Bijlage bij beantwoording technische vragen (PvdD) - 2023 Annual Report based on IFRS (FINAL compressed)

Moving forward, we have clear parameters for R&D to work within so that future innovations take account of the technology limits of our supplier base and, where possible, reduce any risks of suppliers making unnecessary investments in new capabilities.

have your ecosystem Q How partners driven innovation in 2023? Martin: It is impossible to overstate the importance of our partners. A significant number of them are integral to our innovation activities and several have worked with us for many years. Our requirements are frequently unique and very demanding – so we work hard to help suppliers engage with our objectives in a spirit of mutual trust and respect. The importance of these relationships has been further recognized at ASML Board level through the recent appointment of Wayne Allan as Executive Vice President (EVP) and Chief Strategic Sourcing & Procurement Officer (CSPO), heading up the supply improvement program which aims to radically step up our ability to work with suppliers and deliver what our customers demand. We saw a number of developments in our supplier relationships in 2023. Having partnered with imec (Interuniversitair MicroElektronica Centrum) – a leading research and innovation hub in nanoelectronics and digital

technologies – since the late 1980s, in 2023 we signed a new Memorandum of Understanding (MoU) to intensify our collaboration around High NA. The MoU includes the installation and service of our full suite of advanced equipment in the imec pilot line in Leuven, Belgium. This facility will enable us to work alongside imec to develop a new process that will take us to the next semiconductor process node.

do you safeguard Q How ASML’s ability to continually improve? Martin: We aim for R&D spend to be in the 10-15% range of revenue. As our revenue increases rapidly, so too does our financial commitment to supporting innovation – in 2023, we invested €4.0 billion (based on US GAAP) in R&D. Of that amount, we spend around 10% on pure explorative research that aims to fill the innovation pipeline. We continue to work with our partners, for example by investing in a hightransmissive illuminator with ZEISS.

Q

Can you update us on future developments such as Hyper NA?

Martin: Hyper NA with an NA higher than 0.7 is certainly an opportunity that will become more visible from around 2030. It is likely to be most relevant for Logic – and it will need to be more affordable than double patterning – but it may also be an opportunity for DRAM.

For us, the key thing is that Hyper NA is driving our overall EUV capability platform to improve both cost and lead time. Regarding the industry in general, digitalization will continue to enable many of the solutions that are transforming our planet. Although systems such as our EUV platform require a great deal of energy, I think that we make a positive contribution to reducing GHG emissions by enabling the development of technologies such as smart grids and electric vehicles. More such technologies will follow – so at ASML we can feel good that our customers and their customers are engaging with society in a positive way when it comes to the environment.

do you envisage ASML Q How on its 50th anniversary? Martin: It is fair to say that our innovations are likely to be restricted by more boundaries, whether in terms of cost, cycle time or technology limits. Our challenge is to make efficiency gains in all these areas over the next 10 years – to make sure not only that we invent new solutions and ways of working but that these can be put into costeffective and timely practice for our customers. It’s all about doing everything we can to turn theory into practical reality, giving our customers the most efficient possible operation in every regard: cost, sustainability and productivity.

Digitalization will continue to enable many of the solutions that are transforming our planet.” Martin van den Brink President, Chief Technology Officer and Vice Chair of the Board of Management

20

ASML ANNUAL REPORT 2023

INNOVATION

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

How we innovate As a crucial manufacturer of lithography equipment, ASML is a vital part of the semiconductor ecosystem value chain. We don't innovate in isolation, but work as architects and integrators – collaborating closely with customers, our supply chain, and industry and research partners in a strong innovation ecosystem. Innovation is crucial to the continuing success of our business. Every day, more than 15,500 of our engineers take on the exciting challenge of innovating across our holistic lithography portfolio, including the most advanced lithography systems in the world. To stay ahead, we invest heavily in R&D – in 2023, we spent €4.0 billion (based on US GAAP) in this vital area, compared with €3.3 billion (based on US GAAP) in 2022, further building our capability to meet customer needs. A collaborative network at the cutting edge of our digital future To drive the fast pace of innovation in our value chain, we rely on our strong innovation ecosystem to make progress together. We work hard at developing long-term relationships with our customers, suppliers, research partners and peers, listening to and pushing each other to continuously innovate. We trust our supply chain to manufacture most system parts and modules and many are deeply involved in developing our new technology. Read more in Social - Innovation ecosystem on page 136

We innovate across our entire product portfolio and we aim to do this at the same pace as our customers through large and sustained investment in R&D, involving a diverse international academic network. This so-called ‘double helix’ approach is designed to accelerate innovation and provides access to a large leading-edge knowledge base across a wide range of technologies. Read more in Our business model on page 31

Generating ideas and finding technological innovations and solutions Our R&D teams focus on generating and exploring exciting new ideas and demonstrating their feasibility in the long term, as well as finding technological solutions to the challenges colleagues may face with any products and applications that have already moved into development.

Our researchers continuously scout for technological innovations and solutions – within the semiconductor industry and beyond – searching for those that can help us support our customers while delivering on our ESG sustainability commitments.

We innovate through partnerships. By developing our technology in close collaboration with our customers, we seek to build today what they need tomorrow.

21

ASML ANNUAL REPORT 2023

INNOVATION CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

How we innovate (continued)

Filling the innovation funnel

ASML Fellowship Program

We encourage our experts to build wide networks in the broader technology space. This supports the constant stream of new ideas into the technology pipeline that flows through what we call our ‘innovation funnel’ (see diagram). Based on our fundamental understanding of our markets and the needs of chipmakers, we select new ideas that have the potential to advance our products and their customer application.

At ASML, we recognize and honor our technical experts because we know that our company’s success is built on technology leadership. One of the ways we do this is through the ASML Fellowship Program.

