Fulfilling the potentialof semiconductor lithography

Copyright © 2008 ASML Holding N.V. (including af�liates). All rights reserved.All trademarks and registered trademarks are the property of their respective owners.

Contents

ASML at a glance 3

Our role in the chip industry The semiconductor world 8Lithography: the critical stage in chipmaking 10 ASML leadership Innovation: the engine that drives the business 14Accelerating the engine: outsourced innovation 16

Ensuring successMultiple opportunities for growth 20The freedom to make a difference 22

Financial performanceLearning the lessons of the past 26Geared for growth 28

Today’s revolutionary technology: immersionFluid thinking: the liquid lens scanner 32The conversion to immersion 34

Contact information 38Illustration index 39

ASML is the world’s leading provider of lithography systems for the semiconductor industry, manufacturing complex machines that are critical to the production of integrated circuits or microchips. ASML designs, develops, integrates, markets and services these advanced systems, which continue to help our customers – the chipmakers – reduce the size and increase the functionality of microchips and consumer electronic equipment. As a result, ASML helps to create more powerful electronic systems for consumers and professionals.

The ‘digital revolution’ has been realized by the semiconductor industry and indirectly by lithography: the process responsible for projecting smaller electronic features on silicon wafers and continuing ‘Moore’s Law.’ Thanks to lithography, ever-shrinking microchips have brought better, more affordable and more energy-efficient electronics and services to everyone, improving mobility, connectivity, safety and digital entertainment.

Experts in many fields have consistently underestimated the impact of semiconductor technology. ASML aims to keep surprising them by fulfilling the potential of semiconductor lithography.

ASML at a glance

32

“Computers in the futuremay weigh no more

than 1.5 tons”Source: Popular Mechanics magazine article, 1949

“If it keeps up, manwill atrophy all his limbs

but the push-button finger”Frank Lloyd Wright, US architect

Source: The New York Times, 1955

“Impulses from the card or letter mightbe beamed to a postal satellite or even the

moon, bounced back to the destination point,reproduced there in the original printing or handwriting,

sealed in a capsule and delivered”Early thoughts on e-mail

Source: ‘Closer than we think’, Chicago Tribune, 1960

“There is no reason anyonewould want a computer

in their home”Ken Olson, President, chairman and founder of Digital Equipment Corp.

Source: World Future Society convention, 1977

“I predict the Internet willsoon go spectacularly supernova

and in 1996, catastrophically collapse”Robert Metcalfe, Ethernet inventor and founder of 3Com Corp.

Source: InfoWorld, 199519951977

19601955

1949

54

“Since we founded ASML in 1984, lithography – the technology to print tiny patterns on semiconductor chips – has enabled the Internet, mobile phones, electronic mail and banking, and sophisticated medical electronics.”

“I won’t even try to predict what things will be important 25 years from now, but I bet we’ll have enabled some of them.”

Martin van den Brink Executive Vice President of Marketing & Technology

Advanced media processor chip in a Ball Grid Array package.Courtesy of NXP Semiconductors

“Nobodyknew what the web was

15 years ago”

76

Smart electro

nics

2002

2003

2001

2004

2005

20062007

20082009 2010

1

0,640,41

0,260,17 0,10 0,06 0,04 0,020,03

Normalized Costs / Transistor 2001 =

2007 54

2008 45

2009 40

2010 36

2011 32

2012 28

2013 25

2014 23

2015 20

number of

transis

tors

on

an inte

grate

d

circuit (

IC)

1976

1961

2006

2001

1997

1989

1982

10,000

1,000

1,000,000,000

100,000,000

10,000,000

1,000,000

100,000

Thanks to lithography, microchips continuously get smaller, cost less and do more, enabling the consumer electronics industry.

A semiconductor is a material that can conduct electricity (like a metal) or act as an insulator (like plastic) at different times. This On/Off behavior can be controlled precisely, so it can be used as a switch – the building block of all digital circuits – even changing from On (conducting) to Off (insulating) millions of times every second. The most common semiconductor is impure silicon and switches made from it are called transistors. To make a transistor circuit, impurities are added to specific places in a block of pure silicon. Many switches can then be created next to each other, insulated by pure silicon, forming an ‘integrated’ circuit (IC).

Depending on the type of impurities added, and where they are added, semiconductors can do more than electrical switching. They can give out light, turn light into electricity, amplify an electric signal, or store an electric charge.

