Driving the search for global talent

It may be a cliché that people are a company’s greatest asset, but it is also very true – and the shortage of talent is a factor that is impacting every industry on the planet, including ours. To meet the chip industry’s ambitions, globally and within the European ecosystem, we need to significantly increase the inflow of engineering talent in the coming decade.

The governments of South Korea, the US, Taiwan and Japan are all investing heavily in chip-related education and vocational training. We need to see the Dutch and other European governments doing the same. At ASML, we’re playing our part. Education is a key pillar of our community engagement activities, and during 2022 we again supported programs to boost interest in technology among young people and increase local talent pools in [all the main] geographies where we operate.

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In 2022 we welcomed 7,130 new people into ASML, so our efforts to attract talented individuals are paying dividends, supported by the fact that we’re able to offer them the opportunity to work at the cutting edge of technology. Today, we have more than 140 nationalities at ASML – but we know that young people move often and may not stick around for 20 years or so as previous generations did. So our challenge is to make sure that ASML is an attractive long-term option where people can contribute and enjoy the benefits of doing so and develop themselves. That is where our 'can do' culture is so important. We have a workplace environment here where people can drive innovation forward, inspire each other and help make sure that digital technology fulfills its potential.

Looking ahead to 2023 and beyond

At the 2023 AGM, Gerard Kleisterlee, the Chairman of our Supervisory Board, will step down after having served on the Supervisory Board since 2015. I would like to ~~thank them~~express our gratitude to Gerard for his valuable contributions as Chairman of the Supervisory Board and the Selection and Nomination Committee, and member of the Technology Committee. He has brought profound experience to the Supervisory Board during his eight years of service and has been a great source of guidance and advice for ASML. We wish Gerard all the best for the future.

When looking at our business environment, in the short term it is clouded by uncertainty due to a number of macroeconomic concerns including energy shortages, inflation, reduced consumer confidence and recession. On a geopolitical level, the bifurcation of socio-economic blocks – with the associated export and import controls – is threatening the development of the global village that contributed so much to a lot of the innovation we have seen in recent years. If countries or trade blocks withdraw into their ~~commitment~~own territories, then innovation will be less effective and ~~support. As~~more expensive.

Several news organizations reported end of January 2023 that the US, the Netherlands and Japan agreed to further restrict the export of semiconductor manufacturing equipment to China. We understand that steps have been taken that would cover advanced lithography tools as well as other types of equipment. The terms of this agreement have not been publicly disclosed and remain confidential for now. We expect that it will take many months for the governments to write and enact new rules. Combined with the current market situation, we do not expect these measures to have a material effect on our expectations for 2023.

Looking at the immediate future, we will have to deal with the shocks in the system, and I ~~have said many times before,~~am confident that we will do so, supported by growing demand for semiconductors and semiconductor equipment. Over the next 12 months, I anticipate that we will yet again break records.

Beyond 2023, I am very positive about our industry in general and about ASML in particular. Some industry analysts believe that our semiconductor industry will grow to be worth a trillion dollars by 2030 – and we do not disagree. Our own expectation is that our combined systems and installed base revenue could provide an annual revenue growth rate of around 14%1 for the period 2020-2030.

Teamwork, both within ASML and externally with our partners and suppliers, will be a crucial component if we are ~~looking~~to achieve that ambition. By challenging, collaborating and caring, we will play a leading role in meeting customer demands, delivering the right technology at ~~a bright future, but we cannot do this alone.~~the right time to enable the semiconductor industry to thrive while taking to heart the interests of the communities around us.

Peter Wennink

President, Chief Executive Officer and Chair of the Board of Management

~~ASML ANNUAL REPORT 2021 7~~




By challenging, collaborating and caring, we will play a leading role in meeting customer demands, delivering the right technology at the right time.”
Peter Wennink
President, Chief Executive Officer and Chair of the Board of Management

1.Using the midpoint of the 2030 revenue scenarios ASML models over the period 2020-2030, we expect a potential compound annual growth rate of around 14% from our base 2020 revenue, around €14.0 billion. This is a combination of growth in our systems sales as well as our installed base management revenue.

~~ASML ANNUAL REPORT 2021~~

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SMALL PATTERNS. BIG IMPACT.

STRATEGIC REPORT

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~~Our purpose~~

For all the ways we have moved forward as a society, the world still faces crucial challenges for the future. We must change how we think and act on themes that impact everyone, such as energy use, climate change, mobility and access to healthcare and nutrition.

At ASML, we believe that the microchip industry is in a unique position to help tackle these challenges. From artificial intelligence (AI) to a vast internet of things (IoT), microchips are at the heart of modern technology. So whether it’s transitioning to sustainable energy, improving global health, increasing the safety and efficiency of transport, tackling pollution, bridging the digital divide, or feeding eight billion people without exhausting the earth’s resources, our vision is that we will enable the groundbreaking technology that will help solve some of humanity’s toughest challenges.

As the innovation leader that makes vital systems for chip manufacturing, we are proud to play our role as technology enabler in the innovation ecosystem of the semiconductor industry. We can only do this if we continue to challenge the status quo, tap into the collective knowledge of our global ecosystem and create an environment where people can contribute, learn and grow. At ASML, we believe our purpose is to unlock the potential of people and society by pushing technology to new limits.

The long-term growth of the semiconductor industry is based on the principle that the energy, cost and time required for electronic computations can be reduced by shrinking transistors on microchips. One of the main drivers of shrink is the resolution that lithography systems can achieve, which is mainly determined by the wavelength of the light used and the numerical aperture of the optics. A shorter wavelength – like a finer brush used for painting – can print smaller features. A larger numerical aperture can focus the light more tightly, which also leads to better resolution. To enable shrink, what we do – lithography – is key.

We are a focused supplier of holistic lithography solutions to all of the world’s major chipmakers. Our mission, together with our partners, is to provide leading patterning solutions that drive the advancement of microchips. Through our sustained investment in and dedication to research and development, we seek to innovate at least at the same pace as our customers. We put our innovations in the hands of chipmakers as quickly as possible by engineering in parallel, not sequentially, while ensuring their quality, reliability, manufacturability, and serviceability.

~~Our core values~~

~~To help solve humanity’s toughest challenges while at the same time addressing our own, we must continue to amplify ASML's core values that created our success – challenge, collaborate and care.~~

~~We challenge~~

We challenge boundaries, question the status quo and stand up for the ideas we believe in. We’re comfortable with discussion and debate, because it is often inherent to stress-testing and championing an idea. This is what enables us to push technology forward,

~~ASML ANNUAL REPORT 2021 10~~

keep things simple and do things with care and attention. We continue to challenge ourselves to add value for our customers, ensuring that we continually improve across key aspects, such as safety, quality, efficiency and cost.

~~We collaborate~~

As a system architect and system integrator, we collaborate to tap into our collective potential. Together with our partners in our ecosystem, we expand our knowledge and skills, learn from each other, and share approaches to deliver the best results. What we do is unique, and we need each other to make it possible. As we continue to grow and our ecosystem of partners expands, this collaborative mindset becomes even more essential to success.

~~We care~~

As we push technology further together, we have to do so with care. As an industry leader, we realize that our impact extends from people, to society, to the planet. We care not only for those we work with, but for our customers, suppliers, the world we live in, and the communities where we do business. We believe in integrity and respect for people and their human rights. We take personal responsibility to create a safe, inclusive and trusting environment where people from all backgrounds are encouraged and enabled to speak up, contribute, learn, make mistakes, and grow. We also seek to be clear in how we organize ourselves to achieve our goals, making sure we have a clear framework for what we do and how we do it.

We believe that these values will help our company and our employees to make smart decisions that will benefit all stakeholders. Our purpose and values, together with the great responsibility we have as an industry leader, make us optimistic for the future.

~~Where we come from~~

Our company was founded in 1984 in Eindhoven under the name of ASM Lithography, a joint venture between Philips and ASM International. As they moved into their new space near the Philips factories at Strijp-T in Eindhoven, our first employees could never have imagined that in just three decades, ASML would be a global innovation leader.

We’ve grown from our humble beginnings to a global force through relentless focus on innovation, sheer customer focus through tough times, and a willingness to rely on others to come to a better result.

Although we’re constantly looking to the future, where we have come from is just as important to us as we evolve. These pioneering behaviors have been key to our success over the past 37 years, and they’ve become even more important to us as we continue to define our purpose and articulate the values that underpin everything we do. Understanding what made us successful in the past will help us maintain our success in the future.

~~What guides us~~

Innovation is rarely a straight line. We've always known that it takes laser focus, multidisciplinary teamwork and a keen eye for how we can best help our customers. And even then, we've had to show grit. It took a decade of tenacity to get our technology off the ground. We've all cared for this company unconditionally and are proudly committed to its success. We believed then as we do now that even the biggest challenge can be overcome through perseverance, if necessary with thousands of people over many years.

Wealso learned to rely on others to come to a better result – without losing focus. That meant expanding our own knowledge and skills by building an ecosystem of expert suppliers, strategic partners, academia and service providers. We also acquired leading companies with unique technologies that strengthened our ability to deliver better solutions to our customers. We started to see ourselves as architects and integrators, inspiring our partners to innovate on the cutting edge of engineering while sharing risk and reward. And like us, some of our earliest customers are now leaders in the chip industry.

Weare geared towards providing long-term value to our customers and other stakeholders. Our direct value chain consists of our R&D partners, supply chain and customers, as well as our own manufacturing and service activities. Together we enable product and service manufacturers, so-called Original Equipment Manufacturers (OEMs), and Original Design Manufacturers (ODMs) to create end-use devices and services for the consumer market.

~~ASML ANNUAL REPORT 2021 11~~

~~Our position in the semiconductor industry~~

~~The role of lithography~~

Lithography is a driving force in the creation of more powerful, faster and cheaper chips. Today’s most advanced processors, based on the Logic N5 node, contain billions of transistors. Shrinking transistors further is becoming increasingly difficult, but we aren’t as close to the fundamental limits of physics as some would think. Next-generation chip designs will include more advanced materials, new packaging technologies, and more complex 3D designs, which will create the electronics of the future.

The manufacturing of chips becomes increasingly complex as semiconductor feature sizes shrink, while the imperative to mass produce at the right cost remains. Our holistic lithography product portfolio helps to optimize production and enable affordable shrink by integrating lithography systems with computational modeling, as well as metrology and inspection solutions. Our computational models enable our customers to optimize their mask design and tape-out time (the time to send the final design to the manufacturer for production). This works through mask-correction software to prepare and modify the design for optimized exposures, while the metrology and inspection solutions help in analyzing and controlling the manufacturing process in real time.

A lithography system is essentially a projection system. Light is projected through a blueprint of the pattern that will be printed (known as a ‘mask’ or ‘reticle’). With the pattern encoded in the light, the system’s optics shrink and focus the pattern onto a photosensitive silicon wafer. After the pattern is printed, the system moves the wafer slightly and makes another copy on the wafer.

This process is repeated until the wafer is covered in patterns, completing one layer of the wafer’s chips. To make an entire microchip, this process is repeated layer after layer, stacking the patterns to create an integrated circuit (IC). The simplest chips have around 40 layers, while the most complex can have over 150 layers. The size of the features to be printed varies depending on the layer, which means that different types of lithography systems are used for different layers – our latest-generation EUV systems for the most critical layers with the smallest features, and ArFi, ArF, KrF and i-line systems for less critical layers with larger features.

~~Taking a closer look inside a fab~~

A semiconductor fabrication plant, commonly known as a ‘fab’, is a factory where microchips are manufactured. The making of a microchip involves a multiple-step sequence including lithography to create a pattern in the photoresist and chemical processing steps such as deposition, photoresist coating, ion implantation and etching, during which electronic circuits are gradually created on a silicon wafer.

Microchips are made of layers about 50 to 150 nm thick that are built on the semiconductor substrate one layer at a time. Some microchips can have up to 150 or more layers of varying complexity. Typically, the most complex layers are at the bottom and the least complex at the top. The most advanced chips require EUV and DUV immersion lithography tools to make them. Simpler microchips, such as sensors for IoT applications, can be produced using DUV dry machines.

After adding material for a new layer during deposition, the desired pattern is exposed onto it, which after development leaves lines and geometric shapes positioned precisely in the desired locations. Then the layer is etched, making these designs permanent on the wafer. The entire manufacturing process of microchips – from start to tested and packaged device, ready for shipment – can take between 18 and 26 weeks, depending on their complexity.

The heart of a fab is the cleanroom. All fabrication steps take place here, so the environment is controlled to eliminate dust on a nanoscale. Under the cleanroom floor is the so-called sub fab, which contains auxiliary equipment such as the drive laser. The utility fab – where the pumping and abatement systems for vacuum and cooling are located – is usually found one floor below this.

~~ASML ANNUAL REPORT 2021 12~~

~~Semiconductor manufacturing process~~

~~The Rayleigh criterion that drives Moore’s Law~~

Moore’s Law, a prediction made over half a century ago, sets the pace for our industry. Gordon Moore predicted that computing would dramatically increase in power, and decrease in relative cost, at an exponential pace. In other words, the number of transistors (tiny electrical switches) on an integrated circuit will double every two to three years at the same cost. This opens up two options to make microchips faster and more powerful: by using the same number of transistors on a chip at half the cost, or by doubling the number of transistors at the same cost. Even today, the power of this prediction is the fundamental principle of the semiconductor industry and the driving force for innovations that benefit our daily lives.

~~ASML ANNUAL REPORT 2021 13~~

At ASML, our job is to help the industry continue Moore’s Law. Our goal has always been to reduce the critical dimension (CD) – the smallest structure that a lithography system can print. This is defined by the Rayleigh criterion, the equation on which all our innovations are based:




						TACKLING POLLUTION
						Nano innovations, macro challenges
						Our lithography solutions not only help to reduce chip size – they also increase performance and energy efficiency. That’s opened the door to nano-innovations such as the ‘winged microchip’ – inspired by the way seeds disperse through the air, these ultra-miniaturized electronic devices can ride the wind to track air pollution, airborne disease and environmental contamination.
						Read more online

~~CD = k~~ASML1 x ANNUAL REPORT 2022

λOUR COMPANY

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NAAt a glance

As a global innovation leader in the chip industry, we provide chipmakers with hardware, software and services to mass produce patterns on silicon through lithography.

Berliner Glas (ASML Berlin GmbH), which we acquired in 2020, is reflected as part of our business throughout this report, with the exception of non-financial reporting.

•~~CD is the critical dimension, a measure of how small the smallest structures are that the lithography system can print.~~

•λ(lambda) is the wavelength of the light source used and the smaller the wavelength the smaller the structures that can be printed. Our deep ultraviolet (DUV) lithography systems, known as the industry workhorse, dive deep into the UV light spectrum to print the tiny features that form the basis of the microchip. Over the years, ASML made several wavelength steps and our DUV lithography systems range from 365 nm (i-line), 248 nm (KrF) to 193 nm (ArF). With the extreme ultraviolet (EUV) systems, we provide highest-resolution lithography in high-volume manufacturing as these systems make a major step in wavelength. With EUV tin plasma, we generate EUV light which has a wavelength of just 13.5 nm.

•NA is the numerical aperture, indicating the entrance angle of the light – with larger NA lenses/mirrors, smaller structures can be printed. Besides larger lenses, ASML increased the NA of our ArF systems by maintaining a thin film of water between the last lens element and the wafer, using the breaking index of the water to increase the NA (so-called immersion systems). After the wavelength step to EUV, ASML is developing the next-generation EUV systems, called EUV 0.55 NA (High-NA) where we push the numerical aperture from 0.33 to 0.55.

•k1 is a factor relating to optical and process optimizations. Together with our computational lithography and patterning control software solutions, we provide the control loops for our customers to optimize their mask designs and illumination conditions.

ASML's goal has always been to reduce the critical dimension. By reducing the wavelength and increasing the numerical aperture, our systems can print IC structures in increasingly smaller feature sizes. If our customers can print smaller structures, the chips can be smaller and the costs per transistor become cheaper, which in turn makes it more profitable for our customers.

Extending Moore’s Law is becoming increasingly complex and costly. What will always be needed is a way to mass produce IC designs at the right cost. That’s where the full scope of ASML’s product portfolio will continue to play a big role to ensure affordable transistor shrink. We continue to push our entire system portfolio to new productivity levels and imaging performance. We believe that our EUV 0.33 and 0.55 NA lithography will help enable tomorrow’s most advanced chips. In our computational lithography solutions, we’re bringing machine learning and big data to the forefront in predicting both lithography and metrology processes, striving for 100% accuracy. We have developed an entirely new class of e-beam inspection systems to help our customers control defectivity in manufacturing in next-generation chip nodes, as those smaller structures can hardly be detected with optical inspection.

Key facts

€21.2bn

€3.3bn

Total net sales

R&D investments

€18.6bn Asia

€2.0bn US

€0.6bn EMEA

We innovate across our entire
product portfolio through strong investment in R&D

Read more on page 97 >

Key products and services

Lithography systems

Extreme ultraviolet (EUV). We are the world’s only manufacturer of EUV equipment, the most advanced system with the capability of printing smaller features with higher density.

Deep ultraviolet (DUV). As the workhorse of the semiconductor industry, DUV produces the majority of layers in a customer device today, and will remain important for future devices.

Metrology and
inspection systems

Computational
lithography

Using optical and e-beam technology, these systems enable chipmakers to assess their performance across the chip manufacturing process, helping to improve accuracy, performance and quality control.

This process is used in the development of new chips to optimize reticle designs and enable more precise monitoring and control.

Software

Lithography process and control software solutions.

Refurbishment

Customer support

We measure a machine’s life in decades, not years. We refurbish and upgrade our older lithography systems to extend their lives, and we offer associated services.

We support our customers with a broad range of applications, services, technical support products and upgrades to ensure our equipment works reliably in their production process.

Our global presence

Asia

China

Hong Kong

Japan

South Korea

Malaysia

Singapore

Taiwan

North America

Arizona

Oregon

California

Texas

Colorado

Utah

Connecticut

Virginia

Idaho

Massachusetts

New Mexico

New York

EMEA

Belgium

France

Germany

Ireland

Israel

Italy

Netherlands

United Kingdom

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What makes us ASML

~~ASML ANNUAL REPORT 2021 14~~


			Our purpose

			Why we exist
			Unlocking the potential of people and society by pushing technology to new limits
			Society has made huge advances over the years, but the world still faces crucial challenges for the future. We must change how we think and act on themes that impact everyone. That’s why we seek to innovate at least at the same pace as our customers, focusing our intellect and resources to constantly look for new ways that will help improve society in areas such as energy use, climate change, mobility, healthcare, education and nutrition.


			Our vision

			What we try to achieve
			We enable ground-breaking technology to solve some of humanity’s toughest challenges
			At ASML, we believe that the microchip industry is in a unique position to help tackle these challenges. From artificial intelligence (AI) to a vast internet of things (IoT), microchips are at the heart of modern technology that’s enabling the transition to sustainable energy, improving global health, increasing the safety and efficiency of transport, tackling pollution, bridging the digital divide or feeding close to eight billion people without exhausting the earth’s resources.


			Our mission

			What we uniquely do
			Together with our partners, we provide leading patterning solutions that drive the advancement of microchips
			The long-term growth of the semiconductor industry is based on the principle that the energy, cost and time required for electronic computations can be reduced by shrinking transistors on microchips. To enable shrink, what we do – lithography – is key. Through our sustained investment in and dedication to research and development, we have become the innovation leader and a focused supplier of holistic lithography solutions to all of the world’s major chipmakers.

~~Message from the CTO~~

~~Martin van den Brink (President, Chief Technology Officer and Vice Chair of the Board of Management)~~

~~Dear Stakeholder,~~

~~I’ve been asked the question many times, but let me assure you: Moore’s Law is still alive and well. And we believe it will stay with us for quite some time.~~

Over the past 40 years, we have gradually evolved from the era of PCs and mobile devices into the cloud era, where almost every aspect of our lives is now stored and managed online. The next step of our digital future will be about distributed intelligence, driven by the seamless integration of communication, computation and artificial intelligence (AI). All these trends require more computing power, which in turn is accelerating the demand for more powerful and energy-efficient microchips.

With our customers, we share a commitment to increase the energy efficiency performance of microchips. Together, we have a vision of the next 20 years to improve energy efficiency three-fold every two years, through system scaling including ongoing improvements in the resolution of our lithography systems, and through microchip device, material and transistor innovations. Moore’s Law has evolved and it is not only about printing the smallest lines.

~~System scaling is driving innovation~~

Over the last 15 years, the main driver of innovation in the semiconductor industry has expanded from pure lithography-enabled shrink (dimensional scaling) to microchip system scaling. This is achieved through new transistor structures and associated materials (device-level scaling), optimized circuit designs (circuit scaling) and innovative microchip architectures – such as 3D structures (architectural scaling) – as well as shrinking the microchip device footprint.

~~Advancing holistic lithography~~

ASML remains focused on enabling system scaling through shrink. We are integrating our complete product portfolio into a holistic lithography solution to optimize and control the lithography process. We do this through optimizing litho parameters, overlay, critical dimension (CD) and optical proximity correction (OPC), and by reducing the edge placement error (EPE) as well as improving our defect inspection capabilities.

We are uniquely able to help our customers find, measure, and correct for patterning variations. Our main focus is on improving EPE (the difference between the intended and the printed feature edge of a microchip layout), which is one of the keys to improving yield. This is because the lithography systems at our customers not only measure every single wafer that goes through the fab, but they also expose every single field on every single wafer and die individually. This allows our customers to set the actuation values of all of the control knobs that they have on our lithography systems in an optimal way.

How do we achieve that? We use scanner metrology, optical metrology, e-beam metrology and inspection to bring data from every relevant step in the process flow together. By analyzing all data in a single framework, our applications can then provide a feedback loop to the lithography system to make the required corrections, thereby delivering real value for our customers.

~~DUV innovation continues~~

Our deep ultraviolet (DUV) products are the industry backbone, supporting all semiconductor market segments. We keep innovating on all wavelengths. Our immersion and dry systems lead the industry in productivity, imaging and overlay performance for the high-volume manufacturing of the most advanced Logic and Memory chips.

We continue to systematically develop our product portfolio to optimize the installed base for our customers, while increasing our focus on productivity and performance upgrades and additional services to support our customers’ wafer demand.

~~ASML ANNUAL REPORT 2021 15~~

~~Cost-efficient scaling with EUV~~

~~Our extreme ultraviolet (EUV) product roadmap will help us drive affordable scaling well into the next decade. Our EUV 0.33 NA platform extends our customers’ Logic and DRAM roadmaps.~~

Chip manufacturing with EUV helps reduce the amount of critical lithography masks (-40%) and process steps (-30%) when compared to non-EUV manufacturing. This results in significant defect, cost and cycle time reductions for our customers. We expect that adoption of EUV will continue to grow, with all advanced node chipmakers expected to use EUV in production by 2024.

With our next-generation EUV 0.55 NA platform, we will continue to enable cost-efficient scaling for future nodes. The novel optics design with a higher numerical aperture will enable 60% smaller features and increase microchip density by a factor of almost 3 times. Our first early-access system is expected to be available in 2023 and we expect our customers will start their R&D in the 2024-2025 timeframe. High-volume manufacturing is projected to start in 2025-2026.

~~Customers first~~

In everything we do, a trusted relationship with our customers is key. Our comprehensive product portfolio is therefore aligned with our customers' roadmaps to deliver cost-effective solutions in support of all their applications, from advanced to mature nodes. We are aware that commonality across our DUV and EUV platforms allows faster and more cost-effective innovation, production and maintenance. That is why we increasingly focus on using common technology across our portfolio.

We are investing in the energy efficiency of our products to help reduce the energy needed to produce a wafer. In addition, we have a strong roadmap to reduce waste. We are committed to re-using parts, tools and packaging whenever possible in our value chain. We are working together with our customers and suppliers to remanufacture used system parts, re-using them as new parts to prevent unnecessary waste.

I strongly believe that we have a solid roadmap for the coming 10 years that will drive the continuation of Moore’s Law. Enabled by shrink, ongoing system scaling on all levels – on device, circuit, dimensional and architectural level – will require substantial innovation across our whole portfolio. This will be key to increasing the circuit density and energy efficiency of microchips while lowering their cost for many years to come.

~~Martin van den Brink~~

~~Chief Technology Officer~~

~~ASML ANNUAL REPORT 2021 16~~

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What makes us ASML (continued)

~~How we innovate~~

Our core values

To help solve humanity’s toughest challenges while at the same time addressing our own, we must continue to amplify ASML’s core values that created our success – challenge, collaborate and care. We believe that these values help to provide opportunities for our employees in a safe, inclusive environment to develop their talent, feel respected and thrive, which enables them to make smart decisions that benefit all stakeholders.

We challenge

We collaborate

We care

Say it can’t be done, we dare you. We bravely challenge boundaries and question the status quo. We continuously refine our ideas and processes, which enables us to keep pushing technology forward.

We collaborate to tap into our collective potential. Together with our partners in our ecosystem, we expand our knowledge and skills, learn from each other and share approaches to deliver the best results. This way, we create solutions that are optimized for ASML as a whole.

As an industry leader, we act with integrity and respect, realizing that our impact extends beyond technology to people, society and the planet. We take personal responsibility to create a safe, inclusive and trusting environment where people from all backgrounds are encouraged and enabled to speak up, contribute, make mistakes, learn and grow.

We bravely challenge boundaries,

we expand our knowledge and skills,

to people, society and the planet.

Watch 'Our values' video

~~A tiny microchip,~~

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How we innovate

Our innovation philosophy is one where we see ourselves as architects
and integrators, working with partners in an innovation ecosystem.

Tiny microchips, driving a global ecosystem

~~At almost every~~Every moment of every day, ~~all of us~~people make use of technology that contains ~~microchips:~~microchips. These are small but mighty ~~devices. A microchip is a unique product –~~devices, and fabricating the layers on even the simplest chip requires an elaborate process that few companies in the world have mastered.

~~During this process, which~~ This can take months from start to finished product, as the silicon wafer travels through dozens of different machines in a chipmaker’s fab (semiconductor fabrication plant), before it finds its way into electronic products.

This multifaceted production process has led, over decades, to the semiconductor industry becoming a global ecosystem. This ecosystem includes ~~companies~~ specialized in chip design companies, equipment and infrastructure suppliers and the chipmakers themselves.

A strong collaborative network at the cutting edge of our digital future

As a crucial manufacturer of lithography equipment, ASML is a vital part of this ecosystem chain. ~~A critical step in the chip manufacturing process is the~~The fabrication of the circuitry patterns on silicon wafers, made possible by our lithography systems, ~~which~~ can be found in the factories of every major chipmaker in the world.

But our systems are just one part of ~~the~~a network and process involving numerous suppliers and ~~chip-making~~the latest chipmaking equipment. Every step and every machine in the process is important. That’s why collaboration and innovation are key. ~~From~~At ASML, we collaborate to succeed – from the academics who help us understand and ~~bend~~push the laws of physics, to our customers who identify new possibilities and the suppliers that translate our ideas into products and ~~technology – we collaborate to succeed. This huge collaborative network that we call the semiconductor industry is at the cutting edge of our digital future.~~technology.

~~Examples of our~~Our ecosystem partners

~~Product development~~

Product development in the semiconductor industry is managed through so-called ‘roadmaps’, which is essentially planning product development. When an idea has become a more specific definition, this transforms into a roadmap giving guidelines on how the product development should proceed during the next couple of years. By combining the roadmap of our customers and the technological feasibility, we design a product roadmap that outlines the specifications and functionalities of new types of machines that are feasible for us to produce and that meet our customers’ demands.

Product development at ASML is exposed to multiple complexities. Some of our products consist of more than 300,000 parts delivered by more than 700 suppliers, and 50 unique functions that need to be integrated to create a fully functioning system. We need more than 80 specialized disciplines to support successful product and process development. Moreover, we are part of the semiconductor value chain, working closely together with numerous customers, partners and suppliers.

ASML's success depends on the timely delivery of innovative and complex products. This brings uncertainty and risk, and the positive and negative impact of decisions made throughout product development can be huge. Compare it to a sailing race: The goal is clear, but the route is not. There are numerous variables to be managed, at high speed. Every piece of information is crucial to plan and reach the goal.

For more than a decade, we have applied our tailor-made modular innovation and product development process, which we call the Product Generation Process (PGP). PGP describes the way we develop products at ASML, how we introduce these products to the market, and eventually how we phase them out. PGP is a decision-based process. There are 15 sequenced Key Decisions that

~~ASML ANNUAL REPORT 2021 17~~

~~determine the main stream of the product development. This means that PGP enables decisions to be made as to whether or not the development of a product should continue.~~

The modular design of our products allows us to work out solutions to technological challenges independently of projects. This independent work enables us to consistently improve our solutions and it leads to an efficiency in development through reuse of system design and architecture.

~~Our ecosystem partners~~

We innovate through partnerships. ~~Our innovation philosophy is one where we see ourselves as architects and integrators, working with partners in an innovation ecosystem. We develop~~By developing our technology in close collaboration with our customers, we seek to ~~ensure we~~ build today what they need tomorrow. ~~Our~~We develop our machines ~~are developed~~ based on their input, and we engage closely with them to help ~~achieve~~pursue their technology and cost roadmaps.~~Read more in: Customer intimacy.~~

~~In the same way, we~~We also work closely with our suppliers, trusting them to manufacture parts and modules for our systems. Many of them are deeply involved in developing new technology and achieving the innovations we seek. With some of these so-called ‘farmout suppliers’, we work as co-investors. ~~Read more in: Our performance in 2021 - Social - Our supply chain.~~

~~We have been in a~~Our partnership with Carl Zeiss SMT ~~Holding GmbH & Co. KG for over~~has spanned more than three decades, and we also hold an important strategic interest in the company. ~~This partnership runs according to~~We apply the principle of ‘two companies, one business’, working together to drive operational excellence in innovation and technology. ~~Read more in: Our performance in 2021 - Social - Our supply chain.~~

We co-develop expertise ~~within~~through a wide network of technology partners, ~~such as~~including universities and research ~~institutions. Some of our partners include~~institutions such as imec in Belgium and the technical universities in Twente, Delft and Eindhoven ~~in the Netherlands,~~ and ~~the~~ Advanced Research Center for Nanolithography (ARCNL), ~~also~~all in the Netherlands.~~Read more in: Our performance in 2021 - Social - Innovation ecosystem.~~

~~Managing innovation~~Generating ideas and finding technological innovations and solutions

~~Every day at ASML,~~With more than ~~11,000~~14,000 of the brightest minds in the industry in our R&D ~~take on the exciting challenge~~department, ASML is uniquely placed to innovate the most advanced lithography systems in the world. We ~~manage~~continue to invest heavily in R&D – in 2022, we spent €3.3 billion in this ~~process by~~vital area, compared with €2.5 billion in 2021, while balancing our customers’ needs, product capabilities and technology solutions. ~~To stay ahead, we invest heavily in R&D. In 2021, we spent €2.5 billion on~~

Our R&D ~~compared to €2.2 billion in 2020.~~

~~Our Research department’s~~teams focus ~~is to generate~~on generating and ~~explore~~exploring exciting new ideas and ~~demonstrate~~demonstrating their feasibility in the long ~~term. The department also helps to find~~term, as well as finding technological solutions to the challenges ~~in our~~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 – to assess if they can be applied in ASML’s technology roadmap to support our customers toand help drive ~~the~~their own semiconductor device ~~roadmap.~~ roadmaps.




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

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Filling the ‘innovation funnel’

We encourage our experts to build a wide network in the broader technology space.

~~The~~This supports the constant stream of new ideas ~~is crucial~~ to ~~fill~~ our technology pipeline that flows through ~~the so-called~~what we call our ‘innovation funnel’ (see diagram on the right). ~~Here we~~This helps us select new ideas that have the potential to advance our products and their customer application.

Ideas that ~~successfully~~ pass the ~~‘proof of concept’ stage in our Research department are transferred to the Development & Engineering (D&E) department. D&E takes them on~~feasibility assessment go into our ~~Product Generation Process~~product generation process (PGP), a decision-based process for product ~~development. We then build~~development that includes building and ~~test~~testing system prototypes in the necessary environments. Prototypes that pass these tests may eventually lead to new product releases.

~~ASML ANNUAL REPORT 2021 18~~

–Our research teams scout for new ideas

–These ideas are taken through the ‘proof of concept’ stage

–Those that pass the feasibility assessment are transferred to our Development and Engineering (D&E) department

~~Innovation funnel~~

~~Our~~

–Guided by the PGP, our D&E engineers ~~drive our machines forward by creating~~create new components or subsystems, integrating them into the functional system ~~or developing~~

–They also develop new applications ~~to help move the industry forward.~~

~~In D&E,~~–They ensure we ~~work on a multitude of advanced optical and mechatronic modules, along with application software, data scienceand operating systems. D&E innovates~~innovate with a strong focus on time-to-market often starting new system development before the previous generation has even reached the customer. Teams in D&E have extensive contact with leading research institutes, keeping up to date with the latest developments in their respective fields.

Innovation achievements in 2022

Every day, our teams take on the exciting challenge of building and driving innovation ~~forward~~ to ~~maintaining~~enhance our reputation as the providers of the most advanced lithography systems in the world. To do this, we apply concurrent engineering, often starting new system development before the previous generation has even reached the customer. At the same time, we continuously seek to improve our products and capabilities, while ~~guarding our products’~~safeguarding their reliability, manufacturability and serviceability.

In ~~2021, our research and D&E teams showed great achievements. A few examples are provided below.~~

~~Berthold Leibinger Stiftung’s 2021 Innovation Prize~~

~~A prestigious honor granted every two years,~~DUV, we shipped the ~~Berthold Leibinger Innovation Prize is an international award that recognizes excellence in research and development work on~~first TWINSCAN NXT:870 – the ~~application or generation of laser light.~~

~~EUV technology is now the core technology for making modern computer and smartphone chips. A team of ASML scientists~~first NXT KrF system – ~~Daniel Brown, Alexander Schafgans, and Yezheng Tao from ASML, in the Netherlands~~ and the USfirst TWINSCAN NXT:2100i – ~~have been awarded the Berthold Leibinger Stiftung’s 2021 Innovation Prize for a “breakthrough in laser-produced plasma source for Extreme Ultraviolet Lithography scanner~~ enabling ~~high-volume manufacturing”.~~

~~The prize is for unprecedented advancement and research in EUV light source power scaling using a CO~~2 ~~laser architecture. The team's work in the area~~over 20% improvement of laser-produced plasma physics aided greater stability and robustness to EUV light source power, removing performance limitations and enabling greater scaling in high-volume manufacturing. This significant contribution was recognized by a jury of experts from science and industry across the globe.

~~For more information, please visit www.asml.com~~

~~Modular wafer clamp~~

~~We don’t say 'no'~~on-product overlay to a challenge. Our global research and D&E teams were challenged to create a new wafer clamp design that could be manufactured faster while meeting tighter specifications. After two years of research, design and engineering,customer.

In our ~~team launched~~EUV High-NA business, we received both the first ~~full-scale prototype of the modular wafer clamp, ready for qualification in an EUV scanner. This achievement is a true testimony of cross-continental challenge~~High-NA mechanical projection optics and ~~collaboration.~~

~~Wafer table coating~~

Unlike any other module in the scanner, the wafer table is the only scanner part in direct contact with the wafer during exposure. The requirements for flatness and surface stability are therefore rigorous. Thousands of wafers with different shapes and process

~~ASML ANNUAL REPORT 2021 19~~

illuminator and the new wafer stage from suppliers. These modules will be used for initial testing and integration, an important step for the EXE:5000 program.

~~characteristics are clamped~~In addition, to ~~it on~~further strengthen our product offering, we released ALO12C – a ~~daily basis as it moves under high acceleration forces, leading~~hardware-software combination – that enables our customers to ~~unwanted drift and leaving behind a clamping fingerprint which affects the overlay performance.~~

~~Our teams sought a solution to these fundamental issues affecting~~optimize wafer ~~table~~alignment performance ~~and found a more effective coating solution which ensures stability and also has substantial lifetime improvement benefits.~~

~~Water-cooled EUV mirrors~~

~~EUV systems use several mirrors~~using 12 colors instead of ~~lenses~~four.

We have also continued to ~~guide~~progress our metrology and inspection roadmap. For example, the ~~EUV light to the wafer, shrinking the reticle pattern by a factor of four. When EUV light travels through the machine, part of it~~HMI eScan 1100 multibeam system, our first-generation multibeam system with 25 beams (5x5), has been shipped for customer evaluation.

In 2022, we also shipped our first eScan460 system, which is ~~absorbed into each reflecting mirror. This gives rise to so-called mirror heating, which influences imaging and overlay performance.~~

Our researchers and engineers investigated new ways of thermal conditioning for the mirrors. Simulation and modelling showed good results on water-cooled mirrors. Testing of bonded substrates with water channels is underway, with encouraging results.

our next-generation single-beam inspection system
.

~~ASML ANNUAL REPORT 2021 20~~

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Customer intimacy

We believe a true partnership with our customers is vitally important,
to ensure we share the risks and rewards of what we do.

~~Customer intimacy~~

Engaging with our customers at all levels and focusing on long-term challenges

AsWe are one of the world’s leading manufacturers of ~~chip-making~~chipmaking equipment, wewhile our customers are the world’s leading microchip manufacturers. We enable ~~our customers~~them to create the patterns that define the electronic circuits on a ~~chip. Our customers are the world’s leading microchip manufacturers,~~chip, and consequently our success is inextricably linked with theirs.

WeThat’s why we collaborate with our customers to understand how our technology best fits their needs and challenges. ~~For this reason, we engage~~That means engaging with our customers at all levels: building partnerships, sharing ~~knowledge~~know-ledge and risks, ~~and~~ aligning our investments in ~~innovation.~~innovation and increasingly focusing on the long-term challenges for the next five to ten years and beyond. We develop our

solutions based on their input, ~~engage in helping~~help them achieve their technology and cost roadmaps, and work together, often literally in the same team, to make sure our solutions ~~match.~~fit together perfectly.

~~Despite continued travel restrictions and mandatory quarantine and workforce constraints, thanks to~~Engaging fully with customers is also an important part of working toward securing the full product portfolio that will sustain our ~~collaborative efforts across~~company into the ~~company and our business partners,~~future – which includes increasing the adoption of EUV in high-volume manufacturing environments. In 2022, we ~~were able to maintain a high level of engagement with our customers and prevent any major impact on their business requirements. Customers around~~received additional orders for the ~~world have recognized our additional support efforts and interventions during~~TWINSCAN EXE:5200, the ~~pandemic. We were presented with several ‘customer awards’ in recognition~~high-volume manufacturing version of our ~~rapid response to their needs and good overall customer service.~~

~~In 2021,~~EUV 0.55 NA (High-NA) platform. All current EUV customers have submitted orders for High-NA, demonstrating the demand for chips substantially increased driven by market fundamentals such as distributed computing, sensor technology, 5G, AI and digitalization accelerated by the pandemic. This also meant that the need for our customers to increase their capacity was at a record high. Rapidly increasing the number of systems shipped is challenging in our business, requiring seamless coordination with our suppliers who are also experiencing their own supply constraints. Whilecontinuing shrink.

Complete customer satisfaction

When we still managed to produce significantly more systems in 2021, we continued to work in close collaboration with our customers to weather the supply and delivery challenges by optimizing the installed base productivity.

~~Achieving customer intimacy~~

~~To us,~~talk about customer intimacy, ~~is about~~we mean the entire customer relationship across all channels, from the early stages of innovation ~~onwards. We~~onward. At each stage, we aim to foster ~~loyalty,~~trust, advocacy and continuous engagement, with the goal of achieving complete customer satisfaction.

~~We aim to leverage our innovation leading to more sophisticated solutions and interactions with our customers.~~ As customer requirements become more complex, it takes longer to align with a shared vision, so we ~~need~~seek to start ~~earlier.~~earlier in the process. Transparency is key, ~~in this process,~~ and our customer intimacy strategy ~~supports this.~~

~~It’s crucial~~helps us to ~~be in a true partnership~~leverage our innovations and develop even more sophisticated solutions with our ~~customers, to share in the risks and rewards of what we do. Trust and a shared vision are at the heart of this.~~customers.

~~Staying close to our customers~~Close customer alignment

~~To support and sustain our partnerships with customers, we~~We have built a structure of customer interactions across various channels in the organization ~~including, for~~to support and sustain our partnerships with customers. For example, ~~customer alignment meetings. Here, members of~~we run regular meetings with our ~~Board of Management, senior managers and customer representatives come together~~key customers to ~~make sure~~align our product development plans ~~are in line~~ with ~~our customers'~~their business goals and needs.

~~We run regular customer alignment meetings with our key customers.~~ These meetings include ~~our~~ Executive Review Meetings, at which members of our senior management team and Board of Management discuss business and strategies with customers; Technology Review Meetings, at which our senior technology experts, our Chief Technology Officer and our Chief ~~Technology~~Business Officer discuss technology roadmaps and requirements with customers; and Operational Review Meetings, where we review topics related to our customers’ operational activities.

Building on our customer relationships

We ~~have a~~market and sell our products directly to customers, without agencies or other intermediaries. Our dedicated Sales and Customer Management department ~~which~~ is responsible for building and maintaining our customer relationships and ensuring all relevant ASML departments contribute to meeting ~~their~~customer needs. ~~We market and sell our products directly to our customers, without agencies or other intermediaries.~~ Our account managers, field and application engineers and service and technical support specialists are located close to our ~~customer locations~~customers throughout Asia, the US and ~~Europe.~~EMEA.

~~Another focus area~~We know how essential it is for us to have well-trained engineers in the regions where we operate, so we offer training ~~– boosting~~designed to boost the capabilities of ~~the~~our local customer service teams as well as ~~enhancing~~enhance local technical expertise. ~~The travel restrictions, among others, highlighted just how essential the need is for well-trained engineers in the regions where~~Alongside good remote-control capabilities, this ensures that we ~~operate. With the help of remote control capabilities, we were able~~continue to increase the self-sufficiency of the local field engineers.

Working with customers in 2022

While we maintained a high level of engagement with our customers throughout the pandemic, we were pleased that the physical interactions started to return to ‘normal’ this year. With travel restrictions, quarantine and workforce constraints coming to an end in many countries, we were able to hold physical meetings with more customers around the world, and they were able to visit us at the Veldhoven campus more and more.




			We collaborate with our customers to understand how our technology best fits their needs and challenges.

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However, some restrictions remained around the world during the year.

Our customer relationships have been important in trying to manage the significant ramp-up of demand in the first part of the year. The market remained strong, but the overheated nature of the market this year, combined with the challenges we experienced in delivering systems as fast as our customers needed, impacted the conversations we had with them. While we went through the delivery challenges together, we did our best to keep our customers fully informed of shipment status and progress in our capacity plans.

Given the shortages that built up in the early part of 2022, our customers still needed our equipment urgently. We have worked with them to achieve this, focusing on the dynamics of different customers in various areas in the industry. As part of our commitment to responding rapidly to our customers’ needs, we also introduced ‘fast shipments'.

The market continues to be influenced by governments, for example through the CHIPS and Science Act in the US and EU, which focuses on federal aid to encourage the construction of microprocessor manufacturing facilities. This type of governmental attention requires major investments in specific regions, which also require delivery of our equipment for new fabs.

Measuring our approach

Our Voice of the Customer program helps to ensure our employees hear firsthand about our customers’ needs and challenges. This is especially important for employees without direct access to customers. To reach as many of our people as possible, the program makes use of different channels of communication: live presentations and Q&As with senior customer representatives, recorded customer interviews, online articles and personal engagement with customer representatives.

~~ASML ANNUAL REPORT 2021 21~~

~~In 2021, travel~~While we still face the long tail of COVID-19 restrictions ~~and other mitigation measures related~~in some areas, we continue to ~~COVID-19 continued to limit our in-person interactions to a large extent. Our account teams adapted quickly, introducing alternative solutions such as more~~run local Voice of the Customer initiatives and remote customer interviews. Local account and support teams visited our customers at their locations, interviewed them on video, and then shared feedback with teams at ASML. Except for live presentations with large audiences, we were able to adhere to ourOur regular schedule of interactions continued throughout the ~~year.~~year, and we are starting to reintroduce live presentations with larger audiences and combining remote with face-to-face interactions where we can.

~~Another valuable customer feedback tool is our biennial Customer Feedback Survey, which asks~~

We also ask our customers to rate our ~~performance. We also use this opportunity to collect open feedback. The~~performance through our Customer Feedback Survey. Their direct ratings and frank comments provide valuable insight into how we can contribute to our customers’ successes and help them to overcome challenges. We carefully analyze the results, ~~per customer,~~ check ~~our~~the insights gained ~~insights~~ with ~~the~~each customer and then define targeted, continuous improvement plans ~~together~~ with ~~them, taking~~their input to ensure we take their priorities into account. ~~Key elements~~

We have been busy deploying the improvement actions identified in ~~this process are:~~our 2020 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, and updating~~improvements. We have updated our customers regularly on the progress being ~~made. In 2021,~~made, and in September 2022 we ~~continued deploying the improvement actions identified from the survey~~sent out our latest survey. The results of ~~2020. The next~~the 2022 survey ~~will be sent out~~show us that our customers are satisfied with our teams, and products, performance and the business support we provide for them. They also ask us to closely listen to their feedback, provide them with shorter delivery times and continue pushing the technology forward in ~~September 2022.~~collaboration with them and in line with their needs.

~~We also set ourselves a target of achieving a VLSI top-three ranking among large suppliers of semiconductor equipment. The VLSI research~~

Externally, TechInsights, through its annual Customer Satisfaction Survey, benchmarks the performance of suppliers across the semiconductor industry based on three key factors: supplier performance, customer service and product performance. ~~We moved up~~Our target is to achieve a top-three ranking among large suppliers of semiconductor equipment. In the 2022 TechInsights benchmark, we again achieved a second place ~~in the 2021 VLSI research~~ Customer Satisfaction ranking ofamong the ~~’10~~‘10 Best Large Suppliers of Chip Making Equipment’~~. We've maintained our position~~, and first place in the ~~top three overall ‘Large Suppliers~~best suppliers of Chipmaking Equipment’ and also in the top three individual categories: number one in ‘Best Suppliers of Fab Equipment’, ‘Wafer to Foundation Chipmakers’, and ‘Wafer Fabrication Equipment to Specialty Chipmakers’.

In line with our business strategy, we continued in 2021 to work towards securing our full product portfolio that will sustain our company into the future. This includes working with our customers to increase the adoption of EUV in high-volume manufacturing environment, engaging with our customers to introduce EUV 0.55 NA platform, securing our products in mature markets and optimizing the installed base for our customers.

Our product portfolio is aligned with industry trends and our customers’ detailed product roadmaps, which require lithography-enabled solutions. Our customers are showing their trust in us by investing in our newest technology, supporting the industry driver of shrink beyond the current decade.

~~ASML ANNUAL REPORT 2021 22~~fab equipment category.

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Our products and services

Our highly differentiated solutions provide unique value drivers, for both our customers
and ASML, that will enable affordable shrink well into the next decade.

~~Our products~~

Holistic lithography product and ~~services~~
service portfolio

The semiconductor industry is driven by affordable scaling ~~(the~~– the ability to make smaller, more ~~energy efficient~~energy-efficient transistors at the right ~~price).~~price. Our holistic lithography product portfolio is geared toward lithography-enabled shrink that goes far beyond the current decade, ~~to allow~~allowing our customers to generate the greatest value per silicon ~~wafer.~~wafer for many years to come.

Our comprehensive portfolio supports customers with a broad range of products and services, from mass-producing advanced Logic and Memory chips to creating novel ‘More than Moore’ applications or cost-effective mature chip technologies. Our product offerings ~~in our holistic product portfolio~~ provide patterning solutions for ~~every possible wavelength~~various industry wavelengths – from the most advanced 13.5 nm EUV wavelength to the industry’s workhorse DUV wavelengths of 193 nm, 248 nm and 365 nm.

As chipmakers continue to scale nodes, they face unprecedented engineering, material, structural and manufacturing difficulties. Our applications products support our lithography platforms, driven by our unique capability to help customers maximize patterning performance. This ~~comprehensive~~ portfolio ~~supports customers across the semiconductor industry from mass-producing advanced Logic~~includes optical and ~~Memory chips to creating novel ‘More than Moore’ applications or cost-effective manufacturing of mature chip technologies.~~

~~To make sure that every individual pattern on an integrated circuit is connected flawlessly, we provide advanced~~e-beam metrology, high-resolution e-beam inspection, computational lithography and scanner and process control ~~solutions through our metrology and inspection systems and computational lithography~~software solutions. ~~In addition, we~~

We also support our growing installed base with best-in-class customer ~~support. Our highly differentiated solutions provide unique value drivers for~~support, providing our customers with upgrade solutions for higher productivity and ~~ASML, working together to enable affordable shrink well into the next decade.~~improved imaging, overlay and availability.

~~Extreme ultraviolet (EUV) lithography systems~~



Our holistic lithography approach
See page 35 >

~~More~~

In more than two decades ~~ago,~~since we started developing EUV ~~technology. It was "no walk in the park" and, since the start,~~technology, we have invested billions in R&D and acquired Cymer, a San Diego-based maker of light sources, to accelerate our EUV source ~~technology, and~~technology. This has helped us solve several technical challenges to enable the EUV infrastructure ~~that~~ our customers need for high-volume manufacturing. ~~We succeeded by innovating in~~

Our success has come through close cooperation with our customers and ~~suppliers. This partially explains why~~suppliers, and ASML is currently the world’s only manufacturer of EUV lithography systems. Since its introduction, our EUV installed ~~based~~base produced more than 59111 million wafers, ~~by end of 2021,~~ compared ~~to 26~~with 59 million wafers produced by end of ~~2020.~~2021.

EUV 0.33 NA

Our EUV platform extends our customers’ Logic and Memory roadmaps by delivering resolution improvements and state-of-the-art overlay performance, ~~and~~enabling year-on-year cost reductions. EUV lithography uses light with a wavelength of just 13.5 nm and a numerical aperture of 0.33. This is a wavelength reduction of almost 15 times compared towith the next most advanced lithography solution used in advanced chipmaking – deep ultraviolet (DUV) argon fluoride (ArF) lithography, with its 193 nm light. This allows our customers to use EUV in a single exposure, rather than complex ~~multiple patterning~~multiple-patterning strategies with ArF immersion, and ~~allows~~enables them to further shrink microchip structures. Our EUV product roadmap is intended to drive affordable scaling to 2030 and beyond.

The TWINSCAN NXE:3600D is our latest-generation EUV 0.33 NA lithography system. It combines the highest resolution with 15-20% increased productivity and around 30% better overlay compared towith its predecessor, the TWINSCAN NXE:3400C, while also improving system availability.

~~TWINSCAN NXE:3600D~~

EUV 0.55 NA (High-NA)

After ~~five~~six years of engineering, we have started to build the next generation of EUV lithography systems ~~that~~– further ~~improves~~improving resolution with a higher numerical aperture (NA) of 0.55 NA compared towith the 0.33 NA of our current EUV platform. To reduce technological introduction risk and R&D costs, the EUV 0.55 NA (High-NA) platform maximizes commonality with the EUV 0.33 NA platform.

~~The capabilities of our~~Our EUV 0.55 NA ~~system, called~~systems – TWINSCAN EXE:5000 ~~bring~~and EXE:5200 – are an evolutionary step in EUV technology, introducing a novel optics design and significantly faster reticle and wafer stages. Their 0.55 NA provides a resolution increase compared with the 0.33 NA lens used in our previous EUV machines, and this enables higher-resolution patterning for even smaller transistor features.

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These enhancements offer considerable benefits to our customers, by enabling lithography simplification for future nodes, higher yield and decreased defect density for both Logic and ~~DRAM.~~dynamic random-access memory (DRAM). With its larger optics, itthe EXE platform can print smaller features with higher density, reducing patterning costs for ~~customers significantly.~~customers. EUV 0.55 NA helps our customers to extend their shrink roadmap and minimize double or triple patterning compared towith 0.33 NA, leading to reduced patterning complexity, lower risk of defects and a shorter cycle time.

~~ASML ANNUAL REPORT 2021 23~~

~~We believe this technology will enable affordable geometric scaling well into the next decade as~~ EUV 0.55 NA ~~offers higher resolution that enables 1.7x smaller features and 2.9x increased density compared~~has also been designed to ~~EUV 0.33 NA.~~enable multiple future nodes, with the industry’s first deployment expected in 2025, followed by memory technologies at similar density. We expect EUV 0.55 NA ~~is expected~~(High-NA) technology to ~~enter~~start supporting high-volume manufacturing atin 2025/2026.

In 2022, we received purchase orders from all of our current EUV customers ~~in 2025–2026.~~for the delivery of the industry’s first TWINSCAN EXE:5200 system – EUV high-volume production system with a high NA and a productivity of 220 wafers per hour.

~~Deep ultraviolet (DUV) lithography systems~~

DUV lithography systems are the workhorses of the industry. Supporting numerous market segments, DUV systems produce the majority of layers in a customer device today and will remain important for future devices. We offer immersion as well as dry lithography solutions for all ~~DUV~~ wavelengths currently used in the semiconductor industry – i-line using 365 nm wavelength, KrF using 248 nm and ArF using 193 nm. These systems help manufacture a broad range of semiconductor nodes and technologies, and support the industry’s cost- and energy-efficient scaling.

Our DUV immersion and dry systems lead the industry in productivity, imaging and overlay performance for high-volume manufacturing of the most advanced Logic and Memory chips in combination with EUV, while continuing to deliver value for mature nodes and lower-volume applications.

Immersion systems

ArF immersion lithography maintains a thin film of water between the lens and the ~~wafer, increasing~~wafer. Using the refractive index of water to increase NA ~~and improving~~improves resolution to support further shrink. Our immersion systems are suitable for both single-exposure and multiple-patterning lithography, and can be used in seamless combination with EUV systems to print different layers of the same chip.

~~The TWINSCAN NXT:2050i is our current~~

Our latest state-of-the-art immersion system ~~and~~ is ~~being used in high-volume manufacturing of~~ the ~~5 nm Logic and fourth generation of 10 nm DRAM nodes. The~~TWINSCAN NXT:~~2050i is based on a new version of the NXT platform, which includes new developments~~2100i, launched in the third quarter of 2022. Alongside intrinsic improvements to lens metrology, reticle ~~stage,~~conditioning and wafer ~~stage, projection lens, and exposure laser. Thanks to these~~table, as well as overall cross-matching improvements, the NXT:2100i features innovations such as the Alignment Optimizer 12 Color package. The system delivers ~~better~~295-wafers-per-hour productivity combined with unprecedented overlay ~~control at higher productivity than its predecessor.~~

~~TWINSCAN NXT:2050i~~performance, providing the most cost-efficient solution to customers for critical immersion layers on the sub 3 nm nodes.

Dry systems

Not every layer on a chip ~~necessarily needs~~has to be produced by the ~~latest and greatest~~most innovative immersion lithography ~~systems to produce them. There may be~~systems. While some more complicated layers ~~that are made using~~do require more advanced lithography systems, ~~but the rest~~others can often be printed using ‘older’ technology such as dry lithography systems. Our dry systems product portfolio offers our customers more cost-effective solutions for all types of ~~wavelengths for our customers.~~wavelengths.

~~The~~

Our TWINSCAN NXT:1470 ~~is our latest dry~~dual-stage ArF ~~lithography~~ system ~~offering a record productivity~~continues to be adopted by the majority of ~~300 wafers per hour with a 4 nm overlay capability.~~Memory and Logic customers and has been inserted in high-volume manufacturing processes. It is ~~also~~ the first dry NXT system, building on ~~our successful~~the common immersion platform, ~~and delivers~~with improvements in matched machine overlay (<4.0 nm), productivity (>300 wafers per hour) and ~~its fab space.~~footprint.

~~With an 0.80 NA,~~Following our new-generation KrF system, the TWINSCAN XT:860N, we shipped the first TWINSCAN NXT:870 248 nm step-and-scan system to a customer. The NXT:870 is ~~our new-generation~~a high-productivity, dual-stage KrF ~~system, supporting high-volume 200 mm and~~lithography tool designed for volume 300 mm wafer production at and ~~below~~above 110 nm resolution. The ~~XT:860N features the new Large Range Level Sensor that allows customers to measure high topology 3D NAND wafers at increased~~system increases productivity ~~of 260 wafers per hour – up~~ from the ~~240~~260 wafers per hour capability of the XT:~~860M.~~ 860N to 330 wafers per hour through the use of the NXT platform, a higher scan speed and reduced system overhead time.

For more critical KrF layers, the 0.93 NA TWINSCAN XT:1060K is our most advanced dual-stage KrF lithography ~~system,~~tool at 248 nm, with the highest NA and ~~offers~~productivity in the industry, offering best-in-class resolution at and below 80 ~~nm and overlay.~~

~~ASML ANNUAL REPORT 2021 24~~

~~XT:860N~~nm.

The TWINSCAN XT:400L is our latest i-line lithography system, which can print features down to a resolution of 220 nm for 200 mm and 300 mm wafer production.

~~Mature products and services~~



With an 0.80 NA, the TWINSCAN NXT:870 is our new generation KrF system.

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Before EUV, before immersion and even before our TWINSCAN systems, there was the PAS. In 1991, seven years after the company was founded, we launched the PAS 5500, which ~~turned out~~would prove to be our breakthrough platform. This system ~~was able to~~ dramatically ~~reduce~~reduced manufacturing times for our customers, and its modular design enabled them to produce multiple generations of advanced chips using the same system.

Our refurbished products business, known as Mature Products and Services (MPS), refurbishes and upgrades our older lithography systems to extend their lives and offer associated services. MPS’s customer base is wide and active in a variety of markets, especially in the ~~'More~~‘More than ~~Moore'~~Moore’ space.

ASML systems have a very long operational lifetime that often exceeds their role at the initial customer. ~~As a result, many~~Many customers are therefore able to generate value by selling off systems ~~that are~~they no longer ~~required.~~require. To support this sustainable product use and ensure used systems deliver the quality that ASML stands for, ~~ASML is~~we are actively involved in the ~~used system~~used-system market through our refurbishment and associated services. ~~Over 90%~~Remarkably, 95% of the ~~PAS~~ systems ~~ASML has ever~~that we have sold in the last 30 years are still in use.

We offer refurbished systems of the PAS 5500 and first-generation AT, XT and NXT systems. ~~Through our~~Our refurbishment and associated services ~~we extend~~are adept at extending the lifespan of our ~~customers'~~customers’ installed base, drawing value from their capital and contributing to sustainable product use.

Read more in: ~~Our performance in 2021 -~~

Environmental - Circular economy - ~~Recycle~~Refurbish mature ~~products through refurbishment.~~prod uct s .

~~Metrology and inspection systems~~

Our metrology and inspection systems allow chipmakers to measure the patterns that they actually print on the wafer to see how well they match the ~~pattern intended.~~intended pattern. Our portfolio covers every phase of bringing a chip to market, from R&D to mass production, and our systems monitor each step of the manufacturing process – ~~allowing them~~enabling chipmakers to assess the performance of the entire process.

The systems offer the speed and accuracy needed to create automated control loops via our process control ~~solutions, optimizing~~solutions. This optimizes the lithography system settings for each exposure to reduce edge placement error (EPE), which is the combination of product overlay and critical dimension uniformity, enlarge the process window and achieve the highest yield and best performance in mass production.

Optical metrology

Our YieldStar optical metrology solutions allow chipmakers to assess the quality of patterns on the wafer in volume production, through fast and accurate overlay measurements. Overlay, or how well one layer of a chip is aligned with the previous one, is an important measure of lithography performance and a key ~~contribution~~contributor to EPE. As structures on microchips get smaller and smaller, overlay and EPE become ~~more and more~~increasingly important.

The YieldStar 385H, launched in 2020, offers ~~the latest~~ in-resist post-lithography (pre-etch) overlay and focus metrology, with enhanced throughput and accuracy. Compared towith previous systems, key enhancements include a faster stage and faster wavelength changing. This enables highly accurate overlay measurements and tool matching using multiple wavelengths without impacting throughput.

Our latest model, launched in 2021, the YieldStar 1385H, provides the ability to measure after-etch device patterns, enabling extended yield control capability for our customers. ~~The YieldStar 1385H~~This system for fast, accurate in-device overlay and metrology delivers improved in-device accuracy and around 50% productivity improvement capability over the previous ~~model~~ YieldStar ~~1375F. The YieldStar 1385H is the optical tool on the market for fast, accurate in-device overlay and metrology~~1375 model, and has the capability ~~of measuring~~to measure multiple layers at once, ~~which helps~~helping customers to improve yield through post-etch process control.

~~ASML ANNUAL REPORT 2021 25~~

~~YieldStar 1385H~~

E-beam metrology and inspection

Our HMI e-beam solutions allow customers to locate and analyze individual chip defects amid billions of printed features, extending the ~~possibilities~~scope for process control. ~~Historically,~~While e-beam solutions were historically too slow to monitor volume production ~~processes. However, ASML has~~processes, we have made progress in various methods ~~for~~of increasing the throughput of e-beam systems.

~~ASML continues~~

We continue to extend ~~market~~technology leadership in voltage contrast inspection and physical defect inspection with the widely adopted single-beam platform. The eScan 430 is our latest single-beam inspection system, delivering more than 35% throughput improvement across various applications in ~~logic,~~Logic, DRAM and 3D NAND.

Our high-resolution e-beam metrology system eP5 offers world-class 1 nm resolution with large field-of-view ~~capabilities at more than 10 times the speed of existing technologies.~~capabilities. It ~~outputs~~produces critical dimension (CD) and ~~edge placement error (EPE)~~EPE data in high volume with a quality level that customers need for monitoring and control. EPE is becoming more critical for device patterning and yield with shrinking design rules and the adoption of EUV lithography. We also released an EPE metrology application software product on eP5. It is capable of local and global EPE measurements on device, both intralayer and interlayer.

~~Our innovation did not stop after~~In 2022, we ~~launched~~released and shipped eP5 XLE, which extends the high-resolution eP5 system with high landing energy up to 30 keV and fast back-scattered electron detection for inspection and metrology of 3D devices in Logic and Memory. It is capable of overlay measurement on device patterns, complementing our YieldStar product offering. We have also released and shipped the first next generation high resolution e-beam metrology system eP6 to succeed eP5. The projected eP6 performance is expected to be more than 10 times the speed of existing technologies.

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Our products and services (continued)


Metrology and inspection systems (continued)

Building on the 2020 launch of our breakthrough multibeam inspection tool HMI eScan 1000, with a 3x3 image, ~~a year ago. We added~~we have now introduced the ~~next generation~~next-generation HMI eScan 1100 to our product portfolio. With a 5x5 image, it demonstrates successful multibeam operation, simultaneously scanning with 25 beams. The 5x5 system has higher sensitivity for detecting voltage contrast defects and physical defects, while substantially increasing inspection throughput. ~~At this stage, our customers are evaluating our~~In 2022, the first eScan1100 multibeam ~~systems.~~

~~eScan 1100~~system was installed at a customer site to start customer evaluation.

System and process control

Our system and process control software products enable automated control loops to ~~keep~~maintain optimal operation of lithography ~~processes operating optimally.~~processes. Using powerful algorithms, they analyze metrology and inspection data and calculate necessary corrections for each individual ~~exposure that can be~~exposure. These are then fed back to the lithography system to minimize ~~edge placement error~~EPE in subsequent wafer lots. In this way they enable the creation of ever more advanced microchips with maximum yield and performance. Our system and process control roadmap aims to take increasing advantage of the huge flexibility of our lithography ~~systems and~~systems. We are able to apply more powerful algorithms with higher-order corrections to support our customers, own roadmaps for increasing EPE performance.

Computational lithography

~~ASML ANNUAL REPORT 2021 26~~

and software solutions

Our computational lithography solutions are used in the development of new chips to optimize both the reticle patterns and the setup of the lithography system to ensure robust, manufacturable designs that deliver high yields. Insight from computational lithography solutions is also increasingly being used to guide metrology and inspection, increasing throughput and enabling more precise process monitoring and control in high-volume manufacturing.

These products are based on accurate computer simulations of the lithography system and process, representing a wide variety of physical and chemical effects. ~~Machine learning~~Increasingly, we are using machine-learning techniques ~~are also increasingly used~~ to further speed ~~development. We~~up development, and are continually developing our computational lithography offering to increase the range and accuracy of models and reduce the computational time and cost.

~~Visit www.asml.com for more product details and specifications.~~

~~Managing our installed base systems~~

~~The installed base of ASML systems continues to grow, with many systems finding second or even third lives at new owners in new markets and applications.~~

To provide all our customers with the best possible value proposition, we offer an extensive installed base management portfolio, including a wide range of service and upgrade options.

Our installed base continues to grow, with many systems finding second or even third lives at new owners in new markets and applications.

We develop and sell product options and enhancements designed to improve throughput, patterning performance and overlay. ~~Through~~Our field-upgrade packages ~~it is possible to upgrade older systems to improved models in the field. This enables~~enable customers to optimize their cost of ownership over ~~the~~a system’s ~~lifetime.~~lifetime by upgrading older systems to improved models.

Customer support

We support our customers with a broad range of applications, services and technical support products to maintain and enhance our ~~systems'~~systems’ performance. We have ~~almost 7,000~~more than 9,000 customer support employees, who work to ensure the systems in our customers’ fabs run at the highest levels of predictability and availability. We offer 24/7 support, next-day parts delivery, an easy, centralized customer portal and training for customer engineers.

ASML ANNUAL REPORT 2022

Q&A WITH THE CTO

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Innovation – the driving force behind our progress

In conversation with our President, Chief Technology Officer and Vice Chair of the Board of Management

Martin van den Brink

What were the stand-out achievements of the last 12 months?

For us, innovation is all about making a difference in the marketplace. Our goal is always to give customers the products and capabilities they need to deliver on the potential of technology for making a positive contribution to society. The hunger for computational power is endless. Energy transition, connectivity, healthcare and many more areas are all being transformed by digital technology – we do not directly create the tech that is making these developments possible, but we are important enablers.

So the most pleasing aspects of the last year have included seeing some of the ideas we have been working on in recent years become reality. For example, we made the first shipment of our latest DUV NXT technology, the TWINSCAN NXT:2100i. Furthermore, all our current EUV customers have now submitted orders for EUV 0.55 NA (High-NA). Customers will start their R&D in 2024-2025, aiming for high-volume manufacturing in 2025-2026.

The Rayleigh criterion that drives Moore’s Law

–CD is the critical dimension, a measure of how small the smallest structures are that the lithography system can print.

–Lambda is the wavelength of the light source used and the smaller the wavelength, the smaller the structures that can be printed. Our deep ultraviolet (DUV) lithography systems, known as the industry workhorse, dive deep into the UV light spectrum to print the tiny features that form the basis of the microchip. Over the years, ASML has made several wavelength steps, and our DUV lithography systems range from 365 nm (i-line), 248 nm (KrF) to 193 nm (ArF). With the extreme ultraviolet (EUV) systems, we provide highest-resolution lithography in high-volume manufacturing as these systems make a major step in wavelength. With EUV tin plasma, we generate EUV light which has a wavelength of just 13.5 nm.

–NA is the numerical aperture, indicating the
entrance angle of the light – with larger NA
lenses/mirrors, smaller structures can be printed. Besides larger lenses, ASML has increased the NA
of our ArF systems by maintaining a thin film of water between the last lens element and the wafer, using the breaking index of the water to increase
the NA (so-called immersion systems). After the wavelength step to EUV, ASML is developing the next-generation EUV systems, called EUV 0.55 NA (High- NA), where we push the numerical aperture from 0.33 to 0.55.

–k1 is a factor relating to optical and process optimizations. Together with our computational lithography and patterning control software solutions, we provide the control loops for our customers to optimize their mask designs and illumination conditions.

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Innovation – the driving force behind our progress (continued)

In conversation with our President, Chief Technology Officer and Vice Chair of the Board of Management

Martin van den Brink

We are 100% committed to advancing both EUV and DUV technologies in order to provide a balanced product portfolio. We have seen something of a transition in our R&D focus in recent years, with increased emphasis and resources dedicated to DUV, which will continue to be the industry workhorse and the technology of choice for many customers. We are now ramping up our development of solutions that are driving commonality, productivity and performance to new standards, underpinning the future of DUV.

Behind the scenes, we have been making good progress with our scanner and process control software solutions, as well as with our computational engine and optical and e-beam metrology and inspection solutions. And there is a lot more to come in the years ahead, as we continue to sharpen our focus on holistic lithography. Lithography systems are highly complex, so we aim to provide customers with a holistic, integrated approach that enables them to optimize the lithography process. To take the new half-dome mirror as an example, this provides the customer with around 100 different controls, in addition to the approximately 1,000 that we already offered. This year we enhanced our virtual computing platform that brings data together from every part of the lithography process, analyzes it and provides a feedback loop to control the performance of our tools and optimize what is a very complex process.

Is Moore’s Law still alive and well?

Overall shrink will continue for years to come. In ~~2021,~~his book ‘The Singularity is Near’, Ray Kurzweil explains how the number of transistors per device will continue to increase for a decade or more due to system innovation, of which lithography is one aspect.

But first of all, let’s be clear that shrink is a really complicated story. It is partly determined by what we do with our ~~customer support organization~~lithography, in line with Moore’s Law, and through dimensional scaling this has ~~provided nearly 5,000,000 hours~~been the main driver of ~~customer support,~~shrink over the last 15 years. This is still hugely significant but is slowing down a little [as patterns become ever smaller]. In addition to dimensional scaling, shrink is being enabled by both device and system scaling. Device scaling involves innovation in the materials and structures used to make transistors, while system scaling results from greater on-chip integration, such as system-on-chip solutions that combine processors, memory and auxiliary functionality into one chip.

Looking beyond scaling and Moore’s Law, other metrics are also important in our industry – for example, energy-efficient performance (EEP), which was pioneered at TSMC, one of our key customers. EEP tracks energy efficiency, which is expected to increase threefold every two years.

What are the main challenges for you
as CTO?

As CTO, I’m always asking myself how I can best drive innovation at ASML and make sure the pipeline continues to be filled. And one of the most important factors in that is people. Our growth and ability to hire large numbers of new staff present challenges in their own right. We employ more than 14,000 FTE in R&D and are adding 7-8% to that number every year. So that’s 1,000 or more new people over a 12-month period, all of whom need to quickly learn about and buy into our culture before they can become part of our team.

Sustainability is another challenge that has moved rapidly up ~~from 4,500,000 hours~~the agenda in ~~2020.~~recent years. The amount of passion and expertise that we are now able to bring to a topic like re-use and repair – not only internally within ASML but also externally among our partners – is very encouraging. As a group, we are acknowledging responsibility for our environmental footprint, which of course is increasing in line with the industry’s growth. We are constantly striving to improve EEP, but the fact remains that more lithography equipment at work in fabs will inevitably require more energy in total. It is going to be challenging to understand what it means to create a truly sustainable semiconductor industry.

What’s next for innovation at ASML?

I could talk about EUV with an NA higher than 0.7 (known as Hyper-NA) potentially becoming a reality shortly after the end of this decade; however, the most appropriate guide to what comes next is actually: it all depends on cost. We need to be more and more focused on cost reduction – that means not reducing resources but making sure that the solutions we bring to market are simpler, more sustainable, more serviceable, more manufacturable and more scalable. It is not responsible to move to the next product without understanding the cost and complexity constraints we have to put on those products from the very beginning. That is exactly what we did with our new optical metrology system, which will come to market in 2023. We re-examined this project within intense cost parameters and have been able to achieve a new technology that is many times more cost-effective than before.

Similarly, we are continuing to work to contain the cost of the current EUV 0.33 NA systems, as well as High-NA and Hyper-NA, to make sure that the appetite for shrink remains strong. Ten years ago, when we developed High-NA, we could not have imagined that NA beyond 0.55 even existed. So Hyper-NA is very, very difficult to achieve. The great thing is that our business and R&D capability are such that we can handle all of these things simultaneously. We can develop technology like Hyper-NA while focusing on cost containment, simplicity, sustainability, manufacturability and serviceability all at the same time.

ASML ANNUAL REPORT 2022

SMALL PATTERNS. BIG IMPACT.

STRATEGIC REPORT

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						GLOBAL WELL-BEING
						Molecular-scale diagnostics, global health impact
						The COVID-pandemic has underlined the urgent need for a new generation of healthcare diagnostic tools. Ongoing scaling and miniaturization could result in a microchip smaller than a fingernail that can grab a single molecule and analyze it, providing real-time access to biological information and enabling well-being on a global scale.
						Read more online

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The world around us


The big picture

The world faces a range of macro challenges, including the war in Ukraine, post-COVID-19 supply chain constraints, inflationary pressures and risk of a global recession.

The big picture for our sector continues to be dominated by the global shortage of semiconductors. With its ability to transform how we all live and work, digital technology sits at the heart of the macroeconomic landscape. Expanding application space and relentless innovation are expected to continue to fuel growth across semiconductor markets. Industry sources anticipate annual growth rates of 9% and more than a doubling of semiconductor revenue from 2020 to 2030.

However, while the medium- and long-term outlook and trends remain unchanged, the current macro environment creates some near-term uncertainties. The war in Ukraine has changed short-term economic pressures around the world by driving a rapid and significant increase in energy costs which is likely to dampen consumer demand. Not surprisingly, people will choose to pay their utility bills rather than buy the latest smartphone. In addition, we are seeing inflation increases across all the world’s major economies, and this will in the short term also reduce demand for products that use semiconductors.

We continue to be very positive about the outlook for our sector in general, and for ASML ~~ANNUAL REPORT~~in particular. While the current macro environment creates near-term uncertainties, we expect longer-term demand and capacity showing healthy growth. Expanding application space, continued industry innovation, more foundry competition and technological sovereignty drive an increased demand across semiconductor markets.

The issues that restricted the supply chain during and after the pandemic surges of 2020 and 2021 27are beginning to abate, and we are scaling up for capacity increases. With additional global demand for wafers expected to be over 780,000 wafer starts per month per year in 2030, we plan to increase our annual capacity to 90 EUV 0.33 NA and 600 DUV systems (2025-2026), while also ramping up EUV 0.55 NA (High-NA) capacity to 20 systems per year (2027-2028).


Trends affecting our marketplace

The following are some of the major themes and trends driving our industry’s development, both today and tomorrow.

Increasing market demand

The convergence of wireless communication, telecom, media and cloud via connected devices continues to drive demand for advanced semiconductors across the globe. Growing populations, urbanization, the transition toward renewable energy using wind and solar power, and ongoing electrification to support smart mobility are creating increasing demand for advanced electronic devices.

Microchips are at the heart of all of these devices, ranging from sensors and actuators to smart, scalable and flexible computing solutions. This drives the demand for both new and mature chips that are specifically designed for a wave of new applications in areas ranging from smart homes, cities and industries to predictive healthcare, smart wearables and autonomous robotics.

Read more on page 76 >

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The world around us (continued)

Trends affecting our marketplace (continued)

Technological developments

Technology is evolving fast, and the next level of computing is approaching at speed. The era of mobile computing – where you bring the computer with you – is moving toward an immersive world of ‘ubiquitous computing’, with computing power available wherever you go.

Unleashing the power of data better and faster with artificial intelligence

The potential of AloT will gradually open up as AI and loT increasingly intertwine, facilitated by 5G. The vast amount of data that people can access, and the insights this provides, will fuel semiconductor business growth and digital transformation.

There are around 40 billion connected devices currently in use, with more being added every second. This number is expected to increase to 350 billion devices by 2030. Connected IoT devices are expected to create up to 175 ZB (zettabytes) of data per year by 2025 based on external research. To put that in perspective, one zettabyte is equal to a trillion gigabytes. And to download 175 ZB of data with the average internet connection speed currently available would take one person 1.8 billion years – a very long day at the office (or anywhere else).

So, this big data will also need to become fast data to allow for ubiquitous computing, as the world moves toward ‘edge’ computing, where processing is brought as close to the source of data as possible, rather than happening in the cloud.

Semiconductor-enabled computing trends

Moore’s Law is the guiding principle for the semiconductor industry, the motor driving the industry to transit from mobile computing to ubiquitous computing. This transition continues to expand, facilitating three major trends in computing, as shown in the overview on the right: applications, data and algorithms.

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The world around us (continued)

Trends affecting our marketplace (continued)


Semiconductor industry market	Smartphone	Personal computing	Consumer electronics	Automotive	Industrial electronics	Wired and wireless infrastructure	Servers, data centers and storage
In 2020, more than 953 billion chips were manufactured around the world, feeding a $471 billion industry. In 2022, the semiconductor industry increased the output to over 1.11 trillion chips, which fed a $618 billion market. Growth is set to continue, with market analysts predicting the industry could reach an over $700 billion by 2025. Semiconductor technology plays a crucial part in shaping the interconnected and intelligent network future, and end markets continue to grow. The overview shows an outlook on the current market size and market opportunity for the entire industry based on external research.

	Key driver
	Continued refresh of all semiconductor content including image sensors	High-end compute and Memory, fast conversion to SSD	Legacy products and packaged ICs, advanced ICs in add-ons	Strong IC content growth: GPU, sensors, V2X communication sensing	High-end compute for AI on big data and sensors	Devices for fast data processing, modem, base-station infrastructure refresh	High processor and Memory growth, hardware accelerations including GPU
	2020 market size ($bn)							Total
	117	100	50	40	51	38	76	471
	2022 market size ($bn)
	144	115	71	63	73	53	100	618
	2025 market opportunity ($bn)
	150	124	79	93	93	62	136	737
	2030 market opportunity ($bn)
	213	131	114	149	160	82	249	1,098
	Outlook CAGR 2020-2030 (%)
	6%	3%	9%	14%	12%	8%	13%	9%
	Source: ASML’s Investor Day presentation (November 2022). Please note rounding differences may exist.

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The world around us (continued)

Our customers ~~are~~– the world’s leading microchip manufacturers – can be grouped into Memory and ~~our success is inextricably linked with theirs.~~Logic chipmakers. We design our machines based on their input, ~~engage in helping them achieve their technology~~ and ~~cost roadmaps, and~~we work together to make sure our machines ~~are running~~run smoothly in their fabs.

~~Our customers can be grouped into~~ Memory and Logic ~~chipmakers.~~chips

Memory chips can store a large amount 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 ~~Memory: NAND and DRAM.~~

~~With~~chips typically made in dedicated Memory-chip factories: NAND chips ~~data~~that can ~~be stored~~store data even when a device is powered ~~off.~~off, and DRAM memory ischips that are used to efficiently provide data to the processor. ~~These DRAM and NAND chips are typically made in dedicated Memory-chip factories.~~

Logic chips, which process information in electronic devices, are produced by two groups of manufacturers. The first group, known as integrated device manufacturers (IDMs), designs and manufactures Logic chips. The second group comprises contract manufacturers known as foundries. Foundry manufacturers produce chips for ‘fabless’ companies ~~which~~that focus only on chip design and distribution, but do not manufacture microchips themselves.

Both Logic and Memory chips can vary greatly in complexity and capability. For example, the most advanced chips ~~are powering~~power leading-edge technology in ~~artificial intelligence (AI),~~AI, big data and automotive technology, while ~~the~~ simpler, low-cost chips ~~are integrating~~integrate sensing capabilities ininto everyday technology to create a vast ~~IoT.~~loT.

Growth in the chip market

The historical market compound annual growth rate (CAGR) over the last 10 years was 6%, while industry sources project the chip market (worldwide semiconductor revenues) ~~has grown by 5% per year~~will grow at a CAGR of 9%1 in ~~revenue on average over~~ the past 20 years, and is projected to grow even stronger. The factors driving this growth have radically changed. In the 1990s, personal computers (PCs), both desktops and later laptops, drove chip demand. In the 2000s, the market driver evolved from PCs to smartphones. These in turn produced new market drivers, data centers and (edge) cloud solutions, where data from PCs and smartphones is routed, processed and stored with the extensive use of specialized Logic chips, in combination with DRAM, NAND and HDD storage.period 2020-2023.

~~ASML ANNUAL REPORT 2021 29~~

1 Source: ASML’s Investor Day presentation (November 2022).

Lithography is where we come in. It is a driving force in the creation of faster and cheaper chips that are also more powerful and energy efficient. Today’s most advanced processors are based on the Logic N5 node, and contain billions of transistors. Shrinking transistors further is becoming increasingly difficult, but we are not as close to the fundamental limits of physics as some might think.

Next-generation chip designs will include more advanced materials, new packaging technologies and more complex 3D designs, all of which will create the electronics of the future.

The manufacturing of chips becomes increasingly complex as semiconductor feature sizes shrink, but the need to mass produce at an acceptable cost remains. Our holistic lithography product portfolio helps to optimize production and enable affordable shrink by integrating lithography systems with computational modeling, as well as metrology and inspection solutions that help our customers to improve their yield.

Our computational models enable our customers to optimize their mask design and tape-out time (the time taken in sending the final design to the manufacturer for production). This works through mask-correction software to prepare and modify the design for optimized exposures, while the metrology and inspection solutions help in analyzing and controlling the manufacturing process in real time.

~~Semiconductor industry trends and opportunities~~

Technology is evolving fast, and the next level of computing is dawning. The era of mobile computing – where you bring the computer with you – is evolving towards immersive ‘ubiquitous computing’, with computing power available wherever you go.

The transition to ubiquitous computing is enabled by what has been termed the ‘artificial intelligence of things’ (AIoT). AIoT is a smart and connected network of devices that seamlessly communicate over powerful 5G networks, allowing us to unleash the power of data better and faster than ever. This combination of artificial intelligence (AI) technologies with the internet of things (IoT) infrastructure will achieve more efficient IoT operations, improve human-to-machine interactions, and enhance data management and analytics. The potential of AIoT will gradually open up as AI and IoT increasingly intertwine, facilitated by 5G. The vast amount of data that people can access, and the insights this provides, will fuel semiconductor business growth and digital transformation.

There are around 40 billion connected devices currently in use, with more being added every second. This number is expected to increase to 350 billion devices by 2030. Connected IoT devices are expected to create up to 175 ZB (zettabytes) of data per year by 2025 based on external research. In other words, one zettabyte (1021 byte) equals a trillion gigabytes, and to download 175 ZB of data with an average current internet connection speed would take one person 1.8 billion years. This big data will need to become fast data to allow for ubiquitous computing as we move towards ‘edge’ computing, where processing is brought as close to the source of data as possible, rather than in the cloud.

~~Semiconductor-enabled computing trends~~

Moore's Law is the guiding principle for the semiconductor industry, the motor driving the industry to transit from mobile computing to ubiquitous computing. This transition continues to expand, facilitating three major trends in computing: applications, data and algorithms.

~~Semiconductor industry market opportunities~~

In 2020, more than 953 billion chips were manufactured around the world, feeding a $440 billion industry. In 2021 the semiconductor industry increased the output to over 1.1 trillion chips, turning to a $590 billion market. Growth is set to continue, with market analysts predicting the industry could reach a nearly $700 billion market by 2025.

Semiconductor technology plays a crucial part in shaping the interconnected and intelligent network future, and end markets continue to grow. The overview below shows an outlook on the current market size and market opportunity for the entire industry based on external research.

Market Key driver 2020 market size ($bn) 2025 market opportunity ($bn)
2030 estimation1 ($bn)
Outlook CAGR 2020-2025 (%) Previous outlook CAGR 2019-2024 (%)
Smartphone Continued refresh of all semiconductor content including image sensors 116 162 210 7.0 % 7.9 %
Personal computing High-end compute and Memory, fast conversion to SSD 100 121 132 3.9 % 2.8 %
Consumer electronics Legacy products and packaged ICs, advanced ICs in add-ons 48 74 98 8.8 % 7.7 %
Automotive Strong IC content growth: GPU, sensors, V2X communication sensing 39 82 131 16.3 % 9.5 %
Industrial electronics High-end compute for AI on big data and sensors 50 82 119 10.5 % 7.8 %
Wired and wireless infrastructure Devices for fast data processing, modem, base-station infrastructure refresh 38 53 63 7.0 % 5.5 %
Servers, data centers and storage High processor and Memory growth, hardware accelerations including GPU 76 119 187 9.2 % 10.6 %
466 693 940 8.2 % 7.3 %

1. ~~ASML extrapolation of data to 2030 using ’15-’25 Compound Annual Growth Rate (CAGR)~~

~~ASML ANNUAL REPORT 2021 30~~

~~ASML ANNUAL REPORT 2021 31~~

~~Semiconductor industry dynamics~~

~~Several factors are shaping the semiconductor industry landscape. These are some of the major trends driving industry development, both today and tomorrow.~~

~~Rising consumer demand~~

The convergence of wireless communication, telecom, media and cloud via connected devices continues to drive demand for advanced semiconductors across the globe. Growing populations and urbanization are creating increasing demand for advanced consumer electronic devices. Microchips are at the heart of these devices. Significant growth drivers of the emerging technologies are demanding new and advanced chips that are specifically designed for a wave of new applications. ~~Read more in: Semiconductor industry trends and opportunities and Customer intimacy.~~

~~Global race for talent~~

Highly skilled people with a technical background are scarce in the labor market and competition is growing. Top-tier talent select their employer of choice, not the other way around. The global race for talent is becoming more crucial as the industry competes for a small pool of scientists, engineers and software developers with the skill set to develop innovative solutions.

Companies are trying to staff up for growth, but the high-tech resource pool is shallow. The number of STEM jobs is projected to grow significantly, but it is challenging to fill these given the shortage of qualified candidates. Retaining talent has become crucial for tech companies. ~~Read more in: Our people.~~

~~Global geopolitics~~

The current trade environment presents significant challenges for the global semiconductor industry, and trade tensions and increased protectionism are likely to continue. The global pandemic has alerted governments around the world that global supply chains can create significant geographical dependencies on services, raw materials and end products. Semiconductors play an increasingly important role in the growth and continuity of large industrial complexes and the importance of the semiconductor industry is likely only going to increase. Governments have turned their attention to securing sufficient semiconductor supply to support their local industries, creating higher levels of technological sovereignty and planning significant investments in the semiconductor industry.

The industry is being forced to manage trading costs. Ultimately, this could be passed on to the end market resulting in an increase of prices of devices. Besides the financial implication, trade tensions and protectionism also introduce significant complexity throughout the supply chain and its processes. This is forcing the industry to relook at its global supply chain. ~~Read more in: Our supply chain, How we manage risk and Risk factors.~~

~~Expanding R&D investments~~

In the rapidly evolving semiconductor industry, access to the latest technologies, chip designs and manufacturing processes is the basis for competition. R&D is an ever bigger priority and expense. Chipmakers are faced with supporting applications and end markets that are becoming increasingly complex. Traditional semiconductor companies are challenged to diversify their portfolio, due to the rise of tech platform companies moving toward in-house chip design.

In addition, the incremental costs of executing innovation are rising, requiring higher levels of R&D investments to achieve the same goals. Getting products to the market faster is essential – or the chipmakers risk missing the boat. As a result, there is increased pressure to get solutions to the customers early. ~~Read more in: Innovation ecosystem, Risk factors and Financial performance.~~

~~Changing landscape~~

~~To capitalize the convergence of megatrends such as AI, IoT, 5G and autonomous vehicles, the industry is investing significant amounts in assets that can unlock value across the portfolio.~~

The global semiconductor industry has shown tremendous growth in recent years and this is expected to continue. The industry is refocusing on increasing scale and proficiency in core competencies as well as expanding into new capabilities and new markets. Mergers, acquisitions and joint ventures are expected to be key parts of the chip market strategy, with deals focusing on emerging technologies. ~~Read more in:~~ ~~Semiconductor industry trends and opportunities, Our supply chain~~ ~~and Risk factors.~~

~~Taking action on climate change~~

~~Climate change is an urgent matter around the world. It is a global challenge that requires global responsibility to limit a temperature rise to well below 2°C. The industry has a role to play.~~

The semiconductor manufacturing process consumes large volumes of energy and water resources. Driving Moore’s Law in enabling shrink and, at the same time, improving computing power and storage capacity, fuels the demand for these resources. New architectures and a new way of looking at the entire ecosystem will be required to enhance energy and water resource efficiency. To meet these challenges, the semiconductor industry has to reduce power consumption. ~~Read more in: Climate and energy.~~

~~ASML ANNUAL REPORT 2021 32~~

~~SWOT analysis~~

Acting on the global trends and developments in the semiconductor industry and in society is an important factor in the success of our business, as well as in creating value for our stakeholders. Using these external and internal factors, as well as current and future potential, we have evaluated our company's competitive position in the environment we operate in. The following table provides a brief overview of our strengths, weaknesses, opportunities and threats (SWOT). More information on how we manage the topic can be found in the reference sections.

~~Strengths +~~

~~Weaknesses~~ –

~~• Technology leadership~~

~~(Read more in: Our products and services, Innovation ecosystem)~~

~~• Market leadership~~

~~(Read more in: Our products and services, Our markets, Customer intimacy)~~

~~• Collaborative & enduring innovation~~

~~(Read more in: Innovation ecosystem)~~

~~• World-class workforce with 'can-do' mentality~~

~~(Read more in: Our core values, Our people)~~

~~• Strong financial position~~

~~(Read more in: 2021 Highlights, Financial performance)~~

~~• Maturity of resources and processes to support rapid growth~~

~~(Read more in: Our people, How we manage risk)~~

~~• Limited cost leadership advantage~~

~~(Read more in: Operational excellence, CFO financial review, How we manage risk)~~

~~• Increasing complexity of our products and technology~~

~~(Read more in: How we manage risk)~~

~~Opportunities~~ ä

~~Threats~~ æ

~~• Riding the tech megatrends~~

~~(Read more in: Semiconductor industry trends and opportunities, Our strategy)~~

~~• Holistic lithography portfolio expansion~~

~~(Read more in: Our products and services, Our strategy)~~

~~• Emergence of new customers in semiconductor industry~~

~~(Read more in: Semiconductor industry dynamics)~~

~~• Raising brand awareness~~

~~(Read more in: Our people)~~

~~• Increasing sustainability drive~~

~~(Read more in: Our strategy, Circular economy, Climate and energy)~~

~~• Geopolitical tensions~~

~~(Read more in: Semiconductor industry dynamics, How we manage risk)~~

~~• Supply chain disruption~~

~~(Read more in: Our supply chain, How we manage risk)~~

~~• IP technology leadership pressure~~

~~(Read more: in How we manage risk)~~

~~• Intense competition in certain markets~~

~~(Read more in: How we manage risk)~~

~~• Competition for talent~~

~~(Read more in: Semiconductor industry dynamics, Our people, How we manage risk)~~

~~• Outbreaks and the consequences of climate change~~

~~(Read more in: How we manage risk, Climate and energy)~~

~~ASML ANNUAL REPORT 2021 33~~

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The world around us (continued)

~~Our strategy~~

The long-term growth of the semiconductor industry is based on the principle that the power, cost and time required for every computation on a digital electronic device are continuously reduced by a combination of shrinking – increasing the density of transistors on microchips – and system scaling – improving microchip design, materials and architecture.

For the next decade, we believe that Moore’s Law will continue to evolve from cost of power and time, through system scaling, to measuring energy and time efficiency combined. This means that the semiconductor roadmap will continue to drive scaling in four areas:

•~~Device-level scaling through new transistor structures and associated materials~~

•~~Circuit scaling through optimizing microchip circuit designs~~

•~~Dimensional scaling through shrink~~

•~~Architectural scaling through 3D-integrated circuits~~

Scaling fuels the need for advanced semiconductor solutions, where dimensional scaling (shrink) is key to improving circuit density and cost. To drive affordable scaling into the next decade, chip manufacturers’ roadmaps require continued shrink. Lithography is the key enabler for shrink, since it is the process used to pattern the structures on a microchip.

We invest in a technology-based innovation roadmap that enables the continued shrink of microchips by enhancing resolution with EUV, together with the holistic scaling of overlay and pattern fidelity control. Furthermore, we also invest in continued innovations in DUV and metrology and inspection technology, which supplement the power of EUV-led shrink. This is how we pursue our long-term strategic vision.

We innovate across our entire product portfolio at the same pace as our customers through large and sustained investment in research and development. To accelerate our product development, we engineer in parallel, not sequentially, all the while guarding the product’s quality, reliability, manufacturability and serviceability. This enables us to get our innovations into the hands of chipmakers faster. We collaborate with chipmakers to understand how our technology best fits their needs, including their challenges and visions of the future. It is through this collaboration and trust that we can build for today and develop for tomorrow.

~~Five pillars of our core strategy~~

To realize our long-term strategic vision within the semiconductor industry, we continue to drive our core strategy, which we define around five major pillars: strengthen customer trust, holistic lithography and applications, DUV competitiveness, EUV 0.33 NA for manufacturing and EUV 0.55 NA insertion.

~~ASML ANNUAL REPORT 2021 34~~

~~Our sustainability strategy~~

Through our sustainability strategy that comprises five strategic areas – Climate & energy, Circular economy, People, Innovation ecosystem and Responsible supply chain – we continue to advance our corporate responsibility to create long-term value for our stakeholders as well as contribute to the United Nations’ Sustainable Development Goals (SDGs).

We want to ensure sustainable impact while providing the best value for our stakeholders today and in the future. Staying focused on what matters for our business and stakeholders, is the cornerstone of our strategy. Through a materiality assessment, we identify and assess the topics that are most relevant to our stakeholders and sustain ASML's long-term business growth. ~~Read more in: Non-financial statements - Materiality assessment.~~

For more than a decade, we have been committed to sustainability through multifaceted sustainability programs. We aim to address the issues that are most relevant to us and our stakeholders as part of our duty towards corporate responsibility.

~~ASML ANNUAL REPORT 2021 35~~

Our current sustainability strategy was launched in 2018 for the time period 2019–2025, focusing on five strategic sustainability areas. Over the past years, we have shown continuous improvement and consistent performance while gradually expanding our scope. However, the evolution of our company and the increasing demand for transparent reporting on environmental, social and governance (ESG) aspects of sustainability have made us re-assess our sustainability strategy in 2021.

To this end, we have updated our materiality assessment for the remaining period of 2022–2025, based on major sustainability topics and their relative importance to our business operations. The outcome of this assessment served as the basis for ASML to reshape and reformulate our long-term sustainability ambition and targets for 2025 and beyond to strengthen the correlation between our stakeholder expectations and our sustainability strategies.

~~Raising the bar on ESG sustainability~~

At ASML, we aim to make positive contributions to a digital and sustainable future with lithography products and services that enable further shrink. As a responsible organization, we want to do more to become a leader in sustainability, using our innovation strengths to get there.

We believe digital technologies are the cornerstone of a sustainable society. Enabled by microchips, they form the heart of tools and solutions that can help society make progress and address global challenges, such as tackling climate change by reducing energy consumption and greenhouse gas (GHG) emissions.

Our products continue to support the continuation of Moore's Law, which makes computation, communication and countless aspects of our lives more energy efficient. Pursuing our vision, we develop lithography technology to continue to produce microchips that are three times more energy efficient every two years. In addition, we are helping our customers to minimize the use of materials and energy required to produce advanced microchips.

We have defined a roadmap to get us to net zero waste disposal to landfill by 2030 and net zero value chain emissions by 2040. We aim to achieve this with a diverse, engaged and talented workforce and a strong network of innovation partners, all with a keen eye for the needs of a more sustainable society. To be successful, we need to embed this ESG ambition into our corporate culture, mindset and everyday operations.

~~Our ESG sustainability roadmap 2022–2025~~

Building on our current sustainability strategy and the progress we have made, we have re-assessed and are currently enriching our roadmaps toward 2025. We look at our impact at various levels, from society at large to our own operations. As a result of this extensive re-assessment, we have consolidated the material issues and our impact areas to nine sustainability themes categorized by the environmental, social and governance (ESG) aspects of our company, business and operations.

~~ASML ANNUAL REPORT 2021 36~~

~~Category~~

~~Themes~~

This process is repeated until the wafer is covered in patterns, completing one layer of the wafer’s chips. To make an entire microchip, this process is repeated on layer after layer, stacking the patterns to create an integrated circuit (IC). The simplest chips have around 40 layers, while the most complex can have more than 150 layers.

The size of the features to be printed varies depending on the layer, which means that different types of lithography systems are used for different layers – our latest-generation EUV systems are used for the most critical layers with the smallest features, while our ArFi, ArF, KrF and i-line systems can be used for less critical layers with larger features.

~~Environmental~~The lithography process

~~Energy efficiency & climate action~~Inside a fab

The making of a microchip involves a multiple-step sequence, including lithography to create a pattern in the photoresist and chemical processing steps such as deposition, photoresist coating, ion implantation and etching, to create electronic circuits on a silicon wafer.

Microchips are made of layers about 50-150 nm thick that are built on the semiconductor substrate one layer at a time. The most advanced chips require EUV and DUV immersion lithography tools to make them. Simpler microchips, such as sensors for loT applications, can be produced using DUV dry machines.

~~Circular economy~~

~~Social~~When you break it down, a lithography system is essentially a projection system. In our DUV systems, light is projected through a blueprint of the pattern that will be printed (known as 'mask' or 'reticle'); in our EUV systems, light is reflected via the reticle. With the pattern encoded in the light, the system’s optics shrink and focus the pattern onto a photosensitive silicon wafer. After the pattern is printed, the system moves the wafer slightly and makes another copy on the wafer.

A semiconductor fabrication plant, commonly known as a ‘fab’, is a factory where microchips are manufactured. The heart of a fab is the cleanroom. All fabrication steps take place here, so the environment is controlled to eliminate dust on a nanoscale. Under the cleanroom floor is the ‘sub fab’, which contains auxiliary equipment such as the drive laser. The utility fab – containing the pumping and abatement systems for vacuum and cooling – is usually found one floor below this.

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Attractive workplace for all
Innovation ecosystem
Responsible supply chain
Valued partner for our communitiesGOVERNANCE

FINANCIALS

The world around us (continued)


~~Governance~~			Integrated governance Stakeholder engagement Transparent reportingSemiconductor application areas

~~Environmental~~

Predictive healthcare

Predictive analysis of health data from many sources combined with machine learning and AI is helping to improve healthcare services and patient outcomes.

Read our story on page 22 >

Smart home

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

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.

Read our story on page 149 >

Autonomous robotics

A new generation of lightweight robots connected to a greater network and fitted with smart sensors enables humans and machines to work side by side,
with greater safety and efficiency.

Energy transition

Semiconductors play a key enabling role in the global shift from fossil-based energy production and consumption to renewable energy sources like wind and solar.

Read our story on page 40 >

Global connectivity

5G enables a new kind of network that is designed to connect virtually everyone and everything across the world – including machines, objects and devices.

Mixed reality

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

Read our
story on
page 69 >

Smart cities

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

Smart industry

Smart industry devices use real-time data analytics and machine-to-machine sensors to optimize processes to foresee bottlenecks and prevent errors and injuries.

Self-driving cars

These vehicles are literally supercomputers on wheels, with advanced driver-assistance systems (ADAS) enabled by electronics and semiconductors.

ASML ANNUAL REPORT 2022

SMALL PATTERNS. BIG IMPACT.

STRATEGIC REPORT

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						FOOD SECURITY
						Lower cost, higher yield
						Farmland in remote locations, particularly in emerging economies such as Kenya and Ethiopia, can be extremely vulnerable to climate change. As microchips become smaller and cheaper, access to mobile devices is increasing across the world. Farmers are now using smartphones to access vital weather information – aiming to ensure better crops and greater food security.
						Read more online

ASML ANNUAL REPORT 2022

OUR BUSINESS AND ESG STRATEGY

STRATEGIC REPORT

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Focused on long-term value creation


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

We ~~develop lithography~~provide chipmakers with everything they need – hardware, software and services – to mass produce patterns on silicon through lithography. Our customers depend on our products to bring cutting-edge technology to ~~continue~~life. To meet their needs, we invest in the future. We invest in research and development to ~~produce microchips~~create chipmaking machines that ~~are more energy efficient with each new generation, replacing many energy-inefficient technologies, products~~can deliver the smallest features and ~~services. Reducing~~highest yields.

We invest in our ~~environmental footprint~~factories and ~~managing our waste – both from our operations and~~facilities around the ~~use of~~world so we can meet increasing customer demand for our products and services, ~~– is key~~driven by strong growth rates across both advanced and mature semiconductor markets, continued innovation, more foundry competition and technological sovereignty. The number of machines we plan to ~~our circular economy approach and sustainability practices.~~

We maintain our ambition to achieve carbon neutrality with net zero emissions in our operations (scope 1 and 2) by 2025. At the same time, we raise our ambition on scope 3 emissions. Through close collaboration with our tier-1 suppliers we aim to achieve net zero emissions in our supply chain by 2030. In addition, through industry collaboration on a joint roadmap, we strive toward net zero emissions for our products’ use at our customers (scope 3) by 2040.

~~Social~~

As a multinational technology company, we impact many people’s lives, both directly and indirectly. Driven by our values and commitment to corporate responsibility, we want to have a positive role in society – for our employees, the communities around us, and everyone involved in our innovation ecosystem and supply chain.

We aim to provide the best possible employee experience, wanting the talent we need to choose to work for us and want to stay with us for the long run. We foster a culture where different identities, backgrounds, talents and passions are valued and celebrated, and we enable our leadership to bring out the best in people – leading through trust, empowerment and accountability. We also play an active roledeliver in the ~~communities around us. We aim~~coming years continues to ~~be a valued and trusted partner, improving the quality of life for all, with a special focus on people in underserved communities.~~

We strengthen innovation and nurture young entrepreneurship in our industry and innovation ecosystem. We collaborate closely with our customers and partners in our value chain to help them achieve their goals and realize new technology and applications. We strive to meet industry social, ethical and environmental standards, and we require our suppliers to meet them as well.

~~Governance~~

With the growth of the company, organizational structures have become more complex. We champion good integrated corporate governance, of which independence, accountability and transparency are the most significant elements. These are also the elements on which a relationship of trust, respect and mutual benefit between us and our stakeholders – shareholders, customers, suppliers, employees and society – can be built. Continuous stakeholder engagement, in which we embrace open dialogue and knowledge-sharing through various channels and at a variety of levels, is important in our innovation-driven industry and helps us to identify areas of improvement.

To achieve our ambitions within the timeframe set, we focus on strengthening our organization’s governance structure to ensure that each project on our ESG sustainability roadmap is embedded in operational business plans and is best-equipped to meet its targets.

~~Reader’s guidance on ESG topics in this annual report~~

The 2021 Annual Report outlines ASML’s strategy, programs and performance during the 2021 calendar year. In terms of sustainability performance, we refer to the five strategic areas of sustainability – Climate & energy, Circular economy, People, Innovation ecosystem and Responsible supply chain – consistent with our disclosure since 2019.

While we have launched our updated ESG focus areas on ASML’s Investor Day on September 29, 2021, the process of defining the metrics to measure our performance and success was underway and implementation will start in 2022. We will report on our updated ESG ambitions using this set of metrics per our 2022 Annual Report.

~~ASML ANNUAL REPORT 2021 37~~grow.

~~ASML ANNUAL REPORT 2021 39~~

~~How we create value~~

~~The success of our business depends on strong, sustainable relationships with all stakeholders in the value chain to achieve the desired innovations in semiconductor technology.~~ We ~~use input from stakeholders and trends~~also invest in our ~~industry and society~~workforce, the people who give life to ~~develop~~ our ~~strategy, our products and services. We define our stakeholders as our shareholders, customers, suppliers, employees and the society we operate in.~~

We are committed to creating long-term value for our stakeholders and generating broader impact towards the UN's Sustainable Development Goals (SDGs). We base our value creation model on the framework developed by the International Integrated Reporting Council (IIRC), in which we modeled the capital resources we use for our business activities in the executing of our strategy, to the financial, environmental, social and governance topics. Each capital resource is interrelated, and business activities often require a mix of capital. For each topic we developed performance indicators that measure progress on the outcomes against the capital resources used. We aim to use our capital resources in the most effective way by maximizing their potential value and minimizing their negative impact as part of our continuous drive to improve and to generate long-term value for all of our stakeholders.

~~Stakeholder value~~

Our purpose and strategy is aimed at creating both short- and long-term value through our financial, environmental, social and governance focus areas and topics. The short-term value – time horizon of one year – is expressed in the 2021 outcome performance indicators. More information on our progress can be found in subsequent sections of this annual report. The long-term value – time horizon of five to ten years – is described below, which is categorized in the value created per stakeholder. Lastly we have linked our long-term impact along the entire value chain to the SDGs set by the United Nations. We focus on five SDGs where we can make the greatest impact: SDG 4 Quality education, SDG 8 Decent work and economic growth, SDG 9 Innovation and infrastructure, SDG 12 Responsible production and consumption, and SDG 13 Climate action.

~~Long-term stakeholder value~~

~~Our core~~ values – challenge, collaborate and ~~care – are a key contributor~~care. They come from more than 100 countries to ~~our culture aimed at long-term value creation~~work together and ~~as such an important enabler in the execution of our strategy. We define our long-term value for all our stakeholders as follows:~~

~~Shareholder value~~

advance ASML's mission. Our ~~large and sustained investments in research and development to execute our business strategy enable~~values push us to ~~maintain~~invest in being a good neighbor and global citizen. From supporting our ~~position as~~preservation to minimizing our environmental impact, our initiatives lay the groundwork for long-term sustainable growth.

To make our vision for the future a ~~leader in~~reality, we need to collaborate with our customers and suppliers, across departments, sectors and continents, effectively executing improvements and processes across ASML and our ecosystem to bring our holistic ~~lithography. Our innovations contribute~~lithography solutions to the ~~long-term growth of~~market. Our investors enable the innovation that advances our technology and creates value. Together, we aim to lead the semiconductor industry ~~which contributes~~into a sustainable and profitable future.


	Our core strategy is to

1.		Grow our core holistic lithography business

2.		Secure unique supply chain capabilities to ensure business continuity

3.		Move toward adjacent business opportunities


			4.						Increase our focus on ESG sustainability

			With a current focus on five priorities

									Strengthen customer trust

									Holistic lithography

									DUV competitiveness

									EUV.33 NA for manufacturing

									EUV.55 NA insertion


			Grow our holistic lithography business two- to threefold by 2030

Fueled by strong customer demand, we expect substantial growth opportunities for our holistic lithography business in this decade. We will continue to increase the capacity of our ~~solid financial performance~~company to meet this demand, both for mature and ~~capital return policy.~~advanced lithography systems, preparing for cyclicality while sharing risks and rewards fairly with all stakeholders.

~~Customer value~~Based on different market scenarios, we see an opportunity to achieve the following in 2025 and 2030:

~~As one of the world’s leading manufacturers of chip-making equipment,~~–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%

To realize this significant growth, we ~~invest~~will focus on protecting and gaining market share by delivering on our technology roadmap, addressing our growth and execution challenges, and securing competitiveness in ~~innovations~~DUV and metrology and inspection.

The semiconductor industry innovates at an incredible pace to deliver on Moore's Law, producing microchips that ~~enable~~are three times more energy-efficient every two years. By continuing to advance our lithography and patterning control solutions for silicon substrates, we will provide the continued shrink and reduction in edge placement error that our customers' semiconductor roadmaps require over the next decade.

Our holistic lithography approach integrates a set of ~~microchips. With EUV 0.33 NA and the next-generation EUV 0.55 NA platform, we pursue the continuation of Moore’s Law. This allows our customers~~products that enables chipmakers to develop, ~~ever-more powerful chips for new applications~~optimize, and ~~devices. At~~control the ~~same time, we help our customers to reduce their costs and environmental footprint by embedding circularity principles in our products.~~

~~Supplier value~~

As we grow and our innovations enter ever-higher levels of complexity, we want our suppliers to grow with us. We innovate together with our supplier network, sharing knowledge and tapping into each other’s technology expertise. Long-term relations, close cooperation and transparency with our suppliers are keysemiconductor production process. In addition to our ~~success.~~lithography systems, we provide customers with process control solutions that include computational lithography, optical and e-beam metrology, high-resolution inspection, and scanner and process control software solutions. Our comprehensive product portfolio is aligned to our customers’ roadmaps, delivering cost-effective solutions in support of all applications, from leading-edge to mature nodes.

~~Employee value~~

~~Our workforce has grown steeply in recent years, almost doubling from around 16,500 FTE in 2016~~We aim to ~~over 32,000 FTE in 2021. For example, with 16,727 employees at our headquarters in Veldhoven,~~innovate responsibly by improving the Netherlands, we are a major employer in the community. We are a proud employer of 122 nationalities, allowing for diverse points of view in our quest to develop the best ideas. Developing our people is crucial to the sustained successsimplicity, sustainability, serviceability, manufacturability and scalability of our ~~business, so we invest in their career development~~future lithography solutions. By considering the cost and ~~well-being.~~

~~Societal value~~

~~With our continuous innovations, we enable~~complexity constraints of a new technology ~~that supports the growth~~from day one, we can efficiently allocate our resources and ~~transformation of the semiconductor industry, using artificial intelligence to offer~~cost-effectively deliver new applications and services to address society’s needs. Through our innovation ecosystem we nurture innovation by giving back to society, such as by sharing our expertise with universities and research institutes, supporting young tech companies, and promoting STEM education worldwide. We also develop groundbreaking technology to reinforce our innovation footprint and minimize our environmental footprint. We do this by seeking to minimize waste and maximize the value of material we use, and execute our carbon footprint strategy and product energy efficiency strategy.

~~Sustainable impact~~

~~We believe the chip industry is in a unique position to tackle socioeconomic and environmental challenges. We focus on the challenges and sustainability areas that are most relevant~~capabilities to our ~~stakeholders and where we believe ASML can have the greatest~~

~~ASML ANNUAL REPORT 2021 40~~

~~impact in the long term.~~ ~~Read more in: Non-financial statements - Materiality assessment and Semiconductor industry trends and opportunities - SWOT analysis).~~ ~~We focus on those United Nations Sustainable Development Goals on which ASML can make a real difference.~~

~~ASML ANNUAL REPORT 2021 41~~customers.

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Focused on long-term value creation (continued)

~~Message from the CFO~~

Secure unique supply chain capabilities to ensure business continuity

Increase our focus on ESG sustainability

Our five strategic priorities

Our ESG Sustainability strategy

We believe digital technologies are among the most important tools available to help society make progress and address environmental 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 greenhouse gas emissions.

We recognize that development of technology comes with new problems to solve, such as the energy use of devices and data centers, increased waste and material use, and social challenges. We believe our industry has a great opportunity and a moral obligation to drive sustainable growth.

We are committed to using our innovations to also enable the semiconductor industry to reduce its footprint. We aim to help our customers minimize materials and energy required to produce advanced microchips. Within our own operations, including our supply chain, we are also looking closely at our social and environmental impact.

Through the continued execution of our strategic priorities, we aim to provide cost-effective solutions for our customers, enable the extension of the industry roadmap into the next decade, and support our long-term commitment to our environmental, social and governance (ESG) ambitions.

Central to our strategic approach, we collaborate with our stakeholders to deliver on the ambitions of our ESG Sustainability strategy:

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, climate action and circular economy.

Social

We want to ensure that responsible growth benefits all our stakeholders – to have an attractive workplace for all, a responsible supply chain, to fuel innovation in our ecosystem and to be a valued partner in our communities.

Governance

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

Our ESG Sustainability strategy is based on a materiality assessment where we determine the most significant impacts for our company. Our aim is to create long-term value for our stakeholders, while also contributing to the United Nations’ Sustainable Development Goals (SDGs).

We will continue to focus on securing business continuity in our core lithography business and controlling future unique, roadmap-enabling technologies. Our supply chain is a critical enabler of our ambition to grow our core business. In order to deliver our growth aspirations, we need to secure innovation, scale-up and continuity, sound business conditions and a constructive collaboration model with our unique technology suppliers. We are pro-actively assessing our supply base for projected demand and control of future roadmap-enabling capabilities.

Strengthen customer trust

DUV competitiveness

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 re-use, and drive improvements in performance and energy efficiency of our products to reduce costs and waste.

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

EUV .33 NA for manufacturing

Move toward adjacent business opportunities

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

Beyond, if core growth is secured, we can move into adjacencies 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, by leveraging product and technology synergies, and by tapping into different future semiconductor scaling engines.

Read more on page 118 >

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OUR BUSINESS MODELCONTINUED

STRATEGIC REPORT

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Creating value within the fab

We are a critical part of the chip manufacturing process, but
our world-leading technology would not function without
other key partners in the value chain.

Digital technology is required to help people and society progress

See page 35 >

1. Deposition

2. Photoresist coating

3. Lithography

4. Baking and developing

5. Etching

6. Ion implantation

7. Removing photoresist

The first step is typically to deposit thin films of semiconducting material onto the silicon wafer.

The wafer is then coated with a light-sensitive layer called a ‘photoresist’.

Light is projected onto the wafer through a reticle. Optics shrink and focus the reticle pattern. This pattern is then printed onto the wafer when the resist layer is exposed to light.

The wafer is then baked and developed to make the pattern permanent, with a pattern of open spaces.

Materials such as gases are used to etch away material from the open spaces, leaving a 3D version of the pattern.

The wafer may be bombarded with positive or negative ions to tune the semiconductor properties.

After the layer is ionized, the remainder of the photoresist coating that was protecting areas not to be etched is removed.

ASML ANNUAL REPORT 2022

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Creating value with our holistic approach

Our holistic approach is based on the intelligent integration of computational lithography, lithography systems and metrology and inspection.
This enables shrink by optimizing setup and control of the system’s process window during high-volume manufacturing – improving the
availability of our lithography systems, reducing downtime and overall costs, and optimizing yield for our customers.



Our world-leading systems									Lithography



			Computational lithography						Metrology and inspection

			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.						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 inline adjustments can optimize performance as part of the manufacturing process.

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The value we create for our stakeholders

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.

Shareholders

Customers

Suppliers

Employees

Society

Our large and sustained investments in research and development help us execute our business strategy and enable us to maintain our position as a leader in holistic lithography. Our innovations contribute to the long-term growth of the semiconductor industry, which contributes to our solid financial performance and cash return policy by means of share buyback and paid dividends.

We invest in innovations that enable our world-leading lithographic systems to continue to shrink microchips. With EUV 0.33 NA and the next-generation EUV 0.55 NA platform, we pursue the continuation of Moore’s Law. This allows our customers to develop ever more powerful chips for new applications and devices. At the same time, we help our customers reduce costs and their environmental footprint.

We innovate together with our strategic partnerships, sharing knowledge and tapping into each other’s technology expertise to drive ever higher levels of complexity and capability.

We conduct our business in a sustainable and responsible manner, where long-term relationships, close collaboration and transparency with our suppliers are key to our success.

ASML is a growth business providing employment opportunities around the world. With our headquarters in Veldhoven, Netherlands, we are a major employer in the community.

We invest in people’s career development and well-being, and provide a diverse and inclusive environment where people can achieve their full potential. This results in both high employee engagement scores and low attrition.

Our continuous innovations enable new technology to support the growth and transformation of the semiconductor industry to help address society’s needs. As a global technology leader and employer, we play an active role in the local communities we operate in. 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 STEM education worldwide. We also develop ground-breaking technology to minimize our own environmental footprint. We do this by seeking to minimize waste and maximize the value of the materials we use, and executing our carbon footprint strategy and product energy-efficiency strategy.

€4.6bn

€21.2bn

€12.4bn

78%

€11.5m

87%

Share buyback

Total net sales

Total sourcing spend

Employee engagement score

Community investment

Re-use rate of parts returned from field and factory

€5.80

345

5,000

6.0%

€14.7m

38.1 kt

Proposed annualized dividend per share

Lithography systems sold

Number of suppliers (rounded)

Attrition rate

Contribution to EU
research projects

Emissions from manufacturing and buildings (scope 1 + 2)

€14.14

24%

95%

11.9 Mt

Earnings per share

TechInsights Customer Satisfaction ranking of the 10 Best Large Suppliers of Chip Making Equipment

Gender diversity – % females inflow

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

Indirect emissions from total value chain (scope 3)

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Engaging with stakeholders



We develop our materiality assessment based on GRI, which includes the principle of stakeholder engagement, where we identify key topics to discuss with the relevant stakeholder group.

Read more on page 71 >

We think about our stakeholders as belonging to five groups: shareholders, customers, employees, suppliers and society. These groups can affect or be affected by our business, and we embrace continuous open dialogue and knowledge sharing for the benefit of all parties.

This group consists of current shareholders, potential active and passive investors, financial and ESG analysts. We aim to help them to understand our (long-term) investment opportunities. We communicate with them about our financial growth strategies and opportunities, financial performance and outlook and shareholder returns as well as our sustainability strategy.

Shareholders

How we engage

–Direct interaction with the Investor Relations department (e.g. calls, ESG performance surveys, email exchange, site visits – at ASML and/or at the investor)

–AGM

–Investor Day

–Company quarterly results presentations and press releases

–Various investor conferences and roadshows

–Various sustainability questionnaires, assessments and survey feedback

Main topics

– Financial results

– Cash return

– Market outlook

– Products and end market

–Customer adoption

– Geopolitics

– Business summary

– Company roadmap and product portfolio

– ESG targets and results: human capital development, carbon footprint, waste, recycling, energy consumption, social responsibility in supply chain

– Board diversity and remuneration

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Engaging with stakeholders (continued)

We are a manufacturer of leading-edge chipmaking equipment. We enable our customers to create the patterns that define the electronic circuits on a chip. Our customers are the world’s leading microchip manufacturers, and our success is inextricably linked with theirs.

Customers

How we engage

–Customer feedback survey

–Direct interaction via account teams and zone quality managers

–Voice of the Customer sessions

–Technology Review Meetings (between our CTO, product managers, other executives and our major customers)

–Executive Review Meetings (between ASML executives and major customers)

–Different technology symposia and special events

Main topics

–Products and technology

–Customer roadmap

–Innovation

–Customer support, cost of ownership and quality

–ESG: energy efficiency, integrating ESG sustainability in strategy and roadmaps, waste reduction and reuse of materials and safety awareness and behavior

Our customers are the world's leading microchip manufacturers.

We want to provide a unified direction and anchor ASML’s identity deep in the organization. To do this, we aim to help people embrace our values, familiarize themselves with our strategy and purpose and uphold our Code of Conduct principles. Employee engagement is important to the success of our company and employer brand enables us to attract talent. We are committed to good labor practice and respect human rights.

Employees

How we engage

–Employee engagement survey

–Training and development programs, including employee evaluation/feedback

–ASML's Speak Up service

–Works Council

– Employee networks, such as Next, Women/WAVES, Seniors, Parents, Veterans, Green ASML, Atypical, SHADES and Proud

–Internal communication and awareness (e.g. intranet, Ethics program, department employee meeting, lunch with Board members)

–Onboarding program for new employees

–All-employee meeting and senior management meetings

Main topics

–Training and development

–Code of Conduct/Ethics

–Strategy

–Diversity and inclusion

–Labor conditions

–Vitality

–Human rights

–Sustainability target and performance

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Engaging with stakeholders (continued)

We rely heavily on our supplier network to achieve the innovations we strive for. Our goal is to ensure we get the products, materials and services we need to meet our short- and long-term needs. To this end, we invest in developing our supply landscape to help suppliers meet our requirements with regard to quality, logistics, technology, cost and sustainability. We are committed to a responsible and sustainable supply chain.

Suppliers

How we engage

Main topics

–ASML’s Supplier Day

–Direct interactions via supplier account teams/procurement account managers

–Supplier audits

–Site visits

–Newsletter

–RBA self-assessment questionnaire (SAQ)

–ASML's Speak Up service

–Products and technology

–Quality, logistics, technology, total cost and sustainability (QLTCS)

–Supplier performance and risk management

–IP/information security

–Business continuity

–RBA compliance (ethics, labor practice, health and safety, and environment)

–Scarce (natural) resources, 3TG, hazardous substances, etc.

–Circularity (re-use, recycling, refurb)

–Scope 3 carbon footprint

We are committed to conducting our business in an accountable and caring way, for our employees and the wider communities we operate in. As a global technology leader and employer, we play an active role in the local communities in which we operate. We also develop ground-breaking technology to minimize our own environmental footprint. We do this by seeking to minimize waste and maximize the value of material we use, as well as executing our carbon footprint strategy and product energy efficiency strategy.

Society

How we engage

Main topics

With industry unions and associations

–Member conferences and technical forums

–Member consultation on standards

–Brainport Eindhoven

With governments and authorities

–Dialogue with tax authorities

–Relevant EU roundtable discussions

–Compliance reporting

–Proactive dialogue with government, authorities and municipalities

With communities, universities, media, NGOs and others

–Website www.asml.com

–Community engagement programs and events

–Young high-tech community (HighTechXL, Make Next Platform, Eindhoven Startup Alliance)

–Company visits

–Press releases, interviews, engagement calls and meetings

–Employee development

–Charity, sponsoring and donations

–Collaboration in innovation

–Strengthening innovation in the industry, in society and where we operate

–Social and environmental responsibility

–Promotion of science, technology, engineering and mathematics (STEM) education

–Local developments

ASML ANNUAL REPORT 2022

SMALL PATTERNS. BIG IMPACT.

STRATEGIC REPORT

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FINANCIALS




						ENERGY TRANSITION
						Tiny connections, huge implications
						The shift to renewables is helping deliver the clean, affordable energy the world needs to counter climate change. Semiconductors are absolutely central to this shift – harnessing, converting, transferring and storing energy as electricity, and ensuring that national power grids are both responsive and robust.
						Read more online

ASML ANNUAL REPORT 2022

Q&A WITH THE CFO

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

Strong demand driving an outstanding performance

In conversation with our Executive Vice President and Chief Financial Officer

Roger Dassen

From a financial perspective, how did ASML perform in semiconductor end markets, driven by the acceleration of the digital infrastructure, and increasing lithography intensity on future advanced nodes fuel demand for our products and services. These dynamics drive the growth of our company, in terms of sales, our workforce and the investments we make to increase our capability in support of our customers’ wafer demand. With our continued investments in technology leadership we have created significant value for all our stakeholders and we have the right tools in place to achieve continued sustainable growth for the years ahead.

~~Record net sales in 2021~~2022?

This was ~~another growth~~an outstanding year for ASML, ~~setting~~with a record ~~with €18.6~~€21.2 billion in net sales – an increase of ~~€4.6 billion. The COVID-19 crisis has accelerated digitalization worldwide, which has led~~€2.6 billion over 2021.

Our gross profit increased, mainly due to ~~a strong~~the volume increase in ~~demand~~DUV, our NXE:3600D value proposition and continued growth in our installed base business. The overall gross profit, as a percentage of total net sales, decreased from 52.7% in 2021 to 50.5% in 2022, due to fast shipments, the current strong inflationary effects relating to increasing material, freight and labor and the increased factory costs required to ramp up production and keep up with customer demand. In addition, there were costs incurred due to the preparations for High-NA.

Our strong net income and continued working capital improvement initiatives resulted in net cash provided by operating activities of €8.5 billion in 2022. This allowed us to return cash to our ~~customers across all market segments from both advanced~~shareholders through dividends and ~~mature nodes.~~our share buyback programs.

In 2022 we repurchased shares for a total consideration of €4.6 billion and paid dividends totaling €2.6 billion.

What were the key drivers for these increases?

Our Logic system ~~sales grew by €2.2 billion, or 30%. This was due to~~ customers ~~continuing to see~~again saw strong demand for both advanced and mature nodes in support of the ongoing digital transformation, which includes secular growth drivers such as 5G, AI, virtual reality, gaming, simulation and visualization applications, and the intelligent cloud and edge that will be an integral part of the growing digital infrastructure. The rise in Memory system sales ~~grew~~was driven by ~~€1.1 billion, or 39%, as a result of~~continued strong end-market demand for ~~servers and smartphones.~~servers.

~~In EUV we see an increased layer adoption by customers~~




We are increasing our output capability for EUV as well as DUV.”
Roger Dassen
Executive Vice President and Chief Financial Officer

Growth in ~~Logic and DRAM. Adoption is expected to continue to grow to reduce patterning complexity and cost and support~~ our customers' surging demand. This led to EUV system revenue of €6.3 billion in 2021, an increase of €1.8 billion compared to 2020. We successfully shipped and recognized 42 EUV systems in 2021, including our first NXE:3600D for use in high-volume manufacturing. In total we shipped 26 NXE:3600Ds in 2021. Compared to the NXE:3400C the NXE:3600D has around 30% better performance in product overlay and offers 15% to 20% increased throughput productivity.

~~Net~~ service and field option sales ~~grew by €1.3 billion, or 35%,~~was primarily driven by ~~an increase~~the continued scaling of customers' installed base, which resulted in increased service sales to support our systems used in their ongoing operations during the ~~sales~~systems life cycle.

What were the year’s main challenges?

As our CEO Peter Wennink explained in his message, our ability to meet customer demand was impacted by several issues in 2022, including the war in Ukraine and the aftermath of ~~productivity, overlay and focus upgrade packages, in combination~~COVID-19.

ASML ANNUAL REPORT 2022

Q&A WITH THE CFOCONTINUED

STRATEGIC REPORT

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FINANCIALS

Strong demand driving an outstanding performance (continued)

In conversation with our Executive Vice President and Chief Financial Officer

Roger Dassen

We are working hard to keep up with ~~a growing installed base. With the global chip shortage, our customers have pulled forward~~customer demand, for ~~our productivity enhancement packages, which provide the most effective and efficient way to increase wafer output as they can be installed quickly.~~

~~Challenges in our supply chain~~

~~To meet the strong demand across our entire product portfolio, we have been~~example by driving down our manufacturing cycle times across our entire product portfolio and ~~we are working~~by collaborating with our supply chain to increase our output capability for EUV as well as DUV. ~~In the process of increasing capacity to meet the increased demand, the after-effects of the COVID-19 crisis were felt in the form of some~~To address materials shortages, inwe are significantly expanding capacity together with our supply ~~chain. We worked closely with our suppliers and customers to address the materials shortages to support the increased worldwide demand across all our business lines, but~~chain partners, although these shortages ~~did result in~~have already led to the late start onof the assembly of a number of systems. ~~In addition, we experienced issues~~As our tools are in ~~the start-up of our new logistics center. As a consequence of these factors and the high-demand environment,~~high demand, our customers are ~~more~~ frequently requesting fast ~~shipments, where we expedite the delivery of systems by shipping before completion~~shipments. A fast shipment process skips some of the ~~normal Factory Acceptance Tests (FAT),~~testing in ~~order~~our factory. Final testing and formal acceptance then takes place at the customer site. This leads to ~~bring systems into production as quickly as possible. This resulted in~~a delay of revenue recognition ~~being delayed from shipment~~for those shipments until ~~after~~ formal customer acceptance, ~~tests~~but does provide our customers with earlier access to wafer output capacity.

Additionally, I would like to highlight that safety is at the heart of our business. While we did not encounter any ASML work-related fatalities, regrettably two contracted workers had a fatal accident on ASML premises in Wilton in 2022. We are ~~completed in the field.~~doing everything we can to minimize this risk and are working proactively at all levels to deliver on our mission to ensure injury-free and healthy working conditions.

~~ASML ANNUAL REPORT 2021 43~~

Are the current financial uncertainties affecting capital investment plans?

AsAlthough the current macro environment is creating uncertainties, demand for our products continues to exceed supply, and we remain committed to our capital investment plans.

While we are aiming to meet demand in full, we are preparing for cyclicality at the same time. We are looking to invest timely and sustainably in additional capacity while also embedding flexibility so that we can not only grow fast but also adjust rapidly in a ~~result~~down cycle.

Further, we will continue to make the investments required to ramp up our capacity in anticipation of the ~~start-up issues~~medium- to long-term growth of our industry. The expanding application space for semiconductors and secular trend is driving structural demand. We need to raise capacity and plan to further increase our EUV and DUV shipments to support our customers’ productivity roadmaps.

What progress have you made in the project to transform the finance organization?

We are experiencing growth at an unprecedented rate, which creates an increasing demand for the finance organization to support the business. To set up our company and people for future success, we took a snapshot of the current state of our finance organization and created a vision for our future.

Our vision is to deliver a strong foundation and best-in-class integrated solutions. To embed the new ~~logistics center~~vision and way of working, our organization is currently executing multiple projects to improve, automate and continuously monitor its end-to-end processes by using new digital tools and robotics.



						We are experiencing growth at an unprecedented rate.”

						Roger Dassen
						Executive Vice President and Chief Financial Officer

What is the outlook for ASML, from a financial perspective?

There is clearly a lot of uncertainty in ~~Veldhoven~~the current semiconductor market due to a number of global macro concerns such as inflation, declining consumer confidence and a real chance of a recession. As we have shown in the ~~materials shortages~~past, in such an environment we need to maintain flexibility in our supply chain, ~~we experienced delays~~ in ~~shipments. In order~~our workforce and in our manufacturing capability. We aim to address our customers' needs for additional wafer capacity, we expedited delivery of productivity upgrades. Overall, our capabilities to support the strong customer demand has contributed to total net sales growing by 33% in 2021.

~~Outlook~~

~~The ongoing digital transformation and current chip shortage further fuel the need to increase~~adjust our capacity to meet future demand, preparing for cyclicality while fairly sharing risks and rewards with all our stakeholders. This also means we need to invest timely and sustainably in additional capacity to plan to meet demand. Clearly these investments could put pressure on the ~~current and expected future demand. We expect continued~~gross margin next year, but they are inevitable if we want to maintain the longer-term growth in our Logic business assuming that customer demand remains strong for both advanced and mature nodes. For Memory this year's growth is expected to continue into 2022 as lithography tool utilization remains very high, while customers indicate they see strong demand growth for DRAM and NAND. To meetprofile of the company.


			€2.6bn
			Net sales increase

			50.5%
			Gross margin

			€4.6bn
			Repurchased shares

			€2.6bn
			Dividends paid

ASML ANNUAL REPORT 2022

Q&A WITH THE CFOCONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

Strong demand driving an outstanding performance (continued)

In conversation with our Executive Vice President and Chief Financial Officer

Roger Dassen

In the near term, fear of a recession could impact the demand for ~~this expected bit growth,~~semiconductors. We are starting to see diverging demand dynamics across our market segments, with some customers ~~will need~~running our systems at lower utilization levels, and others adjusting the desired timing of their demand to ~~add~~respond to near-term uncertainties. The vast majority of our customers, however, are still requesting shipment of their lithography systems as soon as possible. This is driven by the strategic nature of these investments in support of technology transitions, capacity additions that require time for wafer output to materialize, as well as ~~continue~~governments' global investments in pursuit of technology sovereignty.

The current strong inflationary effects relating to ~~make node migrations. As~~material, freight and labor costs impact our suppliers and put pressure on our margins. In general, customers ~~migrate~~understand our request to ~~more advanced nodes~~share these extraordinary cost increases, and as such we ~~also~~ expect to ~~see~~receive a reasonable level of inflation compensation over the course of 2023.

The scarcity of highly skilled people in the labor market is also leading to higher costs. To maintain our fast pace of innovation and ensure our long-term success as a company, we need to attract and retain the best talent – and this is requiring heavy investment in our hiring activities as well as in the provision of opportunities and an ~~increase in EUV demand~~environment where employees can develop their talent, feel respected and thrive.

The uncertainties around geopolitics continue. Press reports indicate that steps have been taken by the US, Netherlands and Japan to further restrict the export of semiconductor manufacturing equipment to China. This would cover advanced lithography tools as well as other types of equipment. The terms of this agreement have not been publicly disclosed and remain confidential for ~~Memory. Our services~~now. We expect that it will take many months for the governments to write and ~~upgrades business~~enact new rules. While these rules are being finalized, ASML will continue to ~~scale as~~engage with the authorities to discuss the potential impact of any proposed regulation in an effort to ensure the impact on the global semiconductor supply chain is properly assessed. Given the timelines and current market situation, we do not expect these measures to have a material effect on our ~~installed base grows, and~~expectations for 2023.

While the current macro environment creates near-term uncertainties, we expect ~~significant~~longer-term demand ~~for upgrades, with increasing contribution from EUV service revenue as this technology ramps in volume production.~~and capacity to generate healthy growth, fueled by the expanding application space and relentless innovation.

~~Strong gross profit, net income and cash provided by operating activities~~

~~Gross profit as a percentage of net sales increased from 48.6% in 2020~~In conclusion, I believe ASML is well placed to 52.7% in 2021, mainly attributable to the NXE 3600D and DUV immersion systems value proposition and continued growth in our installed base business. We continue to drive profitability of our EUV systems, and as a result, we achieved 50% system gross margin in 2021. Looking ahead, we will continue to seek improvementsdeliver more record performances in the ~~margins in both systems and service via cost reduction and delivering more value, leading to higher selling prices.~~

Our effective tax rate increased to 15.2% mainly due to an increase in the innovation box tax rate in the Netherlands as of 2021. We expect our effective tax rate to be approximately 16% in the coming years.future –

Our strong net income and continued working capital improvement initiatives resulted in Net cash provided by operating activities increasing by €6.2 billion in 2021. The significant growth allowed us to return record amounts to our shareholders through dividends and our share buyback programs. In 2021 we repurchased shares for a total consideration of €8.6 billion and paid dividends totaling €1.4 billion. We expect continuedproviding strong cash returns to shareholders, ~~for next year.~~

~~Overall, it was another record year for ASML, driven by~~collaborating with our partners and suppliers, supporting our people and enabling our customers to manufacture technology that will continue to have a big impact on the ~~ongoing digital transformation and current chip shortage. The secular growth trends, as part~~future of ~~the digital transformation to a more connected world, and countries pushing for technological sovereignty are fueling future demand across all market segments at both the advanced and mature nodes.~~our planet.

~~Roger Dassen~~

~~Chief Financial Officer~~

~~ASML ANNUAL REPORT 2021 44~~




ASML is well placed to deliver more record performances in the future.”
Roger Dassen
Executive Vice President and Chief Financial Officer

ASML ANNUAL REPORT 2022

FINANCIAL PERFORMANCE

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

Performance KPIs

Sales

Profitability

Liquidity

Total net sales

Gross profit

% of total net sales

Cash and cash equivalents (year-end)

€21.2bn

€10.7bn

50.5%

€7.3bn

2021: €18.6bn

2021: €9.8bn

52.7%

2021: €7.0bn

Net system sales

Income from operations

Short-term investments (year-end)

€15.4bn

€6.5bn

30.7%

€0.1bn

2021: €13.7bn

2021: €6.8bn

36.3%

2021: €0.6bn

Net service and field option sales

Net income

Net cash provided by operating activities

€5.7bn

€5.6bn

26.6%

€8.5bn

2021: €5.0bn

2021: €5.9bn

31.6%

2021: €10.8bn

Sales of lithography systems (in units)1

Earnings per share

Free cash flow2

345

€14.14

€7.2bn

2021: 309

2021: €14.36

2021: €9.9bn

Immersion systems recognized (in units)

2021: 81

1.Lithography systems do not include metrology and inspection systems.

EUV systems recognized (in units)

2. Free cash flow is a non-GAAP measure and is defined as net cash provided by operating activities (2022: €8,486.8 million and 2021: €10,845.8 million) minus purchase of property, plant and equipment (2022: €1,281.8 million and 2021: €900.7 million) and purchase of intangible assets (2022: €37.5 million and 2021: €39.6 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.

2021: 42

~~ASML operations update on key performance indicators~~

ASML ANNUAL REPORT 2022

FINANCIAL PERFORMANCE CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

Performance KPIs (continued)

~~The following table presents the KPIs used by our Board of Management and senior management to measure performance.~~

Year ended December 31 (€, in millions, unless otherwise indicated) 2020
%1
2021
%1
Sales
Total net sales 13,978.5 18,611.0
Year-over-year increase in total net sales (%) 18.3 33.1
Net system sales 10,316.6 13,652.8
Net service and field option sales 3,661.9 4,958.2
Sales of lithography systems (in units) 2
258

309

Immersion systems recognized (in units) 68 81
EUV systems recognized (in units) 31 42
Profitability
Gross profit 6,797.2 48.6 9,809.0 52.7
Income from operations 4,051.5 29.0 6,750.1 36.3
Net income 3,553.7 25.4 5,883.2 31.6
Liquidity
Cash and cash equivalents 6,049.4 6,951.8
Short-term investments 1,302.2 638.5
Net cash provided by operating activities 4,627.6 10,845.8
Free cash flow 3
3,626.8 9,905.5


Operating results of 2022 compared to 2021


Year ended December 31 (€, in millions)	2021	%1	2022	%1	% Change
Net system sales	13,652.8	73.4	15,430.3	72.9	13.0
Net service and field option sales	4,958.2	26.6	5,743.1	27.1	15.8
Total net sales	18,611.0	100.0	21,173.4	100.0	13.8

Cost of system sales	(6,482.9)	(34.8)	(7,582.3)	(35.8)	17.0
Cost of service and field option sales	(2,319.1)	(12.5)	(2,891.0)	(13.7)	24.7
Total cost of sales	(8,802.0)	(47.3)	(10,473.3)	(49.5)	19.0

Gross profit	9,809.0	52.7	10,700.1	50.5	9.1

Research and development costs	(2,547.0)	(13.7)	(3,253.5)	(15.4)	27.7
Selling, general and administrative costs	(725.6)	(3.9)	(945.9)	(4.5)	30.4
Other income	213.7	1.1	—	—	(100.0)
Income from operations	6,750.1	36.3	6,500.7	30.7	(3.7)

Interest and other, net	(44.6)	(0.2)	(44.6)	(0.2)	—
Income before income taxes	6,705.5	36.0	6,456.1	30.5	(3.7)

Income tax expense	(1,021.4)	(5.5)	(969.9)	(4.6)	(5.0)
Income after income taxes	5,684.1	30.5	5,486.2	25.9	(3.5)

Profit from equity method investments	199.1	1.1	138.0	0.7	(30.7)
Net income	5,883.2	31.6	5,624.2	26.6	(4.4)

1.As a percentage of total net sales.

2.~~Lithography systems do not include metrology and inspection systems.~~

3.Free cash flow is a non-GAAP measure and is defined as net cash provided by operating activities (2021: €10,845.8 million and 2020: €4,627.6 million) minus purchase of property, plant and equipment (2021: €900.7 million and 2020: €962.0 million) and purchase of intangible assets (2021: €39.6 million and 2020: €38.8 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.


For a comparison of ASML’s operating results for the year ended December 31, 2021, with the year ended December 31, 2020, please see Our performance in 2021 – Financial – Financial performance – Operating results of 2021 compared with 2020 of ASML’s annual report on Form 20-F for the year ended December 31, 2021. The preparation of our Consolidated Financial Statements in conformity with US GAAP requires management to make estimates and assumptions. Reference is made to Note 1 General information / summary of general accounting policies to the Consolidated Financial Statements for detailed information on critical accounting estimates.

~~ASML ANNUAL REPORT 2021 45~~

~~Operating results of 2021 compared to 2020~~

Year ended December 31 (€, in millions) 2020
%1
2021
%1
% Change
Net system sales 10,316.6 73.8 13,652.8 73.4 32.3
Net service and field option sales 3,661.9 26.2 4,958.2 26.6 35.4
Total net sales 13,978.5 100.0 18,611.0 100.0 33.1
Cost of system sales (5,169.3) (37.0) (6,482.9) (34.8) 25.4
Cost of service and field option sales (2,012.0) (14.4) (2,319.1) (12.5) 15.3
Total cost of sales (7,181.3) (51.4) (8,802.0) (47.3) 22.6
Gross profit 6,797.2 48.6 9,809.0 52.7 44.3
Research and development costs (2,200.8) (15.7) (2,547.0) (13.7) 15.7
Selling, general and administrative costs (544.9) (3.9) (725.6) (3.9) 33.2
Other income — — 213.7 1.1 N/A
Income from operations 4,051.5 29.0 6,750.1 36.3 66.6
Interest and other, net (34.9) (0.2) (44.6) (0.2) 27.8
Income before income taxes 4,016.6 28.7 6,705.5 36.0 66.9
Income tax expense (551.5) (3.9) (1,021.4) (5.5) 85.2
Income after income taxes 3,465.1 24.8 5,684.1 30.5 64.0
Profit from equity method investments 88.6 0.6 199.1 1.1 124.7
Net income 3,553.7 25.4 5,883.2 31.6 65.6

1.~~As a percentage of total net sales.~~

For a comparison of ASML’s operating results for the year ended December 31, 2020 with the year ended December 31, 2019, please see CFO financial review - Financial performance - Operating results of 2020 to 2019 of ASML’s annual report on Form 20-F for the ~~year ended~~ ~~December 31, 2020.~~

Total net sales and gross profit

We achieved another record year in ~~2021,~~2022, with ~~Total~~total net sales increasing by ~~€4,632.5~~€2,562.4 million, ~~33.1%~~13.8%, reflecting an increase in ~~Net~~net system sales of ~~32.3%~~13.0%, and an increase in ~~Net~~net service and field ~~options~~option sales of ~~35.4%~~15.8% compared to ~~2020.~~2021.


Revenue growth from each of the Logic and Memory markets and our installed base
(in millions)

We saw ~~growth~~strong demand in both the Logic and Memory markets, which is a reflection of our customers' drive to innovate and continue to invest in future technology nodes to facilitate the acceleration of the digital infrastructure and the push for ‘technological sovereignty’, and increase manufacturing capacity to address the global chip shortage. Logicmarkets. Memory systems sales benefited from continued strong end-market demand for ~~both~~servers, while for Logic system sales we saw strong demand in advanced and mature nodes ~~continues~~ to ~~be strong, driven by~~support the digital transformation (5G, AI, VR, intelligent cloud solutions and ~~distributed computing. Memory demand continues~~simulation and visualization applications).

The global chip shortage in 2022 proved to ~~grow, fueled by end-market demand~~be an accelerator for ~~servers~~the service and ~~smartphones.~~field option sales. Our productivity enhancement packages enabled our customers to increase wafer capacity effectively and efficiently.

Increase on previous year

~~ASML ANNUAL REPORT 2021 46~~


13.8%
Net sales

13.0%
Net system sales

15.8%
Net service and field option sales

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Performance KPIs (continued)


Increase in net sales driven by strong demand across all technologies
(in millions)

The increase in ~~Net~~total net sales was driven by a strong increase in demand from our customers across all technologies. Our ~~DUV~~EUV sales increased as a result of the NXE:3600D system value proposition and ~~EUV~~DUV sales volumes increased to keep up with customer demand driven by the ongoing digital transformation and ~~current~~ chip shortage. We recognized revenue for 40 EUV systems (all NXE:3600D) in 2022 compared with 42 EUV systems (16 NXE:3400 & 26 NXE:3600D) in ~~2021 compared to 31 EUV systems in 2020.~~2021. Our system sales across our DUV technologies increased from ~~227 units in 2020 to~~ 267 units in ~~2021.~~2021 to 305 units in 2022.

In addition to the growth in EUV and DUV ~~Service~~system sales, net service and field ~~options~~option sales were also a key driver for our overall growth in net sales. The increase is mainly driven by an increase in service sales as a result of the ~~sales~~continued scaling of ~~productivity, overlay and focus upgrade packages, which provide the most effective and efficient way to increase wafer output quickly, supported by a growing~~our customers' installed base. EUV continues to contribute ~~in a more meaningful way~~ to net service and field option sales as our installed base continues to grow and our customers continue to run more EUV systems in their high-volume production.


Gross profit
(in millions)

Gross profit increased as a result of ~~both~~ an increase in ~~sales~~sales. This is mainly due to the volume increase in DUV and ~~profitability. Gross profit as a percentage~~the value proposition of ~~net sales increased~~the NXE:3600D system. The gross margin decreased from ~~48.6% in 2020 to~~ 52.7% in 2021 ~~mainly attributable~~ to ~~improvement~~50.5% in ~~our EUV profitability as we deliver more value~~2022. Fast shipments, the strong inflationary effect related to ~~our customers, DUV product mix~~increasing costs (material, labor freight) and ~~improved profitability in our installed base business through a ramp in production and an increase in~~ramp-up costs (increased factory costs) combined with the ~~number of productivity upgrades.~~High-NA investment negatively impacted the gross margin.


Research and development costs
(in millions)

R&D costs were €~~2,547.0~~3,253.5 million in ~~2021 as~~2022 compared ~~to €2,200.8~~with €2,547.0 million in ~~2020.~~2021. The increase is across each of our EUV, DUV and Applications programs supporting our holistic lithography solutions, with the most significant ~~investments~~efforts going toward our roadmap to continue enhancing EUV high-volume manufacturing, as well as our development of EUV 0.55 NA (High-NA). In ~~2021,~~2022, R&D activities mainly related to:

•–~~EUV –~~ Continued investments in EUV high-volume manufacturing, finalizing the development of the NXE:3600D, investments in the development as well as shipment of the NXE:3800E and further improving availability and productivity of our installed base systems. In addition, our roadmap includes High-NA, our ~~next-generation~~ EUV 0.55 NA systems, to support our customers with future nodes for both Logic and DRAM.

•–~~DUV – Ramp-up~~The introduction of our latest-generation immersion system NXT:~~2050i~~2100i for the most critical DUV layers and ~~introduction of~~ the dry system ~~XT:860N.~~NXT:870, which introduces break-through productivity in the KrF market. Continued developments for the next generation of scanners shipping in ~~2022,~~2023 include NXT:~~2100i~~1980Fi and XT:400M, increasing productivity for the ~~most critical DUV~~mid-critical and i-line layers respectively. Furthermore, we are delivering productivity packages and ~~NXT:870 for break-through productivity in the KrF dry market. Productivity improvements continue~~introducing new value-based service models to ~~be developed to boost wafer-per-day~~improve ‘good wafers per day’ at ~~customers'~~customers’ installed ~~base~~.base.

•–~~Applications –~~ Continued investment in ~~Single Beam Inspection, E-Beam Metrology~~single-beam inspection, e-beam metrology and ~~Optical Metrology (Yieldstar~~optical metrology (YieldStar ADI and IDM solutions). In addition, securing our ~~Multibeam Inspection~~multibeam inspection roadmap and continuously expanding our investment in the holistic software applications space.

~~ASML ANNUAL REPORT 2021 47~~

€3.3 billion

R&D costs

27.7%

Increase in R&D costs
on previous year

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Performance KPIs (continued)


Selling, general and administrative costs

SG&A costs increased by ~~33.2%~~30.4% from ~~2020~~2021 to ~~2021~~2022, largely due to an increase in the number of employees, an increase in wages as well as investments in digitalization and ~~cybersecurity to support our growth. Our selling, general and administrative costs as a percentage of net sales in 2021 remained at~~ ~~3.9% (in 2020~~ ~~3.9%~~).cybersecurity.


Income taxes

The effective tax rate ~~increased~~decreased to ~~15.2%~~15.0% in ~~2021,~~2022, compared ~~to 13.7%~~with 15.2% in ~~2020.~~2021. The ~~higher~~lower rate is mainly ~~due to an increase in the innovation box rate in the Netherlands changing~~driven by adjustments of estimated tax positions for prior years following from ~~7% to 9% as of 2021.~~final tax returns filed.


Net income

Net income in ~~2021~~2022 amounted to ~~€5,883.2~~€5,624.2 million, or ~~31.6%~~26.6% of total net sales, representing ~~€14.36~~€14.14 basic net income per ordinary share, compared towith net income in ~~2020~~2021 of ~~€3,553.7~~€5,883.2 million, or ~~25.4%~~31.6% of total net sales, representing ~~€8.49~~€14.36 basic net income per ordinary share. The decrease is mainly due to higher R&D and SG&A costs, lower profit from our equity method investment and the one-off net income in 2021 of €213.7 million related to the divestment of the Berliner Glas (ASML Berlin GmbH) non-litho business. This is partially offset by higher gross profit and lower number of shares.

~~ASML ANNUAL REPORT 2021 48~~

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Performance KPIs (continued)

Cash flow analysis

~~This year we achieved~~We continue to invest heavily in our next-generation technologies in order to secure future growth opportunities which require a ~~record setting~~significant cash ~~flow performance. Our Net cash provided by operating activities increased to €10.8 billion (2020: €4.6 billion) driven by the strong worldwide demand from our customers and our~~investment in net working capital, ~~initiatives.~~ capital expenditures and R&D.

We also continued our efforts to return ~~cash to our shareholders. We were able to return a record amount of~~ cash to our shareholders through our share buyback program and growing dividends. ~~In 2021 we purchased €8.6 billion (2020: €1.2 billion)~~We were able to return a record amount of ~~shares and paid out a total~~ dividend ~~of €1.4 billion (2020: €1.1 billion).~~to our shareholders.

We continue to heavily invest in our next-generation technologies in order to secure future growth opportunities which requires significant cash investment in net working capital, capital expenditures and R&D. However, our capital allocation policy remains unchanged.


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	3,532.3	6,049.4	Cash and cash equivalents, beginning of period	6,049.4	6,951.8

Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	4,627.6	10,845.8	Net cash provided by (used in) operating activities	10,845.8	8,486.8
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(1,352.2)	(72.0)	Net cash provided by (used in) investing activities	(72.0)	(1,028.9)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(753.0)	(9,891.7)	Net cash provided by (used in) financing activities	(9,891.7)	(7,138.3)
Effect of changes in exchange rates on cash	Effect of changes in exchange rates on cash	(5.3)	20.3	Effect of changes in exchange rates on cash	20.3	(3.1)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	2,517.1	902.4	Net increase (decrease) in cash and cash equivalents	902.4	316.5

Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	6,049.4	6,951.8	Cash and cash equivalents, end of period	6,951.8	7,268.3
Short-term investments, end of period	Short-term investments, end of period	1,302.2	638.5	Short-term investments, end of period	638.5	107.7
Cash and cash equivalents and short-term investments	Cash and cash equivalents and short-term investments	7,351.6	7,590.3	Cash and cash equivalents and short-term investments	7,590.3	7,376.0

Purchases of property, plant and equipment and intangible assets	Purchases of property, plant and equipment and intangible assets	(1,000.8)	(940.3)	Purchases of property, plant and equipment and intangible assets	(940.3)	(1,319.3)

Free cash flow 1	Free cash flow 1	3,626.8	9,905.5	Free cash flow1	9,905.5	7,167.5

1.Free cash flow is a non-GAAP measure and is defined as net cash provided by operating activities ~~(2021: €10,845.8~~(2022: €8,486.8 million and ~~2020: €4,627.6~~2021: €10,845.8 million) minus purchase of property, plant and equipment ~~(2021: €900.7~~(2022: €1,281.8 million and ~~2020: €962.0~~2021: €900.7 million) and purchase of intangible assets ~~(2021: €39.6~~(2022: €37.5 million and ~~2020: €38.8~~2021: €39.6 million).

Net cash provided by (used in) operating activities

The ~~significant increase~~decrease in ~~Net~~net cash provided by operating activities of ~~€6.2~~€2.4 billion compared ~~to 2020,~~with 2021 is mainly due to a decrease in net income of €0.3 billion and an increase in ~~Net income of €2.3 billion and increase~~inventory to prepare for the future ramp-up in ~~down payments~~order to facilitate the growing demand from our ~~customers in connection with our continued working capital improvement initiatives.~~customers.

Net cash provided by (used in) investing activities

The ~~decrease~~increase in ~~Net~~net cash used in investing activities of ~~€1.3~~€1.0 billion compared to ~~2020,~~2021 is mainly due to our continuous cash investment in capital expenditures, which increased by €0.4 billion, and the €0.2 billion loan issued to a related party, as well as a decrease in the net purchase and maturity of ~~most of our~~ short-term investments ~~offset with limited purchases~~ of ~~new short-term investments as significant cash was used for our share buyback program. In~~€0.1 billion. Additionally, in 2021 we ~~sold the non-core business acquired as part~~had net proceeds from sale of ~~the Berliner Glas acquisition for €0.3 billion, while Berliner Glas was acquired for total consideration~~subsidiaries of €0.3 billion, with no proceeds in ~~2020.~~2022.

Net cash provided by (used in) financing activities

The ~~significant increase~~decrease in ~~Net~~net cash used in financing activities of ~~€9.1~~€2.8 billion compared to ~~2020,~~2021, is mainly due to ~~an increase of €7.4 billion~~a decrease in ~~the~~ shares purchased through our share buyback program ~~resulting~~(€3.9 billion), offset with an increase in ~~a total of €8.6 billion purchased shares. Additionally, we were able to increase~~ our dividend ~~by €0.3 billion to a total of €1.4 billion.~~(€1.2 billion). In ~~2020,~~2022, we had net proceeds from issuances of notes of ~~€1.5~~€0.5 billion and we repaid an amount of €0.5 billion for a previous issued note that became due, with no note issuance or repayment in ~~2021~~.2021.

As of December 31, ~~2021,~~2022, management has determined that ASML has sufficient ~~working~~ capital for the company’s present requirements.

~~ASML ANNUAL REPORT 2021 49~~

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Long-term growth opportunities

~~Long-term growth opportunities~~

Trend information

WeDespite uncertainties in the market, we expect ~~2022~~2023 to ~~be another~~see continued growth ~~year~~ with an expected net sales ~~increase~~growth, of ~~around 20% compared to 2021 driven by healthy Logic demand and growth in the Memory market.~~more than 25%. The expected growth is driven by increasing sales onacross all ~~platforms,~~technologies, as well as growth in our installed base business. The ~~positive~~ industry momentum around innovation and expanding new markets further ~~strengthen~~strengthens our confidence in the ~~2022~~2023 outlook and our 2025 growth scenarios.

In Logic, we see the digital transformation that is underway as we move to a more connected world. The broadening application space and secular growth drivers translate to very strong demand for both advanced and mature nodes. With this continued strong demand, we expect Logic system revenue to be up more than 20% year-on-year.

In Memory, we also expect continued growth of our business this year. Customers have indicated systems are operating at higher utilization levels. As customers are making the technology transition to support projected growth, additional capacity additions are expected to be required. Subsequently, this is expected to trigger equipment demand. As a result, it seems likely that we will see strong lithography equipment demand from the Memory market in 2022 with a system revenue to be up around 25% year-on-year.

Customers adopted EUV, and with increasing customer confidence in EUV, this is translating into more layers in their next nodes, for Logic production as well as the adoption in Memory. We expect to ship 60 EUV systems in 2023 and an expected sales growth of around ~~55 systems of which we expect revenue from 6 systems to be deferred to 2023 due to fast shipments. Despite this shift, we expect 25 percent growth in our EUV system revenue in 2022.~~40%.

In our DUV and Applications business, we expect growth in both immersion and dry systems, as well as continued demand for metrology and inspection systems. WeFor DUV we plan to ship 375 systems in 2023 of which around 25% will be immersion systems. For non-EUV systems, we expect ~~revenue~~a sales growth of ~~over 20% for non-EUV shipment revenue.~~around 30%.

~~We expect further growth in our~~For the Installed Base Management business we expect year over year revenue growth of around 5 percent. As we are coming off a strong growth year in 2022, we expect to ~~around 10% year-on-year as the~~see a bit lower demand ~~for services will continue to expand as~~in our installed base grows. Additionally, we anticipate an increased contribution to service sales from EUV as more and more systems start running wafers in volume manufacturing, as well as expect significant demand for upgrades, particularly in EUV,upgrade business as customers ~~utilize upgrades as a quick way to increase capacity.~~adjust utilization.

Our expectations and guidance for the first quarter of ~~2022~~2023 can be summarized as follows:

•–Total net sales between ~~€3.3~~€6.1 billion and ~~€3.5~~€6.5 billion

•–Gross margin of ~~around~~between 49% and 50%

•–R&D costs of around ~~€760~~€965 million

•–SG&A costs of around ~~€210~~€285 million

•–Annualized effective tax rate between 15% and 16%

The trends discussed above are subject to risks and uncertainties.

Read more in: ~~Special note regarding forward-looking~~

Forward-looking statements.

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Long-term growth opportunities (continued)

Outlook 2025 and 2030

This decade is all about distributed computing, bringing the cloud closer to devices at the ~~edge, and through~~edge. Through connectivity, ~~the~~ computing power will be available to all of us ‘on device’, enabling a connected world. These global megatrends in the electronics industry, supported by a highly profitable and fiercely innovative ecosystem, are expected to continue to fuel growth across the semiconductor market. This translates tointo increased wafer demand at both advanced and mature nodes.

The continued push of countries around the globe for technological sovereignty is expected to drive increased capital intensity. This means that the industry is expected to make significant investments in wafer capacity, with increasing ~~lithography spending.~~spend on lithography. The semiconductor end markets, such as automotive, data centers, industrial and consumer electronics, are expected to grow, ~~more than 7% year on year until at least 2025,~~and we expect the total semiconductor market to grow around 9% year-on-year through 2030, fueling the strong growth of our business based on an increased mix of EUV, while the demand for DUV is expected to ~~remain strong~~increase across all wavelengths. To achieve this, we and our supply chain partners are actively adding and improving capacity to meet future customer demand.

~~On September 29, 2021~~At our November 2022 Investor Day, also known as Capital Markets Day (CMD), we presented ~~at our Investor Day,~~ our upward revised long-term growth opportunity for 2025 ~~in which we re-modeled~~as well as 2030. We remodeled our previous sales scenarios in a low and high market due to the rapid evolution of ~~digitalization we have seen~~end-market technology growth drivers technological sovereignty and foundry competition projects since our update in the past two years. Customers’ strong capital expenditure growth is expected to continue, translating to an expected lithography capex CAGR of 13.8% (2017-2025). This compares to previous expected CAGR estimate of 7.5% over the same period, as shown at our Investor Day 2018.2021.

~~ASML ANNUAL REPORT 2021 50~~

Based on the different market scenarios, we believe we have an opportunity to reach annual sales ~~in 2025~~of between approximately ~~€24~~€30 billion and ~~€30~~€40 billion in 2025, with a gross margin between approximately 54% and 56%.

~~Moving beyond 2025,~~Looking further ahead, for 2030 we ~~also announced that~~believe we ~~see that the growth opportunities will continue and that we expect our Systems and Installed Base Management~~have an opportunity to ~~provide an~~reach annual sales of between approximately €44 billion and €60 billion, with a gross margin between approximately 56% and 60%.

The main additional demand drivers behind the upward adjustments of our scenarios are the market-driven growth ~~rate of around 11% for the period 2020-2030, based on third-party research~~in both advanced and ~~our assumptions.~~mature markets, technology (e.g. energy transition, die sizes) and geopolitical and competition-driven growth.

