration Policies for the Board of Management and the
Supervisory Board. Both policies were adopted by the General Meeting on April 22, 2020.

During the year we also monitored to what extent COVID-19 impacted ASML's business and financial performance and
we discussed the potential impact of the pandemic on remuneration. Given that ASML experienced only limited impact
from the global economic consequences of COVID-19, we decided to not make (temporary) adjustments to the
remuneration elements or policy in response to the COVID-19 pandemic.

Looking forward to 2021
During 2020, the Remuneration Committee reviewed the reference groups for Board of Management and Supervisory
Board remuneration and performed the recurring bi-annual benchmark reviews. Based on the outcome of those reviews,
we intend to submit proposals for implementing some adjustments to the Remuneration Policies for the Board of
Management and the Supervisory Board to the 2021 AGM. The proposed adjustments will be set out in the convocation
documents for the 2021 AGM, which will be published in March 2021.

Rolf Dieter Schwalb
Chair of the Remuneration Committee

134

ASML ANNUAL REPORT 2020Board of Management remuneration
In this section of the Remuneration Report we provide an
overview of the Board of Management Remuneration
Policy which was adopted by the General Meeting on April
22, 2020 and applied as of January 1, 2020. It also
contains the details of the Board of Management
members' actual remuneration for the financial year 2020.
The Board of Management Remuneration Policy can be
found in the governance section of our website.

Remuneration policy
Remuneration as a strategic instrument
The Board of Management Remuneration Policy supports
the long-term development and strategy of ASML in a
highly dynamic environment, while aiming to fulfill all
stakeholders’ requirements and maintaining an acceptable
risk profile. More than ever, the challenge for us is to drive
technology, to serve our customers and to satisfy our
stakeholders. These drivers are embedded in the identity,
mission and values of ASML and its affiliated enterprises
and are the backbone of the policy. The Supervisory Board
ensures that the policy and its implementation are linked to
ASML's objectives.

The Remuneration Policy is designed to enable ASML to
attract, motivate and retain qualified industry professionals
for the Board of Management in order to define and
achieve our strategic goals. The policy acknowledges the
internal and external context as well as our business needs
and long-term strategy. The policy encourages behavior
that is focused on long-term value creation and the long-
term interests and sustainability of ASML, while adopting
the highest standards of good corporate governance. It is
aimed at motivating for outstanding achievements, using a
combination of non-financial and financial performance
measures. Technology leadership and customer value
creation are the key drivers of sustainable returns to our
shareholders.

Remuneration principles
The remuneration philosophy that ASML applies for all its
employees includes the principle that ASML wants to pay
what is fair in the relevant labor market. The Supervisory
Board applies the same principle for the Board of

Management of ASML and in doing so takes the pay and
employment conditions for the ASML employees into
account when formulating the remuneration policy.

The Board of Management Remuneration Policy is built on
the following principles:

• Transparent – The policy and its execution are clear and

practical;

• Aligned – The Remuneration Policy is aligned with

the Short-term Incentive and/or Long-Term Incentive
policy for ASML senior management and other ASML
employees;

• Long-term – The incentives focus on long-term value

creation;

• Compliant – ASML adopts the highest standards of

good corporate governance; and

• Simple – The policy and its execution are as simple as

possible and easily understandable to all stakeholders.

Reference group and market positioning
Similar to the remuneration philosophy for all ASML
employees, we offer the Board of Management a
remuneration package that is competitive compared to a
relevant labor market. This market is defined by creating a
reference group of companies comparable to ASML in
terms of size and complexity, data transparency and
geographical area. The median market level serves as
reference point for determining the level of pay for the
Board of Management for as long as ASML is positioned
around the median of the reference group in terms of
company size (measured by enterprise value, revenue and
number of employees) and thus complexity.

In principle, a benchmark is conducted every two years. To
ensure an appropriate composition of the relevant labor
market, the Supervisory Board reviews the composition of
the reference group at the time a benchmark is conducted.
Substantial changes applied to the composition of the
reference group will be proposed to the shareholders. In
the year without a market assessment, the Supervisory
Board considers the appropriateness of any change of
base salary in light of the market environment as well as
the salary adjustments for other ASML employees.

Current reference group composition
AkzoNobel
Alstom
Continental

Covestro

DSM

Essilor

Evonik

Givaudan

Infineon Technologies
Legrand

Leonardo-Finmeccanica
Linde
Nokia

Philips

SAP

Schindler

Shire

Smith & Nephew

Solvay
Yara International

Total direct compensation
The remuneration levels are determined using the total direct compensation. Total direct compensation consists of a fixed
base salary and variable remuneration in the form of a short-term incentive (STI) and a long-term incentive (LTI). Other
remuneration elements are pension and expense reimbursements.

135

ASML ANNUAL REPORT 2020Variable compensation
The performance parameters are set by the Supervisory Board and consist of financial and qualitative measures in such a
way that an optimal balance is achieved between the various corporate objectives, both in the short term and the long
term. By doing so, it is ensured that the variable compensation contributes to the strategy, long-term interests and
sustainability of ASML. The Supervisory Board may adjust the performance measures and their relative weighting of the
variable income based on the rules and principles as outlined in the Remuneration Policy, if required by changed strategic
priorities in any given year. The Supervisory Board may use its the discretionary power to adjust the incentive pay-out
upward or downward (‘ultimum remedium’).

The following table represents the variable pay as percentage of base salary for the Presidents and the other Board of
Management members in the case of on-target performance.

2020 variable compensation (on-target)
Short-term incentive
Long-term incentive
Total variable compensation as % of base salary

Presidents Other board members
80%
100%

80%
110%

190%

180%

Summary of Remuneration Policy Board of Management
The elements of the Remuneration Policy for the Board of Management and their link to the strategy of ASML are
summarized as:

Base salary

Description and link to company strategy:
Fixed cash compensation

Attract, motivate and retain qualified industry professionals for the Board of
Management in order to define and achieve strategic goals

Policy summary:
• Derived from total direct compensation
• Determined by the Supervisory Board

Short-term
incentive (STI)

Description and link to company strategy:
Short-term performance-related cash incentive

Ensure a balanced focus on both the (financial) performance of ASML in the short term, as well on the sustained
company future in terms of technological advancement and customer satisfaction, fueling long-term success

Policy summary:
• On-target level: 80% of base salary

• Performance measures (in principle set and evaluated annually)

• Qualitative: Technology Leadership Index
• Qualitative: Market Position
• Financial measures, equally weighted, in principle selected from a pre-defined list:

https://www.asml.com/rempolicy-bom

• Pay-out levels

• Maximum
• Target
• Threshold
• Below threshold
Linear pay-out between threshold and target, and between target and maximum

• Aligned with STI applicable to ASML employees (except employees
in Netherlands subject to CLA with own profit sharing plan)

Weight
20%
20%
60%

% of target
150%
100%
50%
0%

Long-term
incentive (LTI)

Description and link to company strategy:
Long-term performance-related share-based incentive

Contribute to the strategy, long-term interests and sustainability of ASML using performance measures which
balance the direct interest of ASML’s investors, the long-term financial success of ASML, the long-term
continuation of technological advancement and the environmental and social dimensions of sustainability

136

ASML ANNUAL REPORT 2020

Policy summary:
• On-target levels as % of base salary

• Presidents
• Other members Board of Management

• Performance measures (set annually, evaluated over 3-year period)

• ROAIC
• Total shareholder return (TSR) vs Index
• Technology Leadership Index
• Sustainability

• Pay-out levels TSR vs Index (TSR ASML–TSR PHLX Index (X.SOX))

• Greater than or equal to 20%
• 0 to 20%
• -20 to 0%
• Less than or equal to -20%

• Pay-out levels ROAIC, Technology Leadership Index, Sustainability

• Maximum
• Target
• Threshold
• Below threshold
Linear pay-out between threshold and target, and between target and maximum

• Aligned with LTI of ASML employees eligible to receive performance
shares - by using identical performance measures

110%
100%
Weight
40%
30%
20%
10%
% of target
200%
100-200%
50-100%
0%
% of target
200%
100%
50%
0%

Share ownership
guidelines

Description and link to company strategy:
Requirement for a minimum share ownership by members of the Board of Management

Ensure alignment between the interests of the Board of Management
members and ASML’s long-term value creation

Policy summary:
• Presidents 3x annual base salary, other Board members 2x annual base salary
• 3-year period to comply for new members

• Supervisory Board has discretion to allow a temporary deviation in extraordinary circumstances

• Any shortfall will be remediated through the next vesting of shares

Other
remuneration

Description and link to company strategy:
Contribute to the competitiveness of the overall remuneration package and creates alignment with market practice

Policy summary:
• Pension arrangement based on the ‘excedent’ (supplementary) arrangement for
ASML employees in the Netherlands - a defined contribution plan

• Expense reimbursements, such as company car costs, travel expenses, representation allowances, housing
costs (gross amount before taxes), social security costs, and health and disability insurance costs

137

ASML ANNUAL REPORT 2020
Remuneration Board of Management in 2020
The remuneration of the Board of Management for the financial year 2020 is based upon and complies with the
Remuneration Policy as further explained below. As such, the remuneration of the Board of Management in 2020
contributed to the objectives of the Remuneration Policy and, as a result, to ASML's strategy aimed at long-term value
creation. Scenario analyses of the possible outcomes of the variable remuneration components and their effect on the
remuneration of the Board of Management are conducted.

Base Salary
At the beginning of 2020 the Supervisory Board decided to increase the base salaries of the members of the Board of
Management by 2%, taking into account the market environment as well as the salary adjustments for other ASML
employees.

Short-Term Incentive
The financial and non-financial target levels for the STI were set at the beginning of the 2020 financial year in accordance
with the Remuneration Policy and taking into account the annual plan for 2020, ensuring that targets are realistic, but
challenging.

For the STI, the following qualitative performance metrics applied in 2020:

• Market Position, measuring ASML’s performance in the market, not only in terms of market share, but also customer

satisfaction and quality.

• Technology Leadership Index, consisting of a set of targets related to ASML's product and technology roadmaps. It
measures the technological progress made by ASML over the relevant performance period, supporting our efforts to
drive innovation and thereby helping our customers achieve their goals and realize new technology and applications.
Both the STI and LTI make use of the Technology Leadership Index as a qualitative performance measure. The
objective is the same, but the applicable measures, targets and performance periods are different and aligned with
specific short- and long-term strategic priorities.

In addition to the Technology Leadership Index and Market Position performance metrics, three financial performance
metrics were selected for the 2020 STI. Based on ASML's business challenges and circumstances in 2020, the
Supervisory Board chose the following three financial measures from the pre-defined list as included in the Remuneration
Policy:

• EBIT Margin %, measuring Income from operations as percentage of revenues
• EUV Gross Margin %, measuring Gross Profit as a percentage of revenues for EUV
• Free Cash Flow, measuring Cash flow from operations minus purchases of Property, Plant and Equipment and

intangible fixed assets.

After the end of the performance period, the Supervisory Board assessed the performance achieved against the targets, in
cooperation with the relevant subcommittees Technology Committee, Audit Committee and Remuneration Committee.
We do not disclose the exact actual target and achievement levels for the STI performance criteria, as these qualify as
commercially or strategically sensitive information, but in view of transparency, we report performance as follows:

STI Performance metric 2020
EBIT Margin %
EUV Gross Margin %

Free Cash Flow

Technology Leadership Index

Market position

Total

Weight
20%
20%

20%

100%

Pay-out (as % of target)
149.5%
150.0%

150.0%

Between target and max

139.2%

The total STI outcome results in a cash pay-out of €5.4 million, representing 111.3% of the base salary of the Board of
Management.

At the beginning of 2021, the Supervisory Board decided to apply the same three financial performance measures for
2021 as in the previous year: 1. EBIT Margin %, 2. EUV Gross Margin % and 3. Free Cash Flow.

138

ASML ANNUAL REPORT 2020Long-Term Incentive

For the LTI, the following performance metrics apply, in accordance with the Remuneration Policy:

• Total shareholder return vs. Index, measuring ASML's relative change in share price, plus dividends paid over the

relevant performance period. ASML's total shareholder return is compared to the PHLX Semiconductor Sector Index,
a NASDAQ index designed to track the performance of a set of companies engaged in the design, distribution,
manufacture, and sale of semiconductors.

• Return on Average Invested Capital (ROAIC), measuring ASML’s rate of return on capital it has put to work, regardless
of our capital structure. It is used as a fundamental metric to measure value creation of the company. The ROAIC is
calculated by dividing the Net Operating Profit After Tax by the Average Invested Capital.

• Technology Leadership Index, a qualitative measure which is also applied for the STI. Reference is made to the

description under STI.

• Sustainability, a qualitative measure for determining our performance in the area of sustainability by benchmarking our
result from the annual comprehensive Dow Jones Sustainability Index (DJSI) against the best of the semiconductor
industry. This DJSI Assessment is a comprehensive assessment measuring our performance on more than 20 ESG
aspects. It allows us to benchmark our company performance in the wider field of ESG with our industry peers and
drive continuous improvement. Underlying is our Sustainability Strategy 2019-2025 containing a set of 16 KPIs and
targets, which we define by means of a comprehensive materiality assessment and input from continuous stakeholder
engagement. For more information see Non-financial statements - Materiality: assessing our impact.

Vesting LTI 2018-2020

After the end of the three-year performance period 2018-2020, the Supervisory Board assessed the performance
achieved against the LTI targets, in cooperation with the Technology Committee, Audit Committee and Remuneration
Committee. For the LTI performance criteria, the actual target and achievement levels are not disclosed for the same
reason as mentioned under STI, with the exception of total shareholder return. We report performance as follows:

LTI Performance metric 2018-2020
Total Shareholder Return
ROAIC

Technology Leadership Index

Sustainability
Total

Weight
30%
40%

20%

10%

100%

Pay-out (as % of target)
200.0%
88.4%

164.2%

183.5%

146.5%

The total LTI outcome results in a share vesting of 146.5% of target (73.3% of max).

Grant 2020

At the beginning of 2020, 9,245 performance shares were conditionally granted to each of the two Presidents; the other
members of the Board of Management were each conditionally granted 5,718 performance shares. These conditional
grants are based on the maximum achievable opportunity.

The targets levels related to the LTI performance measures ROAIC, Technology Leadership Index and Sustainability were
set at the beginning of 2020 for the performance period 2020-2022. This was done taking into account the long-term
product roadmap, sustainability goals and the long-term financial plan, thereby ensuring alignment between the various
targets and ASML’s long-term strategic priorities and encouraging behavior focused on long-term value creation.

Other remuneration
In 2020, the Board of Management members participated in the pension arrangement for the Board of Management,
which is based on the ‘excedent’ (supplementary) arrangement for our employees in the Netherlands, a defined
contribution opportunity as defined in Dutch fiscal regulations. It consist of a gross pension element (for the salary below
approximately 110,000 euro) and a net pension element (for the salary above 110,000 euro). Some members opted out of
the net pension due to different tax treatment of this outside the Netherlands. Details on the incurred accounting expenses
relating to the application of the pension arrangement in 2020 can be found in the table Total Remuneration Board of
Management.

Expenses reimbursed by ASML in 2020 included company car costs, travel expenses, representation allowances, housing
costs, social security costs, and health and disability insurance costs.

Share ownership guidelines
All members of the Board of Management complied with the share ownership guidelines as incorporated in the
Remuneration Policy.

139

ASML ANNUAL REPORT 2020Total remuneration Board of Management

The remuneration of the members of the Board of Management based on incurred accounting expenses in 2020, 2019
and 2018 was as follows (amounts are in € thousands):

Board of
Management

Financial
Year

Base
salary

Pension

Other
benefits

Total
fixed % Fixed

P.T.F.M.
Wennink

M.A. van den
Brink

F.J. van Hout

F.J.M.
Schneider-
Maunoury

R.J.M. Dassen

C.D. Fouquet

Total Board of
Management

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

1,020

1,000

978

1,020

1,000

978

694

680

661

694

680

661

694

680

386

694

680

496

4,816

4,720

4,160

216

207

203

216

207

203

122

114

122

114

100

859

809

732

1,293

1,260

1,234

1,293

1,259

1,232

863

838

819

852

824

806

845

820

467

828

801

573

299

273

239

5,974

5,802

5,131

28.3%

28.9%

35.9%

28.3%

28.9%

35.9%

29.4%

30.6%

37.6%

29.1%

30.3%

37.2%

22.2%

27.7%

52.0%

27.8%

36.4%

50.9%

27.4%

30.0%

38.8%

Total
variable

%
Variable

Total
Remuneration

Relative
proportion
fixed vs.
variable

STI

1,135

1,070

747

1,135

1,070

747

773

728

505

773

728

505

773

728

295

773

728

379

LTI

2,136

2,031

1,452

2,136

2,031

1,452

1,302

1,172

853

1,302

1,172

858

2,186

1,408

135

1,374

674

173

3,271

3,101

2,199

3,271

3,101

2,199

2,075

1,900

1,358

2,075

1,900

1,363

2,959

2,136

430

2,147

1,402

552

5,362

5,052

3,178

10,436

8,487

4,923

15,798

13,539

8,101

71.7%

71.1%

64.1%

71.7%

71.1%

64.1%

70.6%

69.4%

62.4%

70.9%

69.7%

62.8%

77.8%

72.3%

47.9%

72.2%

63.6%

49.1%

72.6%

70.0%

61.2%

4,564

4,361

3,433

4,564

4,360

3,431

2,938

2,738

2,177

2,927

2,724

2,169

3,804

2,956

897

2,975

2,203

1,125

21,772

19,341

13,232

0.40

0.41

0.56

0.40

0.41

0.56

0.42

0.44

0.60

0.41

0.43

0.59

0.29

0.38

1.09

0.39

0.57

1.04

0.38

0.43

0.63

The remuneration reported as part of the LTI (share awards) is based on costs incurred under US GAAP and EU-IFRS. The
costs of share awards are charged to the Consolidated Statements of Operations over the 3-year vesting period based on
the number of awards expected to vest. For the first 2 years, we apply the maximum achievable number of share awards,
and in the final performance year of the awards we update this estimate for the non-market performance conditions to the
best estimated amounts which are anticipated to vest. Any difference between the amount based on the best estimate of
achievable number of shares awards and the amount based on the actual number of share awards that vest, is taken into
account in the Consolidated Statements of Operations in the financial year in which the share awards vest.

The LTI (share awards) remuneration reported for the year 2020 includes a release for the 2018 performance share plan
based on the actual number of share awards vesting early 2021. The release is as follows: Mr. Wennink: €772,357; Mr. van
den Brink: €772,357; Mr. van Hout: €443,710; Mr. Schneider-Maunoury: €443,840; Mr. Dassen: €281,317; Mr. Fouquet:
€361,691.

The Supervisory Board applied an upward adjustment for the pay-out related to the ROAIC performance metric of the
2018-2020 LTI plan. This adjustment is made to correct for the effects of higher than anticipated investments in R&D and
CAPEX since target setting. The increase in investments is mainly needed to meet customer development roadmaps for
High-NA and as such supports long-term value creation of ASML and our stakeholders. The pay-out changed from
111.2% to 146.5%. The upward adjustments are as follows: Mr. Wennink: 2,307 shares for €369,050; Mr. van den Brink:
2,307 shares for €369,050; Mr. Van Hout: 1,326 shares for €212,017; Mr. Schneider-Maunoury: 1,326 shares for €212,087;
Mr. Dassen: 773 shares for €140,560; Mr. Fouquet: 994 shares for €180,720. Amounts involved are based on the number
of extra vested shares multiplied with the share price at grant date adjusted for the number of service days until vesting in
2021. The modified vesting conditions have been taken into account in the adjustment.

The net impact in the 2020 Consolidated Statements of Operations is a release of: Mr. Wennink: €403,307; Mr. Van den
Brink: €403,307; Mr. Van Hout: €231,693, Mr. Schneider-Maunoury: €231,753; Mr. Dassen: €140,757; Mr. Fouquet:
€180,971.

W.U. Nickl is no longer part of the Board of Management since he left the company in 2018.

Former
Board of
Management

Financial
Year

W.U. Nickl

2018

Base
salary

220

Pension

Other
benefits

Total
fixed % Fixed

264

18.2%

STI

168

Total
variable

%
Variable

Total
Remuneration

LTI

Relative
proportion
fixed vs.
variable

1,020

1,188

81.8%

1,452

0.22

140

ASML ANNUAL REPORT 2020Share-based payments
Performance based share-based remuneration current members of the Board of Management

Market based
element

Non-Market based
element

Full
control

Number
of shares
at target

Fair value
at grant
date

Number
of shares
at target

Fair value
at grant
date

Board of
Management

Grant
date

Status

P.T.F.M.
Wennink

1/24/20 Conditional

7/19/19 Conditional

1/19/18 Unconditional

1/20/17 Unconditional

1/22/16 Unconditional

M.A. van
den Brink

1/24/20 Conditional

7/19/19 Conditional

1/19/18 Unconditional

1/20/17 Unconditional

1/22/16 Unconditional

F.J. van Hout

1/24/20 Conditional

7/19/19 Conditional

1/19/18 Unconditional

1/20/17 Unconditional

1/22/16 Unconditional

1/24/20 Conditional

7/19/19 Conditional

1/19/18 Unconditional

1/20/17 Unconditional

1/22/16 Unconditional

1/24/20 Conditional

7/19/19 Conditional

1/25/19 Conditional

7/20/18 Unconditional

F.J.M.
Schneider-
Maunoury

R.J.M.
Dassen

C.D. Fouquet

1/24/20 Conditional

7/19/19 Conditional

7/20/18 Unconditional

1,387

2,217

1,958

3,037

n/a

1,387

2,217

1,958

3,037

n/a

858

1,371

1,125

1,745

n/a

858

1,371

1,125

1,745

n/a

858

1,371

3,000

657

858

1,371

844

286.9

245.4

215.1

145.4

n/a

286.9

245.4

215.1

145.4

3,235

5,173

4,570

7,085

8,290

3,235

5,173

4,570

7,085

263.7

194.4

162.8

110.5

83.6

263.7

194.4

162.8

110.5

286.9

245.4

215.1

145.4

n/a

286.9

245.4

215.1

145.4

2,001

3,198

2,626

4,070

5,603

2,001

3,198

2,626

4,070

263.7

194.4

162.8

110.5

83.6

263.7

194.4

162.8

110.5

n/a

5,603

83.6

286.9

245.4

169.0

274.6

286.9

245.4

274.6

2,001

3,198

7,000

1,531

2,001

3,198

1,969

263.7

194.4

148.3

185.0

263.7

194.4

185.0

Total
target
shares
at grant
date

4,622

7,390

6,528

Maximum
shares
(200%)

9,245

14,780

Number
of shares
at vesting
date

n/a

Vesting
date

1/1/23

1/1/22

13,056

1/19/21

9,566

10,122

20,243

1/1/20

16,733

Share
price at
vesting

End of
lock-up
date

n/a

439.9

263.7

1/1/25

1/1/24

1/19/23

1/1/22

16,579

1/22/19

12,435

141.4

1/22/21

9,245

14,780

1/1/23

1/1/22

n/a

13,056

1/19/21

9,566

10,122

20,243

1/1/20

16,733

n/a

439.9

263.7

1/1/25

1/1/24

1/19/23

1/1/22

5,718

9,137

7,501

1/1/23

1/1/22

1/19/21

11,629

1/1/20

11,205

1/22/19

5,718

9,137

7,502

1/1/23

1/1/22

1/19/21

11,629

1/1/20

11,205

1/22/19

5,718

9,137

1/1/23

1/1/22

n/a

5,496

9,613

8,404

n/a

5,496

9,613

8,404

n/a

439.9

263.7

1/1/25

1/1/24

1/19/23

1/1/22

141.4

1/22/21

n/a

439.9

263.7

1/1/25

1/1/24

1/19/23

1/1/22

141.4

1/22/21

n/a

1/1/25

1/1/24

10,000

20,000

2,188

2,859

4,569

2,813

4,376

1/19/21

3,207

439.9

1/19/23

5,718

9,137

5,626

1/1/23

1/1/22

n/a

1/1/25

1/1/24

1/19/21

4,122

439.9

1/19/23

8,290

4,622

7,390

6,528

2,859

4,569

3,751

5,815

5,603

2,859

4,569

3,751

5,815

5,603

2,859

4,569

n/a

8,290

83.6

8,290

16,579

1/22/19

12,435

141.4

1/22/21

W.U. Nickl is no longer part of the Board of Management since he left the company in 2018.

Market based
element

Non-Market based
element

Former Board
of
Management

Grant
date

Status

Full
control

Number
of shares
at target

Fair value
at grant
date

Number
of shares
at target

Fair value
at grant
date

Total
target
shares
at grant
date

Maximum
shares
(200%)

Vesting
date

Number
of shares
at vesting
date

Share
price at
vesting

End of
lock-up
date

W.U. Nickl

1/19/18 Unconditional

1/20/17 Unconditional

1/22/16 Unconditional

375

1,745

—

215.1

145.4

—

876

4,070

5,603

162.8

110.5

83.6

1,251

5,815

5,603

2,501

1/19/21

11,629

1/1/20

11,205

1/22/19

1,833

9,613

8,404

439.9

1/19/23

263.7

141.4

1/1/22

1/22/21

Reasons, criteria and principal conditions for granting shares

For the reasons and criteria for granting the performance shares to each member of the Board of Management, reference
is made to the table summarizing the Remuneration Policy for the Board of Management and to the section Board of
Management Remuneration in 2020 - Long Term Incentive as included in this Remuneration Report.

141

ASML ANNUAL REPORT 2020
The principal conditions applicable to the performance shares are described below. These apply to each member of the
Board of Management.

Instrument:

Performance Shares

Grant:

Grant date:

Conditional grant on an annual basis based on maximum achievable opportunity. The number
of performance shares to be conditionally awarded is calculated using the volume-weighted
average share price during the last quarter of the year preceding the conditional award.

Two days after the publication of ASML’s annual results in January of the
year in which the three-year performance period starts

Performance period:

Three years, starting on January 1 in year of grant

Vesting:

The shares will become unconditional in the year after the end of the three-year performance
period, depending on the level of achievement of the predetermined performance targets

Lock-up period:

The minimum holding period is two years after the vesting date.

Upon termination of contract the transfer restrictions will remain in place
during the holding period except in case of decease.

In case a tax payment is due by the members of the Board of Management over
the retrieved variable income, performance shares may be partially sold at vesting
(‘sell to cover’) in accordance with the law and internal regulations.

Relationship between accounted remuneration and company's performance
The following table sets forth an overview of the relationship between accounted remuneration and the company's
performance:

For the year ended December 31 (€, in thousands)
Net sales
Net income based on US GAAP

Net income based on EU-IFRS

ASML share price (closing price on Euronext Amsterdam in €)

Average number of FTEs (payroll and temporary)

2016
6,875,073
1,557,850

2017
8,962,658
2,066,679

2018 1
10,944,016
2,591,614

2019
11,820,001
2,592,252

2020
13,978,452
3,553,670

1,642,800

2,173,400

2,525,515

2,581,107

3,696,813

106.7

12,852

145.2

15,136

137.2

18,204

263.7

22,192

397.6

24,727

Remuneration P.T.F.M. Wennink (CEO)

Remuneration M.A. van den Brink

Remuneration R.J.M. Dassen

Remuneration F.J. van Hout

Remuneration C.D. Fouquet

Remuneration F.J.M. Schneider-Maunoury

Average remuneration per FTE

Internal pay ratio (CEO versus employee remuneration)

3,458

3,462

—

2,360

—

2,301

110

3,455

3,454

—

2,276

—

2,260

109

3,433

3,431

897

2,177

1,125

2,169

107

4,361

4,360

2,956

2,738

2,203

2,724

106

4,564

3,804

2,938

2,975

2,927

113

1. The remuneration of the R.J.M. Dassen and C.D. Fouquet is lower in 2018 as they were appointed as members of the Board of Management during 2018.

Explanation of changes in company's performance versus remuneration

The table set out above aims to provide insight into the Company's performance over the past five years and the
development of the remuneration. The metrics sales, net income and share price are used to measure company
performance, as they are key metrics serving as a good proxy for ASML's general performance, as well as in view of
comparability with other companies. The Company has grown significantly over the last years, not only reflected in the
number of employees but also in terms of revenue. Since 2016, net sales increased by 103%. The performance of the
Company in that same period has increased significantly as well, reflected for example in Net Income (125% growth since
2016 based on EU-IFRS) and Total Shareholder Return (273% growth). As the table shows, the company performance
over the last five years has improved more significantly compared to the development of remuneration in that same
period. The size of the company (measured by enterprise value, revenue and number of employees) is taken into account
in determining the group of reference companies that are used for the benchmark to assess the competitiveness of the
Board of Management remuneration compared to the labor market. This has led to revisions of the Board of Management
remuneration policy in 2017 and 2019, resulting into higher base salaries as well as higher levels of STI (at target) and LTI
(at target). Actual remuneration may fluctuate year over year depending on actual STI pay-out in any year, as well as the
vesting of performance shares (LTI) in any year and the share price at that moment.

142

ASML ANNUAL REPORT 2020Relationship between CEO and average remuneration (pay ratio)

The internal pay ratio1 (CEO versus employee remuneration) remained stable 40:1 in 2020 (2019 41:1) after the reset
performed in 2019. ASML intends to grant competitive remuneration to employees at all position levels within the
Company. At each level remuneration should reflect the responsibilities of the role. The build-up of remuneration from level
to level should therefore be gradual and in line with increasing responsibilities, also following market practice. At the
highest level the steps become gradually bigger as responsibilities ultimately rise from a divisional level to an overall
company level. The Supervisory Board considers the current build-up and the overall pay ratio of 40:1 to be equitable,
considering the current size and organization structure of the company.

1. This ratio consists of the CEO's total remuneration during 2020 of €4,564 thousand, compared to the average remuneration of all employees. The average

remuneration of all employees was calculated using the average number of payroll employees in FTE (wages and salaries + pension and retirement expenses + share-
based payments) / average number of payroll employees = €2,756 million / 24,727 = €113 thousand. This ratio is prepared in accordance with the Dutch Corporate
Governance Code and has not been prepared to comply the Pay Ratio Disclosure requirements under SEC regulations.

Remuneration Supervisory Board
In this section of the Remuneration Report we provide an overview of the Supervisory Board's Remuneration Policy as
adopted by the General Meeting on April 22, 2020 and as in force as of April 1, 2020. It also provides the details of the
Supervisory Board members' actual remuneration in 2020. The Remuneration Policy for the Supervisory Board can be
found in the Governance section of our website.

Remuneration Policy
Remuneration objectives and principles
The remuneration policy for the Supervisory Board is designed to enable ASML to attract and retain qualified Supervisory
Board members, which together compose a diverse and balanced Supervisory Board with the appropriate level of skills,
competences and experience required to properly supervise (the execution of) ASML's strategy, which is focused on the
creation of long-term value for all stakeholders.

The remuneration policy is built on the following principles:

• Transparent – The remuneration policy and its execution are clear and practical
• Alignment – The remuneration policy is benchmarked to market practice
• Compliant – ASML adopts the highest standards of good corporate governance
• Simple – The remuneration policy and its execution are as simple as possible and easily understandable to all

stakeholders

• Fair – The remuneration should reflect the time spent and the responsibilities of the role of the members of the

Supervisory Board

• Independent – The remuneration of a Supervisory Board member may not be made dependent on the results of the

company.

Reference group and market positioning
The remuneration of the Supervisory Board should be competitive compared to a relevant reference market. This market
is defined using a reference group of companies with a two-tier board structure listed on the AEX Index of Euronext
Amsterdam. To determine the positioning in this group, enterprise value, revenue and number of employees are taken into
account.

143

ASML ANNUAL REPORT 2020Summary of Remuneration Policy Supervisory Board
The table below provides an overview and description of the elements of the Remuneration Policy for the Supervisory
Board.

Remuneration element

Description

Value

Fixed remuneration

Basic membership fee

Chair € 110,000
Vice-Chair € 80,000
Member € 70,000
Chair Audit Committee € 23,000
Member Audit Committee € 15,000
Chair other committees € 18,000
Member other committees € 12,000

Extra allowance for
intercontinental meetings

Extra, fixed allowance paid in connection with additional
time commitment for intercontinental travel

€ 5,000 for each meeting that
involves intercontinental travel

Expenses

Expenses incurred in relation to meeting attendance are
reimbursed.

Depends on level of expenses

In addition, a fixed net cost allowance is paid, covering
certain pre-defined out-of-pocket expenses

€ 1,980 for the Chair of the Supervisory
Board and € 1,380 for the other
Supervisory Board members

Loans and guarantees

No (personal) loans or guarantees or the like will be granted Not applicable

Shares and share ownership No (rights to) shares are granted by way of

Not applicable

Other arrangements

remuneration. Any holding of ASML shares for the
purpose of long-term investment. Any trading activity
is subject to ASML's Insider Trading Rules

(Re)appointment based on Dutch law and ASML's
articles of association. No claw-back, severance
or change in control arrangements are in place

Not applicable

Remuneration Supervisory Board in 2020
Overview of the remuneration awarded to the Supervisory Board members over five years (amounts are in € thousands):

Membership
fees 2020

Committee
fees 2020

Allowances
20201

Proportion
fixed vs.
variable 2020

Total
remuneration
2020

Total
remuneration
2019

Total
remuneration
2018

Total
remuneration
2017

Total
remuneration
2016

G.J. Kleisterlee

110

D.A. Grose

T.L. Kelly

A.P. Aris

R.D. Schwalb

C.M.S. Smits Nusteling

J.M.C. Stork

D.W.A. East

D.M. Durcan

Total

636

210

100:0

157

117

104

100

872

154

133

101

118

—

796

138

115

100

—

661

135

113

—

100

—

593

113

105

—

544

Allowances consist of fixed expense allowances and allowances for intercontinental meetings.

No shares and options have been granted to the current and former members of the Supervisory Board during the last five
years. The remuneration of the Supervisory Board is not directly linked to the performance of ASML.

Overview of the remuneration awarded to the former Supervisory members in 2020, 2019 and 2018 (amounts are in €
thousands):

Membership
fees 2020

Committee fees
2020

Allowances
20201

Proportion fixed
vs. variable 2020

Total
remuneration
2020

Total
remuneration
2019

Total
remuneration
2018

P.F.M. van der Meer Mohr

W.H. Ziebart

Total

—

100:0

—

101

Allowances consist of fixed expense allowances and allowances for intercontinental meetings.

109

144

ASML ANNUAL REPORT 2020

Other information

Total remuneration
The annual remuneration for the members of the Board of Management and Supervisory Board members during 2020
amounts to €22.6 million (2019: €20.1 million).

Other arrangements
No remuneration has been granted and allocated by subsidiaries or other companies whose financials are consolidated by
ASML, since all members of the Board of Management and the Supervisory Board are paid directly by ASML Holding N.V.

No (personal) loans have been granted to the members of the Board of Management or the Supervisory Board and no
guarantees or the like have been granted in favor of any of the members of the Board of Management and the Supervisory
Board.

No severance payments were granted to members of the Board of Management and the Supervisory Board in 2020 and
no variable remuneration has been clawed-back.

Derogation
In 2020 no deviations took place from the decision-making process for the implementation of the Remuneration Policies
for the Board of Management and the Supervisory Board and no temporary deviations took place from the Remuneration
Policies.

Shareholder voting
At the 2020 AGM the 2020 Remuneration Policy for the Board of Management was adopted with 95% of the votes cast in
favor. The Remuneration Policy for the Supervisory Board was also adopted at the 2020 AGM with a majority of 99.47% of
the votes cast in favor of the proposal.

The Remuneration Report for the financial year 2019 was submitted to the 2020 AGM for an advisory vote. 93.78% of the
votes were cast in favor. As a result there are no specific topics to be addressed in this Remuneration Report.

This Remuneration Report will be submitted to the 2021 AGM for an advisory vote in line with Dutch law.

145

ASML ANNUAL REPORT 2020Consolidated
financial
statements

146

ASML ANNUAL REPORT 2020Report of Independent Registered Public Accounting Firm

To the Shareholders and the Supervisory Board

ASML Holding N.V.:

Opinions on the Consolidated Financial
Statements and Internal Control Over
Financial Reporting
We have audited the accompanying consolidated balance
sheets of ASML Holding N.V. and subsidiaries (the
“Company”) as of December 31, 2020 and 2019, the
related consolidated statements of operations,
comprehensive income, shareholders’ equity, and cash
flows for each of the years in the three-year period ended
December 31, 2020, and the related notes (collectively, the
“consolidated financial statements”). We also have audited
the Company’s internal control over financial reporting as
of December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the
Treadway Commission.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December 31,
2020 and 2019, and the results of its operations and its
cash flows for each of the years in the three-year period
ended December 31, 2020, in conformity with U.S.
generally accepted accounting principles. Also in our
opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the
Treadway Commission.

Basis for Opinions
The Company’s management is responsible for these
consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
Management’s report on internal control over financial
reporting. Our responsibility is to express an opinion on the
Company’s consolidated financial statements and an
opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting
firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting
was maintained in all material respects.

Our audits of the consolidated financial statements
included performing procedures to assess the risks of
material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures

included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the
accounting principles used and significant estimates made
by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed
risk. Our audits also included performing such other
procedures as we considered necessary in the
circumstances. We believe that our audits provide a
reasonable basis for our opinions.

Definition and Limitations of Internal
Control Over Financial Reporting
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are
being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on
the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Critical Audit Matter
The critical audit matter communicated below is a matter
arising from the current period audit of the consolidated
financial statements that was communicated or required to
be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments.
The communication of a critical audit matter does not alter
in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.

Complex revenue recognition due to the identification of
distinct performance obligations and allocation of the total
contract consideration.