The chip industry is sustained by the need to make cheaper, smaller ICs that do more.Chips are mass-produced by processing and dicing 200/300 mm wafers of silicon. Each wafer is like valuable real estate – the more defect-free chips that can be built on it, the more profit that can be sliced from it. Over 40 years ago, Intel co-founder Gordon Moore predicted that technology would double the number of transistors on a microchip at regular intervals. The technology to shrink the size of these transistors is called ‘lithography.’ Each new lithography development enables more chips to be packed onto a wafer and more functionality per chip. Making smaller chips improves:•productivityforchipmakers

and costs for consumers – more chips on a wafer mean lower production costs and cheaper products

•performance/processingpower – smaller transistors are faster

•batterylife–smallertransistors and chips use less power in mobile equipment

The semiconductor world

•portability–moreofasystemcan be packed onto a single chip, so fewer chips are required, allowing electronic equipment, like cell phones, to be smaller

•reliability–integrationofcomplex systems on a single chip mean fewer vulnerable mechanical connections, improving product reliability.

Consequently, lithography is the technology behind faster processors, massive memory chips, high-resolution digital cameras and smarter electronics.

Mobile applications are driving memory demand (measured in percentages of total global memory sales).Source: IC Insights

Growth in memory consumption (average Gigabytes per household).Source: Samsung

The first semiconductors were used in radios, quartz watches and calculators but today they’re everywhere, not only in consumer goods. Microchips think faster than we can – stopping a car from skidding or solving mathematical problems instantly. They work for us – processing words, animating pictures or controlling the washing machine. They store money and music. They send emails and TV programs. They see things we don’t, in infrared cameras and MRI scanners. And used in smoke detectors, they can even smell for us. In short, they make our lives easier, more fun, safer and longer.

Source: Intel Corp.

Source: Intel Corp.

Source: International Technology Roadmap for Semiconductors

8 9

1991 PAS 5500

1987 PAS 2500

1988 PAS 5000

1991 Krypton Fluoride (KrF) laser source with wavelength of 248 nm

1998 Argon Fluoride (ArF) laser source with wavelength of 193 nm

2001 TWINSCANTM: introduction of unique dual wafer stage for higher accuracy and most efficient use of lithography system

2005 Immersion: first market introduction of purified water between lens and wafer for better resolution and depth of focus

1989

1990

1992

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2007

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A variety of complementary suppliers provide the other tools, materials and packaging equipment necessary to make ICs.

Unbelievably, the wafer and microchip start out as sand! The manufacturing process begins by converting sand (silicon dioxide) into silicon, then melting the silicon in a furnace. A seed crystal of pure silicon is suspended in the molten silicon and ‘grows’ into one huge, pure crystal. The crystal is slowly pulled from the furnace solidifying into a silicon cylinder. The cylinder is cooled, ground to a diameter of 300 mm and sliced into wafers about 1 mm thick. The wafers are polished flat, cleaned and sent to a wafer processing or fabrication facility – the Wafer Fab or Foundry.

The Fab is a multi-billion dollar chipmaking plant built around a cleanroom – the cleanest and one of the most controlled environments on earth. The tiny features on many microchips can be ruined by dust particles, static electricity and vibration, reducing the yield of good chips. So the cleanroom is not only almost dust free, it’s kept at a constant temperature and humidity, protected from electromagnetic interference and designed to dampen noise and vibrations.

Invented more than 200 years ago, lithography is a printing technique. In electronics, ‘photolithography’ or ‘nanolithography’ is based on this technique, imaging a picture of electronic circuits onto a light sensitive layer on a silicon wafer. Today’s chip lithography uses ultraviolet light to shrink complex patterns and print microchips with features down to 40 nanometers (1 nm = 1 millionth of a millimeter), at a very high speed. And that makes lithography the most advanced, costly and demanding technology in chipmaking.

Lithography:the critical stage in

chipmaking

The manufacturing loop. Layers of a chip are built up using a repetitive cycle of treating whole layers (no resist) or selected parts of a layer through a resist mask. The more complex the chip, the more layers are required. In today’s most advanced chips with 40 nm features, customers are averaging over 40 layers per chip. Some layers require smaller features and much greater accuracy than others so a variety of systems are available. The alignment accuracy is called ‘overlay’ and it is measured in nanometers. The very best lithography systems can now do this to an accuracy of 5 nm – a human hair is about 50,000 nm wide and grows at 5 nm per second; a nanometer is about the length of 4 silicon atoms!