Our sales potential is primarily based on assumed organic growth. We continuously review our product roadmap and have, from time to time, made focused acquisitions or equity investments to enhance the industrial synergy of our product offering. Based on such reviews and the assessment of clear potential product and value synergies, we may also evaluate and pursue focused merger and acquisition activities in the future. Within this growth ambition, we expect to continue to return significant amounts of cash to our shareholders through a combination of growing ~~annualized~~ dividends and share buybacks.

Lastly, we seek to continuously improve our performance on ESG ~~Sustainability KPIs and upgrade the KPIs in~~Sustainability. In 2022, ~~based on~~we upgraded our ESG Sustainability strategy ~~roadmap update~~and KPIs to accelerate progress in close collaboration with our partners.



Our updated model for 2025 goes beyond our high-market scenario from CMD 2021


Market		System units				Total sales opportunity (in €bn)

High			CMD 2021 Units ASML	CMD 2022 Units ASML	CMD 2022 Units ASML		CMD 2021 Sales	CMD 2022 Sales	CMD 2022 Sales
			2025	2025	2030		2025	2025	2030
		EUV High-NA 0.55	5	5	30	Systems (Litho and M&I1)	23	32	47
		EUV Low-NA 0.33	70	80	80
		ArFi (immersion)	78	105	115	Installed Base Management2	7	8	13
		Dry	189	385	425
		Total	342	575	650	Total	30	40	60


Low			CMD 2021 Units ASML	CMD 2022 Units ASML	CMD 2022 Units ASML		CMD 2021 Sales	CMD 2022 Sales	CMD 2022 Sales
			2025	2025	2030		2025	2025	2030
		EUV High-NA 0.55	5	5	15	Systems (Litho and M&I1)	18	23	33
		EUV Low-NA 0.33	48	65	65
		ArFi (immersion)	63	75	85	Installed Base Management2	6	7	11
		Dry	124	180	250
		Total	240	325	415	Total	24	30	44

	1. M&I: Metrology and inspection. 2. Installed Base Management equals our net service and field option sales.

ASML ANNUAL REPORT 2022

SMALL PATTERNS. BIG IMPACT.

STRATEGIC REPORT

GOVERNANCE

FINANCIALS




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ASML ANNUAL REPORT 2022

RISK

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

How we manage risk

We use an Enterprise Risk Management (ERM) framework to integrate risk
management into our daily business activities and strategic planning.

Enterprise Risk Management

Our ERM framework enables a well-defined governance structure and a robust ERM process. The Risk and Business Assurance function drives the ERM process and associated activities across ASML. We follow a systematic approach to identify, manage and monitor risks in pursuit of our business objectives by setting standards and enabling management to maintain and continuously improve our governance, risk management, internal control and compliance. The framework also helps to identify opportunities that allow us to achieve our objectives and enable long-term sustainable growth.




The purpose of risk management is to maximize the probability of achieving business objectives responsibly.”
Geert Beullens
VP Risk and Business Assurance

ERM is a continuous process. Its related activities are periodically repeated to identify and address risks in a timely fashion, and ensure that its results are relevant for decision-making purposes. Our Vice President of Risk and Business Assurance reports to the CFO and Audit Committee, and is responsible for leading the development and maintenance of the ERM framework as well as for the implementation of the ERM process. We have adopted the ISO 31000:2018 standard as the basis for our ERM activities. In addition, the Vice President of Risk and Business Assurance is responsible for leading the security and internal control function and for developing and maintaining the compliance process.

Risk management governance structure

Supervisory Board

Audit Committee

Request to investigate specific risk topics

–Bi-annual risk review

–Risk topics feedback

–Assertion on control effectiveness

–Quarterly progress reporting

Board of Management

Corporate Risk Committee (CRC)
Risk oversight

Disclosure Committee
Internal Control Committee

–Risk appetite

–Risk management policy

–CRC sub committees (governance)

–Risk assessment results

–Risk response progress

–Incidents

–Control effectiveness

Risk owners

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How we manage risk (continued)

Supervisory Board and Audit Committee

The Supervisory Board provides independent oversight on management’s response to identifying and mitigating critical risk areas based on regular risk reviews. The Supervisory Board’s Audit Committee provides independent oversight on the ERM process and timely follow-up of priority actions based on quarterly progress updates.

Board of Management

The Board of Management is responsible for managing the internal and external risks related to our business activities and for making sure we comply with applicable laws and regulations.

Corporate Risk Committee

The Corporate Risk Committee is a central risk oversight body that reviews, manages and controls risks in the ASML risk universe, including security. It also approves the risk appetite, risk-management policies and risk-mitigation strategies. The Corporate Risk Committee is chaired by the CFO and comprises senior management representatives across ASML, including the CEO and COO.




ASML risk management process provides direction for adequate risk and control measures for key risks.”
Roel Verstegen
Head of Enterprise Risk Management

Disclosure Committee

The Disclosure Committee assists the Board of Management in overseeing ASML’s disclosure activities and compliance with applicable disclosure requirements arising under Dutch and US law, applicable stock exchange regulations and other regulatory requirements.

Internal Control Committee

The Internal Control Committee, which includes members of the Disclosure Committee, advises the Disclosure Committee and the CEO and CFO in their assessment of our internal control over financial reporting and disclosures, under section 404 of the Sarbanes – Oxley Act. The Chair of the Internal Control Committee updates the Audit Committee, the CEO and CFO on the progress of this assessment. The Chair also includes this update in the Internal Control Committee’s report to the Audit Committee.

Risk owners

Risk owners monitor the development of risks in the ASML risk universe and drive risk response across ASML according to requirements that are defined by the Corporate Risk Committee.

ASML ~~ANNUAL REPORT 2021 51~~risk universe

The ASML risk universe is a consolidated overview of the risks that may have a material adverse impact on our ability to achieve our business objectives. The risk universe was updated in 2022 and consists of 35 risk categories grouped into six risk types. The risk universe allows us to have a consistent approach to risk assessments across ASML.

ASML risk universe

Strategy and products

–Industry cycle risk

–Political risk

–Climate change risk

–Business model risk

–Merger and
acquisition risk

–Competition risk

–Innovation risk

–Product
stewardship risk

–Product roadmap
execution risk

–Intellectual property
rights risk

Finance and
reporting

Partners

People

Operations

–Business planning risk

–Foreign exchange
rate risk

–Liquidity risk

–Interest rate risk

–Capital availability risk

–Counterparty credit risk

–Shareholder activism risk

–Disclosure/external reporting risk

–Customer
dependency risk

–Product/service
quality risk

–Supplier strategy and performance risk

–Supply chain
disruption risk

–Knowledge management risk

–Organizational effectiveness risk

–Human resource risk

–Product
industrialization risk

–Process effectiveness and efficiency risk

–Environment, health and safety risk

–Continuity of own
operation risk

–Security risk

–Information technology risk

–Manufacturing and
install risk

Legal and compliance

–Contractual liability risk

–Violation of laws and regulations risk

–Violation of internal policies risk

We take into account a broad range of internal and external information sources, such as macroeconomic and industry trends, relevant guidelines and legislation, and stakeholders’ needs and expectations in all areas. The risk universe is reviewed, updated and approved annually, or more frequently in case of significant internal and/or relevant external developments.

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How we manage risk (continued)

Enterprise Risk Management process

Our ERM process provides a holistic approach combining both top-down (company-level) and bottom-up (organization- and process-level) perspectives. This helps us to ensure that risk identification, evaluation and management are performed at the right level. We continuously seek to improve our ERM process.

The results of periodic risk assessments and the potential impact of external trends and emerging risks are captured in the ASML risk landscape. As we operate in a dynamic environment, risk exposures are subject to change. The ASML risk landscape is reviewed, updated and discussed by the Corporate Risk Committee each quarter. Risk assessments are carried out according to the risk management plan and any additional engagement is approved by the Corporate Risk Committee. We define strategies to address relevant risks and take these into account when we define our corporate priorities. Our risk responses aim to mitigate the risks up to the level defined by the risk appetite.

Risk appetite

Our risk appetite describes the level of risk we are willing to accept to achieve our objectives – which depends on the nature of the specific risk and is divided into five levels: Averse, Prudent, Moderate, High and Extensive. Our approach is geared toward mitigating the risks to the level defined in our risk appetite.

Risk management process

Risk assessment

Risk response

Top-down risk assessment

Coordination and follow-up

Corporate Risk Committee/Risk owners/Emerging risks

Risk owners

Risk identification

Risk landscape

Risk appetite

Risk analysis

Risk evaluation

Risk treatment

Bottom-up risk assessment

Execution

Country/Sector

Action owners

Risk type

Averse

Prudent

Moderate

High

Extensive

Strategy and products

Partners

People

Operations

Finance and reporting

Legal and compliance

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How we manage risk (continued)

Risk developments

The table below shows examples of external developments that affected the exposure of a series of risk categories in 2022 and includes examples of our responses. The list of risks and risk responses below is not exhaustive.


Strategy	Risk categories	Risk developments	Risk responses
Continue innovating at pace to maintain technology leadership	Innovation Product roadmap execution IP rights Supplier strategy and performance Human resource Knowledge management Security Competition	Intellectual Property (IP) technology leadership pressure	–Intellectual property portfolio management –Patents and relevant technical publications monitoring –Extensive investments in security program –Awareness and training programs –Cyber Defense Center
		–There is significant pressure on know-how and IP protection for ASML and its open innovation partners. ASML’s existence is based on people and knowledge. Unauthorized disclosure of information of ASML, its customers or suppliers may benefit competitors, negatively affect ASML’s ability to file patents or affect cooperation with customers and suppliers. –We experience cyberattacks and other security incidents on our information technology systems, and our suppliers, customers and other service providers also experience such cyberattacks.

Advanced lithography solutions	Product industrialization Manufacturing and install Continuity of own operations Supplier strategy and performance Supply chain disruption Human resource Product and service quality Process effectiveness and efficiency Violations of laws and regulations Business model Competition Political Industry cycle	Growth challenges	–Increase of manufacturing capabilities, utilization rate and cycle-time reduction –Fast shipments –Support suppliers to increase move rate and mitigate material shortages –Deployment of onboarding and well-being programs –Shorten time to knowledge (learning operating model)
		–There is an increasing demand across all market segments and our product portfolio, which is an opportunity for us that also brings challenges. We face challenges to increase production capacity in our end-to-end supply chain to meet this demand. This is amplified by supply chain constraints. –Hiring, onboarding and retaining the workforce in the current competitive market is increasingly challenging. Consistent pressure on our organization and people as a result of our growth may lead to well-being issues among our employees. –The high demand we are continuing to experience could change customers’ sourcing strategies to become less dependent on ASML.
		Geopolitical tensions	–Actively engage with governmental authorities about effectiveness, consequences and enforceability of regulations –Collaborate with peers in global advocacy –Scenario planning around potential geopolitical events –Apply for export licenses as required –Comply with applicable (existing and new) regulations –Optimization of supply chain footprint
		–Geopolitical tensions are rising and additional export control restrictions have been imposed during 2022. The risk of further restrictions on exports or investments is high, and as a consequence global trade is shifting from globalization to regionalization as China, US and many other countries strive for technological sovereignty. In particular, the tensions between China and the US may lead to a decoupled ecosystem and – in the longer term – overcapacity. Given the important role both countries play in the semiconductor supply chain, this can have a significant impact on our industry. Trade and export barriers have already impacted our ability to sell to and service systems for certain customers, and this is likely to continue to impact our business going forward. –Changes in relations between Taiwan and the People’s Republic of China could lead to additional trade restrictions and could impact our employees and the ability to utilize our manufacturing facilities and supply chain in Taiwan for our global customers, as well as our ability to service our customers in Taiwan.
		Weakening global economy	–Control costs and maintain flexibility –Scenario planning around macroeconomic trends
		–Macroeconomic downturn fears are increasing, fueled by high inflation rates that are amplified by the energy crisis. Economic uncertainty has led to reduced consumer and business spending, and could cause our customers to decrease, cancel or delay their orders. A recession might also bring opportunities in the tight labor market.

Drive a more sustainable world	Product stewardship EHS Climate change Human resource Violation of laws and regulations Continuity of own operations Supply chain disruption	Strengthening ESG regulations and increasing stakeholder expectations	–Stakeholder engagement and disclosures –Deployment of ESG strategy in our organization and value chain –Non-financial reporting in accordance with the Global Reporting Initiative (GRI) Universal Standards 2021 –Deployment of business continuity plans –Include extreme weather aspects in building upgrades and new designs –Comply with (existing and new) regulations
		–Companies across all industries are facing increasing scrutiny relating to their ESG policies. Our stakeholders are increasingly focused on our contribution to society and expect us to minimize the environmental and social impact of our products throughout all life-cycle stages. A global trend to transition to a lower carbon economy has resulted in the imposition of increased regulations and disclosure requirements. Failure to achieve our ESG objectives and meet the emerging ESG expectations of our stakeholders could negatively affect our brand and reputation.
		Climate change fueling extreme weather
		–Climate change contributes to increasing severity and frequency of extreme weather events (such as cyclones and flood, fire stress, drought, heat and precipitation stress, rising sea levels) that can impact continuity of our operations and/or our supply chain.

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Risk factors

We face many risks that have the potential to impact our business. It is important to understand the nature of these.
We assess our risks by using the ASML risk universe, which comprises six risk types (Strategy and products,
Finance and reporting, Partners, People, Operations, Legal and compliance).

The risk factors below are classified under these six risk types. Any of these risks and events or circumstances described therein may have a material adverse effect on our business, financial condition, results of operations and reputation. These risks are not the only ones that we face. Some risks may not yet be known to us, and certain risks that we do not currently believe to be material could become material in the future.

Many of these risks may be intensified by global events such as the COVID-19 pandemic (including the China Zero-COVID policy), the Russia–Ukraine conflict, inflation, global measures taken in response to these events and any worsening of the associated global business and economic conditions.

1. Strategy and products

Our future success depends on our ability to respond timely to commercial and technological developments in the semiconductor industry

Risk category:

Business model, Innovation

Our success in developing new technologies, products and services, and in enhancing our existing products and services, depends on a variety of factors. These include the success of our and our suppliers’ R&D programs and the timely and successful completion of product development and design relative to competitors, or more costly. Our business will suffer if the technologies we pursue to assist our customers in producing smaller and more energy-efficient chips are not as effective as those developed by competitors. Our business will also suffer if our customers do not adopt technologies that we develop, or adopt new technological architectures that are less focused on lithography products. The success of our EUV 0.55 NA (High-NA) technology, which we believe is critical for keeping pace with Moore’s Law, remains dependent on continuing technical advances by us and our suppliers. We invest considerable financial resources to develop and introduce new and enhanced technologies, products and service offerings. If we are unsuccessful in developing (or if our customers do not adopt) these technologies, products and service offerings such as EUV 0.55 NA and multibeam inspection, or if alternative technologies or processes are successfully introduced by others, our competitive position and business may suffer.

In addition, we make significant investments in developing new products and product enhancements, and we may be unable to recoup some or all of these investments. We may incur impairment charges on capitalized technology including prototypes or incur costs related to inventory obsolescence, as a result of technological changes. Such costs may increase as the complexity of technology increases. Due to the highly complex nature and costs of our systems, including newer technologies, our customers may purchase existing technology systems rather than new leading-edge systems, or may delay their investment in new technology systems to the extent that such investment is not economical or required, given their product cycles. Global economic conditions affect our customers’ investment decisions, leading to uncertainties on the timing around the introduction of and demand for new leading-edge systems. Some of our customers have experienced and may continue to experience delays in implementing their product roadmaps. This increases the risk of slowing down the overall transition period (or cadence) for the introduction of new nodes, and therefore new systems. We also depend on our suppliers to maintain their development roadmaps to enable us to introduce new technologies on a timely basis. If they are unable to keep pace, whether due to technological factors, lack of financial resources or otherwise, this could prevent us from meeting our development roadmaps.

The success of new product introductions is uncertain and depends on our ability to successfully execute our R&D programs

Risk category:

Product roadmap execution, Innovation

As our lithography systems and applications have become increasingly complex, the costs and time periods to develop new products and technologies have increased. We expect such costs and time periods to continue to increase. In particular, developing new technology, such as EUV 0.55 NA (High-NA) and multibeam, requires significant R&D investments by us and our suppliers to meet our and our customers’ technology demands. Our suppliers may not be able or willing to invest the resources necessary to continue the (co-)development of the new technologies to the extent that such investments are necessary. This may result in ASML contributing funds to such R&D programs or limiting the R&D investments that we can undertake. Furthermore, if our R&D programs are not successful in developing the desired new technology on time or at all, we may be unsuccessful in introducing new products and unable to recoup our R&D investments. In light of the high levels of customer demand, we may prioritize our resources toward increasing production over R&D programs.

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Risk factors (continued)

We face intense competition

The semiconductor industry can be cyclical and we may be adversely affected by any downturn

We derive most of our revenues from the sale of a relatively small number of products

Risk category:

Competition

Risk category:

Industry cycle risk

Risk category:

Business model

The semiconductor equipment industry is highly competitive. Our competitiveness depends upon our ability to develop new and enhanced lithography equipment, related applications and services that bring value to our customers and are competitively priced and introduced on a timely basis – as well as our ability to protect and defend our intellectual property, trade secrets or other proprietary information. We compete primarily with Canon and Nikon in respect of DUV systems. Both Canon and Nikon have substantial financial resources and broad patent portfolios. Each continues to offer products that compete directly with our DUV systems, which may impact our sales or business. In addition, adverse market conditions, long-term overcapacity or a decrease in the value of the Japanese yen in relation to the euro could further intensify price-based competition, resulting in lower prices and lower sales and margins.
We also face competition from new competitors with substantial financial resources, as well as from competitors driven by the ambition of self-sufficiency in the geopolitical context. Furthermore, we face competition from alternative technological solutions or semiconductor manufacturing processes, particularly if we are unsuccessful in developing new EUV technology, products and product enhancements in a timely and cost-competitive manner.

We also compete with providers of applications that support or enhance complex patterning solutions, such as Applied Materials Inc. and KLA-Tencor Corporation. These applications effectively compete with our Applications offering, which is a significant part of our business.

The semiconductor industry has historically been cyclical. As a supplier to the global semiconductor industry, we are subject to the industry’s business cycles, and the timing, duration and volatility are difficult to predict and can have a significant impact on semiconductor manufacturers and therefore ASML. Newer entrants to the industry, including Chinese semiconductor manufacturers, could increase the risk of cyclicality in the future. Certain key end-market customers – Memory and Logic – exhibit different levels of cyclicality and different business cycles. Sales of our lithography systems, services and other holistic lithography products depend in large part upon the level of capital expenditures by semiconductor manufacturers. These in turn are influenced by industry cycles, the drive for technological sovereignty and a range of competitive and market factors, including semiconductor industry conditions and prospects. The timing and magnitude of capital expenditures of our customers also impact the available production capacity of the industry to produce chips, which can lead to imbalances in the supply and demand of chips. Reductions or delays in capital expenditures by our customers, or incorrect assumptions by us about our customers’ capital expenditures, could adversely impact our business. In addition, industry trends that are currently positively impacting our business, such as increasing capital expenditures by our customers, may not continue.

Our ability to maintain profitability in an industry downturn will depend substantially on whether we are able to lower our costs to break-even level. If sales decrease significantly as a result of an industry downturn and we are unable to adjust our costs over the same period, and if down payments need to be returned, our net income may decline significantly or we may suffer losses.

As we have significantly increased our organization in terms of employees, infrastructure, manufacturing capacity and other areas, we may not be able to adjust our costs in the event of an industry downturn.

In addition, we are facing a weakening of the global economy. Economic uncertainty frequently leads to reduced consumer and business spending, and could cause our customers to decrease, cancel or delay their orders. The tightening of credit markets, rising interest rates and concerns regarding the availability of credit could make it more difficult for our customers to raise capital, whether debt or equity, to finance their purchases of equipment, including the products we sell. Reduced demand, combined with delays in our customers’ ability to obtain financing (or the unavailability of such financing) may adversely affect our product sales and revenues and therefore may harm our business and operating results.

If we are unable to timely and appropriately adapt to changes resulting from difficult macroeconomic conditions, our business, financial condition or results of operations may be materially and adversely affected.

We derive most of our revenues from the sale of a relatively small number of lithography systems (345 units in 2022 and 309 units in 2021). As a result, the timing of shipments, including any delays, and recognition of system sales for a particular reporting period from a small number of systems, with an increase in sales prices, may have a material adverse effect on our business, financial condition and results of operations in that period.

In addition, we may not be able to increase installed base revenues to the extent we planned, as, for example, customers may perform more of these services themselves or find other third-party suppliers to provide them.

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Risk factors (continued)

Failure to adequately protect intellectual property, trade secrets or other proprietary information could harm our business

Defending against intellectual property claims brought by others
could harm our business

Risk category:

Intellectual property rights

Risk category:

Intellectual property rights

We rely on intellectual property (IP) rights such as patents and copyrights to protect our proprietary technology. However, we face the risk that such protective measures could prove to be inadequate, and we could suffer material harm because, among other matters:

In addition, legal proceedings may be necessary to enforce our IP rights and the validity and scope may be challenged by others. Any such proceedings may result in substantial costs and diversion of management resources, and, if unfavorable decisions are made, could result in significant costs or have a significant impact on our business.

We have experienced and may in the future experience misappropriation attacks by third parties or our employees, including theft of intellectual property, trade secrets, or other proprietary or confidential information. For example, we have experienced unauthorized misappropriation of data relating to proprietary technology, as described under “Risk Factors – Cybersecurity and other security incidents, or other disruptions in our processes or information technology systems, could materially adversely affect our business operations”. As a result of such incidents, third parties or others have or may, without authorization, obtain, copy, use or disclose our intellectual property, trade secrets or other proprietary information despite our efforts to protect them.

In the course of our business, we have been in the past and are subject to claims by third parties alleging that our products or processes infringe upon their IP. If successful, such claims could limit or prohibit us from developing our technology, manufacturing and selling our products.

In addition, our customers or suppliers may be subject to claims of infringement from third parties, including patent holder companies, alleging that our products used by such customers in the manufacturing of semiconductor products and/or the processes relating to the use of our products infringe on one or more patents issued to such third parties. If such claims are successful, we could be required to indemnify our customers for some or all of any losses incurred or damages assessed against them as a result of such infringement.

We also may incur substantial licensing or settlement costs to settle claims or to potentially strengthen or expand our intellectual property rights or limit our exposure to intellectual property claims of third parties.

Patent litigation is complex and may extend for a protracted period of time, giving rise to the potential for both substantial costs and diverting the attention of key management and technical personnel. Potential adverse outcomes from patent litigation may include payment of significant monetary damages, injunctive relief prohibiting our manufacturing, exporting or selling of products, reputational damage and/or settlement involving significant costs to be paid by us.

–IP laws may not sufficiently support our proprietary rights or may change adversely in the future;

–Our agreements (e.g. confidentiality, licensing) with our customers, employees and technology development partners and others to protect our IP may not be sufficient or may be breached or terminated;

–Patent rights may not be granted or interpreted as we expect;

–Patent rights will expire, which may result in key technology becoming widely available that may harm our competitive position;

–The steps we take to prevent misappropriation or infringement of our proprietary rights may not be successful;

–IP rights and trade secrets are difficult to enforce in countries where the application and enforcement of the laws governing such rights may not have reached the same level compared with other jurisdictions where we operate; and

–Third parties may be able to develop or obtain patents for our or similar competing technology.

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Risk factors (continued)

We are exposed to economic, geopolitical and other developments in
our international operations

We may be unable to make desirable acquisitions or to integrate successfully
any businesses we acquire

Risk category:

Political

Risk category:

Mergers & acquisitions

Global trade issues and changes in and uncertainties with respect to multilateral and bilateral treaties and trade policies, and international trade disputes, trade sanctions, export controls, tariffs and similar regulations, impact our ability to deliver our systems, technology and services internationally. In particular, our ability to deliver technology in certain countries such as China has been and continues to be impacted by our ability to obtain required licenses and approvals.

Our business involves the sale of systems and services to customers in a number of countries, including China, where our business has grown in recent years, and includes technologies that may be the subject of increased export regulations or policies.

The US government has enacted trade measures, including national security regulations and restrictions on conducting business with certain Chinese entities, restricting our ability to provide certain products and services to such entities without a license. The list of Chinese entities impacted by trade restrictions, as well as the export regulation requirements and the implementation and enforcement of such regulations, has increased with the addition of certain entities to the Entity List, and more recently by the Additional Export Controls on Semiconductor Manufacturing Items imposing license requirements on US-origin parts and US persons destined toward fabs in China working on advanced technology nodes. The list of restricted customers is subject to change.

These and further developments in multilateral and bilateral treaties, national regulation, and trade, national security and investment policies and practices have affected and may further affect our business, and the businesses of our suppliers and customers. Such developments have impacted and continue to impact our ability to obtain necessary licenses (among others from the Dutch government), including authorizations for use of US technology and for employees producing and developing such technology. Such developments, including the drive for technological sovereignty, could also lead to long-term changes in global trade, competition and technology supply chains, which could adversely affect our business and growth prospects.

Certain of our manufacturing facilities as well as our supply chain and customers are located in Taiwan. Customers in Taiwan represented 38.2% of our 2022 total net sales and 39.4% of our 2021 total net sales. Taiwan has a unique international political status. Changes in relations between Taiwan and the People’s Republic of China, Taiwanese government policies and other factors affecting Taiwan’s political, economic or social environment could, for example, impact our ability to service our customers in Taiwan, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, certain of our facilities as well as customers are located in South Korea. Customers in South Korea represented 28.6% of our 2022 total net sales and 33.4% of our 2021 total net sales. In addition, there are tensions with the Democratic People’s Republic of Korea (North Korea) which have existed since the division of the Korean Peninsula following World War II. A worsening of relations between those countries or the outbreak of war on the Korean Peninsula could have a material adverse effect on our business, financial condition or results of operations.

From time to time, we may acquire, or seek to acquire, businesses or technologies to complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. Any such acquisitions could lead to failure to achieve our financial or strategic objectives or our ability to perform as we plan or disrupt our ongoing business and adversely impact our results of operations. Furthermore, our ability to complete such transactions may be hindered by a number of factors, including potential difficulties in obtaining government approvals.

Any acquisition that we make could pose risks related to the integration of the new business or technology with our business and organization. We cannot be certain that we will be able to achieve the benefits we expect from a particular acquisition investment. Such transactions may also strain our managerial and operational resources, as the challenge of managing new operations may divert our management from day-to-day operations. Furthermore, we may be unable to retain key personnel from acquired businesses or we may have difficulty integrating employees, business systems and technology. The controls, processes and procedures of acquired businesses may also not adequately ensure compliance with laws and regulations, and we may fail to identify compliance issues or liabilities.

In connection with acquisitions, antitrust and national security regulators have in the past and may in the future impose conditions on us, including requirements to divest assets or other conditions that could make it difficult for us to integrate the businesses that we acquire. Furthermore, we may have difficulty in obtaining or be unable to obtain antitrust and national-security clearances, which could inhibit future desired acquisitions.

As a result of acquisitions, we have recorded a significant amount of goodwill and intangible assets. Accounting standards require periodic review of these assets for indicators of impairment. If one or more indicators of impairment are found to exist, then valuation of the related asset could change and may incur impairment charges.

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Risk factors (continued)

We may not be able to achieve our Environmental, Social and Governance (ESG) objectives or adapt and
respond timely to emerging ESG expectations and regulations

Risk category:

Climate change, Product stewardship

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investors, capital providers, shareholder advocacy groups, other market participants, customers and other stakeholders are increasingly focused on ESG practices and, in recent years, have placed increasing importance on the implications and social cost of their investments. In particular, within the semiconductor industry, there is a focus on contribution to society and minimizing environmental and social impacts of products throughout all life-cycle stages. Failure to achieve our ESG objectives, meet the emerging ESG expectations of our stakeholders and/or timely respond to enhanced regulations and disclosure obligations could negatively affect our brand and reputation, which may impede our ability to compete as effectively to recruit or retain employees, which may adversely affect our operations.

Climate change contributes to increasing severity and frequency of extreme weather events, rising sea levels and droughts that can impact continuity of our operations and/or our supply chain. Climate change concerns and the potential environmental impact of climate change have resulted in and may result in new laws and regulations that may affect us, our suppliers and our customers. Such laws or regulations could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our value chain. Furthermore, the ability to improve our product-related environmental performance (such as energy efficiency) may be affected by the complexity of our technology and products. In order to meet our ESG goals and requirements in this regard, we are dependent on our suppliers and their ability to reduce their ecological footprints. In addition, we are dependent on our customers and/or our customers may not be satisfied with our progress, which can impact demand.

A global trend to transition to a lower-carbon economy has resulted in the imposition of increased regulations that could lead to technology restrictions, modification of product designs, an increase in energy prices and energy or carbon taxes, restrictions on pollution, required remediation measures or other requirements that could impact our business and increase our costs. A variety of regulatory developments have been introduced that focus on restricting or managing the emission of carbon dioxide and other greenhouse gases. This could result in a need to redesign products and/or purchase at higher costs new equipment or materials with lower carbon footprints.

We publish disclosures on ESG matters relating to our business and our partners in compliance with applicable regulations and guidance and other data which may not be required but which we nonetheless elect to disclose.

Such disclosure includes statements based on our expectations and assumptions, involving forecasts about costs and future circumstances, which may prove to be incorrect. In addition, our ESG Sustainability strategy may not have the intended results, and our estimates concerning the timing and cost of implementing and ability to meet stated goals are subject to risks and uncertainties, which could result in us not meeting our goals on expected timing or at all or within expected costs. In addition, ESG disclosure requirements are increasing and authorities have proposed disclosure requirements on ESG matters which differ from the requirements that we are currently subject to, so we face risks in compliance with such regulations, including the risk of complying with requirements in different jurisdictions, costs associated with such compliance and potential liability in the event that our ESG disclosures prove incorrect.

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Risk factors (continued)

2. Finance and reporting

We are exposed to financial risks, including liquidity risk, interest rate risk,
credit risk, foreign exchange risk and inflation

Risk category:

Liquidity, Interest rate, Counterparty credit, Foreign exchange

We are a global company and are exposed to a variety of financial risks, including those related to liquidity, interest rate, credit, foreign exchange and inflation.

Liquidity risk

Negative developments in our business or global capital markets could affect our ability to meet our financial obligations or to raise or refinance debt in the capital or loan markets. In addition, we might be unable to repatriate cash from a country when needed for use elsewhere due to legal restrictions or required formalities.

Interest rate risk

Our Eurobonds bear interest at fixed rates. Our cash and investments as well as our revolving credit facility

bear interest at a floating rate. Failure to effectively hedge this risk could impact our financial condition and results of operation. In addition, we could experience an increase in borrowing costs due to a ratings downgrade (or the expectation of a downgrade), developments in capital and lending markets or developments in our businesses.

finance receivables at December 31, 2022, compared with €3,855.2 million, or 83.7%, at December 31, 2021. Accordingly, business failure or insolvency of one of our main customers could result in significant credit losses.

to the euro. We incur costs of sales predominantly in euros, with portions also denominated in US and Taiwanese dollars. A small portion of our operating results are driven by movements in currencies other than the euro, US dollar, Japanese yen, South Korean won, Taiwanese dollar or Chinese yuan.

Inflation risk

We are exposed to increases in costs due to inflation for costs of goods, transportation and wages, which may impact our profitability. We are currently experiencing higher-than-normal inflation, which impacts our costs and margins to the extent we are not able to pass on increased costs in our prices.

Currency risk

Our Financial Statements are expressed in euros. Accordingly, our results of operations are exposed to fluctuations in exchange rates between the euro and other currencies. Changes in currency exchange rates can result in losses in our Financial Statements. We are particularly exposed to fluctuations in the exchange rates between the US dollar and the euro, and to a lesser extent to the Japanese yen, the South Korean won, the Taiwanese dollar and the Chinese yuan, in relation

Counterparty credit risk

We are exposed to credit risk in particular with respect to financial counterparties with whom we hold our cash and investments as well as our customers. As a result of our limited number of customers, credit risk on our receivables is concentrated. Our three largest customers (based on total net sales) accounted for €5,252.8 million, or 78.6%, of accounts receivable and

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Risk factors (continued)

3. Partners

Our success is highly dependent on the performance of a limited number of
critical suppliers of single-source key components

Risk category:

Supply chain disruption, Supplier strategy and performance

We rely on outside vendors for components and subassemblies used in our systems, including the design thereof. These components and subassemblies are obtained from a single supplier or a limited number of suppliers. As our business has grown, our dependence on single suppliers or a limited number of suppliers has grown, because the highly specialized nature of many of our components, particularly for EUV including 0.55 NA systems, means it is not economical to source from more than one supplier. Our sourcing strategy therefore (in many cases) prescribes ‘single sourcing, dual competence’. Our reliance on a limited group of suppliers involves several risks, including a potential inability to obtain an adequate supply of required components or subassemblies in time and at acceptable costs, and reduced control over pricing and quality. Delays in supply of these components and subassemblies, which could occur for a variety of reasons, such as disruptions experienced by our suppliers, including work stoppages, fire, energy shortages, pandemic outbreaks, flooding, cyberattacks, blockades, sabotage or other disasters, natural and otherwise, can lead to delays in delivery of our products which could impact our business. For example, certain of our suppliers experienced disruptions in their operations

as a result of chip and material shortages. A prolonged inability to obtain adequate deliveries of components or subassemblies, or any other circumstance that requires us to seek alternative sources of supply, could significantly hinder our ability to deliver our products in a timely manner, which could damage relationships with our customers and materially impact our business.

The number of lithography systems we are able to produce may be limited by the production capacity of one of our key suppliers, Carl Zeiss SMT GmbH, which is our sole supplier of lenses, mirrors, illuminators, collectors and other critical optical components (which we refer to as optics). We have an exclusive arrangement with Carl Zeiss SMT GmbH, and if they are unable to maintain and increase production levels, we could be unable to fulfill orders, which could have a material impact on our business and damage relationships with our customers. If Carl Zeiss SMT GmbH were to terminate its supply relationship with us or be unable to maintain production of optics over a prolonged period, we would effectively cease to be able to conduct our business.

From time to time, we experience supply constraints which can impact our production, particularly during periods of high levels of demand such as those we have experienced in 2022 and continue to experience. In 2022, we were impacted by delays and shortages in our supply chain, resulting in a late start on the assembly of a number of systems. In addition, due to high demand, we reduced cycle time in our factory to ship more systems. We have achieved this through a fast shipment process that skips some of the testing in our factory. Final testing and formal acceptance then takes place at the customer site. This provides our customers with earlier access to wafer output capacity but also leads to a delay of revenue recognition for those shipments until formal customer acceptance. We and our suppliers are investing in additional capacity to meet the demand. However, increasing capacity takes time, and we may be unable to meet the full demand of our customers for a few years. Further, we face the risk that demand may not continue to increase, which could result in overcapacity and loss of investment in increasing capacity.

In addition, most of our key suppliers, including Carl Zeiss SMT GmbH, have a limited number of manufacturing facilities, the disruption of which may significantly and adversely affect our production capacity.

Lead times in obtaining components have increased as our products have become more complex. A failure by us to adequately predict demand for our systems or any delays in the shipment of components can result in insufficient supply of components, which can lead to delays in delivery of our systems and can limit our ability to react quickly to changing market conditions. Conversely, a failure to predict demand could lead to excess and obsolete inventory.

We are also dependent on suppliers to develop new models and products and to meet our development roadmaps. If our suppliers do not meet our requirements or timetable in product development, our business could suffer.

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Risk factors (continued)

4. People

A high percentage of net sales is derived from
a few customers

Our business and future success depend on our ability to manage the growth of our organization
and attract and retain a sufficient number of adequately educated and skilled employees

Risk category:

Customer dependency

Risk category:

Human resources, Knowledge management, Organizational effectiveness

Historically, we have sold a substantial number of lithography systems to a limited number of customers. Customer concentration can increase because of continuing consolidation in the semiconductor manufacturing industry. In addition, although the applications part of our holistic lithography solutions constitutes an increasing portion of our revenue, a significant portion of those customers are the same customers as those for our systems. Consequently, while the identity of our largest customers may vary from year to year, sales may remain concentrated among relatively few customers in any particular year. The recognized total net sales to our largest customer amounted to €7,046.9 million, or 33.3% of total net sales in 2022, compared with €6,881.1 million, or 37.0% of total net sales in 2021. In 2022, 55.8% of total net sales were made to two customers. The loss of any significant customer or any significant reduction or delay in orders by such a customer may have a material adverse effect on our business, financial condition and results of operations.

Our business and future success depends significantly upon our ability to attract and retain employees, including a large number of highly qualified professionals. Competition for such personnel is intense and has intensified in the last year. Despite our ability to grow our employee base significantly, attracting sufficient numbers of qualified employees to meet our growing needs will remain a challenge. This risk of not being able to attract, onboard and retain qualified personnel increases as our business grows.

Our R&D programs require a large number of qualified employees. If we are unable to attract sufficient numbers of such employees, this could affect our ability to conduct our R&D on a timely basis. Also, the loss of key employees for unexpected reasons such as resignation or long-term illness is a risk.

Moreover, as a result of the uniqueness and complexity of our technology, qualified engineers capable of working on our systems are scarce and generally not available from other industries or companies. As a result, we have to educate and train our employees to work on our systems. Retention of those key employees is a critical success factor for us.

Furthermore, the increasing complexity of our products results in a longer learning curve for new and existing employees and suppliers, leading to an inability to decrease cycle times, and may result in significant additional costs. Our suppliers face similar risks in attracting and retaining qualified employees, including those in connection with programs that will support our R&D programs and technology developments. If our suppliers are unable to attract and retain qualified employees, this could impact our R&D programs or deliveries of components to us.

In recent years, our organization has grown significantly. We may be unable to effectively manage, monitor and control our employees, facilities, operations and other resources. Our rapid growth in recent years, driven by strong customer demand, puts pressure on our organization and employees, which can negatively impact employee well-being. This may in turn negatively impact the efficiency of our operations, our ability to ensure compliance with laws and regulations as well as our reputation as an employer.

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Risk factors (continued)

5. Operations

We may face challenges in managing the industrialization of our products and
bringing them to high-volume production

We are dependent on the continued operation of a limited
number of manufacturing facilities

Risk category:

Product industrialization

Risk category:

Continuity of own operation

Bringing our products to high-volume production at a value-based price and in a cost-effective manner depends on our ability to manage the industrialization of our products and to manage costs. Customer adoption of our products depends on the performance of our products in the field. As our products become more complex, we face an increasing risk that products may not meet development milestones or specifications and may not perform according to specifications, including quality standards. If our products do not perform according to specifications and performance criteria or if quality or performance issues arise, this may result in additional costs, reduced demand for our products and our customers being unable to meet planned wafer capacity.

Transitioning our newly developed products to full-scale production requires the expansion of our infrastructure, including enhancing our manufacturing capabilities, increasing the supply of components and training qualified personnel. It may also require our suppliers to expand their infrastructure capabilities. If we or our suppliers are unable to expand infrastructure as necessary, we may be unable to introduce new technologies, products or product enhancements or reach high-volume production of newly developed products on a timely basis or at all.

In addition, when we are successful in industrializing new products, it can take years to reach profitable margins, as was the case for EUV 0.33 NA.

New technologies might not have the same margins as existing technologies, and we might not be able to adjust value-based pricing and/or cost in an effective manner. In addition, the introduction of new technologies, products or product enhancements also impacts ASML’s liquidity, as new products may have higher cycle times, resulting in increased working capital needs. This impact on liquidity increases as our products become more complex and expensive.

The capability, capacity and costs associated with providing the required customer support function to cover the increasing number of shipments and service a growing number of EUV systems that are operational in the field could affect the timing of shipments. It could also impact the efficient execution of maintenance, servicing and upgrades, which is key to our systems continuing to achieve the required productivity.

All of our manufacturing activities, including subassembly, final assembly and system testing, take place in cleanroom facilities in Veldhoven (the Netherlands), Berlin (Germany), Wilton, San Diego (US), Pyeongtaek (South Korea), and Linkou and Tainan (Taiwan). These facilities may be subject to disruption for a variety of reasons, including work stoppages, fire, energy shortages, pandemic outbreaks, flooding, cyberattacks, blockages, sabotage or other disasters, natural and otherwise. We cannot ensure that alternative production capacity would be available if a major disruption were to occur. In 2022, we experienced a fire in our Berlin operations which required significant recovery efforts to secure our operations.

As our organization grows, we are not able to fully insure our risk exposure. In addition, not all disasters are insurable. As we are unable to duly insure against potential losses, we are subject to the financial impact of uninsured losses, which can have an adverse impact on our financial condition and results of operation.

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Risk factors (continued)

We face challenges to meet demand

The nature of our operations exposes us to health,
safety and environment risks

Risk category:

Manufacturing and install, Human resources, Supplier strategy and performance

Risk category:

Environment, health and safety

We have in recent years and are continuing to experience increasing demand across all our market segments and product portfolio because our systems play critical roles in meeting end-market demand. This high level of demand brings challenges. We have been and are continuing to increase production capacity in our end-to-end supply chain to meet this demand, but we face challenges in increasing capacity. For example, in order to increase our capacity, we depend on our suppliers increasing their capacity, and it takes time to build the production space and equipment required for expansion. We and our supply chain also need to obtain permits to make expansion possible; these may not be (timely) granted.

It is a challenge for ASML and our suppliers to hire and retain more employees in the current competitive labor market. Our processes and systems may not be able to adequately support our growth. In addition, our end-to-end supply chain is facing a shortage of materials which is hampering our growth.

If we are not successful in increasing our capacity to meet demand, this could impact our relationships with customers and our competitive position. The increased demand and resultant supply constraints that we are continuing to experience lead to longer lead times for customers which could result in customers changing their sourcing strategy to become less dependent on ASML, which impacts our market share in certain product offerings.

Where we are able to increase our capacity, we are subject to increased risk of a downturn, as it becomes more difficult for us to reduce costs in the event of an industry downturn.

Hazardous substances are used in the production and operation of our products and systems, which subjects us to a variety of governmental regulations relating to environmental protection and employee and product health and safety. This includes the transport, use, storage, discharge, handling, emission, generation, and disposal of toxic or other hazardous substances. In addition, operating our systems (which use lasers and other potentially hazardous systems) can be dangerous and can result in injury. The failure to comply with current or future regulations could result in substantial fines being imposed on us, suspension of production, alteration of our manufacturing and assembly and test processes, damage to our reputation and/or restrictions on our operations or sale or other adverse consequences.

Additionally, our products have become increasingly complex. This requires us to invest in continued risk assessments and development of appropriate preventative and protective measures for health and safety for both our employees (in connection with the production and installation of our systems and field options and performance of our services) and our customers’ employees (in connection with the operation of our systems). Our health and safety practices may not be effective in mitigating all health and safety risks. Failure to comply with applicable regulations or the failure of our implemented practices for customer and employee health and safety could subject us to significant liabilities.

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Risk factors (continued)

Cybersecurity and other security incidents, or other disruptions in our processes or
information technology systems, could materially adversely affect our business operations

Risk category:

Security, Information technology, Process effectiveness and efficiency

We rely on the accuracy, availability and security of our information technology (IT) systems. Despite the measures that we have implemented, including those related to cybersecurity, our systems could be breached or damaged by computer viruses and systems attacks, natural or man-made incidents, disasters or unauthorized physical or electronic access, and we have experienced some of these incidents.

We are experiencing an increasing number of cyberattacks on our IT systems as well as the IT systems of our suppliers, customers and other service providers, whose systems we do not control. These attacks include malicious software (malware), attempts and acts to gain unauthorized access to data and other electronic and physical security breaches of our IT systems. They also include the IT systems of our suppliers, customers and other service providers that have led and could lead, for us, our customers, suppliers or other business partners – including R&D partners – to disruptions in critical systems, unauthorized release, misappropriation, corruption or loss of data or confidential information (including confidential information relating to our customers, employees and suppliers). Further, we depend on our employees and the employees of our suppliers to appropriately handle confidential and sensitive data and deploy our IT resources in a safe and secure manner that does not expose our network systems to security breaches or the loss of data.

Inadvertent disclosure or actions or malfeasance by our employees, those of our suppliers or other third parties have resulted and may in the future result in a loss or misappropriation of data or a breach or interruption of our IT systems, and could result in competitive harm and violate export controls and other laws and regulations which could result in fines and penalties, business disruption, reputational harm and additional regulatory scrutiny or export control measures. We have experienced unauthorized misappropriation of data relating to proprietary technology by a (now) former employee in China. We promptly initiated a comprehensive internal review. Based upon our initial findings we do not believe that the misappropriation is material to our business. However, as a result of the security incident, certain export control regulations may have been violated. ASML has therefore reported the incident to relevant authorities. We are implementing additional remedial measures in light of this incident.
In addition, any system failure, accident or security breach could result in business disruption, theft of our intellectual property or trade secrets (including our proprietary technology), unauthorized access to, or disclosure of, customer, personnel, supplier or other confidential information, corruption of our data or of our systems, reputational damage or litigation and violation of applicable laws.

Furthermore, computer viruses or other malware may harm our systems and software and could be inadvertently transmitted to our customers’ systems and operations, which could result in loss of customers, litigation, regulatory investigation and proceedings that could expose us to civil or criminal liabilities and diversion of significant management attention and resources to remedy the damages that result.
We may also be required to incur significant costs to protect against or repair the damage caused by these disruptions or security breaches, including, for example, rebuilding internal systems, implementing additional threat protection measures, providing modifications to our products and services, defending against litigation, responding to regulatory inquiries or actions, paying damages, or taking other remedial steps with respect to third parties. Further, remediation efforts may not be successful and could result in interruptions, delays or cessation of service, unfavorable publicity, damage to our reputation, customer allegations of breach-of-contract, possible litigation and loss of existing or potential customers that may impede our sales or other critical functions.
Cybersecurity threats are constantly evolving. We remain potentially vulnerable to additional known or as yet unknown threats, as in some instances, we, our customers, partners and our suppliers may be unaware of an incident or its magnitude and effects.

We also face the risk that we could unintentionally expose our customers to cybersecurity attacks through the systems we deliver to them, including in the form of malware or other types of attacks, as described above, which could harm our customers. Furthermore, we have increased the level of remote working within our organization, which increases the risks of cybersecurity incidents.
ASML’s visibility and importance for the semiconductor industry continues to increase. There is a risk that this may lead to actions that may adversely impact the security of ASML or the safety of its employees.
In addition, processes and systems may not be able to adequately support the growth that we have experienced in recent years and continue to experience. From time to time, we implement updates to our IT systems and software, which can disrupt or shut down our IT systems. We may not be able to successfully launch and integrate these new systems as planned without disruption to our operations. For example, we are currently implementing a new ERP system and infrastructure. As a result of this system implementation or otherwise, we have and could continue to experience disruptions in our operations.

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Risk factors (continued)

6. Legal and compliance

We are subject to increasingly complex regulatory
and compliance obligations

Changes in taxation could affect our
future profitability

Risk category:

Violation of laws and regulations

Risk category:

Violation of laws and regulations

In recent years, our business has grown significantly in terms of sales, operations, employees and our business infrastructure. As a result, compliance with laws and regulations, including with as well as our internal policies and standards, such as without limitation, the ASML Code of Conduct, has become more complex. Furthermore, as we operate in different countries in the world, we have become increasingly subject to compliance with additional laws and regulations in such jurisdictions, including but not limited to export control, anti-corruption, anti-bribery, antitrust and ESG regulations, which can be complex. We may also be subject to investigations, audits and reviews by authorities in such jurisdictions regarding compliance with laws and regulations, including tax laws.

In addition, the existing laws and regulations that we are subject to, including regulations relating but not limited to trade, national security, tax, export controls, reporting, product compliance, anti-corruption laws, antitrust, human rights, data protection, spatial planning and environmental laws, are becoming more complex and the trade and national security environment has resulted in increasing restrictions. Trade and security regulations limit our ability to sell our products and services in certain jurisdictions and we face the risk of further restrictions. We have experienced delays in permits for shipments as well as restrictions on shipping certain products or components to certain customers.

Such changes in the regulations that apply to our business can increase compliance costs and the risk of non-compliance. Non-compliance could result in fines and penalties, business disruption, reputational harm and additional regulatory scrutiny measures. Furthermore, additional regulations could impact or limit our ability to sell our products and services in certain jurisdictions.

We are subject to income taxes in the Netherlands and the other countries in which we are active. Our effective tax rate has fluctuated in the past and may fluctuate in the future.

Changes in our business environment can affect our effective tax rate. The same applies to changes in tax legislation in the countries where we operate, together with developments driven by global organizations such as the OECD, as well as any change in approach to tax by tax authorities. All these initiatives have already resulted in and may result in further increased compliance obligations for ASML. Additionally, this may result in an increase in our effective tax rate in future years.

Changes in tax legislation in jurisdictions where we operate may adversely impact our tax position and consequently our net income. Our worldwide effective tax rate is heavily impacted by R&D incentives included in tax laws and regulations in the countries where we operate. Examples include the so-called innovation box in the Netherlands and the foreign derived intangible income deduction/R&D credits we obtain in the US. If jurisdictions alter their tax policies/laws in this respect, it may have an adverse effect on our worldwide effective tax rate. In addition, jurisdictions levy corporate income tax at different rates. The mix of our sales over the various jurisdictions in which we operate may vary from year to year, resulting in a different mix of corporate income tax rates applicable to our profits, which can also affect our worldwide effective tax rate and impact our net income.

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Risk factors (continued)

7. Other risk factors

COVID-19 or other pandemics may impact our operations

Restrictions on shareholder rights may dilute voting power

We may not declare cash dividends, conduct share buyback programs or cancel shares at all or in any particular amounts in any given year

We may be impacted by the Russia–Ukraine conflict

The COVID-19 pandemic and the measures implemented to address this pandemic globally may continue to impact our business, our suppliers and our customers. Pandemics can have significant impact on the global economy, which can potentially affect our end markets.

The COVID-19 pandemic has increased the level of remote working within our organization, which impacts productivity and may delay our roadmap, increase the risks of cybersecurity incidents and/or impact our control environment. In addition, as we are dependent on our suppliers, disruptions to their operations as a result of the COVID-19 pandemic impact us and our ability to produce, deliver and service tools. Market demand for semiconductors and therefore our products and services can also be impacted by the COVID-19 pandemic and measures taken to address it. Further, an important part of our business involves installing and servicing tools at customer premises around the globe, and this could be impacted by travel restrictions and vaccination requirements.

There is uncertainty as to how the COVID-19 pandemic could develop and the impact on global GDP, end markets and our manufacturing capability and supply chain. The impact of the pandemic on ASML will depend on future developments, including the continued severity of the pandemic, and the actions of the Dutch and other foreign governments to contain outbreaks or address their impact, which are outside of our control.

Our Articles of Association provide that we are subject to the provisions of Dutch law applicable to large corporations, called ‘structuurregime’. These provisions have the effect of concentrating control over certain corporate decisions and transactions in the hands of our Supervisory Board. As a result, holders of ordinary shares may have more difficulty in protecting their interests in the face of actions by members of our Supervisory Board than if we were not subject to the ‘structuurregime’.

Our authorized share capital also includes a class of cumulative preference shares, and we have granted Stichting Preferente Aandelen ASML, a Dutch foundation, an option to acquire, at the nominal value of €0.09 per share, such cumulative preference shares. Exercise of the Preference Share Option would effectively dilute the voting power of our outstanding ordinary shares by one-half, which may discourage or significantly impede a third party from acquiring a majority of our voting shares.

We aim to pay a quarterly dividend that is growing (on an annualized basis) over time, and we conduct share buybacks from time to time. The dividend proposal, amount of share buybacks and cancellation of shares in any given year will be subject to the availability of distributable profits, retained earnings and cash, and may be affected by, among other factors, the Board of Management’s views on our potential future liquidity requirements, including for investments in production capacity and working capital requirements, the funding of our R&D programs and for acquisition opportunities that may arise from time to time, and by future changes in applicable income tax and corporate laws. The Board of Management may decide to propose not to pay a dividend or to pay a lower dividend and may suspend, adjust the amount of or discontinue share buyback programs, or we may otherwise fail to complete buyback programs.

Although we do not currently have operations in Russia or Ukraine, the impact of the military action in Ukraine creates uncertainty in the macroeconomic environment. This military action, including sanctions and other measures taken in response, have and could further adversely affect the global economy, the financial markets and supply chain, which therefore may impact customer demand, delivery of products and services to clients, as well as our ability and the ability of our supply chain to obtain parts, components and gas supply. In addition, the conflict amplifies the surge in energy prices, commodity prices, transportation costs, inflation and cyberattacks.

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						VIRTUAL AND AUGMENTED REALITY
						Virtual reality, unreal opportunities
						There’s more to virtual reality (VR) and augmented reality (AR) than gaming. At ASML, these technologies are helping us design, build and maintain some of the world’s most complex machines. Through VR and AR, our teams are able to manipulate designs and learn how to maintain systems – in some cases, many years before the machines themselves physically exist.
						Read more online

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ESG at a glance

We aim to be a leader in sustainability, and to continue driving progress toward
inclusive and sustainable growth for all.

Our vision

Our contribution to a
digital, sustainable future

We want to contribute to expanding computing power but with minimal waste, energy use and emissions. That's why we focus on energy efficiency, climate action and circular economy.

Our vision at ASML is to enable ground-breaking technology that solves some of humanity’s toughest challenges.

We want to ensure that responsible growth benefits all our stakeholders – to have an attractive workplace for all and a responsible supply chain, to fuel innovation in our ecosystem and to be a valued partner in our communities.

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

How we report on our ESG progress

SDGs we align with

ESG Sustainability chapters

Environmental

–Energy efficiency and climate action

Read more on page 76 >

–Circular economy

Read more on page 85 >

Social

–Attractive workplace for all

Read more on page 97 >

–Our supply chain

Read more on page 109 >

–Innovation ecosystem

Read more on page 118 >

–Valued partner in our communities

Read more on page 124 >

Governance

133

–Managing ESG sustainability

We also monitor the sustainability context of our activities and business relationships by reviewing relevant sources of information. These sources include international standards and (upcoming) legislation, industry and peers, media and ESG rating agencies.

Step 2:

Identify actual and potential impacts

We identified an initial list of topics and impacts based on insights from stakeholder engagement and relevant sources of information. The list of topics includes positive and negative, actual and potential, and short- and long-term impacts. Actual impacts are those that have already occurred, and potential impacts are those that could occur but have not occurred yet. The assessment aims to cover all impacts likely to be relevant across our value chain and business relationships and considers the relevant GRI Topic Standards.

While our 2022 list of topics includes topics from the 2021 materiality assessment, it also includes a number of changes, with some topics merging to bundle strongly connected impacts. The table on the previous page shows key movements across our material issues.

Step 3:

Assess the significance of the impacts

We assessed the significance of actual negative impacts by their severity (scale, scope and irremediable character) and the significance of actual positive impacts by their scale and scope. For potential impacts we also assessed likelihood. Negative and positive impacts were assessed separately, as these cannot always be compared, and negative impacts cannot be offset by positive impacts.

Based on ASML subject matter experts’ assessment, the topics were ranked, initially based on scale, scope, and remediability, and in case of an equal ranking also on likelihood. The ranking of topics was also subject to review by internal representatives of stakeholder groups, to ensure the concerns and interests of all stakeholders were sufficiently considered.

Step 4:

Prioritize the most significant impacts

The most significant impacts are prioritized for strategy and reporting. The outcomes of the materiality assessment are used to shape our strategy and long-term targets, with the aim of long-term value creation for all our stakeholders. The Board of Management sets this strategy.

The table below shows the material topics, the impacts included in the definition of each topic, whether these impacts are positive or negative, actual or potential and where in the value chain they occur.

Compared with 2021, the criteria for prioritizing topics in the GRI standards have changed, which affects comparability between the 2021 and 2022 material topics. The following changes occurred in 2022:

–'Community engagement' emerged as a new material topic, covering (potential) negative impacts on the availability of housing, talent and infrastructure in the region and positive impacts from job creation and community programs.

–'Human capital development' is no longer a material topic, although the assessment shows that ASML has a positive impact by providing training and career development opportunities for employees.

–'Customer intimacy' is no longer a material topic now that impact is the sole criterion for materiality in the updated GRI standards.

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Our material ESG sustainability topics (continued)

Material topics 20221

Topic name

Topic definition (impacts covered)

Positive or negative impact

Actual or potential impact

Impact area value chain

Energy management and carbon footprint – Product use and downstream

a) Energy-efficiency products (EUV, DUV)
b) Energy consumption (EUV, DUV)
c) Scope 3 downstream emissions

Negative

Actual

Downstream customers and society

Energy management and carbon footprint – Supply chain

a) Energy management supply chain
b) Scope 3 upstream emissions

Negative

Actual

Upstream suppliers and partners

Energy management and carbon footprint – Operations

a) Energy use within and management of own buildings and factories
b) Reduction of energy consumption
c) Use of renewable energy for our operations
d) Resulting scope 1 and 2 GHG emissions

Negative

Actual

Own operations

Circular economy

a) Waste generated through operations (e.g. waste from parts, packaging, construction,
hazardous waste and other waste directed to disposal)
b) Use of non-renewable materials and resources

Negative

Actual

Entire value chain

c) Use of renewable materials and resources
d) Measure to reduce and manage waste from operations (e.g. recycling, re-use and waste
diverted from disposal)
e) Measure to reduce the use of materials and move to circulation of products and material

Positive

Actual

Entire value chain

Diversity and inclusion

a) Workforce gender diversity
b) Diversity of governance bodies
c) Workforce inclusiveness
d) Pay equality, i.e. the ratio of basic salary and remuneration of women to men
e) Diversity (age, gender, cultural background, etc.) of new hires, promotions and turnover

Positive

Actual

Own operations

Talent attraction, employee engagement and retention

a) New employee hires and employee turnover
b) Working conditions, including working time, rest periods, holidays, dismissal practices, maternity
    protection, support for collective bargaining to determine wages, etc.
c) Remuneration practices, including how these relate to legal and industry minimums, whether
    they enable employees to meet their basic needs, how overtime is compensated, etc.
d) Other benefits, including life insurance, healthcare, disability and invalidity coverage, parental
    leave, retirement provision, etc.

Positive

Actual

Own operations

Occupational health and safety

a) Work-related injuries, ill health and well-being
b) Work-related hazards and risks, including the identification, assessment and measures taken to
manage these risks
c) Safety culture, including worker participation, consultation, communication and training on
occupational health and safety

Negative

Potential

Own operations

Responsible supply chain and product stewardship

a) Social impacts (e.g. health and safety, working conditions, child labor, etc.) in the supply chain
and actions taken
b) Environmental impacts (e.g. pollution, water use, etc.) in the supply chain and actions taken
c) Supplier ESG standards and screening
d) Supplier ESG performance
e) Impact on environmental and social aspects in the supply chain from product design and
engineering

Negative

Potential

Upstream suppliers and partners

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Our material ESG sustainability topics (continued)

Topic name

Topic definition (impacts covered)

Positive or negative impact

Actual or potential impact

Impact area value chain

Innovation ecosystem

a) Innovation partnerships
b) Innovation pipeline
c) In-kind support startups and scaleups
d) EU public-private R&D innovation projects
e) Knowledge management

Positive

Actual

Entire value chain

Community engagement

a) Local community impacts, including housing, talent pipeline (region), mobility and infrastructure,
social cohesion, neighbor (local) impact

Negative

Actual

Own operations

b) Local community impacts, including economic growth, local tax contribution and job creation
c) Philanthropy, including local community engagement and development programs

Positive

Actual

Own operations

1.Although Biodiversity was added as a topic in the 2022 materiality assessment, our impact on this topic was assessed and in comparison to other topics it was not considered material.

Contributing to the UN’s Sustainable Development Goals

Adopted by all member states in 2013, the UN’s 2030 agenda for sustainable development provides a shared blueprint for peace and prosperity, for people and planet, now and in the future.

We have developed the work streams of our ESG program to support the 2030 ambition as defined by the UN’s Sustainable Development Goals (SDGs), focusing on six particular SDGs where we can have the greatest impact. Our ambitions, commitment and programs for these SDGs are explained more fully at the start of each ESG chapter of this report. In brief, they are as follows:

In our Environmental pillar, we focus on SDG 13 (Energy efficiency and climate action) by addressing our energy efficiency in our operations, and on SDG 12 (Responsible consumption and production) via our circular economy work streams.

In our Social pillar, we focus on SDG 4 (Quality education) by developing our people and promoting lifelong learning opportunities for the communities where we operate. SDG 8 (Decent work and economic growth) is covered by our commitment to provide an attractive workplace that promotes sustained, inclusive growth, full and productive employment and decent work for all throughout our supply chain. Our support for SDG 9 (Industry, innovation and infrastructure) is demonstrated by our work to build a resilient ecosystem that fosters innovation while promoting inclusive and sustainable industrialization. We support SDG 11 (Sustainable cities and communities) by working with our community outreach partners to make cities and other human settlements inclusive, safe, resilient and sustainable. SDG 12 (Responsible consumption and production) is addressed by our work with suppliers and in our supply chain.

In our Governance pillar, we focus on SDG 8 (Decent work and economic growth) by ensuring that we eradicate all types of forced labor, protect labor rights and promote a safe and secure working environment for everyone. In addition to being covered under our Environmental and Social pillars (see above), SDG 12 (Responsible consumption and production) is also supported under our Governance pillar by our work to achieve environmentally sound management of chemicals and all wastes throughout their life cycles, in accordance with agreed international frameworks.


We believe that increasing digitalization opens the way to a society that is more environmentally and socially sustainable.

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Environmental at a glance

We are committed to reducing our environmental footprint both from our operations and the use of our products and services.



			What we do
			We develop lithography technology that enables manufacturers to make more energy-efficient microchips. Reducing our environmental footprint and managing our waste – both from our operations and in the use of our products and services – is key to our ESG practices.
			Our aims
			As the world continues to increase its dependence on technology to solve some of its most pressing challenges, our role is to help make this happen by expanding the availability of the necessary computing power. Our ambition is to achieve carbon neutrality with net zero emissions in our operations (scope 1 and 2) by 2025. We aim to achieve net zero emissions in our supply chain (scope 3) by 2030, and net zero emissions from the use of our products by our customers (scope 3) by 2040. In addition, our goal is to have zero waste from operations to landfill or incineration by 2030. We focus on energy efficiency – not only in our business but also by addressing the amount of energy that semiconductors require in operation. We are also working hard to manage our own waste streams and improve the circularity of our value chain. Our actions are closely aligned to two SDGs in particular – SDG 13 (Energy efficiency and climate action) and SDG 12 (Circular economy).

Energy efficiency and
climate action

Read more on page 76 >

SDG 13

Take urgent action to combat climate change and its impacts by regulating emissions and promoting developments in renewable energy

–Energy management and carbon footprint: Operations (Scope 1 and 2)

–Energy management and carbon footprint: Supply chain, business travel and commuting (Scope 3)

–Energy management and carbon footprint: Product use at our customers (Scope 3)

Circular economy

Read more on page 85 >

SDG 12

–Reduce waste in our operations

–Re-use parts and materials

–Refurbish mature products

–Water management

Ensure sustainable consumption and production patterns

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Energy efficiency and climate action

We are committed to lowering our carbon footprint wherever we can to achieve net zero emissions across our operations and in our supply chain. As well as increasing the productivity of our products, we are also working toward reducing their absolute energy consumption.

38.1 kt

1.11 kt

Scope 1 and 2 CO2e emissions (2025 target: net zero)

Scope 3 CO2e emissions intensity (per €m gross profit)

(2025 target: 1.02)

0.56 kt

11.9 Mt

Net scope 3 CO2eemissions intensity (per €m revenue)

Scope 3 CO2e emissions (2040 target: net zero)

8.27 kWh

NXE energy use per exposed wafer pass (NXE:3600D, measured in 2021) (2025 target: 5.1 kWh)


			IN THIS SECTION
			78			Our overall performance in 2022
			79			Energy management and carbon footprint: Operations (scope 1 and 2)
			81			Energy management and carbon footprint: Supply chain, business travel and commuting and product use at our customers (scope 3)

Our approach

Climate change is a global challenge that requires urgent action by everyone, including us. ~~The challenge~~While the benefits our industry brings to ~~limit~~society are considerable, these come at a cost, through the ~~temperature rise to well below 2°C is a global responsibility. At ASML, we’re committed to reducing our carbon footprint. In terms~~consumption of considerable energy and resources. We have identified energy management and carbon footprint ~~we identify~~as material topics for our business across three ~~impact areas: the direct emissions from fossil fuels (scope 1) used on our premises, the indirect emissions from the electricity consumption (scope 2) on our premises, and the indirect emissions~~distinct areas – in our ~~value chain (scope 3) from upstream~~own operations, throughout our supply chain and ~~downstream~~in the use of our products and downstream.

In recognition of the importance of following a science-based pathway to limit global warming to 1.5°C, we are signatories to the Science Based Targets initiative (near term SBTi). Our aim at ASML is to achieve net zero emissions along our value chain by ~~customers.~~2040.

We have set out the following milestones and focus areas to help us achieve this:

~~In our~~1.Energy management and carbon footprint ~~strategy,~~– Operations (scope 1 and 2): net zero emissions by 2025

2.Energy management and carbon footprint – Supply chain (scope 3): reduce net scope 3 upstream emissions to zero by 2030 and net zero scope 3 emissions from business travel and commuting by 2025

3.Energy management and carbon footprint – Product use at our customers (scope 3): net zero scope 3 emissions from product use by 2040

In this section, we will elaborate on our approach and explain how we aim to achieve our targets in the context of our focus areas.

Alongside our efforts to lower our own carbon footprint, we are committed to using our innovations and digital technologies to enable the industry to reduce its environmental footprint. For example, our EUV systems allow customers to fabricate advanced chips more efficiently, using fewer process steps and fewer resources.

Energy efficiency and climate action

SDG target

How we measure
our performance

SDG target 13.1

Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries

–Scope 1 and 2 CO2e emissions

–Scope 3 CO2e emissions intensity (per €m gross profit)

–Net scope 3 CO2eemissions intensity (per €m revenue)

–Scope 3 CO2e emissions

–NXE energy use per exposed wafer pass

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Energy efficiency and climate action (continued)


The following diagram illustrates our journey to net zero emissions in our value chain:



			Our journey to net zero emissions in our value chain
			Our goal is to achieve the following milestones in our journey toward net zero emissions in our value chain by 2040, for each of our impact areas: –2025: Net zero scope 1+2 emissions –2025: Net zero scope 3 emissions from business travel and commuting –2030: Collaborating with our suppliers, reduce net scope 3 upstream emissions to zero –2040: Collaborating with our customers and peers, reduce net scope 3 emissions from product use to zero Our approach to achieving net zero emissions is based on four pillars: 1.Analyzing energy use and greenhouse gas (GHG) emissions to learn about improvement options 2.Innovating in energy efficiency, and redesigning our assets, products and processes to minimize environmental impact

Our environmental management system

To measure our journey, we have ~~determined~~an Environmental Management System (EMS) in place to help us monitor our ~~ambition~~energy use and ~~set~~emissions, improve performance and enhance efficiency. The EMS is integrated into our Environmental, Health and Safety (EHS) management system. All our facilities operate on the basis of this system – and the HMI locations in Tainan (Taiwan) and San Jose (US) have now been successfully integrated. Our system is ISO 14001 certified and structured in accordance with ISO 45001 requirements.



3.Aiming to lead on the shift toward 100% credible, renewable energy
4.Compensating residual emissions to achieve our targets if no reasonable other improvement actions are available
We recognize that we cannot do any of this alone, which is why we collaborate closely with our employees, suppliers, customers, peers and society. We identify and assess the impact of climate-related risks and opportunities using the assessment guidelines of the Task Force on Climate-related Financial Disclosures (TCFD).
Read more in:
Our TCFD Recommendations: climate-related disclosure, available on www.asml.com.

This certification gives our stakeholders confidence in our commitment to achieving our environmental goals.

Our participation in the annual assessment by the Carbon Disclosure Project (CDP), a non-profit global disclosure program, also helps steer our environmental initiatives. Our score in the most recent CDP Climate Change 2022 questionnaire is B, which is above the global average of C.

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Energy efficiency and climate action (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Climate action

Net zero

Scope 1 – Direct emissions from fossil fuels in our operations (kton)

15.4

19.3

17.3

•

Net zero

Scope 2 – Indirect emissions from energy consumption (kton) [market-based]2

0.0

20.1

20.8

•

Net zero (2040)

Scope 3 – Indirect emissions from total value chain (kton)

8,800.0

11,400.0

11,900.0

•

Total footprint (in kton)1

8,815.4

11,439.4

11,938.1

n/a

Scope 3 CO2e emissions intensity (per €m revenue)

0.63

0.61

0.56

n/a

1.02

Scope 3 CO2e emissions intensity (per €m gross profit)

1.29

1.16

1.11

•

n/a

Reduction in GHG emissions from projects (kton)

n/a

2.6

n/a

Energy efficiency

5.1

Products – NXE energy use per wafer (in kWh)

9.64 (NXE:3400C)

8.27 (NXE:3600D)

•

n/a

Products – NXT energy use per wafer (in kWh)

0.45 (NXT:2050i)

0.48 (NXT:1980Ei)

0.46 NXT:2100i

n/a

Energy consumption (in TJ)

1,412

1,689

1,633

n/a

100 TJ

Energy savings worldwide through projects (in TJ)3

113.9

12.7

19.0

•

100%

Renewable electricity (of total electricity purchased)

100

•

(10)%

Energy consumption (NXE) (reduction in % of baseline 2018 1.4 MW)

(6)% (NXE:3400C)

(6)% (NXE:3600D)

•

n/a

Throughput (in wph) (NXE)

136 (NXE:3400C)

160 (NXE:3600D)

n/a

(60)%

Energy use per exposed wafer pass (NXE) (reduction in % of baseline 2018)

(26)% (NXE:3400C)

(37)% (NXE:3600D)

•

1.The guidance from the Greenhouse Gas Protocol – the organization that provides widely used international standards for emissions reporting – is used for the calculation of the emission scope. Market-based conversion factors are used to calculate the scope 1 and scope 2 CO2e emissions in kt.

2.We report the market-based emissions after purchase of EACs. ASML currently does not offset any of the remaining emissions, resulting in no differences between our gross and net emissions.

3.In 2021 we started a new masterplan period for 2021-2025, with a target to achieve 100 TJ energy savings by the end of 2025.The figure from 2020 is related to the masterplan 2016-2020. The savings reported are cumulated compared with the base year; therefore, they are not comparable.

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Operations (scope 1 and 2)

Our approach

Scope 1 emissions

Our main direct CO2emissions come from fossil fuels – mainly natural gas in our operations. The vast majority of natural gas consumption is used for heating our buildings and the humidification of our cleanrooms.

Scope 2 emissions

Purchased electricity accounts for 80% of the energy we use at ASML. Most of our electricity consumption relates to the manufacturing of chipmaking equipment – from assembly to testing lithography and other systems – and maintaining consistent climate conditions, such as constant temperature, humidity and air quality.

We aim to achieve our targets ~~in all three areas. We are taking direct responsibility over the~~for scope 1 and 2 by:

1.Reducing energy consumption

2.Using renewable energy

3.Compensating CO2 emissions ~~from our own operations (scope 1 and 2), for which we aim to achieve net zero CO~~2 emissions by 2025. We also recognize that our footprint extends beyond this to our value chain (scope 3). Our main influence on scope 3 emissions is the carbon footprint of our products which we aim to reduce by enhancing their energy efficiency while increasing their productivity.

~~We identify and assess the impact of climate-related risks and opportunities using the assessment guidelines of the Task Force on Climate-related Financial Disclosures (TCFD).~~
~~Read more in: Our TCFD Recommendations: climate-related disclosure, available on www.asml.com.~~

~~Carbon footprint strategy~~

Over the past years, we have made significant steps in our performance and achievements with regard to reducing our scope 1 and 2 carbon footprint and energy consumption, as well as maturing our scope 3 calculation. Although we see many positive results and are making progress, we also realize that we are not there yet.

Our scope 1 and 2 carbon footprint strategy is built on three principles: reducing energy consumption wherever we can, using only green renewable energy, unless no other solution is possible or reasonably feasible, and compensating for the residual emissions.targets

Our target is to achieve net zero scope 1 ~~carbon neutrality~~and 2 emissions by ~~2025,~~2025. This target is consistent with reductions required to keep global warming to 1.5°C and is approved by the SBTi – under the ‘near-term’ category.

Our performance in 2022

Scope 1 emissions

Our gross scope 1 emissions decreased from 19.3 kt in 2021 to 17.3 kt in 2022, despite our sales growing by 13.8%.

Scope 2 emissions

In 2022, our indirect emissions from energy consumption were 20.8 kt (20.1 kt in 2021). We report market-based emissions after purchase of energy attribute certificates (EACs). ASML currently does not offset any of the remaining emissions, resulting in no differences between our gross and net emissions.

Our electricity consumption has increased compared with 2021, along with our scope 2 emissions. The share of renewable electricity decreased slightly to 91% from 92% in 2021 due to higher electricity consumption in Taiwan (where we are currently not yet buying renewable electricity).

One of the most important challenges for us in achieving our net zero emissions target is the procurement of credible renewable energy in Taiwan and South Korea.

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Energy efficiency and climate action (continued)

Our actions in 2022

1. Reducing energy consumption and use of natural gas

We aim to ~~do this by~~reduce our energy consumption through direct ~~energy saving~~annual savings of 100 TJ (or ~~2.5 kt)~~3 kt CO2e) by executing ~~the~~ more than 2580 projects ~~we have defined~~ in the energy-saving masterplan which covers each of our ~~master plan,~~five large industrial sites. The main components of this masterplan are reducing the use of natural gas and electricity, adding renewable production of energy on our sites, purchasing credible renewable electricity and optimizing the use of BREEAM (Building Research Establishment Environmental Assessment Method) certified offices.

Out of over 80 projects, the six key projects and the expected annual energy savings are shown below.



The table below includes six key projects that support the masterplan and will help to realize savings between 2021 and 2025:

Key projects	Location	Total estimated energy saving – annual (TJ)	Estimated natural gas reduction (TJ)	Estimated electricity reduction (TJ)
Energy grid	Veldhoven	50	40	10
Implement adiabatic humidification and elimination of steam generation	Veldhoven	12	12	0
Renewable energy generation (solar panels)	Veldhoven	3	0	3
Onsite renewable electricity generation (solar panels)	San Diego	8	0	8
Replacement of chillers	Wilton	3	0	3
HVAC energy consumption and improving (set points)	Taiwan	3	0	3
Total		79	52	27

Energy savings are achieved mainly by using more energy-efficient technical installations and improving our overall production processes. Our efforts have focused on recovery of exhaust heat and reduction of the energy consumption of our cleanrooms, where maintaining the right conditions is energy intensive.

One of our goals is to reduce the use of natural gas. Based on our plans and calculations, we expect that the use of natural gas in Veldhoven will be reduced from around 4.4 million m3 to around 1.3 million m3 in the next three years, driven by the energy grid in combination with other energy-saving measures.

We have a multi-year project to implement an energy grid to re-use waste heat from our factories in offices on our site in Veldhoven, the Netherlands. The energy grid is a two-pipe loop that makes waste heat available for heating in winter and energy-efficient cooling in summer.

As we grow as a company, we strive to optimize our real-estate portfolio. As 95% of our scope 1 and 2 emissions are related to our buildings, optimizing the use of every square meter in our portfolio contributes to reducing our environmental footprint – each square meter saved is one we do not need to heat, cool, ventilate or light up.

When building new offices and manufacturing sites, we seize the opportunity to make them as environmentally sound as possible. Several of our existing buildings have been assessed for sustainability performance using BREEAM guidelines. We achieved a score of ‘Excellent’ for our newly built logistics center. We expect to have the results of the assessment for the other buildings in early 2023. With an eye on future growth, our new campus in Veldhoven is also being designed with a strong focus on sustainability. For 2025, we strive to implement the most suitable green building certifications in new constructions – such as BREEAM, LEED (Leadership in Energy and Environmental Design) and G-SEED (Green Standard for Energy and Environmental Design) – in the countries where we operate.

In 2022, the key projects executed in the Netherlands, Wilton and Taiwan resulted in ~19 TJ savings:

–2.9 TJ per year through further operationalization of the 4,846 m2 ~~and relocating~~solar panels installed on our ~~employees to more energy-efficient offices (BREEAM certified) and implementing an off-setting strategy for~~campus in Veldhoven

–11 TJ savings in 2022 in the ~~remaining emissions. The main components of~~Netherlands through the ~~energy-saving master plan are improving the energy efficiency of technical installations, improving energy management~~completion of our ~~operations, and increasing~~largest project. This will result in annual savings of around 11 TJ in the ~~production~~years ahead

–3 TJ savings in Wilton by replacing chillers with new high-efficiency variable-speed chillers which reduce energy consumption

–3 TJ savings in Hsinchu, Taiwan, by optimizing the use of ~~our own~~air-conditioning systems through time-outs.

2. Using renewable ~~energy. The table below, includes the top three key projects.~~energy

Key projects Total estimated energy saving - annual (in TJ) Estimated scope 1 reduction: neutral gas (in TJ) Estimated scope 2 reduction: electricity (in TJ)
Energy grid 50 -40 -10
Implement adiabatic humidification and elimination of steam generation 12 -12 0
Air change reduction (feasibility study) 20 0 -20

~~With regard to scope 2, our~~Our ambition is to increase the share of direct green energy purchases (so-called bundled renewable electricity) from renewable electricity produced close to our ~~premises~~premises.

In the Netherlands, we are now in the ~~Netherlands,~~second year of a 10-year purchase agreement for green electricity for our installations which will enable us to achieve our goal of using 100% renewable electricity in the country. We also achieved 100% renewable energy in the US in 2022. For much of Asia, while our goal is to use renewable energy whenever possible, we faced challenges in Taiwan and South Korea procuring credible renewable energy.

3. Compensating for CO2 emissions

We aim to ~~reduce~~use renewable energy as much as possible. Where this is not feasible, we would purchase voluntary emission reduction certificates (VER).

Action plans for 2022-2025

We will continue our work to procure renewable energy in Taiwan and South Korea and will make use of offsetting as a fallback option to reach our net zero target. We are on track and see no reason to adjust our current targets. In the ~~share~~coming years, we plan to expand the use of ~~certificates. For~~solar panels on our sites in EMEA, the US and ~~Asia, our ambition is to purchase renewable energy attribute certificates (respectively RECs and IRECs) and monitor~~Asia.

~~ASML ANNUAL REPORT 2021 53~~

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Supply chain, business travel and commuting (scope 3)

~~the evolution of renewable energy in those countries.~~ Our scope 1 and 2 emissions reduction targets are consistent with reductions required to keep warming to 1.5°C and are approved by the Science Based Targets initiative (SBTi) – under category 'near-term'.approach

We recognize that environmental impact goes beyond our operations. In general, most of the environmental impact ~~of energy consumption~~ in our value chain (scope 3) comes from the greenhouse gas (GHG) emissions of our suppliers (upstream) and the use of our products at our customers (downstream). ~~Results show~~

Our targets

Our overall scope 3 target is to reduce the intensity level (in line with our SBTi commitment) to 1,016 tons CO2e per € million gross profit, by 2025. This represents a 35.3% intensity reduction by 2025 compared with 2019. The intensity is measured by the total scope 3 emissions (in tonnes CO2e) normalized to the total gross profit (in €, millions).

We are working toward reducing our upstream emissions toward net zero by 2030. An element of this target is business travel and commuting, for which we have set a net zero target by 2025.

Our performance in 2022

Our scope 3 intensity for 2022 was 1,110 tonnes CO2e per € million gross profit (similar to 2021). Our results indicate that the indirect scope 3 emissions ~~(scope 3)~~ from upstream and downstream value chains account for ~~around 98%~~11.9 Mt or 99.7% of the total emissions footprint (scope 1, 2 and 3). Of this 11.9 Mt, 7.4 Mt are indirect emissions ‘downstream’ in the value chain ~~the category ‘downstream' – use~~(use of sold products at our customers’ ~~sites – accounts for nearly 65%,~~sites) and ~~the category ‘upstream' –~~4.5 Mt are ‘upstream’ emissions (mainly related to the goods and services we ~~buy~~buy).

Our actions in 2022

Improving our scope 3 emission data quality

We calculate our scope 3 emissions using guidance from the Greenhouse Gas Protocol – ~~accounts~~the organization that provides widely used international standards for ~~30%. The remaining 5%~~emissions reporting. We continuously seek to improve the data quality of our scope 3 ~~emissions relates to, among other things, activities linked to transportation, business travel, and commuting.~~

~~Our~~calculations. In past years, we have reported scope 3 ~~target~~emission data with a one-year lag, but in 2022 we made efforts to collect the emissions data in a more timely manner. For 2022, we are now able to report nine months of actual data and three months of estimated data. In the 2023 reporting year, we will adjust the 2022 figure reported with full-year actual 2022 data.

The next step in improving our data quality is to include actual supplier emissions data in our calculation for ~~2025~~scope 3. This will enable us to obtain more reliable scope 3 emission data, because for supplier data we currently use the spend-based methodology for calculating emissions. In 2022, we made progress by requesting CO2e emission data directly from our suppliers through our Supplier Sustainability Program. That data was not used in the emission calculations for 2022. Recognizing that we depend on our suppliers, we also encourage our value chain partners to work with us to jointly reduce our carbon footprint.

Improving access and mobility

We have also been looking at mobility. For example, with more than 50% of employees at our Veldhoven campus living less than 30 minutes away by bike, our Access & Mobility (A&M) program is focused on developing sustainable commuting options, and we are working with employees to encourage, incentivize and support changing commuting habits. We offer a mix of options, including cycling incentives, free public transport, car-pooling and shuttle buses, all supported by various online apps.

Action plans for 2022-2025

We remain on track to achieve our overall scope 3 target. Our Supplier Sustainability Program is a key enabler in our efforts to further reduce scope 3 emissions.

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Product use at our customers (scope 3)

Our approach

As the demand for enhanced chip functionality grows, the complexity and energy consumption of the overall microchip patterning process, including from our lithography systems, is also increasing.

The EUV light source is the key focus area of our current engineering efforts to reduce energy consumption because it requires the larger portion of an EUV system’s total energy consumption. Our roadmap includes optimizing the sequence of the CO2 laser to produce the plasma for creating EUV light, for example by turning the CO2 laser off when the system is in idle mode and reducing the firing intensity of the laser between exposures. Our longer-term goal is to eventually stop the CO2 laser firing between exposures altogether. Following a feasibility study from our research team and our suppliers, we know that keeping the laser beam stable will require corrective hardware that will be part of the baseline configuration of the next generation (NXE:3800).

Working with our suppliers, we have also identified ways to use cooling water of a higher temperature to remove the heat in the EUV source and electronics cabinets. To do this, we need to make sure that modules such as the drive laser can operate at a higher cooling water temperature – this project is currently in development, in collaboration with our suppliers.

By enabling EUV optics to deal with higher intensities, higher productivity can be achieved for the same energy input, thereby increasing efficiency. That is why we are developing materials and coatings that can deal with higher EUV intensities, and improving the heat management of optical components. This includes the wafer itself, which heats up through the exposure to EUV light during the production process.

We recognize that tackling all these challenges requires ongoing innovation and collaboration within our innovation ecosystem of customers, suppliers and knowledge institutions.

Our targets

We have set a target to reduce the ~~intensity level~~overall energy consumption of our future-generation EUV systems by 10% compared with the 2018 baseline model (NXE:3400B) by 2025, while increasing productivity. We have also set a target of reducing the energy consumption per exposed wafer by 60%, compared with the 2018 baseline (NXE:3400B).

Our actions in 2022

We have been working on making the reduction of energy consumption an integral part of our product generation process (PGP). When designing new systems, reducing the use of energy is becoming an ever more important aspect, together with cost, performance and availability.

In 2022, we continued working on energy-efficiency improvements for future products, which require long lead times and take multiple years to achieve. Progress on these projects is monitored on a quarterly basis. We believe we are on track to achieve our ~~2019 baseline~~targets of ~~0.55. The intensity is measured~~10% EUV system energy consumption reduction by 2025 and 60% reduction in energy use per exposed wafer with NXE:4000.

In 2022, we proved the ~~total~~capability of the NXE:3600D system to reach productivity targeting 175 wph (as compared with the current specification of 160 wph). In 2023, this will be introduced to the market as the NXE:3600 PEP-D package.

We have begun to better assess the energy efficiency of our other product families – in DUV, metrology and inspection, computational lithography and scanner and process control software solutions.

Regarding our scope 3 product use initiative of net zero emissions ~~(in kilotonnes) normalized~~in 2040, we are one of the founding members of and active contributor to the ~~total revenues (in € million). Taking~~Semiconductor Climate Consortium, founded in November 2022 and focused on speeding up industry value chain efforts to reduce greenhouse gas emissions.

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Energy efficiency and climate action (continued)

The table below provides an overview of the system achievements in terms of output and energy-efficiency improvements to achieve this output.

Platform1

DUV
immersion

System type

NXT:1980Di

NXT:2000i

NXT:2050i

NXT:1980Ei

NXT:1960Bi + PEP-B

NXT:2100i

Year of energy measurement

2015

2017

2020

2021

2022

Energy consumption (in MW)

0.14 MW

0.13 MW

0.14 MW

0.13 MW

0.14 MW

Throughput (wph)

275

295

250

295

Energy use per exposed wafer pass (in kWh)

0.51 kWh

0.45 kWh

0.48 kWh

0.51 kWh

0.46 kWh

Platform1

DUV
Dry

YieldStar

System type

XT:860M

XT:1460

NXT:1470

XT:860N

NXT:870

YS350E

YS375F

YS-380

Year of energy measurement

2017

2020

2022

2017

2019

2020

Energy consumption (in MW)

0.07 MW

0.06 MW

0.11 MW

0.06 MW

0.12 MW

0.01 MW

Throughput (wph)

240

209

277

260

330

n/a

Energy use per exposed wafer pass (in kWh)1

0.28 kWh

0.27 kWh

0.38 kWh

0.24 kWh

0.36 kWh

n/a

Platform1

EUV

20 mJ/cm2 dose

EUV

30 mJ/cm2 dose

System type

NXE:3350B

NXE:3400B

NXE:3400C

NXE:3600D

Year of energy measurement

2015

2018

2020

2021

Energy consumption (in MW)

1.15 MW

1.40 MW

1.31 MW

1.32 MW

Throughput (wph)

107

136

160

Energy use per exposed wafer pass (in kWh)

19.49 kWh

13.08 kWh

9.64 kWh

8.27 kWh

1.Dose energy in mJ refers to the energy required per expose per cm2.

Action plans for 2022-2025

In 2023, we will continue to work on the energy efficiency of our systems and other product families. We are still on track to achieve our overall scope 3 target. However, taking into account the change in product mix (an increase in the number of EUV systems sold) and the fact that our output in terms of product units manufactured is expected to increase, the overall emissions in the entire value chain are expected to rise. ~~Our supplier sustainability program is a key enabler to reduce~~At the ~~upstream footprint.~~ ~~Read more in: Our performance in 2021 - Social - Our supply chain.~~ ~~And by executing~~moment, we see no reason for adjusting our ~~product energy efficiency strategy, we can reduce our downstream footprint.~~ ~~Read more in: Product energy efficiency strategy.~~

~~What we achieved in 2021~~

~~In 2021, we expanded our environmental reporting scope to 57 locations – covering more than 95% of our worldwide CO~~2 ~~emissions – up from the 20 locations in the previous reporting scope, which covered around 90% of our emissions. The extended scope gets us ready for reporting against science-based~~2025 targets principles in the near future. The combination of our growth and increase in reporting scope has resulted in an increase of our gross scope 1 and 2 emissions by around 19% compared to 2020. In terms of using renewable electricity, we also need to take the expanded environmental reporting scope into account, therefore the share of renewable electricity decreased to 92% compared to the 100% in 2020. Our ambition remains unchanged – for emissions resulting from our operations (scope 1 and 2), we aim to achieve carbon net neutrality (scope 1 and 2) by 2025.

~~Scope 1 emissions~~

~~Compared to our peers in the semiconductor industry, our energy consumption and related carbon footprint is relatively low. As a manufacturer of lithography equipment, our main direct CO~~2 emissions come from fossil fuels – mainly natural gas. The vast majority of the natural gas consumption is used for heating of our buildings and humidification of the cleanroom to keep them at set temperature and humidity levels. For more information, see the scope 1 breakdown chart.

~~ASML ANNUAL REPORT 2021 54~~

Over the 2010–2021 timeframe, we executed nearly 100 energy-saving projects that have resulted in a cumulative reduction of over 260 TJ. Over the same period, our natural gas consumption remained stable, despite significant growth in the number of cleanrooms and offices (over 10,000 m2 ~~added since 2010).~~

~~Energy grid~~

In 2021 we started with a multi-year project to implement an energy grid to re-use waste heat for offices on our site in Veldhoven, the Netherlands. The energy grid is a two-pipe loop that makes waste heat available for heating in winter and energy-efficient cooling in summer. This project, together with the implementation of adiabatic humidification in two of our cleanrooms, is expected to lead to a reduction of around 1.7 million m3 ~~of natural gas which equals 52 TJ.~~

~~Energy savings~~

Energy savings are mainly achieved by using more energy-efficient technical installations and improving our overall production processes. Our efforts focused on recovery of exhaust heat and reduction ofregarding the energy consumption of our ~~cleanrooms, where maintaining the right conditions is energy intensive.~~systems.

In 2021, we saved 13 TJ per year of energy thanks to projects executed in the Netherlands and in Taiwan. In the Netherlands, the largest project was completed and led to nearly 8 TJ savings in 2021 and will lead to around 11 TJ per year onwards. In Hsinchu, Taiwan, we managed to save 3 TJ energy in 2021 by optimizing the use of air-conditioning systems through time-outs.

Continuing our drive to reduce energy consumption even further, we want to achieve direct energy savings of 100 TJ by 2025 by executing around 25 projects in five different sites worldwide, as defined in our energy savings master plan.

~~Real-estate portfolio~~

As we grow as a company, we strive to optimize our real estate portfolio. Optimizing the use of every square meter in our portfolio contributes to reducing our environmental footprint – each square meter saved is a square meter we don’t need to heat, cool, ventilate or light up.

When building new offices and manufacturing sites, we take the opportunity to make our buildings as environmentally sound as possible. With an eye on future growth, for example, our new campus in Veldhoven, the Netherlands, is designed with a strong sustainability focus. Its design and use of materials will be assessed on sustainability performance using BREEAM guidelines with score of ‘excellent’. For 2025, we strive to implement the most suitable green building certifications in new constructions – such as BREEAM, LEED and G-SEED – in the countries where we operate.

~~Scope 2 emissions~~

Electricity accounts for nearly 80% of the energy we use at ASML. Most of our electricity consumption relates to the manufacturing of chipmaking equipment – from assembly to testing lithography and other systems – and maintaining consistent climate conditions, such as constant temperature, humidity and air quality.

~~ASML ANNUAL REPORT 2021 55~~

In 2021, we secured a 10-year purchase agreement for green electricity for our installations in the Netherlands which will enable us to achieve our goal of using 100% renewable electricity in the Netherlands. For our electricity consumption in the US, we also achieved 100% renewable energy. The renewable market situation in Asia is slightly different and more challenging – we are investigating various options to meet our ambitions there as well.

~~In 2021, we operationalized the 3,700m~~2 solar panels installed on our campus in Veldhoven, the Netherlands, which are expected to provide the equivalent of around 2.3 TJ per year. We plan to expand the share of solar panels on our sites in the coming years in Europe, the US and Asia.

~~ASML signs 10-year green power purchase agreement with RWE~~

In 2020. ASML and RWE, one of the world’s leading renewable energy companies and a major player in global energy trading, signed a power purchase agreement (PPA). Under the terms of the 10-year agreement, ASML will be provided with 263 GWh of green electricity per year from RWE. This agreement brings ASML closer to its objective of carbon neutral electricity by 2025.

The power will be delivered from a portfolio of various renewable energy sources across different technologies: three new RWE onshore wind farms in the Netherlands, a Belgian offshore wind farm and a Dutch solar plant. The two Dutch RWE wind farms Oostpolderdijk and Westereems are located near Eemshaven. The offshore wind farm Noordwester 2 is located off the coast of Zeebrugge in Belgium. The third wind farm and the solar plant are both situated near Borssele in the Netherlands.

~~Scope 3 emissions~~

We calculate our scope 3 emissions using guidance from the Greenhouse Gas Protocol – the organization that provides widely used international standards for emissions reporting. We are continuously seeking to improve the data quality of our scope 3 calculations. In 2021 we made another step by requesting CO2 emission data directly from our suppliers through our Suppliers Sustainability program. Recognizing that we depend on our suppliers, we also encourage our value chain partners to work with us to jointly reduce our carbon footprint. ~~Read more in: Our performance in 2021 - Social - Our supply chain.~~

~~ASML ANNUAL REPORT 2021 56~~

~~Our environmental management system~~

We have an environmental management system (EMS) in place that helps us monitor our energy and emissions, improve performance, and enhance efficiency. Our EMS is integrated into our combined environmental, health and safety (EHS) management system. All our facilities operate on the basis of this EHS management system – the former HMI locations in Tainan (Taiwan) and San Jose (US) have been successfully integrated. Our EHS management system is ISO:14001 certified and structured in accordance with ISO:45001 requirements. This certification gives our stakeholders confidence in our commitment to achieving our environmental goals.

We measure progress in our emissions reductions by monitoring our scope 1, 2 and 3 emissions, representing three key performance indicators. Our participation in the annual assessment by the Carbon Disclosure Project (CDP), a non-profit global disclosure program, also helps steer our environmental initiatives. Our score in the most recent CDP Climate Change 2021 assessment is C, which is the same level as the sector average.

~~ASML ANNUAL REPORT 2021 57~~

~~Product energy efficiency strategy~~

With a growing demand for enhanced chip functionality, the complexity and energy consumption of the overall microchip patterning process, including from our lithography systems, is also increasing. A major benefit of the wider adoption of our EUV lithography systems is the ability to simplify patterning schemes to create the most critical layers of a microchip, which reduces the need for applying difficult multiple patterning schemes – this translates into less overall fab energy and materials use to fully process a wafer when compared to a multi-patterning process. However, the laser light plasma technology of EUV requires high electrical power input, therefore our product energy efficiency strategy is focused on EUV. Our challenge is to increase the energy efficiency of our products.

We have set ourselves the target to reduce the overall energy consumption of our future-generation EUV systems by 10% compared to the 2018 baseline model – NXE:3400B – by 2025, in spite of a increasing productivity. Our second target is at the same time to reduce the energy use per exposed wafer pass by 60%, as compared to the NXE:3400B (baseline 2018). To achieve this, we have developed and are executing an EUV energy efficiency roadmap.

~~Reducing overall energy use~~

The EUV light source is the key focus area of our current engineering efforts to reduce energy consumption because it requires the larger portion of an EUV system’s total energy consumption. The roadmap includes optimizing the sequence of the CO2 ~~laser to produce the plasma for creating EUV light, for example by turning the CO~~2 ~~fire off when the system is in idle mode and reducing the CO~~2 ~~firing between exposures. Our longer-term goal is eventually to cut the CO~~2 ~~fire between exposures altogether. This requires a feasibility study from our research team and our suppliers, to make sure that the laser beam path remains stable.~~

Another area for energy reduction is the cooling water strategy. We identified ways, together with our suppliers, to use cooling water of a higher temperature to remove the heat in the EUV source and electronics cabinets. This will reduce the amount of energy needed to cool the system, through recirculated process cooling water. To make this happen, we need to make sure that modules such as the drive laser can operate at a higher temperature, which we are currently developing together with our suppliers.

~~Creating EUV light~~

The larger portion of an EUV system’s energy consumption is used to operate the laser-produced plasma source to create EUV light. Molten tin droplets of around 25 microns in diameter are ejected from a generator. As they move, the droplets are hit first by a lower-intensity laser pulse. Then a more powerful laser pulse vaporizes and ionizes the flattened droplet to create a plasma that emits EUV light. This conversion process from laser to EUV light using tin droplets takes place 50,000 times per second, and is the most energy-intensive step. By increasing conversion efficiency, we can decrease an EUV system’s energy consumption at constant wafer output. Making this happen, while making sure that this will not negatively affect other functionalities of the EUV system, is a key challenge for our R&D teams.

Other challenges include developing materials and coatings that can deal with higher EUV intensities, and improving the heat management of optical components – this includes the wafer itself, which heats up through the exposure to EUV light during the production process. Tackling these challenges requires ongoing innovation and collaboration within our innovation ecosystem of customers, suppliers and knowledge institutions.

~~Reducing energy use per exposed wafer~~

By reducing the total energy consumption by 10% in absolute terms and at the same time doubling the productivity compared to the baseline model NXE:3400B, we aim to reduce the energy use per exposed wafer pass by 60%. To increase the productivity in number of wafers produced, we are continuously working on improving the conversion efficiency of wall-plug power to EUV light and on optimizing sequences, control schemes and other components, such as higher reflectivity mirrors and faster stages.

Most of our product efficiency enhancements are also offered as upgrades for the installed base of our lithography systems. For our customers, this helps to improve the economic value of the installed base, increase productivity and reduce the lithography energy use per wafer.

~~Our progress in 2021~~

~~In 2021, we measured the energy efficiency of our NXE:3600D system. Power consumption compared to its predecessor (NXE:3400C) was the same at 1.3 MW, but productivity at 30 mJ/cm~~2 dose increased from 136 wafers per hour (wph) to 160 wph. We achieved this higher throughput by improving the transmission of the optical column and by improving wafer management, reducing the so-called scanner overhead. Compared to our baseline model, we achieved 6% reduction system energy consumption. At the same time, the energy use per exposed wafer pass has reduced by 37%. This shows that we are on track in achieving our target of 10% EUV system energy consumption reduction by 2025 and 60% reduction in energy use per exposed wafer pass.

In 2021, we installed dilution systems aimed at simplifying and reducing energy use of the hydrogen abatement system. Our EUV systems need hydrogen for protecting the optics in the EUV scanner and source. For newer production cabins we chose to dilute and vent hydrogen after use, instead of combusting it. This saves energy and emissions both from methane combustion – for keeping the hydrogen flame stable – and from lowering cooling water needs.

In 2021, we continued our investigation on the use of warmer cooling water. We studied how it can be applied in the drive laser and started to engage with our customers and with SEMI (the global industry association representing semiconductor manufacturing

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Energy efficiency and climate action (continued)

supply chain), by taking the lead in an extensive update of the S23 energy standard. As this involves significant changes to the hardware both of our suppliers and of the facility installations in our customers’ fabs, this project is part of our long-term plan to reduce the wall-plug power needed per wafer pass by 60% by 2025 (baseline year 2018).

~~The tables below provide an overview of the system achievements in terms of output and energy usage to achieve this output.~~

Platform1
DUV
Immersion
System NXT:1980Di NXT:2000i NXT:2050i NXT:1980Ei NXT:1960Bi + PEP-B
Year of energy measurement 2015 2017 2020 2021 2021
Energy consumption (in MW) 0.14 MW 0.14 MW 0.13 MW 0.14 MW 0.13 MW
Throughput (wph) 275 275 295 295 250
Energy use per exposed wafer pass (in kWh) 0.51 kWh 0.51 kWh 0.45 kWh 0.48 kWh 0.51 kWh
Wafers per year 2,409,000 2,409,000 2,584,200 2,584,200 2,190,000

Platform1
DUV
Dry YieldStar
System XT:860M XT:1460 NXT:1470 YS350E YS375F YS-380
Year of energy measurement 2017 2020 2020 2017 2019 2021
Energy consumption (in MW) 0.07 MW 0.06 MW 0.11 MW 0.01 MW 0.01 MW 0.01 MW
Throughput (wph) 240 209 277 n/a n/a n/a
Energy use per exposed wafer pass (in kWh) 0.28 kWh 0.27 kWh 0.38 kWh n/a n/a n/a
Wafers per year 2,102,400 1,830,840 2,435,280 n/a n/a n/a

Platform1
EUV
20 mJ/cm2 dose
EUV
30 mJ/cm2 dose
System NXE:3350B NXE:3400B NXE:3400C NXE:3600D
Year of energy measurement 2015 2018 2020 2021
Energy consumption (in MW) 1.15 MW 1.40 MW 1.31 MW 1.32 MW
Throughput (wph) 59 107 136 160
Energy use per exposed wafer pass (in kWh) 19.49 kWh 13.08 kWh 9.64 kWh 8.27 kWh
Wafers per year 516,840 937,320 1,191,360 1,401,600

1.~~Dose energy in mJ' refers to the energy required per expose per cm~~2~~. The number of 'wafers per year' calculated assumes 100% uptime and 100% utilization according to the SEMI S23 standard.~~

Advanced patterning with EUV helps to limit growth in energy and water use and GHG emissions

More advanced microchips mean smaller features, which need shorter wavelengths in lithography to manufacture them. With a single exposure of DUV light at 193 nm, for example, the smallest feature of the image of a microchip pattern reaches its physical limit around 40 nm. However, by using two or more exposures of the same pattern – so-called multiple patterning – it is possible to image details at 20 nm with 2two exposures, or at 10 nm ~~by 4~~with four exposures and additional process steps.

Over the past decades, multiple patterning with DUV has become mainstream in semiconductor manufacturing, at the cost of having to go through the same process steps multiple times, which increases production cycle time and environmental impact.

~~As compared~~

Compared to DUV, EUV at 13.5 nm enables a more efficient chip-manufacturing ~~process – because~~process. Because of the higher resolution of an EUV system, several exposures and process steps can be replaced by a single exposure and fewer process steps to ~~do patterning~~pattern a certain layer of a chip. According to a study conducted by imec,1~~, with~~ EUV enables the number of non-lithography processing steps for some critical layers ~~can~~to be reduced by up to three to five times – and this significantly reduces production cycle ~~time significantly.~~time. The fab also benefits from reduced energy and water usage, resulting from the lower number of deposition, etching and cleaning steps.

~~With~~The increasing productivity of our EUV systems ~~– which~~ allows ~~creating~~ more advanced and more energy-efficient microchips ~~faster – the energy~~to be created faster. Energy consumption of the total patterning process per wafer will thus be lower using EUV lithography, as compared towith using the complex ~~multi-patterning~~multi- patterning strategies ~~with DUV.~~required for DUV-only patterning.

Our next-generation EUV ~~systems,~~system, EUV 0.55 NA ~~(High-NA)~~(High- NA), will enable further shrink and partly eliminate ~~double exposure~~double-exposure schemes, again replacing multiple 0.33 NA exposures with a single 0.55 NA exposure. With EUV 0.55 NA, the number of non-lithography processing steps can therefore again be ~~reduced.~~kept within limits. This will effectively further limit the total energy consumption of the patterning process per ~~wafer even further.~~wafer.

1Source: M. Garcia Bardon et ~~al,~~al., DTCO including Sustainability: ~~Power-Performance-Area-Cost-Environmental~~Power- Performance-Area-Cost-Environmental score (PPACE) Analysis for Logic Technologies, ~~IEDM2020~~

~~ASML ANNUAL REPORT 2021 59~~

IEDM2020.



			Creating EUV light

~~Climate~~The greatest portion of an EUV system’s energy is used to operate the laser-produced plasma source to create EUV light. Molten tin droplets of around 25 microns in diameter are ejected from a generator. As they move, the droplets are hit first by a lower-intensity laser pulse. Then a more powerful laser pulse vaporizes the flattened droplet and ionizes the vaporized tin atoms to create a plasma that emits EUV light. This conversion process from laser to EUV light using tin droplets takes place 50,000 times per second, and is the most energy-intensive step. By increasing conversion efficiency, we can decrease an EUV system’s energy ~~KPIs~~

~~The table below shows~~consumption at constant wafer output. Making this happen, while ensuring that this will not negatively affect other functionalities of the EUV system, is a key ~~performance indicators (KPIs) and the related 2025 targets.~~ ~~Read more in: Non-financial statements - Non-financial indicators - Climate and energy~~challenge for our ~~performance indicators (PIs) and related results.~~ ~~The non-financial data may include a degree of uncertainty, because of limitations in measurement method and assumptions applied.~~ ~~Read more in: Non-financial statements - About the non-financial information - Reporting indicators .~~

KPI 2019 2020 2021 Target 2025
System energy efficiency NXE:3x00 1
System - NXE:3400C NXE:3600D
Energy consumption (reduction in % of baseline 2018) - -6 % -6 % Reduction 10% from baseline 2018 (1.40 MW)
Throughput (wph) - 136 160
Energy use per exposed wafer pass (reduction in % of baseline 2018) - -26 % -37 % Reduction 60% from baseline 2018 (13.1 kWh)
Wafers per year - 1,191,360 1,401,600

Renewable electricity (of total electricity purchased) 97 % 100 % 92 % 100 %
Renewable energy attributes (in kton) 137 140 145
Fossil fuels consumed (in TJ) by location2
Veldhoven 159 141 184
Wilton 111 112 127
Linkou 0 0 0
San Diego 46 40 43
San Jose 0 0 5
Tainan 0 0 0
Other 0 0 8
Total 316 293 367

CO2 footprint (in kt) - Gross 3
2019 2020 2021 Target 2025
Scope 1 - Direct emissions from fossil fuels in our operations 16.9 15.4 19.3
Scope 2 - Indirect emissions from energy consumption 141.4 139.8 165.1
Scope 3 - Indirect emissions from total value chain 6,500.0 8,400.0 8,800.0
Total footprint (in kt) - Gross 6,658.3 8,555.2 8,984.4

CO2 footprint (in kt) - Net 3
2019 2020 2021 Target 2025
Scope 1 - Direct emissions from fossil fuels in our operations 16.9 15.4 19.3 Net zero
Scope 2 - Indirect emissions from energy consumption 5.3 0 20.1 Net zero
Scope 3 - Indirect emissions from total value chain 6,500.0 8,400.0 8,800.0 Reduce intensity rate from baseline
Total footprint (in kt) - Net 6,522.2 8,415.4 8,839.4

1.~~System-energy efficiency is measured according to the SEMI S23 standard and scaled to 100% productivity of our systems.~~

2.~~San Jose, Tainan and 'other' have been in scope for this indicator since 2021. 'Other' includes the locations with more than 250 FTE combined.~~

3.The guidance from the Greenhouse Gas Protocol – the organization that provides widely used international standards for emissions reporting – is used for the calculation of the emission scope. Market-based conversion factors are used to calculate the scope 1 and scope 2 CO2 ~~emissions in kt.~~

~~Contributing to the UN's Sustainable Development Goals~~

~~Our ambitions, commitments and programs as described in this chapter contribute to the following SDGs.~~ ~~For further information on the performance, read more in: Non-financial statements - Non-financial indicators - Climate and energy.~~R&D teams.


~~SDG target~~	~~How we measure our performance~~
~~SDG target 13.1 - Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries~~		•~~Energy efficiency of our products measured per wafer pass~~ •~~Renewable electricity strategy~~ •~~Scope 1 and 2 emissions~~ •~~Optimize real estate to enhance energy efficiency~~

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Circular economy

Minimizing waste and maximizing resources to extract the greatest value from
the materials we use, and repurposing our products across their life cycles

315 kg

75%

Waste generated per €m revenue (2025 target:
209 kg)

Recycling rate (excluding construction) (2025 target: 90%)

95%

€0.8bn

% of systems sold in the past 30 years still active in the field (2025 target: >95%)

Savings from re-used parts

87%

€232m

Re-use rate of parts returned from field and factory (2025 target 95%)

Value of scrapped parts and packaging

6,675 t

Total waste from operations (excluding construction)



			IN THIS SECTION
			87			Our overall performance in 2022
			88			Reduce waste in our operations
			91			Re-use parts and materials
			94			Refurbish mature products
			95			Water management

~~We are committed~~

Our approach

At ASML, we believe the circular economy is vital to ensure the future success and competitiveness of the semiconductor industry. Our commitment to a circular economy ~~and ensuring~~is intended to ensure that any materials we use can retain and generate as much value as possible for us and for our partners in the ecosystem. ~~To minimize~~Our strategy is to eliminate waste to avoid negative impacts on the planet and ~~maximize resources, we focus on three core strategies:~~also to generate business value. We do this by aiming to:

•–Reduce waste in our operations

•–Re-use parts and materials ~~from the installed base~~

•–~~Recycle~~Refurbish mature products

While continuously innovating with our products, we work to ensure the increasingly sustainable use of materials across our processes and value chain. Our overarching goal is twofold: firstly, we aim to close the learning loop on our parts performance, and secondly, we aim to eliminate waste – whether that’s the waste of energy or the materials we need in our operations at every level. This approach is part of the fabric of our company, and fully in line with our values and culture.

Our impact on the use of materials and resources (in weight) was identified as a new material topic in our materiality assessment conducted in 2022 – a process to formally manage this is currently under development.



€781 million
Savings from re-used parts

Circular economy

SDG target

How we measure
our performance

SDG target 12.2

By 2030, achieve the sustainable management
and efficient use of natural resources

–Recycling rate

–Supplier spend covered with commitment to sustainability (LOI)

SDG target 12.5

By 2030, substantially reduce waste generation through prevention, reduction, recycling and re-use

–Reduction in waste

–Increase in re-use of parts

–Decrease in scrapped parts and packaging

–Lifetime extension of systems still active in the field

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Circular economy (continued)

To execute our Circular strategy and achieve our targets, we have defined a set of principles that guide us in our increasing efforts to reduce waste in our operations, re-use parts and materials from our installed base and recycle mature products through ~~refurbishment~~refurbishments:

–We learn to improve our understanding and data around resources and waste flows.

~~The cornerstone of our circular approach is the modular design of our products. It enables us~~–We rethink designs and processes to ~~upgrade a system to a higher performance level at a customer site rather than having to replace the entire product.~~ avoid environmental impact.

–We ~~can further~~ extend the lifetime and productivity of systems to maximize resource value.

–We re-use resources within our ~~products by refurbishing systems after they have been used in the most advanced chipmaking factories, repurposing them for other customers and semiconductor environments. As~~own value chain, to minimize our waste streams.

–We recycle materials to give resources a ~~result of~~new life, if we can no longer re-use those resources ourselves.

The following diagram illustrates our ~~approach, nearly 94% of the lithography systems we’ve ever sold across our whole portfolio, are still in use at customer sites, highlighting our ability to contribute to a~~ circular ~~economy.~~economy approach.

Our circular economy approach

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Circular economy (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Circular economy	>95%	% of systems sold in the past 30 years still active in the field	n/a		94	%	95	%	•
	95%	Re-use rate of parts returned from field and factory	n/a		85	%	87	%	•
	No target	Savings from re-used parts (€, in millions)1,2	551		686		781		n/a
	No target	Value of scrapped parts and packaging (€, in millions)2	n/a		269		232		n/a
	209 kg/€m	Total waste from operations (excl. construction) normalized to revenue	360		305		315		•
	90%	Recycling rate (excl. construction)	85	%	77	%	75	%	n
	No target	Total waste from operations (excl. construction)3	5,026		5,679		6,675		n/a

1.This reporting indicator follows the principle of prior-year indicator ‘Value of parts re-used (in € millions): however, there has been a modification in the methodology and scope:

–For the re-used parts, the value component has been modified from 100% standard cost price to 100% standard cost price less standard reconditioning costs.

Due to the expansion in scope for this indicator, the comparative figures have been recalculated to reflect fair presentation.

2. A limited portion of data is not readily available, therefore the figures in the table are best estimates that contain some uncertainty.

3. Construction waste is excluded from the calculation of this indicator, because this waste is not resulting from the daily operations at ASML. The amount of construction waste tends to fluctuate over the years and can therefore make the trend of the indicator unclear.

For more on our performance indicators (PIs) and related results, please read:

Non-financial statements – Non-financial indicators – Circular economy.

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Circular economy (continued)

Reduce waste in our operations

Our approach

Managing waste from our operations is a complex issue and relies on the availability of detailed and accurate insights into waste streams to and from ASML. We manage our waste through proper classification, separation and safe disposal. Disposal is carried out by waste vendors, in compliance with local legislation.
All our waste vendors are certified by local authorities for waste disposal, and in our contracts we state they need
to comply with local legislation. We aim to further improve the way in which we monitor these vendors' compliance with local legislation. Waste data is managed through our myEHS system, whereby information from our waste vendors in our locations is entered into the system along with the relevant supporting documentation (invoices).
The data entered is checked internally and by an independent party against the supporting documentation.

Our targets

We have set two ambitious targets to reduce waste in our operations:

–By 2025 we aim to have halved waste generation
(209 kg waste generated per €m revenue as compared with a 2019 benchmark of 417 kg waste generated per €m revenue).

–By 2030 we aim to send zero waste from operations to landfill or incineration.

Our performance in 2022

In 2022, we generated 6,913 tonnes of waste from our operations overall (including construction waste), with 75% of this being recycled (77% in 2021). After a significant decrease in the recycling rate in 2021, the recycling rate decreased two percentage points in 2022. This slight decrease is largely due to the impact of improved data on our waste streams.

Compared with 2021, the total amount of waste increased by nearly 18% (from 5,878 tonnes in 2021 to 6,913 tonnes in 2022). This is mainly due to more people working onsite worldwide, following the lifting of COVID-19 measures and our production increase.

Total amount of waste (excluding construction) was 6,675, up 18% from 5,679 in 2021. Over the years 2019-2021, our waste intensity showed a downward trend. In 2022, our waste intensity was 315 kg per €m revenue, slightly up from 305 kg per €m revenue in 2021 but still below the waste intensity pre-COVID-19 waste intensity (417 kg per €m revenue in 2019, 360 kg per €m revenue in 2020). However, to achieve our target of 209 kg per €m revenue, we need to scale up our efforts to reduce our waste streams in absolute terms and improve our recycling rate.

Our waste from operations to landfill or incineration was 25% of the total waste from operations (compared with 2021: 23%). We need to redouble our efforts in order to reach our ambitious target of zero waste from operations to landfill or incineration.

The reduction of our waste is explained below in more detail, via the different waste streams.

Understanding our waste flows

Within our operations, the main waste streams are:

•–Non-hazardous waste, such as packaging material, product-related waste from parts resulting from upgrades or defects, and general waste. This category also includes construction waste, ~~which results~~resulting from building activities.

•–Hazardous waste, ~~for example~~such as the chemicals we use in our manufacturing ~~processes~~processes.

~~We have set ourselves two targets to reduce our waste footprint. The first target is to reduce our waste intensity – the amount~~

Distribution of waste ~~generated~~streams
(total: 6,913 tonnes)



Non-hazardous waste recycling	71	%
Non-hazardous waste disposed	24	%
Hazardous waste recycling	4	%
Hazardous waste disposed	1	%

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Circular economy (continued)



95%
of our total waste in 2022 was non-hazardous waste

Our non-hazardous waste performance in kg per € million revenue – by 50% in 2025 compared to baseline year 2019. The second target is to increase our material recycling to 85% by 2025. These targets include hazardous and non-hazardous waste.

To achieve these targets, we are focusing on circular procurement, driving awareness across our company, implementing (process) efficiency and improvement projects and supporting employee initiatives. We prioritize solutions to reduce, re-use and recycle our waste as much as possible, rather than sending it to an incineration plant or landfill.

~~Our results and progress~~

Managing waste from our operations is a complex issue and relies on having detailed and accurate insight into waste streams to and from ASML. We manage our waste through proper classification, separation and safe disposal. Although we’ve developed procedures to monitor and measure waste that leaves our premises, it’s much harder to gain insight on the waste streams of our customers.

In 2021, we generated 5,878 tonnes of waste from the activities on our sites and 77% of this was recycled (from 85% in 2020). Compared to 2020, the total amount of waste increased by nearly 12% (from 5,257 tonnes), mainly due to both the increase of our reporting scope from 20 locations in 2020 to 57 locations in 2021 and the growth of the company. Waste reduction programs for the expanded scope need to be defined and implemented, aiming at 2022.

~~Non-hazardous waste~~2022

Non-hazardous waste accounted for 95% (2021: 93% (5,483 tonnes)) of our total waste in ~~2021,~~2022, of which the vast majority was ~~diverted through recycling.~~ recycled (75%).

Distribution of non-hazardous waste

(total: 6,533 tonnes)


Wood	31	%
General waste	24	%
Paper and cardboard	13	%
Electronics	6	%
Metals	7	%
Other non-hazardous waste	5	%
Plastic	5	%
Organic waste	5	%
Construction waste	4	%

Our hazardous waste performance in 2022

The production and operation of our products and systems requires the use of hazardous substances. Hazardous waste can include lamps, batteries, hazardous liquids, empty packaging from hazardous materials, and cleaning wipes and filters. Liquids, including acetone and sulfuric acid, comprise the majority of our hazardous waste streams.

The use of hazardous substances means that we are subject to a variety of governmental regulations relating to environmental protection as well as employee and product health and safety. These include the transport, use, storage, discharge, handling, emission, generation and disposal of hazardous substances.

In 2022, hazardous waste accounted for 5% (380 tonnes) of our total waste generated, compared with 7% (395 tonnes) in 2021. Of this, 81% was recycled.

Distribution of hazardous waste
(total: 380 tonnes)


Hazardous liquids	91	%
Other hazardous waste (e.g. packaging, filters, lamps, etc.)	6	%
Cleaning wipes	2	%
Batteries	1	%

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Circular economy (continued)

Our actions in 2022

Non-hazardous waste

We ~~reduced~~worked to reduce non-hazardous waste through several ongoing programs, such as:

•–Cross-sector re-use program, which added €400 million of re-usable parts value in our circular flows in 2022. We plan to add a further €450 million in 2023.

–Circular IT life cycle: After four years of use, we give all functioning computers and laptops used in our organization a second life. In the case of defective computers, we recycle clean, separated streams of recycled plastic, iron, steel, copper, aluminum, glass and precious metals. ~~This has led to over 30,000 kg of materials recycled, which is a sharp increase of 25% compared to 24,000 kg recycled in 2020.~~

•–Flexible cleanrooms: These are cleanrooms that can be moved between locations and assembled quickly, while providing the same standards and performance as our current fixed cleanrooms. More than 95% of the materials used in the flexible cleanroom ~~set-up~~setup are re-usable, with a lifespan of more than 30 years. ~~In 2021 we used the flexible cleanroom concept for five service warehouses.~~

•~~Other examples are local waste reduction initiatives initiated by our employees, such as plastic recycling and working with re-usable gloves in cleanrooms.~~

•–Construction waste: As we expand our operations, we try to make sure that waste from ASML’s construction activities are recycled wherever ~~we can.~~possible. Construction waste accounted for 3% ~~(199~~(238 tonnes) of our total waste generated in ~~2021~~2022 (compared ~~to 4%~~with 3% in ~~2020)~~2021), of which ~~85%~~67% was recycled. ~~In 2021, we added three work centers and one logistics warehouse to our Veldhoven campus.~~ In our real-estate portfolio management, we apply BREEAM standards ~~which~~that emphasize sustainability through the circular use of materials. ~~For~~

–In Wilton, local teams in cooperation with suppliers and waste vendors initiated a recycling program whereby personal protective equipment (for example ~~almost all~~gloves, hair nets, face masks, etc.) are now recycled instead of being disposed of.

Improving data on our hazardous and
non-hazardous waste streams

In 2022, we made adjustments to our waste stream figures in Taiwan, as formal reporting was not in line with our own definition of waste streams. This has led to a decrease in our 2022 overall recycling rate (75%, from 77% in 2021).

We improved the accuracy of our waste reporting by increasing actual measurements of the ~~material from a demolished sprinkler basin was re-used~~amounts of waste in our ~~new buildings~~main production site in Veldhoven. We are also investigating ways to improve data quality in our sites in the US and Asia.

In the context of improving data, in 2023 we aim to include ASML waste generated by third-party warehouses as a first step toward including downstream waste – we are already preparing the required processes to enable the relevant data collection for this. On our campuses we aim to ensure maximum waste separation onsite (in order for waste vendors to more easily recycle) and we ~~recycled ‘old’ cleanroom suits into acoustic wall panels~~are working on getting agreements included in contracts with waste vendors to maximize recycling.

Action plans for 2022-2025

Despite our ~~meeting rooms.~~

~~ASML ANNUAL REPORT 2021 62~~many waste reduction and/or increasing recycling rate initiatives, we are still not on track to achieve our waste recycling goals. This is mainly due to data improvement processes and more reporting locations compared with 2020. In order to achieve our goals, we are currently investigating the impact of our waste on the environment, cooperating with suppliers and waste vendors, and ensuring that new contracts with waste vendors include sustainability requirements. We currently see no reason to adjust our targets.

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Circular economy (continued)

Re-use parts and materials

~~Hazardous waste~~

To produce and operate our products and systems, we need to make use of hazardous substances. In 2021, hazardous waste accounted for nearly 7% (395 tonnes) of our total waste generated. Of this, nearly 88% was recycled. Hazardous waste can include lamps, batteries, hazardous liquids, empty packaging from hazardous materials, and cleaning wipes and filters. Liquids, including acetone and sulfuric acid, are the majority of our hazardous waste streams.

The use of hazardous substances makes us subject to a variety of governmental regulations relating to environmental protection (as well as employee and product health and safety). These include transport, use, storage, discharge, handling, emission, generation, and disposal of hazardous substances.

~~Re-use parts and materials from installed base~~Our approach

We are committed to re-using system parts, ~~tools,~~ packaging and ~~other materials, whenever practical~~tools in our value chain to reduce and prevent waste ~~and reduce~~while also reducing costs. We believe that re-use is a learning ~~opportunity~~opportunity: by re-using, we learn more about the performance of parts and how existing processes affect them. By implementing those learnings in design and processes, we can then improve parts and system performance for all of us in the value ~~chain, so~~chain. It is important that we continue to work closely on this with our customers and suppliers.

Our targets

Our overall target is to increase our rate of re-use ~~to 95%~~ of defective parts in ASML factories and in the field to 95% by 2025.

To achieve ~~this~~our ambition, we focus on:

•–Design for re-use ~~through~~by focusing on more robust and repairable designs at an early stage of development

•–Return ~~for re-use~~ of transportation packaging and materials for shipments to our customers, for re-use

•–Repair at local repair centers to improve parts repair yields by reducing ~~cycle-time~~cycle time of root-cause analysis and repairs

•–Remanufacture modules and parts that return from the field to as-new quality, also to use in new build systems

•–Harvesting of end-of-life parts through disassembly to re-use subcomponents

~~Progress and results in 2021~~

We accelerated our efforts on re-use, formalizing and structuring many parts of the process. Our Re-use Board, chaired by our Chief Operations Officer and Chief Technology Officer, signed off on a field repair strategy that promotes the repair of parts in local supply chains where possible, driven by our local repair centers. We extended our re-use policy to all product-related packaging, parts, materials and tools, and created a dedicated cross-sector Re-use department to drive this change on a global scale. Whether parts returning from the field are well-functioning, defective or unused, we are working hard to get them back into action in as-good-as- or better-than-new condition.

~~We further embedded our re-use commitment by enhancing our Supplier Sustainability Program.~~ ~~Read more in: Our performance in 2021 - Social - Our supply chain.~~

~~ASML ANNUAL REPORT 2021 63~~

We have started a life cycle assessment of the NXE:3400 EUV system to gain relevant insights into designing, developing and manufacturing our lithography systems with a lower carbon footprint. In this assessment we applied the life cycle assessment model for calculating the impact of waste and waste-reduction activities, which we developedOur performance in ~~2020. Similar assessment of our NXT and EXE lithography systems is planned for 2022.~~2022

In ~~2021,~~2022, our re-use rate of defective parts was ~~85% (from around 86%~~87% (85% in ~~2020)~~2021).

~~Saving materials through reclaim~~

Our ~~Reclaim program in San Diego (US) focuses on re-using a constant flow~~savings from re-used parts amounted to €781 million and the value of ~~returned parts. This program includes design for reclaim, improving the ability to re-use and recondition the assemblies to enable further increase of circularity of~~scrapped parts and materials, so that they can either be re-used for spare parts or incorporated into new system builds. This program has been running successfully for more than a decade. In 2021, we achieved over 375,000 kg material savings.packaging was €232 million.

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Circular economy (continued)

Our actions in 2022

Design for re-use

In ~~2021,~~2022, we ~~integrated~~continued to further integrate re-use into our existing design methodologies and tools, such as in our Product Generation Process (PGP)~~, as a~~. This key element of preventing waste ~~that~~ will help us meet our long-term goals. Our design for re-use methodology contains five elements – reliability, accessibility, replaceability, repairability and re-manufacturability – to enable the re-use of parts throughout the entire product life cycle. This means that re-use

Re-use requirements are now part of the core product design strategy and specifications. For example, through the modular design of our products and their components, we make sure that future upgrades, ~~wear~~worn parts and components can be replaced as a single unit. ~~Through~~By ensuring commonality in ~~designing~~the parts design process, a part it can be used in multiple contexts in ~~the~~a product and even in future product generations.

~~The Re-use department’s focus~~Managing reverse flows for ~~2021 was on embedding~~ re-use ~~into our New Product Implementation (NPI) programs and driving~~

In 2022, we set up a dedicated reverse logistics team to drive waste reduction in our ‘reverse flows’ ~~(materials~~– materials coming back to us or to our suppliers both from the ~~field). Work continues~~field and from the factory. The goal of this team is to help support our drive to re-use, reduce reverse logistics and repair lead times, and increase the overall re-use rate.

We are continuing to work to resolve bottlenecks in the execution of re-use and to clarify direction, guidelines and ~~‘re-use rules’~~re-use rules across the business. ~~We are also looking to further mature our waste reporting data.~~

Return for re-use of transportation materials

When modules and systems are shipped, either from our suppliers to our factories or from our factories to our customers, many transportation materials are used – such as packaging, locking and ~~parts,~~plug materials – to ensure that the products arrive safely. ~~These so-called auxiliary parts (plugs, caps, clamps, cover plates, flanges, auxiliary brackets, etc.) are removed on arrival.~~ Instead of ~~throwing them~~being thrown away, these are ~~re-used at use level (the highest level of re-use), so preventing them from ending up as waste.~~re-used. Before ~~sending~~ these parts ~~back~~are returned for re-use, they ~~go through~~undergo an identification process and quality check, followed by ~~logistic~~the logistical and financial processes required to ~~sell~~bring them back in the supply chain (either to the original module suppliers or to ~~ASML.~~ASML). Our goal is to standardize these processes and create a network-related solution to enable high flexibility and reduce transport, which also reduces our CO2e footprint.

We are improving the re-use of ~~packing,~~packaging, locking and transport materials from the field and factory, ~~aiming~~and aim to return and re-use 80% or more in the next installation or relocation. ~~In 2021, over 4,300 tonnes of transportation materials were re-used, up from nearly 4,000 tonnes in 2020.~~

~~Repair~~

Local repair centers

We are extending the number of local repair centers for refurbishing, repairing or cleaning service parts, packaging and ~~materials,~~tools, and we are setting up global repair centers for factory materials. ~~There are currently~~The value handled by our local repair centers increased fourfold in 2022, and we expect it will increase three times again in 2023. Our goal for 2025 is that 10% of our parts sent to the field should be repaired locally.

Currently we have local repair centers in South Korea ~~Taiwan~~ and China, ~~with~~and we are rolling out plans for all our customer regions to eventually have one or more in place. ~~Global~~A global repair center has been opened in Linkou and additional global repair centers will ~~also~~ be ~~set up~~established at each of our factory hubs in Wilton and San Diego (US)~~, Linkou (Taiwan)~~ and Veldhoven (the Netherlands).

Our repair centers partner with local material suppliers and specialized repair partners, creating a local ecosystem. By enabling repair and re-use activities and taking ownership of repairs in the field close to our customers, we are able to reduce logistics time, the costs of stocking of parts and our environmental ~~impact.~~impact (by reducing scrap and waste and greenhouse gas emissions). Our customers benefit from reduced service costs and improved material availability.

~~Remanufacture ‘As-New’~~A single quality standard for both new and
re-used parts

When a part is re-used, our customers expect it to be as good as, or better than, the original new part. We ~~set high-quality standards on ‘As-New’ parts and expect suppliers to be involved to meet these standards. This~~have a single qualification standard and requirement ~~is identical to the one for new parts, meaning~~in place that ensures that the same specifications, performance requirements, ~~warranty,~~warranties, and so on, ~~apply.~~are applicable to both new and re-used parts. We expect our suppliers to be fully engaged in meeting this standard as well.



87%
Re-use rate of defective parts in 2022

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Circular economy (continued)

Our achievements on re-use in 2022

We ~~now~~ have ~~over 75 ‘As-New’ release projects ongoing at over 25 suppliers. Our ambition~~streamlined our scrap approval process. Firstly, every e-scrap request is accompanied by a proposal from the re-use team outlining which parts are still re-usable, to ~~increase~~be assessed by the initiator before the request is approved. Secondly, an automated validation step makes sure the right follow- up actions are in place, which reduces the lead time in the scrap process. We have already implemented this process in Veldhoven and are creating a roll-out plan for other locations.

Re-use is recognized as a key contributor in our ability to ramp up our capacity to cope with strong customer demand. By retrieving parts from inventory or through repair or harvesting, we have been able to execute a large amount of extra module build starts in our work centers, which in turn helps accelerate our efforts to embed re-use across our company.

For example, in 2022, we successfully demonstrated that our external interface module (EIM), built by our supplier Lamers (part of Aalberts Advanced Mechatronics) in the Netherlands, can be remanufactured, requalified and used again in a newly built system with as good as new or better than new quality. EIMs are used for regulating the flow or pressure of the gas supply into our TWINSCAN XT and NXT systems. In this case, re-use saves around 200 kg of waste and between €40k and €50k per EIM.

We have also created and implemented a process for re- use of ~~As-New~~tin catch buckets, modules that are used in the light source of our EUV systems. We retrieve them, disassemble them and drain the tin for re-use. After that, the cleaned module is as-new, ready for re-use in our EUV systems.

Another pioneering re-use example is the EUV reticle masking module (REMA) that blanks off not-used parts of the reticle. Older versions of these modules that return from our customers are harvested for parts that are used to build new REMA modules. This has helped to lower the pressure on our supply chain, secure supplier output for these modules and reduce waste and carbon footprint. Learnings from this project are captured and embedded in our development way of working.

We have also started re-using electronic cabinets that we retrieved as leftovers from system upgrades in the field which would normally have been scrapped. A refurbished electronic cabinet has as-new quality and can therefore be integrated into new systems for our customers.

The Wilton EHS overseas CRE Re-use program is another example of how re-use can deliver key benefits. When an employee or department has a piece of equipment or furniture that is in good condition and can be re-used onsite, a picture of the item is placed on the CRE Re-use Wilton SharePoint page. If an ASML employee sees something they can use, they reach out to ~~prevent unnecessary~~CRE EHS and our technicians will deliver the item. So instead of scrapping ~~of well-functioning parts and modules.~~work benches, cabinets or machines, we are re-using these items onsite.

We further embedded our re-use commitment by enhancing our Supplier Sustainability Program.

Read more in:

S ocial - Our supply chain.

Re-use challenges and roadmap

~~We made~~In 2022, we continued to make good ~~strides~~progress on re-use and ~~are~~remain committed to ~~continuing to reduce~~further reducing our waste streams. Building a re-use mindset and ~~adopting~~embedding it into normal ways of working is critical to achieving re-use and preventing scrap. For example, by replacing scrap bins in our factories with what we now call ‘re-use collection corners’, we encourage employees to think of used parts as having potential rather than being seen as waste.

ToHowever, to fully embed our re-use vision, ~~however,~~we recognize that there are several challenges to overcome and processes to be defined. These include:

•–Configuration control: To re-use ~~As-New~~as-new parts in a system requires traceability of those parts. This means we need to be able to trace ~~its~~a part’s history, where it comes from, and know how many times it was used and repaired.

~~ASML ANNUAL REPORT 2021 64~~

•–Organization: Across our operations, there are a variety of separate processes related to return and re-use. We need to align ~~those~~these to an overall end-to-end re-use process flow.

•–Repair engineering and processes: Part of our new focus is creating awareness onregarding design for re-use, and defining processes around how to include re-use in redesigns and engineering changes.

~~In 2021, under configuration control~~

As a next step, we ~~reduced the risk of what we call ‘broken life cycles’ by improving the traceability of parts.~~have started building a dedicated global re-use center in Veldhoven (Netherlands) that will facilitate various repairs and harvesting activities. We ~~intend to finish this improvement by the end of Q2 2022, solving the broken life cycle issues we now have in 4%~~anticipate a bigger re-use inflow from a bigger installed base. This is part of our ~~parts. We also delivered some new~~strategy to move from re-use ~~execution processes, such~~activities as ~~‘harvesting at the supplier’, enabling~~part of build work centers – which can be very distracting and confusing for teams that are building modules – to making dedicated re-use centers, which will help us to ~~send purchase orders~~create even more re-use output.

Action plans for 2022-2025

This year we determined our targets for 2025 in more detail. With the action plans above, we see no reason to ~~harvest parts~~adjust our 2025 target. Going forwards, we aim to ~~suppliers, embedded~~also include packaging data to our 'Savings from re-used parts' indicator.


4x
the value handled by our local repair centers in 2022

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Circular economy (continued)

Refurbish mature products

Our approach

Our approach is to have more than 95% of systems sold in ~~our sourcing and logistics process.~~

~~As next steps, we have defined five priorities. These include planning of re-use before new, supplier re-use incentives and autonomy, high-quality reverse logistics, further embedding re-use~~the past 30 years, still active in ~~our Product Generation Process (PGP), and launching re-use change and communication campaigns across ASML and suppliers.~~

~~Recycle mature products through refurbishment~~the field.

A well-maintained ASML lithography system can last for decades and can be used by more than one fab. Many ASML lithography systems start out in cutting-edge ~~fabs – once~~fabs. Once that fab needs to upgrade, the lithography systems are given a new lease of life in a fab where the manufacturer requires comparatively less sophisticated chips, such as accelerometers or ~~radio frequency~~radio-frequency chips.

Our Mature Products and Services (MPS) business focuses on the refurbishment of the following product families: the PAS 5500 (with around 1,800 systems at customer sites worldwide), the TWINSCAN XT systems, and, as of 2021, the NXT:1950-1980 systems.

Our refurbishment strategy focuses on buying back systems that are not operational in the field, harvesting parts from decommissioned systems and managing the continued availability of spare parts, which is key to the extended lifetime service we offer for our systems. We provide our customers with a guaranteed service roadmap until at least 2030. This means that all support and the necessary services and spare parts they need to maintain their systems isare expected to be available through at least 2030 and beyond.

For the TWINSCAN AT systems that are still in operation, we focus on measures to proactively manage their end of ~~life~~life. We do this by guaranteeing the availability of spare parts as long as possible on a best-effort basis.

Our performance ~~and progress~~ in ~~2021~~2022

Thirty years after its introduction, ASML’s PAS 5500 platform is still alive and kicking. Currently, 90% of the PAS 5500 systems we have ever built are still in use, whether as refurbished tools or in its original configuration. The PAS platform is used for a wide variety of niche applications, from sensors to power chips and even life-changing implantable medical devices.

Until 2021, we have refurbished and resold well over 500 lithography systems. In 2021, we celebrated the 100th refurbished TWINSCAN, which also marked the 20th anniversary of our TWINSCAN refurbishment program.

~~New challenge – refurbishing and upgrading first-generation NXTs~~

~~In 2021, the~~Our Mature Products and Services (MPS) business ~~line embarked~~focuses on ~~a new challenge to refurbish and upgrade first-generation NXT lithography machines, in addition to~~ the refurbishment of the following product families: PAS 5500 ~~and XT systems. With the NXT platform having established its position as the workhorse of the semiconductor industry, there are more than 200 first-generation NXTs still running production~~(with around 1,800 systems at customer sites ~~around the world.~~

To support the steep growth in semiconductor manufacturing capacity, especially in ‘More-than-Moore’ markets with less advanced requirements, ASML buys back these systems, refurbishes them to the specifications of later-generationworldwide), TWINSCAN XT systems and, ~~sells them~~as of 2021, NXT:1950-1980 systems. By the end of 2022, we had refurbished and resold well over 540 lithography systems. Some 95% of systems sold in the past 30 years are still active in the field, and we have a target to ~~customers that do not need the specs offered~~achieve more than 95% by ~~more advanced machines. This enables customers~~2025. We are on track to ~~purchase an attractively-priced tool that will support their required cost of ownership targets, while contributing to ASML’s commitment to minimize waste and maximize resources.~~meet this target.

~~Securing parts availability~~Our actions in 2022

We are making significant investments to ensure continued supply of more than 2,000 service parts for our PAS platform, either through redesigns, a parts harvesting strategy or by finding an alternative with the same form, fit and function. IfIn instances where this does not work, we are generally able to secure components through Last Time Buy – a ~~supplier's 'last call'~~supplier’s ‘last call’ for a part or component before production switches to its successor. Over time, when a part is no longer available, we redesign parts.

We track the spare parts we have in our portfolio, see how they are being used, and identify when we expect to run out of these parts. For ~~the~~ PAS systems, we use this information to update our priorities for redesigning parts. For ~~the~~TWINSCAN AT systems, we ~~try~~aim to continue supplying parts by harvesting them from systems that are decommissioned by our customers.


			95% of all systems sold in the past 30 years still active in the field

To secure the availability of spare parts into the next decade, we need to replace many unavailable parts that were designed with technology from the 1980s and 1990s with parts based on state-of-the-art technology. This involves a complete overhaul of these parts. For the coming years, we have identified and plan to execute more than 100 redesign projects for nearly 300 parts. This is especially relevant for electronic parts, for which the evolution of technology has ~~gone~~been faster than in any other field.

~~Roll-out~~Action plans for 2022-2025

No additional actions, as we are on track to meet our target of ~~MPS Customer Portal in Asia~~

~~ASML ANNUAL REPORT 2021 65~~95%.

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Circular economy (continued)

Water management

~~A web-based parts ordering portal has been instrumental~~

Water management

Semiconductor manufacturing processes use a great deal of water. Due to climate change, droughts have become more extreme and more unpredictable, which may lead to water becoming a scarce resource in specific locations. Although water is an essential resource in our customers’ semiconductor manufacturing processes, water use in our own operations is limited. ASML’s products use water mainly in three ways. First, water is used to remove heat loads, to keep the ~~business model~~system on a constant temperature. These internal cooling circuits are all designed as ‘closed-loop’ (recycling) systems. Second, these heat loads are ultimately removed by cooling towers, using evaporation of ~~Mature Products and Services (MPS), keeping costs under control while providing an optimal customer experience. In June 2021, following its success~~(lower-quality) water. Third, DUV systems use ultrapure water in the USimmersion hood – this water is currently only partially recycled.

Water consumption at ASML is only a fraction of the water consumption of most companies in the semiconductor industry. Nevertheless, we promote the responsible use of water throughout our company. Our water consumption in 2022 increased to 1,161,850 cubic meters, up from 1,041,000 cubic meters in 2021. This increase can primarily be attributed to more cooling water being used in Veldhoven due to higher power consumption, driven by an increase in the number of systems produced and ~~Europe,~~warmer weather in 2022. In addition, more people were working in the ~~online MPS Customer Portal went live~~office and factory compared with 2021. In San Diego, the HVAC cooling tower water cleanliness set point was modified, resulting in ~~Asia.~~an increased automated flushing of the system.

~~The portal is designed~~While disruptions in access to ~~facilitate Billable and Volume Parts Contract (VPC) parts sales~~water may represent a significant risk for ~~ASML. Paired with a regional hub-based logistical service, it creates an efficient and valuable sales channel for~~some of our customers, ~~that minimizes manual steps~~water-related risk for ASML is limited. We have seven manufacturing sites located in Veldhoven (Netherlands), San Diego (US), Wilton (US), Linkou (Taiwan) and potential delays. Depending on the location, customers can expect their parts to be delivered within a few days or even – in the case of expedited orders in Taiwan and South Korea – within a few hours.Tainan (Taiwan).

~~Circular economy KPIs~~

~~The table below shows the key performance indicators (KPIs) and the related 2025 targets.~~ Read more in: ~~Non-financial statements - Non-financial indicators - Circular economy for our performance indicators (PIs) and related results.~~ ~~The non-financial data may include a degree of uncertainty, because of limitations in measurement method and assumptions applied.~~ ~~Read more in: Non-financial statements - About the non-financial information - Reporting indicators .~~

KPI 2019 2020 2021 Target 2025
Total waste generated normalized to revenue (kg/Million €) 1
417 360 305 -50% of 2019 baseline
Material recycling (% of total waste) 1
80 % 85 % 77 % 85 %
ASML PAS5500 systems sold still in use (in %) 2
90 % 90 % 90 % n/a
Value of parts re-used (€, in millions) n/a 1,151 1,236
Our TCFD Recommendations – Climate-related disclosure, available on www.asml.com.

1.Construction waste is excluded from the calculation of this indicator, because this waste is not resulting from the daily operations of ASML. The amount of construction waste tends to fluctuate over the years and can therefore make the trend of the indicator unclear.

2.Due to a definition change in 2020, the KPI is based on PAS5500 systems sold. For other PAS systems it is not possible to determine the status of use mainly because service contracts have been terminated.

~~Contributing to the UN's Sustainable Development Goals~~

ASML ANNUAL REPORT 2022

SOCIAL

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

Social at a glance

We aim to have a positive role in society for our employees, the communities around us and everyone involved in our innovation ecosystem and supply chain.

What we do

As a multinational technology company, we impact many people’s lives, both directly and indirectly. We want to have a positive role in society – for our employees, our supply chain, everyone involved in our innovation ecosystem and the communities around us.

Our aims

We work closely with our stakeholders, collaborating to achieve the ambitions of our four focus areas.

Our goal is to ensure that responsible growth benefits everyone. To maintain our fast pace of innovation and ensure our long-term success as a company, we need to attract and retain the best talent and provide the best possible employee experience. We aim to be a valued and trusted partner, improving the quality of life for all and supporting people in disadvantaged communities.

Through our focus areas, we support five different SDGs in a range of ways.

Attractive workplace for all

Read more on page 97 >

SDG ~~target~~4 and 8

~~How we measure our performance~~–Inspiring a unified culture

–Best employee experience

–Enabling strong leadership

–Ensuring employee safety

~~SDG target 12.2 - By 2030, achieve the~~Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all/Promote sustained, inclusive and sustainable ~~management~~economic growth, full and ~~efficient use of natural resources~~productive employment and decent work for all

Our supply chain

•Read more on page 109 >

SDG 8 and 12

–~~Material recovery~~Supplier performance and risk management

•–~~Promote circular procurement~~Responsible supply chain

~~SDG target 12.4 - By 2020, achieve the environmentally sound management of chemicals~~Promote sustained, inclusive and ~~all wastes throughout their life cycle, in accordance with agreed international frameworks,~~sustainable economic growth, full and ~~significantly reduce their release to air, water~~productive employment and ~~soil in order to minimize their adverse impacts on human health~~decent work for all/Ensure sustainable consumption and ~~the environment~~production patterns

Innovation ecosystem

•~~RoHS / REACH compliance of parts used~~Read more on page 118 >

SDG ~~target 12.5 - By 2030, substantially reduce waste generation through prevention, reduction, recycling and re-use~~9

•–~~Waste reduction~~Partnerships for research and development

•–~~Increase re-use of parts~~Supporting startups and ~~modules~~scaleups

Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

Valued partner in our ~~products~~communities

Read more on page 124 >

SDG 4 and 11

–Education

•–~~Lifetime extension of used systems~~Arts & culture

•–~~Re-use of packaging~~Local outreach

Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all/Make cities and human settlements inclusive, safe, resilient and sustainable

~~ASML ANNUAL REPORT 2021 66~~

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FINANCIALS

Attractive workplace for all

Empowering individuals for the collective good to ensure our employees are proud to work for us and engaged with our ambitions as a company.



6.0%			37,643
Attrition rate (2025 target: <7%)			Total employees (FTE)1 EMEA 21,267 Asia 8,871 US 7,505

78%		(-4%)	24%
Employee engagement score against benchmark (2025 target -2% vs. top 25% performing companies)			Gender diversity (% females’ inflow) (2024 target: 23%)

143
Nationalities

IN THIS SECTION
98	Our overall performance in 2022
99	Inspiring a unified culture
101	Best employee experience
106	Enabling strong leadership
107	Ensuring employee safety

~~Pushing the limits of technology would not be possible without our~~

Our approach

Our engaged, diverse and highly ~~competent workforce. Our~~skilled employees are critical to the performance of our organization and our long-term success as a company. ~~As well as working~~We work hard to attract the world’s top talent ~~we need to~~and focus on helping them ~~all~~ reach their full ~~potential, in an environment where they are proud~~potential.

ASML’s people vision sets out our ambition for the future, supporting our values and what we stand for: We empower each other to ~~work for us~~thrive, fueling our growth, happiness and ~~engaged with our ambitions as a company.~~business success.

~~We continue to experience strong growth at ASML. Our workforce nearly doubled in size in~~Everyone throughout the last five years. And in spite of the ongoing pandemic, we had an extraordinary year in 2021, with an over 16% increase in employees (in FTE), a revenue increase of more than 30%, and over 20% more product output. This rapid growth also brings challenges. Our organization has ~~become more complex, our workforce is more diverse, and the expectations of our customers and stakeholders are growing.~~

~~Our people~~an important role in this vision,

~~The needs of our growing workforce are changing, which requires~~ but we need an environment and tools that support collaboration, knowledge sharing and autonomy in more diverse and interdependent teams. ~~At the same time, we~~We must also continue to deliver on our commitments to our stakeholders and manage our day-to-day challenges to attract, onboard, develop and retain ~~our~~ talent.

~~We’ve already created a strong foundation by articulating our purpose, vision, mission, values and leadership expectations.~~ To stay successful in the future, we examined how our strengths translate to our current reality. Hence, we define our people vision as follows: We empower each other to thrive, fueling our growth, happiness and business success. ASML’s people vision sets out our ambition for the future, supporting our values and what we stand for. Everyone throughout the organization has an important role in this vision.

~~Our pathway to realizing~~deliver on our long-term people vision, ~~is captured in our people strategy. For the next five years, our roadmap focuses~~we focus on three key areas:

•–Inspiring a unified ~~culture, with our values as our compass to guide our decisions and behavior to deliver on our strategy~~culture;

•–Providing the best possible employee ~~experience, enabling us to attract, develop~~experience; and ~~retain the best talent~~

•–Enabling our leadership to bring out the best in our people ~~by leading through trust, empowerment and accountability~~.

~~Collaborating closely with~~Across the business, ~~on a day-to-day basis,~~ we drive ~~several key~~various programs ~~designed to~~that provide our people with more autonomy in steering their development and career aspirations ~~and~~in a safe environment, while enabling our leaders to support the growth of the company.

Our approach to foster an attractive workplace for all is set out in the following pages.

~~Unified culture~~

~~More than ever,~~

1.This FTE number excludes Berliner Glas (ASML Berlin GmbH).

Attractive workplace for all

SDG target

How we measure our performance

SDG target 4.3

By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university

–Employee training and development indicators

SDG target 8.1

Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries

–Financial performance

SDG target 8.2

Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value-added and labor-intensive sectors

–Employee engagement score

SDG target 8.5

By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

–Workforce data including diversity and inclusion

–Fair remuneration pay ratio

SDG target 8.6

By 2020, substantially reduce the proportion of youth not in employment, education or training

–Employee attrition rate

–New hires

SDG target 8.8

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

–Employee safety indicators

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On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Attractive workplace for all	Be on par with benchmark target: 2% below benchmark of top 25% performing companies	Employee engagement score	80	%	78	%	78	%	•

	No target	Employee growth (new hires and rate)	1,932 (8%)		4,373 (15%)		7,130 (21%)		n/a
	<7%	Attrition rate	3.8		5.4		6.0		•
	20% (in 2024)	Gender diversity – % females inflow job grade 13+	n/a		12%		35%		•
	12% (in 2024)	Gender diversity – % females job grade 13+	n/a		8	%	10%		•
	NL top 10 Taiwan top 20 S Korea top 20 US top 75 China top 100	Attractiveness to talent (employer brand score)1	NL 10 Taiwan 22 S Korea 24 US3 177 China 168		NL 6 Taiwan 6 S Korea2 14 US3 177 China 148		NL 4 Taiwan 6 S Korea n/a US 159 China 188		n
	0.16 (2022)	Recordable incident rate	0.18		0.17		0.18		n
	Target is relative to the score of the top 25% of performing companies by +/-3%) (2024)	Inclusion index	73	%	83	%	85	%	•
	23% (in 2024)	Inflow % female	23	%	21	%	24%		•
	No target	Total employees	Total 26,481 Male 83% Female 17% Asia 6,057 EMEA 14,714 US 5,710		Total 30,842 Male 82% Female 18% Asia 7,430 EMEA 17,230 US 6,182		Total 37,643 Male 80% Female 19% Unknown 1% Asia 8,871 EMEA 21,267 US 7,505		n/a
	No target	Number of nationalities	120		122		143		n/a

As ASML has continued to grow strongly, we ~~need to pay attention to~~have managed a large increase in our workforce in recent years, benefiting from a more diverse employee base. However, this rapid growth brings its own challenges, as the organization becomes more complex, and the expectations of our customers and stakeholders grow.

For more Attractive workplace for all related performance indicators (PIs), see:

Non-financial statements – Non-financial indicators – Attractive workplace fo r a l l.

1.Employer brand ranking from Universum: engineering students.

2.As of 2021, overall ranking for South Korea is no longer conducted by Universum. The result reported for 2021 is based on a customized ranking report.

3.The methodology for the US was changed, which results in a restatement for 2020/2021, so the comparative figures have been revised based on the overall brand ranking. This results in an increased score of 177 versus the previously published rankings of 99 in 2020 and 133 in 2021.

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Inspiring a unified culture

Our approach

We are anchoring ASML’s identity deep in the organization, to help ~~our~~ people embrace our values and to provide a unified direction that enables people to familiarize themselves with our company strategy and purpose.

~~ASML ANNUAL REPORT 2021 68~~

Our company values – challenge, collaborate and care – ensure we are all working from a commonly understood base that ~~can be applied~~applies equally across ~~our organization, helping~~the organization. They help us make choices that keep us true to ~~ourselves. They also~~ourselves, and allow teams to discuss ~~the~~ natural areas of friction ~~where these values overlap. For example, by ensuring that~~when they occur. They also ensure we balance the ~~founders’~~ traits that have brought usASML this far (persistence, a ‘can do’ ~~mentality~~attitude and a belief that anything is possible)~~, are balanced by~~ with the right degree of ~~care. Embedding our values is an ongoing journey, but we aim to succeed by applying them every day.~~care).

Building on ~~our~~these core values, ~~we apply~~our six people principles ~~– clarity and accountability, continuous learning, inclusion, enabling environment, personal growth, and trust – to~~ guide and inspire us in our ~~people decisions~~decision-making to bring the best out of our employees.

~~Our progress~~

~~In addition to ongoing initiatives deployed earlier to make our values tangible now~~ These principles are: clarity and ~~in the future, we launched the ‘Values in action’ program in 2021. As opposed to previous independent annual events, such as ‘Have a safe day’, ‘Ethics week’, ‘Sustainability week’~~accountability, continuous learning, inclusion, an enabling environment, personal growth and the ‘Volunteer fair’ we developed an ongoing program with a series of events that explored the values through the lens of environmental, social and governance (ESG) topics. At every event we ask our senior leaders to outline their plans, ambitions and commitments to ensure we live up to our values.

~~In 2021, we executed several 'Values in action' events around the topics of mental health safety, the ASML Foundation, 5 life-saving rules, Speak Up and green energy.~~

~~Employee experience~~trust.

We ~~believe~~recognize that our success is driven by our unique and diverse teams. As an equal opportunity employer, we are cultivating a diverse and inclusive workforce ~~provides the necessary mix of voices~~to drive innovation and ~~points of view required~~accelerate creativity within our business. We strive to ~~innovate and drive our business forward. We foster a culture~~maintain an environment where ~~different identities, backgrounds, talents and passions are~~all feel valued and ~~celebrated.~~respected and can fully contribute. That has helped us to build a culturally diverse organization, with our employees representing 143 different nationalities. Even with this wide range of diverse talent on our team, we still have opportunities to be more inclusive. Our goal is for our workforce to be representative of the available qualified talent pool.

Our Global Diversity & Inclusion Council, founded in 2021, consists of senior leaders who act on behalf of ASML to provide thought leadership. The Council, chaired by a member of the Board of Management, proposes the Diversity & Inclusion strategy to the Board of Management, sets, promotes and monitors diversity and inclusion initiatives and leads company-wide accountability for our goals. We also have a global diversity and inclusion team, including a Chief Diversity Officer, who is responsible for driving initiatives that are related to diversity and inclusion across ASML.

Our diversity and inclusion roadmap is integrated in our people strategy and focuses on three key areas within ASML: leadership, culture and talent. These pillars strengthen our connection with ASML’s wider community. Through activities centered around talent, culture and leadership, we engage with our communities in a sustainable, mutually beneficial way that demonstrates our care and commitment to diversity and inclusion.

We know it’s important to nurture the connection between employees’ expectations and perspectives with the global D&I strategy. ASML employee networks – such as Atypical for neurodivergent employees and Proud for the LGBTQIA+ community – play an important role in this, and we encourage participation from everyone.

Our Diversity and Inclusion Strategy

Our roadmap focuses on three key areas:

Talent

Leadership

Attract and retain employees by ensuring that they are valued, supported with feedback and
can grow their careers

Enabling our leaders to demonstrate commitment, accountability and role-model behavior to advance
inclusion within their teams

Culture

Cultivate and promote an inclusive culture that equips employees to challenge norms and increase collaboration

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24%
of our new hires were women in 2022

85%
2022 inclusion score

Our targets

We must hold ourselves accountable in our efforts to grow an inclusive workplace which drives innovation and creativity. Therefore, we have set a number of targets which will allow us to measure the effectiveness of our approach. These targets are:

–Reach 23% women new hires by 2024

–Reach 12% women at leadership levels by 2024

–Reach 20% inflow of women to leadership levels by 2024

–Score on par +/- 3 percentage points with the top 25% of top-performing global companies on our inclusion employee survey score in 2024. Our goal is to meet or increase this level of inclusion on an ongoing basis.

More information about the diversity of our Supervisory Board and Board of Management can be found in:

Corporate Governance - Other Board-related matters - Diversity.

Our performance in 2022

In 2022, we made progress in gender diversity at all levels, including individual contributors and senior leaders. Female employees now make up 19% of our workforce worldwide, an improvement of one percentage point compared with last year. We aim to continue this upward trend as we move toward 2024.

To do this, we are focusing on the growth of our existing team members and expanding the diversity of our talent pool. In 2022, 24% of new hires were female.

The current representation of women at leadership level is 10%, while our ambition is to reach 12% by 2024. To make this tangible, we have set a goal to increase the hiring and promotion of female leaders, from 12% in 2021 to 20% in 2024. In 2022, the % inflow of female leaders was 35%.

This talented pool of female employees will be 'role models', paving a path for more to follow. We believe that promoting more diversity in our workforce will help us to attract and retain smart, talented people, enabling us to drive technological innovations that meet our customers’ needs.

Overall, the global STEM (science, technology, engineering and math) talent pool is thinly populated, and it is even more challenging to recruit female talent. Our R&D workforce is 16% female. Nearly 90% of our job positions are STEM-related, whereas peers in the high-tech industry have more non-STEM-related job positions. ASML is highly motivated to see more women pursuing careers in engineering and science now and in the future. The highly specialized nature of our industry means achieving this balance is a long-term process.

We@ASML, our internal employee survey, measures inclusion levels each year. In 2022, our inclusion score was 85%, 1 percentage point above the benchmark of top-performing global companies. Our goal is to meet or increase this level of inclusion among our employees on an ongoing basis.

Our actions in 2022

To promote diversity and inclusion in our workforce, we are building and implementing programs that lead to measurable and actionable results. During 2022, we:

–Facilitated over 20 D&I internal training sessions for approximately 1,000 employees, managers and leaders globally, both virtually and in person.

–Worked toward broadening our talent pipeline to be more diverse and inclusive in all areas of demographics, and having an employee base that is representative of the available qualified workforce. To help achieve this goal, we participated in national engineering conferences in the US

such as the National Society of Black Engineers (NSBE), Society of Hispanic Professional Engineers (SHPE), Out in Science Technology Engineering, and Mathematics (oSTEM), and Society of Women Engineers (SWE).

–Collaborated with universities and organizations dedicated to building diversity and creating opportunities for professional development and engagement. New global partners include Out & Equal Workplace Advocates and Disability:IN.

–Actively engaged with multiple educational programs to grow the talent pipeline, deploying multiple initiatives to promote STEM education among the future female talent pool.

–Executed global D&I engagement activities, such as International Women’s Day, LGBTQIA+ Pride Month and Global Diversity Month.

–Held nine D&I events with keynote speakers which were held alongside observances such as Black History Month, Pride Month, Juneteenth, Hispanic Heritage Month and Global Diversity Awareness Month, each with an average live attendance of 460 employees.

–Supported employee networks giving back locally in their community through mentoring programs such as American Corporate Partners, partnering with local Pride organizations, fundraising events, and donating goods.

Action plans for 2022-2025

In 2022, we had a strong performance with a 24% female inflow. Due to this result and recognizing that we want to continue this ambitious inflow, we have defined a 2025 target of 24% (which is at the same level as our 2022 performance, but higher than the original 2024 target of 23%).

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Best employee experience

Our approach

We want to offer our people the best possible employee experience at all our sites, enabling them to develop their talent, feel respected and work to the best of their abilities ~~and~~– this allows us to attract and retain the best talent.

Employee experience is the sum of all experiences an employee gains through the interactions with the company at each stage of the employee life cycle, from attracting and onboarding talent to attrition. To this end, we focus on employer branding and employee engagement.

