ASM CONTENTS. 3 Financial Highlights and Selected Comparative Financial Data. 4 ASM International. 8 Letter to Shareholders - PDF

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CONTENTS 3 Financial Highlights and Selected Comparative Financial Data 4 ASM International 8 Letter to Shareholders 14 Report from the Supervisory Board 16 Corporate Governance 26 Corporate Information
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CONTENTS 3 Financial Highlights and Selected Comparative Financial Data 4 ASM International 8 Letter to Shareholders 14 Report from the Supervisory Board 16 Corporate Governance 26 Corporate Information 28 ASM International Worldwide 31 Form 20-F ASM In the 40-year history of our Company, ASM International N.V. has witnessed the evolution of the semiconductor equipment industry, from two inch wafers of the late 1960 s, to the 300mm wafers of today. Symbolic of these products is the silicon crystal... the basis of the ASM International logo. Trademarks ASM, the ASM International logo, A600 UHV, Advance, Aurora, Carbonspeed, Coppermine, Dragon, Eagle, EmerALD, Epsilon, Levitor, Polygon, Pulsar, Rapidfire, SiGePLUS and Silcore are our registered trademarks. A400, A412, A4ALD, ALCVD, Atomic Layer CVD, CarbonPLUS, Eagle TRIDENT, NCP, New Technology, PEALD, Pore Builder, SmartBatch, Stellar and Superfill CVD are our trademarks, and The Process of Innovation is our service mark. AB500B, DRYLUB, EQUIPMANAGER, EQUIPMGR, IDEALine, IDEALsystem, IDEALab, IDEALNet, PGS, SMARTWALK, and SOFTEC are registered trademarks of ASM Pacific Technology Ltd. Cheetah, Eagle60, Harrier, Hummingbird, IDEALCompress, IDEALmold, Osprey, SmartSurf and TwinEagle are trademarks of ASM Pacific Technology Ltd. Safe Harbor Statement In addition to historical information, this Annual Report contains statements relating to our future business and / or results, including, among others, statements regarding future revenue, sales, income, expenditures, sufficiency of cash generated from operations, maintenance of majority interest in ASM Pacific Technology Ltd., business strategy, product development, product acceptance, market penetration, market demand, return on investment in new products, facility completion dates and product shipment dates, and any other non-historical information in this Annual Report. These statements include certain projections and business trends, which are forward-looking within the meaning of the United States Private Securities Litigation Reform Act of You can identify these statements by the use of words like may, could, should, project, believe, anticipate, expect, plan, estimate, forecast, potential, intend, continue and variations of these words or comparable words. Forward-looking statements do not guarantee future performance and involve risks and uncertainties. You should be aware that our actual results may differ materially from those contained in the forwardlooking statements as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, economic conditions and trends in the semiconductor industry and the duration of industry downturns, currency fluctuations, the timing of significant orders, market acceptance of new products, competitive factors, litigation involving intellectual property, shareholder and other issues, commercial and economic disruption due to natural disasters, terrorist activity, armed conflict or political instability, epidemics and other risks indicated in our Annual Report on Form 20-F for the year ended December 31, 2007 and other filings from time to time with the SEC. We assume no obligation nor intend to update or revise any forwardlooking statements to reflect future developments or circumstances. Statutory Annual Report The Consolidated Financial Statements and other financial information included in this Annual Report are prepared in accordance with accounting principles generally accepted in the United States of America ( US GAAP ). A copy of our Statutory Annual Report prepared in accordance with International Financial Reporting Standards ( IFRS ), is available free of charge by writing to our corporate offices or to 2007 ANNUAL REPORT 2 Financial Highlights and Selected Comparative Financial Data In euros and U.S. dollars (1) Year ended December 31,) (millions, except per share data and full-time equivalents) 2003) 2004) 2005) 2006) 2007) 2007) EUR) EUR) EUR) EUR) EUR) US $) Operations: Net sales: 581.9) )754.2) 724.7) 877.5) 955.2) )1,394.9) Front-end 286.5) 355.5) 357.9) 409.4) 450.9) 658.4) Back-end 295.4) 398.7) 366.8) 468.1) 504.3) 736.5) Earnings from operations 14.2) 95.4) 66.9) 129.5) 147.4) 215.2) Net earnings (loss): (32.1) 24.0) (40.2) 34.3) 61.0) 89.0) Net earnings (loss) from continuing operations (29.3) 31.3) 8.9) 54.7) 61.0) 89.0) Net loss from discontinued operations (2) (2.8) (7.3) (49.1) (20.4) -) -) Balance sheet: Net working capital (3) 155.1) 190.9) 236.0) 227.1) 271.9) 397.1) Total assets 662.0) 823.8) 812.3) 832.3) 840.3) 1,227.1) Net debt (4) 52.8) 78.6) 122.4) 34.6) 19.0) 27.8) Backlog: 199.0) 186.8) 221.9) 234.3) 200.4) 292.6) Front-end 