The value of ownership. Building and maintaining cleanroom space is expensive, so limiting the number of systems and maximizing their productivity is vitally important. As lithography is the key stage in chipmaking, it’s crucial to consider the cost-per-layer of any lithography system, not just the price per system. This is the lithography yardstick because it measures the true value of ownership – including the cleanroom area used, system throughput, staff required, maintenance and material costs.

Making microchips

The structure of a chip is multilayered and includes semiconducting, metal and insulating materials. Each layer is deposited then physically shaped into millions of devices by etching away many parts of the layer around the resist mask. The electrical properties of the layer are modified by implantation. This involves bombarding the layer with charged impurity atoms (ions), which lodge at a specified depth within the layer. The shapes of the devices, the parts that need to be shielded from etching and implantation, the interconnection tracks that need to be deposited or carved out (in and between layers) – everything is defined by lithography.

Lithography cost per wafer layer - the true measure of system productivity.Source: ASML

Photoresist coating – covering the wafer with unexposed photoresist

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

Developing – leaving the chip pattern as a photoresist mask on the surface of the wafer

Etching or implantation – etching to remove silicon and other materials unprotected by the wafer resist mask – defined by the pattern – using chemicals or a plasma; implantation to embed impurity atoms into areas unprotected by the resist, making semiconducting parts in the silicon

Ashing – removing the resist mask, after etching or implantation, using a plasma

The Semiconductor Manufacturing Process

Exposure – using light in ASML systems to make a pattern in the photoresist

10 11

“With more than €500 million spent on R&D in 2007, ASML is a major investor in innovation. And that’s just part of the story because we prompt a large chain of companies to invest with us, pushing the boundaries in many disciplines for the semiconductor industry. This is a huge stimulus for the global knowledge economy.”

Harry Borggreve Senior Vice President of Development & Engineering

“Our broad R&D efforts are setting new standards in many fields like chemistry, physics, mechatronics and control software”

12 13

500

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200

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100

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50

$billion

12

10

8

6

4

2

0

%

ASML invested more than €500 million in 2007. Measured per employee (€80,000), that’s the highest in Europe and one of the highest in the world. ASML also has an extremely highly qualified workforce, including the highest percentage of PhDs in the Netherlands.

Innovation is expensive so protecting Intellectual Property (IP) is a high priority for ASML. In 2007, the 1,000th US patent was granted, making a total of more than 3,500 worldwide. In the 2007 IEEE survey (source: Booz Allen Hamilton Global Innovation 1000), ASML was ranked first among semiconductor equipment makers for the number and quality of its patented inventions.

It’s hard to think of anything man-made that’s more complex than a silicon chip. And it’s incredible to think that chip features are 222 times smaller1) than they were 36 years ago. A major reason for this is the investment made in lithography R&D: continually fighting the laws of physics takes a lot of effort. Year after year, R&D innovation has delivered solutions – finding ways using light with shorter wavelengths, new lens technologies and more effective processing to continue to make chips smaller. Over a period of just a few decades, these breakthroughs have created a US$256 billion-a-year semiconductor industry.2)

Innovation is the lifeblood of lithography and has indirectly driven today’s consumer electronics industry. For example, €850 million was invested in the TWINSCAN™ platform to image electronic chips on wafers and this technology now is the gold standard for the fastest lithography machine with the highest accuracy. More than €250 million was invested in cutting-edge immersion technology, and it is now the best technique for making the world’s smallest chips.

R&D cost increase for new nodes (indexed to 250 nanometers).Source: Morris Chang, TSMC

ASML spent more on R&D as a percentage of sales than the leading industry averages.Source: Booz Allen Hamilton analysis of Bloomberg data, 2007

ASML files patent applications in many countries and the patented IP portfolio is growing rapidly.Source: ASML

Worldwide revenue of the semiconductor market.Source: Gartner Inc.