Ideas that pass the ideation and selection stages are assessed in the research stage for their feasibility to go into our product generation process (PGP), a decision-based process for product development that includes an ESG assessment as well as the building and testing of system prototypes in the relevant environments. Prototypes that pass these tests may eventually lead to new product releases.

In 2023, three new ASML Fellows were appointed, and two of our current Fellows were promoted to the titles of Senior and Corporate Fellow, respectively, for their personal outstanding technical contributions.

Innovation achievements in 2023 Our goal is to give customers the products and capabilities they need to deliver on technology’s potential to make a positive contribution to society. As well as creating some of the most advanced machines in the world, this includes an increased focus on sustainability through parts commonality and reuse, and improvements in the performance and energy efficiency of our products to reduce costs and waste. Innovation achievements of the last 12 months include: • Soft x-ray (SXR) scatterometry. Using 10-20 nm wavelength light, this is a revolutionary next-generation metrology for 3D metrology suitable for measuring 3D profiles of advanced devices such as Gate All Around (GAA) transistors.

• Generation of smooth mirror surfaces. This innovation is used on the EXE:5200 mirror block. The mirror block carries the wafer table, with its mirrors used to position the wafer in three dimensions. The smooth mirror surface has greater stiffness compared to other glass materials, enabling it to better cope with the extreme stage accelerations in our next-generation NXE and EXE systems.

22

ASML ANNUAL REPORT 2023

MARKETPLACE

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

The world around us

The macroeconomic situation remains volatile and we continue to see macro trends such as high interest rates, inflation, fear of recession and geopolitical tensions increasing in some parts of the world. The semiconductor industry is trying to manage its inventory levels in some end-market segments to balance supply and demand. The semiconductor market was still in the aftermath of the COVID-19 crisis in 2023, during which large stimulus packages accelerated economic growth. This created shortages in supply in the electronics industry as companies built safety stocks to increase future resilience. End demand for electronics slowed as we reached the end of the pandemic, while the supply chain was still building safety buffers. This resulted in a supply chain correction in 2023 which impacted our industry. In the context of demand for lithography, some customers delayed the timing of their demand for specific systems, as some of their facilities were not ready to receive the systems as well as a result of their end demand. This provided an opportunity to allocate these systems to customers whose demand profile we could not initially meet. Despite these delays, for certain system types the supply is still the main constraint, with demand being higher than supply, albeit at a reduced level than was experienced at the start of the year.

All in all, global trends – such as generative AI, the energy transition, the electrification of mobility and the industrial Internet of Things (IoT) – continue to fuel semiconductor growth in the longer term. Our highest-priority objective is to optimize supply so that we can deliver and live up to our customers’ expectations. We have strong confidence that the semiconductor ecosystem will continue to innovate and grow at a high single-digit compound annual growth rate. Factors that may impact our business are explained in more detail over the next few pages, including:

1. Macroeconomic and geopolitical trends

Economic outlook

Middle East conflict

Russia-Ukraine war

Description

Description

Description

The macroeconomic situation did not improve in 2023; inflation rates and interest rates stayed relatively high and the fear of recession, amid the geopolitical conflicts, remained. The continued macroeconomic uncertainty means our customers in different market segments have remained cautious. A later recovery of markets is expected, and the timing and shape of the recovery slope remains unclear.

The military action in the Middle East is an additional factor in the current uncertainty in the macroeconomic environment.

The military action in Ukraine is an element of the current uncertainty in the macroeconomic environment.

What it means for ASML

What it means for ASML

Both ASML and our customers have operations in the Middle East. Additional military action in the region has and could further adversely affect the global economy, financial markets and the supply chain. This may impact our people and operations and our customers' operations, customer demand, delivery of products and services to customers, and the ability to obtain parts and components due to supply chain disruption. The safety and well-being of our employees and their families are a priority for us.

While we do not have operations in Russia or Ukraine, sanctions and other measures taken in response to the military action have adversely affected – and could further affect – the global economy, financial markets and the supply chain. This may impact our customer demand, delivery of products and services to customers, and the ability of us and our suppliers to obtain parts, components and gas supply due to supply chain disruption.

What it means for ASML

2. Semiconductor market trends

Our EUV business saw a slight shift in demand timing, predominantly driven by a lack of readiness of fabs. This was due to the market environment and a shortage of people who have the capability to build advanced fabs. With DUV demand higher than we can deliver, particularly in China, we are working closely with our customers and suppliers to ride out the uncertainty and manage the risks.

3. Semiconductor application areas

Read more in Our business strategy

1. Macroeconomic and geopolitical trends

Read more in Risk - How we manage risk

4. Semiconductor industry market

23

ASML ANNUAL REPORT 2023

MARKETPLACE CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

The world around us (continued)

1. Macroeconomic and geopolitical trends (continued)

Global geopolitics – technological sovereignty

Global geopolitics – export controls

Mitigating climate change

Description

Description

Description

What it means for ASML

With an urgent collective response needed to limit global warming to 1.5°C, climate change is a crucial matter for governments, companies and individuals worldwide.

Our goal is to achieve net zero emissions across our value chain by 2040. We plan to do it by decreasing our GHG emissions and reducing our carbon footprint across our value chain, enhancing the energy efficiency of our products and properties. We aim to achieve this by reducing energy consumption, using renewable energy and compensating CO2 emissions.

Semiconductors are crucial to the economic and strategic development of countries and regions, with the strategic importance of the semiconductor industry only likely to grow. Many countries and regions are pushing for ‘technological sovereignty’ to ensure security of supply, resilience and technological leadership in semiconductor technologies and applications. This is fueling capital expenditures in new regions.