147

ASML ANNUAL REPORT 2020As disclosed in note 3 to the consolidated financial
statements, net system sales was EUR 10,317 million for
the 12 months ended December 31, 2020. Sales of
systems are usually entered into with customers under
Volume Purchase Agreements (VPAs). These VPAs usually
contain multiple performance obligations, for example
delivery of goods, installation, warranty and training. Once
these performance obligations are identified, the total
contract consideration, including discounts, offer of free
goods or services and credits that can be used towards
future purchases, is allocated to the performance
obligations.

We identified complex revenue recognition relating to the
identification of performance obligations in the contracts as
well as the allocation of the total contract consideration,
including discounts, offer of free goods or services and
credits that can be used towards future purchases, as a
critical audit matter since it is inherently judgmental and
results in complex accounting. As a result, evaluating the
Company’s judgments regarding the identified
performance obligations, including the estimate of the
number of systems to be delivered, and the allocation of
the total contract consideration to these performance
obligations required a high degree of auditor judgment.

The following are the primary procedures we performed to
address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal
controls related to the critical matter. This includes controls
related to VPA contract assessment for the identification of
performance obligations and the allocation of the total
contract consideration to these performance obligations,
and the correct application of these on individual sales
transactions. We evaluated the identification of
performance obligations by inspecting a selection including
significant VPAs and their supporting documentation.
Furthermore, we evaluated a sample of individual sales
transactions by inspecting their related supporting
documentation, we performed sensitivity analysis to
assess the estimated number of systems to be delivered,
assessed changes in estimates throughout the year by
inspecting related supporting documentation, and
performed inquiries with different levels of the organization.
Finally, we checked the accuracy of the Company’s model
used to allocate the contract consideration to the identified
performance obligations.

/s/ KPMG Accountants N.V.

We have served as the Company’s auditor since 2015.

Rotterdam, the Netherlands

February 10, 2021

148

ASML ANNUAL REPORT 2020
Consolidated Statements of Operations

Year ended December 31 (€, in millions, except per share data)

Notes

Net system sales
Net service and field option sales

Total net sales

Cost of system sales
Cost of service and field option sales

Total cost of sales 1

2018

8,259.1
2,684.9

2019

8,996.2
2,823.8

3, 4

10,944.0

11,820.0

(4,141.2)
(1,773.6)

(5,914.8)

(4,676.2)
(1,864.0)

(6,540.2)

2020

10,316.6
3,661.9

13,978.5

(5,169.3)
(2,012.0)

(7,181.3)

Gross profit

5,029.2

5,279.8

6,797.2

Research and development costs
Selling, general and administrative costs

Income from operations

Interest and other, net

Income before income taxes

Income tax expense

Income after income taxes

Profit from equity method investments

Net income

Basic net income per ordinary share

Diluted net income per ordinary share

Number of ordinary shares used in computing per share amounts:

Basic
Diluted

(1,575.9)
(488.0)

2,965.3

(1,968.5)
(520.5)

2,790.8

(2,200.8)
(544.9)

4,051.5

23
23

(28.3)

2,937.0

(351.6)

2,585.4

6.2

2,591.6

6.10

6.08

424.9
426.4

(25.0)

2,765.8

(191.7)

2,574.1

18.2

2,592.3

6.16

6.15

420.8
421.6

(34.9)

4,016.6

(551.5)

3,465.1

88.6

3,553.7

8.49

8.48

418.3
419.1

1. Cost of sales includes amounts with related parties of €1,457.4 million, €1,321.8 million and €1,173.7 million in 2020, 2019, and 2018, respectively.

149

ASML ANNUAL REPORT 2020Consolidated Statements of Comprehensive Income

Year ended December 31 (€, in millions)

Net income

Notes

2018

2,591.6

2019

2,592.3

2020

3,553.7

Other comprehensive income:
Proportionate share of OCI from equity method investments

(4.8)

(19.8)

(1.3)

Foreign currency translation, net of taxes:
Gain (loss) on foreign currency translation and effective portion of hedges

18.2

20.1

(73.8)

Financial instruments, net of taxes:
Gain (loss) on derivative financial instruments
Transfers to net income

Other comprehensive income, net of taxes

Total comprehensive income, net of taxes
Attributable to equity holders

25
25

8.3
11.8

33.5

3.2
(10.7)

(7.2)

2,625.1
2,625.1

2,585.1
2,585.1

(21.0)
(2.3)

(98.4)

3,455.3
3,455.3

150

ASML ANNUAL REPORT 2020Consolidated Balance Sheets

As of December 31 (€, in millions, except share and per share data)
Assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Finance receivables, net
Current tax assets
Contract assets
Inventories, net
Other assets 1
Total current assets

Finance receivables, net
Deferred tax assets
Other assets 2
Equity method investments
Goodwill
Other intangible assets, net
Property, plant and equipment, net
Right-of-use assets - Operating
Right-of-use assets - Finance 3

Total non-current assets

Total assets

Liabilities and shareholders’ equity
Accounts payable 4
Accrued and other liabilities
Current tax liabilities
Current portion of long-term debt
Contract liabilities

Total current liabilities

Long-term debt
Deferred and other income tax liabilities
Contract liabilities
Accrued and other liabilities

Total non-current liabilities

Total liabilities

Ordinary shares; €0.09 nominal value;

699,999,000 shares authorized at December 31, 2020; (2019: 699,999,000)

416,514,034 issued and outstanding at December 31, 2020; (2019: 419,810,706)

Issued and outstanding shares

Share premium

Treasury shares at cost

Retained earnings
Accumulated other comprehensive income

Total shareholders’ equity

Notes

2019

2020

5
5
6
7
21
3
8
9

7
21
9
10
11
12
13
14
14

15
21
16
3

16
21
3
15

3,532.3
1,185.8
1,786.8
564.5
178.7
231.0
3,809.2
842.8
12,131.1

421.1
445.3
830.4
833.0
4,541.1
1,104.4
1,999.3
205.4
118.5

6,049.4
1,302.2
1,310.3
1,710.5
67.3
119.2
4,569.4
801.7
15,930.0

400.5
671.5
951.5
820.7
4,629.1
1,048.9
2,470.3
180.1
164.8

10,498.5

11,337.4

22,629.6

27,267.4

1,062.2
1,039.9
65.6
—
2,526.4

4,694.1

3,108.3
234.4
1,759.6
241.0

5,343.3

1,377.9
1,146.0
110.0
15.4
3,954.2

6,603.5

4,662.8
238.3
1,639.9
257.5

6,798.5

10,037.4

13,402.0

38.2

3,772.0

(1,019.6)

9,523.8
277.8

12,592.2

37.6

3,780.1

(863.2)

10,731.5
179.4

13,865.4

Total liabilities and shareholders’ equity

22,629.6

27,267.4

1. Other assets - current includes amounts with related parties of €265.8 million and €215.2 million at December 31, 2020 and 2019, respectively.
2. Other assets - non-current includes amounts with related parties of €668.0 million and €585.3 million at December 31, 2020 and 2019, respectively.
3. Right-of-use assets - Finance includes amounts with related parties of €149.9 million and €107.6 million at December 31, 2020 and 2019, respectively.
4. Accounts Payable includes amounts with related parties of €110.9 million and €127.4 million at December 31, 2020 and 2019, respectively.

151

ASML ANNUAL REPORT 2020Consolidated Statements of Shareholders’ Equity

(€, in millions)
Balance at January 1, 2018
Components of comprehensive income:
Net income

Share of OCI from equity method investments
Foreign currency translation and effective
portion of hedges
Gain (loss) on financial instruments

Total comprehensive income
Purchase of treasury shares

Share-based payments

Issuance of shares
Dividend paid

Balance at December 31, 2018

Components of comprehensive income:
Net income

Share of OCI from equity method investments
Foreign currency translation and effective
portion of hedges
Gain (loss) on financial instruments

Total comprehensive income
Purchase of treasury shares

Cancellation of treasury shares

Share-based payments

Issuance of shares
Dividend paid

Balance at December 31, 2019

Components of comprehensive income:
Net income

Share of OCI from equity method investments
Foreign currency translation and effective
portion of hedges
Gain (loss) on financial instruments

Total comprehensive income
Purchase of treasury shares

Cancellation of treasury shares

Share-based payments

Issuance of shares
Dividend paid

Issued and
Outstanding Shares

Number
427.4

Amount
38.8

Share
Premium
3,732.5

Treasury
Shares at
Cost
(557.9)

Retained
Earnings
7,226.2

Notes

—

(7.0)

—

0.7
—

—

(0.3)

—

0.1
—

—

— 2,591.6

—

— 2,591.6

— (1,145.9)

—

82.0

(22.8)
— (597.1)

46.3

(37.5)
—

OCI1
251.5

Total
10,691.1

— 2,591.6
(4.8)

(4.8)

18.2

20.1

18.2

20.1

33.5

2,625.1
— (1,146.2)
—
46.3

—
21.8
— (597.1)

421.1

38.6

3,741.3 (1,621.8)

9,197.9

285.0

11,641.0

—

(1.9)

—

0.6
—

—

(0.5)

—

0.1
—

—

— 2,592.3

—

— 2,592.3

— (410.0)

—

902.3

(901.8)

74.6

(43.9)
—

—

109.9

(38.9)
— (1,325.7)

— 2,592.3
(19.8)

(19.8)

20.1

(7.5)

20.1

(7.5)

(7.2)

2,585.1
— (410.0)
—
—

—

74.6

—
27.2
— (1,325.7)

419.8

38.2

3,772.0 (1,019.6)

9,523.8

277.8

12,592.2

—

—
(3.9)

—

0.6
—

—

—
—

(0.7)

—

0.1
—

—

— 3,553.7

—

—
— (1,207.5)

— 3,553.7
—

— 1,262.3 (1,261.6)

— 3,553.7
(1.3)

(1.3)

(73.8)

(23.3)

(98.4)

(23.3)
3,455.3
— (1,207.5)
—
—

—

53.9

101.6

(18.0)
— (1,066.4)

—
37.9
— (1,066.4)
13,865.4

179.4

53.9

(45.8)
—

Balance at December 31, 2020

416.5

37.6

3,780.1

(863.2)

10,731.5

1. As of December 31, 2020, accumulated OCI consists of €(26.9) million loss relating to our proportionate share of other comprehensive income from equity method
investments (2019: €(25.6) million loss; 2018: €(5.8) million loss), €229.1 million relating to foreign currency translation gain (2019: €302.4 million gain; 2018: €282.3
million gain) and €(22.3) million relating to unrealized losses on financial instruments (2019: €1.0 million gains; 2018: €8.5 million gains).

152

ASML ANNUAL REPORT 2020Consolidated Statements of Cash Flows

Year ended December 31 (€, in millions)

Notes

2018

2019

2020

Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation and amortization 1
Impairment and loss on disposal

Share-based compensation expense

Inventory reserves

Deferred tax expense (benefit)
Equity method investments 2
Changes in assets and liabilities:

Accounts receivable

Finance receivables

Inventories

Other assets

Accrued and other liabilities

Accounts payable

Current tax assets and liabilities
Contract assets and liabilities

Net cash provided by operating activities

Cash Flows from Investing Activities
Purchase of property, plant and equipment 3, 4
Purchase of intangible assets

Purchase of short-term investments

Maturity of short-term investments

Cash from (used for) derivative financial instruments

Loans issued and other investing
Acquisition of subsidiaries (net of cash acquired)

Net cash used in investing activities

Cash Flows from Financing Activities
Dividend paid

Purchase of treasury shares

Net proceeds from issuance of shares

Net proceeds from issuance of notes, net of issuance costs
Repayment of debt and finance lease obligations

Net cash used in financing activities

Net cash flows

Effect of changes in exchange rates on cash

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

Supplemental Disclosures of Cash Flow Information:
Non-cash portion of PP&E in investing activities

Interest received

Interest paid
Income taxes paid, net of refunds

12, 13

18, 20

21
3

9
2

16
14, 16

2,591.6

2,592.3

3,553.7

422.7

19.0

46.3

218.2

(238.5)

61.6

212.4

(664.9)

(515.7)

(404.0)

237.7

97.9

13.1
975.3

3,072.7

(574.0)

(35.5)

(918.1)

1,034.1

(2.4)

4.4
—

448.5

7.8

74.6

221.5

(236.8)

56.9

490.8

5.5

53.9

192.4

(211.3)

11.0

(255.0)

507.5

(95.3)

(1,125.4)

(404.7)

(199.1)

82.1

(12.1)

(202.6)
1,198.3

3,276.4

(706.7)

(75.1)

47.5

334.3

131.5
1,418.0

4,627.6

(766.6)

(119.3)

(962.0)

(38.8)

(1,291.5)

(1,475.5)

1,019.0

1,359.1

—

0.9
—

—

(12.2)
(222.8)

(491.5)

(1,157.5)

(1,352.2)

(597.1)

(1,325.7)

(1,146.2)

(410.0)

(1,066.4)

(1,207.5)

21.8

—
(2.8)

27.2

—
(3.8)

(1,724.3)

(1,712.3)

856.9

5.2

862.1
2,259.0

3,121.1

24.2

37.3

(61.0)
(554.4)

406.6

4.6

411.2
3,121.1

3,532.3

85.9

38.9

(59.9)
(678.7)

37.9

1,486.3
(3.3)

(753.0)

2,522.4

(5.3)

2,517.1
3,532.3

6,049.4

(46.9)

32.1

(64.1)
(650.2)

1. Depreciation and amortization includes depreciation of property, plant and equipment, amortization of intangible assets, amortization of underwriting commissions and

discount related to the bonds and credit facility.

2. Equity method investments includes the profit and dividends received from our equity method investment, as well as the capitalization of R&D and supply chain

support funding. The dividend received is a cash inflow in 2020 of €128.1 million (2019: €99.9 million, 2018: €89.2 million).
In 2020, an amount of €203.7 million (2019: €184.1 million, 2018: €191.6 million) of the purchase of property, plant and equipment relates to funding provided for
facilities and tooling to our equity method investment, which is initially recognized as part of the other assets.
In 2018, an amount of €54.7 million of land and buildings was reclassified to other assets.

153

ASML ANNUAL REPORT 2020Notes to the Consolidated Financial Statements

1. General information / summary of general accounting policies

ASML, with its corporate headquarters in Veldhoven, the Netherlands, is engaged in the development, production,
marketing, selling and servicing of advanced semiconductor equipment. ASML’s principal operations are in the
Netherlands, the US and Asia.

Our shares are listed for trading in the form of registered shares on Euronext Amsterdam and on NASDAQ. The principal
trading market of our ordinary shares is Euronext Amsterdam.

Basis of preparation
The accompanying Consolidated Financial Statements are stated in millions of euros unless indicated otherwise.

The accompanying Consolidated Financial Statements have been prepared in conformity with US GAAP.

Use of estimates
The preparation of our Consolidated Financial Statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities on the balance sheet dates, and the reported amounts of net sales and costs during the reported
periods. The inputs into our estimates and assumptions consider the economic implications of COVID-19 on our critical
accounting estimates. We believe that the critical accounting estimates and assumptions are appropriate in light of the
increased uncertainties surrounding the severity and duration of the impact of COVID-19. ASML will continue to monitor
the impacts of COVID-19 and incorporate them into accounting estimates. Actual results could differ from those
estimates. We evaluate our estimates continuously and we base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these
estimates if the assumptions prove incorrect. To the extent there are material differences between actual results and these
estimates, our future results could be materially and adversely affected. We believe that the accounting policies described
below require us to make significant judgments and estimates in the preparation of our Consolidated Financial
Statements. Our most critical accounting estimates include:

• Revenue recognition, including lease accounting
• Inventory reserves
• Unrecognized tax benefits
• Contingencies and litigation
• Evaluation of long-lived assets for impairment

Principles of consolidation
The Consolidated Financial Statements include the Financial Statements of ASML Holding N.V. and all of its subsidiaries.
Subsidiaries are all entities over which ASML controls the financial and operating activities, generally accompanying a
shareholding of more than 50.0% of the outstanding voting rights. Subsidiaries are fully consolidated from the date on
which control is obtained by ASML. The Company consolidates Berliner Glas using a one-quarter lag, to allow for the
timely preparation of consolidated financial information. There were no significant intervening events during this lag period
that materially affected the Consolidated Financial Statements. All intercompany transactions, balances and unrealized
results on transactions with subsidiaries are eliminated. We also assess if we are the primary beneficiary of, and thus
would consolidate, any variable interest entity.

Foreign currency translation
The financial information for subsidiaries outside the euro-zone is measured using a mix of local currencies or the euro as
the functional currency. The Financial Statements of those foreign subsidiaries are translated into euros in the preparation
of ASML’s Consolidated Financial Statements. Assets and liabilities are translated into euros at the exchange rate on the
respective balance sheet dates, with the resulting translation adjustments are recorded directly in shareholders’ equity.
Income and costs are translated into euros based on the average exchange rate for the corresponding period.

New US GAAP accounting pronouncements adopted
During 2020, there were no new US GAAP accounting pronouncements that were adopted which have a material impact
on our Consolidated Financial Statements.

New US GAAP accounting pronouncements issued but not adopted
For the year ended December 31, 2020, there are no new US GAAP accounting pronouncements which have not yet been
adopted and are expected to have a material impact on our Consolidated Financial Statements.

154

ASML ANNUAL REPORT 20202. Business Combinations

Accounting Policy
Acquisitions of subsidiaries are included on the basis of the acquisition method. The cost of acquisition is measured
based on the consideration transferred at fair value, the fair value of identifiable assets distributed and the fair value
of liabilities incurred or assumed at the acquisition date (i.e. the date which we obtain control). Goodwill is capitalized
as the excess of the costs of an acquired subsidiary, net of the amounts assigned to identifiable assets acquired and
liabilities incurred or assumed. Acquisition-related costs are expensed when incurred in the period they arise or the
service is received.

On October 30, 2020, we concluded the acquisition of Berliner Glas and obtained control through acquiring 100% of the
issued share capital of Berliner Glas, for a total consideration of €257.1 million, of which €3.9 million relates to contingent
consideration to be paid in cash in 2021.

Berliner Glas is one of the world’s leading providers of optical key components, assemblies and systems, high-quality
refined technical glass as well as glass touch assemblies. Berliner Glas is headquartered in Berlin and has facilities
at five locations throughout Germany, Switzerland and China.

With the acquisition of Berliner Glas, we acquired technical capabilities that are critical to secure the future roadmap for
our EUV and DUV products and will provide increased value to ASML's customers.

The following table summarizes the major classes of consideration transferred, and the recognized amounts of the fair
value of the identifiable assets distributed and the fair value of the liabilities incurred or assumed at the acquisition date.

€, in millions
Cash and cash equivalents
Accounts receivable, net

Inventories, net

Other assets

Deferred tax assets

Intangible assets, net

Property, plant and equipment, net

Right of use assets - Finance

Assets acquired

Accounts payable

Long-term debt, current and non-current

Deferred and other tax liabilities

Accrued and other liabilities, current and non-current
Other liabilities assumed

Liabilities assumed

Total net identifiable assets

Total consideration transferred

Goodwill on acquisition

October 30, 2020
30.3
21.3

83.4

8.2

4.6

32.3

125.1

6.9

312.1

13.1

55.5

16.5

40.2
17.6

142.9

169.2

257.1

87.9

The gross contractual amount for accounts receivable due is €21.6 million, of which €0.3 million is expected to be
uncollectible.

The Accrued and other liabilities include a net pension liability of €14.8 million for a defined benefit pension plan in
Switzerland. For details see Note 19 Employee benefits.

Prior to the acquisition, supply and investment arrangements existed between Berliner Glas and ASML. These pre-existing
relationships were effectively settled as a result of the acquisition. We determined that the supply arrangements as well as
the investment arrangement were at current market terms and therefore no gain or loss was recognized. In addition, the
consideration has not been adjusted for the settlement of the pre-existing relationships between ASML and Berliner Glas.
The total net identifiable assets of €169.2 million include a net liability to ASML of €9.6 million, which is eliminated in the
Consolidated Balance Sheets.

155

ASML ANNUAL REPORT 2020The majority of the goodwill arising on the acquisition of Berliner Glas is attributable to the fact that the acquisition will help
us achieve our strategic objective to secure the ramp-up and roll-out of future lithography systems.

All goodwill has been allocated to the ASML reporting unit. None of the goodwill recognized is expected to be deductible
for income tax purposes.

The operating results of Berliner Glas are recognized in the Company's Consolidated Statements of Operations using a
one-quarter time lag. Therefore, the Consolidated Statements of Operations for the year ended December 31, 2020 do not
include any operating results of Berliner Glas for the period between the date of acquisition and December 31, 2020.
Additionally, Berliner Glas balance sheet information included in the Company’s Consolidated Balance Sheets as of
December 31, 2020 is as of the acquisition date.

In 2020, we incurred €5.4 million transaction costs relating to the acquisition of Berliner Glas. These costs are included in
SG&A.

The following unaudited pro forma summary presents estimated consolidated information of ASML as if the Berliner Glas
acquisition had occurred on January 1, 2019. These amounts have been calculated after applying our accounting policies
and adjusting the results of Berliner Glas to reflect the charges and benefits assuming the fair value adjustments had been
applied from January 1, 2019 with the consequential tax effects.

Pro forma year ended December 31 (€, in millions)

Total net sales
Net income 1,2

Unaudited
2019

11,952.3
2,572.9

Unaudited
2020

14,107.2
3,567.2

1. Pro forma 2019 net income was adjusted to include €18.6 million of non-recurring costs related to the fair value adjustments to acquisition date inventory, €2.3 million

of amortization charges related to the fair value adjustments to acquisition date intangibles as well as €5.4 million of acquisition-related costs incurred in 2020.

2. Pro forma 2020 net income was adjusted to exclude €5.4 million of non-recurring acquisition-related costs incurred and to include €2.3 million of amortization charges

related to the fair value adjustments to acquisition date intangibles.

3. Revenue from contracts with customers

Accounting Policy
We measure revenue based on the consideration specified in the contracts with our customers, adjusted for any
significant financing components, and excluding any taxes collected on behalf of third parties. We recognize revenue
when we satisfy a performance obligation by transferring control over a good or service to our customer. We bill our
customers for, and recognize as revenue, any charges for shipping and handling costs.

Depending on the contract, we obtain a right to payment for our systems through a combination of either a
reservation of a production slot or upon delivery of our systems, with the remaining portion upon final acceptance of
our systems. Right to payment for our service and field options occurs upon shipment or completion of the service
unless described otherwise. The payment term is typically due 15-45 days after the aforementioned events. Our
contracts typically include cancellation penalties that provide economic protection from the risk of customer
cancellation. The costs related to our sales are recognized as cost of sales.

We generate revenue from the sale of integrated patterning solutions for the semiconductor industry, which mainly
consist of systems, system related options and upgrades, other holistic lithography solutions and customer services.
The main portion of our net sales is derived from volume purchase agreements with our customers that have
multiple performance obligations, which mainly include the sale of our systems, system related options, installation,
training and extended and enhanced (optic) warranty. In our volume purchase agreements we offer customers
discounts in the normal course of sales negotiations. As part of these volume purchases agreements, we may also
offer free goods or services and credits that can be used towards future purchases. Occasionally, systems, with the
related extended and enhanced (optic) warranties, installation and training services, are ordered individually. Our
sales agreements do not include a right of return for any reason other than not meeting the agreed upon
specifications.

For bundled packages, we account for individual goods and services as separate and distinct performance
obligations, including the free or discounted goods or services, if a product or service is separately identifiable from
other items in the bundled package and if a customer can benefit from it on its own or with other resources that are
readily available to the customer.

The consideration paid for our performance obligations is typically fixed, unless specifically noted in the nature of the
performance obligations. Most of our volume purchase agreements with customers contain some component of
variable consideration, typically dependent on the final volume of systems ordered by the customer. Variable
consideration is estimated at contract inception for each performance obligation based on communications with the

156

ASML ANNUAL REPORT 2020customer to understand their requirements and roadmap. We subsequently updated each quarter, using either the
expected value method or most likely amount method, whichever is determined to best predict the consideration to
be collected from the customer. Variable consideration is only included in the transaction price if it is considered
probable that a significant revenue reversal will not occur. In certain scenarios when entering into a volume purchase
agreement, free goods or services are provided directly or through a voucher that can be used on future contracts.
Consideration from the contract will be allocated to these performance obligations and revenue recognized when
control transfers based on the nature of the goods or services provided.

Some of our contracts require our customers to pay a down payment on systems to be shipped. We do not record a
significant financing component for down payments as the timing difference between the promised consideration
and the cash selling price arises from other reasons than financing.

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 determined based on other stand-alone sales
that are directly observable, when possible. However, for the majority of our performance obligations these are not
available. If no directly observable evidence is available, the stand-alone selling price is determined using the
adjusted market assessment approach, which requires judgment.

Options to buy goods or services in addition to the purchase commitment are assessed to determine if they provide
a material right to the customer that they would not have received if they had not entered into this contract. Each
option to buy additional goods or services provided at a discount from the stand-alone selling price is considered a
material right. The discount offered from the stand-alone selling price will be allocated from the consideration of the
other goods and services in the contract if it is determined the customer will exercise the option to buy, adjusted for
the likelihood. Revenue will be recognized in line with the nature of the related goods or services. If it is subsequently
determined the customer will not exercise the option to buy, or the option expires, revenue will be recognized.

Occasionally we may enter into a bill-and-hold transaction where we invoice a customer for a system that is ready
for delivery but not shipped to the customer until a later date, based on customer’s request. Transfer of control is
determined to have occurred only when there is a substantive reason for the arrangement, the system is separately
identified as belonging to the customer, the good has been accepted by the customer and is ready for delivery, and
we do not have the ability to direct the use of the system.

We generate revenue from lessor agreements, which we classify as a sales-type lease when the lease meets any of
the following criteria at lease commencement:
• The lease transfers ownership of the underlying asset to the lessee by the end of the lease term;
• The lease grants the lessee an option to purchase the underlying asset, that the lessee is reasonably certain to

exercise;

• The lease term is for the major part of the remaining economic life of the underlying asset. However, if the

commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be
used for purposes of classifying the lease;

• The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not

already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset;
or

• The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at

the end of the lease term.

Leases where substantially all the risks and rewards incidental to ownership of an asset are transferred to the lessee
are classified as sales-type lease arrangements. If we have offered the customer a sales-type lease arrangement,
revenue is recognized at commencement of the lease term. The difference between the gross finance receivable
and the present value of the minimum lease payments is initially recognized as unearned interest and presented
as a deduction to the gross finance receivable. Interest income is recognized in the Consolidated Statements of
Operations over the term of the lease contract using the effective interest method.

Leases whereby all the risks and rewards incidental to ownership are not transferred to the lessee are classified
as operating lease arrangements. If we have offered the customer an operating lease arrangement, the system
is included in property, plant and equipment upon commencement of the lease. Revenue from operating lease
arrangements is recognized in the Consolidated Statements of Operations on a straight-line basis over the term of
the lease contract.

157

ASML ANNUAL REPORT 2020Goods or services

Nature, timing of satisfying the performance obligations, and significant payment terms

New systems (established
technologies)

Used systems

Field upgrades and
options (system
enhancements)

New systems sales include i-line, KrF, ArF, ArFi and EUV related systems, along with the related factory
options ordered with the base system, as well as metrology and inspection systems.
Prior to shipment, the majority of our systems undergo a Factory Acceptance Test (FAT) in our cleanroom
facilities, effectively replicating the operating conditions that will be present on the customer’s site, in
order to verify whether the system meets its standard specifications and any additional technical and
performance criteria agreed with the customer. A system is shipped only after all contractual specifications
are met or discrepancies from agreed upon specifications are waived and customer sign-off is received for
delivery. Each system’s performance is re-tested through a Site Acceptance Test (SAT) after installation at
the customer site. We have never failed to successfully complete installation of a system at a customer’s
premises; therefore, acceptance at FAT is considered to be proven for established technologies with a
history of successful customer acceptances at SAT (equal or better than FAT).

New system sales do not meet the requirements for over time revenue recognition because our customers
do not simultaneously receive and or consume the benefits provided by our performance or control the
asset throughout any stage of our production process, as well as the systems are considered to have
alternative use.

Transfer of control of a system undergoing FAT, and recognition of revenue related to this system, will
occur upon delivery of the system.

Transfer of control of a system not undergoing a FAT, and recognition of revenue related to this system, will
occur upon customer acceptance of the system at SAT.

We have no repurchase commitments in our general sales terms and conditions, however from time to
time we repurchase systems that we have manufactured and sold and, following refurbishment, will resell
to other customers. This repurchase decision is mainly driven by market demand expressed by other
customers and less frequently by explicit or implicit contractual arrangements relating to the initial sale. We
consider reasonable offers from any vendor, including customers, to repurchase used systems that we can
refurbish, resell, and install as part of our normal business operations.

Transfer of control of a used system, and recognition of revenue, follow the same logic as for our “New
systems (established technologies)”.

Field upgrades and options mainly relate to goods and services that are delivered for systems already
installed in the customer factories. Certain upgrades require significant installation efforts, enhancing
an asset the customer controls, therefore resulting in transfer of control over the period of installation,
measured using the cost incurred method which is estimated using labor hours, as this best depicts
the satisfaction of our obligation in transferring control. For the options and other upgrades for which
the customer receives and consumes the benefit at the moment of delivery, the transfer of control and
recognition of revenue will occur upon delivery.

As long as we are not able to make a reliable estimate of the total efforts needed to complete the upgrade,
we only recognize revenue to cover costs incurred. Margin will be realized at the earlier of us being able to
make a reliable estimate or completion of the upgrade.

New product introduction We sell new products and services, which are evolutions of our existing technologies. If installation
is determined not to be a separate performance or if there is not a sufficient established history of
acceptance on FAT, the product is determined to be a “new product introduction”.

Installation

New product introductions are typically newly developed options to be used within our systems. Transfer
of control and revenue recognition for new product introductions occurs upon after successful installation
and customer acceptance at SAT. Once there is an established history of successful installation and
customer acceptance, revenue will be recognized consistent with other systems and goods after transfer
of control.

Installation is provided within the selling price of a system. Installation is considered to be distinct as it
does not significantly modify the system being purchased and the customer or a third party could be
capable of performing the installation themselves, if desired. Transfer of control takes place over the period
of installation from delivery through SAT, measured on a straight-line basis, as our performance is satisfied
evenly over this period of time.

As long as we are not able to make a reliable estimate of the total efforts needed to complete the
installation, we only recognize revenue to cover costs incurred. Margin will be realized at the earlier of us
being able to make a reliable estimate or installation completion.

158

ASML ANNUAL REPORT 2020
Goods or services

Nature, timing of satisfying the performance obligations, and significant payment terms

Warranties

Time-based licenses and
related service

We provide standard warranty coverage on our systems for 12 months and on certain optic parts for 60
months, providing labor and non-consumable parts necessary to repair our systems during these warranty
periods. These standard warranties cannot be purchased and do not provide a service in addition to
the general assurance the system will perform as promised. As a result, no revenue is allocated to these
standard warranties.

Both the extended and enhanced (optic) warranties on our systems are accounted for as a separate
performance obligation, with transfer of control taking place over the warranty period, measured on a
straight-line basis, as this is a stand-ready obligation.

Time-based licenses relate to software licenses and the related service which are sold for a period of
time. The licenses and the related service are not considered to be individually distinct as the support
services are integral to the customer’s ability to continue to use the software license in the rapidly changing
technological environment. The transfer of control takes place over the license term, measured on a
straight-line basis, as our performance is satisfied evenly over this period of time. Payments are made in
installments throughout the license term.

Application projects

Application projects are node transition and consulting projects which at times may be provided as free
service within a volume purchase agreement. Measuring satisfaction of this performance obligation is
performed through an input method based on the labor hours expended relative to the estimated total
labor hours as this best depicts the transfer of control of these kind of services.

Service contracts

As long as we are not able to make a reliable estimate of the total efforts needed to complete these kind
of projects, we only recognize revenue to cover costs incurred. Margin will be realized at the earlier of us
being able to make a reliable estimate or project completion.

Service contracts are entered into with our customers to support our systems used in their ongoing
operations during the systems lifecycle, typically in the form of full-service agreements, limited manpower
agreements, other labor agreements, parts availability or parts usage agreements. These services are
typically for a specified period of time. Control transfers over this period of time, measured on a straight-
line basis, as these are stand-ready obligations, with an exception for the labor hour pool service contracts
for which we recognize revenue in line with invoicing, using the practical expedient in ASC 606-10-55-18.
Invoicing is typically performed monthly or quarterly throughout the service period.

Billable parts and labor

Billable labor represents maintenance services to our systems installed in the customer’s factories while
in operation, through purchase orders from our customer. Control over these services is transferred to the
customer upon receipt of customer sign-off.

Billable parts represent spare parts including optical components relating to our systems installed in the
customer’s factories while in operation, through purchase orders from our customer.

Billable parts can be:

• Sold as direct spare parts, for which control transfers upon delivery; or

• Sold as part of maintenance services, where control transfers upon receipt of customer sign-off.

Field projects (relocations) Field projects represent mainly relocation services. Measuring satisfaction of this performance obligation
is performed through an input method based on the labor hours expended relative to the estimated total
labor hours as this best depicts the transfer of control of our service.

OnPulse Maintenance

OnPulse maintenance services are provided over a specified period of time on our light source systems.
Payment is determined by the amount of pulses counted from each light source system, which is variable.
Invoicing is monthly based on the pulses counted. Revenue is recognized in line with invoicing using the
practical expedient in ASC 606-10-55-18.

159

ASML ANNUAL REPORT 2020Disaggregation of revenue
Our revenue from contracts with customers, on a disaggregated basis, aligns with our reportable segment disclosures
with the addition of disaggregation of net system sales per technology and per end-use.

Net system sales per technology were as follows:

Year ended December 31

2020
EUV
ArFi

ArF dry

KrF

I-line
Metrology & Inspection

Total

2019
EUV

ArFi

ArF dry

KrF

I-line
Metrology & Inspection

Total

2018
EUV

ArFi

ArF dry

KrF

I-line
Metrology & Inspection

Total

Net system sales
in units

Net system sales
in € millions

103

34
137

395

34
115

344

26
114

338

4,463.8

3,917.0

427.0

1,012.3

146.4
350.1

10,316.6

2,799.7

4,707.7

401.2

679.7

133.5
274.4

8,996.2

1,880.1

4,806.9

274.3

860.1

98.6
339.1

8,259.1

Net system sales per end-use were as follows:

Year ended December 31

Net system sales
in units

Net system sales
in € millions

2020
Logic
Memory

Total

2019
Logic
Memory

Total

2018
Logic
Memory

Total

260
135

395

238
106

344

125
213

338

7,393.0
2,923.6

10,316.6

6,565.3
2,430.9

8,996.2

3,713.7
4,545.4

8,259.1

160

ASML ANNUAL REPORT 2020Contract assets and liabilities
The contract assets primarily relate to our rights to a consideration for goods or services delivered but not invoiced at the
reporting date. The contract assets are transferred to the receivables when the receivables become unconditional. The
contract liabilities primarily relate to remaining performance obligations for which consideration has been received such as
down payments received for systems to be delivered, as well as deferred revenue from system shipments, based on the
allocation of the consideration to the related performance obligations in the contract. This deferred revenue mainly
consists of extended and enhanced warranties, installation and free goods or services provided as part of a volume
purchase agreement.

The majority of our customer contracts contain both asset and liability positions. At the end of each reporting period,
these positions are netted on a contract basis and presented as either an asset or a liability in the Consolidated Balance
Sheets. Consequently, a contract balance can change between periods from a net contract asset balance to a net
contract liability balance in the balance sheet.

Significant changes in the contract assets and the contract liabilities balances during the periods are as follows.

Year ended December 31 (€, in millions)

2019

2020

Contract
Assets

Contract
Liabilities

Contract
Assets

Contract
Liabilities

Balance at beginning of the year
Transferred from contract assets to accounts receivables

Revenue recognized during the year ending in contract assets

Revenue recognized that was included in contract liabilities
Changes as a result of cumulative catch-up adjustments arising from
changes in estimates
Remaining performance obligations for which considerations have been
received
Transfer between contract assets and liabilities

Total

95.9
(167.4)

68.7

—

233.8

231.0

2,953.2
—

—

(1,528.4)

(133.4)

2,760.8

233.8

4,286.0

231.0
(192.2)

83.4

—

(3.0)

119.2

4,286.0
—

—

(2,428.4)

(41.9)

3,781.4

(3.0)

5,594.1

The increase in the net contract liability to €5,474.9 million as of December 31, 2020 compared to €4,055.0 million as
of December 31, 2019 is mainly driven by the recognition of down payments for systems which will be shipped in the
future. Cumulative catch-up adjustments recognized in our current year revenue are due to updated estimates for system
volume, discounts and credits included in our volume purchase agreements.

Remaining performance obligations
Our customers generally commit to purchase systems, service, or field options through separate sales orders and service
contracts. Typically the terms and conditions of these sales orders come from volume purchase agreements with our
customers which can cover up to 5 years. The revenues for each committed performance obligation are estimated based
on the terms and conditions agreed through the volume purchase agreements.

When revenues will be recognized is mainly dependent on when systems are shipped or installed, as well as when service
projects and field upgrades are performed and completed. All of which is estimated based on contract terms and
communication with our customers, including the customer facility readiness to take delivery of our goods or services. The
volume purchase agreements may be subject to modifications, impacting the amount and timing of revenue recognition
for the anticipated revenues.

As of December 31, 2020 the remaining performance obligations amount to €15.1 billion (December 31, 2019: €13.2
billion). We estimate 76% (December 31, 2019: 55%) of these anticipated revenues are expected to be recognized during
the next 12 months. The remaining anticipated revenues mainly include orders related to EUV system sales and our next-
generation EUV platform, High-NA, which are planned to be shipped in 2022 or later.

4. Segment disclosure

ASML has one reportable segment, for the development, production, marketing, sales, upgrading and servicing of
advanced semiconductor equipment systems, consisting of lithography, metrology and inspection systems. Its operating
results are regularly reviewed by the Chief Operating Decision Maker in order to make decisions about resource allocation
and assess performance.