ASML R&D investments.Source: ASML

1) Source: Intel Corp., ‘60 Years of the Transistor’, 20072) Source: Gartner Inc., Q2 Semiconductor Forecast, February 27, 2008

1514

Europe (excl. NL) Netherlands

Rest of world

€326 million (16%)

€1,116 million (54%) €615 million

(30%)

Number of suppliers

132 328

296

Samsung Intel Hynix Micron Technology Toshiba TSMC Nanya Powerchip Infineon ProMOS AMD SanDisk Elpida Sony UMC Group ST Microelectronics Fujitsu IBM Chartered Texas Instruments

GERMANY

NETHERLANDS

BELGIUM

Twente

Aachen

NijmegenEindhoven

and Veldhoven

Delft

Leuven

Accelerating the engine: outsourced innovation

ASML alone invested more than €500 million on R&D in 2007, and we also trigger large innovation efforts of our partners and suppliers (90% of the manufacturing costs of an ASML system are outsourced).

This means that we share development costs and have the R&D done by the leading experts in their fields. Since lithography requires multiple high-tech competencies, ASML customers always have the fastest access to the best technology in the shortest time possible without the need of one company being world champion in all areas. For example, we draw upon the world class expertise of Carl Zeiss in lens technology, and of Cymer and Gigaphoton for laser light sources.

As technology requirements shift over time, the ASML technology network provides flexibility to access new technologies. This happens, for example, in supporting technologies for masks, resists, lasers, immersion and EUV optics. And by outsourcing research to experts, we can focus on system integration and adding value – our core competences – to ensure that performance and customer requirements are met.

ASML’s customer focus is reflected in the Customer

Satisfaction Survey on Chip Making Equipment from VLSI

Research. For the 2007 survey, over 48,000 questionnaires

were sent out worldwide. For the fifth consecutive year, ASML has been awarded a

place in the top three on their ‘10 Best’ list, the highest rating

of any lithography exposure tool supplier.

Source: VLSI Research Inc.

ASML draws upon a unique technology network of close partner companies, private research companies, universities and research institutes for innovation.Source: ASML

Outsourced manufacturing costs (2007).Source: ASML

ASML supplies lithography systems to 18 of the top 20 chip companies (ranking by capital expenditure). Source: IC Insights – Company Reports

16 17

18

“Make breakthroughsthat will amaze the world”

“At ASML we are enabling a revolution of applications that make our lives safer, cleaner, healthier and more fun. This is no trivial mission: the objective is challenging and the process of execution is exciting. Our success depends on finding talented people, brilliant engineers, business professionals and managers who have the potential to make breakthroughs that will amaze the world.”

Eric Meurice Chief Executive Officer

19

Lithography is the heart of the chip manufacturing process. There are several reasons why ASML, as the world’s leading lithography equipment company, is ideally placed to benefit from growth opportunities.

Multipleopportunitiesfor

growthASML is not dependent on chip revenue but on chip unit salesUnlike chip revenue, lithography sales are related to the number of chips (wafer area), which increases at a faster rate than the price of chips. This boosts ASML’s market growth to more than 8% a year.

Chips become more complexComplexity means more layers in every chip, which means more processing steps and more lithography needed per wafer. This gives another boost to ASML’s market since more machine usage means more machine sales.

Technology leadership brings increased market shareCutting-edge technology has brought a steadily increasing share of the lithography market to ASML. As a key part of the manufacturing process, lithography is seen by chipmakers as being vitally important to their future success.

The chip industry is growingThis US$256 billion-a-year business has typically been growing by 5-8% annually on average over the past years. That’s our foundation for solid growth.

Chip processing becomes more challengingSmaller chips require more advanced lithography which increases the average selling price (ASP) of lithography systems and requires increasing computational lithography, further boosting ASML’s market and revenues.

Worldwide revenue of the semiconductor market.Source: WSTS

Worldwide IC production.Source: WSTS

Average number of layers per wafer increases with IC complexity.Source: ASML

Average selling price of litho systems (all manufacturers)increases.Source: Gartner Inc.

ASML market share.Source: Gartner Inc.

20 21

Competence:

Junior Senior

Technology

Sales

MarketingFinance IT

Production Customer Support

Illnessin %

6

5

4

3

2

1

0

Eindhoven(40) China

(132)Taiwan (15)

Japan (8)

Europe3,700US

1,750Asia

1,300

Most of the world’s chipmakers rely on ASML’s lithographic know-how. We satisfy their needs by pushing the boundaries of nanotechnology to the limits, to help move the industry forward. To continue doing that, we look for the brightest engineers, scientists and mathematicians and many other specializations. To fit in with the ASML culture, we need people who:• arepassionateabouttechnology• alwayslookforwaystoservecustomersbetter• canofferleadershipandentrepreneurialskills• willmakelearningalifetimejob• canturnchangesandchallengesintoopportunities.

