ASML cuts workforce by 10%, Tempe site to close

“Never before have we witnessed such a sharp and sudden fall-off in lithography system demand, triggered by an unprecedented mix of falling end-demand for semiconductors, weak memory prices and restricted access to capital for our customers,” said Eric Meurice, President and CEO of ASML “This steep decline in our business activity is forcing us to adjust our organization in order to lower our cost base significantly by using the full flexibility of our business model, while maintaining our important strategic investments in research and development (R&D). Although painful for our stakeholders in the short term, the current effort offers ASML an opportunity to emerge healthier and fundamentally stronger when the overall semiconductor market recovers,” Mr Meurice said. ASML is implementing the following set of measures to structurally lower our cost base, while keeping intact our key R&D programs and a level of capacity to ramp production back to customer needs without lengthening lead times: - During the period Q4/2008 to Q2/2009, ASML will reduce our total workforce by more than 10%, comprising approximately 1,000 employees who are mainly on temporary contracts. Reductions will occur mostly at its Veldhoven headquarters site, at the manufacturing site in Wilton, Connecticut, and at the training site in Tempe, Arizona, which will be closed. In the Netherlands, ASML will participate in a Labor Time Reduction Program, a temporary measure made possible by the Dutch government to help companies reduce working hours for employees without impacting their salaries. Employees receive part of their wages from the national unemployment fund, on condition they spend non-working hours on training and schooling. The plan is designed to protect employment in viable industries during an exceptionally severe downturn such as the current one. ASML intends to apply for an extension of the ruling for a period of at least six months. Labor Time Reduction Programs will also be implemented at our Wilton site and at some field sites. - ASML plans to shut down production facilities for a total of four weeks, spread over Q1 and Q2 of 2009. - ASML will further reduce discretionary expenses, including contracted activities, salary raises and miscellaneous consumption. - Due to the anticipated lower level of sales volume in the coming year and the introduction of new, more cost-competitive, scanner models, ASML will take impairment charges on certain inventories and assets. - The costs associated with the above measures are expected to be between €120 million and €150 million, and the majority will be incurred in the 4Q/2008. ASML is making the following observations about the current quarter: - As a result of the severe slowdown, ASML expects sales in the fourth quarter of 2008 to be between €450 million and €500 million, compared with guidance issued on October 15 for sales of around €530 million. - A sharp decline in new order intake, in addition to requests from customers to postpone backlog system deliveries, will translate into substantially lower sales in the 1H/2009. The company currently anticipate that sales in the 1Q/2009 will be between €180 million and €250 million.