~~Employee~~Likewise, employee engagement depends on a wide variety of factors and activities, such as talent attraction and retention, onboarding experience, learning and development, diversity & inclusion, labor practices such as fair remuneration and labor conditions, and leadership.

The overall impact of these programs on the total employee experience is measured by our ~~we@asml~~We@ASML employee engagement survey.

Employer branding

With the demand for top-tier talent increasing year-on-year, employer branding is a vital strategy to ensure ASML gets its share of this talent. Our strong growth means we need to hire large numbers of employees. Highly skilled people with a technical background are scarce in the labor market and competition is growing. We ~~see~~recognize that top-tier talent ~~selects~~select their employer of choice, not the other way around. ~~This is a~~In light of this general ~~development of~~trend for employees ~~choosing~~to choose their future employer, ~~and it’s~~it is important ~~for employees~~ that a potential employer has a ~~proper~~strong value proposition.

~~We view~~

Within the recruitment ~~as an ongoing process, and~~funnel, we continuously seek to raise awareness, consideration and conversion to jobs. We aim to improve and professionalize how we ~~go about it.~~attempt to achieve this by understanding our target audiences and their preferences in an employer. We use this information to ~~fine-tune~~improve our ~~target audiences~~candidate experience and ~~recruitment efforts.~~drive communications, programs and campaigns which enable our talent acquisition teams to hire top talent with speed.

Onboarding and developing our people

Once our people are on board, it’s vital to strengthen and continuously invest in them to anticipate evolving business requirements and developments in the labor market. We empower our employees to take responsibility for their own personal development, pursue their career ambitions and to thrive, offering tailor-made training and development programs.

Supporting careers at ASML

We are always looking for ways to improve how we can help employees identify opportunities for professional development within ASML. We offer a wide range of career paths and have various tools in place to support our employees’ career navigation.

Employee engagement

Employee engagement is critical to the performance of our organization and our long-term success as a company.

We measure the overall impact of our activities on the total employee experience using our we@ASML employee engagement survey. This annual survey is a crucial tool for collecting and measuring employee feedback. It provides insights that enable us to improve the employee experience and refine our policies and processes.

To measure the degree to which our values are embedded in the organization, the survey also includes questions about our culture and values that go beyond the ‘what’ to the ‘how’.




We want to offer our people the best possible employee experience at all our sites, enabling them to develop their talent, feel respected and work to the best of their abilities.

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We support our employees in maintaining a healthy, productive and balanced life.

Working practices and remuneration

We want to provide fair labor conditions and social protection for all our employees, regardless of their location and whether they are on fixed or temporary contracts. We support the principles of the International Labor Organization (ILO) and we respect the rights of all employees to form and join trade unions of their own choosing, to bargain collectively and to engage in peaceful assembly.

We have no indication that we operate in countries where the freedom of association and collective bargaining for ASML employees is restricted. We strive to comply with the relevant legislations in every country where we operate. In those countries where we have employee representation, we engage in regular dialogue with the different organizations representing our employees. In these conversations, topics are put forward and discussed by both the company and the employee representatives. The working conditions and terms of employment of employees not directly covered by collective bargaining agreements are influenced or determined based on other collective bargaining agreements, labor market developments and usage and habits in the specific country.

When it comes to remuneration, our approach is to be fair and balanced. In our Remuneration Policy, we are committed to gender equality and we strive for global consistency while respecting what is common practice in local markets. We continuously review how our remuneration compares with the market benchmark for technology professionals in each region where we operate and, where necessary, make changes to our remuneration policies and levels.

Remote working

Following the pandemic, we recognize that patterns of work have changed, and we want to continue to have a positive impact on the well-being, productivity and work –life balance of our people. We aim to provide ASML employees and their managers with clear guidance and help them to make the right choices between working remotely and working in the office. Remote working is neither mandatory nor an entitlement. As a global guideline, employees may work remotely up to two working days per week if the job allows. There may be exceptions for certain jobs or departments.

Fundamentally, ASML is convinced that employees themselves can best manage their own work. At the same time, managers are responsible for efficiently organizing the way the team and the company is working. This means that employees and managers have joint responsibility for the choices to be made under our Remote Working Policy.

Well-being

Care is central to who we are at ASML. In terms of well-being, this means ensuring we support our employees in maintaining a healthy, productive and balanced life. After all, we only thrive as an organization when everyone can give their best. In a time of unprecedented demand, it is even more important to take care of each other and ensure the well-being of all our colleagues. This means building and maintaining an environment where we can work together with positive energy. Our well-being framework brings together all our well-being activities but also allows us to drive our initiatives region by region to meet local needs. Within ASML, we look at well-being from a holistic perspective and we strive to integrate well-being into everyone’s day-to-day work. We have identified four well-being dimensions – mental, physical, social and financial well-being – and have defined and created our programs, tools and resources accordingly. We also have specific resources and initiatives in place for teams and managers to get the right conversations going.

Our ~~performance~~offerings include general support for employees, training and ~~progress~~masterclasses, well-being events, and physical and mental health checks. In Veldhoven we have a dedicated health & well-being center that provides several health & well-being employee services including an in-house physiotherapist, psychologist, career center, indoor gym, yoga room and a running track. We currently have more than 165 well-being ambassadors globally, and the network is still expanding, helping us to spread well-being across our global organization.

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Our targets

Employer brand

We measure our employer brand for the main locations where we operate – the Netherlands, the US, China, Taiwan and South Korea. We ~~do this by measuring~~measure how ASML is perceived by external audiences – and potential employees in particular – by monitoring our position in an independent external employer-branding ranking.

We have defined targets for our ranking in the different local labor markets ~~on our positioning~~ by ~~2025. We continue to improve our employer brand and values on our corporate website, creating a better understanding of what we do and what we stand for as an employer.~~

~~In 2021, we saw good improvement in nearly every main location compared to 2020, except for~~2025 – the Netherlands top 10, the US ~~which can be explained by the mix of respondents in terms of field of study, university and location. However, our operations in the US were included in the 2021 Most Loved Workplaces -~~top 75, China top 100, ranking by Newsweek in collaboration with the Best Practice Institute (BPI). The ranking is focused squarely on the degree to which employees have a positive feeling about their employer. We are pleased to receive this recognition for our efforts to create best possible employee experience for our employees.~~Read more in: Our people KPIs~~

~~In 2021, restrictions on travel~~Taiwan top 20 and large group gatherings limited our ability to meet future talent in person. Various planned activities were either postponed or adapted to a virtual space. More than ever, the internet is the optimal platform to communicate. Our labor market communications team is continuously working to optimize how we reach, inform and engage our target audiences online. To leverage recruitment efforts, we facilitate job postings and manage ASML’s presence on online social network channels. We also promote the ASML employer brand through online advertising.

~~ASML ANNUAL REPORT 2021 69~~

~~Boosting recruitment and sharing innovation in Taiwan~~

ASML continues to expand operations in Taiwan to provide the best support services to a growing base of customers and optimize R&D support capabilities of measurement and inspection products. To enable ASML’s ambitious roadmap, it’s crucial to attract the best talent from the market.

In March and April 2021, ASML's Innovation Experience Truck took to the road in a tour across major college campuses of Taiwan to boost recruitment of engineers, extending our client and research support team capabilities. Through augmented reality technology and interactive experiences, upcoming engineers could familiarize themselves with advanced lithography technology and high-tech EUV lithography machines.South Korea top 20.

Employee engagement

~~Employee engagement~~We want to compare ourselves and grow toward the top performer category. Our target for 2025 is ~~critical~~ to be within a 2% range of the ~~performance of~~top 25% performing companies benchmark for our ~~organization and our long-term success as a company. We measure the overall impact of our activities on the total employee experience using our we@ASML~~ employee engagement survey.

~~we@ASML survey~~

Our annual we@ASML survey is a crucial tool for collecting and measuring employee feedback. It provides insights that enable us to improve the employee experience and work on our policies and processes. We set ourselves the target of achieving an employee engagement score that is at least on a par with our peers.

Throughout the COVID-19 pandemic, employees across ASML have done admirable work to continue our business, serve our customers and secure our roadmap. We knew they experienced pressure from pandemic fatigue, hybrid working and the rapid growth in our employee base on top of increasing customer demand and we expected this to impact our employee engagement score.

To understand these effects and allow us to set improvement actions, the 2021 survey featured additional questions about well-being topics. To measure the degree to which our values are embedded in the organization, the survey also included questions about our culture and values that go beyond the ‘what’ to the ‘how’.

~~Our performance and progress~~

~~We succeeded in creating a positive working environment amid challenging circumstances, but did not make measurable progress in our key improvement areas.~~

In our 2021 we@ASML employee engagement survey, we again saw good results and received valuable feedback for improvement. The engagement survey score was 78% in 2021 (80% in 2020) – 2 percentage points above our external global benchmark of 76%. Overall, we conclude that ASML still has a highly engaged population. People are proud to work for ASML. Other areas where we score high are, for example, a good working environment, good team spirit with respect and open communication, and opportunities to learn and grow. However, as expected the engagement score decreased due to the dynamics of 2021. Defining action plans to prevent further decline is a priority for us.

Despite our continuous focus and improvement actions executed, we still see the three areas from the 2020 and 2019 surveys, namely: enabling processes, cross-team collaboration and clarity of expectations are lagging behind as we still score well below the external benchmark. The 2021 results also show that we need to pay more attention to well-being. Addressing these four areas is our key priority in 2022.

~~Talent attraction and retention~~

~~We hired 4,373 new payroll employees in 2021, growing our workforce to 30,842 FTEs at year-end. Our workforce more than doubled compared to the 14,681 FTEs we employed at the end of 2015.~~Retention

While attrition can open up a knowledge gap in the company, we also view it as an opportunity to bring in new talent and enhance existing talent. We strive for a healthy attrition rate (the percentage of employees leaving our company), aiming for an annual rate of 3-8% for 2022 and for an attrition rate below 7% in the future.

Our performance in 2022

We hired 7,130 new payroll employees in 2022, compared with 4,373 in 2021, growing our workforce to 37,643 full-time employees (FTEs) at the year end (with a new hires rate of ~~3.0–8.0%~~21%, up from 15% last year). ~~For high performers,~~In addition, we employ 1,443 FTEs in our ASML Berlin entity, which is not fully integrated yet in our reporting, which increases our total

workforce to 39,086 FTE. Our workforce has more than doubled since the end of 2015.

Employer brand

During 2022, we were ranked #4 in the Netherlands, #6 in Taiwan, #159 in the US, #188 in China with ranking unavailable in South Korea.

We continue to create greater understanding of what we do and what we stand for as an employer. In 2022, we saw significant improvement in the Netherlands, our headquarters, by moving up two points into the top five of most attractive employers for students and top 10 for professionals. In Taiwan, we also increased awareness and consideration among students and professionals, especially within our engineering/IT target group. In the Netherlands and Taiwan, we significantly increased awareness among women in this group. In China, we are still struggling to position ourselves, as this remains an extremely competitive and fragmented market for top-tier talent. We are currently known in 81% of the country among our target group for students, but are not yet considered an employer of choice. Similar to China, the US is a fragmented market in which it is extremely difficult to reach everyone. We therefore focus our employer-branding efforts on targeting specific states where we operate and specific target groups. In order to have a consistent method to measure our employer brand, we use the Universum research data in those markets.
Unfortunately, Universum stopped providing their services in South Korea from 2021. Therefore, we are not able to obtain comparable data. However, according to a local survey, ASML was recognized as the top ideal employer among the semiconductor equipment companies operating in South Korea. We are also certificated as the 'Best Employer' by the South Korean government.

Employee engagement

In our 2022 we@ASML employee engagement survey, we again saw good results and a high participation rate of 84% (in line with previous years) and received valuable feedback for improvement. The engagement survey score was 78% in 2022, in line with 2021 – 4 percentage points above our external global benchmark of 74%, which decreased by 2% from 2021.

Against the benchmark of the top 25% performing companies, our 2022 engagement score was four percentage points lower. Our target for 2025 is to be within a 2% range of the top performing companies benchmark, and therefore we have more work to do in enhancing our engagement score. Overall, we conclude that ASML has a highly engaged population. People are proud to work for ASML and would recommend ASML to others.

We improved in nine out of the 15 categories in the survey versus last year and only saw a slight decrease from the 2021 score in two categories related to intention to stay and quality. These two categories scored above the global benchmark in 2022.



7,130
New payroll employees in 2022 (4,373 in 2021)

21%
Rate of new hires in 2022 (15% in 2021)

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We have seen improvement on all key action topics compared to 2021: clarity of expectations, enabling processes, cross-team collaboration and well-being. Even though we have made good progress, there is ~~at least 50% lower than~~still work to do, as these topics are still behind the external benchmark with the exception of well-being, which is 6% above the external norm.

We introduced ESG as a new theme in the 2022 survey in order to set a baseline for our step-up in internal ESG engagement. 74% of our employees are proud of our efforts to have a positive impact on the world, but only 39% indicated that they have the opportunity to contribute to ESG, which is significantly below the external benchmark. We therefore plan to improve awareness and opportunities for employees to contribute to ESG Sustainability efforts.

Our workforce trend1


1.The 2020 to 2022 FTEs in the chart above do not include the FTEs acquired through the acquisition of Berliner Glas (ASML Berlin GmbH).

Retention

With an overall attrition rate ~~target.~~

~~With the overall attrition rate~~in 2022 of 6.0%, up from 5.4% ~~and the attrition rate of our high performers of 2.6%~~ in 2021, ~~both~~we are well within our target range and is below the industry average in every country in which we ~~operate in. In 2021, we saw an increase in the attrition rate to 5.4%, from 3.8% in 2020, a year that was shaped by the COVID-19 pandemic, when people were less inclined to look for other jobs.~~operate. We attribute the increase to the effects of the ~~pandemic, the~~ global shortage of employees across many industries, and ~~the~~a booming semiconductor industry that is providing plenty of job opportunities. Nevertheless, we ~~view~~believe that our efforts to create a unique employee experience, our employee engagement programs and our onboarding of new employees are paying off.

Onboarding and developing our people

~~ASML ANNUAL REPORT 2021 70~~

~~The 2020 and 2021 FTEs in the chart above do not include the FTEs acquired through the acquisition of Berliner Glas (ASML Berlin GmbH).~~

~~Onboarding~~

AsWith our fast-growing global workforce, ~~grows exponentially, onboarding is one of our key priorities. In 2021, we welcomed our 30,000th employee. A~~a positive onboarding experience ~~builds~~is vital to building a sense of connection, ~~helps~~and helping employees fit in ~~quickly, and boosts retention.~~quickly. We ~~believe onboarding is a joint effort, driven by everyone.~~

~~With~~measure the COVID-19 pandemic continuing in 2021, our new employee onboarding remained virtual to give new colleagues the best possible start. For example, the ASML onboarding event is a half-day introduction event organized by HR to make new colleagues feel welcome, learn more about ASML and connect with other new colleagues. In small groups, new colleagues work together to learn about ASML products, technology, organization, customers and programs. Business sectors and functions continue to build on our global onboarding initiatives, making sure we’re providing one consistent experience across the company, further tailored to the various departments.

~~To measure how new hires rate their~~quality of this onboarding experience ~~we conduct~~through pulse surveys ~~in each phase of their onboarding journey from feeling welcome, engaged, equipped, to feel part of ASML. On~~and, on average, ~~89%~~87% of new hires indicated that they had a positive ~~experience. They also perceive the~~experience in 2022, with good support ~~they get~~ from their ~~manager during onboarding as very positive. We are proud that our managers took extra efforts to guarantee a positive onboarding experience while working remotely.~~managers.

~~Learning~~

Our actions in 2022

Attracting and ~~development~~retaining the best talent

In ~~an innovative, high-tech, fast-changing industry, it’s vital~~2022, travel restrictions were lifted and we were again able to ~~strengthen~~engage in a personal way with students and ~~continuously invest~~professionals in our ~~talent pool to anticipate evolving business requirements~~countries, both in person and ~~developments in~~virtually. There was an increasing focus on living the ~~labor market. We empower~~brand from the inside out, by asking our employees to ~~develop~~share their stories on why they join and stay, and supporting these ambassadors in sharing their stories with their networks. This credible way of messaging helps us to target talent ~~pursue their career ambitions~~within earned media and drive awareness and referrals – a high-quality source of hires.

We continue to ~~thrive.~~research the expectations of our key target audiences in order to match them with who we are as an employer. A big challenge is understanding how expectations have changed since the pandemic, especially in areas such as hybrid working and work – life balance. We ~~strongly believe~~recognize that ~~personal development works best when our~~potential employees ~~can invest in themselves. At ASML, we give employees the time, opportunity~~have a choice, and ~~support, while they put~~ in the ~~effort, passion~~highly competitive global labor market we are challenged to differentiate ourselves even more in the coming years, while retaining the unique culture and ~~drive needed~~values that have helped us get to ~~enhance their development.~~ where we are today.




87% of new hires indicated that they had a positive onboarding experience in 2022, with good support from their managers.

We ~~offer tailor-made training~~launched the ASML Academy to ensure our people have the right knowledge and ~~development programs~~expertise to ~~help grow the highly skilled professionals we employ at ASML.~~

~~Training~~

To maintain our technological leadership and the pace of innovation weour industry demands. The Academy unites all learning and knowledge management within ASML, enabling our people to easily access the knowledge, skills and expertise they need to ~~ensure the right knowledge is available to~~perform well in their roles. The launch of our new Learning eXperience Platform (LXP) further enables our people atto drive their own development and learn from each other, and intuitively connects them to best-in-class learning content from ASML and external learning content providers.

Overall, we aim to provide the ~~right time. To do this, we have our own technical development centers in-house for our D&E, customer support,~~best possible employee experience by ensuring that learning and ~~manufacturing employees to tailor training to the specific technical needs of these departments.~~

~~Most of our trainings take~~knowledge management takes place on the job, ~~given the nature of our collaborative innovative business. Overall, we are promoting~~guided by the 70-20-10 approach for ~~learning interventions, meaning that~~learning: 70% is on-the-job learning, 20% ~~is through~~ coaching and 10% ~~is learning through~~ training courses. ~~In 2021, the average number of training hours in this last category, including development programs, was 29 hours per FTE.~~

In 2021 we continued adding virtual trainings where possible. We had to postpone some of the development activities that have a strong networking component to them with the need to bring different sectors and countries together. Due to travel restrictions and different time zones, these activities were not viable. In addition, we continued working on redesigning specific development programs to establish an effective mix between remote and in-person training, bringing people from different locations together, and making training more digestible for online purposes.

~~Career development opportunities~~

We are continuously looking into ways to improve how we can help employees identify opportunities for professional development within ASML. We offer various career paths and have various tools in place to support our employees’ career navigation.

~~ASML ANNUAL REPORT 2021 71~~

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Attractive workplace for all (continued)

Supporting careers at ASML

~~Two years ago, we started the discussion and thinking process around how~~We have reviewed our whole performance management approach and philosophy ~~can~~to align it better ~~align~~ with our culture and values. ~~This forms part of a broader look at the future of performance management in the company. Together with our executive committee, we started defining how to do this more fundamentally. In 2021, we~~We worked hard on ~~re-shaping~~reshaping our performance management processes and to ~~embed~~embedding them in the new tooling, ~~which~~and this went live asin January 2022. Our new ‘develop and perform’ methodology allows for both formal and ‘natural’ moments of ~~January 2022.~~

~~Diversity and inclusion~~

We're proud to be a culturally diverse organization, with employees from 122 different nationalities. Diversity and inclusion enhance our ability to innovate, to be creative, problem solve, and provide an environment where employees feel valued, challenged to grow professionally, and contribute to our common goals.

Since 2020, we have been developing and formalizing our approach to diversity and inclusion. We assembled a Global Diversity & Inclusion Council in 2021 that consists of senior leaders who act on behalf of ASML to provide thought leadership. The Council, chaired by a member of the Board of Management, proposes the Diversity & Inclusion strategy to the Board of Management, sets, promotes and monitors diversity and inclusion initiatives, and drives company-wide accountability towards its goals.

~~Our diversity and inclusion strategy includes the following:~~

•~~Engaging a larger talent pool by making opportunities more visible and accessible~~

•~~Creating shared metrics to more clearly evaluate progress~~

•~~Ensuring inclusive leadership behaviors are embedded in our culture~~

•~~Including diverse perspectives in our talent practices~~

•~~Providing employees more ways to engage and drive their careers~~

Our aim is to be representative of the available skilled workforce. Creating an environment where all feel welcome, know they belong and see a career path in front of them requires diversity at all levels of the organization.

We aim to increase the diversity of our workforce by fostering a culture that is inclusive of all. We@ASML, our employee survey, measures inclusion levels each year. In 2021 our Inclusion score was 83% compared to 82% of top performing global companies. Our goal is to meet or increase this level of inclusion among our employees on an ongoing basis. To do this, we set a target to score on par +/- 3% with the top 25% of this comparison company list in 2024.

In 2021, we made progress in gender diversity among all employees and senior management. Female employees now make up 18% of our workforce worldwide. This improvement has increased by 1% compared to last year. We aim to increase this trend as we move toward 2024.

We believe the most effective way to address this is by focusing on the growth of our existing team members and expanding the diversity of our talent pool. We’ve set goals to increase the hiring of women from 20% in 2021 to 23% by 2024.

We still have work to do in this area and have set specific goals focused on female leadership levels. The current representation of women at this level is 8% today and our ambition is to reach 12% by 2024. To make this tangible, we’ve set a goal to raise the hiring of female leaders, from 12% in 2021 to 20% in 2024. We believe this talented pool will be role models, paving a path for more to follow. Our ambition is to have more diversity in our workforce because we believe it is one of the best ways to attract and retain smart talented people to help us drive technological innovations forward to meet our customers’ needs.

Overall, the global STEM (science, technology, engineering and math) talent pool is scarce and it is even more challenging to recruit female talent. Our R&D workforce is 15% female. Nearly 90% of job positions are STEM related, whereas peers in the high-tech industry have more diverse, non-STEM related job positions. ASML is highly motivated to see more women pursuing careers in engineering and science now and in the future. The highly specialized nature of our industry means achieving this balance is a long-term process. We are actively engaged with multiple educational programs to grow the pipeline, deploy multiple initiatives to promote STEM education among the future female talent pool and continue to foster an environment where our current workforce can thrive.

~~Achievements in the US~~

~~Established in 2020, the ASML US Diversity Council serves as an advisory board and governs diversity and inclusion (D&I) programs, such as employee networks, diversity events,~~connection, feedback and recognition to support ongoing development and education programs across the US. In 2021, the Diversity Events and Education Workstreams and US Diversity Council sponsored numerous external speakers to generate broader awareness and understanding of culturally significant holidays and observances, including Black History Month, PRIDE Month, Hispanic Heritage Month and Veteran’s Day. Over 3,000 employees cumulatively participated in over 15 diversity events. The Council also supported the development of two new employee networks in the US: SHADES for Black, Indigenous and People of Color (BIPOC) and their allies, along with a new veteran’s group.performance.

Fair ~~remuneration~~

~~We want~~pay for our remuneration to be fair and balanced. In our remuneration policy, we are committed to gender equality and we strive for global consistency while respecting what is common practice in local markets. We continuously review how our remuneration compares to the market benchmark for technology professionals in each region where we operate and, where necessary, make changes to our remuneration policies and levels. Each year, we analyze paid salaries for gender disparity. In 2021, as in previous years, we found no major differences in these salaries. ~~Read more in: Non-financial statements - Non-financial indicators - Our people.~~

~~ASML ANNUAL REPORT 2021 72~~

~~Living wage~~employees

At ASML, we are committed to meeting adequate living-wage requirements, meaning that employees earn salaries that meet their and their ~~families'~~families’ basic needs to maintain an adequate standard of life in the circumstances of each country where we operate, but we also provide some discretionary income. Our company has a predominantly highly educated workforce with relatively high levels of remuneration. On average, our salaries are significantly above local living wage.

In ~~2020,~~2022, as part of a two-year cycle, we conducted an analysis of how our lowest base salary compared towith the local minimum wage and local ‘living wage’ in the countries and regions where we operate. We did not detect any gaps. ~~On average, our~~

Each year, we analyze paid salaries ~~are significantly above local living wage. An update~~for gender disparity. In 2022, as in previous years, we found no major differences in these salaries.

Action plans for 2022-2025

From the results of the ~~analysis is planned for 2022.~~

~~Labor relations~~

~~We want to provide fair labor conditions~~we@ASML engagement score, priority areas have been agreed and ~~social protection for all our employees, regardless of their location and whether they are~~will be worked on a fixed or temporary contract. We support the principles of the International Labor Organization (ILO) and we respect the rights of all employees to form and join trade unions of their own choosing, to bargain collectively and to engage in peaceful assembly.

We strive to comply with the relevant legislations in every country we operate in. In those countries where we have employee representation, we engage in regular dialogue with the different organizations representing our employees. In these conversations, topics are put forward and discussed by both the company and the employee representatives.

~~We do not have operations in countries where the freedom of association and collective bargaining for ASML employees is restricted.~~

~~In the Netherlands, we have requested dispensation from the Metalektro Collective Labor Agreement (CLA) in order to develop our own CLA. Our unique position~~ in the ~~global market, our size and growth as well as our very unique group of employees and~~coming year by the large range of competencies and activities we bring together to deliver our products have created a need for our own direction in labor conditions. The purpose of a future ASML CLA is to offer a set of labor conditionsdepartments responsible, which will define actions that ~~match~~address the ~~diversity~~specific situation and needs of ~~all~~the department. At the moment, we see no reason to adjust our ~~employees.~~2025 targets.

In 2021, following an intensive period of consultations, the negotiations with the trade unions began. The new CLA will be developed in close collaboration with the unions represented in the Metalektro. Once we have our new CLA in place, we will continue to work with the unions regarding labor conditions within the framework of our own CLA and maintain our active membership in various labor organizations, such as FME and PME.



			Future ASML CLA

			In the Netherlands, we continue to aim for dispensation from the Metalektro Collective Labor Agreement (CLA) in order to develop our own CLA. Our unique position in the global market, our size and growth as well as our very unique group of employees and the large range of competencies and activities we bring together to deliver our products have created a need for our own approach to labor conditions. The purpose of a future ASML CLA is to offer a set of labor conditions that match the diversity and needs of all our employees.

~~Remote Working Policy~~

We want to have a positive impact on people’s well-being, their productivity and work-life balance. Working from the office and meeting each other face-to-face stimulates innovation and optimal collaboration within and across teams, and it is the starting point of our way of working. During the pandemic, teams expressed the need to meet in person to tackle problems together and to stay aligned toward common goals. We also recognize that a busy office may not be the best place for focused work, so quiet work in a remote office may be much better for some tasks.

Fundamentally, ASML is convinced that employees themselves can best manage their own work. On the other hand, managers are responsible for efficiently organizing the way the team is working and the organization. This means that both employees and managers have joint responsibility for the choices to be made under our Remote Working Policy.

We aim to provide ASML employees and their managers with clear guidance and help to make the right choices between working remotely and working in the office. Remote working is neither mandatory nor an entitlement. As a global guideline, employees may work up to two working days per week remotely, if the job allows. There may be exceptions for certain jobs or departments.

~~Strong leadership~~

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Attractive workplace for all (continued)

Enabling strong leadership

Our approach

To remain a market leader, we must provide unified ~~direction. This means we need~~direction based on authentic leadership ~~to give~~that gives our people a clear picture of where ASML is heading. This offers great opportunities for all of us to contribute to ASML’s success and make an impact, ~~which is~~while also ~~quite~~presenting a ~~challenging job~~challenge for our leaders. As our company grows, so does the need for clarity around roles and expectations. Leaders need to play a part here in providing role clarity for employees, as well as being clear about their own roles and responsibilities. We continue to strive to formulate and capture this more clearly so our people can understand what is expected of them.

Launched in 2020, our Leadership Framework outlines and clarifies a leader’s role in business leadership, role-modeling the values within the company, and what it means to be a people manager and coach for employees. Leadership is all about people.

~~ASML ANNUAL REPORT 2021 73~~




As our company grows, so does the need for clarity around roles and expectations.

~~Leadership framework~~

Our actions in 2022

In ~~2021,~~2022, we continued deploying behavioral competencies training, coaching programs and a practical guide to inspire and enable personal development. We have leadership programs ~~where we~~that fast-track the careers of our most promising managers, ~~through~~for example our Potential Acceleration Program. These programs ensure our managers are aware of what’s expected of them, and help them to develop the skills and competencies they need to become better leaders.

The ~~effects~~impacts of these programs are most visible in employees’ responses to our ~~employees' responses from our 2021~~2022 we@ASML survey, where ~~74%~~all four dimensions of our leadership framework were evaluated: 81% of our employees ~~stated that they~~ see their manager as a role ~~modelling the three ASML values – challenge, collaborate, care – in~~model, 80% as a ~~balanced way.~~coach, 77% as a business leader and 82% as a people leader.

~~Ensuring employee safety~~

~~At ASML, safety is not just a priority – it is a prerequisite. It~~

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Ensuring employee safety

Our approach

Safety is an integral part of our daily work. More than just a priority, it is central to everything we do. We work ~~and the way~~to ensure we ~~lead others. We do everything in our power to~~ provide injury-free and healthy working conditions for everyone on our premises by eliminating hazards and ~~ensure all our operations are safe and secure. This~~reducing safety risks.

That includes employees, contractors, suppliers, customers and visitors. We count on each other – every one of us working at and for ASML – to share this commitment, because only by working together to common standards can we keep each other safe.

In 2021, the persistent effects of the COVID-19 pandemic still reached into every corner, affecting people globally and across every aspect of our business. Our priorities remained unchanged: Our primary focus has always been to ensure our colleagues and their families around the world stayed safe. Our second goal was to make sureNaturally, we ~~upheld exceptional service to our customers.~~

We follow all government guidelines and safety ~~measures. The corporate crisis management team provides our employees with frequent updates about the COVID-19 situation~~measures, and ~~our response to it. In 2021,~~where appropriate we ~~rolled out numerous well-being programs worldwide to address the physical, mental and emotional well-being of people working from home.~~

~~Our employee safety strategy~~go further.

We believe that all work-related injuries and occupational illnesses are preventable. As such, we are working toward a long-term ambition of zero injuries and work-related illnesses.

~~It’s~~While it is impossible to completely eradicate risk, ~~but~~ we ~~can work~~are working proactively at all levels to identify potential issues or concerns in the workplace and develop measures toward reducing ~~these.~~them. We do everything we can to minimize risk, and it is our responsibility to provide our people with the right protection, procedures and processes to keep them safe.

Our goal is to prevent occupational health and safety incidents. To benchmark our performance against industry standards, we use a targeted recordable incident rate of 0.20, which represents world-class performance. But our ongoing ambition is zero recordable incidents, and this drives our continuous improvement in processes, working conditions and employee behavior. To achieve this, we focus on an ~~EHS~~Environment, Health and Safety (EHS) management system, safety culture and training. ~~An example is the ‘Safety Gemba Walks’, where managers visit the employees’ workplace. This helps us to increase safety performance and to strengthen a safety culture.~~

~~New global lifting training~~

Trend analyses and past lifting (near-miss) incidents and good catches formed the foundation of a new, soft-skill-focused, gamified training for future lifting team members worldwide. This human-focused and effective trend-based setup contributes to a safe work environment in an efficient and attractive way, by using blended-learning methodologies, timely workplace learning and modern technology.

~~ASML ANNUAL REPORT 2021 74~~

This EHS lifting training will be enriched with a more in-depth specialist safety training framework of lifting tools for lifting operators and awareness of lifting activities for others involved in the lifting action. The outcomes of lessons learned through incident reporting and incident investigation improve the quality and impact of our EHS training solutions, helping to take safety culture within ASML to the next level.

~~Managing a safe workplace~~

We are committed to a well-established EHS management system. We ~~use~~work to the highest possible professional standards, ~~and~~with continuous improvement isas a key ~~principle of our management system.~~principle. Our EHS management system is based on the ISO 45001 ~~standards~~standard and complies with its requirements.

The EHS reporting system is assessed against the ISO standard as part of its yearly internal audit, although it is not certified or audited by an external party. We have ~~established a~~implemented our EHS management system worldwide at our sites and customer services locations. It covers everyone whose workplace is controlled by ASML, including all our employees and other workers not employed by ASML.

Our Corporate EHS Committee, chaired by our Chief Operations Officer, ~~to oversee~~oversees and ~~approve~~approves ASML’s EHS ~~strategy and lead the EHS management system.~~strategy. Our line managers are responsible for day-to-day EHS ~~management.~~management and performance. Our EHS Competence Center ~~gathers~~(EHS Experts) brings together best practices, ~~and~~ defines the EHS standards for ASML ~~helping~~and supports our managers to implement these standards in the workplace.

Our commitment to employee and product safety ~~commitment~~ is captured in our Sustainability Policy, which applies to ASML colleagues worldwide. ~~In addition, our~~Our ASML EHS Guide ~~aims to provide~~is also an invaluable resource, providing practical, useful and essential information for our employees, contractors and any other parties working for us. The guide, ~~– designed~~which was redesigned in 2022 to create awareness and ownership, – explains our aims and objectives, and clearly describes how employees can contribute to a safe and healthy workplace with minimum impact on the ~~rules and policies we follow.~~environment.

Incident and risk management are key elements of our EHS management system. An incident report is required to be completed by any ASML employee who is involved in or observes an unsafe situation or incident.

We record and investigate all incidents and ~~near-misses~~high-risk unsafe situations to determine the root cause and take ~~corrective action~~actions to prevent them from ~~recurring or occurring in the future.~~recurring.

WeEHS Experts conduct regular hazard and risk evaluations, with a focus on preventing employees’ potential exposure to hazards such as chemicals, ~~fire,~~ radiation, mechanical handling and ergonomic risks. These provide us with further insights into the main hazard and risk areas at ASML. We ~~can~~are then able to take appropriate action to mitigate these risks. We also ensure continuous improvement through internal EHS audits.

~~Strengthening a~~ These are complemented by regular ‘Safety Gemba Walks’, where managers visit the employees’ workplace, helping to increase safety ~~culture~~

~~In 2020, we introduced five life-saving safety rules to create a safer workplace~~performance and ~~enhance~~strengthen our safety performance. Respecting and adhering to these rules could not only save lives, but also make us collectively more aware of safety risks across our organization. Active and consistent deployment of these rules in 2021 led to increased awareness, better insights and actions for improvement, such as improved procedures, tools and education. At ASML, it is standard practice to inform our employees and anyone else accessing our premises and customer sites independently – including contractors and suppliers – about our safety culture and to raise awareness around these. Training is one of the ways we prepare and inform our people about this.

~~Our results and progress~~

We register EHS-related incidents in line with the US Occupational Health and Safety Act. Our recordable incident rate decreased from 0.18 in 2020 to 0.17 in 2021, outperforming the electronic industry benchmark of 0.20. The recordable incident rate is the number of recordable cases beyond first aid in a year per 100 FTE. As in previous years, we did not record any work-related fatalities or permanent disabilities.

Safety goes beyond procedures, rules and the right equipment to human mindset, behavior, attitude and habits. Following the five safety rules, we deployed various department specific awareness programs. For example, we have been rolling out the hein® safety campaign in D&E which helps us develop a common safety language and dialogue. Workshops and trainings took place in many clusters with many interesting discussions and insights into our safety behaviors.

In 2021, we extended the EHS Fundamentals program with a new safety training module. As of September 2021, new hires expected to work in a cleanroom will have to complete EHS Cleanroom Fundamentals, a training module designed to prepare new employees to safely enter, leave and work in a cleanroom at ASML. By year end 2021, 95% of eligible candidates had completed this mandatory training. We are also planning a company-wide reassessment of the safety culture in our company in early 2022, to validate if our safety culture transformation program has the right effect, and to create insights into where we need to step up.culture.

To improve our EHS performance, we encourage our employees to speak up whenever they encounter safety risks. Every employee is empowered to stop working if they feel unsafe. Together with their manager and EHS expert, a safe way of working will subsequently be ~~defined,~~identified, so the work can resume.

At ASML, it is standard practice to inform our employees and anyone else accessing our premises and customer sites independently – including contractors and suppliers – about our safety rules and to raise awareness around these. Training ensures that our people are prepared and informed about these safety requirements.

All new employees joining ASML are required to complete our EHS Fundamentals (EHS basics) e-learning module – with this training refreshed for all employees on an annual basis. The engineers in our cleanrooms receive more extensive training upon joining ASML and annually thereafter through our EHS Cleanroom Fundamentals module, which explains how to recognize hazards and prevent injuries.

We have company doctors or external health services available on all our sites.

~~ASML ANNUAL REPORT 2021 75~~

~~Our people KPIs~~

~~The table below shows the key performance indicators (KPIs) and the related 2025 targets.~~ ~~Read more in: Non-financial statements - Non-financial indicators - Our people for our performance indicators (PIs) and related results.~~ ~~The non-financial data may include a degree of uncertainty, because of limitations in measurement method and assumptions applied.~~ ~~Read more in: Non-financial statements - About the non-financial information - Reporting indicators .~~

KPI 2019 2020 2021 Target 2025
Engagement score We@ASML survey 77 % 80 % 78 % Be on par with peers
Employer brand ranking1
Netherlands 10 10 6 Top 10
US — 99 133 Top 75
China — 168 148 Top 100
Taiwan — 22 6 Top 20
South Korea2
19 24 14 Top 20

1.~~Employer brand ranking from Universum: engineering students.~~

2.As of 2021, overall ranking for South Korea is no longer conducted by Universum. The result reported for 2021 is based on a customized ranking report. The target 2025 refers to the overall ranking. Going forward we need to define our target based on the customized ranking.

~~Contributing to the UN's Sustainable Development Goals~~

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Our targets

Our goal is to prevent occupational health and safety incidents. To benchmark our performance against industry standards, we use a targeted recordable incident rate of 0.16, which represents world-class performance.

Our performance in 2022

Strengthening our safety culture

Following our first safety culture measurement in 2019, using the Bradley maturity model, we repeated this measurement in 2022. We launched a Safety Perception Survey early in 2022 to 25,000 employees in Operations, Development and Engineering and our business line organizations. The feedback was analyzed within the different sectors and rolled up to company level, and revealed a significant growth on the maturity curve compared with the 2019 starting point. The implementation of life-saving rules company wide, safety leadership programs for managers and safety awareness campaigns throughout the company in the past three years has paid off.

Our safety record

We register EHS-related incidents in line with the US Occupational Health and Safety Act. Our recordable incident rate increased from 0.17 in 2021 to 0.22 in 2022. Our recordable incident rate (for our own employees) is 0.18 in 2022, higher than our 2022 desired benchmark of 0.16. The increased rate is due to an increased number of small injuries at our campus and in our offices compared with 2021 as more people returned to the office. The recordable incident rate is the number of cases that required more than first aid in a year per 100 FTE. As in previous years, we did not encounter any ASML work-related fatalities. We reported two injuries in which the employees were away from work for >180 days. Regrettably, two contracted workers (in two separate occurrences) had fatal accidents on ASML premises in Wilton. Although they were not working under supervision of ASML, we thoroughly investigated these accidents together with the contracted agencies and the local authorities to understand the root cause and take corrective action. These incidents were formally reported to the local authorities by the contracted companies, in line with OSHA guidelines.

Our actions in 2022

The rapid growth of ASML presents us with significant challenges – with a large number of new employees every month, we have to make sure people are informed, instructed and also supported while doing their work.

Safety extends beyond procedures, rules and the right equipment to include human mindset, behavior, attitude and habits. Following the five safety rules, we deployed various department-specific awareness programs. For example, we extended the hein® safety campaign to all sectors to secure a common safety language and dialogue. This was supported by workshops and training

sessions that saw many interesting discussions and insights into our safety behaviors.

In 2022, we started separating those incidents related to injuries from those related to ill health. We analyzed the most common root cause for illnesses experienced by our employees and identified that this is related to ergonomics. Based on this finding, we developed a new industrial ergonomics training for our employees, and this will be rolled out in 2023 to our operations teams, supported by ergonomic workplace assessments and improvements where needed. We hope to see a reduction in illness related to ergonomics in future years.

To address the high number of near-miss reports in prior years as a result of incorrect use of lifting equipment, a new ‘lift’ training module was introduced in 2022 for all engineers performing lifting activities.

Action plans for 2022-2025

In response to the increased recordable incident rate in 2022 from 2021, we are deploying a global safety awareness campaign in 2023 for all employees.

We have agreed on a new ambition to move to the next level on the Bradley safety culture measurement maturity curve by 2025. Improvement plans at corporate and sector levels have been identified and will be implemented, supported by solid management commitment. We will continue to engage with our partners, main suppliers and customers to align our safety principles and processes.

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Our supply chain

Setting the bar higher for our world-class supplier network to achieve the innovations we strive for, by ensuring we conduct our business in a sustainable and responsible manner.

€12.4bn

5,000

Total sourcing spend

39% Netherlands

41% EMEA (excl. NL)

13% North America

7% Asia

Total suppliers

1,600 Netherlands

750 EMEA (excl. NL)

1,300 North America

1,350 Asia

59%

% supplier spend covered by commitment to sustainability (LOI) (2025 target: 80%)

IN THIS SECTION

111

Our overall performance in 2022

112

Supplier performance and risk management

113

Responsible supply chain

Our approach

At ASML, we rely heavily on our supplier network to achieve the innovations we strive for. Our suppliers are a critical extension of our value chain. With around 5,000 suppliers in our total supplier base, we distinguish between product-related and non-product-related suppliers.

Product-related suppliers provide materials, equipment, parts and tools used directly to produce our systems. This category comprises approximately 800 suppliers and represents the highest percentage (69%) of our procurement volume. We define around 250 of these suppliers as ‘critical suppliers’, accounting for roughly 92% of the product-related spend. Critical suppliers supply a unique part and/or are single sourced, those that have switching time to an alternative supplier of over 12 weeks or suppliers who supply parts with long production times.

Non-product-related suppliers are goods and services suppliers, providing the products and services that support our operations, from temporary labor to logistics, and from cafeteria services to IT services. With around 4,200 suppliers, this group represents 84% of our total supplier base.

Our supply chain

SDG target

How we measure
our performance

~~SDG target 4.3 - By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university~~

•~~Employee training and development indicators~~

•~~Diversity indicators~~

~~SDG target 4.4 - By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship~~

•~~Community involvement and technology promotions~~

•~~Scholarships granted~~

SDG target 4.5 - By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples and children in vulnerable situations

•~~ASML Foundation projects~~

~~SDG target 8.1 - Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries~~

•~~Financial performance~~

SDG target 8.2 - Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value-added and labor-intensive sectors

•~~Human capital return on investment~~

•~~Employee engagement score~~

~~SDG target 8.5 - By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value~~

•~~Workforce data including diversity and inclusion~~

•~~Fair remuneration pay ratio~~

~~SDG target 8.6 - By 2020, substantially reduce the proportion of youth not in employment, education or training~~

•~~Employee attrition rate~~

•~~New hires~~

SDG target 8.8 -

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

•–~~Employee safety indicators~~Compliance with RBA Code of Conduct

–RBA self-assessment questionnaire completion

–Suppliers with high risk on sustainability elements evaluated and follow-up agreed

SDG target 12.2

By 2030, achieve the sustainable management and efficient use of natural resources

–Supplier spend covered with commitment to sustainability (LOI)

~~ASML ANNUAL REPORT 2021 76~~

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Our supply chain (continued)

We invest considerable resources in developing and introducing new systems and system enhancements, such as EUV lithography and e-beam metrology and inspection. As these are complex technologies involving thousands of specialized parts, we focus on high value-added system integration.

ASML’s supply chain strategy is centered on long-term relationships and close cooperation with our suppliers and partners. Our goal is to ensure we have the products, materials and services we need to meet our short- and long-term needs, to support our operations from the earliest moment of development to the end-of-life stages of our systems. To make sure that this runs smoothly, we involve our suppliers at the earliest possible stage in the Product Generation Process (PGP). This also enables us to increase product performance and ensure manufacturability and serviceability.

Operating in a niche market characterized by producing high-value products in small quantities, fast development cycles and business volatility requires several key performance requirements for the supply base. Continuously improving our suppliers’ capabilities and performance is at the heart of our sourcing and supply chain strategy.



ASML’s supply chain strategy is centered on long-term relationships and close cooperation with our suppliers and partners.



			We require our suppliers to:
			1.Secure materials from their suppliers to enable the output ramp-up for customers 2.Enable our product roadmap through the development and maintenance of best-in-class competencies and capabilities to secure the most advanced technology and fast time-to-market 3.Drive cost reductions, quality and capability improvements through efficient and dedicated operations 4.Build a sufficiently broad customer base and scale to share and spread the risks of volatile market cycles and to increase flexibility and cost competitiveness 5.Make active contributions to our sustainability strategy

To drive a sustainable and resilient supply chain, we place high importance on supplier performance management, supply chain risk management and playing a full part in a responsible supply chain.

We have adopted the Responsible Business Alliance (RBA) Code of Conduct, which sets out ethical, social and environmental standards. We expect our key suppliers and their suppliers to acknowledge and comply with its requirements.

Our Supplier Sustainability Program focuses on seven building blocks – the Supplier Code of Conduct (RBA), RBA self-assessment, responsible minerals sourcing, reducing our carbon footprint, increasing re-use capabilities and reducing waste, information security, and business continuity.

We set out our approaches in these areas ('Supplier performance and risk management' and 'Responsible supply chain') over the following pages.

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Our supply chain (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Our supply chain	80%	% supplier spend covered by commitment to sustainability (LOI)	n/a		n/a		59	%	•
	90%	RBA self-assessment completed (in %)	88	%	89	%	93	%	•
	100%	Suppliers with high risk on sustainability elements evaluated and follow-up agreed (in %)	—	%	100	%	100	%	•

For more supply chain performance indicators (PIs) see:

Non-financial statements – Non-financial indicators – Our supply chain.

~~Being part of a community means not only caring for~~

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Our supply chain (continued)

Supplier performance and risk management

Our approach

Supplier performance management

To help us manage ASML’s growth and our ~~own employees, but also looking out for those beyond~~future ambitions, we continue to improve our ~~organization. We foster close community ties~~key business processes. Tight risk control and ~~encourage our employees~~continuous supply chain improvement are key to ~~get involved~~ensuring quality, long-term business continuity and do their part as well. ASML needs the support of the community to be successful and will earn that support if ASML lets the community benefit from its presence and is considerate of the community's needs.sustainability.

We ~~aim~~invest in developing and monitoring our supply landscape to behelp suppliers meet our requirements with regard to quality, logistics, technology, cost and sustainability (QLTCS). Our supplier profiling methodology helps us to measure supplier performance, supplier capability and risk profile in all of these fields.

We have a ~~valued~~framework in place to communicate process requirements and ~~trusted partner in~~compliance expectations to our ~~communities, improving~~suppliers. This framework outlines our approach to supplier management and development toward the ~~quality~~desired ASML supplier landscape. It also provides an enhanced knowledge base to improve our dialog with suppliers around their performance and development potential. We conduct regular operational and performance review meetings to ensure suppliers continue to improve their performance and processes. When supplier performance drops below the thresholds we set and persistently fails to recover upon request and within a reasonable time frame, ASML’s policy is to take action to secure reliable future supplies.

A structural audit program enables us to assess supply chain risks and identify areas of ~~life for all, with a special focus on disadvantaged communities. We support skills development for young people under~~improvement to mitigate or reduce those risks.

Supply chain risk management

Due to the ~~age~~highly specialized nature of ~~18 to prepare them for an increasingly digital future,~~many of our parts and modules, as well as ~~community services for disadvantaged people,~~the low volume, it is not always economical to source from more than one supplier. In many instances, our sourcing strategy therefore prescribes ‘single sourcing, dual competence’, which requires us to proactively manage supplier performance and ~~local arts~~risk.

In our risk management framework, we assess six risk domains – calamity, ownership, finance, intellectual property ownership, information security and ~~culture initiatives.~~compliance. Since suppliers operating in the same industry or market are typically exposed to similar risks, we evaluate suppliers’ risk and performance within the context of their supply market category. We will adjust our category strategies where required to meet ASML’s short- and long-term business needs. In cases where risk exceeds the agreed threshold, mitigation measures are taken. For example, we have long-term supplier agreements (LTSAs) and/or continuous supply agreements in place, or ensure the availability of intellectual property in escrow.

Read more in:

Risk - How we manage ris k.

Our performance and actions in 2022

We ~~benefit from each other’s~~conduct continuous performance and risk management of our supply base to assuring and improving performance, and preventing reputational damage. Two key programs to this process: a suppliers' business continuity program aimed at securing continuity of supply and suppliers’ information security; and an information security and cyber resilience program intended to protect our intellectual property and maintain our leading technology position.

Business continuity program

In 2022, we continued to focus on improving business recovery capabilities, carrying out a review of business continuity plans for reassurance that suppliers can re-establish deliveries within the shortest possible time frame in case a disruptive event occurs. We require suppliers to have business recovery capabilities in line with the ISO 22301 standard. Supplier recovery plans are requested, evaluated and, where needed, improved to prevent potential business disruptions. For example, suppliers might be required to store their inventory in separate locations, implement fire prevention controls or increase buffer stock. In 2022, we included 235 business-critical product-related suppliers in the business continuity program, and extended the scope with 29 non-product-related suppliers.

Information security and cyber resilience program

We continued to expand our information security and cyber resilience program in 2022, leading to a current scope of 314 suppliers compared with 202 in 2021. Additionally, a cyber-risk monitoring tool to monitor the internet presence of suppliers has been implemented, with 256 suppliers in scope.

Suppliers with access to top-secret information or with privileged access to our IT systems were asked to raise their cyber resilience through the ISO 27001 standard. To support our suppliers and ~~support each other’s development. For~~ other ecosystem partners in this effort, we established a Security Circle of Trust together with Cyber Weerbaarheid (resilience) Brainport in the Netherlands.



We conduct continuous performance and risk management of our supply base to assure and improve performance, and prevent reputational damage.

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Our supply chain (continued)

Responsible supply chain

Our approach

We actively pursue sustainable development of our supply chain to ensure that our Tier 1 suppliers and contractors conduct their business in a caring and accountable manner, and that they act as responsible business partners. As we seek to ensure a responsible supply chain, we deploy several programs that focus on Responsible Business Alliance (RBA) commitments and standards, due diligence, and our Supplier Sustainability Program.

We are a member of the Responsible Business Alliance (RBA) and have adopted the RBA Code of Conduct.

Due diligence

With almost 5,000 Tier 1 (direct) suppliers in our supplier base, it is important for us to ~~create~~identify and prioritize suppliers at risk. We apply a ~~healthy foundation~~risk-based approach to determine which suppliers are in scope for ~~long-term sustainable strategy execution~~our more detailed due diligence process, which consists of three layers:

–Determine inherent risk level by ~~motivated employees.~~screening our full supplier base on ethics, labor, health and safety and environment risk using the RBA Risk Platform.

–Apply supplier risk profiling to business-critical suppliers. For these suppliers we conduct risk assessment of QLTCS capability elements.

–Apply an RBA self-assessment questionnaire (SAQ) to major suppliers, in which we consider the ~~community, success means that~~type of supplier, leverage and geographical location of the supplier. We focus on our product-related suppliers covering 80% of our annual spend, business-critical suppliers including non-product-related suppliers, and suppliers deemed high risk from our annual RBA risk screening.

We expect suppliers in scope for these detailed procedures to complete the RBA SAQ each year to validate their compliance with the RBA Code of Conduct and to determine any potential gaps in relation to its standards. We review all RBA SAQ results, evaluate high-risk findings (if any) and determine the severity of the finding. It is our policy to discuss all high-risk findings with the supplier to evaluate the risk and determine if an improvement plan is needed.

Supplier Sustainability Program

Our Supplier Sustainability Program addresses labor, human rights, safety, ethics and environmental risks in our Tier 1 supply chain by focusing on seven building blocks – Supplier Code of Conduct (RBA), RBA self-assessment, responsible minerals sourcing, reducing carbon footprint, increasing re-use capabilities and reducing waste, information security, and business continuity.

An important element in our Supplier Sustainability Program is the ‘Letter of Intent’. By signing this Letter of Intent, suppliers agree to comply with a number of measures: to continue adhering to the latest version of the RBA Code of Conduct; to measure and share their CO2e emission data with ecosystem partners; to set ambitious targets to reduce CO2e emissions; and to collaborate with ASML and ecosystem partners to remanufacture used system parts, tools, packaging and other materials to maximize the re-use of materials.

Conflict minerals

Like many companies in the electronics industry, our products contain minerals and metals necessary to the functionality or production of our products. Such minerals and metals include tantalum, tungsten, tin and gold, which are 3TG minerals, or so-called ‘conflict minerals’. We do not use a significant amount of these 3TG minerals in the manufacturing of our products. However, certain 3TG minerals are needed to develop our products and for them to function. Gold, for example, is used in coating critical electronic connectors, and tin is used for welding electronic components and creating EUV light.

We have adopted a series of compliance measures based on the legal requirements and guidelines of the five-step framework set out by the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). As part of our responsible sourcing program, we implement a reasonable country of origin inquiry focusing on five areas: 1. a robust management system, 2. risk identification, 3. risk mitigation, 4. industry collaboration with the Responsible Minerals Initiative (RMI) organization and 5. public reporting.

Despite our best efforts, we are ~~able~~unable to ~~close~~determine the ~~divide, so that citizens and their environment thrive.~~

~~Our community engagement program, which falls under our CEO's area of responsibility, is built on three pillars where ASML has competence and can create impact:~~

1.~~Education~~

2.~~Arts & culture~~

3.~~Local outreach~~

The total amount of cash commitments and in-kind support that ASML spent on charities, community engagement, organizations, and our own ASML Foundation in 2021 was approximately €10.4 million. Our corporate citizenship activities stretch beyond community support to in-kind contribution to startups and scaleups aiming to nurture innovation by future young-tech. In addition, we also support the European innovation ecosystem through our R&D across public-private partnerships. ~~Read more in: Innovation ecosystem.~~

~~ASML ANNUAL REPORT 2021 77~~

~~Education~~

~~We contribute to SDG 4 Quality education and SDG 5 Gender equality~~

~~ASML recognizes the need to prepare people~~precise origin of all ~~ages~~of the 3TG minerals included in our products. This is due to several reasons including 3TG supply chain complexity, the number of tiers of suppliers involved in tracing the source and the limited number of certified conflict-free smelters for ~~an increasingly digital future. STEM (science, technology, engineering~~all conflict minerals. Obtaining correct data from our supply chain is a challenge, but we continue to encourage our suppliers to trace the origins of the 3TG minerals within their supply chain in accordance with applicable conflict minerals rules and mathematics) competencies are important in helping children to reach their potential, particularly in disadvantaged communities. We organize and sponsor many initiatives that aim to share our enthusiasm for and expertise in technology to inspire all generations.regulations. We also ~~partner with multiple organizations and educational events that promote careers in technology. Our employees act as role models and guides~~request our suppliers to report smelters who are not listed or identified on the RBA smelters list to the RBA for ~~these initiatives.~~audit.

~~We execute our education programs through the following:~~

1.The Education team works closely with schools and education programs in the communities where ASML has operations. The Education team provides hands-on support and coordinates a network of ASML volunteers (our so-called ASML ambassadors) who visit schools and events, and support children and schools in their curricula, some as part-time ('hybrid') teachers, some as tutors of disadvantaged children, and some as technology and STEM promoters. Our intensive STEM education program aims to boost interest in technology among young people and increase the local and regional talent pool. We also raise awareness of career prospects in a sector offering many development opportunities.

2.The ASML Foundation is an independent foundation, but has strong ties to ASML. It operates at arm’s length and has its own board and budget. It aims to increase the self-sufficiency of disadvantaged children around the world through educational initiatives that develop their talent and help unlock their potential. ~~Read more in: ASML Foundation.~~

~~Projects supported in 2021~~

~~In 2021, we supported a total of 64 education projects across the regions where we operate (Netherlands, US and Asia). The total value of these projects amounted to €4.3 million.~~

~~Below we provide examples of a few highlights. For more information, please visit www.asml.com - community engagement~~

~~TU/e (Netherlands)~~

As one of Eindhoven University of Technology’s (TU/e) most important partners, ASML took the opportunity to celebrate the university’s 65th birthday by donating four high-tech presents with a value of around €3.5 million. These will mainly be used by researchers of the university’s new Eindhoven Hendrik Casimir Institute. For more information, please see ~~section Innovation ecosystem - Partnerships with research institutes and universities.~~our

~~Children’s Discovery Museum (US)~~Conflict Minerals report available on www.asml.com.

There was fun for the whole family to enjoy during Science and Engineering Day on Tuesday, July 20, 2021, put on by the San Diego Children’s Discovery Museum. ASML sponsored the virtual event, which was free to the public and included multiple interactive educational activities hosted on the Museum’s Facebook page. Activities included coding robots to follow a path, solving environmental science challenges and experimenting with chemistry. ASML San Diego sponsored the event for $5,000.

~~Science education in Taiwan (Asia)~~

In Taiwan, ASML joined hands with Yuan T. Lee Science Education to implement a three-year seed teacher training program called the 'Taiwan Science Rooting Project'. More than 70 seed teachers will be trained and 300 students will learn basic scientific knowledge through hands-on experience. In addition to this project, ASML also sponsors four science experience camps each year.

~~Wikimedia (Global)~~

ASML made a donation of €50,000 to the Wikimedia Foundation. This is the first of what will be an annual donation to the organization behind Wikipedia, to ensure their continuity and support their cause to remain a resource for free and open knowledge for everyone. This annual donation will increase over time with ASML's employee growth, in accordance with Wikimedia's guidelines.

~~Partnerships~~

•Together with Spectrum Brabant, we launched the tutoring program ‘Equal opportunities’, a free program for secondary students in the Brainport Eindhoven region aimed at tackling educational disadvantage.

•We entered a partnership with the National Foundation for the Elderly, VodafoneZiggo and Samsung to support digital inclusion of older people through the Welcome Online digital educational program, which aims to help older people in the region become digitally self-reliant.

~~ASML ANNUAL REPORT 2021 78~~

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Our supply chain (continued)

Our targets

We have set three targets to support our drive to increase the sustainability of our supply chain:

–To have 80% of our top 60 suppliers covered with a commitment to sustainability (via letter of intent – LOI or providing us with their CO2e emissions data (scope 1, scope 2 and scope 3)) by 2025

–For 90% of all suppliers in scope of the RBA self-assessment to have completed it by 2025

–For 100% of our suppliers identified by the RBA self-assessment as having high-risk sustainability elements to be evaluated and follow-up action agreed by 2025

We monitor targets and commitments on a monthly basis, tracking the progress against target and following up with the Sourcing lead and Supplier as needed.


Our performance in 2022
Total supplier base
12.4bn
Total spend
			% of total spend
	800	Product-related suppliers	69	%
	4,200	Non-product-related suppliers	31	%

2025 LOI target
is 80%

In 2022, 59% of the total spend was covered with the LOI commitment to sustainability

We apply due diligence screening to the total supplier base using the
RBA Risk Assessment Platform.

~~Arts & culture~~

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Our supply chain (continued)

By year end 2022, 59% of the 60 suppliers in scope had signed the Letter of Intent, acknowledging their joint responsibility and commitment to reducing the collective environmental footprint – in particular the CO2e emissions contributing to our scope 3 reduction and waste contributing to our re-use ambitions. By the end of the year, more than 35 suppliers had provided data on CO2e emissions. By 2025, we aim for 80% of the top 60 suppliers to have signed the Letter of Intent.

We ~~contribute to SDG 11 Sustainable cities and communities~~

Culture is the invisible bond that ties the people of a community together, whereas the arts are culture made visible. To strengthen that bond, ASML supports initiatives and organizations that are vital for the community’s culture and help open them up for newcomers and the underprivileged. We focus on cultural icons in our communities – organizations and initiatives that have ~~an impact beyond the local community.~~

~~Projects supported in 2021~~

~~In 2021, we supported~~asked a total of ~~14 arts and culture projects across~~59 suppliers to complete the ~~regions where~~detailed RBA SAQ. In general, the RBA SAQ results show a relatively low risk level in our supply base, as most of our suppliers operate in countries which we ~~operate (Netherlands, US and Asia)~~believe generally have a strong rule of law. By end 2022, 93% of the suppliers in scope had completed the RBA SAQ (89% in 2021). The ~~total value of these projects amounted to €1.5 million.~~

~~Below we provide examples of a few highlights. For more information, please visit www.asml.com - community engagement~~

~~Partnerships with the Van Gogh Museum and Van Gogh Brabant (Netherlands and global)~~

Uniting science and art, we have long-term partnerships with the Van Gogh Museum and Van Gogh Brabant to help ensure the artist’s work and cultural heritage, rooted in the Dutch region of Brabant, can be enjoyed for many generations to come. Through this partnership we support several programs, including:

•Preserve the paintings: In collaboration with the Cultural Heritage Agency of the Netherlands, the University of Amsterdam and the conservators of the Van Gogh Museum, a team of ASML engineers is investigating how external factors, such as light, affect the paintcompleted RBA SAQs indicated that Van Gogh used. By using this knowledge to optimize display conditions and minimize further degradation of the collection, we help to preserve his masterpieces for future generations. For more information, please visit www.asml.com/en/news/stories/2021/preserving-van-gogh.

•Vincent's Lightlab: We have initiated the realization of 'Vincent's Lightlab' within the planned expansion of Museum Vincentre in Nuenen, the Netherlands. Visitors will be able to learn more about light and how Van Gogh experimented with it in his paintings. The renewed Museum Vincentre will open its doors in 2023.

•ASML Gallery: We support the Van Gogh Museum's 2021 autumn exhibition 'The Potato Eaters: Mistake or Masterpiece'. This exhibition is a tribute to Van Gogh's masterpiece, The Potato Eaters, as well as to his time in Brabant.

•Masterminds & Masterpieces: Together with the Van Gogh Museum, we developed educational materials for students in primary and secondary schools. The artist’s curiosity was key to his craftsmanship, and together with the museum, we encourage students to follow in his footsteps – and, like in our partnership, connect science with art. More than 200 online classes were taught, reaching more than 8,000 children in Europe and Asia.

~~GLOW light art festival (Netherlands)~~

Light is key to our work, which is why we partner with the annual GLOW light art festival in Eindhoven, the Netherlands. In 2021, we showcased a special art object at the festival, created in collaboration with local artist Gijs van Bon. The object was an ode to ASML’s technology and was one of the highlights of the free festival, connecting art with science. More than 580,000 people visited the festival.

~~Local outreach~~

~~We contribute to SDG 11 Sustainable cities and communities~~

As a responsible company, we want to play our part in the communities we operate in. By partnering with businesses and organizations in the regions around the world where ASML is located, we build trust and give back.

We support local initiatives and organizations that are vital for our communities and that connect the people in our communities. Together with ASML employees, we contribute and make these initiatives attractive and accessible, and we pay special attention to stimulate integration, promote diversity and empower the underprivileged.

We are spread over 60 locations across Europe, the US and Asia. With such a widespread presence, it’s important that we engage with and support the communities where we are based. Our passionate employees contribute to local projects and organizations that make a difference in their community. And as a company, we provide sponsorship and donate funds to local non-profit organizations.

Through our global volunteering program, we encourage employees to become more involved in their local communities. Everyone is able to use one day a year as a paid volunteering day with the event, charity or activity of their choice. Employees can also volunteer with ASML Foundation projects. The ASML Foundation is a key partner of our local outreach activities, supporting many of these activities through programming and funding. ~~Read more in: ASML Foundation.~~

~~ASML ANNUAL REPORT 2021 79~~no supplier had overall high risk on all sustainability elements.



			ASML suppliers



			5,000
			Suppliers
			€12.4bn
			Total spend

~~Projects supported in 2021~~

~~In 2021, we supported a total of 55 local outreach projects across the regions where we operate (Netherlands, US and Asia). The total value of these projects amounted to €2.3 million.~~

~~Below we provide examples of a few highlights. For more information, please visit www.asml.com - community engagement.~~

~~Partnership with PSV (Netherlands)~~

In 2019, together with five other partners from the region, we became the main sponsor of our local soccer club: PSV. This club sits at the heart of our local community and is a uniting force for the health and social well-being of our local community. By joining forces, we can collaborate and do more together. Through this partnership, we support several programs, including:

•ASML Community Lounge (in the Philips Stadium): This aims to make soccer accessible to everyone, to help newcomers find their place in our region and to enable people lacking the means to enjoy an evening of top-class sport. We welcomed volunteers and clients from groups like Food Bank, NEOS, Severinus, The Salvation Army and other aid agencies in the venue, totaling more than 1,500 guests in 2021.

•Online vitality platform: Brainport Eindhoven and PSV jointly launched an online platform aimed at inspiring and motivating everyone in the Brainport Eindhoven region in the area of health and well-being, creating a vital and healthy region for all. We shared our knowledge and expertise around seven well-being themes.

•PSV Analytics: A collaboration project between PSV Sport performance and ASML BAS Big Data. The project was started with the intent to help the Dutch premier top soccer club unlock, use and optimize the large amounts of data it has collected, and translate them into dynamic images analyzing the game plan. The work inspires our ASML technologists as we collaborate and support the club to compete with its much bigger (and richer) rivals.

~~Moores Cancer Center (US)~~

Every year, ASML San Diego employees surf for a cure at the Luau & Legends of Surfing Invitational, which raises funds to support research and patient care at UC San Diego Moores Cancer Center. While the event looked a little bit different this year due to COVID-19 precautions, it still raised $500,000. ASML was an event sponsor, donating $15,000 to help make it happen.



Supplier base geographic split by percent spend

	1,600 suppliers				750 suppliers				1300 suppliers			1350 suppliers

		39	%			41	%		13	%		7	%
Netherlands				EMEA (excl. Netherlands)				North America			Asia

~~ASML ANNUAL REPORT 2021 80~~

Supplier Risk Profiles, created for business-critical,
strategically important suppliers

€8.6bn

216 suppliers represent 92% of this spend

€3.8bn

29 suppliers represent 23% of this spend

Product-related
spend

Non-product-related spend



* Major suppliers are those that account for 80% of PR spend and any business-critical NPR suppliers.

The Responsible Business Alliance (RBA) self-assessment questionnaire completed by major suppliers*

€8.6bn

44 suppliers represent 71% of this spend

€3.8bn

15 suppliers represent 26% of this spend

Product-related
spend

Non-product-related spend

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Our supply chain (continued)

However, this process did indicate high risk on Health and Safety, Environment or Ethics standards for several suppliers. Further assessment of identified high risks revealed that the risks were related to a missing 'third-party' management system in place. After follow-up through discussions we assessed the risk as low/medium. ASML ~~Foundation~~does not require suppliers to have a formal environmental/labor management system in place. All suppliers which were followed up on could show that they have a policy/procedure in place to ensure compliance to ethics, labor, safety and environmental requirements. More details can be found in the table below for 2020-2022.


		Number of high risks identified from RBA SAQ
Standard	RBA commitment	2020	2021	2022	Main findings 2022
Labor	To uphold the human rights of all workers (direct and indirect), and to treat them with dignity and respect as understood by the international community, including the ILO's eight fundamental conventions	1	0	0
Health and safety	To minimize the incidence of work-related injury and illness and to ensure a safe and healthy working environment. Communication and education is essential to identifying and solving health and safety issues in the workplace	0	0	1	Finding related to a non-product-related supplier where the requirements do not entirely match the type of organization.
Environment	Environmental responsibility is integral to producing world-class products and services. Adverse effects on the community, environment and natural resources are to be minimized while safeguarding the health and safety of the public	0	0	3	Findings related to 1) a non-product-related company where the requirements do not entirely match the type of organization; 2) a supplier in the process of implementing a company-wide environmental program and supplier management and 3) a company with policies in place, however, no environmental program and supplier contractual requirements in place.
Ethics	To meet social responsibilities and to achieve success in the industry, the highest standards of ethics should be upheld, including but not limited to business integrity, anti-bribery and corruption, antitrust and competition, protecting privacy	1	0	1	Finding related to no separate conflict minerals policy and supplier program in place, but instead this supplier has a supplier code of conduct in place.
Members and participants are committed to establishing a management system to ensure:
–Compliance with applicable laws, regulations and customer requirements –Conformance with the Code standards –Identification and mitigation of operational risks –Facilitation of continuous improvement

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Our supply chain (continued)

Our actions in 2022

Reduction of CO2e emissions and waste

In 2022, we made significant progress in our Supplier Sustainability Program, with the aim of joining forces with suppliers to achieve our goal of net zero emissions by 2030. We launched this program to our top 60 suppliers, and our goal is to gradually increase the scope over time. We recognize that our suppliers are in different phases of maturity with regard to CO2e emissions and waste reduction ambitions, varying from advanced target setting and performances to not having yet started to measure their environmental footprint.

We also started collecting CO2e emissions data from suppliers – more than 35 key suppliers now share their environmental performance and commitment with us, and we are discussing the emission reduction opportunities together. We are also sourcing an IT tool that suppliers can use to share their CO2e emission data with us.

In 2022, we also resumed our onsite supplier audits for QLTCS and business continuity. We also initiated two pilot RBA audits during the year, and we will move to a model where we structurally audit suppliers on RBA compliance.

Engaging with suppliers

We ~~contribute~~held a number of engagement sessions with key suppliers during the year, including a Supplier Ramp-up Day in March and a Supplier Day in September, which gave suppliers the opportunity to ~~SDG 4 Quality education, SDG 5 Gender equality, SDG 10 Reduced inequalities~~ask questions and ~~SDG 17 Partnerships~~share mutual challenges with us. We identified action points from these feedback sessions where possible.

Our suppliers have access to our Sourcing lead or our Strategic Account (SAT) teams, whose job is to manage the relationship with our suppliers. Sourcing and Supply Chain also held workshops for suppliers specifically to cover collaboration on CO2e emissions data, with experts invited to introduce the ~~goals~~program and talk through scope 1, 2 and 3 emissions. The workshops started with 15 suppliers and expanded to 80 over the year, with one being held face-to-face at Brainport to give suppliers an update from an ASML perspective, next steps and the chance to brainstorm ideas. We ask suppliers to let us know their challenges when collecting CO2e emissions data, and we discuss possible solutions.

The ASML Foundation is our charity of choice primarily focusing on impactful, inclusive education and training programs for young people in need. Improving lives through inclusive and quality education and training, is how we view our mission. We want to enable inclusive and equitable participation in society through lifelong learning and education in 21st century and entrepreneurial skills. By doing this, the Foundation aims to make a sustainable impact on SGD 4 (Quality Education),Suppliers have indicated that these workshops are highly beneficial and contribute to ~~SDG 5 (Gender Equality), SDG 10 (Reduce Inequalities)~~best-practice sharing and ~~SDG 17 (Partnerships~~being able to tackle joint problems together. Topics raised in workshops are followed up in future workshops.

To meet the continuing high demand from our customers, we need to work closely together. Our customers’ trust is key, while material shortages threaten our output. Greater transparency and collaboration are crucial to success. We face dynamic market circumstances and these present challenges in their own right. During the Supplier Days, ASML leaders and suppliers spoke openly about how to overcome challenges by improving partnerships, increasing transparency, shortening feedback loops and embracing re-use. In response to suppliers indicating difficulties in understanding the demand flexibility, our team provided more insights into why ASML is adjusting the Start Plan when needing to ramp. Further discussions have centered on how listening to the voice of the customer is an essential part of understanding the market dynamics, as well as transparency on the ASML investments in robust growth, sustainability and improvements regarding industrialization. ASML leaders and suppliers agreed on the importance of highlighting and learning from areas of collaborative success.

Our experience during 2022 has again underlined the importance to the Supplier Sustainability Program of achieving alignment with suppliers and of early engagement with the supplier on RBA and conflict minerals in order to remove time pressures. The biggest challenge relates to collecting data – environmental data is a new area for some suppliers, so they need to put processes in place and develop teams to handle those processes. Every two months we host a workshop to facilitate and help suppliers with their issues and the ~~goals).~~challenges they face. We have also found that overall company targets are not always aligned across suppliers, as some work toward 2030 while others are working to 2040.

Action plans for 2022-2025

We ~~believe that all people deserve~~are on track to ~~receive a quality education, allowing them~~achieve our targets and we intend to be self-sufficient in our increasingly digital world. Our goal is to help people who participate in the programs we support to improve their chances of a better life. Through funding and partnerships, the ASML Foundation aims to unlock the potential of young people in need by enabling inclusive and equitable participation in society through education. Diversity in terms of our project selection does not only indicate the inclusion of women, but also the disadvantages our target groups may face: little access to education, special education needs, or a lack of vocational training.

The ASML Foundation wants to make a difference in the community in the locations where ASML operates. As such, it mainly supports projects and initiatives in Europe, the US and Asia that address specific needs in that region. In the Brainport Eindhoven region in the Netherlands, for example, tackling illiteracy has become a key focus area for the ASML Foundation in 2021. In the US, projects focus mainly on preventing school dropouts in less-privileged areas, and on promoting science, technology, engineering and mathematics (STEM), especially for girls. Projects in Asia differ per country. In developing areas in Asia, for example, there is a focus on education for girls to reduce inequality and also to prevent child marriages. In China, the focus is on STEM for girls in rural areas.

In 2021, the Foundation donated around €2 million (€1 million in 2020), supporting 22 projects in 8 countries. With these committed donations, the Foundation aims to reach about 775,000 young people.

~~Employee volunteering~~

ASML employees support the ASML Foundation financially when they purchase goods from the ASML employee store and through donations. The ASML Foundation is also responsible for ASML’s volunteering program: It coordinates the volunteering activities and keeps track of the volunteering hours that ASML employees contribute to education initiatives and other causes. ASML employees are allowed to take eight hours per year to do volunteer work that aligns with the volunteering policy; many volunteers also donate their own time.

~~Examples of projects supported in 2021~~

~~For more information, please visit www.asmlfoundation.org~~

~~Eindhoven Basic Skills City Plan (Netherlands)~~

~~In the Netherlands,~~expand the number of ~~people~~suppliers with ~~low literacy is increasing – for example,~~a commitment to sustainability to include our top 100 suppliers.

We will continue to host supplier workshops every two months in the Eindhoven region, 7% of people aged between 16–65 years is having trouble reading and writing. Overall, 25% of youth aged 15 does not have the literacy level required to be able to function adequately in society. Eindhoven municipality, the local library, the local Area Health Authority (GGD) and other partners have developed a plan to strengthen the basic skills – reading, writing, calculating and digital skills – of a total of around 10,000 people with low literacy in the Eindhoven region by 2023. ~~As part of this Eindhoven Basic Skills City Plan, the ASML Foundation supports an initiative to prevent illiteracy in an early stage, aimed at children between 0–4 years old.~~

~~STEM - Girls Can Do It (Asia)~~

The STEM - Girls Can Do It project aims to promote more gender-balanced STEM education for young people, age between 10 to 14 years – especially girls – in rural China, near ASML’s offices in Chengdu and Xi’an. Employees from the local ASML offices have been actively involved in the partnership as volunteers, hosting in-person events at ASML’s offices, and involving female engineers as role models

~~Discovery Education (US)~~

The Equity & Access to Digital Educational Resources Initiative supports high-quality digital content and impactful on-demand professional development for under-resourced schools throughout the US to combat the learning loss in the wake of COVID-19. In Bridgeport near Wilton in the US, the ASML Foundation supports this initiative by providing funding for the National Afterschool Association, which enables them to use digital learning materials from Discovery Education, Inc.

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Innovation ecosystem

We don’t innovate in isolation. We develop technology together with the help of our partners and our collaborative knowledge network.

€3.3bn

63%

R&D Investments
(2025 target: >4bn)

R&D spend as % growth from 2019 base year
(2025 target: >100%)

€14.7m

€1.0m

Contribution to EU research projects

Value startups and scaleups in-kind support

IN THIS SECTION

119

Our overall performance in 2022

120

Partnerships for research and development

122

Supporting startups and scaleups

Our approach

We ~~innovate through partnerships. Our innovation philosophy is one where we~~ see ourselves as architects and integrators, working with partners in an innovation ecosystem. InOur focus is on innovating through partnerships, and in our innovation ecosystem, long-term collaboration is based on trust. ~~We share both risk and reward while driving innovation. While~~By sharing our expertise with the ecosystem, ~~it also provides us with access to a large leading-edge knowledge base across a wide range of technologies. Together~~ we build a strong knowledge network ~~to create~~capable of creating technological solutions that society can tap into. ~~This~~We share both risk and reward, and this collaborative approach allows us to accelerate innovation.

We ~~innovate through partnerships. To this end, we~~ focus on collaboration with research centers, fueling the innovation pipeline through partnerships with academia and research institutes, ~~and universities,~~ and collaboration with R&D partners through EU ~~public-private~~public–private partnerships. ~~In addition, we~~We also believe that we can create greater impact in the ecosystem by nurturing future young tech ~~by supporting~~through support for startups and scaleups.

~~Partnerships with research institutes and universities~~

~~We co-develop expertise within a wide network of technology partners, such as universities and research institutions. Some of our partners include imec in Belgium,~~Over the technical universities in Twente, Delft and Eindhoven in the Netherlands, and the Advanced Research Center for Nanolithography (ARCNL), also in the Netherlands. ARCNL conducts fundamental research, focusing on the physics and chemistry that are important in current and future key technologies within nanolithography and its application within the semiconductor industry.

~~In 2021, as in previous years, these partnerships delivered positive results.~~

~~Our progress and achievements~~

In 2021, imec demonstrated a breakthrough in printing narrow 24 nm pitch lines in a single exposure. Using ASML’s NXE:3400B system and combining advanced imaging schemes, innovative resist and optimized settings in its cleanroom, imec demonstratedfollowing pages, we explain how our ~~system is capable of printing lines at 24 nm pitch in a single exposure step. This innovation will enable imec and its partners that specialize in resist and patterning~~approach to ~~help develop and test resist materials that will support the introduction of our next-generation EUV lithography systems, our EUV 0.55 NA (High-NA) platform.~~partnerships can accelerate innovation.

We collaborate with, among others, Tokyo Electron, a fellow semiconductor equipment company in Japan to further enhance scaling solutions for our EUV technology. In 2021, Tokyo Electron joined our partnership with imec and introduced its leading-edge Coater/Developer to the imec-ASML joint High-NA EUV research laboratory (joint High-NA lab). This Coater/Developer will feature advanced capabilities that are not only compatible with widely used chemically amplified resists and underlayers, but are also compatible with spin-on metal-containing resists. Spin-on metal-containing resists have demonstrated high resolution and high etch resistance, and are expected to enable finer patterning. Combined with the new process modules, this will enable flexible fab operation, while also realizing increased productivity and high availability.

We continued our close involvement in the High Tech Systems Center (HTSC), set up by Eindhoven University of Technology (TU/e) to facilitate fundamental research with a focus on understanding the needs of the mechatronics and mechanical engineering industry. Since its launch three and a half years ago, the HTSC has supported the start of several new projects broadening the scope of our cooperation with TU/e toward electrostatic fundamentals and new developments in optical design. To celebrate the TU/e's 65th anniversary and our appreciation for the collaboration, we donated a set of high-tech nanotechnology machines and services for the new institute and for the student labs, with a total value of €3.5 million.

Innovation ecosystem

SDG target

How we measure our performance

SDG target 9.1

Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all

–Supporting startups to Star level

–Supporting scaleup projects

–Collaboration in EU projects

SDG target 9.4

By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities

–Collaboration with research partners

–Energy efficiency of our products measured per wafer pass

SDG target 9.5

Enhance scientific research, upgrade technological capabilities of industrial sectors in all countries, in particular developing countries. For developing countries, this includes, by 2030, encouraging innovation and increasing the number of research and development workers per one million people, as well as public and private research and development spending

–Investments in R&D

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Innovation ecosystem (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Innovation ecosystem

>4bn euro

R&D Investments

€2.2bn

€2.5bn

€3.3bn

•

>100%

R&D spend as % growth from 2019 base year

•

No target

Value startups and scaleups in-kind support

€0.6m

€1.0m

n/a

No target

Startups and scaleups in-kind support hours

1,550

hrs

2,100

hrs

4,180

hrs

n/a

>20%

Startups reached Star level from total startups (in %)

Number of scale-up companies supported (in numbers)

•

No target

Contribution to EU research projects

€28.5m

€30.3m

€14.7m

n/a

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Innovation ecosystem (continued)

Partnerships for research and development

In 2021, we joined forces with the Jheronimus Academy of Data Science (JADS), based in 's-Hertogenbosch, the Netherlands, to collaborate in the field of data science. Data science is increasingly important for the semiconductor industry as a whole and for ASML technology in particular. This collaboration provides us access to the latest academic knowledge and fresh perspectives from young talent, while also helping us develop the skills of our employees through professional education programs.

Our approach

~~New~~Public–private partnership ~~with Heriot-Watt University (UK)~~

We established a new partnership with a world-leading academic team from the UK’s Heriot-Watt University (HWU) to drive the advancement of new light source technologies. The five-year collaboration aims to accelerate the industrialization of fundamental physics research and create a direct route from lab to market for new laser technologies.

ASML has a long tradition of partnerships with academia, while HWU is renowned for its pioneering research informed by business and industry needs. This partnership will address specific real-world engineering challenges, such as the fact that the sensors in ASML’s machines must work at multiple wavelengths due to the various materials they encounter (each of which absorbs light in different ways). The team’s current focus is on new broad bandwidth light sources for optical metrology and builds on their impressive track record of innovation.

~~Collaboration with R&D partners~~

We cooperate with private partners in research and innovation projects subsidized by the European Union and its member states. We run collaborative subsidy projects aimed at advancing ICintegrated circuit (IC) technology for the next node connected to the industry roadmap following Moore’s ~~law.~~Law. The Horizon Europe program, a ~~public-private~~public–private partnership, facilitates collaboration and strengthens the impact of research and innovation in developing, supporting and implementing EU policies while tackling global challenges.

By collaborating in European projects, ASML and its partners play a role in giving the ~~region~~continent a degree of sovereignty by driving and accelerating fundamental research and ~~groundbreaking~~ground-breaking innovation in ~~Europe.~~EMEA. This collaboration also generates significant business value, fuels job creation and creates knowledge. ~~This is borne out of, for example, the~~The increasing number of patent requests per year, both for ASML and the other members in the various consortia, ~~which reflects~~demonstrates the success of ~~the~~these collaborations.

Partnerships with academia and research institutes

We co-develop expertise within a wide network of technology partners, such as universities and research institutions. Our ~~progress~~partners include imec in Belgium, the technical universities in Twente, Delft and ~~achievements~~Eindhoven in the Netherlands and the Advanced Research Center for Nanolithography (ARCNL), also in the Netherlands. ARCNL conducts fundamental research and focusing on the physics and chemistry that are important in current and future key technologies within nanolithography and its application within the semiconductor industry.

~~In 2021, we continued coordinating~~

Our targets for research and development

Our R&D partnerships are underpinned by a number of targets:

–Reach >€4bn R&D investments by 2025

–Grow R&D spend over 100% from 2019 base year

Our performance in 2022

Our R&D investments in 2022 amounted to €3.3 billion, which represents 63% growth from the efforts in three EU projects – TAPES3, PIN3S and IT2, all with a duration of three years – securing timely reporting to the connected public partners, as well as organizing online consortium meetings to exchange ideas and knowledge.2019 investment level.

Our own contribution in R&D across ~~these public-private~~public–private partnerships in ~~2021~~2022 was ~~€30.3~~€14.7 million, and the total value of our investment for the full three-year duration of ~~the~~our projects is ~~€93~~€88.9 million, ~~of the~~with a total project ~~funding~~size of ~~€448~~€438.9 million. InAcross all of ~~these~~our projects, we work with universities, research and technology institutes and other high-tech companies across ~~Europe~~EMEA – varying from 20 to 80 partners from 1012 different European countries – to help enable the industry to move toward next-generation technology.

Our actions in 2022

Public–private partnerships

In ~~2021, ASML started~~2022, we continued coordinating efforts in four EU projects – TAPES3, PIN3S, IT2 and ID2PPAC – all with a ~~new EU collaboration~~duration of three years. We have enabled timely reporting to the connected public partners, and have organized online consortium meetings to exchange ideas and knowledge. The TAPES3 project ~~called ID2PPAC.~~ was successfully closed in April 2022, when an online project review meeting involving independent experts from the industry hired by the European Commission evaluated the results of the project.

In 2022, we submitted a project proposal – 14ACMOS – in the first call of the newly established Key Digital Technologies Joint Undertaking. The aim of this three-year project ~~the technology~~is to explore and realize solutions for the ~~2 nm node, as identified~~manufacture of 14 angstrom (1.4 nm) CMOS chip technology. A consortium has been formed that covers four key areas needed in ~~the preceding IT2 project, will be consolidated~~IC technology development for manufacture – lithography, metrology, mask infrastructure and ~~integrated with the objective to demonstrate that Performance Power Area and Cost (PPAC) requirements for this next generation of leading-edge Logic technology can be achieved.~~process technology.

To continue Moore’s Law trajectory to the 2 nm node, while meeting PPAC requirements, further advancements are required in EUV lithography and masks, 3D device structures, and materials and metrology. The ~~ID2PPAC~~14ACMOS project brings together the R&D capabilities of 2825 leading expert partners to tackle these ~~challenges – it~~challenges. It is valued at more than ~~€107~~€95 million in R&D ~~cost~~costs and unlocks ~~€48.9~~at least €27 million in public funding for the ecosystem. In terms of geography, the project connects people from ~~Austria,~~Romania, the United Kingdom, Belgium, ~~the Czech Republic,~~Sweden, France, Germany, Israel ~~Spain~~ and the Netherlands.

~~Partnering in EU~~



€3.3 billion
R&D investments in 2022

€14.7 million
Contribution in R&D across public–private partnerships in 2022

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Innovation ecosystem (continued)

Partnerships with academia and research ~~projects~~institutes

~~Solmates is a partner in~~Over the ~~EU project ID2PPAC, led by ASML. Matthijn Dekkers, CTO~~last couple of Solmates: "Solmates is a vibrant innovative company of 45 FTE located in the Netherlands that supplies equipment to the semiconductor market. Our thin-film Pulsed Laser Deposition hard- and software is changing the future of thin film materials. Within the ID2PPAC consortium, Solmates is responsible for the development and installation of a 300 mm Pulsed Laser Deposition system at imec. The system will be used for semi-damascene material development. Collaboration with project partnersyears, using 0.33 NA EUV systems, imec and ASML have entered into an extensive technical collaboration to prepare for the introduction of EUV 0.55 NA (High-NA) lithography (see phase 1 in Figure 1). This collaboration identified the critical device layers on a customer’s roadmap that required the most work to enable the introduction of High-NA. We carried out studies to understand and mitigate foreseen High-NA scanner-related challenges, among ~~others, helps Solmates to test newly developed hardware in in a production-relevant environment. The ID2PPAC consortium network enables Solmates to tap into~~other detailed studies on depth of focus and field stitching. In parallel studies, the ~~expertise~~ecosystem challenges – such as choices of ~~partners in~~resist and their stochastic effects, reticle absorber materials and the ~~semiconductor market. The project significantly contributes~~necessary massive metrology – were addressed. As an indication of the impact of this collaboration, more than 30% of the oral paper presentations submitted by ASML to the ~~company's strategic roadmap~~upcoming SPIE Advanced Lithography and ~~ambition to become a relevant player~~Patterning conference (SPIE ALP 2023) are derived from the collaboration between imec and ASML. Preparation for phase 2 began in 2022 with the ~~high-tech~~creation of the infrastructure for the joint High-NA Lab and the installation of the necessary peripheral equipment, ~~segment.”~~such as resist and development track, film thickness and wafer metrology equipment.

In 2022, we joined forces with the NXTGEN Hightech program that is intended to support the future growth of the Netherlands by working on the next generation of high-tech equipment. The ASML contribution in this Growth Fund program focuses on mechatronics, systems engineering and potentially other fields.

Our collaboration with ARCNL is becoming even stronger. In the past we have established a unique collaboration model in which scientists from ARCNL can explore the research questions they would like to focus on and at the same time create value for ASML. In the areas of EUV source, metrology and materials, our joint interest is well established and yielding results. Among many other examples, these results include: new insights into optimal drive laser wavelengths for EUV plasma generation, interferometric metrology techniques for improved wafer analysis and detailed understanding of tribology for wear-resistant coatings on wafer tables.

Action plans for 2022-2025

No additional actions, as we are on track to meet our targets.


Figure 1: ASML’s IPCEI proposal concerns the third step in the three-phase approach toward introduction of EUV 0.55 NA (High-NA) lithography. Phases 1 & 2 are already planned by ASML and imec.

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Innovation ecosystem (continued)

Supporting startups and scaleups

Our approach

To nurture innovation by new generations of technological talents, we also provide valuable expertise to support entrepreneurs and startups. We make use of our experts’ in-depth competencies and knowledge to develop and support startups and scaleups. By fostering entrepreneurship, we aim to help these young enterprises excel and grow. What we share is based on what we are good at, such as building complex manufacturing systems. This is where we can play a role and make a difference.

Sharing our expertise ~~is a way to strengthen~~strengthens our regional high-tech ecosystem, particularly around our headquarters in Veldhoven, the Netherlands. This region has a competitive edge globally, and we need to make sure we maintain this position. Building a

~~ASML ANNUAL REPORT 2021 83~~

strong regional foundation offers benefits not just to ASML and associated partners, but also to other companies and organizations. ~~It also~~In addition, it helps attract a broad base of talent to the region.

~~In 2021, ASML provided nearly €1 million in-kind support~~ And through DeepTechXL, we help to ~~high-tech startups and scaleups. This amount consists of 2,100 hours of support and €0.4 million in cash.~~

~~ASML as a venture builder~~

ASML is one of the main shareholders of HighTechXL, together with other tech-minded partners in the region such as Philips, TNO, the Brabant Development Agency (BOM) and High Tech Campus Eindhoven. Through HighTechXL, we build and accelerate impactful startups by combining high-tech entrepreneurial talent and relevant technologies from reputable tech partners such as ESA, CERN, Fraunhofer, imec and TNO, with the goal of solving main global societal challenges.

Through HighTechXL, a venture-building accelerator that builds teams of entrepreneurs and tech talents around the most advanced technology in the world, we have supported startups and scaleups in their various stages over the years in collaboration with other tech-minded peers from our region. We monitor and assess their maturity through objective assessment and a set of deliverables per KPI, such as business model, finance ~~technology, sustainability and execution skills.~~

~~Insights we’ve gained in recent years show that our past successes were based on working with scaled-up startups with a ‘deep tech’ component, and that~~ these were difficult to find. The solution was to build our own in partnership with other technology providers. Since 2020, we have further developed our involvement in accelerating existing startups and mapped out a new focus area, which is building our own deep-tech ventures.

~~Up to now, 18 new~~ deep-tech ventures, have completed the program and are already getting global attention. Moreover, five new ventures are currently still in the accelerator program, making good progress, and new cohorts are already planned for.

In 2021, most of HighTechXL’s activities still had to be held online due to the COVID-19 pandemic. We had to organize ourselves offline as well, with associated challenges around communications and logistics. And while the spend rate of startup companies is relatively low, some ran into financial difficulty. ASML helped to arrange funding and subsidies for some of these.

Another issue that became more apparent during the COVID-19 crisis was the need for early-stage funding, especially for deep-tech startups. Deep tech is often perceived as complex, requires high-risk capital and is therefore less attractive for typical early-phase venture capital funds. ASML has committed financial contributions to address the needs for startups, particularly in the early ~~phase of~~stages where risks are still at their existence, when there is a need for funding the often relatively high costs associated with building technology demonstrators, prototypes, etc. Together with other HighTechXL shareholders, ASML intends to build a deep-tech seed fund.highest.

~~Carbyon enables capture of CO~~2 ~~from the atmosphere~~

~~A sustainable solution to extract CO~~2 from the air has been, until now, a crucial missing piece of the puzzle for converting green hydrogen into clean fuels. Solving this puzzle will make it possible to convert renewable electricity into chemicals and fuels, closing the organic fuel combustion cycle using only water, air and clean electricity.

~~Technical experts from both ASML and Carbyon, a spin-off company of TNO, joined forces to develop a technical concept for a very complex machine to extract CO~~2 ~~from the air in an economically profitable way. In particular the elaboration of a ‘gas-flushing’ concept for the transition from air to CO~~2 and vice versa was developed in more detail based on technical experience from ASML. With ASML's active support, Carbyon has accelerated the design and realization of its proof-of-concept. It is moving toward becoming a scaleup company with €2.5 million in financing raised, and is in talks with various venture capitalists for capital growth. Thanks to Carbyon, we are one step closer to creating a sustainable future.

~~Make Next Platform~~Supplier Sustainability Program

~~To support young innovative high-tech scaleups,~~Our Supplier Sustainability Program addresses labor, human rights, safety, ethics and environmental risks in our Tier 1 supply chain by focusing on seven building blocks – Supplier Code of Conduct (RBA), RBA self-assessment, responsible minerals sourcing, reducing carbon footprint, increasing re-use capabilities and reducing waste, information security, and business continuity.

An important element in our Supplier Sustainability Program is the ‘Letter of Intent’. By signing this Letter of Intent, suppliers agree to comply with a number of measures: to continue adhering to the latest version of the RBA Code of Conduct; to measure and share their CO2e emission data with ecosystem partners; to set ambitious targets to reduce CO2e emissions; and to collaborate with ASML ~~founded The Make Next Platform~~and ecosystem partners to remanufacture used system parts, tools, packaging and other materials to maximize the re-use of materials.

Conflict minerals

Like many companies in ~~2016 together~~the electronics industry, our products contain minerals and metals necessary to the functionality or production of our products. Such minerals and metals include tantalum, tungsten, tin and gold, which are 3TG minerals, or so-called ‘conflict minerals’. We do not use a significant amount of these 3TG minerals in the manufacturing of our products. However, certain 3TG minerals are needed to develop our products and for them to function. Gold, for example, is used in coating critical electronic connectors, and tin is used for welding electronic components and creating EUV light.

We have adopted a series of compliance measures based on the legal requirements and guidelines of the five-step framework set out by the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). As part of our responsible sourcing program, we implement a reasonable country of origin inquiry focusing on five areas: 1. a robust management system, 2. risk identification, 3. risk mitigation, 4. industry collaboration with ~~Huisman, Vanderlande~~the Responsible Minerals Initiative (RMI) organization and 5. public reporting.

Despite our best efforts, we are unable to determine the precise origin of all of the 3TG minerals included in our products. This is due to several reasons including 3TG supply chain complexity, the number of tiers of suppliers involved in tracing the source and the ~~non-profit Stichting Technology Rating. Thales NL joined as~~limited number of certified conflict-free smelters for all conflict minerals. Obtaining correct data from our supply chain is a ~~co-founder~~challenge, but we continue to encourage our suppliers to trace the origins of the 3TG minerals within their supply chain in ~~2019. The Make Next Platform puts~~accordance with applicable conflict minerals rules and regulations. We also request our suppliers to report smelters who are not listed or identified on the ~~partners' network, competencies, expertise, and experience~~RBA smelters list to ~~work in answering questions that these scaleups encounter in their development. We help them grow into a sustainable company.~~the RBA for audit.

The Make Next Platform aims to help young technology companies that have moved beyond the startup phase and are ready to expand. These companies, so-called scaleups, face challenges such as finding the funding needed to grow, knowing how to target new customer groups, and recruiting new employees with the right skills. Through exchange of best practices, business experience and coaching from corporate experts, the Make Next Platform partners aim to support them in their development to become global players by giving them access to their inside networks.For more information, please see our

Up to now, the Make Next Platform has screened more than 200 companies and engaged with the management teams of more than 50 of these. So far, seven scaleups have been adopted and more than 10 are currently in the pipeline.Conflict Minerals report available on www.asml.com.

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Our supply chain (continued)

~~Innovation ecosystem KPIs~~

Our targets

We have set three targets to support our drive to increase the sustainability of our supply chain:

~~The table below shows the key performance indicators (KPIs)~~–To have 80% of our top 60 suppliers covered with a commitment to sustainability (via letter of intent – LOI or providing us with their CO2e emissions data (scope 1, scope 2 and ~~the related~~scope 3)) by 2025 ~~targets. The non-financial data may include a degree of uncertainty, because of limitations in measurement method and assumptions applied.~~ ~~Read more in: Non-financial statements - About the non-financial information - Reporting indicators .~~

KPI 2019 2020 2021 Target 2025
R&D expenses (€, in billions) 2.0 2.2 2.5 n/a
Number of R&D partner agencies 144 130 121 n/a
Startups reached Star level from total startups supported (in %) 17 % 16 % 15 % > 20%
Number of scale up companies supported (in #) 5 7 7 14
Start-ups and scaleups in-kind support hours 1,300 1,550 2,100 n/a
–For 90% of all suppliers in scope of the RBA self-assessment to have completed it by 2025

~~Contributing~~–For 100% of our suppliers identified by the RBA self-assessment as having high-risk sustainability elements to be evaluated and follow-up action agreed by 2025

We monitor targets and commitments on a monthly basis, tracking the ~~UN's Sustainable Development Goals~~progress against target and following up with the Sourcing lead and Supplier as needed.

~~Our ambitions, commitments~~


Our performance in 2022
Total supplier base
12.4bn
Total spend
			% of total spend
	800	Product-related suppliers	69	%
	4,200	Non-product-related suppliers	31	%

2025 LOI target
is 80%

In 2022, 59% of the total spend was covered with the LOI commitment to sustainability

We apply due diligence screening to the total supplier base using the
RBA Risk Assessment Platform.

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Our supply chain (continued)

By year end 2022, 59% of the 60 suppliers in scope had signed the Letter of Intent, acknowledging their joint responsibility and ~~programs~~commitment to reducing the collective environmental footprint – in particular the CO2e emissions contributing to our scope 3 reduction and waste contributing to our re-use ambitions. By the end of the year, more than 35 suppliers had provided data on CO2e emissions. By 2025, we aim for 80% of the top 60 suppliers to have signed the Letter of Intent.

We have asked a total of 59 suppliers to complete the detailed RBA SAQ. In general, the RBA SAQ results show a relatively low risk level in our supply base, as ~~described~~most of our suppliers operate in ~~this chapter contribute to~~countries which we believe generally have a strong rule of law. By end 2022, 93% of the ~~following SDGs.~~suppliers in scope had completed the RBA SAQ (89% in 2021). The completed RBA SAQs indicated that no supplier had overall high risk on all sustainability elements.



			ASML suppliers



			5,000
			Suppliers
			€12.4bn
			Total spend



Supplier base geographic split by percent spend

	1,600 suppliers				750 suppliers				1300 suppliers			1350 suppliers

		39	%			41	%		13	%		7	%
Netherlands				EMEA (excl. Netherlands)				North America			Asia

Supplier Risk Profiles, created for business-critical,
strategically important suppliers

€8.6bn

216 suppliers represent 92% of this spend

€3.8bn

29 suppliers represent 23% of this spend

Product-related
spend

Non-product-related spend



* Major suppliers are those that account for 80% of PR spend and any business-critical NPR suppliers.

The Responsible Business Alliance (RBA) self-assessment questionnaire completed by major suppliers*

€8.6bn

44 suppliers represent 71% of this spend

€3.8bn

15 suppliers represent 26% of this spend

Product-related
spend

Non-product-related spend

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Our supply chain (continued)

However, this process did indicate high risk on Health and Safety, Environment or Ethics standards for several suppliers. Further assessment of identified high risks revealed that the risks were related to a missing 'third-party' management system in place. After follow-up through discussions we assessed the risk as low/medium. ASML does not require suppliers to have a formal environmental/labor management system in place. All suppliers which were followed up on could show that they have a policy/procedure in place to ensure compliance to ethics, labor, safety and environmental requirements. More details can be found in the table below for 2020-2022.


		Number of high risks identified from RBA SAQ
Standard	RBA commitment	2020	2021	2022	Main findings 2022
Labor	To uphold the human rights of all workers (direct and indirect), and to treat them with dignity and respect as understood by the international community, including the ILO's eight fundamental conventions	1	0	0
Health and safety	To minimize the incidence of work-related injury and illness and to ensure a safe and healthy working environment. Communication and education is essential to identifying and solving health and safety issues in the workplace	0	0	1	Finding related to a non-product-related supplier where the requirements do not entirely match the type of organization.
Environment	Environmental responsibility is integral to producing world-class products and services. Adverse effects on the community, environment and natural resources are to be minimized while safeguarding the health and safety of the public	0	0	3	Findings related to 1) a non-product-related company where the requirements do not entirely match the type of organization; 2) a supplier in the process of implementing a company-wide environmental program and supplier management and 3) a company with policies in place, however, no environmental program and supplier contractual requirements in place.
Ethics	To meet social responsibilities and to achieve success in the industry, the highest standards of ethics should be upheld, including but not limited to business integrity, anti-bribery and corruption, antitrust and competition, protecting privacy	1	0	1	Finding related to no separate conflict minerals policy and supplier program in place, but instead this supplier has a supplier code of conduct in place.
Members and participants are committed to establishing a management system to ensure:
–Compliance with applicable laws, regulations and customer requirements –Conformance with the Code standards –Identification and mitigation of operational risks –Facilitation of continuous improvement

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Our supply chain (continued)

Our actions in 2022

Reduction of CO2e emissions and waste

Engaging with suppliers

We held a number of engagement sessions with key suppliers during the year, including a Supplier Ramp-up Day in March and a Supplier Day in September, which gave suppliers the opportunity to ask questions and share mutual challenges with us. We identified action points from these feedback sessions where possible.

Our suppliers have access to our Sourcing lead or our Strategic Account (SAT) teams, whose job is to manage the relationship with our suppliers. Sourcing and Supply Chain also held workshops for suppliers specifically to cover collaboration on CO2e emissions data, with experts invited to introduce the program and talk through scope 1, 2 and 3 emissions. The workshops started with 15 suppliers and expanded to 80 over the year, with one being held face-to-face at Brainport to give suppliers an update from an ASML perspective, next steps and the chance to brainstorm ideas. We ask suppliers to let us know their challenges when collecting CO2e emissions data, and we discuss possible solutions.

Our experience during 2022 has again underlined the importance to the Supplier Sustainability Program of achieving alignment with suppliers and of early engagement with the supplier on RBA and conflict minerals in order to remove time pressures. The biggest challenge relates to collecting data – environmental data is a new area for some suppliers, so they need to put processes in place and develop teams to handle those processes. Every two months we host a workshop to facilitate and help suppliers with their issues and the challenges they face. We have also found that overall company targets are not always aligned across suppliers, as some work toward 2030 while others are working to 2040.

Action plans for 2022-2025

We are on track to achieve our targets and we intend to expand the number of suppliers with a commitment to sustainability to include our top 100 suppliers.

We will continue to host supplier workshops every two months in 2023.

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Innovation ecosystem

We don’t innovate in isolation. We develop technology together with the help of our partners and our collaborative knowledge network.

€3.3bn

63%

R&D Investments
(2025 target: >4bn)

R&D spend as % growth from 2019 base year
(2025 target: >100%)

€14.7m

€1.0m

Contribution to EU research projects

Value startups and scaleups in-kind support

IN THIS SECTION

119

Our overall performance in 2022

120

Partnerships for research and development

122

Supporting startups and scaleups

Our approach

We see ourselves as architects and integrators, working with partners in an innovation ecosystem. Our focus is on innovating through partnerships, and in our innovation ecosystem, long-term collaboration is based on trust. By sharing our expertise with the ecosystem, we build a strong knowledge network capable of creating technological solutions that society can tap into. We share both risk and reward, and this collaborative approach allows us to accelerate innovation.

We focus on collaboration with research centers, fueling the innovation pipeline through partnerships with academia and research institutes, and collaboration with R&D partners through EU public–private partnerships. We also believe that we can create greater impact in the ecosystem by nurturing future young tech through support for startups and scaleups.

Over the following pages, we explain how our approach to partnerships can accelerate innovation.

Innovation ecosystem

SDG target

How we measure our performance

SDG target 9.1 -

•–Supporting startups to Star level

•–Supporting scaleup projects

•–Collaboration in EU projects

SDG target 9.4 -

•–Collaboration with research partners

•–Energy efficiency of our products measured per wafer pass

SDG target 9.5 -

•–Investments in R&D

•~~Collaboration with R&D partner agencies~~

~~ASML ANNUAL REPORT 2021 85~~

At ASML, we rely heavily on our supplier network to achieve the innovations we strive for. Our suppliers are a critical extension of our value chain. With around 4,700 suppliers in our total supplier base, we distinguish between product-related and non-product-related suppliers.

Product-related suppliers provide materials, equipment, parts and tools used directly to produce our systems. This category comprises 800 suppliers and represents the highest percentage of our procurement volume, accounting for 70% of our total spend. From this total number of product-related suppliers, around 200 suppliers are critical suppliers, accountable for roughly 92% of the product-related spend.

Non-product-related suppliers are goods and services suppliers, providing products and services supporting our operations, varying from temporary labor to logistics and from cafeteria services to IT services. With around 3,900 suppliers, this group represents nearly 85% of our total supplier base.

~~Sourcing and supply chain strategy~~

We invest considerable resources to develop and introduce new systems and system enhancements, such as EUV lithography and e-beam metrology. As these are complex technologies involving thousands of specialized parts, we focus on high value-added system integration.

ASML’s supply chain strategy is centered on long-term relationships and close cooperation with our suppliers and partners. Our goal is to ensure we get the products, materials and services we need to meet our short- and long-term needs, to support our operations from the earliest moment of development to the end-of-life stages of our systems. To make sure that this runs smoothly, we bring in our suppliers at the earliest possible phase in the Product Generation Process (PGP). This also enables us to increase product performance and ensure manufacturability and serviceability.

1.~~Enable our product roadmap through the development and maintenance of best-in-class competencies and capabilities to secure the most advanced technology and fast time-to-market~~

2.~~Drive cost reductions, quality and capability improvements through efficient and dedicated operations~~

3.~~Build a sufficiently broad customer base and scale to share and spread the risks of volatile market cycles and to increase flexibility and cost competitiveness~~

4.~~Make active contributions to our sustainability strategy~~

~~To drive a sustainable and resilient supply chain, we emphasize supplier performance management, supply chain risk management, and a responsible supply chain.~~

~~ASML ANNUAL REPORT 2021 86~~

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Innovation ecosystem (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Innovation ecosystem

>4bn euro

R&D Investments

€2.2bn

€2.5bn

€3.3bn

•

>100%

R&D spend as % growth from 2019 base year

•

No target

Value startups and scaleups in-kind support

€0.6m

€1.0m

n/a

No target

Startups and scaleups in-kind support hours

1,550

hrs

2,100

hrs

4,180

hrs

n/a

>20%

Startups reached Star level from total startups (in %)

Number of scale-up companies supported (in numbers)

•

No target

Contribution to EU research projects

€28.5m

€30.3m

€14.7m

n/a

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Innovation ecosystem (continued)

Partnerships for research and development

Our approach

Public–private partnership

We cooperate with private partners in research and innovation projects subsidized by the European Union and its member states. We run collaborative subsidy projects aimed at advancing integrated circuit (IC) technology for the next node connected to the industry roadmap following Moore’s Law. The Horizon Europe program, a public–private partnership, facilitates collaboration and strengthens the impact of research and innovation in developing, supporting and implementing EU policies while tackling global challenges.

Partnerships with academia and research institutes

We co-develop expertise within a wide network of technology partners, such as universities and research institutions. Our partners include imec in Belgium, the technical universities in Twente, Delft and Eindhoven in the Netherlands and the Advanced Research Center for Nanolithography (ARCNL), also in the Netherlands. ARCNL conducts fundamental research and focusing on the physics and chemistry that are important in current and future key technologies within nanolithography and its application within the semiconductor industry.

Our targets for research and development

Our R&D partnerships are underpinned by a number of targets:

–Reach >€4bn R&D investments by 2025

–Grow R&D spend over 100% from 2019 base year

Our performance in 2022

Our R&D investments in 2022 amounted to €3.3 billion, which represents 63% growth from the 2019 investment level.

Our own contribution in R&D across public–private partnerships in 2022 was €14.7 million, and the total value of our investment for the full three-year duration of our projects is €88.9 million, with a total project size of €438.9 million. Across all of our projects, we work with universities, research and technology institutes and other high-tech companies across EMEA – varying from 20 to 80 partners from 12 different European countries – to help enable the industry to move toward next-generation technology.

Our actions in 2022

Public–private partnerships

In 2022, we continued coordinating efforts in four EU projects – TAPES3, PIN3S, IT2 and ID2PPAC – all with a duration of three years. We have enabled timely reporting to the connected public partners, and have organized online consortium meetings to exchange ideas and knowledge. The TAPES3 project was successfully closed in April 2022, when an online project review meeting involving independent experts from the industry hired by the European Commission evaluated the results of the project.

In 2022, we submitted a project proposal – 14ACMOS – in the first call of the newly established Key Digital Technologies Joint Undertaking. The aim of this three-year project is to explore and realize solutions for the manufacture of 14 angstrom (1.4 nm) CMOS chip technology. A consortium has been formed that covers four key areas needed in IC technology development for manufacture – lithography, metrology, mask infrastructure and process technology.

The 14ACMOS project brings together the R&D capabilities of 25 leading expert partners to tackle these challenges. It is valued at more than €95 million in R&D costs and unlocks at least €27 million in public funding for the ecosystem. In terms of geography, the project connects people from Romania, the United Kingdom, Belgium, Sweden, France, Germany, Israel and the Netherlands.



€3.3 billion
R&D investments in 2022

€14.7 million
Contribution in R&D across public–private partnerships in 2022

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Innovation ecosystem (continued)

Partnerships with academia and research institutes

Over the last couple of years, using 0.33 NA EUV systems, imec and ASML have entered into an extensive technical collaboration to prepare for the introduction of EUV 0.55 NA (High-NA) lithography (see phase 1 in Figure 1). This collaboration identified the critical device layers on a customer’s roadmap that required the most work to enable the introduction of High-NA. We carried out studies to understand and mitigate foreseen High-NA scanner-related challenges, among other detailed studies on depth of focus and field stitching. In parallel studies, the ecosystem challenges – such as choices of resist and their stochastic effects, reticle absorber materials and the necessary massive metrology – were addressed. As an indication of the impact of this collaboration, more than 30% of the oral paper presentations submitted by ASML to the upcoming SPIE Advanced Lithography and Patterning conference (SPIE ALP 2023) are derived from the collaboration between imec and ASML. Preparation for phase 2 began in 2022 with the creation of the infrastructure for the joint High-NA Lab and the installation of the necessary peripheral equipment, such as resist and development track, film thickness and wafer metrology equipment.

Action plans for 2022-2025

No additional actions, as we are on track to meet our targets.


Figure 1: ASML’s IPCEI proposal concerns the third step in the three-phase approach toward introduction of EUV 0.55 NA (High-NA) lithography. Phases 1 & 2 are already planned by ASML and imec.

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Innovation ecosystem (continued)

Supporting startups and scaleups

~~Future-proof business relationship ASML~~

Our approach

To nurture innovation by new generations of technological talents, we also provide valuable expertise to support entrepreneurs and ~~ZEISS~~

~~Since the 1990s, when ZEISS~~startups. We make use of our experts’ in-depth competencies and ~~ASML formed a strategic partnership under the banner 'two companies – one business',~~knowledge to develop and support startups and scaleups. By fostering entrepreneurship, we ~~have been incredibly successful together. We mastered technical challenges: immersion lithography was~~aim to help these young enterprises excel and ~~continues to be a massive success,~~grow. What we ~~brought EUV 0.33 NA lithography into volume chip production, and we now are developing the next generation, EUV 0.55 NA (High-NA).~~

~~ASML and ZEISS have signed a new framework agreement, taking a long and successful relationship to the next level in collaboration and alignment. The new framework agreement~~share is based on ~~three pillars. The first~~what we are good at, such as building complex manufacturing systems. This is where we can play a ~~Behavior & Interaction Model that fosters mutual respect~~role and ~~understanding between~~make a difference.

Sharing our expertise strengthens our regional high-tech ecosystem, particularly around our headquarters in Veldhoven, the Netherlands. This region has a competitive edge globally, and we need to make sure we maintain this position. Building a strong regional foundation offers benefits not just to ASML and ~~ZEISS. The second is~~associated partners, but also to other companies and organizations. In addition, it helps attract a ~~Governance Model that enables both companies~~broad base of talent to ~~become more effective~~the region.

Through HighTechXL and ~~aligned in their decision-making~~DeepTechXL, we build, finance and accelerate impactful startups by combining high-tech entrepreneurial talent and relevant technologies. With the ~~execution of the strategy~~Make Next Platform, we aim to support young, innovative high-tech scaleups. And through DeepTechXL, we help to finance these deep-tech ventures, particularly in the business. The third pillar is a Commercial Model that covers the entire business relationship between the two companies, allowing the product and engineering teams to now focus completely on collaborating to serve our customers. Our mutual intent is to deliver better products to our customers faster, to grow the business, and to share the overall responsibility of this business toward the end customers.early stages where risks are still at their highest.

~~Supplier performance management~~

ASML's continued growth, in combination with our ambitions, requires us to significantly improve our key business processes. Tight risk control and continuous supply chain improvement are key to ensuring quality, long-term business continuity and sustainability.

We invest in developing and monitoring our supply landscape to help suppliers meet our requirements with regard to quality, logistics, technology, cost and sustainability (QLTCS). Our supplier profiling methodology helps us to measure supplier performance, supplier capability and risk profile in all of these fields.

We have a framework in place to communicate process requirements and compliance expectations to our suppliers. This framework outlines our approach to supplier management and development toward the desired ASML supplier landscape. It also provides an enhanced knowledge base to improve our dialogue with suppliers around their performance and development potential. We conduct regular operational and performance review meetings to ensure suppliers continue to improve their performance and processes. When supplier performance drops below annually set thresholds and does not recover upon request and within a reasonable time frame, ASML will take action to secure reliable future supplies.

~~In addition, we have a structural audit program in place to assess supply chain risks and identify areas of improvements to mitigate or reduce those risks.~~

In 2021, we launched various suppliers improvement initiatives, in areas such as N-tier (indirect) supplier change management, product safety and repair. These cross-sectoral improvement projects aim to accelerate learning for our suppliers and improve overall supplier performance.

~~Suppliers join the capacity drive~~

As the chip shortage continues, customers are under pressure to ramp up production, and all eyes are on ASML to help them do that. But with the vast majority of ASML’s products dependent on parts from suppliers, our eyes turn to them to match the capacity increase needed. This was the focus of the virtual Supplier Ramp-Up Day on May 18, 2021. It included two successful live streams with over 320 suppliers participating from Asia, Europe and the US.

Key speakers included our CEO and senior management from DUV and Operations. Their message was clear – with every bit of ASML’s manufacturing capacity currently utilized, we need our suppliers to ramp up quickly with us, with quality and delivery performance being critical. It was a positive call to action – working together, we can deliver what our customers need and ensure the sustainability of our industry, to the benefit of all.

~~Supply chain risk management~~

Due to the highly specialized nature of many of our parts and modules, as well as the low volume, it is not always economical to source from more than one supplier. Our sourcing strategy therefore (in many cases) prescribes 'single sourcing, dual competence', which requires us to proactively manage supplier performance and risk.

In our risk management framework, we asses six risk domains – calamity, ownership, finance, intellectual property and information security, and compliance. Since suppliers operating in the same industry or market are typically exposed to similar risks, we evaluate suppliers’ risk and performance within the context of their supply market category. We will adjust our category strategies where required to meet ASML's short- and long-term business needs. In cases where risk exceeds the agreed threshold, mitigation measures are taken. For example, we have long-term supplier agreements (LTSAs) and/or continuous supply agreements in place, or ensure the availability of intellectual property in escrow. ~~Read more in: Our performance in 2021 - Governance - How we manage risk.~~

~~Our performance and progress~~

We conduct continuous performance and risk management of our supply base with the purpose to assure and improve performance, and prevent reputational damage. To this end, we deploy two key programs: a suppliers business continuity program aimed at securing continuity of supply and suppliers information security, and an information security and cyber resilience program to protect our intellectual property and maintain a leading technology position.

~~Business continuity program~~

~~ASML ANNUAL REPORT 2021 87~~

In 2021, we continued to focus on improving business recovery capabilities through a review of business continuity plans to be sure that suppliers can re-establish deliveries within the shortest possible timeframe in case a disruptive event occurs. We require suppliers to have business recovery capabilities in line with the ISO 22301 standard. Supplier recovery plans are requested, evaluated and, where needed, improved to prevent potential business disruptions. For example, suppliers might be required to put their inventory in separate locations, implement fire prevention controls, or increase buffer stock. In 2021, we included 197 business-critical product-related suppliers in our business continuity program, and extended the scope with 32 non-product-related suppliers.

~~Information security and cyber resilience program~~

We continued to expand our information security and cyber resilience program in 2021, leading to a current scope of 202 suppliers compared to 143 in 2020. Suppliers with access to top-secret information or with privileged access to our IT systems were asked to raise their cyber resilience through the ISO 27001 standard. To support our suppliers and other ecosystem partners in this effort, we established a Security Circle of Trust together with Cyber Weerbaarheid (resilience) Brainport in the Netherlands. ~~Read more in: Our performance in 2021 - Governance - Responsible business - Information security.~~

~~Responsible supply chain~~

We actively pursue sustainable development of our supply chain designed to ensure that our tier-1 suppliers and contractors conduct their business in a caring and accountable manner, and that they act as a responsible business partner. As we seek to ensure a responsible supply chain, we deploy several programs that focus on Responsible Business Alliance (RBA) commitment and standards, due diligence, and our Supplier Sustainability Program.

~~RBA Code of Conduct commitment~~

We are a member of the Responsible Business Alliance (RBA) and have adopted the RBA Code of Conduct, which is a standard intended to ensure that working conditions in the electronics industry, or industries in which electronics is a key component, and its supply chains are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible and conducted ethically.

We expect our key suppliers and their suppliers to acknowledge and comply with the RBA Code of Conduct as well. This requirement is included in our long-term product-related suppliers’ contracts. We also encourage our suppliers to develop their own sustainability strategies, policies and processes, and we actively pursue our suppliers’ adherence to this code.

~~Due diligence~~

With over 4,700 tier-1 suppliers in our supplier base, it is important for us to identify and prioritize suppliers at risk. We apply a risk-based approach to determine which suppliers are in scope for our more detailed due diligence process, which consists of three layers:

a.~~Determine inherent risk level by screening our full supplier base on ethics, labor, health and safety and environment risk using the RBA Risk Platform.~~

b.~~Apply supplier risk profiling to business-critical suppliers. For these suppliers we conduct risk assessment of QLTCS capability elements.~~

c.Apply an RBA self-assessment questionnaire (SAQ) to major suppliers, in which we consider the type of supplier, leverage and geographical location of the supplier. We focus on our product-related suppliers covering 80% of our annual spend, business-critical suppliers including non-product-related suppliers, and suppliers deemed high risk from our annual RBA risk screening.

With regard to the suppliers in scope for these detailed procedures, we expect them to complete the RBA SAQ each year to validate their compliance with the RBA Code of Conduct and to determine any potential gaps in relation to the RBA Code of Conduct standards. We review all RBA SAQ results, evaluate high risk findings (if any) and determine severity of the finding. It is our policy to discuss all high-risk findings with the supplier to evaluate the risk and to determine if an improvement plan is needed.

A key performance indicator of our approach to ensuring a sustainable supply chain is the percentage of suppliers in scope who complete the RBA SAQ. Our target is to achieve a 90% completion rate by 2025. Our second key performance indicator is to have 100% improvement plans in place for high-risk suppliers, as identified by the RBA self-assessment.

~~Our performance and progress~~

~~The graphic below provides an overview of the scoping resulted from our due diligence procedure.~~

~~ASML ANNUAL REPORT 2021 88~~

We have asked a total of 56 suppliers to complete the detailed RBA SAQ. In general, the RBA SAQ results show a relatively low risk level in our supply base, as most of our suppliers operate in countries which we believe generally have a strong rule of law. In 2021, 89% of the suppliers in scope have completed the RBA SAQ (88% in 2020). From this total, the RBA SAQ indicated an overall high risk for two suppliers.

We evaluated these potential gaps and we engaged with these suppliers. Based on our evaluation, we determined that the risks did not relate to an actual breach or incident – we concluded that the high risks were overrated, that no improvement plan was needed, and we adjusted the scoring. With regard to human rights risks, the RBA SAQ indicated a high risk on labor for one supplier. Based on our evaluation, we concluded that this risk was related to management systems rather than actual breaches of human rights. More details can be found in the table below.

Number of high risks identified from RBA SAQ
Standard RBA Commitment 2020 2021 Main findings
Labor To uphold the human rights of all workers (direct and indirect), and to treat them with dignity and respect as understood by the international community, including the International Labor Organization's (ILO) eight fundamental conventions. 1 0
•Own management system, but not third-party verified
•No public reporting of labor metrics
Health and Safety To minimizing the incidence of work-related injury and illness and to ensure a safe and healthy working environment. Communication and education is essential to identifying and solving health and safety issues in the workplace. 0 0

Environment Environmental responsibility is integral to producing world-class products and services. Adverse effects on the community, environment and natural resources are to be minimized while safeguarding the health and safety of the public. 0 0

Ethics To meet social responsibilities and to achieve success in the industry, the highest standards of ethics should be upheld, including but not limited to business integrity, anti-bribery and corruption, antitrust and competition, protecting privacy. 1 0
•Own management system, but not third-party verified
•No public reporting of ethics-related metrics
Members and participants are committed to establishing a management system to ensure:
•compliance with applicable laws, regulations and customer requirements
•conformance with the Code standards
•identification and mitigation of operational risks
•facilitation of continuous improvement.

~~ASML ANNUAL REPORT 2021 89~~

Amid travel restrictions and other COVID-19 measurements, we have not conducted on-site supplier audits. We view this as an area of improvement and have reviewed our previous audit approach. We are considering whether to involve third-party auditors. We will complete the review and start implementation in 2022.

Board of Management

The Board of Management is responsible for managing the internal and external risks related to our business activities and for making sure we comply with applicable laws and regulations.

Corporate Risk Committee




ASML risk management process provides direction for adequate risk and control measures for key risks.”
Roel Verstegen
Head of Enterprise Risk Management

Disclosure Committee

Internal Control Committee

Risk owners

Risk owners monitor the development of risks in the ASML risk universe and drive risk response across ASML according to requirements that are defined by the Corporate Risk Committee.

ASML risk universe

Strategy and products

–Industry cycle risk

–Political risk

–Climate change risk

–Business model risk

–Merger and
acquisition risk

–Competition risk

–Innovation risk

–Product
stewardship risk

–Product roadmap
execution risk

–Intellectual property
rights risk

Finance and
reporting

Partners

People

Operations

–Business planning risk

–Foreign exchange
rate risk

–Liquidity risk

–Interest rate risk

–Capital availability risk

–Counterparty credit risk

–Shareholder activism risk

–Disclosure/external reporting risk

–Customer
dependency risk

–Product/service
quality risk

–Supplier strategy and performance risk

–Supply chain
disruption risk

–Knowledge management risk

–Organizational effectiveness risk

–Human resource risk

–Product
industrialization risk

–Process effectiveness and efficiency risk

–Environment, health and safety risk

–Continuity of own
operation risk

–Security risk

–Information technology risk

–Manufacturing and
install risk

Legal and compliance

–Contractual liability risk

–Violation of laws and regulations risk

–Violation of internal policies risk

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How we manage risk (continued)

Enterprise Risk Management process

Risk appetite

Risk management process

Risk assessment

Risk response

Top-down risk assessment

Coordination and follow-up

Corporate Risk Committee/Risk owners/Emerging risks

Risk owners

Risk identification

Risk landscape

Risk appetite

Risk analysis

Risk evaluation

Risk treatment

Bottom-up risk assessment

Execution

Country/Sector

Action owners

Risk type

Averse

Prudent

Moderate

High

Extensive

Strategy and products

Partners

People

Operations

Finance and reporting

Legal and compliance

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How we manage risk (continued)

Risk developments


Strategy	Risk categories	Risk developments	Risk responses
Continue innovating at pace to maintain technology leadership	Innovation Product roadmap execution IP rights Supplier strategy and performance Human resource Knowledge management Security Competition	Intellectual Property (IP) technology leadership pressure	–Intellectual property portfolio management –Patents and relevant technical publications monitoring –Extensive investments in security program –Awareness and training programs –Cyber Defense Center
		–There is significant pressure on know-how and IP protection for ASML and its open innovation partners. ASML’s existence is based on people and knowledge. Unauthorized disclosure of information of ASML, its customers or suppliers may benefit competitors, negatively affect ASML’s ability to file patents or affect cooperation with customers and suppliers. –We experience cyberattacks and other security incidents on our information technology systems, and our suppliers, customers and other service providers also experience such cyberattacks.

Advanced lithography solutions	Product industrialization Manufacturing and install Continuity of own operations Supplier strategy and performance Supply chain disruption Human resource Product and service quality Process effectiveness and efficiency Violations of laws and regulations Business model Competition Political Industry cycle	Growth challenges	–Increase of manufacturing capabilities, utilization rate and cycle-time reduction –Fast shipments –Support suppliers to increase move rate and mitigate material shortages –Deployment of onboarding and well-being programs –Shorten time to knowledge (learning operating model)
		–There is an increasing demand across all market segments and our product portfolio, which is an opportunity for us that also brings challenges. We face challenges to increase production capacity in our end-to-end supply chain to meet this demand. This is amplified by supply chain constraints. –Hiring, onboarding and retaining the workforce in the current competitive market is increasingly challenging. Consistent pressure on our organization and people as a result of our growth may lead to well-being issues among our employees. –The high demand we are continuing to experience could change customers’ sourcing strategies to become less dependent on ASML.
		Geopolitical tensions	–Actively engage with governmental authorities about effectiveness, consequences and enforceability of regulations –Collaborate with peers in global advocacy –Scenario planning around potential geopolitical events –Apply for export licenses as required –Comply with applicable (existing and new) regulations –Optimization of supply chain footprint
		–Geopolitical tensions are rising and additional export control restrictions have been imposed during 2022. The risk of further restrictions on exports or investments is high, and as a consequence global trade is shifting from globalization to regionalization as China, US and many other countries strive for technological sovereignty. In particular, the tensions between China and the US may lead to a decoupled ecosystem and – in the longer term – overcapacity. Given the important role both countries play in the semiconductor supply chain, this can have a significant impact on our industry. Trade and export barriers have already impacted our ability to sell to and service systems for certain customers, and this is likely to continue to impact our business going forward. –Changes in relations between Taiwan and the People’s Republic of China could lead to additional trade restrictions and could impact our employees and the ability to utilize our manufacturing facilities and supply chain in Taiwan for our global customers, as well as our ability to service our customers in Taiwan.
		Weakening global economy	–Control costs and maintain flexibility –Scenario planning around macroeconomic trends
		–Macroeconomic downturn fears are increasing, fueled by high inflation rates that are amplified by the energy crisis. Economic uncertainty has led to reduced consumer and business spending, and could cause our customers to decrease, cancel or delay their orders. A recession might also bring opportunities in the tight labor market.

Drive a more sustainable world	Product stewardship EHS Climate change Human resource Violation of laws and regulations Continuity of own operations Supply chain disruption	Strengthening ESG regulations and increasing stakeholder expectations	–Stakeholder engagement and disclosures –Deployment of ESG strategy in our organization and value chain –Non-financial reporting in accordance with the Global Reporting Initiative (GRI) Universal Standards 2021 –Deployment of business continuity plans –Include extreme weather aspects in building upgrades and new designs –Comply with (existing and new) regulations
		–Companies across all industries are facing increasing scrutiny relating to their ESG policies. Our stakeholders are increasingly focused on our contribution to society and expect us to minimize the environmental and social impact of our products throughout all life-cycle stages. A global trend to transition to a lower carbon economy has resulted in the imposition of increased regulations and disclosure requirements. Failure to achieve our ESG objectives and meet the emerging ESG expectations of our stakeholders could negatively affect our brand and reputation.
		Climate change fueling extreme weather
		–Climate change contributes to increasing severity and frequency of extreme weather events (such as cyclones and flood, fire stress, drought, heat and precipitation stress, rising sea levels) that can impact continuity of our operations and/or our supply chain.

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Risk factors

1. Strategy and products

Our future success depends on our ability to respond timely to commercial and technological developments in the semiconductor industry

Risk category:

Business model, Innovation

The success of new product introductions is uncertain and depends on our ability to successfully execute our R&D programs

Risk category:

Product roadmap execution, Innovation

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Risk factors (continued)

We face intense competition

The semiconductor industry can be cyclical and we may be adversely affected by any downturn

We derive most of our revenues from the sale of a relatively small number of products

Risk category:

Competition

Risk category:

Industry cycle risk

Risk category:

Business model

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Risk factors (continued)

Failure to adequately protect intellectual property, trade secrets or other proprietary information could harm our business

Defending against intellectual property claims brought by others
could harm our business

Risk category:

Intellectual property rights

Risk category:

Intellectual property rights

–IP laws may not sufficiently support our proprietary rights or may change adversely in the future;

–Patent rights may not be granted or interpreted as we expect;

–Patent rights will expire, which may result in key technology becoming widely available that may harm our competitive position;

–The steps we take to prevent misappropriation or infringement of our proprietary rights may not be successful;

–Third parties may be able to develop or obtain patents for our or similar competing technology.

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Risk factors (continued)

We are exposed to economic, geopolitical and other developments in
our international operations

We may be unable to make desirable acquisitions or to integrate successfully
any businesses we acquire

Risk category:

Political

Risk category:

Mergers & acquisitions

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Risk factors (continued)

We may not be able to achieve our Environmental, Social and Governance (ESG) objectives or adapt and
respond timely to emerging ESG expectations and regulations

Risk category:

Climate change, Product stewardship

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Risk factors (continued)

2. Finance and reporting

We are exposed to financial risks, including liquidity risk, interest rate risk,
credit risk, foreign exchange risk and inflation

Risk category:

Liquidity, Interest rate, Counterparty credit, Foreign exchange

We are a global company and are exposed to a variety of financial risks, including those related to liquidity, interest rate, credit, foreign exchange and inflation.

Liquidity risk

Interest rate risk

Our Eurobonds bear interest at fixed rates. Our cash and investments as well as our revolving credit facility

Inflation risk

Currency risk

Counterparty credit risk

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Risk factors (continued)

3. Partners

Our success is highly dependent on the performance of a limited number of
critical suppliers of single-source key components

Risk category:

Supply chain disruption, Supplier strategy and performance

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Risk factors (continued)

4. People

A high percentage of net sales is derived from
a few customers

Our business and future success depend on our ability to manage the growth of our organization
and attract and retain a sufficient number of adequately educated and skilled employees

Risk category:

Customer dependency

Risk category:

Human resources, Knowledge management, Organizational effectiveness

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Risk factors (continued)

5. Operations

We may face challenges in managing the industrialization of our products and
bringing them to high-volume production

We are dependent on the continued operation of a limited
number of manufacturing facilities

Risk category:

Product industrialization

Risk category:

Continuity of own operation

In addition, when we are successful in industrializing new products, it can take years to reach profitable margins, as was the case for EUV 0.33 NA.

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Risk factors (continued)

We face challenges to meet demand

The nature of our operations exposes us to health,
safety and environment risks

Risk category:

Manufacturing and install, Human resources, Supplier strategy and performance

Risk category:

Environment, health and safety

Where we are able to increase our capacity, we are subject to increased risk of a downturn, as it becomes more difficult for us to reduce costs in the event of an industry downturn.

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Risk factors (continued)

Cybersecurity and other security incidents, or other disruptions in our processes or
information technology systems, could materially adversely affect our business operations

Risk category:

Security, Information technology, Process effectiveness and efficiency

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Risk factors (continued)

6. Legal and compliance

We are subject to increasingly complex regulatory
and compliance obligations

Changes in taxation could affect our
future profitability

Risk category:

Violation of laws and regulations

Risk category:

Violation of laws and regulations

We are subject to income taxes in the Netherlands and the other countries in which we are active. Our effective tax rate has fluctuated in the past and may fluctuate in the future.

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Risk factors (continued)

7. Other risk factors

COVID-19 or other pandemics may impact our operations

Restrictions on shareholder rights may dilute voting power

We may not declare cash dividends, conduct share buyback programs or cancel shares at all or in any particular amounts in any given year

We may be impacted by the Russia–Ukraine conflict

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SMALL PATTERNS. BIG IMPACT.

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						VIRTUAL AND AUGMENTED REALITY
						Virtual reality, unreal opportunities
						There’s more to virtual reality (VR) and augmented reality (AR) than gaming. At ASML, these technologies are helping us design, build and maintain some of the world’s most complex machines. Through VR and AR, our teams are able to manipulate designs and learn how to maintain systems – in some cases, many years before the machines themselves physically exist.
						Read more online

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ESG at a glance

We aim to be a leader in sustainability, and to continue driving progress toward
inclusive and sustainable growth for all.

Our vision

Our contribution to a
digital, sustainable future

We want to contribute to expanding computing power but with minimal waste, energy use and emissions. That's why we focus on energy efficiency, climate action and circular economy.

Our vision at ASML is to enable ground-breaking technology that solves some of humanity’s toughest challenges.

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

How we report on our ESG progress

SDGs we align with

ESG Sustainability chapters

Environmental

–Energy efficiency and climate action

Read more on page 76 >

–Circular economy

Read more on page 85 >

Social

–Attractive workplace for all

Read more on page 97 >

–Our supply chain

Read more on page 109 >

–Innovation ecosystem

Read more on page 118 >

–Valued partner in our communities

Read more on page 124 >

Governance

133

–Managing ESG sustainability

Step 2:

Identify actual and potential impacts

Step 3:

Assess the significance of the impacts

Step 4:

Prioritize the most significant impacts

–'Human capital development' is no longer a material topic, although the assessment shows that ASML has a positive impact by providing training and career development opportunities for employees.

–'Customer intimacy' is no longer a material topic now that impact is the sole criterion for materiality in the updated GRI standards.

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Our material ESG sustainability topics (continued)

Material topics 20221

Topic name

Topic definition (impacts covered)

Positive or negative impact

Actual or potential impact

Impact area value chain

Energy management and carbon footprint – Product use and downstream

a) Energy-efficiency products (EUV, DUV)
b) Energy consumption (EUV, DUV)
c) Scope 3 downstream emissions

Negative

Actual

Downstream customers and society

Energy management and carbon footprint – Supply chain

a) Energy management supply chain
b) Scope 3 upstream emissions

Negative

Actual

Upstream suppliers and partners

Energy management and carbon footprint – Operations

a) Energy use within and management of own buildings and factories
b) Reduction of energy consumption
c) Use of renewable energy for our operations
d) Resulting scope 1 and 2 GHG emissions

Negative

Actual

Own operations

Circular economy

a) Waste generated through operations (e.g. waste from parts, packaging, construction,
hazardous waste and other waste directed to disposal)
b) Use of non-renewable materials and resources

Negative

Actual

Entire value chain

Positive

Actual

Entire value chain

Diversity and inclusion

Positive

Actual

Own operations

Talent attraction, employee engagement and retention

Positive

Actual

Own operations

Occupational health and safety

Negative

Potential

Own operations

Responsible supply chain and product stewardship

Negative

Potential

Upstream suppliers and partners

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Our material ESG sustainability topics (continued)

Topic name

Topic definition (impacts covered)

Positive or negative impact

Actual or potential impact

Impact area value chain

Innovation ecosystem

a) Innovation partnerships
b) Innovation pipeline
c) In-kind support startups and scaleups
d) EU public-private R&D innovation projects
e) Knowledge management

Positive

Actual

Entire value chain

Community engagement

a) Local community impacts, including housing, talent pipeline (region), mobility and infrastructure,
social cohesion, neighbor (local) impact

Negative

Actual

Own operations

b) Local community impacts, including economic growth, local tax contribution and job creation
c) Philanthropy, including local community engagement and development programs

Positive

Actual

Own operations

1.Although Biodiversity was added as a topic in the 2022 materiality assessment, our impact on this topic was assessed and in comparison to other topics it was not considered material.

Contributing to the UN’s Sustainable Development Goals

Adopted by all member states in 2013, the UN’s 2030 agenda for sustainable development provides a shared blueprint for peace and prosperity, for people and planet, now and in the future.


We believe that increasing digitalization opens the way to a society that is more environmentally and socially sustainable.

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Environmental at a glance

We are committed to reducing our environmental footprint both from our operations and the use of our products and services.



			What we do
			We develop lithography technology that enables manufacturers to make more energy-efficient microchips. Reducing our environmental footprint and managing our waste – both from our operations and in the use of our products and services – is key to our ESG practices.
			Our aims
			As the world continues to increase its dependence on technology to solve some of its most pressing challenges, our role is to help make this happen by expanding the availability of the necessary computing power. Our ambition is to achieve carbon neutrality with net zero emissions in our operations (scope 1 and 2) by 2025. We aim to achieve net zero emissions in our supply chain (scope 3) by 2030, and net zero emissions from the use of our products by our customers (scope 3) by 2040. In addition, our goal is to have zero waste from operations to landfill or incineration by 2030. We focus on energy efficiency – not only in our business but also by addressing the amount of energy that semiconductors require in operation. We are also working hard to manage our own waste streams and improve the circularity of our value chain. Our actions are closely aligned to two SDGs in particular – SDG 13 (Energy efficiency and climate action) and SDG 12 (Circular economy).

Energy efficiency and
climate action

Read more on page 76 >

SDG 13

Take urgent action to combat climate change and its impacts by regulating emissions and promoting developments in renewable energy

–Energy management and carbon footprint: Operations (Scope 1 and 2)

–Energy management and carbon footprint: Supply chain, business travel and commuting (Scope 3)

–Energy management and carbon footprint: Product use at our customers (Scope 3)

Circular economy

Read more on page 85 >

SDG 12

–Reduce waste in our operations

–Re-use parts and materials

–Refurbish mature products

–Water management

Ensure sustainable consumption and production patterns

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Energy efficiency and climate action

38.1 kt

1.11 kt

Scope 1 and 2 CO2e emissions (2025 target: net zero)

Scope 3 CO2e emissions intensity (per €m gross profit)

(2025 target: 1.02)

0.56 kt

11.9 Mt

Net scope 3 CO2eemissions intensity (per €m revenue)

Scope 3 CO2e emissions (2040 target: net zero)

8.27 kWh

NXE energy use per exposed wafer pass (NXE:3600D, measured in 2021) (2025 target: 5.1 kWh)


			IN THIS SECTION
			78			Our overall performance in 2022
			79			Energy management and carbon footprint: Operations (scope 1 and 2)
			81			Energy management and carbon footprint: Supply chain, business travel and commuting and product use at our customers (scope 3)

Our approach

Climate change is a global challenge that requires urgent action by everyone, including us. While the benefits our industry brings to society are considerable, these come at a cost, through the consumption of considerable energy and resources. We have identified energy management and carbon footprint as material topics for our business across three distinct areas – in our own operations, throughout our supply chain and in the use of our products and downstream.

We have set out the following milestones and focus areas to help us achieve this:

1.Energy management and carbon footprint – Operations (scope 1 and 2): net zero emissions by 2025

2.Energy management and carbon footprint – Supply chain (scope 3): reduce net scope 3 upstream emissions to zero by 2030 and net zero scope 3 emissions from business travel and commuting by 2025

3.Energy management and carbon footprint – Product use at our customers (scope 3): net zero scope 3 emissions from product use by 2040

In this section, we will elaborate on our approach and explain how we aim to achieve our targets in the context of our focus areas.

Energy efficiency and climate action

SDG target

How we measure
our performance

SDG target 13.1

Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries

–Scope 1 and 2 CO2e emissions

–Scope 3 CO2e emissions intensity (per €m gross profit)

–Net scope 3 CO2eemissions intensity (per €m revenue)

–Scope 3 CO2e emissions

–NXE energy use per exposed wafer pass

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Energy efficiency and climate action (continued)


The following diagram illustrates our journey to net zero emissions in our value chain:



			Our journey to net zero emissions in our value chain
			Our goal is to achieve the following milestones in our journey toward net zero emissions in our value chain by 2040, for each of our impact areas: –2025: Net zero scope 1+2 emissions –2025: Net zero scope 3 emissions from business travel and commuting –2030: Collaborating with our suppliers, reduce net scope 3 upstream emissions to zero –2040: Collaborating with our customers and peers, reduce net scope 3 emissions from product use to zero Our approach to achieving net zero emissions is based on four pillars: 1.Analyzing energy use and greenhouse gas (GHG) emissions to learn about improvement options 2.Innovating in energy efficiency, and redesigning our assets, products and processes to minimize environmental impact

Our environmental management system

To measure our journey, we have an Environmental Management System (EMS) in place to help us monitor our energy use and emissions, improve performance and enhance efficiency. The EMS is integrated into our Environmental, Health and Safety (EHS) management system. All our facilities operate on the basis of this system – and the HMI locations in Tainan (Taiwan) and San Jose (US) have now been successfully integrated. Our system is ISO 14001 certified and structured in accordance with ISO 45001 requirements.



3.Aiming to lead on the shift toward 100% credible, renewable energy
4.Compensating residual emissions to achieve our targets if no reasonable other improvement actions are available
We recognize that we cannot do any of this alone, which is why we collaborate closely with our employees, suppliers, customers, peers and society. We identify and assess the impact of climate-related risks and opportunities using the assessment guidelines of the Task Force on Climate-related Financial Disclosures (TCFD).
Read more in:
Our TCFD Recommendations: climate-related disclosure, available on www.asml.com.

This certification gives our stakeholders confidence in our commitment to achieving our environmental goals.

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Energy efficiency and climate action (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Climate action

Net zero

Scope 1 – Direct emissions from fossil fuels in our operations (kton)

15.4

19.3

17.3

•

Net zero

Scope 2 – Indirect emissions from energy consumption (kton) [market-based]2

0.0

20.1

20.8

•

Net zero (2040)

Scope 3 – Indirect emissions from total value chain (kton)

8,800.0

11,400.0

11,900.0

•

Total footprint (in kton)1

8,815.4

11,439.4

11,938.1

n/a

Scope 3 CO2e emissions intensity (per €m revenue)

0.63

0.61

0.56

n/a

1.02

Scope 3 CO2e emissions intensity (per €m gross profit)

1.29

1.16

1.11

•

n/a

Reduction in GHG emissions from projects (kton)

n/a

2.6

n/a

Energy efficiency

5.1

Products – NXE energy use per wafer (in kWh)

9.64 (NXE:3400C)

8.27 (NXE:3600D)

•

n/a

Products – NXT energy use per wafer (in kWh)

0.45 (NXT:2050i)

0.48 (NXT:1980Ei)

0.46 NXT:2100i

n/a

Energy consumption (in TJ)

1,412

1,689

1,633

n/a

100 TJ

Energy savings worldwide through projects (in TJ)3

113.9

12.7

19.0

•

100%

Renewable electricity (of total electricity purchased)

100

•

(10)%

Energy consumption (NXE) (reduction in % of baseline 2018 1.4 MW)

(6)% (NXE:3400C)

(6)% (NXE:3600D)

•

n/a

Throughput (in wph) (NXE)

136 (NXE:3400C)

160 (NXE:3600D)

n/a

(60)%

Energy use per exposed wafer pass (NXE) (reduction in % of baseline 2018)

(26)% (NXE:3400C)

(37)% (NXE:3600D)

•

2.We report the market-based emissions after purchase of EACs. ASML currently does not offset any of the remaining emissions, resulting in no differences between our gross and net emissions.

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Operations (scope 1 and 2)

Our approach

Scope 1 emissions

Scope 2 emissions

We aim to achieve our targets for scope 1 and 2 by:

1.Reducing energy consumption

2.Using renewable energy

3.Compensating CO2 emissions

Our targets

Our target is to achieve net zero scope 1 and 2 emissions by 2025. This target is consistent with reductions required to keep global warming to 1.5°C and is approved by the SBTi – under the ‘near-term’ category.

Our performance in 2022

Scope 1 emissions

Our gross scope 1 emissions decreased from 19.3 kt in 2021 to 17.3 kt in 2022, despite our sales growing by 13.8%.

Scope 2 emissions

One of the most important challenges for us in achieving our net zero emissions target is the procurement of credible renewable energy in Taiwan and South Korea.

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Energy efficiency and climate action (continued)

Our actions in 2022

1. Reducing energy consumption and use of natural gas

We aim to reduce our energy consumption through direct annual savings of 100 TJ (or 3 kt CO2e) by executing more than 80 projects in the energy-saving masterplan which covers each of our five large industrial sites. The main components of this masterplan are reducing the use of natural gas and electricity, adding renewable production of energy on our sites, purchasing credible renewable electricity and optimizing the use of BREEAM (Building Research Establishment Environmental Assessment Method) certified offices.

Out of over 80 projects, the six key projects and the expected annual energy savings are shown below.



The table below includes six key projects that support the masterplan and will help to realize savings between 2021 and 2025:

Key projects	Location	Total estimated energy saving – annual (TJ)	Estimated natural gas reduction (TJ)	Estimated electricity reduction (TJ)
Energy grid	Veldhoven	50	40	10
Implement adiabatic humidification and elimination of steam generation	Veldhoven	12	12	0
Renewable energy generation (solar panels)	Veldhoven	3	0	3
Onsite renewable electricity generation (solar panels)	San Diego	8	0	8
Replacement of chillers	Wilton	3	0	3
HVAC energy consumption and improving (set points)	Taiwan	3	0	3
Total		79	52	27

In 2022, the key projects executed in the Netherlands, Wilton and Taiwan resulted in ~19 TJ savings:

–2.9 TJ per year through further operationalization of the 4,846 m2 solar panels installed on our campus in Veldhoven

–11 TJ savings in 2022 in the Netherlands through the completion of our largest project. This will result in annual savings of around 11 TJ in the years ahead

–3 TJ savings in Wilton by replacing chillers with new high-efficiency variable-speed chillers which reduce energy consumption

–3 TJ savings in Hsinchu, Taiwan, by optimizing the use of air-conditioning systems through time-outs.

2. Using renewable energy

Our ambition is to increase the share of direct green energy purchases (so-called bundled renewable electricity) from renewable electricity produced close to our premises.

In the Netherlands, we are now in the second year of a 10-year purchase agreement for green electricity for our installations which will enable us to achieve our goal of using 100% renewable electricity in the country. We also achieved 100% renewable energy in the US in 2022. For much of Asia, while our goal is to use renewable energy whenever possible, we faced challenges in Taiwan and South Korea procuring credible renewable energy.

3. Compensating for CO2 emissions

We aim to use renewable energy as much as possible. Where this is not feasible, we would purchase voluntary emission reduction certificates (VER).

Action plans for 2022-2025

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Supply chain, business travel and commuting (scope 3)

Our approach

We recognize that environmental impact goes beyond our operations. In general, most of the environmental impact in our value chain (scope 3) comes from the greenhouse gas (GHG) emissions of our suppliers (upstream) and the use of our products at our customers (downstream).

Our targets

We are working toward reducing our upstream emissions toward net zero by 2030. An element of this target is business travel and commuting, for which we have set a net zero target by 2025.

Our performance in 2022

Our scope 3 intensity for 2022 was 1,110 tonnes CO2e per € million gross profit (similar to 2021). Our results indicate that the indirect scope 3 emissions from upstream and downstream value chains account for 11.9 Mt or 99.7% of the total emissions footprint (scope 1, 2 and 3). Of this 11.9 Mt, 7.4 Mt are indirect emissions ‘downstream’ in the value chain (use of sold products at our customers’ sites) and 4.5 Mt are ‘upstream’ emissions (mainly related to the goods and services we buy).

Our actions in 2022

Improving our scope 3 emission data quality

We calculate our scope 3 emissions using guidance from the Greenhouse Gas Protocol – the organization that provides widely used international standards for emissions reporting. We continuously seek to improve the data quality of our scope 3 calculations. In past years, we have reported scope 3 emission data with a one-year lag, but in 2022 we made efforts to collect the emissions data in a more timely manner. For 2022, we are now able to report nine months of actual data and three months of estimated data. In the 2023 reporting year, we will adjust the 2022 figure reported with full-year actual 2022 data.

The next step in improving our data quality is to include actual supplier emissions data in our calculation for scope 3. This will enable us to obtain more reliable scope 3 emission data, because for supplier data we currently use the spend-based methodology for calculating emissions. In 2022, we made progress by requesting CO2e emission data directly from our suppliers through our Supplier Sustainability ~~Program~~Program. That data was not used in the emission calculations for 2022. Recognizing that we depend on our suppliers, we also encourage our value chain partners to work with us to jointly reduce our carbon footprint.

Improving access and mobility

Action plans for 2022-2025

We remain on track to achieve our overall scope 3 target. Our Supplier Sustainability Program ~~addresses labor, human rights, safety, ethics and environmental risks~~is a key enabler in our ~~tier-1 supply chain by focusing on seven building blocks – Supplier Code~~efforts to further reduce scope 3 emissions.

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Product use at our customers (scope 3)

Our approach

As the demand for enhanced chip functionality grows, the complexity and energy consumption of ~~Conduct (RBA), RBA self-assessment, responsible minerals sourcing, reducing carbon footprint, increase re-use capabilities and reducing waste, information security, and business continuity.~~the overall microchip patterning process, including from our lithography systems, is also increasing.

~~An important element in our Supplier Sustainability Program~~The EUV light source is the ~~‘Letter~~key focus area of ~~Intent’. By signing this Letter of Intent, suppliers agree to continue adhering to the latest version of the RBA Code of Conduct, measure and share their CO~~2 ~~emission data with ecosystem partners, set ambitious targets~~our current engineering efforts to reduce CO2 ~~emissions, and collaborate with ASML and ecosystem partners to remanufacture used system parts, tools, packaging and other materials to maximize~~energy consumption because it requires the ~~re-use~~larger portion of ~~materials.~~

an EUV system’s total energy consumption. Our ~~performance and progress~~

~~By year end 2021, more than 50%~~roadmap includes optimizing the sequence of the suppliers in scope for the first phase roll-out signed the Letter of Intent, exceeding our initial target of onboarding 20%. Through the Letter of Intent, our suppliers acknowledge the joint responsibility and commitment to reduce the collective environmental footprint, in particular on CO2 ~~emissions contributing to our scope 3 reduction and waste contributing to our re-use ambitions.~~ ~~Read more in: Our performance in 2021 - Environmental - Circular economy - Re-use parts and materials from installed base.~~

~~Reduction of CO~~2 ~~emissions and waste~~

In 2021, we made a significant step up in our Supplier Sustainability Program with the ambition to join forces to achieve the global goal of net zero emissions by 2030. We launched this program to our top 60 suppliers, with the intent to gradually increase the scope over time. We recognize that our suppliers are in different phases of maturity with regard to CO2 ~~emissions and waste reduction ambitions, varying from advanced target setting and performances to not having yet started to measure their environmental footprint. Using~~ the CO2 ~~emissions data~~laser to produce the plasma for creating EUV light, for example by turning the CO2 laser off when the system is in idle mode and reducing the firing intensity of the laser between exposures. Our longer-term goal is to eventually stop the CO2 laser firing between exposures altogether. Following a feasibility study from our research team and our suppliers, we ~~aim~~know that keeping the laser beam stable will require corrective hardware that will be part of the baseline configuration of the next generation (NXE:3800).

Working with our suppliers, we have also identified ways to ~~set~~use cooling water of a ~~baseline in 2022 and agree on emission reduction targets with them.~~

~~Conflict minerals~~

~~Like many companies~~higher temperature to remove the heat in the EUV source and electronics ~~industry,~~cabinets. To do this, we need to make sure that modules such as the drive laser can operate at a higher cooling water temperature – this project is currently in development, in collaboration with our ~~products contain minerals~~suppliers.

By enabling EUV optics to deal with higher intensities, higher productivity can be achieved for the same energy input, thereby increasing efficiency. That is why we are developing materials and ~~metals necessary~~coatings that can deal with higher EUV intensities, and improving the heat management of optical components. This includes the wafer itself, which heats up through the exposure to EUV light during the ~~functionality or~~ production process.

We recognize that tackling all these challenges requires ongoing innovation and collaboration within our innovation ecosystem of ~~our products. Such minerals~~customers, suppliers and metals include tantalum, tungsten, tin and gold, which are 3TG minerals, or so-called ‘conflict minerals’. We do not use a significant amount of these 3TG minerals in the manufacturing of our products. However, certain 3TG minerals are needed to develop our products and for them to function. Gold, for example, is used in coating critical electronic connectors, and tin is used for welding electronic components and creating EUV light.knowledge institutions.

Our targets

We have ~~adopted~~set a ~~series~~target to reduce the overall energy consumption of ~~compliance measures based~~our future-generation EUV systems by 10% compared with the 2018 baseline model (NXE:3400B) by 2025, while increasing productivity. We have also set a target of reducing the energy consumption per exposed wafer by 60%, compared with the 2018 baseline (NXE:3400B).

Our actions in 2022

We have been working on making the ~~legal requirements and guidelines~~reduction of ~~the five-step framework set forth by the OECD Due Diligence Guidance from Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). As~~energy consumption an integral part of our ~~responsible sourcing program~~product generation process (PGP). When designing new systems, reducing the use of energy is becoming an ever more important aspect, together with cost, performance and availability.

In 2022, we ~~conduct~~continued working on energy-efficiency improvements for future products, which require long lead times and take multiple years to achieve. Progress on these projects is monitored on a ~~reasonable country~~quarterly basis. We believe we are on track to achieve our targets of ~~origin inquiry. To this end~~10% EUV system energy consumption reduction by 2025 and 60% reduction in energy use per exposed wafer with NXE:4000.

In 2022, we ~~focus on five areas, covering a robust management~~proved the capability of the NXE:3600D system ~~risk identification, risk mitigation, industry collaboration~~to reach productivity targeting 175 wph (as compared with the ~~Responsible Minerals Initiative (RMI) organization,~~current specification of 160 wph). In 2023, this will be introduced to the market as the NXE:3600 PEP-D package.

We have begun to better assess the energy efficiency of our other product families – in DUV, metrology and ~~public reporting.~~inspection, computational lithography and scanner and process control software solutions.

~~Despite continuous efforts,~~Regarding our scope 3 product use initiative of net zero emissions in 2040, we are ~~unable to determine the precise origin of all~~one of the ~~3TG minerals included in our products. This is due to several reasons: 3TG supply chain complexity, the number~~founding members of ~~tiers of suppliers to trace the source,~~ and the limited number of certified conflict-free smelters for all conflict minerals. To obtain correct data from our supply chain is a challenge, but we continue our efforts in this regard. We continue to encourage our suppliers to trace the origins of the 3TG minerals within their supply chain in accordance with applicable conflicts minerals rules and regulations. Furthermore, we request our suppliers to report smelters who are not listed or identified on the RBA smelters listactive contributor to the ~~RBA for audit. For more information, please see our Conflict Minerals report available~~Semiconductor Climate Consortium, founded in November 2022 and focused on ~~www.asml.com.~~

~~ASML ANNUAL REPORT 2021 90~~speeding up industry value chain efforts to reduce greenhouse gas emissions.

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Energy efficiency and climate action (continued)

The table below provides an overview of the system achievements in terms of output and energy-efficiency improvements to achieve this output.

Platform1

DUV
immersion

System type

NXT:1980Di

NXT:2000i

NXT:2050i

NXT:1980Ei

NXT:1960Bi + PEP-B

NXT:2100i

Year of energy measurement

2015

2017

2020

2021

2022

Energy consumption (in MW)

0.14 MW

0.13 MW

0.14 MW

0.13 MW

0.14 MW

Throughput (wph)

275

295

250

295

Energy use per exposed wafer pass (in kWh)

0.51 kWh

0.45 kWh

0.48 kWh

0.51 kWh

0.46 kWh

Platform1

DUV
Dry

YieldStar

System type

XT:860M

XT:1460

NXT:1470

XT:860N

NXT:870

YS350E

YS375F

YS-380

Year of energy measurement

2017

2020

2022

2017

2019

2020

Energy consumption (in MW)

0.07 MW

0.06 MW

0.11 MW

0.06 MW

0.12 MW

0.01 MW

Throughput (wph)

240

209

277

260

330

n/a

Energy use per exposed wafer pass (in kWh)1

0.28 kWh

0.27 kWh

0.38 kWh

0.24 kWh

0.36 kWh

n/a

Platform1

EUV

20 mJ/cm2 dose

EUV

30 mJ/cm2 dose

System type

NXE:3350B

NXE:3400B

NXE:3400C

NXE:3600D

Year of energy measurement

2015

2018

2020

2021

Energy consumption (in MW)

1.15 MW

1.40 MW

1.31 MW

1.32 MW

Throughput (wph)

107

136

160

Energy use per exposed wafer pass (in kWh)

19.49 kWh

13.08 kWh

9.64 kWh

8.27 kWh

1.Dose energy in mJ refers to the energy required per expose per cm2.

Action plans for 2022-2025

~~Our supply chain KPIs~~

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Energy efficiency and climate action (continued)



			Advanced patterning with EUV helps to limit growth in energy and water use and GHG emissions

More advanced microchips mean smaller features, which need shorter wavelengths in lithography to manufacture them. With a single exposure of DUV light at 193 nm, for example, the smallest feature of the image of a microchip pattern reaches its physical limit around 40 nm. However, by using two or more exposures of the same pattern – so-called multiple patterning – it is possible to image details at 20 nm with two exposures, or at 10 nm with four exposures and additional process steps.

Compared to DUV, EUV at 13.5 nm enables a more efficient chip-manufacturing process. Because of the higher resolution of an EUV system, several exposures and process steps can be replaced by a single exposure and fewer process steps to pattern a certain layer of a chip. According to a study conducted by imec, EUV enables the number of non-lithography processing steps for some critical layers to be reduced by up to three to five times – and this significantly reduces production cycle time. The ~~table below shows~~fab also benefits from reduced energy and water usage, resulting from the lower number of deposition, etching and cleaning steps.

The increasing productivity of our EUV systems allows more advanced and more energy-efficient microchips to be created faster. Energy consumption of the total patterning process per wafer will thus be lower using EUV lithography, compared with using the complex multi- patterning strategies required for DUV-only patterning.