ASML employees are often enthusiastic about the freedom they’re given to meet a challenge and see through an idea. We are a company that encourages new ideas and fresh viewpoints, and where opportunity is wide open. Entrepreneurship is highly valued, and the company offers many options for personal growth and experience.

We reward employees competitively for their performance and provide motivating working conditions, including coaching, training and personal career development programs. Depending on interest and qualifications, ASML offers careers in technology, leading project teams and management. Brilliant minds can progress to become a technology fellow, because ASML is a company that truly values technologists.

ASML is a fast-moving company, so every day is different. But this is what makes it exciting and clearly, with very low sick leave and turnover of staff, ASML people are highly motivated.

The freedom to make a difference

David Sachse“Born into a large family and raised on a ranch in Kansas, I’ve strayed far from home. I studied civil engineering at Kansas State University, and spent 10 years designing roads and bridges, which took me to Taiwan in 1991.”

“I loved Asia – it was a great adventure totally influencing my life ever since. I decided to enter graduate school, studying international management and Asian development economics, learning Mandarin along the way. The fast-growing chip industry seemed like the right path, so I joined a small lithography company as their Asia business manager.”

“In 1998, I moved to ASML becoming the first account manager based in Taiwan. I managed the local foundry accounts as they became major players. The growth was tremendous: by 2000, our small team was coping with the arrival of two new systems per week. In 2003, I moved to China taking over a young but growing operation, achieving over 80% market share in 2007. In 2007, I moved to the Netherlands to start up and lead our new asset-management group. Yet again the industry is changing, including the way customers fund today’s large investments.”

“My background in economics and experience in Asia are crucial in my new role of developing financial and customer partnerships to grow business for ASML.”

Sunny Stalnaker“As a child, I was fascinated by nature and how things worked – like when I went skating, I wanted to know how the ice could be solid and liquid at the same time, right under my feet. This early fascination culminated in a physics degree from Texas A&M University. After graduation, most jobs on offer seemed to be in the defense industry. Eventually, I opted for a niche part of the semiconductor business and in 1990 I joined ASML, eager to work at its headquarters in Europe. In 1994, I got my first management job: leading a support group for European chipmakers.”

“Just before 2000, I took over engineering support for Taiwanese customers, who were becoming increasingly important for the global chip industry and ASML. Supporting Chinese customers was added to my to-do list in 2001, which meant even more time spent on planes. Consequently, I moved to Taiwan in 2002, becoming a ‘country’ manager – actually, this meant being responsible for ASML business in Taiwan, Singapore, Malaysia, India and Australia. Mid 2007, I returned to Veldhoven to start up the new business unit of Customized Imaging Solutions, which provides tailored equipment, software and complete solutions to wafer fabs and specialized chipmakers. Once this was up and running, I moved on to be global head of Customer Support.”

“Thankfully, and through ASML, I know the technical needs and the commercial side of working closely with IDMs (integrated device manufacturers) and foundries (chip contract manufacturers) on three continents, including large, small and specialized customers.”

Erik Loopstra“Scientists seek to understand the world but it’s engineers who use their knowledge to build things. Since my youth, I’ve enjoyed making and creating things. And that’s what I like so much about ASML – I use my hobbies, like carpentry and photography, to stimulate ideas for my work. I love to come up with practical solutions to all sorts of engineering problems. As a bonus, my name is now on more than 60 patents.”

“After studying mechanical engineering at Delft University in the Netherlands, I started my career working on electric motors, then liquid crystal displays and TVs. Since joining ASML in 1991, I’ve been ‘carving’ out a career at the real cutting-edge of technology! Highlights so far include becoming Study Leader for our massively successful TWINSCAN™ platform, and later, joining the first immersion technology team. I thought immersion was sure to fail, but the excitement we felt on October 7, 2003 when we produced the first image using immersion was unbelievable – we knew that a new era had begun in nanoelectronics and for the chipmaking industry.”

“Today, I have technical, managerial and business challenges in developing EUV (Extreme Ultraviolet, which is the next lithography technology) systems. What’s special about ASML is that it really values the technical contributions of its engineers, as shown by the ASML Fellowship I was awarded in 2000.”

