January 18, 2017 / 7:36 AM / 7 months ago

UPDATE 1-ASML beats estimates as orders for newest machines grow

(Updates with details, quotes)

By Toby Sterling

AMSTERDAM, Jan 18 (Reuters) - ASML, Europe's largest supplier to semiconductor manufacturers, beat fourth-quarter net income forecasts on Wednesday and said it had almost sold out of its newest, most expensive machines for 2017 and early 2018.

The company said it made quarterly net income of 524 million euros ($560 million), up from 292 million euros in the same period of 2015 and beating analysts' average forecast of 414 million in a Reuters poll.

The bullish outlook for the newest lithography systems is crucial, as they must become widely adopted for ASML to continue dominating the market and reach a goal of 11 billion euros in annual sales by 2020.

"2016 was the year where we definitely turned the corner," CEO Peter Wennink said. "You can see it in our order book."

The company reported 1.58 billion euros worth of new orders in the fourth quarter, including six of the new EUV lithography machines, which cost around 100 million euros apiece and take a year to build and install.

Customers Intel, Samsung and foundry TSMC all helped fund development of the EUV technology. The name stands for "Extreme Ultraviolet", the wavelength of the energy beams the systems use to help create the circuitry of cutting-edge semiconductors.

ASML's overall order backlog grew to 3.96 billion euros at the end of 2016, up from 3.46 billion at the end of the third quarter, and includes 18 EUV systems in all.

The company currently has capacity to build 12 EUV machines annually, expanding to 24 by 2018.

That "means for 2017, we are virtually sold out" of EUV machines," Wennink said. "It also means that our first orders for 2018 shipments (are) already in."

He said given public statements by chipmakers, he expected significant new capacity to come on line in late 2018 and early 2019.

"Looking at that load introduction time, it is very realistic to assume by 2018 that we will use our entire capacity to make (EUV) tools for our customers," he said.

ASML shares are up nearly 50 percent over the past year, as investors gained confidence in the technology.

Some analysts see expectations for the company as stretched - the stock price is 34 times its previous 12 month earnings - and shares tend to react violently to any hint that chipmakers are accelerating or slowing spending on new capacity.

ASML reported fourth-quarter sales of 1.91 billion euros, and forecast sales at 1.8 billion for the first quarter of 2017.

$1 = 0.9364 euros Reporting by Toby Sterling; Editing by Sherry Jacob-Phillips and Mark Potter

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