Management reporting includes net system sales figures of new and used systems, sales per technology and sales per
end-use. For the sales per technology and end-use, see Note 3 Revenue from contracts with customers.

161

ASML ANNUAL REPORT 2020Net system sales for new and used systems were as follows:

Year ended December 31 (€, in millions)
New systems
Used systems

Net system sales

2018
8,115.6
143.5

8,259.1

2019
8,807.1
189.1

8,996.2

2020
10,160.8
155.8

10,316.6

For geographical reporting, total net sales are attributed to the geographic location in which the customers’ facilities are
located. Long-lived assets are attributed to the geographic location in which these assets are located.

Total net sales and long-lived assets (consisting of property, plant and equipment) by geographic region were as follows:

Year ended December 31 (€, in millions)
2020
Japan
South Korea

Singapore

Taiwan

China

Rest of Asia

Netherlands

EMEA
United States

Total

2019
Japan

South Korea

Singapore

Taiwan

China

Rest of Asia

Netherlands

EMEA
United States

Total

2018
Japan

South Korea

Singapore

Taiwan

China
Rest of Asia

Netherlands

EMEA
United States

Total

Total net sales

Long-lived assets

542.8

4,151.6

84.9

4,731.3

2,324.4

1.6

483.3
1,657.0

13,978.5

463.2

2,202.1

120.0

5,357.0

1,377.7

2.6

314.6
1,980.2

11,820.0

567.6

3,725.1

222.5

1,989.5

1,842.8
1.9

1.2

631.7
1,961.7

10,944.0

8.3

34.1

2.1

164.3

17.8

0.4

1,625.2

129.2
488.9

2,470.3

6.5

24.1

1.6

131.6

21.3

0.5

1,396.0

4.3
413.4

1,999.3

8.2

24.6

1.1

96.5

16.2
0.4

1,113.8

5.1
323.6

1,589.5

In 2019 and 2020, 3 customers exceed more than 10% of total net sales, in 2020 totaling €9,946.5 million, or 71.2%, of
total net sales (2019: €8,018.1 million, or 67.8%). In 2018, 4 customers exceed more than 10% of total net sales, totaling
€7,931.4 million, or 72.5%. Our three largest customers (based on total net sales) accounted for €2,757.0 million, or
80.1%, of accounts receivable and finance receivables at December 31, 2020, compared with €2,191.8 million, or 77.2%,
at December 31, 2019.

Substantially all of our sales were export sales in 2020, 2019 and 2018.

162

ASML ANNUAL REPORT 2020
The increase in total net sales of €2,158.5 million, or 18.3%, to €13,978.5 million in 2020 from €11,820.0 million in 2019
(2018: €10,944.0 million) is driven by higher volumes in EUV, higher average selling prices in EUV for the NXE:3400C
relative to the NXE:3400B and growth in our service and field options business. The Logic sector continued to be strong in
2020, and was the largest consumer of our most advanced EUV systems as well. Memory demand picked up in 2020
after a decline in 2019. South Korea saw the largest geographic sales growth in support of expanding capacity in Foundry
and DRAM production lines.

In Q4 2020, 2 systems have been moved into storage on our premises after completion, through a long-term storage
arrangement with a customer. For both systems we have recognized revenue as a bill-and-hold transaction since control
has transferred to the customer.

5. Cash and cash equivalents and short-term investments

Accounting Policy
Cash and cash equivalents consist primarily of highly liquid investments, such as bank deposits, deposits with
governments and government related bodies, money market funds and bank accounts readily convertible to known
amounts of cash with insignificant interest rate risk and original maturities to the entity holding the investments of 3
months or less at the date of acquisition.

Investments with original maturities to the entity holding the investments longer than 3 months and 1 year or less at
the date of acquisition are presented as short-term investments. Other than temporary fair value changes in these
investments are recognized in the Consolidated Statements of Operations. Short-term investments have insignificant
interest rate risk.

Cash and cash equivalents and short-term investments consist of the following:

Year ended December 31 (€, in millions)
Deposits with financial institutions, governments and government related bodies
Investments in money market funds
Bank accounts

Cash and cash equivalents

Deposits with financial institutions, governments and government related bodies

Short-term investments

2019
434.8
2,139.7
957.8

3,532.3

1,185.8

2020
1,545.3
3,841.9
662.2

6,049.4

1,302.2

The cash and cash equivalents and short term investments increased €2.6 billion mainly driven by an increase in Net
income, an increase in down payments from customers and proceeds from the issuance of notes.

The deposits with financial institutions, governments and government related bodies and investments in money market
funds have an investment grade credit rating. Our cash and cash equivalents are predominantly denominated in euros and
partly in US dollars.

As of December 31, 2020, no restrictions on usage of cash and cash equivalents exist (2019: no restrictions). The carrying
amount of these assets approximates their fair value.

163

ASML ANNUAL REPORT 20206. Accounts receivable, net

Accounting Policy
Accounts receivable are measured at fair value and are subsequently measured at amortized cost, less allowance for
credit losses. The carrying amount of the accounts receivable approximates the fair value. We perform ongoing
credit evaluations on our customers’ financial condition. We periodically review whether an allowance for credit
losses is needed by considering factors such as historical payment experience, credit quality, aging of the accounts
receivable balances, expected lifetime losses, and current economic conditions that may affect a customer's ability
to pay.

When entering into arrangements to sell our receivable, we derecognize the receivable only when meeting the
derecognition criteria. The criteria require isolation from the seller, granting the buyer the right to pledge or exchange
the receivables, and legal transfer of control over the receivable.

Accounts receivable consist of the following:

Year ended December 31 (€, in millions)
Accounts receivable, gross
Allowance for credit losses

Accounts receivable, net

2019
1,791.9
(5.1)

1,786.8

2020
1,313.1
(2.8)

1,310.3

The decrease in accounts receivable as of December 31, 2020 compared to December 31, 2019 is due to an increase in
factoring of our accounts receivable, partly offset by an increase in our sales.

In 2020, receivables have been sold through factoring arrangements for cash totaling €2.2 billion (2019: €1.3 billion). The
amounts consist of €1.4 billion (2019: €0.6 billion) regular trade receivables and €0.8 billion (2019: €0.7 billion) absolute,
unconditional, irrevocable accounts receivable for down payments on systems to be shipped in 2021. The total amount
sold has been derecognized since the asset is isolated from the seller, control is transferred to the buyer and there are no
restrictions on the buyer related to the factored items. The fair value of the receivables sold was substantially the same as
their carrying value. The transfer is treated as an operating cash flow within the Consolidated Statements of Cash Flows.

7. Finance receivables, net

Accounting Policy
Finance receivables consist of receivables in relation to sales-type leases. We perform ongoing credit evaluations of
our customers’ financial condition. We periodically review whether an allowance for credit losses is needed by
considering factors such as historical payment experience, credit quality, the aging of the finance receivables
balances, expected lifetime losses, and current economic conditions that may affect a customer’s ability to pay.

The following table lists the components of the finance receivables as of December 31, 2020 and 2019:

Year ended December 31 (€, in millions)
Finance receivables, gross
Unearned interest

Finance receivables, net
Current portion of finance receivables, gross
Current portion of unearned interest

Non-current portion of finance receivables, net

2019
994.4
(8.8)

985.6
568.4
(3.9)

421.1

2020
2,122.5
(11.5)

2,111.0
1,716.1
(5.6)

400.5

The increase in finance receivables as of December 31, 2020 compared to December 31, 2019 is the result of providing
additional systems with a free-use period, to support the capacity ramp-up of high-end systems which are part of the
early-insertion lifecycle of the technology. Additionally, we delivered some of our newest DUV systems to customers with
the right to use and evaluate the new technology during a free-use period, and it is expected they will be purchased at the
end of the free-use period.

Gross profit recognized at the commencement date of the lease for our sales-type leases amounts to €830.2 million
during 2020 (2019: €343.9 million; 2018: €446.5 million). Interest income for our sales-type leases in 2020 amounts to €6.2
million (2019: €4.7 million; 2018: €4.9 million).

164

ASML ANNUAL REPORT 2020At December 31, 2020, payment of the finance receivables in the next 5 years and thereafter are:

(€, in millions)

2021
2022

2023

2024

2025
Thereafter

Finance receivables, gross

Amount

1,716.1
406.4

—

—
—

2,122.5

In 2020, 2019 and 2018 we did not record any expected credit losses from finance receivables. As of December 31, 2020,
the finance receivables were neither past due nor impaired.

8. Inventories, net

Accounting Policy
Inventory costs are computed on a first-in, first-out basis. Our inventory values are comprised of purchased
materials, freight expenses, customs duties, production labor and overhead. The valuation of inventory includes
determining which fixed costs should be capitalized into inventory based on the normal capacity of our
manufacturing and assembly facilities. If the usage of our facilities is below the established normal capacity, a
portion of our fixed overhead costs are not capitalized into inventory but instead are expensed in Cost of sales as
incurred.

Inventory is valued at the lower of cost or net realizable value, based on assumptions about future demand and
market conditions. Valuation of inventory also requires us to establish provisions for inventory that is defective,
obsolete or in excess. We use our demand forecast to develop manufacturing plans and utilize this information to
compare against raw materials, work in progress and finished product levels to determine the amount of defective,
obsolete or excess inventory.

Inventories consist of the following:

Year ended December 31 (€, in millions)
Raw materials
Work-in-process
Finished products

Inventories, gross

Inventory reserves

Inventories, net

2019
2,026.3
1,505.9
771.3

4,303.5

(494.3)

3,809.2

2020
2,073.4
1,805.0
1,164.2

5,042.6

(473.2)

4,569.4

The increase in inventory in 2020 compared to 2019 is driven by the increased demand from customers, higher costs of
our latest technologies and growing install base.

A summary of activity in the inventory reserves is as follows:

Year ended December 31 (€, in millions)
Balance at beginning of year
Additions for the year

Effect of changes in exchange rates
Utilization of the reserve

Balance at end of year

2019
(441.3)
(221.5)

(0.5)
169.0

(494.3)

2020
(494.3)
(192.4)
0.8
212.7

(473.2)

The additions for 2020 and 2019 are recorded in Cost of sales, while 2018 is split between Cost of sales of €207.9 million
and Research and Development costs of €10.3 million. The additions for the year mainly relate to inventory items which
became obsolete due to technological developments and design changes.

165

ASML ANNUAL REPORT 20209. Other assets

Other current and non-current assets consist of the following:

Year ended December 31 (€, in millions)
Advance payments to Carl Zeiss SMT GmbH
Prepaid expenses
Derivative financial instruments 1
VAT receivable
Other assets

Other current assets

Advance payments to Carl Zeiss SMT GmbH

Prepaid expenses
Derivative financial instruments 1
Compensation plan assets

Non-current accounts receivable
Other assets

Other non-current assets

2019
215.2
372.5

34.5

89.5
131.1

842.8

585.3

—

103.0

55.1

67.8
19.2

830.4

2020
265.8
278.7

39.0

125.6
92.6

801.7

668.0

55.2

123.8

67.0

22.6
14.9

951.5

1. For further details on derivative financial instruments see Note 25 Financial risk management.

ASML makes non-interest bearing advance payments to support our equity method investment Carl Zeiss SMT GmbH’s
work-in-process. These payments are made to secure optical column deliveries and these advance payments are settled
through future lens or optical column deliveries. The increase in this balance is due to the support provided under the
High-NA agreement.

Prepaid expenses mainly include prepaid income taxes to intercompany profit on inventory that has not been realized by
the ASML group of €162.9 million (2019: €159.2 million) and the contract balance related to the joint development program
with imec of €53.8 million as of December 31, 2020 (2019: €88.8 million). At the end of 2018 we started the new joint
development program with imec under which we mainly deliver systems and services upfront and receive R&D services
throughout the contract period up until 2024.

10. Equity method investments

Accounting Policy
Equity investments which we are able to exercise significant influence but do not control, are accounted for using the
equity method and presented on our Consolidated Balance Sheets within Equity method investments. The difference
between the cost of our investment and our proportionate share of the carrying value of the investee's underlying net
assets as of the acquisition date is the basis difference. The basis difference is allocated to the identifiable assets
and liabilities based on their fair value as of the acquisition date (i.e. the date which we obtain significant influence),
with the excess costs of the investment over our proportional fair value of the identifiable assets and liabilities being
equity method goodwill.

We amortize the basis difference related to the other intangible assets over the estimated remaining useful lives of
these assets that gave rise to this difference. The remaining weighted-average life of the finite-lived intangible assets
acquired is 16.2 years and is amortized using a straight-line method. In-process R&D is initially capitalized at fair
value as an intangible asset with an indefinite life. When the R&D project is complete, it is reclassified as an
amortizable purchased intangible asset and is amortized over its estimated useful life. If the project is abandoned,
we will record the full basis difference charge for the value of the related intangible asset in our Consolidated
Statements of Operations in the period of abandonment. Equity method goodwill is not amortized or tested for
impairment; instead the equity method investment is tested for impairment whenever events or changes in
circumstances indicate that the carrying value of the investment may not be recoverable.

Under the equity method, after initial recognition at cost, our Equity method investments are adjusted for our
proportionate share of the profit or loss and other comprehensive income of the investee, recognized on a one-
quarter time lag and presented within Profit from equity method investments. Our proportionate share of the profit or
loss of the investee is adjusted for any differences in accounting principles and policies, basis difference adjustments
and intra-entity profits. Receipt of dividends reduces our Equity method investments, which is presented as an
operating cash flow based on the nature of the distributions.

Equity method investments consists of a 24.9% equity interest acquired on June 29, 2017 in Carl Zeiss SMT Holding
GmbH & Co. KG, a limited partnership that owns Carl Zeiss SMT GmbH, our single supplier of optical columns. We have

166

ASML ANNUAL REPORT 2020determined that Carl Zeiss SMT Holding GmbH & Co. KG is a variable interest entity because the entity was established
without substantive voting rights since there is disparity between our voting rights and our economics, as well as
substantially all of Carl Zeiss SMT Holding GmbH & Co. KG’s activities involve or are conducted on our behalf. However,
we are not the primary beneficiary of the variable interest entity because we lack the power, through voting rights or similar
rights, to direct the activities that most significantly impact Carl Zeiss SMT Holding GmbH & Co. KG’s economic
performance.

For the year ended December 31, 2020, we recorded a profit from equity method investments of €88.6 million (2019:
€18.2 million) in our Consolidated Statements of Operations. This profit includes the following components:

• Profit of €111.4 million (2019: €82.8 million) related to our share of Carl Zeiss SMT Holding GmbH & Co. KG’s net

income after accounting policy alignment

• Cost due to basis difference amortization related to intangible assets of €26.7 million (2019: €26.7 million)
• Cost (benefit) due to intercompany profit elimination of €(3.9) million (2019: €13.7 million)
• Cost due to dividend forfeiture of €0.0 million (2019: €24.2 million)

In 2020 we received a dividend of €128.1 million (2019: €99.9 million) from Carl Zeiss SMT Holding GmbH & Co. KG.

Carl Zeiss SMT Holding GmbH & Co. KG is a privately held company; therefore, quoted market prices for its stock are not
available.

The following summarizes the total assets and liabilities related to our variable interest in Carl Zeiss SMT Holding GmbH &
Co. KG as reflected in our Consolidated Balance Sheets, as well as our maximum exposure to losses as of December 31,
2020. Our maximum exposure to loss is limited to our equity method investment in Carl Zeiss SMT Holding GmbH & Co.
KG, right-of-use assets and prepayments provided to the equity method investment.

Year ended December 31 (€, in millions)
EUV Agreements
DUV Agreements

High-NA Agreement
Investment agreement for 24.9% equity

2020

Assets

319.3
33.2

784.0
820.7

2020

Liabilities

Maximum
exposure to loss

—
—

(4.0)
—

319.3
33.2

784.0
820.7

EUV and DUV Agreements
ASML makes non-interest bearing advance payments to support Carl Zeiss SMT GmbH’s work-in-process. These
payments are made to secure optical column deliveries and these advance payments are settled through future lens or
optical column deliveries. Our maximum exposure related to this agreement is limited to the assets not settled as of the
balance sheet date.

High-NA Agreement
On November 3, 2016 we agreed with Carl Zeiss SMT GmbH to support their R&D costs, capital expenditures and supply
chain investments, in respect of High-NA, for an amount initially estimated at €760.0 million. The current estimate as of
December 31, 2020 is €1,354.8 million (2019: €1,242.2 million). As of December 31, 2020 our estimated remaining
commitment to Carl Zeiss SMT GmbH is €319.9 million (2019: €524.8 million).

The table below summarizes support provided to Carl Zeiss SMT GmbH, by type:

Year ended December 31 (€, in millions)
Capital expenditures
R&D costs
Supply chain investments

Total support provided

2018
191.8
74.8
8.5

275.1

2019
184.1
94.2
4.5

282.8

2020
203.7
96.1
17.7

317.5

Our maximum exposure related to this agreement is limited to the amount reimbursable from Carl Zeiss SMT GmbH as of
the balance sheet date.

R&D and supply chain support costs are capitalized for 24.9% of this funding because it directly benefits us through our
investment in Carl Zeiss SMT Holding GmbH & Co. KG. The amount capitalized is presented within equity method
investments. The remainder of this support relating to supply chain support costs is charged to the cost of sales as
incurred, the part related to R&D costs is charged to Research and development costs as incurred.

The support provided related to capital expenditures consists of tooling and facilities, and is determined to be a lease. As
a result, prior to the asset being put into use, it is recorded in Other Assets, then transferred into ROU Assets - Finance
when put into use.

167

ASML ANNUAL REPORT 202011. Goodwill

Accounting Policy
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 acquisition. Goodwill on
acquisition of subsidiaries is allocated to reporting units for the purpose of impairment testing. The allocation is
made to those reporting units that are expected to benefit from the business combination in which the goodwill
arose. Goodwill is stated at cost less accumulated impairment losses.

Goodwill is tested for impairment annually or whenever events or changes in circumstances indicate that the
carrying amount of the goodwill may not be recoverable. To determine whether it is necessary to perform the
quantitative goodwill impairment test, we perform a step-zero qualitative assessment, annually. If we determine that
it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, we do not perform a
quantitative goodwill impairment test.

Goodwill mainly results from the acquisitions of Cymer and HMI. The balance as of December 31, 2020 is €4,629.1 million
(2019: €4,541.1 million). The increase of €87.9 million is the result of the acquisition of Berliner Glas on October 30, 2020.
For details of the Berliner Glas business combination see: Note 2 Business Combinations.

We have identified two reporting units: Reporting Unit ASML and Reporting Unit Cymer Light Sources. As of
December 31, 2020 the goodwill allocated to Reporting Unit ASML amounts to €4,166.8 million (2019: €4,078.8 million)
and Reporting Unit Cymer Light Sources amounts to €462.3 million (2019: €462.3 million). Goodwill related to the Berliner
Glas acquisition is allocated to the Reporting Unit ASML.

Based on our assessment during the annual goodwill impairment test, we believe it is more likely than not that the fair
values of the reporting units exceed their carrying amounts, and therefore goodwill was not impaired as of December 31,
2020.

12. Intangible assets, net

Accounting Policy
Intangible assets include brands, intellectual property, developed technology, customer relationships, and other
intangible assets not yet available for use. These finite-lived intangible assets are stated at cost, less accumulated
amortization and accumulated impairment losses. Amortization is calculated using the straight-line method based on
the estimated useful lives of the assets.

Finite-lived intangible assets are assessed for impairment whenever there is an indication that the balance sheet
carrying amount may not be recoverable using cash flow projections for the useful life.

The following table shows the respective useful lives for intangible assets:

Category

Brands
Intellectual property

Developed technology

Customer relationships
Other

Estimated useful life

20 years
3 - 10 years

6 - 15 years

8 - 18 years
2 - 10 years

168

ASML ANNUAL REPORT 2020As of December 31, 2020 intangible assets consist mainly of brands, intellectual property, developed technology,
customer relationships obtained from the acquisitions of HMI (2016) and Cymer (2013):

€, in millions
Cost
Balance at January 1, 2019

Additions

Disposals
Effect of changes in exchange rates

Balance at December 31, 2019
Acquisitions through business combinations
Additions

Disposals
Effect of changes in exchange rates

Balance at December 31, 2020

Brands

Intellectual
property

Developed
technology

Customer
relationships

Other

Total

39.2

—

—
(0.3)

38.9
—

—

—
—

68.9

73.7

—
(0.2)

142.4
—

2.5

—
(0.1)

1,199.9

228.6

—

—
0.2

1,200.1
30.0

—

—
—

—

—
—

228.6
—

—

—
—

66.2

42.1

(0.2)
2.4

110.5
2.3

33.4

(0.2)
(0.1)

1,602.8

115.8

(0.2)
2.1

1,720.5
32.3

35.9

(0.2)
(0.2)

38.9

144.8

1,230.1

228.6

145.9

1,788.3

Accumulated amortization
Balance at January 1, 2019

Amortization

Disposals
Effect of changes in exchange rates

Balance at December 31, 2019

Amortization

Disposals
Effect of changes in exchange rates

Balance at December 31, 2020

Carrying amount
December 31, 2019
December 31, 2020

7.4

1.9

—
(0.1)

9.2

1.9

—
—

11.1

29.7
27.8

62.8

7.8

—
—

70.6

8.2

—
—

78.8

71.8
66.0

346.5

82.0

—
0.1

428.6

82.1

—
—

510.7

771.5
719.4

70.5

12.7

—
—

83.2

12.7

—
—

95.9

11.6

11.0

(0.2)
2.1

24.5

18.6

(0.2)
—

42.9

498.8

115.4

(0.2)
2.1

616.1

123.5

(0.2)
—

739.4

145.4
132.7

86.0
103.0

1,104.4
1,048.9

During 2020, we recorded amortization charges of €123.5 million (2019: €115.4 million; 2018: €103.7 million) which were
recorded in cost of sales for €101.8 million (2019: €97.4 million; 2018: €97.2 million), in R&D costs for €12.0 million (2019:
€7.5 million and 2018: €1.3 million) and in SG&A costs for €9.7 million (2019: €10.5 million and 2018: €5.2 million).

As of December 31, 2020, the intangible assets not yet available for use amount to €24.8 million (2019: €14.9 million) and
are allocated to Reporting Unit ASML.

During 2020 we recorded no impairment charges (2019: €0.0 million; 2018: €0.0 million).

As of December 31, 2020, the estimated amortization expenses for intangible assets for the next 5 years and thereafter:

€, in millions
2021
2022

2023

2024

2025
Thereafter

Amortization expenses

Amount

129.9
129.4

122.3

113.0

107.8
446.5

1,048.9

169

ASML ANNUAL REPORT 202013. Property, plant and equipment, net

Accounting Policy
Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment
losses. Costs of assets manufactured by ASML include direct manufacturing costs, production overhead and
interest costs incurred for qualifying assets during the construction period. Property, plant and equipment are
depreciated on a straight-line basis in the Consolidated Statements of Operations over their estimated useful lives,
except for land which is not depreciated.

Evaluation systems leased to our customers under an operating lease are capitalized as Property, plant and
equipment at cost and depreciated over the respective lease term. Leased assets that are returned to ASML upon
expiration of the lease term are either taken back into Property, plant and equipment as they will be used internally
by D&E or transferred back to Inventory to be reworked and sold.

The carrying values of prototypes, tooling and equipment that are intended to be sold, but first internally utilized for
more than one year for R&D purposes, are reclassified from Inventories to Property, plant and equipment and
depreciated while being internally used. When no longer required for R&D activities the assets' carrying value is
reclassified back to Inventories and reworked to make them ready for sale to our customers. These transfers are
reported as Net non-cash movements to/from Inventories in our Property, plant and equipment movement schedule.

Property, plant and equipment is assessed for impairment whenever there is an indication that the carrying amount
may not be recoverable using cash flow projections for the useful life.

The following table shows the respective useful lives for property, plant and equipment:

Category
Buildings and constructions
Machinery and equipment

Leasehold improvements
Furniture, fixtures and other

Estimated useful life

5 - 45 years
1 - 7 years

1 - 10 years
3 - 5 years

170

ASML ANNUAL REPORT 2020Land and
buildings

Machinery
and
equipment

Leasehold
improvements

Furniture,
fixtures and
other

Property, plant and equipment consist of the following:

€, in millions
Cost
Balance at January 1, 2019

Additions

Disposals

Net non-cash movements to/from Inventories
Effect of changes in exchange rates

Balance at December 31, 2019
Acquisitions through business combinations
Additions

Disposals

Net non-cash movements to/from Inventories
Effect of changes in exchange rates

1,709.8

321.0

(0.3)

—
6.0

2,036.5
49.1

359.3

(0.4)

—
(12.3)

1,305.1

261.1

(17.5)

33.9
5.2

1,587.8
65.7

263.0

(53.6)

(23.9)
(10.1)

Balance at December 31, 2020

2,432.2

1,828.9

Accumulated depreciation and impairment
Balance at January 1, 2019

Depreciation

Impairment charges

Disposals

Net non-cash movements to/from Inventories
Effect of changes in exchange rates

Balance at December 31, 2019
Depreciation
Impairment charges

Disposals

Net non-cash movements to/from Inventories
Effect of changes in exchange rates

Balance at December 31, 2020

Carrying amount
December 31, 2019
December 31, 2020

646.0

98.5

—

(0.2)

—
2.0

746.3
102.0

—

(0.1)

—
(5.6)

842.6

892.0

166.7

4.7

(14.8)

(28.7)
2.8

1,022.7
186.2

2.7

(51.6)

(29.9)
(3.9)

1,126.2

1,290.2
1,589.6

565.1
702.7

275.2

26.7

(1.4)

—
0.5

301.0
—

45.7

(5.2)

—
(1.2)

340.3

260.9

21.3

—

(1.2)

—
0.3

281.3
21.4

—

(4.7)

—
(0.7)

297.3

19.7
43.0

416.2

64.6

(103.4)

—
0.3

377.7
10.3

43.4

(9.0)

—
(1.8)

420.6

317.9

38.8

—

(103.3)

—
—

253.4
42.1

—

(9.0)

—
(0.9)

285.6

124.3
135.0

Total

3,706.3

673.4

(122.6)

33.9
12.0

4,303.0
125.1

711.4

(68.2)

(23.9)
(25.4)

5,022.0

2,116.8

325.3

4.7

(119.5)

(28.7)
5.1

2,303.7
351.7

2.7

(65.4)

(29.9)
(11.1)

2,551.7

1,999.3
2,470.3

As of December 31, 2020, the carrying amount includes assets under construction for Land and buildings of €526.3
million (2019: €286.6 million), Machinery and equipment of €113.4 million (2019: €85.4 million), Leasehold improvements
of €32.6 million (2019: €4.5 million) and Furniture, fixtures and other of €4.1 million (2019: €7.8 million).

As of December 31, 2020, the carrying amount of land amounts to €102.4 million (2019: €105.7 million).

The additions in 2020 in Land and buildings, as well as Furniture, fixtures and other, relates to construction of ASML’s
logistics facility, High-NA factory and office space at our headquarters in Veldhoven, in order to support our continued
growth.

The additions in 2020 in Machinery and equipment mainly relate to the upgrade and expansion of production tooling to
support the growth of our business, as well as investments in prototypes of new technologies.

The Consolidated Statements of Operations include the following depreciation charges:

Year ended December 31 (€, in millions)
Cost of Sales
R&D Costs
SG&A

Total Depreciation

2018
191.6
105.9
17.9

315.4

2019
196.1
117.2
12.0

325.3

2020
205.9
119.9
25.9

351.7

171

ASML ANNUAL REPORT 202014. Right-of-use assets and lease liabilities

Accounting Policy
We determine if an arrangement is a lease at inception. Operating leases are included in Right-of-use assets -
Operating, accrued & other current liabilities, and accrued & other non-current liabilities in our consolidated balance
sheets. Finance leases are included in Right-of-use assets - Finance, current portion of long-term debt, and Long-
term debt in our consolidated balance sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent
our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized
at commencement date based on the present value of lease payments over the lease term. As our leases do not
provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement
date in determining the present value of lease payments. The Right-of-use assets include any lease payments made
at or before the commencement date and are reduced by lease incentives. Our lease terms may include options to
extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease
payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components. The lease components are accounted for
separately from non-lease components. The allocation of the consideration between lease and non-lease
components is based on the relative stand-alone prices of lease components included in the lease contracts.

Right-of-use assets consist of the following leases:

Year ended December 31 (€, in millions)
Properties
Cars

Equipment

Warehouses
Other

Right-of-use assets

Operating Leases

Finance Leases

2019
177.0
11.9

—

8.7
7.8

205.4

2020
158.2
7.6

—

11.0
3.3

180.1

2019
92.1
—

26.4

—
—

2020
130.7
—

34.1

—
—

118.5

164.8

ASML owns the majority of real estate we utilize for manufacturing, supply chain management and general administration
at our headquarter in Veldhoven, in the Netherlands. At our other locations, worldwide much of the properties we occupy
are leased and therefore comprise the largest amount of our right-of-use assets. Additionally, we lease warehouse space
at locations world-wide and cars for use by our employees.

Right-of-use assets from an operating leases decreased by €25.3 million, mainly due to depreciation over the lease term,
partly offset by new lease contracts.

The Right-of-use assets from finance leases mainly consist of facilities and tooling related to our High-NA agreement with
Carl Zeiss SMT, for which the funds are prepaid by ASML. As capital expenditures under this arrangement are placed into
service, we derecognized our prepaid asset and recognized a ROU Asset under a finance lease arrangement.

Lease liabilities are split between current and non-current:

Year ended December 31 (€, in millions)
Current

Non-current

Lease liabilities

Operating Leases

Finance Leases

2019
55.6
153.8

209.4

2020
46.5
129.8

176.3

2019
—
9.5

9.5

2020
4.7
8.1

12.8

For the year ended December 31, 2020, Lease Liabilities under an operating lease arrangement decreased by €33.1
million, mainly due to scheduled lease payments, partly offset by new lease contracts.

The majority of our finance leases do not have an associated lease liability as the lease payments have been prepaid.

172

ASML ANNUAL REPORT 2020The Consolidated Statements of Operations include the following depreciation charges relating to these leases:

Year ended December 31 (€, in millions)
Properties
Cars

Equipment

Warehouses
Other

Depreciation charge right-of-use assets

Operating Leases

Finance Leases

2018
40.2
7.4

—

7.1
12.4

67.1

2019
48.2
8.1

—

4.5
12.4

73.2

2020
47.6
5.5

—

6.6
5.9

65.6

2018
—
—

—

—
—

—

2019
2.8
—

4.5

—
—

7.3

The total cash flows relating to the lease liabilities are as follows:

Year ended December 31 (€, in millions)
Total Cash Flows

Operating Leases

2018
67.1

2019
73.2

2020
58.8

Finance Leases

2018
—

2019
2.8

The weighted average remaining lease term and weighted average discount rate related to the leases are as follows:

2020
4.1
—

7.0

—
—

11.1

2020
2.9

Year ended December 31 (€, in millions)
Weighted average remaining lease term (months)
Weighted average discount rate (%)

2018
60
2.1%

2019
70
2.2%

2020
65
2.0%

2018
—
—%

2019
230
0.7%

2020
243
0.5%

Operating Leases

Finance Leases

15. Accrued and other liabilities

Accrued and other liabilities consist of the following:

Year ended December 31 (€, in millions)
Costs to be paid
Personnel related items
Derivative financial instruments 1
Operating lease liabilities 2
Provisions

Standard warranty reserve
Other

Accrued and other liabilities
Less: non-current portion of accrued and other liabilities

Current portion of accrued and other liabilities

2019
252.1
654.6

3.9

209.4

30.7

128.4
1.8

1,280.9
241.0

1,039.9

2020
233.9
757.4

20.0

176.3

84.8

119.1
12.0

1,403.5
257.5

1,146.0

1. For further details on derivative financial instruments see Note 25 Financial risk management.
2. For further details on operating lease liabilities see Note 14 Right-of-use assets and lease liabilities.

Costs to be paid as of December 31, 2020 include accrued costs for unbilled services provided by suppliers including
contracted labor, outsourced services and consultancy.

Personnel related items mainly consist of accrued annual short-term incentive bonus plans, accrued vacation days,
accrued pension premiums, accrued wage tax and accrued vacation allowance. The increase in the accrued personnel
related items compared to prior year is mainly due to an increase in the annual short-term incentive bonus plan accrual
based on company performance, as well as the result of the growth of our business, which resulted in an increase in the
number of our employees.

173

ASML ANNUAL REPORT 2020The standard warranty reserve is based on historical product performance and total expected costs to fulfill our warranty
obligation. Annually, we assess and update the standard warranty reserve based on the latest actual historical warranty
costs and expected future warranty costs. Total changes in standard warranty reserve for the years 2020 and 2019 are as
follows:

Year ended December 31 (€, in millions)
Balance at beginning of year
Additions for the year

Utilization of the reserve
Effect of exchange rates

Balance at end of year

2019
59.8
118.5

(50.0)
0.1

128.4

2020
128.4
137.1

(145.9)
(0.5)

119.1

16. Long-term debt and interest and other costs

Accounting policy
Long-term debt represents debt issued privately without registration with a government authority and is payable to
others under the terms of a signed agreement. Long-term debt is initially recognized at fair value and subsequently
measured at amortized cost. Debt is qualified as long-term debt as long as the group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.

Interest accruals and payments relating to Long-term debt are accounted for as part of the “Accrued and other
liabilities”. Interest and other costs should be accrued and recorded with the passage of time over the agreed term,
regardless of when the interest receipt or payment has taken place.

Long-term debt consists of the following:

Year ended December 31 (€, in millions)
€500 million 0.625% senior notes issued July 2016 and principal due July 7th 2022 interest annually
payable on July 7th, carrying amount
€750 million 3.375% senior notes issued September 2013 and principal due September 19th 2023
interest annually payable on September 19th, carrying amount
€1000 million 1.375% senior notes issued July 2016 and principal due July 7th 2026 interest annually
payable on July 7th, carrying amount
€750 million 1.625% senior notes issued November 2016 and principal due May 28th 2027 interest
annually payable on May 28th, carrying amount
€750 million 0.250% senior notes issued February 2020 and principal due February 25th 2030
interest annually payable on February 25th, carrying amount
€750 million 0.625% senior notes Issued May 2020 and principal due May 7th 2029 interest annually
payable on May 7th, carrying amount
Debt acquired through the Berliner Glas business combination
Other

Long-term debt
Less: current portion of long-term debt

Non-current portion of long-term debt

2019

499.5

813.3

2020

501.5

802.1

1,007.0

1,028.0

778.3

—

—
10.2

3,108.3
—

3,108.3

795.4

740.7

746.8

55.5
8.2

4,678.2
15.4

4,662.8

All senior notes are redeemable at the option of ASML, in whole or in part, at any time by paying a make whole premium,
and unless previously redeemed, will be redeemed at 100% of their principal amount on the due date.

174

ASML ANNUAL REPORT 2020Our obligations to make principal repayments under our Eurobonds and other borrowing arrangements excluding interest
expense as of December 31, 2020:

€, in millions
2021
2022

2023

2024

2025
Thereafter

Long-term debt
Less: current portion of long-term debt

Non-current portion of long-term debt

Amount
15.4
512.0

761.1

7.4

2.7
3,265.0

4,563.6
15.4

4,548.2

For the year 2021, the obligations relate to lease payments and Berliner Glas loan repayments. The years thereafter mainly
relate to repayments of principals under our Eurobonds.

Eurobonds
The following table summarizes the carrying amount of our outstanding Eurobonds, including the fair value of interest rate
swaps used to hedge the change in the fair value of the Eurobonds:

Year ended December 31 (€, in millions)
Amortized cost amount
Fair value interest rate swaps 1

Carrying amount

1. The fair value of the interest rate swaps excludes accrued interest.

2019
2,983.2
114.9

3,098.1

2020
4,474.1
140.4

4,614.5

We use interest rate swaps to minimize the net interest exposure for the group by aligning the interest terms of the
available cash and the interest bearing debt. The fair value changes of these interest rate swaps are recorded on the
Consolidated Balance Sheets under Other assets and the carrying amount of the Eurobonds is adjusted for these fair
value changes. In February and May of 2020 we issued new Eurobonds with fixed interest coupons. We did not enter into
additional interest rate swaps in connection with these bonds.

The following table summarizes the estimated fair value of our Eurobonds:

Year ended December 31 (€, in millions)
Principal amount
Carrying amount
Fair value 1

1. Source: Bloomberg Finance LP.

2019
3,000.0
3,098.1
3,247.7

2020
4,500.0
4,614.5
4,798.8

The fair value of our Eurobonds is estimated based on quoted market prices as of December 31, 2020. The fair value
deviates from the principal amount, due to changes in market interest rates and credit spreads since the issue of our
Eurobonds which carry a fixed coupon interest rate.

Lines of credit
We maintain an available committed credit facility, with a group of banks, of €700.0 million as of December 31, 2020 and
as of December 31, 2019. No amounts were outstanding under the committed credit facility at the end of 2020 and
2019. This facility of €700.0 million was renegotiated on July 3, 2019, with an original maturity date of July 3, 2024. The
facility includes options for extension by two 1-year extension options. This extends the maturity to potentially 2026, if
agreed by both ASML and the lenders. In June 2020 the first 1-year extension option was exercised extending the
maturity date of the facility from July 2024 to July 2025. Outstanding amounts under this credit facility will bear interest at
EURIBOR plus a margin that depends on our credit rating and ESG score.

We have a non-committed guarantee facility of €85.0 million under which guarantees in the ordinary course of business,
such as customs or rental guarantees, can be provided to third parties. As of January 1, 2019, ASML entered into a non-
committed credit facility for our Chinese subsidiary of €130.0 million. The non-committed credit facility covers bank
guarantees, standby letters of credit, as well as advances up to €75.0 million. No amounts were outstanding under this
facility. Outstanding amounts under the non-committed facility will bear interest based on market conditions at the
moment of draw down.