What it means for ASML As governments increasingly see semiconductor manufacturing as strategically significant, chips acts are incentivizing our customers to build manufacturing facilities in the US, Europe and Asia. Besides sharing our views with governments on semiconductor manufacturing, we work closely with our customers to build the semiconductor manufacturing ecosystem in new regions, while retaining our focus on supporting incumbent regions.

On June 30, 2023, the Dutch Government published new regulations regarding the export control of semiconductor equipment that came into effect on September 1, 2023. These controls focus on advanced chip manufacturing technology, including the most advanced deposition and immersion lithography systems (NXT:2000i, NXT:2050i, NXT:2100i and subsequent systems). In addition, in October 2023, the US government published updated US export control regulations which include restrictions on shipping mature immersion lithography systems (NXT:1970 and NXT:1980) to a limited group of customers in certain countries (including China). Governments have turned their attention to securing sufficient semiconductor supplies to ensure greater technological sovereignty and support local industries. Significant investments in the semiconductor industry are being planned, with industry forecasts suggesting that the top three semiconductor manufacturers plan to invest over $300 billion in global capacity in the coming years. While the industry is managing its overall costs, price rises could ultimately be passed on to the end market, driving up the price of devices. Trade tensions and protectionism introduce significant complexity across the supply chain and the processes required.

Like so many others in this trading environment, the semiconductor industry needs to review its global supply chain. At the end of 2023, the Dutch Government partially revoked a license for the shipment of NXT:2050i and NXT:2100i lithography systems, impacting a small number of customers in China.

What it means for ASML The new regulations require ASML to apply for Dutch export licenses for all shipments of its most advanced DUV immersion lithography systems (TWINSCAN NXT:2000i and subsequent immersion systems) as well as US licenses for mature systems for a limited number of customers in China. The governments will determine whether to grant or deny the required export licenses and provide further details to the company on any conditions that apply. From January 1, 2024, we will work with our customers to deliver the non-advanced lithography systems which are not impacted by the new restrictions. We continue to educate governments on the semiconductor manufacturing process and ecosystem to foster understanding of the potential impacts of current and future regulatory measures.

Energy and water resources Technologies to counter climate change – from the energy transition to electrification, smart mobility and agricultural innovation – require semiconductors. Semiconductors are crucial to the generation, storage, distribution and consumption of electrical energy. They are at the core of smart (home) devices and play an important role in reducing overall energy consumption. The semiconductor industry also has an important role to play by reducing its own climate impacts; the semiconductor manufacturing process consumes large volumes of energy and water resources. Driving Moore’s Law to enable shrink and improve computing power and storage capacity fuels demand for these vital resources. Innovative architectures and a new way of looking at the entire ecosystem will be required to enhance energy and water resource efficiency of the industry.

We are also committed to using water responsibly. This includes acting to preserve water quality and conservation across our operations and in the communities where we operate. We work closely with our customers and suppliers to minimize waste and maximize the value gained through use of resources. By 2030, we aim to send zero waste from operations to landfill or incineration.

Read more in Environmental – Energy efficiency and climate action and Environmental – Circular economy Read more in Risk – Risk factors

Read more in Risk – Risk factors

24

ASML ANNUAL REPORT 2023

MARKETPLACE CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

The world around us (continued)

TTechnology is evolving at pace – we are moving fast toward intelligent edge computing, the next level of computing which focuses on processing data closer to its source rather than in centralized data centers. The current era of mobile computing – where you bring the computer with you – is moving us into an immersive world of ubiquitous computing, with computing power available everywhere, driven by artificial intelligence (AI).

2. Semiconductor market trends

Trends Increasing market demand The continuing convergence of wireless communication, telecoms, media and cloud technology via connected devices is driving demand for advanced semiconductors across the globe. Growing populations, urbanization, the energy transition and electrification to support smart mobility are increasing demand for advanced electronic devices. Microchips are at the heart of these devices, ranging from sensors and actuators to smart, scalable and flexible computing solutions. This is driving demand for chips in both leading edge and mature process nodes, which are specifically designed for innovative applications in areas ranging from smart homes, cities and industries to predictive healthcare, smart wearables and autonomous robotics.

The virtuous cycle of a datadriven society Moore’s Law is the guiding principle for the semiconductor industry. It is the motor behind the industry transition from mobile computing to ubiquitous computing. This transition continues to expand, driving the three main elements in computing – applications, data and algorithms – that

feed each other in a virtuous cycle: applications generate data, data fuels new algorithms, which again leads to new applications that generate new data, etc. This is the virtuous cycle of our data-driven society.

Unleashing the power of data better and faster with AI AI is becoming more ubiquitous and embedded into the environment and smaller devices, which moves us into the era of intelligent edge computing – smart, connected networks of more energy-efficient devices that seamlessly communicate over powerful 5G networks to unleash the power of data better and faster than ever. This provides people with more innovative functionalities and applications, improves human-to-machine interactions, and enhances data management and analytics. With intelligent edge computing, data processing is brought as close to the source of data as possible, rather than happening in the cloud. The vast amounts of data and insights that people can access are expected to fuel semiconductor business growth and the digital transformation.

Edge intelligence and AI-empowered mobile and ubiquitous computing technologies are key to solving some of society's toughest challenges, such as mitigating climate change, enabling the energy transition, creating sustainable social communities and improving quality of life.

25

ASML ANNUAL REPORT 2023

MARKETPLACE CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

The world around us (continued)

3. Semiconductor application areas Automotive Automotive is one of the fastestgrowing market segments driven, by electrification, autonomy and other mega trends. Integrated automotive systems consist of a full range of scalable, flexible computing solutions that require advanced and mature semiconductor devices. Advanced driver-assistance systems (ADAS) enabled by electronics and semiconductors, considered supercomputers on wheels, are also expected to contribute to the growth of the automotive segment in the semiconductor industry.

Autonomous robotics A new generation of lightweight robots connected to a wide network and fitted with smart sensors enable humans and machines to safely and efficiently work side by side.

