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ASML sees sales at 10 billion euros in 2020 if Moore's Law slows

By Thomas Escritt and Eric Auchard

AMSTERDAM/FRANKFURT (Reuters) - ASML, the world's second largest maker of semiconductor production equipment, said on Monday it could nearly double annual sales to 10 billion euros (7.92 billion pounds) by 2018 -- or up to two years later if customers put off buying its latest machines.

ASML is working to introduce a new generation of 'extreme ultraviolet' (EUV) tools which can multiply the number of transistors the world's top chipmakers such as Intel, Samsung and TSMC can fit onto silicon.

But the Dutch company's uncertain outlook reflects the chance of a slowdown for Moore's Law -- the 50-year-old trend whereby computer chips have doubled in capacity every two years -- if chipmakers extend their machine investment cycle to three years.

ASML kicked off an investor day briefing in London on Monday by saying it expects annual sales to reach 10 billion euros by 2020, two years later than analysts had expected.

But Chief Executive Peter Wennink later said the 2020 sales target was a "conservative assumption" and customers might yet switch out their older generation equipment sooner.

If the two-year upgrade cycles that have been the engine of technology advancements for decades were to continue the company could hit the 10-billion mark sooner and sales by 2020 would then be around 12.4 billion euros, Wennink said.

"It could be 2018, it could be 2019, depending on how things are going," Wennink told investors in reference to the 10 billion-euro target.

ASML's shares closed down 2.5 percent at 83.11 euros. The stock is up 22 percent so far this year, compared with a 3.4 percent rise in the STOXX Europe 600 technology sector index, valuing the company at 36.4 billion euros.

"We believe the market was looking for ASML to reach the disclosed financial targets by 2018," ING analyst Robin van den Broek said in a research note to clients.

Investors were also told by the company that earnings per share should triple by 2020 from last year's 2.36 euros. Sales in 2013 rose 10.8 percent to 5.25 billion euros.

Seeking to demonstrate the progress it is making, ASML said it had now made its first sales of EUV tools to TMSL, the world's top contract chipmaker, with delivery due in 2015.

However, ASML said last month it expected to sell up to nine EUV systems in 2015, instead of the 12 to 15 systems it had previously predicted.

While makers of logic chips used in cloud computers and PCs are powering ahead on the two-year schedule, suppliers of memory and imaging chips used in mobile phones see fewer reasons to upgrade their existing lithography tools.

Nevertheless company officials said the production capability of EUV tools has reached a new milestone of 500 silicon wafers a day and is on track to reach 1,500 in 2016, a level ASML said will make EUV ready for mainstream adoption.

ASML has said the unit cost for EUV systems are about 90 million euros, three times the average selling price of its current production equipment.

Further delays to when the company's EUV products reach mainstream availability threaten to create bottlenecks for the industry in its race to increase capacity, cut costs, and invent an ever expanding number of uses for electronic circuitry.

But the company said it still believes Moore's Law, the prediction made by Intel founder Gordon Moore in 1965 that chips would double in computing capacity and halve in price every two years, looks set to hold for another decade.

(Additional reporting by Harro ten Wolde in Frankfurt; Editing by Greg Mahlich)