175

ASML ANNUAL REPORT 2020Debt acquired through the Berliner Glas business combination
The loans of Berliner Glas are comprised of a mortgage loan of €25.0 million with an annual interest rate of 0.5%
repayable in 2034, revolving credit facilities at various financial institutions of €25.7 million with annual interest rates
varying between 0.8% and 1.2% that are repayable annually through 2024, as well as financial lease liabilities totaling €4.8
million.

Interest and other, net
Interest and other, net consist mainly of interest income and interest expenses. In 2020, the interest expense component is
€43.3 million (2019: €36.6 million and 2018: €41.8 million). The expenses mainly relate to interest expense on our
Eurobonds, interest rate swaps and hedges, and amortized financing costs.

17. Commitments and contingencies

Commitments
We have various contractual obligations, some of which are required to be recorded as liabilities in our Consolidated
Balance Sheets, including long- and short-term debt and lease commitments. Other contractual obligations, namely
purchase obligations, are generally not required to be recognized as liabilities but are required to be disclosed.

Our contractual obligations as of December 31, 2020 can be summarized as follows:

Payments due by period (€, in millions)
Long-Term Debt Obligations, including interest1
Lease Obligations 2
Purchase Obligations
Carl Zeiss SMT GmbH High-NA Funding 3

Total Contractual Obligations

Total
4,874.5
176.3

5,243.1
319.9

10,613.8

1 year
76.4
46.5

4,247.3
229.7

4,599.9

2 year
572.9
37.1

624.0
90.2

3 year
818.9
24.5

231.3
—

1,324.2

1,074.7

4 year
39.9
15.0

67.6
—

122.5

5 year
35.2
12.1

37.9
—

85.2

>5 years
3,331.2
41.1

35.0
—

3,407.3

1. Long-term debt obligations mainly relate to principal amounts and interest payments of our Eurobonds. For the amounts excluding interest expenses and for further

details see Note 16 Long-term debt and interest and other costs.
2. For further details see Note 14 Right-of-use assets and lease liabilities.
3. For further details see Note 10 Equity method investments.

We have purchase obligations towards suppliers in the ordinary course of business which mainly relates to goods and
services for our operations. The general terms and conditions of the agreements relating to the major part of our purchase
obligations as of December 31, 2020 contain clauses that enable us to delay or cancel delivery of ordered goods and
services up to the dates specified in the purchase agreements, in line with the timing of future sales. The terms and
conditions that we normally agree with our suppliers give us additional flexibility to adapt our purchase obligations to our
requirements in light of the cyclically and technological developments inherent in the industry in which we operate.

Contingencies
ASML is subject to proceedings, litigation and other actual or potential claims. In addition, ASML’s customers may be
subject to claims of infringement from third parties alleging that the ASML equipment used by those customers in the
manufacture of semiconductor products, and / or the methods relating to use of the ASML equipment, infringes one or
more patents issued to those third parties. If these claims were successful, ASML could be required to indemnify such
customers for some or all of the losses incurred or damages assessed against them as a result of that infringement.

In connection with any proceedings and claims, our management evaluates, based on the relevant facts and legal
principles, the likelihood of an unfavorable (or favorable) outcome, and whether the amount of the loss (or gain) can be
reasonably estimated. Judgment is required in these evaluations, including judgments regarding the validity of asserted
claims and the likely outcome of legal and administrative proceedings. The outcome of these proceedings, however, is
subject to a number of factors beyond our control, most notably the uncertainty associated with predicting decisions by
courts and administrative agencies. In addition, estimates of the potential costs (or gains) associated with legal and
administrative proceedings frequently cannot be subjected to any sensitivity analysis, as damage estimates or settlement
offers by claimants may bear little or no relation to the eventual outcome. Finally, in any particular proceeding, we may
agree to settle or to terminate a claim or proceeding in which we believe that it would ultimately prevail where we believe
that doing so, when taken together with other relevant commercial considerations, is more effective than engaging in an
expensive and protracted litigation, the outcome of which is uncertain.

As of December 31, 2020, management has determined that ASML does not have any material contingency which is
considered probable or reasonably probable for each year presented in our Consolidated Balance Sheets.

176

ASML ANNUAL REPORT 202018. Personnel expenses and employee information

Personnel expenses for all payroll employees were as follows:

Year ended December 31 (€, in millions)
Wages and salaries
Social security expenses

Pension and retirement expenses
Share-based payments

Personnel expenses

The average number of payroll employees in FTEs was:

Average number of payroll employees in FTEs
Netherlands
Worldwide

2018
1,777.9
146.3

122.0
46.3

2,092.5

2019
2,124.4
181.9

152.5
74.6

2,533.4

2020
2,519.6
208.1

182.6
53.9

2,964.2

2018
8,597
18,204

2019
11,376
22,192

2020
12,812
24,727

The continued increase in payroll employees in 2020 is to support the growth of our business and due to the acquisition of
Berliner Glas. As a result of the acquisition of Berliner Glas, around 1,600 employees joined ASML as of October 30,
2020. None of these employees work in the Netherlands. The personnel expenses in 2020 do not include any expenses of
Berliner Glas, since ASML consolidates Berliner Glas using a one-quarter lag.

The total number of payroll and temporary employees as of December 31 in FTEs per sector was:

Year ended December 31 (in FTE)
Customer Support
Manufacturing and Supply Chain Management

Strategic Supply Management

General & Administrative

Sales and Mature Products and Services
Research & Development

Total
Less: Temporary employees

Payroll employees

2018
5,674
5,779

267

1,701

559
9,267

23,247
3,203

20,044

2019
5,953
5,933

326

1,898

624
10,166

24,900
1,681

23,219

2020
6,429
7,680

346

2,061

744
10,813

28,073
1,459

26,614

Bonus plans
We have annual performance related short-term incentive (STI) bonus plans for our employees. Under these plans, the
payout depends on company and / or individual performance. This STI bonus (excluding the Board of Management) can
range between 0% and 117.0% of the employees' annual base salary, depending on their job grade and the type of STI
plan. The STI for 2020 is accrued for as part of Accrued and other liabilities in the Consolidated Balance Sheets and will
be paid in the first quarter of 2021.

Short-term incentive bonus expenses for the Board of Management and other employees were as follows:

Year ended December 31 (€, in millions)

Board of Management

Other employees

Total bonus expenses

2018

4.5
233.7

238.2

2019

5.1
269.1

274.2

2020

5.4
402.5

407.9

177

ASML ANNUAL REPORT 202019. Employee benefits

Accounting policy
Contributions to defined contribution retirement benefit plans are recognized as an expense when employees have
rendered service entitling them to the contributions. Payments made to state-managed retirement benefit schemes
are dealt with as payments to defined contribution plans where our obligations under the plans are equivalent to
those arising in a defined contribution retirement benefit plan.

We maintain one multi-employer union defined benefit pension plan and various other defined contribution pension
plans covering a substantial part of our employees. ASML accounts for its multi-employer defined benefit plan as if it
were a defined contribution plan for the following reasons:

• ASML is affiliated to an industry-wide pension fund and uses the pension scheme in common with other

participating companies.

• Under the regulations of the pension plan, the only obligation these participating companies have towards the

pension fund is to pay the annual premium liability. Participating companies are under no obligation whatsoever to
pay off any deficits the pension plan may incur. Nor have they any claim to any potential surpluses.

Our pension and retirement expenses for all employees for the years ended December 31, 2020, 2019 and 2018 were:

Year ended December 31 (€, in millions)
Pension plan based on multi-employer union plan
Pension plans based on defined contribution

Pension and retirement expenses

2018
74.0
48.0

122.0

2019
96.6
55.9

152.5

2020
126.8
55.8

182.6

In accordance with the collective bargaining agreements effective for the industry in which we operate, which has no
expiration date, there are 13,816 eligible employees in the Netherlands that participate in a multi-employer union plan. 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.

This multi-employer union plan is managed by PME and covers approximately 1,400 companies and
approximately 168,000 contributing members. Every company participating in the PME contributes a premium that is
based on the same contribution rate. This contribution rate can fluctuate yearly based on the coverage ratio of the multi-
employer union plan. For 2020, the contribution percentage was 22.7% (2019: 22.7%). For 2020, our contribution to this
multi-employer union plan (including the premiums paid by employees), was 14.0% (2019: 11.7%) of the total contribution
to the plan. For 2021, we expect to contribute around €190.0 million to this multi-employer union plan (including the
premiums paid by employees). The pension rights of each employee are based upon the employee’s average salary
during employment.

The PME multi-employer union plan monitors its risks on a global basis and is subject to regulation by Dutch
governmental authorities. By Dutch 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. 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 is 97.2% (December 31, 2019: 98.7%) and is below the legally required
minimum coverage ratio of 104.0%. While the current coverage ratio is below the legally required minimum, PME has
made use of a temporary ministerial exemption regulation in 2020 due to the current economic environment, which
exempts PME from the requirement to reduce the pension payouts in 2021.

Additionally, PME has initiated a recovery plan to increase the coverage ratio to its legally required minimum level. Based
on this plan it is estimated that the coverage ratio will increase to the legally required minimum coverage ratio as of 2028,
which is within the legally required maximum recovery period of ten years. ASML has no obligation to pay off any deficits
the pension fund may incur, nor do we have any claim to any potential surpluses.

We also participate in several other defined contribution pension plans (outside the Netherlands), with our expenses for
these plans equaling the employer contributions made in the relevant period.

As part of the acquisition of Berliner Glas, we assumed a pension plan in Switzerland that is classified as a defined benefit
pension plan as a result of a requirement to provide additional funding in case of a shortfall, while surpluses can only
become due to beneficiaries. The plan is funded in line with the statutory requirements. The current level of funding is
sufficient with a coverage ratio of 106. Furthermore, the pension fund is allowed to take measures to limited the deficit
before additional funding is required by the participating companies. As of December 31, 2020, the plan assets are
estimated at €74.7 million and the pension obligation at €89.5 million, resulting in a net pension liability
of €14.8 million recorded under non-current Accrued and other liabilities.

178

ASML ANNUAL REPORT 2020Deferred compensation plans
We have a non-qualified deferred compensation plan for our US employees that allows a select group of management or
highly compensated employees to defer a portion of their salary, bonus, and commissions. The plan allows us to credit
additional amounts to the participants’ account balances. The participants divide their funds among the investments
available in the plan. Participants elect to receive their funds in future periods after the earlier of their employment
termination or their withdrawal election, at least 3 years after deferral. Expenses were close to nil relating to this plan in
2020, 2019 and 2018. As of December 31, 2020, our liability under deferred compensation plans was €68.3 million (2019:
€56.6 million).The related compensation plan assets are €67.0 million (2019: €55.1 million).

20. Share-based compensation

ASML provides compensation to its employees through different type of share plans. These plans can be categorized as
follows:

• Share based compensation plans (Long term incentive and Employee Umbrella Share Plan)
• Employee purchase plan (Cash reservation for acquisition of undefined number of shares based on an undefined share

price at acquisition date)

• Option plans (Option to buy a predetermined amount of shares against a predetermined exercise price

Share based compensation plans

Accounting Policy
As part of our long-term incentive (LTI) bonus, employees can be granted either a service or performance share
based-payment plan including services. For service plans shares are granted at grant date and after having been in
service for a set period (typically 3 years), the participant is awarded these shares at the vesting date. For
performance plans, the shares are conditionally granted and awarded based on the company specific performance
criteria, which can be split between market and non-market based elements. These shares vest after completion of
the service period and the performance reached at vesting date.

Long-term incentive plans
The table below shows the performance criteria and the corresponding weight for the 2020 LTI performance plans.

LTI performance plan criteria

Market / Non-Market element

Total Shareholder Return
ROAIC

Technology Leadership Index
Sustainability

Total

Market
Non-Market

Non-Market
Non-Market

Weight

30%
40%

20%
10%

100%

The fair value of the market based element is measured at the grant date incorporating the expected vesting and
expected value at vesting, using a tailored Monte Carlo simulation model. The fair value of the service plans and the non-
market based elements of the performance plans is the share price at grant date less the present value of expected
dividends during the vesting period, as participants are not entitled to dividends payable and voting rights during the
vesting period. The likelihood of the conditions being met for service and non-market performance plans is assessed as
part of the company’s best estimate of the number of equity instruments that will ultimately vest.

Participants are entitled to a conditional grant of company shares upon awarding. Performance plans are subject to cliff
vesting and are accounted for on a straight line basis. Service only plans are subject to graded vesting. Each installment of
the plan is therefore accounted as a separate grant with a separate fair value. This means that each installment will be
separately measured and attributed to expense over the related vesting period. Expenses for the market based element
are recognized during vesting at a fixed vesting level (as the vesting expectation is incorporated in the fair value) provided
that all other performance conditions are met. Expenses for the non-market based elements and service plans are
recognized during vesting at expected vesting levels, which are updated during vesting period as necessary, with a final
update/adjustment at vesting date. All share based remuneration expenses are recognized as personnel expense, with a
corresponding entry in equity, during the vesting period of the award. Share based remuneration expenses are included in
the same income statement line or lines in the functional grouped consolidated statement of operations as the
compensation paid to the employees receiving the stock-based awards.

The General Meeting approved the adoption of the most recent remuneration policy for the Board of Management and the
number of shares to be issued. The most recent remuneration policy includes the target and maximum levels of the LTI
plans, the performance measures and pay-out zone percentages. The General Meeting also approved the restrictions and
limits to the Board of Management for issuance/granting of ordinary shares, limits for restricting or excluding the
preemption rights accruing to shareholder and the restrictions and limits to the Board of Management for repurchasing
ordinary shares on behalf of the company.

179

ASML ANNUAL REPORT 2020Employee Umbrella Share Plan
The Employee Umbrella Share Plan, effective as of January 1, 2014 covers all employees. The main purpose of the grants
of Equity Incentives under the Employee Umbrella Share Plan is to continue to attract, reward and retain qualified and
experienced industry professionals in an international labor market. All grants under the Employee Umbrella Share Plan
typically have a 3-year vesting period and are subject to the above mentioned performance or service criteria.

The assumptions for the calculation of the fair value of shares for share based compensation plans, which include a
market based performance element, are set out in the following table:

Year ended December 31
Share price in € at grant date
Expected volatility ASML
Expected volatility PHLX index

Vesting period

Dividend yield

Risk free interest rate (Eurozone)
Risk free interest rate (US)

2018
166.9
26.1%
21.3%

2019
199.5
29.8%
24.8%

2020
270.7
28.9 %

24.7 %

2.9 years

2.5 years

2.9 years

0.8%

(0.4)%
2.2%

1.1%

(0.8)%
1.8%

0.9 %

(0.6)%
1.5 %

Expenses for share based compensation plans were as follows:

Year ended December 31 (€, in millions)
Total compensation expenses incurred for share based remuneration (including
share-based compensation to the BoM)
The income tax benefit (excluding excess income tax benefits) recognized
related to the recognized share-based compensation costs in the US
Total compensation expenses to be incurred for share based remuneration
(including share-based compensation to the BoM) in future periods
Weighted average period in which compensation expenses (including share-
based compensation to the BoM) are expected to be recognized

2018

46.3

5.6

94.2

2019

74.6

5.9

95.8

2020

53.9

6.6

85.9

1.7 years

1.6 years

Details with respect to shares granted and vested during the year are set out in the following table:

Year ended December 31

Total fair value at vesting date of shares vested during the year (in millions)

EUR-denominated

USD-denominated

2018

46.4

2019

58.7

2020

124.9

2018

61.6

2019

54.9

2020

133.9

Weighted average fair value of shares granted

161.63

190.33

297.05

187.98

206.90

302.75

A summary of the status of conditionally outstanding shares as of December 31, 2020, and changes during the year
ended December 31, 2020, is presented below:

Conditional shares outstanding at January 1, 2020
Granted

Vested
Forfeited

Conditional shares outstanding at December 31, 2020

EUR-denominated

USD-denominated

Weighted
average
fair value at
grant date

157.48
297.05

173.80
147.94

201.44

Number
of shares

682,029
210,029

(314,221)
(22,743)

555,094

Weighted
average
fair value at
grant date

179.22
302.75

186.08
179.82

225.26

Number
of shares

578,499
181,221

(274,637)
(40,329)

444,754

Employee purchase plan
Every quarter, we offer our worldwide payroll employees the opportunity to buy our shares against fair value using their net
salary. The Board of Management is excluded from participation in this plan. The fair value for shares is based on the
closing price of our shares listed at Euronext Amsterdam on grant date. The maximum net amount for which employees
can participate in the plan amounts to 10.0% of their annual gross base salary. When employees retain the shares for a
minimum of 12 months, we will pay out a 20.0% cash bonus on the initial participation amount.

Option plans
The grant-date fair value of stock options is estimated using a Black-Scholes option valuation model. This Black-Scholes
model requires the use of assumptions, including expected share price volatility, the estimated life of each award and the
estimated dividend yield. The risk-free interest rate used in the model is determined, based on an index populated with
euro denominated European government agency bond with high credit ratings and with a life equal to the expected life of

180

ASML ANNUAL REPORT 2020
the equity settled share-based payments. Our option plans typically vest over a 3-year service period with any
unexercised stock options expiring 10 years after the grant date. Options granted have fixed exercise prices equal to the
closing price of our shares listed at Euronext Amsterdam on grant date. As of 2017 we no longer grant options to our
employees and all options issued are vested. Issuance of shares upon exercising the stock options are deducted from the
treasury shares. The purchase of shares against the exercise price is settled with the employees involved through
deductions on their salary.

Details with respect to stock options are set out in the following table:

Year ended December 31

Weighted average share price at the exercise date of stock options
Aggregate intrinsic value of stock options exercised (in millions)
Weighted average remaining contractual term of currently exercisable
options (in years)
Aggregate intrinsic value of exercisable stock options (in millions)
Aggregate intrinsic value of outstanding stock options (in millions)

EUR-denominated

USD-denominated

2018

2019

2020

2018

2019

2020

169.68
13.6

201.52
4.3

302.20
4.8

201.01
7.6

225.70
2.3

355.44
3.7

4.76

8.9
9.0

4.16

17.7
17.7

3.55

22.4
22.4

5.20

5.2
5.2

4.40

11.8
11.8

3.66

16.9
16.9

The number and weighted average exercise prices of stock options as of December 31, 2020, and changes during the
year then ended are presented below:

Outstanding, January 1, 2020
Granted

Exercised

Forfeited
Expired

Outstanding, December 31, 2020
Exercisable, December 31, 2020

EUR-denominated

USD-denominated

Weighted
average
exercise price
per ordinary
share (EUR)

64.80
—

48.35

26.07
23.37

70.02
70.02

Weighted
average
exercise price
per ordinary
share (USD)

83.71
—

74.05

—
32.74

86.87
86.87

Number
of options

55,549
—

(13,165)

—
(129)

42,255
42,255

Number
of options

88,740
—

(19,071)

(200)
(929)

68,540
68,540

Details with respect to the stock options outstanding as of December 31, 2020 are set out in the following table:

EUR-denominated

USD-denominated

Range of exercise
prices (€)
25 - 40
40 - 50

50 - 60

60 - 70

70 - 80

80 - 90

90 - 100

100 - 110

Total

Number of
outstanding
options

Weighted average
remaining
contractual life of
outstanding (years)

5,611
6,857

6,082

13,483

11,951

12,035

12,521

—

68,540

0.73
1.80

2.97

2.93

4.37

4.85

4.68

—

3.55

Range of exercise
prices (USD)
25 - 40
40 - 50

50 - 60

60 - 70

70 - 80

80 - 90

90 - 100

100 - 110

Total

Number of
outstanding
options

Weighted average
remaining
contractual life of
outstanding (years)

2,136
562

2,698

423

856

9,690

18,228

7,662

42,255

0.42
0.84

1.67

2.06

2.30

3.87

3.97

4.72

3.66

181

ASML ANNUAL REPORT 2020
21. Income taxes

Accounting Policy
The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the tax effect of operating losses and tax credit carry forward as well as for tax
consequences attributable to differences between the balance sheets carrying amounts of existing assets and
liabilities and their respective tax bases. If it is more likely than not that the carrying amounts of deferred tax assets
will not be realized, a valuation allowance is recorded for the differences. Income tax expense includes current and
deferred taxes on profit, including related interest and penalties, as well as actual or potential withholding taxes on
current and expected dividend income from group companies.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which temporary differences and net operating losses are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of
Operations in the period that includes the enactment date. Deferred income taxes including stranded effects
originally recognized through OCI are recycled through earnings in future periods upon release of the connected item
from OCI to the statement of income.

We assess unrecognized tax benefits based on a two-step process. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position
will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to
measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While
we believe we have appropriate support for the positions taken on our tax returns, we regularly assess the potential
outcomes of examinations by tax authorities in determining the adequacy of our income tax expense, and adjust the
income tax expense, income taxes payable and deferred taxes in the period in which the facts that give rise to a
revision become known.

Income taxes are affecting our Consolidated Statements of Operations, Consolidated Statements of Comprehensive
Income and Consolidated Balance Sheets. The disclosure of the Income taxes is therefore split into:

• Income tax expense
• Liability for unrecognized tax benefits
• Deferred taxes

Income tax expense
The components of the income tax expense are as follows:

Year ended December 31 (€, in millions)
Netherlands
Foreign

Income before income taxes

Income tax expense current
Income tax expense deferred

Income tax expense Netherlands

Income tax expense current
Income tax expense deferred

Income tax expense Foreign

Total income tax expense current
Total income tax expense deferred

Total income tax expense

2018
2,602.0
335.0

2,937.0

(433.5)
9.7

(423.8)

(210.1)
282.3

72.2

(643.5)
291.9

(351.6)

2019
2,441.2
324.6

2,765.8

(305.5)
74.8

(230.7)

(118.4)
157.4

39.0

(423.9)
232.2

(191.7)

2020
3,574.6
442.0

4,016.6

(407.7)
1.4

(406.3)

(375.3)
230.1

(145.2)

(783.0)
231.5

(551.5)

The Dutch statutory tax rate was 25.0% in 2020, 2019 and 2018. Tax amounts in other jurisdictions are calculated at the
rates prevailing in the relevant jurisdictions.

182

ASML ANNUAL REPORT 2020The reconciliation of the income tax expense is as follows:

Year ended December 31 (€, in millions)
Income before income taxes
Income tax expense based on ASML’s domestic rate

Effects of tax rates in foreign jurisdictions
Adjustments in respect of tax exempt income

2018
2,937.0
(734.3)

15.4
6.2

%1
100.0%
25.0%

(0.5)%
(0.2)%

2019
2,765.8
(691.4)

5.0
7.2

%1
100.0%

2020
4,016.6
25.0% (1,004.1)
(0.2)%
0.9
(0.3)%

0.2

Adjustments in respect of tax incentives

311.8

(10.6)%

351.0

(12.7)%

Adjustments in respect of prior years’ current taxes

Adjustments in respect of prior years’ deferred taxes

Movements in the liability for unrecognized tax benefits

Tax effects in respect to HMI restructuring

Change in valuation allowance

Equity method investments

Effect of change in tax rates
Other (credits) and non tax deductible items

Income tax expense

1. As a percentage of income before income taxes.

(1.2)

3.3

(57.2)

115.3

(28.5)

(14.5)

—
32.1
(351.6)

—%

(0.1)%

1.9%

(3.9)%

1.0%

0.5%

—%
(1.1)%
12.0%

46.7

9.8

(16.9)

89.8

7.6

(19.7)

—
19.2
(191.7)

(1.7)%

(0.4)%

0.6%

(3.2)%

(0.3)%

0.7%

—%
(0.7)%
6.8%

510.4

(39.3)

27.0

(41.0)

—

(56.9)

(20.9)

15.0
57.2

(551.5)

%1
100.0%
25.0%
—%

—%

(12.7)%

1.0%

(0.7)%

1.0%

—%

1.4%

0.5%

(0.4)%
(1.4)%

13.7%

The effective tax rate increased to 13.7% of income before income taxes in 2020, compared to 6.8% in 2019. The lower
rate for 2019 was a result of discrete tax benefits relating to restructuring of our HMI group companies and US Tax Reform
regulations.

The individual line items can further be explained as follows:

Income tax expense based on ASML’s domestic rate
The income tax expense based on ASML’s domestic rate is based on the Dutch statutory income tax rate. It reflects
the income tax expense that would have been applicable assuming that all of our income is taxable against the Dutch
statutory tax rate and there are no permanent differences between taxable base and financial results and no Dutch tax
incentives are applied.

Effects of tax rates in foreign jurisdictions
A portion of our results is realized in countries other than the Netherlands where different tax rates are applicable. The
effect can differ from year to year depending on the profit before tax in foreign jurisdictions.

Adjustments in respect of tax exempt income
In past years in certain jurisdictions part of the income generated was tax exempted. In conjunction with changed facts
and circumstances this effect is reduced as of 2020. With regard to previous years the higher effect in 2019 compared to
2018 was caused by a small increasing level of income reported at the level of ASML Hong Kong.

Adjustments in respect of tax incentives
Adjustments in respect of tax incentives mainly relates to a reduced tax rate as a result of application of the Dutch
Innovation Box. The Innovation box is a facility under Dutch corporate tax law pursuant to which qualified income
associated with R&D is subject to an effective tax rate of 7.0% (rate for 2020; in 2021 effective innovation box tax rate will
increase to 9%). The innovation box benefit is determined according to Dutch laws and published tax policy, the
application of which has been confirmed in an agreement among ASML and the Dutch tax authorities, which agreement
applies for the years 2017 through 2023 assuming facts and circumstances do not change.

Furthermore this category includes the benefit of US Tax Reform through the Foreign Derived Intangible Income (FDII)
deduction at the level of our US group companies. The FDII deduction is a facility under US corporate tax law which
reduces the effective tax rate on qualifying income.

The higher effect in 2020 compared to 2019 is mainly caused by an increase in innovation box benefit resulting from an
increased level in income before tax.

Adjustments in respect of prior years’ current taxes
The movements in the adjustments in respect of prior years’ current taxes relate to differences between the initially
estimated income taxes and final corporate income tax returns filed, which to a certain extent are offset with
corresponding adjustments in prior years' deferred taxes (movement in temporary differences).

The impact in 2019 is mainly due to an increase in the FDII deduction as taken into account in our 2018 tax filing in the
US.

183

ASML ANNUAL REPORT 2020Adjustments in respect of prior years’ deferred taxes
The movements in the adjustments in respect of prior years’ deferred taxes for 2020 and 2018 relate to differences
between the initially estimated income taxes and final corporate income tax returns filed. For 2019 the movement was
mainly driven by the capitalization of R&D expenses for tax purposes in the US, which was mirrored by an adjustment in
prior years' current taxes.

Movements in the liability for unrecognized tax benefits
In 2020, similar to prior years 2019 and 2018, the effective tax rate was impacted by movements in the liability for
unrecognized tax benefits. The movement for 2020 is mainly driven by the finalization of a tax audit at the level of our
South Korean group companies - reference is made to the 'liabilities for unrecognized tax benefits' paragraph below.

Tax effects in respect to HMI restructuring
The 2019 and 2018 tax effects are driven by an internal restructuring of our HMI group companies. As a result of this
internal restructuring the deferred tax liabilities on intangible assets that were initially included in the business combination
accounting for HMI have been released during 2018. Furthermore a deferred tax asset has been recognized in 2019 for
book to tax differences on intangible fixed assets transferred as part of the internal restructuring. For 2020 this
restructuring has no additional impact on the effective tax rate.

Change in valuation allowance
The higher effect in 2020 as compared to prior years is to the main extent caused by the recognition of R&D and
withholding tax credits at the level of our group companies in the Netherlands and the US as of which it is considered not
more likely than not that these can be realized in future years.

Equity method investments
This line includes the income tax expense relating to our investment in Carl Zeiss SMT Holding GmbH & Co. KG The
higher effect in 2020 compared to 2019 is mainly caused by an increase of the profit before tax of the equity investment.

Effect of change in tax rates
The impact on the effective tax rate in 2020 is in essence driven by the enacted increase of the Dutch innovation box rate
to 9% as of 2021 as well as reversal of the initial enacted reduction of the general Dutch corporate income tax rate (from
21.7% back to 25%), which rate changes both have impact on the valuation of deferred taxes at the level of the Dutch
group companies.

Additionally it includes a small impact of a change in blended tax rate of one or our HMI group companies in the US.

Other credits and non-tax deductible items
Other credits and non-tax deductible items reflect the impact on our statutory rates of permanent non-tax deductible
items such as non-deductible interest expense and non-deductible meals and entertainment expenses, as well as the
impact of various tax credits on our income tax expense.

US Tax Reform
The 2018, 2019 and 2020 year-end tax positions calculated also reflect the regulations of US Tax Reform, thereby taking
into account the guidance issued by the US government. Hereby the position has been taken not to apply the most recent
guidance relating to the final FDII regulations issued in 2020 retrospectively, but only as of 2021 onwards, which is
permitted under the aforementioned regulations. In regard to GILTI and BEAT, the decision has been taken to treat this as
a period permanent item.

Liability for unrecognized tax benefits and deferred taxes
The liability for unrecognized tax benefits (including accrued interest and penalties) and total deferred tax position
recorded on the Consolidated Balance Sheets is as follows:

Year ended December 31 (€, in millions)
Liability for unrecognized tax benefits
Deferred tax assets
Deferred tax liabilities

Deferred and other tax assets (liabilities)

2019
(227.1)
445.3
(7.3)

210.9

2020
(200.4)
671.5
(37.9)

433.2

Liability for unrecognized tax benefits
We have operations in multiple jurisdictions, where we are subject to the application of complex tax laws. Application of
these complex tax laws may lead to uncertainties on tax positions. We aim to resolve these uncertainties in discussions
with the tax authorities. We record unrecognized tax benefits in line with the requirements of ASC 740, which requires us
to estimate the potential outcome of any tax position. Our estimate for the potential outcome of any uncertain tax position
is highly judgmental. We believe that we have adequately provided for uncertain tax positions. However, settlement of
these uncertain tax positions in a manner inconsistent with our expectations could have a material impact on our
Consolidated Financial Statements.

184

ASML ANNUAL REPORT 2020Consistent with the requirements of ASC 740, as of December 31, 2020, the liability for unrecognized tax benefits
including interest and penalties amounts to €200.4 million (2019: €227.1 million) which is classified as Deferred and other
tax liabilities. If recognized, these unrecognized tax benefits would affect our effective tax rate for approximately equal
amounts.

Expected interest and penalties related to income tax liabilities have been accrued for and are included in the liability
for unrecognized tax benefits and in the income tax expense. Accrued interest and penalties in 2020 amount to a benefit
of €(14.2) million (2019: €9.0 million expense; 2018: €32.6 million expense).

A reconciliation of the beginning and ending balance of the liability for unrecognized tax benefits (excluding interest and
penalties) is as follows:

Year ended December 31 (€, in millions)
Balance, January
Gross presentation for different tax jurisdictions

Gross increases – tax positions in prior period

Gross decreases – tax positions in prior period
Gross increases – tax positions in current period

Settlements

Lapse of statute of limitations

Effect of changes in exchange rates

Total liability for unrecognized tax benefits
Balance of accrued interest and penalties

Total liabilities for unrecognized tax benefits including interest and penalties

2019
(140.4)
—

(21.3)

2.2
(18.9)

—

28.7

(1.0)

(150.7)
(76.4)

(227.1)

2020
(150.7)
(27.3)

(66.6)
0.5

(21.6)

106.6

14.5

6.6

(138.0)
(62.4)

(200.4)

We conclude our allowances for tax contingencies to be appropriate. Based on the information currently available, we
estimate that the liability for unrecognized tax benefits will decrease by €33.1 million (excluding interest and penalties)
within the next 12 months, mainly as a result of expiration of statute of limitations.

Gross increases of tax positions in prior period and Settlements are in essence mainly relating to finalization of a tax audit
at the level of our South Korean group companies.

We file income tax returns in all countries where we operate, with the Netherlands, US, Taiwan, South Korea and China
being the major jurisdictions. The years for which tax returns are still open for examination for respective jurisdictions are
as follows:

Country
Netherlands
US

Taiwan

South Korea
China

Years
2016-2020
2016-2020

2016-2020

2016-2020
2011-2020

We are routinely subject to examinations and audits from tax and other authorities in the various jurisdictions in which we
operate. We believe that adequate amounts of taxes and related interest and penalties have been provided for, and any
adjustments as a result of examinations are not expected to have a material adverse effect.

185

ASML ANNUAL REPORT 2020Deferred taxes
The composition of total deferred tax assets and liabilities reconciled to the classification in the Consolidated Balance
Sheets is:

Deferred taxes (€, in millions)
Deferred tax assets:
Capitalized R&D expenditures
R&D & other credit carry forwards

Inventories

Deferred revenue

Accrued and other liabilities

Installation and warranty reserve

Tax effect carry-forward losses

Property, plant and equipment

Lease liabilities

Intangible fixed assets

Share-based payments
Other temporary differences

Total deferred tax assets, gross
Valuation allowance 1

Total deferred tax assets, net
Deferred tax liabilities:
Intangible fixed assets

Goodwill

Right-of-use assets

Property, plant and equipment

Deferred revenue

Borrowing costs long-term debt
Other temporary differences

Total deferred tax liabilities
Net deferred tax assets (liabilities)
Classified as:

Deferred tax assets – non-current
Deferred tax liabilities – non-current

Net deferred tax assets (liabilities)

Acquisitions
through
business
combinations

Consolidated
Statements
of
Operations

January 1,
2020

Income tax
recognized
in Other
Comprehensive
Income

Effect of
changes
in exchange
rates

December
31, 2020

—
—

—

3.8

—

0.8

—

4.6
—

4.6

(8.9)

—

(1.9)

—

—
(5.7)

(16.5)
(11.9)

117.3
63.7

(9.0)

70.8

15.9

5.4

15.3

(7.0)

(1.6)

13.7

(0.6)
1.9

285.8
(56.9)

228.9

11.0

(9.0)

1.6

10.9

(5.1)

(0.1)
(6.7)

2.6
231.5

192.9
60.8

49.3

56.8

73.4

12.3

12.5

32.8

8.1

129.8

8.5
20.3

657.5
(73.6)

583.9

(104.2)

(6.6)

(8.1)

(15.3)

(13.1)

(1.5)
2.9

(145.9)
438.0

445.3
(7.3)

438.0

—

—
0.6

0.6
—

0.6

—

—
—

—
0.6

(23.1)

(7.3)

(3.1)

(2.4)

(5.3)

(1.3)

(0.7)

0.3

—

(0.7)
1.1

(42.5)
8.0

(34.5)

8.2

—

0.9

—

—
0.8

287.1

117.2

37.2

125.2

87.8

16.4

27.1

26.9

6.5

143.5

7.2
23.9

906.0
(122.5)

783.5

(93.9)

(15.6)

(6.5)

(5.4)

(18.2)

(1.6)
(8.7)

9.9
(24.6)

(149.9)
633.6

671.5
(37.9)

633.6

1. The valuation allowance disclosed above relates to R&D and other credits and Tax effect carry-forward losses that may not be realized.

186

ASML ANNUAL REPORT 2020Deferred taxes (€, in millions)
Deferred tax assets:
Capitalized R&D expenditures
R&D & other credit carry forwards

Inventories

Deferred revenue

Accrued and other liabilities

Installation and warranty reserve

Tax effect carry-forward losses

Property, plant and equipment

Lease liabilities

Intangible fixed assets

Share-based payments
Other temporary differences

Total deferred tax assets, gross
Valuation allowance 1

Total deferred tax assets, net
Deferred tax liabilities:
Intangible fixed assets
Goodwill

Right-of-use assets

Property, plant and equipment

Deferred revenue

Borrowing costs long-term debt
Other temporary differences

Total deferred tax liabilities
Net deferred tax assets (liabilities)
Classified as:

Deferred tax assets – non-current
Deferred tax liabilities – non-current

Net deferred tax assets (liabilities)

Acquisitions
through
business

combinations Other

January
1, 2019

Consolidated
Statements
of
Operations

Income tax
recognized
in Other
Comprehensive
Income

Effect of
changes
in exchange
rates

December
31, 2019

—
—

—

—
—

—

—
—

—

—
—

—

—
—

—

—
—

—

—
7.4

7.4
7.4

189.0
(11.1)

(0.2)

(92.4)

31.4

(1.3)

3.4

9.0

8.1

81.1

0.6
(5.4)

212.2
7.6

219.8

17.9
(6.6)

(8.1)

9.8

(13.0)

—
12.4

12.4
232.2

1.7
70.5

52.9

150.3

40.5

13.3

8.5

19.4

—

48.7

7.7
21.7

435.2
(79.2)

356.0

(119.8)
—

—

(25.7)

(0.1)

(1.5)
(15.1)

(162.2)
193.8

236.3
(42.5)

193.8

—

—
6.1

6.1
—

6.1

—
—

—

—
—

—
6.1

2.2

1.4

(3.4)

(1.1)

1.5

0.3

0.6

4.4

—

0.2
(2.1)

4.0
(2.0)

2.0

(2.3)
—

—

0.6

—

—
(1.8)

(3.5)
(1.5)

192.9

60.8

49.3

56.8

73.4

12.3

12.5

32.8

8.1

129.8

8.5
20.3

657.5
(73.6)

583.9

(104.2)
(6.6)

(8.1)

(15.3)

(13.1)

(1.5)
2.9

(145.9)
438.0

445.3
(7.3)

438.0

1. The valuation allowance disclosed above relates to R&D and other credits and Tax effect carry-forward losses that may not be realized.

Tax effect carry-forward losses and Tax credits
The deferred tax assets from carry-forward losses and R&D & other credits recognized as per December 31, 2020 are
almost fully reserved. R&D & other credits for the amount of €92.9 million have no expiration date. The remaining R&D &
other credits of €24.3 million have an expiration date between 2021 and 2035. The carry-forward losses of €133.9 million
have an expiration date between 2021 and 2030.