Mixed reality Augmented reality and virtual reality technology can combine to bring the real world and digital elements together (so that physical and digital objects coexist and interact in real time) to create the next-level user experience.

Global connectivity 5G enables a new kind of network that is designed to connect almost everyone and everything around the world, including machines, objects and devices.

Smart industry Smart industry devices use realtime data analytics and machineto-machine sensors to optimize processes, foresee bottlenecks, and prevent errors and injuries. Predictive healthcare Predictive analysis of health data from multiple sources combined with machine learning and AI is being harnessed to improve healthcare services and patient outcomes.

Smart cities Smart cities use technology and digital networks to integrate transportation and infrastructure, connectivity, energy and lighting, and other public services.

Artificial intelligence Artificial intelligence (AI) is about developing systems that have the intellectual processes characteristic of humans, such as the ability to reason, discover meaning, generalize or learn from past experience. Due to the exponential growth in computation, along with the availability of massive data sets and improved algorithms, AI has made huge advancements over a short period of time. Today, AI not only matches, but also beats human performance in many areas.

Wearables Wearable devices (such as fitness trackers smart watches, smart rings, jewelry or glasses) are able to connect to the internet and continuously monitor, track and transmit personal data.

Energy transition The energy transition is expected to be a key market driver, with semiconductors enabling the global shift from fossilbased energy production to renewable sources like wind and solar. Semiconductors are crucial in the generation, storage, distribution and consumption of electrical energy. The energy transition also drives the need for more intelligent infrastructure and end devices.

Smart home Smart home devices, such as thermostats, lights and smart TVs, learn a user’s habits to provide automated support for everyday tasks.

26

ASML ANNUAL REPORT 2023

MARKETPLACE CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

27

The world around us (continued)

4. Semiconductor industry market Semiconductor technology plays a crucial role in shaping the interconnected and intelligent network future. As a result, end markets continue to grow. This overview provides an outlook on current market size and opportunity for the entire industry, based on external research. The historical market compound annual growth rate (CAGR) from 2012 to 2022 was 7%. In 2022, almost 1.1 trillion chips were manufactured around the world, feeding a $0.6 trillion industry. 2023 was a correction year, as consumer markets like PC slowed following the peak in working-from-home triggered by COVID-19. At the same time, the supply chain continued to build safety buffers in 2022 to increase resilience against future supply chain disruptions, and these needed to be corrected given lower demand. Industry sources project that the chip market (worldwide semiconductor revenues) will resume growth after 2023 in line with historical growth rates. The longerterm market outlook is not expected to be materially impacted by the 2023 downturn. With an expected global annual wafer capacity growth of over 780,000 wafer starts per month per year, we plan to increase our annual capacity to 90 EUV 0.33 NA and 600 DUV systems (2025-2026), while ramping up EUV 0.55 NA (High NA) capacity to 20 systems per year (2027-2028).

Smartphone

Personal computing

Consumer electronics

Automotive

Industrial electronics

Wired and wireless infrastructure

Servers, data centers and storage

High-end compute and Memory, fast conversion to solidstate drive (SSD), edge AI processors

Both low-power and high-bandwidth connectivity, sensors

Strong IC content growth: graphics processing unit (GPU), sensors, vehicle-to-everything (V2X) communication sensing

Connectivity, edge processors, sensors

High-bandwidth connectivity, edge processors

High processor and Memory growth, hardware accelerations including GPU for AI applications

Key driver

Continued refresh of all semiconductor content including image sensors and edge AI processors 2020 market size ($bn)

117

Total

100

50

40

51

38

76

471

89

60

79

74

50

78

534

107

74

104

94

60

136

721

2%

8%

21%

14%

10%

12%

9%

2023 market size ($bn)

104 2025 market opportunity ($bn)

146 Outlook CAGR 2020-2025 (%)

5%

Source: Based on external market research firms

ASML ANNUAL REPORT 2023

MARKETPLACE CONTINUED

The world around us (continued)

Logic and Memory chips Logic chips are the ‘brains’ that process information in electronic devices. They are produced by two groups of manufacturers: integrated device manufacturers (IDMs), which design and manufacture Logic chips, and contract manufacturers, known as foundries. Foundry manufacturers produce chips for ‘fabless’ companies that focus on chip design and distribution but do not manufacture microchips themselves. Memory chips can store large amounts 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 chips typically made in dedicated Memory-chip factories: NAND chips that can store data even when a device is powered off and DRAM Memory chips that are used to efficiently provide data to the processor.

Logic and Memory chips can vary greatly in complexity and capability. For example, the most advanced chips power leading-edge technology, in AI, big data and automotive technology, while simpler low-cost chips integrate sensing capabilities into everyday technology to create a vast network of connected devices, the loT. During 2023 generative AI got a lot of traction, which resulted in strong demand for GPU chips (Logic) and High-Bandwidth Memory (HBM) at our customers. Both products are still a small portion of the overall Logic and Memory market.

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

28

ASML ANNUAL REPORT 2023

OUR BUSINESS STRATEGY

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

Focused on sustainable long-term value creation

Our purpose is to unlock the potential of people and society by pushing technology to new limits. Our vision is that we enable ground-breaking technology to solve some of humanity’s toughest challenges. Our strategy and priorities are designed to deliver on these points and create long-term sustainable value for our stakeholders.

Our strategy is to

1

Grow our holistic lithography business

2

Secure unique supply chain capabilities to ensure business continuity

3

Move toward adjacent business opportunities

1. Grow our holistic lithography business Fueled by strong customer demand, we expect substantial growth opportunities for our holistic lithography business in the remainder of this decade. We will continue to increase the capacity of our company to meet the demand across all market segments, preparing for cyclicality while sharing risks and rewards fairly with all stakeholders. We will remain focused on protecting and gaining market share by delivering on our technology roadmap, securing our competitiveness, and addressing our growth and execution challenges. We aim to innovate responsibly by improving the simplicity, sustainability, serviceability, manufacturability and scalability of our future lithography solutions. By considering the cost and complexity constraints of a new technology from day one, we can efficiently allocate our resources and cost-effectively deliver new capabilities to our customers.