With many highly-qualified employees worldwide, ASML also draws upon an integrated knowledge network of 20,000 specialists.Source: ASML, Q1 2008

Employee sick leave is well below the national average at ASML’s main facility and HQ in the Netherlands.Sources: Dutch Central Bureau of Statistics and ASML

ASML employs 6,750 people worldwide and offers scholarship programs to talented students around the world.Source: ASML, Q1 2008

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“The semiconductor industry has traditionally been a cyclical business. There are fundamental reasons why ASML sees lower peaks and shallower troughs than many companies. Most important is that our machines are essential to chipmakers and take a few months to assemble. This results in an order book that looks out 6-9 months which smoothens the cycle. In addition, our superior technology has created a more secure position amongst our customers. Another stabilizing factor is the chip industry itself: with US$256 billion in annual sales the chip industry has grown and is better capable of digesting large investments.”

Peter Wennink Chief Financial Officer

“We’re learning to ride the semiconductor cycle without falling off”

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1985

1987

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2007

Semiconductor units

Chip Equipment r

evenue

Litho re

venue

Semiconductor revenue

Electronics re

venue

Europe 9% Asia68%

US23%

Learningthe lessons of the

past

Many market segmentsYears ago, there was only one semiconductor cycle and it followed the ups and downs of the computer industry. Today, there are many kinds of microchips used in many industries: from automotive to digital electronics. Even though there are still cycles, we see that our customers require a variety of technologies at different times, spreading out the peaks and troughs of supply and demand.

For several years now, ASML has shown steady growth in an industry that is notoriously cyclical. There are several reasons why stability has increased, particularly for ASML. For investors as well as customers, ASML is aiming to be a relatively safe haven in the semiconductor sea, focusing on customers in different market segments, technology

leadership and flexible operations.

Cutting-edge technologyLeading chipmakers need the most modern machines to make more powerful chips at lower cost, which boosts additional sales. By always being first with the finest and fastest lithography machines, ASML gives customers the tools they need to compete, and which help them to find new markets and expand the semiconductor industry.

Flexible operations with outsourcingASML designs all the specifications of its lithography machines, and then ASML buys many high-tech components from outside suppliers. This is called ‘value sourcing’ and it allows ASML to have low operating costs. In addition, ASML has a sizeable contracted workforce which means that operating costs can be scaled down by 18 percent within three months if economic circumstances so require. Value sourcing is one of our key tools to adapt to the volatile semiconductor industry.

Flexible laborASML has a flexible labor model for its payroll employees, which means they work longer during peak times and less at other times. This reinforces our ability to adapt more quickly to market cycles, including support for potential 24-hour, seven days-a-week production activities.

Increasing industry capital expenditures.Source: VLSI Research Inc.

Downturn flexibility – the possibility to cut costs quickly in every area.Source: ASML

Global delivery with comprehensive and advanced local support.Source: ASML

From IC manufacturing equipment to end-user goods, we see reduced peaks and milder troughs in a maturing industry.Sources: Gartner Inc., VLSI Research Inc. and WSTS

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100

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0 ASMLAMAT

KLA TencorLAM Research

Novellus

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%

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0Average Cycle TimeAverage Cycle Time last 10 machines

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%

Geared for growth

ASML is a growth company. This is fueled by a focus on innovation for technological leadership, but also on excellent execution of the company’s operating strategy. This includes reducing cycle times (the time from a customer’s order to the delivery of a system) while improving our cost competitiveness. Every year we aim to improve the efficiency of our machines by between 10 and 15 percent, providing more value to chipmakers.

ASML boosts shareholder value by generating strong cash flow, and by handing back cash above ASML’s operational needs to shareholders. ASML has a clear and efficient liquidity policy. The company is committed to return cash to shareholders above its cash buffer of between €1 billion and €1.5 billion. ASML will consider different ways to return cash to shareholders, either through share buybacks, dividend or capital repayments.

ASML offers above average returns on investment in the semiconductor equipment industry.Source: Bloomberg Financial

Despite increasing complexity, ASML has been consistently reducing the manufacturing time of new TWINSCAN systems.Source: ASML

Consistent execution and improvements have allowed regular capital repayments to shareholders. In 2007, ASML returned a cumulative amount of €1,372 million in cash to its shareholders.Source: ASML

A robust operating margin for eight successive quarters.Source: ASML

Diluted shares

Cash

Revenue

Basic EPSDiluted EPS

Q205

Q305

Q405

Q106

Q206

Q306

Q104

Q204

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“Immersion technology is an excellent trick to make chips smaller and more powerful. Early in the decade, the industry desperately needed a new solution to make electronic circuits smaller in order to continue Moore’s Law. Then, in late 2001, one of our distinguished technology fellows suggested adding water between the lens and the wafer. It sounds easy, but is in fact extremely challenging at high speed in an ultra-clean, high-accuracy system. Our first experiments were promising. It went very quickly: by the end of 2003, customers were impressed and placing orders, long before placing orders with our competitors. It’s strange that the most advanced and smallest microchips in the world today are made with two of the most basic materials: sand (silicon) and water.”