Unrecognized Deferred Tax Liability Related to Investments in Foreign Subsidiaries
In general, it is our practice and intention to reinvest the earnings of our non-Dutch subsidiaries in those operations and
distribute only when necessary or opportune by law. The tax implications of distributions by such non-Dutch subsidiaries
are dependent on local tax and accounting regulations applying at the moment of actual distribution. As these cannot
practicably be determined no deferred tax liability has been recognized in respect of undistributed profit reserves of the
foreign subsidiaries. As per December 31, 2020 the aggregate amount of unrecognized temporary differences
approximately amounts to €240.0 million.

187

ASML ANNUAL REPORT 202022. Shareholders’ equity

Share capital

ASML's authorized share capital amounts to €126.0 million and is divided into:

Type of shares

Cumulative preference shares

Ordinary shares

Ordinary shares B

Amount of shares

Nominal value

Votes per share

700,000,000

€0.09 per share

699,999,000

€0.09 per share

9,000

€0.01 per share

The issued and fully paid up ordinary shares with a nominal value of €0.09 each were as follows:

Year ended December 31
Issued ordinary shares with nominal value of €0.09

Issued ordinary treasury shares with nominal value of €0.09

2018
421,097,729

2019
419,810,706

2020
416,514,034

10,368,038

5,848,998

2,983,454

Total issued ordinary shares with nominal value of €0.09

431,465,767

425,659,704

419,497,488

77,733,738 ordinary shares were held by 288 registered holders with a registered address in the US. Since certain of our
ordinary shares were held by brokers and nominees, the number of record holders in the US may not be representative of
the number of beneficial holders, or of where the beneficial holders are resident.

A total of 96,566,077 depository receipts for ordinary shares were issued at the launch of the CCIP. This number has since
decreased with the sell-down by the relevant customers following expiry of the lock-up.

Each ordinary share consists of 900 fractional shares. Fractional shares entitle the holder thereof to a fractional dividend,
but do not give entitlement to voting rights. Only those persons who hold shares directly in the share register in the
Netherlands, held by us at our address at 5504 DR Veldhoven, de Run 6501, the Netherlands, or in the New York share
register, held by JP Morgan Chase Bank, N.A., P.O. Box 64506, St. Paul, MN 55164-0506, United States, can hold
fractional shares. Shareholders who hold ordinary shares through the deposit system under the Dutch Securities Bank
Giro Transactions Act maintained by the Dutch central securities depository Euroclear Nederland or through the
Depository Trust Company cannot hold fractional shares.

No ordinary shares B and no cumulative preference shares have been issued.

There are no special voting rights on the issued shares in our share capital.

Certain voting restrictions apply in respect of ordinary shares issued in connection with the customer co-investment
program, which ASML entered into in 2012 with three key customers – Intel, TSMC and Samsung – to accelerate ASML’s
development of EUV. Under this program, the participating customers funded certain development programs and invested
in ASML’s ordinary shares. Currently, only one participating customer still holds (directly or indirectly) ordinary shares. The
voting restrictions in respect of these ordinary shares are set out in the underlying agreement between ASML and the
relevant customer.

There are currently no limitations, either under Dutch law or in ASML’s Articles of Association, on the transfer of ordinary
shares in the share capital of ASML. Pursuant to ASML’s Articles of Association, the Supervisory Board’s approval shall be
required for every transfer of cumulative preference shares.

Issue and repurchase of (rights to) shares
Our Board of Management has the power to issue ordinary shares and cumulative preference shares insofar as it has
been authorized to do so by the General Meeting. The Board of Management requires approval of the Supervisory Board
for such an issue. The authorization by the General Meeting can only be granted for a certain period not exceeding five
years and may be extended for no longer than five years on each occasion. If the General Meeting has not authorized the
Board of Management to issue shares, the General Meeting will be authorized to issue shares on the Board of
Management’s proposal, provided that the Supervisory Board has approved such proposal.

Holders of ASML’s ordinary shares have a preemptive right, in proportion to the aggregate nominal amount of the ordinary
shares held by them. This preemptive right may be restricted or excluded. Holders of ordinary shares do not have
preemptive right with respect to any ordinary shares issued for consideration other than cash or ordinary shares issued to
employees. If authorized for this purpose by the General Meeting, the Board of Management has the power, subject to
approval of the Supervisory Board, to restrict or exclude the preemptive rights of holders of ordinary shares.

188

ASML ANNUAL REPORT 2020of Management through October 22, 2021, subject to approval of the Supervisory Board, to restrict or exclude preemptive
rights with respect to holders of ordinary shares up to a maximum of 10% of our issued share capital.

We may repurchase our issued ordinary shares at any time, subject to compliance with the requirements of Dutch law and
our Articles of Association. Any such repurchases are subject to the approval of the Supervisory Board and the
authorization by the General Meeting, which authorization may not be for more than 18 months.

At the 2020 AGM, the Board of Management was authorized, subject to Supervisory Board approval, to repurchase
through October 22, 2021, up to a maximum of two times 10% of our issued share capital at April 22, 2020, at a price
between the nominal value of the ordinary shares purchased and 110% of the market price of these securities on Euronext
Amsterdam or NASDAQ.

ASML Preference Shares Foundation
The ASML Preference Shares Foundation (Stichting Preferente Aandelen ASML), a foundation organized under Dutch law,
has been granted an option right to acquire preference shares in the share capital of ASML. The Foundation may exercise
the Preference Share Option in situations where, in the opinion of the Foundation’s Board of Directors, ASML’s interests,
ASML’s business or the interests of ASML’s stakeholders are at stake. This may be the case if:

• a public bid for ASML’s shares is announced or made, or there is a justified expectation that such a bid will be made

without any agreement having been reached with ASML in relation to such a bid; or

• in the opinion of the Foundation’s Board of Directors, the (attempted) exercise of the voting rights by one shareholder
or more shareholders, acting in concert, is materially in conflict with ASML’s interests, ASML’s business or ASML’s
stakeholders.

The Foundation’s objectives are to look after the interests of ASML and the enterprises maintained by and/or affiliated in a
group with ASML, in such a way that the interests of ASML, of those enterprises and of all parties concerned are
safeguarded in the best possible way, and that influences in conflict with these interests, which might affect the
independence or the identity of ASML and those companies, are deterred to the best of the Foundation’s ability, and
everything related to the above or possibly conducive thereto. The Foundation aims to realize its objects by acquiring and
holding cumulative preference shares in the capital of ASML and by exercising the rights attached to these shares,
particularly the voting rights.

The Preference Share Option gives the Foundation the right to acquire such number of cumulative preference shares as
the Foundation will require, provided that the aggregate nominal value of such number of cumulative preference shares
shall not exceed the aggregate nominal value of the ordinary shares issued at the time of exercise of the Preference Share
Option. The subscription price will be equal to their nominal value. Only one-fourth of the subscription price would be
payable at the time of initial issuance of the cumulative preference shares, with the other three-fourths of the nominal value
only being payable when ASML calls up this amount. Exercise of the preference share option could effectively dilute the
voting power of the outstanding ordinary shares by one-half.

Cancellation and repayment of the issued cumulative preference shares by ASML requires authorization by the General
Meeting, on a proposal to this effect made by the Board of Management and approved by the Supervisory Board. If the
Preference Share Option is exercised and as a result cumulative preference shares are issued, ASML will initiate the
repurchase or cancellation of all cumulative preference shares held by the Foundation on the Foundation’s request. In that
case, ASML is obliged to effect the repurchase and respective cancellation as soon as possible. A cancellation will result
in a repayment of the amount paid and exemption from the obligation to pay up on the cumulative preference shares. A
repurchase of the cumulative preference shares can only take place when such shares are fully paid up.

If the Foundation does not request ASML to repurchase or cancel all cumulative preference shares held by the Foundation
within 20 months of issuance of these shares, we will be required to convene a General Meeting for the purpose of
deciding on a repurchase or cancellation of these shares.

The Foundation is independent of ASML. The Board of Directors of the Foundation is composed of four independent
members from the Netherlands’ business and academic communities. The Foundation’s Board of Directors is composed
of the following members: Mr A.P.M. van der Poel, Mr S. Perrick, Mr A.H. Lundqvist and Mr. J. Streppel.

Other than the arrangements made with the Foundation as described above, ASML has not established any other anti-
takeover devices.

Dividend policy
ASML aims to distribute a dividend that will be growing over time, paid semi-annually. On an annual basis, the Board of
Management, upon prior approval from the Supervisory Board, submits a proposal to the AGM with respect to the amount
of dividend to be declared with respect to the prior year, taking into account any interim dividend distributions. The
dividend proposal in any given year will be subject to availability of distributable profits, retained earnings and cash, and
may be affected by, among other things, our view of potential future liquidity requirements including for investments in
production capacity, working capital requirements, the funding of our R&D programs and acquisition opportunities that
may arise from time to time.

189

ASML ANNUAL REPORT 2020ASML intends to declare a total dividend in respect of 2020 of €2.75 per ordinary share. Recognizing the interim dividend
of €1.20 per ordinary share paid in November 2020, this leads to a final dividend proposal to the General Meeting
of €1.55 per ordinary share. This is a 15% increase compared to the 2019 total dividend of €2.40 per ordinary share.

Dividends on ordinary shares are payable out of net income or retained earnings as shown in our Financial Statements as
adopted by our AGM, after payment first of (accumulated) dividends out of net income on any issued cumulative
preference shares.

Purchase of equity securities
In addition to dividend payments, we intend to return cash to our shareholders on a regular basis through share buybacks
or capital repayment, subject to our actual and anticipated level of liquidity requirements and other relevant factors.

On January 22, 2020 we announced a new three year share buyback program, to be executed within the 2020-2022 time
frame pursuant to which ASML expects to purchase shares up to €6 billion, which includes a total of up to 0.4 million
shares to cover employee share plans. ASML intends to cancel the remainder of the shares repurchased.

This program was temporarily paused in the first quarter of 2020 in order to address the uncertainty related to COVID-19,
and subsequently resumed in the fourth quarter of 2020. In 2020 we repurchased 3,908,429 shares (2019:
1,948,808 shares) for a total consideration of €1,207.5 million (2019: €410 million) and cancelled 6,162,395 shares, of
which 4,255,817 shares were repurchased under the 2018-2019 program (2019: 5,806,366 shares canceled).

The remainder of the shares bought back under the 2020-2022 program is intended to be canceled, with the exception of
up to 0.4 million shares, which will be used to cover employee share plans. The share buyback program may be
suspended, modified or discontinued at any time.

The following table provides a summary of shares repurchased by ASML in 2020:

Period

January 23 - 31, 2020
February 1 - 29, 2020

March 1 - 31, 2020

April 1 - 30, 2020

May 1 - 31, 2020

June 1 - 30, 2020

July 1 - 31, 2020

August 1 - 31, 2020

September 1 - 30, 2020

October 1 - 31, 2020

November 1 - 30, 2020

December 1 - 18, 2020

Total

Total number
of shares
purchased

Average
price paid per
Share (€)

Total number
of shares
purchased under
programs

Maximum value
of shares that may yet
be purchased
(€ millions)

371,468
1,071,844

463,235

—

578,776

800,405

622,701

3,908,429

264.49
275.41

246.12

—

320.19

347.77

379.51

308.94

371,468
1,443,312

1,906,547

2,485,323

3,285,728

3,908,429

5,901.8
5,606.5

5,492.5

5,307.2

5,028.9

4,792.5

23. Net income per ordinary share

Basic net income per ordinary share is calculated by dividing net income by the weighted average number of ordinary
shares outstanding for that period.

The dilutive effect is calculated using the treasury stock method by dividing net income by the weighted average number
of ordinary shares outstanding for that period plus shares applicable to options and conditional shares (Dilutive potential
ordinary shares). The calculation of diluted net income per ordinary share does not assume exercise of options when
exercise would be anti-dilutive. Excluded from the diluted weighted average number of shares outstanding calculation are
cumulative preference shares contingently issuable to the preference share foundation, since they represent a different
class of stock than the ordinary shares.

190

ASML ANNUAL REPORT 2020The basic and diluted net income per ordinary share has been calculated as follows:

Year ended December 31 (€, in millions, except per share data)
Net income

2018
2,591.6

2019
2,592.3

2020
3,553.7

Weighted average number of shares outstanding

Basic net income per ordinary share

Weighted average number of shares outstanding
Plus shares applicable to options and conditional shares

Diluted weighted average number of shares

Diluted net income per ordinary share

424.9

6.10

424.9
1.5

426.4

6.08

420.8

6.16

420.8
0.9

421.6

6.15

418.3

8.49

418.3
0.8

419.1

8.48

24. Vulnerability due to certain concentrations

We rely on outside vendors for components and subassemblies used in our systems including the design thereof, each of
which is obtained from a single supplier or a limited number of suppliers. Our reliance on a limited group of suppliers
involves several risks, including a potential inability to obtain an adequate supply of required components, reduced control
over pricing and the risk of untimely delivery of these components and subassemblies.

Carl Zeiss SMT GmbH, in which ASML owns an indirect interest of 24.9%, is our single supplier, and we are their single
customer, of Optical Columns for lithography systems. Carl Zeiss SMT GmbH is capable of developing and producing
these items only in limited numbers and only through the use of manufacturing and testing facilities in Oberkochen and
Wetzlar, Germany.

In 2020, 28.2% of our cost of system sales was purchased from Carl Zeiss SMT GmbH (2019: 28.3%; 2018: 28.3%).

Our relationship with Carl Zeiss AG is structured as a strategic alliance pursuant to several agreements executed in 1997
and subsequent years. These agreements define a framework in all areas of our business relationship. The partnership
between ASML and Carl Zeiss AG is run under the principle of ‘two companies, one business’ and is focused on
continuous improvement of operational excellence. Pursuant to these agreements, ASML and Carl Zeiss AG have agreed
to continue their strategic alliance until either party provides at least three years notice of its intent to terminate.

A constraint in the production could result in limited availability of Optical Columns. During 2020, our production was not
limited by the deliveries from Carl Zeiss SMT GmbH.

For further information on the relationship between ASML and Carl Zeiss SMT GmbH, see Note 10 Equity method
investments and Note 26 Related party transactions.

25. Financial risk management

We are exposed to certain financial risks such as foreign currency risk, interest rate risk, credit risk, liquidity risk and capital
risk. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimize
potentially adverse effects on our financial performance. Our risk management program focuses appropriately on the
current environment of uncertainty in the financial markets.

A key element within our risk management program is our long held prudent financing policy, which is based on three
foundational elements:

• Liquidity: Maintain financial stability with a target to keep our Cash & cash equivalents, together with Short-term

investments, above a minimum range of €2.0 to €2.5 billion

• Capital structure: Maintain a capital structure that targets a solid investment grade credit rating
• Cash return: Provide a sustainable dividend per share that will grow over time, paid semi-annually, while returning

excess cash to shareholders through share buybacks or capital repayment

We use derivative financial instruments to hedge certain risk exposures. None of these transactions are entered into for
trading or speculative purposes. We use market information to determine the fair value of our derivative financial
instruments.

Foreign currency risk management
We are exposed to currency risks. Our Financial Statements are expressed in euros. Accordingly, our results of operations
are exposed to fluctuations in exchange rates between the euro and other currencies. Changes in currency exchange
rates can result in losses in our Financial Statements. We are particularly exposed to fluctuations in the exchange rates
between the US dollar and the euro, and to a lesser extent to the Japanese yen, the South Korean won, the Taiwanese

191

ASML ANNUAL REPORT 2020dollar and Chinese yuan, in relation to the euro. We incur costs of sales predominantly in euros with portions also
denominated in US and Taiwanese dollars. A small portion of our operating results are driven by movements in currencies
other than the euro, US dollar, Japanese yen, South Korean won, Taiwanese dollar or Chinese yuan. In general, our
customers run their businesses in US dollars and therefore a weakening of the US dollar against the euro might impact the
ability or desire of our customers to purchase our products at quoted prices.

Foreign currency sensitivity
The following table details our sensitivity to a 10.0% strengthening of foreign currencies against the euro. The sensitivity
analysis includes foreign currency denominated monetary items outstanding and adjusts their translation at the period end
for a 10.0% strengthening in foreign currency rates. A positive amount indicates an increase in net income or equity.

Year ended December 31 (€, in millions)

2019

2020

US dollar
Japanese yen

Taiwanese dollar
Other currencies

Total

Impact on net
income

Impact on
equity

Impact on net
income

Impact on
equity

(11.5)
4.2

(6.2)
(4.0)

(17.5)

30.2
(0.9)

—
—

29.3

(4.3)
(13.4)

1.3
(3.9)

(20.3)

34.4
—

—
—

34.4

It is our policy to limit the effects of currency exchange rate fluctuations on our Consolidated Statements of Operations.
The impact on net income reflects our net exposure to currencies other than the euro at year-end 2020. The negative
effect on net income as presented in the table above for 2020 is mainly attributable to timing differences between the
arising and hedging of exposures.

The effects of the fair value movements of cash flow hedges, entered into for US dollar transactions are recognized in
equity. The US dollar effect on equity in 2020 compared with 2019 is the result of an increase in outstanding purchase
hedges and increase in outstanding sales hedges.

For a 10.0% weakening of the foreign currencies against the euro, there would be approximately an equal but opposite
effect on net income and equity.

Foreign currency risk policy
It is our policy to hedge material transaction exposures, such as forecasted sales and purchase transactions. We hedge
these exposures through the use of forward foreign exchange contracts.

Foreign exchange contracts
The notional principal amounts of the outstanding forward foreign exchange contracts in the main currencies US dollar,
Japanese yen and Taiwanese dollar at December 31, 2020 are USD 0.4 billion, JPY 15.5 billion and TWD 0.5 billion (2019:
USD 0.2 billion, JPY 8.6 billion and TWD 3.8 billion).

The hedged highly probable forecasted transactions denominated in foreign currency are expected to occur at various
dates during the coming 12 months. Gains and losses recognized in OCI on forward foreign exchange contracts included
in a hedge relationship will be recognized in the Consolidated Statements of Operations in the period during which the
hedged forecasted transactions affect the Consolidated Statements of Operations.

In 2020, we recognized a net amount of €2.3 million gain (2019: €10.7 million gain; 2018: €11.8 million loss) in the
Consolidated Statements of Operations resulting from effective cash flow hedges for forecasted sales and purchase
transactions that occurred in the year. Furthermore, we recognized a net amount of €28.2 million gain in the Consolidated
Statements of Operations resulting from derivative financial instruments measured at fair value through profit or loss (2019:
€12.0 million loss; 2018: €24.2 million gain), which is almost fully offset by the revaluation of the hedged monetary items.

As of December 31, 2020, accumulated OCI includes €26.1 million representing the total anticipated loss to be charged to
cost of sales (2019: gain €2.1 million and 2018: gain €10.9 million) (net of taxes: 2020: loss €22.7 million; 2019: gain €1.8
million; 2018: gain €9.7 million), which will offset the euro equivalent of foreign currency denominated forecasted purchase
transactions. All amounts are expected to be released over the next 12 months. As of December 31, 2020, accumulated
OCI includes gain €0.4 million (2019: loss €1.2 million; 2018: loss €1.4 million), representing the total anticipated gain to be
released to sales. The effectiveness of all contracts for which we apply hedge accounting is monitored on a quarterly basis
throughout the life of the hedges. During 2020, 2019 and 2018, no ineffective hedge relationships were recognized.

Interest rate risk management
We have interest-bearing assets and liabilities that expose us to fluctuations in market interest rates, managed through
interest rate swaps.

192

ASML ANNUAL REPORT 2020Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative financial
and non-derivative financial instruments at the balance sheet date with the stipulated change taking place at the beginning
of the financial year and held constant throughout the reporting period. The table below shows the effect of a 1.0
percentage point increase in interest rates on our net income and equity. A positive amount indicates an increase in net
income and equity.

Year ended December 31 (€, in millions)

Effect of a 1.0% point increase in interest rates

2019

Impact on net
income
17.2

2020

Impact on
equity
—

Impact on net
income
43.5

Impact on
equity
—

The positive effect on net income mainly relates to our total amount of cash and cash equivalents and short-term
investments being higher than our total floating debt position.

For a 1.0 percentage point decrease in interest rates there would be approximately an equal but opposite effect on net
income and equity.

Hedging policy interest rates
We use interest rate swaps to minimize the net interest exposure for the group by aligning the interest terms of the
available cash and the interest bearing debt. There may be residual interest rate risk to the extent the asset and liability
positions do not fully offset.

Interest rate swaps
The notional principal amount of the outstanding interest rate swap contracts as of December 31, 2020 was €3.0 billion
(2019: €3.0 billion). During 2020, these outstanding hedges were highly effective in hedging the fair value exposure to
interest rate movements. The changes in fair value of the Eurobonds were included in the Consolidated Statements of
Operations in the same period as the changes in the fair value of the interest rate swaps. In February and May 2020 we
issued new Eurobonds with fixed interest coupons. We did not enter into interest rate swaps in connection with these
bonds.

Credit risk management
Financial instruments that potentially subject us to significant concentration of credit risk consist principally of Cash and
cash equivalents, Short-term investments, Derivative financial instruments used for hedging activities, Accounts receivable
and Finance receivables and prepayments to suppliers.

Cash and cash equivalents, Short-term investments and Derivative financial instruments contain an element of risk of the
counterparties being unable to meet their obligations. Our risk management program focuses appropriately on the current
environment of uncertainty in the financial markets. We invest our Cash and cash equivalents and Short-term investments
in short-term deposits with financial institutions that have investment grade credit ratings and in government and or
government related bodies that have investment grade credit ratings and in money market and other investment funds
that invest in high-rated debt securities. To mitigate the risk that our counterparties in hedging transactions are unable to
meet their obligations, we enter into transactions with a limited number of major financial institutions that have investment
grade credit ratings and closely monitor their creditworthiness. Concentration risk is mitigated by limiting the exposure to
each of the individual counterparties.

Our customers consist of integrated circuit manufacturers located throughout the world. We perform ongoing credit
evaluations of our customers’ financial condition. We mitigate credit risk through additional measures, including the use of
down payments, letters of credit, and contractual ownership retention provisions. Retention of ownership enables us to
recover the systems in the event a customer defaults on payment.

Liquidity risk management
Our principal sources of liquidity consist of Cash and cash equivalents, Short-term investments and available credit
facilities with a target to keep our Cash & cash equivalents, together with Short-term investments, above a minimum range
of €2.0 to €2.5 billion. In addition, we may from time to time raise additional funding in debt and equity markets. We seek
to ensure that our principal sources of liquidity will be sufficient to satisfy our liquidity requirements at all times.

Our liquidity needs are affected by many factors, some of which are based on the normal on-going 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 these factors, we believe that cash generated from
operations, together with our other sources of liquidity are sufficient to satisfy our current requirements, including our
expected capital expenditures and debt servicing.

We intend to return cash to our shareholders on a regular basis in the form of dividend payments and, subject to our
actual and anticipated liquidity requirements and other relevant factors, share buybacks or capital repayments.

193

ASML ANNUAL REPORT 2020Capital risk management
Our objectives when managing our capital structure are to safeguard our ability to satisfy our capital providers by
maintaining a capital structure that ensures liquidity and supports a solid investment grade credit rating. The capital
structure includes both debt and the components of equity, in accordance with both US GAAP and EU-IFRS. The capital
structure is mainly altered by, among other things, adjusting the amount of dividends paid to shareholders, the amount of
share buybacks or capital repayment, and any changes in the level of debt. Our capital structure is formally reviewed with
the Supervisory Board each year in connection with our updated long term financial plan and relevant scenarios. The
outcome of this year’s review confirmed to maintain our historical financing policy in relation to our capital structure.

Our current credit rating from Moody’s is A3 (stable) and from Fitch is A- (stable), which is consistent with the credit ratings
as of December 31, 2019.

Financial instruments

Accounting Policy - Derivative financial instruments and hedging activities
We measure all derivative financial instruments based on fair values derived from level 2 input criteria. We adopt
hedge accounting for hedges that are highly effective in offsetting the identified hedged risks taking into account
required effectiveness criteria.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and subsequently
remeasured. The method of recognizing the resulting gain or loss depends on whether the derivative is designated
as a hedging instrument, and if so, the nature of the item being hedged. We designate derivatives as one of the
following:

• A hedge of an exposure relating to changes in the fair value of a recognized asset or liability, that is attributable to

a particular risk (fair value hedge).

• A hedge of an exposure relating to the variability in the cash flows of a recognized asset or liability, or of a

forecasted transaction, that is attributable to a particular risk (cash flow hedge).

• A hedge of the foreign currency exposure relating to a net investment in a foreign operation (net investment

hedge).

We assess at the inception of the transaction the relationship between hedging instruments and hedged items, as
well as our risk management objectives and strategy for undertaking various hedging transactions. We also assess,
both at hedge inception and on an ongoing basis, whether derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged items. The cash flows resulting from the
derivative financial instruments are classified in the Consolidated Statements of Cash Flows according to the nature
of the hedged item.

Fair value hedge
Changes in the fair value of a derivative financial instrument, that is designated and qualified as a fair value hedge,
along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in the
Consolidated Statements of Operations.

Hedge accounting is discontinued when we revoke the hedging relationship, the hedging instrument expires or is
sold, terminated or exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of
the hedged item arising from the hedged risk is amortized to the Consolidated Statements of Operations from that
date.

Interest rate swaps that are being used to hedge the fair value of fixed loan coupons payable are designated as fair
value hedges. The change in fair value is intended to offset the change in the fair value of the underlying fixed loan
coupons, which is recorded accordingly. The gain or loss relating to the ineffective portion of interest rate swaps
hedging fixed loan coupons payable is recognized in the Consolidated Statements of Operations as interest and
other, net.

Cash flow hedge
Changes in the fair value of a derivative that is designated and qualified as a cash flow hedge are recorded in OCI,
net of taxes, until the underlying hedged transaction is recognized in the Consolidated Statements of Operations. In
the event that the underlying hedge transaction will not occur within the specified time period, the gain or loss on the
related cash flow hedge is released from OCI and included in the Consolidated Statements of Operations, unless
extenuating circumstances exist that are related to the nature of the forecasted transaction and are outside our
control or influence and which cause the forecasted transaction to be probable of occurring on a date that is beyond
the specified time period.

Foreign currency hedging instruments that are being used to hedge cash flows related to forecasted sales or
purchase transactions in non-functional currencies are designated as cash flow hedges. The gain or loss relating to
the ineffective portion of the foreign currency hedging instruments is recognized in the Consolidated Statements of
Operations in Net sales or Cost of sales.

194

ASML ANNUAL REPORT 2020Fair values of the derivatives
The following table summarizes the notional amounts and estimated fair values of our derivative financial instruments:

Year ended December 31 (€, in millions)

2019

2020

Forward foreign exchange contracts
Interest rate swaps

Notional
amount

142.6
3,000.0

Fair Value

(0.7)
134.3

Notional
amount

182.0
3,000.0

Fair Value

(17.6)
160.4

The following table summarizes our derivative financial instruments per category:

Year ended December 31 (€, in millions)

2019

2020

Interest rate swaps — fair value hedges
Forward foreign exchange contracts — cash flow hedges
Forward foreign exchange contracts — no hedge accounting

Total
Less non-current portion:
Interest rate swaps — fair value hedges

Total non-current portion
Total current portion

Assets

Liabilities

Assets

Liabilities

134.3
2.4
0.8

137.5

103.0

103.0
34.5

—
0.6
3.3

3.9

—

—
3.9

160.4
0.9
1.5

162.8

123.8

123.8
39.0

—
15.1
4.9

20.0

—

—
20.0

The fair value part of a hedging derivative financial instrument that has a remaining term of 12 months or less after balance
sheet date is classified as current asset or liability. When the fair value part of a hedging derivative has a term of more than
12 months after balance sheet date, it is classified as non-current asset or liability. Derivative financial instruments are
included in Other assets and Accrued and other liabilities in the Consolidated Balance Sheets, split between current and
non-current.

Fair value measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement hierarchy prioritizes the inputs to valuation
techniques used to measure fair value as follows:

• Level 1: Valuations based on inputs such as quoted prices for identical assets or liabilities in active markets that the

entity has the ability to access.

• Level 2: Valuations based on inputs other than level 1 inputs such as quoted prices for similar assets or liabilities,

quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable
data for substantially the full term of the assets or liabilities.

• Level 3: Valuations based on inputs that are supported by little or no market activity and that are significant to the fair

value of the assets or liabilities.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instrument’s fair value classification is
based on the lowest level of any input that is significant in the fair value measurement hierarchy.

Financial assets and financial liabilities measured at fair value on a recurring basis
Investments in money market funds (included in our Cash and cash equivalents) have fair value measurements which are
all based on quoted prices for identical assets or liabilities.

Our Short-term investments consist of deposits with original maturities to the entity holding the investments longer than 3
months and one year or less at the date of acquisition with financial institutions that have investment grade credit ratings.
The fair value of the deposits is determined with reference to quoted market prices in an active market for similar assets or
discounted cash flow analysis.

The principal market in which we execute our derivative contracts is the institutional market in an over-the-counter
environment with a high level of price transparency. The market participants usually are large commercial banks. The
valuation inputs for our derivative contracts are based on quoted prices and quoting pricing intervals from public data
sources; they do not involve management judgment.

The valuation technique used to determine the fair value of forward foreign exchange contracts (used for hedging
purposes) approximates the net present value technique which is the estimated amount that a bank would receive or pay
to terminate the forward foreign exchange contracts at the reporting date, taking into account current interest rates and
current exchange rates.

195

ASML ANNUAL REPORT 2020The valuation technique used to determine the fair value of interest rate swaps (used for hedging purposes) is the net
present value technique, which is the estimated amount that a bank would receive or pay to terminate the swap
agreements at the reporting date, taking into account current interest rates.

Our Eurobonds serve as hedged items in fair value hedge relationships in which we hedge the variability of changes in the
fair value of our Eurobonds due to changes in market interest rates with interest rate swaps. The fair values of these
interest rate swaps are recorded on the Consolidated Balance Sheets under derivative financial instruments (within other
current and non-current assets and other current and non-current liabilities) and the carrying amounts of the Eurobonds
are adjusted for the effective portion of these fair value changes only. For the actual aggregate carrying amount and the
fair value of our Eurobonds, see Note 16 Long-term debt and interest and other costs.

The following tables present our financial assets and financial liabilities that are measured at fair value on a recurring basis:

Year ended December 31, 2020 (€, in millions)
Assets measured at fair value
Derivative financial instruments
Money market funds
Short-term investments

Total
Liabilities measured at fair value
Derivative financial instruments

Assets and Liabilities for which fair values are disclosed
Long-term debt 1

1. Long-term debt relates to Eurobonds. See Note 16 Long-term debt and interest and other costs.

Year ended December 31, 2019 (€, in millions)
Assets measured at fair value
Derivative financial instruments
Money market funds
Short-term investments

Total
Liabilities measured at fair value
Derivative financial instruments

Assets and Liabilities for which fair values are disclosed
Long-term debt 1

1. Long-term debt relates to Eurobonds. See Note 16 Long-term debt and interest and other costs.

Level 1

Level 2

Level 3

Total

—
3,841.9
—

3,841.9

—

4,798.8

162.8
—
1,302.2

1,465.0

20.0

—

—
—
—

—

162.8

3,841.9
1,302.2

5,306.9

20.0

4,798.8

Level 1

Level 2

Level 3

Total

—
2,139.7
—

2,139.7

—

3,247.7

137.5
—
1,185.8

1,323.3

3.9

—

—
—
—

—

137.5

2,139.7
1,185.8

3,463.0

3.9

3,247.7

There were no transfers between levels during the years ended December 31, 2020 and December 31, 2019.

Financial assets and financial liabilities that are not measured at fair value
The carrying amount of Cash and cash equivalents, Accounts payable, and other current financial assets and liabilities
approximate their fair value because of the short-term nature of these instruments.

Money market and investment funds measurement
The money market and investment funds qualify as available for sale securities. The fair value is close to the carrying value
due to short term nature and since related to investment with investment grade credit ratings. Allowances for credit losses
and total unrealized gains and losses are close to nil. These money market funds can be called on a daily basis.
Investments and redemptions in money market funds are managed on a daily basis based triggered through actual cash
balances. Realized gain and losses on these money market funds are not significant given low interest rates and high
credit ratings. Costs of securities were close to nil. ASML does not have trading securities as of December 31, 2020.

Deposits measurement
The deposits as part of the Cash and cash equivalents and Short term investments qualify as securities held to maturity.
The amortized cost value is close to the fair value and carrying value due to short term nature and since related to
investment with investment grade credit ratings. Allowance for credit losses and total unrealized gains and losses are
close to nil. Maturities are shorter than one year. No held to maturity securities were sold before expiration date.

Assets and liabilities measured at fair value on a non-recurring basis
In 2019 and 2020, we had no significant fair value measurements on a non-recurring basis from regular business activities.
We did not recognize any impairment charges for goodwill and other intangible assets during 2019 and 2020. For fair
value measurements in relation to the acquisition of Berliner Glas, we refer to Note 2 Business Combinations.

196

ASML ANNUAL REPORT 202026. Related party transactions

We have a 24.9% interest in Carl Zeiss SMT Holding GmbH & Co. KG, which owns 100% of the shares in Carl Zeiss SMT
GmbH. Based on the 24.9% investment, Carl Zeiss SMT Holding GmbH & Co. KG and its subsidiaries are considered
related parties.

On November 3, 2016 we agreed with Carl Zeiss SMT GmbH to support their R&D costs, capital expenditures and supply
chain investments, in respect of High-NA, for an amount initially estimated at €760.0 million. The current estimate as of
December 31, 2020 is €1,354.8 million (2019: €1,242.2 million). As of December 31, 2020 our estimated remaining
commitment to Carl Zeiss SMT GmbH is €319.9 million (2019: €524.8 million).

The table below summarizes support provided to Carl Zeiss SMT GmbH, by type:

Year ended December 31 (€, in millions)
Capital expenditures
R&D costs
Supply chain investments

Total support provided

2018
191.8
74.8
8.5

275.1

2019
184.1
94.2
4.5

282.8

2020
203.7
96.1
17.7

317.5

In 2018, ASML and Carl Zeiss SMT GmbH entered into an agreement for ASML to support the development and
integration of certain tooling to be used in future production of High-NA optical columns, for which Carl Zeiss SMT GmbH
has agreed to reimburse all costs to ASML. Receivable amounts from Carl Zeiss SMT GmbH are presented within Other
Assets.

The total purchases and outstanding balances with Carl Zeiss SMT Holding GmbH & Co. KG and its subsidiaries:

Year ended December 31 (€, in millions)
Total purchases

2018
1,401.0

2019
1,502.3

2020
1,623.9

Year ended December 31 (€, in millions)
Advance payments and High-NA capital expenditure support
Right-of-use assets - Finance
Accounts payable

2019
814.5
107.6
127.4

2020
986.6
149.9
110.9

For more details on our 24.9% interest in Carl Zeiss SMT Holding GmbH & Co. KG see Note 10 Equity method
investments.

There have been no transactions between ASML or any of its subsidiaries, any other significant shareholder, any director
or officer, or any relative or spouse thereof, other than ordinary course (compensation) arrangements. During our most
recent fiscal year, there has been no, and at present there is no, outstanding indebtedness to ASML owed by or owing to
any director or officer of ASML or any associate thereof, other than the virtual financing arrangement with respect to
shares described under Note 19 Employee benefits. Furthermore, ASML has not granted any personal loans, guarantees,
or the like to members of the Board of Management or Supervisory Board.

197

ASML ANNUAL REPORT 202027. Subsequent events

Subsequent events were evaluated up to February 10, 2021, which is the date the Financial Statements included in this
Annual Report were approved. There are no events to report.

Veldhoven, the Netherlands
February 10, 2021

/s/ Peter T.F.M. Wennink
Peter T.F.M. Wennink
President, CEO and member of the Board of Management

/s/ Roger J.M. Dassen
Roger J.M. Dassen
Executive Vice President, CFO and member of the Board of Management

198

ASML ANNUAL REPORT 2020Non-financial
statements

199

ASML ANNUAL REPORT 2020Assurance Report of the
Independent Auditor

To the Shareholders and the Supervisory Board of ASML
Holding N.V.:

section ‘About the non-financial information’ of the Annual
Report.

Our conclusion
We have reviewed the non-financial information (hereafter:
the Non-financial Information) of the ‘Annual Report 2020’
of ASML Holding N.V (hereafter: the Company) for the year
ended December 31, 2020 in accordance with U.S.
generally accepted accounting principles (hereafter: the
Annual Report). A review is aimed at obtaining a limited
level of assurance.

Materiality
Based on our professional judgement we determined
materiality levels for each relevant part of the Annual
Report and for the non-financial information as a whole.
When evaluating our materiality levels, we have taken into
account quantitative and qualitative considerations as well
as the relevance of information for both stakeholders and
the Company.

Based on the procedures performed nothing has come to
our attention that causes us to believe that the non-
financial information is not prepared, in all material
respects, in accordance with the applicable criteria as
described in the ‘Applicable criteria’ section of our report.

The non-financial information consists of: 2020 at a
The non-financial information consists of: 2020 at a
glance (pages 4-8), Who we are and what we do (pages
glance (pages 5-9), Who we are and what we do (pages
9-25), What we achieved in 2020 (pages 26-72), How we
10-27), What we achieved in 2020 (pages 28-74), How we
manage risk (pages 86-88), Responsible business (pages
manage risk (pages 90-92), Responsible business (pages
99-103) and the Non-financial statements (pages 199-224).
104-108) and the Non-financial statements (pages 206-
227).
Basis for our conclusion
We performed our review in accordance with Dutch law,
including Dutch Standard 3810N: "Assurance
engagements relating to sustainability reports", which is a
specified Dutch standard that is based on the International
Standard on Assurance Engagements (ISAE) 3000:
"Assurance Engagements other than Audits or Reviews of
Historical Financial Information (Attestation engagements)".

