Avino Silver & Gold Mines Ltd. Price & Performance (ASM)

Our new orders in the fourth quarter amounted to €731,000,000 up 8% year on year. Orders dropped by 12% compared to the level in Q3. And this was in part explained by the effect of order pull ins from Q4 to Q3 as already communicated last quarter. Logic foundry accounted for the largest part of our Q4 orders. And increased significantly compared to Q3. Gate all around orders increased to a very strong level as leading customers [indiscernible] Memory orders decreased compared to the relatively strong level in Q3, but they were still up substantially compared to Q4 'twenty three. Power and our Wave orders dropped to a fairly low level, reflecting the soft market conditions in this segment including the silicon carbide markets, Let's now look at the full year results. At €2,900,000,000 our sales in 2024 increased 12% at constant currencies to a new record high. In terms of customer segments, our total LogicFoundry sales increased slightly and continue to account for more than half of Gate all around related sales increased substantially in the quarter of the year and represented a larger part of our Logic Foundry sales in 2024. Mature logic findery sales decreased in '24 particularly in the second half of the year.

In memory, our sales surged by more than 150%. This is compared to a fairly depressed level in 2023 when our sales dropped around 40%. DRAM accounted for the largest part driven by very strong HBM related DRAM demand. Three d NAND sales approximately doubled in 2024 but from a low base and represents a smaller part of our memory sales. As a percentage of equipment sales, total memory jumped from 11% in 2023 to 25% in 2024. Power, Analog and Vapor sales dropped by significant double digit impacted by the ongoing cyclical downturn in this market. The drop in 2024 is compared to a strong level in '20 when sales in this segment almost doubled. Asokin carbide Epi sales increased by mid single digit percentage in 2024. This is below our previous projections of double digit growth but still a robust performance in view of the significant slowdown in this market. At constant currencies, our equipment sales increased by 9% in 2024. We booked solid double digit growth in ALD, which accounted for clearly more than half of our equipment sales. We've increased demand in both the logic foundry and memory markets. Our Spares and Service sales increased 29% as constant currencies in 2024.

Over the last four years, since we started to roll out outcome based service in 2020, we have increased our spare and service sales at an average annual rate of 19%. Gross margin for the year fell to improved on 49.3% in 2023 to 50.5%. Mainly reflecting mix including a continued substantial sales contribution from China. For 2025, we have a normalization in China sales we expect the gross margin to return to the target range of 46% to 50%. Net R and D increased by 22% at constant currency reflecting a further increase in our customer R and D engagements as well as the aforementioned accounting impact of higher amortization. As a percentage of sales, net R and D increased from 11.2% to 12.1% in 2024. For 2025, we expect net R and D to remain at the upper end of our target range of high single digit to low double digit as a percentage of sales or even slightly higher as earlier communicated. SG and A expenses increased 3% at constant currencies in 2024. The rate of increase in SG and A slowed down significantly compared to previous two years. As the additional investments we made to strengthen our organization were largely completed in 2023.

A percentage of sales, SG and A decreased from 11.5% to 10.6% in 2024. And for next year or for this year for 2025, we expect SG and A to be at around similar levels and as a percentage of sales to decrease to a high single digit percentage. Operating profit increased 17% in 2024, with the operating margin improving from 20.6% to 28%. Results from investments largely reflecting our holding in HMPT dropped from €21,000,000 in 2023 to €10,000,000 in 2024. Due to the continued downturn in the back end markets. Now turning to the balance sheet. ASM's financial position remains solid. We ended the year with a cash of €927,000,000 at no debt. Free cash flow increased 23% to €584,000,000 in 2024. This was mainly driven by improved profitability and deferred tax payments, and despite slightly higher working capital and higher CapEx. Working capital increased from EUR $425,000,000 to EUR €447,000,000 with highly charged receivables partially offset by higher contract liabilities and accounts payable. In terms of number of days, working capital dropped to fifty fifty, down from 60 at the end of twenty twenty three. And for 2025, we expect to return to the guided range of €55,000,000 to seventy five days.