Our next-generation EUV system, EUV 0.55 NA (High- NA), will enable further shrink and partly eliminate double-exposure schemes, again replacing multiple 0.33 NA exposures with a single 0.55 NA exposure. With EUV 0.55 NA, the number of non-lithography processing steps can therefore again be kept within limits. This will effectively further limit the total energy consumption of the patterning process per wafer.

Source: M. Garcia Bardon et al., DTCO including Sustainability: Power- Performance-Area-Cost-Environmental score (PPACE) Analysis for Logic Technologies, IEDM2020.



			Creating EUV light

The greatest portion of an EUV system’s energy is used to operate the laser-produced plasma source to create EUV light. Molten tin droplets of around 25 microns in diameter are ejected from a generator. As they move, the droplets are hit first by a lower-intensity laser pulse. Then a more powerful laser pulse vaporizes the flattened droplet and ionizes the vaporized tin atoms to create a plasma that emits EUV light. This conversion process from laser to EUV light using tin droplets takes place 50,000 times per second, and is the most energy-intensive step. By increasing conversion efficiency, we can decrease an EUV system’s energy consumption at constant wafer output. Making this happen, while ensuring that this will not negatively affect other functionalities of the EUV system, is a key ~~performance indicators (KPIs) and the related 2025 targets.~~ ~~Read more in: Non-financial statements - Non-financial indicators - Our supply chain~~challenge for our ~~performance indicators (PIs)~~R&D teams.

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Circular economy

Minimizing waste and maximizing resources to extract the greatest value from
the materials we use, and repurposing our products across their life cycles

315 kg

75%

Waste generated per €m revenue (2025 target:
209 kg)

Recycling rate (excluding construction) (2025 target: 90%)

95%

€0.8bn

% of systems sold in the past 30 years still active in the field (2025 target: >95%)

Savings from re-used parts

87%

€232m

Re-use rate of parts returned from field and factory (2025 target 95%)

Value of scrapped parts and packaging

6,675 t

Total waste from operations (excluding construction)



			IN THIS SECTION
			87			Our overall performance in 2022
			88			Reduce waste in our operations
			91			Re-use parts and materials
			94			Refurbish mature products
			95			Water management

Our approach

At ASML, we believe the circular economy is vital to ensure the future success and ~~related results.~~ ~~The non-financial data may include~~competitiveness of the semiconductor industry. Our commitment to a ~~degree of uncertainty, because of limitations~~circular economy is intended to ensure that any materials we use can retain and generate as much value as possible for us and for our partners in ~~measurement method~~the ecosystem. Our strategy is to eliminate waste to avoid negative impacts on the planet and ~~assumptions applied.~~ ~~Read more in: Non-financial statements - About the non-financial information - Reporting indicators .~~

KPI 2019 2020 2021 Target 2025
RBA self-assessment completed (in %)1
78 % 88 % 89 % 90 %
Suppliers with high risk on sustainability elements evaluated and follow-up agreed (in %) 2
25 % 0 % 100 % 100 %
also to generate business value. We do this by aiming to:

1.–~~This indicator shows the percentage of major suppliers~~Reduce waste in ~~scope that completed the annual RBA self-assessment questionnaire (SAQ).~~our operations

2.–~~Zero suppliers were identified with a high risk on sustainability elements.~~Re-use parts and materials

~~Contributing~~–Refurbish mature products

While continuously innovating with our products, we work to ensure the ~~UN's Sustainable Development Goals~~increasingly sustainable use of materials across our processes and value chain. Our overarching goal is twofold: firstly, we aim to close the learning loop on our parts performance, and secondly, we aim to eliminate waste – whether that’s the waste of energy or the materials we need in our operations at every level. This approach is part of the fabric of our company, and fully in line with our values and culture.

Our ~~ambitions, commitments and programs as described in this chapter contribute to the following SDGs.~~ ~~For further information~~impact on the ~~performance, read more in: Non-financial statements - Non-financial indicators - Our supply chain.~~use of materials and resources (in weight) was identified as a new material topic in our materiality assessment conducted in 2022 – a process to formally manage this is currently under development.



€781 million
Savings from re-used parts

Circular economy

SDG target

How we measure
our performance

SDG target 12.2

By 2030, achieve the sustainable management
and efficient use of natural resources

–Recycling rate

–Supplier spend covered with commitment to sustainability (LOI)

SDG target 12.5

By 2030, substantially reduce waste generation through prevention, reduction, recycling and re-use

–Reduction in waste

–Increase in re-use of parts

–Decrease in scrapped parts and packaging

–Lifetime extension of systems still active in the field

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Circular economy (continued)

–We learn to improve our understanding and data around resources and waste flows.

–We rethink designs and processes to avoid environmental impact.

–We extend the lifetime and productivity of systems to maximize resource value.

–We re-use resources within our own value chain, to minimize our waste streams.

–We recycle materials to give resources a new life, if we can no longer re-use those resources ourselves.

The following diagram illustrates our circular economy approach.

Our circular economy approach

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Circular economy (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Circular economy	>95%	% of systems sold in the past 30 years still active in the field	n/a		94	%	95	%	•
	95%	Re-use rate of parts returned from field and factory	n/a		85	%	87	%	•
	No target	Savings from re-used parts (€, in millions)1,2	551		686		781		n/a
	No target	Value of scrapped parts and packaging (€, in millions)2	n/a		269		232		n/a
	209 kg/€m	Total waste from operations (excl. construction) normalized to revenue	360		305		315		•
	90%	Recycling rate (excl. construction)	85	%	77	%	75	%	n
	No target	Total waste from operations (excl. construction)3	5,026		5,679		6,675		n/a

1.This reporting indicator follows the principle of prior-year indicator ‘Value of parts re-used (in € millions): however, there has been a modification in the methodology and scope:

–For the re-used parts, the value component has been modified from 100% standard cost price to 100% standard cost price less standard reconditioning costs.

Due to the expansion in scope for this indicator, the comparative figures have been recalculated to reflect fair presentation.

2. A limited portion of data is not readily available, therefore the figures in the table are best estimates that contain some uncertainty.

For more on our performance indicators (PIs) and related results, please read:

Non-financial statements – Non-financial indicators – Circular economy.

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Circular economy (continued)

Reduce waste in our operations

Our approach

Our targets

We have set two ambitious targets to reduce waste in our operations:

–By 2025 we aim to have halved waste generation
(209 kg waste generated per €m revenue as compared with a 2019 benchmark of 417 kg waste generated per €m revenue).

–By 2030 we aim to send zero waste from operations to landfill or incineration.

Our performance in 2022

The reduction of our waste is explained below in more detail, via the different waste streams.

Understanding our waste flows

Within our operations, the main waste streams are:

–Non-hazardous waste, such as packaging material, product-related waste from parts resulting from upgrades or defects, and general waste. This category also includes construction waste, resulting from building activities.

–Hazardous waste, such as the chemicals we use in our manufacturing processes.

Distribution of waste streams
(total: 6,913 tonnes)



Non-hazardous waste recycling	71	%
Non-hazardous waste disposed	24	%
Hazardous waste recycling	4	%
Hazardous waste disposed	1	%

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Circular economy (continued)



95%
of our total waste in 2022 was non-hazardous waste

Our non-hazardous waste performance in 2022

Non-hazardous waste accounted for 95% (2021: 93% (5,483 tonnes)) of our total waste in 2022, of which the vast majority was recycled (75%).

Distribution of non-hazardous waste

(total: 6,533 tonnes)


Wood	31	%
General waste	24	%
Paper and cardboard	13	%
Electronics	6	%
Metals	7	%
Other non-hazardous waste	5	%
Plastic	5	%
Organic waste	5	%
Construction waste	4	%

Our hazardous waste performance in 2022

In 2022, hazardous waste accounted for 5% (380 tonnes) of our total waste generated, compared with 7% (395 tonnes) in 2021. Of this, 81% was recycled.

Distribution of hazardous waste
(total: 380 tonnes)


Hazardous liquids	91	%
Other hazardous waste (e.g. packaging, filters, lamps, etc.)	6	%
Cleaning wipes	2	%
Batteries	1	%

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Circular economy (continued)

Our actions in 2022

Non-hazardous waste

We worked to reduce non-hazardous waste through several ongoing programs, such as:

–Cross-sector re-use program, which added €400 million of re-usable parts value in our circular flows in 2022. We plan to add a further €450 million in 2023.

–Flexible cleanrooms: These are cleanrooms that can be moved between locations and assembled quickly, while providing the same standards and performance as our current fixed cleanrooms. More than 95% of the materials used in the flexible cleanroom setup are re-usable, with a lifespan of more than 30 years.

–Construction waste: As we expand our operations, we try to make sure that waste from ASML’s construction activities are recycled wherever possible. Construction waste accounted for 3% (238 tonnes) of our total waste generated in 2022 (compared with 3% in 2021), of which 67% was recycled. In our real-estate portfolio management, we apply BREEAM standards that emphasize sustainability through the circular use of materials.

–In Wilton, local teams in cooperation with suppliers and waste vendors initiated a recycling program whereby personal protective equipment (for example gloves, hair nets, face masks, etc.) are now recycled instead of being disposed of.

Improving data on our hazardous and
non-hazardous waste streams

We improved the accuracy of our waste reporting by increasing actual measurements of the amounts of waste in our main production site in Veldhoven. We are also investigating ways to improve data quality in our sites in the US and Asia.

In the context of improving data, in 2023 we aim to include ASML waste generated by third-party warehouses as a first step toward including downstream waste – we are already preparing the required processes to enable the relevant data collection for this. On our campuses we aim to ensure maximum waste separation onsite (in order for waste vendors to more easily recycle) and we are working on getting agreements included in contracts with waste vendors to maximize recycling.

Action plans for 2022-2025

Despite our many waste reduction and/or increasing recycling rate initiatives, we are still not on track to achieve our waste recycling goals. This is mainly due to data improvement processes and more reporting locations compared with 2020. In order to achieve our goals, we are currently investigating the impact of our waste on the environment, cooperating with suppliers and waste vendors, and ensuring that new contracts with waste vendors include sustainability requirements. We currently see no reason to adjust our targets.

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Circular economy (continued)

Re-use parts and materials

Our approach

We are committed to re-using system parts, packaging and tools in our value chain to reduce and prevent waste while also reducing costs. We believe that re-use is a learning opportunity: by re-using, we learn more about the performance of parts and how existing processes affect them. By implementing those learnings in design and processes, we can then improve parts and system performance for all of us in the value chain. It is important that we continue to work closely on this with our customers and suppliers.

Our targets

Our overall target is to increase our rate of re-use of defective parts in ASML factories and in the field to 95% by 2025.

To achieve our ambition, we focus on:

–Design for re-use by focusing on more robust and repairable designs at an early stage of development

–Return of transportation packaging and materials for shipments to our customers, for re-use

–Repair at local repair centers to improve parts repair yields by reducing cycle time of root-cause analysis and repairs

–Remanufacture modules and parts that return from the field to as-new quality, also to use in new build systems

–Harvesting of end-of-life parts through disassembly to re-use subcomponents

Our performance in 2022

In 2022, our re-use rate of defective parts was 87% (85% in 2021). Our savings from re-used parts amounted to €781 million and the value of scrapped parts and packaging was €232 million.

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Circular economy (continued)

Our actions in 2022

Design for re-use

In 2022, we continued to further integrate re-use into our existing design methodologies and tools, such as in our Product Generation Process (PGP). This key element of preventing waste will help us meet our long-term goals.

Re-use requirements are now part of the core product design strategy and specifications. For example, through the modular design of our products and their components, we make sure that future upgrades, worn parts and components can be replaced as a single unit. By ensuring commonality in the parts design process, a part can be used in multiple contexts in a product and even in future product generations.

Managing reverse flows for re-use

In 2022, we set up a dedicated reverse logistics team to drive waste reduction in our ‘reverse flows’ – materials coming back to us or to our suppliers both from the field and from the factory. The goal of this team is to help support our drive to re-use, reduce reverse logistics and repair lead times, and increase the overall re-use rate.

We are continuing to work to resolve bottlenecks in the execution of re-use and to clarify direction, guidelines and re-use rules across the business.

Return for re-use of transportation materials

When modules and systems are shipped, either from our suppliers to our factories or from our factories to our customers, many transportation materials are used – such as packaging, locking and plug materials – to ensure that the products arrive safely. Instead of being thrown away, these are re-used. Before these parts are returned for re-use, they undergo an identification process and quality check, followed by the logistical and financial processes required to bring them back in the supply chain (either to the original module suppliers or to ASML). Our goal is to standardize these processes and create a network-related solution to enable high flexibility and reduce transport, which also reduces our CO2e footprint.

We are improving the re-use of packaging, locking and transport materials from the field and factory, and aim to return and re-use 80% or more in the next installation or relocation.

Local repair centers

We are extending the number of local repair centers for refurbishing, repairing or cleaning service parts, packaging and tools, and we are setting up global repair centers for factory materials. The value handled by our local repair centers increased fourfold in 2022, and we expect it will increase three times again in 2023. Our goal for 2025 is that 10% of our parts sent to the field should be repaired locally.

Currently we have local repair centers in South Korea and China, and we are rolling out plans for all our customer regions to eventually have one or more in place. A global repair center has been opened in Linkou and additional global repair centers will be established at each of our factory hubs in Wilton and San Diego (US) and Veldhoven (the Netherlands).

Our repair centers partner with local material suppliers and specialized repair partners, creating a local ecosystem. By enabling repair and re-use activities and taking ownership of repairs in the field close to our customers, we are able to reduce logistics time, the costs of stocking parts and our environmental impact (by reducing scrap and waste and greenhouse gas emissions). Our customers benefit from reduced service costs and improved material availability.

A single quality standard for both new and
re-used parts

When a part is re-used, our customers expect it to be as good as, or better than, the original new part. We have a single qualification standard and requirement in place that ensures that the same specifications, performance requirements, warranties, and so on, are applicable to both new and re-used parts. We expect our suppliers to be fully engaged in meeting this standard as well.



87%
Re-use rate of defective parts in 2022

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Circular economy (continued)

Our achievements on re-use in 2022

We have streamlined our scrap approval process. Firstly, every e-scrap request is accompanied by a proposal from the re-use team outlining which parts are still re-usable, to be assessed by the initiator before the request is approved. Secondly, an automated validation step makes sure the right follow- up actions are in place, which reduces the lead time in the scrap process. We have already implemented this process in Veldhoven and are creating a roll-out plan for other locations.

We have also created and implemented a process for re- use of tin catch buckets, modules that are used in the light source of our EUV systems. We retrieve them, disassemble them and drain the tin for re-use. After that, the cleaned module is as-new, ready for re-use in our EUV systems.

The Wilton EHS overseas CRE Re-use program is another example of how re-use can deliver key benefits. When an employee or department has a piece of equipment or furniture that is in good condition and can be re-used onsite, a picture of the item is placed on the CRE Re-use Wilton SharePoint page. If an ASML employee sees something they can use, they reach out to CRE EHS and our technicians will deliver the item. So instead of scrapping work benches, cabinets or machines, we are re-using these items onsite.

We further embedded our re-use commitment by enhancing our Supplier Sustainability Program.

Read more in:

S ocial - Our supply chain.

Re-use challenges and roadmap

In 2022, we continued to make good progress on re-use and remain committed to further reducing our waste streams. Building a re-use mindset and embedding it into normal ways of working is critical to achieving re-use and preventing scrap. For example, by replacing scrap bins in our factories with what we now call ‘re-use collection corners’, we encourage employees to think of used parts as having potential rather than being seen as waste.

However, to fully embed our re-use vision, we recognize that there are several challenges to overcome and processes to be defined. These include:

–Configuration control: To re-use as-new parts in a system requires traceability of those parts. This means we need to be able to trace a part’s history, where it comes from, and know how many times it was used and repaired.

–Organization: Across our operations, there are a variety of separate processes related to return and re-use. We need to align these to an overall end-to-end re-use process flow.

–Repair engineering and processes: Part of our new focus is creating awareness regarding design for re-use, and defining processes around how to include re-use in redesigns and engineering changes.

As a next step, we have started building a dedicated global re-use center in Veldhoven (Netherlands) that will facilitate various repairs and harvesting activities. We anticipate a bigger re-use inflow from a bigger installed base. This is part of our strategy to move from re-use activities as part of build work centers – which can be very distracting and confusing for teams that are building modules – to making dedicated re-use centers, which will help us to create even more re-use output.

Action plans for 2022-2025

This year we determined our targets for 2025 in more detail. With the action plans above, we see no reason to adjust our 2025 target. Going forwards, we aim to also include packaging data to our 'Savings from re-used parts' indicator.


4x
the value handled by our local repair centers in 2022

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Circular economy (continued)

Refurbish mature products

Our approach

Our approach is to have more than 95% of systems sold in the past 30 years, still active in the field.

A well-maintained ASML lithography system can last for decades and can be used by more than one fab. Many ASML lithography systems start out in cutting-edge fabs. Once that fab needs to upgrade, the lithography systems are given a new lease of life in a fab where the manufacturer requires comparatively less sophisticated chips, such as accelerometers or radio-frequency chips.

Our refurbishment strategy focuses on buying back systems that are not operational in the field, harvesting parts from decommissioned systems and managing the continued availability of spare parts, which is key to the extended lifetime service we offer for our systems. We provide our customers with a guaranteed service roadmap until at least 2030. This means that all support and the necessary services and spare parts they need to maintain their systems are expected to be available through at least 2030 and beyond.

For the TWINSCAN AT systems that are still in operation, we focus on measures to proactively manage their end of life. We do this by guaranteeing the availability of spare parts as long as possible on a best-effort basis.

Our performance in 2022

Our Mature Products and Services (MPS) business focuses on the refurbishment of the following product families: PAS 5500 (with around 1,800 systems at customer sites worldwide), TWINSCAN XT systems and, as of 2021, NXT:1950-1980 systems. By the end of 2022, we had refurbished and resold well over 540 lithography systems. Some 95% of systems sold in the past 30 years are still active in the field, and we have a target to achieve more than 95% by 2025. We are on track to meet this target.

Our actions in 2022

We are making significant investments to ensure continued supply of more than 2,000 service parts for our PAS platform, either through redesigns, a parts harvesting strategy or finding an alternative with the same form, fit and function. In instances where this does not work, we are generally able to secure components through Last Time Buy – a supplier’s ‘last call’ for a part or component before production switches to its successor. Over time, when a part is no longer available, we redesign parts.

We track the spare parts we have in our portfolio, see how they are being used, and identify when we expect to run out of these parts. For PAS systems, we use this information to update our priorities for redesigning parts. For TWINSCAN AT systems, we aim to continue supplying parts by harvesting them from systems that are decommissioned by our customers.


			95% of all systems sold in the past 30 years still active in the field

Action plans for 2022-2025

No additional actions, as we are on track to meet our target of 95%.

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Circular economy (continued)

Water management

Semiconductor manufacturing processes use a great deal of water. Due to climate change, droughts have become more extreme and more unpredictable, which may lead to water becoming a scarce resource in specific locations. Although water is an essential resource in our customers’ semiconductor manufacturing processes, water use in our own operations is limited. ASML’s products use water mainly in three ways. First, water is used to remove heat loads, to keep the system on a constant temperature. These internal cooling circuits are all designed as ‘closed-loop’ (recycling) systems. Second, these heat loads are ultimately removed by cooling towers, using evaporation of (lower-quality) water. Third, DUV systems use ultrapure water in the immersion hood – this water is currently only partially recycled.

Water consumption at ASML is only a fraction of the water consumption of most companies in the semiconductor industry. Nevertheless, we promote the responsible use of water throughout our company. Our water consumption in 2022 increased to 1,161,850 cubic meters, up from 1,041,000 cubic meters in 2021. This increase can primarily be attributed to more cooling water being used in Veldhoven due to higher power consumption, driven by an increase in the number of systems produced and warmer weather in 2022. In addition, more people were working in the office and factory compared with 2021. In San Diego, the HVAC cooling tower water cleanliness set point was modified, resulting in an increased automated flushing of the system.

While disruptions in access to water may represent a significant risk for some of our customers, water-related risk for ASML is limited. We have seven manufacturing sites located in Veldhoven (Netherlands), San Diego (US), Wilton (US), Linkou (Taiwan) and Tainan (Taiwan).

Read more in:

Our TCFD Recommendations – Climate-related disclosure, available on www.asml.com.

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SOCIAL

STRATEGIC REPORT

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Social at a glance

We aim to have a positive role in society for our employees, the communities around us and everyone involved in our innovation ecosystem and supply chain.

What we do

Our aims

Attractive workplace for all

Read more on page 97 >

SDG 4 and 8

–Inspiring a unified culture

–Best employee experience

–Enabling strong leadership

–Ensuring employee safety

Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all/Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

Our supply chain

Read more on page 109 >

SDG 8 and 12

–Supplier performance and risk management

–Responsible supply chain

Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all/Ensure sustainable consumption and production patterns

Innovation ecosystem

Read more on page 118 >

SDG 9

–Partnerships for research and development

–Supporting startups and scaleups

Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

Valued partner in our communities

Read more on page 124 >

SDG 4 and 11

–Education

–Arts & culture

–Local outreach

Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all/Make cities and human settlements inclusive, safe, resilient and sustainable

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Attractive workplace for all

Empowering individuals for the collective good to ensure our employees are proud to work for us and engaged with our ambitions as a company.



6.0%			37,643
Attrition rate (2025 target: <7%)			Total employees (FTE)1 EMEA 21,267 Asia 8,871 US 7,505

78%		(-4%)	24%
Employee engagement score against benchmark (2025 target -2% vs. top 25% performing companies)			Gender diversity (% females’ inflow) (2024 target: 23%)

143
Nationalities

IN THIS SECTION
98	Our overall performance in 2022
99	Inspiring a unified culture
101	Best employee experience
106	Enabling strong leadership
107	Ensuring employee safety

Our approach

Our engaged, diverse and highly skilled employees are critical to the performance of our organization and our long-term success as a company. We work hard to attract the world’s top talent and focus on helping them reach their full potential.

ASML’s people vision sets out our ambition for the future, supporting our values and what we stand for: We empower each other to thrive, fueling our growth, happiness and business success.

Everyone throughout the organization has an important role in this vision, but we need an environment and tools that support collaboration, knowledge sharing and autonomy in more diverse and interdependent teams. We must also continue to deliver on our commitments to our stakeholders and manage our day-to-day challenges to attract, onboard, develop and retain talent.

To deliver on our long-term people vision, we focus on three key areas:

–Inspiring a unified culture;

–Providing the best possible employee experience; and

–Enabling our leadership to bring out the best in our people.

Across the business, we drive various programs that provide our people with more autonomy in steering their development and career aspirations in a safe environment, while enabling our leaders to support the growth of the company.

Our approach to foster an attractive workplace for all is set out in the following pages.

1.This FTE number excludes Berliner Glas (ASML Berlin GmbH).

Attractive workplace for all

SDG target

How we measure our performance

SDG target 4.3

By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university

–Employee training and development indicators

SDG target 8.1

Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries

–Financial performance

SDG target 8.2

Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value-added and labor-intensive sectors

–Employee engagement score

SDG target 8.5

By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

–Workforce data including diversity and inclusion

–Fair remuneration pay ratio

SDG target 8.6

By 2020, substantially reduce the proportion of youth not in employment, education or training

–Employee attrition rate

–New hires

SDG target 8.8

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

–Employee safety indicators

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Attractive workplace for all (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Attractive workplace for all	Be on par with benchmark target: 2% below benchmark of top 25% performing companies	Employee engagement score	80	%	78	%	78	%	•

	No target	Employee growth (new hires and rate)	1,932 (8%)		4,373 (15%)		7,130 (21%)		n/a
	<7%	Attrition rate	3.8		5.4		6.0		•
	20% (in 2024)	Gender diversity – % females inflow job grade 13+	n/a		12%		35%		•
	12% (in 2024)	Gender diversity – % females job grade 13+	n/a		8	%	10%		•
	NL top 10 Taiwan top 20 S Korea top 20 US top 75 China top 100	Attractiveness to talent (employer brand score)1	NL 10 Taiwan 22 S Korea 24 US3 177 China 168		NL 6 Taiwan 6 S Korea2 14 US3 177 China 148		NL 4 Taiwan 6 S Korea n/a US 159 China 188		n
	0.16 (2022)	Recordable incident rate	0.18		0.17		0.18		n
	Target is relative to the score of the top 25% of performing companies by +/-3%) (2024)	Inclusion index	73	%	83	%	85	%	•
	23% (in 2024)	Inflow % female	23	%	21	%	24%		•
	No target	Total employees	Total 26,481 Male 83% Female 17% Asia 6,057 EMEA 14,714 US 5,710		Total 30,842 Male 82% Female 18% Asia 7,430 EMEA 17,230 US 6,182		Total 37,643 Male 80% Female 19% Unknown 1% Asia 8,871 EMEA 21,267 US 7,505		n/a
	No target	Number of nationalities	120		122		143		n/a

As ASML has continued to grow strongly, we have managed a large increase in our workforce in recent years, benefiting from a more diverse employee base. However, this rapid growth brings its own challenges, as the organization becomes more complex, and the expectations of our customers and stakeholders grow.

For more Attractive workplace for all related performance indicators (PIs), see:

Non-financial statements – Non-financial indicators – Attractive workplace fo r a l l.

1.Employer brand ranking from Universum: engineering students.

2.As of 2021, overall ranking for South Korea is no longer conducted by Universum. The result reported for 2021 is based on a customized ranking report.

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Attractive workplace for all (continued)

Inspiring a unified culture

Our approach

We are anchoring ASML’s identity deep in the organization, to help people embrace our values and to provide a unified direction that enables people to familiarize themselves with our company strategy and purpose.

Our company values – challenge, collaborate and care – ensure we are all working from a commonly understood base that applies equally across the organization. They help us make choices that keep us true to ourselves, and allow teams to discuss natural areas of friction when they occur. They also ensure we balance the traits that have brought ASML this far (persistence, a ‘can do’ attitude and a belief that anything is possible) with the right degree of care).

Building on these core values, our six people principles guide and inspire us in our decision-making to bring the best out of our employees. These principles are: clarity and accountability, continuous learning, inclusion, an enabling environment, personal growth and trust.

We recognize that our success is driven by our unique and diverse teams. As an equal opportunity employer, we are cultivating a diverse and inclusive workforce to drive innovation and accelerate creativity within our business. We strive to maintain an environment where all feel valued and respected and can fully contribute. That has helped us to build a culturally diverse organization, with our employees representing 143 different nationalities. Even with this wide range of diverse talent on our team, we still have opportunities to be more inclusive. Our goal is for our workforce to be representative of the available qualified talent pool.

Our Diversity and Inclusion Strategy

Our roadmap focuses on three key areas:

Talent

Leadership

Attract and retain employees by ensuring that they are valued, supported with feedback and
can grow their careers

Enabling our leaders to demonstrate commitment, accountability and role-model behavior to advance
inclusion within their teams

Culture

Cultivate and promote an inclusive culture that equips employees to challenge norms and increase collaboration

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Attractive workplace for all (continued)



24%
of our new hires were women in 2022

85%
2022 inclusion score

Our targets

–Reach 23% women new hires by 2024

–Reach 12% women at leadership levels by 2024

–Reach 20% inflow of women to leadership levels by 2024

More information about the diversity of our Supervisory Board and Board of Management can be found in:

Corporate Governance - Other Board-related matters - Diversity.

Our performance in 2022

To do this, we are focusing on the growth of our existing team members and expanding the diversity of our talent pool. In 2022, 24% of new hires were female.

Our actions in 2022

To promote diversity and inclusion in our workforce, we are building and implementing programs that lead to measurable and actionable results. During 2022, we:

–Facilitated over 20 D&I internal training sessions for approximately 1,000 employees, managers and leaders globally, both virtually and in person.

–Actively engaged with multiple educational programs to grow the talent pipeline, deploying multiple initiatives to promote STEM education among the future female talent pool.

–Executed global D&I engagement activities, such as International Women’s Day, LGBTQIA+ Pride Month and Global Diversity Month.

Action plans for 2022-2025

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Attractive workplace for all (continued)

Best employee experience

Our approach

We want to offer our people the best possible employee experience at all our sites, enabling them to develop their talent, feel respected and work to the best of their abilities – this allows us to attract and retain the best talent.

Likewise, employee engagement depends on a wide variety of factors and activities, such as talent attraction and retention, onboarding experience, learning and development, diversity & inclusion, labor practices such as fair remuneration and labor conditions, and leadership.

The overall impact of these programs on the total employee experience is measured by our We@ASML employee engagement survey.

Employer branding

With the demand for top-tier talent increasing year-on-year, employer branding is a vital strategy to ensure ASML gets its share of this talent. Our strong growth means we need to hire large numbers of employees. Highly skilled people with a technical background are scarce in the labor market and competition is growing. We recognize that top-tier talent select their employer of choice, not the other way around. In light of this general trend for employees to choose their future employer, it is important that a potential employer has a strong value proposition.

Within the recruitment funnel, we continuously seek to raise awareness, consideration and conversion to jobs. We aim to improve and professionalize how we attempt to achieve this by understanding our target audiences and their preferences in an employer. We use this information to improve our candidate experience and drive communications, programs and campaigns which enable our talent acquisition teams to hire top talent with speed.

Onboarding and developing our people

Supporting careers at ASML

Employee engagement

Employee engagement is critical to the performance of our organization and our long-term success as a company.

To measure the degree to which our values are embedded in the organization, the survey also includes questions about our culture and values that go beyond the ‘what’ to the ‘how’.




We want to offer our people the best possible employee experience at all our sites, enabling them to develop their talent, feel respected and work to the best of their abilities.

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Attractive workplace for all (continued)



We support our employees in maintaining a healthy, productive and balanced life.

Working practices and remuneration

Remote working

Well-being

Our offerings include general support for employees, training and masterclasses, well-being events, and physical and mental health checks. In Veldhoven we have a dedicated health & well-being center that provides several health & well-being employee services including an in-house physiotherapist, psychologist, career center, indoor gym, yoga room and a running track. We currently have more than 165 well-being ambassadors globally, and the network is still expanding, helping us to spread well-being across our global organization.

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Attractive workplace for all (continued)

Our targets

Employer brand

We measure our employer brand for the main locations where we operate – the Netherlands, the US, China, Taiwan and South Korea. We measure how ASML is perceived by external audiences – and potential employees in particular – by monitoring our position in an independent external employer-branding ranking.

We have defined targets for our ranking in the different local labor markets by 2025 – the Netherlands top 10, the US top 75, China top 100, Taiwan top 20 and South Korea top 20.

Employee engagement

We want to compare ourselves and grow toward the top performer category. Our target for 2025 is to be within a 2% range of the top 25% performing companies benchmark for our employee engagement survey.

Retention

Our performance in 2022

We hired 7,130 new payroll employees in 2022, compared with 4,373 in 2021, growing our workforce to 37,643 full-time employees (FTEs) at the year end (with a new hires rate of 21%, up from 15% last year). In addition, we employ 1,443 FTEs in our ASML Berlin entity, which is not fully integrated yet in our reporting, which increases our total

workforce to 39,086 FTE. Our workforce has more than doubled since the end of 2015.

Employer brand

During 2022, we were ranked #4 in the Netherlands, #6 in Taiwan, #159 in the US, #188 in China with ranking unavailable in South Korea.

Employee engagement



7,130
New payroll employees in 2022 (4,373 in 2021)

21%
Rate of new hires in 2022 (15% in 2021)

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Attractive workplace for all (continued)

We have seen improvement on all key action topics compared to 2021: clarity of expectations, enabling processes, cross-team collaboration and well-being. Even though we have made good progress, there is still work to do, as these topics are still behind the external benchmark with the exception of well-being, which is 6% above the external norm.

Our workforce trend1


1.The 2020 to 2022 FTEs in the chart above do not include the FTEs acquired through the acquisition of Berliner Glas (ASML Berlin GmbH).

Retention

With an overall attrition rate in 2022 of 6.0%, up from 5.4% in 2021, we are well within our target range and below the industry average in every country in which we operate. We attribute the increase to the effects of the global shortage of employees across many industries, and a booming semiconductor industry that is providing plenty of job opportunities. Nevertheless, we believe that our efforts to create a unique employee experience, our employee engagement programs and our onboarding of new employees are paying off.

Onboarding and developing our people

With our fast-growing global workforce, a positive onboarding experience is vital to building a sense of connection, and helping employees fit in quickly. We measure the quality of this onboarding experience through pulse surveys and, on average, 87% of new hires indicated that they had a positive experience in 2022, with good support from their managers.

Our actions in 2022

Attracting and retaining the best talent

In 2022, travel restrictions were lifted and we were again able to engage in a personal way with students and professionals in our countries, both in person and virtually. There was an increasing focus on living the brand from the inside out, by asking our employees to share their stories on why they join and stay, and supporting these ambassadors in sharing their stories with their networks. This credible way of messaging helps us to target talent within earned media and drive awareness and referrals – a high-quality source of hires.

We continue to research the expectations of our key target audiences in order to match them with who we are as an employer. A big challenge is understanding how expectations have changed since the pandemic, especially in areas such as hybrid working and work – life balance. We recognize that potential employees have a choice, and in the highly competitive global labor market we are challenged to differentiate ourselves even more in the coming years, while retaining the unique culture and values that have helped us get to where we are today.




87% of new hires indicated that they had a positive onboarding experience in 2022, with good support from their managers.

We launched the ASML Academy to ensure our people have the right knowledge and expertise to maintain our technological leadership and the pace of innovation our industry demands. The Academy unites all learning and knowledge management within ASML, enabling our people to easily access the knowledge, skills and expertise they need to perform well in their roles. The launch of our new Learning eXperience Platform (LXP) further enables our people to drive their own development and learn from each other, and intuitively connects them to best-in-class learning content from ASML and external learning content providers.

Overall, we aim to provide the best possible employee experience by ensuring that learning and knowledge management takes place on the job, guided by the 70-20-10 approach for learning: 70% on-the-job learning, 20% coaching and 10% training courses.

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Attractive workplace for all (continued)

Supporting careers at ASML

We have reviewed our whole performance management approach and philosophy to align it better with our culture and values. We worked hard on reshaping our performance management processes and to embedding them in the new tooling, and this went live in January 2022. Our new ‘develop and perform’ methodology allows for both formal and ‘natural’ moments of connection, feedback and recognition to support ongoing development and performance.

Fair pay for our employees

At ASML, we are committed to meeting adequate living-wage requirements, meaning that employees earn salaries that meet their and their families’ basic needs to maintain an adequate standard of life in the circumstances of each country where we operate, but we also provide some discretionary income. Our company has a predominantly highly educated workforce with relatively high levels of remuneration. On average, our salaries are significantly above local living wage.

In 2022, as part of a two-year cycle, we conducted an analysis of how our lowest base salary compared with the local minimum wage and local ‘living wage’ in the countries and regions where we operate. We did not detect any gaps.

Each year, we analyze paid salaries for gender disparity. In 2022, as in previous years, we found no major differences in these salaries.

Action plans for 2022-2025

From the results of the we@ASML engagement score, priority areas have been agreed and will be worked on in the coming year by the departments responsible, which will define actions that address the specific situation and needs of the department. At the moment, we see no reason to adjust our 2025 targets.



			Future ASML CLA

			In the Netherlands, we continue to aim for dispensation from the Metalektro Collective Labor Agreement (CLA) in order to develop our own CLA. Our unique position in the global market, our size and growth as well as our very unique group of employees and the large range of competencies and activities we bring together to deliver our products have created a need for our own approach to labor conditions. The purpose of a future ASML CLA is to offer a set of labor conditions that match the diversity and needs of all our employees.

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Attractive workplace for all (continued)

Enabling strong leadership

Our approach

To remain a market leader, we must provide unified direction based on authentic leadership that gives our people a clear picture of where ASML is heading. This offers great opportunities for all of us to contribute to ASML’s success and make an impact, while also presenting a challenge for our leaders. As our company grows, so does the need for clarity around roles and expectations. Leaders need to play a part here in providing role clarity for employees, as well as being clear about their own roles and responsibilities. We continue to strive to formulate and capture this more clearly so our people can understand what is expected of them.




As our company grows, so does the need for clarity around roles and expectations.

Our actions in 2022

In 2022, we continued deploying behavioral competencies training, coaching programs and a practical guide to inspire and enable personal development. We have leadership programs that fast-track the careers of our most promising managers, for example our Potential Acceleration Program. These programs ensure our managers are aware of what’s expected of them, and help them to develop the skills and competencies they need to become better leaders.

The impacts of these programs are most visible in employees’ responses to our 2022 we@ASML survey, where all four dimensions of our leadership framework were evaluated: 81% of our employees see their manager as a role model, 80% as a coach, 77% as a business leader and 82% as a people leader.

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Attractive workplace for all (continued)

Ensuring employee safety

Our approach

Safety is an integral part of our daily work. More than just a priority, it is central to everything we do. We work to ensure we provide injury-free and healthy working conditions for everyone on our premises by eliminating hazards and reducing safety risks.

Naturally, we follow all government guidelines and safety measures, and where appropriate we go further.

We believe that all work-related injuries and occupational illnesses are preventable. As such, we are working toward a long-term ambition of zero injuries and work-related illnesses.

While it is impossible to completely eradicate risk, we are working proactively at all levels to identify potential issues or concerns in the workplace and develop measures toward reducing them. We do everything we can to minimize risk, and it is our responsibility to provide our people with the right protection, procedures and processes to keep them safe.

Our ongoing ambition is zero recordable incidents, and this drives our continuous improvement in processes, working conditions and employee behavior. To achieve this, we focus on an Environment, Health and Safety (EHS) management system, safety culture and training.

We are committed to a well-established EHS management system. We work to the highest possible professional standards, with continuous improvement as a key principle. Our EHS management system is based on the ISO 45001 standard and complies with its requirements. The EHS reporting system is assessed against the ISO standard as part of its yearly internal audit, although it is not certified or audited by an external party. We have implemented our EHS management system worldwide at our sites and customer services locations. It covers everyone whose workplace is controlled by ASML, including all our employees and other workers not employed by ASML.

Our Corporate EHS Committee, chaired by our Chief Operations Officer, oversees and approves ASML’s EHS strategy. Our line managers are responsible for day-to-day EHS management and performance. Our EHS Competence Center (EHS Experts) brings together best practices, defines the EHS standards for ASML and supports our managers to implement these standards in the workplace.

Our commitment to employee and product safety is captured in our Sustainability Policy, which applies to ASML colleagues worldwide. Our ASML EHS Guide is also an invaluable resource, providing practical, useful and essential information for our employees, contractors and any other parties working for us. The guide, which was redesigned in 2022 to create awareness and ownership, explains our aims and objectives, and clearly describes how employees can contribute to a safe and healthy workplace with minimum impact on the environment.

We record and investigate all incidents and high-risk unsafe situations to determine the root cause and take actions to prevent them from recurring.

EHS Experts conduct regular hazard and risk evaluations, with a focus on preventing employees’ potential exposure to hazards such as chemicals, radiation, mechanical handling and ergonomic risks. These provide us with further insights into the main hazard and risk areas at ASML. We are then able to take appropriate action to mitigate these risks. We also ensure continuous improvement through internal EHS audits. These are complemented by regular ‘Safety Gemba Walks’, where managers visit the employees’ workplace, helping to increase safety performance and strengthen our safety culture.

We have company doctors or external health services available on all our sites.

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Attractive workplace for all (continued)

Our targets

Our performance in 2022

Strengthening our safety culture

Our safety record

Our actions in 2022

sessions that saw many interesting discussions and insights into our safety behaviors.

Action plans for 2022-2025

In response to the increased recordable incident rate in 2022 from 2021, we are deploying a global safety awareness campaign in 2023 for all employees.

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Our supply chain

Setting the bar higher for our world-class supplier network to achieve the innovations we strive for, by ensuring we conduct our business in a sustainable and responsible manner.

€12.4bn

5,000

Total sourcing spend

39% Netherlands

41% EMEA (excl. NL)

13% North America

7% Asia

Total suppliers

1,600 Netherlands

750 EMEA (excl. NL)

1,300 North America

1,350 Asia

59%

% supplier spend covered by commitment to sustainability (LOI) (2025 target: 80%)

IN THIS SECTION

111

Our overall performance in 2022

112

Supplier performance and risk management

113

Responsible supply chain

Our approach

Our supply chain

SDG target

How we measure
our performance

SDG target 8.8

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

•–Compliance with RBA Code of Conduct

•–RBA self-assessment questionnaire completion

•–Suppliers with high risk on sustainability elements evaluated and follow-up agreed

SDG target 12.2 -

By 2030, achieve the sustainable management and efficient use of natural resources

•–~~Promote circular procurement~~Supplier spend covered with commitment to sustainability (LOI)

~~ASML ANNUAL REPORT 2021 91~~

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Our supply chain (continued)



ASML’s supply chain strategy is centered on long-term relationships and close cooperation with our suppliers and partners.



			We require our suppliers to:
			1.Secure materials from their suppliers to enable the output ramp-up for customers 2.Enable our product roadmap through the development and maintenance of best-in-class competencies and capabilities to secure the most advanced technology and fast time-to-market 3.Drive cost reductions, quality and capability improvements through efficient and dedicated operations 4.Build a sufficiently broad customer base and scale to share and spread the risks of volatile market cycles and to increase flexibility and cost competitiveness 5.Make active contributions to our sustainability strategy

To drive a sustainable and resilient supply chain, we place high importance on supplier performance management, supply chain risk management and playing a full part in a responsible supply chain.

We set out our approaches in these areas ('Supplier performance and risk management' and 'Responsible supply chain') over the following pages.

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Our supply chain (continued)

On track or met target •

Ongoing focus area n

~~Corporate governance~~

We endorse the importance of good corporate governance, of which independence, accountability and transparency are the most significant elements. These are also the elements on which a relationship of trust between us and our stakeholders can be built.

~~ASML Holding N.V. is a public limited liability company operating under Dutch law. ASML’s shares are listed on Euronext Amsterdam and NASDAQ.~~

We have a two-tier board structure, consisting of a Board of Management responsible for managing the company, and an independent Supervisory Board which supervises and advises the Board of Management. For the fulfillment of their duties, the two Boards are accountable to the General Meeting, the corporate body representing our shareholders.

Our governance structure is based on ASML’s articles of association, Dutch corporate and securities laws and the Dutch Corporate Governance Code. Because we are listed on NASDAQ, we are also required to comply with applicable provisions of the Sarbanes-Oxley Act, the NASDAQ Listing Rules, and the rules and regulations promulgated by the US Securities and Exchange Commission.

~~We are subject to the relevant provisions of Dutch law applicable to large corporations~~ ~~(structuurregime~~). These provisions have the effect of concentrating control over certain corporate decisions and transactions in the hands of the Supervisory Board. Procedures for the appointment and dismissal of Board of Management and Supervisory Board members are based on the ~~structuurregime~~.

This section of the Annual Report addresses our corporate governance structure and the way ASML applies the principles and best practices of the Dutch Corporate Governance Code. It also provides information required by the Decree adopting further rules related to the content of the management report and the Decree implementing Article 10 of the Takeover Directive.

In accordance with the Dutch Corporate Governance Code (https://www.mccg.nl/english), other parts of this Annual Report address our strategy and culture aimed at long-term value creation, our values and Code of Conduct, as well as the main features of our internal control and risk management systems. ~~Read more in: Who we are and what we do - Our company, Our position in the semiconductor value chain - Our strategy, Our~~overall performance in ~~2021 - How we create value and~~ 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Our supply chain	80%	% supplier spend covered by commitment to sustainability (LOI)	n/a		n/a		59	%	•
	90%	RBA self-assessment completed (in %)	88	%	89	%	93	%	•
	100%	Suppliers with high risk on sustainability elements evaluated and follow-up agreed (in %)	—	%	100	%	100	%	•

For more supply chain performance indicators (PIs) see:

Non-financial statements – Non-financial indicators – Our ~~performance in 2021 - Governance - How we manage risk.~~supply chain.

~~ASML corporate governance structure~~

~~ASML ANNUAL REPORT 2021 93~~

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Our supply chain (continued)

Supplier performance and risk management

Our approach

Supplier performance management

To help us manage ASML’s growth and our future ambitions, we continue to improve our key business processes. Tight risk control and continuous supply chain improvement are key to ensuring quality, long-term business continuity and sustainability.

We have a framework in place to communicate process requirements and compliance expectations to our suppliers. This framework outlines our approach to supplier management and development toward the desired ASML supplier landscape. It also provides an enhanced knowledge base to improve our dialog with suppliers around their performance and development potential. We conduct regular operational and performance review meetings to ensure suppliers continue to improve their performance and processes. When supplier performance drops below the thresholds we set and persistently fails to recover upon request and within a reasonable time frame, ASML’s policy is to take action to secure reliable future supplies.

A structural audit program enables us to assess supply chain risks and identify areas of improvement to mitigate or reduce those risks.

Supply chain risk management

Due to the highly specialized nature of many of our parts and modules, as well as the low volume, it is not always economical to source from more than one supplier. In many instances, our sourcing strategy therefore prescribes ‘single sourcing, dual competence’, which requires us to proactively manage supplier performance and risk.

In our risk management framework, we assess six risk domains – calamity, ownership, finance, intellectual property ownership, information security and compliance. Since suppliers operating in the same industry or market are typically exposed to similar risks, we evaluate suppliers’ risk and performance within the context of their supply market category. We will adjust our category strategies where required to meet ASML’s short- and long-term business needs. In cases where risk exceeds the agreed threshold, mitigation measures are taken. For example, we have long-term supplier agreements (LTSAs) and/or continuous supply agreements in place, or ensure the availability of intellectual property in escrow.

Read more in:

Risk - How we manage ris k.

Our performance and actions in 2022

We conduct continuous performance and risk management of our supply base to assuring and improving performance, and preventing reputational damage. Two key programs to this process: a suppliers' business continuity program aimed at securing continuity of supply and suppliers’ information security; and an information security and cyber resilience program intended to protect our intellectual property and maintain our leading technology position.

Business continuity program

Information security and cyber resilience program

Suppliers with access to top-secret information or with privileged access to our IT systems were asked to raise their cyber resilience through the ISO 27001 standard. To support our suppliers and other ecosystem partners in this effort, we established a Security Circle of Trust together with Cyber Weerbaarheid (resilience) Brainport in the Netherlands.



We conduct continuous performance and risk management of our supply base to assure and improve performance, and prevent reputational damage.

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Our supply chain (continued)

Responsible supply chain

Our approach

We are a member of the Responsible Business Alliance (RBA) and have adopted the RBA Code of Conduct.

Due diligence

With almost 5,000 Tier 1 (direct) suppliers in our supplier base, it is important for us to identify and prioritize suppliers at risk. We apply a risk-based approach to determine which suppliers are in scope for our more detailed due diligence process, which consists of three layers:

–Determine inherent risk level by screening our full supplier base on ethics, labor, health and safety and environment risk using the RBA Risk Platform.

–Apply supplier risk profiling to business-critical suppliers. For these suppliers we conduct risk assessment of QLTCS capability elements.

–Apply an RBA self-assessment questionnaire (SAQ) to major suppliers, in which we consider the type of supplier, leverage and geographical location of the supplier. We focus on our product-related suppliers covering 80% of our annual spend, business-critical suppliers including non-product-related suppliers, and suppliers deemed high risk from our annual RBA risk screening.

~~Board~~Enterprise Risk Management

Our ERM framework enables a well-defined governance structure and a robust ERM process. The Risk and Business Assurance function drives the ERM process and associated activities across ASML. We follow a systematic approach to identify, manage and monitor risks in pursuit of ~~Management~~our business objectives by setting standards and enabling management to maintain and continuously improve our governance, risk management, internal control and compliance. The framework also helps to identify opportunities that allow us to achieve our objectives and enable long-term sustainable growth.

~~ASML’s Board~~




The purpose of risk management is to maximize the probability of achieving business objectives responsibly.”
Geert Beullens
VP Risk and Business Assurance

ERM is a continuous process. Its related activities are periodically repeated to identify and address risks in a timely fashion, and ensure that its results are relevant for decision-making purposes. Our Vice President of ~~Management~~Risk and Business Assurance reports to the CFO and Audit Committee, and is responsible for ~~managing ASML. Its responsibilities include establishing a position on~~leading the ~~relevance~~development and maintenance of ~~long-term value creation~~the ERM framework as well as for ~~ASML~~the implementation of the ERM process. We have adopted the ISO 31000:2018 standard as the basis for our ERM activities. In addition, the Vice President of Risk and ~~its business, defining~~Business Assurance is responsible for leading the security and ~~deploying ASML’s strategy, establishing~~internal control function and for developing and maintaining ~~effective risk~~the compliance process.

Risk management and control systems, managing the realization of ASML’s operational and financial objectives and the corporate social responsibility aspects relevant to ASML. In fulfilling its management tasks and responsibilities, the Board of Management is guided by the interests of ASML and its business and takes into consideration the interests of our stakeholders.governance structure

The current Board of Management is comprised of five members. It has a dual leadership structure, under the chairmanship of the President and Chief Executive Officer, and the vice chairmanship of the President and Chief Technology Officer. The Board of Management has adopted a division of tasks, charging individual members with a specific part of the managerial tasks, but the Board of Management remains collectively responsible for the management of ASML.

The Board of Management is supervised and advised by the Supervisory Board. The Board of Management provides the Supervisory Board with all the information, in writing or otherwise, necessary for the Supervisory Board to properly carry out its duties. Besides the information provided in the regular meetings, the Board of Management provides the Supervisory Board with regular updates on developments relating to our business, financials, operations, and industry developments in general. Certain important decisions of the Board of Management require the approval of the Supervisory Board, see the Supervisory Board section of this Corporate Governance chapter.

Further information regarding the general responsibilities of the Board of Management, the relationship with the Supervisory Board and various stakeholders, the decision-making process within the Board of Management, and the logistics surrounding the meetings can be found in the Board of Management’s rules of procedure. These are published in the Governance section on our website.

~~Appointments~~

~~In line with Dutch law, all members of the Board of Management are engaged by means of a management services agreement for the duration of their appointment.~~

The management services agreements between ASML and the Board of Management members contain specific provisions regarding severance payments. If ASML terminates the agreement for reasons which are not exclusively or mainly found in acts or omissions of the Board of Management member, a severance payment not exceeding one year’s base salary will be paid. Furthermore, current agreements stipulate that a member of the Board of Management, when giving notice of termination pursuant to a change of control, will be entitled to a severance amount. Given that such a resignation is specifically linked to a change of control, ASML does not consider this provision a deviation from the Dutch Corporate Governance Code.

~~The Supervisory Board may suspend and dismiss members of the Board of Management, but this can only be done after consulting the General Meeting.~~

~~More information about changes to the Board of Management during 2021 can be found in the Supervisory Board Report included in this Annual Report.~~

~~Peter T.F.M. Wennink (1957, Dutch)~~

~~President, Chief Executive Officer and Chair of Board of Management~~

~~Term expires 2022~~

~~ASML ANNUAL REPORT 2021 94~~

Supervisory Board

Audit Committee

Request to investigate specific risk topics

–Bi-annual risk review

–Risk topics feedback

–Assertion on control effectiveness

–Quarterly progress reporting

Board of Management

Corporate Risk Committee (CRC)
Risk oversight

Disclosure Committee
Internal Control Committee

–Risk appetite

–Risk management policy

–CRC sub committees (governance)

–Risk assessment results

–Risk response progress

–Incidents

–Control effectiveness

Risk owners

Peter Wennink became President and CEO in 2013, having served as Executive VP, CFO and member of the Board of Management since 1999. Peter was previously a partner at Deloitte Accountants, focusing on the semiconductor industry. He has an extensive background in finance and is a member of the Dutch Institute of Registered Accountants. Peter was a member of the Advisory Board of the Investment Committee of Stichting Pensioenfonds ABP until December 31, 2021. He serves as vice-chairman on the board of the FME-CWM, Peter is also a member of the board of Captains of Industry Eindhoven Region and is Chair of the Eindhovensche Fabrikantenkring and of the Supervisory Board of the Eindhoven University of Technology. Furthermore, Peter is council member of Topconsortium voor 'Kennis en Innovatie' TKI HTS&M, member of the Advisory Committee of the Dutch National Growth Fund and a member of the Circle of Influence of Startup Delta.

~~Martin A. van den Brink (1957, Dutch)~~

~~President, Chief Technology Officer and Vice Chair of Board of Management~~

~~Term expires 2022~~

Martin van den Brink has been President and CTO of ASML since 2013. He joined ASML at its founding in 1984, and for the next 11 years held various positions in engineering. In 1995 he became Vice President Technology, and in 1999 was appointed Executive Vice President Product & Technology and member of the Board of Management. Martin holds a degree in Electrical Engineering from HTS Arnhem (HAN University), as well as a degree in Physics (1984) from the University of Twente. In 2012, the University of Amsterdam awarded him an honorary doctorate in physics.

~~Roger J.M. Dassen (1965, Dutch)~~

~~Executive Vice President and Chief Financial Officer~~

~~Term expires 2022~~

Roger Dassen joined ASML in June 2018 and was appointed Executive Vice President and CFO and member of the Board of Management at the AGM the same year. He previously served as Global Vice Chair and member of the Executive Board of Deloitte Touche Tohmatsu Limited, having been CEO of Deloitte Holding B.V. Roger holds a master’s in Economics and Business Administration, a post-master’s in Auditing, and a PhD in Business Administration, all from the University of Maastricht. He is Professor of Auditing at Vrije Universiteit Amsterdam, and sits on the Supervisory Board of the Dutch National Bank. He is also the Chair of the Supervisory Board of Maastricht University Medical Center+.

~~ASML ANNUAL REPORT 2021 95~~

~~Christophe D. Fouquet (1973, French)~~

~~Executive Vice President EUV~~

~~Term expires 2022~~

Christophe Fouquet was appointed Executive Vice President EUV and member of the Board of Management in 2018. Since joining ASML in 2008, he has held several positions, including Senior Director Marketing, Vice President Product Management, and Executive Vice President Applications, a position he held from 2013 until 2018. Prior to joining ASML, he worked for semiconductor equipment peers KLA Tencor and Applied Materials. Christophe holds a master’s degree in Physics from the Institut Polytechnique de Grenoble.

~~Frédéric J.M. Schneider-Maunoury (1961, French)~~

~~Executive Vice President and Chief Operations Officer~~

~~Term expires 2022~~

Frédéric Schneider-Maunoury has been Executive Vice President and Chief Operations Officer since he joined ASML in 2009. He was appointed to the Board of Management in 2010. Prior to joining ASML, Frédéric was Vice President Thermal Products Manufacturing at power generation and rail transport equipment group Alstom, having previously served as General Manager of the worldwide Hydro Business of Alstom. Before joining Alstom, Frederic held various positions at the French Ministry of Trade and Industry. He is a graduate of Ecole Polytechnique (1985) and Ecole Nationale Supérieure des Mines (1988) in Paris.

~~ASML ANNUAL REPORT 2021 96~~

~~Supervisory Board~~

Our Supervisory Board supervises the Board of Management and the general course of affairs of ASML and its subsidiaries. The Supervisory Board also supports the Board of Management with advice. In fulfilling its role and responsibilities, the Supervisory Board takes into consideration the interests of ASML and its subsidiaries, as well as the relevant interests of its stakeholders. In the two-tier structure, the Supervisory Board is a separate and independent body from the Board of Management and from ASML. No member of the Supervisory Board personally maintains a business relationship with ASML, other than as a member of the Supervisory Board.

~~The Supervisory Board currently consists of eight members, with the minimum being three.~~

In performing its task, the Supervisory Board focuses on, inter alia, ASML’s corporate strategy aimed at long-term value creation and the execution thereof, the staffing of and succession planning for the Board of management, the management of risks inherent to ASML's business activities, the financial reporting process, compliance with applicable legislation and regulations, ASML’s culture and the activities of the Board of Management in that regard, the relationship with shareholders and other stakeholders, and corporate social responsibility issues important for ASML.

Important management decisions, such as setting the operational and financial objectives, the strategy designed to achieve these objectives and the parameters to be applied in relation thereto, major investments, budget and the issue, repurchase and cancellation of shares, require the Supervisory Board’s approval.

The Supervisory Board is governed by its rules of procedure. Items covered in these rules include the responsibilities of the Supervisory Board and its committees, the composition of the Supervisory Board and its committees, logistics surrounding the meetings, the meeting attendance of members of the Supervisory Board, the rotation schedule for these members and the Committee charters. The Supervisory Board’s rules of procedure and the committee charters are regularly reviewed and, if needed, amended. The Audit Committee charter is reviewed annually to confirm that the charter still complies with applicable rules and regulations, especially those relating to the Sarbanes-Oxley Act.

~~Read more information on the meetings and activities of the Supervisory Board in 2021 in: Supervisory Board - Supervisory Board report - Meetings and attendance.~~

~~Appointments~~

The members of the Supervisory Board are appointed by the General Meeting based on binding nominations proposed by the Supervisory Board. When nominating persons for (re)appointment, the Supervisory Board checks whether the candidates fit the Supervisory Board's profile. The profile is available in the Governance section of our website. The General Meeting may reject binding nominations of the Supervisory Board by way of a resolution adopted with an absolute majority of the votes cast, representing at least one-third of ASML’s outstanding share capital. If the votes cast in favor of such a resolution do not represent at least one-third of the total outstanding capital, a new shareholders’ meeting can be convened, at which the nomination can be overruled by an absolute majority.

The Supervisory Board generally informs the General Meeting and the Works Council about upcoming retirements by rotation at the Annual General Meeting of Shareholders (AGM) in the year preceding the actual retirement(s) by rotation. This ensures they have sufficient opportunity to recommend candidates for the upcoming vacancies. The Supervisory Board has the right to reject the proposed recommendations. Furthermore, the Works Council has an enhanced right to make recommendations for one-third of the members of the Supervisory Board. This enhanced recommendation right implies that the Supervisory Board may only reject the Works Council’s recommendations in limited circumstances: (i) if the relevant person is unsuitable or (ii) if the Supervisory Board would not be duly composed if the recommended person were appointed as Supervisory Board member.

Members of the Supervisory Board serve for a maximum term of four years or a shorter period as per the Supervisory Board’s rotation schedule. Supervisory Board members are eligible for reappointment for another maximum term of four years. After that, members may be reappointed again for a maximum period of two years. This appointment may be extended for a final term of no more than two years. The rotation schedule is available in the Governance section on our website.

If the General Meeting loses confidence in the Supervisory Board, it may, by an absolute majority of the votes representing at least one-third of the total outstanding capital, withdraw its confidence in the Supervisory Board. This resolution shall result in the immediate dismissal of the entire Supervisory Board. In such case, the Enterprise Chamber of the Amsterdam Court of Appeal shall appoint one or more members to the Supervisory Board at the request of the Board of Management.

~~Supervisory Board committees~~

The Supervisory Board, while retaining overall responsibility, has assigned some of its tasks and responsibilities to four committees: the Audit Committee, the Remuneration Committee, the Selection and Nomination Committee and the Technology Committee. Further information on the Supervisory Board committees can be found in the Supervisory Board report and in the charters of the committees as posted on our website.

~~ASML ANNUAL REPORT 2021 97~~

~~Gerard J. Kleisterlee (1946, Dutch)~~

~~Member of the Supervisory Board since 2015; second term expires in 2023~~

~~Chair of the Supervisory Board, Chair of the Selection and Nomination Committee and member of the Technology Committee~~

Gerard Kleisterlee joined the Supervisory Board in 2015, and has been its Chair since 2016. He was President and CEO of the Board of Management of Royal Philips NV from 2001 until 2011, having worked at the company since 1974. From 2011 to 2022 Gerard was the Chairman of the Board of Vodafone Group Plc. From 2010 until May 2020, he was a Non-Executive Director of Royal Dutch Shell Plc. Currently, Gerard is an independent board member at IBEX Limited.

~~Antoinette (Annet) P. Aris (1958, Dutch)~~

~~Member of the Supervisory Board since 2015; third term expires in 2024~~

~~Vice Chair of the Supervisory Board since 2021, Member of Remuneration Committee, Technology Committee and Selection and Nomination Committee~~

Annet Aris has been a member of the Supervisory Board since 2015. She is Senior Affiliate Professor of Strategy at INSEAD business school, France, a position she has held since 2003. From 1994 to 2003 she was a partner at McKinsey & Company in Germany and until 2019 she was the Non-Executive Director of Thomas Cook Group. She also sits on the supervisory boards of Jungheinrich AG, Randstad Holding NV and the Cooperatieve Rabobank U.A.

~~Johannes (Hans) M.C. Stork (1954, American)~~

~~Member of the Supervisory Board since 2014; second term expires in 2022~~

~~Member of the Technology Committee and the Remuneration Committee~~

~~ASML ANNUAL REPORT 2021 98~~

Hans Stork joined the Supervisory Board in 2014. He is Senior Vice President and CTO of ON Semiconductor Corporation, a position he has held since 2011. Prior to that, Hans held a range of senior positions, including Senior Manager at IBM Corporation, Director of ULSI Research Lab at Hewlett Packard Company, Senior Vice President and CTO of Texas Instruments, Inc and Group Vice President and CTO of Applied Materials, Inc. He has also been a member of the Board of Sematech, and currently sits on the Scientific Advisory Board of imec.

~~Mark. M.D. Durcan (1961, American)~~

~~Member of the Supervisory Board since 2020; first term expires in 2024~~

~~Chair of the Technology Committee, member of the Selection and Nomination Committee~~

Mark Durcan was appointed as a member the Supervisory Board in 2020. From 2012 to 2017, he was CEO of Micron Technology, Inc, having joined the company in 1984, and held various management positions before being appointed as CEO. Furthermore, Mark was director at Freescale Semiconductor and MWI Veterinary Supply. Mark is a Non-Executive Director at Advanced Micro Devices, Inc and Veoneer, a member of the board of AmerisourceBergen Corporation, member of the Board of Trustees for Rice University (Texas), director at St. Luke's Health System (Idaho) and Director at Natural Intelligence Systems CA private AI. Startup Company.

~~Terri L. Kelly (1961, American)~~

~~Member of the Supervisory Board since 2018; first term expires in 2022~~

~~Chair of the Remuneration Committee, member of the Selection and Nomination Committee~~

Terri Kelly has been a member of the Supervisory Board since 2018. Previously, she was President and Chief Executive Officer at W.L. Gore & Associates from 2005 until 2018, having worked at Gore since 1983 in various management roles. She also served on Gore’s Board of Directors through July 2018. Terri is a Trustee of the Nemours Foundation, Vice-Chair of the University of Delaware, and a Trustee of the Unidel Foundation. She is also a member of the Board of Directors of United Rentals, Inc.

~~ASML ANNUAL REPORT 2021 99~~

~~Rolf-Dieter Schwalb (1952, German)~~

~~Member of the Supervisory Board since 2015; second term expires in 2023~~

~~Chair of the Audit Committee and member of the Remuneration Committee~~

Rolf-Dieter Schwalb has been a member of the Supervisory Board since 2015. He was CFO and member of the Board of Management of Royal DSM NV from 2006 to 2014. Prior to that, he was CFO and member of the Executive Board of Beiersdorf AG. He also held a variety of management positions in Finance, IT and Internal Audit at Beiersdorf AG and Procter & Gamble Co.

~~Warren D.A. East (1961, British)~~

~~Member of the Supervisory Board since 2020; first term expires in 2024~~

~~Member of the Audit Committee~~

Warren East became a member of the Supervisory Board in 2020. Warren has been CEO of Rolls-Royce Group Plc since 2015. He spent his early career at Texas Instruments Ltd from 1985 to 1994. He then joined ARM Holdings, Plc, where he held various management positions and was appointed as its CEO from 2001 to 2013.

~~Birgit Conix (1965, Belgian)~~

~~Member of the Supervisory Board since 2021; first term expires in 2025~~

~~Member of the Audit Committee~~

Birgit Conix became a member of the Supervisory Board in 2021. Birgit has been CFO and a member of the Management Board of Sonova Holding AG since June 2021. From 2018 until January 1, 2021, Birgit was a member of the Executive Board and CFO of TUI AG. Prior to that, she was the CFO of the Belgian media, cable and telecommunications company Telenet Group NV. Prior to that, she held various management positions in finance at Johnson & Johnson, Heineken, Tenneco and Reed Elsevier.

~~ASML ANNUAL REPORT 2021 100~~

~~Other Board-related matters~~

~~The section below addresses a number of topics that apply to both the Board of Management and the Supervisory Board.~~

~~Remuneration and share ownership~~

The remuneration of the Board of Management is determined by the Supervisory Board, on recommendation of the Remuneration Committee, in accordance with the Remuneration Policy adopted by the General Meeting. The current Remuneration Policy was adopted by the General Meeting in 2021.

The remuneration of the Supervisory Board is based on the Remuneration Policy. The current Remuneration Policy was adopted by the General Meeting in 2021. The remuneration of the Supervisory Board is not dependent on our (financial) results. The members of the Supervisory Board do not receive ASML shares, or rights to acquire ASML shares, as part of their remuneration.

Board of Management and Supervisory Board members who acquire or have acquired ASML shares or rights to acquire ASML shares must intend to keep these for long-term investment only. In concluding transactions in ASML shares, members of the Board of Management and the Supervisory Board must comply with our Insider Trading Rules. Any transactions in ASML shares performed by members of the Board of Management and the Supervisory Board are reported to the Dutch AFM. No member of the Supervisory Board currently has any ASML shares or rights to acquire ASML shares.

~~We will not and have not granted any personal loans, guarantees, or the like to members of the Board of Management and the Supervisory Board.~~

Our Articles of Association provide for the indemnification of the members of the Board of Management and the Supervisory Board against claims that are a direct result of their tasks, provided that such claims are not attributable to willful misconduct or intentional recklessness of the respective member. We have also implemented the indemnification of the members of the Board of Management and the Supervisory Board by means of separate indemnification agreements for each member.

~~Detailed information on the Board of Management’s and the Supervisory Board’s remuneration can be found in Supervisory Board - Remuneration report.~~

~~Diversity~~

On August 6, 2021, the US Securities and Exchange Commission approved the Nasdaq Stock Market’s proposal to amend its listing standards to encourage greater board diversity and to require board diversity disclosures for Nasdaq-listed companies. Pursuant to the amended listing standards, ASML, as a foreign private issuer, is required to have at least two diverse Supervisory Board members or explain the reasons for not meeting this objective. Furthermore, a Board diversity matrix is required to be included in the Annual Report on Form 20-F, containing certain demographic and other information regarding members of the Supervisory Board. ASML currently complies with the diversity requirement, as we currently have three female and five male members on our Supervisory Board. The Board diversity matrix is set out below.

~~Board Diversity Matrix (status per December 31, 2021)~~

~~Country of Principal Executive Offices~~

~~The Netherlands~~

~~Foreign Private Issuer~~

~~Yes~~

~~Disclosure Prohibited under Home Country Law~~

~~Total Number of Supervisory Board members~~

~~8 (2020: 9)~~

~~Female~~

~~Male~~

~~Non-Binary~~

~~Did Not Disclose~~

~~Part I: Gender Identity~~

~~Directors~~

~~3 (2020: 3)~~

~~5 (2020: 6)~~

~~0 (2020: 0)~~

~~Part II: Demographic Background~~

~~Underrepresented Individual in Home Country Jurisdiction~~

~~0 (2020: 0)~~

~~LGBTQI+~~

~~0 (2020: 0)~~

~~Did Not Disclose Demographic Background~~

~~0 (2020: 0)~~

On September 28, 2021, a gender diversity bill was adopted by Dutch Parliament, introducing a quota for the supervisory boards of Dutch listed companies pursuant to which the composition of the supervisory board should comprise at least one-third of both men and women. New appointments will be declared null and void in the event of non-compliance with this requirement. Also, the bill introduced a requirement to set ambitious gender balance targets for boards of management and senior management of large listed and non-listed Dutch NVs and BVs. This gender diversity bill has entered into force on January 1, 2022. Annually, as of the 2022 reporting year, companies will have to report on their progress made in achieving the gender balance targets to the Dutch Social and Economic Council and in the management report.

Currently, the Supervisory Board meets the gender criterion of the Dutch gender diversity bill, since both men and women are represented in the Supervisory Board with at least three out of eight members.

~~ASML ANNUAL REPORT 2021 101~~

We recognize the importance of diversity and inclusion: a diverse and inclusive workforce provides the necessary mix of voices and points of view required to continue to innovate and drive our business forward. Ensuring balanced gender representation has proven to be challenging in a technology environment such as the one ASML operates in. Overall, the global STEM (science, technology, engineering and math) talent pool is scarce and it is even more challenging to recruit female talent. Our R&D workforce is 15% female. Nearly 90% of job positions are STEM related, while peers in the high-tech industry have more diverse, non-STEM related job positions. ASML is highly motivated to see more women pursuing careers in engineering and science now and in the future, thereby increasing our future talent pool, so that more women will be available in the future for technical positions and (senior) management positions, including the Board of Management. The highly-specialized nature of our industry means achieving this balance is a long-term process. We are actively engaged with multiple educational programs to grow the pipeline, deploy multiple initiatives to promote STEM education among the future female talent pool and continue to foster an environment where on our current workforce can thrive.

Since 2020, we have been developing and formalizing our approach to diversity and inclusion. We assembled a Global Diversity & Inclusion Council in 2021 that consists of senior leaders who act on behalf of ASML to provide thought leadership. The Council, chaired by a member of the Board of Management, creates strategic accountability for results, provides governance and oversight on diversity and inclusion initiatives, and promotes company-wide accountability to goals. Our diversity and inclusion strategy includes the following:

•~~Engaging a larger talent pool by making opportunities more visible and accessible~~

•~~Creating shared metrics to more clearly evaluate progress~~

•~~Ensuring inclusive leadership behaviors are embedded in our culture~~

•~~Including diverse perspectives in our talent practices~~

•~~Providing employees more ways to engage and drive their careers~~

~~Conflicts of interest and related party transactions~~

Conflicts of interest procedures are incorporated in both the Board of Management’s and the Supervisory Board’s rules of procedure. These procedures reflect Dutch law and the principles and best practice provisions of the Code with respect to conflicts of interest.

There have been no transactions in 2021, nor are there currently any transactions, between ASML or any of ASML’s subsidiaries, or any significant shareholder and any member of the Board of Management, officer, Supervisory Board member or any relative or spouse thereof, other than ordinary course compensation arrangements. Furthermore, ASML has not granted any personal loans, guarantees, or the like to members of the Board of Management or Supervisory Board.

~~Outside positions~~

Pursuant to Dutch legislation, a member of the Board of Management may not be a Supervisory Board member in more than two other large companies or large foundations, as defined in Dutch law. A member of the Board of Management may never be the Chairperson of a Supervisory Board of a large company. Board of Management members require prior approval from the Supervisory Board before accepting a position of another large company or foundation. Members of the Board of Management are also required to notify the Supervisory Board of other important functions held or to be held by them.

~~ASML ANNUAL REPORT 2021 102~~

Dutch law stipulates that a Supervisory Board member may not hold more than five Supervisory Board positions in large companies or large foundations as defined in Dutch law, with chairmanships counting double.

~~During the financial year 2021, all members of the Board of Management and the Supervisory Board complied with the requirements described above.~~

~~General Meeting~~

A General Meeting (AGM) is held at least once a year and generally takes place in Veldhoven, the Netherlands. However, due to the COVID-19 pandemic and in accordance with the Temporary Act COVID-19 Justice and Safety, in 2021 the AGM was held fully virtually. The agenda for the AGM typically includes the following topics:

•~~Discussion of the management report and the adoption of the financial statements over the past financial year;~~

•~~Discussion of the dividend policy and approval of any proposed dividends;~~

•~~Advisory vote on the Remuneration Report over the past financial year;~~

•~~The discharge from liability of the members of the Board of Management and the Supervisory Board for the performance of their responsibilities in the previous financial year;~~

•The limited authorization for the Board of Management to issue (rights to) shares in ASML’s capital, and to exclude preemptive rights for such issuances, as well as to repurchase shares and to cancel shares; and

•~~Any other topics proposed by the Board of Management, the Supervisory Board or shareholders in accordance with Dutch law and the articles of association.~~

Proposals placed on the agenda by the Supervisory Board, the Board of Management, or by shareholders, provided that they have submitted the proposals in accordance with the applicable legal provisions, are discussed and resolved upon. Shareholders representing at least 1.0% of ASML’s outstanding share capital or representing a share value of at least €50 million are entitled to place items on the agenda of a General Meeting at the latest 60 days before the date of the meeting.

Extraordinary general meetings may be held when considered necessary by the Supervisory Board or Board of Management. In addition, an extraordinary general meeting must be held if one or more ordinary or cumulative preference shareholders, who jointly represent at least 10% of the issued share capital, make a written request to that effect to the Supervisory Board and the Board of Management. The request must specify in detail the business to be dealt with.

Shareholders’ meetings are convened by public announcement via the website of ASML no later than 42 days prior to the meeting, as stipulated by Dutch law. The record date is set at the 28th day prior to the day of the AGM. Persons who are registered as shareholders on the record date are entitled to attend the meeting and to exercise other shareholder rights.

The Board of Management and Supervisory Board provide the shareholders with the information relevant to the topics on the agenda by means of an explanation to the agenda and other documents necessary or helpful for this purpose. The agenda indicates which agenda items are voting items, and which items are for discussion only. All documents related to the General Meeting, including the agenda with explanations, are posted on our website.

ASML shareholders may appoint a proxy who can vote on their behalf at the AGM. We also use an internet proxy voting system, facilitating shareholder participation without having to attend in person. We also provide the option for shareholders to issue voting proxies or voting instructions to an independent civil law notary prior to the AGM. We do not solicit from or nominate proxies for our shareholders.

~~Virtual AGM~~

In view of the COVID-19 pandemic, we organized a fully virtual AGM in 2021, accommodating virtual attendance of the AGM by enabling shareholders to follow the proceedings of the meeting via video webcast and to vote electronically during the meeting. The opportunity to participate in the AGM virtually was offered in addition to the opportunity to vote in advance via written or electronic proxy. As we highly value the interaction with our shareholders, we invited shareholders to submit questions about the agenda items prior to the AGM and we provided holders of shares traded on Euronext Amsterdam the opportunity to ask live questions in writing through the virtual meeting platform or verbally via a video connection. We received a total of 19 questions before and during the meeting. All questions were answered during the AGM.

~~ASML ANNUAL REPORT 2021 103~~

Resolutions are adopted by the General Meetings by an absolute majority of the votes cast (except where a different proportion of votes are required by the Articles of Association or Dutch law), and there are generally no quorum requirements applicable to such meetings.

Voting results from the AGM are made available on our website within 15 days of the meeting. The draft report of the AGM is made available on our website or on request no later than three months after the meeting. Shareholders have the opportunity to provide comments in the subsequent three months, after which the report is adopted by the Chairman and the Secretary of the meeting. The adopted report is also available on our website and on request.

~~Powers~~

~~In addition to the items submitted annually at the AGM, the General Meeting also has other powers, with due observance of the statutory provisions. These include resolving:~~

•~~To amend the articles of association;~~

•~~To issue shares if and insofar as the Board of Management has not been designated by the General Meeting for this purpose; and~~

•~~To adopt the Remuneration Policies for the members of the Board of Management and the Supervisory Board.~~

(Proposed) amendments of the Articles of Association require the approval of the Supervisory Board. A quorum requirement applies for the General Meeting at which an amendment of the Articles of Association is proposed: more than half of the issued share capital is required to be represented; the proposal requires a voting majority of at least three-fourths of the votes cast. If the quorum requirement is not met, a subsequent General Meeting shall be convened, to be held within four weeks of the first meeting. At this second meeting, the resolution can be adopted with at least three-fourths of the votes cast, irrespective of the share capital represented. If a resolution to amend the Articles of Association is proposed by the Board of Management, the resolution will be adopted with an absolute majority of votes cast irrespective of the represented share capital at the General Meeting.

A brief summary of the most significant provisions of our Articles of Association is included as Exhibit 99.1 to our form 6-K furnished to the SEC on February 8, 2013 (the ‘Articles of Association’), which is incorporated by reference herein.

~~Share capital~~

~~ASML's authorized share capital amounts to €126.0 million and is divided into:~~

Type of shares Amount of shares Nominal value Votes per share
Cumulative preference shares 700,000,000 €0.09 per share 9
Ordinary shares 699,999,000 €0.09 per share 9
Ordinary shares B 9,000 €0.01 per share 1

~~ASML ANNUAL REPORT 2021 104~~

~~The issued and fully paid up ordinary shares with a nominal value of~~ ~~€0.09~~ ~~each were as follows:~~

Year ended December 31 2019 2020 2021
Issued ordinary shares with nominal value of €0.09 419,810,706 416,514,034 402,601,613
Issued ordinary treasury shares with nominal value of €0.09 5,848,998 2,983,454 3,873,663
Total issued ordinary shares with nominal value of €0.09 425,659,704 419,497,488 406,475,276

82,915,935 ordinary shares were held by 286 registered holders with a registered address in the US. Since certain of our ordinary shares were held by brokers and nominees, the number of record holders in the US may not be representative of the number of beneficial holders, or of where the beneficial holders are resident.

~~Each ordinary share consists of~~ ~~900~~ fractional shares. Fractional shares entitle the holder thereof to a fractional dividend, but do not give entitlement to voting rights. Only those persons who hold shares directly in the share register in the Netherlands, held by us at our address at 5504 DR Veldhoven, de Run 6501, the Netherlands, or in the New York share register, held by JP Morgan Chase Bank, N.A., P.O. Box 64506, St. Paul, MN 55164-0506, United States, can hold fractional shares. Shareholders who hold ordinary shares through the deposit system under the Dutch Securities Bank Giro Transactions Act maintained by the Dutch central securities depository Euroclear Nederland or through the Depository Trust Company cannot hold fractional shares.

~~No ordinary shares B and no cumulative preference shares have been issued.~~

~~Special voting rights, limitation voting rights and transfers of shares~~

~~There are no special voting rights on the issued shares in our share capital.~~

In 2012, we issued shares to three key customers – Intel, TSMC and Samsung – as part of the customer co-investment program (CCIP) to accelerate ASML’s development of EUV. Under this program, the participating customers funded certain development programs and invested in ASML’s ordinary shares. Currently, only one participating customer still holds (directly or indirectly) ordinary shares. Certain voting restrictions apply in respect of ordinary shares issued in connection with the CCIP. These voting restrictions in respect of these ordinary shares are set out in the underlying agreement between ASML and the relevant customer. T~~he shares issued in the CCIP were held by foundations which issued depository receipts to participants in the CCIP. A total of 96,566,077~~ ~~depository receipts for ordinary shares were issued at the launch of the CCIP. This number has since decreased with the sell-down by the relevant customers following expiry of the lock-up.~~

There are currently no limitations, either under Dutch law or in ASML’s Articles of Association, on the transfer of ordinary shares in the share capital of ASML. Pursuant to ASML’s Articles of Association, the Supervisory Board’s approval shall be required for every transfer of cumulative preference shares.

~~Issue and repurchase of (rights to) shares~~

Our Board of Management has the power to issue ordinary shares and cumulative preference shares insofar as it has been authorized to do so by the General Meeting. The Board of Management requires approval of the Supervisory Board for such an issue. The authorization by the General Meeting can only be granted for a certain period not exceeding five years and may be extended for no longer than five years on each occasion. If the General Meeting has not authorized the Board of Management to issue shares, the General Meeting will be authorized to issue shares on the Board of Management’s proposal, provided that the Supervisory Board has approved such proposal.

Holders of ASML’s ordinary shares have a preemptive right, in proportion to the aggregate nominal amount of the ordinary shares held by them. This preemptive right may be restricted or excluded. Holders of ordinary shares do not have preemptive right with respect to any ordinary shares issued for consideration other than cash or ordinary shares issued to employees. If authorized for this purpose by the General Meeting, the Board of Management has the power, subject to approval of the Supervisory Board, to restrict or exclude the preemptive rights of holders of ordinary shares.

~~2021 authorization to issue shares~~

At our 2021 AGM, the Board of Management was authorized from April 29, 2021 through October 29, 2022, subject to the approval of the Supervisory Board, to issue shares and / or rights thereto representing up to a maximum of 5% of our issued share capital at April 29, 2021, plus an additional 5% of our issued share capital at April 29, 2021 that may be issued in connection with mergers, acquisitions and / or (strategic) alliances. Our shareholders also authorized the Board of Management through October 29, 2022, subject to approval of the Supervisory Board, to restrict or exclude preemptive rights with respect to holders of ordinary shares up to a maximum of 5% of our issued share capital in connection with the general authorization to issue shares and/ or rights to shares, plus an additional 5% in connection with the authorization to issue shares and/ or rights to shares in connection with mergers, acquisitions and / or (strategic) alliances.

We may repurchase our issued ordinary shares at any time, subject to compliance with the requirements of Dutch law and our Articles of Association. Any such repurchases are subject to the approval of the Supervisory Board and the authorization by the General Meeting, which authorization may not be for more than 18 months.

~~2021 authorization to repurchase shares~~

~~ASML ANNUAL REPORT 2021 105~~

At the 2021 AGM, the Board of Management was authorized, subject to Supervisory Board approval, to repurchase through October 29, 2022, up to a maximum of two times 10% of our issued share capital at April 29, 2021, at a price between the nominal value of the ordinary shares purchased and 110% of the market price of these securities on Euronext Amsterdam or NASDAQ.

~~Read more details on our share buyback program in: Consolidated Financial Statements - Notes to the Consolidated Financial Statements - Note 22 Shareholders’ equity.~~

~~ASML Preference Shares Foundation~~

The ASML Preference Shares Foundation (Stichting Preferente Aandelen ASML), a foundation organized under Dutch law, has been granted an option right to acquire preference shares in the share capital of ASML. The Foundation may exercise the Preference Share Option in situations where, in the opinion of the Foundation’s Board of Directors, ASML’s interests, ASML’s business or the interests of ASML’s stakeholders are at stake. This may be the case if:

•A public bid for ASML’s shares is announced or made, or there is a justified expectation that such a bid will be made without any agreement having been reached with ASML in relation to such a bid; or

•In the opinion of the Foundation’s Board of Directors, the (attempted) exercise of the voting rights by one shareholder or more shareholders, acting in concert, is materially in conflict with ASML’s interests, ASML’s business or ASML’s stakeholders.

~~Objectives of the Foundation~~

The Foundation’s objectives are to look after the interests of ASML and the enterprises maintained by and/or affiliated in a group with ASML, in such a way that the interests of ASML, of those enterprises and of all parties concerned are safeguarded in the best possible way, and that influences in conflict with these interests, which might affect the independence or the identity of ASML and those companies, are deterred to the best of the Foundation’s ability, and everything related to the above or possibly conducive thereto. The Foundation aims to realize its objects by acquiring and holding cumulative preference shares in the capital of ASML and by exercising the rights attached to these shares, particularly the voting rights.

~~The Preference Share Option~~

The Preference Share Option gives the Foundation the right to acquire such number of cumulative preference shares as the Foundation will require, provided that the aggregate nominal value of such number of cumulative preference shares shall not exceed the aggregate nominal value of the ordinary shares issued at the time of exercise of the Preference Share Option. The subscription price will be equal to their nominal value. Only one-fourth of the subscription price would be payable at the time of initial issuance of the cumulative preference shares, with the other three-fourths of the nominal value only being payable when ASML calls up this amount. Exercise of the preference share option could effectively dilute the voting power of the outstanding ordinary shares by one-half.

~~Cancellation of cumulative preference shares~~

Cancellation and repayment of the issued cumulative preference shares by ASML requires authorization by the General Meeting, on a proposal to this effect made by the Board of Management and approved by the Supervisory Board. If the Preference Share Option is exercised and as a result cumulative preference shares are issued, ASML will initiate the repurchase or cancellation of all cumulative preference shares held by the Foundation on the Foundation’s request. In that case, ASML is obliged to effect the repurchase and respective cancellation as soon as possible. A cancellation will result in a repayment of the amount paid and exemption from the obligation to pay up on the cumulative preference shares. A repurchase of the cumulative preference shares can only take place when such shares are fully paid up.

~~If the Foundation does not request ASML to repurchase or cancel all cumulative preference shares held by the Foundation within~~ ~~20 months~~ ~~of issuance of these shares, we will be required to convene a General Meeting for the purpose of deciding on a repurchase or cancellation of these shares.~~

~~Board of Directors~~

The Foundation is independent of ASML. The Board of Directors of the Foundation is composed of four independent members from the Netherlands’ business and academic communities. The Foundation’s Board of Directors is composed per December 31, 2021 of the following members: Mr. A.P.M. van der Poel, Mr. S. Perrick, Mr. A.H. Lundqvist and Mr. J. Streppel.

~~Other than the arrangements made with the Foundation as described above, ASML has not established any other anti-takeover devices.~~

~~ASML ANNUAL REPORT 2021 106~~

~~Major shareholders~~

The Dutch Act on the supervision of financial markets and US securities laws contain requirements regarding the disclosure of capital interests and voting rights in listed companies. The following table sets forth the total number of ordinary shares owned by each shareholder that reported to the Dutch AFM or the US SEC a beneficial ownership of ordinary shares that is at least 3.0% (5.0%, in the case of the SEC) of our ordinary shares issued and outstanding. Also included in the table below is the total number of ordinary shares owned by our members of the Board of Management as of December 31, 2021. The information set out below with respect to shareholders is based on public filings with the SEC and AFM as of January 31, 2022.

Shares
% of Class6
Capital Research and Management Company 1
63,658,826 15.81 %
BlackRock Inc. 2
32,024,422 7.95 %
Baillie Gifford & Co 3
18,262,995 4.54 %
Members of ASML’s current Board of Management (5 persons) 4,5
89,892 0.02 %

1.As reported to the AFM on February 28, 2020, Capital Research & Management Company ("CRMC") reports 572,929,434 voting rights, corresponding to 63,658,826 ordinary shares (based on 9 votes per share), but do not report ownership rights related to those shares. Capital World Investors reported on a Schedule 13-G/A filed with the SEC on February 14, 2020, that it is the beneficial owner of 34,865,768 shares of our ordinary shares as a result of its affiliation with CRMC. Capital World Investors, which is a division of Capital Research and Management Company, as well as its investment management subsidiaries and affiliates Capital Bank and Trust Company, Capital International, Inc., Capital International Limited, Capital International Sarl and Capital International K.K. (reported on a Schedule 13-G/A filed with the SEC on February 16, 2021) that it is the beneficial owner of 28,032,968 of our ordinary shares. We believe that some or all of these shares are included within the shares reported to be owned by Capital Research and Management Company, as set forth above.

2.Based solely on the Schedule 13-G/A filed by BlackRock Inc. with the SEC on January 29, 2021; BlackRock reports voting power with respect to 28,755,630 of these shares. A public filing with the AFM on May 10, 2021 shows an aggregate indirect capital interest of 5.95% and voting rights of 5.81%, based on the total number of issued shares and voting rights at that time.

3.A public filing with the AFM on October 1, 2019 shows Baillie Gifford & Co have 147,694,140 voting rights, corresponding to 18,262,995 shares (based on 9 votes per share), but no ownership rights related to those shares.

4.~~Does not include unvested shares granted to members of the Board of Management. For further information see Leadership and governance - Remuneration report.~~

5.~~No shares are owned by members of the Supervisory Board.~~

6.As a percentage of the total number of ordinary shares issued and outstanding 402,601,613 as of December 31, 2021, which excludes 3,873,663 ordinary shares which have been issued but are held in treasury by ASML. The share ownership percentages reported to the AFM are expressed as a percentage of the total number of ordinary shares issued (including treasury stock) and accordingly, percentages reflected in this table may differ from percentages reported to the AFM.

~~ASML ANNUAL REPORT 2021 107~~

~~Financial Reporting and Audit~~

~~ASML publishes, among others, the following annual reports regarding the financial year 2021:~~

•The statutory Annual Report, prepared in accordance with the requirements of Dutch law. The financial statements included therein are prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code and EU-IFRS;

•~~The Annual Report on Form 20-F, prepared in accordance with the requirements of the Exchange Act. The financial statements included therein are prepared in conformity with US GAAP.~~

Both reports have the same qualitative base and describe the same risk factors that are specific to the semiconductor industry, ASML and ASML’s shares. We also provide sensitivity analyses by providing:

•~~A narrative explanation of ASML’s financial statements;~~

•~~The context within which financial information should be analyzed;~~

•~~Information about the quality, and variability, of our earnings and cash flow.~~

With respect to the process of creating the Annual Report, we have extensive guidelines for the content and layout of our report. These guidelines are primarily based on the applicable laws and regulations referred to above. With respect to the preparation process of these and the other financial reports, we apply internal procedures to safeguard the completeness and accuracy of such information as part of its disclosure controls and procedures. The Disclosure Committee assists the Board of Management in overseeing ASML’s disclosure activities and ensures compliance with applicable disclosure requirements arising under Dutch and US law, and other regulatory requirements. These internal procedures are frequently discussed by the Audit Committee and the Supervisory Board. ~~Read more in: Our performance in 2021 - Governance - How we manage risk - Enterprise Risk Management where ASML’s internal risk management and control systems are discussed.~~

The Supervisory Board has reviewed and approved, and all Supervisory Board members signed, ASML’s 2021 financial statements as prepared by the Board of Management. KPMG has duly examined our financial statements, and the Auditor’s Report is included in the Consolidated Financial Statements.

~~External Audit~~

In accordance with Dutch law, our external auditor is appointed by the General Meeting, based on a nomination for appointment by the Supervisory Board. The Supervisory Board bases its nomination on the advice from the Audit Committee and the Board of Management, who annually provide a report to the Supervisory Board on the performance of and relationship with the external auditor, as well as its independence. ASML’s current external auditor, KPMG, was first appointed by the General Meeting in 2015 for the reporting year 2016, and has been reappointed on a yearly basis since then. At the 2020 AGM, KPMG was appointed as the external auditor for the reporting year 2021.

The Audit Committee reviews and approves the external auditor’s audit plan for the audits planned during the financial year. The audit plan also includes, among others, the activities of the external auditor with respect to their limited procedures on the quarterly results other than the annual accounts. Proposed services may be preapproved at the beginning of the year by the Audit Committee (annual pre-approval) or may be pre-approved during the year by the Audit Committee in case of a particular engagement (specific pre-approval). The annual pre-approval is based on a detailed, itemized list of services to be provided, which is designed to ensure there is no management discretion in determining whether a service has been approved, and to ensure the Audit Committee is informed of each service it is pre-approving.

Dutch rules require strict separation of audit and advisory services for Dutch public-interest entities and US regulations restrict services that can be provided by an auditor of a US listed company. Dutch law prohibits the acceptance by the external auditor of other services when an audit is performed. The Audit Committee monitors compliance with Dutch and US rules on services provided by the external auditor.

The remuneration of external auditor is approved by the Audit Committee on behalf of the Supervisory Board, and after consulting the Board of Management. As the Audit Committee has the most relevant insight and experience in this area, the Supervisory Board has delegated these responsibilities to the Audit Committee. ~~Read more information on principal accountant fees and services in: Other appendices - Appendix - Principal accountant fees and services.~~

In principle, the external auditor attends all the Audit Committee meetings. The external auditor’s findings are discussed at these meetings. The Audit Committee reports to the Supervisory Board on the topics discussed with the external auditor, including the external auditor’s reports with regards to the audit of the annual reports as well as the content of the annual reports. Furthermore, the external auditor may attend the Supervisory Board meeting in which the annual external audit report is discussed. The external auditor may also attend Supervisory Board meetings in which the quarterly financial results are discussed.

~~The Audit Committee is informed by the external auditor without delay in case the external auditor would discover irregularities in the content of the audit of the financial reports.~~

~~The external auditor is present at our AGM to respond to questions, if any, from the shareholders about the auditor’s report on the Consolidated Financial Statements.~~

~~ASML ANNUAL REPORT 2021 108~~

~~Internal Audit~~

The role of our Internal Audit function is to assess our systems of internal controls by performing independent procedures such as risk-based operational audits, IT audits and compliance audits. The Internal Audit department reports directly to the Audit Committee and the Board of Management. The yearly Internal Audit plan is discussed with and approved by the Audit Committee, the Board of Management and the Supervisory Board. The follow-up on the Internal Audit findings and progress made compared to the plan are discussed on a quarterly basis with the Audit Committee. The external auditor and Internal Audit department have meetings on a regular basis.

~~Corporate Information~~

ASML Holding N.V. is a holding company that operates through its subsidiaries. We have operating subsidiaries in the Netherlands, the United States, Italy, France, Germany, the United Kingdom, Ireland, Belgium, South Korea, Taiwan, Singapore, China, Hong Kong, Japan, Malaysia and Israel. ~~Read more in: Exhibit index - Exhibit 8.1 - List of main subsidiaries.~~

~~US Listing Requirements~~

As ASML's New York Shares are listed on NASDAQ Stock Market LLC (‘NASDAQ’), NASDAQ corporate governance standards in principle apply to us. However, NASDAQ rules provide that foreign private issuers may follow home country practice in lieu of the NASDAQ corporate governance standards subject to certain exceptions. Our corporate governance practices are primarily based on Dutch requirements. The table below sets forth the practices followed by ASML in lieu of NASDAQ rules based upon the exception as described above.

~~Quorum~~ASML ANNUAL REPORT 2022

RISK CONTINUED

STRATEGIC REPORT

ASML does not follow NASDAQ’s quorum requirements applicable to meetings of ordinary shareholders. In accordance with Dutch law and generally accepted Dutch business practice, ASML’s Articles of Association provide that there are no quorum requirements generally applicable to general meetings of shareholders.GOVERNANCE

FINANCIALS

~~Solicitation of proxies~~How we manage risk (continued)

ASML does not follow NASDAQ’s requirements regarding the solicitation of proxies and the provision of proxy statements for general meetings of shareholders. ASML does furnish proxy statements and solicit proxies for the General Meeting. Dutch corporate law sets a mandatory (participation and voting) record date for Dutch listed companies at the 28th day prior to the date of the General Meeting. Shareholders registered at such record date are entitled to attend and exercise their rights as shareholders at the General Meeting, regardless of sale of shares after the record date.

~~Distribution Annual Report~~

ASML does not follow NASDAQ’s requirement regarding distribution to shareholders of copies of an annual report containing audited Financial Statements prior to our AGM. The distribution of our Annual Reports to shareholders is not required under Dutch corporate law or Dutch securities laws, or by Euronext Amsterdam. Furthermore, it is generally accepted business practice for Dutch companies not to distribute annual reports. In part, this is because the Dutch system of bearer shares has made it impractical to keep a current list of holders of the bearer shares in order to distribute the annual reports. Instead, we make our Annual Report available at our corporate head office in the Netherlands (and at the offices of our Dutch listing agent as stated in the convening notice for the meeting) no later than 42 days prior to convocation of the AGM. In addition, we post a copy of our Annual Reports on our Website prior to the AGM.

~~Equity compensation arrangements~~

ASML does not follow NASDAQ’s requirement to obtain shareholder approval of stock option or purchase plans or other equity compensation arrangements available to officers, directors or employees. It is not required under Dutch law or generally accepted practice for Dutch companies to obtain shareholder approval of equity compensation arrangements available to officers, directors or employees. The General Meeting adopts the Remuneration Policy for the Board of Management, approves equity compensation arrangements for the Board of Management and approves the remuneration for the Supervisory Board. The Remuneration Committee evaluates the achievements of individual members of the Board of Management with respect to the short and long-term quantitative performance, the full Supervisory Board evaluates the quantitative performance criteria. Equity compensation arrangements for employees are adopted by the Board of Management within limits approved by the General Meeting.

~~Compliance with the Corporate Governance Code~~

We closely follow the developments in the area of corporate governance and the applicability of the relevant corporate governance rules for ASML. Any substantial changes to ASML’s corporate governance structure or application of the Corporate Governance Code will be submitted to the General Meeting for discussion.

~~We are of the opinion that ASML fully complies with the Dutch Corporate Governance Code.~~

~~The Board of Management and the Supervisory Board,~~

~~Veldhoven, February 9, 2022~~

~~ASML ANNUAL REPORT 2021 109~~

Supervisory Board and Audit Committee

~~How we manage risk~~

~~ASML manages risks through an Enterprise Risk Management (ERM) framework that integrates risk management into our daily business activities and strategic planning.~~

Enterprise Risk Management

~~We deploy our~~Our ERM framework ~~through~~enables a well-defined governance structure and a robust ERM process. The Risk and Business Assurance function drives the ERM process and associated activities across ~~ASML and its affiliates. It takes~~ASML. We follow a systematic approach to identify, manage and monitor risks in pursuit of our business objectives by setting standards and enabling management to ~~make ASML's~~maintain and continuously improve our governance, risk management, internal control and ~~compliance more efficient and effective.~~compliance. The framework also helps to identify opportunities that allow us to achieve our objectives and enable ~~continuous~~long-term sustainable growth.




The purpose of risk management is to maximize the probability of achieving business objectives responsibly.”
Geert Beullens
VP Risk and Business Assurance

ERM is a continuous process. Its related activities are periodically repeated to identify and address risks in a timely fashion, and ensure that its results ~~remain~~are relevant for decision-making purposes. Our Vice President of Risk and Business Assurance ~~reporting~~reports to ~~ASML's~~the CFO and Audit Committee, and is responsible for leading the development and maintenance of the ERM framework ~~and makes sure~~as well as for the implementation of the ERM ~~process is carried out. ASML has~~process. We have adopted the ISO 31000:2018 standard as the ~~foundation of its enterprise risk management.~~basis for our ERM activities. In addition, the ~~Vice~~Vice President of Risk and Business Assurance is responsible for leading the security and internal control function and for ~~the development~~developing and ~~maintenance of~~maintaining the compliance process.

Risk management governance structure

Supervisory Board

Audit Committee

Request to investigate specific risk topics

–Bi-annual risk review

–Risk topics feedback

–Assertion on control effectiveness

–Quarterly progress reporting

Board of Management

Corporate Risk Committee (CRC)
Risk oversight

Disclosure Committee
Internal Control Committee

–Risk appetite

–Risk management policy

–CRC sub committees (governance)

–Risk assessment results

–Risk response progress

–Incidents

–Control effectiveness

Risk owners

ASML ANNUAL REPORT 2022

RISK CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

How we manage risk (continued)

Supervisory Board and Audit Committee

The Supervisory Board provides independent oversight on management’s response to identifying and mitigating critical risk areas based on regular risk reviews. The Supervisory Board’s Audit Committee provides independent oversight on the ERM process and ~~the~~ timely follow-up onof priority actions based on quarterly progress updates.

Board of Management

The Board of Management is responsible for managing the internal and external risks related to our business activities and for making sure we comply with applicable laws and regulations. ~~The Board of Management has delegated its risk oversight to ASML’s Corporate Risk Committee.~~

Corporate Risk Committee

The Corporate Risk Committee is a central risk oversight body that reviews, manages and controls risks in the ASML risk universe, including ~~information~~ security. It also approves the risk appetite, risk-management policies and risk-mitigation strategies. The Corporate Risk Committee is chaired by the CFO and comprises senior management representatives ~~from all sectors at~~across ASML, including the CEO and COO.




ASML risk management process provides direction for adequate risk and control measures for key risks.”
Roel Verstegen
Head of Enterprise Risk Management

Disclosure Committee

The Disclosure Committee assists the Board of Management in overseeing ASML’s disclosure activities and compliance with applicable disclosure requirements arising under Dutch and US law, ~~and~~ applicable stock exchange regulations and other regulatory requirements.

~~ASML ANNUAL REPORT 2021 110~~

Internal Control Committee

The Internal Control Committee, which includes members of the Disclosure Committee, advises the Disclosure Committee and the CEO and CFO in their assessment of our internal control over financial reporting and disclosures, under section 404 of the ~~Sarbanes-Oxley~~Sarbanes – Oxley Act. The Chair of the Internal Control Committee updates the Audit Committee, the CEO and CFO on the progress of this assessment. The Chair also includes this update in the Internal Control Committee’s report to the Audit Committee.

Risk owners

Risk owners monitor the development of risks in the ASML risk universe and drive risk response across ~~the~~ ASML ~~organization~~ according to requirements that are defined by the Corporate Risk Committee.

ASML risk universe

The ASML risk universe is a consolidated overview of the risks that may have a material adverse ~~effect in achieving~~impact on our ability to achieve our business objectives. ItThe risk universe was updated in 2022 and consists of 3835 risk categories grouped into six risk types. ~~This~~The risk universe allows us to have a consistent approach to risk assessments across ~~ASML when assessing risks.~~ASML.

ASML risk universe

Strategy and products

–Industry cycle risk

–Political risk

–Climate change risk

–Business model risk

–Merger and
acquisition risk

–Competition risk

–Innovation risk

–Product
stewardship risk

–Product roadmap
execution risk

–Intellectual property
rights risk

Finance and
reporting

Partners

People

Operations

–Business planning risk

–Foreign exchange
rate risk

–Liquidity risk

–Interest rate risk

–Capital availability risk

–Counterparty credit risk

–Shareholder activism risk

–Disclosure/external reporting risk

–Customer
dependency risk

–Product/service
quality risk

–Supplier strategy and performance risk

–Supply chain
disruption risk

–Knowledge management risk

–Organizational effectiveness risk

–Human resource risk

–Product
industrialization risk

–Process effectiveness and efficiency risk

–Environment, health and safety risk

–Continuity of own
operation risk

–Security risk

–Information technology risk

–Manufacturing and
install risk

Legal and compliance

–Contractual liability risk

–Violation of laws and regulations risk

–Violation of internal policies risk

We take into account a broad range of internal and external information sources, such as macroeconomic and industry trends, relevant guidelines and legislation, and stakeholders’ needs and expectations in all areas. The risk universe is reviewed, updated and approved ~~on a yearly basis,~~annually, or more frequently in case of significant internal and/or relevant external developments.

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How we manage risk (continued)

Enterprise Risk Management process

The results of periodic risk assessments and the potential impact of external trends and emerging risks are captured in the ASML risk landscape. As we operate in a dynamic environment, risk exposures are subject to change. The ASML risk landscape is reviewed, updated and discussed by the Corporate Risk Committee each quarter. ~~The execution of the risk~~Risk assessments ~~is done~~are carried out according to the risk management plan and any additional engagement is approved by the Corporate Risk Committee. We define strategies to address relevant risks and take these into account when we define ~~the~~our corporate priorities. ~~ASML defines~~Our risk responses ~~with the~~ aim to mitigate the risks up to the level defined by the risk appetite.

~~ASML ANNUAL REPORT 2021 111~~

~~Risk management process~~

Risk appetite

Our risk appetite ~~depends on the nature of the risk. ASML’s risk appetite –~~describes the level of risk ~~ASML is~~we are willing to accept to achieve ~~its~~our objectives – ~~may vary based~~which depends on the nature of the specific risk and is divided into five levels: Averse, Prudent, Moderate, High and Extensive. Our approach is geared toward mitigating the risks to the level defined in our risk appetite.

Risk management process

Risk assessment

Risk response

Top-down risk assessment

Coordination and follow-up

Corporate Risk Committee/Risk owners/Emerging risks

Risk owners

Risk identification

Risk landscape

Risk appetite

Risk analysis

Risk evaluation

Risk treatment

Bottom-up risk assessment

Execution

Country/Sector

Action owners

Risk type

Averse

Prudent

Moderate

High

Extensive

Strategy and products

Partners

People

Operations

Finance and reporting

Legal and compliance

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How we manage risk (continued)

Risk developments

The table below ~~presents~~shows examples of external developments that ~~have~~ affected the exposure of a series of risk categories in ~~2021, including~~2022 and includes examples of our responses. The list of risks and risk responses below is not exhaustive.


~~Challenges to meet demand~~			~~Risk category~~
There is an increasing demand across all market segments and our product portfolio which is an opportunity for us that also brings challenges. Our systems are critical in this surge in demand. We notice a stretch to increase production capacity in our end-to-end supply chain to meet this demand. This is amplified by chip and material shortages. In addition, stepping up in hiring and retaining the workforce in the current competitive market is increasingly challenging. The growth in our business could also lead to well-being issues, increasing use of workarounds and in some cases the risk of non-compliance with internal processes and/or controls. Our processes and systems may not be able to adequately support our growth and development. ~~The demand increase we have been and are continuing to experience could change customers' sourcing strategy to get less dependent on ASML. This can impact our market share in certain segments.~~			•~~Supplier strategy and performance~~ •~~Supply chain disruption~~ •~~Product industrialization~~ •~~Human resource~~ •~~Product and service quality~~ •~~Competition~~ •~~Industry cycle~~ •~~Political~~ •~~Legal liability~~ •~~Process effectiveness and efficiency~~ •~~Violations of laws and regulations~~
~~Risk response~~
•~~Increase of manufacturing capabilities and utilization rate on short and long term~~ •~~Cycle time reduction~~ •~~Supplier support to increase move rate and mitigate chip- and material shortages~~ •~~Improve compensation offering and enhance recruiting activities~~ •~~Execute well-being program~~ •~~Increase training programs and onboarding experience~~ •~~Internal control framework and assessments~~

~~ASML ANNUAL REPORT 2021 112~~

Strategy

Risk categories

Risk developments

Risk responses

Continue innovating at pace to maintain technology leadership

Innovation
Product roadmap execution
IP rights
Supplier strategy and performance
Human resource
Knowledge management
Security
Competition

Intellectual Property (IP) technology leadership pressure

~~Risk category~~–Intellectual property portfolio management

–Patents and relevant technical publications monitoring

–Extensive investments in security program

–Awareness and training programs

–Cyber Defense Center

–There is ~~increased~~significant pressure on know-how and IP protection for ASML and its open innovation partners. ASML’s existence is based on people and knowledge. Unauthorized disclosure of information of ASML, its customers or suppliers may benefit competitors, negatively affect ASML’s ability to file patents or affect cooperation with customers and suppliers.

–

We ~~are experiencing~~experience cyberattacks and other security incidents on our information technology systems, and our suppliers, customers and other service providers also experience such cyberattacks.

~~We are committed to protect our information assets and those of our partners.~~

~~We observe that risk exposure in 2021 remains high.~~

•~~Information security~~

•~~Intellectual property rights~~

•~~Competition~~

~~Risk response~~

•~~Information security function and information security policy to implement controls to ensure authorized use of information~~

•~~Significant increase of our information security investments (people, systems) and security roadmap to increase security of our processes and systems~~

•~~Cyber Defense Center~~

•~~Security incident response procedure in place and tested at least annually~~

•~~Awareness and training programs~~

•~~IP rights management~~

•~~Patents and relevant technical publications monitoring~~

Advanced lithography solutions

Product industrialization
Manufacturing and install
Continuity of own operations
Supplier strategy and performance
Supply chain disruption
Human resource
Product and service quality
Process effectiveness and efficiency
Violations of laws and regulations
Business model
Competition
Political
Industry cycle

Growth challenges

–Increase of manufacturing capabilities, utilization rate and cycle-time reduction

–Fast shipments

–Support suppliers to increase move rate and mitigate material shortages

–Deployment of onboarding and well-being programs

–Shorten time to knowledge (learning operating model)

–There is an increasing demand across all market segments and our product portfolio, which is an opportunity for us that also brings challenges. We face challenges to increase production capacity in our end-to-end supply chain to meet this demand. This is amplified by supply chain constraints.

–Hiring, onboarding and retaining the workforce in the current competitive market is increasingly challenging. Consistent pressure on our organization and people as a result of our growth may lead to well-being issues among our employees.

–The high demand we are continuing to experience could change customers’ sourcing strategies to become less dependent on ASML.

Geopolitical tensions

~~Risk category~~–Actively engage with governmental authorities about effectiveness, consequences and enforceability of regulations

–Collaborate with peers in global advocacy

–Scenario planning around potential geopolitical events

–Apply for export licenses as required

–Comply with applicable (existing and new) regulations

–Optimization of supply chain footprint

~~Export restrictions~~–Geopolitical tensions are rising and additional export control restrictions have been imposed during 2022. The risk of further restrictions on exports or investments is high, and as a consequence global trade is shifting from globalization to regionalization ~~particularly~~as China, US and many other countries strive for technological sovereignty. In particular, the tensions between China and the US ~~and countries that strive for technological sovereignty. This~~ may lead to a decoupled ecosystem and -– in the longer term – overcapacity. Given the important role both countries play in the semiconductor supply chain, this can have a significant impact on our industry. Trade and export barriers have already impacted our ability to sell to and ~~maintain~~service systems tofor certain customers, and this is likely to continue to impact our business ~~by limiting~~going forward.

–Changes in relations between Taiwan and the People’s Republic of China could lead to additional trade restrictions and could impact our employees and the ability to utilize our manufacturing facilities and supply chain in Taiwan for our global customers, as well as our ability to ~~sell our products and services in certain jurisdictions or to certain customers.~~

Geopolitical tensions also result in movement restrictions of the employees across countries. Protectionism and bureaucracy are increasing, as well as restrictions impacting international knowledge workers from certain countries, (e.g. restricted technology access, visa/travel restrictions).

~~We aim to serve and support all~~service our customers ~~around the world to the best of our ability, while being compliant with laws and regulations set by the jurisdictions where we operate.~~

in Taiwan.

~~Risk exposure with regard to political tensions, protectionism and restriction remains high in 2021.~~

Weakening global economy

•–~~Political~~Control costs and maintain flexibility

•–~~Continuity of own operations~~

•~~Human resources~~

•~~Business model~~

•~~Industry cycle~~

•~~Violations of laws and regulations~~Scenario planning around macroeconomic trends

~~Risk response~~–Macroeconomic downturn fears are increasing, fueled by high inflation rates that are amplified by the energy crisis. Economic uncertainty has led to reduced consumer and business spending, and could cause our customers to decrease, cancel or delay their orders. A recession might also bring opportunities in the tight labor market.

Drive a more sustainable world

Product stewardship
EHS
Climate change
Human resource
Violation of laws and regulations
Continuity of own operations
Supply chain disruption

Strengthening ESG regulations and increasing stakeholder expectations

•–~~Monitor geopolitical developments~~Stakeholder engagement and disclosures

•–~~Apply for export licenses as required~~Deployment of ESG strategy in our organization and value chain

•–Non-financial reporting in accordance with the Global Reporting Initiative (GRI) Universal Standards 2021

–Deployment of business continuity plans

–Include extreme weather aspects in building upgrades and new designs

–Comply with (existing and new) regulations

•–~~Collaborate with peers~~Companies across all industries are facing increasing scrutiny relating to their ESG policies. Our stakeholders are increasingly focused on our contribution to society and expect us to minimize the environmental and social impact of our products throughout all life-cycle stages. A global trend to transition to a lower carbon economy has resulted in ~~global advocacy~~the imposition of increased regulations and disclosure requirements. Failure to achieve our ESG objectives and meet the emerging ESG expectations of our stakeholders could negatively affect our brand and reputation.

Climate change fueling extreme weather

–Climate change contributes to increasing severity and frequency of extreme weather events (such as cyclones and flood, fire stress, drought, heat and precipitation stress, rising sea levels) that can impact continuity of our operations and/or our supply chain.

~~COVID-19 pandemic~~

~~Risk category~~

COVID-19 has spread globally, leading to quarantines, travel and workplace restrictions, business shutdowns and restrictions, supply chain interruptions, labor shortages, changes of legislation and overall economic and financial market instability.

The pandemic has an impact on the global economy. Going forward, there is still uncertainty on how the situation will develop, and what the impact on global GDP development, (end) markets, and our manufacturing capability and supply chain will be.

~~In 2021, the COVID-19 pandemic had limited impact on our operations – risk exposure is more controlled compared to 2020.~~

•~~Continuity of own operations~~

•~~Supply chain disruption~~

•~~Environment, Health and Safety~~

•~~Human resources~~

•~~Process effectiveness and efficiency~~

•~~Roadmap execution~~

•~~Information security~~

~~Risk response~~

•~~Set health and safety of our employees as our first priority and implement preventive measures globally~~

•~~Strong financial capabilities to react to a downturn~~

•~~Activation of business continuity management plan~~

•~~Active engagement with our critical suppliers and increased inventory~~

•~~Implementation of virtual remote support solution on customer sites~~

•~~Implementation of measures to facilitate (secure) remote working and to support the well-being of our employees~~

~~ASML ANNUAL REPORT 2021 113~~

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Risk factors

~~Risk factors~~

In conducting our business, we face many risks that may interfere with our business objectives. It is important to understand the nature of these risks. We assess our risks by using the ASML risk universe, consisting of six risk types (Strategy and Products, Finance and reporting, Partners, People, Operations, Legal and compliance).

~~Strategy and products~~

~~Our future success depends on our ability to respond timely to commercial and technological developments in the semiconductor industry~~

~~Risk category: Business model, Innovation~~

~~Our success in developing new technologies and products, and in enhancing our existing products, depends on a variety~~Many of factors. These include the success of our and our suppliers’ R&D programs and the timely and successful completion of product development and design relative to competitors. Our business will suffer if the technologies we pursue to assist our customers in producing smaller and more energy-efficient chips are not as effective as those developedthese risks may be intensified by competitors, or if our customers do not adopt technologies that we develop or adopt new technological architectures that are less focused on lithography products. The success of our EUV 0.55 NA (High-NA) technology, which we believe is critical for keeping pace with Moore’s Law, remains dependent on continuing technical advances by us and our suppliers. We invest considerable financial and other resources to develop and introduce new technologies, products and product enhancements. If we are unsuccessful in developing (or if our customers do not adopt) new technologies, products and product enhancementsglobal events such as ~~EUV 0.55 NA~~the COVID-19 pandemic (including the China Zero-COVID policy), the Russia–Ukraine conflict, inflation, global measures taken in response to these events and ~~multibeam inspection, or if competitors successfully introduce alternative technologies or processes, our competitive position and business may suffer.~~

In addition, we make significant investments into development of new products and product enhancements, and we may be unable to recoup some or all the investments that we have made. We may also incur costs related to inventory obsolescence, as a result of technological changes. Such costs may increase as the complexity of technology increases.

Due to the highly complex nature and costs of our systems, including newer technologies, our customers may purchase existing technology systems rather than new leading-edge systems, or may delay their investment in new technology systems to the extent that such investment is not economical or required given their product cycles. Global economic conditions affect our customers’ investment decisions, leading to uncertainties on the timing around the introduction of and demand for new leading-edge systems. Some of our customers have experienced and may continue to experience delays in implementing their product roadmaps. This increases the risk of slowing down the overall transition period (or cadence) for the introduction of new nodes, and therefore new systems.

We are also dependent on our suppliers to maintain their development roadmaps to enable us to introduce new technologies on a timely basis. If they are unable to keep pace, whether due to technological factors, lack of financial resources, or otherwise, this could prevent us from meeting our development roadmaps.

~~The success of new product introductions is uncertain and depends on our ability to successfully execute our R&D programs~~

~~Risk category: Roadmap execution, Innovation~~

Our lithography systems and applications have become increasingly complex, and accordingly, the costs and time period to develop new products and technologies have increased. We expect such costs and time periods to continue to increase. In particular, developing new technology, such as EUV 0.55 NA (High-NA) and multibeam, requires significant R&D investments from us and our suppliers to meet our and our customers’ technology demands. Our suppliers may not have, or may not be willing to invest the resources necessary to continue the (co-)developmentany worsening of the new technologies to the extent that such investments are necessary. This may result in ASML contributing funds to such R&D programs or limiting the R&D investments that we can undertake. Furthermore, if our R&D programs are not successful in developing the desired new technology on time or at all, we may be unsuccessful in introducing new productsassociated global business and ~~unable to recoup our R&D investments.~~

~~We face intense competition~~

~~Risk category: Competition~~

The lithography equipment industry is highly competitive. Our competitiveness depends upon our ability to develop new and enhanced lithography equipment, related applications and services that are competitively priced and introduced on a timely basis, as well as our ability to protect and defend our intellectual property rights. We compete primarily with Canon and Nikon in respect of DUV systems. Both Canon and Nikon have substantial financial resources and broad patent portfolios. Each continues to offer

~~ASML ANNUAL REPORT 2021 114~~economic conditions.

1. Strategy and products

Our future success depends on our ability to respond timely to commercial and technological developments in the semiconductor industry

Risk category:

Business model, Innovation

products that compete directly with our DUV systems, which may impact our sales or business. In addition, adverse market conditions, industry overcapacity or a decrease in the value of the Japanese yen in relation to the euro, could further intensify price-based competition, resulting in lower prices, and lower sales and margins.

We may also face competition from new competitors with substantial financial resources, as well as from competitors driven by the ambition of self-sufficiency in the geopolitical context. Furthermore, we face competition from alternative technological solutions or semiconductor manufacturing processes, particularly if we are unsuccessful in developing new EUV technology, products and product enhancements in a timely and cost-competitive manner.

The success of new product introductions is uncertain and depends on our ability to successfully execute our R&D programs

Risk category:

Product roadmap execution, Innovation

We also compete with providers of applications that support or enhance complex patterning solutions, such as Applied Materials Inc. and KLA-Tencor Corporation. These applications effectively compete with our Applications offering, which is a significant part of our business. The competition we face in our applications business may be higher than for our systems, as there are more competitors and potential competitors in this market.

~~The semiconductor industry can be cyclical and we may be adversely affected by any downturn~~

~~Risk category: Industry cycle risk~~

As a supplier to the global semiconductor industry, we are subject to the industry’s business cycles, of which the timing, duration and volatility are difficult to predict. The semiconductor industry has historically been cyclical. Newer entrants in the industry, including Chinese semiconductor manufacturers, could increase the risk of cyclicality in the future. Certain key end-market customers – Memory and Logic – exhibit different levels of cyclicality and different business cycles. Sales of our lithography systems, services and other holistic lithography products depend in large part upon the level of capital expenditures by semiconductor manufacturers. These in turn are influenced by industry cycles, the drive for technological sovereignty and a range of competitive and market factors, including semiconductor industry conditions and prospects. The timing and magnitude of capital expenditures of our customers also impact the available production capacity of the industry to produce chips, which can lead to imbalances in the supply and demand of chips. Reductions or delays in capital expenditures by our customers, or incorrect assumptions by us about our customers’ capital expenditures, could adversely impact our business. In addition, industry trends that are currently positively impacting our business such as increasing capital expenditures by our customers may not continue.

Our ability to maintain profitability in an industry downturn will depend substantially on whether we are able to lower our costs and break-even level, which is the level of sales that we must reach in a year to have positive net income. If sales decrease significantly as a result of an industry downturn and we are unable to adjust our costs over the same period, our net income may decline significantly, or we may suffer losses. Furthermore, as the value per system increases and we have grown, and continue to grow, in terms of employees, facilities and inventories, it may be more difficult for us to reduce our costs to respond to an industry downturn.

~~We derive most of our revenues from the sale of a relatively small number of products~~

~~Risk category: Business model, Product portfolio~~

We derive most of our revenues from the sale of a relatively small number of lithography systems (309 units in 2021 and 258 units in 2020). As a result, the timing of shipments, including any delays, and recognition of system sales for a particular reporting period from a small number of systems may have a material adverse effect on our business, financial condition and results of operations in that period. This risk is increasing due to the higher average sales price of EUV systems as compared to DUV systems.

In addition, we derive significant revenue from servicing and upgrading our installed base. However, we may not be able to increase revenues to the extent we planned as, for example, customers may perform more of these services themselves or find other third-party suppliers for that service.

~~Failure to adequately protect the intellectual property rights, trade secrets or other confidential information could harm our business~~

~~Risk category: Intellectual property rights~~

We rely on intellectual property rights such as patents and copyrights to protect our proprietary technology and applications. However, we face the risk that such measures could prove to be inadequate, and we could suffer material harm because, among other things:

•~~Intellectual property laws may not sufficiently support our proprietary rights or may change in the future in a manner adverse to us;~~

•Our confidentiality and licensing agreements with our customers, employees and technology development partners and others to protect our IP rights may not be sufficient or may be breached or terminated;

•~~Patent rights may not be granted or interpreted as we expect;~~

•~~Patents rights will expire which may result in key technology becoming widely available that may harm our competitive position;~~

•~~The steps we take to prevent misappropriation or infringement of our proprietary rights may not be successful;~~

•Intellectual property rights are difficult to enforce in countries where the application and enforcement of the laws governing such rights may not have reached the same level as compared to other jurisdictions where we operate; and

~~ASML ANNUAL REPORT 2021 115~~

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We face intense competition

The semiconductor industry can be cyclical and we may be adversely affected by any downturn

We derive most of our revenues from the sale of a relatively small number of products

Risk category:

Competition

Risk category:

Industry cycle risk

Risk category:

Business model

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•~~Third parties may be able to develop or obtain patents for similar competing technology.~~

In addition, legal proceedings may be necessary to enforce our intellectual property rights and the validity and scope may be challenged by others. Any such proceedings may result in substantial costs and diversion of management resources, and, if decided unfavorably to us, could result in significant costs or have a significant impact on our business.

We are subject to attempted misappropriation attacks, including theft of our trade secrets, proprietary customer data, intellectual property or other confidential information by third parties or our own employees. It is also possible that unauthorized third parties may obtain, copy, use or disclose our proprietary technologies, our products, designs, processes and other intellectual property despite our efforts to protect our intellectual property.

In 2021, we became aware of reports that a company associated with XTAL Inc., DongFang JingYuan Electron (“DFJY”) was actively marketing products in China that could potentially infringe on ASML's IP rights. ~~Read more in: Our performance in 2021 - Governance - Responsible business - Intellectual Property protection.~~

~~Defending against intellectual property claims brought by others could harm our business~~

~~Risk category: Intellectual property rights~~

In the course of our business, we are subject to claims by third parties alleging that our products or processes infringe upon their intellectual property rights. If successful, such claims could limit or prohibit us from developing our technology, manufacturing and selling our products.

In addition, our customers or suppliers may be subject to claims of infringement from third parties, alleging that our products used by such customers in the manufacturing of semiconductor products and / or the processes relating to the use of our products infringe on one or more patents issued to such third parties. If such claims are successful, we could be required to indemnify our customers or suppliers for some or all of any losses incurred or damages assessed against them as a result of such infringement.

Patent litigation is complex and may extend for a protracted period of time, giving rise to the potential for both substantial costs and diverting the attention of key management and technical personnel. Potential adverse outcomes from patent litigation may include payment of significant monetary damages, injunctive relief prohibiting our manufacturing, exporting or selling of products, and / or settlement involving significant costs to be paid by us.

~~We are exposed to economic and political developments in our international operations~~

~~Risk category: Political~~

Global trade issues and changes in and uncertainties with respect to multilateral and bilateral treaties and trade policies, and international trade disputes, trade sanctions, export controls, tariffs and similar regulations, impact our ability to deliver our systems and services internationally. In particular, our ability to deliver systems in certain countries such as China has been and continues to be impacted by our ability to obtain required licenses and approvals.

The US government has enacted trade measures, including import tariffs, national security regulations and restrictions on conducting business with certain Chinese entities, restricting our ability to provide certain products and services to such entities without a license. The list of Chinese entities impacted by trade restrictions, as well as the export regulation requirements and the implementation and enforcement of such regulations are subject to change. Our business involves the sale of systems and services to customers in a number of countries, including China, where our business has grown in recent years, and includes sensitive technologies that may be the subject of increased export regulations, policies or practices. These and further developments in multilateral and bilateral treaties, national regulation, and trade, national security and investment policies and practices have affected and may further affect our business, and the businesses of our suppliers and customers. Such developments have impacted and continue to impact our ability to obtain necessary licenses, including permits for use of US technology and for employees producing and developing such technology. Such developments including the drive for technological sovereignty could also lead to long-term changes in global trade, competition and technology supply chains, which could adversely affect our business and growth prospects.

Certain of our manufacturing facilities as well as customers are located in Taiwan. Customers in Taiwan represented 39.4% of our 2021 total net sales and 33.8% of our 2020 total net sales. Taiwan has a unique international political status. The People’s Republic of China asserts sovereignty over Taiwan and does not recognize the legitimacy of the Taiwanese government. Changes in relations between Taiwan and the People’s Republic of China, Taiwanese government policies, and other factors affecting Taiwan’s political, economic or social environment could have a material adverse effect on our business, financial condition and results of operations. Furthermore, certain of our facilities as well as customers are located in South Korea. Customers in South Korea represented 33.4% of our 2021 total net sales and 29.7% of our 2020 total net sales. There are tensions with the Democratic People’s Republic of Korea (North Korea), which have existed since the division of the Korean Peninsula following World War II. A worsening of relations between those countries or the outbreak of war on the Korean Peninsula could have a material adverse effect on our business, financial condition or results of operations.

Failure to adequately protect intellectual property, trade secrets or other proprietary information could harm our business

Defending against intellectual property claims brought by others
could harm our business

Risk category:

Intellectual property rights

Risk category:

Intellectual property rights

–IP laws may not sufficiently support our proprietary rights or may change adversely in the future;

–Patent rights may not be granted or interpreted as we expect;

–Patent rights will expire, which may result in key technology becoming widely available that may harm our competitive position;

–The steps we take to prevent misappropriation or infringement of our proprietary rights may not be successful;

–Third parties may be able to develop or obtain patents for our or similar competing technology.

~~ASML ANNUAL REPORT 2021 116~~

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We are exposed to economic, geopolitical and other developments in
our international operations

We may be unable to make desirable acquisitions or to integrate successfully
any businesses we acquire

Risk category:

Political

Risk category:

Mergers & acquisitions

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~~We may be unable to make desirable acquisitions or to integrate successfully any businesses we acquire~~

~~Risk category: Mergers & acquisitions~~

From time to time we may acquire, businesses or technologies to complement, enhance or expand our current business or products or that might otherwise offer us growth opportunities. Any such acquisitions could lead to failure to achieve our financial or strategic objectives, to perform as we plan or disrupt our ongoing business and adversely impact our results of operations. Furthermore, our ability to complete such transactions may be hindered by a number of factors, including potential difficulties in obtaining government approvals.

Any acquisition that we make could pose risks related to the integration of the new business or technology with our business and organization. We cannot be certain that we will be able to achieve the benefits we expect from a particular acquisition investment. Such transactions may also strain our managerial and operational resources, as the challenge of managing new operations may divert our management from day-to-day operations. Furthermore, we may be unable to retain key personnel of acquired businesses or may have difficulty integrating employees, business systems, and technology. The controls, processes and procedures of acquired businesses may also not adequately ensure compliance with laws and regulations, and we may fail to identify compliance issues or liabilities.

In connection with acquisitions, anti-trust and national security regulators have in the past and may in the future impose conditions on us, including requirements to divest assets or other conditions that could make it difficult for us to integrate the businesses that we acquire. Furthermore, we may have difficulty in obtaining or be unable to obtain anti-trust and national-security clearances, which could inhibit future desired acquisitions.

As a result of acquisitions, we have recorded, and may continue to record, a significant amount of goodwill and other intangible assets. Current accounting guidelines require, at least annually and potentially more frequently, assessment of whether there are indicators that the value of goodwill or other intangible assets has been impaired.

We may not be able to achieve our Environmental, Social ~~Governance (ESG) objectives or adapt~~ and Governance (ESG) objectives or adapt and
respond timely to emerging ESG expectations and regulations

~~Risk Category: Climate change, Product stewardship~~

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investors and other stakeholders are increasingly focused on ESG practices and, in recent years, have placed increasing importance on the implications and social cost of their investments. In particular, within the semiconductor industry, there is focus on contribution to society and minimizing environmental and social impacts of products throughout all life cycle stages. Failure to achieve our ESG objectives, meet the emerging ESG expectations of our stakeholders and/or timely respond to enhanced regulations could negatively affect our brand and reputation.

Climate change contributes to increasing severity and frequency of extreme weather events, rising sea levels and droughts that can impact continuity of our operations and/or our supply chain. Climate change concerns and the potential resulting environmental impact may result in new laws and regulations that may affect us, our suppliers, and our customers. Such laws or regulations could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers and suppliers. Furthermore, the ability to reduce our product-related environmental performance (such as energy efficiency) may be affected by the complexity of our technology and products. We are also dependent on our suppliers and their ability to reduce the ecological footprint.

A global transition to a lower carbon economy has resulted in the imposition of increased regulations that could lead to technology restrictions, modification of product designs, an increase in energy prices and energy or carbon taxes, restrictions on pollution, required remediation equipment, or other requirements. A variety of regulatory developments have been introduced that focus on restricting or managing the emission of carbon dioxide and other greenhouse gases. This could result in a need to redesign products and/or purchase at higher costs new equipment or materials with lower carbon footprints.

~~Finance and reporting~~

~~We are exposed to treasury risks, including liquidity risk, interest rate risk, credit risk and foreign exchange risk~~

~~Risk category: Liquidity, Interest rate, Counterparty credit, Foreign exchange~~

~~We are a global company and are exposed to a variety of financial risks, including liquidity risk, interest rate risk, credit risk foreign exchange risk, inflation risk.~~

~~Liquidity risk:~~ We are exposed to liquidity risks. Negative developments in our business or global capital markets could affect our ability to meet our financial obligations or to raise or re‐finance debt in the capital or loan markets. In addition, we might be unable to repatriate cash from a country immediately for use elsewhere due to legal restrictions or required formalities.

~~Interest rate risk:~~ We are exposed to interest rate risks. Our Eurobonds bear interest at fixed rates. Our cash and investments as well as our revolving credit facility bear interest at a floating rate. Failure to effectively hedge this risk could impact our financial

Risk category:

Climate change, Product stewardship

~~ASML ANNUAL REPORT 2021 117~~

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2. Finance and reporting

We are exposed to financial risks, including liquidity risk, interest rate risk,
credit risk, foreign exchange risk and inflation

Risk category:

Liquidity, Interest rate, Counterparty credit, Foreign exchange

We are a global company and are exposed to a variety of financial risks, including those related to liquidity, interest rate, credit, foreign exchange and inflation.

Liquidity risk

Interest rate risk

Our Eurobonds bear interest at fixed rates. Our cash and investments as well as our revolving credit facility

Inflation risk

Currency risk

Counterparty credit risk

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condition and results of operation. In addition, we could experience an increase in borrowing costs due to a ratings downgrade (or expectation of a downgrade), developments in capital and lending markets or developments in our businesses.

3. Partners

~~Counterparty credit risk:~~ We are exposed to counterparty credit risks, in particular with respect to financial counterparties with whom we hold our cash and investments as well as our customers. As a result of our limited number of customers, credit risk on our receivables is concentrated. Our three largest customers (based on total net sales) accounted for €3,855.2 million, or 83.7%, of accounts receivable and finance receivables at December 31, 2021, compared with €2,757.0 million, or 80.1%, at December 31, 2020. Accordingly, business failure or insolvency of one of our main customers could result in significant credit losses.

~~Currency risk:~~ We are exposed to currency risks. Our Financial Statements are expressed in euros. Accordingly, our results of operations are exposed to fluctuations in exchange rates between the euro and other currencies. Changes in currency exchange rates can result in losses in our Financial Statements. We are particularly exposed to fluctuations in the exchange rates between the US dollar and the euro, and to a lesser extent to the Japanese yen, the South Korean won, the Taiwanese dollar and Chinese yuan, in relation to the euro. We incur costs of sales predominantly in euros with portions also denominated in US and Taiwanese dollars. A small portion of our operating results are driven by movements in currencies other than the euro, US dollar, Japanese yen, South Korean won, Taiwanese dollar or Chinese yuan.

In general, our customers run their businesses in US dollars and therefore a weakening of the US dollar against the euro might impact the ability or desire of our customers to purchase our products at quoted prices.

~~Inflation risk:~~ We are exposed to inflation for costs of goods, transport and wages as a result of supply shortages which may impact our profitability. Currently supply chain constraints has resulted in higher-than-normal inflation.

~~Partners~~

Our success ~~is highly dependent on the performance of a limited number of critical suppliers of single-source key components~~

~~Risk category: Supply chain disruption, Supplier strategy and performance~~

We rely on outside vendors for components and subassemblies used in our systems, including the design thereof. These components and subassemblies are obtained from a single supplier or a limited number of suppliers. As our business has grown, our dependence on single suppliers or a limited number of suppliers has grown, as the highly specialized nature of many of our components, particularly for EUV systems, means it is not economical to source from more than one supplier. Our sourcing strategy therefore (in many cases) prescribes 'single sourcing, dual competence'. Our reliance on a limited group of suppliers involves several risks, including a potential inability to obtain an adequate supply of required components or subassemblies, in a timely manner or at all, additional costs resulting from switching to alternate suppliers and reduced control over pricing and quality. Delays in supply of these components and subassemblies, which could occur for a variety of reasons, such as disruptions experienced by our suppliers, including work stoppages, fire, energy shortages, pandemic outbreaks, flooding, cyberattacks, sabotage or other disasters, natural and otherwise can lead to delays in delivery of our products which would impact our business. For example, certain of our suppliers experienced disruptions in their operations as a result of chip and material shortages. A prolonged inability to obtain adequate deliveries of components or subassemblies, or any other circumstance that requires us to seek alternative sources of supply, could significantly hinder our ability to deliver our products in a timely manner, which could damage relationships with our customers and materially impact our business.

The number of lithography systems we are able to produce may be limited by the production capacity of one of our key suppliers, Carl Zeiss SMT GmbH, which is our sole supplier of lenses, mirrors, illuminators, collectors and other critical optical components (which we refer to as optics). We have an exclusive arrangement (see related parties’ paragraph in our annual report) with Carl Zeiss SMT GmbH and if they are unable to maintain and increase production levels, we could be unable to fulfill orders, which could have a material impact on our business and damage relationships with our customers. If Carl Zeiss SMT GmbH were to terminate its supply relationship with us or if Carl Zeiss SMT GmbH is unable to maintain production of optics over a prolonged period, we would effectively cease to be able to conduct our business.

From time to time, we experience supply constraints which can impact our production, particularly during periods of increasing demand as we have experienced in 2021 and which we continue to experience. In 2021, we experienced some delays and shortages in our supply chain, resulting in a late start on the assembly of a number of systems. Also, in 2021, due to high demand, we have been reducing cycle time in our factory to ship more systems. One way to reduce cycle time is highly dependent on the performance of a limited number of
critical suppliers of single-source key components

Risk category:

Supply chain disruption, Supplier strategy and performance

From time to time, we experience supply constraints which can impact our production, particularly during periods of high levels of demand such as those we have experienced in 2022 and continue to experience. In 2022, we were impacted by delays and shortages in our supply chain, resulting in a late start on the assembly of a number of systems. In addition, due to high demand, we reduced cycle time in our factory to ship more systems. We have achieved this through a fast shipment process that skips some of the testing in our factory. Final testing and formal acceptance then takes place at the customer site. This leads to a deferral of revenue recognition for those shipments until formal customer acceptance, but does provide our customers with earlier access to wafer output capacity. We and our suppliers are investing in additional capacity to meet this demand however to increase capacity takes time and we may be unable to meet the full demand of our customers for a few years. Further, we face the risk that demand may not continue to increase which could result in overcapacity and loss of investment in increasing capacity.

~~In addition,~~ some of the testing in our factory. Final testing and formal acceptance then takes place at the customer site. This provides our customers with earlier access to wafer output capacity but also leads to a delay of revenue recognition for those shipments until formal customer acceptance. We and our suppliers are investing in additional capacity to meet the demand. However, increasing capacity takes time, and we may be unable to meet the full demand of our customers for a few years. Further, we face the risk that demand may not continue to increase, which could result in overcapacity and loss of investment in increasing capacity.

~~ASML ANNUAL REPORT 2021 118~~

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Risk factors (continued)

4. People

A high percentage of net sales is derived from
a few customers

Our business and future success depend on our ability to manage the growth of our organization
and attract and retain a sufficient number of adequately educated and skilled employees

Risk category:

Customer dependency

Risk category:

Human resources, Knowledge management, Organizational effectiveness

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Risk factors (continued)

Lead times in obtaining components have increased as our products have become more complex, and a failure by us to adequately predict demand for our systems or any delays in the shipment of components can result in insufficient supply of components, which can lead to delays in delivery of our systems and can limit our capabilities to react quickly to changing market conditions. Conversely, a failure to predict demand could lead to excess and obsolete inventory.

We are also dependent on suppliers to develop new models and products and to meet our development roadmaps. To the extent our suppliers do not meet our requirements or timetable in product development, our business could suffer.

~~A high percentage of net sales is derived from a few customers~~

~~Risk category: Customer dependency~~

Historically, we have sold a substantial number of lithography systems to a limited number of customers. Customer concentration can increase because of continuing consolidation in the semiconductor manufacturing industry. In addition, although the applications part of our holistic lithography solutions constitutes an increasing portion of our revenue, a significant portion of those customers are the same customers as those of our systems. Consequently, while the identity of our largest customers may vary from year to year, sales may remain concentrated among relatively few customers in any particular year. The recognized total net sales to our largest customer from each year accounted for €6,881.1 million, or 37.0% of total net sales in 2021, compared with €4,394.8 million, or 31.4% of total net sales in 2020. In 2021, 66.3% of total net sales were made to two customers. The loss of any significant customer or any significant reduction or delay in orders by a significant customer may have a material adverse effect on our business, financial condition and results of operations.

~~People~~

~~Our business and future success depend on our ability to manage the growth of our organization and attract and retain a sufficient number of adequately educated and skilled employees~~

~~Risk category: Human resources, Knowledge management, Organizational effectiveness~~

Our business and future success significantly depends upon our employees, including a large number of highly qualified professionals, as well as our ability to attract and retain employees. Competition for such personnel is intense and has intensified in the last year. Despite our ability to grow our employee base significantly, attracting sufficient numbers of qualified employees to meet our growing needs will remain a challenge. This risk of not being able to attract and retain qualified personnel increases as our business grows.

Our R&D programs require a significant number of qualified employees. If we are unable to attract sufficient numbers of qualified employees, this could affect our ability to conduct our R&D on a timely basis. Also, the loss of key employees for unexpected reasons like illness a risk.

Moreover, as a result of the uniqueness and complexity of our technology, qualified engineers capable of working on our systems are scarce and generally not available (e.g. from other industries or companies). As a result, we must educate and train our employees to work on our systems. Retention of those key employees is a critical success factor for us as a company.

Furthermore, the increasing complexity of our products results in a longer learning curve for new and existing employees and suppliers leading to an inability to decrease cycle times and may result in the occurrence of significant additional costs. Our suppliers face similar risks in attracting qualified employees, including attracting employees in connection with programs that will support our R&D programs and technology developments. To the extent that our suppliers are unable to attract qualified employees, this could impact our R&D programs or deliveries of components to us.

In recent years, our organization has grown significantly. As a result of this growth in a short period of time, we may be unable to effectively manage, monitor and control our employees, facilities, operations and other resources. Consistent pressure on our organization and people as a result of our growth may lead to wellbeing issues of our employees.

~~Operations~~

~~We may face challenges in managing the industrialization of our products and bringing them to high-volume production~~

~~Risk category: Product industrialization~~

Bringing our products to high-volume production at a value-based price and in a cost-effective manner, depends on our ability to manage the industrialization of our products and our ability to manage costs. Customer acceptance

5. Operations

We may face challenges in managing the industrialization of our products and
bringing them to high-volume production

We are dependent on the continued operation of a limited
number of manufacturing facilities

Risk category:

Product industrialization

Risk category:

Continuity of own operation

Bringing our products to high-volume production at a value-based price and in a cost-effective manner depends on our ability to manage the industrialization of our products and to manage costs. Customer adoption of our products depends on the performance of our products in the field. As our products become more complex, we face an increasing risk that products ~~that we develop~~ may not meet development milestones or specifications and ~~that our products~~ may not perform according to specifications, including quality standards. If our products do not perform according to specifications and performance criteria or if quality or performance issues arise, this may result in additional costs, reduced demand for our products and our customers being unable to meet planned wafer capacity.

In addition, when we are successful in industrializing new products, it can take years to reach profitable margins, as was the case for EUV 0.33 NA.

~~ASML ANNUAL REPORT 2021 119~~

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Risk factors (continued)

We face challenges to meet demand

The nature of our operations exposes us to health,
safety and environment risks

Risk category:

Manufacturing and install, Human resources, Supplier strategy and performance

Risk category:

Transitioning our newly developed products to full-scale production requires the expansion of our infrastructure, including enhancing our manufacturing capabilities, increasing supply of components and training qualified personnel, and may also require our suppliers to expand their infrastructure capabilities. If we or our suppliers are unable to expand infrastructure as necessary, we may be unable to introduce new technologies, products or product enhancements or reach high-volume production of newly developed products on a timely basis or at all.

~~In addition, when we are successful in industrializing new products, it can take years to reach profitable margins, as was the case for EUV.~~

New technologies might not have the same margins as existing technologies and we might not be able to adjust value-based pricing and or cost in an effective manner. In addition, the introduction of new technologies, products or product enhancements also impacts ASML’s liquidity, as new products may have higher cycle times to produce resulting in increased working capital needs. This impact on liquidity increases as our products become more complex and expensive.

The capability, capacity and costs associated with providing the required customer support function to cover the increasing number of shipments and servicing a growing number of EUV systems that are operational in the field could affect the timing of shipments, and the efficient execution of maintenance, servicing and upgrades, which is key to the systems continuing to achieve the required productivity.

~~We are dependent on the continued operation of a limited number of manufacturing facilities~~

~~Risk category: Continuity of own operation~~

All of our manufacturing activities, including subassembly, final assembly and system testing, take place in cleanroom facilities in Veldhoven, the Netherlands, in Berlin, Germany, in Wilton, Connecticut, US and in San Diego and San Jose, California, US, in Pyeongtaek, South Korea, in Beijing, China, and in Linkou and Tainan, Taiwan. These facilities may be subject to disruption for a variety of reasons, including work stoppages, fire, energy shortages, pandemic outbreaks, flooding, cyberattacks, sabotage or other disasters, natural and otherwise. We cannot ensure that alternative production capacity would be available if a major disruption were to occur.

~~The nature of our operations exposes us to health, safety, and environment risks~~

~~Risk category:~~ Environment, health and safety

Where we are able to increase our capacity, we are subject to increased risk of a downturn, as it becomes more difficult for us to reduce costs in the event of an industry downturn.

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Risk factors (continued)

Cybersecurity and other security incidents, or other disruptions in our processes or
information technology systems, could materially adversely affect our business operations

Risk category:

Security, Information technology, Process effectiveness and efficiency

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Risk factors (continued)

6. Legal and compliance

We are subject to increasingly complex regulatory
and compliance obligations

Changes in taxation could affect our
future profitability

Risk category:

Violation of laws and regulations

Risk category:

Violation of laws and regulations

We are subject to income taxes in the Netherlands and the other countries in which we are active. Our effective tax rate has fluctuated in the past and may fluctuate in the future.

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Risk factors (continued)

7. Other risk factors

COVID-19 or other pandemics may impact our operations

Restrictions on shareholder rights may dilute voting power

We may not declare cash dividends, conduct share buyback programs or cancel shares at all or in any particular amounts in any given year

We may be impacted by the Russia–Ukraine conflict

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SMALL PATTERNS. BIG IMPACT.

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						VIRTUAL AND AUGMENTED REALITY
						Virtual reality, unreal opportunities
						There’s more to virtual reality (VR) and augmented reality (AR) than gaming. At ASML, these technologies are helping us design, build and maintain some of the world’s most complex machines. Through VR and AR, our teams are able to manipulate designs and learn how to maintain systems – in some cases, many years before the machines themselves physically exist.
						Read more online

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ESG at a glance

We aim to be a leader in sustainability, and to continue driving progress toward
inclusive and sustainable growth for all.

Our vision

Our contribution to a
digital, sustainable future

We want to contribute to expanding computing power but with minimal waste, energy use and emissions. That's why we focus on energy efficiency, climate action and circular economy.

Our vision at ASML is to enable ground-breaking technology that solves some of humanity’s toughest challenges.

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

How we report on our ESG progress

SDGs we align with

ESG Sustainability chapters

Environmental

–Energy efficiency and climate action

Read more on page 76 >

–Circular economy

Read more on page 85 >

Social

–Attractive workplace for all

Read more on page 97 >

–Our supply chain

Read more on page 109 >

–Innovation ecosystem

Read more on page 118 >

–Valued partner in our communities

Read more on page 124 >

Governance

133

–Managing ESG sustainability

Step 2:

Identify actual and potential impacts

Step 3:

Assess the significance of the impacts

Step 4:

Prioritize the most significant impacts

–'Human capital development' is no longer a material topic, although the assessment shows that ASML has a positive impact by providing training and career development opportunities for employees.

–'Customer intimacy' is no longer a material topic now that impact is the sole criterion for materiality in the updated GRI standards.

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Our material ESG sustainability topics (continued)

Material topics 20221

Topic name

Topic definition (impacts covered)

Positive or negative impact

Actual or potential impact

Impact area value chain

Energy management and carbon footprint – Product use and downstream

a) Energy-efficiency products (EUV, DUV)
b) Energy consumption (EUV, DUV)
c) Scope 3 downstream emissions

Negative

Actual

Downstream customers and society

Energy management and carbon footprint – Supply chain

a) Energy management supply chain
b) Scope 3 upstream emissions

Negative

Actual

Upstream suppliers and partners

Energy management and carbon footprint – Operations

a) Energy use within and management of own buildings and factories
b) Reduction of energy consumption
c) Use of renewable energy for our operations
d) Resulting scope 1 and 2 GHG emissions

Negative

Actual

Own operations

Circular economy

a) Waste generated through operations (e.g. waste from parts, packaging, construction,
hazardous waste and other waste directed to disposal)
b) Use of non-renewable materials and resources

Negative

Actual

Entire value chain

Positive

Actual

Entire value chain

Diversity and inclusion

Positive

Actual

Own operations

Talent attraction, employee engagement and retention

Positive

Actual

Own operations

Occupational health and safety

Negative

Potential

Own operations

Responsible supply chain and product stewardship

Negative

Potential

Upstream suppliers and partners

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Our material ESG sustainability topics (continued)

Topic name

Topic definition (impacts covered)

Positive or negative impact

Actual or potential impact

Impact area value chain

Innovation ecosystem

a) Innovation partnerships
b) Innovation pipeline
c) In-kind support startups and scaleups
d) EU public-private R&D innovation projects
e) Knowledge management

Positive

Actual

Entire value chain

Community engagement

a) Local community impacts, including housing, talent pipeline (region), mobility and infrastructure,
social cohesion, neighbor (local) impact

Negative

Actual

Own operations

b) Local community impacts, including economic growth, local tax contribution and job creation
c) Philanthropy, including local community engagement and development programs

Positive

Actual

Own operations

1.Although Biodiversity was added as a topic in the 2022 materiality assessment, our impact on this topic was assessed and in comparison to other topics it was not considered material.

Contributing to the UN’s Sustainable Development Goals

Adopted by all member states in 2013, the UN’s 2030 agenda for sustainable development provides a shared blueprint for peace and prosperity, for people and planet, now and in the future.


We believe that increasing digitalization opens the way to a society that is more environmentally and socially sustainable.

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Environmental at a glance

We are committed to reducing our environmental footprint both from our operations and the use of our products and services.



			What we do
			We develop lithography technology that enables manufacturers to make more energy-efficient microchips. Reducing our environmental footprint and managing our waste – both from our operations and in the use of our products and services – is key to our ESG practices.
			Our aims
			As the world continues to increase its dependence on technology to solve some of its most pressing challenges, our role is to help make this happen by expanding the availability of the necessary computing power. Our ambition is to achieve carbon neutrality with net zero emissions in our operations (scope 1 and 2) by 2025. We aim to achieve net zero emissions in our supply chain (scope 3) by 2030, and net zero emissions from the use of our products by our customers (scope 3) by 2040. In addition, our goal is to have zero waste from operations to landfill or incineration by 2030. We focus on energy efficiency – not only in our business but also by addressing the amount of energy that semiconductors require in operation. We are also working hard to manage our own waste streams and improve the circularity of our value chain. Our actions are closely aligned to two SDGs in particular – SDG 13 (Energy efficiency and climate action) and SDG 12 (Circular economy).

Energy efficiency and
climate action

Read more on page 76 >

SDG 13

Take urgent action to combat climate change and its impacts by regulating emissions and promoting developments in renewable energy

–Energy management and carbon footprint: Operations (Scope 1 and 2)

–Energy management and carbon footprint: Supply chain, business travel and commuting (Scope 3)

–Energy management and carbon footprint: Product use at our customers (Scope 3)

Circular economy

Read more on page 85 >

SDG 12

–Reduce waste in our operations

–Re-use parts and materials

–Refurbish mature products

–Water management

Ensure sustainable consumption and production patterns

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Energy efficiency and climate action

38.1 kt

1.11 kt

Scope 1 and 2 CO2e emissions (2025 target: net zero)

Scope 3 CO2e emissions intensity (per €m gross profit)

(2025 target: 1.02)

0.56 kt

11.9 Mt

Net scope 3 CO2eemissions intensity (per €m revenue)

Scope 3 CO2e emissions (2040 target: net zero)

8.27 kWh

NXE energy use per exposed wafer pass (NXE:3600D, measured in 2021) (2025 target: 5.1 kWh)


			IN THIS SECTION
			78			Our overall performance in 2022
			79			Energy management and carbon footprint: Operations (scope 1 and 2)
			81			Energy management and carbon footprint: Supply chain, business travel and commuting and product use at our customers (scope 3)

Our approach

We have set out the following milestones and focus areas to help us achieve this:

1.Energy management and carbon footprint – Operations (scope 1 and 2): net zero emissions by 2025

2.Energy management and carbon footprint – Supply chain (scope 3): reduce net scope 3 upstream emissions to zero by 2030 and net zero scope 3 emissions from business travel and commuting by 2025

3.Energy management and carbon footprint – Product use at our customers (scope 3): net zero scope 3 emissions from product use by 2040

In this section, we will elaborate on our approach and explain how we aim to achieve our targets in the context of our focus areas.

Energy efficiency and climate action

SDG target

How we measure
our performance

SDG target 13.1

Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries

–Scope 1 and 2 CO2e emissions

–Scope 3 CO2e emissions intensity (per €m gross profit)

–Net scope 3 CO2eemissions intensity (per €m revenue)

–Scope 3 CO2e emissions

–NXE energy use per exposed wafer pass

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Energy efficiency and climate action (continued)


The following diagram illustrates our journey to net zero emissions in our value chain:



			Our journey to net zero emissions in our value chain
			Our goal is to achieve the following milestones in our journey toward net zero emissions in our value chain by 2040, for each of our impact areas: –2025: Net zero scope 1+2 emissions –2025: Net zero scope 3 emissions from business travel and commuting –2030: Collaborating with our suppliers, reduce net scope 3 upstream emissions to zero –2040: Collaborating with our customers and peers, reduce net scope 3 emissions from product use to zero Our approach to achieving net zero emissions is based on four pillars: 1.Analyzing energy use and greenhouse gas (GHG) emissions to learn about improvement options 2.Innovating in energy efficiency, and redesigning our assets, products and processes to minimize environmental impact

Our environmental management system



3.Aiming to lead on the shift toward 100% credible, renewable energy
4.Compensating residual emissions to achieve our targets if no reasonable other improvement actions are available
We recognize that we cannot do any of this alone, which is why we collaborate closely with our employees, suppliers, customers, peers and society. We identify and assess the impact of climate-related risks and opportunities using the assessment guidelines of the Task Force on Climate-related Financial Disclosures (TCFD).
Read more in:
Our TCFD Recommendations: climate-related disclosure, available on www.asml.com.

This certification gives our stakeholders confidence in our commitment to achieving our environmental goals.

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Energy efficiency and climate action (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Climate action

Net zero

Scope 1 – Direct emissions from fossil fuels in our operations (kton)

15.4

19.3

17.3

•

Net zero

Scope 2 – Indirect emissions from energy consumption (kton) [market-based]2

0.0

20.1

20.8

•

Net zero (2040)

Scope 3 – Indirect emissions from total value chain (kton)

8,800.0

11,400.0

11,900.0

•

Total footprint (in kton)1

8,815.4

11,439.4

11,938.1

n/a

Scope 3 CO2e emissions intensity (per €m revenue)

0.63

0.61

0.56

n/a

1.02

Scope 3 CO2e emissions intensity (per €m gross profit)

1.29

1.16

1.11

•

n/a

Reduction in GHG emissions from projects (kton)

n/a

2.6

n/a

Energy efficiency

5.1

Products – NXE energy use per wafer (in kWh)

9.64 (NXE:3400C)

8.27 (NXE:3600D)

•

n/a

Products – NXT energy use per wafer (in kWh)

0.45 (NXT:2050i)

0.48 (NXT:1980Ei)

0.46 NXT:2100i

n/a

Energy consumption (in TJ)

1,412

1,689

1,633

n/a

100 TJ

Energy savings worldwide through projects (in TJ)3

113.9

12.7

19.0

•

100%

Renewable electricity (of total electricity purchased)

100

•

(10)%

Energy consumption (NXE) (reduction in % of baseline 2018 1.4 MW)

(6)% (NXE:3400C)

(6)% (NXE:3600D)

•

n/a

Throughput (in wph) (NXE)

136 (NXE:3400C)

160 (NXE:3600D)

n/a

(60)%

Energy use per exposed wafer pass (NXE) (reduction in % of baseline 2018)

(26)% (NXE:3400C)

(37)% (NXE:3600D)

•

2.We report the market-based emissions after purchase of EACs. ASML currently does not offset any of the remaining emissions, resulting in no differences between our gross and net emissions.

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Operations (scope 1 and 2)

Our approach

Scope 1 emissions

Scope 2 emissions

We aim to achieve our targets for scope 1 and 2 by:

1.Reducing energy consumption

2.Using renewable energy

3.Compensating CO2 emissions

Our targets

Our performance in 2022

Scope 1 emissions

Our gross scope 1 emissions decreased from 19.3 kt in 2021 to 17.3 kt in 2022, despite our sales growing by 13.8%.

Scope 2 emissions

One of the most important challenges for us in achieving our net zero emissions target is the procurement of credible renewable energy in Taiwan and South Korea.

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Energy efficiency and climate action (continued)

Our actions in 2022

1. Reducing energy consumption and use of natural gas

Out of over 80 projects, the six key projects and the expected annual energy savings are shown below.



The table below includes six key projects that support the masterplan and will help to realize savings between 2021 and 2025:

Key projects	Location	Total estimated energy saving – annual (TJ)	Estimated natural gas reduction (TJ)	Estimated electricity reduction (TJ)
Energy grid	Veldhoven	50	40	10
Implement adiabatic humidification and elimination of steam generation	Veldhoven	12	12	0
Renewable energy generation (solar panels)	Veldhoven	3	0	3
Onsite renewable electricity generation (solar panels)	San Diego	8	0	8
Replacement of chillers	Wilton	3	0	3
HVAC energy consumption and improving (set points)	Taiwan	3	0	3
Total		79	52	27

In 2022, the key projects executed in the Netherlands, Wilton and Taiwan resulted in ~19 TJ savings:

–2.9 TJ per year through further operationalization of the 4,846 m2 solar panels installed on our campus in Veldhoven

–11 TJ savings in 2022 in the Netherlands through the completion of our largest project. This will result in annual savings of around 11 TJ in the years ahead

–3 TJ savings in Wilton by replacing chillers with new high-efficiency variable-speed chillers which reduce energy consumption

–3 TJ savings in Hsinchu, Taiwan, by optimizing the use of air-conditioning systems through time-outs.

2. Using renewable energy

Our ambition is to increase the share of direct green energy purchases (so-called bundled renewable electricity) from renewable electricity produced close to our premises.

3. Compensating for CO2 emissions

We aim to use renewable energy as much as possible. Where this is not feasible, we would purchase voluntary emission reduction certificates (VER).

Action plans for 2022-2025

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Supply chain, business travel and commuting (scope 3)

Our approach

Our targets

We are working toward reducing our upstream emissions toward net zero by 2030. An element of this target is business travel and commuting, for which we have set a net zero target by 2025.

Our performance in 2022

Our actions in 2022

Improving our scope 3 emission data quality

We calculate our scope 3 emissions using guidance from the Greenhouse Gas Protocol – the organization that provides widely used international standards for emissions reporting. We continuously seek to improve the data quality of our scope 3 calculations. In past years, we have reported scope 3 emission data with a one-year lag, but in 2022 we made efforts to collect the emissions data in a more timely manner. For 2022, we are now able to report nine months of actual data and three months of estimated data. In the 2023 reporting year, we will adjust the 2022 figure reported with full-year actual 2022 data.

The next step in improving our data quality is to include actual supplier emissions data in our calculation for scope 3. This will enable us to obtain more reliable scope 3 emission data, because for supplier data we currently use the spend-based methodology for calculating emissions. In 2022, we made progress by requesting CO2e emission data directly from our suppliers through our Supplier Sustainability Program. That data was not used in the emission calculations for 2022. Recognizing that we depend on our suppliers, we also encourage our value chain partners to work with us to jointly reduce our carbon footprint.

Improving access and mobility

Action plans for 2022-2025

We remain on track to achieve our overall scope 3 target. Our Supplier Sustainability Program is a key enabler in our efforts to further reduce scope 3 emissions.

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Energy efficiency and climate action (continued)

Energy management and carbon footprint: Product use at our customers (scope 3)

Our approach

As the demand for enhanced chip functionality grows, the complexity and energy consumption of the overall microchip patterning process, including from our lithography systems, is also increasing.

We recognize that tackling all these challenges requires ongoing innovation and collaboration within our innovation ecosystem of customers, suppliers and knowledge institutions.

Our targets

We have set a target to reduce the overall energy consumption of our future-generation EUV systems by 10% compared with the 2018 baseline model (NXE:3400B) by 2025, while increasing productivity. We have also set a target of reducing the energy consumption per exposed wafer by 60%, compared with the 2018 baseline (NXE:3400B).

Our actions in 2022

In 2022, we continued working on energy-efficiency improvements for future products, which require long lead times and take multiple years to achieve. Progress on these projects is monitored on a quarterly basis. We believe we are on track to achieve our targets of 10% EUV system energy consumption reduction by 2025 and 60% reduction in energy use per exposed wafer with NXE:4000.