2025

€30-40bn Annual revenue

4

Deliver on our ESG sustainability commitments

54-56% Gross margin

Based on different market scenarios, shared during our 2022 Investor Day, we presented an opportunity to achieve the following in 2025 and 2030: • In 2025: annual revenue between approximately €30 billion and €40 billion with a gross margin between approximately 54% and 56% • In 2030: annual revenue between approximately €44 billion and €60 billion with a gross margin between approximately 56% and 60% Our priorities Our holistic approach to lithography integrates a set of products that enables chipmakers to develop, optimize and control the semiconductor production process. Through the continued execution of our strategic priorities, we aim to deliver costeffective solutions that support all applications, from leading-edge to mature nodes, and enable the extension of the industry roadmap into the next decade. 2030

€44-60bn Annual revenue

56-60% Gross margin

Our five priorities are:

Strengthen customer trust

Enhance the value of EUV 0.33 NA for manufacturing

Enhance our innovation and operational excellence capabilities to deliver on our roadmap for new product introductions and system deliveries, on time and with the highest quality, to address the needs of our customers. Increase our focus on sustainability through parts commonality and reuse, and drive improvements in the performance and energy efficiency of our products to reduce costs and waste.

Secure high-volume manufacturing performance and enhance the value of EUV technology by extending our product portfolio for future nodes. Improve cost effectiveness for our customers by improving system performance and energy efficiency.

Build a winning position in holistic lithography

Insert EUV 0.55 NA into high-volume manufacturing

Build a winning position in edge placement metrology and process control to support customer needs. Integrate our complete product portfolio into a holistic lithography solution to optimize and control lithography performance.

Insert EUV 0.55 NA (High NA) in Logic and DRAM for high-volume manufacturing from 2025 onward to support customer roadmaps by simplifying patterning schemes and decreasing defect density.

Continue innovation leadership in DUV Continue our innovation leadership, enabling execution of customer roadmaps by driving DUV to the highest level of performance while remaining costcompetitive. Expand our installed base and support customer needs.

Toward the end of 2023 and in light of our expectation that 2024 would be a year of transition, we reviewed our strategic business priorities, adding operational excellence and people empowerment as supplementary focus points.

29

ASML ANNUAL REPORT 2023

OUR BUSINESS STRATEGY CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

Focused on sustainable long-term value creation (continued)

2. Secure unique supply chain capabilities In order to deliver on our growth aspirations, we need to secure innovation, scale-up and continuity, while preserving sound business conditions and a constructive collaboration model with our unique technology suppliers. Our supply chain is a critical enabler of our ambition to grow our core business. Therefore, we are proactively assessing our supply base for projected demand and control of future roadmap-enabling capabilities.

3. Move toward adjacent business opportunities Once core growth is secured, we can move into adjacent business opportunities representing additional growth opportunities. We aim to do this by focusing on synergetic opportunities at the forefront of holistic transistor scaling to best serve our customers. This includes leveraging product and technology synergies, and tapping into different future semiconductor scaling engines.

4. Deliver on our ESG sustainability commitments We believe digital technologies can have a positive impact on the world – supporting society to make progress and addressing environmental and social challenges. Enabled by microchips, these technologies are fueling a digital transformation that is helping to address global challenges, such as tackling climate change by reducing energy consumption and GHG emissions.

Our ESG sustainability strategy Our aim is to create long-term sustainable value for our stakeholders, while also contributing to the United Nations’ Sustainable Development Goals (SDGs). Our ESG sustainability strategy is based on a materiality assessment that helps us identify and focus on the ESG sustainability topics where we can have the biggest impact.

We recognize that new technology comes with new challenges – and we’re committed to using our innovations to enable the semiconductor industry to reduce its footprint. We aim to help our customers minimize the materials and energy required to produce advanced microchips. Within our own operations, including our supply chain, we aim to minimize our environmental impact while having a positive role in society for our employees, the communities around us and everyone involved in our innovation ecosystem.

Environmental We want to continue to expand computing power but with minimal waste, energy use and emissions. That's why we focus on energy efficiency and climate action, and a circular economy. Social We want to ensure that responsible growth benefits all our stakeholders – we aim to offer an attractive workplace for all, to build and maintain a responsible supply chain, to fuel innovation in our ecosystem and to be a valued partner in our communities. Read more on how we're delivering on our vision on pages 17, 34, 88, 104, 123, 134, 143 > Read more in ESG - Our material ESG sustainability topics

Governance We act on our responsibilities and aim to fully anchor them in the way we do business through our focus on integrated governance, engaged stakeholders and transparent reporting.

See how we're delivering on our ESG sustainability commitments

30

ASML ANNUAL REPORT 2023

OUR BUSINESS MODEL

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

What we need to create sustainable long-term value The depth and breadth of our resources and the relationships we build are key to our continued success in growing a sustainable holistic lithography business.

People and culture

Manufacturing facilities We depend on more than 42,400 talented, dedicated and highly motivated employees who live our values of challenge, collaborate and care. Every day, our colleagues in R&D, manufacturing, customer support, sourcing and supply chain, and support functions take on the exciting challenge of building and maintaining the most advanced lithography, metrology and inspection systems in the world. Read more on pages 33 and 106 >

Capital

Innovation

We need strong capital reserves, underpinned by a robust balance sheet. Total shareholders' equity at the end of 2023 amounts to 16.2 billion on a consolidated balance sheet total of €43.1 billion and net cash provided by operating activities of €6.5 billion in 2023.