CapEx increased to $168,000,000 in '24 up from €154,000,000 in 2023. And was within our annual guidance of €100,000,000 to €180,000,000 2024, our CapEx was primarily focused on R and D infrastructure including a new Korean facility. So scheduled for completion in 2025, and the start of investment program for our new R and D facility in Scottsdale, Arizona. 2025 will be a year of continued investments as we further advance the upgrade plans for our R and D facilities. Regarding our cash flow outlook in 2025, it is important to note that the anticipated earn out payment of €100,000,000 for LPE ASM previously disclosed at the time of the acquisition in 2022. In terms of shareholder remuneration, we spent €287,000,000 in cash on dividends and share buybacks in 2020 With our Q4 press release, we announced a new share buyback program for an amount of €150,000,000 as well as proposed dividend of €3 per share up from EUR 2.75 in the prior year. And with that, I would like to hand back to Hijshem. Thank you, Paul. Let's now review the trends in our markets. After the drop in 2023, the semiconductor end market recovered by eighteen percent twenty twenty four.

This growth was however, uneven with mixed dynamics across the different segments. AI has become the main driver of the semiconductor market significantly boosting data center growth. In 2024, other high volume end market segments such as PCs, and smartphones [indiscernible] relatively sluggish due to slow customer spending, economic uncertainty, and ongoing geopolitical tensions. This picture is the end markets was also reflected in the spending patterns of our customers with good momentum in advanced technologies that enable AI in particular [indiscernible] is larger foundry and high bandwidth memory but softer trends in other parts of the market. In total, we further have equipment spending was up But by a mid single digit percentage, Our leading edge logic foundry business accelerated in 2024. In the first part of the year, sales in this segment were still relatively slow. Following the softer market condition in 2023. In the second half of the year, leading edge logic foundry sales increased significantly driven by investment in the new [indiscernible] That momentum continued in the fourth quarter with a further rise in Gates all around borders, and sales, The tools we are shipping now are fundamentally predominantly in support to our customers' high volume manufacturing ramp in '20 The two nanometer note offers significant improvement in device performance and power efficiency.

Some of our customers have reported that they are seeing substantial demand for two nanometer from their own customers, including AI shipmakers, and that capacity for the two nanometer node is expected to be larger than 43 nanometer. The transition from FinFET to Gaitheran has increased our addressable market with $400,000,000 based on 100 ks wafer starts per month, In addition, we believe we successfully maintained our leading share in ALD this transition and we strengthened our position in silicon While our total silicon epi sales decreased slightly in 2024 due to the downturn in the power and wafer segments sales of our reduced pressure advanced and rapid ES platform increased substantially reflecting our growing share in gate all around applications. There have been some further shifts in CapEx forecast among the customers in the leading edge logicfoundry segment. But overall, our forecast for a substantial increase in gate all around related sales in 2025, [indiscernible] During 2024, we also expanded our R and D engagement with key logic foundry customers for the next version version of Gataraunt. Including the 1.4 nanometer node. We expect innovation such as backside power delivery, widening adoption of metal ALD, and selective ALD to drive further increases in ALD intensity.

Our memory business delivered an exceptional performance 2024. High bandwidth related DRAM has become the main driver of the memory market. The high performance DRAM devices used in this HPN stacks require high phase metal gate LD technology in which ASM has a leading In three d NAND, we benefited from technology driven demand for our LD gas cell solution. But overall, the contribution of three d NAND [indiscernible] In memory, we expect healthy sales in 2025. Supported by continued solid demand for HBM related DRAM, [indiscernible] it's too early to tell if memory sales would be at the same very strong level of 20 Other parts of the DRAM segment as well as the three gs NAND are likely to be subdued 2025. In the absence of a more meaningful meaningful recovery, in consumer related end markets such as PCs, and smartphones. Longer term, the memory market remains a strategic growth area for ASN. As the DRAM industry transition to the next nodes [indiscernible] would be adopted which plays to the strength of ASM. And the new DRAM node [indiscernible] or one gamma we have increased our share of wallet with new LLD layers. We are working with leading customers on additional ALD and new epi layers that will be required in the next generation such as vertical channel access transistor DRAM, [indiscernible] The power analog waveform market is still in a cyclical correction that started by the end of twenty twenty three.