Our responsibilities in this regard are further described in
the ‘Auditor’s responsibilities’ section of our report.

We are independent of ASML Holding N.V. in accordance
with the ‘Verordening inzake de onafhankelijkheid van
accountants bij assurance-opdrachten’ (ViO, Code of
Ethics for Professional Accountants, a regulation with
respect to independence). Furthermore, we have complied
with the ‘Verordening gedrags- en beroepsregels
accountants’ (VGBA, Dutch Code of Ethics).

We believe the assurance evidence we have obtained is
enough and appropriate to provide a basis for our
conclusion.

Applicable criteria
The non-financial information needs to be read and
understood together with the reporting criteria. The
Company is solely responsible for selecting and applying
these reporting criteria, taking into account applicable law
and regulations related to reporting.

The reporting criteria used for the preparation of the non-
financial information are the Sustainability Reporting
Standards of the Global Reporting Initiative (GRI) and the
applied supplemental reporting criteria as disclosed in

We agreed with the Supervisory Board that misstatements
which are identified during the review and which in our
view must be reported on quantitative or qualitative
grounds, would be reported to them.

Scope of the group review
ASML Holding N.V. is the parent company of a group of
entities. The non-financial information incorporates the
consolidated information of this group of entities to the
extent as specified in 'About the non-financial information’
of the Annual Report.

Our group review procedures consisted of both review
procedures at corporate (consolidated) level and at site
level. Our selection of sites in scope of our review
procedures is primarily based on the site’s individual
contribution to the consolidated information.

By performing our review procedures at site level, together
with additional review procedures at corporate level, we
have been able to obtain sufficient and appropriate
assurance evidence about the group’s non-financial
information to provide a conclusion about the non-financial
information.

Limitations to the scope of our review
The non-financial information includes prospective
information such as ambitions, strategy, plans,
expectations and estimates. Inherently the actual future
results are uncertain. We do not provide any assurance on
the assumptions and achievability of prospective
information in the non-financial information.

References to external sources or websites in the non-
financial information are not part of the non-financial
information itself as reviewed by us. Therefore, we do not
provide assurance on this information.

Board of Management's responsibilities
The Board of Management of the Company is responsible
for the preparation of the non-financial information in
accordance with the applicable criteria as described in the
‘Applicable criteria’ section of our report, including the
identification of stakeholders and the definition of material
matters. The choices made by the Board of Management
regarding the scope of the Annual Report and the reporting

200

ASML ANNUAL REPORT 2020policy are summarized in section ‘About the non-financial
information’ of the Annual Report.

Furthermore, the Board of Management is responsible for
such internal control as it determines is necessary to
enable the preparation of the non-financial information that
is free from material misstatement, whether due to fraud or
error.

The Board of Management is, amongst other things,
responsible for overseeing the Company’s reporting
process.

Auditor’s responsibilities
Our responsibility is to plan and perform our review in a
manner that allows us to obtain sufficient and appropriate
assurance evidence for our conclusion.

Procedures performed to obtain a limited level of
assurance are aimed to determine the plausibility of
information and vary in nature and timing, and are less in
extent, compared to a reasonable assurance engagement.
The level of assurance obtained in a limited assurance
engagement is substantially lower than the assurance that
would have been obtained had a reasonable assurance
engagement been performed.

We apply the ‘Nadere Voorschriften Kwaliteitssystemen’
(NVKS, Regulations for Quality management systems) and
accordingly maintain a comprehensive system of quality
control including documented policies and procedures
regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory
requirements.

• Identifying areas of the non-financial information where
a material misstatement, whether due to fraud or error,
are most likely to occur, designing and performing
assurance procedures responsive to these areas, and
obtaining assurance information that is enough and
appropriate to provide a basis for our conclusion. These
procedures included, amongst others:

–

Interviewing management and relevant staff
at corporate level responsible for the strategy,
policy and results;
Interviewing relevant staff responsible for
providing the information for, carrying out internal
control procedures over, and consolidating the
data in the non-financial information;

– Obtaining assurance information that the non-

financial information reconciles with underlying
records of the Company;

– Reviewing, on a limited test basis, relevant
internal and external documentation;

– Performing analytical reviews of the data and

trends.

• Evaluating the consistency of the non-financial

information with the information in the report which is
not included in the scope of our review;

• Evaluating the presentation, structure and content of the

non-financial information;

• Considering whether the non-financial information as a
whole, including the disclosures, reflects the purpose of
the reporting criteria used.

We have communicated with the Supervisory Board
regarding, among other matters, the planned scope and
timing of the review and significant findings that we identify
during our review.

We have exercised professional judgment and have
maintained professional skepticism throughout the review,
in accordance with the Dutch Standard 3810N, ethical
requirements and independence requirements.

Rotterdam, February 10, 2021
KPMG Accountants N.V.
J. van Delden RA

Our review included among others:

• Performing an analysis of the external environment and
obtaining an understanding of relevant societal themes
and issues, and the characteristics of the Company;

• Evaluating the appropriateness of the reporting

criteria used, their consistent application and related
disclosures in the Annual Report. This includes the
evaluation of the results of stakeholder dialogue and
the reasonableness of estimates made by the Board of
Management;

• Obtaining an understanding of the reporting processes
for the non-financial information, including obtaining a
general understanding of internal control relevant to our
review;

201

ASML ANNUAL REPORT 2020About the non-financial
information

Reporting scope
The content disclosed in this Annual Report1 is based on
the material topics identified for both ASML and our
stakeholders by the comprehensive materiality assessment
conducted in 2018. As part of the materiality assessment,
we asked internal and external stakeholders to identify
where in the value chain the theme has an impact (see
table in section Non-financial statements - Materiality:
assessing our impact, where we include the boundaries as
required by the GRI Standards). For more information on
the materiality assessment process, see Non-financial
statements - Materiality: assessing our impact.

The materiality assessment was used as input for the new
sustainability strategy setting for the period 2019-2025.
New (key) performance indicators have been determined to
report on our performance in the area of sustainability. No
comparative results for 2018 are shown for new indicators
not previously disclosed.

The Reporting scope table (see next page) clarifies the
scope of the data reported per theme and explains where
the scope of the data provided differs from the scope of
the report’s content. Our acquisition of Berliner Glas closed
on October 30, and as a result the non-financial indicators
reported do not include any impact from Berliner Glas.

This Annual Report generally covers the performance of
ASML from January 1, 2020 to December 31, 2020. Please
see Who we are and what we do - Our company for
significant changes regarding the size, structure, or
ownership of the organization or its supply chain.

The financial information in this report is derived from our
Financial Statements that are in accordance with US GAAP.
The reporting basis for the information in this report on our
performance in the area of sustainability is prepared in
accordance with the GRI Sustainability Reporting
Standards and is presented in accordance with the ‘core’
option. Details of our compliance with the GRI standards
(GRI content index) can be found in a separate Reporting
Supplement available on the Website. We have also
included disclosures required as part of the EU Directive
on disclosure of non-financial information and diversity
information. This disclosure was implemented in 2017 and
is decreed as part of the Dutch Civil Code.

1. We publish two versions of the Annual Report: one version containing

Financial Statements based on US GAAP and one version containing Financial
Statements based on EU-IFRS.

Reporting process
Each theme has an owner who is responsible for the theme
ambition, strategy and relevant performance indicators, as
well as the timely delivery of content and relevant data for
reporting and monitoring the execution of the strategy. The
data is reviewed and consolidated by Finance. Finance is
also responsible for the reporting and planning process for
the Annual Report.

Reporting indicators
The Consolidated Financial Statements included in this
report are audited. Please see Consolidated Financial
Statements - Report of Independent Registered Public
Accounting Firm.

The non-financial data disclosed in this report is derived
from various sources and the way data is processed differs
within our operating subsidiaries and departments. This
causes a degree of uncertainty, because of limitations in
measuring and estimating data. We continue to work on
improving our sustainability control environment and data
collection processes.

Scope 3 emissions
One of our reporting indicators is scope 3 emissions.
See What we achieved in 2020 - Climate and energy -
Reviewing our value-chain carbon footprint

The emissions reported are in line with the Greenhouse
Gas (GHG) Protocol and are calculated for nine categories,
as described in the Scope 3 Accounting and Reporting
Standard issued by GHG Protocol, which are deemed
relevant to us and our value chain. The categories are:
Cat.1 Purchased goods and services, Cat.2 Capital goods,
Cat.3 Fuel- and energy- related activities, Cat.4 and Cat.9
Upstream / Downstream transportation & distribution,
Cat.5 Waste generated in operations, Cat.6 Business
travel, Cat.7 Employee commuting, Cat.11 Use of sold
products, and Cat.12 End-of-life treatment of sold
products. The remaining five categories are deemed
irrelevant or immaterial to ASML and our value chain.
Therefore we exclude these categories from our Scope 3
emissions assessment.

The applied emission factors used to calculate our value
chain carbon footprint are from the latest DEFRA (UK
Department for Environment, Food & Rural Affairs) 2020
emission factors.

Data reliability: The basis for the calculation method
applied for scope 3, Cat.1 Purchased goods and services
is based on spend. As a result, it relies on expenditure-
based emission factors, which is an indirect measure of
GHG intensity of goods and services. In addition, we have
gathered actual emissions data from our suppliers for Cat.4
Upstream transportation & distribution and Cat.6 Business
travel, which accounts for around 5% of total Scope 3
emissions.

202

ASML ANNUAL REPORT 2020Reporting scope table
The below table clarifies the scope of the data reported per theme and explains where the scope of the data provided
differs from the scope of the report’s content.

Non-financial (sub)chapter
Technology and innovation ecosystem

Scope

Where we innovate

ASML worldwide

Collaborating with R&D partners

ASML worldwide excluding HMI

Product safety

ASML products

Supporting start-ups and scale-ups

ASML worldwide – NOTE: Scope of indicators is ASML Netherlands only

Customer intimacy

Operational excellence

Our people

Employee engagement

Strong employer branding

Promoting diversity and inclusion

Ensuring employee safety

Labor relations and fair remuneration

Community engagement

ASML worldwide

ASML worldwide – NOTE: The indicator ‘Absenteeism’ is excluding Cymer and HMI. The
scope for indicator Open positions filled by internal candidates (in %) excludes ASML US.

ASML worldwide

ASML worldwide – NOTE: The scope is ASML Netherlands for all, except for Time
investment of volunteers (in hours) – Community Involvement and total costs of
volunteering, which is ASML worldwide excluding HMI.

Our supply chain

ASML worldwide

Responsible Supply Chain

ASML worldwide excluding HMI

Circular procurement and conflict minerals

ASML worldwide

Circular economy

Reduce waste

ASML main manufacturing locations : Veldhoven (the Netherlands), Linkou (Taiwan), Wilton
and San Diego (US)

Accelerate re-use of parts and materials

ASML products

Lifetime Extension of Mature Products

ASML products

Climate and energy

Climate change risk and opportunities

ASML worldwide

Energy efficiency of our products

ASML products

Greenhouse gas emissions from operations

ASML main manufacturing locations : Veldhoven (the Netherlands), Linkou (Taiwan), Wilton
and San Diego (US)

Reviewing our value chain carbon footprint

ASML worldwide

Water management

Governance

Responsible business

Financial performance

ASML main manufacturing locations: Veldhoven (the Netherlands), Linkou (Taiwan), Wilton
and San Diego (US) – except for Total Ultra-pure water consumption and Total water
recycled and re-used, which is Veldhoven (the Netherlands) and Linkou (Taiwan) only.

ASML worldwide

Financial performance indicators

ASML worldwide

Scope changes
Compared to the 2020 Annual Report, the following scope changes have been made:

• Scholarships in previous years we only reported on the scholarships in the Netherlands but starting from 2020 the

reporting scope will be worldwide.

Verification of this report
As requested by our Board of Management, our non-financial information has been independently reviewed. Our external
auditor (KPMG) was asked to provide this assurance. For KPMG’s assurance report, including details of the work they
carried out, see Non-financial statements - Assurance Report of the Independent Auditor.

203

ASML ANNUAL REPORT 2020Non-financial indicators

The non-financial Key Performance Indicators (KPIs) are reported in the different chapters of our sustainability reporting within What we achieved in 2020. The other non-financial
performance indicators (PIs) are reported in the tables below. No comparative results for 2018 are shown for new indicators not previously disclosed. Our acquisition of Berliner Glas
closed on October 30, and as a result the non-financial indicators reported do not include any impact from Berliner Glas.

Technology and innovation ecosystem - Product safety

Description

2018

2019

2020 Comments

Percentage of product types shipped that have a SEMI S2 Safety
Guidelines compliance report
Number of (significant) fines for non-compliance with product design
related laws and regulations
% RoHS compliant parts

% RoHS non-compliant parts
% RoHS unknown

Total

Our people - Workforce indicators

Number of FTEs (payroll and temporary)

Payroll employees (in FTE)

Female (in %)

Male (in %)

Temporary employees (in FTE)
Female (in %)

Male (in %)

Total

Number of FTEs (by age group)

< 30

30 - 50

> 50

Unknown 1

Total

In the US, it is not mandatory to register the age for temporary employees.

100.0% 100.0% 100.0%

91.6% 95.4% 96.0%
0.4%
0.3%
4.2%
3.7%

0.8%
7.6%

100.0% 100.0% 100.0%

Total ASML

2018

2019

2020

20,044

23,219

25,082

2018

5,305

3,203

1,681

1,399

Asia

2019

5,664

Europe

2020

6,027

2018

2019

2020

9,950

12,393

13,627

2,752

1,339

1,087

2019

5,162

274

2018

4,789

366

2020

5,428

282

23,247

24,900

26,481

5,390

5,732

6,057

12,702

13,732

14,714

5,155

5,436

5,710

Total ASML
2019

2018

2020

2018

4,820

4,894

4,798

14,338

15,606

16,848

3,730

4,130

4,556

359

270

279

1,670

3,556

164

—

Asia
2019

1,628

3,902

201

2020

2018

1,518

4,300

238

2,346

8,197

2,159

—

Europe
2019

2,378

8,924

2,430

—

2020

2018

2,381

9,615

2,718

804

2,584

1,408

359

US
2019

888

2,780

1,499

269

2020

899

2,933

1,600

278

23,247

24,900

26,481

5,390

5,732

6,057

12,702

13,732

14,714

5,155

5,436

5,710

ASML ANNUAL REPORT 2020

204

Our people - Workforce indicators

Number of payroll FTEs (split in full-time and part-time)

2018

2019

2020

2018

2019

2020

2018

2019

2020

2018

2019

2020

Total ASML

Asia

Europe

Full-time payroll FTEs (by age group)

< 30

30 - 50

> 50

Total

Full-time payroll FTEs (by gender)
Female (in %)

Male (in %)

Part-time payroll FTEs (by age group)
< 30

30 - 50

> 50
Unknown

Total

Part-time payroll FTEs (by gender)

Female (in %)

Male (in %)

Our people - Workforce indicators

Number of new hires payroll employees (in FTEs)

Number of new hires
Rate of new hires (in %)

Gender
Female
Male

Total

Age group

< 30

30 - 50

> 50

Total

ASML ANNUAL REPORT 2020

3,737

4,397

4,351

11,831

13,567

14,938

3,193

3,674

4,028

1,635

3,506

159

1,612

3,856

193

1,512

4,280

232

1,300

5,747

1,634

1,898

6,937

1,988

1,941

7,730

2,207

18,761

21,638

23,317

5,300

5,661

6,024

8,681

10,823

11,878

802

2,578

1,400

4,780

887

2,774

1,493

5,154

898

2,928

1,589

5,415

1,035

1,264

1,337

214
1

276
—

389
—

1,283

1,581

1,765

Total ASML

2018

3,479
17

746
2,733

3,479

1,666

1,636

177

2019

2,219
10

542
1,677

2,219

923

1,136

160

2020

1,932
8

454
1,478

1,932

854

947

131

2
—

2018

1,299
24

234
1,065

1,299

783

508

3,479

2,219

1,932

1,299

2
—

Asia

2019

558
10

123
435

558

318

233

558

2
—

1,030

1,259

1,332

207
—

270
—

378
—

1,269

1,570

1,749

—

100

Europe

2019

1,102
9

280
822

1,102

380

643

2018

1,348
14

332
1,016

1,348

522

750

1,348

1,102

2020

598
10

123
475

598

338

253

598

2020

879
6

216
663

879

329

491

879

6
—

2018

832
17

180
652

832

361

378

832

4
—

2019

559
11

139
420

559

225

260

559

9
—

2020

455
8

115
340

455

187

203

455

205

Our people - Workforce indicators

Employee attrition (in FTE)

Number of involuntary employee attrition

Number of voluntary employee attrition

Total

Gender

Female

Male

Total

Age group

< 30

30 - 50

> 50

Total

Our people - Employee engagement

Engagement score We@ASML by gender

Female

Male

Our people - Employee engagement

Description

Employee Attrition (in %)

Attrition rate of high performers (in %)

Promotion rate - Overall (in %)
Promotion rate of high performers (in %)

Absenteeism (in %)
Asia 1
Europe

Total ASML

Asia

Europe

2018

2019

2020

2018

2019

2020

2018

2019

2020

2018

2019

2020

153

679

832

151

681

832

183

478

171

832

177

761

938

196

742

938

219

519

200

938

186

723

909

189

720

909

218

479

212

909

232

267

222

267

104

149

267

198

238

183

238

144

238

201

239

183

239

149

239

176

245

197

245

158

245

257

337

265

337

198

337

102

239

341

272

341

179

341

271

320

262

320

171

320

306

363

294

363

177

106

363

283

329

265

329

151

100

329

2018

—

2019

75%

77%

2020 Comments

80%

2018

2019

2020 Comments

A high performer is an employee with the merit classification 'exceptional' or 'exceeds expectations'
from the annual employee performance evaluation

4.7

2.2

0.3
2.5

1.5

4.3

2.4

0.4
2.6

1.6

3.8

1.7

0.5
2.3

1.3

In some Asian countries sick leave is regarded as annual leave, hence illness-related absenteeism is recorded as 0%.

ASML ANNUAL REPORT 2020

206

Our people - Employee engagement

Description

2018

2019

2020 Comments

Open positions filled by internal candidates (in %)
Rotation ratio (in %)

Human Capital Return On Investment (ROI) 1

People Performance Management process completion (in %)
Development Action Plan completion (in %)

Scholarships
Number of scholarships Netherlands

Number of scholarships US

Number of scholarships Taiwan
Number of scholarships China

Number of scholarships South Korea

—
—

—

36
18

2.1

—

30 Worldwide average for Asia and Europe. US is excluded because the data is not yet available
20

2.4

Represents the degree to which economic value is derived from profitability in relation to human
capital costs

0 Delayed because of COVID-19, expected to start in 2021

1. Human Capital Return on Investment is calculated as total net sales minus total operating expenses excluding total employee salaries & benefits, divided by total employee salaries & benefits.

ASML ANNUAL REPORT 2020

207

Our people - Employee engagement

Description

Total training expenses (in million €)

Average spent on training and development per FTE (€)

Number of total training hours per FTE

Female

Male

Total

Number of technical training hours per technical FTE 1

Female
Male

Total

Number of non-product related training hours per FTE

Female
Male

Total

2018

2019

2020 Comments

—

44
30

12
8

836

494

Out-of-pocket expenses for technical and non-product related classroom trainings as recorded in
MyLearning (learning management system)

Includes technical and non-product related training hours (including nomination courses)

35
41

13
8

22
27

7
4

Excluding nomination courses (leadership development programs)

Nomination courses: Leadership Development Programs

Number of training hours

Number of employees attending (unique)

24,738

33,715

22,896

331

387

216

1. The number of technical training hours per FTE is calculated as the total technical training hours divided by the total payroll FTEs working in technical departments within Operations and R&D.

ASML ANNUAL REPORT 2020

208

Our people - Diversity & inclusion

Description
Male/female in managerial positions and in Supervisory Board (in
headcount) 1
Supervisory Board

Board of Management
Senior Management

Middle Management

Junior Management

Other

Total

Gender

Gender ratio

Age group

Female

Male

Total

Female

Male

< 30

30 - 50

>50

Total

—

310

200

504

2,315

1,066

562

2,625

1,266

3,878

17,167

21,045

4,449

21,064

25,513

33%

—%

10%

12%

16%

18%

17%

67%

100%

90%

88%

84%

82%

83%

—

250

1,613

1,064

312

1,010

180

562

2,625

1,266

4,385

13,657

3,003

21,045

4,409

16,585

4,519

25,513

Gender

Gender ratio

Male/female split by sector (in FTE)

Female

Male

Total

Female

Male

Customer Support

Manufacturing and Supply Chain Management

Research & Development

General & Administrative

Sales and Mature Product Services

Strategic Supply Management

Total

1. Temporary employees are not included in the headcount numbers.

681

1,295

1,464

856

100

5,617

5,325

9,079

1,176

542

255

6,298

6,620

10,543

2,032

642

346

4,487

21,994

26,481

11%

20%

14%

42%

16%

26%

17%

89%

80%

86%

58%

84%

74%

83%

ASML ANNUAL REPORT 2020

209

Our people - Diversity & inclusion
Description

Workforce by gender male / female (in %)
Female

Male

Total

Number of nationalities working for ASML

Asia

Europe

Total

Foreign nationals working for ASML (in %) 1

Asia

Europe

Total

2018

2019

2020 Comments

100

105

123

100

103

118

100

103

120

1. Foreign nationals working for ASML (in%) is the percentage of payroll and temporary employees with another nationality than the country in which the employee is working.

Our people - Labor relations

Description

Percentage of employees covered by collective bargaining agreements

2018

48%

2019

52%

2020 Comments

53%

ASML ANNUAL REPORT 2020

210

Our people - Fair remuneration

Description

Ratio of base salary of women to men 1,2

Senior Management 3
Middle Management 3
Non-management 3
Ratio of total cash of women to men 1,4
Senior Management 5
Middle Management 5
Non-Management 5

Internal pay ratio (CEO versus employee remuneration)

2018

2019

2020 Comments

107%

99%

100%

103%

99%

98%

—

102%

98%

—

98%

99% Calculation method has been changed compared to 2019 see footnote 3
98%

98%

99% Total cash is base salary plus short-term incentive
98% Total cash is base salary plus short-term incentive
97%

40 For more information, see Leadership and governance - Remuneration Report

1. The base salary and total cash used for the calculation in the reporting year consists of the actual base salaries and total cash paid in the previous reporting year.
2.

In 2020 the definition for the ratio of base salary women to men has changed and is calculated as: average weighted salary female/average weighted salary male * 100%. In 2018 and 2019 the ratio of the base salary women to men was calculated as: average
salary per grade female/ average salary per grade male *100%.

3. The recalculated ratio of base salary of women to men for 2019 of senior management is 99%. The recalculation does not impact the 2019 PI for middle management and non-management.
4.

In 2020 the definition for the ratio of total cash women to men has changed and is calculated as: average weighted salary including bonus female/average weighted salary including bonus male * 100%. In 2018 & 2019 the ratio of the base salary women to men
was calculated as: average salary per grade including bonus female/ average salary per grade including bonus male *100%.

5. The recalculated ratio of total cash of women to men for 2019 PI of senior management is 96%. The recalculation does not impact the 2019 PI for middle management and non-management.

Our people - Community engagement

Description

2018

2019

2020 Comments

Number of students reached
Time investment of volunteers (in hours) - Technology promotion and
Campus promotion
Time investment of volunteers (in hours) - Community Involvement

Cash commitments - Charity (x €1,000)

Cash commitments - Sponsorship (x €1,000)
Total cost of volunteering (x €1,000)

11,694

8,998

13,378

5,257

5,445

5,434

700

784
—

7,664

705

3,416
772

2,936

1,333

701

3,076
271

ASML ANNUAL REPORT 2020

211

Our people - Employee safety
Description

ASML recordable incident rate
Number of recordable incidents
Number of fatalities

Number of recordable incidents by region:
Asia

Europe

Number of first-aid incidents per body part affected:
Head

Eyes

Shoulder

Chest

Back

Arm

Hand

Leg

Foot
Other

Total

Number of first-aid incidents per region:

Asia

Europe
US

Total

Number of near misses by region:

Asia
Europe

Total

2018

0.24
49

—

—
—

—

—
—

—

2019

0.28
66

12
29

2020 Comments

0.18
46

19
1

241

182

143
54

241

1,031

1,498

718

80
55

182

A near miss is an unplanned event which did not result in injury, illness, or damage, but had the

3,201 potential to do so
1,221

631

3,247

5,053

ASML ANNUAL REPORT 2020

212

Our supply chain - Responsible supply chain

Description

2018

2019

2020 Comments

RBA Code of Conduct compliance contract clause for LTSA suppliers (in
%)
Suppliers assessed on sustainability (in #) split by:
Audits

RBA Self-Assessment Questionnaire (SAQ)
RBA self-assessment completed (in %) 1
Suppliers identified with overall risk level 'high' on all sustainability
elements (in #)
High sustainability risks identified (in #) split by sustainability
elements:
Ethics

Labor

Health and safety

Environment

—

59%

67%

—

78%

88%

The risk level is determined by means of the RBA SAQ and ASML assessment, applied to major
product-related suppliers

See comment above.

1. This indicator measures whether improvement plans are closed before the due date agreed with the supplier. The improvement plans are initiated in prior or current reporting period(s) based on RBA SAQs or Audits.

ASML ANNUAL REPORT 2020

213

Our supply chain - Supply chain

Description

Total number of suppliers

Number of suppliers, split by region:
Asia

EMEA (excl. Netherlands)

Netherlands

North America

Total

Number of suppliers, split by:

Product-related

Non-product related

Total

Number of suppliers, split by:

Critical

Non-critical

Total

Number of critical suppliers, split by:

Product-related

Non-product related

Total

Number of suppliers in scope for risk management

Total sourcing spend (in million €)

Sourcing spend per supplier group (in %)
Product-related

Non-product related
Proportion of spending on local suppliers (in %) 1
Veldhoven

Linkou
San Diego

Wilton

2018

2019

2020 Comments

5,000

5,003

4,749

1,400

700

1,500

1,400

5,000

1,356

700

1,620

1,327

5,003

790

4,213

5,003

221

4,782

5,003

198

221

212

1,313

684

1,477

1,275

4,749

779

3,970

4,749 Only Tier 1 suppliers

222 Critical suppliers are Tier 1 suppliers of strategic importance

4,527

4,749

188

222

235 This includes 13 critical N-Tier suppliers

6,683

7,645

—

44%

51%
93%

64%

66%

34%

46%

46%
89%

66%

68%

32%

47% A relatively large amount of the total supplier spend for Veldhoven relates to Carl Zeiss (non-local)
48%

94%

71%

1. We define 'local' as the country in which a significant location of operation is located. The significant locations of operations are the main manufacturing sites of ASML, which are located in Veldhoven, the Netherlands; Linkou, Taiwan; San Diego and in

Wilton, both in the United States.

ASML ANNUAL REPORT 2020

214

Circular economy - Waste management

Description

Total waste generated (in 1,000 kg)

Waste from operations
Construction waste 1

Total

Total hazardous waste (in 1,000 kg) 2

Recycling

Recovery, including energy recovery

Incineration (mass burn)
Landfill

Total

Total non-hazardous waste (in 1,000 kg) 2

Recycling

Recovery, including energy recovery

Incineration (mass burn)
Landfill

Total

Total construction waste (in 1,000 kg) 1, 2

Recycling

Recovery, including energy recovery

Landfill

Total

Total waste disposed (% of total waste from operations)

Incineration without energy recovery

Landfill

Total

Used lithography systems sold

2018

2019

2020 Comments

—
—

5,292

4,927
608

5,535

5,026
231

5,257

—

—
—

347

—

—
—

336

15
2

362

349

13
1

372

3,618

3,911

567

37
343

411

3
329

4,945

4,565

4,654

—

578

608

206

231

—%

22 Lifetime extension of mature systems

In previous years, construction waste was reported as part of total non-hazardous waste. From 2019, construction waste is reported as a separate category, because this waste does not result from daily operations of ASML. Amounts of construction
waste tend to fluctuate a lot over the years. Therefore this type of waste is excluded from the waste numbers that are used in the calculation of the other (key) performance indicators for waste reporting.

2. The waste disposal methods are determined by information provided by the waste disposal contractor.

ASML ANNUAL REPORT 2020

215

Climate and energy - Energy efficiency of products

Description

2018

2019

2020

Comments

System energy efficiency NXT

System
Throughput
Measured energy efficiency (kWh / wafer pass) 1

—

—
—

— XT:1460K
—
209
—
0.27

NXT:1470 NXT:2050i

there are no measurements in these years

No new NXT systems were introduced in 2018 or 2019, therefore

277
0.38

295
0.45

1. System energy efficiency is measured according to the SEMI S23 standard, and scaled to 100% availability of our systems.

Climate and energy - Energy

Description

Energy consumption (in TJ)

Energy savings worldwide through projects (in TJ) 1

Electricity purchased per location (in TJ)
Veldhoven

Wilton

Linkou

San Diego

Total

2018

2019

2020 Comments

1,355

1,367

1,412

114

712

102

177

751

102

162

802

114

167

1,028

1,051

1,118

Fossil fuels consumed from non-renewable sources (in TJ) 2

Fossil fuels consumed consists of only natural gas

Veldhoven
Wilton
Linkou

San Diego

Total

Fossil fuels consumed from renewable sources (in TJ)

—

—
—

—

159

111
0

316

141

112

293

In 2016 we started a master-plan period with a target to achieve 111 TJ energy savings by the end of 2020. The savings reported are cumulated compared to base year 2015. The savings are realized by projects resulting in improved technical
installation or by projects resulting in an improved production process. Types of energy included in savings: fuel and electricity.

2. The sources of the conversion factors used are the Dutch Emissions Authority and the US Energy Information Administration.

ASML ANNUAL REPORT 2020

216

Climate and energy - CO2 emissions
Description

Emission intensity 1
Type of Energy Attribute Certificates (in TJ)
Guarantee of Origins (GOs)

Renewable Energy Certificates (RECs)
I-RECs

Total

Type of Energy Attribute Certificates (in kton)

Guarantee of Origins (GOs)

Renewable Energy Certificates (RECs)
I-RECs

Total

Number of significant fines and non-monetary sanctions

The monetary value of significant fines for non-compliance with
environmental laws and regulations (in thousand €)

2018

—

—
—

—

—
—

—

2019

0.01

751

264
—

2020 Comments

0.61 Per 2020, scope 3 is included in the calculation

802

281
35

1,015

1,118

116

21
—

137

—

110

21
9

140

1 There was one fine for HMI Beijing due to fact that they did not have an environmental permit

In 2020 the definition for emission intensity has changed and is calculated as scope 1,2 and 3 emissions (in kt) divided by total revenue (in millions). The recalculated number for 2019 amounts to 0.56. In 2019 the emission intensity was calculated as
gross scope 1 and scope 2 emissions (in kt) divided by total revenue (in millions).

Climate and energy - Water management

Description

Water consumption (in 1,000 m3)
Veldhoven
San Diego
Wilton

Linkou

Total

Total Ultrapure water consumption (in 1,000 m3) 1

Total water recycled and reused (in %) 1

Water intensity 2

2018

2019

2020 Comments

—
—
—

—

895

—

628
90
90

838

115

658
80
94

860 Municipal water supply

127 Only Veldhoven and Linkou are in scope for this indicator

2.4%

1.8% Only Veldhoven and Linkou are in scope for this indicator

1. Veldhoven and Linkou are in scope for this indicator. San Diego and Wilton are excluded from the scope because the data to report on the indicator is not yet available.
2. Water intensity is calculated as total water consumption (in m3) divided by total revenue (in millions).

ASML ANNUAL REPORT 2020

217

Responsible business - Business ethics

Description

Total number of Speak Up messages
Anti-corruption & bribery Speak Up messages 1
Human rights Speak Up messages
% Completion of Code of Conduct online training

2018

266
33

63
—

2019

255
16

58
86%

2020 Comments

229
19

69
88%

1. None of the Speak Up messages led to any indication of violation of anti-corruption laws.

ASML ANNUAL REPORT 2020

218

Materiality: assessing our
impact

Dialogue and knowledge-sharing are important in an innovation-driven industry. To this end, we
continually and openly communicate with our main stakeholder groups through various channels
and at different levels in our organization. Our stakeholders are parties affected by our activities or
those who have a direct interest in or who can influence our company’s long-term business
success.

Our materiality process
We develop our materiality assessment framework according to the GRI Standards, which includes principles of
stakeholder engagement and identification, analysis and prioritization. We conduct our materiality assessment through a
three-step approach.

Step 1: Identification of relevant
aspects

Input

We update a shortlist of relevant topics annually.
These are based on an analysis of stakeholder
feedback, continuous stakeholder engagement, risks
and opportunities, and a review of relevant industry
and global trends. Topics include those important to
our stakeholders in their decision-making, and, for
ASML, those that can have an environmental, social
or economic impact, in the organization, value chain
or society.

International standards and legislation: GRI, ISO 26000, TCFD, the EU
Non-financial Reporting Directive, among others.

Industry and media analysis: RBA, industry development reports,
benchmarking sustainability performance from our peers in the DJSI,
among others.

ESG analysts’ questionnaires/assessments: DJSI, Sustainalytics, ISS
ESG rating, CDP, MSCI ESG Index, FTSE4Good, among others.

Step 2: Analysis and prioritization
We follow GRI Standards guidelines to rate how
important topics are based on the level of stakeholder
concern, and the significance of our environmental,
social and economic impact resulting from our
business and operations.

Step 3: Confirmation and
implementation
The results of the materiality assessment are used to
shape our strategy. The results also define the content
of this Annual Report, in line with the GRI principles for
defining report content.

Stakeholder engagement: feedback from regular and occasional
stakeholder communication, ESG conferences and networks. Read
more in: Stakeholder engagement

Output
We narrow the longlist of topics down to a shortlist of those relevant to us.
The impact of these topics is gauged using available data, feedback from
continuous stakeholder engagement, discussions with senior management and
Board of Management members, business owners, and other relevant internal
stakeholders (such as subject-matter experts). The Board of Management
validates and approves assessment results. We identified the environmental,
social, and governance topics that have the greatest impact on our business,
and are of the greatest concern to stakeholders in our value chain. Read more
in: How we create value.

Strategy and reporting structure
In our latest assessment, conducted in 2018 for the sustainability strategy
2019-2025, we identified 10 material themes for sustainability, summarized in
the materiality table. These are the themes most relevant to our stakeholders in
their decision-making, and in areas where ASML has or could have the highest
impact. We also identified other factors we need to address as a company
committed to conducting our business in an accountable and caring way.
These include issues our stakeholders expect us to act on or issues we have an
impact on. We have been categorized these under the ‘Corporate citizenship’
themes. Read more in: Our strategy.

We also support the 2030 ambition defined in the United Nations Sustainable Development Goals (SDGs) adopted by the
United Nations. These goals aim to protect the planet and improve the lives of people everywhere. We have mapped out
how our strategy and current efforts actively support these goals. The materiality table outlines the five most relevant
SDGs we contribute to. The SDG 9 'Industry, Innovation and Infrastructure' goal is connected to the core of our company,
as innovation is our lifeblood and the engine that drives our business. We also contribute towards the SDG 4 'Quality
Education', SDG 8 'Decent Work and Economic Growth', SDG 12 'Responsible Production and Consumption' and SDG
13 'Climate Action' goals. We highlight our performance against these SDGs throughout this report.

219

ASML ANNUAL REPORT 2020Core material themes for sustainability reporting
Innovation ecosystem
• To maintain our fast pace of innovation, collaboration with our partners in
the value chain, such as suppliers, research institutes and our customer
is key.

• While innovating for our holistic lithography solutions, we need to give
back to society by nurturing young entrepreneurship in the high tech
sector.

People
• Employee engagement is critical to ASML's performance and our long-

term success as a company.

• Employee engagement depends on a wide range of factors and activities,

such as talent attraction and retention, the onboarding experience,
leadership, learning and development, and diversity and inclusion.

• Highly skilled people with a technical background are scarce in the labor
market and competition is growing. Employer branding is a vital strategy
to make sure ASML attracts the best talent.

Responsible supply chain
• We are committed to the responsible sourcing of parts, components, and

materials in our supply chain.

• We screen our supplier base on sustainability performance using the RBA

standard (ethics, labor, health and safety, and environment)

Circular economy
• We are committed to the responsible use of (natural and other) resources

and scarce materials.

• We limit our environmental impact by minimizing waste.
• We repurpose products, parts and materials across their lifespan by

recycling and re-use.

Climate and energy
• We are committed to decreasing our greenhouse gas (GHG) emissions

and reducing our carbon footprint across our operations, as well as in our
value chain.

• Scope 1, 2, 3 carbon footprint
• Energy consumption of our products

Impact on value chain

Upstream

Our operations

Downstream

Note: The table above refers to the topics in the field of sustainability. Along these topics, other topics such as technology, customer
intimacy, operational excellence are key for the execution of our core business strategy. Corporate governance and financial performance
are part of our annual reporting process.

Corporate citizenship themes

Supply chain

Our operations

Product use

Impact on value chain

Product safety

Fair remuneration

Labor relations

Human rights

Employee safety

Community involvement

Water management

Responsible business

Tax policy

Enterprise Risk Management

Information / cybersecurity

Privacy protection

This report focuses, in a comprehensive manner, on the material themes that we disclose. However, as we also want to
meet our stakeholders’ expectations, we seek to address elements of particular interest to them in our corporate
citizenship themes. This means we address themes in different levels of detail.