In 2023, we spent a total of €4.0 billion on R&D (based on US GAAP). We do not innovate alone – our more than 15,500 R&D employees collaborate closely within an innovation ecosystem of key partners in the value chain.

Read more on page 248 >

Read more on page 136 >

Ecosystem of innovation partners

We have eight manufacturing sites in the EU, US and Asia that provide high-precision, highly controlled environments where we assemble, test and deliver our complex lithography and metrology and inspection portfolio, from prototype to final product. Read more on page 12 >

Our lithography solutions are the result of strong partnerships based on trust, respect, and shared risks and incentives to compete and drive innovation. Customers We believe a true partnership with our customers is vitally important, to ensure we share the risks and rewards of what we do.

Research partners We co-develop R&D expertise within a wide network of technology partners, such as universities and research institutions – accelerating innovation and giving us access to a large leading-edge knowledge base across a wide range of technologies.

Suppliers Our lithography systems comprise thousands of parts, with most of them co-designed with and made by our suppliers. Early involvement of our suppliers has always been a key part of our business model.

Peers Our semiconductor industry peers optimize the total manufacturing process by delivering complementary process equipment, critical materials, essential data and new processing steps.

31

ASML ANNUAL REPORT 2023

OUR BUSINESS MODEL CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

Creating sustainable long-term value through holistic lithography Our holistic approach is based on the intelligent integration of computational lithography, lithography systems, and metrology and inspection.

Computational lithography Computational lithography is used to predict and enhance the process window of our lithography systems by calculating the optimal settings, depending on the specific application. This takes place in the research and development phase, before a lithography system goes into high-volume manufacturing.

Metrology and inspection We have a suite of tools – optical and e-beam metrology, high-resolution inspection, and scanner and process control software solutions – which control the process window and help ensure that the lithography system operates optimally in the fab environment. Lithography is the only way in which in-line adjustments can optimize performance as part of the manufacturing process.

Read more about the microchip manufacturing process on page 11 > Read more in Our products and services on page 12 >

Holistic lithography enables shrink by optimizing setup and control of a lithography system’s process window for high-volume manufacturing – improving the system’s availability, reducing downtime and overall costs, and optimizing yield (or number of good wafers per day) for our customers.

32

ASML ANNUAL REPORT 2023

OUR BUSINESS MODEL CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

The sustainable long-term value we created for our stakeholders in 2023 Our success depends on strong, sustainable relationships with all stakeholders in the value chain. We aim to create sustainable value for them, and to use their input to develop our strategy, products and services.

Customers

Employees

Suppliers

Shareholders

Society

Our world-leading lithographic systems enable our customers to develop ever more powerful and energy-efficient chips for new applications and devices. At the same time, we help our customers reduce costs and their environmental footprint.

ASML is a growth business providing employment opportunities around the world. We invest in people’s career development and well-being, and provide a diverse and inclusive environment where people can achieve their full potential.

We innovate together with our strategic partners, sharing knowledge and tapping into each other’s technology expertise to drive ever higher levels of complexity and capability. Longterm relationships, close collaboration, transparency and a commitment to sustainability with our suppliers are key to our success.

The effective and disciplined investment of free cash flow drives the profitable growth of our company, and delivers solid financial performance and a healthy financial position. This underpins our cash return policy through share buybacks and dividends.

We play an active role in the communities where we operate, recognizing that when the community thrives, we thrive. And our collaborative ecosystem nurtures innovation and benefits society. For example, we share our expertise with universities and

research institutes, support young tech companies and promote science, technology, engineering and mathematics (STEM) education worldwide.

€27.6bn

80.3%

€15.5bn

€3.2bn

€413

88%

600

27%

5,100

€6.10

€16.4m

35.1 kt

#2

3.6%

57%

€1.0bn

95%

15.0 Mt

Read more in Engaging with our stakeholders – Customers

Read more in Engaging with our stakeholders – Employees

Read more in Engaging with our stakeholders – Suppliers

Read more in Engaging with our stakeholders – Shareholders

Read more in Engaging with our stakeholders – Society

Total net sales

Net system sales (in units)

TechInsights customer satisfaction ranking

Employee engagement score

Gender diversity – % inflow of women

Attrition rate

Total sourcing spend

Number of suppliers

% supplier spend covered by commitment to sustainability via Letter of Intent (LOI)

1

Free cash flow (based on US GAAP)

Proposed annualized dividend per share

Share buyback

Community partnership program: amount invested per employee

Contribution to EU research projects

% of systems sold in the past 30 years still active in the field

We are also committed to creating sustainable value by reducing our environmental footprint, both from our operations and during the use of our products and services.

% Reuse rate of parts returned from field and factory

Emissions from manufacturing and building (scope 1 and 2)

Indirect emissions from total value change (scope 3)

1. Free cash flow is a non-GAAP measure and is defined (based on US GAAP figures) as net cash provided by operating activities (2023: €5,443.4 million and 2022: €8,486.8 million) minus purchase of property, plant and equipment (2023: €2,155.6 million and 2022: €1,281.8 million) and purchase of intangible assets (2023: €40.6 million and 2022: €37.5 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 in calculating free cash flow because these payments are necessary to support the maintenance and investments in our assets to maintain the current asset base.

33

ASML ANNUAL REPORT 2023

SMALL PATTERNS. BIG IMPACT.

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

My new role will help us safeguard our innovation power as we evolve to support future growth.” Ron Kool Head of Business Performance Improvement 26 years at ASML

Embracing change, driving innovation Ron Kool spent over 25 years in various product-related roles within ASML, most recently leading our deep ultraviolet (DUV) lithography business. In 2023, he changed direction to use the experience he has gained in improving our technology to help us improve our business processes.