As the automotive and industrial end markets continue to be impacted, by soft demand and inventory correction there are no signs that spending in this space would pick up The moment that it will ASM is well positioned to benefit. In the last few years, we have won several new customers [indiscernible] in the silicon based power analog including in China, especially on the back of new innovative products such as our Sonora vertical furnace and Entrepid [indiscernible] FE platform. [indiscernible] our sales increased by a mid single digit percentage in 2024 just mentioned it by far, We believe this is a better performance than the overall silicon carbide EPI market [indiscernible] in the course of the year. Our sales last year were supported by the new customer wins that we announced in 2023 and 2024. While the outlook for 2025 has further weakened, we believe that the longer term prospects for the silicon carbide market [indiscernible] In addition, we are well placed to further extend our market share, with the launch last September of the PE-two zero eight our new cluster system for 200 millimeter silicon carbide epi application, combining best in class field performance with a new productivity double shaver platform.

Looking at China, the sales contribution was again strong in 2024. However, within the year, sales decreased in the second half and also from Q3 to Q4 down from an exceptional level the first half. This was in line with our previous indication. This lower demand is mainly due to several customers in meteorological foundry in China entering a Phase of digestion. Following the substantial new capacity investment But they need 2023 and 2024. We expect the softening trend continue in 2025 with sales in China down the full year. We project equipment sales in China to represent a low to high 20s total revenue 2025. The impact from new U. S. Export control announced in December 2024 was in line with our assumption and is reflected our projection Next, I'd like to highlight our progress in sustainability. In 2024, we published our climate transition plan. As the first milestone on our path to decarbonization, we achieved 100% renewable electricity in our worldwide operations. This contributed to a 2552% decrease in our combined [indiscernible] And two, greenhouse gas emissions in 2024. If we don't look at the longer term, the prospects for our company continue to be strong. Third party research forecasts the semiconductor market to reach $1,000,000,000,000 by the end of the decade.

With AI being the key driver [indiscernible] Next, to growth in the data center segment, AI is expected to move in the coming years to edge devices, [indiscernible] and industrial application supporting growth in broader parts of the semiconductor market. As AI application demand higher performance and power efficiency, the need for advanced semiconductor devices will continue to rise. To enable these next generation devices, more three d structures, new materials are expected to be introduced. This in turn will require more ALD and MP steps and using ASM's addressable markets. Next to driving sales growth in the longer term, we remain focused on improving the efficiency of our organization Examples are ongoing digitalization, of our business processes as well as further streamlining of our supply chain and manufacturing operations. These multiyear projects will help us to scale the organization in a cost efficient way and to support continued healthy Lastly, let's have a look at our guidance for this year. Wafer fab equipment is forecasted to be slightly up and so far twenty twenty five shows the same mix picture as last year. Growth in AI related segments is expected to remain robust but visibility for any meaningful recovery in other segments is limited.

The main area of growth for ASM in 2025 and for the broader wafer sub equipment market, would be the ramp of Gaetal around in the leading edge Logic Foundry segment, as just discussed. In memory, we expect healthy sales in 2025 supported by solid demand for HBM related DRAM, although it's too early to tell if memory sales would be at the same very strong level as in 2024 ASM. In power analog, there are no signs of a recovery in the near term and the outlook for the silicon carbide market in 2025 has further weakened. Our China sales are expected to decrease in 2025. We confirm our target for total revenue in a range of €3,200,000,000 to €3,600,000,000 in 2025. But it's too early to be more specific. For the first quarter, constant currency, we expect revenue to increase from the Q4 twenty twenty four level to a range of €810,000,000 to €850,000,000 with a projected further increase In Q2, compared to Q1. With that, we have finished our prepared remarks. Let's now move on to the Q and A. We'd like to ask you to please limit your questions to not more than two ASM time so that everyone has a chance to ask a question.

Operator, we are ready for the first questions. Thank you. This is the Corusco conference. Operator, The first question is from Temi Kwi from Berenberg. Please go ahead. Hi. Thank you for taking my question. So, firstly, may I ask about China, China? Have you seen any situation change over the past months I. E. Becoming worse than you previously expected? Or do you see same situation as you have expected previously, I. E. Revenue coming down, but it's not actually Chinese spending?

So I can take this question. I think our our revenue projects in China doesn't change. We didn't see any meaningful change in the projection that we have made in the last few months. So business ASM usual for us.

Okay, that's clear. And secondly, just want to confirm on GAA momentum for 2025. You mentioned that your second half visibility remains low. May I ask if your visibility on GA for the full year is actually much higher than the other areas because it seems to be that some customer may change their plan, but you have other customers who is willing to pick up.