In 2022, we proved the capability of the NXE:3600D system to reach productivity targeting 175 wph (as compared with the current specification of 160 wph). In 2023, this will be introduced to the market as the NXE:3600 PEP-D package.

We have begun to better assess the energy efficiency of our other product families – in DUV, metrology and inspection, computational lithography and scanner and process control software solutions.

Regarding our scope 3 product use initiative of net zero emissions in 2040, we are one of the founding members of and active contributor to the Semiconductor Climate Consortium, founded in November 2022 and focused on speeding up industry value chain efforts to reduce greenhouse gas emissions.

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Energy efficiency and climate action (continued)

The table below provides an overview of the system achievements in terms of output and energy-efficiency improvements to achieve this output.

Platform1

DUV
immersion

System type

NXT:1980Di

NXT:2000i

NXT:2050i

NXT:1980Ei

NXT:1960Bi + PEP-B

NXT:2100i

Year of energy measurement

2015

2017

2020

2021

2022

Energy consumption (in MW)

0.14 MW

0.13 MW

0.14 MW

0.13 MW

0.14 MW

Throughput (wph)

275

295

250

295

Energy use per exposed wafer pass (in kWh)

0.51 kWh

0.45 kWh

0.48 kWh

0.51 kWh

0.46 kWh

Platform1

DUV
Dry

YieldStar

System type

XT:860M

XT:1460

NXT:1470

XT:860N

NXT:870

YS350E

YS375F

YS-380

Year of energy measurement

2017

2020

2022

2017

2019

2020

Energy consumption (in MW)

0.07 MW

0.06 MW

0.11 MW

0.06 MW

0.12 MW

0.01 MW

Throughput (wph)

240

209

277

260

330

n/a

Energy use per exposed wafer pass (in kWh)1

0.28 kWh

0.27 kWh

0.38 kWh

0.24 kWh

0.36 kWh

n/a

Platform1

EUV

20 mJ/cm2 dose

EUV

30 mJ/cm2 dose

System type

NXE:3350B

NXE:3400B

NXE:3400C

NXE:3600D

Year of energy measurement

2015

2018

2020

2021

Energy consumption (in MW)

1.15 MW

1.40 MW

1.31 MW

1.32 MW

Throughput (wph)

107

136

160

Energy use per exposed wafer pass (in kWh)

19.49 kWh

13.08 kWh

9.64 kWh

8.27 kWh

1.Dose energy in mJ refers to the energy required per expose per cm2.

Action plans for 2022-2025

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Energy efficiency and climate action (continued)



			Advanced patterning with EUV helps to limit growth in energy and water use and GHG emissions

More advanced microchips mean smaller features, which need shorter wavelengths in lithography to manufacture them. With a single exposure of DUV light at 193 nm, for example, the smallest feature of the image of a microchip pattern reaches its physical limit around 40 nm. However, by using two or more exposures of the same pattern – so-called multiple patterning – it is possible to image details at 20 nm with two exposures, or at 10 nm with four exposures and additional process steps.

Compared to DUV, EUV at 13.5 nm enables a more efficient chip-manufacturing process. Because of the higher resolution of an EUV system, several exposures and process steps can be replaced by a single exposure and fewer process steps to pattern a certain layer of a chip. According to a study conducted by imec, EUV enables the number of non-lithography processing steps for some critical layers to be reduced by up to three to five times – and this significantly reduces production cycle time. The fab also benefits from reduced energy and water usage, resulting from the lower number of deposition, etching and cleaning steps.

Source: M. Garcia Bardon et al., DTCO including Sustainability: Power- Performance-Area-Cost-Environmental score (PPACE) Analysis for Logic Technologies, IEDM2020.



			Creating EUV light

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Circular economy

Minimizing waste and maximizing resources to extract the greatest value from
the materials we use, and repurposing our products across their life cycles

315 kg

75%

Waste generated per €m revenue (2025 target:
209 kg)

Recycling rate (excluding construction) (2025 target: 90%)

95%

€0.8bn

% of systems sold in the past 30 years still active in the field (2025 target: >95%)

Savings from re-used parts

87%

€232m

Re-use rate of parts returned from field and factory (2025 target 95%)

Value of scrapped parts and packaging

6,675 t

Total waste from operations (excluding construction)



			IN THIS SECTION
			87			Our overall performance in 2022
			88			Reduce waste in our operations
			91			Re-use parts and materials
			94			Refurbish mature products
			95			Water management

Our approach

At ASML, we believe the circular economy is vital to ensure the future success and competitiveness of the semiconductor industry. Our commitment to a circular economy is intended to ensure that any materials we use can retain and generate as much value as possible for us and for our partners in the ecosystem. Our strategy is to eliminate waste to avoid negative impacts on the planet and also to generate business value. We do this by aiming to:

–Reduce waste in our operations

–Re-use parts and materials

–Refurbish mature products



€781 million
Savings from re-used parts

Circular economy

SDG target

How we measure
our performance

SDG target 12.2

By 2030, achieve the sustainable management
and efficient use of natural resources

–Recycling rate

–Supplier spend covered with commitment to sustainability (LOI)

SDG target 12.5

By 2030, substantially reduce waste generation through prevention, reduction, recycling and re-use

–Reduction in waste

–Increase in re-use of parts

–Decrease in scrapped parts and packaging

–Lifetime extension of systems still active in the field

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Circular economy (continued)

–We learn to improve our understanding and data around resources and waste flows.

–We rethink designs and processes to avoid environmental impact.

–We extend the lifetime and productivity of systems to maximize resource value.

–We re-use resources within our own value chain, to minimize our waste streams.

–We recycle materials to give resources a new life, if we can no longer re-use those resources ourselves.

The following diagram illustrates our circular economy approach.

Our circular economy approach

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Circular economy (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Circular economy	>95%	% of systems sold in the past 30 years still active in the field	n/a		94	%	95	%	•
	95%	Re-use rate of parts returned from field and factory	n/a		85	%	87	%	•
	No target	Savings from re-used parts (€, in millions)1,2	551		686		781		n/a
	No target	Value of scrapped parts and packaging (€, in millions)2	n/a		269		232		n/a
	209 kg/€m	Total waste from operations (excl. construction) normalized to revenue	360		305		315		•
	90%	Recycling rate (excl. construction)	85	%	77	%	75	%	n
	No target	Total waste from operations (excl. construction)3	5,026		5,679		6,675		n/a

1.This reporting indicator follows the principle of prior-year indicator ‘Value of parts re-used (in € millions): however, there has been a modification in the methodology and scope:

–For the re-used parts, the value component has been modified from 100% standard cost price to 100% standard cost price less standard reconditioning costs.

Due to the expansion in scope for this indicator, the comparative figures have been recalculated to reflect fair presentation.

2. A limited portion of data is not readily available, therefore the figures in the table are best estimates that contain some uncertainty.

For more on our performance indicators (PIs) and related results, please read:

Non-financial statements – Non-financial indicators – Circular economy.

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Circular economy (continued)

Reduce waste in our operations

Our approach

Our targets

We have set two ambitious targets to reduce waste in our operations:

–By 2025 we aim to have halved waste generation
(209 kg waste generated per €m revenue as compared with a 2019 benchmark of 417 kg waste generated per €m revenue).

–By 2030 we aim to send zero waste from operations to landfill or incineration.

Our performance in 2022

The reduction of our waste is explained below in more detail, via the different waste streams.

Understanding our waste flows

Within our operations, the main waste streams are:

–Hazardous waste, such as the chemicals we use in our manufacturing processes.

Distribution of waste streams
(total: 6,913 tonnes)



Non-hazardous waste recycling	71	%
Non-hazardous waste disposed	24	%
Hazardous waste recycling	4	%
Hazardous waste disposed	1	%

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Circular economy (continued)



95%
of our total waste in 2022 was non-hazardous waste

Our non-hazardous waste performance in 2022

Non-hazardous waste accounted for 95% (2021: 93% (5,483 tonnes)) of our total waste in 2022, of which the vast majority was recycled (75%).

Distribution of non-hazardous waste

(total: 6,533 tonnes)


Wood	31	%
General waste	24	%
Paper and cardboard	13	%
Electronics	6	%
Metals	7	%
Other non-hazardous waste	5	%
Plastic	5	%
Organic waste	5	%
Construction waste	4	%

Our hazardous waste performance in 2022

The use of hazardous substances means that we are subject to a variety of governmental regulations relating to environmental protection ~~and~~as well as employee and product health and ~~safety, including~~safety. These include the transport, use, storage, discharge, handling, emission, generation and disposal of ~~toxic or other~~ hazardous substances.

In 2022, hazardous waste accounted for 5% (380 tonnes) of our total waste generated, compared with 7% (395 tonnes) in 2021. Of this, 81% was recycled.

Distribution of hazardous waste
(total: 380 tonnes)


Hazardous liquids	91	%
Other hazardous waste (e.g. packaging, filters, lamps, etc.)	6	%
Cleaning wipes	2	%
Batteries	1	%

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Circular economy (continued)

Our actions in 2022

Non-hazardous waste

We worked to reduce non-hazardous waste through several ongoing programs, such as:

–Cross-sector re-use program, which added €400 million of re-usable parts value in our circular flows in 2022. We plan to add a further €450 million in 2023.

Improving data on our hazardous and
non-hazardous waste streams

In the context of improving data, in 2023 we aim to include ASML waste generated by third-party warehouses as a first step toward including downstream waste – we are already preparing the required processes to enable the relevant data collection for this. On our campuses we aim to ensure maximum waste separation onsite (in order for waste vendors to more easily recycle) and we are working on getting agreements included in contracts with waste vendors to maximize recycling.

Action plans for 2022-2025

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Circular economy (continued)

Re-use parts and materials

Our approach

Our targets

Our overall target is to increase our rate of re-use of defective parts in ASML factories and in the field to 95% by 2025.

To achieve our ambition, we focus on:

–Design for re-use by focusing on more robust and repairable designs at an early stage of development

–Return of transportation packaging and materials for shipments to our customers, for re-use

–Repair at local repair centers to improve parts repair yields by reducing cycle time of root-cause analysis and repairs

–Remanufacture modules and parts that return from the field to as-new quality, also to use in new build systems

–Harvesting of end-of-life parts through disassembly to re-use subcomponents

Our performance in 2022

In 2022, our re-use rate of defective parts was 87% (85% in 2021). Our savings from re-used parts amounted to €781 million and the value of scrapped parts and packaging was €232 million.

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Circular economy (continued)

Our actions in 2022

Design for re-use

Re-use requirements are now part of the core product design strategy and specifications. For example, through the modular design of our products and their components, we make sure that future upgrades, worn parts and components can be replaced as a single unit. By ensuring commonality in the parts design process, a part can be used in multiple contexts in a product and even in future product generations.

Managing reverse flows for re-use

We are continuing to work to resolve bottlenecks in the execution of re-use and to clarify direction, guidelines and re-use rules across the business.

Return for re-use of transportation materials

When modules and systems are shipped, either from our suppliers to our factories or from our factories to our customers, many transportation materials are used – such as packaging, locking and plug materials – to ensure that the products arrive safely. Instead of being thrown away, these are re-used. Before these parts are returned for re-use, they undergo an identification process and quality check, followed by the logistical and financial processes required to bring them back in the supply chain (either to the original module suppliers or to ASML). Our goal is to standardize these processes and create a network-related solution to enable high flexibility and reduce transport, which also reduces our CO2e footprint.

We are improving the re-use of packaging, locking and transport materials from the field and factory, and aim to return and re-use 80% or more in the next installation or relocation.

Local repair centers

Our repair centers partner with local material suppliers and specialized repair partners, creating a local ecosystem. By enabling repair and re-use activities and taking ownership of repairs in the field close to our customers, we are able to reduce logistics time, the costs of stocking parts and our environmental impact (by reducing scrap and waste and greenhouse gas emissions). Our customers benefit from reduced service costs and improved material availability.

A single quality standard for both new and
re-used parts



87%
Re-use rate of defective parts in 2022

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Circular economy (continued)

Our achievements on re-use in 2022

The Wilton EHS overseas CRE Re-use program is another example of how re-use can deliver key benefits. When an employee or department has a piece of equipment or furniture that is in good condition and can be re-used onsite, a picture of the item is placed on the CRE Re-use Wilton SharePoint page. If an ASML employee sees something they can use, they reach out to CRE EHS and our technicians will deliver the item. So instead of scrapping work benches, cabinets or machines, we are re-using these items onsite.

We further embedded our re-use commitment by enhancing our Supplier Sustainability Program.

Read more in:

S ocial - Our supply chain.

Re-use challenges and roadmap

However, to fully embed our re-use vision, we recognize that there are several challenges to overcome and processes to be defined. These include:

–Organization: Across our operations, there are a variety of separate processes related to return and re-use. We need to align these to an overall end-to-end re-use process flow.

–Repair engineering and processes: Part of our new focus is creating awareness regarding design for re-use, and defining processes around how to include re-use in redesigns and engineering changes.

Action plans for 2022-2025


4x
the value handled by our local repair centers in 2022

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Circular economy (continued)

Refurbish mature products

Our approach

Our approach is to have more than 95% of systems sold in the past 30 years, still active in the field.

Our refurbishment strategy focuses on buying back systems that are not operational in the field, harvesting parts from decommissioned systems and managing the continued availability of spare parts, which is key to the extended lifetime service we offer for our systems. We provide our customers with a guaranteed service roadmap until at least 2030. This means that all support and the necessary services and spare parts they need to maintain their systems are expected to be available through at least 2030 and beyond.

Our performance in 2022

Our actions in 2022

We are making significant investments to ensure continued supply of more than 2,000 service parts for our PAS platform, either through redesigns, a parts harvesting strategy or finding an alternative with the same form, fit and function. In instances where this does not work, we are generally able to secure components through Last Time Buy – a supplier’s ‘last call’ for a part or component before production switches to its successor. Over time, when a part is no longer available, we redesign parts.


			95% of all systems sold in the past 30 years still active in the field

Action plans for 2022-2025

No additional actions, as we are on track to meet our target of 95%.

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Circular economy (continued)

Water management

Semiconductor manufacturing processes use a great deal of water. Due to climate change, droughts have become more extreme and more unpredictable, which may lead to water becoming a scarce resource in specific locations. Although water is an essential resource in our customers’ semiconductor manufacturing processes, water use in our own operations is limited. ASML’s products use water mainly in three ways. First, water is used to remove heat loads, to keep the system on a constant temperature. These internal cooling circuits are all designed as ‘closed-loop’ (recycling) systems. Second, these heat loads are ultimately removed by cooling towers, using evaporation of (lower-quality) water. Third, DUV systems use ultrapure water in the immersion hood – this water is currently only partially recycled.

Water consumption at ASML is only a fraction of the water consumption of most companies in the semiconductor industry. Nevertheless, we promote the responsible use of water throughout our company. Our water consumption in 2022 increased to 1,161,850 cubic meters, up from 1,041,000 cubic meters in 2021. This increase can primarily be attributed to more cooling water being used in Veldhoven due to higher power consumption, driven by an increase in the number of systems produced and warmer weather in 2022. In addition, ~~operating~~more people were working in the office and factory compared with 2021. In San Diego, the HVAC cooling tower water cleanliness set point was modified, resulting in an increased automated flushing of the system.

While disruptions in access to water may represent a significant risk for some of our ~~systems (which use lasers~~customers, water-related risk for ASML is limited. We have seven manufacturing sites located in Veldhoven (Netherlands), San Diego (US), Wilton (US), Linkou (Taiwan) and Tainan (Taiwan).

Read more in:

Our TCFD Recommendations – Climate-related disclosure, available on www.asml.com.

ASML ANNUAL REPORT 2022

SOCIAL

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

Social at a glance

We aim to have a positive role in society for our employees, the communities around us and everyone involved in our innovation ecosystem and supply chain.

What we do

Our aims

Attractive workplace for all

Read more on page 97 >

SDG 4 and 8

–Inspiring a unified culture

–Best employee experience

–Enabling strong leadership

–Ensuring employee safety

Our supply chain

Read more on page 109 >

SDG 8 and 12

–Supplier performance and risk management

–Responsible supply chain

Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all/Ensure sustainable consumption and production patterns

Innovation ecosystem

Read more on page 118 >

SDG 9

–Partnerships for research and development

–Supporting startups and scaleups

Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

Valued partner in our communities

Read more on page 124 >

SDG 4 and 11

–Education

–Arts & culture

–Local outreach

Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all/Make cities and human settlements inclusive, safe, resilient and sustainable

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Attractive workplace for all

Empowering individuals for the collective good to ensure our employees are proud to work for us and engaged with our ambitions as a company.



6.0%			37,643
Attrition rate (2025 target: <7%)			Total employees (FTE)1 EMEA 21,267 Asia 8,871 US 7,505

78%		(-4%)	24%
Employee engagement score against benchmark (2025 target -2% vs. top 25% performing companies)			Gender diversity (% females’ inflow) (2024 target: 23%)

143
Nationalities

IN THIS SECTION
98	Our overall performance in 2022
99	Inspiring a unified culture
101	Best employee experience
106	Enabling strong leadership
107	Ensuring employee safety

Our approach

ASML’s people vision sets out our ambition for the future, supporting our values and what we stand for: We empower each other ~~potentially hazardous systems)~~to thrive, fueling our growth, happiness and business success.

To deliver on our long-term people vision, we focus on three key areas:

–Inspiring a unified culture;

–Providing the best possible employee experience; and

–Enabling our leadership to bring out the best in our people.

Our approach to foster an attractive workplace for all is set out in the following pages.

1.This FTE number excludes Berliner Glas (ASML Berlin GmbH).

Attractive workplace for all

SDG target

How we measure our performance

SDG target 4.3

By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university

–Employee training and development indicators

SDG target 8.1

Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries

–Financial performance

SDG target 8.2

Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value-added and labor-intensive sectors

–Employee engagement score

SDG target 8.5

By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

–Workforce data including diversity and inclusion

–Fair remuneration pay ratio

SDG target 8.6

By 2020, substantially reduce the proportion of youth not in employment, education or training

–Employee attrition rate

–New hires

SDG target 8.8

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

–Employee safety indicators

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Attractive workplace for all (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Attractive workplace for all	Be on par with benchmark target: 2% below benchmark of top 25% performing companies	Employee engagement score	80	%	78	%	78	%	•

	No target	Employee growth (new hires and rate)	1,932 (8%)		4,373 (15%)		7,130 (21%)		n/a
	<7%	Attrition rate	3.8		5.4		6.0		•
	20% (in 2024)	Gender diversity – % females inflow job grade 13+	n/a		12%		35%		•
	12% (in 2024)	Gender diversity – % females job grade 13+	n/a		8	%	10%		•
	NL top 10 Taiwan top 20 S Korea top 20 US top 75 China top 100	Attractiveness to talent (employer brand score)1	NL 10 Taiwan 22 S Korea 24 US3 177 China 168		NL 6 Taiwan 6 S Korea2 14 US3 177 China 148		NL 4 Taiwan 6 S Korea n/a US 159 China 188		n
	0.16 (2022)	Recordable incident rate	0.18		0.17		0.18		n
	Target is relative to the score of the top 25% of performing companies by +/-3%) (2024)	Inclusion index	73	%	83	%	85	%	•
	23% (in 2024)	Inflow % female	23	%	21	%	24%		•
	No target	Total employees	Total 26,481 Male 83% Female 17% Asia 6,057 EMEA 14,714 US 5,710		Total 30,842 Male 82% Female 18% Asia 7,430 EMEA 17,230 US 6,182		Total 37,643 Male 80% Female 19% Unknown 1% Asia 8,871 EMEA 21,267 US 7,505		n/a
	No target	Number of nationalities	120		122		143		n/a

For more Attractive workplace for all related performance indicators (PIs), see:

Non-financial statements – Non-financial indicators – Attractive workplace fo r a l l.

1.Employer brand ranking from Universum: engineering students.

2.As of 2021, overall ranking for South Korea is no longer conducted by Universum. The result reported for 2021 is based on a customized ranking report.

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Attractive workplace for all (continued)

Inspiring a unified culture

Our approach

Our Diversity and Inclusion Strategy

Our roadmap focuses on three key areas:

Talent

Leadership

Attract and retain employees by ensuring that they are valued, supported with feedback and
can grow their careers

Enabling our leaders to demonstrate commitment, accountability and role-model behavior to advance
inclusion within their teams

Culture

Cultivate and promote an inclusive culture that equips employees to challenge norms and increase collaboration

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100

Attractive workplace for all (continued)



24%
of our new hires were women in 2022

85%
2022 inclusion score

Our targets

–Reach 23% women new hires by 2024

–Reach 12% women at leadership levels by 2024

–Reach 20% inflow of women to leadership levels by 2024

More information about the diversity of our Supervisory Board and Board of Management can be ~~dangerous~~found in:

Corporate Governance - Other Board-related matters - Diversity.

Our performance in 2022

To do this, we are focusing on the growth of our existing team members and expanding the diversity of our talent pool. In 2022, 24% of new hires were female.

Our actions in 2022

To promote diversity and inclusion in our workforce, we are building and implementing programs that lead to measurable and actionable results. During 2022, we:

–Facilitated over 20 D&I internal training sessions for approximately 1,000 employees, managers and leaders globally, both virtually and in person.

–Actively engaged with multiple educational programs to grow the talent pipeline, deploying multiple initiatives to promote STEM education among the future female talent pool.

–Executed global D&I engagement activities, such as International Women’s Day, LGBTQIA+ Pride Month and Global Diversity Month.

Action plans for 2022-2025

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Attractive workplace for all (continued)

Best employee experience

Our approach

The overall impact of these programs on the total employee experience is measured by our We@ASML employee engagement survey.

Employer branding

With the demand for top-tier talent increasing year-on-year, employer branding is a vital strategy to ensure ASML gets its share of this talent. Our strong growth means we need to hire large numbers of employees. Highly skilled people with a technical background are scarce in the labor market and competition is growing. We recognize that top-tier talent select their employer of choice, not the other way around. In light of this general trend for employees to choose their future employer, it is important that a potential employer has a strong value proposition.

Onboarding and developing our people

Supporting careers at ASML

We are always looking for ways to improve how we can ~~result~~help employees identify opportunities for professional development within ASML. We offer a wide range of career paths and have various tools in ~~injury. The failure~~place to support our employees’ career navigation.

Employee engagement

Employee engagement is critical to the performance of our organization and our long-term success as a company.

To measure the degree to which our values are embedded in the organization, the survey also includes questions about our culture and values that go beyond the ‘what’ to the ‘how’.




We want to offer our people the best possible employee experience at all our sites, enabling them to develop their talent, feel respected and work to the best of their abilities.

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Attractive workplace for all (continued)



We support our employees in maintaining a healthy, productive and balanced life.

Working practices and remuneration

We have no indication that we operate in countries where the freedom of association and collective bargaining for ASML employees is restricted. We strive to comply with ~~current~~the relevant legislations in every country where we operate. In those countries where we have employee representation, we engage in regular dialogue with the different organizations representing our employees. In these conversations, topics are put forward and discussed by both the company and the employee representatives. The working conditions and terms of employment of employees not directly covered by collective bargaining agreements are influenced or ~~future regulations could result~~determined based on other collective bargaining agreements, labor market developments and usage and habits in ~~substantial fines being imposed~~the specific country.

Remote working

Following the pandemic, we recognize that patterns of work have changed, and we want to continue to have a positive impact on ~~us, suspension of production, alteration~~the well-being, productivity and work –life balance of our ~~manufacturing~~people. We aim to provide ASML employees and ~~assembly~~their managers with clear guidance and ~~test~~help them to make the right choices between working remotely and working in the office. Remote working is neither mandatory nor an entitlement. As a global guideline, employees may work remotely up to two working days per week if the job allows. There may be exceptions for certain jobs or departments.

Well-being

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Attractive workplace for all (continued)

Our targets

Employer brand

We have defined targets for our ranking in the different local labor markets by 2025 – the Netherlands top 10, the US top 75, China top 100, Taiwan top 20 and South Korea top 20.

Employee engagement

Retention

Our performance in 2022

workforce to 39,086 FTE. Our workforce has more than doubled since the end of 2015.

Employer brand

During 2022, we were ranked #4 in the Netherlands, #6 in Taiwan, #159 in the US, #188 in China with ranking unavailable in South Korea.

Employee engagement



7,130
New payroll employees in 2022 (4,373 in 2021)

21%
Rate of new hires in 2022 (15% in 2021)

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Attractive workplace for all (continued)

We have seen improvement on all key action topics compared to 2021: clarity of expectations, enabling processes, ~~damage~~cross-team collaboration and well-being. Even though we have made good progress, there is still work to do, as these topics are still behind the external benchmark with the exception of well-being, which is 6% above the external norm.

Our workforce trend1


1.The 2020 to 2022 FTEs in the chart above do not include the FTEs acquired through the acquisition of Berliner Glas (ASML Berlin GmbH).

Retention

Onboarding and developing our people

Our actions in 2022

Attracting and retaining the best talent




87% of new hires indicated that they had a positive onboarding experience in 2022, with good support from their managers.

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Attractive workplace for all (continued)

Supporting careers at ASML

Fair pay for our employees

Each year, we analyze paid salaries for gender disparity. In 2022, as in previous years, we found no major differences in these salaries.

Action plans for 2022-2025



			Future ASML CLA

			In the Netherlands, we continue to aim for dispensation from the Metalektro Collective Labor Agreement (CLA) in order to develop our own CLA. Our unique position in the global market, our size and growth as well as our very unique group of employees and the large range of competencies and activities we bring together to deliver our products have created a need for our own approach to labor conditions. The purpose of a future ASML CLA is to offer a set of labor conditions that match the diversity and needs of all our employees.

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Attractive workplace for all (continued)

Enabling strong leadership

Our approach




As our company grows, so does the need for clarity around roles and expectations.

Our actions in 2022

The impacts of these programs are most visible in employees’ responses to our ~~reputation, and/or restrictions~~2022 we@ASML survey, where all four dimensions of our leadership framework were evaluated: 81% of our employees see their manager as a role model, 80% as a coach, 77% as a business leader and 82% as a people leader.

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Attractive workplace for all (continued)

Ensuring employee safety

Our approach

Safety is an integral part of our daily work. More than just a priority, it is central to everything we do. We work to ensure we provide injury-free and healthy working conditions for everyone on our ~~operations~~premises by eliminating hazards and reducing safety risks.

Naturally, we follow all government guidelines and safety measures, and where appropriate we go further.

We believe that all work-related injuries and occupational illnesses are preventable. As such, we are working toward a long-term ambition of zero injuries and work-related illnesses.

While it is impossible to completely eradicate risk, we are working proactively at all levels to identify potential issues or ~~sale~~concerns in the workplace and develop measures toward reducing them. We do everything we can to minimize risk, and it is our responsibility to provide our people with the right protection, procedures and processes to keep them safe.

Our Corporate EHS Committee, chaired by our ~~products~~Chief Operations Officer, oversees and approves ASML’s EHS strategy. Our line managers are responsible for day-to-day EHS management and performance. Our EHS Competence Center (EHS Experts) brings together best practices, defines the EHS standards for ASML and supports our managers to implement these standards in the workplace.

We record and investigate all incidents and high-risk unsafe situations to determine the root cause and take actions to prevent them from recurring.

We have ~~become increasingly complex. The increasing complexity requires us~~company doctors or external health services available on all our sites.

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Attractive workplace for all (continued)

Our targets

Our goal is to ~~invest in continued risk assessments and development of appropriate preventative and protective measures for~~prevent occupational health and safety ~~for both~~incidents. To benchmark our performance against industry standards, we use a targeted recordable incident rate of 0.16, which represents world-class performance.

Our performance in 2022

Strengthening our safety culture

Following our first safety culture measurement in 2019, using the Bradley maturity model, we repeated this measurement in 2022. We launched a Safety Perception Survey early in 2022 to 25,000 employees ~~(in connection~~in Operations, Development and Engineering and our business line organizations. The feedback was analyzed within the different sectors and rolled up to company level, and revealed a significant growth on the maturity curve compared with the ~~production~~2019 starting point. The implementation of life-saving rules company wide, safety leadership programs for managers and ~~installation of our systems and field options and performance of our services) and our customers’ employees (in connection~~safety awareness campaigns throughout the company in the past three years has paid off.

Our safety record

We register EHS-related incidents in line with the ~~operation~~US Occupational Health and Safety Act. Our recordable incident rate increased from 0.17 in 2021 to 0.22 in 2022. Our recordable incident rate (for our own employees) is 0.18 in 2022, higher than our 2022 desired benchmark of 0.16. The increased rate is due to an increased number of small injuries at our ~~systems). Our health~~campus and safety practices may not be effective in mitigating all health and safety risks. Failing to comply with applicable regulations or the failure of our implemented practices for customer and employee health and safety could subject us to significant liabilities.

~~Cybersecurity and other security incidents, or other disruptions~~ in our ~~processes or information technology systems, could materially adversely affect our business operations~~offices compared with 2021 as more people returned to the office. The recordable incident rate is the number of cases that required more than first aid in a year per 100 FTE. As in previous years, we did not encounter any ASML work-related fatalities. We reported two injuries in which the employees were away from work for >180 days. Regrettably, two contracted workers (in two separate occurrences) had fatal accidents on ASML premises in Wilton. Although they were not working under supervision of ASML, we thoroughly investigated these accidents together with the contracted agencies and the local authorities to understand the root cause and take corrective action. These incidents were formally reported to the local authorities by the contracted companies, in line with OSHA guidelines.

~~Risk category: Information security, Information technology, Process effectiveness and efficiency, Safeguarding~~Our actions in 2022

The rapid growth of ~~assets~~

~~We rely on the accuracy, availability and security~~ASML presents us with significant challenges – with a large number of ~~our information technology systems. Despite the measures that~~new employees every month, we have ~~implemented, including~~to make sure people are informed, instructed and also supported while doing their work.

sessions that saw many interesting discussions and insights into our safety behaviors.

In 2022, we started separating those incidents related to injuries from those related to ~~cybersecurity,~~ill health. We analyzed the most common root cause for illnesses experienced by our ~~systems could~~employees and identified that this is related to ergonomics. Based on this finding, we developed a new industrial ergonomics training for our employees, and this will be ~~breached or damaged~~rolled out in 2023 to our operations teams, supported by ~~computer viruses~~ergonomic workplace assessments and ~~systems attacks, natural or man-made incidents, disasters or unauthorized physical or electronic access.~~improvements where needed. We hope to see a reduction in illness related to ergonomics in future years.

Action plans for 2022-2025

In response to the increased recordable incident rate in 2022 from 2021, we are deploying a global safety awareness campaign in 2023 for all employees.

We ~~are experiencing an increasing number of cyberattacks~~have agreed on a new ambition to move to the next level on the Bradley safety culture measurement maturity curve by 2025. Improvement plans at corporate and sector levels have been identified and will be implemented, supported by solid management commitment. We will continue to engage with our partners, main suppliers and customers to align our safety principles and processes.

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Our supply chain

Setting the bar higher for our world-class supplier network to achieve the innovations we strive for, by ensuring we conduct our business in a sustainable and responsible manner.

€12.4bn

5,000

Total sourcing spend

39% Netherlands

41% EMEA (excl. NL)

13% North America

7% Asia

Total suppliers

1,600 Netherlands

750 EMEA (excl. NL)

1,300 North America

1,350 Asia

59%

% supplier spend covered by commitment to sustainability (LOI) (2025 target: 80%)

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Our overall performance in 2022

112

Supplier performance and risk management

113

Responsible supply chain

Our approach

Our supply chain

SDG target

How we measure
our performance

SDG target 8.8

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

–Compliance with RBA Code of Conduct

–RBA self-assessment questionnaire completion

–Suppliers with high risk on sustainability elements evaluated and follow-up agreed

SDG target 12.2

By 2030, achieve the sustainable management and efficient use of natural resources

–Supplier spend covered with commitment to sustainability (LOI)

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Our supply chain (continued)



ASML’s supply chain strategy is centered on long-term relationships and close cooperation with our suppliers and partners.



			We require our suppliers to:
			1.Secure materials from their suppliers to enable the output ramp-up for customers 2.Enable our product roadmap through the development and maintenance of best-in-class competencies and capabilities to secure the most advanced technology and fast time-to-market 3.Drive cost reductions, quality and capability improvements through efficient and dedicated operations 4.Build a sufficiently broad customer base and scale to share and spread the risks of volatile market cycles and to increase flexibility and cost competitiveness 5.Make active contributions to our sustainability strategy

To drive a sustainable and resilient supply chain, we place high importance on supplier performance management, supply chain risk management and playing a full part in a responsible supply chain.

We set out our approaches in these areas ('Supplier performance and risk management' and 'Responsible supply chain') over the following pages.

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Our supply chain (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022


			Progress tracking
Topic	Target 2025	Performance indicator	2020		2021		2022		Status

Our supply chain	80%	% supplier spend covered by commitment to sustainability (LOI)	n/a		n/a		59	%	•
	90%	RBA self-assessment completed (in %)	88	%	89	%	93	%	•
	100%	Suppliers with high risk on sustainability elements evaluated and follow-up agreed (in %)	—	%	100	%	100	%	•

For more supply chain performance indicators (PIs) see:

Non-financial statements – Non-financial indicators – Our supply chain.

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Our supply chain (continued)

Supplier performance and risk management

Our approach

Supplier performance management

We invest in developing and monitoring our supply landscape to help suppliers meet our requirements with regard to quality, logistics, technology, ~~systems~~cost and sustainability (QLTCS). Our supplier profiling methodology helps us to measure supplier performance, supplier capability and risk profile in all of these fields.

We have a framework in place to communicate process requirements and compliance expectations to our suppliers. This framework outlines our approach to supplier management and development toward the desired ASML supplier landscape. It also provides an enhanced knowledge base to improve our dialog with suppliers around their performance and development potential. We conduct regular operational and performance review meetings to ensure suppliers continue to improve their performance and processes. When supplier performance drops below the thresholds we set and persistently fails to recover upon request and within a reasonable time frame, ASML’s policy is to take action to secure reliable future supplies.

A structural audit program enables us to assess supply chain risks and identify areas of improvement to mitigate or reduce those risks.

Supply chain risk management

Read more in:

Risk - How we manage ris k.

Our performance and actions in 2022

Business continuity program

Information security and cyber resilience program

Suppliers with access to top-secret information or with privileged access to our IT systems were asked to raise their cyber resilience through the ISO 27001 standard. To support our suppliers and other ecosystem partners in this effort, we established a Security Circle of Trust together with Cyber Weerbaarheid (resilience) Brainport in the Netherlands.



We conduct continuous performance and risk management of our supply base to assure and improve performance, and prevent reputational damage.

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Our supply chain (continued)

Responsible supply chain

Our approach

We are a member of the Responsible Business Alliance (RBA) and have adopted the RBA Code of Conduct.

Due diligence

–Determine inherent risk level by screening our full supplier base on ethics, labor, health and safety and environment risk using the RBA Risk Platform.

–Apply supplier risk profiling to business-critical suppliers. For these suppliers we conduct risk assessment of QLTCS capability elements.

Supplier Sustainability Program

Conflict minerals

Despite our best efforts, we are unable to determine the precise origin of all of the 3TG minerals included in our products. This is due to several reasons including 3TG supply chain complexity, the number of tiers of suppliers involved in tracing the source and the limited number of certified conflict-free smelters for all conflict minerals. Obtaining correct data from our supply chain is a challenge, but we continue to encourage our suppliers to trace the origins of the 3TG minerals within their supply chain in accordance with applicable conflict minerals rules and regulations. We also request our suppliers to report smelters who are not listed or identified on the RBA smelters list to the RBA for audit.

For more information, please see our

Conflict Minerals report available on www.asml.com.

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Our supply chain (continued)

Our targets

We have set three targets to support our drive to increase the sustainability of our supply chain:

–To have 80% of our top 60 suppliers covered with a commitment to sustainability (via letter of intent – LOI or providing us with their CO2e emissions data (scope 1, scope 2 and scope 3)) by 2025

–For 90% of all suppliers in scope of the RBA self-assessment to have completed it by 2025

–For 100% of our suppliers ~~customers~~identified by the RBA self-assessment as having high-risk sustainability elements to be evaluated and ~~other service providers, whose systems~~follow-up action agreed by 2025

We monitor targets and commitments on a monthly basis, tracking the progress against target and following up with the Sourcing lead and Supplier as needed.


Our performance in 2022
Total supplier base
12.4bn
Total spend
			% of total spend
	800	Product-related suppliers	69	%
	4,200	Non-product-related suppliers	31	%

2025 LOI target
is 80%

In 2022, 59% of the total spend was covered with the LOI commitment to sustainability

We apply due diligence screening to the total supplier base using the
RBA Risk Assessment Platform.

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Our supply chain (continued)

By year end 2022, 59% of the 60 suppliers in scope had signed the Letter of Intent, acknowledging their joint responsibility and commitment to reducing the collective environmental footprint – in particular the CO2e emissions contributing to our scope 3 reduction and waste contributing to our re-use ambitions. By the end of the year, more than 35 suppliers had provided data on CO2e emissions. By 2025, we ~~do not control. These attacks include malicious software (malware), attempts~~aim for 80% of the top 60 suppliers to ~~gain unauthorized access~~have signed the Letter of Intent.

We have asked a total of 59 suppliers to ~~data, and other electronic security breaches of~~complete the detailed RBA SAQ. In general, the RBA SAQ results show a relatively low risk level in our ~~information technology systems. They also include the information technology systems~~supply base, as most of our suppliers ~~customers and other service providers~~operate in countries which we believe generally have a strong rule of law. By end 2022, 93% of the suppliers in scope had completed the RBA SAQ (89% in 2021). The completed RBA SAQs indicated that have led and could lead, for us, our customers, suppliers or other business partners - including R&D partners - to disruptions in critical systems, unauthorized release, misappropriation, corruption or loss of data or confidential information (including confidential information relating to our customers, employees and suppliers). Further, we dependno supplier had overall high risk on ~~our employees and the employees of our suppliers to appropriately handle confidential and sensitive data and deploy our IT resources in a safe and~~all sustainability elements.

~~ASML ANNUAL REPORT 2021 120~~



			ASML suppliers



			5,000
			Suppliers
			€12.4bn
			Total spend



Supplier base geographic split by percent spend

	1,600 suppliers				750 suppliers				1300 suppliers			1350 suppliers

		39	%			41	%		13	%		7	%
Netherlands				EMEA (excl. Netherlands)				North America			Asia

Supplier Risk Profiles, created for business-critical,
strategically important suppliers

€8.6bn

216 suppliers represent 92% of this spend

€3.8bn

29 suppliers represent 23% of this spend

Product-related
spend

Non-product-related spend



* Major suppliers are those that account for 80% of PR spend and any business-critical NPR suppliers.

The Responsible Business Alliance (RBA) self-assessment questionnaire completed by major suppliers*

€8.6bn

44 suppliers represent 71% of this spend

€3.8bn

15 suppliers represent 26% of this spend

Product-related
spend

Non-product-related spend

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Our supply chain (continued)

~~secure manner~~However, this process did indicate high risk on Health and Safety, Environment or Ethics standards for several suppliers. Further assessment of identified high risks revealed that the risks were related to a missing 'third-party' management system in place. After follow-up through discussions we assessed the risk as low/medium. ASML does not ~~expose~~require suppliers to have a formal environmental/labor management system in place. All suppliers which were followed up on could show that they have a policy/procedure in place to ensure compliance to ethics, labor, safety and environmental requirements. More details can be found in the table below for 2020-2022.


		Number of high risks identified from RBA SAQ
Standard	RBA commitment	2020	2021	2022	Main findings 2022
Labor	To uphold the human rights of all workers (direct and indirect), and to treat them with dignity and respect as understood by the international community, including the ILO's eight fundamental conventions	1	0	0
Health and safety	To minimize the incidence of work-related injury and illness and to ensure a safe and healthy working environment. Communication and education is essential to identifying and solving health and safety issues in the workplace	0	0	1	Finding related to a non-product-related supplier where the requirements do not entirely match the type of organization.
Environment	Environmental responsibility is integral to producing world-class products and services. Adverse effects on the community, environment and natural resources are to be minimized while safeguarding the health and safety of the public	0	0	3	Findings related to 1) a non-product-related company where the requirements do not entirely match the type of organization; 2) a supplier in the process of implementing a company-wide environmental program and supplier management and 3) a company with policies in place, however, no environmental program and supplier contractual requirements in place.
Ethics	To meet social responsibilities and to achieve success in the industry, the highest standards of ethics should be upheld, including but not limited to business integrity, anti-bribery and corruption, antitrust and competition, protecting privacy	1	0	1	Finding related to no separate conflict minerals policy and supplier program in place, but instead this supplier has a supplier code of conduct in place.
Members and participants are committed to establishing a management system to ensure:
–Compliance with applicable laws, regulations and customer requirements –Conformance with the Code standards –Identification and mitigation of operational risks –Facilitation of continuous improvement

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Our supply chain (continued)

Our actions in 2022

Reduction of CO2e emissions and waste

In 2022, we made significant progress in our ~~network systems~~Supplier Sustainability Program, with the aim of joining forces with suppliers to ~~security breaches or~~achieve our goal of net zero emissions by 2030. We launched this program to our top 60 suppliers, and our goal is to gradually increase the ~~loss of data. However, there is always a risk~~scope over time. We recognize that ~~inadvertent disclosure or actions or internal malfeasance by our employees or those of~~ our suppliers ~~could result~~are in ~~a loss~~different phases of maturity with regard to CO2e emissions and waste reduction ambitions, varying from advanced target setting and performances to not having yet started to measure their environmental footprint.

We also started collecting CO2e emissions data ~~or a breach or interruption of our~~from suppliers – more than 35 key suppliers now share their environmental performance and commitment with us, and we are discussing the emission reduction opportunities together. We are also sourcing an IT ~~systems.~~tool that suppliers can use to share their CO2e emission data with us.

In ~~addition, any system failure, accident or security breach could result~~2022, we also resumed our onsite supplier audits for QLTCS and business continuity. We also initiated two pilot RBA audits during the year, and we will move to a model where we structurally audit suppliers on RBA compliance.

Engaging with suppliers

We held a number of engagement sessions with key suppliers during the year, including a Supplier Ramp-up Day in ~~business disruption, theft of our intellectual property, trade secrets (including our proprietary technology), unauthorized~~March and a Supplier Day in September, which gave suppliers the opportunity to ask questions and share mutual challenges with us. We identified action points from these feedback sessions where possible.

Our suppliers have access to our Sourcing lead or ~~disclosure of, customer, personnel, supplier or other confidential information, corruption of~~ our Strategic Account (SAT) teams, whose job is to manage the relationship with our suppliers. Sourcing and Supply Chain also held workshops for suppliers specifically to cover collaboration on CO2e emissions data, ~~or of our systems, reputational damage or litigation. Furthermore, computer viruses or other malware may harm our systems~~with experts invited to introduce the program and ~~software~~talk through scope 1, 2 and ~~could be inadvertently transmitted~~3 emissions. The workshops started with 15 suppliers and expanded to ~~our customers' systems~~80 over the year, with one being held face-to-face at Brainport to give suppliers an update from an ASML perspective, next steps and ~~operations, which could result~~the chance to brainstorm ideas. We ask suppliers to let us know their challenges when collecting CO2e emissions data, and we discuss possible solutions.

Suppliers have indicated that these workshops are highly beneficial and contribute to best-practice sharing and being able to tackle joint problems together. Topics raised in ~~loss of customers, litigation, government investigation and proceedings that could expose us to civil or criminal liabilities and significant management attention and resources to remedy~~workshops are followed up in future workshops.

To meet the damages that result. We may also be required to incur significant costs to protect against or repair the damage caused by these disruptions or security breaches in the future, including, for example, rebuilding internal systems, implementing additional threat protection measures, providing modifications to our products and services, defending against litigation, responding to regulatory inquiries or actions, paying damages, or taking other remedial steps with respect to third parties. Further, remediation efforts may not be successful and could result in interruptions, delays or cessation of service, unfavorable publicity, damage to our reputation, customer allegations of breach-of-contract, possible litigation, and loss of existing or potential customers that may impede our sales or other critical functions.

~~Cybersecurity threats are constantly evolving. We remain potentially vulnerable to additional known or yet unknown threats, as in some instances, we,~~continuing high demand from our customers, we need to work closely together. Our customers’ trust is key, while material shortages threaten our output. Greater transparency and collaboration are crucial to success. We face dynamic market circumstances and these present challenges in their own right. During the Supplier Days, ASML leaders and suppliers spoke openly about how to overcome challenges by improving partnerships, increasing transparency, shortening feedback loops and embracing re-use. In response to suppliers indicating difficulties in understanding the demand flexibility, our team provided more insights into why ASML is adjusting the Start Plan when needing to ramp. Further discussions have centered on how listening to the voice of the customer is an essential part of understanding the market dynamics, as well as transparency on the ASML investments in robust growth, sustainability and improvements regarding industrialization. ASML leaders and suppliers ~~may be unaware~~agreed on the importance of ~~an incident or its magnitude~~highlighting and ~~effects. We also face~~learning from areas of collaborative success.

Our experience during 2022 has again underlined the ~~risk that we expose our customers~~importance to ~~cybersecurity attacks through~~ the ~~systems we deliver~~Supplier Sustainability Program of achieving alignment with suppliers and of early engagement with the supplier on RBA and conflict minerals in order to our customers, including in the form of malware or other types of attacks as described above, which could harm our customers. Furthermore, the COVID-19 pandemic has increased the level of remote working within our organization, which increases the risks of cybersecurity incidents.

~~ASML visibility and importance for the semiconductor industry keeps on growing. There~~remove time pressures. The biggest challenge relates to collecting data – environmental data is a ~~risk~~new area for some suppliers, so they need to put processes in place and develop teams to handle those processes. Every two months we host a workshop to facilitate and help suppliers with their issues and the challenges they face. We have also found that ~~this may lead~~overall company targets are not always aligned across suppliers, as some work toward 2030 while others are working to ~~actions that may adversely impact the security of ASML or the safety of its employees.~~2040.

In addition, processes and systems may not be able to adequately support the growth. From time to time, we implement updates to our information technology systems and software, which can disrupt or shutdown our information technology systems. We may not be able to successfully launch and integrate these new systems as planned without disruption to our operations. For example, we are currently implementing a new ERP system and infrastructure (ONE program). As a result of this system implementation or otherwise, we have and could continue to experience disruptions in our operations. In 2021, we experienced delays of operations after the launch of a new logistics center, which resulted in a delay in production of some products.

~~Legal and compliance~~

Action plans for 2022-2025

We are ~~subject~~on track to ~~increasingly complex regulatory~~achieve our targets and ~~compliance obligations~~we intend to expand the number of suppliers with a commitment to sustainability to include our top 100 suppliers.

~~Risk category: Violation~~We will continue to host supplier workshops every two months in 2023.

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Innovation ecosystem

We don’t innovate in isolation. We develop technology together with the help of our partners and our collaborative knowledge network.

€3.3bn

63%

R&D Investments
(2025 target: >4bn)

R&D spend as % growth from 2019 base year
(2025 target: >100%)

€14.7m

€1.0m

Contribution to EU research projects

Value startups and scaleups in-kind support

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119

Our overall performance in 2022

120

Partnerships for research and development

122

Supporting startups and scaleups

Our approach

We see ourselves as architects and integrators, working with partners in an innovation ecosystem. Our focus is on innovating through partnerships, and in our innovation ecosystem, long-term collaboration is based on trust. By sharing our expertise with the ecosystem, we build a strong knowledge network capable of ~~laws~~creating technological solutions that society can tap into. We share both risk and ~~regulations~~reward, and this collaborative approach allows us to accelerate innovation.

~~In recent years, our business has grown significantly in terms of sales, operations, employees~~We focus on collaboration with research centers, fueling the innovation pipeline through partnerships with academia and ~~our business infrastructure. As a result, the complexity of complying~~research institutes, and collaboration with rules and regulations has increased. Furthermore, as we have expanded our business in countries where we did not previously operate, we have become increasingly subject to compliance with additional rules and regulations in such jurisdictions, including but not limited to anti-corruption, anti-bribery and anti-trust standards, which can be complex.R&D partners through EU public–private partnerships. We ~~are~~ also ~~subject to investigations, audits and reviews by authorities in such jurisdictions regarding compliance with rules and regulations, including tax laws.~~

~~Furthermore, the existing rules and regulations~~believe that we ~~are subject~~can create greater impact in the ecosystem by nurturing future young tech through support for startups and scaleups.

Over the following pages, we explain how our approach to ~~including regulations relating but not limited~~partnerships can accelerate innovation.

Innovation ecosystem

SDG target

How we measure our performance

SDG target 9.1

–Supporting startups to Star level

–Supporting scaleup projects

–Collaboration in EU projects

SDG target 9.4

–Collaboration with research partners

–Energy efficiency of our products measured per wafer pass

SDG target 9.5

–Investments in R&D

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Innovation ecosystem (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Innovation ecosystem

>4bn euro

R&D Investments

€2.2bn

€2.5bn

€3.3bn

•

>100%

R&D spend as % growth from 2019 base year

•

No target

Value startups and scaleups in-kind support

€0.6m

€1.0m

n/a

No target

Startups and scaleups in-kind support hours

1,550

hrs

2,100

hrs

4,180

hrs

n/a

>20%

Startups reached Star level from total startups (in %)

Number of scale-up companies supported (in numbers)

•

No target

Contribution to EU research projects

€28.5m

€30.3m

€14.7m

n/a

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Innovation ecosystem (continued)

Partnerships for research and development

Our approach

Public–private partnership

We cooperate with private partners in research and innovation projects subsidized by the European Union and its member states. We run collaborative subsidy projects aimed at advancing integrated circuit (IC) technology for the next node connected to ~~trade, national security, tax, exchange controls, reporting, product compliance, anti-corruption laws, anti-trust, data protection, are becoming more complex~~the industry roadmap following Moore’s Law. The Horizon Europe program, a public–private partnership, facilitates collaboration and strengthens the impact of research and innovation in developing, supporting and implementing EU policies while tackling global challenges.

By collaborating in European projects, ASML and its partners play a role in giving the continent a degree of sovereignty by driving and accelerating fundamental research and ground-breaking innovation in EMEA. This collaboration also generates significant business value, fuels job creation and creates knowledge. The increasing number of patent requests per year, both for ASML and the trade and national security environment has resulted in increasing restrictions. We also face the risk that trade, and security regulations could limit our ability to sell our products and services in certain jurisdictions. We have experienced delays in shipments permits and may experience restrictions on shipping products to certain customers.

~~Such changes~~other members in the ~~regulation that applies to our business can increase compliance costs~~various consortia, demonstrates the success of these collaborations.

Partnerships with academia and the risk of non-compliance. Non-compliance can result in fines and penalties as well as reputational damages. Furthermore, additional regulations could impact or limit our ability to sell our products and services in certain jurisdictions.

~~Changes in taxation could affect our future profitability~~

~~Risk category: Violation of laws and regulations~~research institutes

We ~~are subject to income taxes~~co-develop expertise within a wide network of technology partners, such as universities and research institutions. Our partners include imec in Belgium, the technical universities in Twente, Delft and Eindhoven in the Netherlands and the Advanced Research Center for Nanolithography (ARCNL), also in the Netherlands. ARCNL conducts fundamental research and focusing on the physics and chemistry that are important in current and future key technologies within nanolithography and its application within the semiconductor industry.

Our targets for research and development

Our R&D partnerships are underpinned by a number of targets:

–Reach >€4bn R&D investments by 2025

–Grow R&D spend over 100% from 2019 base year

Our performance in 2022

Our R&D investments in 2022 amounted to €3.3 billion, which represents 63% growth from the 2019 investment level.

Our actions in 2022

Public–private partnerships



€3.3 billion
R&D investments in 2022

€14.7 million
Contribution in R&D across public–private partnerships in 2022

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Innovation ecosystem (continued)

Partnerships with academia and research institutes

Action plans for 2022-2025

No additional actions, as we are ~~active.~~ on track to meet our targets.


Figure 1: ASML’s IPCEI proposal concerns the third step in the three-phase approach toward introduction of EUV 0.55 NA (High-NA) lithography. Phases 1 & 2 are already planned by ASML and imec.

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Innovation ecosystem (continued)

Supporting startups and scaleups

Our ~~effective tax rate~~approach

Sharing our expertise strengthens our regional high-tech ecosystem, particularly around our headquarters in Veldhoven, the Netherlands. This region has ~~fluctuated~~a competitive edge globally, and we need to make sure we maintain this position. Building a strong regional foundation offers benefits not just to ASML and associated partners, but also to other companies and organizations. In addition, it helps attract a broad base of talent to the region.

Through HighTechXL and DeepTechXL, we build, finance and accelerate impactful startups by combining high-tech entrepreneurial talent and relevant technologies. With the Make Next Platform, we aim to support young, innovative high-tech scaleups. And through DeepTechXL, we help to finance these deep-tech ventures, particularly in the ~~past~~early stages where risks are still at their highest.

Make Next Platform

To support young innovative high-tech scaleups, ASML founded the Make Next Platform (MNP) in 2016 together with Huisman, Vanderlande and ~~may fluctuate~~the non-profit Stichting Technology Rating (STR). Thales NL joined as a co-founder in 2019. MNP puts the partners’ network, competencies, expertise and experience to work in answering questions that these scaleups encounter in their development and helps them grow into sustainable companies.

MNP aims to help emerging high-tech ventures that have moved beyond the startup phase and are ready to expand. These scaleup companies face challenges such as systems engineering, supply chain management, business/corporate development, targeting beachhead markets, managerial issues, funding issues and public affairs. Through the exchange of best practices, business experience and coaching from senior corporate experts, the MNP partners aim to support scaleup companies in their development to become global players by giving them access to their internal and external networks.

Our targets

Our target for 2025 is for >20% of the total startups to reach Star level and to support 14 new scaleup projects by 2025.

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Innovation ecosystem (continued)

Our performance in 2022

In 2022, ASML committed to providing more than €15 million support to high-tech startups and scaleups, with 4,180 hours of in-kind support provided and over €14 million cash committed. This commitment includes our contribution to the DeepTechXL startup investment fund for early-phase funding. 12% of startups reached Star level.

To date, the MNP has screened more than 250 companies and engaged with the management teams of more than 60 of them. So far, 10 scaleups have been adopted, including three in 2022. Meanwhile, one has reached Alumnus status and is now finding their own way, based on their own strengths: SMART Photonics (2021).

Our actions in 2022

ASML as a venture builder

In 2022, we became a strategic investor and co-initiator in DeepTechXL Fund I, a new Dutch deep-tech fund of €85 million. Together with the other investing industry partners (Philips, Brabantse Ontwikkelings Maatschappij (BOM), research institute TNO, PME Pension Fund, Invest-NL and some family offices), the fund provides deep-tech startups and scaleups with access to knowledge, network, technology, licenses and business development support, and it intends to finance these tech ventures particularly in their early stage of growth, where investments risks are still at the highest. The fund aims to introduce launching customers, find partners in the ~~future.~~supply chain and to assist in entering new markets and scaling up manufacturing. DeepTechXL originates from and will work closely with HighTechXL.

~~Changes in our business environment can affect our effective tax rate. The same applies for changes in tax legislation~~

ASML is also one of the main shareholders of HighTechXL, together with other tech-minded partners in the ~~countries~~region such as Philips, TNO, BOM and High Tech Campus Eindhoven. Through HighTechXL, we build and accelerate impactful startups by combining high-tech entrepreneurial talent and relevant technologies from reputable tech partners such as ESA, CERN, Fraunhofer, imec and TNO, with the goal of solving major global societal challenges. Selected ASML talents join these startups for 30% of their time for a period of three months. They define their learning goals and typically benefit from both enriched skills and mindsets after this entrepreneurial experience.

To date, over 20 new deep-tech ventures have completed the program and some are already receiving global attention. Moreover, several new ventures are currently still in the accelerator program, making good progress, and new cohorts are already planned.

Action plans for 2022-2025

We are on track to support 14 new scaleup projects by 2025 and to meet our R&D investment targets. However, the target of 20% of startups to achieve Star level by 2025 may take longer than originally expected. This target was first set when HighTechXL was still a traditional startup accelerator, but since it was transformed into a venture building program, we have seen that it generally takes longer for these newly established startups to mature. Additionally, the focus is now on deep-tech, which typically requires a longer time to develop. A discussion on defining a more applicable target reflecting the new situation is ongoing.



			inPhocal makes first sale after two years as HighTechXL Venture Building Program alumnus

In 2020, a group of enthusiastic founders set course on a journey to start inPhocal, a deep-tech company based on an optical technology that originated from the CERN institute, where ~~we operate, developments~~it was originally developed for long-distance alignment of equipment in their Large Hadron Collider (LHC) experiment.

Within the nine-months HighTechXL venture building program, inPhocal was given the chance to pick technologies from several top-class institutes and companies, such as ~~driven~~ASML, the European Space Agency, Philips and TNO, and to develop themselves into a mature company. As part of this program, inPhocal discovered the potential of their unique technology for laser processing, which provides a laser beam with a long focus depth – this means the focus does not have to be adjusted when marking curved objects or cutting through thick materials, which results in unprecedented improvements in speed and efficiency. Market research proved that their technology could indeed solve current problems and their technology quickly gained the interest of several large companies, such as Heineken, Coca-Cola, Pepsico, AbInBev and Logitech.



			We are on track to support 14 new scaleup projects by 2025.

In the meantime, inPhocal developed a functional product prototype in 2021, together with lab partner Exspectrum. They optimized their technology further in cooperation with development partner Lion Lasers, which led to a first fully certified system mid 2022. By that time, they also received a €2 million investment, led by ~~global organizations~~the new DeepTechXL fund in which ASML is participating as ~~the OECD, as well as the change~~well. InPhocal is using their funding to scale production in ~~approach to tax-by-tax authorities. All these initiatives~~2023 and have already ~~resulted~~made their first sale of a system that will be installed in the Netherlands in early 2023.

Over the years, inPhocal has made optimal use of the support provided by ASML to HighTechXL with four ASML talents joining at various stages during the program. As part of their own personal development, these talents are allowed to join the startup for a period of three months and ~~may result~~make contributions to topics ranging from technology, finance, market research and strategy. After completing the program, the ASML talents went back to work on their ASML duties, however with all of them strong relationships have been built and the talents remain available for InPhocal to ask for advice and guidance on an ad hoc basis. InPhocal will continue its mission to become the new standard in ~~further increased compliance obligations for ASML. Additionally, this may result in increase~~laser processing while at the same time strengthening the high-tech ecosystem of ~~our effective tax rate in future years.~~the Eindhoven region.

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Valued partner in our communities

As a global technology leader and employer, we play an active role in the communities where we operate – we recognize that when the community thrives, we thrive. At the same time, our ASML Foundation aims to improve lives through education and training.

~~ASML ANNUAL REPORT 2021 121~~

~~Changes in tax legislation of jurisdictions we operate in, may adversely impact our tax position~~


€11.5m			13,645
Community investment			Time investment in volunteers – hrs community involvement


4,736			411
Time investment in volunteers – hrs technology promotion			Total number of projects supported


			IN THIS SECTION
			125			Our overall performance in 2022
			126			Education
			128			Arts & culture
			130			Local outreach
			132			ASML Foundation

Our approach

ASML’s success and consequently our net income. Our worldwide effective tax rate is heavily impacted by R&D incentives included in tax laws and regulations in the countries we operate in. Examples in this regard are the so-called innovation box tax legislation in the Netherlands and the Foreign Derived Intangible Income deduction / R&D credits we obtain in the US. In case jurisdictions alter their tax policies in this respect, this may have an adverse effect on our worldwide effective tax rate. In addition, jurisdictions levy corporate income tax at different rates. The mix of our sales over the various jurisdictions in which we operate may vary from year to year, resulting in a different mix of corporate income tax rates applicable to our profits, which can affect our worldwide effective tax rate and adversely impact our net income.

~~Other risk factors~~

~~The COVID-19 or other pandemics may impact our operations~~

~~The COVID-19 pandemic and the measures implemented to address this pandemic globally continue to impact our business and our suppliers and customers. The pandemic~~growth has ~~already had~~ a significant impact on the ~~global economy,~~communities where we operate, in particular at our large sites (Brainport Eindhoven region, Wilton, Silicon Valley, San Diego and Hsinchu), where ASML and its network of suppliers and partners generate a wealth of jobs and social activity.

We aim to be a valued and trusted partner in our communities, improving the quality of life for all, with a special focus on disadvantaged communities. Our community engagement program, which ~~can potentially impact our end markets.~~

~~The COVID-19 pandemic has increased~~falls under the level of remote working within our organization, which impacts productivity, may delay our roadmap, increase the risks of cybersecurity incidents and may impact our control environment. In addition, we are dependent on our suppliers, so disruptions to their operations as a result of the COVID-19 pandemic impact us and our ability to produce, deliver and service tools. Market demand for semiconductors and therefore our products and services can also be impacted by the COVID-19 pandemic and measures taken to address it. Also, an important partresponsibility of our ~~business involves installing~~CEO, is built on three pillars where ASML has competence and ~~servicing tools at customer premises around the globe,~~can create impact:

1.Education

2.Arts & culture

3.Local outreach

Our corporate citizenship activities stretch beyond community support to in-kind contribution to startups and ~~travel restrictions and vaccination requirements impact that activity.~~

There is uncertainty about how the COVID-19 pandemic will impact global GDP development, end markets, our manufacturing capability and supply chain, and the longer this pandemic lasts the greater are the risks. The continuing impact of this pandemic on ASML will depend onscaleups, aiming to nurture innovation by future developments, including continued severity of the COVID-19 pandemic, and the actions from the Dutch and other foreign governments to contain the outbreak or address its impact which are outside of our control.

~~Restrictions on shareholder rights may dilute voting power~~

Our Articles of Association provide that we are subject to the provisions of Dutch law applicable to large corporations, called 'structuurregime'. These provisions have the effect of concentrating control over certain corporate decisions and transactions in the hands of our Supervisory Board. As a result, holders of ordinary shares may have more difficulty in protecting their interests in the face of actions by members of our Supervisory Board than if we were incorporated in the US or another jurisdiction.

Our authorized share capital also includes a class of cumulative preference shares and we have granted Stichting Preferente Aandelen ASML, a Dutch foundation, an option to acquire, at their nominal value of €0.09 per share, such cumulative preference shares. Exercise of the Preference Share Option would effectively dilute the voting power of our outstanding ordinary shares by one-half, which may discourage or significantly impede a third party from acquiring a majority of our voting shares.young tech.

Through our global volunteering program, we encourage employees to become more involved in their local communities. Every person is able to use one day a year as a paid volunteering day with an event, charity or activity that is in line with our volunteering policy. Employees can also volunteer with ASML Foundation projects.

In this chapter, we outline our approach to community outreach and our actions to improve education, arts & culture and local outreach.

Valued partner in our communities

SDG target

How we measure
our performance

SDG target 4.4

By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship

–Community engagement and technology promotion

SDG target 4.5

By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples and children in vulnerable situations

–ASML Foundation projects

SDG target 11.2

By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons

–Community engagement

SDG target 11.4

Strengthen efforts to protect and safeguard the world’s cultural and natural heritage

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Valued partner in our communities (continued)

On track or met target •

Ongoing focus area n

Our overall performance in 2022

Progress tracking

Topic

Target 2025

Performance indicator

2020

2021

2022

Status

Valued partner in our communities

No target

ASML Foundation projects supported

n/a

No target

ASML Foundation's value of donations

€1.0m

€2.0m

€2.4m

n/a

No target

Projects supported

n/a

133

390

n/a

No target

Value of donations

€3.1m

€8.1m

€7.9m

n/a

No target

Total cost of volunteering

€271k

€283k

€1,200k

n/a

No target

Time investment of volunteers (in hours) – Community involvement

1,333

2,393

13,645

n/a

No target

Time investment of volunteers (in hours) – Tech promotion

2,936

1,886

4,736

n/a

We are welcomed as a source of high-tech economic activity that benefits people and planet, and we scored 7.8 out of 10 in the October 2022 Brainport Eindhoven survey. However, our many stakeholders in the community also point out that our growing presence means that more engagement is expected and required to ensure that everyone in the community can benefit, and our presence delivers true positive social impact.

The total amount of cash commitments and in-kind support that ASML spent on charities, community engagement, organizations and our own ASML Foundation in 2022 was approximately €11.5 million.

Five of our locations (Veldhoven, Wilton, Silicon Valley, San Diego and Hsinchu) benefit from implemented and dedicated community engagement programs. These locations represent 83% of our operations (in headcount). We also operate smaller community engagement initiatives in other locations, and these will be gradually scaled up to more formal dedicated programs in the coming years.

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Valued partner in our communities (continued)

Education

Our approach

Education, as the ‘big equalizer’ and opportunity creator, needs to prepare people of all ages for an increasingly digital future. Our intensive STEM (science, technology, engineering and mathematics) education programs aim to boost interest in technology among young people and increase the local and regional talent pool. We also raise awareness of career prospects in a sector offering many development opportunities. STEM competencies are important in helping children to reach their potential, particularly in disadvantaged communities. At the same time, we work with senior citizens’ organizations to help the elderly bridge the digital divide.

We organize and sponsor many initiatives that aim to share our enthusiasm for and expertise in technology to inspire all generations. We also partner with multiple organizations and educational events that promote careers in technology. Our employees act as role models and guides for all these initiatives.

The education team works closely with schools and education programs in the communities where we have operations. It provides hands-on support and coordinates a network of ASML volunteers (known as ASML ambassadors) who visit schools and events, and support children and schools in their curricula, some as part-time (‘hybrid’) teachers, some as tutors of disadvantaged children, and some as technology and STEM promoters.

The ASML Foundation aims to unlock the potential of young people in need by enabling inclusive and equitable participation in society through quality education. The ASML Foundation is an independent foundation with strong ties to ASML. It operates at arm’s length and has its own board and budget. It aims to increase the self-sufficiency of underrepresented and underserved youth around the world, and more specifically in the communities where ASML operates, through educational initiatives that develop their talent and help unlock their potential. Read more in: ASML Foundation.

Our performance in ~~2021 - Governance - Corporate~~2022

In 2022, we supported a total of 221 education projects across the regions where we operate (Netherlands, US and Asia). The total value of these projects amounted to €0.9 million.

'Our actions' outlines a few highlights – for more information, please visit

www.asml.com – community engagement.

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Valued partner in our communities (continued)

We’re doing our part to ensure everyone, at every age, is prepared for an increasingly digital future and that all young people have access to technical education to reach their potential.

Our actions in 2022

Ongoing projects

–ASML Junior Academy (the Netherlands): In September, the ASML Junior Academy kicked off with 58 primary schools in a partnership with Mad Science, a renowned name in the field of STEM education and promotion. It offers all participating classes (children aged 4–12) technology lessons six times a year, with the aim of creating more awareness of STEM topics. One of the six lessons focuses on the role of the microchip in our daily lives and will be given by an ASML employee. The partnership also includes a project to familiarize teacher-training students with more STEM topics. The aim is to have all 271 primary schools in the Brainport Eindhoven region supported with STEM lessons by 2025.

–Wikimedia (global): We donated €64,000 to the Wikimedia Foundation, the organization behind Wikipedia, to ensure its continuity and support its drive to remain a resource for free and open knowledge for everyone. This annual donation will increase over time as our employee base grows, in accordance with Wikimedia’s guidelines.

–Dutch Technology Festival (the Netherlands): Technology is at the core of who we are and what we do at ASML. At the annual Dutch Technology Festival we share this passion and knowledge to inspire the next generation of scientists and engineers. In 2022, we highlighted the best our region has to offer, all in one place, to inspire more than 22,000 young thinkers and doers.

Standalone initiatives

–Science & Engineering Night (US): In July 2022, the San Diego Children’s Discovery Museum was transformed after hours to host hands-on activities at Science & Engineering Night. As main sponsor, we hosted a booth at this educational event with seven ASML employees featuring an exhibit that taught kids how to bring a robot to life using coding and programming, giving them the opportunity to learn more about science and engineering.

–BOYO Foundation (Taiwan): The Enlighten Your Potential project aims to prevent underserved students from dropping out of school by sponsoring the salaries of educators and the lecture materials for the BOYO Foundation. As well as providing funding, the ASML Foundation worked with the ASML Community Engagement team on setting up teacher-training workshops. By the end of 2022, over 35 teachers from four remote schools had joined our workshops. We also sent multiple volunteers as speakers to schools in order to encourage underserved students to continue learning and exploring their potential.

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Valued partner in our communities (continued)

Arts & culture

Our approach

While culture is the invisible bond that ties the people of a community together, the arts are how culture becomes visible. To strengthen that bond, we support initiatives and organizations that are vital for the community’s culture and help open them up for newcomers and the underprivileged. We focus on cultural icons in our communities – organizations and initiatives that have an impact beyond the local community.

Our performance in 2022

In 2022, we supported a total of 29 arts & culture projects across the regions where we operate (Netherlands, US and Asia). The total value of these projects amounted to €1.9 million.

'Our actions' outlines a few highlights – for more information, please visit

www.asml.com – community engagement.

Our actions in 2022

Ongoing projects

–Van Gogh Museum and Van Gogh Brabant (Netherlands and global): We have long-term partnerships with the Van Gogh Museum and Van Gogh Brabant to help ensure the artist’s work and cultural heritage, rooted in the Dutch region of Brabant, can be enjoyed for many generations to come. Through this partnership we support several programs, including:

–Preserve the paintings: In collaboration with the Cultural Heritage Agency of the Netherlands, the University of Amsterdam and the conservators of the Van Gogh Museum, a team of ASML engineers is investigating how external factors, such as light, affect the paint that Van Gogh used. By using this knowledge to optimize display conditions and minimize further degradation of the collection, we help to preserve his masterpieces for future generations. In 2022, we made steady progress in developing the condition assessment tool – and we are looking forward to demonstrating our work during the celebrations for the 50th anniversary of the Van Gogh Museum in 2023.

–Vincent’s Lightlab: Museum Vincentre, which focuses on Vincent’s Brabant years, has plans for a significant expansion that includes ‘Vincent’s Lightlab’, developed together with ASML. The reopening is planned for May 2023. The ambition is to welcome 40,000 visitors every year to the new Museum Vincentre and to share the story of Vincent Van Gogh and his search for color and light in Brabant.

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Valued partner in our communities (continued)

– Educational programs: Together with the Van Gogh Museum, we have developed educational materials for students in primary and secondary schools, connecting science and art. The artist’s curiosity was key to his craftsmanship, and together with the museum, we encourage students to follow in his footsteps.

–In 2022, we participated in the Vakkanjers program, which sets real-world competitions – working with a different industry partner each year – and challenges to teenage boys and girls, designed to help them discover and develop their skills. Through this program, schools and companies collaborate to help develop the craftspeople of the future. This year, the Van Gogh Museum in cooperation with ASML challenged students to think of innovative ways of preserving Van Gogh’s artworks for the future, as well as to give new dimensions to Vincent’s story and the way people experience his paintings by using technical components and creative solutions. In total, 254 schools and more than 12,000 students took part in these challenges.

–In Taiwan, ASML and the Van Gogh Museum launched Masterminds & Masterpieces, an international STEM program that reached students across the country. Working closely with two non-profit organizations, colleagues co-developed a hybrid initiative, leveraging their expertise in developing offline and online resources. In September, a bookmobile – developed in partnership with the CommonWealth Magazine Foundation – started traveling to schools in remote areas of Taiwan, supporting wider efforts to improve students’ literacy. ASML Taiwan recruited over 70 volunteers to participate in this education program. The roll-out of the school tour and the online learning program will continue across Taiwan until the end of 2022, with over 20,000 primary school students in Taiwan estimated to join in Q4 2022.

–GLOW Light Art Festival (the Netherlands): Light is key to our work, which is why we partner with the annual GLOW Light Art Festival in Eindhoven, the Netherlands. In November 2022, around 700,000 people visited the festival.

–ASML on Stage (the Netherlands): ASML on Stage is an annual event featuring a multicultural mix of musical styles, all performed by acts featuring ASML colleagues and friends. With 17 ASML acts and 1,400 tickets sold in 2022, the event once again showcased the multiple talents of our employees, combining their love of music with their passion for science and technology.

–Spotlight (the Netherlands): Together with Muziekgebouw Eindhoven, we host the Spotlight program, where anyone who normally does not have the chance can take the main stage and experience being a performing artist. During 2022, 437 people participated and enjoyed their moment in the spotlight.

Standalone initiatives

–Van Gogh PaintFest (global): This year, a partnership between the Foundation for Hospital Art (FFHA) and the Van Gogh Museum in Amsterdam opened the door for hospitals all over the world to brighten their walls with the wonder of Van Gogh. The Van Gogh Museum collaborated with FFHA to license six of Van Gogh’s greatest original works as inspiration for the designs. ASML was given first access to the PaintFest Kit designs before they were made available for public purchase. Throughout March 2022, leading up to Van Gogh’s birthday, five ASML sites around the globe (Wilton, San Jose, San Diego, Veldhoven and Hsinchu) invited colleagues to paint the murals. 750 colleagues joined in on the fun. All finished murals were donated to local healthcare facilities upon completion for permanent installation to cheer and uplift patients and their families as well as hospital staff.

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Valued partner in our communities (continued)

Local outreach

Our approach

Because our operations are concentrated in a limited number of locations, our presence and impact in these communities is important to us and to our local stakeholders. Our continuous interactions with community members as well as local government give us the opportunity to focus our efforts and improve our impact.

While our stakeholders welcome ASML’s presence in the community as a sustainable engine of progress and economic development, they also observe that ASML’s growth brings several challenges for their community. Their main concerns are connected with the growing and increasingly international workforce at ASML and its supplier network. At our main locations this has recently been associated with increasing home prices and competition for scarce engineering talent, while traffic congestion has been a longer-term concern.




It is important to us that everyone in our communities around the world can benefit from ASML’s presence and develop their potential.

In the Brainport Eindhoven region, community leaders also observe increasing tensions between established residents and international newcomers, who all claim their fair share of public and non-public services. On top of these main concerns that take place in the public domain, local government leaders ask for successful businesses to become more inclusive employers and offer development and career opportunities for the disadvantaged local residents who currently benefit less from the prosperity brought by the high-tech industry.

In these high-impact areas, we aim for smart and sustainable interventions. To battle congestion, we actively encourage employees to choose healthy and sustainable modes of transportation, such as cycling and public transport, through our successful Access & Mobility program that has been running for several years.

We support education and development by promoting STEM, with ASML employees working as ‘hybrid teachers’ and tutoring disadvantaged students, helping to increase the number of youngsters with a professional qualification. For our neighbors and local stakeholders, we invest in local amenities and services, while we enable our employees to take part in community service and to share their knowledge and expertise. Across all our partnerships and programs, we pay special attention to encouraging integration, promoting diversity and empowering the underprivileged.

We work with key players and fund high-impact programs and projects that also make a quantified contribution to our ESG strategy, and are supported by approved, robust governance -structures.

Our performance in 2022

In 2022, we supported a total of 140 local outreach projects across the regions where we operate (Netherlands, US and Asia). The total value of these projects amounted to €5.1 million.

'Our actions' outlines a few highlights – for more information, please visit

www.asml.com – community engagement.

Our actions in 2022

Ongoing projects

–Gift Matching (US & the Netherlands): Dedicated to supporting the causes that our people care about, we have launched our Gift Matching program in the US and the Netherlands. We match donations made to non-profit organizations via the Global Matching Gift program, up to €1,000 per employee per year. This means that when an employee donates €100 to a qualified organization, we match their generosity and donate another €100 to the same organization. The program was initially launched in the US and has already succeeded in matching almost $150,000 of employee donations. We are looking forward to launching the program in Asia in 2023.

–PSV football club (the Netherlands): In a unique sponsorship innovation, ASML and five other partners teamed up to sponsor professional local soccer club PSV. Through this partnership, we are committed to promoting the Brainport Eindhoven region as an attractive environment to live and work. We support several programs, including:

–ASML Community Lounge at Philips Stadium: This aims to make soccer accessible to everyone, to help newcomers find their place in our region and to enable people lacking the means to enjoy an evening of top-class sport. We welcomed volunteers and clients from groups such as Food Bank, senior citizens’ union, Severinus, The Salvation Army and other aid agencies to the venue, totaling more than 4,200 guests in 2022.

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Valued partner in our communities (continued)

–As part of our partnership with PSV, we are able to use their pitch for a day. We took full advantage during 2022, inviting the Eindhoven children of the Weekend School. We also welcomed 500 primary school students to present their innovative ideas while participating in the PSV Brainport School Challenge, as well as 400 Ukrainian children and their supervisors, who enjoyed some respite from their troubles.

–Brainport Eindhoven and PSV’s online vitality platform is still up and running, offering health and well-being inspiration and motivation for everyone in the Brainport Eindhoven region, creating a vital and healthy region for all.

–PSV Analytics: This collaboration project between PSV Sport performance and ASML BAS Big Data was initiated to help the Dutch premier top soccer club unlock, use and optimize the large amounts of data it has collected, and translate it into dynamic images analyzing the game plan. This work inspires our technologists as we collaborate and support the club to compete with its much bigger (and richer) rivals.

–Open Huis (the Netherlands): Following a two-year pause, we were thrilled to once again underline our role as a good neighbor and welcome 2,400 Brainport Eindhoven residents to the Veldhoven campus. These well-known Neighbor Days returned for the seventh time with a new name, ‘Open Huis’, and took place on not just one but four days in September. All residents of the Brainport region were able to register online, with places filled very quickly. The visitors were guided by more than 300 ASML ambassadors and enjoyed an action-packed program. We hosted various on-campus tours, shared our plans for new ASML buildings in the local area, gave insightful presentations on how our machines work, arranged Van Gogh workshops, led Mad Science experiments, hosted a photo corner with cleanroom suits and much more. Our neighbors particularly noted the campus’s full-sized running track, 24-hour market, magnificent view over our neighborhood from the nineteenth floor and extremely neat cleanrooms.

–ASML Eindhoven Marathon (the Netherlands): The annual ASML Marathon Eindhoven took place in October 2022. A record 1,700+ ASML colleagues (up from 900 last year) took part in the various races, including the full marathon, half marathon, relay and quarter marathon. Anyone, of any age, experience or ability was welcome to take part, and we encouraged all of our runners to wear a special ASML shirt with pride. Runners and spectators were out in force to celebrate the city and the spirit of this challenge, with more than 25,000 runners competing.

Standalone initiatives

–Blood banks (US): The San Diego Blood Bank and blood banks across the US are experiencing a major decline in donor turnout, leading to a disruption in blood supply. In 2022, our San Diego office hosted six blood drives to help the community. 148 San Diego employees and 47 members of the community donated 180 units, which will help save the lives of 544 people.

–Support for Ukraine (the Netherlands): Russia’s invasion of Ukraine has forced millions of people to leave their homes and seek refuge in the EU and neighboring countries. ASML helped the municipality of Eindhoven and social organization Springplank040 to accommodate more than 100 refugees in a specially created shelter. Working with our partners from the Brainport Partner Fund, we helped fit out the shelter and provided toys and supplies to soften the experience for the children. Together with our partner PSV, we also organized an afternoon of fun and games in the Philips Stadium for 400 Ukrainian children.

–Wilton Land Conservation Trust (US): Over 30 ASML Wilton employees joined forces with Wilton Land Conservation Trust to clear invasive plant species from Schenck’s Island Park in Wilton. The invasive plants were replaced with native blueberry bushes, which will provide food for native animals and local hikers alike.

–Rise Against Hunger (USA): ASML Wilton partnered with Rise Against Hunger, an international hunger relief non-profit organization that coordinates the packaging and distribution of food and other aid to people worldwide. Over 140,000 meals were packaged and shipped to our neighbors in need.

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Valued partner in our communities (continued)

ASML foundation

Our approach

The ASML Foundation is our charity of choice, with a primary focus on impactful, inclusive education and training programs for young people in need. Its mission is to improve lives through inclusive and quality education and training – with the goal of enabling equitable participation in society. The Foundation aims to make a sustainable impact on SDG 4 (Quality Education), and contribute to SDG 5 (Gender Equality), SDG 10 (Reduce Inequalities) and SDG 17 (Partnerships for the goals).

We believe that all people deserve to receive a quality education, allowing them to be self-sufficient, no matter what their background is. We aim to help people who participate in the programs we support to improve their chances of a better life. In terms of diversity, our project selection seeks to improve the inclusion of underserved groups, such as people of color, people who are neurodivergent and people from a less-privileged background, thereby tackling the disadvantages our target groups may face, such as limited access to education, special education needs or a lack of vocational training.

As the ASML Foundation aims to make a difference in ASML’s communities, it mainly supports projects and initiatives in EMEA, the US and Asia that address specific needs in the ASML regions. For example, in the Brainport Eindhoven region in the Netherlands, tackling illiteracy continues to be a key focus area for the ASML Foundation, alongside support for organizations that provide help to neurodivergent young people, with special attention on autism and high giftedness. In the US, projects focus mainly on preventing school dropouts in less-privileged areas, and on promoting science, technology, engineering and mathematics (STEM) for girls as well as for specific minority groups. Projects in Asia differ per country. In developing areas in Asia, for example, there is a focus on education for girls to reduce inequality and also to prevent child marriages. In China, the focus is on STEM for girls in rural areas.

Where possible, the ASML Foundation strongly promotes collaboration between organizations with similar focus, but with complementary programs. This has resulted in a number of initiatives that clearly added value to the organizations, resulting in improved support for a number of our target groups.

ASML employees support the ASML Foundation financially when they purchase goods from the ASML employee store, and the Foundation also receives regular private donations from a number of colleagues.

Our performance in 2022

In 2022, the Foundation donated around €2.4 million (€2.0 million in 2021), supporting 21 projects in nine countries. With the Foundation's financial support, the Foundation contributed to improving the lives of around 1.2 million young people. Our employees contributed a total of 13,645 volunteering hours to community involvement and 4,736 hours to tech promotion. We saw an increase from prior years due to the relaxation of COVID-19 measures.

Action plans for 2022-2025

Next steps in society and community engagement

Our reputation and license to operate are for a large part dependent on the local and regional communities where we operate – we need their support to be able to execute our strategy. Our continuing strong growth and increasing visibility mean that these communities expect considerably more from us. That is why we aim to increase our investments, by a factor of 10, in society and community engagement activities across the globe in the coming years. Those activities will have a strong focus on social cohesion, talent and education, digital inclusion and employee engagement. This has also led to the creation of an ESG Community Partnership Program Team. This new team will provide integrated governance on all company-wide community outreach activities and overseeing our increasing investments.

As part of our step up we will determine our actions for this topic, setting tangible targets and implementing a process to monitor the effectiveness of our approach. Working closely with local stakeholders as well as employees, our goal is to increase our positive impact in all of these areas and strengthen ASML’s position as a robust, reliable and valued partner in the communities around us.

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Governance at a glance

What we do

We champion good integrated corporate governance to build a relationship of trust, respect and mutual benefit with our stakeholders – shareholders, customers, suppliers, employees and society. In this ESG Governance section, we describe how we organize the management of ESG issues within our business, and the other ways in which we ensure we are a responsible business.

Our aims

As the innovator that makes vital systems for the chip industry, we have a responsibility to lead by example. We are committed to conducting our business in compliance with applicable laws and regulations in all the countries we operate in. We strive to work to the highest standards of integrity and continuous improvement of our governance, based on feedback we actively procure from our internal and external stakeholders. We want to conduct our business with honesty and embrace an open dialogue and knowledge sharing throughout our ecosystem.

Managing ESG sustainability, Responsible business and
Our approach to tax

Read more in:

Risk.

Our performance in sustainability areas is part of the Long Term Incentive Plans of our Board of Management and ~~Supervisory Board, and Consolidated Financial Statements - Notes to the Consolidated Financial Statements - Note 22 Shareholders’ equity.~~senior management.

~~We may not declare cash dividends and conduct share buyback programs at all or in any particular amounts in any given year~~Read more in:

We aim to pay a semi-annual dividend that is growing (on an annualized basis) over time, and we conduct share buyback programs from time to time. The dividend proposal and amount of share buybacks in any given year will be subject to the availability of distributable profits, retained earnings and cash, and may be affected by, among other factors, the Board of Management’s views on our potential future liquidity requirements, including for investments in production capacity and working capital requirements, the funding of our R&D programs and for acquisition opportunities that may arise from time to time, and by future changes in applicable income tax and corporate laws. We may also suspend buyback programs from time to time, which would reduce the amount of cash we are able to return to shareholders. Accordingly, the Board of Management may decide to propose not to pay a dividend or pay a lower dividend and may suspend, adjust the amount of or discontinue share buyback programs or we may otherwise fail to complete buyback programs.

Remuneration Report.

~~ASML ANNUAL REPORT 2021 122~~

~~Responsible business~~

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Responsible business

Empowering individuals for the collective good to ensure our employees are proud to work for us and engaged with our ambitions as a company.



			414						10%
			Speak Up messages						Gender diversity % female in senior (13+) job grades (2024 target: 12%)



			IN THIS SECTION
			136			Business ethics and Code of Conduct
			139			Legal & Compliance
			139			Anti-bribery and anti-corruption
			139			Competition Law Compliance Policy
			140			Export Controls
			140			Privacy protection
			141			Respecting human rights
			142			Information security
			145			Product safety

We are a global leader in the semiconductor industry.
As the innovator that makes vital systems for the chip industry, we have a responsibility to lead by example. Our purpose is clear ~~"to~~– 'to unlock the potential of people and society by pushing technology to new ~~limits",~~limits' – and we want our values to reflect in everything we do to pursue our purpose.

Besides the material focus areas in our strategy, we need to make sure that we conduct our business in a responsible manner. Anywhere we operate, we believe that conducting our business with honesty and acting with the highest standards of integrity is essential to our value creation for our stakeholder groups and the long-term success of our company.

We have corporate policies and procedures in place detailing our principles and compliance, guiding us in making the right decisions and living up to our values.
In the next sections, more information can be found on topics such as our business ethics and Code of Conduct, compliance, our responsibility to respect human rights, protection of information and tax.

Responsible business

SDG target

How we measure our performance

SDG target 8.7

Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms

–Number of speak-up messages

SDG target 8.8

Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

SDG target 12.4

By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health

–RoHs/REACH compliance of parts used

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Responsible business (continued)

Business ethics and Code of Conduct

We are committed to conducting our business in compliance with applicable laws and regulations in all the countries we operate in. We promote and uphold ethical behavior, fostering a culture where speaking up is encouraged and appreciated.

We seek to continuously improve and professionalize our Ethics and related Compliance organization to the highest standards. In ~~2021,~~2022, we continued to grow our network of Ethics Liaisons and provided them with tailored training sessions, updated our ~~Speak Up~~Anti-Bribery & ~~Non-Retaliation Policy in line with the new requirements of the EU Whistleblower Directive,~~Anti-Corruption and ~~launched~~Anti-Fraud policies, and refreshed our ~~refreshed~~ Gifts & Entertainment ~~Policy~~Policy. These policies are reflecting the precautionary principle as ~~well as our internal Competition Law Compliance Policy.~~a guiding principle. We continued our training programs and focused on raising awareness across our entire organization. Our next Global Ethics Survey will take place in ~~2022.~~2023, as part of the we@ASML pulse survey.

Our values – challenge, collaborate and care – guide us in our everyday dealings with ~~colleagues,~~employees, customers, suppliers, shareholders and the ~~communities~~society we serve. These values are reflected in our Code of Conduct (hereafter: Code). ItThe Code sets clear expectations and guiding principles for the way we conduct our business and serves to foster a culture of integrity, ethics and respect. Together with a set of practical guidelines, it puts integrity at the center of what we do.

At ASML, ~~relies~~we rely heavily on the skills, commitment and behavior of ~~its~~our employees for ~~its~~our continued success, and for ~~its~~our positive contribution to society. ~~That’s~~That is why we expect all employees to fully live up to the company’s values and to act with integrity and respect at all times. We ask all our employees and our business partners to abide by our Code.

For over a decade, we have been a member of the Responsible Business Alliance (RBA), the world’s largest industry coalition dedicated to corporate social responsibility in the global electronics industry. As a member of the RBA, we have adopted the RBA Code of Conduct, which is a ~~common set of social, environmental~~standard intended to ensure that working conditions in the electronics industry, or industries in which electronics is a key component, and ~~ethical industry standards.~~ its supply chains are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible and conducted ethically.
Our Code is in line with the RBA Code of Conduct. To reinforce our commitment to the supplier network, we expect our key suppliers (representing around 80% of our total spend) and their suppliers to acknowledge and comply with the RBA Code of Conduct and to develop their own strategies, policies and processes to follow it. This requirement is included in our long-term product-related suppliers’ contracts. ~~Read more in: Our performance in 2021 - Social - Our supply chain.~~We also encourage our suppliers to develop their own sustainability strategies, policies and processes, and we actively encourage our suppliers’ adherence to this code.

~~Our ethics governance consists of several levels, which include:~~

1.Our Ethics Board, chaired by our CEO, is reporting to the Audit Committee and Board of Management. The Ethics Board is responsible for policy-making and the supervision of ASML’s compliance with legal and ethical requirements. The Ethics Board meets regularly to give guidance on relevant issues.

2.~~Our Ethics Committee investigates significant notifications about potential breaches of ASML's Code of Conduct worldwide.~~

3.Our Ethics Office is responsible for overseeing and implementing our Ethics program. All reports of a possible breach of ASML's Code of Conduct are screened by one of the Ethics Officers and all significant reports are discussed with the Ethics Committee.

4.Our ethics organization includes employees who, in addition to their regular roles at ASML, act as Ethics Liaisons in all the countries we operate in. They serve as trusted representatives, and act as the first local point of contact for employees with questions and concerns related to ethi~~cs.~~

~~ASML ANNUAL REPORT 2021 123~~



			Our ethics governance consists of several levels, which include: 1.Our Ethics Board, chaired by our CEO, reports to the Audit Committee and Board of Management. The Ethics Board is responsible for policymaking and the supervision of ASML’s compliance with legal and ethical requirements. The Ethics Board meets regularly to give guidance on relevant issues and approve the relevant policies. 2.Our Ethics Committee investigates significant notifications about potential breaches of ASML’s Code of Conduct worldwide. 3.Our Ethics Office is responsible for overseeing and implementing our Ethics program. All reports of a possible breach of ASML’s Code of Conduct are screened by one of the Ethics Officers and all significant reports are discussed with the Ethics Committee. 4.Our Ethics organization includes employees who, in addition to their regular roles at ASML, act as Ethics Liaisons in all the countries we operate in. They serve as trusted representatives, and act as the first local point of contact for employees with questions and concerns related to ethics.


Our values – challenge, collaborate and care – guide us in our everyday dealings with employees, customers, suppliers, shareholders and the society we serve.

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Responsible business (continued)

Our Code of Conduct principles



						Our commitment
			We respect people			ASML is committed to maintaining a safe and healthy working environment, respecting human rights in line with international laws and regulations and industry standards such as the RBA Code of Conduct. Diversity of cultures, education and talent makes us a stronger, more creative and innovative company. By working together and using these values to guide us, we create an environment based on mutual respect – one that leads to better results than any of us can achieve alone.
			We operate with integrity			A strong culture of integrity and compliance underpins ASML’s business success. We define ‘integrity’ as acting with honesty, sincerity, care and reliability. Compliance not only means complying with laws and regulations, but also with our high ethical standards. Our reputation for integrity is a valuable asset. It is essential for us to demonstrate personal and business integrity at all times.
			We commit to safety and social responsibility			Technology reaches all parts of society. By helping to make chips more affordable and more powerful, ASML has an important role to play – not only by reputation and results but also in relation to the environment too. This is why ASML is committed to conducting business responsibly, enabling sustainable growth while fulfilling legal and moral obligations. We aim to achieve our business objectives in a caring and responsible manner as outlined in the key principles.
			We protect our assets			ASML’s most valuable assets are its people and knowledge, both of which are highly valued and protected. Our ‘assets’ include intellectual property, ~~(IP),~~trade secrets or other proprietary information which refers to intangible assets such as technical know-how, products data, business data and personal data, as well as physical assets such as products, tooling, funds and computers for conducting ASML business. Our company expects anyone entrusted with ASML assets to keep them safe from loss, damage, misuse or theft.
			We encourage you to communicate and Speak Up			To fulfill our commitment to upholding the high standards of integrity described in this Code, communication is key. We strive for a working environment that encourages open dialogue among employees, as well as between employees and third parties, where employees feel comfortable and respected, and that they can trust each other to do the right thing. If you observe or suspect a violation, we encourage you to speak up.

Our Code is available for all our stakeholders on our website ~~(www.asml.com),~~

www.asml.com, our intranet and in our Employee app.

Promoting ethical behavior

~~We provide a~~Our dedicated Ethics program, and related Compliance ~~Program, which offers~~program, provides the necessary support, advice, training and communication to enable employees and others to understand and follow our Code. It does this by building awareness through various communication channels to ~~foster~~promote a culture of high integrity. It also helps create an open and honest culture that fosters compliance with the law and ASML policies across the organization.

In ~~2021,~~2022, we continued to extend our ethics training curriculum, by introducing two new modules – ‘We respect people’ and ‘Gifts and entertainment’ – along with the launch of updated policies. We aim to have all six modules ready for all employees over the course of the coming year.curriculum.




Our Code of Conduct serves to foster a culture of integrity, ethics and respect.

In addition to generic modules, which are available to all employees, the curriculum will include ~~manager~~modules with a specific ~~modules – to be completed by 2022.~~audience depending on potential exposure. The curriculum aims to support management and employees in decision-making and promoting our Code and other compliance-related topics, and to raise awareness around the importance of ethical behavior and our Speak Up & Non-Retaliation Policy. It also provides information and guidance on dealing with topics such as personal relationships at work, conflicts of interest, navigating cultural differences and ethical aspects around ancillary activities or other positions outside of ASML. In our training program we particularly ~~focused~~focus on all new employees; within the first three months of starting at ASML they receive an invitation to complete the first module of the curriculum.

In 2021, we changed our approach from having a dedicated Ethics Awareness Week to participating in a series of various interactive topic discussions throughout the year. We had two ‘Our values in action’ sessions, during which leaders of a number of our Corporate Functions explained how ASML’s values – challenge, collaborate and care – connect to the work they're doing, and employees around the company shared how they have actually experienced the values in action.

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We promote an open culture of trust and honest communication.

Encouraging people to ~~speak up~~Speak Up

~~A key insight gained from the last Global Ethics Survey was that employees occasionally may feel reluctant~~In 2022, following an update to ~~report harmful, discriminatory or unethical behavior, due to fear for the consequences of doing so. In 2021, we therefore updated~~ our ~~Speak-up~~Speak Up & ~~Non-retaliation policy,~~Non-Retaliation Policy which ~~was launched at the end of October 2021, and we implemented amendments to address~~addressed the requirements of the EU ~~Whistleblower Directive. In this process, our~~Whistleblowing Directive, we continued to focus ~~was~~ on ~~integrating~~putting the concept of non-retaliation at the core of ~~the policy.~~what we do. We strongly believe that employees should feel safe to express their concerns with the company without apprehension due to the fear of retaliation. These policies and procedures reassure employees that they can report a breach without fear of repercussions. ASML has zero tolerance for retaliation.

~~The policy includes, among others,~~In 2022, we also focused on updating our ~~Ethics Investigation~~internal ethics investigation procedure, which outlines the investigation phases of an ethics ~~complaints,~~complaint, from ~~intake~~first report to ~~remedy~~remedial action and final closure.

For more information on speaking up, non-retaliation, our ethics investigation procedure, anonymity and privacy, please see our Speak Up & Non-Retaliation Policy publicly available on www.asml.com.

We encourage everyone, including external business partners, such as suppliers, contractors and other workers, to express any concerns they might have regarding possible violations of our Code, our company’s policies, the law ~~and~~or our values. We promote an open culture of trust and honest communication where violations of the Code are not tolerated. We have several different

~~ASML ANNUAL REPORT 2021 124~~

channels within the ~~Speak-Up service~~Speak Up program to report such concerns, including an online reporting ~~tool(hosted~~tool (hosted by an independent, external service company), phone numbers for each country in which we operate, a dedicated email address and via our Ethics Liaisons. For employees or external stakeholders who prefer to remain anonymous, the ~~Speak-Up~~Speak Up service is available to report breaches anonymously. The role of the Ethics Office is to assess each ~~Speak-Up~~Speak Up report and take ~~appropriate~~proper action to address the report so that any ~~appropriate remediation~~suitable remedial actions can be taken by the appropriate body.

We review and assess all ~~Speak-Up~~Speak Up messages and follow up on all of them by providing feedback to the reporting party if possible. If necessary, we engage with the reporting party and/or ~~counterpart~~counterparty to understand the nature of the ~~Speak-Up~~Speak Up message, and to conduct more detailed analysis and/or investigation. When required, we implement ~~remedy~~remedial actions to prevent recurrence.

We registered ~~396 ethics related~~414 ethics-related reports in ~~2021 (229~~2022 (396 in ~~2020)~~2021). We view this increase as a sign that our employees and external business partners feel comfortable and protected to report their concern. We attribute this result to the improvements implemented, but we also noted high number of reports related to COVID-19, such as travel restrictions, vaccination, quarantine and country specific measurements. The vast majority of the number of reports relates to questions, rather than concerns of potential misconduct. Another area of increase relates to conflict of interest questions.

Among these ~~Speak-Up~~Speak Up reports, ~~ten~~sixteen complaints were ~~filed.~~considered to be admissible as investigations by the Ethics Committee. These follow a formal ethics complaint investigation procedure. At the time of publication of this annual report, the investigation procedure of ~~five~~ten ethics complaints ~~were~~was completed. ~~From~~Of this total, ~~four~~two complaints were deemed unsubstantiated – no violation ~~with~~of the Code – and ~~for one complaint disciplinary measure – termination of employment – was taken.~~two partially substantiated. The corrective actions on the six substantiated complaints vary from warning letters and suspension to instant dismissal. The remaining ~~five~~six ethics complaints ~~are still~~remain in the formal investigation process.

~~We did not incur any fines for breaches of ethical regulations in 2021.~~

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Legal & Compliance

Our Legal & Compliance function oversees adherence to a wide variety of regulatory compliance-related areas and advises management about the regulatory framework, including changes in legislation and ~~regulations, seeking~~regulations. The function aims to ensure that we conduct business in compliance with all relevant national and international laws and regulations, as well as professional standards, accepted business practices and our own internal standards. Examples of ~~such~~ regulatory compliance areas ~~are our~~include securities and insider trading, competition law (antitrust), export control and anti-bribery and anti-corruption. When needed, our Legal & Compliance Department takes charge of any regulatory investigations.

Anti-bribery and anti-corruption

ASML does not tolerate bribery or corruption or any form of improper influence on ~~others~~colleagues or ~~ourselves.~~others. We are committed to the highest standards of personal and business integrity. ~~Our~~In September 2022, our Anti-Fraud and Anti-Bribery & Anti-Corruption policies were both updated. The Anti-Bribery & Anti-Corruption Policy ~~as updated in 2020,~~ details our commitment to strong ethics and integrity and the measures we take to prevent bribery and corruption at ASML. ItASML does not allow employees to accept or provide facilitation payments or to make political contributions on behalf of the company. The policy also requires compliance with applicable anti-bribery and anti-corruption laws as well as the ASML Code of Conduct.

For more information or to download of the policy, please ~~visit~~ visit:

www.asml.com.

~~In April 2021, we launched our revised~~

Our Gifts & Entertainment Policy ~~which~~ details the behavior expected of all ASML employees with regard to giving and accepting gifts or entertainment (including business meals) and supports our commitment to doing business in a professional, ethical and transparent manner. The policy is also a key element in our compliance and anti-bribery & anti-corruption program. We require our employees to always comply with this policy, use common sense and, if needed, seek guidance or support as outlined in this ~~policy.~~policy and explanatory material (such as FAQs and flowchart). An important ~~new~~ element of the policy is the request for prior approval for certain categories of third-party gifts or entertainment. This enables us to capture registration of both given and accepted gifts and entertainment in these categories, which supports us in complying with the policy, as well as with laws and regulations. Giving and accepting gifts and entertainment should never influence, or appear to influence, the integrity of our business decisions and transactions, or the loyalty of the parties involved. ~~ASML does not allow employees to accept or provide facilitation payments or to make political contributions on behalf of the company.~~

In ~~2021,~~2022, we ~~revised and~~ updated our training curriculum regarding fraud, anti-bribery and anti-corruption topics, ~~mostly as~~by launching an all-employee mandatory e-learning course which is part of the ~~updated~~ ethics training curriculum and by providing additional classroom ~~trainings~~training to specific stakeholder groups. We are further strengthening our global third-party due diligence program.

There were no regulatory fines or actions toward ASML in the area of bribery and corruption in the reporting year ~~2021.~~2022.

Competition Law Compliance ~~policy~~Policy

~~ASML considers~~We consider compliance with competition law an essential part of ~~its~~our business. Competition law (also known as ‘antitrust law’) protects effective competition in order to ensure the optimal functioning of the market. Competition law impacts many areas of ASML’s day-to-day ~~business. It~~business, and affects our dealings and interactions with customers, suppliers, co-developers and other business partners.

We are committed to the principles of fair competition and fairness in dealing with our business partners, including suppliers, ~~codevelopers,~~co-developers, customers and other industry peers. As such, ASML does not condone any form of conduct that is considered illegal

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under applicable competition laws or is contrary to our Code of Conduct, and we will not engage in business or cooperate with business partners who resort to anticompetitive behavior or suggest entering into illegal conduct.

To this end, ~~ASML has~~we have general and specific control measures in place to prevent, detect and disclose potential competition law issues, including the following:

Competition law compliance risk assessment:

~~ASML~~We regularly ~~performs~~perform risk assessments of relevant competition law focus areas. This assessment identifies and takes into account risks that may be present from a competition law perspective, ~~which~~the controls that have been put into place, ~~what~~ the remaining risks ~~are,~~ and which measures will be taken in order to mitigate any remaining risks.

Policy review:

Our Competition Law Compliance Policy demonstrates our ongoing commitment to ensuring compliance with applicable competition laws and our Code of Conduct. Any act of an ~~Employee~~employee or business partner contrary to this ~~Policy~~policy will be considered a significant breach of ASML’s Code of Conduct. Consequently, this may lead to appropriate disciplinary measures, including dismissal. ~~ASML reviews this Policy periodically.~~ We published a public version of the ~~Policy~~policy in ~~2020,~~2020. ASML reviews this policy periodically, and released an updated version of the internal ~~Policy~~policy in 2021.

Training and awareness:

~~ASML’s~~Our competition law training program consists of a combination of different ~~methods;~~methods, including computer-based ~~training sessions~~ and in-person training sessions. ~~Awareness~~It also promotes awareness of relevant topics and issues relating to competition law ~~is also promoted~~ by periodic communications through, for example, presentations and articles on ~~ASML’s~~our intranet or by email communications.

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Contacts with business partners:

~~ASML expects its~~We expect our business partners (such as customers, suppliers, consultants, contractors ~~intermediaries, etc.)~~and intermediaries) to demonstrate high standards of ethical behavior that are consistent with our own. ~~ASML~~We will not engage in business or cooperate with business partners that resort to anticompetitive behavior or suggest entering into illegal conduct. ~~ASML~~We firmly ~~condemns~~condemn any anticompetitive behavior by ~~its~~our business partners.

Reporting and resolving an issue, violation or complaint:

~~ASML~~We will support ~~its~~our employees and business partners who refuse to enter into anticompetitive conduct or who report potential violations of our policy, as clearly stated in our Speak Up & Non-Retaliation Policy. ~~ASML does~~We do not tolerate any form of retaliation or other ~~form~~forms of adverse consequences against employees who practice strict adherence to competition law rules or against those who Speak Up, even if ~~ASML loses~~we lose business as a result. We didn’t incur any fines for breaches of competition law in 2022.

For more information, or download ofour ASML’s public ~~competition law~~Competition Law Compliance Policy:

www.asml.com.

Export Controls

We are committed to compliance ~~policy, please visit www.asml.com.~~with all applicable export controls laws globally. We have implemented policies and procedures designed to promote compliance and prevent unauthorized transactions. Employees are required to follow our policies and procedures. Further, we have IT controls and other measures in place designed to facilitate protection against inadvertent violations of export control requirements.

We regularly assess the effectiveness of such policies, procedures, and controls, and update them as necessary. For example, we have recently updated our policies and procedures in connection with the Additional Export Controls on Semiconductor Manufacturing Items imposed by the U.S. government in October 2022.



We expect our business partners – customers, suppliers, consultants, contractors and intermediaries – to demonstrate high standards of ethical behavior that are consistent with our own.

Privacy protection

We are committed to respecting and protecting the privacy rights of employees, customers, suppliers and everyone we do business with. Personal data is managed in a professional, lawful and ethical way, in line with our Code of Conduct and in compliance with applicable laws and regulations.

We have technical and organizational measures in place intended to prevent ~~the~~ accidental or unlawful destruction, loss, alteration, unauthorized disclosure of, or access to, personal data. Our Privacy Policy sets the minimum requirements from the perspective of ASML as a global organization. The policy is binding for all ASML employees and applies to the processing of personal data of our staff, job applicants and business partners such as customers, suppliers, visitors and other individuals.

A dedicated privacy and personal data protection program ensures we adhere to high standards of personal data ~~protection standards. Our privacy~~protection. Among other elements, the program ~~includes, among others, the following elements:~~covers:

•–Governance: At the senior management level, the Corporate Risk Committee is responsible for oversight of the topic of privacy, while the Privacy Office manages the privacy framework and provides assistance and guidance. Each employee is responsible for reading and understanding the content and implications of the Privacy Policy.

•–Systems and procedures: The Privacy Controls framework ~~consist~~consists of 130 privacy activities including privacy impact assessments and data protection impact assessments. The Privacy Controls framework is included in our ERM process.

•–Disciplinary actions: We investigate all incidents, concerns and ~~registered~~ reports of potential breaches that are registered in our Privacy portal, as outlined in our personal data breach procedure. We take appropriate control measures and disciplinary actions to prevent reoccurrence.

•–Audit: Privacy is included in our internal audit program. Our privacy notices for both business partners and recruitment are derived from our Privacy Policy. They explain why personal data is collected and how ASML uses it.

In 2021, we updated our Global Privacy Notices for workers, job ~~applicant,~~applicants, business partners and visitors. The new privacy notices reflect the latest processing of personal data within ASML, and meet the requirements of the applicable ~~Privacy~~privacy laws and regulations, for example GDPR (EU) and CCPA (US).

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Respecting human rights

ASML is a keen proponent of intentional integrity, particularly given its responsibility to society. This means not just ticking a box when it comes to critical issues
such as upholding human rights. We conduct business
on the basis of fairness, good faith and integrity, and we expect the same from all those we work with. To this end, we also believe that we have the responsibility not only to respect human rights but to advocate for them throughout our organization to help make a positive impact on society. The work we are doing around our ESG framework, the steps we are taking with respect to diversity and ~~contribute~~inclusion, our well-being program and our continuous efforts to ~~positive impact.~~

address integrity as part of our culture are all attribute to advocating for human rights within ASML. We are committed to respecting universal human rights and honoring the value of ethics as expressed in our Code of Conduct. We support the principles laid down in ~~the OECD Guidelines for Multinational Enterprises, United Nations~~UN Guiding Principles ~~(UNGP)~~ on
Business and Human ~~Rights and those in the International Labor Organization’s (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. We have established a~~Rights. In 2017, we initiated our Human Rights Policy, which is publicly available on ~~www.asml.com.~~www.asml.com, which reflects the earlier mentioned precautionary principle and takes a holistic view on embedding and protecting human rights within our organization.

The provisions of this policy are derived from key international human rights standards including the ILO Declaration on Fundamental Principles and Rights at Work and the UN Declaration of Human Rights, the UN Global Compact and the principles laid down in the OECD Guidelines for Multinational Enterprises. In 2023, we will review our existing policy to ensure we are not only complying with the minimum requirements but adjust them where necessary and consider whether we can introduce additional measures to meet our goals of being leaders in this field. In addition, we will review the effectiveness of the procedures that have been implemented in order to identify, manage and prevent adverse human rights impacts that are material to ASML's business.

Our Human Rights Policy complements our ASML Code of Conduct and the RBA Code of Conduct, to which we ~~adhere to.~~adhere. It expresses our commitment to human rights and responsible labor practice in our operations and our supply chain. The Human Rights Policy applies to ASML and its subsidiaries anywhere in the world. The overall responsibility for identifying and managing human rights issues in our direct operations falls under the remit of our Executive Vice President HR. Responsibility for human rights in our supply chain falls under the remit of our Executive Vice President Sourcing and Supply Chain.

Defining salient human rights issues

Salient human rights issues are those human rights that are at risk of the most severe negative impact through a ~~company's~~company’s activities or business relationships. We assessed possible impacts on people’s human rights across our value chain. We focused our efforts on seeking stakeholder input on the one hand and performing due diligence in relation to our initial salient issues on the other hand. Our commitments to address and engage actively in our salient human rights issues are highlighted in our Code of Conduct, Human Rights Policy and RBA Code of Conduct for suppliers. We identify and manage human rights issues in various ways, for example through stakeholder engagement ~~internal~~and by assessing human rights ~~assessment~~ in our own operations, ~~and suppliers'~~as well as suppliers’ due diligence and sustainability risk management.

Read more in:

Social – Our supply ~~chain.~~chain.

We received no grievances about breaches of human rights in ~~2021.~~2022.

Our operations

~~In 2019,~~Following the risk assessment which we conducted ~~a risk assessment~~ to identify the inherent risks related to human rights within our own ~~operations.~~operations, we have decided to review the current policy and update it during 2023. The results of our previous analysis showed that the ~~inherent~~ risk of human rights vulnerabilities inherent in ~~ASML's~~our own operations are working hours and overtime, health and safety, and workplace harassment. The vulnerable rights-holder groups identified within ASML are contractors, ethnic minorities and migrant workers. ~~An update of this assessment is planned for 2022. In addition, we also conduct~~We continue to monitor these issues through regular internal EHS ~~audits regularly.~~ audits.

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We believe that we have the responsibility not only to respect human rights but to advocate for them throughout our organization to help make a positive impact on society.

Workplace harassment

We are a global company with operations in more than 60 locations in 16 countries and regions. We have a culturally diverse workforce, employing ~~122~~143 nationalities. This leads to a higher inherent human rights risk around the issue of workplace ~~harassment in human rights.~~ harassment.

Through our Ethics program, we raise awareness around the importance of ethical behavior and our Speak Up & Non-Retaliation Policy. It also provides information and guidance on dealing with topics such as personal relationships at work, conflict of interest, dealing with cultural differences, and ethical aspects around ancillary activities or other positions outside of ASML.

Our supply chain

We assess risks related to human rights in our supply chain through a risk-based approach. In our due diligence process, we use the RBA Risk Assessment Platform to identify inherent risks in labor (including human rights), ethics, health and safety and environmental standards across our full supply base.
In the event that a medium or high risk relating to labor is identified, we engage with the supplier and conduct a more detailed analysis. For strategic suppliers covering around 80% of our product-related spend, we expect them to complete the annual RBA SAQ. This SAQ covers more than 400 risk elements related to labor (including human rights), ethics, environmental and safety factors, control elements and management systems, including their performance. It helps us to determine a supplier’s risk profile on sustainability. When we identify compliance gaps, we engage with the supplier to determine corrective action plan(s).

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The salient issues we have ~~defined~~identified relate to working conditions (forced and bonded labor), health and safety, and trade union rights. However, ~~operating~~as they work in the high-tech industry, the majority of our suppliers operate in countries with a strong rule of law and are law abiding. We view this inherent risk as low.

Read more in:

Social - Our supply ~~chain.~~chain.

Information security

Like other companies, ASML is increasingly subject to cyberattacks. These attacks can potentially have an adverse effect on our business, reputation, revenues, operations or financial health, especially when they breach data protection rules and jeopardize confidential information of our customers or partners. With ASML’s unique position and the growing ~~exposure~~geopolitical tensions in the semiconductor industry, we see increasing security risk trends, ranging from ransomware and phishing attacks to ~~insider threats and infiltration~~ attempts to acquire ~~our leading~~ intellectual property ~~(IP)~~ or disrupt business continuity.

In ~~2021,~~2022, ASML ~~encountered~~registered around ~~20,000~~2,800 cybersecurity incidents, excluding phishing. We don’t believe that any of these incidents has had a material impact on our business. See “Risk Factors – Cybersecurity and other security incidents, ~~most predominantly from phishing attacks with minor impact. According to an external research report '2021 Data Breach Investigations Report (DBIR)' conducted by Verizon,~~or other disruptions in our processes or information technology systems, could materially adversely affect our business operations”. We have increased the ~~incidence~~number of phishing attacks in data breaches went up from 25% in 2020 to 36% in 2021. With the increase of exposure to cyberattacks over the past years, we have also strengthened our resources and capabilities, comingFTEs from 10 ~~FTEs~~ around ~~10 years~~a decade ago to around ~~250~~300 FTEs ~~in 2021~~ dedicated to security ~~matters.~~matters in 2022.

Security – like safety and quality – is a prerequisite for trust in the ASML brand. Our customers and partners must be able to rely on the security, safety and quality of our products and services. ~~ASML's existence~~ASML’s competitive edge is based on ~~people and knowledge. Our specific~~the knowledge and intellectual property ~~are~~that has been developed through decades within our ecosystem. That knowledge sits in various repositories within the company as well as in the minds of our employees and the many people we work with within our collaborative eco-system of hundreds of suppliers, customers and knowledge institutions. On the one hand it makes the protection of knowledge a challenge, because our eco-system is to a large extent based on exchange of ideas and insights among many individuals. On the other hand it also means that it is very difficult to replicate what ~~give us a leading edge over~~we do. Without (operating) software, knowledge about electronics and the behavior of the different components, the specific knowledge of

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individuals within ASML and our ~~competitors~~partners about integration of different elements of our technology, and ~~they are therefore vital~~without the very diverse and extensive partnerships within our eco-system, it is extremely difficult to ~~protect.~~effectively build machines as complex as ours.

As ~~ASML innovates~~we innovate together with ~~its~~our ecosystem partners, ~~these~~our partners need access to some of our systems. AsBecause the chain is only as strong as the weakest link, we need to make sure that ~~our partners~~this access ~~our systems~~is enabled in a secure way. ~~ASML's~~ASML’s Security Circle of Trust is intended to certify and assist our ecosystem partners to increase the maturity of their information security, ~~maturity.~~

~~Our security governance consists~~while also resulting in developments for ASML itself to learn of ~~three levels:~~

1.~~Our Corporate Risk Committee (CRC) is a central risk oversight body, which reviews, manages~~effective techniques and ~~controls risk~~technologies in the ASML Risk Universe, including information security. It also approves the risk appetite, risk management policies and risk mitigation strategies. The CRC, which reports to the Audit Committee and the Board of Management on a regular basis, is chaired by the Chief Financial Officer (CFO) and comprises top senior management representatives from all sectors at ASML.

2.Our Security Committee, a sub-committee of the CRC, validates the risk appetite related to information security and validated policies and roadmaps. It closely monitors mitigation of security risks across the company.

3.The central security department, led by the Chief Information Security Officer (CISO) as the owner of the information security risk, aided by security risk management teams in the sectors. The CISO is in the second line of defense, and is empowered to drive policy through the security roadmap building the controls, and monitors the effective execution of controls in the sectors as the first line of defense.return.

Information security resilience framework

Our vision on security is that it needs to be embedded in the DNA of our people, processes and technologies. ToIn our effort to ensure this, we have created a dedicated security function in order to ~~prevent and~~ manage security risks. The Chief Information Security Officer (CISO) coordinates the response on information security risks as second line of responsibility and is supported by security teams in the sectors as first line of responsibility. Our mission is to enable ASML to have control over the protection of information and assets of the company, as well as confidential information of its customers and suppliers, by applying risk-based and efficient measures for people, processes and technology that support our business goals. To realize this vision and mission, we pursue and deploy our security strategy as we seek to achieve the highest level of ~~maturity.~~maturity in our security capabilities, and rolling these out to our assets in a risk-based manner.

We developed our information security framework by applying the ~~ISO27001~~ISO 27001 Information Security Standard

across its 14 domains and by driving security maturity – from policy setting, asset management and access control to incident management and more. For each of these domains, we have tailored controls in place, which are assessed routinely intended to ensure compliance and effectiveness. In addition, ~~we have an incident reporting~~our incident-reporting tool ~~in place~~seeks to make sure that all IT and information security issues can be reported, correlated and investigated.

People and knowledge are key to the business success of ASML. Unauthorized disclosure of our information, ~~of ASML,~~ or information of ~~its~~our customers or suppliers in ~~its~~our innovation ecosystem, could benefit competitors, negatively affect ~~ASML’s~~our ability to file patents or negatively affect cooperation with customers, suppliers and ~~suppliers.~~regulators. At the same time, ~~ASML’s~~our operations are dependent on reliable information processing, and unauthorized changes to the information content of these assets can damage ~~the~~our ability to ~~perform~~carry out our business. Therefore, it is critical to guarantee confidentiality and integrity of information. To make sure that our employees understand the security policy and know how to act, we provide mandatory security ~~awareness~~ training and through the year host ~~an annual~~multiple security awareness ~~week,~~events, during which we provide additional information and share learnings.

In our supply chain network, we use a single model for risk assessment of our partners, which they also use in order to screen their suppliers. We are also in close contact with peers, partners and best-in-class security solution providers, and ~~have~~ our security solutions are tested regularly through penetration testing (ethical hacking) to identify exploitable issues so that effective security controls can be implemented.

Given the continuous trend of increasing cyber and security risk and the increasing geopolitical attention

towards ASML, we are continuously reviewing the adequacy of our risk control framework and continue to implement additional controls. However, given the pervasiveness, sophistication and rapid rise of cybersecurity and other security risks, the geopolitical attention towards the semiconductor industry and the inherent limitations that follow from our collaborative innovation approach, this may not always be sufficient to prevent an incident, and reduce this risk entirely. Hence a relentless drive is required and in place to adopt the latest best practices.

Read more in:

Risk - How we manage risk.

Creating Security Circles of Trust

At ASML, we develop our technology in close collaboration with partners inside and outside our company in an innovation ecosystem based on trust. Innovating and collaborating in a connected ecosystem requires secure information sharing beyond corporate boundaries, as the vulnerability to cyberattacks is extended to the perimeter of the total ecosystem.

Therefore, in 2021 ASML started the Security Circles of Trust initiative to protect our innovation ecosystem in the Brainport Eindhoven region and the Netherlands. The ‘circle of trust’ is a network of peers and suppliers who jointly embrace the same information security standards and raise their performance against these standards. The network also drives the exchange of knowledge and best practices between ASML, suppliers and ecosystem partners.

We share best practices to help our innovation partners develop and reinforce security maturity. The goals are to protect intellectual property and guard the industry and the region against cybercrime such as ransomware, to share relevant threat intelligence, to collaborate on security topics and to become more secure together. Annually we hold master classes with our top 10 key suppliers and more than 50 of our neighbor companies to increase information security awareness and knowledge in the region, and to share practical tips, tricks and strategies, for example about combating ransomware. In 2022, we have expanded the Circle of Trust to also include semiconductor companies in the US, Europe and Taiwan, with further roll-out scheduled for 2023 to other geographies.

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~~Creating Security Circles of Trust~~

Therefore, in 2021 ASML started the Security Circles of Trust initiative to protect our innovation ecosystem in the Brainport Eindhoven region in the Netherlands. The 'circle of trust' is a network of suppliers who jointly embrace the same information security standards and raise their performance against these standards. The network also drives the exchange of knowledge and best practices between ASML, suppliers and ecosystem partners.

We share best practices and information about cyber incidents to help our innovation partners develop and reinforce security maturity. The goals are to protect intellectual property and guard the industry and the region against cybercrime such as ransomware, to share relevant threat intelligence, to collaborate on security topics, and to become more secure together.

In 2021, we held master classes with our top 10 key suppliers and more than 50 of our neighbor companies to increase information security awareness and knowledge in the region, and to share practical tips, tricks and strategies, for example about combating ransomware.

Intellectual ~~Property~~property protection

Our company is based on people and knowledge. Our specific knowledge gives us a leading edge and a head start over competitors. To stay in business, it is key to protect our own knowledge as well as information entrusted to ASML by our customers and business partners. Patents are a way to protect ~~ASML's~~ASML’s research and development investments from use by ~~ASML's competitors, but also from~~our third parties, including exploitation by ~~ASML's~~our competitors, customers, suppliers and co-developers. We innovate and develop our technology with our ecosystem partners consisting of many different firms and institutions, each of which requires a dedicated way of dealing with intellectual property ~~(IP)~~ matters.

~~ASML's~~ASML’s general intellectual property (IP) strategy has three objectives:

•–Build and maintain a solid intellectual property portfolio by protecting ~~ASML's~~ASML’s inventions.

•–Prevent situations where ASML infringes the intellectual property rights of third parties.

•–Prevent the disclosure of confidential information, including know-how and trade secrets, to the outside world, in accordance with ~~ASML's~~ASML’s Knowledge Protection Program.

Our Corporate Intellectual Property department is tasked ~~to strengthen~~with strengthening our global IP position including our patent portfolio, as well as protecting our patents. The department’s mission ~~of this department~~ is to maximize ~~ASML's~~ASML’s intellectual property value, to execute and support ~~ASML's~~ASML’s overall objectives and to preserve ~~ASML's~~ASML’s freedom of operation. To protect our technology leadership and our R&D in leading-edge technology, the ~~Corporate Intellectual Property~~ department is involved in the product generation process ~~with the aim of ensuring that ASML's products are not at risk of infringing on third-party intellectual property rights. The department~~and assesses new products to determine whether they would potentially

infringe any relevant third-party intellectual property rights of third parties.

Our significant investment in complex research and development justifies a strong intellectual property portfolio. We have developed an IP ~~Rights~~rights management mechanism to safeguard our IP rights and to respect the IP of other parties. This includes, among others, a dedicated knowledge protection program, restricted access to Engineering Top Secrets, an information security program, mandatory information classification, and a training and awareness program.

We have adopted controls, policies and procedures to safeguard the protection of our trade secrets, proprietary customer data, and other information, and in order for us to comply with export controls, economic sanctions and similar regulations. These controls and procedures may not always be effective, and we have experienced unauthorized accessibility of data which enabled misappropriation of information by a former employee, which may constitute a violation of such regulations (see the risk factor “Cybersecurity and other security incidents, or other disruptions in our processes or information technology systems, could materially adversely affect our business operations”). We have implemented remedial measures to prevent similar unauthorized access and we are reviewing our security controls, policies and procedures to determine whether any further changes are appropriate.

Early in 2021, we became aware of reports that a company associated with XTAL Inc., against which ASML had obtained a damage award for trade secret misappropriation in 2019 in the USA, was actively marketing products in China that could potentially infringe on ASML's IP rights. In response, we reached out to certain customers urging them not to aide or abet this company, DongFang JingYuan Electron ('DFJY') in any such potential infringement. Furthermore, we shared our concerns with the Chinese authorities. ASML is monitoring the situation closely and is ready to take legal action if appropriate.


IP portfolio trend

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Product safety

We want to innovate, but always with safety at the top of mind. ~~It’s~~It is our duty to provide a safe work environment at all times. We ~~focus~~do this by focusing on safety at every stage of a product ~~lifecycle:~~life cycle: research, development, production, transport, installation, maintenance, upgrades and decommissioning. And we make sure we cover all our stakeholder groups, including employees, customers, suppliers, contractors and visitors.

How we manage product safety

Safe products start with good design. The first step is to eliminate risk by product design, and since human factors play an important role in the safe operation of a product, we try to guard against them becoming a risk factor as much as possible. One example of this is the way we interlock laser beam activities to limit our employees' exposure to dangerous laser beams. This helps prevent workplace activities from turning into potential accidents.

We focus on safety by design in hardware followed by safety by procedure – prevention is key. We seek to ensure all the products and tools we develop comply with the world’s most stringent product safety regulations, and with legislation applicable to the countries where we do business. In cases where there are no safety precautions available to address potential hazards, we develop our own.

We have clear systems and processes in place to support our approach to product safety. When we start designing our systems, our safety engineers conduct an initial Safety Risk Assessment (SRA). They take into account nine key risk areas that we have identified, and alert risk experts if they believe designs might pose a human safety risk. Our product designers are trained to identify any safety issues in the early stages of the design process. The SRA is evaluated during the entire product development process.

In each subsequent stage of the product lifecycle, we evaluate product safety. We track any reported product-related incidents – including supply chain incidents – through our incident-reporting system. Every year, we provide management with a product-safety review, where we report any product safety incidents of the past year. In 2021, as in previous years, we are proud to say that there were no recordable incidents caused by our equipment.

~~Inside our in-house testing lab~~

As the technological complexity of our systems increases, so does the need for testing to prevent field failures. Our test labs provide hardware testing capabilities to root out potential risks and flaws in design as early as possible. Testing early in the design process prevents part failures down the line, at customer fabs, and also supports D&E's drive toward more robust product design, from risk to result.

Over the years, we have developed modular test platforms to decrease the mean time between testing (MTBT) and to standardize test lab equipment. In the Modular Vacuum Test platform, for example, around 80% of vacuum-related part risks can be characterized and tested, and additional test environments can be flexibly added, such as gases, high voltage and temperature, using standardized hardware and software interfaces.

~~Our Veldhoven facility has 24 labs with a total lab space of around 1,500 m~~2~~. These labs provide a high-tech test environment for up to 100 test setups, ranging from standard bolt friction tests to tailor-made actuator tests.~~

As we have grown, so has our product complexity and the number of geographical locations where we ~~operate in, and~~operate. It is therefore ~~it is~~ becoming more complex to assess which safety legislation and regulations apply to our products and tools. At the same time, it is also more complex to determine the rules and procedures we need to follow to demonstrate this compliance. Some of our technology is so innovative and new that it is not always immediately clear which regulatory regime applies. ASML is extending the expertise by hiring country safety regulatory experts.

~~In 2021, we established a Corporate~~We have clear systems and processes in place to support our approach to product safety. Our Global Product Safety and Regulatory organization is part of Quality and ~~Compliance Office, tasked to ensure that our products are compliant with~~Excellence, which coordinates the overall product safety ~~policy. The Regulatory Board is~~approach within ASML. To support ASML products, each product line has safety engineers who are responsible for the ~~decision-making on ASML~~ product and make a first-level system risk assessment. To support safe design, we have defined and implemented 12 key risk areas, with risk experts supporting individual projects.


Product safety competences
With regard to all of our competences, the role of our D&E safety competence leads is to provide thorough knowledge about our ways of working and to design rules for specific safety hazards in all of our competences. Electrical: Making an electrical design safe and protecting people from electrical shock. This involves making conductors carrying hazardous voltage inaccessible, ensuring that accessible conductors do not carry hazardous voltages and that inaccessible conductors are sufficiently insulated from accessible ones through compliance with corresponding regulations and standards. Pressure: Interpreting and explaining local legislations and standards, and also advising on testing and documentation, and maintaining the manufacturing record book which is needed for a high-pressure permit in certain countries. Human factor engineering (including ergonomics): Incorporating a human-centered design approach helping projects maintain access for maintenance and servicing by laying down rules for issues such as accessibility, posture, forces and the lifting of parts. Mechanical: Keeping track of safety factors, as well as seismic requirements for our machines. Lifting: Many special requirements (such as the certification and training of crane operators) are applicable in countries where we use lifting tools. Our team can advise when certification is needed. For example, in South Korea certification is required for weights of 500 kg or more.						Working at height: This is a new area of expertise which was required during the design of our EXE:5000, our first EUV 0.55NA (High-NA) system to guarantee good access to the various areas. Radiation: Main focus on lasers with intensities that go beyond standard. In addition, we consider the impacts of standard and special lamps and LEDs that we are using. Dangerous goods: Prevent shipments being stopped due to requirements for transport and the importation of certain hazardous substances such as chemicals, magnets and batteries. Safety in procedures: Support of creating written safety procedures for highly complex operations. Thermal: The use of tin at high temperatures requires special precautions to protect people. Dangerous gases: The use of gases requires safety systems and procedures to protect machines and people. For example, nitrogen is an asphyxiation hazard, and the use of hydrogen in EUV has additional applicable legislations and standards. Materials and substances: Monitoring worldwide legislation to check the legal status of all materials used on our products, and ensuring that we don’t use or introduce hazardous materials in our products.

Product safety ~~compliance and~~in design

We seek to ensure all the strategy to eliminate non-compliance, monitors compliance status and drives risk mitigation. During its monthly meetings, the Regulatory Board discusses the non-compliance cases and takes decisions based on the mitigation plan presented. This allows us to further improve our ability to assess which legislation and regulations – including Restriction of Hazardous Substances (RoHS) and Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) – apply in each country we operate in, how to interpret them, and whether our products and tools comply. As always, we provide safety documents for our machines – including the results of the safety tests of parts and the machines’ functioning – taking regulatory requirements into account.

In 2021, we investigated if the use of a Teflon coating on our wafer stages is compliant with international regulations with regard to persistent organic pollutants (POPs). Teflon – the name of a synthetic chemical called polytetrafluoroethylene (PTFE) – is considered a persistent organic pollutant. Results of our analysis show that the Teflon concentration is 0.027 ppb (worst-case scenario), which is far below the 25 ppb limit.

~~Ensuring safety compliance~~

~~Our D&E safety competence leads are at hand to provide thorough knowledge about the way of working and design rules for specific safety hazards. The~~ products and tools we develop comply with the world’s most stringent product safety regulations, and with legislation applicable to the countries where we do business. We focus on safety by design in hardware, followed by safety by procedure – prevention is key.

Safe products start with a well-thought-out design and with product safety requirements implemented right at the start of initial design. The first step to a human-safe design is to eliminate risk or protect people by product design. Since human factors play an important role in the safe operation of a product, we try to guard against these becoming a risk factor as much as possible. This helps prevent workplace activities from turning into potential accidents. If there are no safety precautions available to address potential hazards, we develop our own.

When we start designing our systems, our engineers conduct an initial Safety Risk Assessment (SRA). Our product designers are trained to identify any safety issues in the early stages of the design process. The SRA is evaluated throughout the entire product development process. We evaluate product safety at each subsequent stage of the product life cycle and track any reported product-related incidents – including supply chain incidents – through our incident-reporting system. We are proud to report that in 2022 there were no recordable incidents caused by our equipment.

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Responsible business (continued)

Progress on EUV 0.55 NA (High-NA) safety aspects

EUV 0.55 NA (High-NA) is the latest ASML product on our EUV roadmap and is recognized as the next generation of EUV machines. The development of this system presented new challenges for product safety due to its size, weight of modules and accessibility. To support the design, we placed extra focus on ergonomics and working at height.

For example, our ergonomic experts use 3D simulations to enable people to practice various actions.

In addition, the new system features built-in service platforms and platforms which led to the new ‘working at height’ safety competence.

Due to the complexity of the system, the EU Safety Directives and semiconductor industry guidelines (SEMI S2) review was split, with a first design review followed by a second inspection of the hardware. During 2022, we began the SEMI S2 third-party safety design review.

Embedding product safety in the organization

In 2021, we established a Safety and Regulatory Office, tasked with tracking new legislation and standards and ensuring that our products are compliant with product safety rules and regulations. The Regulatory Board is responsible for decision-making on ASML product safety compliance as well as the strategy to eliminate non-compliance. It also monitors compliance status and drives risk mitigation. The Regulatory Board discusses possible non-compliance cases at its monthly meetings and takes decisions based on the mitigation plan presented.

Ensuring safety compliance

The products and tools we develop comply with the SEMI S2 to ensure product safety is taken into account at all times. These guidelines are incorporated in the Safety System Performance Specification (Safety SPS). We ~~also take into account customer-specific safety guidelines.~~

~~ASML ANNUAL REPORT 2021 130~~

We are SEMI ~~S2 compliant~~S2-compliant for every product type shipped. In ~~2021,~~2022, a report confirming ~~SEMI S2~~this compliance was available for every product type we shipped. We also have a CE ('conformité européenne') declaration of conformity for all ASML products and tools.

Increasing product safety in ~~the~~our supply chain

Ensuring product safety does not end at our ~~facilities.~~facilities – we also focus on product safety in the supply chain. A ~~large portion~~significant proportion of our innovation and development ~~happens~~takes place at our suppliers’ sites. Safety is a key priority for ASML, and we want to be sure that all the products that we ship comply with the most stringent legislation, including the designs that are made and supplied by our ~~customers and partners~~suppliers in the value chain. ~~That is why we have started the 'Product Safety in the Supply Chain project’.~~ Our goal is to ensure that our ~~colleagues and partners~~suppliers have the capability to deliver a safe and compliant product, so that we can avoid safety accidents or incidents, safety-related non-compliance issues or delayed shipments.

~~In order to achieve these goals, we~~We have defined an end-to-end process in close cooperation with our suppliers, ~~to ensure~~ensuring that ~~the products and tools that we purchase through them~~deliveries meet our safety requirements. We have added product safety requirements and competencies to the Supplier Profile, which is our methodology to communicate with our suppliers and measure performance. We screen suppliers to assess how they are meeting specific safety requirements, starting with a supplier self-assessment survey, followed by a site audit as required and then a gap closure review. We expect our suppliers to also provide safety-related data and supporting documentation for the parts or tools they make for us. This process enables supplier capability assessments as a proactive approach to mitigating possible safety risks.

Dangerous goods management

~~We completed phase one~~Following the successful completion of ~~the 'Dangerous Goods' project successfully in 2020, which resulted in, among other things, the appointment of a specialist dedicated to the technical competence handling ‘dangerous goods’,~~our Dangerous Goods program, dangerous goods management is structurally embedded across our organization. Policies, processes, guidelines and ~~the adoption of best practices related to shipping of dangerous goods. With the baseline~~IT infrastructures are in place in the standing organization, in 2021 we focused on further improving the process. The second phase of the project will focus on three aspects – introducing relevant (hazardous properties) attributes in Teamcenter (our knowledge sharing database), connecting to ~~the processes with knowledge on hazardous properties at the front end (materials database and hazardous substance management), and including hazardous properties /~~enable dedicated specialists to manage dangerous goods ~~information in the vendor component design process. By identifying~~as part of our competence groups. Hazardous properties are identified at an early stage ~~which materials are hazardous, we can~~in the design process in order to enable us to take measures ~~for their~~to ensure the safe handling, transport and ~~transportation in~~storage of our products on time and with ~~more~~greater efficiency. As these activities are overseen by the safety and compliance organization, we are able to safeguard the active control of regulations and legislation impacting ASML products.

~~RoHS~~Materials and ~~REACH~~substance compliance

We are committed to complying with EU guidelines for handling hazardous materials and chemicals, the so-called RoHS directive and the REACH regulation, even though the products we manufacture are currently excluded from the RoHS directive. Wherever possible, we aim to reduce and eliminate any use of hazardous substances and replace non-compliant parts with RoHS-compliant alternatives.

REACH regulations are ever changing, which presents a potential challenge. Each year, new additions are made to the hazardous substances list. As ASML machines consist of thousands of parts not manufactured at ASML locations, we need to keep in very close communication with our suppliers to identify the Substances of Very High Concern (SVHC) content of our products. However, our huge supplier portfolio and six-monthly updates of the SVHC list means this process is challenging. Currently, there are 75 substances and groups of substances, of which some contains more than 10 individual substances, that need to be assessed.

In 2021, we have updated our REACH policy and further embedded REACH compliance in D&E’s operations at all our locations and in our global supply chain. In parallel, we also aligned our procedures with the new EU legislation and regulations in the markets where we operate. We follow the most stringent or leading regulations, currently but not limited to RoHS (Restriction of Hazardous Substances), REACH (Registration, Evaluation, Authorization and restriction of Chemicals) and Batteries Directive in the EU, ~~‘SCIP’ database~~K-REACH (Act on the Registration and Evaluation of ~~hazardous materials.~~

~~Water management~~

~~Semiconductor manufacturing processes use a lot of water. Due to climate change, droughts have become more extreme and more unpredictable, which may lead to water becoming a scarce resource~~Chemicals) in specific locations. Although water is an essential resource in our customers' semiconductor manufacturing process, water use in our own operations is limited. ASML’s products are designed to use water according to a ‘closed-loop’ (recycling) system. The aim of using water in our manufacturing process is to keep the system cool against the heat released during the exposure process.

~~Water consumption at ASML is only a fraction of the water consumption of most companies~~South Korea or TSCA (Toxic Substances Control Act) in the ~~semiconductor industry. Nevertheless, we promote~~US.

We have implemented multiple initiatives to overcome compliance challenges due to factors including: the ~~responsible use~~increasing number of water throughout our company. Our water consumption in 2021 increased to 1,041,000 cubic meters, up from 860,000 cubic meters in 2020, an increase that can be attributed to the expansion of the manufacturing facility in Veldhoven, an increase in product output and the extension of our reporting scope from 20 locations previously to 57 locations as of 2021. We use water from the municipal water supply. In 2021, we implemented separation of rain water from other types of waste waterchanges in the ~~Netherlands and we are exploring ways to re-use~~regulatory landscape; the ~~water.~~

~~While disruptions in access to water may represent a significant risk for some~~number of our customers, water-related risk for ASML is limited. We have seven manufacturing sites, of which the four main facilities are Veldhoven (Netherlands), San Diego (US), Wilton (US) and Linkou (Taiwan). ~~Read more in: Our TCFD Recommendations: climate-related disclosure, available on www.asml.com.~~

~~Operational excellence~~

~~ASML ANNUAL REPORT 2021 131~~

ASML has achieved strong growth over the past few years, thanks to groundbreaking innovations and technology leadership. We’ve introduced several generations of cutting-edge chipmaking systems and built a strong market position in the semiconductor equipment manufacturing industry. As we mature as a company and build on this position, we are putting effort into ways to continuously improve the customer experience and help customers reduce the cost of ownership. Customers look at both the cost of the systems and running costs. As such, improving quality requires an end-to-end approach. We need to look at the whole chain to identify the real issues and find solutions. We seek to combine our innovation power with operational excellence.

~~Our New Enterprise program~~

The strong growth in our business operations and the evolution of the company drove us to review our work practices and determine where we can increase efficiency in our operational processes to improve the customer experience and unlock business value. We put ample effort into reshaping our processes and IT landscape. The Our New Enterprise (ONE) program is centered on improving our business processes and IT enterprise management system. It builds on the steps taken in recent years to improve our IT systems, which were built in the 1990s and were not optimized for tailored customer solutions. This is a multi-year program, with the rollout being done in phases.

The ONE program addresses the complex processes that have resulted from a fragmented application landscape with numerous customized applications. The aim is to ensure flexibility while introducing standardization. ONE will enable ASML to function in a more unified and efficient way by simplifying processes to ensure a future-proof and more sustainable system. The program adopts a cross-sector, company-wide, and end-to-end approach that will enable us to deliver higher business value for our stakeholders, which we define as:

•~~Shareholders: Increased competitiveness of our products and services~~

•~~Customers: Increased performance and reliable product life-cycle management of our products and services~~

•~~Suppliers: Stable and clear requirements on~~unique parts ~~tools, and timing through decoupled planning~~

•~~Employees: Empowered through simplified, standardized, and cross-sector operations~~

~~Quality culture~~

ASML is committed to providing a high level of customer satisfaction by delivering top-quality, sustainable products and services that consistently meet or exceed our customers’ expectations. Quality and operational excellence are essential elements of our technology leadership. This leadership is reinforced by a company-wide quality culture that creates an environment to excel. Together with our suppliers and partners, we ensure high-level performance for our products and services. As a learning organization, we continuously improve our offerings and processes.

~~The aim of our quality culture is to shorten Time to Mature Yield and ensure end-to-end quality of our products and services in several ways:~~

•~~First Time Right: Apply risk management processes on products and execution to minimize the impact for our customers.~~

•~~Zero defect: Embed controls to guarantee adherence to our policies, processes and procedures.~~

•~~Zero repeat: Learn from failures and prevent reoccurrence, driving structural improvement~~used in our products ~~services and processes.~~

We have established a Quality Program Review Board, chaired by our Chief Operations Officer (COO), tasked with steering and monitoring on quality. We are also committed to internationally recognized quality management systems and standards. Our quality management system complies with(>50,000); an extensive global supply chain; the ~~ISO 9001:2015 standard and is third-party certified. This demonstrates our robust quality governance, effective quality management system, and quality compliance across the company.~~

~~Quality Day 2021: the power of learning~~

~~With a record~~ number of ~~over 7,500 participants worldwide,~~regulated substances we use (>100) we use. Activities during the ~~Quality Day's theme put~~course of 2022 include:

–A multi-disciplinary program embedding processes throughout our organization – improving our IT solutions, enabling automated supply chain communication and delivering flexible reporting capabilities.

–A global safety focus to strengthen our communications with new local safety expert teams and establish a regulatory intelligence team.

–A proactive approach toward upcoming regulations such as PFAS, TSCA and the ~~spotlight on~~Battery directive by taking part in the ~~habit of learning, by showing that 'Learning is caring' – caring for our products, our customers, our colleagues and~~Semiconductor PFAS Consortium, working with our business ~~partners. More than 150 workshops, trainings, best practice sharing sessions, poster sessions and simulations were held in online, live and hybrid formats.~~

For example, in D&E, a Root Cause Analysis escape room experience exposed the participants to contrast thinking, a process that can be used to solve complex technical problems. Another example was a simulation of a cost decision meeting among several departments, where engineers could experience, for instance, what it is like to be a customer support manager in those given circumstances.

In addition to these quality market programs, this year we also introduced cross-sector HaQathons, organized by the business lines, which tackled business quality challenges in areas such as in re-use, diagnostics, supplier workmanship,partners and the ~~customer journey. Colleagues from all sectors were invited to collaborate~~supply chain, and ~~come up~~establishing a working relationship with ~~new insights and ideas to address these challenges and create value for the business and our customers.~~

a well-respected firm of consultants.

~~ASML ANNUAL REPORT 2021 132~~

~~Financing policy~~

~~We continue to hold on to our long-held prudent financing policy, which is based on three foundational elements:~~

•~~Liquidity: Maintain financial stability with a target to keep our cash and cash equivalents, together with short-term investments, above a minimum range of €2.0 to €2.5 billion~~

•~~Capital structure: Maintain a capital structure that targets a solid investment grade credit rating~~

•~~Cash return: Provide a sustainable dividend per share that will grow over time, paid semi-annually, while returning excess cash to shareholders through share buybacks or capital repayment~~

~~Liquidity~~

Our principal sources of liquidity consist of cash and cash equivalents, short-term investments and available credit facilities. In addition, we may from time to time raise additional funding in debt and equity markets. We seek to ensure that our principal sources of liquidity will be sufficient to satisfy our liquidity requirements at all times.

Our liquidity needs are affected by many factors, some of which are based on the normal ongoing operations of the business, and others by the uncertainties of the global economy, the bulky character of our business and the specific characteristics of the semiconductor industry. Although our cash requirements fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with our other sources of liquidity are sufficient to satisfy our expected requirements, including our expected capital expenditures, research and development expenses and debt servicing.

We invest our cash and cash equivalents and short-term investments in short-term deposits with financial institutions, governments and government-related bodies that have investment grade credit ratings and in money market and other investment funds that invest in high-rated short- and medium-term debt securities. Our investments are ~~mainly~~ ~~denominated in euros and to some extent in US dollars, Taiwanese dollars and Chinese Yuan.~~

Year ended December 31 (€, in millions) 2020 2021
Deposits with financial institutions, governments and government related bodies 1,545.3 2,131.7
Investments in money market funds 3,841.9 2,928.3
Bank accounts 662.2 1,891.8
Cash and cash equivalents 6,049.4 6,951.8

Deposits with financial institutions, governments and government related bodies 1,302.2 638.5
Short-term investments 1,302.2 638.5

~~We maintain an available committed credit facility, with a group of banks, of~~ ~~€700.0 million, under which~~ no ~~amounts were outstanding at the end of 2021 and 2020. This facility has a maturity date of~~ ~~July 2026~~. We further maintain a local uncommitted credit facility with a bank in China ensuring local liquidity and operational requirements are met at all times, also given existing regulatory restrictions regarding flexible intercompany funding.

~~Capital structure~~

Our objectives when managing our capital structure are to safeguard our ability to satisfy our capital providers by maintaining a capital structure that ensures liquidity and supports a solid investment grade credit rating. The capital structure includes both debt and the components of equity, in accordance with both US GAAP and EU-IFRS. The capital structure is mainly altered by, among other things, adjusting the amount of dividends paid to shareholders, the amount of share buybacks or capital repayment, and any changes in the level of debt. Our capital structure is formally reviewed with the Supervisory Board each year in connection with our updated long-term financial plan and relevant scenarios. The outcome of this year’s review confirmed to maintain our existing financing policy in relation to our capital structure.

~~Our current credit rating from Moody’s is A2 (Stable). This rating was upgraded in September 2021 from A3. Our current credit rating from Fitch is A- (stable), which is~~ ~~consistent~~ ~~with the rating on December 31, 2020.~~

~~ASML ANNUAL REPORT 2021 133~~

~~We have Eurobonds outstanding with an aggregate principal amount of~~ ~~€4.5 billion, having the following maturities:~~

~~Cash return policy~~

ASML aims to distribute a dividend that will be growing over time, paid semi-annually. On an annual basis, the Board of Management, upon prior approval from the Supervisory Board, submits a proposal to the AGM with respect to the amount of dividend to be declared with respect to the prior year, taking into account any interim dividend distributions. The dividend proposal in any given year will be subject to availability of distributable profits, retained earnings and cash, and may be affected by, among other things, our view of potential future liquidity requirements including for investments in production capacity, working capital requirements, the funding of our R&D programs and acquisition opportunities that may arise from time to time. In addition to dividend payments, we intend to return cash to our shareholders on a regular basis through share buybacks or capital repayment, subject to our actual and anticipated level of liquidity requirements and other relevant factors.

~~ASML intends to declare a total dividend in respect of~~ ~~2021~~ of ~~€5.50~~ ~~per ordinary share. Recognizing the interim dividend of~~ ~~€1.80~~ ~~per ordinary share paid in~~ ~~November 2021, this leads to a final dividend proposal to the General Meeting of~~ ~~€3.70~~ ~~per ordinary share. The total 2021 dividend is a~~ ~~100%~~ ~~increase compared to the 2020 total dividend of €2.75 per ordinary share.~~

On July 21, 2021 we announced a new share buyback program to be executed by 31 December 2023. As part of this program, ASML intends to repurchase shares up to an amount of €9 billion, of which we expect a total of up to 0.45 million shares will be used to cover employee share plans. ASML intends to cancel the remainder of the shares repurchased. The new program has replaced the previous €6 billion share buyback program 2020-2022 which has not been completed for the full amount in light of the new share buyback program.

~~In 2021 we repurchased~~14,358,838 shares (2020: 3,908,429 shares) for a total consideration of €8,560.3 million (2020: €1,207.5 million) of which 6,601,699 shares for a consideration of €4,560.3 million were purchased under the new program.

~~ASML ANNUAL REPORT 2021 134~~

~~ASML ANNUAL REPORT 2021 135~~

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Our approach to tax

ASML is committed to helping build a fairer and more sustainable society through social economic cohesion, sustainable growth and long-term prosperity. Taxation is a means to that end.

We consider the taxes that we pay to be a contribution to the communities in which we operate and an integral part of our responsibility for social value creation. Openness and transparency on how we operate and our approach to tax is important to us, which is supported by our business and ESG strategy.

€1.7bn

15.0%

Income tax paid 2022

(€1.2bn in 2021)

Effective tax rate 2022

(15.2% in 2021)

Read more in:

‘Approach to tax report’ on www.asml.com


Income tax paid in our five most significant countries of operation


1. Netherlands			€757m
2. United States			€474m
3. Taiwan			€209m
4. South Korea			€167m
5. China			€42m

Last year we already took a significant step in our efforts to be more transparent on our tax affairs among others by sharing our tax principles and disclosing information about the five main countries in terms of business and tax footprint.

This ~~section~~year we have taken it a step further and made several improvements. We signed up to the VNO-NCW Tax Governance Code. This Tax Governance Code should lead to more transparency on the tax position of Dutch listed companies. In line with this Code, we have included country-by-country tax information in our tax report for all countries where ASML is established. We also have included an explanation of the ~~Annual Report outlines~~activities in our five main countries as well as a brief explanation of the ~~highlights~~type and geographic scope of activities of our entities.

We will keep improving our transparency for tax matters. ASML’s move to sign up to the VNO-NCW Tax Governance Code reflects this and answers to the call for companies to respond to shifting expectations from ~~our Tax Policy. For more information~~policymakers, NGOs and the ~~full Tax Policy document, please visit www.asml.com. Additionally please note that in below text 'tax' and 'taxes' include customs duties.~~general public.

Our leading principle is that our tax position is a reflection of our business operations, being the sale of lithography systems and related products and services, supported by our manufacturing and R&D activities. Since the start of the company, ASML has had a straightforward operating model, with our campus in Veldhoven, the Netherlands, at the heart of our global operations.

~~The operating model described below is critical in understanding ASML’s tax position.~~

Of ASML’s global work force, 55% is located in the Netherlands, 20% in the US region, 24% in Asia and 1% in EMEA (excl. the Netherlands). Of all senior management roles 70% is based in the Netherlands. This reflects the fact that ASML Netherlands is actively leading and controlling the group’s activities, performance and risks.

With regard to R&D activities, 72.5% of our R&D employees are located in the Netherlands. The remaining part is mainly employed by our legal entities in the US and the rest is scattered over other locations. The costs of our US and other foreign R&D organizations are borne by ASML in the Netherlands, and 95% of our patents is owned by ASML Netherlands. During the 2000-2020 period, ASML Netherlands bore approximately €16.7bn of R&D costs, an average of more than 15% of our yearly revenue in that period.

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Our approach to tax (continued)

All our lithography machines are assembled in Veldhoven, whereas a significant percentage of the parts are being supplied by our ecosystem of suppliers in the Netherlands, Europe and the US. Some modules and metrology systems are manufactured by our factories in the US and Taiwan. Generally our new lithography machines are shipped directly from the Netherlands to our customers once they are ready.

Currently, our customers are mainly based in four locations: Taiwan, South Korea, China and the US. Our operations in those countries contribute to our sales and customer service efforts. In general the leading roles for our sales and customer services activities are based in Veldhoven.

The compensation of the ASML activities in the countries where we are active is a fair reflection of the operating model in line with local laws and international standards. Where possible we have agreed (or are in the process of agreeing) the level of remuneration of our activities with local tax authorities. Furthermore we have processes and controls in place to monitor various taxes, such as customs, value-added tax (VAT), corporate income tax (CIT) and withholding tax (WHT). Our approach to tax is regularly discussed with senior management. Training is provided within ASML on a regular basis to emphasize the importance of compliance with laws and regulations.

~~Our tax principles~~

The following principles guide us in how we report and pay tax in the countries we operate ~~in:~~in.

~~ASML ANNUAL REPORT 2021 136~~

1.~~We act in accordance with the letter~~The Board of Management is accountable for ASML’s tax strategy, tax principles and the ~~spirit of~~overall tax ~~laws and regulations.~~

2.~~We report taxable income in a jurisdiction commensurate with~~risk management, which are subsequently reviewed by the ~~added value~~Audit Committee. The ASML Tax & Customs department is responsible for the execution of the ~~business activities in that jurisdiction.~~

3.~~ASML’s profit allocation methods are based on internationally accepted standards as published~~ASML tax strategy set by the ~~OECD, as well as relevant rules and regulations in the local jurisdictions we operate in.~~

4.We pursue an open and constructive dialogue with the tax authorities in the jurisdictions we operate in, based on mutual respect, transparency and trust, disclosing all relevant facts and circumstances. We do not use tax structures intended for tax avoidance, nor will we engage in the artificial transferBoard of ~~profits to low tax jurisdictions.~~

5.~~We do not operate in tax havens (as defined by the European Commission’s ‘blacklist’) other than for ASML business purposes.~~

6.~~We make tax disclosures in accordance with reporting requirements, US GAAP and IFRS.~~

~~Our tax strategy~~Management.

ASML’s tax strategy is based on our tax principles and is closely aligned to our business strategy and our sustainability goals. ItThe tax strategy is approved by the Board of ~~Management~~Management. The tax strategy, tax principles and ~~is aligned with our accountability for ASML’s Tax & Customs affairs.~~

~~We focus on:~~

•Our role in managing all our stakeholders. From an external perspective with tax authorities and regulators, but also investor communication. Internally, in supporting our business in managing risks, being in control and at the ~~same time remain efficient in its administrative procedures and way of working. We work in an integrated way with other experts within ASML.~~

•~~The future of taxation, which includes developments in ESG (including Tax Transparency) and Tax technology.~~

•~~Compliance & Control: This includes the development, implementation and monitoring of processes and controls for appropriate~~overall tax risk management ~~and reporting purposes. Furthermore through~~apply to all group entities.




Our tax strategy is closely aligned to our business strategy and our sustainability goals.”
Gaby Bes
Head of Tax & Customs


			Our tax principles
			Compliance

			–We act in accordance with the letter, intent and spirit of tax laws and regulations. –We make tax disclosures in accordance with reporting requirements, US GAAP and IFRS. –ASML’s profit allocation methods are based on internationally accepted standards as published by the OECD. We apply these consistently across our business, contingent on the relevant rules and regulations in the local jurisdictions we operate in.

			Support tax systems

			–We report taxable income in a jurisdiction commensurate with the added value of the business activities in that jurisdiction. –We do not use so-called tax havens (as defined by the European Commission’s ‘blacklist’) for tax avoidance.

			Relationships with authorities

			–We pursue an open and constructive dialogue with the tax authorities, and other relevant authorities, in the jurisdictions we operate in, based on mutual respect, transparency and trust, disclosing all relevant facts and circumstances. We do not use tax structures intended for tax avoidance, nor will we engage in the artificial transfer of profits to low-tax jurisdictions.


			Our tax strategy

			1			Stakeholder management

			Externally, with tax authorities and regulators, but also investor communication. Internally, in supporting our business in managing risks, being in control and at the same time remaining efficient in its administrative procedures and way of working. We work in an integrated way with other experts within ASML.
			2			The future of taxation

			This includes developments in ESG (including Tax Transparency) and Tax technology, whereby we closely monitor the developments in the outside world and continuously translate these into potential requirements or implications for ASML.
			3			Compliance & Control

			This includes the development, implementation and continuous monitoring of processes and controls for appropriate tax risk management and reporting purposes. Furthermore, this includes ensuring timely and accurate fulfillment of tax compliance obligations in line with applicable tax laws and regulations (incl. timely payment of taxes due).
			4			Tax & Customs organization

			In a fast-changing world, it is important to have a diverse team which can handle change and are more than just good tax and customs experts. Communication, digital and project management skills are becoming increasingly important. We strive to work together and develop each other in line with the ASML values (challenge, collaborate, and care).
			5			Projects

			Our business and the regulatory environment in which we operate change constantly. We work on projects that deal with these changes to ensure the solutions implemented are compliant and efficient. Likewise, we continuously strive for simplification and review of existing business models to ensure we remain tax and customs compliant.

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						WEARABLE TECHNOLOGY
						Ground-breaking tech, life-changing outcomes
						Semiconductors are essential to a new range of wearable devices with the potential to transform medical care, particularly for our elderly populations. From smartwatches to fall detection services, nano-sensors can monitor patients’ health and alert caregivers – while in conjunction with artificial intelligence, they can even predict conditions such as heart disease and cancer.
						Read more online

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Corporate Governance at a glance

We champion integrated corporate governance to build a relationship of trust, respect and mutual benefit with our stakeholders.

Overview

Corporate
Governance Statement

Read more in:

Our company,

Our business and ESG strategy,

Our business model and

Risk - How we manage risk.

•

ASML corporate governance structure

Shareholders

Supervisory Board

Board of Management

Business
sectors

Business
functions

Corporate
functions

Employee
support

Projects: Every year our business changes and the regulatory environment in which we operate changes. We work on projects that deal with these changes to ensure the solutions implemented are compliant and efficient. Likewise we continuously strive for simplification and review existing business models for compliancy.

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Board of Management

•The ASML Tax & Customs organization. In this fast changing world it is important to have a diverse team, which can handle change and are more than just good tax and customs experts. Communication, digital and project management skills are becoming increasingly important. We strive to work together and develop each other in line with the ASML values (Collaborate, Challenge and Care).

~~Tax governance~~

Our ~~globally organized tax department~~Board of Management is responsible for ~~daily tax management. It falls~~managing ASML. Its responsibilities include establishing a position on the relevance of long-term value creation for ASML and its business, defining and deploying ASML’s strategy, establishing and maintaining effective risk management and control systems, managing the realization of ASML’s operational and financial objectives and the corporate social responsibility aspects relevant to ASML. In fulfilling its management tasks and responsibilities, the Board of Management is guided by the interests of ASML and its business and takes into consideration the interests of our stakeholders.

The current Board of Management comprises five members. On October 19, 2022, the Supervisory Board announced its intention to expand the Board of Management to six members effective per the 2023 AGM, adding the Chief Strategic Sourcing & Procurement function as a Board of Management position, given the increased strategic importance of this function for ASML’s strategy.

The Board of Management has a dual leadership structure, under the ~~supervision~~chairmanship of the President and Chief Executive Officer, and the vice chairmanship of the President and Chief Technology Officer. The Board of Management divides tasks among its members, charging individual members with specific managerial tasks. However, the Board of Management remains collectively responsible for the management of ASML.

The Board of Management is supervised and advised by the Supervisory Board. The Board of Management provides the Supervisory Board with all the information, in writing or otherwise, necessary for the Supervisory Board to properly carry out its duties. In addition to the information provided in the regular meetings, the Board of Management provides the Supervisory Board with regular updates on developments relating to our business, financials, operations and industry developments in general. Certain important decisions of the Board of Management require the approval of the Supervisory Board. For details, see the Supervisory Board section of this Corporate Governance chapter.