104.7) 140.9) 135.4) 155.5) 99.2) 144.9) Back-end 94.3) 45.9) 86.5) 78.8) 101.2) 147.7) Number of staff: Full-time equivalents: 7,433) 8,260) 9,451) 10,868) 11,832) 11,832) Front-end 1,179) 1,492) 1,691) 1,860) 1,843) 1,843) Back-end 6,254) 6,768) 7,760) 9,008) 9,989) 9,989) Per share data: Net earnings (loss) per share: Basic net earnings (loss): (0.65) 0.47) (0.76) 0.64) 1.13) 1.65) Basic net earnings (loss) from continuing operations (0.59) 0.61) 0.17) 1.02) 1.13) 1.65) Basic net loss from discontinued operations (0.06) (0.14) (0.93) (0.38) -) -) Diluted net earnings (loss): (0.65) 0.46) (0.76) 0.64) 1.07) 1.56) Diluted net earnings (loss) from continuing operations (0.59) 0.60) 0.17) 1.02) 1.07) 1.56) Diluted net loss from discontinued operations (0.06) (0.14) (0.93) (0.38) -) -) Weighted average number of shares used in computing per share amounts (in thousands): Basic 49,642) 51,540) 52,638) 53,403) 53,968) 53,968) Diluted 49,642) 51,858) 52,638) 53,575) 65,076) 65,076) (1) For the convenience of the reader, Financial Highlights and Selected Comparative Financial Data for 2007 have been converted into U.S. dollars at the exchange rate of U.S. dollar per euro, which was the noon buying rate in New York City for cable transfers payable in euros at December 31, (2) The restructuring of ASM NuTool in 2005 followed by the sale of substantially all of the ASM NuTool patent portfolio to a third party in December 2006 required ASM NuTool to be accounted for retroactively as discontinued operations under US GAAP in our Consolidated Financial Statements. (3) Net working capital includes accounts receivable, inventories, other current assets, accounts payable, accrued expenses, advance payments from customers and deferred revenue. (4) Net debt includes long-term debt, convertible subordinated debt and notes payable to banks, less cash and cash equivalents ANNUAL REPORT ASM International ASM International N.V. ( ASMI ) is a leading supplier of semiconductor equipment, materials and process solutions addressing both the wafer processing and assembly and packaging markets. Our customers include all of the top semiconductor device manufacturers in the world. Mission and Strategy ASMI's mission is to provide our customers with the most advanced, cost-effective, and reliable products, service and global support network in the semiconductor industry and beyond. We advance the adoption of our new technology platforms by developing new materials and process applications that progressively align ASMI with our customers' long-term technology roadmaps. Our strategic objective is to realize profitable, sustainable growth by capitalizing on our technological innovations, manufacturing infrastructure and sales and support offices close to our global customers. This includes: Expanding returns on front-end operations while maintaining solid profitability for our back-end segment. Executing a vertical manufacturing model in front-end that follows the highly successful model of our back-end segment, by systematically increasing our operating efficiency, reducing manufacturing costs in our supply chain and locating significant parts of our manufacturing capability in more cost efficient countries. Maintaining our global reach through our operating, sales and customer service facilities in key parts of the world in order to establish and maintain long-term customer relationships. Leveraging our combined strong front-end and back-end technology leadership and manufacturing capabilities through advancements in our products and processes early in the technology lifecycle. Expanding the scope and depth of our research and development capabilities through strategic alliances with independent research institutes, universities, customers and suppliers, and expanding our intellectual property portfolio by filing patent applications for key developments in equipment, processes, materials and software, and by licensing programs for our technologies. Wafer Processing ASMI participates in three distinct front-end manufacturing processes: wafer manufacturing, transistor formation, and interconnect. By building upon our core strengths in Vertical Furnaces, Epitaxy, and PECVD technologies, as well as our newer platforms in atomic layer deposition and RTP, today we address all of the critical areas driving the semiconductor industry roadmap: silicon-on-insulator (SOI) and strained silicon, high-k gate stacks, shallow junctions and silicides, low-k and interconnect, leading the industry transition to smaller line-widths and better transistors. Assembly and Packaging ASM Pacific Technology Ltd. ( ASMPT ), our 53-percent owned back-end subsidiary, is the world's largest assembly and packaging equipment supplier for the semiconductor industry and is a leading supplier of stamped and etched leadframes. With headquarters in Hong Kong, and operations in the People's Republic of China, Singapore and Malaysia, ASMPT offers the most comprehensive leading edge portfolio for all of the major process steps in back-end, from die attach through encapsulation. In