I think ASM we mentioned in our press release, we think that Gataraunt is strong in 2025. This is the year of HVM for Gatarone. And we see that continuing unabated. So we don't really see any change in the case around and 2025 is actually very strong in the two nanometer technology.

The next question is from Didier Simama Bank of America. Please go ahead.

Yes, good afternoon. Thank you for taking my question. Michel, I've got a question for you with regards to the order intake perhaps you feel about it for the first half. In order to reach the upper end of your range, do you feel like you need secure a substantial increase in orders in Q1 or Q2 at the latest given your lead times? Or are you you fairly relaxed to hit the upper end of the range as you you've got a funnel of opportunities into the second half? And I've got a quick follow-up. Thank you.

Yes, let me take that question, DJ. We are indeed seeing orders in in Q4, which came down compared to Q3 ASM expected. As you know, we already communicate in Q3 that we saw some pull in orders that we are expecting in Q3 Q4. But as you know, timing is always difficult to predict. In addition to that, what we've seen is, of course, Yes, still a power wafer analog market that is very slow. As we said, sharp down. So that didn't really help. China is as expected, but still lower than what what we saw in 2024. Also that, of course, did not help gate on round. As Sushim already mentioned, continue to be strong And as you know, your question about Q1, Q2, we don't guide on orders We stop guiding on orders for a good reason, and it is simply because timing of orders is sometimes is bulky, sometimes is not bulky. We burned our fingers a few times and we prefer not to do that again. So we will not guide on Q1 Okay. Fair enough. My follow-up, it's talking about the opportunities for molybdenum. So clearly, you've got a big play in metallization going forward with molybdenum.

And now we see effectively all your competitors talking about moly being implemented not just Foundry Logic, but also in NAND, and in DRAM. So I just wondered if you could talk about how you see those opportunities playing out maybe in '25, 2026, 2027? And also related to that the new materials we see also cobalt and the rutanium being mentioned in replacement to tankston and copper. So I just wondered if you think you could also capitalize on those opportunities?

So I'll take this question. What I can tell you is that we mentioned before, Malaz Venum is a new metal. For logic devices and memory devices. Our focus is actually on Mellanum is with the customer logic foundry We engaged with many DRAM customers in In Monobulinum, we have a very active program We have actually lots of engagement with many customers. And as a matter of fact, we actually shipping tools in Molabian for HVM. This year. So we are very much in working on melodulinum. We think that melodulinum is like you mentioned, is a new metal It started in N2 right now ASM with a very small volume but there are more and more applications as the technology is the gate on our technology transition to the 1.4 nanometer node, and eventually also to the one point zero nanometer technology node.

So you can see more and more molybdenum being one in especially in larger and DRAM [indiscernible] [indiscernible] in mid and the flying and off the uneven in back and the flying. Talking about your question about different metal, think that's what you refer here like to about cobalt and ruthenium. What's going to happen in back end of line and utilization in the future? Is the move from a damascene to metallization. So right now what you do you deposit a direct rate and you etch and after that you deposit the metal. In the future, actually going back to the 1990s where value deposit the metal and then you etch the metal and you deposit the low case electric between those metal. So the new metals are going to happen, part of it actually going to be Resunium is one of the metal. That's going to happen. In this new metallization scheme. So yes, this is going to be a run with ALD. It's going to happen in the future. And these are areas that we are also aware of and also working on. Thank you.

Thank you. Can I just have a tiny one on NAND? I think you didn't mention NAND. Is that because of the productivity limitation of your ALD or AP tools?

I think that's for FLEDNAND. What we think that in that market, there are some [indiscernible] We think in that market that the offering there can be either you can make the offering with the single wafer ALD, but also you can do the offering with a battery ALD. We think that that market will most likely transition to batch ALD in the future because of higher productivity and lower cost.

Makes sense. Thank you.

The next question is from Sandeep Deshpande JPMorgan. Yes. Hi. Thank you for letting me on. My first question is regarding the one point six and one point four nanometer nodes that you highlighted earlier for Logic.