220

ASML ANNUAL REPORT 2020
Managing sustainability
Our Board of Management approves and signs off our Sustainability Strategy. The most senior member of the organization
directly responsible for sustainability matters is our Executive Vice President and Chief Strategy Officer, who is a member
of the Board of Management. Each of the material and corporate citizenship themes is assigned to a senior manager, who
is responsible for monitoring progress against agreed targets, and ensuring there are sufficient resources available to meet
targets and objectives. In the event of insufficient progress, this is discussed at operational performance review meetings
and raised with senior management during a review meeting or other relevant committee meetings. Our performance on
sustainability areas, as outlined in the materiality table, is part of the long-term incentive plans of our Board of
Management and senior management. We measure our overall sustainability performance by benchmarking our result
from the annual comprehensive Dow Jones Sustainability Index (DJSI) – assessing more than 20 ESG topics – with the
best of the semiconductor industry. Read more in: Remuneration Report.

221

ASML ANNUAL REPORT 2020Stakeholder engagement

We define stakeholders as those individuals or groups or organizations that can affect or can be affected by our business.
We regard five stakeholder groups: shareholders, customers, suppliers (including contractors), employees and society
(e.g. local community, governments and authorities, industry union, labor organizations, other associations, media and
NGOs).

Continuous stakeholder engagement, in which we embrace open dialogue and knowledge-sharing, are important in an
innovation-driven industry and helps us to identify the areas of improvement. We communicate with our stakeholders
through various channels and at a variety of levels. The methods of engagement will vary depending on the stakeholders,
the issues of concern and the purpose of engagement. The following table is an overview of our main stakeholder groups,
the way we communicate with them and an overview of the topics most relevant to them.

Shareholders
Purpose: This group consist of current shareholders, potential active and passive investors, financial and ESG analysts.
We aim to help them to understand our (long-term) investment opportunities. We communicates with them about our
financial growth strategies and opportunities, financial performance and outlook, shareholder returns as well as our
Sustainability Strategy.

Main communication channel and
frequency

Main engagement topic

Themes in our materiality

• Direct interaction with the Investor Relations

department (e.g. calls, ESG performance surveys,
email exchange, site visits - at ASML and/or at the
investor) - [daily]
• AGM - [annually]
•
• Company quarterly results presentation and press

Investor Day - [bi-annually]

release - [quarterly]

• Financial results
• Capital return
• Market outlook
• Products and end-market
• Customer adoption
• Geopolitics
• Business summary
• Company roadmap and product

• Various investor conferences and roadshows - [on

portfolio

occurrence]

• Various sustainability questionnaires, assessments and
survey feedback - [on occurrence, the majority of these
are annual recurring]

• ESG targets: human capital

development, carbon
footprint, waste, recycling,
energy consumption, social
responsibility in supply chain

• Board diversity and

remuneration

• Financial performance
• Technology and innovation

ecosystem

• Customer intimacy
• Our people
• Our supply chain
• Circular economy
• Climate and energy
• How we manage risk
• Responsible business
• Governance

Customers
Purpose: We are a manufacturer of leading edge chipmaking equipment, we enable our customers to create the patterns
that define the electronic circuits on a chip. Our customers are the world’s leading microchip manufacturers, and our
success is inextricably linked with theirs.

Main communication channel and
frequency

• Customer feedback Survey - [bi-annually]
• Direct interaction via account teams and zone quality

managers

• Voice of the customer sessions - [monthly]
• Technology Review Meetings (between our CTO,

product managers, other executives and our major
customers) - [bi-annually]

• Executive Review Meetings (between ASML

executives and major customers) - [bi-annually]
• Different technology symposia and special events -

[on occurrence]

Main engagement topic

Themes in our materiality

• Products and technology
• Customer roadmap
•
• Customer support, cost of
ownership and quality

Innovation

• ESG targets: carbon footprint,
energy consumption, social
responsibility in supply chain
(RBA)

• Technology and innovation

ecosystem

• Customer intimacy
• Operational excellence
• Responsible supply chain
• Circular economy
• Climate and energy

222

ASML ANNUAL REPORT 2020Suppliers
Purpose: We rely heavily on our supplier network to achieve the innovations we strive for. Our goal is to ensure we get the
products, materials and services we need to meet our short- and long-term needs. To this end we invest in developing our
supply landscape to help suppliers meet our requirements with regard to quality, logistics, technology, cost and
sustainability. We are committed to a responsible and sustainable supply chain.

Main communication channel and
frequency

• ASML’s supplier day - [annually]
• Direct interaction via supplier account teams /

procurement account managers - [daily]

• Supplier audits - [on occurrence]
• Site visit - [on occurrence]
• Newsletter - [monthly]
• RBA Self-assessment questionnaire - [annually]
• ASML Speak up service - [on occurrence]

Main engagement topic

Themes in our materiality

• Technology and innovation

ecosystem
• Our supply chain
• Responsible supply chain
• Responsible business (including

human rights)
• Circular economy
• Climate and energy

• Products and technology
• QLTCS
• Supplier performance and risk

management
IP / information security

•
• Business continuity
• RBA compliance (ethics, labor
practice, health and safety, and
environment)

• Scare (natural) resources, 3TG,
hazardous substances, etc.
• Circularity (re-use, recycling,

refurb)

• Scope 3 carbon footprint

Employees
Purpose: We want to provide a unified direction and anchor ASML’s identity deep in the organization. To do this, we aim
to help people embrace our values and familiarize themselves with our strategy and purpose and uphold our Code of
Conduct principles. Employee engagement is to the success of our company and employer brand enables us to attract
talent. We are committed to good labor practice and respect human rights.

Main communication channel and
frequency

• Employee engagement survey - [annually]
• Training and development programs including

employee evaluation/feedback - [on occurrence]

• ASML Speak up service - [on occurrence]
• Works Council - [quarterly]
• Employee networks, such as Young ASML, Women@
ASML, Seniors@ASML, Pink ASML - [on occurrence]
Internal communication and awareness (e.g. intranet,
ethics program, department employee meeting, lunch
with board members) - [daily]

•

• Onboarding program new employees - [on

occurrence]

• All-employee meeting and Senior Management

meetings - [annually]

Main engagement topic

Themes in our materiality

• Training and development
• Code of Conduct/Ethics
• Strategy
• Diversity and inclusion
• Labor conditions
• Vitality
• Human rights
• Sustainability target and

performance

• Technology and innovation

ecosystem

• Our people (employee

development, labor relations, fair
remuneration)

• Responsible supply chain
• Circular economy
• Climate and energy
• Responsible business

223

ASML ANNUAL REPORT 2020Society
Purpose: We are committed to conducting our business in an accountable and caring way, for our employees and the
wider communities we operate in. As a global technology leader and employer, we play an active role in the local
communities in which we operate. We engage regularly with governments and (local) authorities, industry unions and
associations, (local) community, universities, media and NGOs.

Main engagement topic

Themes in our materiality

• Employee development
• Charity, sponsoring and

donations

• Collaboration in innovation
• Strengthening innovation in the
industry, society and where we
operate

• Technology and innovation

ecosystem

• Customer intimacy
• Community engagement
• Responsible business (human
rights, ethics, privacy, ABC
policy, etc.)

• Social and environmental

• Our people (employee

responsibility

• Promote STEM education
• Local developments

development, labor relations, fair
remuneration)

• Climate and energy
• Circular economy
• How we manage risk

Main communication channel and
frequency
Industry unions and associations

• Member conferences and technical forums (e.g. RBA,
SEMI, FME, VNO-NCW, SPIE, etc.) - [monthly/on
occurrence]

• Member consultation on standards - [on occurrence]
• Brainport - [on occurrence]

Governments and authorities

• Dialogue with tax authority - [monthly/on occurrence]
• Relevant EU round table discussions (semiconductor

industry or innovation) - [on occurrence]

• Compliance reporting - [monthly/on occurrence]
• Proactive dialogue with government, authorities and

municipalities - [on occurrence]

Community, universities, media, NGOs, other

• www.asml.com - [daily]
• Community engagement program (STEM promotion

at secondary schools and universities, cultural
institutions, local community, etc) - [on occurrence]
• Young high tech community (HighTechXL, Make Next
platform, Startup Alliance) - [daily/on occurrence]

• Company visit - [on occurrence]
• Press release, interviews, engagement calls/meetings,

etc. - [on occurrence]

224

ASML ANNUAL REPORT 2020Other
appendices

225

ASML ANNUAL REPORT 2020Appendix - Selected financial data

The following selected consolidated financial data should be read in conjunction with our Consolidated Financial
Statements.

Five-year financial summary

Year ended December 31 (€, in millions, except per share data)

2016

2017

2018

2019

2020

Consolidated Statements of Operations data

Net sales

Cost of sales

Gross profit

Other income

Research and development costs

Selling, general and administrative costs

Income from operations

Interest and other, net

Income before income taxes

Income tax expense

Income after income taxes

6,875.1

8,962.7

10,944.0

11,820.0

13,978.5

(3,729.8)

(4,942.5)

(5,914.8)

(6,540.2)

(7,181.3)

3,145.3

4,020.2

5,029.2

5,279.8

6,797.2

93.8

95.8

—

(1,105.8)

(1,259.7)

(1,575.9)

(1,968.5)

(2,200.8)

(374.8)

1,758.5

(416.6)

2,439.7

(488.0)

2,965.3

(520.5)

2,790.8

(544.9)

4,051.5

33.7

(50.3)

(28.3)

(25.0)

(34.9)

1,792.2

2,389.4

2,937.0

2,765.8

4,016.6

(234.4)

1,557.8

(306.0)

2,083.4

(351.6)

2,585.4

(191.7)

2,574.1

(551.5)

3,465.1

Profit (loss) related to equity method investments

—

(16.7)

6.2

18.2

88.6

Net income

1,557.8

2,066.7

2,591.6

2,592.3

3,553.7

Earnings per share data:
Basic net income per ordinary share

Diluted net income per ordinary share

3.66

3.64

4.81

4.79

6.10

6.08

6.16

6.15

8.49

8.48

Number of ordinary shares in per share amounts (in millions):
Basic

Diluted

425.6

427.7

429.8

431.6

424.9

426.4

420.8

421.6

418.3

419.1

226

ASML ANNUAL REPORT 2020Five-year financial summary

As of and for the year ended December 31 (€, in millions)

2016

2017

2018

2019

2020

Consolidated Balance Sheets data

Cash and cash equivalents

Short-term investments
Working capital 1
Total assets
Long-term debt 2
Shareholders’ equity

Issued and outstanding shares

Consolidated Statements of Cash Flows data
Selected Cash Flows from Operating Activities
Depreciation and amortization 3
Impairment

Net cash provided by operating activities

Selected Cash Flows from Investing Activities

Purchase of property, plant and equipment

Purchase of intangible assets

Purchase of short-term investments

Maturity of short-term investments

Cash from (used for) derivative financial instruments

Loans issued and other investments

Repayment on loans

Acquisition of equity method investments

Acquisition of subsidiary (net of cash acquired)

Net cash used in investing activities

Selected Cash Flows from Financing Activities

Dividend paid

Purchase of treasury shares

Net proceeds from issuance of shares

Net proceeds from issuance of notes

Repayment of debt

Tax benefit (deficit) from share-based payments

Net cash from (used in) financing activities

2,906.9

1,150.0
5,434.9

2,259.0

1,029.3
5,715.8

3,121.1

913.3
6,739.5

3,532.3

1,185.8
7,437.0

6,049.4

1,302.2
9,326.5

17,155.0

18,188.9

20,136.9

22,629.6

27,267.4

3,319.5

9,972.4

39.4

3,025.3

3,026.5

3,108.3

4,678.2

10,776.4

11,641.0

12,592.2

13,865.4

38.8

38.6

38.2

37.6

356.9

3.5

417.5

9.0

422.7

15.4

448.5

4.7

490.8

2.7

1,665.9

1,818.3

3,072.7

3,276.4

4,627.6

(316.3)

(8.4)

(338.9)

(19.1)

(2,520.0)

(1,129.3)

2,320.0

1,250.0

(15.0)

(7.4)

—

27.0

(0.6)

1.6

— (1,019.7)

—

(574.0)

(35.5)

(918.1)

1,034.1

(2.4)

(1.0)

5.4

—

(766.6)

(119.3)

(962.0)

(38.8)

(1,291.5)

(1,475.5)

1,019.0

1,359.1

—

0.9

—

(12.2)

—

(222.8)

(2,641.3)

(3,188.4)

(445.9)

(400.0)

582.7

2,230.6

(4.7)

0.9

(1,229.0)

(491.5)

(1,157.5)

(1,352.2)

(516.7)

(500.0)

50.6

—

(243.0)

—

(597.1)

(1,325.7)

(1,066.4)

(1,146.2)

(410.0)

(1,207.5)

21.8

—

(2.8)

—

27.2

—

(3.8)

—

37.9

1,486.3

0.1

—

1,963.6

(1,209.1)

(1,724.3)

(1,712.3)

(753.0)

Net increase (decrease) in cash and cash equivalents

448.2

(647.9)

862.1

411.2

2,517.1

1. Working capital is calculated as the difference between total current assets and total current liabilities.
2. Long-term debt includes the current portion of long-term debt.
3. Depreciation and amortization includes depreciation of property, plant and equipment, amortization of intangible assets, amortization of underwriting commissions and

4.
5.

discount related to the bonds and credit facility.
In 2016, net proceeds from issuance of shares include an amount of €536.6 million which is included in the consideration transferred for the acquisition of HMI.
In 2016, net proceeds from issuance of notes relate to the total cash proceeds of €2,230.6 million (net of incurred transaction costs) from the issuance of our €500
million 0.625% senior notes due 2022, our €1000 million 1.375% senior notes due 2026 and our €750 million 1.625% senior notes due 2027.
In 2020, net proceeds from issuance of notes relate mainly to the total cash proceeds of €1,486.3 million (net of incurred transaction costs) from the issuance of our €750
million 0.250% senior notes due 2030 and our €750 million 0.625% senior notes due 2029.

227

ASML ANNUAL REPORT 2020Five-year financial summary

As of and for the year ended December 31

2016

2017

2018

2019

2020

Ratios and other data
Gross profit as a percentage of net sales

Income from operations as a percentage of net sales

Net income as a percentage of net sales

Shareholders’ equity as a percentage of total assets

Income taxes as a percentage of income before income taxes

Sales of lithography systems (in units) 1
Value of booked systems (in millions €) 2,3
Net bookings lithography systems (in units) 1,2,3
Number of payroll employees (in FTEs)

Number of temporary employees (in FTEs)

Increase (decrease) net sales in percentage

Number of ordinary shares issued and outstanding (in millions)

Closing ASML share price on Euronext Amsterdam (in €)
Volatility 260 days as percentage of our shares listed on Euronext
Amsterdam (in €) 4
Closing ASML share price on NASDAQ (in USD)
Volatility 260 days as percentage of our shares listed on NASDAQ (in
USD) 5
Dividend per ordinary share (in €)6,8

Dividend per ordinary share (in USD)6,7,8

45.7

25.6

22.7

58.1

13.1

154

44.9

27.2

23.1

59.6

12.8

197

46.0

27.1

23.7

57.8

12.0

224

44.7

23.6

21.9

55.6

6.9

229

48.6

29.0

25.4

50.8

13.7

258

5,396.3

9,357.2

8,180.7

11,741.0

11,292.2

160

13,991

2,656

9.3

429.9

106.65

255

241

16,219

20,044

2,997

30.4

427.4

3,203

22.1

421.1

145.15

137.16

236

23,219

1,681

8.0

419.8

263.70

25.47

18.84

29.60

26.15

303

26,614

1,459

18.3

416.5

397.55

40.77

112.20

173.82

155.62

295.94

487.72

26.85

21.80

35.74

28.06

49.33

1.20

1.28

1.40

1.74

2.10

2.34

2.40

2.63

2.75

3.28

1. Lithography systems do not include metrology and inspection systems.
2. Our systems net bookings include all system sales orders for which written authorizations have been accepted (for EUV starting with the NXE:3350B and excluding the High-

NA systems).

3. Our systems net bookings values for 2016, and 2017 have been calculated without taking into consideration the adoption of the new Revenue Recognition Standard (ASC

606) and Lease Standard (ASC 842) which ASML adopted effective January 1, 2018.

4. Volatility represents the variability in our share price on Euronext Amsterdam as measured over the 260 business days of each year presented (source: Bloomberg Finance LP).
5. Volatility represents the variability in our share price on NASDAQ as measured over the 260 business days of each year presented (source: Bloomberg Finance LP).
6. Subject to approval of the AGM to be held on April 29, 2021.
7. The dividend per ordinary share in USD has been adjusted compared to the relevant Annual Report based on US GAAP in order to reflect the actual exchange rate at the time

of each year's dividend payment.

8. The exchange rate used to express the final proposed dividend per ordinary share in USD is the exchange rate of USD/€1.22 as of January 26, 2021.

228

ASML ANNUAL REPORT 2020Appendix - Principal accountant fees and services

KPMG has served as our independent registered public accounting firm for the years ending December 31, 2020 and
2019. The following table sets out the aggregate fees for professional audit services and other services rendered by
KPMG and their member firms and affiliates in 2020 and 2019:

Year ended December 31

(€, in thousands)

Audit fees

Audit-related fees
Tax fees

All other fees

Principal accountant fees

KPMG
Accountants
N.V.

2,086

70
—

2,165

2019

KPMG
Network

815

—
—

—

815

KPMG
Accountants
N.V.

2,246

88
—

Total

2,901

70
—

2020

KPMG
Network

1,090

—
—

—

Total

3,337

88
—

2,980

2,371

1,090

3,461

Audit fees and audit-related fees
Audit fees relate to the audit of the Financial Statements as set out in this Annual Report, certain procedures on our
quarterly results, services related to offering memoranda, as well as our statutory and regulatory filings of our subsidiaries.
These fees relate to the audit of the respective Financial Statements, regardless of whether the work was performed
during the financial year. Other audit-related fees are related to assurance services on non-financial information.

Other (non-audit) services relate to certain agreed-upon procedures on the targets achieved in order for the Remuneration
Committee to assess compliance with the Remuneration Policy and agreed upon procedures for the US Advanced Pricing
Agreement.

The Audit Committee pre-approved the external audit plan and audit fees for the years 2020 and 2019.

The Audit Committee monitors compliance with the Dutch, EU regulation and SEC rules on non-audit services provided
by an independent registered public accounting firm, which outlines strict separation of audit and advisory services for
Dutch public interest entities.

229

ASML ANNUAL REPORT 2020Appendix - Property, plant and equipment

We lease a number of our facilities under operating leases.
We also own a number of buildings, mainly consisting of
production facilities in Veldhoven, the Netherlands, in
Wilton, Connecticut, and San Diego, California, both in the
US, in Linkou and Tainan, both in Taiwan and in
Pyeongtaek, South Korea. The book value of land and
buildings owned amounts to €1,589.6 million as
of December 31, 2020 compared with €1,290.2 million as
of December 31, 2019. See Consolidated Financial
Statements - Notes to the Consolidated Financial
Statements - Note 13 Property, plant and equipment, net.

Our capital expenditures (purchases of property, plant and
equipment, see the Consolidated Statements of Cash
Flows as recorded in the Consolidated Financial
Statements) for 2020, 2019 and 2018 amounted to €962.0
million, €766.6 million and €574.0 million, respectively. The
increased capital expenditures in 2020 compared to 2019
relates to the expansion and upgrades of facilities,
prototypes, evaluation and training systems.

Subject to market conditions, we expect that our capital
expenditures (purchases of property, plant and equipment)
in 2021 will be approximately €1.5 billion. These
expenditures will mainly consist of further expansion and
upgrades of facilities. We expect to finance these capital
expenditures through cash generated by operations and
existing cash and cash equivalents.

Facilities in Europe
Our headquarters, main manufacturing and R&D facilities
are located at a single site in Veldhoven, the Netherlands.
This state-of-the-art facility includes 66 thousand square
meters of office space and 50 thousand square meters of
cleanroom used for manufacturing and R&D activities and
24 thousand square meters of warehouses. Our facilities in
Veldhoven, the Netherlands are partly owned and partly
leased. We also lease several sales and service facilities at
locations across Europe.

Facilities in the US
Our US head office is located in a 5,000 square meter
office building in Chandler, Arizona. We maintain R&D and
manufacturing operations in a 28,000 square meter facility
in Wilton, Connecticut, and three facilities totaling 41,000
square meters in San Jose, California. Furthermore, our
facilities in San Diego include 25,000 square meters of
buildings used for manufacturing and office space, 19,000
square meters of buildings used for engineering and R&D
activities and 7,000 square meters of buildings used for
warehousing. As a result of the HMI acquisition, our
facilities in San Jose, California expanded by approximately
34,000 square meters for R&D and local sales and service
activities.

Facilities in Asia
Our Asian headquarters is located in Hong Kong, The
People’s Republic of China. In addition, our facility in
Linkou, Taiwan comprises a cleanroom (approximately
3,000 square meters) and office space (approximately
6,000 square meters). Our facility in Hwasung, South Korea
is comprised of a cleanroom (approximately 900 square
meters) and office space (approximately 7,000 square
meters). We also lease and own several sales, service and
training facilities at locations across Asia. As a result of the
Cymer acquisition, we acquired a manufacturing facility in
Pyeongtaek, South Korea, mainly used for refurbishment
activities of light sources. As a result of the HMI acquisition,
we acquired manufacturing facilities in Tainan, Taiwan
(approximately 20,000 square meters) and Beijing, China.
Additionally, both Cymer and HMI lease a few smaller
locations in South Korea and Japan which are mainly used
for local sales and service activities.

230

ASML ANNUAL REPORT 2020Appendix - Dutch taxation

The statements below represent a summary of current
Dutch tax laws, regulations and judicial interpretations
thereof. The description is limited to the material tax
implications for a holder of ordinary shares who is not, and
/ or is not deemed to be, a resident of the Netherlands for
Dutch tax purposes (‘Non-Resident Holder’). This summary
does not address special rules that may apply to special
classes of holders of ordinary shares and should not be
read as extending by implication to matters not specifically
referred to herein. As to individual tax consequences, each
investor in our ordinary shares should consult his or her tax
counsel.

General
The acquisition of ordinary shares by a non-resident of the
Netherlands should in itself not be treated as a taxable
event for Dutch tax purposes. The material tax
consequences in connection with owning and disposing of
our ordinary shares are discussed below.

Substantial interest
A person that, (inter alia) directly or indirectly, and either
independently or jointly with his partner (as defined in the
Dutch Personal Income Tax Act 2001), owns 5.0% or more
of our share capital, owns profit participating rights that
correspond to at least 5.0% of the annual profits of a Dutch
company or to at least 5.0% of the liquidation proceeds of
such company or holds options to purchase 5.0% or more
of our share capital, is deemed to have a substantial
interest in our shares, or our options, as applicable.
Specific rules apply in case certain family members of the
Non-Resident Holder hold a substantial interest. A deemed
substantial interest also exists if (part of) a substantial
interest has been disposed of, or is deemed to be
disposed of, in a transaction where no taxable gain has
been recognized. Specific attribution rules exist in
determining the presence of a substantial interest.

Income tax consequences for individual
non-resident holders on owning and
disposing of the ordinary shares
An individual who is a Non-Resident Holder will not be
subject to Dutch income tax on received income in respect
of our ordinary shares or capital gains derived from the
sale, exchange or other disposition of our ordinary shares,
provided that such holder:

• Does not carry on and has not carried on a business
in the Netherlands through a (deemed) permanent
establishment or a permanent representative to which
the ordinary shares are attributable;

• Does not hold and has not held a (deemed) substantial

interest in our share capital or, in the event the
Non-Resident Holder holds or has held a (deemed)
substantial interest in our share capital, such interest is,
or was, a business asset in the hands of the holder;
• Does not share and has not shared directly (through
the beneficial ownership of ordinary shares or similar
securities) in the profits of an enterprise managed and
controlled in the Netherlands which (is deemed to)
own(s), or (is deemed to have) has owned, our ordinary
shares; and

• Does not carry out and has not carried out any activities

which generate taxable profit in the Netherlands or
taxable income in the Netherlands to which the holding
of our ordinary shares was connected.

Corporate income tax consequences for
corporate non-resident holders
Income derived from ordinary shares or capital gains
derived from the sale, exchange or disposition of ordinary
shares by a corporate Non-Resident Holder is taxable if:

• The holder carries on a business in the Netherlands
through a permanent establishment or a permanent
representative in the Netherlands (Dutch enterprise) and
the ordinary shares are attributable to this permanent
establishment or permanent representative, unless the
participation exemption (discussed below) applies; or
• The holder has a substantial interest in our share capital,
which is held with the primary aim or one of the primary
aims to avoid the levy of income tax at the level of
another person and which is not put into place with valid
commercial reasons that reflect economic reality; or
• The holder is a resident of Aruba, Curacao or Saint

Martin with a permanent establishment or permanent
representative in Bonaire, Eustatius or Saba to which
our ordinary shares are attributable and certain
conditions are met; or

• Certain assets of the holder are deemed to be treated as
a Dutch enterprise under Dutch tax law and the ordinary
shares are attributable to this Dutch enterprise.

To qualify for the Dutch participation exemption, the holder
must generally hold at least 5.0% of our nominal paid-in
capital and meet certain other requirements.

Dividend withholding tax
In general, a dividend distributed by us in respect of our
ordinary shares will be subject to a withholding tax
imposed by the Netherlands at the statutory rate of 15.0%.

Dividends include:
• Dividends in cash and in kind;
• Deemed and constructive dividends;
• Consideration for the repurchase or redemption of
ordinary shares (including a purchase by a direct
or indirect ASML subsidiary) in excess of qualifying
average paid-in capital unless such repurchase is made
for temporary investment purposes or is exempt by law;

• Stock dividends up to their nominal value (unless

distributed out of qualifying paid-in capital);

• Any (partial) repayment of paid-in capital not qualifying
as capital for Dutch dividend withholding tax purposes;
and

• Liquidation proceeds in excess of qualifying average
paid-in capital for Dutch dividend withholding tax
purposes.

231

ASML ANNUAL REPORT 2020Under certain circumstances, a reduction of Dutch
dividend withholding tax can be obtained:
• An exemption at source is available if the participation

exemption applies and the ordinary shares are
attributable to a business carried out in the Netherlands;

• An exemption at source is available for dividend

distributions to certain qualifying EU/EEA resident
corporate holders, unless such holder holds our ordinary
shares with the primary aim or one of the primary aims
to avoid the levy of Dutch dividend withholding tax at
the level of another person and our ordinary shares
are not held for valid commercial reasons that reflect
economic reality;

• An exemption at source is available for dividend

distributions to certain qualifying corporate holders that
are a resident of a non-EU/EEA jurisdiction with which
the Netherlands has concluded a tax treaty that includes
a dividend article, unless such holder holds our ordinary
shares with the primary aim or one of the primary aims
to avoid the levy of Dutch dividend withholding tax at
the level of another person and our ordinary shares
are not held for valid commercial reasons that reflect
economic reality;

• Certain tax exempt organizations (e.g. pension funds
and excluding collective investment vehicles) resident
in EU/EEA member states or in qualifying non-EU/EEA
states may be eligible for a refund of Dutch dividend
withholding tax upon their request. Based on domestic
law not yet entered into force, in those circumstances,
an exemption at source may also become available
upon request;

• Upon request and under certain conditions, certain
qualifying Non-Resident Individual and Corporate
Holders of ordinary shares resident in EU/EEA member
states or in a qualifying non-EU/EEA state may be
eligible for a refund of Dutch dividend withholding tax
insofar the withholding tax levied is higher than the
personal and corporate income tax which would have
been due if they were resident of the Netherlands.

Furthermore, a Non-Resident Holder of ordinary shares can
be eligible for a partial or complete exemption or refund of
all or a portion of the above withholding tax under a tax
treaty that is in effect between the Netherlands and the
Non-Resident Holder’s country of residence. The
Netherlands has concluded such treaties with the US,
Canada, Switzerland, Japan, most EU member states, as
well as many other countries. Under the treaty between the
US and the Netherlands for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect
to Taxes on Income (the ‘US Tax Treaty’), dividends paid by
us to a Non-Resident Holder that is a resident of the US as
defined in the US Tax Treaty (other than an exempt
organization or exempt pension trust, as discussed below)
are generally liable to 15.0% Dutch withholding tax or, in
the case of certain US corporate shareholders owning
directly at least 10.0% of our voting power, a reduction to
5.0%, provided that the Holder is the beneficial owner of
the dividends received and does not have an enterprise or
an interest in an enterprise that is, in whole or in part,
carried on through a permanent establishment or
permanent representative in the Netherlands to which the
dividends are attributable. The US Tax Treaty also provides
for a dividend withholding tax exemption on dividends, but
only for a shareholder owning directly at least 80.0% of our
voting power and meeting all other requirements. The US
Tax Treaty provides for a complete exemption from tax on
dividends received by exempt pension trusts and exempt

organizations, as defined therein. Except in the case of
exempt organizations, the reduced dividend withholding
tax rate (or exemption from withholding) can be applied at
the source upon payment of the dividends, provided that
the proper forms have been filed in advance of the
payment. Exempt organizations, in principle, remain
subject to the statutory withholding rate of 15.0% and are
required to file for a refund of such withholding, however
such organizations may become eligible for the exemption
at source when the domestic law as described above has
entered into force.

A Non-Resident Holder may not claim the benefits of the
US Tax Treaty unless (i) he/she is a resident of the US as
defined therein, or (ii) he/she is deemed to be a resident on
the basis of the provisions of article 24(4) of the US Tax
Treaty, and (iii) his or her entitlement to those benefits is not
limited by the provisions of article 26 (limitation on benefits)
of the US Tax Treaty.

Dividend stripping rules
Under Dutch tax legislation regarding anti-dividend
stripping, no exemption from, or refund of, Dutch dividend
withholding tax is granted if the recipient of dividends paid
by us is not considered the beneficial owner of such
dividends.

Gift or inheritance taxes
Dutch gift or inheritance taxes will not be levied on the
transfer of ordinary shares by way of gift or upon the death
of a Non-Resident Holder, unless the transfer is construed
as an inheritance or as a gift made by or on behalf of a
person, who at the time of the gift or death, is deemed to
be resident of the Netherlands.

Gift tax and inheritance tax are levied on the beneficiary.
For purposes of Dutch gift and inheritance tax, an
individual of Dutch nationality is deemed to be a resident of
the Netherlands if he/she has been a resident thereof at
any time during the ten years preceding the time of the gift
or death. For purposes of Dutch gift tax, a person not
possessing Dutch nationality is deemed to be a resident of
the Netherlands if he / she has resided therein at any time
in the twelve months preceding the gift.

Value added tax
No Dutch VAT is imposed on dividends in respect of our
ordinary shares or on the transfer of our shares.

Residence
A Non-Resident Holder will not become resident, or be
deemed to be resident, in the Netherlands solely as a result
of holding our ordinary shares or of the execution,
performance, delivery and / or enforcement of rights in
respect of our ordinary shares.

US taxation
The following is a discussion of the material US federal
income tax consequences relating to the acquisition,
ownership and disposition of ordinary shares by a United
States Holder (as defined below) acting in the capacity of a
beneficial owner who is not a tax resident of the
Netherlands. This discussion deals only with ordinary
shares held as capital assets and does not deal with the
tax consequences applicable to all categories of investors,
some of which (such as tax-exempt entities, financial
institutions, regulated investment companies, dealers in

232

ASML ANNUAL REPORT 2020securities/traders in securities that elect a mark-to-market
method of accounting for securities holdings, insurance
companies, investors owning directly, indirectly or
constructively 10.0% or more of our outstanding voting
shares, investors who hold ordinary shares as part of
hedging or conversion transactions and investors whose
functional currency is not the US dollar) may be subject to
special rules. In addition, the discussion does not address
any alternative minimum tax or any state, local, Foreign
Investment in Real Property Tax Act-related US federal
income tax consequences, or non-US tax consequences.

This discussion is based on the US-Netherlands Income
tax treaty, the Internal Revenue Code of 1986, as amended
to the date hereof, final, temporary and proposed Treasury
Department regulations promulgated, and administrative
and judicial interpretations thereof, changes to any of
which subsequent to the date hereof, possibly with
retroactive effect, may affect the tax consequences
described herein. In addition, there can be no assurance
that the IRS will not challenge one or more of the tax
consequences described herein, and we have not
obtained, nor do we intend to obtain, a ruling from the IRS
or an opinion of counsel with respect to the US federal
income tax consequences of acquiring or holding shares.
Prospective purchasers of ordinary shares are advised to
consult their tax advisers with respect to their particular
circumstances and with respect to the effects of US
federal, state, local or non-US tax laws to which they may
be subject.

As used herein, the term ‘United States Holder’ means a
beneficial owner of ordinary shares for US federal income
tax purposes whose holding of such ordinary shares does
not form part of the business property or assets of a
permanent establishment or fixed base in the Netherlands;
who is fully entitled to the benefits of the treaty in respect
of such ordinary shares; and is:
• An individual citizen or tax resident of the US; or
• A corporation or other entity treated as a corporation for
US federal income tax purposes created or organized
in or under the laws of the US or of any political
subdivision thereof; or

• An estate of which the income is subject to US federal

income taxation regardless of its source; or

• A trust whose administration is subject to the primary

supervision of a court within the US and which has one
or more US persons who have the authority to control all
of its substantial decisions.

If an entity treated as a partnership for US federal income
tax purposes owns ordinary shares, the US federal income
tax treatment of a partner in such partnership will generally
depend upon the status and tax residency of the partner
and the activities of the partnership. A partnership that
owns ordinary shares and the partners in such partnership
should consult their tax advisors about the US federal
income tax consequences of holding and disposing of the
ordinary shares.

Passive Foreign Investment Company
considerations
We believe we were not a passive foreign investment
company for US federal income tax purposes in 2020 and
that we will not be a passive foreign investment company
in 2021. However, as passive foreign investment company
status is a factual matter that must be determined annually
at the close of each taxable year, there can be no certainty

as to our actual passive foreign investment company
status in any particular year until the close of the taxable
year in question. We have not conducted a detailed study
at this time to confirm our non-passive foreign investment
company status. If we were treated as a passive foreign
investment company in any year during which a United
States Holder owned common shares, certain adverse tax
consequences could apply. Investors should consult their
tax advisors with respect to any passive foreign investment
company considerations.

Taxation of dividends
United States Holders should generally include in gross
income, as foreign-source dividend income the gross
amount of any non-liquidating distribution (before reduction
for Dutch withholding taxes) we make out of our current or
accumulated earnings and profits (as determined for US
federal income tax purposes) when the distribution is
actually or constructively received by the United States
Holder. Distributions will not be eligible for the dividends-
received deduction generally allowed to US corporations in
respect of dividends received from other US corporations.
The amount of the dividend distribution includible in
income of a United States Holder should be the US dollar
value of the foreign currency (e.g. euros) paid, determined
by the spot rate of exchange on the date of the distribution,
regardless of whether the payment is in fact converted into
US dollars. Distributions in excess of current and
accumulated earnings and profits, as determined for US
federal income tax purposes, will be treated as a non-
taxable return of capital to the extent of the United States
Holder’s US tax basis in the ordinary shares and thereafter
as taxable capital gain. We presently do not maintain
calculations of our earnings and profits under US federal
income tax principles. If we do not report to a United
States Holder the portion of a distribution that exceeds
earnings and profits, the distribution will generally be
taxable as a dividend even if that distribution would
otherwise be treated as a non-taxable return of capital or
as capital gain under the rules described above.

Subject to limitations provided in the US Internal Revenue
Code, a United States Holder may generally deduct from
its US federal taxable income, or credit against its US
federal income tax liability, the amount of qualified Dutch
withholding taxes. However, Dutch withholding tax may be
credited only if the United States Holder does not claim a
deduction for any Dutch or other non-US taxes paid or
accrued in that year. In addition, Dutch dividend
withholding taxes will likely not be creditable against the
United States Holder’s US tax liability to the extent we are
not required to pay over the amount withheld to the Dutch
Tax Administration. Currently, a Dutch corporation that
receives dividends from qualifying non-Dutch subsidiaries
may credit source country tax withheld from those
dividends against Dutch withholding tax imposed on a
dividend paid by a Dutch corporation, up to a maximum of
3.0% of the dividend paid by the Dutch corporation. The
credit reduces the amount of dividend withholding that we
are required to pay to the Dutch Tax Administration but
does not reduce the amount of tax we are required to
withhold from dividends.

For US foreign tax credit purposes, dividends paid by us
generally will be treated as foreign-source income and as
‘passive category income’ (or in the case of certain holders,
as ‘general category income’). Gains or losses realized by a
United States Holder on the sale or exchange of ordinary

233

ASML ANNUAL REPORT 2020shares generally will be treated as US-source gain or loss.
The rules governing the foreign tax credit are complex and
we suggest that each United States Holder consult his or
her own tax advisor to determine whether, and to what
extent, a foreign tax credit will be available.

Dividends received by a United States Holder will generally
be taxed at ordinary income tax rates. However, the Jobs
and Growth Tax Relief Reconciliation Act of 2003, as
amended by the Working Families Tax Relief Act of 2004,
the American Jobs Creation Act of 2004, the American
Taxpayer Relief Act of 2012, and most recently the 2017
tax reform act (Public Law No. 115-97) reduces to 20.0%
the maximum tax rate for certain dividends received by
individuals, so long as certain exclusions do not apply and
the stock has been held for at least 60 days during the
121-day period beginning 60 days before the ex-dividend
date. Dividends received from ‘qualified foreign
corporations’ generally qualify for the reduced rate. A non-
US corporation (other than a passive foreign investment
company) generally will be considered to be a qualified
foreign corporation if: (i) the shares of the non-US
corporation are readily tradable on an established
securities market in the US or (ii) the non-US corporation is
eligible for the benefits of a comprehensive income tax
treaty with the US that has been identified as a qualifying
treaty and contains an exchange of information program. In
addition, subject to income limitations, dividends received
by US individuals and US residents, estates and trusts will
be subject to a Net Investment Income Tax (NIIT) assessed
at the rate of 3.8%. Individual United States Holders
should consult their tax advisors regarding the impact of
this provision on their particular situations.