addition to the semiconductor industry, ASMPT's geographic and technologically diversified customer base encompasses the photonic and optoelectronics industries. Global Operations With corporate headquarters in Bilthoven, the Netherlands, ASMI operates manufacturing facilities in the Netherlands, the United States, Japan, Hong Kong, the People's Republic of China, Singapore, Malaysia, with design, research and development centers in Europe, North America, and Asia, and our sales and service operations spanning 18 countries across the globe. Our workforce totals more than 11,000 worldwide. ASMI trades on the NASDAQ stock market under the symbol ASMI, and on Euronext Amsterdam under the symbol ASM. ASMPT trades on the Hong Kong Stock Exchanges under the code ANNUAL REPORT 4 ASMI ACHIEVEMENTS 2007 Our front-end wafer processing operations met our target of net profitability for the year, excluding the expense resulting from early extinguishment of convertible debt. Our back-end business hit record revenues and earnings as measured in the local currency, and expanded its leadership position in assembly and packaging industry segment. We expanded and diversified our customer base. In front-end we increased our penetration of the memory market in Taiwan and Korea. In back-end we further solidified its market share with semiconductor customers while continuing to broaden the field of product applications beyond its traditional market. Both front-end and back-end introduced new products and processes based on proven core concepts that provide innovative solutions as the industry moves to smaller more powerful device architectures. In front-end, the Eagle XP became a standard very high productivity platform that is extendable for use within multiple front-end business units. In back-end, new die and wire bonder models including a chip-on-glass die bonder for LCD application extend our technology leadership in the assembly market. We moved forward with our program for vertically-integrated manufacturing in our front-end operations, following the immensely successful business model of back-end. The transfer of generic parts and subsystems production remained on target with both our vertical furnace and epitaxial lines firmly established at our FEMS (Front End Manufacturing Singapore) operation. We lead the industry in the adoption of atomic layer deposition, a breakthrough technology for device dimensions of 45nm and below technology nodes. ASMI entered into high volume production of its systems for the production of hafnium-based high-k dielectrics with ALD for 45nm and below. We enlarged our intellectual property (IP) licensing program, leveraging our advanced technologies beyond our addressable markets, through an agreement with Hitachi Kokusai Electric Inc. for specific usage of our atomic layer deposition patents. Back-end s strong results reflect the exceptionally smooth transition by the new back-end Management team in its first full year at the helm. We announced the front-end Management succession that will assume leadership in In both sectors, Management is committed to preserving the Company s core values. We exercised our option to increase shareholder value by using dividends from back-end to buy back convertible debt, repurchase common shares, and pay a cash dividend. In the process, we strengthened the Company s balance sheet ANNUAL REPORT ASM International (continued) 2007: THE YEAR OF THE TRANSISTOR For its 60th birthday, the TRANSISTOR - that remarkable tiny device, the basic building block of digital electronics - was given a monumental make-over. The ability to shrink the transistor has reached an impasse using traditional silicon materials. The powerful changes implemented last year in the transistor's basic design will now allow the minute switches to drive an even smaller, faster and more powerful future generations of chips. In every product that houses electronics -- from toasters, cell phones and cameras to computers and automobiles -- transistors play an important role in every segment of the global economy and virtually all aspects of our day-to-day lives. It s hard to image life without them. So what has happened to this mighty 1947 invention that replaced vacuum tubes in a myriad of electronic applications. Over the decades, the push toward miniaturized components with increased capabilities was achieved by scaling down the size of the transistors and other device elements that form integrated circuits. But at today s cutting edge sizes, there is excessive power loss through the conventional silicon insulators that are too leaky, and in conductors that are too resistive. In short, conventional insulators and conductors have become too thin to work properly. ASMI offers an industry solution that meets this challenge with atomic layer deposition and a hafnium-based high-k dielectric material. These solutions not only solve present challenges -- they are a key, for at least the next three generations, to the continuation of Moore's Law that postulates the number of transistors per chip doubles