Are you going are you in a position to say what revenue you can achieve 100,000 based on your wins in those nodes, like you've given at two nanometer node $400,000,000 hundred thousand wafer. So what kind of opportunities you won in those load which will provide you the growth in 'twenty five, 'twenty six and 'twenty seven onwards? And then I have one follow-up.

Okay. Hi. To answer this question, I think we what we always say, and that's really what's happening in the industry, as we transition from one technology node to the other, the ALD intensity increases by double digit. So this is going to continue. From the two nanometer node to the one point six and one point four nanometer nodes. So we see that continuing unabated. And as I mentioned earlier, some of the LDE application actually is going to be in the Beside Power Distribution network. And also I just talked a few minutes ago that ALD is going to molybdenum ALD is okay, it's going to take more and more layers. As you transition from N2 to N1.6 and N1.4. So we still see meaningful double digit increase in ALD intensity.

And my follow-up, Hishav, is about memory. You've had this very strong growth in 2024 in the memory market. When we hear about the CapEx from the memory players this year, there seems to be more focus on building capacity capacity rather than building putting equipment into those buildings. Is that likely to impact you in terms of your IKEA engagements in the DRAM market, for instance, Or do you expect to continue to see growth in the memory market in 2025?

We expect to see growth in the high end of the memory market in the high bandwidth memory in the DDR5 in the DDR6, think the high part of the memory, DNR memory is actually increasing unabated and we see where there's a strong growth that we see and that's going to continue. And with it, we see more and more high K metal gate application in that part of the market. So we are really upbeat about the high bandwidth memory of the DRAMux.

The next question is from Nigel Fan Putten, Morgan Stanley. Please go ahead.

Hi, good afternoon.

First, I have a follow-up on the services. Paul, you already addressed it in the prepared remarks, just to make it a little bit more clear. When you say that growth will moderate is that from the fourth quarter level? Or should we think about that being sort of on a year on year basis, which kind of would imply that the next couple of quarters will be down compared to the fourth quarter? That will be my first question. Thanks.

Yes. The question level of growth is still expect some growth, but yes, we've seen pretty exceptional growth in 49%, you might have used not a standard growth that we will be able to achieve. And yes, that's had two reasons. One, CGM is continuing to do well, to be honest, programs that we kicked off really start to get good traction. But also equally and maybe slightly more important, we saw a acceleration of parts in China. And that will also, in our view, normalize. I'm not in position now to give you specific how this will evolve over the year. That's a little bit too early to tell.

Understood. And then next question would be on Advanced Logic Foundry where the GAA visibility is very strong. But can you provide some context How big a chunk of your total revenue coming out of [indiscernible] In that segment outside of GA? Because in your press release, it does seem to imply that there is changes going on, while at the same time, GAA has not changed. So I mean, yes, I'll leave it there. Just have a sense of how big that potential viability is.

Yes. I think for this year, so for €25,000,000 I think we might even have said it, I'm not 100% sure. But if you look at our total logic foundry sales, more than half will come from GEA. So it's a big year on year growth. As Yixin already said, we're very positive about about GEA and as Sergio expect more than half of the material logic sorry, of the total logic foundry ASM to come from [indiscernible] I mean, if I add something to what Paul has mentioned, like we have talked in our previous earnings call, we said that 2025 is going to be a prime time for Gatanel.

It's actually happening.

Gaitheran two nanometer technology node is an HVM tool scheme ahead. But also we see that in 2025, that also there are some technology buys for next generation Gaitherron like 1.4 nanometer.

So Gaetenor round, the best constitute over 50% of our Logic Foundry business right now.

The next question is from Jacob Bluestone, BNP Paribas. Please go ahead.

Hi, good afternoon. Thanks for taking the question.

I was hoping you could maybe comment a little bit on how you've seen your market share evolve for ALD Just sort of any thoughts around how you think that will evolve from here And then I've got a follow-up as well. [indiscernible] press release right now in my in prepared remarks. We think that our market share in LD is very strong, continue to be strong. [indiscernible] Right. And just a clarification on China.