Further information regarding the general responsibilities of the Board of Management, its relationships with the Supervisory Board and various stakeholders, the decision-making process within the Board of Management and the logistics surrounding the meetings can be found in the Board of Management’s Rules of Procedure. These are published in the Governance section of our website.

Appointments

Members of the Board of Management are appointed by the Supervisory Board on the recommendation of the Selection and Nomination Committee and upon notification to the General Meeting. Members of the Board of Management are appointed for a term of four years. Reappointment for consecutive four-year terms is possible. For persons aged 65 years or above, a maximum appointment term of two years applies, with the possibility of reappointment for consecutive two-year terms.

In line with Dutch law, all members of the Board of Management are engaged by means of a management services agreement for the duration of their appointment.

The Supervisory Board may suspend and dismiss members of the Board of Management, but this can only take place after consulting the General Meeting.

More information about changes related to the Board of Management during 2022 can be found in the

Supervisory Board Report included in this Annual Report.

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Board of Management (continued)

Martin A. van den Brink
(1957, Dutch)

Christophe D. Fouquet
(1973, French)

President, Chief Technology
Officer and Vice Chair of Board
of Management

Term expires 2024

Executive Vice President
and Chief Business Officer

Term expires 2026

Christophe Fouquet was appointed Executive Vice President EUV and member of the Board of Management in 2018. In 2022, Christophe was appointed Executive Vice President and Chief Business Officer. Since joining ASML in 2008, he has held several positions, including Senior Director Marketing, Vice President Product Management, and Executive Vice President Applications, a position he held from 2013 until 2018. Prior to joining ASML, he worked for semiconductor equipment peers KLA-Tencor and Applied Materials. Christophe holds a master’s degree in Physics from the Institut Polytechnique de Grenoble.

Martin van den Brink has been President and CTO of ASML since 2013. He joined ASML at its founding in 1984, and for the next 11 years held various positions in engineering. In 1995, he became Vice President Technology, and in 1999 was appointed Executive Vice President Product & Technology and member of the Board of Management. Martin holds a degree in Electrical Engineering from HTS Arnhem (HAN University), as well as a degree in Physics (1984) from the University of Twente. In 2012, the University of Amsterdam awarded him an honorary doctorate in Physics.

Roger J.M. Dassen
(1965, Dutch)

Executive Vice President
and Chief Financial Officer

Term expires 2026

Peter T.F.M. Wennink
(1957, Dutch)

Peter was a member of the Advisory Board of the Investment Committee of Stichting Pensioenfonds ABP until December 31, 2021. He serves as Vice Chairman on the Board of the FME-CWM. Peter is also a member of the Board of Captains of Industry Eindhoven Region and is Chair of the Eindhovensche Fabrikantenkring and of the Supervisory Board of the Eindhoven University of Technology. Furthermore, Peter is council member of Topconsortium voor ‘Kennis en Innovatie’ TKI HTS&M, member of the Advisory Committee of the Dutch National Growth Fund and a member of the Circle of Influence of Startup Delta.

Roger Dassen joined ASML in June 2018 and was appointed Executive Vice President and CFO and member of the Board of Management at the AGM the same year. He previously served as Global Vice Chair and member of the Executive Board of Deloitte Touche Tohmatsu Limited, having been CEO of Deloitte Holding B.V. Roger holds a master’s in Economics and Business Administration, a post-master’s in Auditing and a PhD in Business Administration, all from the University of Maastricht. He is Professor of Auditing at Vrije Universiteit Amsterdam, and sits on the Supervisory Board of the Dutch National Bank. He is also the Chair of the Supervisory Board of Maastricht University Medical Center+ and serves on the Board of the Stichting Brainport.

Frédéric J.M. Schneider-Maunoury (1961, French)

President, Chief Executive Officer and Chair of Board of Management

Term expires 2024

Executive Vice President

and Chief Operations Officer

Term expires 2026

Frédéric Schneider-Maunoury has been Executive Vice President and Chief Operations Officer since he joined ASML in 2009. He was appointed to the Board of Management in 2010. Prior to joining ASML, Frédéric was Vice President Thermal Products Manufacturing at power generation and rail transport equipment group Alstom, having previously served as General Manager of the worldwide Hydro Business of Alstom. Before joining Alstom, Frédéric held various positions at the French Ministry of Trade and Industry. He is a graduate of École polytechnique (1985) and École Nationale Supérieure des Mines (1988) in Paris.

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Supervisory Board

In our two-tier structure, the Supervisory Board is a separate and independent body from the Board of Management and from ASML. No member of the Supervisory Board personally maintains a business relationship with ASML, other than as a member of the Supervisory Board.

The Supervisory Board currently consists of nine members, with the minimum being three.

In performing its tasks, the Supervisory Board focuses on, inter alia, ASML’s corporate strategy aimed at long-term value creation and the execution thereof, the staffing of and succession planning for the Board of Management, the management of risks inherent to ASML’s business activities, the financial reporting process, compliance with applicable legislation and regulations, ASML’s culture and the activities of the Board of Management in that regard, the relationship with shareholders and other stakeholders and corporate social responsibility issues important for ASML.

Important management decisions, such as setting the operational and financial objectives, the strategy designed to achieve these objectives, major investments, budget and the issue, repurchase and cancellation of shares, require the Supervisory Board’s approval.

The Supervisory Board is governed by its Rules of Procedure. Items covered in these rules include the responsibilities of the Supervisory Board and its committees, the composition of the Supervisory Board and its committees, logistics surrounding the meetings, the meeting attendance of members of the Supervisory Board, the rotation schedule for these members and the committee charters. The Supervisory Board’s Rules of Procedure and the committee charters are regularly reviewed and, if needed, amended. The Audit Committee charter is reviewed annually to confirm that the charter still complies with applicable rules and regulations, especially those relating to the Sarbanes-Oxley Act.

Read more information on the meetings and activities of the Supervisory Board in 2022 in:

Supervisory Board Report - Meetings and attendance.

Appointments

binding nominations of the Supervisory Board by way of a resolution adopted with an absolute majority of the votes cast, representing at least one-third of ASML’s outstanding share capital. If the votes cast in favor of such a resolution do not represent at least one-third of the total outstanding capital, a new shareholders’ meeting can be convened, at which the nomination can be overruled by an absolute majority.

The Supervisory Board generally informs the General Meeting and the Works Council about upcoming retirements by rotation at the AGM in the year preceding the actual retirement(s) by rotation. This ensures they have sufficient opportunity to recommend candidates for the upcoming vacancies. The Supervisory Board has the right to reject the proposed recommendations. Furthermore, the Works Council has an enhanced right to make recommendations for one-third of the members of the Supervisory Board. This enhanced recommendation right implies that the Supervisory Board may only reject the Works Council’s recommendations in limited circumstances: (i) if the relevant person is unsuitable or (ii) if the Supervisory Board would not be duly composed if the recommended person were appointed as Supervisory Board member.

Further information about changes to the Supervisory Board's composition in 2022 and 2023 can be found in the

Supervisory Board Report.

Supervisory Board committees

Further information on the Supervisory Board committees can be found in the

Supervisory Board Report and in the charters of the committees as posted on our website.

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Supervisory Board (continued)

Antoinette (Annet) P. Aris
(1958, Dutch)

Member of the Supervisory
Board since 2015
(Third term expires in 2024)

Vice Chair of the Supervisory
Board since 2021, Member
of Remuneration Committee, Technology Committee
and Selection and Nomination Committee

Annet Aris has been a member of the Supervisory Board since 2015. She is Senior Affiliate Professor of Strategy at INSEAD business school, France, a position she has held since 2003. From 1994 to 2003, she was a partner at McKinsey & Company in Germany and until December 2022 she was a Supervisory Board member at the Cooperatieve Rabobank UA. She also sits on the supervisory boards of Jungheinrich AG and Randstad Holding NV.

Alexander F.M. Everke
(1963, German)

Member of the Supervisory Board since 2022
(First term expires in 2026)

Gerard J. Kleisterlee
(1946, Dutch)

Gerard Kleisterlee joined the Supervisory Board in 2015, and has been its Chair since 2016. He was President and CEO of the Board of Management of Royal Philips NV from 2001 until 2011, having worked at the company since 1974. He also served as a Supervisory Board member of the Dutch Central Bank from 2006 until 2012, as Non-Executive Director at Daimler AG from 2009 until 2014 and as Non-Executive Director at Dell from 2010 until 2013. From 2011 to 2022, Gerard was the Chairman of the Board of Vodafone Group Plc. From 2010 until May 2020, he was a Non-Executive Director of Royal Dutch Shell Plc. Currently, Gerard is an independent Board member at IBEX Limited.

Member of the

Remuneration Committee

D. Mark Durcan
(1961, American)

Mark Durcan was appointed as a member of the Supervisory Board in 2020. From 2012 to 2017, he was CEO of Micron Technology, Inc., having joined the company in 1984 and held various management positions before being appointed as CEO. Furthermore, Mark was director at Freescale Semiconductor, MWI Veterinary Supply and Veoneer, Inc. Mark is a Non-Executive Director at Advanced Micro Devices, Inc., a member of the Board of AmerisourceBergen Corporation, member of the Board of Trustees for Rice University (Texas), Director at St Luke’s Health System (Idaho) and Director at Natural Intelligence Systems CA private AI, Startup Company.

Member of the Supervisory
Board since 2015
(Second term expires in 2023)

Alexander Everke joined the Supervisory Board in 2022. He is the CEO of ams-OSRAM AG, a position he has held since March 2016, after having joined ams AG in October 2015. Prior to that, Mr. Everke held a range of positions in the semiconductor industry including management positions at Siemens and Infineon and various leadership positions at NXP Semiconductors.

Member of the Supervisory
Board since 2020
(First term expires in 2024)

Chair of the Supervisory Board,
Chair of the Selection and Nomination Committee and member of the Technology Committee

Chair of the Technology Committee, member of the Selection and Nomination Committee

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Supervisory Board (continued)

Rolf-Dieter Schwalb
(1952, German)

Birgit M. Conix
(1965, Belgian)

Terri L. Kelly
(1961, American)

Terri Kelly has been a member of the Supervisory Board since 2018. Previously, she was President and Chief Executive Officer at W.L. Gore & Associates from 2005 until 2018, having worked at Gore since 1983 in various management roles. She also served on Gore’s Board of Directors through July 2018. Terri is a Trustee of the Alfred I. Dupont Charitable Trust, which provides oversight of the Nemours Foundation. She is the Chair of the Board of the University of Delaware and she is a member of the Board of Directors of United Rentals, Inc.

Member of the Supervisory
Board since 2015
(Second term expires in 2023)

Member of the Supervisory
Board since 2021
(First term expires in 2025)

Member of the Supervisory
Board since 2018
(Second term expires in 2026)

Chair of the Audit Committee
and member of the Remuneration Committee

Member of the Audit Committee

Chair of the Remuneration Committee, member of the Selection and Nomination Committee

Birgit Conix became a member of the Supervisory Board in 2021. Birgit has been CFO and a member of the Management Board of Sonova Holding AG since June 2021. From 2018 until January 1, 2021, Birgit was a member of the Executive Board and CFO of TUI AG. Prior to that, she was the CFO of the Belgian media, cable and telecommunications company Telenet Group N.V. Prior to that, she held various management positions in finance at Johnson & Johnson, Heineken, Tenneco and Reed Elsevier.

Rolf-Dieter Schwalb has been a member of the Supervisory Board since 2015. He was CFO and member of the Board of Management of Royal DSM N.V. from 2006 to 2014. Prior to that, he was CFO and member of the Executive Board of Beiersdorf AG. He also held a variety of management positions in Finance, IT and Internal Audit at Beiersdorf AG and Procter & Gamble Co.

An L. Steegen
(1971, Belgian)

Member of the Supervisory
Board since 2022
(First term expires in 2026)

D. Warren A. East
(1961, British)

Member of the Technology Committee

Member of the Supervisory
Board since 2020
(First term expires in 2024)

An Steegen joined the Supervisory Board in 2022. She is co-CEO and member of the Board of Directors of Barco N.V., a position she has held since October 2021. Prior to that, An was R&D director at IBM Semiconductor and Executive Vice President at the research institute imec in Belgium. Furthermore, An was CTO and Executive Vice President Electronic and Electro-Optical Materials at Umicore.

Member of the Audit Committee

Warren East became a member of the Supervisory Board in 2020. Warren was CEO of Rolls-Royce Group Plc from 2015 until December 2022. He spent his early career at Texas Instruments Ltd from 1985 to 1994. He then joined ARM Holdings, Plc, where he held various management positions and was appointed CEO from 2001 to 2013.

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Other Board-related matters

The section below addresses a number of topics that apply to both the Board of Management and the Supervisory Board.

Remuneration and share ownership

The remuneration of the Board of Management is determined by the Supervisory Board, on recommendation of the Remuneration Committee, in accordance with the Remuneration Policy for the Board of Management as adopted by the General Meeting. The current Remuneration Policy for the Board of Management was adopted by the General Meeting in 2022.

The remuneration of the Supervisory Board is based on the Remuneration Policy for the Supervisory Board. The current Remuneration Policy for the Supervisory Board was adopted by the General Meeting in 2021. The remuneration of the Supervisory Board is not dependent on our (financial) results. The members of the Supervisory Board do not receive ASML shares, or rights to acquire ASML shares, as part of their remuneration.

We will not and have not granted any personal loans, guarantees or the like to members of the Board of Management and the Supervisory Board.

Detailed information on the Board of Management’s and the Supervisory Board’s remuneration can be found in the:

Remuneration Report.

Diversity

On August 6, 2021, the US Securities and Exchange Commission approved the NASDAQ Stock Market’s proposal to amend its listing standards to encourage greater board diversity and to require board diversity disclosures for NASDAQ-listed companies. Pursuant to the amended listing standards, ASML, as a foreign private issuer, is required to have at least two diverse Supervisory Board members or explain the reasons for not meeting this objective. Furthermore, a Board diversity matrix is required to be included in the Annual Report on Form 20-F, containing certain demographic and other information regarding members of the Supervisory Board. ASML currently complies with the diversity requirement, as we currently have four female and five male members on our Supervisory Board. The Board diversity matrix is set out on this page.

Board Diversity Matrix
(status per December 31, 2022)

Female

Male

Non-Binary

Did not
Disclose

Part I: Gender Identity

Directors

4
(2021: 3)

5
(2021: 5)

0
(2021: 0)

Part II: Demographic Background

Underrepresented Individual in Home
Country Jurisdiction

0
(2021: 0)

LGBTQI+

0
(2021: 0)

Did Not Disclose Demographic Background

0
(2021: 0)


Country of Principal Executive Offices			The Netherlands
Foreign Private Issuer			Yes
Disclosure Prohibited under Home Country Law			No
Total Number of Supervisory Board members			9 (2021: 8)

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Other Board-related matters (continued)



			We recognize the importance of diversity and inclusion.”
			Christophe Fouquet
			Executive Vice President, Chief Business Officer and member of the Board of Management

On January 1, 2022, the gender diversity bill came into force, introducing a quota for the supervisory boards of Dutch listed companies following which the composition of the supervisory board should comprise at least one-third men and one-third women. New appointments will be declared null and void in the event of non-compliance with this requirement. Also, the bill introduced a requirement to set ambitious gender balance targets for boards of management and senior management of large listed and non-listed Dutch NVs and BVs and a plan which outlines the actions needed in order to meet the gender diversity targets. Based on the gender diversity bill, companies will have to report on the gender balance targets, the plan and their progress made in achieving the gender balance targets to the Dutch Social and Economic Council within 10 months after the end of the financial year and in the management report.

Currently, the Supervisory Board meets the gender quota of the Dutch gender diversity bill, as both men and women are represented on the Supervisory Board by at least three out of nine members.

Currently, no seats are taken by women on the Board of Management. During 2022, the Supervisory Board set a gender balance target for the Board of Management to in 2026 have at least one female and a at least one male Board of Management member. Taking into account the intended appointment of Wayne Allan as member of the Board of Management per the 2023 AGM, this would lead to a female representation of at least 17% based on the size of the Board of Management per the 2023 AGM, being six members. When setting the gender balance target for the Board of Management, the Supervisory Board has considered the technology environment ASML operates in, with a thinly populated global STEM (science, technology, engineering and math) talent pool, making it challenging to recruit female talent. Our R&D workforce is 16% female. The Supervisory Board has also considered the female representation of the ASML group overall, which was 19% (December 31, 2022) and the female representation in senior leadership (JG 13+), which was 10% (December 31, 2022). Furthermore, during 2022 a target was set to reach a representation of women at senior management level of 12% by 2024, the current level being 10%. To make this gender target for senior management tangible, we also set a goal to increase the hiring and promotion of female leaders (JG 13+), from 12% in 2021 to 20% in 2024. The Supervisory Board also included performance metrics aimed at improving the representation of females in senior leadership in the Board of Management's long term incentive. During 2022, the Supervisory Board updated

the Board of Management Diversity Policy, which can be found on our website.

The Supervisory Board fully supports ASML’s Diversity & Inclusion strategy as set out in this Annual Report. We recognize that human capital is ASML’s most valuable asset and that our success is driven by our unique and diverse teams. Diversity promotes the inclusion of different perspectives and ideas, mitigates against groupthink and ensures ASML can benefit from all available talent. This also applies to the Board of Management and our senior management, where a diverse composition contributes to robust decision-making and proper functioning. Diversity complements ASML’s company values – challenge, collaborate and care.

We are building and implementing company-wide programs to further promote diversity and inclusion at all levels of our workforce. This includes specific programs aimed at attracting, retaining and developing diverse leaders with the purpose of increasing our talent pool of diverse talent for senior leadership and Board of Management positions.

Our Global Diversity & Inclusion Council, founded in 2021, consists of senior leaders who act on behalf of ASML to provide thought leadership. The Council, chaired by a member of the Board of Management, proposes the Diversity & Inclusion strategy to the Board of Management, sets, promotes and monitors diversity and inclusion initiatives, and leads company-wide accountability for our goals. We also have a global diversity and inclusion team, including a Chief Diversity Officer, who is responsible for driving initiatives that are related to diversity and inclusion across ASML.

Our diversity and inclusion roadmap focuses on three key areas within ASML: leadership, culture and talent.



						12%
						Target 2024 representation of women at leadership level

To promote diversity and inclusion in our workforce, including our Board of Management ~~which~~and senior management, we are building and implementing programs that lead to measurable and actionable results. These programs include:

– Organizing internal training sessions for employees, managers and leaders globally

–Participating in national engineering conferences to broaden our talent pipeline to be more diverse and inclusive in all areas of demographics

–Collaborating with universities and organizations dedicated to building diversity and creating opportunities for professional development and engagement

–Executing global D&I engagement activities, such as International Women’s Day, LGBTQIA+ Pride Month and Global Diversity Month

–Organizing D&I events with keynote speakers

–Supporting employee networks give back locally in their community through mentoring programs

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Other Board-related matters (continued)

For the Board of Management specifically, the Supervisory Board will select candidates for appointment to the Board of Management with due observance of ASML's objective to foster a diverse and inclusive working environment. Accordingly, ASML aims to fill vacancies by considering candidates that bring the required expertise and contribute to ASML's diversity. The Supervisory Board, when assessing the composition of the Board of Management and identifying suitable candidates for succession, will consider candidates on merit against objective criteria and the specific profile for the job, while having due regard for the relevant aspects of diversity. This applies in particular to continuously striving for a more balanced gender representation.

In ASML's internal development efforts for potential Board of Management members, we strive for participation of a diverse group of employees, specifically senior leadership.

Any search firm engaged by the Supervisory Board or its Selection and Nomination Committee will be specifically directed to include diverse candidates in general and multiple female candidates in particular.

To do this, we are focusing on the growth of our existing team members and expanding the diversity of our talent pool. We had set goals to increase the percentage of females among our new hires from 20% in 2021 to 23% by 2024. In 2022, 24% of new hires were females.

The current representation of women at leadership level is ~~ultimately responsible~~10%, while our ambition is to reach 12% by 2024. To make this tangible, we had set a goal to increase the hiring and promotion of female leaders, from 12% in 2021 to 20% in 2024. In 2022, the % inflow of female leaders was 35%.

Due to the strong performance of our female inflow of new hires and recognizing that we want to continue this ambitious inflow, we have defined a 2025 target of 24% (which is at the same level as our 2022 performance, but higher than the original 2024 target of 23%).

This talented pool of female employees will be 'role models', paving a path for ~~ASML's approach~~more to ~~tax. Our integrated global tax department is spread across three regional hubs where~~follow. We believe that promoting more diversity in our workforce will help us to attract and retain smart, talented people, enabling us to drive technological innovations that meet our customers’ needs.

Ensuring balanced gender representation has proven to be challenging in a technology environment such as the one ASML operates in. Overall, the global STEM (science, technology, engineering and ~~aligns~~math) talent pool is thinly populated and it is even more challenging to recruit female talent. Our R&D workforce is 16% female. Nearly 90% of our job positions are STEM-related, whereas peers in the high-tech industry have more non-STEM-related job positions. ASML is highly motivated to see more women pursuing careers in engineering and science now and in the future. The highly specialized nature of our industry means achieving this balance is a long-term process. We are actively engaged with multiple educational programs to grow the pipeline, deploy multiple initiatives to promote STEM education among the future female talent pool and continue to foster an environment where our current workforce can thrive.

Read more information on ~~cross-border tax matters.~~our diversity and inclusion strategy, initiatives, women in leadership and performance data in:

Social - Attractive workplace for all - Best employee experience and Non-financial statements - Non-financial indicators - Attractive workplace for all.

Conflicts of interest and related party transactions

Conflict of interest procedures are incorporated in both the Board of Management’s and the Supervisory Board’s Rules of Procedure. These procedures reflect Dutch law and the principles and best practice provisions of the Code with respect to conflicts of interest.

There have been no transactions in 2022, nor are there currently any transactions, between ASML or any of ASML’s ~~global tax department~~subsidiaries, or any significant shareholder and any member of the Board of Management, officer, Supervisory Board member or any relative or spouse thereof, other than ordinary course compensation arrangements. Furthermore, ASML has not granted any personal loans, guarantees or the like to members of the Board of Management or Supervisory Board.

Outside positions

During the financial year 2022, all members of the Board of Management and the Supervisory Board complied with the requirements described above.

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AGM and share capital



			We highly value the interaction with our shareholders.”
			Gerard Kleisterlee
			Chair of the Supervisory Board

General Meeting

A General Meeting (AGM) is ~~well connected~~held at least once a year and generally takes place in Veldhoven, the Netherlands. In 2022, shareholders had the option to attend the 2022 AGM in person in Veldhoven or virtually. The agenda for the AGM typically includes the following topics:



			–Discussion of the management report and the adoption of the financial statements over the past financial year; –Discussion of the dividend policy and approval of any proposed dividends; –Advisory vote on the Remuneration Report over the past financial year; –The discharge from liability of the members of the Board of Management and the Supervisory Board for the performance of their responsibilities in the previous financial year; –The limited authorization for the Board of Management to issue (rights to) shares in ASML’s capital, and to exclude preemptive rights for such issuances, as well as to repurchase shares and to cancel shares; and –Any other topics proposed by the Board of Management, the Supervisory Board or shareholders in accordance with Dutch law and the Articles of Association.

Proposals placed on the agenda by the Supervisory Board, the Board of Management or shareholders, provided that they have submitted the proposals in accordance with the applicable legal provisions, are discussed and resolved upon. Shareholders representing at least 1.0% of ASML’s ~~operations worldwide. This helps~~outstanding share capital or

representing a share value of at least €50 million are entitled to ~~ensure compliance~~place items on the agenda of a General Meeting at least 60 days before the date of the meeting.

Shareholders’ meetings are convened by public announcement via the website of ASML no later than 42 days prior to the meeting, as stipulated by Dutch law.

The record date is set at the 28th day prior to the day of the AGM. Persons who are registered as shareholders on the record date are entitled to attend the meeting and to exercise other shareholder rights.

The Board of Management and Supervisory Board provide shareholders with applicable local tax laws and regulations. Tax filing obligations are monitored via a central tax compliance dashboard. Controls are implemented and executed via our SOx and Internal Control Frameworks. Automation is used in various areasinformation relevant to ~~support operational tax processes~~the topics on the agenda by means of an explanation of the agenda as well as ~~tax risk management.~~by documents necessary or helpful for this purpose. The agenda indicates which agenda items are voting items, and which items are for discussion only. All documents related to the General Meeting, including the agenda with explanations, are posted on our website.

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AGM and share capital (continued)

ASML shareholders may appoint a proxy who can vote on their behalf at the AGM. In addition, we use an internet proxy voting system, facilitating shareholder participation without having to attend in person. We also provide the option for shareholders to issue voting proxies or voting instructions to an independent civil law notary prior to the AGM. We do not solicit from or nominate proxies for our shareholders.

Hybrid AGM

In view of the ongoing COVID-19 pandemic, we organized a hybrid AGM in 2022, accommodating attendance in person as well as virtual attendance of the AGM by enabling shareholders to follow the proceedings of the meeting via video webcast and to vote electronically during the meeting. The ~~Audit Committee~~opportunity to participate in the AGM in person or virtually was offered in addition to the opportunity to vote in advance via written or electronic proxy. As we highly value interaction with our shareholders, we invited shareholders who attended the AGM in person to ask questions about the agenda items during the AGM and we provided holders of shares traded on Euronext Amsterdam who attended the AGM virtually the opportunity to ask live questions in writing through the virtual meeting platform. All questions were answered during the AGM.

Resolutions are adopted by the General Meeting by an absolute majority of the votes cast (except where a different proportion of votes are required by the Articles of Association or Dutch law), and there are generally no quorum requirements applicable to such meetings.

Powers

In addition to the items submitted annually at the AGM, the General Meeting also has other powers, with due observance of the statutory provisions. These include resolving:

–To amend the articles of association;

–To issue shares if and insofar as the Board of Management has not been designated by the General Meeting for this purpose; and

–To adopt the Remuneration Policies for the members of the Board of Management and the Supervisory Board.

During the 2022 AGM, the Board of Management, with the approval of the Supervisory Board, ~~(SB) reviews our tax strategy and annually confers with our tax professionals~~proposed to ~~discuss tax policies and~~ the ~~impact~~General Meeting to amend the Articles of ~~tax~~Association. The amendments mainly related to reflecting various changes in applicable laws and regulations, simplifying the Articles of Association and applying amendments of a technical nature. The proposal was adopted by the General Meeting and the new Articles of Association became effective as per May 12, 2022. For more detailed information on ~~ASML.~~the amendments to the Articles of Association, please see the 2022 AGM page on our website.

~~Training programs are in place in order~~A brief summary of the most significant provisions of our Articles of Association is included as Exhibit 99.1 to ~~ensure that global tax department members stay aligned and up~~our Form 6-K furnished to ~~date~~the SEC on February 8, 2013 (the ‘Articles of Association’), which is incorporated by reference herein.

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AGM and share capital (continued)



ASML’s authorized share capital amounts to €126.0 million and is divided into:

	Type of shares	Number of shares	Nominal value	Votes per share
	Cumulative preference shares	700,000,000	€0.09 per share	1
	Ordinary shares	700,000,000	€0.09 per share	1

The issued and fully paid up ordinary shares with a nominal value of €0.09 each were as follows:

	Year ended December 31	2020	2021	2022
	Issued ordinary shares with nominal value of €0.09	416,514,034	402,601,613	394,589,411
	Issued ordinary treasury shares with nominal value of €0.09	2,983,454	3,873,663	8,548,631
	Total issued ordinary shares with nominal value of €0.09	419,497,488	406,475,276	403,138,042

87,875,651 ordinary shares were held by 280 registered holders with ~~latest developments~~a registered address in the ~~global tax landscape. Additionally, tax department members regularly provide tax awareness sessions for stakeholders from business and other finance departments.~~

~~We aim to be clear about all aspects~~US. Since certain of our ~~tax position~~ordinary shares were held by brokers and to share these in a transparent manner, fostering a relationship of honesty, transparency and trust with tax authorities in the countries we operate in. ASML’s approach to tax is aimed at maintaining a low tax-risk appetite. This is reflected, for example, innominees, the number of ~~bilateral advance pricing agreements (BAPA) we have with~~record holders in the ~~tax authorities~~US may not be representative of the number of beneficial holders, or of where the beneficial holders are resident.

~~Tax contribution~~

~~ASML’s technology is driving our profitability. Around 90% of our income is taxable~~the share register in the Netherlands, held by us at our address at 5504 DR Veldhoven, de Run 6501, the Netherlands, or in the New York share register, held by JP Morgan Chase Bank, N.A., P.O. Box 64506, St. Paul, MN 55164-0506, United States, can hold fractional shares. Shareholders who hold ordinary shares through the deposit system under the Dutch Securities Bank Giro Transactions Act maintained by the Dutch central securities depository Euroclear Nederland or through the Depository Trust Company cannot hold fractional shares.

No cumulative preference shares have been issued. Following the amended Articles of Association that were adopted by the General Meeting during the 2022 AGM, the capital structure changed. Due to these changes, we no longer have the ordinary share class B. With the removal of the ordinary share class B, each share carries one vote.

Special voting rights, limitation voting rights and transfers of shares

There are no special voting rights on the issued shares in our share capital.

In 2012, we issued shares to three key customers – Intel, TSMC and Samsung – as ~~most~~part of the customer co-investment program (CCIP) to accelerate ASML’s development of EUV. Under this program, the participating customers funded certain development programs and invested in ASML’s ordinary shares. Currently, only one participating customer still holds (directly or indirectly) ordinary shares issued in the CCIP. Certain voting restrictions apply in respect of ordinary

shares issued in connection with the CCIP. These voting restrictions in respect of these ordinary shares are set out in the underlying agreement between ASML and the relevant customer. The shares issued in the CCIP were held by foundations which issued depository receipts to participants in the CCIP. A total of 96,566,077 depository receipts for ordinary shares were issued at the launch of the CCIP. This number has since decreased with the sell-down by the relevant customers following expiry of the lock-up.

Issue and repurchase of (rights to) shares

shares do not have preemptive right with respect to any ordinary shares issued for consideration other than cash or ordinary shares issued to employees. If authorized for this purpose by the General Meeting, the Board of Management has the power, subject to approval of the Supervisory Board, to restrict or exclude the preemptive rights of holders of ordinary shares.

2022 authorization to issue shares

At our 2022 AGM, the Board of Management was authorized from April 29, 2022 through October 29, 2023, subject to the approval of the Supervisory Board, to issue shares and/or rights thereto representing up to a maximum of 5% of our ~~value creation~~issued share capital at April 29, 2022, plus an additional 5% of our issued share capital at April 29, 2022, that may be issued in connection with mergers, acquisitions and/or (strategic) alliances. Our shareholders also authorized the Board of Management through ~~R&D, design and manufacturing activities is based there. The income from other activities, such as regional equipment sales and customer support activities, is~~October 29, 2023, subject to ~~taxation~~approval of the Supervisory Board, to restrict or exclude preemptive rights with respect to holders of ordinary shares up to a maximum of 5% of our issued share capital in connection with the general authorization to issue shares and/or rights to shares, plus an additional 5% in connection with the authorization to issue shares and/or rights to shares in connection with mergers, acquisitions and/or (strategic) alliances.

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AGM and share capital (continued)

2022 authorization to repurchase shares

At the 2022 AGM, the Board of Management was authorized, subject to Supervisory Board approval, to repurchase through October 29, 2023, up to a maximum of 10% of our issued share capital at April 29, 2022, at a price between the nominal value of the ordinary shares purchased and 110% of the market price of these securities on Euronext Amsterdam or NASDAQ.

Read more details on our share buyback program in:

C onsolidated Financial Statements - Notes to the Consolidated Financial Statements - Note 22 Shareholders’ equity.

ASML Preference Shares Foundation

The ASML Preference Shares Foundation (Stichting Preferente Aandelen ASML), a foundation organized under Dutch law, has been granted an option right to acquire preference shares in the ~~countries~~share capital of ASML. The Foundation may exercise the Preference Share Option in situations where, in the opinion of the Foundation’s Board of Directors, ASML’s interests, ASML’s business or the interests of ASML’s stakeholders are at stake. This may be the case if:

–A public bid for ASML’s shares is announced or made, or there is a justified expectation that such a bid will be made without any agreement having been reached with ASML in relation to such a bid; or

–In the opinion of the Foundation’s Board of Directors, the (attempted) exercise of the voting rights by one shareholder or more shareholders, acting in concert, is materially in conflict with ASML’s interests, ASML’s business or ASML’s stakeholders.

Objectives of the Foundation

The Foundation’s objectives are to look after the interests of ASML and the enterprises maintained by and/or affiliated in a group with ASML, in such a way that the interests of ASML, of those enterprises and of all parties concerned are safeguarded in the best possible way, and that influences in conflict with these ~~activities~~interests, which might affect the independence or the identity of ASML and those companies, are deterred to the best of the Foundation’s ability, and everything related to the above or possibly conducive thereto. The Foundation aims to realize its objects by acquiring and holding cumulative preference shares in the capital of ASML and by exercising the rights attached to these shares, particularly the voting rights.

The Preference Share Option

The Preference Share Option gives the Foundation the right to acquire such number of cumulative preference shares as the Foundation will require, provided that the aggregate nominal value of such number of cumulative preference shares shall not exceed the aggregate nominal value of the ordinary shares issued at the time of exercise of the Preference Share Option. The subscription price will be equal to their nominal value. Only one-fourth of the subscription price would be payable at the time of initial issuance of the cumulative preference shares, with the other three-fourths of the nominal value only being payable when ASML calls up this amount. Exercise of the preference Share Option could effectively dilute the voting-power of the outstanding ordinary shares by one-half.

Cancellation of cumulative preference shares

If the ~~main ones being Taiwan, South Korea, China and~~Foundation does not request ASML to repurchase or cancel all cumulative preference shares held by the ~~US.~~

~~To foster innovation, we make use~~Foundation within 20 months of ~~incentives that have been introduced in the countries we operate in – the Dutch innovation box and the US Foreign Derived Intangible Income regulation being the most significant ones. Use~~issuance of these ~~incentives has beneficial impact~~shares, we will be required to convene a General Meeting for the purpose of deciding on ~~our consolidated effective tax rate. For more information on the financial impact~~a repurchase or cancellation of these ~~regulations we refer to note 21 in~~shares.

Board of Directors

The Foundation is independent of ASML. The Board of Directors of the ~~Consolidated financial statements.~~Foundation is composed of four independent members from the Netherlands’ business and academic communities. The Foundation’s Board of Directors is composed per December 31, 2022, of the following members: Mr. A.P.M. van der Poel, Mr. S. Perrick, Mr. S.S. Vollebregt and Mr. J. Streppel.

Other than the arrangements made with the Foundation as described above, ASML has not established any other anti-takeover devices.

~~ASML ANNUAL REPORT 2021 137~~

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AGM and share capital (continued)

Major shareholders

The Dutch Act on the supervision of financial markets and US securities laws contain requirements regarding the disclosure of capital interests and voting rights in listed companies. The following table sets forth the total number of ordinary shares owned by each shareholder that reported to the Dutch AFM or the US SEC a beneficial ownership of ordinary shares that is at least 3.0% (5.0%, in the case of the SEC) of our ordinary shares issued and outstanding. Also included in the table below is the total number of ordinary shares owned by our members of the Board of Management as of December 31, 2022. The information set out below with respect to shareholders is based on public filings with the SEC and AFM as of February 8, 2023.

~~We pro-actively participate in discussions about~~


	Shares	% of Class6
Capital Research and Management Company1	40,615,837	10.29	%
BlackRock Inc.2	32,539,755	8.25	%
T. Rowe Price Group, Inc.3	13,527,385	3.43	%
Members of ASML’s current Board of Management (5 persons)4,5	89,892	0.02	%

1.As reported to the ~~future development~~AFM on February 7, 2022, Capital Research & Management Company (CRMC) reports 365,542,532 voting rights corresponding to 40,615,837 ordinary shares (based on 9 votes per share), but do not report ownership rights related to those shares.

2.Based solely on the Schedule 13-G/A filed by BlackRock Inc. with the SEC on March 11, 2022; BlackRock reports voting power with respect to 29,277,159 of these ~~incentives as these significantly support~~shares. A public filing with the ~~level~~AFM on December 6, 2022 shows an aggregate indirect capital interest of ~~R&D activities we~~5.80% and voting rights of 7.23%, based on the total number of issued shares and voting rights at that time.

3.A public filing with the AFM on November 8, 2022 shows T. Rowe Price Group, Inc. indirectly holding 13,527,385 shares (comprising common shares and new york shares) and 13,098,195 votes, representing a capital interest of 3.33% and a voting interest of 3.22%, based on the total number of issued shares and voting rights at that time.

4.Does not include unvested shares granted to members of the Board of Management. For further information, see Leadership and governance – Remuneration Report.

5.No shares are ~~able to perform and~~owned by members of the ability to create job opportunities for people in the countries in which we operate. Abolishment or legislative changes on these or other tax regulations (e.g. Pillar 1 and Pillar 2 developments) could have impact on our consolidated future effective tax rate.Supervisory Board.

Disclosures are provided in our financial statements and cover tax payments/taxes collected in our main markets. Income Taxes paid include withholding taxes that classify as an income tax under ASC 740. We provide country-by-country tax reporting in6.As a ~~transparent and accurate manner to the tax authorities. Below we have included key data for our most significant countries (which represent 97%~~percentage of the total ~~group).~~

~~Income tax profile per significant country~~

(€, in millions) Netherlands US Taiwan South -Korea China
Total net external sales 69 1,635 7,355 6,256 2,673
Total net internal sales 19,388 2,213 1,651 571 266
Income before income taxes 5,983 297 56 183 39
Income tax expense (actual)1
894 (54) 17 60 14
Income tax paid2
818 215 93 41 24

1.~~Income tax expense (actual) concerns~~number of ordinary shares issued and outstanding, 394,589,411 as of December 31, 2022, which excludes 8,548,631 ordinary shares which have been issued but are held in treasury by ASML. The share ownership percentages reported to the AFM are expressed as a percentage of the total ~~current & deferred tax expense/benefit accrued~~number of ordinary shares issued (including treasury stock), and accordingly, percentages reflected in this table may differ from percentages reported to the AFM or the SEC.

2.~~Income tax paid concerns the actual income tax paid in 2021~~

~~ASML ANNUAL REPORT 2021 138~~

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Financial reporting and audit

ASML publishes, among others, the following annual reports regarding the financial year 2022:

–The statutory Annual Report, prepared in accordance with the requirements of Dutch law. The financial statements included therein are prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code and EU-IFRS; and

–The Annual Report on Form 20-F, prepared in accordance with the requirements of the Exchange Act. The financial statements included therein are prepared in conformity with US GAAP.

–A narrative explanation of ASML’s financial statements;

–The context within which financial information should be analyzed; and

–Information about the quality, and variability, of our earnings and cash flow.

ASML annually prepares two sets of annual reports including financial statements as set out on this page. With respect to the process of creating the Annual Report, we have extensive guidelines for the content and layout of our report. These guidelines are primarily based on the applicable laws and regulations referred to above. With respect to the preparation process of these and the other financial reports, we apply internal procedures to safeguard the completeness and accuracy of such information as part of its disclosure controls and procedures. The Disclosure Committee assists the Board of Management in overseeing ASML’s disclosure activities and ensures compliance with applicable disclosure requirements arising under Dutch and US law, and other regulatory requirements. These internal procedures are frequently discussed by the Audit Committee and the Supervisory Board.

For ASML’s internal risk management and control systems read more in:

Risk - How we manage risk - Enterprise Risk Management.

The Supervisory Board has reviewed and approved, and all Supervisory Board members signed, ASML’s 2022 financial statements as prepared by the Board of Management. KPMG has duly examined our financial statements, and the Auditor’s Report is included in the Consolidated Financial Statements.

External Audit

In accordance with Dutch law, our external auditor is appointed by the General Meeting, based on a nomination for appointment by the Supervisory Board. The Supervisory Board bases its nomination on the advice from the Audit Committee and the Board of Management, who annually provide a report to the Supervisory Board on the performance of and relationship with the external auditor, as well as its independence. ASML’s current external auditor, KPMG, was first appointed by the General Meeting in 2015 for the reporting year 2016, and has been reappointed on a yearly basis since then. At the 2022 AGM, KPMG was appointed as the external auditor for the reporting years 2023 and 2024.

On April 29, 2022, ASML announced the Supervisory Board’s decision to nominate PricewaterhouseCoopers Accountants NV (PwC) as its external auditor for the reporting year 2025. The formal appointment of PwC will be submitted for voting at ASML’s 2023 AGM.

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Financial reporting and audit (continued)

The Audit Committee reviews and approves the external auditor’s audit plan for the audits planned during the financial year. The audit plan also includes, among others, the activities of the external auditor with respect to their limited procedures on the quarterly results other than the annual accounts. Proposed services may be pre-approved at the beginning of the year by the Audit Committee (annual pre-approval) or may be pre-approved during the year by the Audit Committee in case of a particular engagement (specific pre-approval). The annual pre-approval is based on a detailed, itemized list of services to be provided, which is designed to ensure there is no management discretion in determining whether a service has been approved, and to ensure the Audit Committee is informed of each service it is pre-approving.

The remuneration of the external auditor is approved by the Audit Committee on behalf of the Supervisory Board, and after consulting the Board of Management. As the Audit Committee has the most relevant insight and experience in this area, the Supervisory Board has delegated these responsibilities to the Audit Committee.

Read more information on principal accountant fees and services in:

Other appendices - Appendix - Principal accountant fees and services.

In principle, the external auditor attends all the Audit Committee meetings. The external auditor’s findings are discussed at these meetings. The Audit Committee reports to the Supervisory Board on the topics discussed with the external auditor, including the external auditor’s reports with regard to the audit of the annual reports as well as the content of the annual reports. Furthermore, the external auditor may attend the Supervisory Board meeting in which the annual external audit report is discussed. The external auditor may also attend Supervisory Board meetings at which the quarterly financial results are discussed.

The Audit Committee is informed by the external auditor without delay if the external auditor discovers irregularities in the content of the audit of the financial reports.

The external auditor is present at our AGM to respond to questions, if any, from the shareholders about the auditor’s report on the Consolidated Financial Statements.

Internal Audit

The role of our Internal Audit function is to assess our systems of internal controls by performing independent procedures such as risk-based operational audits, IT audits and compliance audits. The Internal Audit department reports directly to the Audit Committee and the Board of Management. The yearly Internal Audit plan is discussed with and approved by the Audit Committee, the Board of Management and the Supervisory Board. The follow-up on the Internal Audit findings and progress made compared with the plan are discussed on a quarterly basis with the Audit Committee. The external auditor and Internal Audit department have meetings on a regular basis.

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Compliance with Corporate Governance requirements

Corporate information

US listing requirements

As ASML’s New York Shares are listed on NASDAQ Stock Market LLC, NASDAQ corporate governance standards in principle apply to us. However, NASDAQ rules provide that foreign private issuers may follow home country practice in lieu of the NASDAQ corporate governance standards subject to certain exceptions. Our corporate governance practices are primarily based on Dutch requirements. The table on this page sets forth the practices followed by ASML in lieu of NASDAQ rules the exception as described above.


Practices followed by ASML in lieu of NASDAQ rules
Quorum			ASML does not follow NASDAQ’s quorum requirements applicable to meetings of ordinary shareholders. In accordance with Dutch law and generally accepted Dutch business practice, ASML’s Articles of Association provide that there are no quorum requirements generally applicable to general meetings of shareholders.
Solicitation of proxies			ASML does not follow NASDAQ’s requirements regarding the solicitation of proxies and the provision of proxy statements for general meetings of shareholders. ASML does furnish proxy statements and solicit proxies for the General Meeting. Dutch corporate law sets a mandatory (participation and voting) record date for Dutch listed companies at the 28th day prior to the date of the General Meeting. Shareholders registered at such a record date are entitled to attend and exercise their rights as shareholders at the General Meeting, regardless of sale of shares after the record date.
Distribution of Annual Report			ASML does not follow NASDAQ’s requirement regarding distribution to shareholders of copies of an annual report containing audited Financial Statements prior to our AGM. The distribution of our annual reports to shareholders is not required under Dutch corporate law or Dutch securities laws, or by Euronext Amsterdam. Furthermore, it is generally accepted business practice for Dutch companies not to distribute annual reports. In part, this is because the Dutch system of bearer shares has made it impractical to keep a current list of holders of the bearer shares in order to distribute the annual reports. Instead, we make our Annual Report available at our corporate head office in the Netherlands (and at the offices of our Dutch listing agent as stated in the convening notice for the meeting) no later than 42 days prior to convocation of the AGM. In addition, we post a copy of our Annual Reports on our website prior to the AGM.
Equity compensation arrangements			ASML does not follow NASDAQ’s requirement to obtain shareholder approval of stock option or purchase plans or other equity compensation arrangements available to officers, directors or employees. It is not required under Dutch law or generally accepted practice for Dutch companies to obtain shareholder approval of equity compensation arrangements available to officers, directors or employees. The General Meeting adopts the Remuneration Policy for the Board of Management, approves equity compensation arrangements for the Board of Management and approves the remuneration for the Supervisory Board. The Remuneration Committee evaluates the achievements of individual members of the Board of Management with respect to the short- and long-term quantitative performance and he full Supervisory Board evaluates the quantitative performance criteria. Equity compensation arrangements for employees are adopted by the Board of Management within limits approved by the General Meeting.

Compliance with the Corporate Governance Code

We are of the opinion that ASML fully complies with the applicable principles and best-practice provisions of the Dutch Corporate Governance Code as in effect for the financial year 2022.

The Board of Management and the Supervisory Board,

Veldhoven, February 15, 2023

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Message from the Chair of the Supervisory Board

Another record performance, in challenging circumstances



			The Supervisory Board supervises and advises the Board of Management in performing its management tasks and setting the direction for ASML, focusing on long-term and sustainable value creation. The members of the Supervisory Board are fully independent.





The Supervisory Board is confident that the full order book – supported by the skills and passion of our outstanding teams – lays a firm foundation for the months and years ahead.”
Gerard Kleisterlee
Chair of the Supervisory Board

Dear Stakeholder,

Despite geopolitical turmoil, high inflation and massive supply chain issues, 2022 has been another record year for our company. Driven by continuing strong demand for microchips, we currently enjoy the fullest order book in our history – and we are in a very good position to achieve further growth in the years to come.

As a supervisory Board we are of course very pleased with these achievements that only could be realized thanks to our highly engaged workforce that always went the extra mile required. We are satisfied, but not complacent. The high market demand, especially for DUV, took us by surprise and our systems and supply chain issues did not allow us to meet all our customer requirements.

In order to maintain our success we are working hard to prepare for the future. Below, I outline some of the key areas that we focused on during 2022.

Reviewing our capacity plans

The last 12 months again saw unprecedented demand for semiconductors, both in mature as well as leading edge technology, resulting in the fullest order book in our history. This against a backdrop of a declining global economic growth, driven by geopolitical tensions – including the war in Ukraine as well as legacy issues associated with COVID-19 - with resulting high inflation and the desire for (regional) technological sovereignty.

In this highly volatile and uncertain environment the Supervisory Board dedicated several of its sessions to discuss different long term market development scenarios and agree with management the plans for structural capacity expansion both at ASML and in our supply chain with the required flexibility to cope with market volatility.

The Supervisory Board also discussed in detail with management the actions required to meet the short term demand of our customers. Although we could not supply all that we were asked to deliver, we ensured that our teams did everything possible to help our customers continue to meet the demands of their customers. For example, our fast shipments initiative reduced throughput time and increased output by having some final testing and formal acceptance carried out on customer sites instead of at our own facilities.

Organizing for continued growth

Reviewing our priorities for continued growth, we confirmed that our current core business presents by far the biggest opportunity. This requires a further strengthening of our partnerships with certain key suppliers, where we are making good progress. In addition, we see interesting opportunities in adjacent holistic lithography markets that we will further explore.

We strive to foster a unified culture at ASML based on our values of challenge, collaborate and care. Making the impossible possible and always trying to reach the cutting edge of what is technically doable are core characteristics of our company. However, ASML’s rapid growth presents significant challenges for our way of working, our people and our managerial capacity and capabilities.

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Message from the Chair of the Supervisory Board (continued)

We have grown from a small-to-medium-sized company, operating in one location and relying on a handful of people to oversee the entire organization, to a global multinational business. Such expansion requires a different approach and new structures, so organizational and people development have been top priorities for the Supervisory Board. Projects have been agreed to renew and strengthen both our Customer Management as well as our Supply Chain Management.

In addition, as a Supervisory Board, we maintained a strong focus on Management development and succession planning. We are working hard together with the Board of Management to identify and develop the talent we need to ensure that we have qualified successors both in middle- and senior-management to deliver continued growth and meet market demands for cutting edge lithography solutions.

Emphasizing the importance of ESG

Environment, Social and Governance (ESG) matters are increasingly important to us and all our stakeholders. With us and all our stakeholders, from customers and our investors to our people and local communities, there is a growing awareness of the role that all businesses must play in society.

The Supervisory Board has spent considerable time evaluating and discussing the company’s ESG strategy and is fully supportive of the decisions that management has made.

Energy efficiency, climate action, a circular economy, water management and product safety are key commitments from an environmental perspective. At the same time, our management is working hard to ensure that ASML is an attractive workplace for all and a valued partner in our communities, while supporting the innovation ecosystem and the supply chain. Overarching our Environmental and Social initiatives is a firm commitment to the highest standards of Governance.

Engaging with our stakeholders

The Supervisory Board continued to visit customers and suppliers during the year in order to learn more about the challenges they face and build engagement at the highest level. We visited Intel, one of our major customers, where we engaged with their senior team to further improve our customer focus, and Zeiss, the supply partner for all our optics, to explore how we could make the supply chain more robust and resilient.

Our visits to internal functions including the 5L Warehouse project and the High NA factory gave us a good insights into the expertise we have at ASML and delivered valuable learnings on further improvement required. l We also visited one of our key technology partners, the Advanced Research Center for Nanolithography (ARCNL), where we were impressed by their depth of technical capability.

In addition a delegation of the Supervisory Board regularly meets with the Works Council in order to better understand the needs and concerns of our people. Although our thoughts are usually closely aligned with those of the Works Council, we ensure that we engage directly with them to provide a clear communications channel to the feelings of people across our organization.

Also Members of the Supervisory Board regularly meet with institutional investors. For instance, the Chair of our ~~Supervisory Board~~Remuneration Committee frequently engages with major investors to ensure that the Remuneration Policy is closely aligned with their expectations.

~~Gerard Kleisterlee (Chair of the Supervisory Board)~~

~~Dear Stakeholder,~~

In 2021, ASML had stellar performance – driven by strongly surging demand for microchips, it was a record year, again under adverse circumstances. We still had to cope with COVID-19 and some supply issues, but we saw fantastic growth, making 2021 an even better year than 2020 with record turnover, cash flow and profitability.

~~Impressive technological progress~~

Success of the company starts with the success that ASML has with its customers. We have seen great progress with the wide adoption of ASML’s EUV 0.33 NA platform in high-volume manufacturing, and growing commitment to the next-generation EUV 0.55 NA (High-NA) platform, where good technical advances have been made. At the start of Q4, the Supervisory Board's Technology Committee made a visit to ZEISS in Germany, where preparations for assembly of the first new system are being executed, and we were impressed by the great achievements of the teams working on this.

~~Dealing with surging demand~~

We continue to see surging demand, not only for our leading-edge EUV lithography systems, but also for DUV, the workhorse of the semiconductor industry in mature nodes. To meet this strong demand across our entire product portfolio, we are first of all driving down our manufacturing cycle times and are working with our supply chain to increase our output capability across our product portfolio. In 2021, we have seen some tension in our operations as well as in ASML’s supply chain, which caused some delays in system shipments at the end of the year. However, with ASML’s typical ‘let’s just do it’ mentality, these issues have been addressed with the highest priority.

~~Aligning with customers~~

In the context of being a trusted partner in the semiconductor ecosystem, ASML has seen great progress in dialogues with leading customers on EUV 0.33 NA and EUV 0.55 NA (High-NA). Particularly in EUV, it is important for ASML to be totally transparent toward its customers, because they have no alternative. Instead of just selling equipment, ASML works with its customers toward achieving a specific wafer output – this requires total alignment with customers’ objectives, which may be different depending on how they run their factories. ASML always needs to adapt to that, thinking from its customers’ perspective and being fully aligned to address their needs with its products and services.

~~Maintaining a well-functioning global semiconductor ecosystem~~

ASML operates in a world that is getting more complex. Also in 2021, with chips being at the core of modern digital life, ASML has been a topic in the ongoing trade discussions between the world’s superpowers. ASML takes up a neutral position in this. The starting point here has been and will be that ASML aims to work with its customers in a way that allows the company to continue to serve all of them, wherever they are, within all applicable rules and regulations. We strongly believe that it is in the interest of all stakeholders in the semiconductor and electronics industry to avoid fragmentation and maintain a well-functioning global ecosystem, based on cooperation, fair competition and trust.

~~Increasing focus on ESG sustainability~~

ASML takes today’s increasing focus on ESG (environment, social and governance) sustainability very seriously. We take responsibility for what we do and can control. On the social and governance aspects – we are taking care of our employees and the communities that we are in, and we are well governed. The environmental aspect is primarily about addressing climate change,

~~ASML ANNUAL REPORT 2021 140~~

which is a global challenge that requires urgent action by everyone, including us. We have to take care of our own environmental footprint, the footprint of our suppliers and the potential negative effects of the products and services that we supply. We ask our suppliers to show us their environmental programs, and we work with them on joint programs in areas such as re-use. On our side, it is our responsibility to minimize the energy consumption, greenhouse gas emissions and use of materials of our lithography solutions, for which we have programs in place.

~~Strong growth comes with challenges~~

As a fast-growing organization, ASML’s focus on people and leadership development is critical to its success. Every new ASML employee should feel welcome, become part of this dynamic environment quickly and be able to contribute and develop their skills. This requires a well-organized set of processes and controls as well as a strong culture of caring. Hiring the numbers of people as we did in 2021 comes with responsibility to foster their talents. In addition, we need to prepare and adapt for the future. With the broad range of advanced lithography solutions and services, and with a strongly growing installed base, we have to carefully balance our focus on cost, quality and output in our mature business with our continuous drive for innovation at the leading edge of technology.

~~Confident outlook for 2022~~Looking ahead

The Supervisory Board ~~proudly recognizes~~is confident that the ~~great~~full order book – supported by the skills and passion of our outstanding teams – lays a firm foundation for the months and years ahead. While geopolitical matters, likely mild recession and the aftermath of COVID-19 will continue to hamper efforts ~~made by ASML’s workforce – at the end of the day, the employees and their partners in~~to ensure the supply chain and innovation ecosystem make it all happen under the challenging circumstances that we are still in. ASML has done an amazing job in managing its way through the COVID-19 crisis while continuing to deliver outstanding, advanced and mature products and services.

~~We are looking forward with confidence, and we strongly believe that~~runs smoothly, ASML is well placed to achieve another excellent performance in 2023.

At the 2023 AGM, Rolf-Dieter Schwalb and I will step down after having served on ASML's Supervisory Board for eight years. On behalf of the Supervisory Board I would like to express gratitude to Rolf-Dieter for his important contribution to the Supervisory Board, especially as Chairman of the Audit Committee and previously also as Chairman of the Remuneration Committee.

During our 8 years on the Board, we were part of a ~~clear path~~fantastic journey that saw ASML grow with the breakthrough of EUV from a 6 billion revenue company in 2014 to a 21 billion Company in 2022, driven by absolute customer focus, technological prowess and an unbelievably strong “can do” mentality. The journey will continue ~~enabling groundbreaking technology~~under our successors. For us it was a pleasure and a privilege to ~~solve some~~serve.

To close, on behalf of ~~humanity’s toughest challenges. The company also has~~ the ~~right strategy~~whole Supervisory Board I would once again like to ~~support the global electronics ecosystem in a sustainable way~~thank every member of our 39,086-strong team for their hard work and ~~deliver value to all its stakeholders.~~sheer enthusiasm throughout 2022.You made it happen!

~~Gerard Kleisterlee~~Remuneration Committee

~~Chairman~~D. Mark Durcan
(1961, American)Mark Durcan was appointed as a member of the Supervisory Board in 2020. From 2012 to 2017, he was CEO of Micron Technology, Inc., having joined the company in 1984 and held various management positions before being appointed as CEO. Furthermore, Mark was director at Freescale Semiconductor, MWI Veterinary Supply and Veoneer, Inc. Mark is a Non-Executive Director at Advanced Micro Devices, Inc., a member of the Board of AmerisourceBergen Corporation, member of the Board of Trustees for Rice University (Texas), Director at St Luke’s Health System (Idaho) and Director at Natural Intelligence Systems CA private AI, Startup Company.Member of the Supervisory
Board since 2015
(Second term expires in 2023)Alexander Everke joined the Supervisory Board in 2022. He is the CEO of ams-OSRAM AG, a position he has held since March 2016, after having joined ams AG in October 2015. Prior to that, Mr. Everke held a range of positions in the semiconductor industry including management positions at Siemens and Infineon and various leadership positions at NXP Semiconductors.Member of the Supervisory
Board since 2020
(First term expires in 2024)

Chair of the Supervisory Board,
Chair of the Selection and Nomination Committee and member of the Technology CommitteeChair of the Technology Committee, member of the Selection and Nomination Committee

ASML

~~ASML~~ ANNUAL REPORT ~~2021 141~~2022

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Supervisory Board (continued)

Rolf-Dieter Schwalb
(1952, German)

Birgit M. Conix
(1965, Belgian)

Terri L. Kelly
(1961, American)

Terri Kelly has been a member of the Supervisory Board since 2018. Previously, she was President and Chief Executive Officer at W.L. Gore & Associates from 2005 until 2018, having worked at Gore since 1983 in various management roles. She also served on Gore’s Board of Directors through July 2018. Terri is a Trustee of the Alfred I. Dupont Charitable Trust, which provides oversight of the Nemours Foundation. She is the Chair of the Board of the University of Delaware and she is a member of the Board of Directors of United Rentals, Inc.

Member of the Supervisory
Board since 2015
(Second term expires in 2023)

Member of the Supervisory
Board since 2021
(First term expires in 2025)

Member of the Supervisory
Board since 2018
(Second term expires in 2026)

Chair of the Audit Committee
and member of the Remuneration Committee

Member of the Audit Committee

Chair of the Remuneration Committee, member of the Selection and Nomination Committee

Birgit Conix became a member of the Supervisory Board in 2021. Birgit has been CFO and a member of the Management Board of Sonova Holding AG since June 2021. From 2018 until January 1, 2021, Birgit was a member of the Executive Board and CFO of TUI AG. Prior to that, she was the CFO of the Belgian media, cable and telecommunications company Telenet Group N.V. Prior to that, she held various management positions in finance at Johnson & Johnson, Heineken, Tenneco and Reed Elsevier.

An L. Steegen
(1971, Belgian)

Member of the Supervisory
Board since 2022
(First term expires in 2026)

D. Warren A. East
(1961, British)

Member of the Technology Committee

Member of the Supervisory
Board since 2020
(First term expires in 2024)

Member of the Audit Committee

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Other Board-related matters

The section below addresses a number of topics that apply to both the Board of Management and the Supervisory Board.

Remuneration and share ownership

The remuneration of the Board of Management is determined by the Supervisory Board, on recommendation of the Remuneration Committee, in accordance with the Remuneration Policy for the Board of Management as adopted by the General Meeting. The current Remuneration Policy for the Board of Management was adopted by the General Meeting in 2022.

We will not and have not granted any personal loans, guarantees or the like to members of the Board of Management and the Supervisory Board.

Detailed information on the Board of Management’s and the Supervisory Board’s remuneration can be found in the:

Remuneration Report.

Diversity

Board Diversity Matrix
(status per December 31, 2022)

Female

Male

Non-Binary

Did not
Disclose

Part I: Gender Identity

Directors

4
(2021: 3)

5
(2021: 5)

0
(2021: 0)

Part II: Demographic Background

Underrepresented Individual in Home
Country Jurisdiction

0
(2021: 0)

LGBTQI+

0
(2021: 0)

Did Not Disclose Demographic Background

0
(2021: 0)


Country of Principal Executive Offices			The Netherlands
Foreign Private Issuer			Yes
Disclosure Prohibited under Home Country Law			No
Total Number of Supervisory Board members			9 (2021: 8)

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Other Board-related matters (continued)



			We recognize the importance of diversity and inclusion.”
			Christophe Fouquet
			Executive Vice President, Chief Business Officer and member of the Board of Management

Currently, the Supervisory Board meets the gender quota of the Dutch gender diversity bill, as both men and women are represented on the Supervisory Board by at least three out of nine members.

the Board of Management Diversity Policy, which can be found on our website.

Our Global Diversity & Inclusion Council, founded in 2021, consists of senior leaders who act on behalf of ASML to provide thought leadership. The Council, chaired by a member of the Board of Management, proposes the Diversity & Inclusion strategy to the Board of Management, sets, promotes and monitors diversity and inclusion initiatives, and leads company-wide accountability for our goals. We also have a global diversity and inclusion team, including a Chief Diversity Officer, who is responsible for driving initiatives that are related to diversity and inclusion across ASML.

Our diversity and inclusion roadmap focuses on three key areas within ASML: leadership, culture and talent.



						12%
						Target 2024 representation of women at leadership level

To promote diversity and inclusion in our workforce, including our Board of Management and senior management, we are building and implementing programs that lead to measurable and actionable results. These programs include:

– Organizing internal training sessions for employees, managers and leaders globally

–Participating in national engineering conferences to broaden our talent pipeline to be more diverse and inclusive in all areas of demographics

–Collaborating with universities and organizations dedicated to building diversity and creating opportunities for professional development and engagement

–Executing global D&I engagement activities, such as International Women’s Day, LGBTQIA+ Pride Month and Global Diversity Month

–Organizing D&I events with keynote speakers

–Supporting employee networks give back locally in their community through mentoring programs

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Other Board-related matters (continued)

In ASML's internal development efforts for potential Board of Management members, we strive for participation of a diverse group of employees, specifically senior leadership.

The current representation of women at leadership level is 10%, while our ambition is to reach 12% by 2024. To make this tangible, we had set a goal to increase the hiring and promotion of female leaders, from 12% in 2021 to 20% in 2024. In 2022, the % inflow of female leaders was 35%.

Ensuring balanced gender representation has proven to be challenging in a technology environment such as the one ASML operates in. Overall, the global STEM (science, technology, engineering and math) talent pool is thinly populated and it is even more challenging to recruit female talent. Our R&D workforce is 16% female. Nearly 90% of our job positions are STEM-related, whereas peers in the high-tech industry have more non-STEM-related job positions. ASML is highly motivated to see more women pursuing careers in engineering and science now and in the future. The highly specialized nature of our industry means achieving this balance is a long-term process. We are actively engaged with multiple educational programs to grow the pipeline, deploy multiple initiatives to promote STEM education among the future female talent pool and continue to foster an environment where our current workforce can thrive.

Read more information on our diversity and inclusion strategy, initiatives, women in leadership and performance data in:

Social - Attractive workplace for all - Best employee experience and Non-financial statements - Non-financial indicators - Attractive workplace for all.

Conflicts of interest and related party transactions

There have been no transactions in 2022, nor are there currently any transactions, between ASML or any of ASML’s subsidiaries, or any significant shareholder and any member of the Board of Management, officer, Supervisory Board member or any relative or spouse thereof, other than ordinary course compensation arrangements. Furthermore, ASML has not granted any personal loans, guarantees or the like to members of the Board of Management or Supervisory Board.

Outside positions

During the financial year 2022, all members of the Board of Management and the Supervisory Board complied with the requirements described above.

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AGM and share capital



			We highly value the interaction with our shareholders.”
			Gerard Kleisterlee
			Chair of the Supervisory Board

General Meeting

A General Meeting (AGM) is held at least once a year and generally takes place in Veldhoven, the Netherlands. In 2022, shareholders had the option to attend the 2022 AGM in person in Veldhoven or virtually. The agenda for the AGM typically includes the following topics:



			–Discussion of the management report and the adoption of the financial statements over the past financial year; –Discussion of the dividend policy and approval of any proposed dividends; –Advisory vote on the Remuneration Report over the past financial year; –The discharge from liability of the members of the Board of Management and the Supervisory Board for the performance of their responsibilities in the previous financial year; –The limited authorization for the Board of Management to issue (rights to) shares in ASML’s capital, and to exclude preemptive rights for such issuances, as well as to repurchase shares and to cancel shares; and –Any other topics proposed by the Board of Management, the Supervisory Board or shareholders in accordance with Dutch law and the Articles of Association.

representing a share value of at least €50 million are entitled to place items on the agenda of a General Meeting at least 60 days before the date of the meeting.

Shareholders’ meetings are convened by public announcement via the website of ASML no later than 42 days prior to the meeting, as stipulated by Dutch law.

The Board of Management and Supervisory Board provide shareholders with information relevant to the topics on the agenda by means of an explanation of the agenda as well as by documents necessary or helpful for this purpose. The agenda indicates which agenda items are voting items, and which items are for discussion only. All documents related to the General Meeting, including the agenda with explanations, are posted on our website.

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AGM and share capital (continued)

Hybrid AGM

In view of the ongoing COVID-19 pandemic, we organized a hybrid AGM in 2022, accommodating attendance in person as well as virtual attendance of the AGM by enabling shareholders to follow the proceedings of the meeting via video webcast and to vote electronically during the meeting. The opportunity to participate in the AGM in person or virtually was offered in addition to the opportunity to vote in advance via written or electronic proxy. As we highly value interaction with our shareholders, we invited shareholders who attended the AGM in person to ask questions about the agenda items during the AGM and we provided holders of shares traded on Euronext Amsterdam who attended the AGM virtually the opportunity to ask live questions in writing through the virtual meeting platform. All questions were answered during the AGM.

Powers

In addition to the items submitted annually at the AGM, the General Meeting also has other powers, with due observance of the statutory provisions. These include resolving:

–To amend the articles of association;

–To issue shares if and insofar as the Board of Management has not been designated by the General Meeting for this purpose; and

–To adopt the Remuneration Policies for the members of the Board of Management and the Supervisory Board.

During the 2022 AGM, the Board of Management, with the approval of the Supervisory Board, proposed to the General Meeting to amend the Articles of Association. The amendments mainly related to reflecting various changes in applicable laws and regulations, simplifying the Articles of Association and applying amendments of a technical nature. The proposal was adopted by the General Meeting and the new Articles of Association became effective as per May 12, 2022. For more detailed information on the amendments to the Articles of Association, please see the 2022 AGM page on our website.

A brief summary of the most significant provisions of our Articles of Association is included as Exhibit 99.1 to our Form 6-K furnished to the SEC on February 8, 2013 (the ‘Articles of Association’), which is incorporated by reference herein.

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AGM and share capital (continued)



ASML’s authorized share capital amounts to €126.0 million and is divided into:

	Type of shares	Number of shares	Nominal value	Votes per share
	Cumulative preference shares	700,000,000	€0.09 per share	1
	Ordinary shares	700,000,000	€0.09 per share	1

The issued and fully paid up ordinary shares with a nominal value of €0.09 each were as follows:

	Year ended December 31	2020	2021	2022
	Issued ordinary shares with nominal value of €0.09	416,514,034	402,601,613	394,589,411
	Issued ordinary treasury shares with nominal value of €0.09	2,983,454	3,873,663	8,548,631
	Total issued ordinary shares with nominal value of €0.09	419,497,488	406,475,276	403,138,042

87,875,651 ordinary shares were held by 280 registered holders with a registered address in the US. Since certain of our ordinary shares were held by brokers and nominees, the number of record holders in the US may not be representative of the number of beneficial holders, or of where the beneficial holders are resident.

Each ordinary share consists of 900 fractional shares. Fractional shares entitle the holder thereof to a fractional dividend, but do not give entitlement to voting rights. Only those persons who hold shares directly in the share register in the Netherlands, held by us at our address at 5504 DR Veldhoven, de Run 6501, the Netherlands, or in the New York share register, held by JP Morgan Chase Bank, N.A., P.O. Box 64506, St. Paul, MN 55164-0506, United States, can hold fractional shares. Shareholders who hold ordinary shares through the deposit system under the Dutch Securities Bank Giro Transactions Act maintained by the Dutch central securities depository Euroclear Nederland or through the Depository Trust Company cannot hold fractional shares.

Special voting rights, limitation voting rights and transfers of shares

There are no special voting rights on the issued shares in our share capital.

Issue and repurchase of (rights to) shares

2022 authorization to issue shares

At our 2022 AGM, the Board of Management was authorized from April 29, 2022 through October 29, 2023, subject to the approval of the Supervisory Board, to issue shares and/or rights thereto representing up to a maximum of 5% of our issued share capital at April 29, 2022, plus an additional 5% of our issued share capital at April 29, 2022, that may be issued in connection with mergers, acquisitions and/or (strategic) alliances. Our shareholders also authorized the Board of Management through October 29, 2023, subject to approval of the Supervisory Board, to restrict or exclude preemptive rights with respect to holders of ordinary shares up to a maximum of 5% of our issued share capital in connection with the general authorization to issue shares and/or rights to shares, plus an additional 5% in connection with the authorization to issue shares and/or rights to shares in connection with mergers, acquisitions and/or (strategic) alliances.

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AGM and share capital (continued)

2022 authorization to repurchase shares

Read more details on our share buyback program in:

C onsolidated Financial Statements - Notes to the Consolidated Financial Statements - Note 22 Shareholders’ equity.

ASML Preference Shares Foundation

Objectives of the Foundation

The Preference Share Option

The Preference Share Option gives the Foundation the right to acquire such number of cumulative preference shares as the Foundation will require, provided that the aggregate nominal value of such number of cumulative preference shares shall not exceed the aggregate nominal value of the ordinary shares issued at the time of exercise of the Preference Share Option. The subscription price will be equal to their nominal value. Only one-fourth of the subscription price would be payable at the time of initial issuance of the cumulative preference shares, with the other three-fourths of the nominal value only being payable when ASML calls up this amount. Exercise of the preference Share Option could effectively dilute the voting-power of the outstanding ordinary shares by one-half.

Cancellation of cumulative preference shares

If the Foundation does not request ASML to repurchase or cancel all cumulative preference shares held by the Foundation within 20 months of issuance of these shares, we will be required to convene a General Meeting for the purpose of deciding on a repurchase or cancellation of these shares.

Board of Directors

The Foundation is independent of ASML. The Board of Directors of the Foundation is composed of four independent members from the Netherlands’ business and academic communities. The Foundation’s Board of Directors is composed per December 31, 2022, of the following members: Mr. A.P.M. van der Poel, Mr. S. Perrick, Mr. S.S. Vollebregt and Mr. J. Streppel.

Other than the arrangements made with the Foundation as described above, ASML has not established any other anti-takeover devices.

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AGM and share capital (continued)

Major shareholders

The Dutch Act on the supervision of financial markets and US securities laws contain requirements regarding the disclosure of capital interests and voting rights in listed companies. The following table sets forth the total number of ordinary shares owned by each shareholder that reported to the Dutch AFM or the US SEC a beneficial ownership of ordinary shares that is at least 3.0% (5.0%, in the case of the SEC) of our ordinary shares issued and outstanding. Also included in the table below is the total number of ordinary shares owned by our members of the Board of Management as of December 31, 2022. The information set out below with respect to shareholders is based on public filings with the SEC and AFM as of February 8, 2023.


	Shares	% of Class6
Capital Research and Management Company1	40,615,837	10.29	%
BlackRock Inc.2	32,539,755	8.25	%
T. Rowe Price Group, Inc.3	13,527,385	3.43	%
Members of ASML’s current Board of Management (5 persons)4,5	89,892	0.02	%

1.As reported to the AFM on February 7, 2022, Capital Research & Management Company (CRMC) reports 365,542,532 voting rights corresponding to 40,615,837 ordinary shares (based on 9 votes per share), but do not report ownership rights related to those shares.

2.Based solely on the Schedule 13-G/A filed by BlackRock Inc. with the SEC on March 11, 2022; BlackRock reports voting power with respect to 29,277,159 of these shares. A public filing with the AFM on December 6, 2022 shows an aggregate indirect capital interest of 5.80% and voting rights of 7.23%, based on the total number of issued shares and voting rights at that time.

4.Does not include unvested shares granted to members of the Board of Management. For further information, see Leadership and governance – Remuneration Report.

5.No shares are owned by members of the Supervisory Board.

6.As a percentage of the total number of ordinary shares issued and outstanding, 394,589,411 as of December 31, 2022, which excludes 8,548,631 ordinary shares which have been issued but are held in treasury by ASML. The share ownership percentages reported to the AFM are expressed as a percentage of the total number of ordinary shares issued (including treasury stock), and accordingly, percentages reflected in this table may differ from percentages reported to the AFM or the SEC.

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Financial reporting and audit

ASML publishes, among others, the following annual reports regarding the financial year 2022:

–The Annual Report on Form 20-F, prepared in accordance with the requirements of the Exchange Act. The financial statements included therein are prepared in conformity with US GAAP.

–A narrative explanation of ASML’s financial statements;

–The context within which financial information should be analyzed; and

–Information about the quality, and variability, of our earnings and cash flow.

For ASML’s internal risk management and control systems read more in:

Risk - How we manage risk - Enterprise Risk Management.

External Audit

In accordance with Dutch law, our external auditor is appointed by the General Meeting, based on a nomination for appointment by the Supervisory Board. The Supervisory Board bases its nomination on the advice from the Audit Committee and the Board of Management, who annually provide a report to the Supervisory Board on the performance of and relationship with the external auditor, as well as its independence. ASML’s current external auditor, KPMG, was first appointed by the General Meeting in 2015 for the reporting year 2016, and has been reappointed on a yearly basis since then. At the 2022 AGM, KPMG was appointed as the external auditor for the reporting years 2023 and 2024.

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Financial reporting and audit (continued)

The Audit Committee reviews and approves the external auditor’s audit plan for the audits planned during the financial year. The audit plan also includes, among others, the activities of the external auditor with respect to their limited procedures on the quarterly results other than the annual accounts. Proposed services may be pre-approved at the beginning of the year by the Audit Committee (annual pre-approval) or may be pre-approved during the year by the Audit Committee in case of a particular engagement (specific pre-approval). The annual pre-approval is based on a detailed, itemized list of services to be provided, which is designed to ensure there is no management discretion in determining whether a service has been approved, and to ensure the Audit Committee is informed of each service it is pre-approving.

Read more information on principal accountant fees and services in:

Other appendices - Appendix - Principal accountant fees and services.

In principle, the external auditor attends all the Audit Committee meetings. The external auditor’s findings are discussed at these meetings. The Audit Committee reports to the Supervisory Board on the topics discussed with the external auditor, including the external auditor’s reports with regard to the audit of the annual reports as well as the content of the annual reports. Furthermore, the external auditor may attend the Supervisory Board meeting in which the annual external audit report is discussed. The external auditor may also attend Supervisory Board meetings at which the quarterly financial results are discussed.

The Audit Committee is informed by the external auditor without delay if the external auditor discovers irregularities in the content of the audit of the financial reports.

The external auditor is present at our AGM to respond to questions, if any, from the shareholders about the auditor’s report on the Consolidated Financial Statements.

Internal Audit

The role of our Internal Audit function is to assess our systems of internal controls by performing independent procedures such as risk-based operational audits, IT audits and compliance audits. The Internal Audit department reports directly to the Audit Committee and the Board of Management. The yearly Internal Audit plan is discussed with and approved by the Audit Committee, the Board of Management and the Supervisory Board. The follow-up on the Internal Audit findings and progress made compared with the plan are discussed on a quarterly basis with the Audit Committee. The external auditor and Internal Audit department have meetings on a regular basis.

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Compliance with Corporate Governance requirements

Corporate information

US listing requirements


Practices followed by ASML in lieu of NASDAQ rules
Quorum			ASML does not follow NASDAQ’s quorum requirements applicable to meetings of ordinary shareholders. In accordance with Dutch law and generally accepted Dutch business practice, ASML’s Articles of Association provide that there are no quorum requirements generally applicable to general meetings of shareholders.
Solicitation of proxies			ASML does not follow NASDAQ’s requirements regarding the solicitation of proxies and the provision of proxy statements for general meetings of shareholders. ASML does furnish proxy statements and solicit proxies for the General Meeting. Dutch corporate law sets a mandatory (participation and voting) record date for Dutch listed companies at the 28th day prior to the date of the General Meeting. Shareholders registered at such a record date are entitled to attend and exercise their rights as shareholders at the General Meeting, regardless of sale of shares after the record date.
Distribution of Annual Report			ASML does not follow NASDAQ’s requirement regarding distribution to shareholders of copies of an annual report containing audited Financial Statements prior to our AGM. The distribution of our annual reports to shareholders is not required under Dutch corporate law or Dutch securities laws, or by Euronext Amsterdam. Furthermore, it is generally accepted business practice for Dutch companies not to distribute annual reports. In part, this is because the Dutch system of bearer shares has made it impractical to keep a current list of holders of the bearer shares in order to distribute the annual reports. Instead, we make our Annual Report available at our corporate head office in the Netherlands (and at the offices of our Dutch listing agent as stated in the convening notice for the meeting) no later than 42 days prior to convocation of the AGM. In addition, we post a copy of our Annual Reports on our website prior to the AGM.
Equity compensation arrangements			ASML does not follow NASDAQ’s requirement to obtain shareholder approval of stock option or purchase plans or other equity compensation arrangements available to officers, directors or employees. It is not required under Dutch law or generally accepted practice for Dutch companies to obtain shareholder approval of equity compensation arrangements available to officers, directors or employees. The General Meeting adopts the Remuneration Policy for the Board of Management, approves equity compensation arrangements for the Board of Management and approves the remuneration for the Supervisory Board. The Remuneration Committee evaluates the achievements of individual members of the Board of Management with respect to the short- and long-term quantitative performance and he full Supervisory Board evaluates the quantitative performance criteria. Equity compensation arrangements for employees are adopted by the Board of Management within limits approved by the General Meeting.

Compliance with the Corporate Governance Code

We are of the opinion that ASML fully complies with the applicable principles and best-practice provisions of the Dutch Corporate Governance Code as in effect for the financial year 2022.

The Board of Management and the Supervisory Board,

Veldhoven, February 15, 2023

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Message from the Chair of the Supervisory Board

Another record performance, in challenging circumstances

The Supervisory Board supervises and advises the Board of Management in performing its management tasks and setting the direction for ~~ASML. The Supervisory Board focuses~~ASML, focusing on long-term and sustainable value creation, with the goal to ensure that the Board of Management pursues a strategy that secures its leading position as a supplier of holistic lithography solutions to the semiconductor industry. As Supervisory Board, we uphold an appropriate system of checks and balances, provide oversight, evaluate performance and give advice where required or requested. Through good governance, we help to ensure that ASML acts in the best interests of the company and its stakeholders. In this Supervisory Board Report, we report on our activities in 2021.

During 2021, the semiconductor industry as a whole grew by 17.3% worldwide, while the COVID-19 pandemic still had impact. ASML continued to grow and welcomed new colleagues, while safeguarding health, safety and business continuity. Increasing customer demand and growth of the company have resulted in additional challenges in 2021. We are pleased to see that ASML has been able to realize fantastic growth, making 2021 an even better year than 2020 with record turnover, cash flow and profitability.

~~Our activities in~~ ~~2021~~

In exercising our task in 2021, the Supervisory Board agenda was centered around the strategy and its execution, financial and operational performance, business developments, risk management, and people and organization. Based on the strategic priorities for ASML as agreed in the annual strategy review, several topics were extensively discussed by means of deep dives, allowing a focused and in-depth review.

~~Strategy and long-term value creation~~

During 2021, the Supervisory Board devoted a considerable amount of time discussing strategic topics. We performed the recurring annual review of ASML's corporate strategy, the long-term financial plan and the long-term plans of EUV, DUV and Applications.creation. The Supervisory Board fully supports ASML strategy, which continues to be centered around the five pillars strengthen customer trust, holistic lithography and applications, DUV competitiveness, EUV 0.33 NA for manufacturing and EUV 0.55 NA (High-NA) insertion. With the strong demand for ASML's products in combination with the company’s focus on execution of its strategic priorities, the Supervisory Board has confidence in ASML’s long-term growth opportunities and the continued delivery of value to its stakeholders.

As part of the annual strategy review, we held dedicated workshops focused on long-term semiconductor market developments and external global forces, including geopolitics and ESG sustainability. Other workshops concerned challenges related to strategy execution, zooming in on the end-to-end supply chain and on the installed base and services strategy. These workshops enable an engaged and focused discussion between the Supervisory Board and Board of Management on key strategic matters, and as a Supervisory Board we highly value this way of contributing to the strategic decision-making process.

~~Besides the annual strategy review, strategic topics were addressed throughout the year by means of deep dives, allowing focused, in-depth review by the Supervisory Board.~~

~~ASML ANNUAL REPORT 2021 142~~

~~DEEP DIVE: Strategic cooperation with Carl Zeiss SMT~~

With respect to the strategic cooperation with Carl Zeiss SMT, the Board of Management and the Supervisory Board discussed the new overall framework agreement covering the entire spectrum of the relationship between the two companies. In the review, we looked in depth at the three – strongly interrelated and mutually supportive – pillars of the agreement: behavior and culture, governance and commercial, as well as on the renewed arrangement with respect to IP. We consider the new framework agreement as a step forward, especially in the relationship and cooperation between the two companies, as well as in the opportunities to simplify the operational execution.

~~Financial and operational performance~~

We reviewed the annual and interim financial statements, including non-financial information, the quarterly results and accompanying press releases, as well as the outcomes of the year-end US GAAP and EU-IFRS audits.

As part of the financial updates, the Supervisory Board, assisted by the Audit Committee, reviewed ASML's financing and capital return policies. The Supervisory Board approved the Board of Management’s proposals for the final and interim dividend to be paid in 2021. Furthermore, the Supervisory Board approved the 2021-2023 share buyback program and discussed the execution of the program with the Board of Management on a quarterly basis.

One special Supervisory Board meeting was held to discuss the messaging around the 2021 Investor Day, during which investors and other key stakeholders were updated about our long-term strategy and financial model. We are confident that ASML is well positioned to continue to deliver long-term growth and stakeholder value in a sustainable manner.

~~Business developments~~

In 2021 we witnessed increased wafer demand at both advanced and mature nodes driven by global megatrends in the electronics industry as well as countries pushing for technological sovereignty. This surging demand came with challenges both in our own operations and in our supply chain. The Supervisory Board closely monitored the developments in this regards and saw management address these challenges with the highest priority.

As a technology leader in the semiconductor industry, technological progress is one of ASML's top priorities. The Supervisory Board is pleased to see the ever-wider adoption of ASML’s EUV 0.33 NA scanner platform in high-volume manufacturing, and growing commitment to the next-generation EUV 0.55 NA (High-NA) platform, where great progress has been made by the teams working on this program.

~~DEEP DIVE: Applications and holistic lithography strategy~~

An in-depth review of the applications and holistic lithography strategy was performed. We looked at the growth opportunities arising from technology shifts in key market segments and the technological roadmap and how it can support ASML’s business. Key drivers of growth were looked into in detail, including applications such as multi-beam inspection, optical and e-beam metrology, and computational litho and scanner application software. The Supervisory Board is pleased with the applications and holistic lithography strategy and is confident that ASML is well-positioned to create value by executing on its roadmap.

~~People and organization~~

Given the significant growth of ASML in recent years, the topics of people and organization continued to be an area of focus for the Supervisory Board in 2021, as we believe that these are of critical importance for the future success of ASML. On several occasions, we were provided with updates from Human Resources and Organization (HR&O). Topics covered included the ASML leadership framework and the results of the annual employee engagement survey. Furthermore, the Supervisory Board, assisted by the Selection and Nomination Committee, extensively discussed and provided advice in respect of ASML's talent management and people development programs as well as succession planning for the Board of Management and senior management. The Supervisory Board is pleased to see the effort being put into the onboarding of new employees, enabling them to develop and contribute as quickly as possible.

Furthermore, it is important that business processes are fit for growth. We oversaw various transformation programs such as ONE. ONE is ASML’s transformation program dedicated to securing configuration integrity over the life cycle of our customer offerings while enhancing the business processes and maintaining flexibility, with the support of its upgraded backbone information system. We paid special attention to the sub-roadmaps of the program where progress had been less than planned, looking at the challenges and mitigating actions. We will continue to closely follow the developments.

~~DEEP DIVE: ESG sustainability strategy~~

We discussed the step-up in focus on ESG sustainability with the Board of Management and we reviewed ASML's new ESG sustainability strategy based on nine themes in the areas of environment, social and governance. We are pleased with the further increasing focus within ASML on ESG sustainability, which includes topics such as the energy efficiency of our products, re-use, diversity and inclusion and a responsible supply chain. We intend to connect remuneration targets for the Board of Management to the new ESG sustainability strategy and to increase the weight of the ESG performance measure as part of a revision of the Remuneration Policy for the Board of Management, which we intend to submit to the General Meeting in 2022.

~~Risk management~~

As risk management is a key element of the Supervisory Board’s responsibilities, we received periodic risk management updates during the year. Attention was paid to the risk landscape and the developments in that area, the risk appetite and the measures put in place by the Board of Management to mitigate the critical risks. Particular area of attention in 2021 were the challenges created

~~ASML ANNUAL REPORT 2021 143~~

by the strong increase in demand for ASML's products across the entire product portfolio, which impacts multiple risks in ASML's risk landscape. Another recurring point of attention was the risk related to rapid growth of the organization. During the year, specific risk areas were reviewed in deep dive sessions. Topics covered in 2021 were IT and IT security risks, intellectual property risks and political risks in light of the global trade situation. ~~For further information on ASML's risk management, read more in: Our performance in 2021 - Governance - How we manage risk.~~

~~Relationship with stakeholders~~

The Supervisory Board regularly discussed ASML’s relationship with its shareholders and members of the Supervisory Board engaged with shareholders throughout the year on topics such as ASML’s strategy and performance, governance and ESG. The Remuneration Committee held engagement meetings with a variety of ASML shareholders and other stakeholders regarding Board of Management remuneration. More information about this topic can be found in the Remuneration Report.

A Supervisory Board delegation held two formal meetings with the Works Council in 2021. In the first meeting, time was spent on getting to know each other, as the composition of the Works Council changed significantly after the Works Council elections held in December 2020. We exchanged views on ASML's strategy and priorities, ASML's performance and challenges, in particular related to the growth and increased complexity of ASML's business. Other topics of discussion were climate change, leadership at ASML and the COVID-19 pandemic, and in particular the challenges related to working from home and the potential impact on innovation and on the mental and physical health of ASML employees. The composition of the Supervisory Board and the Board of Management was discussed, in particular the changes which took effect per the 2021 AGM. The Works Council and Supervisory Board also discussed the Remuneration Policies for the Board of Management and Supervisory Board.

In October 2021, the Technology Committee paid a visit to one of our key suppliers, ZEISS, where the committee met with ZEISS management and discussed the cooperation between ASML and ZEISS, especially given the new framework agreement concluded in 2021.

~~Additional topics~~

~~Other topics that were relevant during Supervisory Board meetings in 2021 included:~~

•IT and Security: We reviewed the IT strategy, renewed in Q4 2020, and looked into the key objectives centered around the objectives Running IT as a Business, Business Relevance, IT Art of the Possible and Employee Engagement. Particular attention was paid to the increased risk profile on security and business continuity and how the comprehensive IT strategy brings business relevance, value delivery and risk management together.

•Divestment of the non-semiconductor activities of Berliner Glas: The sale of the technical glass activities to Glas Trösch Group in Q2 2021 and the medical applications and SwissOptic activities to Jenoptik in Q4 2021.

•~~Compliance with rules and regulations: The Supervisory Board monitored compliance with rules and regulations including the Dutch Corporate Governance Code and was kept informed on key legal matters.~~

•Supervisory Board composition, profile and functioning: We extensively discussed our own composition, profile and functioning, the composition and functioning of its committees as well as the composition and functioning of the Board of Management. More information can be found in the report of the Selection and Nomination Committee.

•Board of Management performance: We also monitored the performance of the Board of Management and decided on the Board of Management's remuneration targets and target achievements. More information can be found in the report of the Remuneration Committee.

~~An overview of topics discussed during the year can be found in the table below.~~

~~ASML ANNUAL REPORT 2021 144~~


Q1	•~~2020 Annual Results and Annual Report~~ •~~2020 external audit report~~ •~~Final dividend 2020~~ •~~Remuneration Board of Management and Supervisory Board,~~ •~~Risk Management incl deep-dive: IP risk~~ •~~Market & Customer deep-dive: logic segment~~ •~~Outcome Supervisory Board evaluation~~ •~~Legal update~~ •~~Composition Supervisory Board~~ •~~Legal Issues Report~~ •~~AGM agenda~~	Q2	•~~Business priorities update~~ •~~Strategy deep dive: Geopolitics~~ •~~Strategy deep dive: Zeiss~~ •~~AGM update~~
Q3	•~~2021 statutory interim report~~ •~~Share buyback program~~ •~~Business priorities update~~ •~~HR&O Update~~ •~~Risk Management: update Risk Landscape & deep-dive: IT strategy and IT Security~~ •~~Strategy deep-dive: Applications and Holistic Lithography incl. HMI lessons learned~~ •~~Strategy deep-dive: ESG~~ •~~Composition SPAA Board per January 1, 2022~~ •~~Capital Markets Day messaging~~	Q4	•~~2021 Interim Dividend proposal~~ •~~Business priorities update 2021 and 2022~~ •~~Update geopolitical developments~~ •~~Semiconductor Market & Global Forces / ESG (incl. breakout sessions)~~ •~~Factory Tour~~ •~~From technology trends to ASML product strategy~~ •~~Long-term end-to-end supply chain setup / Installed Base Management & Services (incl, breakout sessions)~~ •~~Topline growth, Costs & Capital allocation 2020-2030~~ •~~Supply chain shortages~~ •~~Output capability challenges~~ •~~Physical security~~ •~~Long-term financial plan and Annual Plan 2022~~ •~~Financing policy incl. capital return & dividend policy~~ •~~HR&O update: Leadership framework~~ •~~ONE Program~~

~~Meetings and attendance~~

The Supervisory Board meets at least four times per year in accordance with an annual meeting schedule and whenever the Chairman, one or more of its members, or the Board of Management requests a meeting.

In 2021, the Supervisory Board held six meetings. Of these meetings, four were held virtually and two were held at ASML's headquarters in Veldhoven. In addition to these meetings, there were several informal meetings and telephone calls among Supervisory Board and/or Board of Management members.

The Supervisory Board meetings and the Supervisory Board committee meetings are held over several days, ensuring there is time for review and discussion. At each meeting, the Supervisory Board members discuss among themselves the goals and outcome of

~~ASML ANNUAL REPORT 2021 145~~

the meeting, as well as topics such as the functioning and composition of the Supervisory Board and the Board of Management. Also discussed during each meeting are the reports from the different Committees of the Supervisory Board.

~~Virtual and in-person meetings~~

Like in 2020, the majority of the Supervisory Board and Supervisory Board committees meetings in 2021 were held virtually due to the COVID-19 pandemic. To address the challenges resulting from meeting virtually, we continued to apply various measures: we planned shorter meeting sessions spread over more days, we held break-out sessions in smaller groups to optimize interaction, and we also made use of video as a means for meeting preparation, in addition to providing written meeting documents. The Supervisory Board is very positive about these new solutions and continued to use them during the meetings that were held in person in 2021.

~~The Supervisory Board meetings and the meetings of the four Supervisory Board committees were well attended, as is shown in the table below.~~

In addition to the Supervisory Board members, the members of the Board of Management are invited to the Supervisory Board meetings. All Board of Management members were present for the Supervisory Board meetings in 2021. Members of senior management are regularly invited to provide updates on topics within their area of expertise. This gives the Supervisory Board the opportunity to get acquainted with a variety of ASML managers, which the Supervisory Board considers very useful in connection with its talent management and succession planning activities.

~~Supervisory Board meeting attendance overview~~

~~Name~~

~~Supervisory Board~~

~~Audit Committee~~

~~Remuneration Committee~~

~~Selection and Nomination Committee~~

~~Technology Committee~~

~~Gerard Kleisterlee (Chair)~~

~~6/6~~

~~n/a~~

~~9/9~~

~~5/5~~

~~Annet Aris~~

~~6/6~~

~~n/a~~

~~6/6~~

~~9/9~~

~~5/5~~

~~Birgit Conix~~1

~~4/4~~

~~3/3~~

~~n/a~~

~~Marc Durcan~~

~~5/6~~

~~n/a~~

~~4/4~~

~~5/5~~

~~Warren East~~

~~6/6~~

~~n/a~~

~~Terri Kelly~~

~~6/6~~

~~n/a~~

~~9/9~~

~~4/4~~

~~n/a~~

~~Rolf-Dieter Schwalb~~

~~6/6~~

~~9/9~~

~~n/a~~

~~Hans Stork~~

~~6/6~~

~~n/a~~

~~9/9~~

~~n/a~~

~~5/5~~

~~Douglas Grose~~2

~~2/2~~

~~n/a~~

~~5/5~~

~~3/3~~

~~Carla Smits-Nusteling~~3

~~2/2~~

~~3/3~~

~~n/a~~

1.~~Appointed at the AGM on April 29, 2021 also appointed as member of the Audit Committee.~~

2.~~Stepped down per the AGM on April 29, 2021.~~

3.~~Stepped down per the AGM on April 29, 2021.~~

~~Composition~~

The Supervisory Board determines the number of Supervisory Board members required to perform its functions, the minimum being three members. The Supervisory Board currently consists of eight members. The Supervisory Board attaches great importance to its composition, independence and diversity and strives to meet all the associated guidelines and requirements. To ensure an appropriate and balanced composition, the Supervisory Board spends considerable time on an ongoing basis discussing its profile, composition and rotation schedule.

~~Independence~~

In order to properly perform its tasks, the Supervisory Board considers it to be very important that its members are able to act critically and independently of one another, the Board of Management and other stakeholders. The independence of the Supervisory Board and its individual members is assessed on an annual basis. All current members of the Supervisory Board are fully ~~independent, as defined by the Dutch Corporate Governance Code, and have completed the annual questionnaire addressing the relevant independence requirements.~~independent.




~~Diversity~~
The ~~current composition of ASML’s~~ Supervisory Board is ~~diverse in terms~~confident that the full order book – supported by the skills and passion of ~~gender, nationality, knowledge, experience~~our outstanding teams – lays a firm foundation for the months and ~~background and has a suitable level~~years ahead.”
Gerard Kleisterlee
Chair of ~~experience in~~ the financial, economic, technological, social and legal aspects of international business. For more information about diversity, reference is made to the section Corporate Governance - Other Board-Related Matters.Supervisory Board

Dear Stakeholder,

In order to maintain our success we are working hard to prepare for the future. Below, I outline some of the key areas that we focused on during 2022.

Reviewing our capacity plans

Organizing for continued growth

~~ASML ANNUAL REPORT 2021 146~~

~~Supervisory Board skills matrix~~

ASML ANNUAL REPORT 2022

SUPERVISORY BOARD REPORT CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

169

Message from the Chair of the Supervisory Board (continued)

~~Gerard Kleisterlee (Chair)~~

~~Annet Aris~~

~~Birgit Conix~~

~~Marc Durcan~~

~~Warren East~~

~~Terri Kelly~~

~~Rolf-Dieter Schwalb~~

~~Hans Stork~~

~~General skills~~

~~Executive board member of (listed) international company~~

~~Finance / governance~~

~~Remuneration~~

~~Human resources / employee relations~~

~~IT / digital / cyber~~

~~ASML-specific skills~~

~~Semiconductor ecosystem~~

~~Deep understanding of semiconductor technology~~

~~High-tech manufacturing / integrated supply chain management~~

~~Business in Asia~~

~~Changes in composition in 2021~~

Per the 2021 AGM, the term of appointment of Douglas Grose and Carla Smits-Nusteling expired. Mr. Grose and Ms. Smits-Nusteling stepped down from the Supervisory Board per the 2021 AGM, after having served eight years on the Supervisory Board. As announced during the 2020 AGM, the number of Supervisory Board members increased temporarily from eight to nine in 2020. Upon the retirement of Mr. Grose and Ms. Smits-Nusteling, the Supervisory Board decided to only nominate one candidate, Ms. Birgit Conix, for appointment at the 2021 AGM. The Works Council of ASML Netherlands B.V. decided not to use its recommendation right with regard to the vacancy arising per the 2021 AGM and the General Meeting resolved to appoint Ms. Conix for a term of four years effective per the 2021 AGM. As a result, the Supervisory Board consists of eight members per the 2021 AGM.

~~Changes in composition in 2022~~

~~Per the 2022 AGM, the appointment terms of Terri Kelly and Hans Stork will expire.~~

Mr. Stork has informed the Supervisory Board that he is not available for reappointment and will retire per the 2022 AGM, upon completion of his current term. The Supervisory Board extends its thanks to Mr. Stork for his valuable contribution over the past eight years, during which the Supervisory Board has greatly benefited from his knowledge and experience.

Ms. Kelly has informed the Supervisory Board that she is available for reappointment per the 2022 AGM. As Ms. Kelly's initial appointment was based on the enhanced recommendation right of the Works Council, the Works Council also has an enhanced right of recommendation in respect of the vacancy arising from the retirement by rotation of Ms. Kelly.

~~The agenda and explanatory notes for the 2022 AGM will contain further information about the nomination for (re)appointment of Supervisory Board members~~.

For further information and background on the members of the Supervisory Board, including details on nationality, gender and age, please see the Supervisory Board members’ information in Our performance in 2021 - Governance - Corporate governance - Supervisory Board as well as the Supervisory Board skills matrix included in this Supervisory Board Report.

~~Induction and training~~

We have a comprehensive induction program in place for newly appointed Supervisory Board members, designed to ensure that new members gain a good understanding of our business and strategy, as well as the key risks we face. The induction program includes meetings with other Supervisory Board and Board of Management members, a technology tutorial and detailed presentations by our Business Lines, Sectors and Corporate departments. A site visit and factory tour is also part of the induction program. On joining the Supervisory Board, Ms. Conix followed an induction program, which was partly virtual and partly in person.

~~To ensure permanent education, the Supervisory Board is provided with regular deep dives on a variety of topics, both in the plenary meetings and in the meetings of the Supervisory Board's committees.~~ During 2021, strategy and risk deep dives were held on a variety of topics, see the Our Activities 2021 section in this Supervisory Board Report. Furthermore, external speakers or advisors attended various committee meetings to provide outside-in views on topics such as technology developments and technology outlook. The Supervisory Board also performed site visits. We visited the EUV factory at ASML's headquarters and were updated on the EUV 0.33 NA and EUV 0.55 NA (High-NA) programs. We saw the preparations for the assembly of the first High-NA system and were impressed by the achievements made. The Technology Committee visited ZEISS to see, among other things, how ZEISS' High-NA program was progressing. Finally, a vi~~rtual tour of ASML's production facilities in Wilton and San Diego was organized~~.

~~ASML ANNUAL REPORT 2021 147~~

~~Evaluation~~

The Supervisory Board greatly values the structural and ongoing evaluation process as a means of ensuring continuous improvement in our way of working. Each year, the Supervisory Board, assisted by the Selection and Nomination Committee, evaluates the composition, competence and functioning of the Supervisory Board and its committees, the relationship between the Supervisory Board and the Board of Management, its committees, its individual members, the chairs of both the Supervisory Board and the committees, as well as the composition and functioning of the Board of Management and its individual members, and the education and training needs for the Supervisory Board and Board of Management members.

In principle, the evaluation of the Supervisory Board is performed once every three years by an external adviser; in the other two years, the evaluation of the Supervisory Board is performed by means of a self-assessment using a written questionnaire, followed by one-on-one meetings between the Chairman and individual Supervisory Board members.

The 2021 evaluation of the Supervisory Board and its committees was performed through a web-based survey, which was prepared by the Selection and Nomination Committee. The Chairman of the Supervisory Board also held meetings with the individual Supervisory Board members. The evaluation was centered around the following themes: composition, stakeholder oversight, oversight of strategy, risk management and succession planning, management and focus of meetings and priorities for improvement. An upward review by the ~~Board of Management and the external Auditor was also part of the annual assessment.~~

~~The results of the Supervisory Board evaluation were discussed in early 2022.~~ The conclusion was that the Supervisory Board and its committees continue to function well. Suggestions to further improve the functioning of the Supervisory Board include further optimizing the meeting agenda to ensure an appropriate balance between recurring items and strategic topics as well as topics related to operations and people and organization. Other suggestions relate to the balance between presentation and discussion during meetings, and increasing the engagement with management and the organization outside meetings.

The Board of Management also conducted a self-evaluation in 2021, focusing on the role, responsibilities and functioning of the Board of Management collectively, and on the functioning of the individual Board of Management members. This self-evaluation was performed in a number of off-site Board of Management meetings dedicated to this topic. As part of the self-evaluation a survey was completed and interviews with the individual Board of Management members were held. Themes addressed include the Board of Management's strategic focus, stakeholder involvement, people & organization, board dynamics and board organization. Also in 2022 a special Board of Management session will be held to continue the discussion and follow-up on the observations made. The overall conclusion of the self-evaluation was that ASML has a well-functioning Board of Management. The self-evaluation was also discussed with the Supervisory Board and its Selection and Nomination ~~Committee.~~

The four committees of the Supervisory Board prepare the decision-making of the full Board. In the plenary Supervisory Board meetings, the chairpersons of the committees report on the items discussed in the committee meetings. In addition, the meeting documents and minutes of the committee meetings are available to all Supervisory Board members, enabling the full Supervisory Board to make the appropriate decisions.

~~Audit Committee~~

~~The Audit Committee assists the Supervisory Board in overseeing the integrity and quality of our financial reporting and the effectiveness of the internal risk management and internal control systems.~~

~~ASML ANNUAL REPORT 2021 148~~


~~Members~~			~~Main responsibilities~~
•~~Rolf-Dieter Schwalb~~ ~~(Chairman~~) •~~Birgit Conix~~ •~~Warren East~~			•~~Overseeing the integrity and quality of ASML's financial statements and related non-financial disclosure and submitting proposals to ensure such integrity;~~ •~~Overseeing the accounting and financial reporting processes and the audits of the financial statements;~~ •~~Overseeing the effectiveness of our internal risk management and control systems, including the compliance with the relevant legislation and regulations, and the effect of codes of conduct;~~ •~~Overseeing the integrity and effectiveness of our system of disclosure controls and procedures and our system of internal controls over financial reporting;~~ •~~Overseeing the External Auditor’s qualifications, independence, performance and determining its compensation; and~~ •~~Overseeing the functioning of Internal Audit.~~
~~The members of the Audit Committee are all independent members of the Supervisory Board.~~ The Supervisory Board has determined that both Mr. Schwalb and Ms. Conix qualify as an Audit Committee financial expert pursuant to Section 407 of the Sarbanes-Oxley Act and Dutch statutory rules, taking into consideration their extensive financial backgrounds and experience.

The Audit Committee is provided with all relevant information to be able to adequately and efficiently supervise the preparation and disclosure of financial information. This includes information on the status and development of the (semiconductor) market to be able to judge the outlook and budget for the next six to 12 months, the application of EU-IFRS and US GAAP, the choice of accounting policies and the work of the internal and external auditor.

~~Audit Committee meetings in 2021~~

~~The Audit Committee meets at least four times a year and always before the publication of the quarterly, half-year and annual financial results. In 2021, the Audit Committee held six meetings.~~


~~Recurring agenda topics (quarterly)~~						~~Attendance~~
•~~Financial update and financing~~ •~~Review of the quarterly financial results and press release~~ •~~Accounting update~~ •~~Internal control update~~ •~~Observations External Auditor~~ •~~Risk and Internal Audit update~~ •~~Disclosure Committee report~~ •~~Legal matters report~~ •~~Ethics and compliance~~						In addition to the Audit Committee members, the Chairman of the Supervisory Board attends the Audit Committee meetings whenever possible. The external auditor and the internal auditor have a standing invitation for Audit Committee meetings and attended all Audit Committee meetings in 2021. The CEO, CFO, EVP Finance, Corporate Chief Accountant and the VP Risk and Business Assurance are invited to the meetings.

~~The below overview provides a number of topics discussed during Audit Committee meetings in 2021, in addition to the recurring agenda topics.~~In addition, as a Supervisory Board, we maintained a strong focus on Management development and succession planning. We are working hard together with the Board of Management to identify and develop the talent we need to ensure that we have qualified successors both in middle- and senior-management to deliver continued growth and meet market demands for cutting edge lithography solutions.


Q1	•~~2020 Annual Report and financial statements US GAAP and EU-IFRS~~Emphasizing the importance of ESG Environment, Social and Governance (ESG) matters are increasingly important to us and all our stakeholders. With us and all our stakeholders, from customers and our investors to our people and local communities, there is a growing awareness of the role that all businesses must play in society. The Supervisory Board has spent considerable time evaluating and discussing the company’s ESG strategy and is fully supportive of the decisions that management has made. Energy efficiency, climate action, a circular economy, water management and product safety are key commitments from an environmental perspective. At the same time, our management is working hard to ensure that ASML is an attractive workplace for all and a valued partner in our communities, while supporting the innovation ecosystem and the supply chain. Overarching our Environmental and Social initiatives is a firm commitment to the highest standards of Governance. Engaging with our stakeholders The Supervisory Board continued to visit customers and suppliers during the year in order to learn more about the challenges they face and build engagement at the highest level. We visited Intel, one of our major customers, where we engaged with their senior team to further improve our customer focus, and Zeiss, the supply partner for all our optics, to explore how we could make the supply chain more robust and resilient. Our visits to internal functions including the 5L Warehouse project and the High NA factory gave us a good insights into the expertise we have at ASML and delivered valuable learnings on further improvement required. l We also visited one of our key technology partners, the Advanced Research Center for Nanolithography (ARCNL), where we were impressed by their depth of technical capability. In addition a delegation of the Supervisory Board regularly meets with the Works Council in order to better understand the needs and concerns of our people. Although our thoughts are usually closely aligned with those of the Works Council, we ensure that we engage directly with them to provide a clear communications channel to the feelings of people across our organization. Also Members of the Supervisory Board regularly meet with institutional investors. For instance, the Chair of our Remuneration Committee frequently engages with major investors to ensure that the Remuneration Policy is closely aligned with their expectations. Looking ahead The Supervisory Board is confident that the full order book – supported by the skills and passion of our outstanding teams – lays a firm foundation for the months and years ahead. While geopolitical matters, likely mild recession and the aftermath of COVID-19 will continue to hamper efforts to ensure the supply chain runs smoothly, ASML is well placed to achieve another excellent performance in 2023. At the 2023 AGM, Rolf-Dieter Schwalb and I will step down after having served on ASML's Supervisory Board for eight years. On behalf of the Supervisory Board I would like to express gratitude to Rolf-Dieter for his important contribution to the Supervisory Board, especially as Chairman of the Audit Committee and previously also as Chairman of the Remuneration Committee. During our 8 years on the Board, we were part of a fantastic journey that saw ASML grow with the breakthrough of EUV from a 6 billion revenue company in 2014 to a 21 billion Company in 2022, driven by absolute customer focus, technological prowess and an unbelievably strong “can do” mentality. The journey will continue under our successors. For us it was a pleasure and a privilege to serve. To close, on behalf of the whole Supervisory Board I would once again like to thank every member of our 39,086-strong team for their hard work and sheer enthusiasm throughout 2022.You made it happen! •~~Accounting deep-dive: Balance sheet review~~ •~~2020 External audit report~~ •~~Annual Reporting Process~~ •~~Capital return: final dividend 2020 and share buyback program~~ •~~Fraud-risk assessment~~ •~~Results of the External Auditor evaluation 2020~~ •~~Results Self-Evaluation Audit Committee~~ •~~Annual plans Risk and Internal Audit~~	Q2	•~~Approval external audit plan 2021~~ •~~Expense reporting Board of Management and Supervisory Board 2020~~
Q3	•~~Statutory Interim report 2021~~ •~~External Audit rotation process~~ •~~Compliance deep-dive: export control~~ •~~Share Buyback program 2021-2023~~ •~~Finance and IT transformation program~~	Q4	•~~Interim Dividend 2021~~ •~~Accounting deep-dive: Zeiss framework agreement~~ •~~2021 Annual Report process~~ •~~Long-term financial plan~~ •~~Annual Plan 2022~~ •~~Compliance deep-dives: Finance compliance and country compliance Korea~~ •~~Annual tax update~~ •~~External audit update~~ •~~Review rules of procedure Audit Committee~~ •~~Process for the External Auditor evaluation~~

~~Financials~~

In 2021, the Audit Committee focused, among other things, on financial reporting, most particularly the review of ASML's Annual and Interim Reports, including the annual and interim financial statements and non-financial information. The Audit Committee also closely monitored the progress and discussed the outcomes of the year-end US GAAP and EU-IFRS audits. The quarterly results and the accompanying press releases were reviewed before publication.

On a quarterly basis, the Audit Committee was provided accounting updates by the Corporate Chief Accountant, highlighting the main accounting matters relevant for the quarter. A recurring item of focus of the Audit Committee in this regard is revenue recognition, as this is a complex accounting also identified as a critical audit matter by the external auditor. Other important elements of the Audit Committee's quarterly procedures were the discussion of the observations of the External Auditor in relation to the accounting matters, as well as the report by the Disclosure Committee on the accuracy and completeness of the quarterly

~~ASML ANNUAL REPORT 2021 149~~

~~disclosures. Throughout the year, specific accounting topics were addressed in-depth, for instance the accounting aspects of the new framework agreement between ASML and ZEISS dated September 21, 2021. In this review, the Audit Committee took note of Management's and the external auditor's assessments on the accounting treatment and concurred with the conclusions.~~ ~~An annual in-depth balance sheet review was also performed.~~

The operational and financial short- and long-term performance of ASML was discussed extensively, looking at various performance scenarios and their impact on ASML’s results, cash generation, and financing and capital return policies. Particular item of focus in 2021 was the surge in customer demand, the ability of ASML to deliver in order to meet this demand and the potential impact on the financial figures.

The Audit Committee reviewed and provided the Supervisory Board with advice regarding the long-term financial plan, the financing of ASML and ASML’s capital return policy. Specifically discussed were the proposed final dividend payment in respect of the 2020 financial year and the interim dividend for the financial year 2021, which were approved by the Supervisory Board upon recommendation of the Audit Committee. The Audit Committee was kept updated on the progress of the 2020-2022 share buyback program, which was replaced by a new program in July 2021. The Audit Committee also extensively discussed the entering into of the new 2021-2023 share buyback program, thereby taking into consideration ASML's cash position and free cash flow, and provided the Supervisory Board with a positive recommendation with respect to the Board of Management's proposal.

~~Risk management and internal control~~

Throughout 2021, the Audit Committee closely monitored risk management and the risk management process, including the timely follow-up of high-priority actions based on quarterly progress updates. The Audit Committee oversaw the annual internal control process. Focus was on scoping, materiality levels, updates to the internal control framework, the tests of design and effectiveness and management's assessment of ASML's internal control over financial reporting and disclosures. The observations made by the Internal Auditor and the External Auditor on the design and effectiveness of internal controls were also discussed with the Audit Committee. We are pleased with the conclusion that ASML's internal control framework was effective in 2021.

~~Emerging risks related to increasing demand~~

In 2021, we performed an in-depth review of emerging risks as a result of ASML's growth and ramp-up to meet customer demand, given its potential impact on several risk categories in the risk landscape. We looked in detail into the risks impacted and the mitigating actions identified by management. We paid special attention to the process effectiveness and efficiency risk, with a focus on support processes, not only in view of the challenges related to the significant growth, but also considering the different business models for ASML's products, the IT and process landscape.

~~Ethics and compliance~~

We consider acting with the highest standards of integrity of key importance to our value creation for our stakeholders and the long-term success of ASML. The Audit Committee received quarterly reports on the Ethics program, including the trends and risks in the area of ethics and the Ethics training strategy. The Audit Committee was also involved in the revision of ASML's Speak Up & Non-Retaliation Policy. During 2021 we also discussed ASML's compliance program and performed detailed reviews of specific compliance topics such as export control, finance compliance and the country compliance review for South Korea. Furthermore, an annual update on fraud and fraud risk management was provided.

~~Internal audit~~

The Audit Committee reviewed the annual internal audit plan, including the scope of the audit at the start of 2021. During the year, the Audit Committee was kept updated on the progress of the internal audit activities on a quarterly basis and reviewed the results of audits performed as well as the status of the follow-up on action plans. The Audit Committee also discussed the internal management letter and monitored the follow-up by the Board of Management on the recommendations made in the internal management letter.

~~External audit~~

The Audit Committee reviewed the 2021 external audit plan, including scoping, materiality level and fees. It monitored the progress of the external audit activities, including review of the observations made in the quarterly procedures and the audits performed at year-end. The Audit Committee oversaw the follow-up by the Board of Management on the control deficiencies reported by the External Auditor in their periodic internal control update. The Audit Committee confirms that the communication over the 2021 financial year contained no significant items that need to be mentioned in this report.

The Audit Committee evaluated the performance of the external auditor at the end of 2021, including a review of their independence. The results of the evaluation have led the Audit Committee to recommend to the Supervisory Board to submit to the 2022 AGM a proposal to appoint KPMG as the External Auditor for the reporting year 2023. The Audit Committee reached the decision to do so independently.

Due to the required audit partner rotation, a new lead audit partner became responsible for the ASML audit as of the 2021 reporting year. Much effort has been put into the transition process in anticipation of the change, and the Audit Committee is pleased that the transition has gone smoothly.

In September 2021, the Audit Committee started the selection process in connection with the mandatory external audit firm rotation. Although the current external auditor is only required to rotate off after 2025, the Audit Committee considers it prudent to

~~ASML ANNUAL REPORT 2021 150~~

start the selection process early, given the limited number of candidate firms eligible for selection and in view of non-audit services provided by potential candidate audit firms. A Selection Committee was established, consisting of the members of the Audit Committee, the CFO, the EVP Finance and the Corporate Chief Accountant. The Selection Committee met three times in 2021. At the 2022 AGM, we intend to submit a proposal to appoint a new external auditor for the ~~2025~~ ~~reporting year. The proposal will contain more detailed information on the process followed.~~

~~Other topics~~

~~Other topics discussed by the Audit Committee in 2021 were ASML’s tax policy and planning, the Finance and IT transformation program and the quarterly legal matters overviews.~~

~~The Audit Committee also performed an annual review and update of its Rules of Procedure.~~

After most of the Audit Committee meetings, the internal and external auditor each have a session with the Audit Committee without management present to discuss their views on the matters warranting the attention of the Audit Committee. This may include their relationship with the Audit Committee, the relationship with the Board of Management, and any other matters deemed necessary to be discussed. The Audit Committee also held regular one-to-one meetings with the CFO.

Remuneration Committee

~~The Remuneration Committee advises~~D. Mark Durcan
(1961, American)Mark Durcan was appointed as a member of the Supervisory Board in 2020. From 2012 to 2017, he was CEO of Micron Technology, Inc., having joined the company in 1984 and ~~prepares the Supervisory Board's resolutions with respect to the remuneration~~held various management positions before being appointed as CEO. Furthermore, Mark was director at Freescale Semiconductor, MWI Veterinary Supply and Veoneer, Inc. Mark is a Non-Executive Director at Advanced Micro Devices, Inc., a member of the Board of ~~Management~~AmerisourceBergen Corporation, member of the Board of Trustees for Rice University (Texas), Director at St Luke’s Health System (Idaho) and Director at Natural Intelligence Systems CA private AI, Startup Company.Member of the Supervisory
Board since 2015
(Second term expires in 2023)Alexander Everke joined the Supervisory ~~Board.~~Board in 2022. He is the CEO of ams-OSRAM AG, a position he has held since March 2016, after having joined ams AG in October 2015. Prior to that, Mr. Everke held a range of positions in the semiconductor industry including management positions at Siemens and Infineon and various leadership positions at NXP Semiconductors.Member of the Supervisory
Board since 2020
(First term expires in 2024)

Chair of the Supervisory Board,
Chair of the Selection and Nomination Committee and member of the Technology Committee

Chair of the Technology Committee, member of the Selection and Nomination Committee

~~Members~~

~~Main responsibilities~~

•~~Terri Kelly (Chair);~~

•~~Annet Aris;~~

•~~Rolf-Dieter Schwalb;~~

•~~Hans Stork.~~

•O~~verseeing the development and implementation of the Remuneration Policy for the Board of Management and preparing the Supervisory Board Remuneration Policy;~~

•~~Reviewing and proposing to the Supervisory Board corporate goals and objectives relevant to the variable part of the Board of Management’s remuneration;~~

•Carrying out scenario analyses of the possible financial outcomes on the variable remuneration of meeting these goals, as well as exceeding these goals, before proposing these corporate goals and objectives to the Supervisory Board for approval;

•Evaluating the performance of the members of the Board of Management in view of those goals and objectives, and – based on this evaluation – recommending to the Supervisory Board appropriate compensation levels for the members of the Board of Management.

Each member is an independent, non-executive member of our Supervisory Board in accordance with the NASDAQ Listing Rules. Ms. Kelly is neither a former member of our Board of Management, nor a member of the management board of another company. Currently, no member of the Remuneration Committee is a member of the management board of another Dutch listed company.

~~Remuneration Committee meetings in 2021~~

The Remuneration Committee meets at least two times a year and more frequently when deemed necessary. In 2021, the Remuneration Committee held nine meetings. Of these nine meetings, four were regular meeting and five were special meetings, scheduled in connection with the fundamental review of the Remuneration Policy for the Board of Management.

~~Recurring agenda topics~~

~~Attendance~~

•

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Supervisory Board (continued)

Rolf-Dieter Schwalb
(1952, German)

Birgit M. Conix
(1965, Belgian)

Terri L. Kelly
(1961, American)

Terri Kelly has been a member of the Supervisory Board since 2018. Previously, she was President and Chief Executive Officer at W.L. Gore & Associates from 2005 until 2018, having worked at Gore since 1983 in various management roles. She also served on Gore’s Board of Directors through July 2018. Terri is a Trustee of the Alfred I. Dupont Charitable Trust, which provides oversight of the Nemours Foundation. She is the Chair of the Board of the University of Delaware and she is a member of the Board of Directors of United Rentals, Inc.

Member of the Supervisory
Board since 2015
(Second term expires in 2023)

Member of the Supervisory
Board since 2021
(First term expires in 2025)

Member of the Supervisory
Board since 2018
(Second term expires in 2026)

Chair of the Audit Committee
and member of the Remuneration Committee

Member of the Audit Committee

Chair of the ~~Board of Management~~

•~~Remuneration of the Supervisory Board~~

•~~Update on performance on targets for short- and long-term incentives~~

In addition to the Remuneration Committee members, the Remuneration Committee generally invites the CEO, the EVP HR&O, the Head of Compensation and Benefits and in some instances also the CFO to attend (parts of) its meetings. The Remuneration Committee’s external advisor is also invited to attend the Remuneration Committee meetings when deemed necessary.

~~The below overview provides details on the topics discussed during~~ Remuneration Committee, ~~meetings~~member of the Selection and Nomination CommitteeBirgit Conix became a member of the Supervisory Board in 2021. Birgit has been CFO and a member of the Management Board of Sonova Holding AG since June 2021. From 2018 until January 1, 2021, Birgit was a member of the Executive Board and CFO of TUI AG. Prior to that, she was the CFO of the Belgian media, cable and telecommunications company Telenet Group N.V. Prior to that, she held various management positions in finance at Johnson & Johnson, Heineken, Tenneco and Reed Elsevier.

Rolf-Dieter Schwalb has been a member of the Supervisory Board since 2015. He was CFO and member of the Board of Management of Royal DSM N.V. from 2006 to 2014. Prior to that, he was CFO and member of the Executive Board of Beiersdorf AG. He also held a variety of management positions in Finance, IT and Internal Audit at Beiersdorf AG and Procter & Gamble Co.

An L. Steegen
(1971, Belgian)Member of the Supervisory
Board since 2022
(First term expires in 2026)

D. Warren A. East
(1961, British)

Member of the Technology Committee

Member of the Supervisory
Board since 2020
(First term expires in 2024)

Member of the Audit Committee

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Other Board-related matters

The section below addresses a number of topics that apply to both the Board of Management and the Supervisory Board.

Remuneration and share ownership

The remuneration of the Board of Management is determined by the Supervisory Board, on recommendation of the Remuneration Committee, in accordance with the Remuneration Policy for the Board of Management as adopted by the General Meeting. The current Remuneration Policy for the Board of Management was adopted by the General Meeting in 2022.

We will not and have not granted any personal loans, guarantees or the like to members of the Board of Management and the Supervisory Board.

Detailed information on the Board of Management’s and the Supervisory Board’s remuneration can be found in the:

Remuneration Report.

Diversity

Board Diversity Matrix
(status per December 31, 2022)

Female

Male

Non-Binary

Did not
Disclose

Part I: Gender Identity

Directors

4
(2021: 3)

5
(2021: 5)

0
(2021: 0)

Part II: Demographic Background

Underrepresented Individual in Home
Country Jurisdiction

0
(2021: 0)

LGBTQI+

0
(2021: 0)

Did Not Disclose Demographic Background

0
(2021: 0)

•~~Short-term Incentive Plan: performance 2020, pay-out 2020 and targets 2021~~

•~~Long-term Incentive Plan: share vesting performance period 2018-2020, and conditional grant and targets performance period 2021-2023~~

•~~Remuneration Report 2020~~

•~~Self-Evaluation Remuneration Committee~~

•~~Board of Management Remuneration Policy review~~

•~~Selection external remuneration adviser~~

•~~Board of Management Remuneration Policy review~~

•~~Board of Management Remuneration Policy review including labor market reference group~~

•~~Feedback BoM on direction of new Remuneration Policy~~

•~~Share ownership guidelines~~

•~~Board of Management Remuneration Policy review~~

•~~Approach & planning stakeholder outreach~~

•~~Update Short-term Incentive Plan and Long-term Incentive Plan~~

•~~Draft Remuneration Report 2021~~

•~~Compliance Board of Management members with share ownership guideline~~

•~~Share planning AGM period 2022-2023~~

•~~Engagement of external auditor for agreed upon procedures on remuneration~~

~~ASML ANNUAL REPORT 2021 151~~


Country of Principal Executive Offices			The Netherlands
Foreign Private Issuer			Yes
Disclosure Prohibited under Home Country Law			No
Total Number of Supervisory Board members			9 (2021: 8)

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Other Board-related matters (continued)

~~Remuneration~~



			We recognize the importance of diversity and inclusion.”
			Christophe Fouquet
			Executive Vice President, Chief Business Officer and member of the Board of Management

Currently, the Supervisory Board meets the gender quota of the Dutch gender diversity bill, as both men and women are represented on the Supervisory Board by at least three out of nine members.

the Board of Management Diversity Policy, which can be found on our website.

Our Global Diversity & Inclusion Council, founded in 2021, consists of senior leaders who act on behalf of ASML to provide thought leadership. The Council, chaired by a member of the Board of Management, proposes the Diversity & Inclusion strategy to the Board of Management, sets, promotes and monitors diversity and inclusion initiatives, and leads company-wide accountability for our goals. We also have a global diversity and inclusion team, including a Chief Diversity Officer, who is responsible for driving initiatives that are related to diversity and inclusion across ASML.

Our diversity and inclusion roadmap focuses on three key areas within ASML: leadership, culture and talent.



						12%
						Target 2024 representation of women at leadership level

– Organizing internal training sessions for employees, managers and leaders globally

–Participating in national engineering conferences to broaden our talent pipeline to be more diverse and inclusive in all areas of demographics

–Collaborating with universities and organizations dedicated to building diversity and creating opportunities for professional development and engagement

–Executing global D&I engagement activities, such as International Women’s Day, LGBTQIA+ Pride Month and Global Diversity Month

–Organizing D&I events with keynote speakers

–Supporting employee networks give back locally in their community through mentoring programs

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Other Board-related matters (continued)

In ASML's internal development efforts for potential Board of Management members, we strive for participation of a diverse group of employees, specifically senior leadership.

Ensuring balanced gender representation has proven to be challenging in a technology environment such as the one ASML operates in. Overall, the global STEM (science, technology, engineering and math) talent pool is thinly populated and it is even more challenging to recruit female talent. Our R&D workforce is 16% female. Nearly 90% of our job positions are STEM-related, whereas peers in the high-tech industry have more non-STEM-related job positions. ASML is highly motivated to see more women pursuing careers in engineering and science now and in the future. The highly specialized nature of our industry means achieving this balance is a long-term process. We are actively engaged with multiple educational programs to grow the pipeline, deploy multiple initiatives to promote STEM education among the future female talent pool and continue to foster an environment where our current workforce can thrive.

Read more information on our diversity and inclusion strategy, initiatives, women in leadership and performance data in:

Social - Attractive workplace for all - Best employee experience and Non-financial statements - Non-financial indicators - Attractive workplace for all.

Conflicts of interest and related party transactions

Outside positions

During the financial year 2022, all members of the Board of Management and the Supervisory Board complied with the requirements described above.

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AGM and share capital



			We highly value the interaction with our shareholders.”
			Gerard Kleisterlee
			Chair of the Supervisory Board

General Meeting



			–Discussion of the management report and the adoption of the financial statements over the past financial year; –Discussion of the dividend policy and approval of any proposed dividends; –Advisory vote on the Remuneration ~~Committee~~Report over the past financial year; –The discharge from liability of the members of the Board of Management and the Supervisory Board for the performance of their responsibilities in the previous financial year; –The limited authorization for the Board of Management to issue (rights to) shares in ASML’s capital, and to exclude preemptive rights for such issuances, as well as to repurchase shares and to cancel shares; and –Any other topics proposed ~~certain adjustments~~by the Board of Management, the Supervisory Board or shareholders in accordance with Dutch law and the Articles of Association.

representing a share value of at least €50 million are entitled to place items on the agenda of a General Meeting at least 60 days before the date of the meeting.

Shareholders’ meetings are convened by public announcement via the website of ASML no later than 42 days prior to the meeting, as stipulated by Dutch law.

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AGM and share capital (continued)

Hybrid AGM

In view of the ongoing COVID-19 pandemic, we organized a hybrid AGM in 2022, accommodating attendance in person as well as virtual attendance of the AGM by enabling shareholders to follow the proceedings of the meeting via video webcast and to vote electronically during the meeting. The opportunity to participate in the AGM in person or virtually was offered in addition to the opportunity to vote in advance via written or electronic proxy. As we highly value interaction with our shareholders, we invited shareholders who attended the AGM in person to ask questions about the agenda items during the AGM and we provided holders of shares traded on Euronext Amsterdam who attended the AGM virtually the opportunity to ask live questions in writing through the virtual meeting platform. All questions were answered during the AGM.

Powers

In addition to the items submitted annually at the AGM, the General Meeting also has other powers, with due observance of the statutory provisions. These include resolving:

–To amend the articles of association;

–To issue shares if and insofar as the Board of Management has not been designated by the General Meeting for this purpose; and

–To adopt the Remuneration Policies for the members of the Board of Management and the Supervisory Board.

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AGM and share capital (continued)



ASML’s authorized share capital amounts to €126.0 million and is divided into:

	Type of shares	Number of shares	Nominal value	Votes per share
	Cumulative preference shares	700,000,000	€0.09 per share	1
	Ordinary shares	700,000,000	€0.09 per share	1

The issued and fully paid up ordinary shares with a nominal value of €0.09 each were as follows:

	Year ended December 31	2020	2021	2022
	Issued ordinary shares with nominal value of €0.09	416,514,034	402,601,613	394,589,411
	Issued ordinary treasury shares with nominal value of €0.09	2,983,454	3,873,663	8,548,631
	Total issued ordinary shares with nominal value of €0.09	419,497,488	406,475,276	403,138,042

Special voting rights, limitation voting rights and transfers of shares

There are no special voting rights on the issued shares in our share capital.

Issue and repurchase of (rights to) shares

2022 authorization to issue shares

At our 2022 AGM, the Board of Management was authorized from April 29, 2022 through October 29, 2023, subject to the approval of the Supervisory Board, to issue shares and/or rights thereto representing up to a maximum of 5% of our issued share capital at April 29, 2022, plus an additional 5% of our issued share capital at April 29, 2022, that may be issued in connection with mergers, acquisitions and/or (strategic) alliances. Our shareholders also authorized the Board of Management through October 29, 2023, subject to approval of the Supervisory Board, to restrict or exclude preemptive rights with respect to holders of ordinary shares up to a maximum of 5% of our issued share capital in connection with the general authorization to issue shares and/or rights to shares, plus an additional 5% in connection with the authorization to issue shares and/or rights to shares in connection with mergers, acquisitions and/or (strategic) alliances.

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AGM and share capital (continued)

2022 authorization to repurchase shares

Read more details on our share buyback program in:

C onsolidated Financial Statements - Notes to the Consolidated Financial Statements - Note 22 Shareholders’ equity.

ASML Preference Shares Foundation

Objectives of the Foundation

The Preference Share Option

The Preference Share Option gives the Foundation the right to acquire such number of cumulative preference shares as the Foundation will require, provided that the aggregate nominal value of such number of cumulative preference shares shall not exceed the aggregate nominal value of the ordinary shares issued at the time of exercise of the Preference Share Option. The subscription price will be equal to their nominal value. Only one-fourth of the subscription price would be payable at the time of initial issuance of the cumulative preference shares, with the other three-fourths of the nominal value only being payable when ASML calls up this amount. Exercise of the preference Share Option could effectively dilute the voting-power of the outstanding ordinary shares by one-half.

Cancellation of cumulative preference shares

Board of Directors

The Foundation is independent of ASML. The Board of Directors of the Foundation is composed of four independent members from the Netherlands’ business and academic communities. The Foundation’s Board of Directors is composed per December 31, 2022, of the following members: Mr. A.P.M. van der Poel, Mr. S. Perrick, Mr. S.S. Vollebregt and Mr. J. Streppel.

Other than the arrangements made with the Foundation as described above, ASML has not established any other anti-takeover devices.

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AGM and share capital (continued)

Major shareholders

The Dutch Act on the supervision of financial markets and US securities laws contain requirements regarding the disclosure of capital interests and voting rights in listed companies. The following table sets forth the total number of ordinary shares owned by each shareholder that reported to the Dutch AFM or the US SEC a beneficial ownership of ordinary shares that is at least 3.0% (5.0%, in the case of the SEC) of our ordinary shares issued and outstanding. Also included in the table below is the total number of ordinary shares owned by our members of the Board of Management as of December 31, 2022. The information set out below with respect to shareholders is based on public filings with the SEC and AFM as of February 8, 2023.


	Shares	% of Class6
Capital Research and Management Company1	40,615,837	10.29	%
BlackRock Inc.2	32,539,755	8.25	%
T. Rowe Price Group, Inc.3	13,527,385	3.43	%
Members of ASML’s current Board of Management (5 persons)4,5	89,892	0.02	%

4.Does not include unvested shares granted to members of the Board of Management. For further information, see Leadership and governance – Remuneration Report.

5.No shares are owned by members of the Supervisory Board.

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Financial reporting and audit

ASML publishes, among others, the following annual reports regarding the financial year 2022:

–The Annual Report on Form 20-F, prepared in accordance with the requirements of the Exchange Act. The financial statements included therein are prepared in conformity with US GAAP.

–A narrative explanation of ASML’s financial statements;

–The context within which financial information should be analyzed; and

–Information about the quality, and variability, of our earnings and cash flow.

For ASML’s internal risk management and control systems read more in:

Risk - How we manage risk - Enterprise Risk Management.

External Audit

In accordance with Dutch law, our external auditor is appointed by the General Meeting, based on a nomination for appointment by the Supervisory Board. The Supervisory Board bases its nomination on the advice from the Audit Committee and the Board of Management, who annually provide a report to the Supervisory Board on the performance of and relationship with the external auditor, as well as its independence. ASML’s current external auditor, KPMG, was first appointed by the General Meeting in 2015 for the reporting year 2016, and has been reappointed on a yearly basis since then. At the 2022 AGM, KPMG was appointed as the external auditor for the reporting years 2023 and 2024.

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Financial reporting and audit (continued)

The Audit Committee reviews and approves the external auditor’s audit plan for the audits planned during the financial year. The audit plan also includes, among others, the activities of the external auditor with respect to their limited procedures on the quarterly results other than the annual accounts. Proposed services may be pre-approved at the beginning of the year by the Audit Committee (annual pre-approval) or may be pre-approved during the year by the Audit Committee in case of a particular engagement (specific pre-approval). The annual pre-approval is based on a detailed, itemized list of services to be provided, which is designed to ensure there is no management discretion in determining whether a service has been approved, and to ensure the Audit Committee is informed of each service it is pre-approving.

Read more information on principal accountant fees and services in:

Other appendices - Appendix - Principal accountant fees and services.

In principle, the external auditor attends all the Audit Committee meetings. The external auditor’s findings are discussed at these meetings. The Audit Committee reports to the Supervisory Board on the topics discussed with the external auditor, including the external auditor’s reports with regard to the audit of the annual reports as well as the content of the annual reports. Furthermore, the external auditor may attend the Supervisory Board meeting in which the annual external audit report is discussed. The external auditor may also attend Supervisory Board meetings at which the quarterly financial results are discussed.

The Audit Committee is informed by the external auditor without delay if the external auditor discovers irregularities in the content of the audit of the financial reports.

The external auditor is present at our AGM to respond to questions, if any, from the shareholders about the auditor’s report on the Consolidated Financial Statements.

Internal Audit

The role of our Internal Audit function is to assess our systems of internal controls by performing independent procedures such as risk-based operational audits, IT audits and compliance audits. The Internal Audit department reports directly to the Audit Committee and the Board of Management. The yearly Internal Audit plan is discussed with and approved by the Audit Committee, the Board of Management and the Supervisory Board. The follow-up on the Internal Audit findings and progress made compared with the plan are discussed on a quarterly basis with the Audit Committee. The external auditor and Internal Audit department have meetings on a regular basis.

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Compliance with Corporate Governance requirements

Corporate information

US listing requirements


Practices followed by ASML in lieu of NASDAQ rules
Quorum			ASML does not follow NASDAQ’s quorum requirements applicable to meetings of ordinary shareholders. In accordance with Dutch law and generally accepted Dutch business practice, ASML’s Articles of Association provide that there are no quorum requirements generally applicable to general meetings of shareholders.
Solicitation of proxies			ASML does not follow NASDAQ’s requirements regarding the solicitation of proxies and the provision of proxy statements for general meetings of shareholders. ASML does furnish proxy statements and solicit proxies for the General Meeting. Dutch corporate law sets a mandatory (participation and voting) record date for Dutch listed companies at the 28th day prior to the date of the General Meeting. Shareholders registered at such a record date are entitled to attend and exercise their rights as shareholders at the General Meeting, regardless of sale of shares after the record date.
Distribution of Annual Report			ASML does not follow NASDAQ’s requirement regarding distribution to shareholders of copies of an annual report containing audited Financial Statements prior to our AGM. The distribution of our annual reports to shareholders is not required under Dutch corporate law or Dutch securities laws, or by Euronext Amsterdam. Furthermore, it is generally accepted business practice for Dutch companies not to distribute annual reports. In part, this is because the Dutch system of bearer shares has made it impractical to keep a current list of holders of the bearer shares in order to distribute the annual reports. Instead, we make our Annual Report available at our corporate head office in the Netherlands (and at the offices of our Dutch listing agent as stated in the convening notice for the meeting) no later than 42 days prior to convocation of the AGM. In addition, we post a copy of our Annual Reports on our website prior to the AGM.
Equity compensation arrangements			ASML does not follow NASDAQ’s requirement to obtain shareholder approval of stock option or purchase plans or other equity compensation arrangements available to officers, directors or employees. It is not required under Dutch law or generally accepted practice for Dutch companies to obtain shareholder approval of equity compensation arrangements available to officers, directors or employees. The General Meeting adopts the Remuneration Policy for the Board of Management, ~~and the Supervisory Board. The adjusted Remuneration Policies were submitted to and adopted by the General Meeting on April 29, 2021.~~ Starting as of Q2 2021, the Remuneration Committee performed a fundamental review of the Remuneration Policy for the Board of Management. This review had been planned for 2020, but was postponed due to the COVID-19 pandemic. For more information about the fundamental review of the Remuneration Policyapproves equity compensation arrangements for the Board of Management ~~reference is made to~~and approves the ~~Remuneration Report, which is also part of this 2021 Annual Report, and to the convocation documents~~remuneration for the ~~2022 AGM, which we intend to publish in March 2022.~~ Supervisory Board. The Remuneration Committee ~~made recommendations to~~evaluates the ~~Supervisory Board concerning the total remuneration package~~achievements of the Board of Management and the variable remuneration consisting of a short-term incentive in cash and a long-term incentive in shares. The Remuneration Committee proposed 2021 targets for the Board of Management's variable remuneration to the Supervisory Board. During the year, the Remuneration Committee closely monitored the Board of Management's performance. It provided recommendations to the Supervisory Board regarding the achievement of the 2021 targets and related compensation levels for the Board of Management members. In proposing and evaluating the Board of Management's performance in relation to the corporate goals and objectives for the variable remuneration of the Board of Management members, the Remuneration Committee closely cooperates with the Audit Committee and the Technology Committee. ~~The Remuneration Committee has taken note of the views of the~~ individual members of the Board of Management with ~~regard~~respect to the ~~amount~~short- and ~~structure of their remuneration.~~ ~~The shareholding positions of~~long-term quantitative performance and he full Supervisory Board evaluates the quantitative performance criteria. Equity compensation arrangements for employees are adopted by the Board of Management ~~members were reviewed~~within limits approved by the ~~Remuneration Committee~~General Meeting.

Compliance with the Corporate Governance Code

We are of the opinion that ASML fully complies with the applicable principles and best-practice provisions of the Dutch Corporate Governance Code as in effect for the financial year 2022.

The Board of Management and the Supervisory Board,

Veldhoven, February 15, 2023

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Message from the Chair of the Supervisory Board

Another record performance, in ~~order to assess compliance with the share ownership guideline as included in the Remuneration Policy for~~challenging circumstances



			The Supervisory Board supervises and advises the Board of ~~Management.~~ ~~The Remuneration Committee also prepared~~Management in performing its management tasks and setting the ~~Remuneration Report, which details the remuneration of~~direction for ASML, focusing on long-term and sustainable value creation. The members of the Supervisory Board are fully independent.





The Supervisory Board is confident that the full order book – supported by the skills and passion of our outstanding teams – lays a firm foundation for the months and years ahead.”
Gerard Kleisterlee
Chair of the Supervisory Board

Dear Stakeholder,

In order to maintain our success we are working hard to prepare for the future. Below, I outline some of the key areas that we focused on during 2022.

Reviewing our capacity plans

Organizing for continued growth

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Message from the Chair of the Supervisory Board (continued)

Emphasizing the importance of ESG

The Supervisory Board has spent considerable time evaluating and discussing the company’s ESG strategy and is fully supportive of the decisions that management has made.

Engaging with our stakeholders

Also Members of the Supervisory Board regularly meet with institutional investors. For instance, the Chair of our Remuneration Committee frequently engages with major investors to ensure that the Remuneration Policy is closely aligned with their expectations.

Looking ahead

The Supervisory Board is confident that the full order book – supported by the skills and passion of our outstanding teams – lays a firm foundation for the months and years ahead. While geopolitical matters, likely mild recession and the aftermath of COVID-19 will continue to hamper efforts to ensure the supply chain runs smoothly, ASML is well placed to achieve another excellent performance in 2023.

During our 8 years on the Board, we were part of a fantastic journey that saw ASML grow with the breakthrough of EUV from a 6 billion revenue company in 2014 to a 21 billion Company in 2022, driven by absolute customer focus, technological prowess and an unbelievably strong “can do” mentality. The journey will continue under our successors. For us it was a pleasure and a privilege to serve.

To close, on behalf of the whole Supervisory Board I would once again like to thank every member of our 39,086-strong team for their hard work and sheer enthusiasm throughout 2022.You made it happen!

Gerard Kleisterlee

Chair of the Supervisory Board

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Supervisory Board focus in 2022




			7			44%
			Supervisory Board meetings (2021: 6)			Female members (2021: 38%)


			95%			4.0
			Attendance rate (2021: 98%)			Years average tenure (2021: 3.9)

The Supervisory Board supervises and advises the Board of Management in performing its management tasks and setting the direction for ASML. The Supervisory Board focuses on long-term and sustainable value creation, with the goal of ensuring that the Board of Management pursues a strategy that secures ASML’s leading position as a supplier of holistic lithography solutions to the semiconductor industry. The Supervisory Board maintains an appropriate system of checks and balances, provides oversight, evaluates performance and gives advice where required or requested. Through good governance, we help to ensure that ASML acts in the best interests of the company and its stakeholders. In this Supervisory Board Report, we report on our activities in 2022.

We are pleased to see that 2022 was another record year for ASML in terms of turnover, cash flow and profitability. It was a challenging year as well, since demand for our products continued to outweigh our output possibilities. The company has therefore been working very hard to ramp up capacity. We recognize that the strong growth of ASML leads to challenges in the area of people and organizational development. Furthermore, the geopolitical situation is a sincere factor of risk and uncertainty. However, with a record order book and a clear strategy for growth, we believe that ASML is well positioned to continue to provide its customers with leading, cost-effective patterning solutions that drive the advancement of microchips.

Supervisory Board focus in 2022

Throughout 2022, the Supervisory Board agenda was centered around the strategy and its execution, financial and operational performance, business developments, risk management, and people and organization. Based on the strategic priorities for ASML as agreed in the annual strategy review, several topics were extensively discussed by means of deep dives, allowing a focused and in-depth review.

Strategy and long-term value creation

During 2022, the Supervisory Board devoted a considerable amount of time to discussing strategic topics. We carried out our recurring annual review of ASML’s corporate strategy, the long-term financial plan and the long-term plans of EUV, DUV and Applications. The Supervisory Board fully supports ASML’s strategy, which continues to be centered around the five pillars: strengthen customer trust, holistic lithography and applications, DUV competitiveness, EUV 0.33 NA for manufacturing and EUV 0.55 NA (High-NA) insertion. With the strong demand for ASML’s products in combination with the company’s focus on the execution of its strategic priorities, the Supervisory Board has confidence in ASML’s long-term growth opportunities and the continued delivery of value to its stakeholders.

As part of the annual strategy review, we held dedicated workshops focused on ASML’s value strategy and data strategy. An in-depth review was performed of the short-, medium- and long-term market developments in the semiconductor industry and the related capacity ramp-up required to meet our customers’ demands. Another session was focused on long-term organic and in-organic growth opportunities. These sessions enable an engaged and focused discussion between the

Supervisory Board and Board of Management on key strategic matters, and we highly value this way of contributing to the strategic decision-making process.

Deep dive

Market developments and ASML capacity

The Supervisory Board discussed with the Board of ~~Management.~~

~~Increased transparency around remuneration~~

AtManagement the ~~AGM 2021, we received valuable feedback from shareholders~~short-, medium- and shareholder interest organizations on the Remuneration Report, in particular how to further improve transparency around remuneration. We have taken this feedback into consideration and as a result, we have implemented several changeslong-term market developments in the ~~2021 Remuneration Report. For example, we now include ex-post disclosure~~semiconductor industry and the related capacity ramp-up required to meet our customers’ demands. Key areas of Supervisory Board attention were the ~~target~~various demand drivers and ~~actual performance levels~~their impact on overall demand, potential demand volatilities and the consequences of increasing demand in terms of capacity (ASML infrastructure and FTEs, supply chain). The challenges and risks related to the capacity ramp-up were also a key focus area for the ~~variable remuneration (where this is not contrary to~~Supervisory Board.

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Supervisory Board focus in 2022 (continued)



Alongside the ~~strategic and/or commercial interests of ASML). Read more in~~annual strategy review, the ~~2021 Remuneration Report, which is included in this Annual Report.~~ ~~The Remuneration Committee engaged the external auditor to perform certain agreed-upon procedures with respect to the execution of the Remuneration Policy for the Board of Management.~~ ~~Remuneration~~ Supervisory Board ~~In Q1 2021,~~ addressed strategic topics throughout the ~~Remuneration Committee finalized its benchmark review~~year via deep dives, which enabled focused, in-depth review.”
Gerard Kleisterlee
Chair of the Supervisory ~~Board's remuneration. This led to some adjustments to the Supervisory~~ Board ~~and Committees membership fees. The revised Remuneration Policy~~

Financial and operational performance

As part of the financial updates, the Supervisory Board, assisted by the Audit Committee, reviewed ASML’s financing and capital return policies. The Supervisory Board approved the Board of Management’s proposals for the final and interim dividends paid in 2022. Furthermore, the Supervisory Board monitored the execution of the 2021-2023 share buyback program, which was completed on October 18, 2022. The Supervisory Board also discussed and approved the 2022-2025 share buyback program, which was announced on November 10, 2022.

A special Audit Committee meeting was held, in which also the majority of the full Supervisory Board was also present, to discuss the messaging around the 2022 Capital Markets Day. During this meeting, our updated market outlook and financial model were extensively reviewed and discussed.

As a Supervisory Board, we are pleased with the financial performance of the Company and we are confident that ASML is well positioned to continue to deliver long-term growth and stakeholder value in a sustainable manner.

Business developments

In 2022, we witnessed continued increase of wafer demand at both advanced and mature nodes driven by global megatrends in the electronics industry as well as countries pushing for technological sovereignty in a complex geopolitical context. This surging demand came with challenges both in our own operations and in our supply chain. The Supervisory Board closely monitored the developments in this regard and saw management address these challenges with the highest priority.

As a technology leader in the semiconductor industry, technological progress is one of ASML’s top priorities. The Supervisory Board closely followed the execution of the product and technology roadmap and is pleased to see the ever-wider adoption of ASML’s EUV 0.33 NA scanner platform in high-volume manufacturing, and growing commitment to the next-generation EUV 0.55 NA (High-NA) platform, where great progress has been made by the teams working on this program.

Deep dive

Growth

Growth is a central theme that touches on many aspects of ASML. For this reason, growth has also been top of mind for the Supervisory Board ~~incorporating~~during 2022. We discussed with the Board of Management the challenges resulting from our growth in various areas, including how to grow our customer trust and performance, our people and organization, our output capability, and our innovation, and also how to grow sustainably. On all of these ~~adjustments was submitted to and adopted by~~themes we held open dialogues in which the ~~General Meeting on April 29, 2021.~~

~~For further details, see~~ Supervisory Board ~~- Remuneration report.~~challenged and advised the Board of Management, not only on how to deal with the current growth ASML is going through, but on how to organize for the future expected growth towards 2030.

People and organization

Given the significant growth of ASML in recent years, the topics of people and organization continued to be key areas of focus for the Supervisory Board in 2022, as we believe that these are of critical importance for the future success of ASML. On several occasions, we were provided with updates on Human Resources and Organization. Topics covered included the ASML progress made on the ASML leadership program, the results of the annual employee engagement survey and the Diversity & Inclusion strategy and progress made. Specific attention was also paid to ASML's culture and values the focus of the Supervisory Board was how to maintain the culture that has made ASML successful while growing so fast in number of employees. Also, internal and external perspectives on ASML's culture were discussed. We also extensively discussed the organizational setup of ASML in the context of current and future growth. As a result of this discussion, the Supervisory Board decided to position the role of the Executive Vice President and Chief Strategic Sourcing & Procurement Officer in the Board of Management, as announced by press release on October 19, 2022. Furthermore, the Supervisory Board, assisted by the Selection and Nomination Committee, extensively discussed and provided advice in respect of ASML’s talent management and people development programs as well as succession planning for the Board of Management and senior management. The Supervisory Board is pleased to see the effort being put into the onboarding of new employees, enabling them to develop and contribute as quickly as possible.

~~ASML ANNUAL REPORT 2021 152~~

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Supervisory Board focus in 2022 (continued)

Furthermore, as a Supervisory Board, we find it important that business processes are fit for growth. We therefore oversaw various transformation programs such as the Business Performance Improvement (BPI) initiative, focused on improving our cross-sectoral, non-product-related business processes. As part of the BPI initiative, we also monitored the progress on the ONE Program, ASML’s program dedicated to securing configuration integrity over the life cycle of our customer offerings while enhancing the business processes and maintaining flexibility, with the support of its upgraded backbone information system. We paid special attention to the sub-roadmaps of the program where there had been less progress than planned, looking at the challenges and mitigating actions. We will continue to closely follow the developments.

Deep dive:

ESG Sustainability strategy

As a Supervisory Board we consider ESG Sustainability an increasingly important topic. While the Supervisory Board keeps the overall oversight of ESG Sustainability, various ESG Sustainability aspects are discussed at committee level, e.g. reporting in the Audit Committee, diversity in the Selection and Nomination Committee, ESG Sustainability as part of the Board of Management's incentive scheme in the Remuneration Committee and product and technology aspects in the Technology Committee. In 2022, we discussed ASML’s updated ESG Sustainability strategy and execution with the Board of Management. In deep dive sessions specific attention was paid to EUV energy efficiency, which is a key area of focus also given ASML's CO2 reduction ambitions, and the Diversity & Inclusion strategy and the implementation thereof. To underline the importance of ESG Sustainability, the Supervisory Board decided to include in the Board of Management's incentive scheme metrics directly linked to ESG Sustainability strategy, with an increased weighting.

Risk management

As risk management is a key element of the Supervisory Board’s responsibilities, we received periodic risk management updates during the year. We focused on the risk landscape and the developments in that area, the risk appetite and the measures put in place by the Board of Management to mitigate the critical risks. We paid particular attention to the challenges created by the strong increase in demand for ASML’s products across the entire product portfolio, which impacts multiple risks in ASML’s risk landscape. We also focused on the risk related to rapid growth of the organization. During the year, specific risk areas were reviewed in deep dive sessions. These included the physical and IT security risk, the risk related to the ability to deliver according to plan and political risks in light of the global trade situation.

Read more in:

Risk - How we manage risk.

Relationship with stakeholders

The Supervisory Board regularly discussed ASML’s relationship with its shareholders, and Supervisory Board members engaged with shareholders throughout the year on topics such as ASML’s strategy and performance, governance and ESG. The Remuneration Committee engaged with a variety of ASML shareholders and other stakeholders regarding Board of Management remuneration. More information can be found in the Remuneration Report.

A Supervisory Board delegation held two formal meetings with the Works Council in 2022. We exchanged views on ASML’s strategy and priorities, ASML’s performance and challenges, in particular related to the growth and increased complexity of ASML’s business. In this context, the effectiveness of new processes supporting growth and institutionalizing of ASML was addressed. Other topics of discussion were ESG, the develop and perform program at ASML, leadership development and the status and future plans related to working from home / return to work onsite. The composition of the Supervisory Board and the Board of Management was discussed, in particular the changes per the 2022 and 2023 AGMs. The Works Council and Supervisory Board also extensively discussed the 2022 Remuneration Policy for the Board of Management; more information on the interactions with the Works Council on the topic of executive remuneration can be found in the Remuneration Report.

In November 2022, the Supervisory Board paid a visit to one of our key customers, Intel. The Supervisory Board met with Intel’s management and visited the Intel facility in Hillsboro, Oregon, US. Topics of discussion included market outlook, Intel’s technology roadmap and how ASML can support it, and the relationship between the two companies. For the Supervisory Board, such visits are highly valuable because it increases our understanding of our customers and the challenges they face.

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Supervisory Board focus in 2022 (continued)

Additional topics

Other topics considered during Supervisory Board meetings in 2022 included:

–Compliance with rules and regulations: We monitored compliance with rules and regulations including the Dutch Corporate Governance Code and were kept informed on key legal matters, including developments in the area of export control regulations.

–Supervisory Board composition, profile and functioning: We extensively discussed our own composition, profile and functioning, the composition and functioning of Board committees and the composition and functioning of the Board of Management. More information can be found in the report of the Selection and Nomination Committee.

–Board of Management composition and performance: We also monitored the performance of the Board of Management and decided on the Board of Management’s remuneration targets and target achievements. More information can be found in the reports of the Selection & Nomination Committee and the Remuneration Committee.

An overview of topics discussed during the year can be found in the list on the right.

Overview of the year

–2021 Annual Results and Annual Report

–2021 external audit report

–Final dividend 2021

–Remuneration Board of Management and Supervisory Board

–Risk Management including deep dive: ability to deliver according to plan

–ESG strategy, including deep dives on EUV energy efficiency and Diversity & Inclusion

–Expansions beyond current scope and M&A strategy

–Outcome of Supervisory Board evaluation

–Composition of Supervisory Board

–Composition of Board of Management

–Remuneration Policy for the Board of Management

–Amendment to the Rules of Procedure Board of Management and Supervisory Board

–Amendment of the Articles of Association

–External auditor rotation

–Legal matters report

–AGM agenda

–Strategy deep dive: Future operating model

–Strategy deep dive: Tool allocation policy

–Strategy deep dive: Scenarios to ramp the end-to-end supply chain including industrial footprint

–Market outlook and demand drivers

–Update on business sectors: EUV, DUV, Applications

–AGM update

–2022 statutory interim report

–Cash return including dividend policy and interim dividend

–Visit to ASML new logistics warehouse (5L)

–HR&O update

–Risk management: Update risk landscape & deep dive: Security

–Strategy deep dive: 2023-2027 litho demand and consequences for ASML capacity

–Business Performance Improvement initiative including update on Our New Enterprise program

–Revision to insider trading rules

–Annual strategy review

–Long-term financial plan and Annual Plan 2023

–Update of business plans of the business sectors and functions

–Cash return including interim dividend and share buyback program

–Strategy deep dive: Expansion beyond current scope

–Strategy deep dive: Value strategy

–Strategy deep dive: Data

–Transformation projects related to sourcing & supply chain, Customer and operating model

–Capital Markets Day messaging

–Composition of Supervisory Board

–Composition of Board of Management

–HR&O, including deep dives on Diversity & Inclusion and Culture

–Customer deep dive: Intel

–Intel visit

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Meetings and attendance

The Supervisory Board meets at least four times per year in accordance with its annual schedule and whenever the Chairman, one or more of its members, or the Board of Management requests a meeting.

In 2022, the Supervisory Board held seven meetings. Of these meetings, three were held virtually and four were held in person. Three in-person meetings were held at ASML's headquarters, one was held offsite in the Netherlands and one was held in the USA. In addition to these meetings, there were several informal meetings and interactions among Supervisory Board and/or Board of Management members.

Supervisory Board meetings and Supervisory Board committee meetings are held over several days, ensuring there is time for review and discussion. At each meeting, the Supervisory Board members discuss among themselves the goals and outcome of the meeting, as well as topics such as the functioning and composition of the Supervisory Board and the Board of Management. Also discussed during each meeting are the reports from the different committees of the Supervisory Board.

The Supervisory Board meetings and the meetings of the four Supervisory Board committees were well attended, as is shown in the table on the far right.

In addition to the Supervisory Board members, the members of the Board of Management are invited to the Supervisory Board meetings. All Board of Management members were present at the Supervisory Board meetings in 2022. Members of senior management are regularly invited to provide updates on topics within their area of expertise. This gives the Supervisory Board the opportunity to get acquainted with a variety of ASML managers, which the Supervisory Board considers very useful in connection with its talent management and succession-planning activities.

Meetings of the Supervisory Board

While most Supervisory Board and Committee meetings of 2022 were held in person, the Supervisory Board also met virtually on some occasions. Using the experience gained from virtual meetings during the COVID-19 pandemic, the Supervisory Board continued to apply a number of solutions developed to benefit the discussion in the meetings, such as organizing break-out sessions in smaller groups to optimize interaction. We also used video for meeting preparation and provided written meeting documents, in order to allow as much time as possible for discussion. The Supervisory Board members provided positive feedback about applying these solutions in the annual evaluation.

Supervisory Board meeting attendance overview

95%

Attendance rate

Name

Supervisory
Board

Audit
Committee

Remuneration Committee

Selection and Nomination Committee

Technology Committee

Gerard Kleisterlee (Chair)

7/7

n/a

6/6

5/5

Annet Aris

6/7

n/a

4/4

6/6

5/5

Birgit Conix

6/7

n/a

Mark Durcan

7/7

n/a

6/6

5/5

Warren East

6/7

5/7

n/a

Alexander Everke1

4/4

n/a

3/3

n/a

Terri Kelly

7/7

n/a

4/4

6/6

n/a

Rolf-Dieter Schwalb

7/7

4/4

n/a

An Steegen2

4/4

n/a

1/2

Hans Stork3

3/3

n/a

1/1

n/a

3/3

1.Appointed at the AGM on April 29, 2022; also appointed as member of the Remuneration Committee.

2.Appointed at the AGM on April 29, 2022; also appointed as member of the Technology Committee.

3.Stepped down per the AGM on April 29, 2022.

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Meetings and attendance (continued)

Composition, training and evaluation

Composition

The Supervisory Board determines the number of members required to perform its functions, the minimum being three members. The Supervisory Board currently consists of nine members. The Supervisory Board attaches great importance to its composition, independence and diversity and strives to meet all the associated guidelines and requirements. To ensure an appropriate and balanced composition, the Supervisory Board spends considerable time on an ongoing basis discussing its profile, composition and rotation schedule.

Independence

In order to properly perform its tasks, the Supervisory Board considers it to be very important that its members are able to act critically and independently of one another, the Board of Management and other stakeholders. The independence of the Supervisory Board and its individual members is assessed on an annual basis. All current members of the Supervisory Board are fully independent, as defined by the Dutch Corporate Governance Code, and have completed the annual questionnaire addressing the relevant independence requirements.

Diversity

The current composition of ASML’s Supervisory Board is diverse in terms of gender, nationality, knowledge, experience and background and has a suitable level of experience in the financial, economic, technological, social and legal aspects of international business. For more information about diversity, see Corporate governance – Other Board-related Matters.