Jos Benschop Vice President of Research

“In

genious immersion went from idea to product with

in 2

ye

ars

”

30 31

Lens

Air

Lens

Water

It’s more than 300 years since Robert Hooke proposed a microscope with a liquid as the final lens element.

Since then, immersion lenses have been used successfully in microscopy for years, so the idea of reversing the

principle and using it to shrink chip dimensions was logical. But the reality

of containing a pool of water under the lens of a high-speed lithography system is something quite different.

A lithography system – called a scanner – moves across a wafer in steps, at a speed of 60 cm/s with an accuracy of

2 nanometers. The R&D effort to contain the water and beat mechanical forces, bubble forming, temperature problems, chemical

contamination and a host of other difficulties was a major achievement. This was only

possible thanks to the creativity and commitment of ASML employees, and their

experience in many different fields, including electrical engineering, physics, chemistry

and mechatronics.

Fluid thinking:the liquid lens scanner

In layman’s terms, immersion lithography involves placing a layer of water between the lens of the lithography system and the photoresist on the wafer. The technique uses water like the eye uses a liquid to help form images on the retina. The water bends the light in such a way as to get more light onto the wafer and improve the image it creates, allowing sharper lines and smaller features. In fact the water actually offers two benefits: it increases the depth of focus and improves the resolution. As a technique to make smaller chips, it is extremely effective – ASML’s most advanced system has imaged lines 36.5 nm apart.

SEM photograph showing detail of chip features imaged with an ASML machine.Source: IMEC

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0.010.05

0.1

1.1

1.8

7

3.5

0.7

0.40.3

0.2

Q3

Q22005

Q12006

Q4

Q4

Q2Q3

Q4

Q12007

Q2

Q3

Europe8

Asia44

(incl. 14 to Japan)

US20

The conversion to immersion

ASML had a flying start with immersion technology. As well as being involved in immersion R&D from the start, the ASML dual wafer table systems – originally designed to increase the throughput and cost efficiency – proved to be perfect for immersion. Measurements are taken when the wafer is in the dry position, before liquid enters the equation, thus eliminating the potential for distortion. The first ASML immersion system for volume production shipped in 2005; the fifth generation system shipped in the summer of 2007. ASML is a unique company with a huge technology advantage – over 70 ASML immersion units had shipped and were in production by the end of 2007, including 20 of the latest and most advanced TWINSCAN XT:1900i systems.

Continued growthASML has come a long way since basic step-and-repeat technology evolved into today’s ultra-high-NA Argon Fluoride (ArF) immersion step-and-scan systems, but as always, people wonder how much more of Moore’s Law we can expect.

In the near future, higher-index fluids and optical materials can be developed for advanced lithography. Double-patterning (exposing a wafer twice in a lithographic system) is another solution that can be applied to immersion machines and which will help produce even smaller electronic circuits on chips: 32 nanometer circuits which will result in flash memory chips with storage capacity of 8 to 16 Gigabytes (GB) on a single tiny chip.

For the next decade, ASML is working on a completely new design with Extreme Ultraviolet (EUV) light which can put 22, 16 and 11 nanometer features on chips. ASML has a history of surprising the industry – previous technology hurdles also appeared insurmountable, but were always overcome.

Brion, a U.S. computational lithography company, which was acquired by ASML early in 2007, helps to take full advantage of the improvements made possible by advanced technology. As images projected on the wafer lose contrast at very small feature sizes, software from Brion helps to optimize masks as well as lithography system settings to achieve the sharpest possible image of electronic circuits on a wafer, resulting in more good chips per wafer.

By Q1 2008, more than 10 million wafers had been processed on ASML immersion systems.Source: ASML

Forecast growth in NAND Flash memory chip capacity, measured in Gigabytes per standard chip.Source: Gartner Inc.