Is the decline, is that just purely digestion of inventory Or is there anything embedded in your guidance regarding tariff and further restrictions You mentioned that the latest round of restrictions were as expected. You expect anything more In the guidance that we've given for China, what is included there is what we call digestion of an exceptional level of revenue that we've seen in particular in the first half of twenty twenty four, but also still strong sales in the second half, but lower than the first half. That's one. And two, as you know, I think on December 2, if I'm not mistaken, the new export controls also have an impact somewhat, which we anticipated. So also that is reflected in this guidance. What is not yet reflected is potential new restrictions because that's at this point in time, your speculation if anything will happen, what will happen, if anything will happen, So that's not yet reflected in this guidance. But the latest December 24, Restrictions have been taken into account in these kinds.

Very clear.

Next question is from France Bouvigny, UBS. Please go ahead.

You very much. My first question is on the more longer term beyond '27 and ICML, one of your peers is talking about high NDA insertion in 2027 and then for mass production a bit later on. And I was the impact you think you could have this R and A introduction. I assume that you have a couple of layers using multi exposures for your ILD, which was not the case before. So I was wondering if we should expect some moderation of growth as high E and A comes in? Of course, all else equal, you might have some other opportunities somewhere else. But on the Advanced Logic side, I was wondering what do you think high in that could impact your ILD business on the growth rates?

So I mean, what I can tell you here is that we see that as the technology know the transition that both ALD and lesso are actually enabling the next generation.

So we see high NA happening but we'll also see more and more ALD there actually taking place So if there is one one application that goes away, from because of high NA introduction reduces the number of ALD layer there are actually the complexity of the devices that are happening right now is actually giving rise to new selective ALD deposition market, which was not even present which has actually more LD than ever. So what I can tell you again is with the increased complexity need more or less you need more IOD.

Okay. So still net positive if I read correctly, yes.

Absolutely.

And maybe the second question I have is very quick one is you mentioned China ASM percentage of revenues will come down to low 20 to high 20 in 2025. Could you disclose your 2024? How much is West China? Just to put into perspective? Yes. Francois, I think you know the answer already. We have given qualitative comments on our '24 exposure in China We have also because of these export controls given some more guidance in 'twenty for 'twenty five, as you mentioned.

Low to high 20s. And that's what I can confirm. [indiscernible] Understood.

Porren. Thank you very much.

The next question is from Robert Sanders, Deutsche Bank. Please go ahead.

Yes. Hi. Thanks for taking my question. You mentioned the services number in China.

You just give us a sense of how much sort of stockpiling of spare parts there is in China and perhaps some stockpiling of your tools as well at Chinese fabs? And I have Yes. If I would know, I might tell you, Robert, I really don't know. So I don't know if there's a lot of parts piling, but You might expect there is some given this accelerated demand, of course, that is happening because you can imagine that the Chinese players concerns given everything that's happening from a geopolitical point of view In terms of equipment, yes, most of our equipment goes straight to taps and sometimes not, but that simply because fabs might not be fully ready yet or or for other reasons, but the build will go straight into fabs. So I would not be able to give you more information on this at this point, Rob.

Okay. No worries. And just a question on backside power delivery. So if we we see the power delivery network moving to a different way for effectively and scaling down at a much more aggressive feature side, What does that mean for the opportunity, whether it's metallization or anything else relative to the transition to Gate all around? I mean, is there a significant increase in opportunity? How should we think about it in terms of significance?

I think it's a little bit I don't call it significant. If you ask me, but it's an increase. Especially in metal LD deposition. There's also some dielectric ALD there, but it's an increase, but I don't really call it a significant Got it. Thanks.

The next question is from Stephane O'Ri ODDO, BHF.

The first one is on the the guidance for the full year, the range of 3.2% to 3.6%.

And I wanted to understand what are the assumptions that you took to maintain it. I understand that Gate Around is super strong still, but memory kind of flattish or maybe. Power analog down, silicon carbide down. So what will it take for you to be H2 that would be down compared to to H1? And I'm asking that because if you do the math with the the elements you've given, you should have it just takes a flat H2 to go to the middle of the range. So I'd like to understand how you build this one.

So I'll answer the question. I think To answer your question, I think we kept our 3.2 to 3.6 range for 2025. I think that part of the uncertainty that we talked about is really that we don't see a sign of recovery in the power wafer analog market. We mentioned that previously that the power and wafer market we talked about is really that we don't see a sign of recovery. In the power wafer analog market. We mentioned that previously that the power anode wafer market is very cyclical. It's usually cyclical. It takes about eight quarters cyclicality. This time, it looks like maybe it's one more quarter or two more quarters, so it's actually longer. Cyclicality, but it's really within the range that we see. We don't see a recovery in the second half of the market in second half of the year. Never know. But right now, we don't see any sign of recovery. The other thing part is really on silicon carbide. Mean, silicon carbide market is weaker than ever before. So that's also another uncertainty from that point of view. In memory, we have talked about memory in earlier that we see that that it's too early to tell its memory sales would be at the same very strong level of 2024.