Supervisory Board skills matrix

Gerard Kleisterlee (Chair)

Annet Aris

Birgit Conix

Mark Durcan

Warren East

Alexander Everke

Terri Kelly

Rolf-Dieter Schwalb

An Steegen

General skills

Executive board member of (listed) international company

Finance/governance

Remuneration

Human resources/employee relations

IT/digital/cyber

ESG

ASML-specific skills

Semiconductor ecosystem

Deep understanding of semiconductor technology

High-tech manufacturing/integrated supply chain management

Business in Asia

For further information and background on the members of the Supervisory Board, including details on nationality, gender and age,
please see the

Supervisory Board members’ information in Corporate Governance - Supervisory Board.

Changes in composition in 2022

When his term of appointment expired, Hans Stork did not stand for re-election and stepped down from the Supervisory Board at the 2022 AGM, after having served eight years on the Supervisory Board. The Supervisory Board decided, with due observance of the Supervisory Board profile and rotation schedule, to nominate two candidates, Mr. Alexander Everke and Ms. An Steegen, for appointment at the 2022 AGM. The nomination for the appointment of An Steegen was based on the enhanced recommendation right of the Works Council of ASML Netherlands B.V. The General Meeting resolved to appoint Alexander Everke and An Steegen for a term of four years effective from the date of the 2022 AGM. As a result, the Supervisory Board consists of nine members following the 2022 AGM.

Changes in composition in 2023

At the 2022 AGM, the Supervisory Board gave notice that the appointment terms of Gerard Kleisterlee and Rolf-Dieter Schwalb would expire per the 2023 AGM.

Gerard Kleisterlee and Rolf-Dieter Schwalb have informed the Supervisory Board that they will not stand for re-election and will retire at the 2023 AGM, upon completion of their current term. The Supervisory Board extends its thanks to Gerard Kleisterlee and Rolf-Dieter Schwalb for their valuable contribution over the past eight years, during which the Supervisory Board has greatly benefited from their knowledge and experience.

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Meetings and attendance (continued)

On November 23, 2022, the Supervisory Board announced that it intends to nominate Nils Andersen and Jack de Kreij as members of the Supervisory Board effective from the 2023 AGM, with the intention to elect Nils Andersen as Chair of the Supervisory Board and Jack De Kreij as Chair of the Audit Committee following their appointment. Furthermore, Nils Andersen is intended to be elected as the Chair of the Selection and Nomination Committee. Jack de Kreij is intended to be elected as a member of the Remuneration Committee upon appointment. Both candidate Supervisory Board members have been present at the Supervisory Board meetings as observers as of Q4 2022 in order to ensure a smooth onboarding.

The agenda and explanatory notes for the 2023 AGM will contain further information about the intended nominations for appointment of these two Supervisory Board members.

Induction and training

We have a comprehensive induction program in place for newly appointed Supervisory Board members, designed to ensure that new members gain a good understanding of our business and strategy, as well as the key risks we face. The induction program includes meetings with other Supervisory Board and Board of Management members, a technology tutorial and detailed presentations by our business lines, sectors and corporate departments. A site visit and factory tour is also part of the induction program. On joining the Supervisory Board, Alexander Everke and An Steegen completed an induction program, which was partly virtual and partly in person. Nils Andersen and Jack de Kreij will also complete their induction program prior to their appointment.

To ensure permanent education, the Supervisory Board is provided with regular deep dives on a variety of topics, both in the plenary meetings and in the meetings of the Supervisory Board’s committees. During 2022, strategy and risk deep dives were held on a variety of topics: see the Our Activities 2022 section in this Supervisory Board Report. Furthermore, external speakers or advisers attended various committee meetings to provide outside-in views on topics such as technology developments and technology outlook. The Supervisory Board also performed site visits. We visited the 5L logistics center at ASML’s headquarters, where we saw the process of the new logistics center first hand and were impressed by the achievements made. Visits were also paid to ASML's office in Hillsboro, Oregon, US, where the Supervisory Board met with local management and employees, as well as to Intel, one of our key customers. The Technology Committee visited the Advanced Research Center for Nanolithography (ARCNL) to see how ARCNL works and cooperates with ASML as well as see the ARCNL facilities in Amsterdam at first hand.

Evaluation

education and training needs for the Supervisory Board and Board of Management members.

In principle, the evaluation of the Supervisory Board is performed once every three years by an external adviser; in the other two years, the evaluation of the Supervisory Board is performed by means of a self-assessment using a written questionnaire, followed by one-to-one meetings between the Chairman and individual Supervisory Board members.

The 2022 evaluation of the Supervisory Board and its committees was performed through a web-based survey, which was prepared by the Selection and Nomination Committee. The Chairman of the Supervisory Board also met with the individual Supervisory Board members. The evaluation was centered around the following themes: composition, stakeholder oversight, oversight of strategy, risk management and succession planning, management and focus of meetings and priorities for improvement. A specific focus was the follow-up of prior-year recommendations. An upward review by the Board of Management was also part of the annual assessment.

The results of the Supervisory Board evaluation were discussed in early 2023. The conclusion was that the Supervisory Board and its committees continue to function well. Suggestions to further improve the functioning of the Supervisory Board will be implemented in 2023. These suggestions include further developing the open and constructive dialogue with the Board of Management on strategic topics and emerging risks, and increasing the focus on key priorities identified by the Supervisory Board. Other recommendations relate to continuous enhancement of the oversight on stakeholders, in particular customers and suppliers, and

to increase the understanding of the ecosystem beyond our direct stakeholders. Obtaining outside-in perspectives, where relevant, was another recommendation resulting from the evaluation. Opportunities for improving the focus and concision of meeting materials were also identified, for instance by including executive summaries highlighting the key discussion items. The Supervisory Board furthermore decided performing an in-depth analysis of its profile in 2023 and investigating the establishment of an ESG Sustainability Committee in view of corporate governance developments.

The Board of Management also conducted a self-evaluation in 2022, focusing on the role, responsibilities and functioning of the Board of Management collectively, and on the functioning of the individual Board of Management members. This self-evaluation was performed in a number of offsite Board of Management meetings dedicated to this topic. Important aspects addressed by the Board of Management include the Board of Management’s strategic focus, stakeholder involvement, people & organization, Board dynamics and (future) Board organization. Also in 2023, special Board of Management sessions will be held to continue the discussion and follow up on the observations made. The overall conclusion of the self-evaluation was that ASML has a well-functioning Board of Management. The self-evaluation was also discussed with the Supervisory Board and its Selection and Nomination Committee.

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Supervisory Board committees

The Supervisory Board has four standing committees, with members appointed by the Supervisory Board from among its members. The full Supervisory Board remains responsible for all decisions, even if prepared and taken by one of the Supervisory Board’s Committees.

The four committees of the Supervisory Board support the decision-making by the full Board. In the plenary Supervisory Board meetings, the chairpersons of the committees report on the items discussed in their committee meetings. In addition, the meeting documents and minutes of the committee meetings are available to all Supervisory Board members, enabling the full Supervisory Board to make the appropriate decisions.

Further information about the Audit Committee, the Technology Committee and the Selection and Nomination Committee can be found in this Supervisory Board Report. Further information about the Remuneration Committee can be found in the Remuneration Report.

Supervisory Board

Audit
Committee

Remuneration Committee

Technology Committee

Selection and Nomination Committee

Assisting in overseeing the integrity and quality of our financial reporting and the effectiveness of risk management and controls

Overseeing the development and implementation of the Remuneration Policies, in cooperation with the Audit and Technology Committee

Providing advice with respect to our technology plans required to execute the business strategy

Assisting with the preparation of the selection criteria and appointment procedures for the Supervisory Board and Board of Management

Members

Changes to Supervisory Board Committees in 2022

The Selection and Nomination Committee also discussed the composition of the Supervisory Board committees in light of the retirement of Hans Stork and the appointment of An Steegen and Alexander Everke. Several changes in the composition of the Supervisory Board Committees took effect per the 2022 AGM. Alexander Everke became a member of the Remuneration Committee upon the retirement of Hans Stork. In the Technology Committee, Hans Stork was succeeded by An Steegen.

At the end of 2022 and early 2023, the Selection and Nomination Committee discussed the functioning of the individual members of the Supervisory Board as well as the process and outcome of the Supervisory Board’s self-evaluation.

Corporate governance

As part of its responsibility to monitor corporate governance developments, the Selection and Nomination Committee discussed, among other things, the amendments of the Articles of Association and the Rules of Procedure for the Board of Management and the Supervisory Board. In addition, the Selection and Nomination Committee discussed developments with regard to the Dutch gender diversity bill that came into effect on January 1, 2022, and its impact on ASML. The Committee also discussed the amendment of the Dutch Corporate Governance Code as well as matters of interest to investors and shareholder organizations.

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Supervisory Board committees (continued)

•~~Role, composition, functioning Supervisory Board~~

•~~Corporate governance~~

Besides the Selection and Nomination Committee members, the two Presidents and the EVP HRO are regularly invited to attend (parts of) its meetings. An external advisors is also invited to attend the Selection and Nomination Committee meetings when deemed necessary.

Technology Committee

The Technology Committee advises the Supervisory Board
with respect to the technology plans required to execute
our business strategy.

Recurring agenda topics (quarterly)

Attendance

–Product roadmap

–Progress Technology Leadership Index

In addition to the Technology Committee members, the Committee’s external and internal advisers regularly attended committee meetings. The advisers do not have voting rights.

Members:

Main responsibilities:

Technology Committee meetings in 2022

–Mark Durcan (Chair)

–Annet Aris

–Gerard Kleisterlee

–An Steegen

–Advising on technology trends, the study of potential alternative strategies, the technology strategy, product roadmaps, required technical resources and operational performance in R&D;

–Making recommendations to the Supervisory Board on technology-related projects with respect to ASML’s competitive position; and

–Discussing the technology targets set to measure short- and long-term performance as well as the achievements related to these, and advising the Remuneration Committee on this topic.

In general, the Technology Committee meets at least twice a year and more frequently when deemed necessary. In 2022, the Technology Committee held five meetings.

The Technology Committee is supported by external experts as well as experts from within ASML who act as advisers on the subjects reviewed and discussed. External experts may include representatives of customers, suppliers and partners to increase the Committee’s understanding of the technology and research required to develop our leading-edge systems.

The overview below ~~overview~~ provides details on the topics discussed during ~~Remuneration~~
Technology Committee meetings in ~~2021.~~

2022.

–Business line review: Applications

–Technology target setting for 2022

–Business line review: EUV (including High-NA)

–Next EUV

–Review of the Development & Engineering department

–Visit to Advanced Research Center for Nanolithography in Amsterdam, the Netherlands

–Roadmap in Logic and Memory

–Business line review: DUV

In Q2 2022, the Technology Committee visited the Advanced Research Center for Nanolithography in Amsterdam, the Netherlands.

~~1st Half Year~~

•~~Composition Board of Management, including diversity aspects, and succession pipeline~~

•~~Composition Supervisory Board, incl. succession and composition of committees per 2021~~

•~~Changes in composition Supervisory Board per 2022 and 2023 AGM and nominations for appointment of Supervisory Board members~~

•~~Induction program for new appointed Supervisory board member~~

•~~Evaluation Supervisory Board and committees~~

~~2nd Half Year~~

•~~Future composition Board of Management, incl. diversity requirements, and succession pipeline~~

•~~Composition Board of Management per 2022 AGM~~

•~~Changes in composition Supervisory Board per 2022 and 2023 AGM and nomination for appointment of Supervisory Board members~~

•~~Composition of the Supervisory Board committees per 2022 AGM~~

•~~Evaluation of the Supervisory Board and committees~~

•~~Corporate Governance update: Dutch gender diversity bill~~

•~~Composition Board of Directors Preference Shares Foundation per January 1, 2022~~

~~Composition, role and responsibilities Board of Management~~

In 2021, the Selection and Nomination Committee spent ample time to discuss the future composition, role and responsibilities of the Board of Management, e.g. reviewing the talent bench, discussing career development of top talent to prepare for future Board of Management roles. The committee also assessed the functioning of the Board of Management and its individual members. For this purpose, the Chair held meetings with each individual Board of Management member, the outcome of which was discussed with the Committee.

Frits van Hout retired as member of ASML's Board of Management upon completion of his appointment term, which ended per the 2021 AGM. ASML did not appoint a successor to Frits van Hout. As a result, the Board of Management consists of five members effective per the 2021 AGM. Frits van Hout's responsibilities have been taken over by the remaining Board of Management members, securing the uninterrupted execution of ASML’s strategy to reach its stated targets for stakeholders.

Per the 2022 AGM the appointment terms of Messrs. Wennink, Van den Brink, Dassen, Fouquet and Schneider-Maunoury will expire. In light of this, the Selection and Nomination Committee and the Supervisory Board are extensively discussing the potential extension of the appointment terms effective per the 2022 AGM, both among themselves as well as with the individual Board of Management members.

~~Composition, role and responsibilities Supervisory Board~~

~~The Selection and Nomination Committee extensively discussed the composition of the Supervisory Board.~~

A significant amount of time was spent discussing the Supervisory Board's profile and rotation schedule, particularly the appointment and reappointment of Supervisory Board members to fill vacancies both in the short and longer term. This resulted in

ASML

~~ASML~~ ANNUAL REPORT ~~2021 153~~2022

SUPERVISORY BOARD REPORT CONTINUED

STRATEGIC REPORT

~~the recommendation to the Supervisory Board to nominate Birgit Conix as member of the Supervisory Board effective per the 2021 AGM.~~

~~The Selection and Nomination Committee also discussed the composition of the~~

GOVERNANCE

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184

Supervisory Board committees ~~in light of the retirements and new appointment and proposed several changes which took effect per the 2021 AGM.~~

~~Changes to Supervisory Board Committees in 2021~~

On recommendation of the Selection and Nomination Committee, the Supervisory Board decided to implement several changes in the composition of its committees in 2021. Rolf-Dieter Schwalb became the Chair of the Audit Committee after the retirement of Carla Smits-Nusteling and Birgit Conix became an Audit Committee member. Terri Kelly took over the Remuneration Committee chairmanship and Annet Aris joined the Remuneration Committee as a regular member. Mark Durcan was appointed Chair of the Technology Committee, succeeding Douglas Grose upon his retirement. Mark Durcan and Terri Kelly joined the Selection and Nomination Committee after Douglas Grose retired. Finally, Annet Aris was appointed Vice Chair of the Supervisory Board.

The Selection and Nomination Committee also discussed the changes to its composition effective per the 2022 AGM and advised the Supervisory Board on the nomination for appointment of a successor to Hans Stork, who will retire after having served eight years on our Supervisory Board. (continued)~~For further details, see Supervisory Board - Supervisory Board report - Composition.~~

At the end of 2021 and early 2022, the Selection and Nomination Committee discussed the functioning of the individual members of the Supervisory Board as well as the process and outcome of the Supervisory Board’s self-evaluation. ~~For further details on the self-evaluation, see Supervisory Board - Supervisory Board report - Evaluation.~~

~~Corporate governance~~

As part of its responsibility to monitor corporate governance developments, the Selection and Nomination Committee discussed, among other things, the developments with regard to the Dutch gender diversity bill that was adopted by Dutch Parliament on September 28, 2021 and its impact on ASML. The focus items of investors and shareholder interest organizations were also discussed.

~~Technology Committee~~

~~The Technology Committee advises the Supervisory Board with respect to our technology plans required to execute our business strategy.~~

~~Members~~

~~Main responsibilities~~

Review of technology programs

As in previous years, the Technology Committee’s primary focus in 2022 was on the review of the execution and implementation of technology programs and roadmaps in EUV 0.55 NA (High-NA), EUV 0.33 NA, DUV and Applications. In this respect, the key challenges and opportunities, from a business perspective as well as from a technology standpoint, were reviewed and discussed in depth. During each meeting the Technology Committee also discussed the progress made on the technology targets included in the Technology Leadership Index, a performance measure for the short-term and long-term variable remuneration of the Board of Management. At the beginning of the year, in a meeting especially planned for this purpose, the Technology Committee discussed the final achievements on the technology targets. In the same meeting, new technology targets were set for the new performance period. The Technology Committee subsequently provided advice to the Remuneration Committee and the Supervisory Board.

The meeting in Q1 was dedicated to the achievements within the Applications business line. The Technology Committee was presented with a recap of the achievements in 2021 and was informed about the roadmap toward 2027, the market developments, competitive landscape and the opportunities in that respect. In addition, updates were provided on computational lithography, optical metrology, e-beam metrology and control and data products.

In Q2, the main focus of the meeting was on the Development & Engineering department of ASML, including its Research department. In addition, a presentation was provided on system engineering within ASML and how this contributes to the product and technology roadmap. The meeting took place at the Advanced Research Center for Nanolithography (ARCNL) in Amsterdam. In addition to a presentation on how ARCNL works and cooperates with ASML, the Technology Committee was provided with a tour of through the ARCNL facilities in Amsterdam.

The primary focus of the meeting in Q3 was the achievements and challenges in EUV 0.33 NA and EUV 0.55 NA (High-NA), including an extensive discussion about the biggest risks and opportunities for EUV 0.33 NA. Special attention was paid to the overall roadmap, market developments and EUV field performance as well as the status of new product development. The Technology Committee was informed about the interest and engagement of customers in High-NA, the customer insertion roadmap and node requirements and how supply chain challenges are managed. In addition, the Technology Committee was presented with input regarding the possibilities and the landscape beyond EUV 0.55 NA (High-NA).

In Q4, the Technology Committee invited imec to provide its view on the long-term device roadmap for both Logic and Memory, and this was followed by a detailed discussion of the impact of the device roadmap on the lithography roadmap. In addition, the Technology Committee discussed the developments and achievements in DUV. In addition to the product roadmaps and the technology programs, the Technology Committee was informed about the product strategy and the service strategy. Furthermore, the Committee paid attention to the Mature Products & Services business line and the related challenges and opportunities.

The Technology Committee’s in-depth technology discussions and the subsequent reporting of the main points of these discussions to the full Supervisory Board increases the Supervisory Board’s understanding of our technology requirements. It also enables the Supervisory Board to adequately supervise the strategic choices we face, including our investment in R&D.

•~~Mark Durcan~~ ~~(Chair)~~

•~~Annet Aris~~

•~~Gerard Kleisterlee~~

•~~Hans Stork~~

•A~~dvising on technology trends, the study of potential alternative strategies, the technology strategy, product roadmaps, required technical resources and operational performance in R&D;~~

•M~~aking recommendations to the Supervisory Board on technology-related projects with respect to ASML’s competitive position;~~

•D~~iscussing the technology targets set to measure short- and long-term performance as well as the achievements related to these, and advising the Remuneration Committee on this topic.~~

The Technology Committee is supported by external experts and as experts from within ASML who act as advisers on the subjects reviewed and discussed by this committee. External experts may include representatives of customers, suppliers and partners to increase the committee’s understanding of the technology and research required to develop our leading-edge systems.

~~Technology Committee meetings in 2021~~

~~In general, the Technology Committee meets at least two times a year and more frequently when deemed necessary. In 2021, the Technology Committee held five meetings.~~

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Financial Statements and Profit Allocation

~~Recurring agenda items~~

~~Attendance~~

•~~Product Roadmap~~

•~~Progress Technology Leadership Index~~

~~Besides the Technology Committee members, the committee's external and internal advisors regularly attended committee meetings. The advisers do not have voting rights.~~

~~In addition to the recurring agenda items, the Technology Committee also reviewed and discussed other matters in 2021. Below table provides an overview of these topics.~~


Q1	•~~Business Line review: Applications~~ •~~Review self-Evaluation Technology Committee~~	Q2	•~~Business Line review: EUV (including High-NA)~~
Q3	•~~Business Line review: DUV~~ •~~Future of Moore's Law~~ •~~Roadmap in Logic and memory~~	Q4	•~~Status of the roadmap and challenges in EUV (including High-NA)~~ •~~Status of the roadmap and challenges in DUV~~ •~~Mid- / Long-term roadmap and technology outlook~~

~~Review of technology programs~~

In 2021, the Technology Committee primarily focused on the review of the execution and implementation of technology programs and roadmaps in EUV 0.55 NA (High-NA), EUV 0.33 NA, DUV and Applications. In this respect the key challenges and opportunities

~~ASML ANNUAL REPORT 2021 154~~

both from a business perspective as well as from a technology standpoint were reviewed and discussed in depth. During each meeting the Technology Committee also discussed the progress made on the technology targets included in the Technology Leadership Index, a performance measure for the short-term and long-term variable remuneration of the Board of Management. In a meeting especially planned for this purpose, the Technology Committee discussed the final achievements on the technology targets and the technology targets for the new performance period. The Technology Committee subsequently provided advice to the Remuneration Committee and the Supervisory Board.

The meeting in Q1 was dedicated to the achievements within the business line Applications. The Technology Committee was informed on the outlook toward 2026, the market developments, competitive landscape and the opportunities in that respect. In addition, updates were provided with respect to the computational lithography, optical metrology, e-beam metrology and control and data products. In this meeting the Technology Committee also discussed the outcome of the external evaluation of the functioning of the Technology Committee.

In Q2, the achievements and challenges in EUV 0.33 NA and EUV 0.55 NA (High-NA) were discussed. Special attention was paid to market developments and performance in EUV 0.33 NA as well as the product and power roadmap. On High-NA the Technology Committee was informed on the interest and engagement of customers for High-NA, the status of the shipment plan and the value proposition. During this meeting there was a live connection where the Technology Committee was provided with a virtual tour of the ASML production facilities in Wilton and San Diego. Next to that ZEISS also provided a virtual tour of its facilities in Oberkochen, Germany.

The primary focus of the Q3 meeting of the Technology Committee were the developments and achievements in DUV. Next to the product roadmaps and the technology programs, the Technology Committee discussed the possibilities to ramp-up capacity at ASML and its supply chain to meet customer demand, the continuation of innovation to support the roadmap and economics of our customers and the drive for efficiency and quality. Furthermore, external speakers from imec were invited to inform the Technology Committee on their view on the future of Moore’s law and the roadmaps for logic and memory.

In Q4, the Technology Committee focused on the status of the roadmaps and the challenges relating to EUV 0.55 NA (High-NA), EUV 0.33 NA and DUV. Furthermore the Technology Committee also looked ahead to the mid- and long-term roadmap and the technology outlook. The Q4 Technology Committee meeting was partly attended by representatives from ZEISS management to discuss the cooperation and common challenges related to the product and technology roadmaps.

~~Technology Committee visit to ZEISS~~

The Q4 Technology Committee meeting was held at ZEISS in Oberkochen, Germany. During the visit, the Technology Committee and a delegation from ZEISS discussed the cooperation between the two companies, also in light of the new framework agreement concluded in 2021. They also discussed the status of the various product roadmaps and related challenges. The Technology Committee also visited the ZEISS manufacturing facility to witness the great achievements made in preparing for the assembly of the first EUV 0.55 NA system.

The Technology Committee’s in-depth technology discussions and the subsequent reporting on the main points of these discussions in the full Supervisory Board increases the Supervisory Board’s understanding of our technology requirements. It also enables the Supervisory Board to adequately supervise the strategic choices we face, including our investment in R&D.

~~ASML ANNUAL REPORT 2021 155~~

~~Financial Statements and Profit Allocation~~

The financial statements of ASML for the financial year 2021, as prepared by the Board of Management, have been audited by KPMG Accountants N.V. All members of the Board of Management and the Supervisory Board have signed these financial statements.

~~We recommend to shareholders that they adopt th~~e 2021 financial statements. We also recommend that our shareholders adopt the Board of Management's proposal to make a final dividend payment of €3.70 per ordinary share, which together with the interim dividend of €1.80 per ordinary share, leads to a total dividend of €5.50 per ordinary sha~~re in respect of the 2021 financial year.~~

The financial statements of ASML for the financial year 2022, as prepared by the Board of Management, have been audited by KPMG Accountants N.V. All members of the Board of Management and the Supervisory Board have signed these financial statements.

We recommend to shareholders that they adopt the 2022 financial statements. We also recommend that our shareholders adopt the Board of Management’s proposal to make a final dividend payment of €1.69 per ordinary share. Together with the interim dividends paid in respect of the 2022 financial year, which add up to €4.11 per ordinary share, this leads to a total dividend of €5.80 per ordinary share for the year 2022.

Finally, we would like to extend a word of thanks to the Board of Management and all ASML employees for their continued commitment and hard work during this challenging year.

The Supervisory Board,

Gerard Kleisterlee, Chair

Annet Aris, Vice Chair

Birgit Conix

~~Marc~~Mark Durcan

Warren East

Alexander Everke

Terri Kelly

Rolf-Dieter Schwalb

~~Hans Stork~~An Steegen

Veldhoven, February ~~9, 2022~~15, 2023

~~ASML ANNUAL REPORT 2021 156~~

ASML ANNUAL REPORT 2022

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Remuneration Report

Message from the Chair of the Remuneration Committee

~~Message from the Chair of the Remuneration Committee~~



			A fair and balanced remuneration is our main priority, and this year we have looked to increase the level of transparency around how we reward management in order to attract the right talent.

~~Terri Kelly (Chair of the Remuneration Committee)~~





Overall, starting from high standards, ASML’s leadership set ambitious targets and was able to resolve and respond to many challenges.”
Terri Kelly
Chair of the Remuneration Committee

Dear Stakeholder,

On behalf of the Remuneration Committee, I am pleased to present the ~~2021~~2022 Remuneration Report, ~~providing~~which provides a summary of the remuneration policies for the Board of Management and the Supervisory ~~Board and an explanation about~~Board. The following pages explain how ~~they~~these policies were applied in ~~2021.~~2022.

~~To maintain its fast pace~~From a personal perspective, my first full year as Chair has been challenging but highly enjoyable. Throughout, I have really appreciated the support I have received from both internal and external stakeholders. The Committee worked hard to engage with as many stakeholders as possible during the year. We built a sound understanding of ~~innovation~~the major issues around remuneration, particularly those around disclosure and incentives, and this enabled us to prepare a fair and balanced Remuneration Policy.

Broad support

These are early days during which we are closely monitoring the impact of the new policy to ensure ~~long-term success as a company, ASML needs~~that it has the desired effects. Our initial engagements with shareholders and shareholder representatives revealed that they were generally supportive. In particular, they were appreciative of the increased disclosure and of the ways in which the Supervisory Board proposed to address sensitivities around the higher pay levels.

However, some shareholders expressed concerns regarding our ability to attract and retain the ~~best talent. Remuneration is an important, but not the sole factor here – I strongly believe that people are motivated for other reasons beyond that as well. We have a great story~~right talent, given senior executive pay packages at ASML versus those at companies with which we compete in the global ~~impact~~race for talent. Furthermore, some shareholders have raised questions around the level of ~~ASML still growing,~~ambition of the performance metrics in the long-term incentive (LTI), notably Relative Total Shareholder Return and ~~it can also be very rewarding to work together at~~employee engagement. We amended the ~~cutting edge of technology with highly talented colleagues – we offer a work culture that enables people to develop their talent, feel respected and work to~~threshold level for the ~~best of their abilities.~~employee engagement target following this feedback.

A lot of great work has been done in rolling out ASML’s cultural values and making them more explicit. While striving to keep a fine balance between protecting our competitive position and providing transparency, we are continually looking for opportunities to get these values reinforced in how we reward our leaders and the broader organization, to drive long-term success for ASML.

~~Summary of 2021 performance~~

Looking back on 2021, which by all accounts was not an easy year due to the many constraints caused by the COVID-19 pandemic, we are pleased to see ASML has had an outstanding performance in a very dynamic environment. Strong growth in semiconductor end markets and increasing lithography intensity to address the need for more wafer output led to huge demand for ASML’s products and services. To meet current and future customer demand, ASML and its supply chain partners are actively adding and improving capacity. In addition, ~~stepping up in hiring and retaining ASML’s workforce in~~while the ~~current competitive market has become increasingly challenging. Overall, starting from high standards, ASML’s leadership set ambitious targets~~Works Council acknowledged the recruitment challenges we face and was ~~able to resolve and respond to many challenges. The Supervisory Board is very supportive of ASML’s long-term strategy and proud of what~~positive about the Remuneration Policy for the Board of Management in many respects, it did have reservations regarding some matters including the short-term incentive (STI) – for example, the Works Council was concerned that internal factors such as process efficiency and employee well-being were not explicitly considered in the ~~entire organization have achieved.~~

~~Changes in~~STI and that there were no explicit criteria regarding internal and societal fairness. Throughout 2022, the Remuneration Committee and the Works Council continued to engage constructively about these topics.

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Message from the Chair of the Remuneration Committee (continued)

An eventful year, a strong team

The last 12 months have seen ASML continue to go from strength to strength, supported by a wonderful team of people who have again come together in ~~2021~~uncertain times and done what is best for our company and for our customers.

A key factor that motivates our people across ASML is the opportunity to engage in meaningful work and make an impact. In ~~2021, Annet Aris~~an increasingly digital world, the work carried out at ASML is ultimately enabling innovative businesses to transform the way in which we all live by bringing new opportunities in areas from healthcare to agriculture, interconnectivity to climate change.

Nevertheless, fair and balanced remuneration must always be the top priority for our Remuneration Committee, and throughout the year we have continued to engage with stakeholders, not only ahead of the presentation of the new ASML Remuneration Policy at the 2022 AGM, but in the many months since.

During my time as Chair, I am committed to ensuring that engagement and collaboration continue to be the hallmarks of the ASML Remuneration Committee.

Changes to the Remuneration Committee

At the 2022 AGM, Hans Stork stepped down from the Remuneration Committee and the Supervisory Board, and I would like to thank him for his contribution over the past years.

We are delighted that Alexander Everke became a member of the Remuneration Committee ~~and I feel honored about taking over the chair role from Rolf-Dieter Schwalb~~ after the ~~2021~~2022 AGM. ~~The~~It is important that the composition of the Remuneration ~~Committee’s composition provides~~Committee maintains a proper balance that drives a deep and broad understanding of ASML’s business environment. Alexander brings with ~~very different views, both~~him valuable and extensive skills from a ~~geographical~~business and ~~historical~~operational perspective. ~~For me, it is a great opportunity~~We have already benefited from his experience and input and look forward to ~~come~~continuing to work closely with him in ~~at a time that~~the future.

Decisions made in 2022: Our new Remuneration Policy

In the first quarter of 2022, we ~~are taking a deep dive in revisiting~~finalized our review of the Remuneration Policy for the Board of ~~Management, to assess what is working well~~Management. The Remuneration Committee and ~~to see where we can still improve. We also rely upon external experts to help us understand best practices with other peer organizations, as well as changing expectations from our many constituents.~~

~~Decisions made in 2021~~

In the first quarter of 2021, we finalized the review of the Remuneration Policies for the Board of Management and the Supervisory Board. Based on the results of the bi-annual review of the labor market reference group and the remuneration benchmark performed during 2020, the Supervisory Board concluded that it was appropriate to ~~slightly adjust~~amend the Remuneration Policy for the Board of Management, as the last major revision took place in 2017 with only minor revisions having been made to compensation levels – primarily associated with the Short Term Incentive and Long Term Incentive plans. Since 2017, ASML has grown significantly and the context in which we operate has changed. The revised Remuneration Policy for the Board of Management was submitted to the 2022 AGM and was adopted with 93.18% support.

During our review, we took the opportunity to explore current market practice, stakeholder views and societal trends and expectations, as well as developments in corporate governance. We also asked our Board of Management members to share their views on the proposed amendments.

The main changes are outlined in the 2022 Remuneration Policy changes in the section Board of Management remuneration.

Transparency around remuneration

The Remuneration Report for the financial year 2021 was submitted to the 2022 AGM for an advisory vote. 84.59% of the votes were cast in favor. As part of our efforts to further improve transparency, we have added the ex-ante disclosure of the STI metrics for 2023 and the ex-ante disclosure of the LTI metrics and target levels for the 2023-2025 performance period. We have also continued to disclose the actual achievement levels. An exception is made in the case of sensitive information where disclosure is not in the interests of ASML or our shareholders.

Outlook

The development of an appropriate Remuneration Policy is an evolutionary process, and during 2022 the Remuneration Committee continued to evaluate both the Remuneration Policy itself and the changing landscape in which ASML operates. Our focus remains on ensuring that we have the right incentive measures in place and that we use the right metrics. Only then will we be able to drive the right behaviors and the correct outcomes.

This process will continue over the coming year. We have a degree of flexibility in the Remuneration Policy for the Board of Management to ~~maintain competitive~~align the metrics with what is important to drive strategy, as well as an improved ability to make that vital connection between remuneration ~~levels in relation~~and strategy. We have made good strides toward being more transparent and are committed to ~~a reference market in which ASML had considerably grown again in size and complexity. The revision of the Remuneration Policy for the Supervisory Board entailed an~~making further changes to enhance transparency where practicable.

~~ASML ANNUAL REPORT 2021 157~~

~~amendment of the Supervisory Board and Committees' membership fees in order to remain competitive and~~We will also continue to ~~be able~~engage with all our stakeholders as well as with external advisers in 2023, ensuring that our decisions take account of best practice, stakeholder views and the wider societal perspectives on executive remuneration. In addition, we will continue to ~~attract and retain qualified Supervisory Board members. Both policies were submitted to~~engage with the ~~2021 AGM and were adopted with over 90% support.~~

~~Toward more transparency about our Remuneration Policy~~

~~In 2021, we had many interactions with governance organizations, proxy advisors, individual shareholders and ASML's Works Council. These interactions related to the revision~~members of ~~the Remuneration Policies for~~ the Board of Management ~~and~~to gather their views on remuneration.

Finally, I would like to thank my fellow Remuneration Committee members for their support during the ~~Supervisory Board as already referred to above, and to the 2020 Remuneration Report.~~

~~The discussions concerned three topics: i) the level of transparency around target setting and actual achievements; ii)~~last year. Together, we have put in place a discretionary adjustment to the ROAIC score as part of the overall achievement score on the long-term incentive; and iii) the performance metric related to sustainability. Finally, views were exchanged with our stakeholders on the Remuneration Policy for the Board of Management ~~in general, the link between remuneration and company strategy and performance, the structure of remuneration and the performance metrics~~that I believe will serve us well for the ~~short- and long-term incentives.~~

~~The discussions were very constructive and~~period to come. In the year ahead, we ~~received valuable feedback and suggestions on how the level of transparency in the Remuneration Report could be further improved. This feedback has been taken into account in~~will work hard to continue this Remuneration Report. Stakeholder feedback has also been taken into account in the fundamental review of the Remuneration Policy for the Board of Management, which started in Q2 2021. The sustainability-related performance metric was extensively discussed in this context, in particular its weight and how to best define the performance measure and link it to ASML's ESG strategy, which was amended during 2021.

~~Looking ahead to 2022~~

Starting in Q2 2021, the Remuneration Committee performed a fundamental review of the Remuneration Policy for the Board of Management – this review had been planned for 2020, but was postponed due to the COVID-19 pandemic. Important focus points in the review were the remuneration structure and elements, as well as the labor market reference group. We considered a fundamental review appropriate, as the prior structural revision of the policy took place in 2017 and since that time only minor revisions were implemented by adjusting compensation levels (mainly STI and LTI) to remain competitive. After five years, it was time to do a more fundamental review to see if the policy optimally supports the strategic direction of the company. It was also a moment to review current market practice, societal trends and expectations, and developments in corporate governance. Based on the outcome of this fundamental review, we intend to submit a proposal for a revised Remuneration Policy for the Board of Management to the AGM in 2022. The main changes relate to a revised labor market reference group and remuneration structure, as well as adjusted STI and LTI performance metrics.

During the fundamental review of the Remuneration Policy for the Board of Management, we have had continued dialogue with the Board of Management to gain their perspective and feedback. Strong collaboration between the Remuneration Committee and ASML’s leadership is top of mind for us, to establish confidence that we are measuring the things that matter, that we are comparing ourselves to the right companies, and that we are setting ambitious, but realistic goals.

We are also in dialogue with the Works Council as well as with governance organizations, proxy advisors and our major shareholders on the envisaged changes to the Remuneration Policy for the Board of Management. More information on these stakeholder engagements will be included in the convocation documents for the 2022 AGM.

For the fundamental review of the Remuneration Policy for the Board of Management we engaged an external remuneration expert, bringing in a fresh pair of eyes to challenge us and share with us their experience in the field of managing people, risk and capital.

~~The full proposal for the revised Remuneration Policy for the Board of Management will be included in the convocation documents for the 2022 AGM, which are expected to be published in March 2022.~~

A fundamental review of the Remuneration Policy for the Supervisory Board has not taken place, since the Supervisory Board Remuneration Policy is relatively new, introduced in 2020 based on new legal requirements.

I would like to thank our shareholders and other stakeholders for their engagement and for sharing their views on executive remuneration. We welcome feedback from our stakeholders on this 2021 Remuneration Report, which will be submitted to the shareholders on April 29, 2022 for an advisory vote. Furthermore, we hope for that our shareholders will support the 2022 Remuneration Policy for the Board of Management which we intend to submit for adoption at our 2022 AGM. ongoing process.

Terri Kelly

Chair of the Remuneration Committee

~~ASML ANNUAL REPORT 2021 158~~

ASML ANNUAL REPORT 2022

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Remuneration at a glance

Remuneration is an essential tool to motivate and retain the right talent to continue to
develop our technology.


			Our remuneration principles for 2022 performance support long-term success and sustainable value

			Competitiveness						The remuneration structure and levels intend to be competitive in the relevant labor market, while at the same time taking into account societal trends and perceptions.
			Alignment						The remuneration policy is aligned with the short-term and long-term incentive policies for ASML senior management and other ASML employees and takes into account internal relativities.
			Long-term orientation						The policy and incentives focus on sustainable and long-term value creation.
			Compliance						ASML adopts the highest standards of good corporate governance.
			Simplicity and transparency						The policy and its execution are as simple as possible and easily understandable to all stakeholders.

Linking remuneration to purpose and strategy

Purpose

Strategy

Incentive
measures

Pay for
performance

Unlocking the potential of people and society by pushing technology to new limits.

Strengthen
customer trust

Financial measures

Remuneration
outcomes

Holistic lithography and applications

Customer Orientation

DUV
competitiveness

Technology leadership

EUV
industrialization

High-NA

Leadership in
ESG sustainability

How we performed in 2022

Financial (based on US GAAP)

Non-financial

€21.2bn

€10.7bn

€6.5bn

8.1

Total sales

Gross profit

Income from operations

Technology Leadership Index score

(2021: €18.6bn)

(2021: €9.8bn)

(2021: €6.8bn)

(2021: 8.0)

€8.5bn

€14.14

48.2%

10.8%

Net cash provided by operating activities

Earning
per share

ROAIC (Non-GAAP measure)1

Dow Jones Sustainability Index

(2021: €10.8bn)

(2021: €14.36)

(2021: 34.2%)

(2021: 12.1%)

1.The ROAIC (Non-GAAP measure) is based on a three-year average by dividing the Income after income taxes by the Average Invested Capital. Average Invested Capital is calculated by taking the average of Total Assets minus Cash, Short Term Investments, Current liabilities and
Long-term contract liabilities at the start and end of each quarter over three years. We believe that ROAIC is a meaningful measure because it quantifies our effectiveness in generating returns relative to the capital invested in our business over the past three years.



			Relative TSR - ASML vs PHLX

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Remuneration at a glance (continued)



We aim to align the total remuneration for our Board of Management to our business strategy through a combination of fixed pay and short- and long- term incentives, underpinned by stretching performance targets.

			€17.0m
			Total remuneration

			99.1%
			Achieved of STI target

			182.2%
			Achieved of LTI target

			34:1
			CEO vs. average per FTE (based on US GAAP)


			Board of Management

			Peter T.F.M. Wennink
			Total remuneration 2022 (€’000s)
			€4,280

			Martin A. van den Brink
			Total remuneration 2022 (€’000s)
			€4,279

			Frédéric J.M. Schneider-Maunoury
			Total remuneration 2022 (€’000s)
			€2,844

			Roger J.M. Dassen
			Total remuneration 2022 (€’000s)
			€2,834

			Christophe D. Fouquet
			Total remuneration 2022 (€’000s)
			€2,798


Remuneration summary

Base salary and benefit

STI

LTI


			Stakeholder engagement in 2022

			During 2022, we consulted with our large shareholders and other stakeholders. The Remuneration Committee also consulted the views of the Board of Management.

			Shareholders
			Number of organizations met			10
			Number of meetings			10
			Percentage of issued share capital owned			22%

			Shareholders representatives and proxy advisers
			Number of organizations met			3
			Number of meetings			3

			Works Council
			Number of organizations met			1
			Number of meetings			>5

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Remuneration Committee

The Remuneration Committee advises the Supervisory Board and prepares the Supervisory Board’s resolutions with respect to the remuneration of the Board of Management and the Supervisory Board.

Recurring agenda topics (quarterly)

Attendance

–Remuneration of the Board of Management

–Remuneration of the Supervisory Board

–Update on performance on targets for short- and long-term incentives

In addition to the Remuneration Committee members, the Remuneration Committee generally invites the CEO, the EVP HRO, the Head of Compensation and Benefits and in some instances also the CFO to attend (parts of) its meetings. The Remuneration Committee’s external adviser is also invited to attend the Remuneration Committee meetings when deemed necessary.

Members:

Main responsibilities:

–Terri Kelly (Chair)

–Annet Aris

–Alexander Everke

–Rolf-Dieter Schwalb

–Overseeing the development and implementation of the Remuneration Policy for the Board of Management and preparing the Supervisory Board Remuneration Policy;

–Reviewing and proposing to the Supervisory Board corporate goals and objectives relevant to the variable part of the Board of Management’s remuneration;

–Carrying out scenario analyses of the possible financial outcomes on the variable remuneration of meeting these goals, as well as exceeding these goals, before proposing these corporate goals and objectives to the Supervisory Board for approval; and

–Evaluating the performance of the members of the Board of Management in view of those goals and objectives, and – based on this evaluation – recommending to the Supervisory Board appropriate compensation levels for the members of the Board of Management.

The below overview provides details on the topics discussed during Remuneration Committee meetings in 2022.

–Short Term Incentive Plan: Performance 2021, pay-out 2021 and targets 2022

–Long Term Incentive Plan: share vesting performance period 2019-2021, and conditional grant and targets performance period 2022-2024

–Remuneration Report 2021

–Self-evaluation of Remuneration Committee

–Board of Management Remuneration Policy review including stakeholder outreach

–Compliance with share ownership requirements

–Progress STI and LTI targets and metrics

–Customer Orientation metric

–Latest trends in policies and reporting

–Report on interaction with the Works Council

–Board of Management remuneration 2023, including selection of STI and LTI metrics

–Progress STI and LTI targets

–Board of Management remuneration 2023, including selection of STI and LTI metrics

–Benchmark on Supervisory Board remuneration

–Update on corporate governance developments: remuneration

–Engagement of external auditor for agreed-upon procedures on remuneration

–Draft Remuneration Report 2022

–Compliance Board of Management members with share ownership guideline

–Share planning AGM period 2023-2024

–No meetings

The Committee will continue to monitor the Board of Management’s performance and make recommendations around compensation levels.

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Remuneration Committee (continued)

Remuneration of the Board of Management

In Q1 2022, the Remuneration Committee finalized its fundamental review of the Remuneration Policy for the Board of Management. During this process, the Remuneration Committee was supported by an external remuneration adviser. Before proposing to amend the Remuneration Policy for the Board of Management to the General Meeting, the Remuneration Committee consulted extensively with shareholders, shareholder representatives and other stakeholders, including the Works Council of ASML Netherlands B.V. For more information about the stakeholder feedback, reference is made to the 2022 AGM page on our website.

On April 29, 2022, the Supervisory Board, upon recommendation of the Remuneration Committee, proposed to the General Meeting to amend the Remuneration Policy for the Board of Management. The amended policy was adopted at the 2022 AGM. A summary of the main changes compared with the previous Remuneration Policy is included in this Remuneration Report.

The Remuneration Committee made recommendations to the Supervisory Board concerning the total remuneration package of the Board of Management and the variable remuneration consisting of an STI in cash and an LTI in shares. The Remuneration Committee proposed 2022 targets for the Board of Management’s variable remuneration to the Supervisory Board. During the year, the Remuneration Committee closely monitored the Board of Management’s performance. It provided recommendations to the Supervisory Board regarding the achievement of the 2022 targets and related compensation levels for the Board of Management members.

In proposing and evaluating the Board of Management’s performance in relation to the corporate goals and objectives for the variable remuneration of the Board of Management members, the Remuneration Committee closely cooperates with the Audit Committee and the Technology Committee.

At the end of 2022 we performed a light review of Board of Management remuneration levels. Since the 2022 STI and LTI at-target levels were below the maximum at-targets levels allowed by the 2022 Remuneration Policy, the RC wanted to determine if an increase of these at-target levels for 2023 was desirable. The outcome of this review is that the Supervisory Board decided to increase the at-target levels for the STI from 95% to 105% for the Presidents and from 90% to 95% for the non-Presidents. For the LTI the increase will be from 160% to 170%.

The Remuneration Committee has taken note of the views of the individual members of the Board of Management with regard to the amount and structure of their remuneration.

The shareholding positions of the Board of Management members were reviewed by the Remuneration Committee in order to assess compliance with the share ownership guideline as included in the Remuneration Policy for the Board of Management.

The Remuneration Committee also prepared the Remuneration Report, which details the remuneration of members of the Supervisory Board and the Board of Management.

Increased transparency around remuneration

In our engagements with stakeholders during 2022, we received valuable feedback on the Remuneration Report, in particular on further improving transparency around remuneration. We have taken this feedback into consideration, and as a result, we have implemented several changes in the 2022 Remuneration Report. For example, we now include ex-ante disclosures of the selected STI metrics and of the selected LTI metrics and target levels (where this is not contrary to the strategic and/or commercial interests of ASML).

The Remuneration Committee engaged the external auditor to perform certain agreed-upon procedures regarding the reported performance by the Board of Management on the Short Term Incentive Plan 2022 and Long Term Incentive Plan for performance period 2020-2022.

Remuneration of the Supervisory Board

The current Remuneration Policy for the Supervisory Board was adopted by the General Meeting at the 2021 AGM. In 2022, the Remuneration Committee discussed the latest trends in policies and reporting and performed the recurring bi-annual benchmark of Supervisory Board remuneration. Based on the outcome of this review, we intend to submit a proposal for implementing some adjustments to the Remuneration Policy for the Supervisory Board at the 2023 AGM. The proposal will be set out in the convocation notice for the 2023 AGM, which will be published in March 2023.

The Remuneration Committee also reviewed the Remuneration Report, which details the remuneration of the members of the Supervisory Board.

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Board of Management remuneration

In this section of the Remuneration Report, we provide an overview of the ~~2021~~ Remuneration Policy for the Board of Management, which was adopted by the General Meeting on April 29, ~~2021~~2022, and has applied as of January 1, ~~2021.~~2022 onwards. It also contains information about the execution of the ~~2021~~ Remuneration Policy for the Board of Management as well as ~~the~~ details of the Board of Management ~~members'~~members’ actual remuneration for the financial year ~~2021.~~2022. The ~~2021~~ Remuneration Policy for the Board of Management can be found in the ~~governance~~Governance section of our website.

Remuneration Policy

Remuneration as a strategic instrument

The ~~2021~~2022 Remuneration Policy for the Board of Management supports the strategy, long-term ~~development~~interests and ~~strategy~~sustainability of ASML in a highly dynamic environment, while aiming to fulfill all stakeholders’ requirements and ~~maintaining~~keeping an acceptable risk profile. More than ever, the ~~challenge~~challenges for ASML isare to drive technology, to serve ~~its~~our customers and to satisfy ~~its~~our stakeholders. These drivers are embedded in the identity, mission and values of ASML and its affiliated enterprises and are the backbone of the ~~policy.~~2022 Remuneration Policy for the Board of Management. The Supervisory Board ensures that the ~~policy and its implementation are linked to ASML's objectives.~~

~~The 2021~~2022 Remuneration Policy for the Board of Management and its implementation are linked to ASML’s objectives. A direct way in which this is ~~designed~~achieved is by determining performance measures and setting targets with respect to ~~enable~~variable compensation that are linked to our short-term and long-term ambitions. More indirectly, we want to ensure that our 2022

Remuneration Policy for the Board of Management enables ASML to attract, motivate and retain qualified industry professionals for the Board of Management in order to define and achieve our strategic goals. ~~The policy~~This is reflected by our drive to determine a remuneration structure and remuneration levels that intends to be competitive in the relevant labor market, while at the same time being aware of societal trends and perception. Therefore, the 2022 Remuneration Policy for the Board of Management acknowledges the internal and external context as well as our business needs and long-term strategy.

The ~~policy encourages~~2022 Remuneration Policy for the Board of Management is designed to encourage behavior that is focused on long-term value creation and the long-term interests and sustainability of ASML, while adopting the highest standards of good corporate governance. ItThe 2022 Remuneration Policy for the Board of Management is aimed at motivating ~~for~~the Board of Management members to achieve outstanding ~~achievements,~~results, using a combination of non-financial and financial performance ~~measures.~~measures as well as an appropriate ratio between base salary and variable compensation. Technology leadership, customer value creation and employee engagement are the key drivers of sustainable returns to our shareholders.

Remuneration principles

The remuneration philosophy that ASML applies for all its employees includes the principle that ASML wants to be competitive in its relevant labor markets and pay what is fair in such markets, while maintaining internal consistency in reflecting differences in size and complexity of individual ~~jobs.~~responsibilities. The Supervisory Board applies the same principle for the Board of Management of ASML and in doing so takes the pay and employment conditions for the ASML employees into account when formulating the Remuneration Policy for the Board of Management. The level of stakeholder support, including the support of society, for the Remuneration Policy for the Board of Management that ASML applies is important to us and is also taken into account when formulating the various elements of the policy. While revising the Remuneration Policy for the Board of Management, the Supervisory Board considered the external environment in which the Company operates, the relevant statutory provisions and provisions of the Dutch Corporate Governance Code and competitive market practice as well as the guidance issued by organizations representing institutional shareholders. The Supervisory Board’s Remuneration Committee engaged extensively with various stakeholders to obtain their perspectives. These stakeholders included ASML’s shareholders, shareholder interest organizations, proxy advisers and the Works Council of ASML Netherlands B.V. We received a high level of support for the revised Remuneration Policy at the 2022 AGM, with 93.18% of votes in favor. The Works Council was asked to provide advice on the proposed amended Remuneration Policy. The Works Council took the position that it did not fully support the proposed amendment and had some serious concerns. The Works Council and a delegation of the Supervisory Board

continued the dialogue on this topic throughout the course of 2022. A detailed overview of the stakeholder feedback is published on ASML’s website (asml.com/agm2022). In line with the Dutch Corporate Governance Code, the members of the Board of Management have been asked to share their views on the proposed amendments of their own remuneration. Furthermore, advice has been obtained from an external remuneration ~~policy.~~expert.

The ~~2021~~2022 Remuneration Policy for the Board of Management is built on the following principles:

•–~~Transparent –~~Competitiveness: The ~~policy~~remuneration structure and ~~its execution are clear~~levels intend to be competitive in the relevant labor market, while at the same time taking into account societal trends and ~~practical;~~perceptions;

•–~~Aligned –~~Alignment: The policy is aligned with the Short-term Incentive and/or ~~Long-Term~~Long-term Incentive ~~policy~~Policy for ASML senior management and other ASML ~~employees;~~employees and takes into account internal relativities;

•–Long-term –orientation: The policy and incentives focus on sustainable and long-term value creation;

•–~~Compliant –~~Compliance: ASML adopts the highest standards of good corporate governance; and

•–~~Simple –~~Simplicity and transparency: The policy and its execution are as simple as possible and easily understandable to all stakeholders.

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Board of Management remuneration (continued)

Reference group and market positioning

Similar to the remuneration philosophy for all ASML employees, we aim to offer the members of the Board of Management a remuneration package that is competitive compared towith a relevant labor market. ~~This~~To define this market, ~~is defined by creating~~we created a reference group consisting of companies that are comparable to

~~ASML ANNUAL REPORT 2021 159~~

ASML in terms of size and complexity, industry or business profile, data transparency and geographical area. The ~~median market level serves as~~ reference ~~point for determining the level~~group may include Dutch and international companies where members of ~~pay for~~ the Board of Management ~~for~~might be recruited to and from.

For as long as ASML is positioned around the median of the ~~reference~~ group ~~in terms~~ of ~~company~~companies with respect to size (measured by enterprise value, revenue and number of employees) and thus ~~complexity.~~complexity, the median market level may serve as a reference in determining the level of remuneration for the Board of Management.

As ASML is a Dutch-headquartered company, the Supervisory Board also takes into account the external environment in which the Company operates in the Netherlands, and furthermore considers competitive market practices as well as guidance issued by organizations representing institutional shareholders in the Netherlands, and has decided for the 2022 remuneration policy not to follow the (high) international market level for long-term incentives (LTI) and to cap the maximum target LTI award at 200% of base salary. This means that the reference to a median market level described above will be used for the cash compensation only (i.e. the base salary and the short-term incentive (STI), as the LTI will be capped).

As ASML has a dual presidency and considers the two presidents of equal weight and importance to the Company, the Supervisory Board has decided to continue the Company’s longstanding practice that the relevant benchmark reference level for the two presidents is the average of the CEO level and that of the other members of the Board of Management in the labor market data, instead of benchmarking against CEO data only. For the other members of the Board of Management, the Supervisory Board has applied the average of all non-CEO members of the Board of Management in the benchmark as relevant reference, instead of differentiating between members of the Board of Management.

In principle, a benchmark of the Board of Management remuneration is conducted every two years. In the year without a market assessment, the Supervisory Board considers the appropriateness of any change of base salary, taking into account the market environment as well as the salary adjustments for other ASML employees. To ensure an appropriate composition of the relevant labor market, the Supervisory Board reviews the composition of the reference group at the time a benchmark is conducted. The composition of the reference group may be adjusted as a result of takeover transactions, mergers or other corporate activities. Substantial changes applied to the composition of the reference group will be proposed to ~~the~~ shareholders. In the year without a market assessment, the Supervisory Board considers the appropriateness of any change of base salary in light of the market environment as well as the salary adjustments for other ASML employees.

In 2020 we reviewed the reference group and performed a remuneration benchmark. The reference group (consisting of twenty companies) had not changed since 2018, while ASML grew considerably. The outcome of the 2020 review of the reference group was that, as a result of ASML's growth, one reference company, Smith & Nephew PLC, became too small compared to ASML and was therefore removed. Two other companies, Shire PLC and Linde AG, were removed because they were acquired by or merged with companies outside Europe and therefore no longer qualified as reference companies due to geography. To keep the size of the reference group more or less equal, two new companies were added to the reference group: NXP Semiconductors, which is an industry peer of ASML, and Ericsson, which is on average larger than ASML and therefore brings ASML closer to the median of the reference group in terms of size. In the revised reference group, ASML ends up slightly above the median (55th percentile) in terms of size (based on 2019 data). The 2020 review of the reference group and corresponding benchmark were the basis for the adjustments in the 2021 Remuneration Policy for the Board of Management.


The current reference group consists of the following companies:
Current reference group composition
	~~AkzoNobel~~European companies with focus on long-term technology/industrial engineering/R&D	~~Legrand~~Semiconductor manufacturing companies	Semiconductor equipment companies
	~~Alstom~~ABB	~~Leonardo-Finmeccanica~~Broadcom	Applied Materials
	~~Continental~~Airbus	~~Nokia~~Intel	Lam Research
	~~Covestro~~Dassault Systèmes	~~NXP Semiconductors~~Qualcomm
~~DSM~~	~~Philips~~
~~Ericsson~~	~~SAP~~
~~Essilux (formerly Essilor)~~	~~Schindler~~
~~Evonik~~	~~Solvay~~
~~Givaudan~~	~~Yara International~~
Infineon Technologies
	Linde
	Medtronic
	Novartis
	NXP Semiconductors
	Philips
	Roche
	SAP
	Schneider Electric
	Shell
	Siemens
	Siemens Healthineers

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Board of Management remuneration (continued)

Total direct compensation

The remuneration levels are determined using the ~~total direct compensation.~~ Total ~~direct compensation~~Cash Compensation (TCC). TCC consists of ~~a fixed~~ base salary and variable remuneration in the form of an STI. A capped LTI is added to the TCC, which together constitutes the total direct compensation.

Base salary

The 2022 Remuneration Policy for the Board of Management prescribes a ~~short-term incentive (STI)~~benchmark that will only be conducted for the TCC level. The base salary of Board of Management members is derived from this TCC level. The actual base salary and ~~a long-term incentive (LTI). Other~~annual increases will be reported in the Remuneration Report. The base salary for the Board of Management for the reporting year 2022 is disclosed in the table ‘Total remuneration ~~elements are pension and expense reimbursements.~~Board of Management.

Variable compensation

The variable compensation consists of the STI and the LTI. The performance ~~parameters~~metrics are set by the Supervisory Board and consist of financial and ~~qualitative measures~~non-financial metrics in such a way that an optimal balance is achieved between the various ~~corporate~~Company objectives, both in the short term and the long term. By doing so, ~~it is ensured~~we ensure that the variable compensation contributes to the strategy, long-term interests and sustainability of ~~ASML.~~the Company. The Supervisory Board may adjust the performance ~~measures~~metrics and their relative weighting of the variable income based on the rules and principles as outlined in the ~~2021~~2022 Remuneration Policy for the Board of Management of ASML Holding N.V., if required by changed strategic priorities in any given year. The Supervisory Board ~~may use its~~assesses the extent to which performance metrics are met at the end of a performance period.

The 2022 Remuneration Policy for the Board of Management contains maximum levels for the STI and the LTI for on-target performance. These maximum levels can be implemented if ASML’s relative positioning in the reference group is at least equal to the median (in terms of size). For 2022, the target STI levels were lower, namely 95% for the presidents and 90% for the other members of the Board of Management, aligned with a positioning in the reference group slightly below the median (in terms of size) at the time of designing the Remuneration Policy, and applying a gradual transition into the new policy levels. For the same reason, the target LTI level for 2022 was 160% of base salary for all members of the Board of Management.

The Supervisory Board has the discretionary power to adjust the incentive pay-out upward or downward ~~(‘ultimum remedium’).~~if it feels that the outcome is unreasonable due to exceptional circumstances during the performance period.

~~As part~~Scenario analyses of the ~~revision~~possible outcomes of the ~~Remuneration Policy for~~variable remuneration components and their effect on the remuneration of the Board of Management as approved at the 2021 AGM, total direct compensation at target was adjusted so that it was closer to the median total direct compensation level of the revised reference group. This was done by increasing the at-target level of the long-term incentive from 110% (Presidents) or 100% (other Board of Management members) to 120% for all Board of Management members.have been conducted.

The following table represents the variable pay as percentage of base salary for the Board of Management in the case of on-target performance.


Maximum variable compensation (on-target)	Market reference	Variable pay as % of base salary (maximum)		2022 Variable pay as % of base salary (on-target)
Short-term incentive	Determined based on ASML’s relative position in the reference group capped at 50th percentile	Presidents: 120% Other members: 100%		Presidents: 95% Other members: 90%
Long-term incentive	Maximum on-target LTI is capped at 200% of base salary	200.0	%	160.0	%
Total		Presidents: 320% Other members: 300%		Presidents: 255% Other members: 250%

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~~Short-term incentive~~Board of Management remuneration (continued)

~~Long-term incentive~~

~~120~~

~~Total~~

~~200~~

~~ASML ANNUAL REPORT 2021 160~~

Summary of ~~2021~~2022 Remuneration Policy Board of Management

The elements of the ~~2021~~2022 Remuneration Policy for the Board of Management and their link to the strategy of ASML are summarized below.

Summary of 2022 Remuneration Policy

Base
salary

STI
Cash bonus

LTI
Share-based
incentive

Pension and other benefits

Total
remuneration

Fixed remuneration (base salary)

Link to strategy/rationale

2022 policy

Attract, motivate and retain qualified industry professionals for the Board of Management in order to define and achieve strategic goals.

Benchmark

–Consisting of 20 most relevant technology and R&D oriented companies, including ASML’s talent competitors and business peers and (indirect) customers

–Composition of companies in the reference group takes into account ASML’s geographic location – it’s weighted toward European companies (75% weighting), with some US companies (25% weighting)

STI (cash bonus)

Link to strategy/rationale

2022 policy

Ensure a balanced focus on both the (financial) performance of ASML in the short term, and the sustained company future in terms of technological advancement and customer satisfaction, fueling long-term success.

–Maximum target STI: 120% of base salary for the presidents and 100% for the other BoM members

–2022 target STI: 95% of base salary for the presidents and 90% for the other BoM members

The weight of the individual STI performance metrics is as follows:

–60% Financial

–20% Technology Leadership Index

–20% Customer Orientation

LTI (share-based incentive)

Link to strategy/rationale

2022 policy

Contribute to the strategy, long-term interests and sustainability of ASML using performance measures which balance the direct interest of ASML’s investors, the long-term financial success of ASML, the long-term continuation of technological advancement and the environmental and social dimensions of sustainability.

Maximum target LTI: capped at 200% of base salary
2022 target LTI: 160% of base salary

The weight of the individual LTI performance metrics is as follows:

–30% Relative TSR

–20-30% ESG measures; 2022 weight: 20%

–20-30% Technology Leadership Index; 2022 weight: 20%

–20-30% Strategic value drivers; 2022 weight: 30%

Other elements of fixed remuneration (pension and other benefits)

Link to strategy/rationale

2022 policy

Contribute to the competitiveness of the overall remuneration package and create alignment with market practice.

–Pension arrangement based on the ‘excedent’ (supplementary) arrangement for ASML employees in the Netherlands – a defined contribution plan

–Expense reimbursements, such as company car costs, travel expenses, representation allowances, housing costs (gross amount before taxes), social security costs and health and disability insurance costs

Share ownership guidelines

Link to strategy/rationale

2022 policy

Requirement for a minimum share ownership by members of the Board of Management. Ensure alignment between the interests of the Board of Management members and ASML’s long-term value creation.

–Presidents three times annual base salary, other Board members two times annual base salary

–5-year period to comply for new members

–Supervisory Board has discretion to allow a temporary deviation in extraordinary circumstances

–Any shortfall will be remediated through the next vesting of shares

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Board of Management remuneration (continued)

~~ASML ANNUAL REPORT 2021 161~~2022 Remuneration Policy changes

Remuneration benchmarking

Reference group

2021 policy

2022 policy

–Consisting of similar-sized European companies from various industry sectors

–Consisting of 20 most relevant technology and R&D orientated companies, including ASML’s competitors and business peers and (indirect) customers

–Composition of companies in reference group takes into account ASML’s geographic location – it’s weighted toward European companies (75% weighting), with some US companies (25% weighting)

Incentive levels

2021 policy

2022 policy

STI

–Target: 80% base salary (presidents and other BoM members)

–Phased increase from 80% of base salary to 120% of base salary for presidents and 100% for the other BoM members

LTI

–Target: 120% base salary (presidents and other BoM members)

–Phased increase from 120% of base salary to 200% of base salary for presidents and other BoM members

Performance measures

2021 policy

2022 policy

STI

The weight of the individual performance metrics:

–60% Financial

–20% Technology Leadership Index

–20% Market Position

–60% Financial

–20% Technology Leadership Index

–20% Customer Orientation

LTI

–Threshold pay-out at -20% versus the PHLX index

–(Threshold pay-out as 50% of target)

–Proposed performance incentive zone adjusted into percentile-based relative TSR ranking approach instead of fixed range

–Reduced vesting level pay-out with 25th percentile performance at 25% of target

The weight of the individual performance metrics:

–40% ROAIC

–30% Relative TSR

–20% Technology Leadership Index

–10% Sustainability

–30% Strategic value drivers

–30% Relative TSR

–20% Technology Leadership Index

–20% ESG

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Board of Management remuneration (continued)

Remuneration of Board of Management in ~~2021~~2022

The remuneration of the Board of Management for the financial year ~~2021~~2022 is an implementation of and complies with the ~~2021~~2022 Remuneration Policy for the Board of Management, as further explained below. As such, the remuneration of the Board of Management in ~~2021~~2022 contributed to the objectives of the ~~2021~~2022 Remuneration Policy for the Board of Management and, as a result, to ~~ASML's~~ASML’s strategy aimed at long-term value creation. Scenario analyses of the possible outcomes of the variable remuneration components and their effect on the remuneration of the Board of Management ~~are~~have been conducted.

Base Salary

The base salaries of the members of the Board of Management were set at the beginning of ~~2021.~~2022. The Supervisory Board decided not to apply a base salary increase for 2022 compared with 2021 ~~compared to 2020 levels. The reason to keep~~levels, as the base salary ~~levels unchanged,~~ was considered competitive compared with the ~~2021 revision of the Remuneration Policy, which~~ reference group.~~included an increase of the at-target level of the long-term incentive, thereby increasing total direct compensation.~~ For ~~2021 base~~2022 base salary levels, reference is made to the section Total remuneration Board of ~~Management.~~Management.

~~Short-Term Incentive~~

Short-term incentive 2022

The financial and non-financial target levels for the STI were set at the beginning of the ~~2021~~2022 financial year in accordance with the ~~2021~~2022 Remuneration Policy for the Board of Management and taking into account the annual plan (forecast) for ~~2021.~~2022. The rationale for amending the Remuneration Policy of the Board of Management including replacement of certain STI metrics is included in the 2022 Remuneration Policy for the Board of Management of ASML Holding N.V.

For the STI, the Supervisory Board selected the financial performance metric below, taking into consideration ASML’s business challenges and circumstances in 2022:

–EBIT Margin %, measuring Income from operations as percentage of Total net sales

In addition, the following ~~qualitative~~non-financial performance metrics applied for the STI in ~~2021:~~2022:

•–~~Market Position,~~Customer Orientation: This metric consisted of four equally weighed sub-targets measuring ASML’s ~~performance~~positioning in the market ~~not only~~and its performance in terms of ~~market share, but also~~customer experience, customer satisfaction and quality. The ~~Market Position metric consisted of several sub-metrics. For~~sub-targets were: the Applications ~~and DUV business,~~ market share ~~targets were set. These targets related to certain~~of YieldStar and HMI Single Beam, as these are segments of the Applications ~~and DUV markets~~market where ASML faces intense ~~competition. For~~competition; DUV output in terms of systems, in light of the 2022 supply-demand situation; EUV ~~no market share target was set, given that ASML is the sole supplier of EUV technology. Instead, a target related to the~~ availability of the NXE:~~3400~~3600D tool, ~~was used, as availability~~which is a key metric reflecting the quality of the performance of our tools at the customer site and as such ~~the Supervisory Board~~is considered it an appropriate metric to measure customer ~~satisfaction. Overall~~satisfaction; and overall customer satisfaction, ~~was also part of the Market Position metric and~~which was measured using an external benchmark: the VLSI Survey. The Applications and DUV market share metrics and the EUV availability metric together accounted for 50% of the total weighting of the Market Position metric. The VLSI survey result accounted for the remaining 50% of the Market Position target.

•

–~~Technology~~Technology Leadership ~~Index, a~~Index: A set of internal targets related to ~~ASML's~~ASML’s product and technology roadmaps. ~~As such, it~~The index measures the technological progress made by ASML over the relevant performance period, supporting our efforts to drive innovation and thereby helping our customers achieve their goals and realize new technology and applications. The Technology Leadership Index for ~~2021~~2022 consisted of a list ~~of 17~~of 18 key projects in Applications, DUV and EUV. ~~These~~Among others, these projects ~~are for example~~ related to improvements in inspection and metrology systems, manufacturing capacity expressed in wafers per day, component commonality to decrease costs and the power of the (EUV) light ~~source, etcetera.~~source. Exact details of the key projects included in the Technology Leadership Index are not disclosed, given that this would be detrimental to the Company and its stakeholders from a competitive and strategic point of view. To calculate the Technology Leadership Index performance, each project is scored between 1 and 10; the overall Technology Leadership Index score is the average of the 1718 individual scores. ~~Both~~Both the STI and LTI make use of the Technology Leadership Index as a qualitative performance measure. The objectives are the same for both, but the applicable measures, targets and performance periods are different and aligned with specific short- and long-term strategic priorities.

In addition to the Technology Leadership Index and Market Position performance metrics, three financial performance metrics were selected for the 2021 STI. Based on ASML's business challenges and circumstances in 2021, the Supervisory Board chose the following three financial measures from the pre-defined list as included in the 2021 Remuneration Policy for the Board of Management:

•~~EBIT Margin %, measuring Income from operations as percentage of Total net sales~~

•~~EUV Gross Margin %, measuring Gross Profit as a percentage of Total net sales for EUV~~

•~~Free Cash Flow, measuring Cash Flow from Operating Activities minus purchase of property, plant and equipment and Purchase of intangible assets.~~

After the end of the performance period, the Supervisory Board assessed the performance achieved against the targets, in cooperation with the relevant ~~subcommittees~~subcommittees: the Technology Committee, Audit Committee and Remuneration Committee. The target and actual achievement levels for the STI performance criteria are set out in the table below, ~~except for figures~~excluding information which ~~qualify~~qualifies as commercially or strategically ~~sensitive information, being the figures related to availability and market share related elements of the Market Position metric.~~ sensitive. The Supervisory Board considers disclosure of this information not to be in the interest of ASML and its stakeholders. In view of transparency, we report performance for these metrics as percentage of target.

~~ASML ANNUAL REPORT 2021 162~~

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Board of Management remuneration (continued)

Performance metric
Performance Targets2
Actual Outcome
Payout4
Weight Threshold Target Stretch % target
Market Position
Availability & market share 10 % * 122.5 %
VLSI Survey 10 % Top 5 Top 3 Top 2 Top 2 150.0 %
Total Market Position 20 % 136.3 %

Technology Leadership Index 20 % 4 6 10 8 125.0 %

EBIT Margin (%) 3
20 % 24 % 27 % 30 % 36 % 150.0 %

EUV Gross Margin % 20 % 43.5 % 45.5 % 47.5 % 46.0 % 111.3 %

Free Cash Flow (€, in millions) 1
20 % 1,000 2,000 3,000 8,158 150.0 %

Total 100 % 134.5 %


	Performance targets1				Actual outcome		Pay-out2
	Weight	Threshold	Target	Stretch			% target
EBIT Margin (%) (Non-GAAP measure)	60%	33%	35%	37%	34.5	%	88.1	%

Customer Orientation	20%						105.0	%
Consisting of the following equally weighted sub-targets:
Applications market share	5%	*					120.0	%
DUV output (systems)	5%	*					—	%
EUV availability	5%	*					150.0	%
VLSI customer survey	5%	Top 5	Top 3	Top 2	Top 2		150.0	%

Technology Leadership Index	20%	4	6	10	8.1		126.3	%

Total	100%						99.1	%

1.Free Cash Flow target levels and actuals are excluding early payments received in this financial year from clients without a contractual payment obligation in 2021. Actual Outcome Free Cash Flow (Non-GAAP measure) is calculated as Cash Flow from Operating Activities of €10,846 million minus Purchase of property, plant and equipment of €901 million, minus purchases of Intangible assets of €39.6 million and minus early payments received in this financial year from clients without a contractual payment obligation in 2021 of €1,747 million resulting in an Actual Outcome of €8,158 million.

2.Certain performance targets (*) are not disclosed due to strategic or commercial sensitivity.

3.2.~~Actual Outcome~~The pay-out % is based on the pay-out levels as included in the Summary of 2022 Remuneration Policy Board of Management.

The 2022 EBIT Margin % (Non-GAAP measure), of 30.7% is calculated as Income from ~~Operations~~operations of ~~€6,750~~€6,501 million divided by Total net sales of ~~€18,611 million resulting~~€21,173 million.

The Supervisory Board applied an adjustment for fast shipments on the STI financial performance metric EBIT Margin % result. The rationale behind this decision is that fast shipments are a change in the business model made on request of our customers; the Board of Management decided to honor these customer requests, as this was considered the best decision in the interest of ASML and its stakeholders, especially also in light of the global chip shortage; however, fast shipments lead to a delay in revenue recognition and as such have a negative impact on the EBIT Margin %. Considering the foregoing, the Supervisory Board decided to normalize the EBIT Margin % result for these fast shipments. The adjustment for the delay in revenue recognition due to fast shipments results in an ~~Actual Outcome~~EBIT margin % of ~~36%.~~34.5% and a total STI pay-out as % of target of 99.1% compared with 46.3% without adjustment.

4.The ~~Payout %~~composition of customer performance changed, since DUV is now measured based on ~~the payout levels as included~~output in systems. Performance in the ~~section Summary~~other sub targets was comparable to last year.

The actual outcome for Technology Leadership Index of ~~2021 Remuneration Policy Board of Management.~~8.1 is in line with last year performance.

The total STI outcome for current Board of Management results in a cash pay-out of ~~€4.4~~€3.8 million, representing a payout as % of target of ~~134.5%~~99.1%.

~~The Actual Performance outcome~~Short-Term Incentive 2023

For 2023, the Supervisory Board has decided to apply the following STI performance measures:


			Weight
EBIT Margin (%) (Non-GAAP measure)			60%

Customer Orientation			20%
Consisting of the following equally weighted sub-targets:
Applications market share			5%
DUV output (systems)			5%
EUV availability			5%
TechInsights (f.k.a. VLSI) customer survey			5%

Technology Leadership Index			20%

Total			100%

In setting the target levels for the performance metric EBIT Margin % for 2023, the Supervisory Board has taken the assumption that the timing of ~~36% is mainly driven by an~~revenue recognition of fast shipments will be the same as it was in 2022, in line with the 2022 normalization applied for fast shipments. In case of any change in accounting treatment, which would no longer result in a delay in revenue recognition, the Supervisory Board intends to increase the EBIT Margin % target levels accordingly.

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Board of Management remuneration (continued)

Board of Management Remuneration in ~~sales and profitability. Profitability increased for our EUV and DUV immersion systems, as we deliver more value to our customers. The improved profitability~~2022 – Long-term incentive

Conditionally granted Long-term incentive 2022–2024 Plan in ~~our installed base business is through a ramp in production and economies~~2022

At the beginning of ~~scale.~~

~~The Actual Performance outcome for Free Cash Flow of €8,158 million is mainly driven by strong Net cash provided by operating activities due~~2022, 19,105 performance shares were conditionally granted to the ~~increase~~current members of the Board of Management for the 2022-2024 LTI performance plan. These conditional grants are based on the maximum achievable opportunity.

At the beginning of 2022, the Supervisory Board, in ~~Net income~~line with the recommendation of the Remuneration Committee, selected the performance metrics to be used to measure ASML’s performance related to strategic value drivers and ~~increase~~ESG Sustainability. The Supervisory Board also set the target levels related to all performance metrics for the
2022–2024 LTI Plan, as listed below. This was done taking into account the long-term product roadmap, ESG goals and the long-term financial plan, thereby ensuring alignment between the various targets and ASML’s long-term strategic priorities and encouraging behavior focused on long-term value creation. The rationale for amending the Remuneration Policy of the Board of Management including replacement of certain LTI metrics is included in ~~down payments from our customers.~~

~~Long-Term Incentive~~the 2022 Remuneration Policy for the Board of Management of ASML Holding N.V.

For the 2022-2024 LTI Plan, the following performance metrics apply, in accordance with the ~~2021~~2022 Remuneration Policy for the Board of Management:

•–Total shareholder return vs. Index ~~measuring ASML's~~(TSR): Measuring ASML’s relative change in share price, plus dividends paid over the relevant performance period. ~~ASML's total shareholder return~~The TSR is calculated as the difference between (i) the average (closing) share price during the last quarter of the performance period and (ii) the average (closing) share price during the quarter preceding the performance period; in the calculation, dividends are reinvested at the ex-dividend date. The TSR of ASML (calculated with the ASML New York share) is compared towith the PHLX Semiconductor Sector ~~Index, a~~Index. This NASDAQ index is designed to track the performance of a set of companies engaged in the design, distribution, manufacture and sale of semiconductors. There are two versions of this index, a price return index and a total return index, the latter of which has been chosen (NASDAQ: X.SOX), as this index reinvests cash dividends, equivalent to the TSR definition described above.

•–~~Return~~Strategic value driver: Normalized three-year average cash conversion rate is a measure to ensure a focus on ~~Average Invested Capital (ROAIC), measuring ASML’s rate of return~~balance sheet and cash generation, in addition to the focus on ~~capital it has put to work, regardless of our capital structure. It~~margin that is ~~used as a fundamental metric to measure value creation~~already part of the ~~company.~~2022 STI (by including EBIT Margin). The ~~ROAIC~~Normalized Cash Conversion Rate percentage is calculated over a three-year average by dividing ~~the Income after income taxes~~Normalized Free Cash Flow (non-GAAP measure) by ~~the Average Invested Capital.~~Net Income. Free Cash Flow is a non-GAAP measure and is defined as net cash provided by operating activities minus purchase of property, plant and equipment and purchase of intangible assets. Normalized Free Cash Flow (non-GAAP measure) is Free Cash Flow (non-GAAP measure) excluding early payments received in a certain financial year from customers without a contractual payment obligation in that financial year.

•–Technology Leadership ~~Index, a~~Index: A qualitative measure which is also applied for the STI. ~~For~~As a metric for the ~~definition of~~LTI, the Technology Leadership Index ~~and an explanation of how it contributes to the corporate strategy, reference is made to the section Short-Term Incentive. The Technology Leadership Index as metric for the LTI~~ is more forward looking than its STI equivalent. It consists of targets to be achieved three years ahead, two years ahead and in the coming year. Each year, new targets are defined for the period three years ahead. The targets for two years ahead are based on the ~~prior year~~prior-year targets (that were three years ahead at that ~~moment)~~time) and a correction factor on the score (up or down) depending on whether targets appeared to be easier or more difficult to achieve. The same approach is utilized for ~~the~~ subsequent years. The total score for the Technology Leadership Index over the three-year performance period is the average of the scores over the three years, including the relevant correction factors applied on each ~~year's~~year’s score.

•–~~Sustainability, a~~ESG: A qualitative measure ~~for determining our performance~~consisting of three equally weighted sub-targets: (1) EUV energy use per wafer pass, (2) employee engagement and (3) the percentage of female employees in ~~the area of sustainability~~a job grade 13+.

Performance metric

Performance targets

Weight

Threshold

Target

Maximum

Relative TSR

30%

Lower quartile

Median

Upper quartile

Normalized three-years average Cash Conversion Rate %1

30%

80.0%

90.0%

95.0%

ESG Measures

20%

Consisting of:

EUV energy use per wafer pass

7.0 kWh

6.5 kWh

6.0 kWh

Employee engagement

X2 – 4% point

X2 – 3% point

% female representation in JG13+

10%

12%

14%

Technology Leadership Index

20%

Total

100%

1.The Normalized three-year average Cash Conversion Rate % (CCR) is calculated by ~~benchmarking our result~~dividing Normalized Free Cash Flow (Non-GAAP measure) by Net Income (three-year average). Free Cash Flow (Non-GAAP measure) is normalized by excluding early payments received in a certain financial year from ~~the annual comprehensive Dow Jones Sustainability Index (DJSI) against the best of the semiconductor industry. This DJSI Assessment is~~customers without a ~~comprehensive assessment measuring our performance on more than 20 ESG aspects. It allows us to benchmark our company performance~~contractual payment obligation in the wider field of ESG with our industry peers and drive continuous improvement. Underlying is our Sustainability Strategy 2019-2025 containing a set of 16 KPIs and targets, which we define by means of a comprehensive materiality assessment and input from continuous stakeholder engagement. that financial year.

2.~~Read more in: Non-financial statements - Materiality assessment.~~X = top 25% companies.

~~ASML ANNUAL REPORT 2021 163~~

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Board of Management remuneration (continued)

Vesting ~~LTI 2019-2021~~under the Long-Term Incentive 2020–2022 Plan

~~After~~Following the end of the three-year performance period ~~2019-2021,~~2020-2022, the Supervisory Board assessed the performance achieved against the LTI targets, in cooperation with the Technology Committee, Audit Committee and Remuneration Committee. The performance metrics that applied to the LTI 2020-2022 Plan were Relative Total Shareholder Return vs. Index, Return on Average Invested Capital (ROAIC), Technology Leadership Index and Sustainability, in accordance with the 2020 Remuneration Policy for the Board of Management. The target and actual achievement levels for the LTI performance criteria based on the Remuneration Policy for the Board of Management are set out in the table below.

The Supervisory Board applied an adjustment for the pay-out related to the ROAIC performance metric of the 2019-2021 LTI plan, in order to bring the performance metric in line with the metric in use for the 2021-2023 plan and the previously adjusted 2018-2020 plan. The adjustment resulted in a payout of 193.3% for the performance metric ROAIC compared to Stretch performance (200%) on an unadjusted basis, and was therefore unfavorable for the outcome under the 2019-2021 LTI plan. This adjustment has no incremental accounting impact since expenses are recognized based on the maximum Stretch performance.

~~The target and achievement levels for the 2019-2021 LTI performance criteria are set out in the table below.~~


																		Performance targets					Actual performance	Pay-out %2
Performance metric	Performance metric	Performance Targets										Actual Performance		Payout %2			Performance metric	Weight	Threshold	Target	Exceed	Stretch
		Weight		Threshold		Target		Exceed		Stretch
Relative TSR	Relative TSR	30	%	(20)	%	0	%	n/a		20	%	161.1	%	200.0	%		Relative TSR	30%	(20%)	0%	n/a	20%	41.4%	200%
ROAIC 1	ROAIC 1	40	%	27.0	%	29.5	%	32.0	%	34.5	%	34.2	%	193.3	%		ROAIC1	40%	29.5%	31.0%	32.5%	34.0%	48.2%	200%
Technology Leadership Index	Technology Leadership Index	20	%	4		6		8		10		8.3		157.5	%		Technology Leadership Index	20%	4	6	8	10	8.3	158.3%
Sustainability	Sustainability	10	%	≤ 16%		≤ 13%		n/a		≤ 7%		12.1	%	115.2	%		Sustainability	10%	≤13.5%	≤11%	n/a	≤6%	10.8%	104.9%

Total	Total	100	%											180.3	%	3	Total	100%						182.2%	3

1.~~Actual Performance score~~The ROAIC ~~of 34.2%~~(Non-GAAP measure) is ~~the Normalized score. ROAIC is calculated~~based on a three-year average by dividing the Income after income taxes by the Average Invested Capital. Average Invested Capital is calculated by taking the average of Total Assets minus Cash, Short Term Investments, Current liabilities and
Long-term contract liabilities at the start and end of each quarter over three years. We believe that ROAIC is a meaningful measure because it quantifies our effectiveness in generating returns relative to the capital invested in our business over the past three years.

2.The ~~Payout~~Pay-out % is based on the ~~payout~~pay-out levels as included in the ~~section Summary of 2021~~2020 Remuneration Policy Board of Management.

3.Total Actual Performance score of ~~180.3%~~182.2% is based on weighting of individual performance metrics multiplied ~~with~~by the ~~payout~~pay-out %.

The total LTI outcome results in a share vesting of ~~180.3%~~182.2% of target.

~~Grant 2021~~LTI Plan 2023-2025

At the beginning of ~~2021, 28,354~~2023, 28,604 performance shares were conditionally granted to the current members of the Board of Management for the ~~2021~~2023-2025 LTI performance plan. These conditional grants are based on the maximum achievable ~~opportunity.~~opportunity for 2023.

~~The targets levels related~~

For the 2023-2025 performance period, the Supervisory Board has decided to apply the following LTI performance measures ~~ROAIC, Technology Leadership Index~~ and ~~Sustainability were set at the beginning of 2021 for the performance period 2021-2023. This was done taking into account the long-term product roadmap, sustainability goals and the long-term~~target setting:

Performance targets

Performance metric

Weight

Threshold

Target

Maximum

Relative TSR

30%

As per remuneration policy

Normalized three-year average Cash Conversion Rate %1

30%

85%

90%

95%

ESG measures

20%

Consisting of:

Net zero emission (Scope 1+2) with minimum compensation

<37kT compensation

<30kT compensation

<20kT compensation

Employee engagement

X2 – 4% point

X2 – 2% point

Total and JG9+ female Inflow

22%

24%

26%

Technology Leadership Index

20%

Total

100%

1.The Normalized three-year average Cash Conversion Rate % (CCR) is calculated by dividing Normalized Free Cash Flow (Non-GAAP measure) by Net Income (three-year average). Free Cash Flow (Non-GAAP measure) is normalized by excluding early payments received in a certain financial ~~plan, thereby ensuring alignment between the various targets and ASML’s long-term strategic priorities and encouraging behavior focused on long-term value creation.~~year from customers without a contractual payment obligation in that financial year.

2.X = top 25% companies.

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Board of Management remuneration (continued)

Other remuneration

In ~~2021,~~2022, members of the Board of Management ~~members~~ participated in the pension arrangement for the Board of Management, which is based on the ‘excedent’ (supplementary) ~~arrangement~~arrangement for our employees in the Netherlands, a defined contribution opportunity as defined in Dutch fiscal regulations. It consists of a gross pension element (for the salary below approximately ~~EUR 112,000)~~€115k) and a net pension element (for ~~the~~a salary above ~~EUR 112,000)~~€115k). Some members opted out of the net pension due to different tax treatment of this outside the Netherlands. Details onof the incurred accounting expenses relating to the application of the pension arrangement in ~~2021~~2022 can be found in the table Total Remuneration Board of Management.

Expenses reimbursed by ASML in ~~2021~~2022 included company car costs, representation allowances, social security costs and health and disability insurance costs.

Share ownership guidelines

The table below shows the share ownership ~~requirement,~~guidelines, number of outstanding vested shares and share ownership ratio of each Board of Management member as per December 31, ~~2021.~~2022. All members of the Board of Management complied with the minimum ownership guidelines per year end 2022.

BoM Member Ownership requirement 2021 base salary in € thousands Total vested shares
Ownership ratio1
P.T.F.M. Wennink 3x base 1,020 32,485 22.51
M.A. van den Brink 3x base 1,020 13,066 9.05
F.J.M Schneider-Maunoury 2x base 694 17,506 17.83
R.J.M. Dassen 2
2x base 694 1,613 1.64
C.D. Fouquet 2x base 694 3,488 3.55


Board of Management	Ownership guidelines	2022 base salary in € thousands	Number of outstanding vested shares	Ownership ratio1
P.T.F.M. Wennink	3x base	1,020	38,047	18.79
M.A. van den Brink	3x base	1,020	11,923	5.89
F.J.M. Schneider-Maunoury	2x base	694	17,903	13.00
R.J.M. Dassen	2x base	694	15,549	11.29
C.D. Fouquet	2x base	694	6,470	4.70

1.The Ownership ratio is calculated by multiplying the ~~total~~number of outstanding vested shares with the share price of ~~€706.70~~ €503.80 (based on the closing share price of December ~~31, 2021)~~30, 2022) and dividing this by the base salary.

2.The Ownership ratio of RJ.M. Dassen as per December 31, 2021 is lower than the internal Ownership requirement. The Remuneration Committee decided to take into account the vesting of shares in January 2022 for the assessment of compliance with the share ownership guidelines per December 31, 2021. This results in a total number of vested shares that far exceeds the ownership requirement due to vesting of the 2019-2021 plans on January 1, 2022.

~~ASML ANNUAL REPORT 2021 164~~

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Board of Management remuneration (continued)

Total remuneration Board of Management

The remuneration of the members of the Board of Management based on incurred accounting expenses in 2022, 2021 ~~2020~~ and ~~2019~~2020 was as follows (amounts are in € thousands):

Board of
Management Financial
Year Base salary Pension Other benefits Total fixed % Fixed STI LTI Total variable % Variable Total Remuneration Relative proportion fixed vs. variable
P.T.F.M. Wennink 2021 1,020 206 57 1,283 26.6 % 1,098 2,439 3,537 73.4 % 4,820 0.36
2020 1,020 216 57 1,293 28.3 % 1,135 2,136 3,271 71.7 % 4,564 0.40
2019 1,000 207 53 1,260 28.9 % 1,070 2,031 3,101 71.1 % 4,361 0.41
M.A. van den Brink 2021 1,020 206 56 1,282 26.6 % 1,098 2,439 3,537 73.4 % 4,819 0.36
2020 1,020 216 57 1,293 28.3 % 1,135 2,136 3,271 71.7 % 4,564 0.40
2019 1,000 207 52 1,259 28.9 % 1,070 2,031 3,101 71.1 % 4,360 0.41
F.J.M.
Schneider-
Maunoury 2021 694 115 36 845 26.8 % 747 1,566 2,313 73.2 % 3,158 0.37
2020 694 122 36 852 29.1 % 773 1,302 2,075 70.9 % 2,927 0.41
2019 680 114 30 824 30.3 % 728 1,172 1,900 69.7 % 2,724 0.43
R.J.M. Dassen 2021 694 115 51 860 22.6 % 747 2,193 2,940 77.4 % 3,800 0.29
2020 694 100 51 845 22.2 % 773 2,186 2,959 77.8 % 3,804 0.29
2019 680 93 47 820 27.7 % 728 1,408 2,136 72.3 % 2,956 0.38
C.D. Fouquet 2021 694 78 52 824 26.3 % 747 1,566 2,313 73.7 % 3,137 0.36
2020 694 83 51 828 27.8 % 773 1,374 2,147 72.2 % 2,975 0.39
2019 680 74 47 801 36.4 % 728 674 1,402 63.6 % 2,203 0.57
Total Board of Management 2021 4,122 720 252 5,094 25.8 % 4,437 10,203 14,640 74.2 % 19,734 0.35
2020 4,122 737 252 5,111 27.1 % 4,589 9,134 13,723 72.9 % 18,834 0.37
2019 4,040 695 229 4,964 29.9 % 4,324 7,316 11,640 70.1 % 16,604 0.43


Board of Management	Financial Year	Base salary	Pension	Other benefits	Total fixed	% Fixed		STI	LTI	Total variable	% Variable		Total Remuneration	Relative proportion fixed vs. variable
P.T.F.M. Wennink	2022	1,020	206	58	1,284	30.0	%	961	2,035	2,996	70.0	%	4,280	0.43
	2021	1,020	206	57	1,283	26.6	%	1,098	2,439	3,537	73.4	%	4,820	0.36
	2020	1,020	216	57	1,293	28.3	%	1,135	2,136	3,271	71.7	%	4,564	0.40
M.A. van den Brink	2022	1,020	206	57	1,283	30.0	%	961	2,035	2,996	70.0	%	4,279	0.43
	2021	1,020	206	56	1,282	26.6	%	1,098	2,439	3,537	73.4	%	4,819	0.36
	2020	1,020	216	57	1,293	28.3	%	1,135	2,136	3,271	71.7	%	4,564	0.40
F.J.M. Schneider-Maunoury	2022	694	141	36	871	30.6	%	619	1,354	1,973	69.4	%	2,844	0.44
	2021	694	115	36	845	26.8	%	747	1,566	2,313	73.2	%	3,158	0.37
	2020	694	122	36	852	29.1	%	773	1,302	2,075	70.9	%	2,927	0.41
R.J.M. Dassen	2022	694	116	51	861	30.4	%	619	1,354	1,973	69.6	%	2,834	0.44
	2021	694	115	51	860	22.6	%	747	2,193	2,940	77.4	%	3,800	0.29
	2020	694	100	51	845	22.2	%	773	2,186	2,959	77.8	%	3,804	0.29
C.D. Fouquet	2022	694	78	53	825	29.5	%	619	1,354	1,973	70.5	%	2,798	0.42
	2021	694	78	52	824	26.3	%	747	1,566	2,313	73.7	%	3,137	0.36
	2020	694	83	51	828	27.8	%	773	1,374	2,147	72.2	%	2,975	0.39
Total Board of Management	2022	4,122	747	255	5,124	30.1	%	3,779	8,132	11,911	69.9	%	17,035	0.43
	2021	4,122	720	252	5,094	25.8	%	4,437	10,203	14,640	74.2	%	19,734	0.35
	2020	4,122	737	252	5,111	27.1	%	4,589	9,134	13,723	72.9	%	18,834	0.37

The remuneration reported as part of the LTI (share awards) is based on costs incurred under ~~US GAAP.~~accounting values. The costs of share awards are charged to the Consolidated Statements of Operations over the ~~3-year~~three-year vesting period based on the number of awards expected to vest for ~~Non-market based~~non-market-based elements. For the first 2two years, we apply the maximum achievable number of share awards, and in the final performance year of the awards we update this estimate for the non-market performance conditions to the best estimated ~~amounts~~number of awards which are anticipated to vest. Any difference between the amount based on the best estimate of achievable number of shares awards and the amount based on the actual number of share awards that vest, is taken into account in the Consolidated Statements of Operations in the financial year in which the share awards vest. ~~Market based~~Market-based elements are accounted at target.

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Board of Management remuneration (continued)

Total remuneration Former Board of Management

F.J. van Hout is no longer part of the Board of Management ~~since~~as he retired from ~~the company~~ASML in 2021.

Former Board of
Management Financial
Year Base salary Pension Other benefits Total fixed % Fixed STI LTI Total variable % Variable Total Remuneration Relative proportion fixed vs. variable
F.J. van Hout 1
2021 231 47 16 294 11.4 % 243 2,036 2,279 88.6 % 2,573 0.13
2020 694 122 47 863 29.4 % 773 1,302 2,075 70.6 % 2,938 0.42
2019 680 114 44 838 30.6 % 728 1,172 1,900 69.4 % 2,738 0.44


Former Board of Management	Financial Year	Base salary	Pension	Other benefits	Total fixed	% Fixed		STI	LTI	Total variable	% Variable		Total Remuneration	Relative proportion fixed vs. variable
F.J. van Hout1	2021	231	47	16	294	11.4	%	243	2,036	2,279	88.6	%	2,573	0.13
	2020	694	122	47	863	29.4	%	773	1,302	2,075	70.6	%	2,938	0.42

1.The 2021 total remuneration of F.J. van Hout ~~is excluding~~excluded an estimated ~~amount of €8.8 million to account for the~~ tax levy payable to the Dutch tax authorities by the Company on termination benefits pursuant to ~~Article~~article 32bb of the Dutch ~~wage tax act.~~Wage Tax Act.

The 2021 STI of Mr. van Hout is pro-rated based on the days of service provided in 2021. Mr. van Hout will remain entitled to the performance shares granted under the LTI plans in 2018, 2019 and 2020, which will vest in accordance with the relevant performance criteria as stated in the grant letters. The grant of the 2021-2023 LTI plan is pro-rated based on the days of service provided in 2021. All LTI expenses for the running LTI plans are accounted in 2021, since no services are provided beyond the end of the service period in 2021. The total disclosed remuneration is excluding an estimated amount of €8.8 million to account for the tax levy payable to the Dutch tax authorities by the Company on termination benefits pursuant to Article 32bb of the Dutch wage tax act. Total remuneration expense for Mr. van Hout including this tax levy are €11.4 million for the financial year 2021.

~~ASML ANNUAL REPORT 2021 165~~

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Board of Management remuneration (continued)

Share-based payments

~~Performance based~~Performance-based share-based remuneration for current members of the Board of Management is disclosed in ~~below table.~~the table below. Fractional shares are rounded down to full shares for reporting purposes.

Market based element Non-Market based element
Board of
Management Grant date Status Full control Number of shares at target Fair value at grant date Number of shares at target Fair value at grant date Total target shares at grant date Maximum shares (200%) Vesting date Number of shares at vesting date Year-end share price in year of vesting End of lock-up date
P.T.F.M.
Wennink 1/22/21 Conditional No 1,053 635.6 2,455 454.9 3,508 7,016 1/1/24 n/a n/a 1/1/26
1/24/20 Conditional No 1,387 286.9 3,235 263.7 4,622 9,245 1/1/23 n/a n/a 1/1/25
7/19/19 Unconditional No 2,217 245.4 5,173 194.4 7,390 14,780 1/1/22 13,326 706.7 1/1/24
1/19/18 Unconditional No 1,958 215.1 4,570 162.8 6,528 13,056 1/19/21 9,566 439.9 1/19/23
1/20/17 Unconditional No 3,037 145.4 7,085 110.5 10,122 20,243 1/1/20 16,733 263.7 1/1/22
M.A. van
den Brink 1/22/21 Conditional No 1,053 635.6 2,455 454.9 3,508 7,016 1/1/24 n/a n/a 1/1/26
1/24/20 Conditional No 1,387 286.9 3,235 263.7 4,622 9,245 1/1/23 n/a n/a 1/1/25
7/19/19 Unconditional No 2,217 245.4 5,173 194.4 7,390 14,780 1/1/22 13,326 706.7 1/1/24
1/19/18 Unconditional No 1,958 215.1 4,570 162.8 6,528 13,056 1/19/21 9,566 439.9 1/19/23
1/20/17 Unconditional No 3,037 145.4 7,085 110.5 10,122 20,243 1/1/20 16,733 263.7 1/1/22
F.J.M.
Schneider-
Maunoury 1/22/21 Conditional No 717 635.6 1,670 454.9 2,387 4,774 1/1/24 n/a n/a 1/1/26
1/24/20 Conditional No 858 286.9 2,001 263.7 2,859 5,718 1/1/23 n/a n/a 1/1/25
7/19/19 Unconditional No 1,371 245.4 3,198 194.4 4,569 9,137 1/1/22 8,239 706.7 1/1/24
1/19/18 Unconditional No 1,125 215.1 2,626 162.8 3,751 7,502 1/19/21 5,496 439.9 1/19/23
1/20/17 Unconditional No 1,745 145.4 4,070 110.5 5,815 11,629 1/1/20 9,613 263.7 1/1/22
R.J.M.
Dassen 1/22/21 Conditional No 717 635.6 1,670 454.9 2,387 4,774 1/1/24 n/a n/a 1/1/26
1/24/20 Conditional No 858 286.9 2,001 263.7 2,859 5,718 1/1/23 n/a n/a 1/1/25
7/19/19 Unconditional No 1,371 245.4 3,198 194.4 4,569 9,137 1/1/22 8,239 706.7 1/1/24
1/25/19 Unconditional No 3,000 169.0 7,000 148.3 10,000 20,000 1/1/22 18,032 706.7 1/1/24
7/20/18 Unconditional No 657 274.6 1,531 185.0 2,188 4,376 1/19/21 3,207 439.9 1/19/23
C.D. Fouquet 1/22/21 Conditional No 717 635.6 1,670 454.9 2,387 4,774 1/1/24 n/a n/a 1/1/26
1/24/20 Conditional No 858 286.9 2,001 263.7 2,859 5,718 1/1/23 n/a n/a 1/1/25
7/19/19 Unconditional No 1,371 245.4 3,198 194.4 4,569 9,137 1/1/22 8,239 706.7 1/1/24
7/20/18 Unconditional No 844 274.6 1,969 185.0 2,813 5,626 1/19/21 4,122 439.9 1/19/23


				Market-based element		Non-market-based elements
Board of Management	Grant date	Status	Full control	Number of shares at target	Fair value at grant date	Number of shares at target	Fair value at grant date	Total number of shares at target	Total number of shares at maximum (200%)	Vesting date	Number of vested shares on publication date	Year-end closing share price in year of vesting	End of lock-up date
P.T.F.M. Wennink	4/29/22	Conditional	No	709	596.0	1,655	533.5	2,364	4,727	1/1/25	n/a	n/a	1/1/27
	1/22/21	Conditional	No	1,053	635.6	2,455	454.9	3,508	7,016	1/1/24	n/a	n/a	1/1/26
	1/24/20	Unconditional	No	1,387	286.9	3,235	263.7	4,622	9,245	1/1/23	8,420	503.8	1/1/25
	7/19/19	Unconditional	No	2,217	245.4	5,173	194.4	7,390	14,780	1/1/22	13,326	706.7	1/1/24
	1/19/18	Unconditional	No	1,958	215.1	4,570	162.8	6,528	13,056	1/19/21	9,566	439.9	1/19/23

M.A. van den Brink	4/29/22	Conditional	No	709	596.0	1,655	533.5	2,364	4,727	1/1/25	n/a	n/a	1/1/27
	1/22/21	Conditional	No	1,053	635.6	2,455	454.9	3,508	7,016	1/1/24	n/a	n/a	1/1/26
	1/24/20	Unconditional	No	1,387	286.9	3,235	263.7	4,622	9,245	1/1/23	8,420	503.8	1/1/25
	7/19/19	Unconditional	No	2,217	245.4	5,173	194.4	7,390	14,780	1/1/22	13,326	706.7	1/1/24
	1/19/18	Unconditional	No	1,958	215.1	4,570	162.8	6,528	13,056	1/19/21	9,566	439.9	1/19/23

F.J.M. Schneider-Maunoury	4/29/22	Conditional	No	483	596.0	1,126	533.5	1,609	3,217	1/1/25	n/a	n/a	1/1/27
	1/22/21	Conditional	No	717	635.6	1,670	454.9	2,387	4,774	1/1/24	n/a	n/a	1/1/26
	1/24/20	Unconditional	No	858	286.9	2,001	263.7	2,859	5,718	1/1/23	5,208	503.8	1/1/25
	7/19/19	Unconditional	No	1,371	245.4	3,198	194.4	4,569	9,137	1/1/22	8,239	706.7	1/1/24
	1/19/18	Unconditional	No	1,125	215.1	2,626	162.8	3,751	7,502	1/19/21	5,496	439.9	1/19/23

R.J.M. Dassen	4/29/22	Conditional	No	483	596.0	1,126	533.5	1,609	3,217	1/1/25	n/a	n/a	1/1/27
	1/22/21	Conditional	No	717	635.6	1,670	454.9	2,387	4,774	1/1/24	n/a	n/a	1/1/26
	1/24/20	Unconditional	No	858	286.9	2,001	263.7	2,859	5,718	1/1/23	5,208	503.8	1/1/25
	7/19/19	Unconditional	No	1,371	245.4	3,198	194.4	4,569	9,137	1/1/22	8,239	706.7	1/1/24
	1/25/19	Unconditional	No	3,000	169.0	7,000	148.3	10,000	20,000	1/1/22	18,032	706.7	1/1/24
	7/20/18	Unconditional	No	657	274.6	1,531	185.0	2,188	4,376	1/19/21	3,207	439.9	1/19/23
C.D. Fouquet	4/29/22	Conditional	No	483	596.0	1,126	533.5	1,609	3,217	1/1/25	n/a	n/a	1/1/27
	1/22/21	Conditional	No	717	635.6	1,670	454.9	2,387	4,774	1/1/24	n/a	n/a	1/1/26
	1/24/20	Unconditional	No	858	286.9	2,001	263.7	2,859	5,718	1/1/23	5,208	503.8	1/1/25
	7/19/19	Unconditional	No	1,371	245.4	3,198	194.4	4,569	9,137	1/1/22	8,239	706.7	1/1/24
	7/20/18	Unconditional	No	844	274.6	1,969	185.0	2,813	5,626	1/19/21	4,122	439.9	1/19/23

~~Performance based~~

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Board of Management remuneration (continued)

Performance-based share-based remuneration for former ~~member~~members of the Board of Management is disclosed in below table. Fractional shares are rounded down to full shares for reporting purposes.


					Market based element		Non-Market based element												Market-based element		Non-market-based elements
Former Board of Management	Former Board of Management	Grant date	Status	Full control	Number of shares at target	Fair value at grant date	Number of shares at target	Fair value at grant date	Total target shares at grant date	Maximum shares (200%)	Vesting date	Number of shares at vesting date	Year-end share price in year of vesting	End of lock-up date	Former Board of Management	Grant date	Status	Full control	Number of shares at target	Fair value at grant date	Number of shares at target	Fair value at grant date	Total number of shares at target	Total number of shares at maximum (200%)	Vesting date	Number of vested shares on publication date	Year-end closing share price in year of vesting	End of lock-up date
F.J. van Hout	F.J. van Hout	1/22/21	Conditional	No	239	635.6	557	454.9	796	1,592	1/1/24	n/a		1/1/26	F.J. van Hout	1/22/21	Conditional	No	239	635.6	557	454.9	796	1,592	1/1/24	n/a		1/1/26
		1/24/20	Conditional	No	858	286.9	2,001	263.7	2,859	5,718	1/1/23	n/a		1/1/25		1/24/20	Unconditional	No	858	286.9	2,001	263.7	2,859	5,718	1/1/23	5,208	503.8	1/1/25
		7/19/19	Unconditional	No	1,371	245.4	3,198	194.4	4,569	9,137	1/1/22	8,239	706.7	1/1/24		7/19/19	Unconditional	No	1,371	245.4	3,198	194.4	4,569	9,137	1/1/22	8,239	706.7	1/1/24
		1/19/18	Unconditional	No	1,125	215.1	2,626	162.8	3,751	7,501	1/19/21	5,496	439.9	1/19/23		1/19/18	Unconditional	No	1,125	215.1	2,626	162.8	3,751	7,501	1/19/21	5,496	439.9	1/19/23
		1/20/17	Unconditional	No	1,745	145.4	4,070	110.5	5,815	11,629	1/1/20	9,613	263.7	1/1/22

Reasons, criteria and principal conditions for granting shares

For the reasons and criteria for granting the performance shares to each member of the Board of Management, reference is made to the ~~table summarizing the 2021~~Summary of 2022 Remuneration Policy ~~for the~~ Board of Management and to the section Board of Management Remuneration in ~~2021 - Long Term Incentive~~2022 – Long-term incentive as included in this Remuneration Report.

The principal conditions applicable to the ~~2021~~2022 performance shares are described below. These apply to each member of the Board of Management.

~~ASML ANNUAL REPORT 2021 166~~


Instrument:						Performance ~~Shares~~shares
~~Grant:~~Grant						Conditional grant on an annual basis based on maximum achievable opportunity. The number of performance shares to be conditionally awarded is calculated using the volume-weighted average share price during the last quarter of the year preceding the conditional award.
Grant ~~date:~~date						~~Two days after the publication of ASML’s annual results in January of the year in~~Date on which the ~~three-year~~ performance ~~period starts~~shares are conditionally granted.
Performance ~~period:~~period						~~Three years, starting on January 1 in year~~Period of ~~grant~~three-years over which the achievement of the pre-defined performance targets is measured.
~~Vesting:~~Vesting						The shares will become unconditional ~~in the year~~ after the end of the ~~three-year~~ performance period, depending on the level of achievement of the predetermined performance ~~targets~~targets.
Lock-up ~~period:~~period						The minimum holding period is two years after the vesting date.
						Upon termination of contract, the transfer restrictions will remain in place during the holding period except in case of decease.
						In case a tax payment is due by the members of the Board of Management over the retrieved variable income, performance shares may be partially sold at vesting (‘sell to cover’) in accordance with the law and internal regulations.

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Board of Management remuneration (continued)

Relationship between accounted remuneration and ~~company's~~company’s performance

The following table ~~sets forth~~provides an overview of the relationship between accounted remuneration and the ~~company's~~company’s performance for the past five years:


For the year ended December 31 (€, in thousands)	For the year ended December 31 (€, in thousands)	2017	2018 1	2019	2020	2021	For the year ended December 31 (€, in thousands)	20181	Change (in %)1		2019	Change (in %)		2020	Change (in %)		2021	Change (in %)		2022	Change (in %)
Net sales	Net sales	8,962,658	10,944,016	11,820,001	13,978,452	18,610,994	Net sales	10,944,016	22	%	11,820,001	8	%	13,978,452	18	%	18,610,994	33	%	21,173,448	14	%

Net income based on US GAAP	Net income based on US GAAP	2,066,679	2,591,614	2,592,252	3,553,670	5,883,177	Net income based on US GAAP	2,591,614	25	%	2,592,252	—	%	3,553,670	37	%	5,883,177	66	%	5,624,209	(4)	%

Net income based on EU-IFRS	Net income based on EU-IFRS	2,173,400	2,525,515	2,581,107	3,696,813	6,134,595	Net income based on EU-IFRS	2,525,515	16	%	2,581,107	2	%	3,696,813	43	%	6,134,595	66	%	6,395,775	4	%

ASML share price (closing price on Euronext Amsterdam in €)	ASML share price (closing price on Euronext Amsterdam in €)	145.2	137.2	263.7	397.6	706.7	ASML share price (closing price on Euronext Amsterdam in €)	137.2	(6)	%	263.7	92	%	397.6	51	%	706.7	78	%	503.8	(29)	%

Average number of payroll employees in FTEs	Average number of payroll employees in FTEs	15,136	18,204	22,192	24,727	28,223	Average number of payroll employees in FTEs	18,204	20	%	22,192	22	%	24,727	11	%	28,223	14	%	33,071	17	%


Remuneration P.T.F.M. Wennink (CEO)	Remuneration P.T.F.M. Wennink (CEO)	3,455	3,433	4,361	4,564	4,820	Remuneration P.T.F.M. Wennink (CEO)	3,433	(1)	%	4,361	27	%	4,564	5	%	4,820	6	%	4,280	(11)	%

Remuneration M.A. van den Brink	Remuneration M.A. van den Brink	3,454	3,431	4,360	4,564	4,819	Remuneration M.A. van den Brink	3,431	(1)	%	4,360	27	%	4,564	5	%	4,819	6	%	4,279	(11)	%

Remuneration R.J.M. Dassen	Remuneration R.J.M. Dassen	—	897	2,956	3,804	3,800	Remuneration R.J.M. Dassen	897	—		2,956	230	%	3,804	29	%	3,800	—	%	2,834	(25)	%

Remuneration F.J. van Hout		2,276	2,177	2,738	2,938	2,573

Remuneration C.D. Fouquet	Remuneration C.D. Fouquet	—	1,125	2,203	2,975	3,137	Remuneration C.D. Fouquet	1,125	—		2,203	96	%	2,975	35	%	3,137	5	%	2,798	(11)	%

Remuneration F.J.M. Schneider-Maunoury	Remuneration F.J.M. Schneider-Maunoury	2,260	2,169	2,724	2,927	3,158	Remuneration F.J.M. Schneider-Maunoury	2,169	(4)	%	2,724	26	%	2,927	7	%	3,158	8	%	2,844	(10)	%


Average remuneration per FTE 2		117	115	114	120	122

Average remuneration per FTE2 based on US GAAP							Average remuneration per FTE2 based on US GAAP	115	(2)	%	114	(1)	%	120	5	%	122	2	%	125	2	%


Internal pay ratio (CEO versus employee remuneration) 2		30	30	38	38	40
Average remuneration per FTE2 based on EU-IFRS							Average remuneration per FTE2 based on EU-IFRS	115	(2)	%	114	(1)	%	120	5	%	122	2	%	118	(3)	%
Internal pay ratio (CEO versus employee remuneration based on US GAAP)2							Internal pay ratio (CEO versus employee remuneration based on US GAAP)2	30	—	%	38	27	%	38	—	%	40	5	%	34	(15)	%
Internal pay ratio (CEO versus employee remuneration based on EU-IFRS)2							Internal pay ratio (CEO versus employee remuneration based on EU-IFRS)2	30	—	%	38	27	%	38	—	%	40	5	%	36	(10)	%

Ratio of the percentage increase in annual total compensation for CEO to the percentage increase in average annual remuneration for all employees3 based on US GAAP							Ratio of the percentage increase in annual total compensation for CEO to the percentage increase in average annual remuneration for all employees3 based on US GAAP													(5.5)	n/a
Ratio of the percentage increase in annual total compensation for CEO to the percentage increase in average annual remuneration for all employees3 based on EU-IFRS							Ratio of the percentage increase in annual total compensation for CEO to the percentage increase in average annual remuneration for all employees3 based on EU-IFRS													3.7	n/a

1.The remuneration of the R.J.M. Dassen and C.D. Fouquet iswas lower in 2018 as they were appointed as members of the Board of Management during 2018.

2.The calculation approach of the ~~Internal~~internal pay ratio is disclosed in the section Relationship between CEO and average remuneration (pay ratio). ~~We revised our calculation approach to the internal pay~~

3.The ratio ~~based on the December 2020 guidance from the Monitoring Committee Dutch Corporate Governance Code on section 3.4.1.iv~~ of the ~~Dutch Corporate Governance Code effective~~percentage increase in annual total compensation for CEO to percentage increase in average annual remuneration for all employees is calculated by dividing the % annual increase in the remuneration of the CEO by the % annual increase in the average remuneration per FTE. This ratio is only applicable as of ~~2021. The comparative historical numbers of the internal pay ratio have therefore been restated~~2022 to ~~include the social security expenses in the internal pay ratio numbers. In the calculation, we have taken into account the payroll employees only, since this ensures consistency~~comply with the ~~figures disclosed in the consolidated financial statements. The ratio would be lower in case we would incorporate the temporary employees as they earn on average a higher remuneration.~~GRI Standards 2021.

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Board of Management remuneration (continued)

Explanation of changes in ~~company's~~company’s performance versus remuneration

The foregoing table ~~set out above~~ aims to provide insight into the ~~Company's~~Company’s performance over the past five years and the development of the remuneration. The metrics net sales, net income and share price are used to measure Company performance, as they are key metrics serving as a good proxy for ~~ASML's~~ASML’s general performance, as well as in view of comparability with other companies. The Company has grown significantly over ~~the last~~recent years, not only reflected in the number of employees but also in terms of ~~revenue.~~net sales. Since ~~2017,~~2018, net sales have increased by ~~107%~~93%. The performance of the Company in that same period has increased significantly as well, reflected for example in Net Income ~~(185%~~(117% growth since ~~2017~~2018 based on US GAAP and 153% growth since 2018 based on EU-IFRS) and ASML share price ~~(387%~~(267% growth). As the table shows, the Company performance over the last five years has improved more significantly compared to the development of remuneration in that same period. The growth of the Company has led to revisions of the Remuneration Policy for the Board of Management in 2019, 2021 and ~~2021,~~2022, resulting ~~into~~in higher base salaries as well as higher levels of STI (at target) and LTI (at target). Total remuneration for the Board of Management in 2022 was lower compared to 2021, due to the impact of supply chain issues and inflation on the STI score, and due to a lower number of granted shares at issuance date for the 2020-2022 LTI plan. Actual remuneration may fluctuate year over year depending on actual STI pay-out in any year, as well as the vesting of performance shares (LTI) in any year and the share price at that moment.

Relationship between CEO and average remuneration (pay ratio)

The internal pay ratio1 consists of the CEO’s total remuneration (including all remuneration components) during 2022 of €4,280 thousand, compared to the average remuneration of all employees. The average remuneration of all employees was calculated using the average number of payroll employees in FTE (wages and salaries + social security expenses + pension and retirement expenses + share-based payments)/average number of payroll employees = €4,128 million / 33,071 = €125 thousand. This ratio has not been prepared to comply with the Pay Ratio Disclosure requirements under SEC regulations. The ratio is based on the highest paid individual according to accounting values consisting of fixed and variable remuneration elements compared to the average remuneration of all employees that are in service with the company, which excludes all other Board Members. This calculation approach brings the ratios more in line with the requirements from the Corporate Governance Code.

The internal pay ratio (CEO versus employee remuneration) ~~increased~~based on US GAAP decreased towards ~~40:~~ 34:1 in ~~2021 (2020 38:~~2022 (2021 40:1), and based on EU-IFRS decreased towards 36:1 in 2022 (2021 40:1). Decrease is driven by lower remuneration for the Board of Management in 2022, due to the ~~policy change performed~~impact of supply chain issues and inflation on the STI score, and due to a lower number of granted shares at issuance date for the 2020-2022 LTI plan. In 2022, the remuneration of the employees was adjusted for CLA and merit increases in ~~2021,~~2022. Furthermore, in addition to normalizing the STI score for fast shipments, the 2022 STI score for employees was also adjusted for the impact of supply chain issues and inflation in 2022, which ~~increased remuneration.~~is reflected in the 2022 US GAAP figures. ASML intends to grant competitive remuneration to employees at all position levels within the Company. At each level remuneration should reflect the responsibilities of the role. The build-up of remuneration from level to level should therefore be gradual and in line with increasing responsibilities, also following market practice. At the highest level the steps become gradually bigger as responsibilities ultimately rise from a divisional level to an overall company level. The Supervisory Board considers the current build-up and the overall pay ratio of ~~40:~~34:1 to bebe equitable, considering the current ~~size and organization structure~~performance of the company.

~~ASML ANNUAL REPORT 2021 167~~

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Supervisory Board remuneration

1.This ratio consists of the CEO's total remuneration (including all remuneration components) during 2021 of €4,820 thousand, compared to the average remuneration of all employees. The average remuneration of all employees was calculated using the average number of payroll employees in FTE (wages and salaries + social security expenses + pension and retirement expenses + share-based payments) / average number of payroll employees = €3,439.2 million / 28,223 = €122 thousand. This ratio has not been prepared to comply with the Pay Ratio Disclosure requirements under SEC regulations.

~~Remuneration Supervisory Board~~

In this section of the Remuneration Report, we provide an overview of the 2021 Remuneration Policy for the Supervisory Board as adopted by the General Meeting on April 29, 2021, and as in force ~~as of~~from April 1, ~~2021. The Supervisory Board's Remuneration Policy as adopted by the General Meeting on April 22, 2020 was applicable for the first few months in~~ 2021 ~~as disclosed in the Remuneration Report 2020.~~onwards. It ~~also~~ provides information about the implementation of the 2021 Remuneration Policy for the Supervisory Board in 2022 and contains the details of the Supervisory Board ~~members'~~members’ actual remuneration in ~~2021.~~2022. The 2021 Remuneration Policy for the Supervisory Board can be found in the Governance section of our website.

Remuneration Policy

Remuneration objectives and principles

The 2021 Remuneration Policy for the Supervisory Board is designed to enable ASML to attract and retain qualified Supervisory Board members, ~~which~~who together compose a diverse and balanced Supervisory Board with the appropriate level of skills, competencies and experience required to properly supervise (the execution of) ~~ASML's~~ASML’s strategy, which is focused on the creation of long-term value for all stakeholders.

The 2021 Remuneration Policy for the Supervisory Board is built on the following principles:

•–Transparent – The ~~remuneration policy~~Remuneration Policy and its execution are clear and practical

•–Alignment – The ~~remuneration policy~~Remuneration Policy is benchmarked to market practice

•–Compliant – ASML adopts the highest standards of good corporate governance

•–Simple – The ~~remuneration policy~~Remuneration Policy and its execution are as simple as possible and easily understandable to all stakeholders

•–Fair – The remuneration should reflect the time spent and the responsibilities of the role of the members of the Supervisory Board

•–Independent – The remuneration of a Supervisory Board member may not be dependent on the results of the ~~company.~~company

Reference group and market positioning

The remuneration of the Supervisory Board should be competitive compared towith a relevant reference market. This market is defined using a reference group of companies with a two-tier board structure included in the AEX Index of Euronext Amsterdam. To determine the positioning in this group, enterprise value, revenue and number of employees are taken into account.

~~ASML ANNUAL REPORT 2021 168~~

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Supervisory Board remuneration (continued)

Summary of Remuneration Policy Supervisory Board

~~The~~

This table ~~below~~ provides an overview and description of the elements of the 2021 Remuneration Policy for the Supervisory Board. ~~The table includes the amended Supervisory Board and Committee membership fees resulting from the revision~~

Fixed remuneration

Description

Value

Basic membership fee

Chair of Supervisory Board

€130,000

Vice Chair of Supervisory Board

€94,000

Member of Supervisory Board

€75,000

Chair Audit Committee

€25,500

Member Audit Committee

€18,000

Chair of other Committees

€20,000

Member of other Committees

€14,500

Extra allowance for intercontinental meetings

Description

Value

Extra, fixed allowance paid in connection with additional time commitment for intercontinental travel

€ 5,000 for each meeting that involves intercontinental travel

Expenses

Description

Value

Expenses incurred in relation to meeting attendance are reimbursed. In addition, a fixed net cost allowance is paid, covering certain pre-defined out-of-pocket expenses

Depending on level of expenses

Chair of Supervisory Board

€1,980

Member of Supervisory Board

€1,380

Loans and guarantees

Description

Value

No (personal) loans or guarantees or the like will be granted

Not applicable

Shares and share ownership

Description

Value

No (rights to) shares are granted by way of remuneration. Any holding of ASML shares is for the purpose of long-term investment. Any trading activity is subject to ASML’s Insider Trading Rules

Not applicable

Other arrangements

Description

Value

(Re)appointment based on Dutch law and ASML’s Articles of Association. No claw-back, severance or change in control arrangements are in place

Not applicable

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Supervisory Board remuneration (continued)

Remuneration of the ~~Remuneration Policy as approved at the 2021 AGM.~~

~~Remuneration~~ Supervisory Board in ~~2021~~2022

Overview of the remuneration toof the Supervisory Board members based on incurred accounting expenses over the last five years (amounts are in € thousands):


		Membership fees 2021	Committee fees 2021	Allowances 20211	Proportion fixed vs. variable 2021	Total remuneration 2021	Total remuneration 2020	Total remuneration 2019	Total remuneration 2018	Total remuneration 2017		Membership fees 2022	Committee fees 2022	Allowances 2022	Proportion fixed vs. variable 2022	Total remuneration 2022	Total remuneration 2021	Total remuneration 2020	Total remuneration 2019	Total remuneration 2018
G.J. Kleisterlee	G.J. Kleisterlee	125	51	2	100:0	178	157	154	138	135	G.J. Kleisterlee	130	53	7	100:0	190	178	157	154	138
A.P. Aris	A.P. Aris	87	39	1	100:0	127	95	98	80		A.P. Aris	94	44	6	100:0	144	127	95	98	80
B.M. Conix	B.M. Conix	50	12	1	100:0	63	—				B.M. Conix	75	18	6	100:0	99	63	n/a
D.M. Durcan	D.M. Durcan	74	27	11	100:0	112	57	—			D.M. Durcan	75	35	16	100:0	126	112	57	n/a
D.W.A. East	D.W.A. East	74	17	2	100:0	93	59	—			D.W.A. East	75	18	6	100:0	99	93	59	n/a
T.L. Kelly	T.L. Kelly	74	27	6	100:0	107	88	101	60	—	T.L. Kelly	75	35	16	100:0	126	107	88	101	60
R.D. Schwalb	R.D. Schwalb	74	38	1	100:0	113	104	101	88	86	R.D. Schwalb	75	40	1	100:0	116	113	104	101	88
J.M.C. Stork		74	28	11	100:0	113	100	118	100
A.F.M. Everke											A.F.M. Everke	50	10	6	100:0	66	n/a
A.L. Steegen											A.L. Steegen	50	10	6	100:0	66	n/a
Total	Total	632	239	35	100:0	906	660	572	466	401	Total	699	263	70	100:0	1,032	793	560	454	366

1. Allowances consist of ~~fixed expense~~fixed-expense allowances and allowances for intercontinental meetings.

~~ASML ANNUAL REPORT 2021 169~~

No variable pay has been granted to the current and former members of the Supervisory Board during the last five years. The remuneration of the Supervisory Board is not directly linked to the performance of ASML, in line with the remuneration principles set out in the 2021 Remuneration Policy for the Supervisory Board.

Remuneration ~~Former~~of former Supervisory Board members

Overview of the remuneration awarded to the former Supervisory Board members in 2022, 2021 ~~2020~~ and ~~2019~~2020 (amounts are in € thousands):


		Membership fees 2021	Committee fees 2021	Allowances 20211	Proportion fixed vs. variable 2021	Total remuneration 2021	Total remuneration 2020	Total remuneration 2019		Membership fees 2022	Committee fees 2022	Allowances 2022	Proportion fixed vs. variable 2022	Total remuneration 2022	Total remuneration 2021	Total remuneration 2020
J.M.C. Stork									J.M.C. Stork	25	10	5	100:0	40	113	100
D.A. Grose	D.A. Grose	26	10	—	100:0	36	117	133	D.A. Grose	n/a					36	117
C.M.S. Smits Nusteling	C.M.S. Smits Nusteling	23	8	—	100:0	31	95	91	C.M.S. Smits Nusteling	n/a					31	95
W.H. Ziebart	W.H. Ziebart	—					30	101	W.H. Ziebart	n/a					n/a	30
Total	Total	49	18	—		67	242	325	Total	25	10	5		40	180	342

1. Allowances consist of ~~fixed expense~~fixed-expense allowances and allowances for intercontinental meetings.

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Remuneration Report - Other Information

Other information

Total remuneration

The total annual remuneration for the members of the Board of Management and the Supervisory Board, including former members, ~~including Former Members~~ during ~~2021~~2022 amounts to ~~€23.2~~€18.1 million ~~(2020: €22.6~~(2021: €23.3 million).

Other arrangements

No remuneration has been granted and allocated by subsidiaries or other companies whose financials are consolidated by ASML, since all members of the Board of Management and the Supervisory Board are paid directly by ASML Holding N.V.

No (personal) loans have been granted to the members of the Board of Management or the Supervisory Board and no guarantees or the like have been granted in favor of any of the members of the Board of Management and the Supervisory Board.

No severance payments were granted to members of the Board of Management and the Supervisory Board in ~~2021~~2022 and no variable remuneration has been ~~clawed-back.~~clawed back.

Deviations

In ~~2021~~2022, no deviations took place from the decision-making process for the implementation of the 2021 Remuneration ~~Policies~~Policy for the Supervisory Board and the 2022 Remuneration Policy for the Board of Management ~~and the Supervisory Board~~ and no temporary deviations took place from the 2022 Remuneration Policy for the Board of Management and the 2021 Remuneration ~~Policies.~~Policy for the Supervisory Board.

Shareholder voting

At the ~~2021~~2022 AGM, the ~~2021~~2022 Remuneration Policy for the Board of Management was adopted with ~~93.86% of the votes cast in favor. The 2021 Remuneration Policy for the Supervisory Board was also adopted at the 2021 AGM with a majority of 98.90%~~93.18% of the votes cast in favor of the proposal.

The Remuneration Report for the financial year ~~2020~~2021 was submitted to the ~~2021~~2022 AGM for an advisory vote. ~~85.07%~~84.59% of the votes were cast in favor. In the Message from the Remuneration Committee Chair at the beginning of this Remuneration Report, we discuss how we have ~~responded to~~taken into account the feedback received on Board of Management remuneration.

This Remuneration Report will be submitted to the ~~2022~~2023 AGM for an advisory vote in line with Dutch ~~law, together with a proposal for revision of the 2021 Remuneration Policy for the Board of Management as described in more detail in the section "Looking forward to 2022".~~law.

~~ASML ANNUAL REPORT 2021 170~~

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						Financials & Non-financials

						IN THIS SECTION

									Consolidated Financial Statements
						214			Report of Independent Registered Public Accounting Firm
						216			Consolidated Statements of Operations
						217			Consolidated Statements of Comprehensive Income
						218			Consolidated Balance Sheets
						219			Consolidated Statements of Shareholders’ Equity
						221			Consolidated Statements of Cash Flows
						222			Notes to the Consolidated Financial Statements

									Non-financial statements
						264			Assurance Report of the Independent Auditor
						266			About the non-financial information
						272			Non-financial indicators

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						Consolidated Financial Statements

						IN THIS SECTION

						214			Report of Independent Registered Public Accounting Firm
						216			Consolidated Statements of Operations
						217			Consolidated Statements of Comprehensive Income
						218			Consolidated Balance Sheets
						219			Consolidated Statements of Shareholders’ Equity
						221			Consolidated Statements of Cash Flows
						222			Notes to the Consolidated Financial Statements

~~To the Shareholders and the Supervisory Board~~

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Supervisory Board

ASML Holding N.V.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of ASML Holding N.V. and subsidiaries (the ~~“Company”)~~Company) as of December 31, ~~2021~~2022 and ~~2020,~~2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, ~~2021,~~2022, and the related notes (collectively, the ~~“consolidated~~consolidated financial ~~statements”)~~statements). We also have audited the Company’s internal control over financial reporting as of December 31, ~~2021,~~2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2021~~2022 and ~~2020,~~2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2021,~~2022, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2021,~~2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”)~~(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated

~~ASML ANNUAL REPORT 2021 172~~

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Report of Independent Registered Public Accounting Firm (continued)

Revenue recognition -– Identification of distinct performance obligations and allocation of the total contract consideration

As disclosed in note 2 to the consolidated financial statements, net system sales was EUR ~~13,652.8~~15,430.3 million for the year ended December 31, ~~2021.~~2022. Sales of systems are usually entered into with customers under Volume Purchase Agreements (VPAs). These VPAs contain multiple performance obligations, for example delivery of goods, installation, warranty and training. Once these performance obligations are identified, the total contract consideration, including discounts, offer of free goods or services and credits that can be used towards future purchases, is allocated to the performance obligations.

We identified revenue recognition, and specifically the identification of performance obligations in ~~the~~certain VPAs as well as the allocation of the total contract consideration, including discounts, offer of free goods or services and credits that can be used towards future purchases, as a critical audit matter since it is inherently judgmental, and complex. As a result, evaluating the Company’s judgments regarding the identified performance obligations, notably the estimate of the number of systems to be delivered, and the allocation of the total contract consideration to these performance obligations required a high degree of auditor judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This includes controls related to VPA assessments for the identification of performance obligations and the allocation of the total contract consideration to these performance obligations, and the correct application to individual sales transactions. We evaluated the identification of performance obligations and the allocation of the total contract consideration by inspecting a selection of VPAs and the related documentation, performing inquiries with relevant operational functions in the Company, and performing sensitivity analyses, to assess the impact of the estimated number of systems to be delivered on the allocation. Furthermore, we tested a selection of recognized sales transactions under VPAs and performed a retrospective review of prior period estimates to assess management’s ability to estimate the number of systems to be delivered. Finally, we checked the accuracy of the Company’s model used to allocate the contract consideration to the identified performance obligations.

/s/ KPMG Accountants N.V.

We have served as the ~~Company's~~Company’s auditor since 2015.

Amstelveen, the Netherlands

February ~~9, 2022~~15, 2023

~~ASML ANNUAL REPORT 2021 173~~

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Consolidated Statements of Operations

~~Consolidated Statements of Operations~~


Year ended December 31 (€, in millions, except per share data)	Year ended December 31 (€, in millions, except per share data)	Notes	2019	2020	2021	Year ended December 31 (€, in millions, except per share data)	Notes	2020	2021	2022
Net system sales	Net system sales		8,996.2	10,316.6	13,652.8	Net system sales		10,316.6	13,652.8	15,430.3
Net service and field option sales	Net service and field option sales		2,823.8	3,661.9	4,958.2	Net service and field option sales		3,661.9	4,958.2	5,743.1
Total net sales	Total net sales	2, 3	11,820.0	13,978.5	18,611.0	Total net sales	2, 3	13,978.5	18,611.0	21,173.4

Cost of system sales	Cost of system sales		(4,676.2)	(5,169.3)	(6,482.9)	Cost of system sales		(5,169.3)	(6,482.9)	(7,582.3)
Cost of service and field option sales	Cost of service and field option sales		(1,864.0)	(2,012.0)	(2,319.1)	Cost of service and field option sales		(2,012.0)	(2,319.1)	(2,891.0)
Total cost of sales 1	Total cost of sales 1		(6,540.2)	(7,181.3)	(8,802.0)	Total cost of sales1		(7,181.3)	(8,802.0)	(10,473.3)

Gross profit	Gross profit		5,279.8	6,797.2	9,809.0	Gross profit		6,797.2	9,809.0	10,700.1

Research and development costs	Research and development costs		(1,968.5)	(2,200.8)	(2,547.0)	Research and development costs		(2,200.8)	(2,547.0)	(3,253.5)
Selling, general and administrative costs	Selling, general and administrative costs		(520.5)	(544.9)	(725.6)	Selling, general and administrative costs		(544.9)	(725.6)	(945.9)
Other income	Other income	10	—	—	213.7	Other income	10	—	213.7	—
Income from operations	Income from operations		2,790.8	4,051.5	6,750.1	Income from operations		4,051.5	6,750.1	6,500.7

Interest and other, net	Interest and other, net	16	(25.0)	(34.9)	(44.6)	Interest and other, net	16	(34.9)	(44.6)	(44.6)
Income before income taxes	Income before income taxes		2,765.8	4,016.6	6,705.5	Income before income taxes		4,016.6	6,705.5	6,456.1

Income tax expense	Income tax expense	21	(191.7)	(551.5)	(1,021.4)	Income tax expense	21	(551.5)	(1,021.4)	(969.9)
Income after income taxes	Income after income taxes		2,574.1	3,465.1	5,684.1	Income after income taxes		3,465.1	5,684.1	5,486.2

Profit from equity method investments	Profit from equity method investments	9	18.2	88.6	199.1	Profit from equity method investments	9	88.6	199.1	138.0
Net income	Net income		2,592.3	3,553.7	5,883.2	Net income		3,553.7	5,883.2	5,624.2

Basic net income per ordinary share	Basic net income per ordinary share	23	6.16	8.49	14.36	Basic net income per ordinary share	23	8.49	14.36	14.14
Diluted net income per ordinary share	Diluted net income per ordinary share	23	6.15	8.48	14.34	Diluted net income per ordinary share	23	8.48	14.34	14.13
Number of ordinary shares used in computing per share amounts:	Number of ordinary shares used in computing per share amounts:					Number of ordinary shares used in computing per share amounts:
Basic	Basic	23	420.8	418.3	409.8	Basic	23	418.3	409.8	397.7
Diluted	Diluted	23	421.6	419.1	410.4	Diluted	23	419.1	410.4	398.0

1.Cost of sales includes amounts with related parties of €2,206.1 million, €1,855.2 million and €1,457.4 million in 2022, 2021, and ~~€1,321.8 million in 2021,~~ 2020, ~~and 2019,~~ respectively.

~~ASML ANNUAL REPORT 2021 174~~

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Consolidated Statements of Comprehensive Income

~~Consolidated Statements of Comprehensive Income~~


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	Notes	2019	2020	2021	Year ended December 31 (€, in millions)	Notes	2020	2021	2022
Net income	Net income		2,592.3	3,553.7	5,883.2	Net income		3,553.7	5,883.2	5,624.2

Other comprehensive income:	Other comprehensive income:					Other comprehensive income:
Proportionate share of OCI from equity method investments	Proportionate share of OCI from equity method investments		(19.8)	(1.3)	22.0	Proportionate share of OCI from equity method investments		(1.3)	22.0	37.7

Foreign currency translation, net of taxes:	Foreign currency translation, net of taxes:					Foreign currency translation, net of taxes:
Gain (loss) on foreign currency translation and effective portion of hedges			20.1	(73.8)	93.3
Gain (loss) on foreign currency translation						Gain (loss) on foreign currency translation		(73.8)	93.3	66.0

Financial instruments, net of taxes:	Financial instruments, net of taxes:					Financial instruments, net of taxes:
Gain (loss) on derivative financial instruments	Gain (loss) on derivative financial instruments	25	3.2	(21.0)	16.6	Gain (loss) on derivative financial instruments	25	(21.0)	16.6	57.6
Transfers to net income	Transfers to net income	25	(10.7)	(2.3)	22.2	Transfers to net income	25	(2.3)	22.2	(66.5)
Other comprehensive income, net of taxes	Other comprehensive income, net of taxes		(7.2)	(98.4)	154.1	Other comprehensive income, net of taxes		(98.4)	154.1	94.8

Total comprehensive income, net of taxes	Total comprehensive income, net of taxes		2,585.1	3,455.3	6,037.3	Total comprehensive income, net of taxes		3,455.3	6,037.3	5,719.0
Attributable to equity holders	Attributable to equity holders		2,585.1	3,455.3	6,037.3	Attributable to equity holders		3,455.3	6,037.3	5,719.0

~~ASML ANNUAL REPORT 2021 175~~

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218

Consolidated Balance Sheets

~~Consolidated Balance Sheets~~


As of December 31 (€, in millions, except share and per share data)	Notes	2021	2022
Assets
Cash and cash equivalents	4	6,951.8	7,268.3
Short-term investments	4	638.5	107.7
Accounts receivable, net	5	3,028.0	5,323.8
Finance receivables, net	6	1,185.6	1,356.7
Current tax assets	21	42.0	33.4
Contract assets	2	164.6	131.9
Inventories, net	7	5,179.2	7,199.7

Other assets1	8	1,000.5	1,643.4

Total current assets		18,190.2	23,064.9

Finance receivables, net	6	383.0	—
Deferred tax assets	21	1,098.7	1,672.8

Loan receivable2	26	124.4	364.4
Other assets3	8	887.0	739.8
Equity method investments	9	892.5	923.6
Goodwill	11	4,555.6	4,555.6
Other intangible assets, net	12	952.1	842.4
Property, plant and equipment, net	13	2,982.7	3,944.2
Right-of-use assets	14	164.8	192.7
Total non-current assets		12,040.8	13,235.5






Total assets		30,231.0	36,300.4

As of December 31 (€, in millions, except share and per share data) Notes 2020 2021
Assets
Cash and cash equivalents 4 6,049.4 6,951.8
Short-term investments 4 1,302.2 638.5
Accounts receivable, net 5 1,310.3 3,028.0
Finance receivables, net 6 1,710.5 1,185.6
Current tax assets 21 67.3 42.0
Contract assets 2 119.2 164.6
Inventories, net 7 4,569.4 5,179.2
Other assets 1
8 801.7 1,000.5
Total current assets 15,930.0 18,190.2

Finance receivables, net 6 400.5 383.0
Deferred tax assets 21 671.5 1,098.7
Other assets 2
8 951.5 1,011.4
Equity method investments 9 820.7 892.5
Goodwill 11 4,629.1 4,555.6
Other intangible assets, net 12 1,048.9 952.1
Property, plant and equipment, net 13 2,470.3 2,982.7
Right-of-use assets - Operating 14 180.1 159.5
Right-of-use assets - Finance 3
14 164.8 5.3
Total non-current assets 11,337.4 12,040.8

Total assets 27,267.4 30,231.0

Liabilities and shareholders’ equity
Accounts payable 4
1,377.9 2,116.3
Accrued and other liabilities 15 1,146.0 1,435.5
Current tax liabilities 21 110.0 301.9
Current portion of long-term debt 16 15.4 509.1
Contract liabilities 2 3,954.2 7,935.2
Total current liabilities 6,603.5 12,298.0

Long-term debt 16 4,662.8 4,075.0
Deferred and other income tax liabilities 21 238.3 240.6
Contract liabilities 2 1,639.9 3,225.7
Accrued and other liabilities 15 257.5 251.1
Total non-current liabilities 6,798.5 7,792.4

Total liabilities 13,402.0 20,090.4

Ordinary shares; €0.09 nominal value;
699,999,000 shares authorized at December 31, 2021; (2020: 699,999,000)
402,601,613 issued and outstanding at December 31, 2021; (2020: 416,514,034)
Issued and outstanding shares 37.6 36.5
Share premium 3,780.1 3,876.1
Treasury shares at cost (863.2) (2,422.8)
Retained earnings 10,731.5 8,317.3
Accumulated other comprehensive income 179.4 333.5
Total shareholders’ equity 22 13,865.4 10,140.6

Total liabilities and shareholders’ equity 27,267.4 30,231.0


As of December 31 (€, in millions, except share and per share data)	Notes	2021	2022
Liabilities and shareholders’ equity
Accounts payable4		2,116.3	2,565.2
Accrued and other liabilities5	15	1,435.5	1,875.9
Current tax liabilities	21	301.9	315.3
Current portion of long-term debt	16	509.1	746.2
Contract liabilities	2	7,935.2	12,481.0

Total current liabilities		12,298.0	17,983.6

Long-term debt	16	4,075.0	3,514.2
Deferred and other income tax liabilities	21	240.6	267.0
Contract liabilities	2	3,225.7	5,269.9
Accrued and other liabilities	15	251.1	454.9
Total non-current liabilities		7,792.4	9,506.0

Total liabilities		20,090.4	27,489.6

Ordinary shares; €0.09 nominal value;
700,000,000 shares authorized at December 31, 2022 (2021: 699,999,000)
394,589,411 issued and outstanding at December 31, 2022 (2021: 402,601,613)
Issued and outstanding shares		36.5	36.3
Share premium		3,876.1	3,940.8
Treasury shares at cost		(2,422.8)	(4,641.3)
Retained earnings		8,317.3	9,046.7
Accumulated other comprehensive income		333.5	428.3
Total shareholders’ equity	22	10,140.6	8,810.8

Total liabilities and shareholders’ equity		30,231.0	36,300.4

1.Other assets -– current includes amounts with related parties of ~~€288.5~~€479.9 million and ~~€265.8~~€288.5 million at December 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

2.Loan receivable includes amounts with related parties of €364.4 million and €124.4 million at December 31, 2022 and 2021, respectively.

3.Other assets -– non-current includes amounts with related parties of ~~€818.7~~€620.4 million and ~~€668.0~~€694.3 million at December 31, 2022 and 2021, ~~and 2020, respectively.~~

3.respectively~~Right-of-use assets - Finance includes amounts with related parties of €0.0 million and €149.9 million at December 31, 2021 and 2020, respectively.~~.

4.Accounts Payable includes amounts with related parties of ~~€482.7~~€269.2 million and ~~€110.9~~€482.7 million at December 31, 2022 and 2021, ~~and 2020,~~ respectively.

5.Accrued and other liabilities – current includes amounts with related parties of €111.2 million and €0.0 million at December 31, 2022 and 2021, respectively.

~~ASML ANNUAL REPORT 2021 176~~

ASML ANNUAL REPORT 2022

CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

219

Consolidated Statements of Shareholders’ Equity

~~Consolidated Statements of Shareholders’ Equity~~


	Notes	Issued and Outstanding Shares		Share Premium	Treasury Shares at Cost	Retained Earnings	OCI1	Total
(€, in millions)		Number	Amount
Balance at January 1, 2020		419.8	38.2	3,772.0	(1,019.6)	9,523.8	277.8	12,592.2
Components of comprehensive income:
Net income		—	—	—	—	3,553.7	—	3,553.7
Proportionate share of OCI from equity method investments		—	—	—	—	—	(1.3)	(1.3)
Gain (loss) on foreign currency translation		—	—	—	—	—	(73.8)	(73.8)
Gain (loss) on financial instruments	25	—	—	—	—	—	(23.3)	(23.3)
Total comprehensive income		—	—	—	—	3,553.7	(98.4)	3,455.3



Purchase of treasury shares	22	(3.9)	—	—	(1,207.5)	—	—	(1,207.5)
Cancellation of treasury shares	22	—	(0.7)	—	1,262.3	(1,261.6)	—	—
Share-based payments	20	—	—	53.9	—	—	—	53.9
Issuance of shares	20	0.6	0.1	(45.8)	101.6	(18.0)	—	37.9
Dividend paid	22	—	—	—	—	(1,066.4)	—	(1,066.4)

Balance at December 31, 2020		416.5	37.6	3,780.1	(863.2)	10,731.5	179.4	13,865.4



Components of comprehensive income:
Net income		—	—	—	—	5,883.2	—	5,883.2
Proportionate share of OCI from equity method investments		—	—	—	—	—	22.0	22.0
Gain (loss) on foreign currency translation		—	—	—	—	—	93.3	93.3
Gain (loss) on financial instruments	25	—	—	—	—	—	38.8	38.8
Total comprehensive income		—	—	—	—	5,883.2	154.1	6,037.3



Purchase of treasury shares	22	(14.4)	—	—	(8,560.3)	—	—	(8,560.3)
Cancellation of treasury shares	22	—	(1.2)	—	6,926.6	(6,925.4)	—	—
Share-based payments	20	—	—	117.5	—	—	—	117.5
Issuance of shares	20	0.5	0.1	(21.5)	74.1	(3.7)	—	49.0
Dividend paid	22	—	—	—	—	(1,368.3)	—	(1,368.3)

Balance at December 31, 2021		402.6	36.5	3,876.1	(2,422.8)	8,317.3	333.5	10,140.6

Issued and Outstanding Shares Share Premium Treasury Shares at Cost Retained Earnings
OCI1
Total
(€, in millions) Notes Number Amount
Balance at January 1, 2019 421.1 38.6 3,741.3 (1,621.8) 9,197.9 285.0 11,641.0
Components of comprehensive income:
Net income — — — — 2,592.3 — 2,592.3
Share of OCI from equity method investments — — — — — (19.8) (19.8)
Foreign currency translation — — — — — 20.1 20.1
Gain (loss) on financial instruments 25 — — — — — (7.5) (7.5)
Total comprehensive income — — — — 2,592.3 (7.2) 2,585.1

Purchase of treasury shares 22 (1.9) — — (410.0) — — (410.0)
Cancellation of treasury shares 22 — (0.5) — 902.3 (901.8) — —
Share-based payments 20 — — 74.6 — — — 74.6
Issuance of shares 20 0.6 0.1 (43.9) 109.9 (38.9) — 27.2
Dividend paid 22 — — — — (1,325.7) — (1,325.7)
Balance at December 31, 2019 419.8 38.2 3,772.0 (1,019.6) 9,523.8 277.8 12,592.2

Components of comprehensive income:
Net income — — — — 3,553.7 — 3,553.7
Share of OCI from equity method investments — — — — — (1.3) (1.3)
Foreign currency translation — — — — — (73.8) (73.8)
Gain (loss) on financial instruments 25 — — — — — (23.3) (23.3)
Total comprehensive income — — — — 3,553.7 (98.4) 3,455.3

Purchase of treasury shares 22 (3.9) — — (1,207.5) — — (1,207.5)
Cancellation of treasury shares 22 — (0.7) — 1,262.3 (1,261.6) — —
Share-based payments 20 — — 53.9 — — — 53.9
Issuance of shares 20 0.6 0.1 (45.8) 101.6 (18.0) — 37.9
Dividend paid 22 — — — — (1,066.4) — (1,066.4)
Balance at December 31, 2020 416.5 37.6 3,780.1 (863.2) 10,731.5 179.4 13,865.4

Components of comprehensive income:
Net income — — — — 5,883.2 — 5,883.2
Share of OCI from equity method investments — — — — — 22.0 22.0
Foreign currency translation — — — — — 93.3 93.3
Gain (loss) on financial instruments 25 — — — — — 38.8 38.8
Total comprehensive income — — — — 5,883.2 154.1 6,037.3

Purchase of treasury shares 22 (14.4) — — (8,560.3) — — (8,560.3)
Cancellation of treasury shares 22 — (1.2) — 6,926.6 (6,925.4) — —
Share-based payments 20 — — 117.5 — — — 117.5
Issuance of shares 20 0.5 0.1 (21.5) 74.1 (3.7) — 49.0
Dividend paid 22 — — — — (1,368.3) — (1,368.3)
Balance at December 31, 2021 402.6 36.5 3,876.1 (2,422.8) 8,317.3 333.5 10,140.6

ASML ANNUAL REPORT 2022

CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

220

Consolidated Statements of Shareholders’ Equity (continued)


	Notes	Issued and Outstanding Shares		Share Premium	Treasury Shares at Cost	Retained Earnings	OCI1	Total
(€, in millions)		Number	Amount
Balance at December 31, 2021		402.6	36.5	3,876.1	(2,422.8)	8,317.3	333.5	10,140.6
Components of comprehensive income:
Net income		—	—	—	—	5,624.2	—	5,624.2
Proportionate share of OCI from equity method investments		—	—	—	—	—	37.7	37.7
Gain (loss) on foreign currency translation		—	—	—	—	—	66.0	66.0
Gain (loss) on financial instruments	25	—	—	—	—	—	(8.9)	(8.9)
Total comprehensive income		—	—	—	—	5,624.2	94.8	5,719.0



Purchase of treasury shares	22	(8.5)	—	—	(4,639.7)	—	—	(4,639.7)
Cancellation of treasury shares	22	—	(0.3)	—	2,333.7	(2,333.4)	—	—
Share-based payments	20	—	—	68.9	—	—	—	68.9
Issuance of shares	20	0.5	0.1	(4.2)	87.5	(1.6)	—	81.8
Dividend paid	22	—	—	—	—	(2,559.8)	—	(2,559.8)

Balance at December 31, 2022		394.6	36.3	3,940.8	(4,641.3)	9,046.7	428.3	8,810.8

1.As of December 31, ~~2021,~~2022, accumulated OCI consists of ~~€(4.9)~~€32.8 million ~~loss~~gain relating to our proportionate share of other comprehensive income from equity method investments ~~(2020: €(26.9)~~(2021: €4.9 million loss; ~~2019: €(25.6)~~2020: €26.9 million loss), ~~€321.9~~€387.9 million relating to foreign currency translation gain ~~(2020: €228.6~~(2021: €321.9 million gain; ~~2019: €302.4~~2020: €228.6 million gain) and ~~€16.5~~€7.6 million relating to unrealized gains on financial instruments ~~(2020: €(22.3)~~(2021: €16.5 million ~~loss; 2019: €1.0~~gains; 2020: €22.3 million ~~gains)~~losses).

~~ASML ANNUAL REPORT 2021 177~~

ASML ANNUAL REPORT 2022

CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

221

Consolidated Statements of Cash Flows

~~Consolidated Statements of Cash Flows~~


Year ended December 31 (€, in millions)	Notes	2020	2021	2022
Cash Flows from Operating Activities
Net income		3,553.7	5,883.2	5,624.2
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization1	12, 13, 14	490.8	471.0	583.6
Impairment and loss (gain) on disposal	12, 13	5.5	(15.9)	39.3
Share-based compensation expense	18, 20	53.9	117.5	68.9
Gain on sale of subsidiaries	10	—	(213.7)	—
Inventory reserves	7	192.4	180.7	278.5
Deferred tax expense (benefit)	21	(211.3)	(419.6)	(564.2)
Equity method investments2	9	11.0	(49.8)	15.3
Changes in assets and liabilities:
Accounts receivable, net	5	507.5	(1,754.9)	(2,338.0)
Finance receivables, net	6	(1,125.4)	542.3	212.2
Inventories	7	(706.7)	(483.2)	(2,080.9)
Other assets	8	(75.1)	(222.2)	(864.3)
Accrued and other liabilities	15	47.5	347.6	439.7
Accounts payable		334.3	718.6	406.2
Current tax assets and liabilities	21	131.5	214.4	33.6
Contract assets and liabilities	2	1,418.0	5,529.8	6,632.7
Net cash provided by operating activities		4,627.6	10,845.8	8,486.8

Cash Flows from Investing Activities
Purchase of property, plant and equipment3	13	(962.0)	(900.7)	(1,281.8)
Purchase of intangible assets	12	(38.8)	(39.6)	(37.5)
Purchase of short-term investments	4	(1,475.5)	(1,162.7)	(334.3)
Maturity of short-term investments	4	1,359.1	1,826.4	864.7

Loans issued and other investments	26	(12.2)	(124.4)	(240.0)
Proceeds from sale of subsidiaries (net of cash disposed of)	10	—	329.0	—

Acquisition of subsidiaries (net of cash acquired)	10	(222.8)	—	—
Net cash used in investing activities		(1,352.2)	(72.0)	(1,028.9)

Year ended December 31 (€, in millions) Notes 2019 2020 2021
Cash Flows from Operating Activities

Net income 2,592.3 3,553.7 5,883.2
Adjustments to reconcile net income to net cash flows from operating activities:
     Depreciation and amortization 1
12, 13, 14 448.5 490.8 471.0
     Impairment and loss (gain) on disposal 12, 13 7.8 5.5 (15.9)
     Share-based compensation expense 18, 20 74.6 53.9 117.5
     Gain on sale of subsidiaries 10 — — (213.7)
     Inventory reserves 7 221.5 192.4 180.7
     Deferred tax expense (benefit) 21 (236.8) (211.3) (419.6)
     Equity method investments 2
9 56.9 11.0 (49.8)
     Changes in assets and liabilities:
           Accounts receivable, net 5 (255.0) 507.5 (1,754.9)
           Finance receivables, net 6 (95.3) (1,125.4) 542.3
           Inventories 7 (404.7) (706.7) (483.2)
           Other assets 8 (199.1) (75.1) (222.2)
           Accrued and other liabilities 15 82.1 47.5 347.6
           Accounts payable (12.1) 334.3 718.6
           Current tax assets and liabilities 21 (202.6) 131.5 214.4
           Contract assets and liabilities 2 1,198.3 1,418.0 5,529.8
Net cash provided by operating activities 3,276.4 4,627.6 10,845.8

Cash Flows from Investing Activities
Purchase of property, plant and equipment 3
13 (766.6) (962.0) (900.7)
Purchase of intangible assets 12 (119.3) (38.8) (39.6)
Purchase of short-term investments 4 (1,291.5) (1,475.5) (1,162.7)
Maturity of short-term investments 4 1,019.0 1,359.1 1,826.4
Loans issued and other investments 8 0.9 (12.2) (124.4)
Proceeds from sale of subsidiaries (net of cash disposed of) 10 — — 329.0
Acquisition of subsidiaries (net of cash acquired) 10 — (222.8) —
Net cash used in investing activities (1,157.5) (1,352.2) (72.0)

Cash Flows from Financing Activities
Dividend paid 22 (1,325.7) (1,066.4) (1,368.3)
Purchase of treasury shares 22 (410.0) (1,207.5) (8,560.3)
Net proceeds from issuance of shares 20 27.2 37.9 49.0
Net proceeds from issuance of notes, net of issuance costs 16 — 1,486.3 —
Repayment of debt and finance lease obligations 14, 16 (3.8) (3.3) (12.1)
Net cash used in financing activities (1,712.3) (753.0) (9,891.7)

Net cash flows 406.6 2,522.4 882.1
Effect of changes in exchange rates on cash 4.6 (5.3) 20.3
Net increase (decrease) in cash and cash equivalents 411.2 2,517.1 902.4
Cash and cash equivalents at beginning of the year 4 3,121.1 3,532.3 6,049.4
Cash and cash equivalents at end of the year 4 3,532.3 6,049.4 6,951.8

Supplemental Disclosures of Cash Flow Information:
Unpaid portion of property, plant & equipment excluded in investing activities 85.9 (46.9) 29.3
Interest received 38.9 32.1 36.6
Interest paid (59.9) (64.1) (83.0)
Income taxes paid, net of refunds (678.7) (650.2) (1,235.0)


Year ended December 31 (€, in millions)	Notes	2020	2021	2022
Cash Flows from Financing Activities
Dividend paid	22	(1,066.4)	(1,368.3)	(2,559.8)
Purchase of treasury shares	22	(1,207.5)	(8,560.3)	(4,639.7)
Net proceeds from issuance of shares	20	37.9	49.0	81.8
Net proceeds from issuance of notes, net of issuance costs	16	1,486.3	—	495.6

Repayment of debt and finance lease obligations	14, 16	(3.3)	(12.1)	(516.2)
Net cash used in financing activities		(753.0)	(9,891.7)	(7,138.3)

Net cash flows		2,522.4	882.1	319.6
Effect of changes in exchange rates on cash		(5.3)	20.3	(3.1)
Net increase (decrease) in cash and cash equivalents		2,517.1	902.4	316.5
Cash and cash equivalents at beginning of the year	4	3,532.3	6,049.4	6,951.8
Cash and cash equivalents at end of the year	4	6,049.4	6,951.8	7,268.3

Supplemental Disclosures of Cash Flow Information:
Unpaid portion of property, plant and equipment, excluded in investing activities, included in Accounts payable		(46.9)	29.3	50.3
Interest received		32.1	36.6	42.4
Interest paid		(64.1)	(83.0)	(82.2)
Income taxes paid, net of refunds		(650.2)	(1,235.0)	(1,734.6)

1.Depreciation and amortization ~~includes~~include depreciation of property, plant and equipment, amortization of intangible assets, depreciation of right-of-use assets, amortization of underwriting commissions and discount related to the bonds and credit facility.

2.Equity method investments relates to our 24.9%equity interest in Carl Zeiss SMT Holding GmbH & Co. KG and includes our share of the ~~profit and~~net result, dividends received ~~from our~~and other equity ~~method investment,~~movements, as well as the capitalization of R&D and supply chain support funding ~~in 2019 and 2020~~ as disclosed in ~~note 26.~~Note 26 Related parties and variable interest entities. The dividend received is a cash inflow ~~in 2021~~ of €178.7 million (2021: €168.0 million, ~~(2020:~~2020: €128.1 ~~million, 2019: €99.9~~ million).

3.~~In 2021, an amount of €69.2 million (2020: €203.7 million, 2019: €184.1 million) was included in purchase~~Purchase of property, plant and equipment ~~which relates~~includes a cash outflow of €33.8 million (2021: €69.2 million, 2020: €203.7 million) to ~~funding provided for facilities and tooling to our equity method investment,~~related parties, which was initially recognized as part of ~~the other~~Other assets.

~~ASML ANNUAL REPORT 2021 178~~

ASML ANNUAL REPORT 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

222

Notes to the Consolidated Financial Statements

~~Notes to the Consolidated Financial Statements~~

1. General information / summary of general accounting policies

~~We are~~ASML is a ~~global innovation leader in~~leading supplier to the ~~chip~~semiconductor industry. ~~We provide~~The company provides chipmakers with hardware, software and services to mass produce the patterns ~~on silicon~~of integrated circuits (microchips). Together with its partners, ASML drives the ~~highest possible level~~advancement of ~~fidelity, we call this holistic lithography. What we do increases the value~~more affordable, more powerful and ~~lowers the cost~~more energy-efficient microchips. ASML enables groundbreaking technology to solve some of ~~a chip, which advances us all toward a smarter, more connected world.~~humanity’s toughest challenges, such as in healthcare, energy use and conservation, mobility and agriculture. Headquartered in Europe’s top tech hub, the Brainport Eindhoven region in the Netherlands, we are a global team of over ~~32,000~~39,000 FTEs with ~~122~~143 different nationalities across 3 continents. ASML’s principal operations are in ~~Europe,~~EMEA, North America and Asia.

Our shares are listed for trading in the form of registered shares on Euronext Amsterdam and on NASDAQ. The principal trading market of our ordinary shares is Euronext Amsterdam.

Basis of preparation

The accompanying Consolidated Financial Statements are stated in millions of euros unless indicated otherwise.

The accompanying Consolidated Financial Statements have been prepared in conformity with US GAAP.

Use of estimates

The preparation of our Consolidated Financial Statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities on the balance sheet dates, and the reported amounts of net sales and costs ~~during~~for the reported periods. The inputs into our estimates and assumptions consider economic implications including supply chain constraints, inflation, the Russia-Ukraine conflict, COVID-19 ~~on our critical accounting estimates.~~and uncertainty in the macroeconomic environment. We believe that the critical accounting estimates and assumptions are appropriate. ASML will continue to monitor the impacts of economic implications ~~including COVID-19~~ and incorporate them into accounting estimates. Actual results could differ from those estimates. We evaluate our estimates continuously and we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates if the assumptions prove incorrect. To the extent there are material differences between actual results and these estimates, our future results could be materially and adversely affected.