34

ASML ANNUAL REPORT 2023

SMALL PATTERNS. BIG IMPACT. CONTINUED

STRATEGIC REPORT

Perhaps unsurprisingly, given my history, I am copying our PGP approach as a blueprint for BPI. In particular, we’ve adopted the PGP’s key decision process, whereby we only move on to the next step if everyone agrees. It’s very much an ASML-tailored approach, but it works well in our product development, and I believe it will help on the BPI side too: If you actively say yes to something, you are more committed to it.

Evolving for the future A strong track record

Building on strong foundations

When I joined ASML in 1997, it had fewer than 2,000 employees. Today, it has over 42,400. We are shipping more products each year and supporting many more installed systems in the field. And we have plans to grow further to support future developments in the semiconductor industry.

The challenge is to do that in a structured way. Business processes are, by nature, cross-sector – they govern how different parts of the company work together to deliver what customers and shareholders want. You need to make sure improvements in one area don’t cause problems in others. That means having insight from all affected groups while keeping the end goal clearly in focus.

ASML has always been driven by technology. We employ the best technical minds and let them focus on innovation. But with the massive growth, we have had to evolve how we work around the technology. At ASML, we have always seen ourselves as technology firefighters – ready to tackle any challenge that comes our way. But firefighters need to be organized or bad things can happen. So ASML has continually improved its processes for developing new products and running the business so that our innovators can continue to focus on what they do best: innovation.

In 2023, I stepped away from a career track in technical and business line management to start a Business Performance Improvement (BPI) group. The group aims to be a catalyst, to create a way of working that makes cross-sector business performance improvements more efficient.

We currently have around 10 ongoing BPI initiatives, covering areas such as reuse, supporting field operations, planning and IT. In each case, execution is handled mostly by the main sector involved. Our role is to help them communicate with the other sectors to understand the wider impact and know who to connect with to address issues. So, our planning department is responsible for improving planning, but they need input from our sourcing and customer-facing departments to make that happen.

CORPORATE GOVERNANCE

Another example is an initiative to improve how we ship systems to customers. Any changes to shipping impact the whole work chain for many operational sectors. First, we need alignment with our customers, so sales and customer support must be involved. But we also need to consider the internal way of working for departments such as finance, because changes to shipping practices could affect our compliance with customs regulations and tax rules. Having the right people from all the necessary departments involved from the start allows us to discuss and solve those issues at an early stage, and not have to spend time fighting fires later.

FINANCIALS

Improving business processes is an ongoing challenge for any company. At ASML, we want to safeguard our innovation-driven way of working while we evolve. That was my motivation for making the change to BPI. It’s a step we need to take to prepare for further growth and the evolving needs of our customers.

35

ASML ANNUAL REPORT 2023

OUR BUSINESS MODEL CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

Engaging with our stakeholders

We engage with our stakeholders on an ongoing basis, working hard to understand how we impact them and how we can best meet their needs. This approach plays a key role in our ability to build stakeholder relationships based on mutual trust. Read more on page 70 >

A new Stakeholder Engagement Policy has been published. Read more at asml.com

Our stakeholders – customers, employees, suppliers, shareholders and society – can affect or be affected by our business, and we embrace continuous open dialogue and knowledge-sharing for the benefit of all parties.

Customers

At each stage of the customer relationship, we aim to foster trust, advocacy and continuous engagement, with the goal of achieving complete customer satisfaction and loyalty. As customer requirements become more complex, it takes longer to align with a shared vision, so we seek to start earlier in the process. Transparency is key, and our customer intimacy strategy helps us to leverage our innovations and develop even more sophisticated solutions with our customers.

What’s happening in their world Macroeconomic uncertainty across different market segments led our customers to more carefully control capital expenditure and cash flow. In 2023, the market continued to be influenced by governments focusing on incentives to encourage the construction of semiconductor manufacturing facilities in their respective countries through chips acts. This led our customers to look into expanding their manufacturing in these new geographical locations. However, the readiness of these 'off-shore' facilities has been impacted due to a shortage of experienced staff in these new locations. In addition, new regulations were announced and imposed by the Dutch, US and Japanese governments regarding the export control of advanced semiconductor equipment impacting the customers in China that are using advanced lithography tools. How we respond We had delivery challenges for our DUV systems (in light of the heightened demand) and we kept our customers informed about shipment status and progress in our capacity plans. To respond to their demand faster, we implemented the fast shipment solution as a standard way of working in 2023. We continued to closely collaborate with our customers to support them in settling in to their new manufacturing locations by providing them with operational flexibility where needed.

We worked with governments and our customers to minimize the potential impact of new regulations on our customers’ deliveries. In new product design, we are increasing our focus on reducing energy consumption of our systems.

We have deployed improvement actions identified in our 2022 customer survey. This has helped us focus on truly understanding what customers need from us, and validating that we are on the right track with the right improvements. We have updated our customers regularly on the progress being made, and in September 2023 we sent out our latest survey, including a new set of questions to measure customer trust. Survey results reveal that our customers have high levels of trust in us, mainly driven by our transparency and commitment to fairness in driving mutual success. They ask us to listen closely to their feedback, resolve issues in a timely manner, provide them with shorter delivery times for good-quality products and continue pushing the technology forward to meet their current and future needs.

How we engage • Regular meetings with our key customers • Technology Review Meetings where our senior technology experts, our Chief Technology Officer (CTO) and our Chief Business Officer (CBO) discuss technology roadmaps and requirements with customers • Executive Review Meetings where members of our senior management team and Board of Management discuss business and strategies with customers • Operational Review Meetings where we review topics related to our customers’ operational activities • Annual customer feedback survey • Voice of the Customer program, which provides firsthand feedback about our customers’ needs and challenges for employees without direct access to customers • Various technology symposia and special events

36

ASML ANNUAL REPORT 2023

OUR BUSINESS MODEL CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

Engaging with our stakeholders (continued)

We strive for engaged employees who are proud to work for ASML and deliver jointly our vision and our ambitions as a company.