We see a very strong HBM memory strength in 2025. But for commodity DRAM market, it's really too early to tell from that point of view. That's why we came up with we still continue with a range of C2 to C3.6.

Okay. Thank you. And then I have a follow-up. It's about the the OpEx in 2025. How did you see them evolving? You grew a lot R and D not too much SG and A. Are we still heading for the same trends in 2025?

I think so. I think that we have a strong program to have better efficiency to improve our business processes to incorporate digitalization and we introduced introducing S4HANA. We're introducing Teamcenter to really streamline our business processes So I think that we have a strong focus to keep to keep in our operation to make sure that we have we continue continue to continue to run our operation very efficiently. So that would impact actually is going to impact it's a multiyear impact for the future. And we are very much committed to improve our top line revenue growth for many, many years in the future. But also want to make sure that this growth is very profitable and that's what we're doing right now.

R and D specifically, sorry, you are you talking about double digit growth still again? Sorry for interrupting you.

Maybe to add to that, Stephane. If you look at the gross R and D, Maybe also just to help you for your modeling. That is likely to expand 10% to 15% year on year. Net R and D will expand somewhat more, again, because of increased amortization. So the net R and D will increase [indiscernible] Like you've seen in '24. Then the gross R and D, So just then you have, I think, a reasonable guidance for your modeling. And SG and A, we expect an absolute four ASM. And as a percentage of revenue, of course, it should come down in Q2 to high single digits.

Very clear. Thank you very much. The next question is from Aditya Met [indiscernible] afternoon, guys. Thank you for taking my questions.

Firstly, just on gate all around high volume manufacture capacity is being installed. I just wondered if you might be able to give some color on the tools you shipping or you plan to ship in 2025? What level of gate all around capacity Will that lead to an aggregate at the three customers that are meant to be ramping Gate all around in 2025? Based on the discussions you've had with your customers so far? That's my first question and I've got a follow-up.

We believe that our wafer capacity for two nanometer will be actually a significant number. But we are not commenting right now on specific numbers. As I mentioned, end market continued to be actually very strong based on what we are hearing leading customers are actually continuing in their HV amount. Our view for a substantial increase in Gatanar sales in 2025 has not changed from that point of view.

Okay, understood. And then secondly, on China, if I did my math correctly, I think China is close to 40% of your equipment revenue in 2024, similar to what we've seen at your peers. So now when I look at the news flow out of China Narrow is talking about shipping multiple high k ALD systems to multiple clients. And there seems to be a significant focus on developing CVD and furnaces from the likes of AMAG and Nara again. So I just wondered how do you see competition in China developing and we be concerned about local players potentially gaining share from you? Any thoughts there would be great. Thank you.

So let me start and then Nanisha can add [indiscernible] You're right. Norway is growing steeply also in terms of revenue. You might have seen that, I don't know. Chinese competitors are clearly trying to catch up, which is logical given everything that is happening. For us, it is just competition that we have also with other players. I mean, the key is to innovate to be ahead of them. And to lead, that's we try, that we will try compared to our Chinese competitors. We do the same with other competitors. So no real difference there. But they are definitely catching up. That's but not to the extent where we are. I mean, as of still far behind us. But we are paranoia. We always are paranoia about competition. Also about Chinese competition. So it just motivates us to go even faster with all kinds of innovation that we have in I mean, if I add to what Paul has just mentioned, there's competition and so on, but also we continue in our innovation we continue to compete in the Chinese market. We have developed the new products actually for the China market like in epi, We have introduced the Entrepid ESA.

Atmospheric epi for power analog devices We also have released very successful product for the China market, which is the Sonora vertical furnace. Running many furnace application in actually in 300 millimeter even in 200 millimeter, we our dual tool So yes, I think we are competing to China. It's a market that's very competitive, but as long as we continue to innovate, we'll be able to be successful There's two.

Understood.