Dividends paid by us generally will constitute ‘portfolio
income’ for purposes of the limitations on the use of
passive activity losses (and, therefore, generally may not be
offset by passive activity losses) and as ‘investment
income’ for purposes of the limitation on the deduction of
investment interest expense.

Taxation on sale or other disposition of
ordinary shares
Upon a sale or other disposition of ordinary shares, a
United States Holder will generally recognize capital gain or
loss for US federal income tax purposes in an amount
equal to the difference between the amount realized, if paid
in US dollars, or the US dollar value of the amount realized

(determined at the spot rate on the settlement date of the
sale) if proceeds are paid in currency other than the US
dollar, as the case may be, and the United States Holder’s
US tax basis (determined in US dollars) in such ordinary
shares. Generally, the capital gain or loss will be long-term
capital gain or loss if the holding period of the United
States Holder in the ordinary shares exceeds one year at
the time of the sale or other disposition. The deductibility of
capital losses is subject to limitations for US federal income
tax purposes. Gain or loss from the sale or other
disposition of ordinary shares generally will be treated as
US source income or loss for US foreign tax credit
purposes. Generally, any gain or loss resulting from
currency fluctuations during the period between the date of
the sale of the ordinary shares and the date the sale
proceeds are converted into US dollars will be treated as
ordinary income or loss from sources within the US. Each
United States Holder should consult his or her tax advisor
with regard to the translation rules applicable when
computing its adjusted US tax basis and the amount
realized upon a sale or other disposition of its ordinary
shares if purchased in, or sold or disposed of for, a
currency other than US dollar.

Information reporting and backup
withholding
Information returns may be filed with the IRS in connection
with payments on the ordinary shares or proceeds from a
sale, redemption or other disposition of the ordinary
shares. A ‘backup withholding’ tax may be applied to, and
withheld from, these payments if the beneficial owner fails
to provide a correct taxpayer identification number to the
paying agent and to comply with certain certification
procedures or otherwise establish an exemption from
backup withholding. Any amounts withheld under the
backup withholding rules might be refunded (or credited
against the beneficial owner’s US federal income tax
liability, if any) depending on the facts and provided that
the required information is furnished to the IRS.

The discussion set out above is included for general
information only and may not be applicable depending
upon a holder’s particular situation. Holders should consult
their tax advisors with respect to the tax consequences to
them of the purchase, ownership and disposition of shares
including the tax consequences under state, local and
other tax laws and the possible effects of changes in US
federal and other tax laws.

234

ASML ANNUAL REPORT 2020Appendix - Government regulation

Our business is subject to direct and indirect regulations in
each of the countries in which our customers or we do
business, and changes in various types of regulations can
affect our business adversely. As our business has
expanded, we have become subject to increasing and
increasingly complex regulation. The implementation of
new safety, environmental or legal requirements, including
export controls and required permits and licenses or
changes in interpretation, implementation or enforcement
of such regulations and requirements, could impact our
products, our manufacturing or distribution processes or

location of sales, and could affect the timing of product
introductions, the cost of our production, and products as
well as their commercial success in each market in which
we operate. The impact of these regulations could
adversely affect our business, financial condition and our
results of operations even where the specific regulations
do not directly apply to us or to our products. See How we
manage risk - Risk factors - Legal and compliance - We are
subject to increasingly complex regulatory and compliance
obligations.

235

ASML ANNUAL REPORT 2020Appendix - Offer and listing details

Our ordinary shares are listed for trading in the form of
registered ASML NASDAQ shares and in the form of
registered ASML Euronext Amsterdam shares. The
principal trading market of our ordinary shares is Euronext
Amsterdam (trading symbol: ASML). Our ordinary shares
also trade on NASDAQ (trading symbol: ASML).

Our shares listed on NASDAQ are registered with
JPMorgan Chase Bank N.A., our New York Transfer Agent,
pursuant to the terms of the Transfer Agent Agreement
between ASML and JPMorgan Chase Bank N.A. Our
shares listed on Euronext Amsterdam are held in
dematerialized form through the facilities of Euroclear
Nederland, the Dutch centralized securities custody and
administration system. The New York Transfer Agent
charges shareholders a fee of up to USD 5.00 per 100
shares for the exchange of our shares listed at NASDAQ
for our shares listed at Euronext Amsterdam and vice
versa.

Dividends payable on our shares listed at NASDAQ are
declared in euro and converted to US dollars at the rate of
exchange at the close of business on the date determined

by the Board of Management. The resulting amounts are
distributed through the New York Transfer Agent and no
charge is payable by holders of our shares listed at
NASDAQ in connection with this conversion or distribution.

Pursuant to the terms of the Transfer Agent Agreement, we
have agreed to reimburse the New York Transfer Agent for
certain out of pocket expenses, including in connection
with any mailing of notices, reports or other
communications made generally available by ASML to
holders of ordinary shares. The New York Transfer Agent
has waived its fees associated with routine services to
ASML associated with our shares listed at NASDAQ. In
addition, the New York Transfer Agent in consideration of
its acting as Transfer Agent has agreed to make a
contribution towards covering certain expenses incurred by
ASML in connection with the issuance and transfer of our
shares listed on NASDAQ. In the year ended December 31,
2020, the Transfer Agent contributed USD 0.4
million towards coverage of expenses incurred by ASML
(which mainly comprised of audit, advisory, legal and listing
fees incurred due to the existence of our share listing on
NASDAQ).

236

ASML ANNUAL REPORT 2020Appendix - Material contracts

Settlement and Cross License Agreement Among ASML, Zeiss and Nikon

In February 2019, ASML entered into a settlement and
license agreement with Nikon Corporation and Carl Zeiss
SMT, and for purposes of certain provisions Carl Zeiss AG.
The agreement settles all pending litigation between ASML
and Zeiss on the one hand and Nikon on the other hand
and provides for a patent cross license between ASML,
Zeiss and Nikon. The key terms of the cross-license are set
forth below.

Scope of License
Pursuant to the settlement and license agreement:

(i) ASML and Zeiss grant Nikon a worldwide, non-exclusive
license under all patents owned or licensable ("Licensed
Patents") by ASML and Zeiss to make, use and sell
lithography equipment and components as well as digital
cameras, but excluding EUV lithography products and
laser sources ("Nikon Licensed Products");

(ii) Nikon grants ASML a worldwide, non-exclusive license
under all Nikon Licensed Patents to make, use and sell
lithography equipment and components, but excluding
FPD/large area substrate products ("ASML Licensed
Products"); and

(iii) Nikon grants Zeiss a worldwide, non-exclusive license
under all Nikon Licensed Patents to make, use and sell a)
components for use in lithography equipment and b)
certain digital cameras developed and marketed by Zeiss,
but excluding FPD/large area substrate products (“Zeiss
Licensed Products”).

These license grants cover existing patents, as well as
additional patents that issue worldwide before the end of
the term of the cross-license.

Term of License
The term of the cross-license is 10 years from the date of
the cross-license agreement, February 18, 2019. ASML
and Zeiss, jointly on the one hand and Nikon on the other
hand, each have the right to convert up to 20 Licensed
Patent families of the other side into permanently Licensed
Patents.

Post-Term
After the term of the cross-license, remedies for any party's
infringement of any patents with an effective application
date before the end of the term of the cross-license are
limited to damages in the form of a reasonable royalty
applied against a royalty base that is apportioned to reflect
the value of such patent features and excluding from the
base value attributable to unpatented features. Whether a
Licensed Product infringes a Licensed Patent, all defenses
to such a claim, and any such reasonable royalty in the
event liability is found shall be determined by a court
mutually agreed by the parties.

Certain Releases
The parties have granted each other releases for claims of
infringement of Licensed Patents based on acts prior to the
date of the agreement.

Immunity
ASML and Nikon have granted each other certain
immunities from patent suits by the other party in respect
of covered entities, including customers, subject to certain
defensive rights.

Payments
ASML and Zeiss agreed that ASML pays a total of
€150.0 million to Nikon.

ASML and Zeiss agreed that ASML pays Nikon a royalty of
0.8% of the net sales price of entire immersion lithography
systems (on the first sale of each system) that are ASML
Licensed Products sold during the term of the agreement.

Nikon agreed to pay ASML a royalty of 0.8% of the net
sales price of entire immersion lithography systems (on the
first sale of each system) that are Nikon Licensed Products
sold during the term of the agreement.

237

ASML ANNUAL REPORT 2020Appendix - Exchange controls

Cash distributions, if any, payable in euros on our shares
listed at Euronext Amsterdam may be officially transferred
by a bank from the Netherlands and converted into any
other currency without being subject to any Dutch legal
restrictions. However, for statistical purposes, such
payments and transactions must be reported by ASML to
the Dutch Central Bank. Furthermore, no payments,
including dividend payments, may be made to jurisdictions

subject to certain sanctions, adopted by the government of
the Netherlands, implementing resolutions of the Security
Council of the United Nations. Cash distributions, if any, on
our shares listed at NASDAQ shall be declared in euros but
paid in US dollars, converted at the rate of exchange at the
close of business on the date fixed for that purpose by the
Board of Management in accordance with the Articles of
Association.

238

ASML ANNUAL REPORT 2020Appendix - Documents on display

We are subject to certain reporting requirements of the
Exchange Act. As a "foreign private issuer", we are exempt
from the rules under the Exchange Act prescribing certain
disclosure and procedural requirements for proxy
solicitations, and our officers, directors and principal
shareholders are exempt from the reporting and "short-
swing" profit recovery provisions contained in Section 16
of the Exchange Act, with respect to their purchases and
sales of shares. In addition, we are not required to file
reports and financial statements with the SEC as frequently
or as promptly as companies whose securities are
registered under the Exchange Act that are not foreign
private issuers. However, we are required to file with the
SEC, within 4 months after the end of each fiscal year, an

Annual Report on Form 20-F containing financial
statements audited by an independent accounting firm and
interactive data comprising financial statements in
extensible business reporting language. We publish
unaudited interim financial information in accordance with
U.S. GAAP after the end of each quarter. We furnish this
quarterly financial information to the SEC under cover of a
Form 6-K.

Documents we file with the SEC are publicly available on
the SEC's website, which contains reports and other
information regarding registrants that are required to file
electronically with the SEC. The address of this website is
http://www.sec.gov.

239

ASML ANNUAL REPORT 2020Appendix - Controls and procedures

Disclosure controls and procedures
As of December 31, 2020, ASML’s senior management
conducted an evaluation, under the supervision and with
the participation of ASML’s CEO and CFO, of the
effectiveness of the design and operation of ASML’s
disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act). Based on such
evaluation, ASML’s CEO and CFO have concluded that, as
of December 31, 2020, ASML’s disclosure controls and
procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information
required to be disclosed by ASML in the reports that it files
or submits under the Exchange Act and are effective in
ensuring that information required to be disclosed by
ASML is accumulated and communicated to ASML’s
management, including ASML’s CEO and CFO, as
appropriate to allow timely decisions regarding required
disclosure.

Management’s report on internal
control over financial reporting
ASML’s management is responsible for establishing and
maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) under the Exchange
Act. Under the supervision and with the participation of
ASML’s CEO and CFO, ASML’s management conducted
an evaluation of the effectiveness of ASML’s internal
control over financial reporting as of December 31, 2020
based upon the framework in "Internal Control – Integrated
Framework" (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that

evaluation, management has concluded that ASML’s
internal control over financial reporting was effective as of
December 31, 2020 at providing reasonable assurance
regarding the reliability of financial reporting and the
preparation of the Financial Statements for external
purposes in conformity with US GAAP.

KPMG Accountants N.V., an independent registered public
accounting firm, have audited the Financial Statements as
included in this Annual Report and, have also audited and
issued a report, included herein, on the effectiveness of
ASML’s internal control over financial reporting.

Changes in internal control over
financial reporting
During the year ended December 31, 2020, there have
been no changes in our internal control over financial
reporting that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.

Inherent limitations of disclosure
controls and procedures in internal
control over financial reporting
It should be noted that any system of controls, however
well-designed and operated, can provide only reasonable,
and not absolute, assurance that the objectives of the
system will be met. In addition, the design of any control
system is based in part upon certain assumptions about
the likelihood of future events.

240

ASML ANNUAL REPORT 2020Appendix - Financial calendar and investor relations

Investor Relations
ASML Investor Relations supplies information regarding the
company and its business opportunities to investors and
financial analysts. Our annual reports, quarterly releases
and other information are also available on our website.

Financial Calendar
April 21, 2021
Announcement of First Quarter results for 2021

April 29, 2021
Annual General Meeting

July 21, 2021
Announcement of Second Quarter results for 2021

October 20, 2021
Announcement of Third Quarter results for 2021

Fiscal Year
ASML’s fiscal year ends on December 31, 2021

241

ASML ANNUAL REPORT 2020Appendix - ASML worldwide contact information

Corporate Headquarters
De Run 6501
5504 DR Veldhoven
The Netherlands

Mailing Address
P.O. Box 324
5500 AH Veldhoven
The Netherlands

United States Main Office
2650 W Geronimo Place
Chandler, AZ 85224
U.S.A.

Asia Main Office
Suites 3704-6, 37/F Tower Two, Times Square
1 Matheson Street
Causeway Bay, Hong Kong

Investor Relations
phone: +31 40 268 3938
email: investor.relations@asml.com

For additional contact information please visit www.asml.com.

242

ASML ANNUAL REPORT 2020Form 20-F Caption

Location in this document

Page

Appendix - Reference table 20-F

Item

Part I

Identity of Directors, Senior Management and Advisors

Not applicable

Offer Statistics and Expected Timetable

Not applicable

Key Information

A. Selected Financial Data

Other appendices - Appendix - Selected financial data

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the Offer and Use of Proceeds

Not applicable

D. Risk Factors

Information on the Company

A. History and Development of the Company

How we manage risk - Risk factors

B. Business Overview

Who we are and what we do - Our company - Our core values

Who we are and what we do - Our company - Where we come from
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 10 Equity method investments
Other appendices - Appendix - Property, plant and equipment

Other appendices - Appendix - ASML worldwide contact information

Who we are and what we do - Our company

Who we are and what we do - Our products and services

Who we are and what we do - Our markets

What we achieved in 2020 - Technology and innovation ecosystem - How we innovate

What we achieved in 2020 - Technology and innovation ecosystem - Customer intimacy

What we achieved in 2020 - Our supply chain

How we manage risk - Risk factors
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 3 Revenue from contracts with customers
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 4 Segment disclosure
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 17 Commitments and contingencies
Other appendices - Appendix - Government regulation

C. Organizational Structure

D. Property, Plant and Equipment

Leadership and governance - Corporate governance - Corporate Information

Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 13 Property, plant and equipment, net
Other appendices - Appendix - Property, plant and equipment

Unresolved Staff Comments

Not applicable

226

166

230

242

156

161

176

235

117

170

230

243

ASML ANNUAL REPORT 2020Item

Form 20-F Caption

Location in this document

Operating and Financial Review and Prospects

Executive Summary

Who we are and what we do - Our company - Our purpose

Who we are and what we do - Our strategy

CFO financial review - Long-term growth opportunities - Outlook 2025
CFO financial review - Financial performance - ASML operations update on key
performance indicators
CFO financial review - Long-term growth opportunities - Trend information

CFO financial review - Financial performance - Operating results of 2020 compared to
2019
Consolidated Financial Statements - Consolidated Statements of Operations

A. Operating Results

B. Liquidity and Capital Resources

Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 10 Equity method investments
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 16 Long-term debt and interest and other costs
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 17 Commitments and contingencies

C. Research and Development, Patents and Licenses, etc.

How we manage risk - Risk factors - Strategy and products - Failure to adequately
protect the intellectual property rights, trade secrets or other confidential information
could harm our business
How we manage risk - Risk factors - Strategy and products - Defending against
intellectual property claims brought by others could harm our business
Risk category: Intellectual property rights
What we achieved in 2020 - Technology and innovation ecosystem
CFO financial review - Financial performance - Operating results of 2020 compared to
2019

D. Trend Information

E. Off-Balance Sheet Arrangements

CFO financial review - Long-term growth opportunities - Trend information

F. Tabular Disclosure of Contractual Obligations

Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 17 Commitments and contingencies

G. Safe Harbor

Special note regarding forward-looking statements

Directors, Senior Management and Employees

A. Directors and Senior Management

B. Compensation

C. Board Practices

Leadership and governance - Corporate governance - Board of Management

Leadership and governance - Corporate governance - Supervisory Board

Leadership and governance - Remuneration report

Leadership and governance - Corporate governance - Board of Management

Leadership and governance - Corporate governance - Supervisory Board

Leadership and governance - Supervisory Board report

Page

76
149

166

174

176

92
27

166

176

105

108

134

105

108

119

244

ASML ANNUAL REPORT 2020Item

Form 20-F Caption

Location in this document

Page

D. Employees

How we manage risk - Risk factors - Our business and future success depend on our
ability to manage the growth of our organization and attract and retain a sufficient number
of adequately educated and skilled employees
Risk category: Human resource, Knowledge management, Organizational effectiveness
What we achieved in 2020 - Our people - Labor relations
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 19 Employee benefits
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 18 Personnel expenses and employee information
Non-financial statements - Non-financial indicators - Our people - Employee engagement
- Number of FTEs (payroll and temporary)

Leadership and governance - Remuneration report

Leadership and governance - Corporate governance - Corporate Information
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 20 Share-based compensation

E. Share Ownership

Major Shareholders and Related Party Transactions

A. Major Shareholders

B. Related Party Transactions

Leadership and governance - Corporate governance - Major Shareholders

Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 26 Related party transactions

C. Interests of Experts & Counsel

Not applicable

Financial Information

A. Consolidated Statements and Other Financial Information

Consolidated Financial Statements

B. Significant Changes

The Offer and Listing

A. Offer and Listing Details

B. Plan of Distribution

C. Markets

D. Selling Shareholders

E. Dilution

F. Expenses of the Issue

Additional Information

A. Share Capital

CFO financial review - Long-term growth opportunities
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 27 Subsequent events

Other appendices - Appendix - Offer and listing details

Not applicable

Other appendices - Appendix - Offer and listing details

Not applicable

B. Memorandum and Articles of Association

Leadership and governance - Corporate governance

C. Material Contracts

D. Exchange Controls

Other appendices - Appendix - Material contracts

Other appendices - Appendix - Exchange controls

95
44

178

177

204

134

117

179

115

197

146

198

236

105

237

238

245

ASML ANNUAL REPORT 2020Item

Form 20-F Caption

Location in this document

E. Taxation

F. Dividends and Paying Agents

How we manage risk - Tax policy

G. Statement by Experts

H. Documents on Display

I. Subsidiary Information

Not applicable

Other appendices - Appendix - Documents on display

Quantitative and Qualitative Disclosures About Market Risk

Leadership and governance - Corporate governance - Corporate Information

Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 4 Segment disclosure
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 5 Cash and cash equivalents and short-term investments
Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 25 Financial risk management - Paragraph on valuation techniques used

Description of Securities Other Than Equity Securities

Not applicable

Part II

Defaults, Dividend Arrearages and Delinquencies

None

Material Modifications to the Rights of Security Holders and Use of Proceeds

Controls and Procedures

None

16A

Audit Committee Financial Expert

Leadership and governance - Supervisory Board report

Other appendices - Appendix - Controls and procedures

16B

Code of Ethics

16C

Principal Accountant Fees and Services

Other appendices - Appendix - Principal accountant fees and services

How we manage risk - Responsible business - Business ethics and Code of Conduct

16D

Exemptions from the Listing Standards for Audit Committees

Not applicable

16E

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Page

239

117

161

163

191

240

119

229

Consolidated Financial Statements - Notes to the Consolidated Financial Statements -
Note 22 Shareholders’ equity

188

16F

Change in Registrant’s Certifying Accountant

16G

Corporate Governance

None

Leadership and governance - Corporate governance - Corporate Information - Our US
Listing Requirements

117

16H

Mine Safety Disclosure

Part III

Financial Statements

Exhibits

Definitions

Not applicable

Consolidated Financial Statements

Exhibit index

Definitions

146

257

249

246

ASML ANNUAL REPORT 2020This document contains information required for the Annual Report on Form 20-F for the year ended December 31, 2020
of ASML Holding N.V. Reference is made to the Form 20-F cross reference table contained herein under ‘Reference Table
- 20-F’. Only the information in this document that is referenced in the Form 20-F cross reference table and this paragraph
shall be deemed to be filed with the Securities and Exchange Commission for any purpose. Any additional information in
this document which is not referenced in the Form 20-F cross reference table, or the Exhibits themselves, shall not be
deemed to be incorporated by reference, shall not be part of the 2020 Annual Report on Form 20-F and is furnished to the
Securities and Exchange Commission for information only.

247

ASML ANNUAL REPORT 2020Definitions

248

ASML ANNUAL REPORT 2020Name

0-9

3TG

ADAS

AFM

AGM

AIoT

Description

Tin, tantalum, tungsten and gold

Advanced driver-assistance systems

The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten)

Annual general meeting

Artificial intelligence

Artificial intelligence of things

Annual Report

Annual Report on Form 20-F

ARCNL

ArF

ArFi

ASC

ASML

ASML Foundation

ASML Preference
Shares Foundation

ATAD

BAPA

BEAT

BEPS

BoM

Advanced Research Center for Nanolithography

Argon fluoride

Argon fluoride immersion

Accounting Standards Codification

ASML Holding N.V. and / or any of its subsidiaries and / or any investments in associates

An independent charity with strong ties to ASML that supports educational initiative for disadvantaged 4-18
year olds in regions where ASML operates.

Stichting Preferente Aandelen ASML

Anti-tax avoidance directives

Bilateral advance pricing agreements

Base erosion anti-abuse tax

Base erosion and profit shifting

Board of Management

BREEAM

Building Research Establishment Environmental Assessment Method

Brion

CAGR

Canon

Canon Cross-License
Agreement

Brion Technologies, Inc.

Compound annual growth rate

Canon Kabushiki Kaisha

A global patent cross-license agreement between ASML and Canon related to semiconductor lithography

Carl Zeiss SMT

Carl Zeiss SMT GmbH

CCIP

CCPA

CDP

CEO

CFO

CGU

CGU ASML

Cleanroom

CMO

CO2

CMOS

Code

Customer Co-investment Program

California Consumer Privacy Act (US)

The Carbon Disclosure Project

Chief Executive Officer

Chief Financial Officer

Cash-generating unit

ASML excluding CGU Cymer Light Sources

The central part of a wafer fab where wafers are processed, and the environment is minutely controlled to
eliminate dust and other contaminants.

Chief Marketing Officer

Carbon dioxide

Complementary metal oxide semiconductor

The Dutch Corporate Governance Code

Code of Conduct

Code of ethics and conduct

Company

Computational
lithography

ASML Holding N.V.

The use of powerful algorithms and computer modeling of the manufacturing process to optimize reticle
patterns by intentionally deforming them to compensate for physical and chemical effects that occur during
lithography and patterning.

COO

COVID-19

Chief Operating Officer

Coronavirus disease 2019

249

ASML ANNUAL REPORT 2020Name

CRC

CRMC

CTO

Cymer

D&E

DAP

Deloitte

D&I

DJSI

DRAM

DUV

EAISI

EHS

Description

Corporate responsibility

ASML’s corporate risk committee

Capital Research & Management Company

Chief Technology Officer

Cymer Inc., Cymer LLC and its subsidiaries

Development and engineering

Development Action Plan

Deloitte Accountants B.V.

Diversity and inclusion

Dow Jones Sustainability Index

Dynamic Random Access Memory

Deep ultraviolet

Eindhoven Artificial Intelligence Systems Institute

Environment, health and safety

EHS Competence
Center

A group within ASML that defines EHS standards, gathers best practices and helps managers implement
them

EMEA

EPS

ERM

eScan

ESG score

ETR

EURIBOR

Eurobond

Europe, the Middle East and Africa

Earnings per share

Enterprise risk management

ASML’s e-beam wafer inspection system family for targeted in-line defect detection

An integrated scoring system for environmental, social and governance (ESG) factors used in credit rating
decisions

Effective tax rate

European Union

Euro Interbank Offered Rate

A bond denominated in Euros

Euroclear Nederland

The Dutch Central Securities Depository (Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V.)

Euronext Amsterdam

Euronext Amsterdam N.V.

EUV lithography

A lithography technology that uses extreme ultraviolet light with a wavelength of 13.5 nm. This is currently
the cutting edge of lithography, enabling technology nodes of 16 nm and beyond. It is used for only the
most critical layers with the smallest features.

Exchange Act

US Securities Exchange Act of 1934

ExCom

Executive Committee

Fab

FAT

FDII

Feature

Flash

Foundry

FTEs

Semiconductor fabrication plant

Factory acceptance test

Foreign-derived intangible income

The elements that make up the pattern for a given layer of a microchip.

A type of non-volatile memory used for storing and transferring information.

A contract manufacturer of logic chips

Full-time equivalents

FTSE4Good

Series of ethical investment stock market indices launched in 2001 by the FTSE Group

GAAP

GDPR

GeSI

GHG

GILTI

GPU

GRI

Generally accepted accounting principles

General data protection regulation

Global e-Sustainability Initiative

Greenhouse gas

Global intangible low-tax income

Graphics processing unit

Global Reporting Initiative

GRI standards

GRI sustainability reporting standards

250

ASML ANNUAL REPORT 2020Name

HDD

High-NA

HMI

Description

Hydrogen

Hard disk drive

High numerical aperture – specifically a next-generation EUV lithography platform

The brand name for ASML's range of electron beam (e-beam) wafer inspection and metrology systems

Holistic lithography

The ability to optimize the entire microchip manufacturing process and enable affordable scaling in chip
technology by integrating lithography systems with computational modeling and wafer metrology solutions
(analyzing and controlling the manufacturing process in real time)

HTSC

IDM

IFRS

IIRC

i-line

ILO

Imaging

imec

High Tech Systems Center

Integrated circuit

Integrated device manufacturer

International Financial Reporting Standards as adopted by the European Union

International Integrated Reporting Council

Light with a wavelength of 365 nm, generated by mercury vapor lamps and used in some lithography
systems

International Labor Organization

The ability to transfer a pattern to the photoresist on to a wafer using light

Interuniversitair Micro-Elektronica Centrum

Immersion lithography

A lithography technique that uses a pool of ultra-pure water between the lens and the wafer to increase the
lenses numerical aperture (ability to collect and focus light). This improves both the resolution and depth of
focus for the lithography system.

Installed Base
Management

Intel

Net service and field option sales

Intel Corporation

Internet of Things (IoT)

A network of physical objects embedded with sensors, actuators, electronics and software that allow the
objects to collect and exchange data

IPR

ISO

Intellectual property rights

International Organization for Standardization

KLA-Tencor

KLA-Tencor Corporation

KPI

KPMG

KrF

kWh

LGBTI

LIBOR

Logic

LTI

MBA

Memory

MPS

MSCI

NAND

NASDAQ

NGO

Key performance indicator

KPMG Accountants N.V.

Krypton fluoride

Kilowatt-hour

Lesbian, gay, bisexual, transgender and intersex

London Interbank Offered Rate

Integrated devices such as microprocessors, microcontrollers and GPUs. Also refers to companies that
manufacture such devices.

Long-term incentive

Master of Business Administration

Microchips, such as NAND Flash and DRAM, that store information. Also refers to companies that
manufacture such chips.

Millimeter (one thousandth of a meter)

Mature Products and Services

Morgan Stanley Capital International

Numerical aperture

A binary logical operator that gives an output when it receives one or no input; a composite of ‘NOT AND’

NASDAQ Stock Market LLC

Non-governmental organization

251

ASML ANNUAL REPORT 2020Name

Nikon

Node

Description

Nikon Corporation

The Netherlands

Nanometer (one billionth of a meter)

A steppingstone in the chipmaking industry's roadmap for smaller features and more advanced microchips,
describes and differentiates generations of semiconductor manufacturing technologies and the chips made
with them. Nodes with “smaller sizes” refer to more advanced technologies.

Non-GAAP

A company’s historical or future financial performance, financial position, or cash flows that are not
calculated or presented in accordance with the most comparable GAAP measure.

NRE

NXE

NXT

OCI

ODM

OECD

OEM

ONE

Overlay

Non-recurring engineering

The original TWINSCAN system platform for EUV lithography

An enhanced version of the original TWINSCAN system platform offering significantly improved overlay and
productivity

Other comprehensive income

Original design manufacturer

Organization for Economic Co-operation and Development

Original equipment manufacturer

ASML’s Our New Enterprise program, which aims to improve our business processes and IT enterprise
management system

The layer-to-layer alignment of chip structures

Pattern fidelity

A holistic measure of how well the desired pattern is reproduced on the wafer

Pattern fidelity control

A holistic approach to controlling the whole process of manufacturing advanced microchips in high volumes
that aims to improve overall yields. It draws data from production equipment and computational lithography
tools, analyzing it with techniques such as machine learning to provide real-time feedback.

Patterning

The process of creating a pattern in a surface (to build microchips)

PGP

PME

Preference shares
foundation

Preference share
option

QLTCS

R&D

RBA

REACH

Product generation process

Bedrijfstakpensioenfonds Metalektro

Stichting Preferente Aandelen ASML

An option to acquire cumulative preference shares in our capital

Quality, logistics, technology, cost and sustainability

Research and development

Responsible Business Alliance

ASML’s Remuneration Committee

Registration, evaluation, authorization and restriction of chemicals

Recoverable amount

The greater out of an asset’s fair value less costs to sell and its value in use

Remuneration policy

The remuneration policy applicable to the Board of Management of ASML Holding N.V.

Reticle

ROAIC

RoHS

Samsung

SAQ

A plate containing the pattern of features to be transferred to the wafer for each exposure

Return on average invested capital

Restriction of hazardous substances

Samsung Electronics Corporation

Self-assessment questionnaire

Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002

SAT

Scope 1 CO2
emissions

Site acceptance test

ASML’s Supervisory Board

Direct carbon dioxide emissions from resources an organization owns or controls

252

ASML ANNUAL REPORT 2020Name

Scope 2 CO2
emissions

Scope 3 CO2
emissions

SDG

SEC

SEMI

SEMI S2

SEMI S23

SG&A

Shrink

SoC

Description

Indirect carbon dioxide emissions due to the energy and organization consumes

All other indirect carbon dioxide emissions that occur in an organization’s value chain

United Nations Sustainable Development Goals

The United States Securities and Exchange Commission

Semiconductor Equipment and Materials International

SEMI S2 – Safety Guideline, Environmental, Health, and Safety Guideline for Semiconductor Manufacturing
Equipment, a set of performance-based EHS considerations for semiconductor manufacturing equipment

SEMI S23 – Guide for Conservation of Energy, Utilities, and Materials Used by Semiconductor
Manufacturing Equipment, guidelines for collecting, analyzing, and reporting energy-consuming
semiconductor manufacturing equipment utility data

Selling, general and administrative

The process of developing smaller transistors for more advanced chips

System on a chip

SPE Shareholders

A syndicate of three banks for the purpose of leasing ASML’s headquarters in Veldhoven

S&SC

SSD

SSPS

SSRA

STEM

STI

SWOT

TCFD

TCJA

TDC

Sourcing and supply chain

Solid-state drive

Safety system performance specification

Safety risk assessment

Science, technology, engineering and mathematics

Short-term incentive

Strengths, weaknesses, opportunities and threats

ASML’s Technology Committee

Task Force on Climate-related Financial Disclosures

Tax Cuts and Jobs Act

Total direct compensation

Technical competence

The capabilities and spread of technical expertise among our people, and the extent to which they are
embedded in our processes and operations

Throughput

Transistor

TSMC

TSR

TWINSCAN

UNGP

US GAAP

US ITC

VAT

VIE

VLSI

The number of wafers a system can process per hour

Terajoule (one trillion joules)

A semiconductor device that is the fundamental building block of microchips

Taiwan Semiconductor Manufacturing Company Ltd.

Total shareholder return

ASML’s unique lithography system platform, with two complete wafer stages to allow one wafer to be
mapped while another is being exposed - enabling higher accuracy and throughput.

United Nations guiding principles

United States

Generally accepted accounting principles in the United States of America

United States International Trade Commission

Value-added tax

Variable interest entity

VLSI Research Inc.

VNO-NCW

The Confederation of Netherlands Industry and Employers

WACC

Vice president

Weighted average cost of capital

Wafer inspection

The process of locating and analyzing individual chip defects on a wafer

Wafer metrology

The process of measuring the quality of patterns on a wafer

253

ASML ANNUAL REPORT 2020Name

Wavelength

Description

The distance between two peaks of a wave such as light. The shorter the wavelength of light used in a
lithography system, the smaller the features the system can resolve.

Website

www.asml.com

Works Council

Works Council of ASML Netherlands B.V.

YieldStar

Zeiss

ASML's diffraction-based wafer metrology platform

Carl Zeiss AG

254

ASML ANNUAL REPORT 2020ASML Holding N.V. hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused
and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf.

ASML Holding N.V. (Registrant)

/s/ Peter T.F.M. Wennink

Name: Peter T.F.M. Wennink
Title: President, CEO and member of the Board of Management
Dated: February 10, 2021

/s/ Roger J.M. Dassen
Name: Roger J.M. Dassen
Title: Executive Vice President, CFO and member of the Board of Management
Dated: February 10, 2021

255

ASML ANNUAL REPORT 2020

Exhibit index

256

ASML ANNUAL REPORT 2020Exhibit index

Exhibit No. Description

2.1

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

8.1

12.1

13.1

15.1

101.INS

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

Articles of Association of ASML Holding N.V. (English translation) (Incorporated by reference to Amendment No. 13 to
the Registrant’s Registration Statement on Form 8-A/A, filed with the SEC on February 8, 2013)

Description of Securities registered under Section 12 of the Exchange Act 2

Agreement between ASM Lithography B.V. and Carl Zeiss, dated March 17, 2000 (Incorporated by reference to the
Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, 2000) 1

Agreement between ASML Holding N.V. and Carl Zeiss SMT AG, dated October 24, 2003 (Incorporated by reference to
the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2003) 1

Form of Indemnity Agreement between ASML Holding N.V. and members of its Board of Management (Incorporated by
reference to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2003)
Form of Indemnity Agreement between ASML Holding N.V. and members of its Supervisory Board (Incorporated by
reference to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2003)
Form of Employment Agreement for members of the Board of Management (Incorporated by reference to the
Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, 2003)
Nikon-ASML Patent Cross-License Agreement, dated December 10, 2004, between ASML Holding N.V. and Nikon
Corporation (Incorporated by reference to the Registrant’s Annual Report on Form 20-F for the fiscal year ended
December 31, 2014) 1
ASML/Carl Zeiss Sublicense Agreement, 2004, dated December 10, 2004, between Carl Zeiss SMT AG and ASML
Holding N.V. (Incorporated by reference to the Registrant’s Annual Report on Form 20-F for the fiscal year ended
December 31, 2004) 1
ASML Performance Stock Plan for Members of the Board of Management (Version 1) (Incorporated by reference to the
Registrant’s Registration Statement on Form S-8 filed with the SEC on July 5, 2007 (file No. 333-144356))

ASML Performance Stock Option Plan for Members of the Board of Management (Version 2) (Incorporated by reference
to the Registrant’s Registration Statement on Form S-8 filed with the Commission on July 5, 2007 (file No. 333-144356))

ASML Board of Management Umbrella Share Plan (Incorporated by reference to the Registrant’s Registration Statement
on Form S-8 filed with the SEC on April 13, 2015 (file No. 333-203390))

Partnership and Joint Venture Agreement, among Carl Zeiss AG, ASML Holding N.V. and Carl Zeiss SMT Holding
Management GmbH, dated 29 June 2017 (Incorporated by reference to the Registrant’s Annual Report on Form 20-F
for the fiscal year ended December 31, 2017)
Settlement and Cross License Agreement, dated February 18, 2019, among Nikon Corporation, ASML Holding N.V. and
Carl Zeiss SMT GmbH and, with regards to Sections 3(b) 2.2.1, 3.8, 6.3.3, 6.6, 10.6, 10.8, 10.14 and 10.15, Carl Zeiss
AG (Incorporated by reference to the Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31,
2019) 3
List of Main Subsidiaries 2
Certification of CEO and CFO Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 2
Certification of CEO and CFO Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 2
Consent of Independent Registered Public Accounting Firm 2
XBRL Instance Document 2
XBRL Taxonomy Extension Schema Document 2
XBRL Taxonomy Extension Calculation Linkbase Document 2
XBRL Taxonomy Extension Definition Linkbase Document 2
XBRL Taxonomy Extension Label Linkbase Document 2
XBRL Taxonomy Extension Presentation Linkbase Document 2

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) 2

1. Certain information omitted pursuant to a request for confidential treatment filed separately with the SEC.
2. Filed at the SEC herewith.
3. Portions of this exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed

ASML is party to 6 debt instruments (senior notes) under which the total amount of securities under each individual debt
instrument does not exceed 10% of the total assets of ASML and its subsidiaries on a consolidated basis. Pursuant to
paragraph 2(b) (i) of the instructions to the exhibits to Form 20-F, ASML agrees to furnish a copy of such instruments to the
SEC upon request. Classes of senior notes registered are:

• 0.625% ASML Holding NV Fixed Rate Senior Notes due 2022 (XS1405774990) at Luxembourg Stock Exchange;
• 3.375% ASML Holding NV Fixed Rate Senior Notes due 2023 (XS0972530561) at Luxembourg Stock Exchange;
• 1.375% ASML Holding NV Fixed Rate Senior Notes due 2026 (XS1405780963) at Luxembourg Stock Exchange;
• 1.625% ASML Holding NV Fixed Rate Senior Notes due 2027 (XS1527556192) at Luxembourg Stock Exchange;
• 0.625% ASML Holding NV Fixed Rate Senior Notes due 2029 (XS2166219720) at Luxembourg Stock Exchange;
• 0.25% ASML Holding NV Fixed Rate Senior Notes due 2030 (XS2010032378) at Luxembourg Stock Exchange.

257

ASML ANNUAL REPORT 2020