Employees What’s happening in their world Our growth in recent years has been accompanied by a large increase in our workforce. This has brought benefits – such as a more diverse employee base – as well as challenges. As the organization becomes more complex, and the expectations of our customers and stakeholders increase, the need to engage all our employees becomes even more crucial. Our employees feel respected and have trust in each other. They continue to raise suggestions to improve processes, and they like to have more opportunities to participate in sustainability initiatives. Read more in Social - Attractive workplace for all

How we respond Since the pandemic, employee expectations have continued to change, especially around work-life balance, hybrid working and well-being. Staying on top of these trends and understanding how the world of work and expectations is evolving is a key part of our strategy to attract and retain talent. Inclusion, well-being and job enablement are the key themes we will focus on to further increase our engagement. Cross-collaboration and sharing knowledge across teams also remain subjects for improvement.

We engage with our suppliers to help deliver our innovations. They are critical to our value chain and our ambition to be a sustainable leader in the semiconductor industry.

Suppliers How we engage • Employee engagement survey • Training and development programs, including employee evaluation and feedback • ASML's Speak Up service • Works Council/Unions • Employee networks, such as Next, Women/WAVES, Seniors, Parents, Veterans, Green ASML, Atypical, SHADES and Proud • ASML Ambassadors community, aiming to attract and inspire talent, engage colleagues and show the community our appreciation • Internal communication and awareness, for example through the intranet, our Ethics program, department employee meetings and interactive lunch sessions with Board members • Onboarding program for new employees • All-employee meeting and senior management meetings

What’s happening in their world Over recent years, the world of our suppliers has been quite turbulent. First of all, geopolitical uncertainties led to disruptions in our supply chain due to less availability of materials as well as increased price levels. Furthermore, on a broader scale, the inflationary pressure has hit our suppliers, mainly in areas of raw materials, energy and wages. And finally, throughout all those challenges, ASML continued to grow, and despite short-term market uncertainties was still requiring suppliers to build up further capacity for future growth while putting pressure on cost and quality performance. The future growth in demand of ASML’s customers can only be met if our suppliers are capable and willing to keep up. How we respond Our commitment to our suppliers is that we want to maintain and build a strong business relationship based on mutual trust. We listen to our suppliers when they openly share their pain points and challenges. We are implementing improvements relating to quality issues, early supplier involvement during the industrialization phase of new product introductions, reducing cycle time and cost, planning with our suppliers and ESG sustainability.

How we engage • ASML’s Suppliers' Day • Direct interactions via supplier account teams / sourcing account leaders • Supplier audits • Site visits • Newsletter • Responsible Business Alliance (RBA) selfassessment questionnaire (SAQ) • ASML's Speak Up service • Knowledge sessions on ESG sustainability

37

ASML ANNUAL REPORT 2023

OUR BUSINESS MODEL CONTINUED

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIALS

Engaging with our stakeholders (continued)

Shareholders

We aim to help shareholders – as well as financial and ESG sustainability analysts – to understand our long-term investment opportunities. We communicate with them about our financial growth strategies and opportunities, financial and ESG sustainability performance, and our outlook and shareholder returns.

What’s happening in their world For investors in the semiconductor industry, 2023 was an interesting, highly dynamic year in which ASML showed impressive sales growth while overall semiconductor sales went down. Key focus areas for investors were to get a better sense of when the industry will recover from its short-term cyclical downturn in order to understand how 2024 will shape up. There were also positive developments of (generative) AI gaining strong traction. In addition to uncertainties around a potential recession, inflationary costs, the Russia-Ukraine war and the conflict in the Middle East, the Dutch and US governments published new regulations in 2023 regarding the export controls of semiconductor equipment.

How we respond During the year, ASML’s management and Investor Relations team actively engaged with our investor community to discuss specific topics that are relevant to ASML’s equity story. We focus on being transparent, accessible, credible, reliable and responsive. We actively engage with the investor community via a large number of (ESG-related) conferences, roadshows and conference calls. We also encourage investors to visit our Veldhoven (NL) or Wilton (US) facilities to be able to discuss our capacity expansion plans as well as our technology challenges and opportunities in our ASML Experience Centers.

How we engage • AGM • Investor calls and Investor Days • Company quarterly results presentations and press releases • Various (ESG) investor conferences and roadshows • Various sustainability questionnaires, assessments and survey feedback • Direct personal interactions in line with our Bilateral Contacts Policy as published on our website

Society

We know that our actions and our activities have an impact beyond ASML – on the environment, for example, and on the world around us in its broadest sense, which is how we define society. We engage with organizations, communities and other bodies in society on a wide range of issues – from reducing our environmental footprint to regulatory matters and fulfilling our commitment to playing an active role in the communities where we operate.

What’s happening in their world Increasingly the local community feels the impact of the rapid development of our headquarters in the Brainport Eindhoven region, home to around half of ASML’s employees. Our community stakeholders expect ASML to take its fair share in keeping the region attractive and inclusive for all community members, with sufficient affordable housing, sustainable transportation, a strong (technology) education system for all and opportunities for the underserved. Meanwhile, our headquarter campus expansion should take into account the interests of our close neighbors. How we respond Launched in collaboration with our ESG Sustainability team at the start of 2023, ASML’s Society & Community Engagement team focuses on four areas: boosting the attractiveness of the communities, aiming to keep these communities inclusive, promoting science and technology education, and supporting ESG innovation. Within these focus areas, we and our stakeholders have identified and formed 17 program strategies that we began to execute during 2023. Read more in Social - Valued partner in our communities