Dispersion of immersion systems per continent (Q4 2007).Source: ASML

Cumulative number of immersion systems.Source: ASML

Cumulative number of exposed wafers (in millions).Source: ASML

ASML has the strategy and know-how to continue to support the US$256 billion semiconductor industry with added value solutions. It will do so using some of the most innovative technologies currently in development. For customers, shareholders and employees it will continue to be a very exciting and profitable company.

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“Supercomputers will achieve one human brain capacity by2010, and personal computers will do so by about 2020”

Ray Kurzweil, Author, scientist and futurist

Source: ‘The Singularity is Near’, Penguin Putnam Inc., 2005

“Nanotechnology will let us build computers that areincredibly powerful. We’ll have more power in the volume of

a sugar cube than exists in the entire world today”Ralph Merkle, Inventor of public key cryptography & nanotechnology researcher

Source: ‘Nanotechnology: Designs for the Future’, Ubiquity, Issue 20, 11 July 2000 (ISSN 1530-2180)

“The companies that survive longest are the onesthat work out what they uniquely can give

to the world. Not just growth or money but theirexcellence, their respect for others,

or their ability to make people happy”Charles Handy, Author, philosopher and management consultant

Source: ‘The Search for Meaning’, Leader to Leader, Journal No. 5, 1997

“Every revolutionary idea seems to evoke three stages of reaction.They may be summed up by the phrases:1 – It’s completely impossible.

2 – It’s possible, but it’s not worth doing. 3 – I said it was a good idea all along”Arthur C. Clarke, Author and inventor

Source: ‘The Promise of Space’, Harper and Row, 1968

“Vision is the art of seeing things invisible”Jonathan Swift, Author

Source: ‘Miscellanies’, 172617261968

19972000

2005

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ASML worldwide contact information

Corporate headquartersDe Run 65015504 DR VeldhovenThe Netherlandstel +31 40 268 3000web www.asml.come-mail corpcom@asml.com

Mailing addressP.O. Box 3245500 AH VeldhovenThe Netherlands

United States main offices8555 South River ParkwayTempe, AZ 85284U.S.A.

77 Danbury RoadWilton, CT 06897U.S.A.

Asia main officeASML Hong Kong Ltd.Suite 1702-3 17th Floor100 Queen’s Road CentralHong Kongtel +852 2295 1168fax +852 2295 1388information@asml.com

Corporate Communicationstel +31 40 268 7870fax +31 40 268 3655e-mail corpcom@asml.com

Investor Relationstel +31 40 268 3938fax +31 40 268 3655e-mail investor.relations@asml.com

For more information, please visit our website: www.asml.comFor careers information, please visit our recruitment website: www.careers.asml.com

Illustration index

ASML financial data Diluted shares 28Earnings per share (basic/diluted) 28Operating cash 28Operating margin (as percentage of sales) 28Return on invested capital (ROIC) versus peer companies 28Revenue (sales) 28System cycle times (TWINSCAN™) 28 ASML success factors ASML lithography tool market share 21Average selling price of lithography systems (complete industry) 21Global IC production (units) 21Global semiconductor sales 21Increasing IC complexity (average numbers of layers) 21 Immersion systems Number of immersion systems per continent 35Number of shipped immersion systems 34Number of wafers exposed on immersion systems 34 Lithography & semiconductor business cycles ASML expense base – downturn flexibility 27Global lithography sales cycle 26Global sales cycle of electronic goods 26Global semiconductor equipment sales cycle 26Global semiconductor revenue cycle 26Global semiconductor unit sales cycle 26Semiconductor industry capital expenditure (all manufacturing equipment) 27 People Employees and scholarships worldwide 22Employee illness 22Knowledge network & specialized workforce 23 Research and development ASML patent portfolio 15ASML R&D investments 14Global R&D spending per sector 15Increasing R&D costs per node 14 Semiconductor manufacturing ASML system history (product introductions) 11Lithography tool productivity/cleanroom efficiency 10Semiconductor manufacturing process 11 Semiconductor market Feature size reduction (Flash memory 1/2 pitch nm) 8Memory demand per application 8Memory demand per household 8NAND Flash density growth – driving immersion technology 35Normalized IC manufacturing cost 9Number of transistors per IC (Moore’s Law) 9Worldwide revenue of the semiconductor market 14, 21 Suppliers and customers ASML sales geographically 26Outsourced innovation and supplier geography 16Top 20 spenders in the semiconductor industry 16

NoteAll data in this publication is from ASML unless otherwise indicated.

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