approximately every two years. In order to increase the speed of a device today, that is, reduce the distance an electronic signal travels, the industry must manufacture integrated circuits composed of billions of transistors with gates, or switches, measuring only 45 nanometers or less in length that are controlled through a field in a gate insulator that is only a few atoms thick. Using ASMI s Pulsar reactor for ALCVD, we are able to deposit a hafnium oxide insulator and a capping layer of very thin lanthanum oxide. In 2007, ASMI s success with its partners in taking these technologies into mass production not only confirmed the feasibility of this breakthrough, it also changed the dynamics of the transistor roadmap. And, according to Moore, the implementation of high-k and metal materials marks the biggest change in transistor technology since the introduction of polysilicon gate MOS transistors in the late 1960s. What does this mean for the consumer? For one thing, it means more data can be downloaded, stored and processed on mobile devices at faster speeds, yet at reduced power consumption that translates into longer battery life. It means also that wireless connectivity can explore areas well beyond traditional communications. All of this from the tiny transistor that keeps surprising us -- and enriching our lives ANNUAL REPORT 6 Financial Highlights and Selected Comparative Financial Data ANNUAL REPORT Letter to Shareholders In 2007, ASMI delivered on our strategic objectives for the year and for the longer-term. Beyond our primary focus to restore net profitability to front-end wafer processing operations, we also continued a disciplined execution of our long-term strategies and commitments to all stakeholders. Front-end remained profitable throughout the year, despite the industry retrenchment as semiconductor manufacturers absorbed recent equipment purchases while very cautiously committing to additional capacity. Our industry-leading back-end operations once again posted record revenues and earnings, driven by broad-based demand for its assembly and packaging solutions from diverse customers in multiple market segments. At the corporate level, we initiated our first cash dividend to ASMI shareholders as part of our flexible program to employ the dividends received from back-end to increase shareholder value. Of course, none of these recent accomplishments would have been possible without a steadfast commitment and investment in ASMI s long-term vision: to build a unique technologically-innovative, global enterprise that serves both the wafer processing and assembly and packaging segments of the semiconductor industry. The advantages of ASMI s comprehensive corporate strategy are clearly visible in the progress demonstrated in Operating Results Over the past few years, we have improved significantly the financial profile of our front-end operations. We have turned the front-end bottom line, from a loss from continuing operations of H 41.9 million for 2005, to net earnings of H 7.7 million for 2007 (excluding the expense resulting from early extinguishment of convertible debt). We achieved this by: 1) streamlining our product line and consolidating system platforms, 2) bringing new product lines to maturity, 3) extending our intellectual property licensing program, 4) intensifying our sales efforts in prime Asian markets, and 5) transferring generic parts and subsystem manufacturing from outsourcing to in-house production in Asia. We further strengthened our balance sheet in 2007 with the buy-back of over $ 35 million in convertible securities. We are proud of the record performance of our back-end operations, which once again outperformed its competitors in the global assembly and packaging market. The foundation of ASMPT's success is its unique business model: a verticallyintegrated manufacturing base established in low-cost manufacturing centers in China and Southeast Asia, which produce multiple product lines that serve diverse applications markets. From this solid base, we have built a thriving leading-edge company over the years that is resilient to industry cycles - evident in the company s outstanding financials and consistent annual returns to shareholders. The Process of Innovation Smaller, faster, cheaper has been the refrain of the electronics industry since the first microprocessors and personal computers were commercially introduced some four decades ago. Today in nearly every consumer market - from communications, entertainment, and transportation, to education and healthcare - there is a growing demand for electronic devices that combine high functionality and performance. The semiconductor industry is meeting these challenges with innovative technologies that are changing the face of the transistor as well as device interconnects and packaging. If you have followed ASMI over the years, you will know that our company has a long history of innovation and of contributing leading-edge solutions to meet these challenges through the successive tech
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