Thank you, guys.

The next question is from Tim Schulz Mannender, Malander.

Redburn Atlantic. Please go ahead.

Hi, good afternoon guys and thanks for taking my questions.

Maybe the first one for Hisham please on Moly.

I appreciate that it is very, very early. But maybe could you provide some qualitative commentary around sort of win rates and differentiators? And then I had a follow-up.

I think, Borlatin, it's as I mentioned, it's a new metal. It's used in both memory and logic and foundry. There are many I mean, in molybdenum, there are many innovation that's happening in the process technology, in the chemistry, in the precursor, in productivity and how you deliver the chemicals, etcetera, etcetera. So it's an ALV process, which we have lots of experience on how to make the process repeatable with very good very good performance. We really have a few wins in Molabdina, which we're very excited about. You're going to hear more about it in our investor meeting in September. Of this year. We have a very strong engagement and we're really excited about our engagement in Mali. Even in DRAM, we have very very upbeat about some of the interaction we have with our customers. So it's it's a new metal. There's a new metal. It's a new thing. And this is disruptive. And I think this opportunity whenever to come in and with the innovative solution, and we are excited in the engagement that we have so far.

Awesome. Okay. Look forward to hearing more about that.

At the CMD Maybe just for Paul, a lot of color there on the operating expense lines which is really helpful. Just in terms of modeling China in 4Q, are we close to the 25 Corridor?

What do you mean? Sorry, are we close to the 25 Corridor? What do you mean? [indiscernible] Guided a range for €25,000,000 in terms of China as a percent of sales. I'm just wondering are we close to that in Q4?

Yes, nice try. I can repeat the same answer I get right before Tim, but I think you know the answer. Was strong goods, but below Q3 and also below the same [indiscernible] Is coming down. And as you know also '25 compared to '24 is coming down. So I leave it to you try to make sense of that. Think what is more important is that going forward for this year, we guided low 20s to high 20s. It should give you a reasonable good indication, which means, of course, that 24% was higher than that.

Got it. Worth a try. Thank you.

Thank you.

And the last question comes from Mark Hasseling, ING. Please go ahead.

Yes. Thanks for taking the question. The first one is just reading through your press release and also the comments during the call today, I have the feeling that maybe the opportunities even accelerated a bit faster than what you have communicated before. Given the step up in the R and D, also especially in the fourth quarter and also the evaluation tools again moving up in the second half of the year, which typically is a good leading indicator Is that true observation? Is that true?

I think the what we can say that I think for us that we are looking into all new application that's happening right now. I think the R and D spending is ASM accelerated. I would like to mention, there is more and more LD layer for more generation the other. So by definition, you have to do more R and D to get those layers. And that's not I mean, if you do R and D right now, I mean, business is going to happen four years from now. So it's not something that really is immediate from that point of view because it takes a long time to develop a new processes and new equipment for ALD. But that's an indication strong belief and our the LD market growth into the future and like we mentioned ALD is a new CBD. We see that happening.

Replacing PVD layers, replacing even some CBD layers.

But also, LD is happening for for the high aspect ratio growth is happening in back five power So it's just the normal. As the LNG expense, the market expense, our R and D is to expand with it.

Okay, great. And then my final second question is on your cash returns. Given you are sort of target cash level that you earlier communicated, and what you've and the buyback that you now started, it seems a bit small given buyback for the next year. Maybe your thoughts about that?

I think my thoughts about that, I think that we're looking into our cash allocation strategy and doing going forward. So it's something that [indiscernible] right now, I think that we didn't make any decision. From that point of view. But what we really focus on, okay, how can we provide the best return to our shareholders, and that's really our focus going forward. And maybe to add to that Mark, I mean, we have also €100,000,000 earn out payments in 2025 You should add that as well. We are expanding rapidly R and D infrastructure. I you know, we finished Korea. We started in Scottsdale. So there's a lot going on. So yes, also for that part, we are maybe a little bit conservative, you might be right, I don't know. But you should take these two things also into account.

Okay. Okay. Very clear. Thanks.

There are no more questions registered. I turn the conference back to you for any closing remarks.

I would like last, I would like to thank you, everyone, attending today's call. Also on behalf of Paul and Victor, hope to meet with many of you in the upcoming investor events Thanks again and goodbye.