We believe that the accounting policies described below require us to make significant judgments and estimates in the preparation of our Consolidated Financial Statements. Our most critical accounting estimates include:

•–Revenue recognition ~~including lease accounting~~(see Note 2 Revenue from contracts with customer)

•–~~Inventory reserves~~Recoverability of deferred taxes for capitalized R&D expenditures (see Note 21 Income taxes)

•~~Unrecognized tax benefits~~

•~~Contingencies and litigation~~

•~~Evaluation of long-lived assets for impairment~~

Principles of consolidation

The Consolidated Financial Statements include the Financial Statements of ASML Holding N.V. and all of its subsidiaries. Subsidiaries are all entities over which ASML controls the financial and operating activities, generally accompanying a shareholding of more than 50.0% of the outstanding voting rights. Subsidiaries are fully consolidated from the date on which control is obtained by ASML. The Company consolidates Berliner Glas using a one-quarter lag, to allow for the timely preparation of consolidated financial information. There were no significant intervening events occurred during this lag period that materially affected the Consolidated Financial Statements except for the divestiture of the non-core business of Berliner Glas, which has been recognized in the financial year ended December 31, 2021. All intercompany transactions, balances and unrealized results on transactions with subsidiaries are eliminated. We also assess if we are the primary beneficiary of, and thus ~~would~~should consolidate, any variable interest entity.

Foreign currency translation

The financial information for subsidiaries with a functional currency outside the euro-zone is measured using a mix of local currencies or the euro as the functional currency. The Financial Statements of those foreign subsidiaries with a functional currency different than the euro are translated into euros in the preparation of ASML’s Consolidated Financial Statements. Assets and liabilities are translated into euros at the exchange rate on the respective balance sheet dates and income and costs are translated into euros based on the average exchange rate for the corresponding period. The resulting translation adjustments are recorded directly in shareholders’ equity.

New US GAAP accounting pronouncements adopted

During ~~2021,~~2022, there were no new US GAAP accounting pronouncements that were adopted which have a material impact on our Consolidated Financial Statements.

New US GAAP accounting pronouncements issued but not adopted

For the year ended December 31, ~~2021,~~2022, there are no new US GAAP accounting pronouncements issued which have not yet been adopted and are expected to have a material impact on our Consolidated Financial Statements.

~~ASML ANNUAL REPORT 2021 179~~

2. Revenue from contracts with customers

Accounting Policy

We measure revenue based on the consideration specified in the contracts with our customers, adjusted for any significant financing components, and excluding any taxes collected on behalf of third parties. We recognize revenue when we satisfy a performance obligation by transferring control over a good or service to our customer. We bill our customers for, and recognize as revenue, ~~any~~ charges for shipping and handling costs.

Depending on the contract, we obtain a right to payment for our systems through a combination of either a reservation of a production slot or upon delivery of our systems, with the remaining portion upon final acceptance of our systems. Right to payment for our service and field options occurs upon shipment or completion of the service unless described otherwise. The payment is typically due 15-45 days after the aforementioned events. Our contracts typically include cancellation penalties that provide economic protection from the risk of customer cancellation. The costs related to our sales are recognized as cost of sales.

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We generate revenue from the sale of integrated patterning solutions for the semiconductor industry, which mainly consist of systems, ~~system related~~system-related options and upgrades, other holistic lithography solutions and customer services. The main portion of our net sales is derived from volume purchase agreements with our customers that have multiple performance obligations, which mainly include the ~~sale~~sales of our systems, ~~system related~~system-related options, installation, training and extended and enhanced warranties. In our volume purchase agreements we offer customers discounts in the normal course of sales negotiations. As part of these volume purchases agreements, we may also offer free goods or services and credits that can be used towards future purchases. Occasionally, systems, with the related extended and enhanced warranties, installation and training services, are ordered individually. Our sales agreements do not include a right of return for any reason other than not meeting the agreed upon specifications.

~~For bundled packages, we~~We account for individual goods and services as separate and distinct performance obligations, including the free or discounted goods or services, if a product or service is separately identifiable from other items ~~in the bundled package~~ and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

The consideration paid for our performance obligations is typically fixed. However, most of our volume purchase agreements with customers contain some component of variable consideration, typically dependent on the final volume of systems ordered by the customer or the system performance. Variable consideration is estimated at contract inception for each performance obligation based on ~~communications~~communication with the customer to understand their requirements and roadmap. This is subsequently updated each quarter, using either the expected value method or most likely amount method, whichever is determined to best predict the consideration to be collected from the customer. Variable consideration is only included in the transaction price if it is considered probable that a significant revenue reversal will not occur.

In certain scenarios when entering into a volume purchase agreement, free goods or services are provided directly or through a voucher that can be used on future contracts. Consideration from the contract will be allocated to these performance obligations and revenue recognized when control transfers based on the nature of the goods or services provided.

~~Some~~Most of our contracts require our customers to pay a down payment on systems to be shipped. We do not record a significant financing component for down payments as the timing difference between when the consideration is paid and when the system is transferred to the customer arises from reasons other than financing.

The total consideration of the contract is allocated between all distinct performance obligations in the contract based on their ~~stand-alone~~standalone selling prices. The ~~stand-alone~~standalone selling prices are determined based on other ~~stand-alone~~standalone sales that are directly observable, when possible. However, for the majority of our performance obligations these are not available. If no directly observable evidence is available, the ~~stand-alone~~standalone selling price is determined using the adjusted market assessment approach, which requires ~~judgment.~~judgment and is based on multiple factors including, but not limited to, historical pricing practices and discounting trends for products and services.

Options to buy goods or services in addition to the purchase commitment are assessed to determine if they provide a material right to the customer that they would not have received if they had not entered into this contract. Each option to buy additional goods or services provided at a discount from the ~~stand-alone~~standalone selling price is considered a material right. The discount offered from the ~~stand-alone~~standalone selling price will be allocated from the consideration of the other goods and services in the contract if it is determined the customer will exercise the option to buy, adjusted for the likelihood. Revenue will be recognized in line with the nature of the related goods or services. If it is subsequently determined the customer will not exercise the option to buy, or the option expires, revenue will be recognized.

Occasionally we enter into bill-and-hold transactions where we invoice a customer for a system that is ready for delivery but not shipped to the customer until a later date, based on customer’s request. Transfer of control is determined to have occurred only when there is a substantive reason for the arrangement, the system is separately identified as belonging to the customer, the good has been accepted by the customer and is ready for delivery, and we do not have the ability to direct the use of the system.

We generate revenue from lessor agreements, which we classify as a sales-type lease when the lease meets any of the following criteria at lease commencement:

~~ASML ANNUAL REPORT 2021 180~~

•–The lease transfers ownership of the underlying asset to the lessee by the end of the lease term;

•–The lease grants the lessee an option to purchase the underlying asset, that the lessee is reasonably certain to exercise;

•–The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease;

•–The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset; or

•–The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

For sales-type leases where substantially all the risks and rewards incidental to ownership of an asset are transferred to the lessee, revenue is recognized at commencement of the ~~lease term. The~~lease. If material, the difference between the gross finance receivable and the present value of the minimum lease payments is initially recognized as unearned interest and presented as a deduction to the gross finance receivable. Interest income is recognized in the Consolidated Statements of Operations over the term of the lease contract using the effective interest method.

Leases that are not a sales-type lease are operating lease arrangements. If we have offered the customer an operating lease arrangement, the system is included in Property, plant and equipment upon commencement of the

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Notes to the Consolidated Financial Statements (continued)

lease. Revenue from operating lease arrangements is recognized in the Consolidated Statements of Operations on a straight-line basis over the term of the lease contract.


Goods or services						Nature, timing of satisfying the performance obligations, and significant payment terms
New systems (established technologies)						New systems sales include i-line, KrF, ArF, ArFi and ~~EUV related~~EUV-related systems, along with the related factory options ordered with the base system, as well as metrology and inspection systems.
						Prior to shipment, the majority of our systems undergo a Factory Acceptance Test (FAT) in our cleanroom facilities, effectively replicating the operating conditions that will be present on the customer’s site, in order to verify whether the system meets its standard specifications and any additional technical and performance criteria agreed with the customer.
						A system undergoing FAT, is shipped only after all contractual specifications are met or discrepancies from agreed upon specifications are waived and customer sign-off is received for delivery. Each system’s performance is re-tested through a Site Acceptance Test (SAT) after installation at the customer site. We have never failed to successfully complete installation of a system at a customer’s premises; therefore, acceptance at FAT is considered to be proven for established technologies with a history of successful customer acceptances at SAT (equal or better than FAT).
						Transfer of control of a system undergoing a FAT, and recognition of revenue related to this system, will occur upon delivery of the system.
						A system not undergoing a FAT or for which some of the testing in our factory is skipped (fast shipments), transfer of control of such a system and revenue recognition will occur upon customer acceptance of the system at SAT after installation is complete.
						New system sales do not meet the requirements for over time revenue recognition because our customers do not simultaneously receive and consume the benefits provided by our performance, or control the asset throughout any stage of our production process, as well as the systems are considered to have alternative use.
~~Transfer of control of a system undergoing a FAT, and recognition of revenue related to this system, will occur upon delivery of the system.~~
~~Transfer of control of a system not undergoing a FAT, and recognition of revenue related to this system, will occur upon customer acceptance of the system at SAT after installation is complete.~~

Used systems						We have no repurchase commitments in our general sales terms and conditions, however we occasionally repurchase systems that we previously manufactured and sold, in order to refurbish and resell the system to a different customer. This repurchase decision is mainly driven by market demand expressed by other customers.
						Transfer of control of a used system, and recognition of revenue, follow the same logic as for our “New systems (established technologies)”.


Goods or services		Nature, timing of satisfying the performance obligations, and significant payment terms
Field upgrades and options (system enhancements)		Field upgrades and options mainly relate to goods and services that are delivered for systems already installed in the customer factories. Certain upgrades require significant installation efforts, enhancing an asset the customer controls, therefore resulting in transfer of control over the period of installation, measured using the cost incurred method which is estimated using labor hours, as this best depicts the satisfaction of our obligation in transferring control. For the options and other upgrades for which the customer receives and consumes the benefit at the moment of delivery, the transfer of control and recognition of revenue will occur upon delivery.
		As long as we are not able to make a reliable estimate of the total efforts needed to complete the upgrade, we only recognize revenue to cover costs incurred. Margin will be realized at the earlier of us being able to make a reliable estimate or completion of the upgrade.

	New product introduction		We sell new products and services, which are evolutions of our existing technologies. If installation is determined not to be a separate performance or if there is not a sufficient established history of acceptance on FAT, the product is determined to be a “new product introduction”.
	New product introductions are typically newly developed options to be used within our systems. Transfer of control and revenue recognition for new product introductions occurs after successful installation and customer acceptance at SAT. Once there is an established history of successful installation and customer acceptance, revenue will be recognized consistent with other systems and goods after transfer of control.

Installation		Installation is provided within the selling price of a system. Installation is considered to be distinct as it does not significantly modify the system being purchased and the customer or a third party could be capable of performing the installation themselves, if desired. Transfer of control takes place over the period of installation from delivery through SAT, measured on a straight-line basis, as our performance is satisfied evenly over this period of time.

~~ASML ANNUAL REPORT 2021 181~~


~~Goods or services~~	~~Nature, timing~~ Installation is not considered to be distinct when recognition of ~~satisfying~~revenue related to a system occurs upon customer acceptance of the ~~performance obligations, and significant payment terms~~system at SAT after installation is complete.
Warranties		We provide standard warranty coverage on our systems for 12 months, providing labor and non-consumable parts necessary to repair our systems during these warranty periods. These standard warranties cannot be purchased and do not provide a service in addition to the general assurance the system will perform as promised. As a result, no revenue is allocated to these standard warranties.
		Both the extended and enhanced warranties on our systems are accounted for as a separate performance obligation, with transfer of control taking place over the warranty period, measured on a straight-line basis, as this is a stand-ready obligation.

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Notes to the Consolidated Financial Statements (continued)


Goods or services						Nature, timing of satisfying the performance obligations, and significant payment terms
Time-based licenses and related service						Time-based licenses relate to software licenses and the related service which are sold for a period of time. The licenses and the related service are not considered to be individually distinct as the support services are integral to the customer’s ability to continue to use the software license in the rapidly changing technological environment. The transfer of control takes place over the license term, measured on a straight-line basis, as our performance is satisfied evenly over this period of time. Payments are generally made in installments throughout the license term.

Application projects						Application projects are node transition and consulting projects which at times may be provided as free service within a volume purchase agreement. Measuring satisfaction of this performance obligation is performed through an input method based on the labor hours expended relative to the estimated total labor hours as this best depicts the transfer of control of these kind of services.

Service contracts						Service contracts are entered into with our customers to support our systems used in their ongoing operations during the systems ~~lifecycle,~~life cycle, typically in the form of full-service agreements, limited manpower agreements, other labor agreements, parts availability or parts usage agreements. These services are for a specified period of time and typically have a fixed price. Control transfers over this period of time, measured on a straight-line basis, as these are stand-ready obligations. For service contracts where the price is not fixed, the transaction price has a variable component that is based on the performance of the system.

Billable parts and labor						Billable labor represents maintenance services to our systems installed in the customer’s factories while in operation, through purchase orders from our customer. Control over these services is transferred to the customer upon receipt of customer sign-off.
						Billable parts represent spare parts including optical components relating to our systems installed in the customer’s factories while in operation, through purchase orders from our customer.
						Billable parts can be:
						•–Sold as direct spare parts, for which control transfers point in time upon delivery; or
						•–Sold as part of maintenance services, where control transfers point in time upon receipt of customer sign-off.

Field projects (relocations)						Field projects represent mainly relocation services. Measuring satisfaction of this performance obligation is performed through an input method based on the labor hours expended relative to the estimated total labor hours as this best depicts the transfer of control of our service.

OnPulse Maintenance						OnPulse maintenance services are provided over a specified period of time on our light source systems. Payment is determined by the ~~amount~~number of pulses counted from each light source system, which is variable. Invoicing is monthly based on the pulses counted. Revenue is recognized in line with invoicing using the practical expedient in ASC 606-10-55-18.

~~ASML ANNUAL REPORT 2021 182~~

Disaggregation of revenue

Our revenue from contracts with customers, on a disaggregated basis, aligns with our reportable segment disclosures with the addition of disaggregation of net system sales per technology and per end-use.

Net system sales per technology were as follows:


Year ended December 31	Year ended December 31	Net system sales in units	Net system sales in € millions	Year ended December 31	Net system sales in units	Net system sales in € millions
2022				2022
EUV				EUV	40	7,045.3
ArFi				ArFi	81	5,236.5
ArF dry				ArF dry	28	623.7
KrF				KrF	151	1,653.7
I-line				I-line	45	211.5
Metrology & Inspection				Metrology & Inspection	216	659.6
Total				Total	561	15,430.3

2021	2021			2021
EUV	EUV	42	6,284.0	EUV	42	6,284.0
ArFi	ArFi	81	4,959.6	ArFi	81	4,959.6
ArF dry	ArF dry	22	431.9	ArF dry	22	431.9
KrF	KrF	131	1,321.3	KrF	131	1,321.3
I-line	I-line	33	142.3	I-line	33	142.3
Metrology & Inspection	Metrology & Inspection	196	513.7	Metrology & Inspection	196	513.7
Total	Total	505	13,652.8	Total	505	13,652.8

2020	2020			2020
EUV	EUV	31	4,463.8	EUV	31	4,463.8
ArFi	ArFi	68	3,917.0	ArFi	68	3,917.0
ArF dry	ArF dry	22	427.0	ArF dry	22	427.0
KrF	KrF	103	1,012.3	KrF	103	1,012.3
I-line	I-line	34	146.4	I-line	34	146.4
Metrology & Inspection	Metrology & Inspection	137	350.1	Metrology & Inspection	137	350.1
Total	Total	395	10,316.6	Total	395	10,316.6

2019
EUV		26	2,799.7
ArFi		82	4,707.7
ArF dry		22	401.2
KrF		65	679.7
I-line		34	133.5
Metrology & Inspection		115	274.4
Total		344	8,996.2

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Net system sales per end-use were as follows:


Year ended December 31	Year ended December 31	Net system sales in units	Net system sales in € millions	Year ended December 31	Net system sales in units	Net system sales in € millions
2022				2022
Logic				Logic	357	9,977.6
Memory				Memory	204	5,452.7
Total				Total	561	15,430.3

2021	2021			2021
Logic	Logic	327	9,588.5	Logic	327	9,588.5
Memory	Memory	178	4,064.3	Memory	178	4,064.3
Total	Total	505	13,652.8	Total	505	13,652.8

2020	2020			2020
Logic	Logic	260	7,393.0	Logic	260	7,393.0
Memory	Memory	135	2,923.6	Memory	135	2,923.6
Total	Total	395	10,316.6	Total	395	10,316.6

2019
Logic		238	6,565.3
Memory		106	2,430.9
Total		344	8,996.2

Contract assets and liabilities

The contract assets relate to our right to a consideration in exchange for goods or services delivered, when that right is conditional on something other than the passage of time. The contract assets are transferred to the receivables when the receivables become unconditional. The contract liabilities primarily relate to remaining performance obligations for which consideration has been received ~~such as down payments received~~ for systems ~~to be delivered,~~not yet recognized in revenue, as well as deferred revenue from system shipments, based on the allocation of the consideration to the related performance obligations in the contract. ~~This deferred revenue mainly consists of extended and enhanced warranties, installation and free goods or services provided as part of a volume purchase agreement.~~

~~ASML ANNUAL REPORT 2021 183~~

The majority of our customer contracts ~~contain~~result in both asset and liability positions. At the end of each reporting period, these positions are netted on a contract basis and presented as either an asset or a liability in the Consolidated Balance Sheets. Consequently, a contract balance can change between periods from a net contract asset balance to a net contract liability balance in the balance sheet.

Significant changes in the contract assets and the contract liabilities balances during the periods are as follows.


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020		2021		Year ended December 31 (€, in millions)	2021		2022
		Contract Assets	Contract Liabilities	Contract Assets	Contract Liabilities		Contract Assets	Contract Liabilities	Contract Assets	Contract Liabilities
Balance at beginning of the year	Balance at beginning of the year	231.0	4,286.0	119.2	5,594.1	Balance at beginning of the year	119.2	5,594.1	164.6	11,160.9
Transferred from contract assets to accounts receivables	Transferred from contract assets to accounts receivables	(192.2)	—	(268.2)	—	Transferred from contract assets to accounts receivables	(268.2)	—	(393.4)	—
Revenue recognized during the year ending in contract assets	Revenue recognized during the year ending in contract assets	83.4	—	199.7	—	Revenue recognized during the year ending in contract assets	199.7	—	116.5	—
Revenue recognized that was included in contract liabilities	Revenue recognized that was included in contract liabilities	—	(2,428.4)	—	(3,767.0)	Revenue recognized that was included in contract liabilities	—	(3,767.0)	—	(6,326.6)
Changes as a result of cumulative catch-up adjustments arising from changes in estimates	Changes as a result of cumulative catch-up adjustments arising from changes in estimates	—	(41.9)	—	39.7	Changes as a result of cumulative catch-up adjustments arising from changes in estimates	—	39.7	—	(118.0)
Remaining performance obligations for which considerations have been received, or for which we have an unconditional right to consideration	Remaining performance obligations for which considerations have been received, or for which we have an unconditional right to consideration	—	3,781.4	—	9,180.2	Remaining performance obligations for which considerations have been received, or for which we have an unconditional right to consideration	—	9,180.2	—	12,790.4

Transfer between contract assets and liabilities	Transfer between contract assets and liabilities	(3.0)	(3.0)	113.9	113.9	Transfer between contract assets and liabilities	113.9	113.9	244.2	244.2
Total	Total	119.2	5,594.1	164.6	11,160.9	Total	164.6	11,160.9	131.9	17,750.9

The increase in the net contract ~~liability~~liabilities to ~~€10,996.3 million~~€17.6 billion as of December 31, ~~2021~~2022 compared to ~~€5,474.9 million~~€11.0 billion as of December 31, ~~2020~~2021 is mainly driven by the recognition of down payments for systems which will be shipped in the ~~future.~~future, and consideration received for fast shipment systems that have been delivered, but for which revenue has not yet been recognized. Cumulative catch-up adjustments recognized in our current year revenue are due to updated estimates for system volume, discounts and credits included in our volume purchase agreements.

Remaining performance obligations

Our customers generally commit to purchase systems, service, or field options through separate sales orders and service contracts. Typically the terms and conditions of these sales orders come from volume purchase agreements with our customers which can cover up to 5 years. The revenues for each committed performance obligation are estimated based on the terms and conditions agreed through the volume purchase agreements.

When revenues will be recognized is mainly dependent on when systems are ~~shipped~~delivered or installed, as well as when service projects and field upgrades are performed and completed. All of which is estimated based on contract terms and communication with our customers, including the customer facility readiness to take delivery of our goods or services. The volume purchase agreements may be subject to modifications, impacting the amount and timing of revenue recognition for the anticipated revenues.

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Notes to the Consolidated Financial Statements (continued)

As of December 31, ~~2021~~2022, the remaining performance obligations amount to ~~€28.9~~€45.4 billion (December 31, ~~2020: €15.1~~2021: €28.9 billion). We estimate that ~~61%~~56% (December 31, ~~2020: 76%~~2021: 61%) of these anticipated revenues will be recognized during the next 12 months. The remaining anticipated revenues mainly include orders related to EUV systems and our next-generation EUV platform, High-NA, which are ~~planned~~expected to be ~~shipped~~recognized in ~~2023~~revenue in 2024 or later.

3. Segment disclosure

ASML has 1one reportable segment, since we are an integrated holistic lithography solution provider, for the development, production, marketing, sales, upgrading and servicing of advanced semiconductor equipment systems, consisting of lithography, metrology and inspection systems. ~~Its operating results are regularly reviewed by the~~The Chief Operating Decision Maker ~~in order~~regularly sets and monitors goals and boundaries on a consolidated basis to make decisions about resource allocation and assess performance.

Management reporting includes net system sales figures of new and used systems, sales per technology and sales per end-use. For the sales per technology and end-use, see Note 2 Revenue from contracts with customers.

Net system sales for new and used systems were as follows:

Year ended December 31 (€, in millions) 2019 2020 2021
New systems 8,807.1 10,160.8 13,446.1
Used systems 189.1 155.8 206.7
Net system sales 8,996.2 10,316.6 13,652.8

~~ASML ANNUAL REPORT 2021 184~~


Year ended December 31 (€, in millions)	2020	2021	2022
New systems	10,160.8	13,446.1	15,152.3
Used systems	155.8	206.7	278.0
Net system sales	10,316.6	13,652.8	15,430.3

For geographical reporting, total net sales are attributed to the geographic location in which the customers’ facilities are located. Long-lived assets are attributed to the geographic location in which these assets are located. Total net sales and long-lived assets ~~(consisting of Property, plant and equipment, net)~~ by geographic region were as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	Total net sales	Long-lived assets	Year ended December 31 (€, in millions)	Total net sales	Long-lived assets
2021
2022				2022
Japan	Japan	459.3	5.5	Japan	1,008.6	7.9
South Korea	South Korea	6,223.0	61.2	South Korea	6,045.6	85.4
Singapore	Singapore	126.2	7.3	Singapore	475.5	5.5
Taiwan	Taiwan	7,327.9	163.6	Taiwan	8,095.5	216.3
China	China	2,740.8	17.0	China	2,916.0	40.8
Rest of Asia	Rest of Asia	1.8	0.2	Rest of Asia	7.2	0.2
Netherlands	Netherlands	14.2	2,048.1	Netherlands	9.2	2,748.5
EMEA	EMEA	134.6	124.0	EMEA	624.5	228.5
United States	United States	1,583.2	555.8	United States	1,991.3	803.8
Total	Total	18,611.0	2,982.7	Total	21,173.4	4,136.9

2020
Japan		542.8	8.3
South Korea		4,151.6	34.1
Singapore		84.9	2.1
Taiwan		4,731.3	164.3
China		2,324.4	17.8
Rest of Asia		1.6	0.4
Netherlands		1.6	1,625.2
EMEA		483.3	129.2
United States		1,657.0	488.9
Total		13,978.5	2,470.3

2019
Japan		463.2	6.5
South Korea		2,202.1	24.1
Singapore		120.0	1.6
Taiwan		5,357.0	131.6
China		1,377.7	21.3
Rest of Asia		2.6	0.5
Netherlands		2.6	1,396.0
EMEA		314.6	4.3
United States		1,980.2	413.4
Total		11,820.0	1,999.3


Year ended December 31 (€, in millions)	Total net sales	Long-lived assets

2021
Japan	459.3	5.5
South Korea	6,223.0	61.2
Singapore	126.2	7.3
Taiwan	7,327.9	163.6
China	2,740.8	17.0
Rest of Asia	1.8	0.2
Netherlands	14.2	2,048.1
EMEA	134.6	124.0
United States	1,583.2	555.8
Total	18,611.0	2,982.7

2020
Japan	542.8	8.3
South Korea	4,151.6	34.1
Singapore	84.9	2.1
Taiwan	4,731.3	164.3
China	2,324.4	17.8
Rest of Asia	1.6	0.4
Netherlands	1.6	1,625.2
EMEA	483.3	129.2
United States	1,657.0	488.9
Total	13,978.5	2,470.3

In ~~2021,~~2022, 2 customers exceed more than 10% of total net sales, totaling ~~€12,505.4 million,~~€11.8 billion, or ~~67.2%~~55.8%, of total net sales. In ~~2020~~2021, 2 customers exceeded more than 10% of total net sales and ~~2019,~~in 2020, 3 customers ~~exceed~~exceeded more than 10% of total net sales, in ~~2020~~2021 totaling ~~€9,946.5 million,~~€12.5 billion, or ~~71.2% (2019: €8,018.1 million,~~67.2% (2020: €9.9 billion, or ~~67.8%~~71.2%). Our three largest customers (based on total net sales) accounted for ~~€3,855.2 million,~~€5.3 billion, or ~~83.7%~~78.6%, of accounts receivable and finance receivables at December 31, ~~2021,~~2022, compared with ~~€2,757.0 million,~~€3.9 billion, or 83.7%, at December 31, 2021 and €2.8 billion, or 80.1%, at December 31, ~~2020 and 2,191.8 million, or 77.2%, at December 31, 2019.~~2020.

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Notes to the Consolidated Financial Statements (continued)

The increase in total net sales of ~~€4,632.5 million,~~€2.6 billion, or ~~33.1%~~13.8%, to ~~€18,611.0 million~~€21.2 billion in 2022, from €18.6 billion in 2021 ~~from €13,978.5 million in 2020~~ is ~~driven~~driven by the global chip shortage, the acceleration of the digital infrastructure and the push for ‘technological sovereignty’. This resulted in higher sales volumes ~~across each technology.~~for DUV systems, whereas the increase in EUV sales is mainly attributable to the NXE:3600D value proposition. It has also led to growth in our service and field options business, ~~as customers have pulled forward demand for our productivity enhancement packages,~~ which ~~provide the most effective and efficient way to increase wafer output.~~has benefited from a growing installed base. The Logic sector continued to be strong in ~~2021,~~2022 and was the largest consumer of our most advanced EUV systems. Memory demand continued growing in ~~2021~~2022, resulting from strong data center ~~and smartphone~~ demand. Taiwan and ~~South Korea~~Japan saw the largest geographic sales growth in support of expanding capacity to meet worldwide demand.

~~ASML ANNUAL REPORT 2021 185~~

4. Cash and cash equivalents and short-term investments

Accounting Policy

Cash and cash equivalents consist primarily of highly liquid investments, such as bank deposits, deposits with governments and ~~government related~~government-related bodies, money market funds and bank accounts readily convertible to known amounts of cash with insignificant interest rate risk and original maturities to the entity holding the investments 3 months or less at the date of acquisition.

Investments with original maturities at the date of acquisition greater than 3 months and 1 year or less are presented as short-term investments. Fair value changes in these investments, which are not temporary, are recognized in the Consolidated Statements of Operations. Short-term investments have insignificant interest rate risk.

Cash and cash equivalents and short-term investments consist of the following:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022

Deposits with financial institutions, governments and government related bodies	Deposits with financial institutions, governments and government related bodies	1,545.3	2,131.7	Deposits with financial institutions, governments and government related bodies	2,131.7	2,548.1
Investments in money market funds	Investments in money market funds	3,841.9	2,928.3	Investments in money market funds	2,928.3	3,196.7
Bank accounts	Bank accounts	662.2	1,891.8	Bank accounts	1,891.8	1,523.5
Cash and cash equivalents	Cash and cash equivalents	6,049.4	6,951.8	Cash and cash equivalents	6,951.8	7,268.3

Deposits with financial institutions, governments and government related bodies	Deposits with financial institutions, governments and government related bodies	1,302.2	638.5	Deposits with financial institutions, governments and government related bodies	638.5	107.7
Short-term investments	Short-term investments	1,302.2	638.5	Short-term investments	638.5	107.7

Cash and cash equivalents and ~~short term~~short-term investments are mainly impacted by strong net cash provided by operating activities, driven by ~~higher~~ net income and ~~increase in~~ down payments, mainly offset by ~~the share buyback program, dividends paid and acquisition~~purchase of property, plant &and equipment, purchase of treasury shares and ~~intangible assets.~~dividend paid.

The deposits with financial institutions, governments and ~~government related~~government-related bodies and investments in money market funds have an investment grade credit rating as rated by credit rating institutions such as S&P, ~~Moody's~~Moody’s or

Fitch. Our cash and cash equivalents are predominantly denominated in euros and to some extent in US dollars, Taiwanese dollars, South Korean ~~Won~~won and Chinese ~~Yuan.~~yuan.

The carrying amount of these assets approximates their fair value.

As of December 31, ~~2021,~~2022, no restrictions on usage of cash and cash equivalents exist ~~(2020:~~(2021: no restrictions). ~~The carrying amount of these assets approximates their fair value.~~

5. Accounts receivable, net

Accounting Policy

Accounts receivable are measured at fair value and are subsequently measured at amortized cost, less allowance for credit losses. The carrying amount of the accounts receivable approximates the fair value. We perform ongoing credit evaluations on our customers’ financial condition. We periodically review whether an allowance for credit losses is needed by considering factors such as historical payment experience, credit quality, aging of the accounts receivable balances, expected lifetime losses, and current economic conditions that may affect a ~~customer's~~customer’s ability to pay.

When entering into arrangements to sell our receivable, we derecognize the receivable only when meeting the derecognition criteria. The criteria require isolation from the seller, granting the buyer the right to pledge or exchange the receivables, and legal transfer of control over the receivable.

Accounts receivable consist of the following:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Accounts receivable, gross	Accounts receivable, gross	1,313.1	3,032.5	Accounts receivable, gross	3,032.5	5,327.9
Allowance for credit losses	Allowance for credit losses	(2.8)	(4.5)	Allowance for credit losses	(4.5)	(4.1)
Accounts receivable, net	Accounts receivable, net	1,310.3	3,028.0	Accounts receivable, net	3,028.0	5,323.8

The increase in accounts receivable as of December 31, ~~2021~~2022, compared to December 31, ~~2020~~2021, is mainly due to an increase in our sales, ~~and~~the timing of ~~factoring receivables.~~cash receipts and systems purchased at the end of the free-use or evaluation period, and an increase in down payment receivables related to future system deliveries.

In ~~2021,~~2022, no receivables ~~have been~~were sold through factoring a~~rrangements for cash totaling~~arrangements (2021: €2.3 ~~billion (2020: €2.2~~ billion). The amounts consist of €0.5 billion (2020: €1.4 billion) regular trade receivables and €1.8 billion (2020: €0.8 billion) absolute, unconditional, irrevocable accounts receivable for down payments on systems to be shipped in 2022 and 2023. The factored receivables have been derecognized since the asset is isolated from the seller, control is transferred to the buyer and there are no restrictions on the buyer related to the factored items. The fair value of the receivables sold was substantially the same as their carrying value. The cash receipt is treated as an operating cash flow within the Consolidated Statements of Cash Flows.

~~ASML ANNUAL REPORT 2021 186~~

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Notes to the Consolidated Financial Statements (continued)

6. Finance receivables, net

Accounting Policy

Finance receivables consist of receivables in relation to sales-type leases. We perform ongoing credit evaluations of our customers’ financial condition. We periodically review whether an allowance for credit losses is needed by considering factors such as historical payment experience, credit quality, the aging of the finance receivables balances, expected lifetime losses, and current economic conditions that may affect a customer’s ability to pay.

The following table lists the components of the finance receivables as of December 31, ~~2021~~2022 and ~~2020:~~2021:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Finance receivables, gross	Finance receivables, gross	2,122.5	1,570.0	Finance receivables, gross	1,570.0	1,356.7
Unearned interest	Unearned interest	(11.5)	(1.4)	Unearned interest	(1.4)	—
Finance receivables, net	Finance receivables, net	2,111.0	1,568.6	Finance receivables, net	1,568.6	1,356.7
Current portion of finance receivables, gross	Current portion of finance receivables, gross	1,716.1	1,187.0	Current portion of finance receivables, gross	1,187.0	1,356.7
Current portion of unearned interest	Current portion of unearned interest	(5.6)	(1.4)	Current portion of unearned interest	(1.4)	—
Non-current portion of finance receivables, net	Non-current portion of finance receivables, net	400.5	383.0	Non-current portion of finance receivables, net	383.0	—

The decrease in finance receivables as of December 31, ~~2021~~2022, compared to December 31, ~~2020~~2021, is the result of the expiration of free-use and evaluation periods of systems shipped, partly offset by new sales-type leases by providing additional systems with a free-use or evaluation period. These sales-type leases support the capacity ramp-up of high-end systems which are part of the early-insertion ~~lifecycle~~life cycle of the ~~technology.~~technology or system type. It is expected ~~they~~these systems will be purchased at the end of the free-use or evaluation period.

Gross profit recognized at the commencement date of the lease for our sales-type leases amounts to ~~€514.2~~€429.1 million during ~~2021 (2020:~~2022 (2021: €514.2 million; 2020: €830.2 ~~million; 2019: €343.9~~ million).

At December 31, ~~2021,~~2022, payment of the finance receivables in the next 5five years and thereafter are:


(€, in millions)	(€, in millions)	Amount	(€, in millions)	Amount
2022		1,187.0
2023	2023	383.0	2023	1,356.7
2024	2024	—	2024	—
2025	2025	—	2025	—
2026	2026	—	2026	—
2027			2027	—
Thereafter	Thereafter	—	Thereafter	—
Finance receivables, gross	Finance receivables, gross	1,570.0	Finance receivables, gross	1,356.7

In 2022, 2021 ~~2020~~ and ~~2019~~2020 we did not record any expected credit losses from finance receivables. As of December 31, ~~2021,~~2022, the finance receivables were neither past due nor impaired.

7. Inventories, net

Accounting Policy

Inventory costs are computed on a first-in, first-out basis. Our inventory values are comprised of purchased materials, freight expenses, customs, duties, production labor and ~~variable~~ overhead. The valuation of inventory includes determining which fixed production overhead costs should be capitalized into inventory based on the normal capacity of our manufacturing and assembly facilities. During periods when production is below our established normal capacity ~~abnormal amounts~~level, a portion of our fixed overhead costs ~~freights and wasted materials~~ are not ~~capitalized into inventory but are expensed~~included in ~~Cost~~the cost of inventory; instead, it is recognized as cost of sales as incurred.

Inventory is valued at the lower of cost or net realizable value, based on assumptions about future demand and market conditions. Valuation of inventory also requires us to establish provisions for inventory that is defective, obsolete or in excess. We use our demand forecast to develop manufacturing plans and utilize this information to compare against raw materials, work in progress and finished product levels to determine the amount of defective, obsolete or excess inventory.

~~ASML ANNUAL REPORT 2021 187~~

Inventories consist of the following:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Raw materials	Raw materials	2,073.4	2,668.3	Raw materials	2,668.3	3,198.9
Work-in-process	Work-in-process	1,805.0	1,749.9	Work-in-process	1,749.9	2,163.9
Finished products	Finished products	1,164.2	1,179.0	Finished products	1,179.0	2,303.8
Inventories, gross	Inventories, gross	5,042.6	5,597.2	Inventories, gross	5,597.2	7,666.6
Inventory reserves	Inventory reserves	(473.2)	(418.0)	Inventory reserves	(418.0)	(466.9)
Inventories, net	Inventories, net	4,569.4	5,179.2	Inventories, net	5,179.2	7,199.7

The increase in inventory in ~~2021~~2022, compared to ~~2020~~2021, is driven by the increased demand from customers reflected through an increased number of fast shipments during 2022. Systems that are fast shipped to our customers are not recognized into revenue until formal customer acceptance at SAT and thus remain part of ASML Finished products. Additionally, inventory increased in 2022 due to higher costs of our latest technologies and growing install base.

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Notes to the Consolidated Financial Statements (continued)

A summary of movements in the inventory reserves is as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Balance at beginning of year	Balance at beginning of year	(494.3)	(473.2)	Balance at beginning of year	(473.2)	(418.0)
Additions for the year	Additions for the year	(192.4)	(180.7)	Additions for the year	(180.7)	(278.5)
Effect of changes in exchange rates	Effect of changes in exchange rates	0.8	(6.1)	Effect of changes in exchange rates	(6.1)	(1.1)
Utilization of the reserve	Utilization of the reserve	212.7	242.0	Utilization of the reserve	242.0	230.7
Balance at end of year	Balance at end of year	(473.2)	(418.0)	Balance at end of year	(418.0)	(466.9)

The additions for ~~2021,~~2022, ~~2020~~2021 and ~~2019~~2020 are recorded in Cost of sales. The additions for the year mainly relate to inventory items which became obsolete due to technological developments and design changes.

8. Other assets

Other current and non-current assets consist of the following:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Advance payments to Carl Zeiss SMT GmbH 1	Advance payments to Carl Zeiss SMT GmbH 1	265.8	288.5	Advance payments to Carl Zeiss SMT GmbH1	288.5	479.9
Prepaid expenses	Prepaid expenses	278.7	374.3	Prepaid expenses	374.3	678.6
Derivative financial instruments 2	Derivative financial instruments 2	39.0	52.2	Derivative financial instruments2	52.2	17.3
VAT receivable	VAT receivable	125.6	136.7	VAT receivable	136.7	201.2
Other assets	Other assets	92.6	148.8	Other assets	148.8	266.4
Other current assets	Other current assets	801.7	1,000.5	Other current assets	1,000.5	1,643.4

Advance payments to Carl Zeiss SMT GmbH 1	Advance payments to Carl Zeiss SMT GmbH 1	668.0	694.3	Advance payments to Carl Zeiss SMT GmbH1	694.3	620.4
Loan to Carl Zeiss SMT GmbH 1		—	124.4
Prepaid expenses	Prepaid expenses	55.2	41.0	Prepaid expenses	41.0	32.4
Derivative financial instruments 2	Derivative financial instruments 2	123.8	47.3	Derivative financial instruments2	47.3	—
Compensation plan assets	Compensation plan assets	67.0	81.4	Compensation plan assets	81.4	71.1
Non-current accounts receivable	Non-current accounts receivable	22.6	8.0	Non-current accounts receivable	8.0	—
Other assets	Other assets	14.9	15.0	Other assets	15.0	15.9
Other non-current assets	Other non-current assets	951.5	1,011.4	Other non-current assets	887.0	739.8

1.For further details on ~~other assets~~advance payments to Carl Zeiss SMT GmbH see Note 26 Related parties and variable interest entities.

2.For further details on derivative financial instruments see Note 25 Financial risk management.

Prepaid expenses mainly include prepaid income taxes toof intercompany profit on inventory that has not been realized by ~~the~~ ASML ~~group~~ of ~~€261.2~~€515.3 million ~~(2020: €162.9~~(2021: €261.2 million). Prepaid expenses further include ~~mainly~~ prepayments for maintenance and the contract balance related to the joint development program with imec of ~~€30.3~~€16.3 million as of December 31, ~~2021 (2020: €53.8~~2022 (2021: €30.3 million). At the end of 2018 we started the new joint development program with imec under which we mainly deliver systems and services upfront and receive R&D services throughout the contract period up until 2024.

~~ASML ANNUAL REPORT 2021 188~~

9. Equity method investments

Accounting Policy

Equity investments over which we are able to exercise significant influence but do not control, are accounted for using the equity method and presented on our Consolidated Balance Sheets within Equity method investments. The difference between the cost of our investment and our proportionate share ofin the carrying value of the ~~investee's~~investee’s underlying net assets as of the acquisition date is the basis difference. The basis difference is allocated to the identifiable assets and liabilities based on their fair value as of the acquisition date (i.e. the date on which we obtain significant influence), with the excess costs of the investment over our proportional fair value of the identifiable assets and liabilities being equity method goodwill.

We amortize the basis difference related to the other intangible assets over the estimated remaining useful lives of these assets that gave rise to this difference. The remaining weighted-average life of the finite-lived intangible assets acquired is ~~15.1~~14.1 years and is amortized using a straight-line method. In-process R&D is initially capitalized at fair value as an intangible asset with an indefinite life. When the R&D project is complete, it is reclassified as an amortizable purchased intangible asset and is amortized over its estimated useful life. If the project is abandoned, we will record the full basis difference charge for the value of the related intangible asset in our Consolidated Statements of Operations in the period of abandonment. Equity method goodwill is not amortized or tested for impairment; instead the equity method investment is tested for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable.

Under the equity method, after initial recognition at cost, our Equity method investments are adjusted for our proportionate share ofin the profit or loss and other comprehensive income of the investee, recognized on a one-quarter time lag to allow for the timely preparation of financial information and presented within Profit from equity method investments. Our proportionate share ofin the profit or loss of the investee is adjusted for any differences in accounting principles and policies, basis difference adjustments and intra-entity profits. Receipt of dividends reduces our Equity method investments, which is presented as an operating cash flow based on the nature of the ~~distributions.~~distributions.

Equity method investments consists of a 24.9% equity interest acquired on June 29, 2017 in Carl Zeiss SMT Holding GmbH & Co. KG, a limited partnership that owns Carl Zeiss SMT GmbH, our single supplier of optical columns.

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Notes to the Consolidated Financial Statements (continued)

For the year ended December 31, ~~2021,~~2022, we recorded a profit from equity method investments of ~~€199.1~~€138.0 million ~~(2020: €88.6~~(2021: €199.1 million) in our Consolidated Statements of Operations. This profit includes the following components:

•–Profit of ~~€246.5~~€169.1 million ~~(2020: €111.4~~(2021: €246.5 million) related to our share of Carl Zeiss SMT Holding GmbH & Co. KG’s net income after accounting policy alignment ~~including a €79.0 million benefit in 2021 related to previously deferred income of Carl Zeiss SMT Holding GmbH & Co. KG, which was released due to entering into the new framework agreement~~

•–Cost due to basis difference amortization related to intangible assets of €26.7 million ~~(2020:~~(2021: €26.7 million)

•–Cost ~~(benefit)~~ due to intercompany profit elimination of ~~€20.7~~€4.4 million ~~(2020: €(3.9)~~(2021: €20.7 million)

In ~~2021~~2022, we received a dividend of ~~€168.0~~€178.7 million ~~(2020: €128.1~~(2021: €168.0 million) from Carl Zeiss SMT Holding GmbH & Co. KG.

Carl Zeiss SMT Holding GmbH & Co. KG is a privately held company; therefore, quoted market prices for its stock are not available.

10. Business combinations and divestitures

Accounting Policy

Acquisitions of subsidiaries are included on the basis of the acquisition method. The cost of acquisition is measured based on the consideration transferred at fair value, the fair value of identifiable assets distributed and the fair value of liabilities incurred or assumed at the acquisition date (i.e. the date which we obtain control). Goodwill is capitalized as the excess of the costs of an acquired subsidiary, net of the amounts assigned to identifiable assets acquired and liabilities incurred or assumed. Acquisition-related costs are expensed when incurred in the period they arise or the service is received.

Business combinations

On October 30, 2020, we concluded the acquisition of Berliner Glas ~~and~~(ASML Berlin GmbH), a provider of optical key components. We obtained control through acquiring 100% of the issued share capital ~~of Berliner Glas,~~ for a total consideration of €257.1 million. ~~Berliner Glas is one of the world’s leading providers of optical key components, assemblies and systems.~~

The total consideration was allocated to goodwill of €87.9 million, assets acquired of €312.1 million, and liabilities assumed of €142.9 million. The contingent consideration was paid in cash in 2021. The majority of the goodwill arising on the acquisition of Berliner Glas (ASML Berlin GmbH) is attributable to the fact that the acquisition will help us achieve our strategic objective to secure the ramp-up and roll-out of future lithography systems. All goodwill has been allocated to the ASML reporting unit. None of the goodwill recognized is expected to be deductible for income tax purposes.

Divestitures

During 2021, we sold the non-semiconductor businesses ~~acquired as part~~ of the acquired Berliner Glas ~~acquisition.~~

~~ASML ANNUAL REPORT 2021 189~~

(ASML Berlin GmbH) group.

The proceeds from these disposals totaled €339.4 million, which primarily related to the sale of the Medical Applications and Swiss Optic business on November 30, 2021. The remaining proceeds are from the sale of the Berliner Glas Technical Glas business on April 30, 2021.

A pre-tax gain of €213.7 million was recognized on these transactions which was recorded in the line item Other income (loss) in our Consolidated Statements of ~~Operations.~~Operations in 2021.

11. Goodwill

Accounting Policy

Goodwill represents the excess of the costs of an acquisition over the fair value of the amounts assigned to assets acquired and liabilities incurred or assumed of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is allocated to reporting units for the purpose of impairment testing. The allocation is made to those reporting units that are expected to benefit from the business combination in which the goodwill arose. Goodwill is stated at cost less accumulated impairment losses.

Goodwill is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. To determine whether it is necessary to perform the quantitative goodwill impairment test, we perform a step-zero qualitative assessment, annually. If we determine that it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, we do not perform a quantitative goodwill impairment test.

Goodwill mainly results from the acquisitions of Cymer and HMI. The balance as of December 31, ~~2021~~2022, is €4,555.6 million ~~(2020: €4,629.1~~(2021: €4,555.6 million). ~~The decrease of €73.5 million~~ ~~is the result of the divestment of the non-semiconductor businesses of Berliner Glas during~~ ~~2021~~.

We have identified 2two reporting units: Reporting Unit ASML and Reporting Unit Cymer Light Sources. As of December 31, ~~2021~~2022, the goodwill allocated to Reporting Unit ASML amounts to €4,093.3 million ~~(2020: €4,166.8~~(2021: €4,093.3 million) and Reporting Unit Cymer Light Sources amounts to €462.3 million ~~(2020:~~(2021: €462.3 million).

Based on our assessment during the annual goodwill impairment test, we believe it is more likely than not that the fair values of the reporting units exceed their carrying amounts, and therefore goodwill was not impaired as of December 31, ~~2021.~~2022. The accumulated impairment as of December 31, 2022 is nil (2021: nil).

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Notes to the Consolidated Financial Statements (continued)

12. Intangible assets, net

Accounting Policy

Intangible assets include brands, intellectual property, developed technology, customer relationships, and other intangible assets not yet available for use. These finite-lived intangible assets are stated at cost, less accumulated amortization and accumulated impairment losses. Amortization is calculated using the straight-line method based on the estimated useful lives of the assets.

Finite-lived intangible assets are assessed for impairment, annually or whenever there is an indication that the balance sheet carrying amount may not be recoverable using cash flow projections for the useful life.

The following table shows the respective useful lives for intangible assets:


Category			Estimated useful life
Brands			20 years
Intellectual property			~~3 -~~ 3–10 years
Developed technology			~~6 -~~ 6–15 years
Customer relationships			~~8 -~~ 8–18 years
Other			~~2 -~~ 2–10 years

~~ASML ANNUAL REPORT 2021 190~~

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Notes to the Consolidated Financial Statements (continued)

As of December 31, ~~2021~~2022, intangible assets consist mainly of brands, intellectual property, developed technology and customer relationships obtained from the acquisitions of HMI (2016) and Cymer (2013):


€, in millions	€, in millions	Brands	Intellectual property	Developed technology	Customer relationships	Other	Total	€, in millions	Brands	Intellectual property	Developed technology	Customer relationships	Other	Total
Cost	Cost							Cost
Balance at January 1, 2020		38.9	142.4	1,200.1	228.6	110.5	1,720.5
Acquisitions through business combinations		—	—	30.0	—	2.3	32.3
Additions		—	2.5	—	—	33.4	35.9

Disposals		—	—	—	—	(0.2)	(0.2)
Effect of changes in exchange rates		—	(0.1)	—	—	(0.1)	(0.2)
Balance at December 31, 2020		38.9	144.8	1,230.1	228.6	145.9	1,788.3
Balance at January 1, 2021								Balance at January 1, 2021	38.9	144.8	1,230.1	228.6	145.9	1,788.3

Additions	Additions	—	—	—	—	45.6	45.6	Additions	—	—	—	—	45.6	45.6
Divestment	Divestment	—	—	(9.9)	—	(0.8)	(10.7)	Divestment	—	—	(9.9)	—	(0.8)	(10.7)
Disposals	Disposals	—	—	—	—	(0.5)	(0.5)	Disposals	—	—	—	—	(0.5)	(0.5)
Effect of changes in exchange rates	Effect of changes in exchange rates	—	—	—	—	(0.2)	(0.2)	Effect of changes in exchange rates	—	—	—	—	(0.2)	(0.2)
Balance at December 31, 2021	Balance at December 31, 2021	38.9	144.8	1,220.2	228.6	190.0	1,822.5	Balance at December 31, 2021	38.9	144.8	1,220.2	228.6	190.0	1,822.5

Accumulated amortization
Balance at January 1, 2020		9.2	70.6	428.6	83.2	24.5	616.1
Amortization		1.9	8.2	82.1	12.7	18.6	123.5
Additions								Additions	—	1.5	—	—	32.5	34.0

Disposals	Disposals	—	—	—	—	(0.2)	(0.2)	Disposals	—	—	—	—	(1.6)	(1.6)
Effect of changes in exchange rates	Effect of changes in exchange rates	—	—	—	—	—	—	Effect of changes in exchange rates	—	0.8	—	—	1.6	2.4
Balance at December 31, 2020		11.1	78.8	510.7	95.9	42.9	739.4
Balance at December 31, 2022								Balance at December 31, 2022	38.9	147.1	1,220.2	228.6	222.5	1,857.3

Accumulated amortization								Accumulated amortization
Balance at January 1, 2021								Balance at January 1, 2021	11.1	78.8	510.7	95.9	42.9	739.4
Amortization	Amortization	1.9	8.4	84.2	12.7	25.8	133.0	Amortization	1.9	8.4	84.2	12.7	25.8	133.0

Divestment	Divestment	—	—	(0.9)	—	(0.4)	(1.3)	Divestment	—	—	(0.9)	—	(0.4)	(1.3)
Disposals	Disposals	—	—	—	—	(0.4)	(0.4)	Disposals	—	—	—	—	(0.4)	(0.4)
Effect of changes in exchange rates	Effect of changes in exchange rates	—	—	—	—	(0.3)	(0.3)	Effect of changes in exchange rates	—	—	—	—	(0.3)	(0.3)
Balance at December 31, 2021	Balance at December 31, 2021	13.0	87.2	594.0	108.6	67.6	870.4	Balance at December 31, 2021	13.0	87.2	594.0	108.6	67.6	870.4
Amortization								Amortization	1.9	8.6	83.4	12.7	28.5	135.1
Impairment charges								Impairment charges	—	—	—	—	9.2	9.2

Disposals								Disposals	—	—	—	—	(1.4)	(1.4)
Effect of changes in exchange rates								Effect of changes in exchange rates	—	—	—	—	1.6	1.6
Balance at December 31, 2022								Balance at December 31, 2022	14.9	95.8	677.4	121.3	105.5	1,014.9

Carrying amount	Carrying amount							Carrying amount
December 31, 2020		27.8	66.0	719.4	132.7	103.0	1,048.9
December 31, 2021	December 31, 2021	25.9	57.6	626.2	120.0	122.4	952.1	December 31, 2021	25.9	57.6	626.2	120.0	122.4	952.1
December 31, 2022								December 31, 2022	24.0	51.3	542.8	107.3	117.0	842.4

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Notes to the Consolidated Financial Statements (continued)

The Consolidated Statements of Operations include the following amortization charges:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Cost of Sales	Cost of Sales	97.4	101.8	107.8	Cost of Sales	101.8	107.8	105.9
R&D Costs	R&D Costs	7.5	12.0	14.5	R&D Costs	12.0	14.5	18.2
SG&A	SG&A	10.5	9.7	10.7	SG&A	9.7	10.7	11.0
Total Amortization	Total Amortization	115.4	123.5	133.0	Total Amortization	123.5	133.0	135.1

As of December 31, ~~2021,~~2022, the intangible assets not yet available for use, as included in Other, amount toto €34.0 million (2021: €23.6 ~~million (2020: €24.8~~ million) and are allocated to Reporting Unit ASML.

During ~~2021~~2022 we recorded no€9.2 million impairment charges ~~(2020:~~(2021: €0.0 million; ~~2019:~~2020: €0.0 million).

As of December 31, ~~2021,~~2022, the estimated amortization expenses for intangible assets for the next 5five years ~~and thereafter:~~and thereafter is as follows:


€, in millions	€, in millions	Amount	€, in millions	Amount
2022		135.2
2023	2023	130.4	2023	130.8
2024	2024	121.0	2024	124.8
2025	2025	115.6	2025	119.3
2026	2026	109.0	2026	113.0
2027			2027	109.1
Thereafter	Thereafter	340.9	Thereafter	245.4
Total	Total	952.1	Total	842.4

~~ASML ANNUAL REPORT 2021 191~~

13. Property, plant and equipment, net

Accounting Policy

Property, plant and equipment ~~are~~is stated at cost, less accumulated depreciation and accumulated impairment losses. Costs of assets manufactured by ASML include direct manufacturing costs, production overhead and interest costs incurred for qualifying assets during the construction period. Property, plant and equipment are depreciated on a straight-line basis in the Consolidated Statements of Operations over their estimated useful lives, except for land which is not depreciated.

Evaluation systems leased to our customers under an operating lease are capitalized as Property, plant and equipment at cost and depreciated over the respective lease term. Leased assets that are returned to ASML upon expiration of the lease term are either taken back into Property, plant and equipment as they will be used internally by D&E or transferred back to Inventory to be reworked and sold.

The carrying values of prototypes, tooling and equipment that are intended to be sold, but first internally utilized for more than one year for R&D purposes, are reclassified from Inventories to Property, plant and equipment and depreciated while being internally used. When no longer required for R&D activities, the ~~assets'~~assets’ carrying value is reclassified back to Inventories and reworked to make them ready for sale to our customers. These transfers are reported as Net non-cash movements to/from Inventories in our Property, plant and equipment movement schedule.

Property, plant and equipment is assessed for impairment whenever there is an indication that the carrying amount may not be recoverable using cash flow projections for the useful life.

The following table shows the respective useful lives for Property, plant and equipment:


Category			Estimated useful life
Buildings and constructions			~~5 -~~ 5–45 years
Machinery and equipment			~~1 -~~ 1–7 years
Leasehold improvements			~~1 -~~ 1–10 years
Furniture, fixtures and other			~~3 -~~ 3–5 years

~~ASML ANNUAL REPORT 2021 192~~

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Notes to the Consolidated Financial Statements (continued)

Property, plant and equipment ~~consist~~consists of the following:


€, in millions	€, in millions	Land and buildings	Machinery and equipment	Leasehold improvements	Furniture, fixtures and other	Total	€, in millions	Land and buildings	Machinery and equipment	Leasehold improvements	Furniture, fixtures and other	Total
Cost	Cost						Cost
Balance at January 1, 2020		2,036.5	1,587.8	301.0	377.7	4,303.0
Acquisitions through business combinations		49.1	65.7	—	10.3	125.1
Additions		359.3	263.0	45.7	43.4	711.4
Disposals		(0.4)	(53.6)	(5.2)	(9.0)	(68.2)
Net non-cash movements to/from Inventories		—	(23.9)	—	—	(23.9)
Effect of changes in exchange rates		(12.3)	(10.1)	(1.2)	(1.8)	(25.4)
Balance at December 31, 2020		2,432.2	1,828.9	340.3	420.6	5,022.0
Balance at January 1, 2021							Balance at January 1, 2021	2,432.2	1,828.9	340.3	420.6	5,022.0

Additions	Additions	372.7	389.6	33.2	65.3	860.8	Additions	372.7	389.6	33.2	65.3	860.8
Divestment	Divestment	(17.9)	(13.4)	—	(4.7)	(36.0)	Divestment	(17.9)	(13.4)	—	(4.7)	(36.0)
Disposals	Disposals	(0.5)	(199.1)	(7.5)	(70.3)	(277.4)	Disposals	(0.5)	(199.1)	(7.5)	(70.3)	(277.4)
Net non-cash movements to/from Inventories	Net non-cash movements to/from Inventories	—	11.9	—	—	11.9	Net non-cash movements to/from Inventories	—	11.9	—	—	11.9
Effect of changes in exchange rates	Effect of changes in exchange rates	17.2	10.8	2.6	3.2	33.8	Effect of changes in exchange rates	17.2	10.8	2.6	3.2	33.8
Balance at December 31, 2021	Balance at December 31, 2021	2,803.7	2,028.7	368.6	414.1	5,615.1	Balance at December 31, 2021	2,803.7	2,028.7	368.6	414.1	5,615.1

Accumulated depreciation and impairment
Balance at January 1, 2020		746.3	1,022.7	281.3	253.4	2,303.7
Depreciation		102.0	186.2	21.4	42.1	351.7
Impairment charges		—	2.7	—	—	2.7
Additions							Additions	510.9	665.4	34.4	87.6	1,298.3

Disposals	Disposals	(0.1)	(51.6)	(4.7)	(9.0)	(65.4)	Disposals	(1.3)	(42.2)	(1.0)	(3.0)	(47.5)
Net non-cash movements to/from Inventories	Net non-cash movements to/from Inventories	—	(29.9)	—	—	(29.9)	Net non-cash movements to/from Inventories	—	129.2	—	—	129.2
Effect of changes in exchange rates	Effect of changes in exchange rates	(5.6)	(3.9)	(0.7)	(0.9)	(11.1)	Effect of changes in exchange rates	0.7	(3.5)	(1.2)	(1.7)	(5.7)
Balance at December 31, 2020		842.6	1,126.2	297.3	285.6	2,551.7
Balance at December 31, 2022							Balance at December 31, 2022	3,314.0	2,777.6	400.8	497.0	6,989.4

Accumulated depreciation and impairment							Accumulated depreciation and impairment
Balance at January 1, 2021							Balance at January 1, 2021	842.6	1,126.2	297.3	285.6	2,551.7
Depreciation	Depreciation	95.6	167.1	15.9	43.0	321.6	Depreciation	95.6	167.1	15.9	43.0	321.6
Impairment charges	Impairment charges	3.1	8.2	0.2	—	11.5	Impairment charges	3.1	8.2	0.2	—	11.5
Divestment	Divestment	(0.6)	(4.4)	—	(2.5)	(7.5)	Divestment	(0.6)	(4.4)	—	(2.5)	(7.5)
Disposals	Disposals	(0.4)	(181.2)	(3.9)	(69.7)	(255.2)	Disposals	(0.4)	(181.2)	(3.9)	(69.7)	(255.2)
Net non-cash movements to/from Inventories	Net non-cash movements to/from Inventories	—	(7.9)	—	—	(7.9)	Net non-cash movements to/from Inventories	—	(7.9)	—	—	(7.9)
Effect of changes in exchange rates	Effect of changes in exchange rates	7.4	7.6	1.5	1.7	18.2	Effect of changes in exchange rates	7.4	7.6	1.5	1.7	18.2
Balance at December 31, 2021	Balance at December 31, 2021	947.7	1,115.6	311.0	258.1	2,632.4	Balance at December 31, 2021	947.7	1,115.6	311.0	258.1	2,632.4

Carrying amount
December 31, 2020		1,589.6	702.7	43.0	135.0	2,470.3
December 31, 2021		1,856.0	913.1	57.6	156.0	2,982.7

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Notes to the Consolidated Financial Statements (continued)


€, in millions	Land and buildings	Machinery and equipment	Leasehold improvements	Furniture, fixtures and other	Total
Depreciation	134.8	232.6	21.9	55.9	445.2
Impairment charges	10.9	6.4	0.5	—	17.8

Disposals	(2.3)	(29.5)	(0.9)	(2.4)	(35.1)
Net non-cash movements to/from Inventories	—	(10.9)	—	—	(10.9)
Effect of changes in exchange rates	(0.5)	(1.9)	(0.6)	(1.2)	(4.2)
Balance at December 31, 2022	1,090.6	1,312.3	331.9	310.4	3,045.2

Carrying amount
December 31, 2021	1,856.0	913.1	57.6	156.0	2,982.7
December 31, 2022	2,223.4	1,465.3	68.9	186.6	3,944.2

As of December 31, ~~2021,~~2022, the carrying amount includes assets under construction of ~~€695.9~~€869.8 million ~~(2020: €676.4~~(2021: €695.9 million) consisting of primarily ~~Land and~~ buildings, as well as Machinery and equipment.

As of December 31, ~~2021,~~2022, the carrying amount of land amounts to ~~€137.5~~€178.7 million ~~(2020: €102.4~~(2021: €137.5 million).

The additions in ~~2021~~2022 in Land and buildings, as well as Furniture, fixtures and other mainly relates to the construction of ~~ASML’s logistics facility,~~the EUV 0.55 NA (High-NA) factory and office space at our headquarters in Veldhoven, in order to support our continued growth.

The additions in ~~2021~~2022 in Machinery and equipment mainly relate to the upgrade and expansion of production tooling to support the growth of our business, as well as investments in prototypes of new technologies.

The additions in ~~2021~~2022 in Leasehold Improvements mainly relate to installation of ~~clean rooms~~cleanrooms and office space for leased properties in both the United States and ~~Korea.~~Taiwan. During ~~2021~~2022, we ~~did not enter~~entered into ~~any additional~~23 leases that will require further Leasehold Improvement ~~investments.~~

~~ASML ANNUAL REPORT 2021 193~~investments amounting €33.3 million.

The Consolidated Statements of Operations include the following depreciation charges:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Cost of Sales	Cost of Sales	196.1	205.9	188.6	Cost of Sales	205.9	188.6	248.2
R&D Costs	R&D Costs	117.2	119.9	101.4	R&D Costs	119.9	101.4	163.7
SG&A	SG&A	12.0	25.9	31.6	SG&A	25.9	31.6	33.3
Total Depreciation	Total Depreciation	325.3	351.7	321.6	Total Depreciation	351.7	321.6	445.2

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Notes to the Consolidated Financial Statements (continued)

14. Right-of-use assets and lease liabilities

Accounting Policy

We determine ifwhether an arrangement iscontains a lease at inception. ~~Operating leases~~Leases are included in Right-of-use assets, ~~- Operating,~~ Accrued & other current liabilities, ~~and~~ Accrued & other non-current liabilities, ~~in our consolidated balance sheets. Finance leases are included in Right-of-use assets - Finance,~~ current portion of Long-term debt, and Long-term debt in our Consolidated Balance ~~Sheets.~~Sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Right-of-use assets include any lease payments made at or before the commencement date and are reduced by lease incentives. Our Right-of-use asset and lease liability valuation may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expenses for operating leases are recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components. The lease components are accounted for separately from non-lease components. The allocation of the consideration between lease and non-lease components is based on the relative ~~stand-alone~~standalone prices of lease components included in the lease contracts.

Right-of-use assets consist of the following leases:


		Operating Leases		Finance Leases
Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Properties	Properties	158.2	144.4	130.7	5.3	Properties	149.7	148.9
Cars	Cars	7.6	6.7	—	—	Cars	6.7	5.1
Equipment	Equipment	—	—	34.1	—	Equipment	—	—
Warehouses	Warehouses	11.0	7.5	—	—	Warehouses	7.5	38.0
Other	Other	3.3	0.9	—	—	Other	0.9	0.7
Right-of-use assets	Right-of-use assets	180.1	159.5	164.8	5.3	Right-of-use assets	164.8	192.7

ASML owns the majority of real estate we utilize for manufacturing, supply chain management and general administration at our ~~headquarter~~headquarters in Veldhoven, in the Netherlands. At our other locations worldwide, ~~much~~most of the properties we occupy are leased.

The Right-of-use assets from finance leases in 2020 mainly consisted of facilities and tooling related to our High-NA agreement with Carl Zeiss SMT, for which the funds are prepaid by ASML. This agreement was replaced by a new framework agreement. These assets no longer meet the definition of a lease upon entering into the new agreement. They are classified as part of Other assets in 2021. For further details, see Note 26 Related parties and variable interest entities.

Lease liabilities are split between current and ~~non-current:~~

Operating Leases Finance Leases
Year ended December 31 (€, in millions) 2020 2021 2020 2021
Current 46.5 43.7 4.7 2.9
Non-current 129.8 118.0 8.1 2.3
Lease liabilities 176.3 161.7 12.8 5.2

non-current. The non-current portion mainly consists of properties and warehouses. For the year ended December 31, ~~2021,~~2022, Lease ~~Liabilities~~liabilities under an operating lease arrangement ~~decreased~~increased by ~~€14.6~~€35.0 million, mainly due to ~~scheduled lease payments, partly offset by~~ new ~~lease contracts.~~leases of warehouses that commenced during 2022.

~~ASML ANNUAL REPORT 2021 194~~


Year ended December 31 (€, in millions)	2021	2022
Current	46.6	47.6
Non-current	120.3	151.5
Lease liabilities	166.9	199.1

The Consolidated Statements of Operations include the following depreciation charges relating to these leases:


		Operating Leases			Finance Leases
Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Properties	Properties	48.2	47.6	49.3	2.8	4.1	2.9	Properties	51.7	52.2	52.3
Cars	Cars	8.1	5.5	4.8	—	—	—	Cars	5.5	4.8	2.7
Equipment	Equipment	—	—	—	4.5	7.0	—	Equipment	7.0	—	—
Warehouses	Warehouses	4.5	6.6	3.0	—	—	—	Warehouses	6.6	3.0	4.0
Other	Other	12.4	5.9	2.4	—	—	—	Other	5.9	2.4	1.4
Depreciation charge right-of-use assets	Depreciation charge right-of-use assets	73.2	65.6	59.5	7.3	11.1	2.9	Depreciation charge right-of-use assets	76.7	62.4	60.4

The total cash flows relating to the lease liabilities are as follows:


		Operating Leases			Finance Leases
Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Total Cash Flows	Total Cash Flows	73.2	58.8	64.3	2.8	2.9	4.6	Total Cash Flows	61.7	68.9	57.9

The weighted average remaining lease term and weighted average discount rate related to the leases are as follows:


		Operating Leases						Finance Leases
Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019		2020		2021		2019		2020		2021		Year ended December 31 (€, in millions)	2020		2021		2022
Weighted average remaining lease term (months)	Weighted average remaining lease term (months)	70		65		64		230		243		86		Weighted average remaining lease term (months)	147		62		67
Weighted average discount rate (%)	Weighted average discount rate (%)	2.2	%	2.0	%	2.0	%	0.7	%	0.5	%	0.5	%	Weighted average discount rate (%)	1.3	%	1.9	%	2.2	%

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Notes to the Consolidated Financial Statements (continued)

15. Accrued and other liabilities

Accrued and other liabilities consist of the following:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Costs to be paid		233.9	352.0
Personnel related items		757.4	864.7
Derivative financial instruments 1		20.0	2.8
Operating lease liabilities 2		176.3	161.7
Costs to be paid1				Costs to be paid1	352.0	511.6
Personnel-related items				Personnel-related items	864.7	1,070.9
Derivative financial instruments2				Derivative financial instruments2	2.8	261.2
Operating lease liabilities3				Operating lease liabilities3	161.7	196.7
Provisions	Provisions	84.8	91.2	Provisions	91.2	90.5
Standard warranty reserve	Standard warranty reserve	119.1	145.3	Standard warranty reserve	145.3	143.6
Other	Other	12.0	68.9	Other	68.9	56.3
Accrued and other liabilities	Accrued and other liabilities	1,403.5	1,686.6	Accrued and other liabilities	1,686.6	2,330.8
Less: non-current portion of accrued and other liabilities	Less: non-current portion of accrued and other liabilities	257.5	251.1	Less: non-current portion of accrued and other liabilities	251.1	454.9
Current portion of accrued and other liabilities	Current portion of accrued and other liabilities	1,146.0	1,435.5	Current portion of accrued and other liabilities	1,435.5	1,875.9

1.Costs to be paid includes an amount payable to related parties. For further details see Note 26 Related parties and variable interest entities.

2.For further details on derivative financial instruments see Note 25 Financial risk management.

2.3.For further details on ~~operating~~ lease liabilities see Note 14 Right-of-use assets and lease liabilities.

Costs to be paid as of December 31, ~~2021~~2022, include VAT payables and accrued costs for unbilled services provided by suppliers including contracted labor, outsourced services and consultancy. Cost to be paid represent ASML’s estimate of contractual liability as of the reporting date, to be settled in a future period, based upon the underlying terms and conditions.

~~Personnel related~~Personnel-related items mainly consist of accrued annual short-term incentive bonus plans, accrued vacation days, accrued pension premiums, accrued wage tax and accrued vacation allowance. The increase in the accrued ~~personnel related~~personnel-related items compared to prior year is mainly ~~the result~~ of ~~the continued growth of our business, which resulted in~~ an increase in the number of our ~~employees.~~employees to support the continued growth of our business.

The standard warranty reserve is based on historical product performance and total expected costs to fulfill our warranty obligation. Annually, we assess and update the standard warranty reserve based on the latest actual historical warranty costs and expected future warranty costs. Total changes in standard warranty reserve for the years ~~2021~~2022 and ~~2020~~2021, are as follows:

Year ended December 31 (€, in millions) 2020 2021
Balance at beginning of year 128.4 119.1
Additions for the year 137.1 188.6
Utilization of the reserve (145.9) (162.8)
Effect of exchange rates (0.5) 0.4
Balance at end of year 119.1 145.3

~~ASML ANNUAL REPORT 2021 195~~


Year ended December 31 (€, in millions)	2021	2022
Balance at beginning of year	119.1	145.3
Additions for the year	188.6	191.5
Utilization of the reserve	(162.8)	(193.5)

Effect of exchange rates	0.4	0.3
Balance at end of year	145.3	143.6

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Notes to the Consolidated Financial Statements (continued)

16. Long-term debt and interest and other costs

Accounting ~~policy~~Policy

Long-term debt represents debt issued privately without registration with a government authority and is payable to others under the terms of a signed agreement. Long-term debt is initially recognized at fair value and subsequently measured at amortized cost. Debt is qualified as long-term debt as long as the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Interest accruals and payments relating to Long-term debt are accounted for as part of Accrued and other liabilities. Interest and other costs should be accrued and recorded with the passage of time over the agreed term, regardless of when the interest receipt or payment has taken place.

Long-term debt consists of the following:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
€500 million 0.625% senior notes issued July 2016 and principal due July 7th 2022 interest annually payable on July 7th, carrying amount	€500 million 0.625% senior notes issued July 2016 and principal due July 7th 2022 interest annually payable on July 7th, carrying amount	501.5	500.5	€500 million 0.625% senior notes issued July 2016 and principal due July 7th 2022 interest annually payable on July 7th, carrying amount	500.5	—
€750 million 3.375% senior notes issued September 2013 and principal due September 19th 2023 interest annually payable on September 19th, carrying amount	€750 million 3.375% senior notes issued September 2013 and principal due September 19th 2023 interest annually payable on September 19th, carrying amount	802.1	780.6	€750 million 3.375% senior notes issued September 2013 and principal due September 19th 2023 interest annually payable on September 19th, carrying amount	780.6	744.6
€1,000 million 1.375% senior notes issued July 2016 and principal due July 7th 2026 interest annually payable on July 7th, carrying amount	€1,000 million 1.375% senior notes issued July 2016 and principal due July 7th 2026 interest annually payable on July 7th, carrying amount	1,028.0	1,003.2	€1,000 million 1.375% senior notes issued July 2016 and principal due July 7th 2026 interest annually payable on July 7th, carrying amount	1,003.2	893.9
€750 million 1.625% senior notes issued November 2016 and principal due May 28th 2027 interest annually payable on May 28th, carrying amount	€750 million 1.625% senior notes issued November 2016 and principal due May 28th 2027 interest annually payable on May 28th, carrying amount	795.4	769.3	€750 million 1.625% senior notes issued November 2016 and principal due May 28th 2027 interest annually payable on May 28th, carrying amount	769.3	666.8
€750 million 0.250% senior notes issued February 2020 and principal due February 25th 2030 interest annually payable on February 25th, carrying amount	€750 million 0.250% senior notes issued February 2020 and principal due February 25th 2030 interest annually payable on February 25th, carrying amount	740.7	741.7	€750 million 0.250% senior notes issued February 2020 and principal due February 25th 2030 interest annually payable on February 25th, carrying amount	741.7	742.7
€750 million 0.625% senior notes Issued May 2020 and principal due May 7th 2029 interest annually payable on May 7th, carrying amount		746.8	747.1
Debt acquired with Berliner Glas		55.5	36.4
€750 million 0.625% senior notes issued May 2020 and principal due May 7th 2029 interest annually payable on May 7th, carrying amount				€750 million 0.625% senior notes issued May 2020 and principal due May 7th 2029 interest annually payable on May 7th, carrying amount	747.1	747.5
€500 million 2.250% senior notes issued May 2022 and principal due May 17th 2032 interest annually payable on May 17th, carrying amount				€500 million 2.250% senior notes issued May 2022 and principal due May 17th 2032 interest annually payable on May 17th, carrying amount	—	440.3
Debt acquired from Berliner Glas (ASML Berlin GmbH)				Debt acquired from Berliner Glas (ASML Berlin GmbH)	36.4	22.3
Other	Other	8.2	5.3	Other	5.3	2.3
Long-term debt	Long-term debt	4,678.2	4,584.1	Long-term debt	4,584.1	4,260.4
Less: current portion of long-term debt	Less: current portion of long-term debt	15.4	509.1	Less: current portion of long-term debt	509.1	746.2
Non-current portion of long-term debt	Non-current portion of long-term debt	4,662.8	4,075.0	Non-current portion of long-term debt	4,075.0	3,514.2

All senior notes are redeemable at the option of ASML, in whole or in part, at any time by paying a make whole premium, and unless previously redeemed, will be redeemed at 100% of their principal amount on the due date.

Our obligations to make principal repayments under our senior notes and other borrowing arrangements excluding interest expense as of December 31, ~~2021:~~2022:


€, in millions	€, in millions	Amount	€, in millions	Amount
2022		508.6
2023	2023	755.9	2023	753.8
2024	2024	4.5	2024	2.0
2025	2025	4.5	2025	2.0
2026	2026	1,004.5	2026	1,002.0
2027			2027	752.0
Thereafter	Thereafter	2,263.6	Thereafter	2,012.9
Total debt maturities	Total debt maturities	4,541.6	Total debt maturities	4,524.7

For the year ~~2022,~~2023, the obligations mainly relate to principal repayment of the senior notes due on ~~July 7, 2022.~~September 19, 2023. The years thereafter mainly relate to repayments of principals under the long-term senior notes.

Eurobonds

The following table summarizes the carrying amount of our outstanding Eurobonds, including the fair value of interest rate swaps used to hedge the change in the fair value of the Eurobonds:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Amortized cost amount	Amortized cost amount	4,474.1	4,478.5	Amortized cost amount	4,478.5	4,479.0
Fair value interest rate swaps 1	Fair value interest rate swaps 1	140.4	63.9	Fair value interest rate swaps1	63.9	(243.2)
Carrying amount	Carrying amount	4,614.5	4,542.4	Carrying amount	4,542.4	4,235.8

1.The fair value of the interest rate swaps excludes accrued interest.

~~ASML ANNUAL REPORT 2021 196~~

We use interest rate swaps to minimize the net interest exposure for the group by aligning the interest terms of the available cash and the interest bearing debt. The fair value changes of these interest rate swaps are recorded on the Consolidated Balance Sheets under ~~Other assets~~Current and Non-Current Accrued and other liabilities and the carrying amount of the Eurobonds is adjusted for these fair value changes. We did not enter into additional interest rate swaps in connection with the Eurobonds issued in 2020.

ASML ANNUAL REPORT 2022

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Notes to the Consolidated Financial Statements (continued)

The following table summarizes the estimated fair value of our Eurobonds:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2021	2022
Principal amount	Principal amount	4,500.0	4,500.0	Principal amount	4,500.0	4,500.0
Carrying amount	Carrying amount	4,614.5	4,542.4	Carrying amount	4,542.4	4,235.8
Fair value 1	Fair value 1	4,798.8	4,673.9	Fair value1	4,673.9	4,072.8

1.Source: Bloomberg Finance LP.

The fair value of our Eurobonds is estimated based on quoted market prices as of December 31, ~~2021.~~2022. The fair value deviates from the principal amount, due to changes in market interest rates and credit spreads since the issue of our Eurobonds which carry a fixed coupon interest rate.

Debt acquired ~~with~~from Berliner Glas (ASML Berlin GmbH)

The ~~loans~~loan of Berliner Glas ~~are comprised of~~(ASML Berlin GmbH) is a mortgage loan of ~~€24.1~~€22.3 million with an annual interest rate of 0.5%, repayable in ~~2034, revolving credit facilities at various financial institutions of €12.3 million with an annual interest rate between 0.8% and 1.2% that are repayable annually through 2024.~~2034. Debt decreased compared to 2021, due to repayments made in 2022.

Lines of credit

We maintain an available committed credit facility, with a group of banks, of €700.0 million as of December 31, ~~2021~~2022 and as of December 31, ~~2020.~~2021. No amounts were outstanding under the committed credit facility at the end of ~~2021~~2022 and ~~2020.~~2021. This facility of €700.0 million was renegotiated on July 3, 2019, with an original maturity date of July 3, 2024. The facility included 2two 1-year extension options. The second ~~1-year~~one-year extension was exercised in June 2021. This extends the maturity from July 2025 to July 2026. Outstanding amounts under this credit facility will bear an interest of Euribor plus a margin. The margin depends on our credit rating and ESG score.

We have a non-committed guarantee facility of €85.0 million under which guarantees in the ordinary course of business, such as customs or rental guarantees, can be provided to third parties. As of ~~2019,~~December 31, 2022, an amount of €23.4 million has been provided as guarantee. In addition, ASML ~~entered into~~has a non-committed credit facility for our Chinese subsidiary of €130.0 million. The non-committed credit facility covers bank guarantees, standby letters of credit, as well as advances up to €75.0 million. No amounts were outstanding under this facility. Outstanding amounts under the non-committed facility will bear interest based on market conditions at the moment of draw down.

Interest and other, net

Interest and other, net consist mainly of interest income and interest expenses. In ~~2021,~~2022, the interest expense component is €60.8 million (2021: €54.6 ~~million (2020:~~million; 2020: €43.3 ~~million; 2019: €36.6~~ million). The expenses mainly relate to interest expense on our Eurobonds, interest rate swaps and hedges, ~~and~~ amortized financing costs, and to negative interest on Cash and cash equivalents.

17. Commitments and contingencies

Commitments

We have various contractual obligations, some of which are required to be recorded as liabilities in our Consolidated Balance Sheets, including long- and short-term debt and lease commitments. Other contractual obligations, namely unconditional purchase obligations, are generally not required to be recognized as liabilities but are required to be disclosed.

Our contractual obligations as of December 31, ~~2021~~2022 can be summarized as follows:


Payments due by period (€, in millions)	Payments due by period (€, in millions)	Total	1 year	2 year	3 year	4 year	5 year	>5 years	Payments due by period (€, in millions)	Total	1 year	2 year	3 year	4 year	5 year	>5 years
Long-Term Debt Obligations, including interest1	Long-Term Debt Obligations, including interest1	4,806.9	570.3	814.2	37.5	37.6	1,037.7	2,309.6	Long-Term Debt Obligations, including interest1	4,837.1	823.5	46.3	46.4	1,046.3	782.4	2,092.2
Lease Obligations 2	Lease Obligations 2	161.7	43.7	35.7	21.3	16.6	15.4	29.0	Lease Obligations2	199.1	49.9	37.4	28.8	24.7	21.1	37.2
Purchase Obligations	Purchase Obligations	8,527.4	6,974.0	814.1	405.7	223.4	74.2	36.0	Purchase Obligations	11,815.1	9,703.9	1,152.5	729.9	165.5	51.1	12.2
Total Contractual Obligations	Total Contractual Obligations	13,496.0	7,588.0	1,664.0	464.5	277.6	1,127.3	2,374.6	Total Contractual Obligations	16,851.3	10,577.3	1,236.2	805.1	1,236.5	854.6	2,141.6

1.Long-term debt obligations mainly relate to principal amounts and interest payments of our Eurobonds. For the amounts excluding interest expenses and for further details see Note 16 Long-term debt and interest and other costs.

2.For further details see Note 14 Right-of-use assets and lease liabilities.

~~ASML ANNUAL REPORT 2021 197~~

We have purchase obligations towards suppliers in the ordinary course of business which mainly relate to goods and services for our operations. The general terms and conditions of the agreements relating to the major part of our purchase obligations as of December 31, ~~2021~~2022, contain clauses that enable us to delay or cancel delivery of ordered goods and services up to the dates specified in the purchase agreements, in line with the timing of future sales. The terms and conditions that we normally agree with our suppliers give us additional flexibility to adapt our purchase obligations to our requirements in light of the ~~cyclically~~cyclicality and technological developments inherent in the industry in which we operate.

Contingencies

ASML is subject to proceedings, litigation and other actual or potential ~~claims. In addition,~~claims, including those related to a potential violation of laws and regulations. ASML’s customers may be subject to claims of infringement from third parties alleging that the ASML equipment used by those customers in the manufacture of semiconductor products, ~~and /~~ and/or the methods relating to use of the ASML equipment, infringes one or more patents issued to those third parties. If these claims were successful, ASML could be required to indemnify such customers for some or all of the losses incurred or damages assessed against them as a result of that infringement. Further, ASML has been subject to misappropriation of data relating to proprietary technology by a (now) former employee in China. Although we do not believe that the misappropriation is material to our business, certain export control regulations may have been violated. ASML has reported the incident to relevant authorities.

ASML ANNUAL REPORT 2022

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Notes to the Consolidated Financial Statements (continued)

In connection with any proceedings and claims, our management evaluates, based on the relevant facts and legal principles, the likelihood of an unfavorable (or favorable) outcome, and whether the amount of the loss (or gain) can be reasonably estimated. Judgment is required in these evaluations, including judgments regarding the validity of asserted claims and the likely outcome of legal and administrative proceedings. The outcome of these proceedings, however, is subject to a number of factors beyond our control, most notably the uncertainty associated with predicting decisions by courts and administrative agencies. In addition, estimates of the potential costs (or gains) associated with legal and administrative proceedings frequently cannot be subjected to any sensitivity analysis, as damage estimates or settlement offers by claimants may bear little or no relation to the eventual outcome. Finally, in any particular proceeding, we may agree to settle or to terminate a claim or proceeding in which we believe that it would ultimately prevail where we believe that doing so, when taken together with other relevant commercial considerations, is more effective than engaging in an expensive and protracted litigation, the outcome of which is uncertain.

As of December 31, ~~2021,~~2022, management has determined that ASML does not have any material ~~contingency~~contingencies which isare considered probable or reasonably probable for each year presented in our Consolidated Balance Sheets.

18. Personnel expenses and employee information

Personnel expenses for all payroll employees were as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Wages and salaries	Wages and salaries	2,124.4	2,519.6	2,842.7	Wages and salaries	2,519.6	2,842.7	3,502.5
Social security expenses	Social security expenses	181.9	208.1	249.8	Social security expenses	208.1	249.8	300.7
Pension and retirement expenses	Pension and retirement expenses	152.5	182.6	229.2	Pension and retirement expenses	182.6	229.2	255.9
Share-based payments	Share-based payments	74.6	53.9	117.5	Share-based payments	53.9	117.5	68.9
Personnel expenses	Personnel expenses	2,533.4	2,964.2	3,439.2	Personnel expenses	2,964.2	3,439.2	4,128.0

The continued increase in personnel expenses is mainly due to an increase in payroll employees to support the continued growth of our business. The personnel expenses in 2020 do not include any expenses offrom Berliner Glas (ASML Berlin GmbH), since ASML ~~consolidates~~consolidated Berliner Glas (ASML Berlin GmbH) using a one-quarter lag.

The average number of payroll employees in FTEs was:


Average number of payroll employees in FTEs	Average number of payroll employees in FTEs	2019	2020	2021	Average number of payroll employees in FTEs	2020	2021	2022
Netherlands	Netherlands	11,376	12,812	14,222	Netherlands	12,812	14,222	16,722
Worldwide		22,192	24,727	28,223
Worldwide (including Netherlands)					Worldwide (including Netherlands)	24,727	28,223	33,071

The total number of payroll and temporary employees as of December 31 in FTEs per sector was:

Year ended December 31 (in FTE) 2019 2020 2021
Customer Support 5,953 6,429 7,485
Manufacturing and Supply Chain Management 5,933 7,680 8,237
Strategic Supply Management 326 346 707
General & Administrative 1,898 2,061 2,761
Sales and Mature Products and Services 624 744 766
Research & Development 10,166 10,813 12,060
Total 24,900 28,073 32,016
Less: Temporary employees 1,681 1,459 2,155
Payroll employees 23,219 26,614 29,861

~~ASML ANNUAL REPORT 2021 198~~


Year ended December 31 (in FTE)	2020	2021	2022
Customer Support	6,429	7,485	8,901
Manufacturing and Supply Chain Management	7,680	8,237	9,953
Strategic Supply Management	346	707	1,541
General & Administrative	2,061	2,761	3,768
Sales and Mature Products and Services	744	766	742
Research & Development	10,813	12,060	14,181
Total	28,073	32,016	39,086
Less: Temporary employees	1,459	2,155	2,974
Payroll employees	26,614	29,861	36,112

Short-term incentive bonus plans

We have annual ~~performance related~~performance-related short-term incentive (STI) bonus plans for our employees. Under these plans, the employee bonus payout depends on the ~~employee's~~employee’s job grade, the type of bonus plan and the company/individual performance. The employee bonus payout (excluding the Board of Management) ranges between ~~0.0%~~0% and ~~117.0%~~126% of their annual base gross salary. The ~~2021~~2022 STI bonus is accrued for as part of Accrued and other liabilities in the Consolidated Balance Sheets and will be paid in the first quarter of ~~2022.~~2023.

The STI bonus expenses for the (former) Board of Management and other employees were as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Board of Management	Board of Management	5.1	5.4	4.4	Board of Management	5.4	4.4	3.8
Former Board of Management	Former Board of Management	—	—	0.2	Former Board of Management	—	0.2	—
Other employees	Other employees	269.1	402.5	423.5	Other employees	402.5	423.5	629.6
Total STI bonus expenses	Total STI bonus expenses	274.2	407.9	428.1	Total STI bonus expenses	407.9	428.1	633.4

ASML ANNUAL REPORT 2022

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Notes to the Consolidated Financial Statements (continued)

19. Employee benefits

Accounting ~~policy~~Policy

Contributions to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution plans where our obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

We maintain 1one multi-employer union defined benefit pension plan and various other defined contribution pension plans covering a substantial part of our employees. ASML accounts for its multi-employer defined benefit plan as if it were a defined contribution plan for the following reasons:

•–ASML is affiliated to an industry-wide pension fund and uses the pension scheme in common with other participating companies

•–Under the regulations of the pension plan, the only obligation these participating companies have towards the pension fund is to pay the annual premium liability. Participating companies are under no obligation whatsoever to pay off any deficits the pension plan may incur. Nor have they any claim to any potential surpluses

Our pension and retirement expenses for all employees for the years ended December 31, 2022, 2021 ~~2020~~ and ~~2019~~2020, were:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Pension plan based on multi-employer union plan	Pension plan based on multi-employer union plan	96.6	126.8	161.7	Pension plan based on multi-employer union plan	126.8	161.7	181.2
Pension plans based on defined contribution & other plans		55.9	55.8	67.5
Pension plans based on defined contribution and other plans					Pension plans based on defined contribution and other plans	55.8	67.5	74.7
Pension and retirement expenses	Pension and retirement expenses	152.5	182.6	229.2	Pension and retirement expenses	182.6	229.2	255.9

The accrued pension premiums were €53.2 million as at December 31, 2022 and €10.8 million as at December 31, 2021.

Multi-employer union plan

In accordance with the collective bargaining agreements effective for the industry in which we operate, which has no expiration date, there are ~~15,414~~18,631 number of eligible payroll employees in the Netherlands (51.6% of our total payroll ~~employees)~~FTEs) that participate in a multi-employer union plan. Our net periodic pension cost for this multi-employer union plan for any period is the amount of the required employer contribution for that period.

This multi-employer union plan is managed by PME (Stichting Pensioenfonds van de Metalektro) and this plan covers approximately ~~1,466~~1,565 companies and approximately ~~167,768~~173,743 contributing members. Every participating company contributes a premium that is based on the same contribution rate. This contribution rate can fluctuate yearly based on the coverage ratio of the multi-employer union plan. For ~~2021,~~2022, the contribution percentage was 28.0% (2021:

27.6% ~~(2020: 22.7%~~, ~~2019:~~2020: 22.7%). For ~~2021,~~2022, our contribution to this multi-employer union plan (including the premiums paid by employees), was was 15.7% (2021: 13.6%(, 2020: 14.0%~~, 2019: 11.7%~~) of the total contribution to the plan. For ~~2022,~~2023, we expect to contribute around ~~€240.0~~€300.0 million to this plan (including the premiums paid by employees). The pension rights of each employee are based upon the employee’s average salary during employment.

The PME multi-employer union plan monitors its risks on a global basis and is subject to regulation by Dutch governmental authorities. By Dutch law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan’s assets to its obligations. The coverage ratio is calculated by dividing the funds capital by the total sum of pension liabilities and is based on actual market interest rates.

~~ASML ANNUAL REPORT 2021 199~~

During 2021 the coverage ratio of PME improved to 107.9% as per December 31, 2021 (December 31, 2020: 97.2%). The pension payouts during 2021 were not reduced, since PME made use of an extended temporary ministerial exemption regulation. The legally required minimal coverage ratio is 104.3% ~~(2020:~~(2021: 104.3%). ~~A recovery plan is in place to improve~~During 2022, the coverage ratio ~~towards 118%~~of PME improved to 110.4% as per December 31, 2022 (December 31, 2021: 107.9%). ~~ASML has no obligation to pay off any deficits the pension fund may incur, nor do we have any claim to any potential surpluses.~~

Defined contribution and other pension plans

We also participate in several other defined contribution pension plans (inside and outside the Netherlands), with our expenses for these plans equaling the employer contributions made in the relevant period.

Deferred compensation plans

For ~~our~~more senior US employees we have a non-qualified deferred compensation plan that allows ~~a select group of management or highly compensated employees~~ to defer a portion of their salary, bonus, and commissions. The plan allows us to credit additional amounts to the participants’ account balances. The participants divide their funds among the investments available in the plan. Participants elect to receive their funds in future periods after the earlier of their employment termination or their withdrawal election, at least 3 years after deferral. Expenses were close to nil relating to this plan in 2022, 2021 ~~2020~~ and ~~2019.~~2020. As of December 31, ~~2021,~~2022, our liability under deferred compensation plans was €70.5 million (2021: €82.4 ~~million (2020: €68.3~~ million)~~.The~~. The related compensation plan assets are €71.1 million (2021: €81.4 ~~million (2020: €67.0~~ million).

20. Share-based compensation

ASML has the following plans in place for its employees:

•–Long-term incentive bonus plans

•–Option plans

•–Employee purchase plan

Long-term incentive bonus plans

Our LTI plans are covered by an overarching Employee Umbrella Share Plan, which is effective as of January 1, 2014, and covers all employees. The main purpose of the grants of Equity Incentives under this Employee Umbrella Share Plan is to continue to attract, reward and retain qualified and experienced industry professionals in an international labor market. All grants under the Employee Umbrella Share Plan typically have a 2.5 to 3 year vesting period and are subject to performance and/or service criteria.

ASML ANNUAL REPORT 2022

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Notes to the Consolidated Financial Statements (continued)

As part of our long-term incentive (LTI) bonus, employees can be granted either a service or performance ~~share based-payment~~share-based payment plan. For service-type plans, shares are granted at grant date and after having been in service for a set period, the participant is awarded these shares at the vesting date. For performance plans, the same conditions apply as a service-type plan. Additionally, the shares are conditionally granted and awarded based on the company specific performance criteria, which can be split between market and ~~non-market based~~non-market-based elements. These shares vest after completion of the service period and the performance reached at vesting date.

The General Meeting approved the adoption of the most recent remuneration policy for the Board of Management and the number of shares to be issued. The most recent remuneration policy includes the target and maximum levels of the LTI plans, the performance measures and pay-out zone percentages. The policies for employees are approved by the Board of Management. The General Meeting also approved the restrictions and limits to the Board of Management for issuance/granting of ordinary shares, limits for restricting or excluding the preemption rights accruing to shareholder and the restrictions and limits to the Board of Management for repurchasing ordinary shares on behalf of the company.

~~ASML ANNUAL REPORT 2021 200~~

The table below shows the performance criteria and the corresponding weight of the LTI performance plans granted in ~~2021.~~2022.


LTI performance plan criteria	~~Market /~~ Market/Non-Market element	Weight
~~Total Shareholder Return~~Relative TSR	Market	30	%30%
~~ROAIC~~Cash Conversion Rate % (3-year average)	Non-Market	40	%30%
Technology Leadership Index	Non-Market	20	%20%
~~Sustainability~~ESG Measures	Non-Market	10	%20%
Total		~~100~~	%100%

Accounting Policy

The fair value of the ~~market based~~market-based element is measured at the grant date incorporating the expected vesting and expected value at vesting, using a tailored Monte Carlo simulation model. The fair value of the service plans and the ~~non-market based~~non-market-based elements of the performance plans is the share price at grant date less the present value of expected dividends during the vesting period, as participants are not entitled to dividends payable and voting rights during the vesting period. The likelihood of the conditions being met for service and non-market performance plans is assessed as part of the company’s best estimate of the number of equity instruments that will ultimately vest.

Participants are entitled to a conditional grant of company shares upon awarding. Performance plans are subject to cliff vesting and are accounted for on a ~~straight line~~straight-line basis. Service only plans are subject to graded vesting. Each installment of the plan is therefore accounted as a separate grant with a separate fair value. This means that each installment will be separately measured and attributed to expense over the related vesting period. Expenses for the ~~market based~~market-based element are recognized during vesting at a fixed vesting level (as the vesting expectation is

incorporated in the fair value) provided that all other performance conditions are met. Expenses for the ~~non-market based~~non-market-based elements and service plans are recognized during vesting at expected vesting levels, which are updated during vesting period as necessary, with a final update/adjustment at vesting date. All ~~share based~~share-based remuneration expenses are recognized as personnel expense, with a corresponding entry in equity, during the vesting period of the award. ~~Share based~~Share-based remuneration expenses are included in the same income statement line or lines in the functional grouped consolidated statement of operations as the compensation paid to the employees receiving the stock-based awards.

The most important assumptions for the calculation of the fair value of shares for the LTI performance plans, which include a ~~market based~~market-based performance criteria, are set out in the following table:


Year ended December 31	Year ended December 31	2019		2020		2021		Year ended December 31	2020		2021		2022
Share price in € at grant date	Share price in € at grant date	199.5		270.7		462.9		Share price in € at grant date	270.7		462.9		548.0
Expected volatility ASML	Expected volatility ASML	29.8	%	28.9 %		38.5	%	Expected volatility ASML	28.9	%	38.5	%	41.8	%
Expected volatility PHLX index	Expected volatility PHLX index	24.8	%	24.7 %		35.3	%	Expected volatility PHLX index	24.7	%	35.3	%	n/a
Average volatility of the peer group (market practice)								Average volatility of the peer group (market practice)	n/a				47.8	%
Vesting period	Vesting period	2.5 years		2.9 years		2.9 years		Vesting period	2.9 years				2.7 years
Dividend yield	Dividend yield	1.1	%	0.9 %		0.6	%	Dividend yield	0.9	%	0.6	%	1.0	%
Risk free interest rate (Eurozone)	Risk free interest rate (Eurozone)	(0.8)	%	(0.6)	%	(0.8)	%	Risk free interest rate (Eurozone)	(0.6)	%	(0.8)	%	0.5	%
Risk free interest rate (US)	Risk free interest rate (US)	1.8	%	1.5 %		0.2	%	Risk free interest rate (US)	1.5	%	0.2	%	2.8	%

Expenses for LTI plans, including the Board of Management, were as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Total incurred expenses	Total incurred expenses	74.6	53.9	117.5	Total incurred expenses	53.9	117.5	68.9
Recognized income tax benefit (excluding excess income tax benefits)	Recognized income tax benefit (excluding excess income tax benefits)	5.9	6.6	8.2	Recognized income tax benefit (excluding excess income tax benefits)	6.6	8.2	10.2
Total expected expenses in future periods	Total expected expenses in future periods	95.8	85.9	125.4	Total expected expenses in future periods	85.9	125.4	113.0
Weighted average period in which these expected expenses are to be recognized	Weighted average period in which these expected expenses are to be recognized	1.6 years		1.7 years	Weighted average period in which these expected expenses are to be recognized	1.6 years	1.7 years	1.4 years

Details with respect to shares granted and vested during the year are set out in the following table:


		EUR-denominated			USD-denominated				EUR-denominated			USD-denominated
Year ended December 31	Year ended December 31	2019	2020	2021	2019	2020	2021	Year ended December 31	2020	2021	2022	2020	2021	2022
Total fair value at vesting date of shares vested during the year (in millions)	Total fair value at vesting date of shares vested during the year (in millions)	58.7	124.9	156.9	54.9	133.9	164.0	Total fair value at vesting date of shares vested during the year (in millions)	124.9	156.9	120.6	133.9	164.0	149.6
Weighted average fair value of shares granted	Weighted average fair value of shares granted	190.33	297.05	547.79	206.90	302.75	498.64	Weighted average fair value of shares granted	297.05	547.79	578.65	302.75	498.64	553.61

~~ASML ANNUAL REPORT 2021 201~~

ASML ANNUAL REPORT 2022

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Notes to the Consolidated Financial Statements (continued)

A summary of the status of conditionally outstanding shares as of December 31, ~~2021,~~2022, and changes during the year ended December 31, ~~2021,~~2022, is presented below:


		EUR-denominated		USD-denominated			EUR-denominated		USD-denominated
		Number of shares	Weighted average fair value at grant date	Number of shares	Weighted average fair value at grant date		Number of shares	Weighted average fair value at grant date	Number of shares	Weighted average fair value at grant date
Conditional shares outstanding at January 1, 2021		555,094	201.44	444,754	225.26
Conditional shares outstanding at January 1, 2022						Conditional shares outstanding at January 1, 2022	452,205	303.32	297,001	416.07
Granted	Granted	120,665	547.79	69,440	498.64	Granted	88,432	578.65	230,568	553.61
Vested	Vested	(222,085)	273.86	(205,945)	270.80	Vested	(239,685)	247.17	(273,861)	418.03
Forfeited	Forfeited	(1,469)	458.46	(11,248)	349.44	Forfeited	(8,187)	239.82	(15,314)	487.93
Conditional shares outstanding at December 31, 2021		452,205	303.32	297,001	416.07
Conditional shares outstanding at December 31, 2022						Conditional shares outstanding at December 31, 2022	292,765	434.10	238,394	542.22

Option plans

Since 2017, we no longer grant any options, but there are still outstanding options which may be exercised by employees.

Accounting Policy

The grant-date fair value of stock options was estimated using a Black-Scholes option valuation model. This Black-Scholes model required the use of assumptions, including expected share price volatility, the estimated life of each award and the estimated dividend yield. The risk-free interest rate used in the model is determined, based on an index populated with euro denominated European government agency bonds with high credit ratings and with a life equal to the expected life of the equity settled share-based payments. Our option plans typically vest over a 3-year service period with any unexercised stock options expiring 10 years after the grant date. Options granted have fixed exercise prices equal to the closing price of our shares listed at Euronext Amsterdam on grant date. The purchase of shares against the exercise price is settled with the employees involved through deductions on their salary and the issuance of shares upon exercising the stock options are deducted from our treasury shares.

Details with respect to stock options exercised and outstanding are set out in the following table:


		EUR-denominated			USD-denominated				EUR-denominated			USD-denominated
Year ended December 31	Year ended December 31	2019	2020	2021	2019	2020	2021	Year ended December 31	2020	2021	2022	2020	2021	2022

Weighted average share price at the exercise date of stock options	Weighted average share price at the exercise date of stock options	201.52	302.20	583.33	225.70	355.44	658.16	Weighted average share price at the exercise date of stock options	302.20	583.33	494.14	355.44	658.16	565.39
Aggregate intrinsic value of stock options exercised (in millions)	Aggregate intrinsic value of stock options exercised (in millions)	4.3	4.8	5.7	2.3	3.7	4.1	Aggregate intrinsic value of stock options exercised (in millions)	4.8	5.7	4.4	3.7	4.1	1.6
Weighted average remaining contractual term of currently exercisable options (in years)	Weighted average remaining contractual term of currently exercisable options (in years)	4.16	3.55	2.81	4.40	3.66	2.93	Weighted average remaining contractual term of currently exercisable options (in years)	3.55	2.81	2.08	3.66	2.93	2.09
Aggregate intrinsic value of exercisable stock options (in millions)	Aggregate intrinsic value of exercisable stock options (in millions)	17.7	22.4	36.7	11.8	16.9	24.9	Aggregate intrinsic value of exercisable stock options (in millions)	22.4	36.7	20.3	16.9	24.9	14.6
Aggregate intrinsic value of outstanding stock options (in millions)	Aggregate intrinsic value of outstanding stock options (in millions)	17.7	22.4	36.7	11.8	16.9	24.9	Aggregate intrinsic value of outstanding stock options (in millions)	22.4	36.7	20.3	16.9	24.9	14.6

The number and weighted average exercise prices of stock options as of December 31, ~~2021,~~2022, and changes during the year then ended are presented below:


		EUR-denominated		USD-denominated			EUR-denominated		USD-denominated
		Number of options	Weighted average exercise price per ordinary share (EUR)	Number of options	Weighted average exercise price per ordinary share (USD)		Number of options	Weighted average exercise price per ordinary share (EUR)	Number of options	Weighted average exercise price per ordinary share (USD)
Outstanding, January 1, 2021		68,540	70.02	42,255	86.87
Outstanding, January 1, 2022						Outstanding, January 1, 2022	57,923	73.87	35,251	90.36
Granted 1	Granted 1	—	—	—	—	Granted 1	—	—	—	—
Exercised	Exercised	(10,717)	48.77	(7,004)	69.32	Exercised	(10,016)	55.49	(3,113)	64.73
Forfeited	Forfeited	100	28.77	—	—	Forfeited	—	—	—	—
Expired	Expired	—	—	—	—	Expired	(300)	40.03	—	—
Outstanding, December 31, 2021		57,923	73.87	35,251	90.36
Exercisable, December 31, 2021		57,923	73.87	35,251	90.36
Outstanding, December 31, 2022						Outstanding, December 31, 2022	47,607	77.95	32,138	92.84
Exercisable, December 31, 2022						Exercisable, December 31, 2022	47,607	77.95	32,138	92.84

1.As of 2017, we no longer grant options to our employees.

~~ASML ANNUAL REPORT 2021 202~~

ASML ANNUAL REPORT 2022

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Notes to the Consolidated Financial Statements (continued)

Details with respect to stock options exercised in the relevant year and outstanding stock options as of December 31, ~~2021~~2022, are set out in the following table:

EUR-denominated USD-denominated
Range of exercise prices (€) Number of outstanding options Weighted average remaining contractual life of outstanding (years) Range of exercise prices (USD) Number of outstanding options Weighted average remaining contractual life of outstanding (years)
25 - 40 234 0.08 25 - 40 — 0.00
40 - 50 5,902 0.80 40 - 50 291 0.05
50 - 60 5,376 1.95 50 - 60 1,699 0.62
60 - 70 12,355 1.94 60 - 70 393 1.06
70 - 80 10,920 3.35 70 - 80 843 1.30
80 - 90 11,625 3.85 80 - 90 9,036 2.89
90 - 100 11,511 3.69 90 - 100 16,062 3.02
100 - 110 — 0.00 100 - 110 6,927 3.74
Total 57,923 2.81 Total 35,251 2.93


EUR-denominated			USD-denominated
Range of exercise prices (€)	Number of outstanding options	Weighted average remaining contractual life of outstanding (years)	Range of exercise prices (USD)	Number of outstanding options	Weighted average remaining contractual life of outstanding (years)






50–60	5,268	0.96	50–60	—	0.00
60–70	10,773	0.96	60–70	278	0.06
70–80	10,109	2.35	70–80	828	0.30
80–90	10,791	2.83	80–90	8,855	1.90
90–100	10,666	2.73	90–100	15,308	2.05
100–110	—	0.00	100–110	6,869	2.74

Total	47,607	2.08	Total	32,138	2.09

Employee ~~purchase plan~~Purchase Plan

Additionally, we also offer an Employee Purchase Plan to our payroll employees, except the Board of Management who is excluded from participation in this plan. Through this plan, payroll employees are given the opportunity to buy our shares ~~using~~through their monthly paycheck. The maximum amount for which employees can participate in the plan amounts to 10.0% of their annual gross base salary. When employees retain the shares for a minimum of 12 months, we will pay out a 20.0% gross cash bonus on the initial participation amount.

Accounting Policy

Employee purchase plans are accounted on an accrual basis. The shares for employee purchase plans are issued on a quarterly basis and the share purchase price is based on the closing share price of our listed shares on grant date, which is the date after our quarterly filings. The purchased shares by employees are ~~deducted~~issued from our treasury shares.

In ~~2021,~~2022, ASML received €81.8 million (2021: €49.0 million ~~(2020:~~and 2020: €37.9 ~~million and 2019: €27.2~~ million) from issuance of shares for this plan.

21. Income taxes

Accounting Policy

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the tax effect of operating ~~losses~~loss and tax credit carry ~~forward~~forwards as well as for tax consequences attributable to differences between the balance sheets carrying amounts of existing assets and liabilities and their respective tax bases. If it is more likely than not that the carrying amounts of deferred tax assets will not be realized, a valuation allowance is recorded for the difference. Income tax expense includes current and deferred taxes on profit, related interest and penalties, non-recoverable withholding taxes that qualify as income tax, as well as actual or potential withholding taxes on current and expected dividend income from group companies.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences, ~~net~~ operating ~~losses~~loss carry forwards and tax credit carry forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. Deferred income taxes originally recognized through OCI are recycled through earnings in future periods upon release of the connected item from OCI to the statement of income.

We assess unrecognized tax benefits based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe we have appropriate support for the positions taken on our tax returns, we regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our income tax expense, and adjust the income tax expense, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.

Income taxes are affecting our Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income and Consolidated Balance Sheets. The disclosure of the Income taxes is therefore split into:

•–Income tax expense

•–Liability for unrecognized tax benefits

•–Deferred taxes

~~ASML ANNUAL REPORT 2021 203~~

Income tax expense

The components of the income tax expense are as ~~follows:~~follows, whereby ‘Income tax expense Netherlands’ represents the total tax expense on taxable income generated by our entities in the Netherlands and ‘Income tax expense Foreign’ represents the total tax expense on taxable income generated by our non-Dutch group entities. Hereby ‘total income tax expense Netherlands’ includes withholding tax expense withheld at source on income paid by non-Dutch entities to the Netherlands.

Year ended December 31 (€, in millions) 2019 2020 2021
Netherlands 2,441.2 3,574.6 5,982.8
Foreign 324.6 442.0 722.7
Income before income taxes 2,765.8 4,016.6 6,705.5

Income tax expense current (305.5) (407.7) (865.0)
Income tax expense deferred 74.8 1.4 (28.6)
Income tax expense Netherlands (230.7) (406.3) (893.6)

Income tax expense current (118.4) (375.3) (523.5)
Income tax expense deferred 157.4 230.1 395.7
Income tax expense Foreign 39.0 (145.2) (127.8)

Total income tax expense current (423.9) (783.0) (1,388.5)
Total income tax expense deferred 232.2 231.5 367.1
Total income tax expense (191.7) (551.5) (1,021.4)

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Notes to the Consolidated Financial Statements (continued)


Year ended December 31 (€, in millions)	2020	2021	2022
Netherlands	3,574.6	5,982.8	5,881.0
Foreign	442.0	722.7	575.1
Income before income taxes	4,016.6	6,705.5	6,456.1

Income tax expense current	(407.7)	(865.0)	(818.4)
Income tax expense deferred	1.4	(28.6)	(44.4)
Income tax expense Netherlands	(406.3)	(893.6)	(862.8)

Income tax expense current	(375.3)	(523.5)	(678.3)
Income tax expense deferred	230.1	395.7	571.2
Income tax expense Foreign	(145.2)	(127.8)	(107.1)

Total income tax expense current	(783.0)	(1,388.5)	(1,496.7)
Total income tax expense deferred	231.5	367.1	526.8
Total income tax expense	(551.5)	(1,021.4)	(969.9)

Current and deferred tax expense can be further broken down into:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Current year tax expense	Current year tax expense	(470.6)	(743.7)	(1,367.2)	Current year tax expense	(743.7)	(1,367.2)	(1,440.9)
Prior year tax expense	Prior year tax expense	46.7	(39.3)	(21.3)	Prior year tax expense	(39.3)	(21.3)	(55.8)
Current tax expense		(423.9)	(783.0)	(1,388.5)
Total current tax expense					Total current tax expense	(783.0)	(1,388.5)	(1,496.7)


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Changes to recognition of tax losses and tax credits		7.6	(56.9)	(37.2)
Changes to recognition of operating losses and tax credits					Changes to recognition of operating losses and tax credits	(56.9)	(37.2)	(41.2)

Prior year tax expense	Prior year tax expense	9.8	27.0	(2.4)	Prior year tax expense	27.0	(2.4)	79.2
Tax rate changes	Tax rate changes	—	15.0	1.5	Tax rate changes	15.0	1.5	(1.1)
Origination and reversal of temporary differences, tax losses and tax credits		214.8	246.4	405.2
Deferred tax expense		232.2	231.5	367.1
Origination and reversal of temporary differences, operating losses and tax credits					Origination and reversal of temporary differences, operating losses and tax credits	246.4	405.2	489.9
Total deferred tax expense					Total deferred tax expense	231.5	367.1	526.8

The Dutch statutory tax rate was ~~25.0%~~25.8% in 2022 (25.0% for 2021 ~~2020~~ and ~~2019.~~2020). Tax amounts in other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions.

The reconciliation of the income tax expense from the Dutch statutory rate to the effective income tax rate is as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2019	%1		2020	%1		2021	%1		Year ended December 31 (€, in millions)	2020	%1		2021	%1		2022	%1
Income before income taxes	Income before income taxes	2,765.8	100.0	%	4,016.6	100.0	%	6,705.5	100.0	%	Income before income taxes	4,016.6	100.0	%	6,705.5	100.0	%	6,456.1	100.0	%
Income tax expense based on ASML’s domestic rate	Income tax expense based on ASML’s domestic rate	(691.4)	25.0	%	(1,004.1)	25.0	%	(1,676.4)	25.0	%	Income tax expense based on ASML’s domestic rate	(1,004.1)	25.0	%	(1,676.4)	25.0	%	(1,665.7)	25.8	%
Effects of tax rates in foreign jurisdictions	Effects of tax rates in foreign jurisdictions	5.0	(0.2)	%	0.9	—	%	(4.6)	0.1	%	Effects of tax rates in foreign jurisdictions	0.9	—	%	(4.6)	0.1	%	13.0	(0.2)	%
Adjustments in respect of tax exempt income		7.2	(0.3)	%	0.2	—	%	—	—	%
Adjustments in respect of tax-exempt income											Adjustments in respect of tax-exempt income	0.2	—	%	—	—	%	—	—	%
Adjustments in respect of tax incentives	Adjustments in respect of tax incentives	351.0	(12.7)	%	510.4	(12.7)	%	727.3	(10.8)	%	Adjustments in respect of tax incentives	510.4	(12.7)	%	727.3	(10.8)	%	741.2	(11.5)	%
Adjustments in respect of prior years’ current taxes	Adjustments in respect of prior years’ current taxes	46.7	(1.7)	%	(39.3)	1.0	%	(21.3)	0.3	%	Adjustments in respect of prior years’ current taxes	(39.3)	1.0	%	(21.3)	0.3	%	(55.8)	0.9	%
Adjustments in respect of prior years’ deferred taxes	Adjustments in respect of prior years’ deferred taxes	9.8	(0.4)	%	27.0	(0.7)	%	(2.4)	—	%	Adjustments in respect of prior years’ deferred taxes	27.0	(0.7)	%	(2.4)	—	%	79.2	(1.2)	%
Movements in the liability for unrecognized tax benefits	Movements in the liability for unrecognized tax benefits	(16.9)	0.6	%	(41.0)	1.0	%	(21.6)	0.3	%	Movements in the liability for unrecognized tax benefits	(41.0)	1.0	%	(21.6)	0.3	%	(9.9)	0.2	%
Tax effects in respect of acquisition/restructuring related items	Tax effects in respect of acquisition/restructuring related items	89.8	(3.2)	%	—	—	%	35.9	(0.5)	%	Tax effects in respect of acquisition/restructuring related items	—	—	%	35.9	(0.5)	%	—	—	%
Change in valuation allowance	Change in valuation allowance	7.6	(0.3)	%	(56.9)	1.4	%	(37.2)	0.6	%	Change in valuation allowance	(56.9)	1.4	%	(37.2)	0.6	%	(41.2)	0.6	%
Equity method investments	Equity method investments	(19.7)	0.7	%	(20.9)	0.5	%	(46.7)	0.7	%	Equity method investments	(20.9)	0.5	%	(46.7)	0.7	%	(38.3)	0.6	%
Effect of change in tax rates	Effect of change in tax rates	—	—	%	15.0	(0.4)	%	1.5	—	%	Effect of change in tax rates	15.0	(0.4)	%	1.5	—	%	(1.1)	—	%
Other (credits) and non-tax deductible items	Other (credits) and non-tax deductible items	19.2	(0.7)	%	57.2	(1.4)	%	24.1	(0.4)	%	Other (credits) and non-tax deductible items	57.2	(1.4)	%	24.1	(0.4)	%	8.7	(0.1)	%
Income tax expense	Income tax expense	(191.7)	6.8	%	(551.5)	13.7	%	(1,021.4)	15.2	%	Income tax expense	(551.5)	13.7	%	(1,021.4)	15.2	%	(969.9)	15.0	%

1.As a percentage of income before income taxes.

The individual line items in the table above are explained in more detail below.

~~ASML ANNUAL REPORT 2021 204~~

Income tax expense based on ASML’s domestic rate

The income tax expense based on ASML’s domestic rate is based on the Dutch statutory income tax rate. It reflects the income tax expense that would have been applicable assuming that all of our income is taxable against the Dutch statutory tax rate and there are no differences between taxable base and financial results and no tax incentives are applied.

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Notes to the Consolidated Financial Statements (continued)

Effects of tax rates in foreign jurisdictions

A portion of our results is realized in countries other than the Netherlands where different tax rates are applicable. The effect can differ from year to year depending on the profit before tax in respective foreign jurisdictions.

Adjustments in respect of ~~tax exempt~~tax-exempt income

In past years in certain jurisdictions part of the income generated was tax exempted. In conjunction with changed facts and circumstances this effect is significantly reduced as of ~~2020 and stable in 2021.~~2020.

Adjustments in respect of tax incentives

Adjustments in respect of tax incentives mainly relate to a reduced tax rate as a result of application of the Dutch Innovation Box, which is a facility under Dutch corporate tax law pursuant to which qualified income associated with R&D is subject to an effective tax rate of 9.0% inas of 2021. The effective innovation box tax rate was 7%7.0% in ~~2020 and 2019.~~2020. The innovation box benefit is determined according to Dutch laws and published tax policy, whereby the application has been confirmed in an agreement between ASML and the Dutch tax authorities that is applicable for the years through 2023 assuming facts and circumstances do not change.

Furthermore, this category includes the benefit of the Foreign Derived Intangible Income (FDII) deduction which is applicable at the level of our US group companies. The FDII deduction is a facility under US corporate tax law which reduces the effective tax rate on income derived from tangible and intangible products and services in foreign markets.

The higher amount in 2021 and 2022 compared to ~~prior years~~2020 is mainly caused by an increase in innovation box benefit resulting from an increased level in income before tax at the level of our Dutch group companies.

The increase in relative weight of this item in the effective tax rate reconciliation for 2022 as compared to 2021 is mainly caused by increase in the general Dutch CIT rate to 25.8% as of 2022 (2021: 25%).

Adjustments in respect of prior ~~years'~~years’ current taxes

The adjustments in respect of prior years’ current taxes relate to differences between the initially estimated income taxes and final corporate income tax returns filed or arrangements agreed upon with tax authorities.

~~The benefit~~ To the main extent these are caused by modifications in ~~2019 mainly related to the FDII deduction which was taken into account~~temporary differences on contract liabilities and are offset by similar movements in ~~our 2018~~prior year deferred tax ~~filings in the US for the first time.~~balances.

Adjustments in respect of prior years’ deferred taxes

The movements in the adjustments in respect of prior years’ deferred taxes ~~also~~ mainly relate to differences between the initially estimated income taxes and final corporate income tax returns filed. ~~Additionally it includes some smaller adjustments~~This is mainly caused by modifications in temporary differences on ~~the deferred tax positions initially recorded.~~contract liabilities.

Movements in the liability for unrecognized tax benefits

In ~~2021,~~2022, similar to prior years, the effective tax rate was impacted by movements in the liability for unrecognized tax benefits. The movement for ~~2021~~2022 is mainly driven by ~~pending~~continued dialogues with Dutch and foreign tax authorities in the area of transfer pricing, as well as by uncertainties in FDII deduction and R&D credits claimed at the level of our US group companies. Additionally, some prior year positions have been released as a result of the lapse of statute.

Tax effects in respect to acquisition/~~restructuring related~~restructuring-related items

The 2019 effect was driven by an internal restructuring of our HMI group companies concluded in that year. As a result of that restructuring a deferred tax asset was recognized in 2019 for book to tax differences on intangible fixed assets transferred as part of the restructuring. For years 2020 and 2021 this restructuring has no additional impact on the effective tax rate.

The 2021 effect relates to divestment of part of the Berliner ~~Glass~~Glas (ASML Berlin GmbH) entities, whereby the commercial transaction result is, to a large extent, is exempt for income tax ~~purposes~~purposes. No such transaction has taken place in 2020 or 2022. .

Change in valuation allowance

~~The higher effect~~Changes in ~~2020 and 2021 as compared~~valuation allowance mainly relate to ~~2019 is mainly caused by the recognition of~~newly recognized R&D and withholding tax credits ~~during~~for the respective year at the level of our group companies in the Netherlands and the US ~~as of~~for which it is considered not more likely than not that these can be realized in future years.

Equity method investments

This line includes the income tax expense relating to our investment in Carl Zeiss SMT Holding GmbH & Co. KG. The increased effect in 2021 and 2022 compared to ~~prior years~~2020 is mainly caused by an increase in the profit from the equity method investment as well as – for 2021 – tax accounting consequences following from adjustment in the outside basis difference for the equity investment.

Effect of change in tax rates

The 2022 tax rate change impact relates to reduction in the corporate income tax rate in South Korea, slightly impacting the valuation of deferred tax positions at the level of our South Korean group entities. The impact on the effective tax rate for the years 2020 and in 2021 is mainly caused by ~~the enacted increase of~~changes in the general Dutch corporate income tax rate ~~to 25.8%~~ as ~~of 2022, which impacts~~well as the ~~valuation of deferred tax assets and liabilities of our Dutch fiscal unity.~~

~~ASML ANNUAL REPORT 2021 205~~

innovation box rate enacted in respective years.

Other credits and non-tax deductible items

Other credits and non-tax deductible items reflect the impact on our statutory rates of permanent non-tax deductible items such as non-deductible withholding taxes, non-deductible ~~shared based~~shared-based payment expenses and non-deductible meals and entertainment expenses, as well as the impact of various tax credits (e.g. US R&D credits) on our income tax expense.

ASML ANNUAL REPORT 2022

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FINANCIALS

248

Notes to the Consolidated Financial Statements (continued)

US Tax Reform

The year-end tax positions also reflect the regulations of 2017 US Tax Reform, thereby taking into account the guidance issued by the US government. Hereby the most recent guidance for the final FDII regulations has been applied as of 2021 onwards, not retrospectively as permitted by aforementioned regulations. With regard to GILTI and BEAT, the decision has been taken to treat these as a period permanent item.

On August 9, 2022, the U.S. enacted the CHIPS and Science Act which, among other things, implemented a 25% investment tax credit on semiconductor and semiconductor equipment manufacturing assets. Pending the release of expected regulations, it is currently uncertain whether the Company will claim the investment tax credit to which we may be entitled as of 2023.

Additionally, on August 16, 2022, the US enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on share buybacks, several clean energy provisions, and additional funding for the IRS. Based on our current analysis of the law, we do not believe the IRA will have a material impact on our consolidated financial statements for years 2022 and onwards.

Globalminimumtax

To address concerns about uneven profit distribution and tax contributions of large multinationals corporations, various agreements have been reached at global level, including an agreement by over 135 jurisdictions to introduce a global minimum tax rate of 15%. We continuously monitor the developments with regard to Global Minimum Tax. At December 31, 2022, only jurisdiction in which we operate that already has made some legislative changes related to top-up tax is South Korea, with effective date of January 1, 2024. The same is expected however for other countries where we operate, like the EU and the UK. At this moment we are not able to assess quantitative impact of these (potential) new rules in full detail yet, but in general the impact is expected to be limited.

Liability for unrecognized tax benefits and deferred taxes

The liability for unrecognized tax benefits and related accrued interest and penalties and total deferred tax position recorded on the Consolidated Balance Sheets is as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Liability for unrecognized tax benefits	Liability for unrecognized tax benefits	(200.4)	(205.9)	Liability for unrecognized tax benefits	(200.4)	(205.9)	(215.5)
Deferred tax assets	Deferred tax assets	671.5	1,098.7	Deferred tax assets	671.5	1,098.7	1,672.8
Deferred tax liabilities	Deferred tax liabilities	(37.9)	(34.7)	Deferred tax liabilities	(37.9)	(34.7)	(51.5)
Deferred and other tax assets (liabilities)	Deferred and other tax assets (liabilities)	433.2	858.1	Deferred and other tax assets (liabilities)	433.2	858.1	1,405.8

Liability for unrecognized tax benefits

We have operations in multiple jurisdictions, where we are subject to the application of complex tax laws. Application of these complex tax laws may lead to uncertainties on tax positions. We aim to resolve these uncertainties in discussions with the tax authorities. We record unrecognized tax benefits in line with the requirements of ASC 740, which requires us to estimate the potential outcome of any tax position. Our estimate for the potential outcome of any uncertain tax position is highly judgmental. We believe that we have adequately provided for uncertain tax positions. However, settlement of these uncertain tax positions in a manner inconsistent with our expectations could have a material impact on our Consolidated Financial Statements.

Consistent with the requirements of ASC 740, as of December 31, ~~2021,~~2022, the liability for unrecognized tax ~~benefits and related~~benefit (excluding interest and ~~penalties~~penalties) amounts to ~~€205.9~~€160.0 million ~~(2020: €200.4~~(2021: €144.3 million) which is classified as Deferred and other income tax liabilities. If recognized, these unrecognized tax benefits would affect our effective tax rate for approximately ~~€190.9~~€139.2 million benefit ~~(2020: €151.7~~(2021: €190.9 million benefit).

~~Expected interest~~Interest and penalties related to ~~income tax liabilities have been accrued for and are included in~~ the liability for unrecognized tax benefits amount to €55.5 million (2021: €61.6 million) and are included in the ~~income tax expense.~~ total liability position as specified below. P~~Accrued~~&L impact of accrued interest and penalties in ~~2021~~2022 amount to a benefit of ~~€9.7~~€5.0 million ~~(2020~~(2021: €9.7 million benefit; 2020: €14.2 million ~~benefit; 2019: €9.0 million expense)~~benefit).

ASML ANNUAL REPORT 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIALS

249

Notes to the Consolidated Financial Statements (continued)

A reconciliation of the beginning and ending balance of the liability for unrecognized tax benefits (excluding interest and penalties) is as follows:


Year ended December 31 (€, in millions)	Year ended December 31 (€, in millions)	2020	2021	Year ended December 31 (€, in millions)	2020	2021	2022
Balance as at January 1	Balance as at January 1	(150.7)	(138.0)	Balance as at January 1	(150.7)	(138.0)	(144.3)
Gross presentation for different tax jurisdictions	Gross presentation for different tax jurisdictions	(27.3)	—	Gross presentation for different tax jurisdictions	(27.3)	—	—
Gross increases – tax positions in prior period	Gross increases – tax positions in prior period	(66.6)	(21.6)	Gross increases – tax positions in prior period	(66.6)	(21.6)	(11.7)
Gross decreases – tax positions in prior period	Gross decreases – tax positions in prior period	0.5	8.9	Gross decreases – tax positions in prior period	0.5	8.9	2.0
Gross increases – tax positions in current period	Gross increases – tax positions in current period	(21.6)	(18.8)	Gross increases – tax positions in current period	(21.6)	(18.8)	(23.1)

Settlements	Settlements	106.6	2.5	Settlements	106.6	2.5	6.8
Lapse of statute of limitations	Lapse of statute of limitations	14.5	32.0	Lapse of statute of limitations	14.5	32.0	13.2
Effect of changes in exchange rates	Effect of changes in exchange rates	6.6	(9.3)	Effect of changes in exchange rates	6.6	(9.3)	(2.9)
Total liability for unrecognized tax benefits	Total liability for unrecognized tax benefits	(138.0)	(144.3)	Total liability for unrecognized tax benefits	(138.0)	(144.3)	(160.0)
Balance of accrued interest and penalties	Balance of accrued interest and penalties	(62.4)	(61.6)	Balance of accrued interest and penalties	(62.4)	(61.6)	(55.5)
Total liabilities for unrecognized tax benefits including interest and penalties	Total liabilities for unrecognized tax benefits including interest and penalties	(200.4)	(205.9)	Total liabilities for unrecognized tax benefits including interest and penalties	(200.4)	(205.9)	(215.5)

We conclude our liability for unrecognized tax benefits to be appropriate. Based on the information currently available, we estimate that the liability for unrecognized tax benefits will decrease by €~~23.8~~11.9 million (excluding interest and penalties) within the next 12 months, mainly as a result of expiration of statute of limitations.

For 2020 gross increases of tax positions in prior period and settlements were in essence mainly relating to finalization of a tax audit at the level of our South Korean group companies. Settlements in 2022 mainly relate to final settlement of 2018 and 2019 corporate income tax returns of our Dutch fiscal unity.

We file income tax returns in all countries where we operate, with the Netherlands, US, Taiwan, South Korea and China being the major jurisdictions. The years for which tax returns are still open for examination for respective jurisdictions are as follows:

~~ASML ANNUAL REPORT 2021 206~~


Country			Years
Netherlands			~~2018-2021~~2019-2022
US			~~2015-2021~~2017-2022
Taiwan			~~2016-2021~~2017-2022
South Korea			~~2017-2021~~2019-2022
China			~~2011-2021~~2012-2022

We are routinely subject to examinations and audits from tax and other authorities in the various jurisdictions in which we operate. We believe that adequate amounts of taxes and related interest and penalties have been provided for, and any adjustments as a result of examinations are not expected to have a material adverse effect.






			Message from the CEO on page 5 >


			Q&A with the CTO on page 20 >


			Q&A with the CFO on page 41 >


			View our Highlights online >



			Smaller size, bigger capability is a well-established trend in the chip industry. And thanks to the joint efforts of our 39,000 people working together with suppliers, customers and innovation partners, we are taking that ever further. Every day we push the boundaries of physics and shrink patterns to help shape the future of life, work and play across the planet. Strongly embedded in a global innovation ecosystem, we enable ground-breaking technology that can help humanity manage challenges and seize opportunities by facilitating smart living and mobility, accessible healthcare, food security and the transition to renewable energy.
			Creating small patterns that enable a big impact.


	2021 at a glance		Supervisory Board
6	Message from the CEO	140	Message from the Chair of our Supervisory Board
8	2021 Highlights	142	Supervisory Board report
		157	Remuneration report
	Who we are and what we do
10	Our company		Consolidated Financial Statements
15	Message from the CTO	172	Report of Independent Registered Public Accounting Firm
17	How we innovate	174	Consolidated Statements of Operations
21	Customer intimacy	175	Consolidated Statements of Comprehensive Income
23	Our products and services	176	Consolidated Balance Sheets
		177	Consolidated Statements of Shareholders’ Equity
	Our position in the semiconductor value chain	178	Consolidated Statements of Cash Flows
29	Our markets	179	Notes to the Consolidated Financial Statements
30	Semiconductor industry trends and opportunities
34	Our strategy		Non-financial statements
		222	Assurance Report of the Independent Auditor
	Our performance in 2021	224	About the non-financial information
39	How we create value	227	Non-financial indicators
	Financial	240	Materiality assessment
43	Message from the CFO	244	Stakeholder engagement
45	Financial performance
50	Long-term growth opportunities	247	Other appendices
	Environmental	265	Definitions
53	Climate and energy	272	Exhibit index
61	Circular economy
	Social
68	Our people
77	Community engagement
82	Innovation ecosystem
86	Our supply chain
	Governance
93	Corporate governance
110	How we manage risk
114	Risk factors
123	Responsible business


STRATEGIC REPORT

4	Forward-looking statements		Environmental
5	Message from the CEO	76	Energy efficiency and climate action
9	Our company	85	Circular economy
20	Q&A with the CTO		Social
23	Marketplace	97	Attractive workplace for all
31	Our business and ESG strategy	109	Our supply chain
33	Our business model	118	Innovation ecosystem
41	Q&A with the CFO	124	Valued partner in our communities
	Financial performance		Governance
44	Performance KPIs	134	Managing ESG Sustainability
49	Long-term growth opportunities	135	Responsible business
	Risk	147	Our approach to tax
52	How we manage risk
56	Risk factors		Our stories
	Environmental, Social and Governance	8	Tackling pollution
		22	Global well-being
70	ESG at a glance	30	Food security
71	Our material ESG sustainability topics	40	Energy transition
		51	Smart mobility
		69	Virtual and augmented reality
		149	Wearable technology


FINANCIALS & NON FINANCIALS

						Consolidated Financial Statements
214						Report of Independent Registered Public Accounting Firm
216						Consolidated Statements of Operations
217						Consolidated Statements of Comprehensive Income
218						Consolidated Balance Sheets
219						Consolidated Statements of Shareholders’ Equity
221						Consolidated Statements of Cash Flows
222						Notes to the Consolidated Financial Statements
						Non-financial statements
264						Assurance Report of the Independent Auditor
266						About the non-financial information
272						Non-financial indicators
290						Other appendices
309						Definitions
317						Exhibit index




Our investments are set to increase capacity.”
Peter Wennink
President, Chief Executive Officer and Chair of the Board of Management






Our ESG strategy is an important beacon that is lighting up the way ahead.”
Peter Wennink
President, Chief Executive Officer and Chair of the Board of Management


Market	Key driver	2020 market size ($bn)	2025 market opportunity ($bn)	2030 estimation1 ($bn)	Outlook CAGR 2020-2025 (%)		Previous outlook CAGR 2019-2024 (%)
Smartphone	Continued refresh of all semiconductor content including image sensors	116	162	210	7.0	%	7.9	%
Personal computing	High-end compute and Memory, fast conversion to SSD	100	121	132	3.9	%	2.8	%
Consumer electronics	Legacy products and packaged ICs, advanced ICs in add-ons	48	74	98	8.8	%	7.7	%
Automotive	Strong IC content growth: GPU, sensors, V2X communication sensing	39	82	131	16.3	%	9.5	%
Industrial electronics	High-end compute for AI on big data and sensors	50	82	119	10.5	%	7.8	%
Wired and wireless infrastructure	Devices for fast data processing, modem, base-station infrastructure refresh	38	53	63	7.0	%	5.5	%
Servers, data centers and storage	High processor and Memory growth, hardware accelerations including GPU	76	119	187	9.2	%	10.6	%
		466	693	940	8.2	%	7.3	%


Key projects	Total estimated energy saving - annual (in TJ)	Estimated scope 1 reduction: neutral gas (in TJ)	Estimated scope 2 reduction: electricity (in TJ)
Energy grid	50	-40	-10
Implement adiabatic humidification and elimination of steam generation	12	-12	0
Air change reduction (feasibility study)	20	0	-20


Type of shares	Amount of shares	Nominal value	Votes per share
Cumulative preference shares	700,000,000	€0.09 per share	9
Ordinary shares	699,999,000	€0.09 per share	9
Ordinary shares B	9,000	€0.01 per share	1


	Shares	% of Class6
Capital Research and Management Company 1	63,658,826	15.81	%
BlackRock Inc. 2	32,024,422	7.95	%
Baillie Gifford & Co 3	18,262,995	4.54	%
Members of ASML’s current Board of Management (5 persons) 4,5	89,892	0.02	%


Performance metric	Performance Targets2								Actual Outcome		Payout4
	Weight		Threshold		Target		Stretch				% target
Market Position
Availability & market share	10	%	*								122.5	%
VLSI Survey	10	%	Top 5		Top 3		Top 2		Top 2		150.0	%
Total Market Position	20	%									136.3	%

Technology Leadership Index	20	%	4		6		10		8		125.0	%

EBIT Margin (%) 3	20	%	24	%	27	%	30	%	36	%	150.0	%

EUV Gross Margin %	20	%	43.5	%	45.5	%	47.5	%	46.0	%	111.3	%

Free Cash Flow (€, in millions) 1	20	%	1,000		2,000		3,000		8,158		150.0	%

Total	100	%									134.5	%


BoM Member	Ownership requirement	2021 base salary in € thousands	Total vested shares	Ownership ratio1
P.T.F.M. Wennink	3x base	1,020	32,485	22.51
M.A. van den Brink	3x base	1,020	13,066	9.05
F.J.M Schneider-Maunoury	2x base	694	17,506	17.83
R.J.M. Dassen 2	2x base	694	1,613	1.64
C.D. Fouquet	2x base	694	3,488	3.55


Deferred taxes (€, in millions)	Deferred taxes (€, in millions)	January 1, 2021	Credits and other	Consolidated Statements of Operations	Income tax recognized in Other Comprehensive Income	Effect of changes in exchange rates	December 31, 2021	Deferred taxes (€, in millions)	January 1, 2022	Credits and other	Consolidated Statements of Operations	Income tax recognized in Other Comprehensive Income	Effect of changes in exchange rates	December 31, 2022
Deferred tax assets:	Deferred tax assets:							Deferred tax assets:
Capitalized R&D expenditures	Capitalized R&D expenditures	287.1	—	106.8	—	26.5	420.4	Capitalized R&D expenditures	420.4	—	151.2	—	20.5	592.1
R&D & other credit carry forwards		117.2	21.4	16.4	—	7.7	162.7
R&D & other tax credit carry forwards								R&D & other tax credit carry forwards	162.7	23.7	20.6	—	6.4	213.4
Inventories	Inventories	37.2	—	(7.2)	—	1.5	31.5	Inventories	31.5	—	12.5	—	1.2	45.2
Deferred revenue		125.2	—	288.0	—	10.0	423.2
Contract liabilities								Contract liabilities	423.2	—	400.8	—	(3.2)	820.8
Accrued and other liabilities	Accrued and other liabilities	87.8	—	5.7	—	4.6	98.1	Accrued and other liabilities	98.1	—	4.4	—	3.3	105.8
Installation and warranty reserve		16.4	—	(6.3)	—	1.2	11.3
Tax effect carry-forward losses		27.1	—	(19.9)	—	0.2	7.4
Standard warranty reserve								Standard warranty reserve	11.3	—	(4.1)	—	0.9	8.1
Operating loss carry forwards								Operating loss carry forwards	7.4	—	(2.8)	—	(0.1)	4.5
Property, plant and equipment	Property, plant and equipment	26.9	—	(10.8)	—	2.5	18.6	Property, plant and equipment	18.6	—	1.7	—	(1.4)	18.9
Lease liabilities	Lease liabilities	6.5	—	16.2	—	0.5	23.2	Lease liabilities	23.2	—	3.1	—	1.1	27.4
Intangible fixed assets		143.5	—	—	—	—	143.5
Other intangible assets								Other intangible assets	143.5	—	(18.7)	—	—	124.8

Share-based payments	Share-based payments	7.2	—	1.8	—	0.6	9.6	Share-based payments	9.6	—	1.2	—	0.6	11.4
Other temporary differences	Other temporary differences	23.9	—	7.5	(1.0)	(2.9)	27.5	Other temporary differences	27.5	—	3.7	(6.5)	(1.4)	23.3
Total deferred tax assets, gross	Total deferred tax assets, gross	906.0	21.4	398.2	(1.0)	52.4	1,377.0	Total deferred tax assets, gross	1,377.0	23.7	573.6	(6.5)	27.9	1,995.7
Valuation allowance 1	Valuation allowance 1	(122.5)	—	(37.2)	—	(7.9)	(167.6)	Valuation allowance 1	(167.6)	—	(41.2)	—	(6.6)	(215.4)
Total deferred tax assets, net	Total deferred tax assets, net	783.5	21.4	361.0	(1.0)	44.5	1,209.4	Total deferred tax assets, net	1,209.4	23.7	532.4	(6.5)	21.3	1,780.3
Deferred tax liabilities:	Deferred tax liabilities:							Deferred tax liabilities:
Intangible fixed assets		(93.9)	2.9	17.1	—	(6.0)	(79.9)
Other intangible assets								Other intangible assets	(79.9)	—	19.8	—	(5.3)	(65.4)
Goodwill	Goodwill	(15.6)	—	(5.3)	—	—	(20.9)	Goodwill	(20.9)	—	(7.9)	—	—	(28.8)
Right-of-use assets	Right-of-use assets	(6.5)	—	(16.2)	—	(0.5)	(23.2)	Right-of-use assets	(23.2)	—	(3.1)	—	(1.1)	(27.4)
Property, plant and equipment	Property, plant and equipment	(5.4)	—	(4.3)	—	(1.2)	(10.9)	Property, plant and equipment	(10.9)	—	1.5	—	(0.4)	(9.8)
Deferred revenue		(18.2)	—	10.3	—	—	(7.9)
Borrowing costs long-term debt		(1.6)	—	0.1	—	—	(1.5)
Contract liabilities								Contract liabilities	(7.9)	—	(8.4)	—	—	(16.3)
Long-term debt								Long-term debt	(1.5)	—	—	—	—	(1.5)
Other temporary differences	Other temporary differences	(8.7)	2.5	4.4	—	0.7	(1.1)	Other temporary differences	(1.1)	—	(7.5)	(2.1)	0.9	(9.8)
Total deferred tax liabilities	Total deferred tax liabilities	(149.9)	5.4	6.1	—	(7.0)	(145.4)	Total deferred tax liabilities	(145.4)	—	(5.6)	(2.1)	(5.9)	(159.0)
Net deferred tax assets (liabilities)	Net deferred tax assets (liabilities)	633.6	26.8	367.1	(1.0)	37.5	1,064.0	Net deferred tax assets (liabilities)	1,064.0	23.7	526.8	(8.6)	15.4	1,621.3
Classified as:	Classified as:							Classified as:

Deferred tax assets – non-current	Deferred tax assets – non-current	671.5					1,098.7	Deferred tax assets – non-current	1,098.7					1,672.8
Deferred tax liabilities – non-current	Deferred tax liabilities – non-current	(37.9)					(34.7)	Deferred tax liabilities – non-current	(34.7)					(51.5)
Net deferred tax assets (liabilities)	Net deferred tax assets (liabilities)	633.6					1,064.0	Net deferred tax assets (liabilities)	1,064.0					1,621.3


Deferred taxes (€, in millions)	Deferred taxes (€, in millions)	January 1, 2020	Acquisitions through business combinations	Consolidated Statements of Operations	Income tax recognized in Other Comprehensive Income	Effect of changes in exchange rates	December 31, 2020	Deferred taxes (€, in millions)	January 1, 2021	Credits and other	Consolidated Statements of Operations	Income tax recognized in Other Comprehensive Income	Effect of changes in exchange rates	December 31, 2021
Deferred tax assets:	Deferred tax assets:							Deferred tax assets:
Capitalized R&D expenditures	Capitalized R&D expenditures	192.9	—	117.3	—	(23.1)	287.1	Capitalized R&D expenditures	287.1	—	106.8	—	26.5	420.4
R&D & other credit carry forwards		60.8	—	63.7	—	(7.3)	117.2
R&D & other tax credit carry forwards								R&D & other tax credit carry forwards	117.2	21.4	16.4	—	7.7	162.7
Inventories	Inventories	49.3	—	(9.0)	—	(3.1)	37.2	Inventories	37.2	—	(7.2)	—	1.5	31.5
Deferred revenue		56.8	—	70.8	—	(2.4)	125.2
Contract liabilities								Contract liabilities	125.2	—	288.0	—	10.0	423.2
Accrued and other liabilities	Accrued and other liabilities	73.4	3.8	15.9	—	(5.3)	87.8	Accrued and other liabilities	87.8	—	5.7	—	4.6	98.1
Installation and warranty reserve		12.3	—	5.4	—	(1.3)	16.4
Tax effect carry-forward losses		12.5	—	15.3	—	(0.7)	27.1
Standard warranty reserve								Standard warranty reserve	16.4	—	(6.3)	—	1.2	11.3
Operating loss carry forwards								Operating loss carry forwards	27.1	—	(19.9)	—	0.2	7.4
Property, plant and equipment	Property, plant and equipment	32.8	0.8	(7.0)	—	0.3	26.9	Property, plant and equipment	26.9	—	(10.8)	—	2.5	18.6
Lease liabilities	Lease liabilities	8.1	—	(1.6)	—	—	6.5	Lease liabilities	6.5	—	16.2	—	0.5	23.2
Intangible fixed assets		129.8	—	13.7	—	—	143.5
Other intangible assets								Other intangible assets	143.5	—	—	—	—	143.5

Share-based payments	Share-based payments	8.5	—	(0.6)	—	(0.7)	7.2	Share-based payments	7.2	—	1.8	—	0.6	9.6
Other temporary differences	Other temporary differences	20.3		1.9	0.6	1.1	23.9	Other temporary differences	23.9	—	7.5	(1.0)	(2.9)	27.5
Total deferred tax assets, gross	Total deferred tax assets, gross	657.5	4.6	285.8	0.6	(42.5)	906.0	Total deferred tax assets, gross	906.0	21.4	398.2	(1.0)	52.4	1,377.0
Valuation allowance 1	Valuation allowance 1	(73.6)	—	(56.9)	—	8.0	(122.5)	Valuation allowance1	(122.5)	—	(37.2)	—	(7.9)	(167.6)
Total deferred tax assets, net	Total deferred tax assets, net	583.9	4.6	228.9	0.6	(34.5)	783.5	Total deferred tax assets, net	783.5	21.4	361.0	(1.0)	44.5	1,209.4
Deferred tax liabilities:	Deferred tax liabilities:							Deferred tax liabilities:
Intangible fixed assets		(104.2)	(8.9)	11.0	—	8.2	(93.9)
Other intangible assets								Other intangible assets	(93.9)	2.9	17.1	—	(6.0)	(79.9)
Goodwill	Goodwill	(6.6)	—	(9.0)	—	—	(15.6)	Goodwill	(15.6)	—	(5.3)	—	—	(20.9)
Right-of-use assets	Right-of-use assets	(8.1)	—	1.6	—	—	(6.5)	Right-of-use assets	(6.5)	—	(16.2)	—	(0.5)	(23.2)
Property, plant and equipment	Property, plant and equipment	(15.3)	(1.9)	10.9	—	0.9	(5.4)	Property, plant and equipment	(5.4)	—	(4.3)	—	(1.2)	(10.9)
Deferred revenue		(13.1)	—	(5.1)	—	—	(18.2)
Borrowing costs long-term debt		(1.5)	—	(0.1)	—	—	(1.6)
Contract liabilities								Contract liabilities	(18.2)	—	10.3	—	—	(7.9)
Long-term debt								Long-term debt	(1.6)	—	0.1	—	—	(1.5)
Other temporary differences	Other temporary differences	2.9	(5.7)	(6.7)	—	0.8	(8.7)	Other temporary differences	(8.7)	2.5	4.4	—	0.7	(1.1)
Total deferred tax liabilities	Total deferred tax liabilities	(145.9)	(16.5)	2.6	—	9.9	(149.9)	Total deferred tax liabilities	(149.9)	5.4	6.1	—	(7.0)	(145.4)
Net deferred tax assets (liabilities)	Net deferred tax assets (liabilities)	438.0	(11.9)	231.5	0.6	(24.6)	633.6	Net deferred tax assets (liabilities)	633.6	26.8	367.1	(1.0)	37.5	1,064.0
Classified as:	Classified as:							Classified as:

Deferred tax assets – non-current	Deferred tax assets – non-current	445.3					671.5	Deferred tax assets – non-current	671.5					1,098.7
Deferred tax liabilities – non-current	Deferred tax liabilities – non-current	(7.3)					(37.9)	Deferred tax liabilities – non-current	(37.9)					(34.7)
Net deferred tax assets (liabilities)	Net deferred tax assets (liabilities)	438.0					633.6	Net deferred tax assets (liabilities)	633.6					1,064.0


Period	Total number of shares purchased	Average price paid per Share (€)	Total number of shares purchased under programs	Maximum value of shares that may yet be purchased (€ millions)
January 21 - 31, 2021	495,533	455.68	495,533	4,566.7
February 1 - 28, 2021	1,360,410	474.24	1,855,943	3,921.6
March 1 - 31, 2021	1,580,604	469.40	3,436,547	3,179.6
April 1 - 30, 2021	1,128,123	537.04	4,564,670	2,573.8
May 1 - 31, 2021	1,240,714	528.93	5,805,384	1,917.5
June 1 - 30, 2021	1,204,128	570.95	7,009,512	1,230.0
July 1 - 31, 2021	1,178,129	603.46	8,187,641	8,726.6
August 1 - 31, 2021	1,274,521	674.28	9,462,162	7,867.2
September 1 - 30, 2021	1,188,430	723.11	10,650,592	7,007.8
October 1 - 31, 2021	1,237,721	658.97	11,888,313	6,192.2
November 1 - 30, 2021	1,393,794	726.43	13,282,107	5,179.7
December 1 - 23, 2021	1,076,731	687.26	14,358,838	4,439.7

Total	14,358,838	596.17


Year ended December 31, 2021 (€, in millions)	Level 1	Level 2	Level 3	Total
Assets measured at fair value
Derivative financial instruments 1	—	99.5	—	99.5
Money market funds 2	2,928.3	—	—	2,928.3
Short-term investments 3	—	638.5	—	638.5
Total	2,928.3	738.0	—	3,666.3
Liabilities measured at fair value
Derivative financial instruments 1	—	2.8	—	2.8
Assets and Liabilities for which fair values are disclosed
Long-term debt 4	4,673.9	—	—	4,673.9


Year ended December 31, 2022 (€, in millions)	Level 1	Level 2	Level 3	Total
Assets measured at fair value
Derivative financial instruments1	—	17.3	—	17.3
Money market funds2	3,196.7	—	—	3,196.7
Short-term investments3	—	107.7	—	107.7
Total	3,196.7	125.0	—	3,321.7
Liabilities measured at fair value
Derivative financial instruments1	—	261.2	—	261.2
Assets and Liabilities for which fair values are disclosed
Loan receivable	—	—	307.9	307.9
Long-term debt4	4,072.8	—	—	4,072.8


Year ended December 31, 2020 (€, in millions)	Level 1	Level 2	Level 3	Total
Assets measured at fair value
Derivative financial instruments 1	—	162.8	—	162.8
Money market funds 2	3,841.9	—	—	3,841.9
Short-term investments 3	—	1,302.2	—	1,302.2
Total	3,841.9	1,465.0	—	5,306.9
Liabilities measured at fair value
Derivative financial instruments 1	—	20.0	—	20.0
Assets and Liabilities for which fair values are disclosed
Long-term debt 4	4,798.8	—	—	4,798.8


	(Sub)chapter Annual Report		Scope
	~~Who we are and what we do~~Our company
	How we innovate		ASML worldwide
	Customer intimacy		ASML worldwide, excluding Cymer and Berliner Glas (ASML Berlin GmbH) NOTE: Techinsights ASML only
	Financial performance
	Financial performance indicators		ASML worldwide
	~~Financial performance~~Energy efficiency and climate action
	~~Financial performance indicators~~Energy management and carbon footprint (scope 1 and 2)	~~ASML worldwide~~
~~Climate and energy~~
~~Carbon footprint strategy~~	ASML locations above 250 FTE, excluding BGBerliner Glas (ASML Berlin GmbH)
	~~Product energy efficiency strategy~~Energy management and carbon footprint (scope 3)		ASML ~~products, excluding BG~~worldwide: except category 8,9,10,13,14 and 15
	Energy management and carbon footprint: Product use at our customers		ASML Products that reached a certain stage of maturity and have been measured
	Circular economy
	Reduce waste in our operations		ASML locations above 250 FTE, excluding BGBerliner Glas (ASML Berlin GmbH)
	Re-use parts and materials		ASML worldwide material flows NOTE: Re-use rate and Savings from ~~installed base~~re-used parts are excluding packaging
	Refurbish mature products		ASML products, excluding BGYieldStar and SBI/MBI metrology tools.
~~Recycle mature products through refurbishment~~	~~ASML products, excluding BG~~
~~Our people~~
~~Our people vision~~	~~ASML worldwide, excluding BG~~
~~Unified culture~~	~~ASML worldwide, excluding BG~~
~~Employee experience~~	~~ASML worldwide, excluding BG – NOTE: The indicator ‘Absenteeism’ is excluding Cymer and HMI. The scope for indicator Open positions filled by internal candidates (in %) excludes ASML US.~~
~~Strong leadership~~	~~ASML worldwide, excluding BG~~
~~Ensuring employee safety~~	~~ASML worldwide, excluding BG~~
~~Community engagement~~
~~Community engagement program~~	~~ASML worldwide, excluding BG – NOTE: Technology promotion is ASML Netherlands only~~
~~ASML Foundation~~	~~ASML worldwide, excluding BG~~
~~Innovation ecosystem~~
~~Partnerships with research institutes and universities~~	~~ASML worldwide, excluding BG~~
~~Collaborating with R&D partners~~	~~ASML worldwide, excluding HMI and BG~~
~~Supporting startups and scaleups~~	~~ASML Netherlands~~
~~Responsible supply chain~~
~~Sourcing and supply chain strategy~~	~~ASML worldwide, excluding BG~~
~~Supplier performance management~~	~~ASML worldwide, excluding BG~~
~~Supply chain risk management~~	~~ASML worldwide, excluding BG~~
~~Responsible Supply Chain~~	~~ASML worldwide, excluding HMI and BG~~
~~Responsible business~~
~~Business ethics and Code of Conduct~~	~~ASML worldwide, excluding BG~~
~~Product safety~~	~~ASML products~~
Water management		ASML locations above 250 FTE, excluding ~~BG -~~Berliner Glas (ASML Berlin GmbH) – except for Total Ultra-pure water consumption and Total water recycled and re-used, which is Veldhoven (the Netherlands), Linkou (Taiwan) and HMI Tainan (Taiwan) only.
	~~Rest~~Attractive workplace for all

	Inspiring a unified culture		ASML worldwide, excluding Berliner Glas (ASML Berlin GmbH)
	Best employee experience		ASML worldwide, excluding Berliner Glas (ASML Berlin GmbH) NOTE: The scope for indicator Open positions filled by internal candidates (in %) includes only open positions for which a formal vacancy has been created
	Enabling strong leadership		ASML worldwide, excluding Berliner Glas (ASML Berlin GmbH)


Climate and energy - Energy
Description	2019	2020	2021	Comments
Energy consumption (in TJ)	1,367	1,412	1,689
Energy savings worldwide through projects (in TJ)	80	114	13	In 2021 we started a new master-plan period for 2021-2025 with a target to achieve 100 TJ energy savings by the end of 2025. The savings are realized by projects resulting in improved technical installation or by projects resulting in an improved production process. Types of energy included in savings: fuel and electricity. The figures from 2019 and 2020 are related to the master-plan 2016-2020. The savings reported are cumulated compared to the base year, therefore they are not comparable.
Electricity purchased per location (in TJ)
Veldhoven	751	802	881
Wilton	102	114	120
Linkou	36	35	34
San Diego	162	167	176
San Jose	—	—	28	In scope for this indicator since 2021.
Tainan	—	—	36	In scope for this indicator since 2021.
Other	—	—	47	In scope for this indicator since 2021.Other includes the locations with more than 250 FTE combined.
Total	1,051	1,118	1,322


Climate and energy - Energy
Energy efficiency and climate action – Energy						Energy efficiency and climate action – Energy
Description	Description	2019	2020	2021	Comments	Description	2020	2021	2022	Comments
Energy consumption (in TJ)						Energy consumption (in TJ)	1,412	1,689	1,633
Energy savings worldwide through projects (in TJ)						Energy savings worldwide through projects (in TJ)	114	13	19	In 2021, we started a new masterplan period for 2021-2025 with a target to achieve 100 TJ energy savings by the end of 2025. The savings are realized by projects resulting in improved technical installation or by projects resulting in an improved production process. Types of energy included in savings: fuel and electricity. The figure from 2020 is related to the masterplan 2016-2020. The savings reported are cumulated compared with the base year; therefore, they are not comparable.
Energy intensity (per €m revenue)						Energy intensity (per €m revenue)	n/a		0.08	The denominator is revenue and the numerator represents total energy consumption within the organization made up of total electricity consumption (in TJ) and Fossil fuels (natural gas (consumed) (in TJ).
Energy consumption outside of the organization (in TJ)						Energy consumption outside of the organization (in TJ)	n/a		93,962
Electricity purchased per location (in TJ)						Electricity purchased per location (in TJ)
Veldhoven						Veldhoven	802	881	837
Wilton						Wilton	114	120	130
Linkou						Linkou	35	34	34
San Diego						San Diego	167	176	188
San Jose						San Jose	—	28	25	In scope for this indicator since 2021.
Tainan						Tainan	—	36	43	In scope for this indicator since 2021.
Other						Other	—	47	50	In scope for this indicator since 2021. Other includes the locations with more than 250 FTE combined.
Total						Total	1,118	1,322	1,307
Fossil fuels consumed from non-renewable sources (in TJ) 1	Fossil fuels consumed from non-renewable sources (in TJ) 1				Fossil fuels consumed consists of only natural gas.	Fossil fuels consumed from non-renewable sources (in TJ)1				Fossil fuels consumed consists of only natural gas.
Veldhoven	Veldhoven	159	141	184		Veldhoven	141	184	149
Wilton	Wilton	111	112	127		Wilton	112	127	121
Linkou	Linkou	—	—	—	No natural gas is used by this manufacturing location.	Linkou	—	—	—	No natural gas is used by this manufacturing location.
San Diego	San Diego	46	40	43		San Diego	40	43	43
San Jose	San Jose	—		5	In scope for this indicator since 2021.	San Jose	—	5	6	In scope for this indicator since 2021.
Tainan	Tainan	—		—	In scope for this indicator since 2021. No natural gas is used by this manufacturing location.	Tainan	—		—	In scope for this indicator since 2021. No natural gas is used by this manufacturing location.
Other	Other	—		8	In scope for this indicator since 2021.Other includes the locations with more than 250 FTE combined.	Other	—	8	7	In scope for this indicator since 2021. Other includes the locations with more than 250 FTE combined.
Total	Total	316	293	367		Total	293	367	326
Fuels consumed from renewable sources (in TJ)	Fuels consumed from renewable sources (in TJ)	—	—	—		Fuels consumed from renewable sources (in TJ)	—	—	—


Climate and energy - CO2 emissions
Description	2019	2020	2021	Comments
Emission intensity (scope 1+2+3)	0.01	0.61	0.47	In 2020 the definition for emission intensity has changed and is calculated as scope 1,2 and 3 emissions (in kt) divided by total revenue (in millions). The recalculated number for 2019 amounts to 0.56. In 2019 the emission intensity was calculated as net scope 1 and scope 2 emissions (in kt) divided by total revenue (in millions). Per 2020, scope 3 is included in the calculation.
Type of Energy Attribute Certificates (in TJ)
Guarantee of Origins (GOs)	751	802	883
Renewable Energy Certificates (RECs)	264	281	331
I-RECs	—	35	—
Total	1,015	1,118	1,214
Type of Energy Attribute Certificates (in kton)
Guarantee of Origins (GOs)	116	110	121
Renewable Energy Certificates (RECs)	21	21	24
I-RECs	—	9	—
Total	137	140	145
Number of significant fines and non-monetary sanctions	—	1	—	In 2020, there was one fine for HMI Beijing due to fact that they had no environmental permit.
The monetary value of significant fines for non-compliance with environmental laws and regulations (in thousand €)	—	70	—


Energy efficiency and climate action – CO2e emissions
Description	2020		2021		2022		Comments
Emission intensity net scope 1+2+3 (in kton/€m revenue)	0.63		0.62		0.56		Comparison figures have been recalculated to eliminate the one-year lag in scope 3 emission data. In 2022, we made efforts to collect the emissions data in a more timely manner so we are able to report for the 2022 year, nine months of actual data and three months of estimate. Gases included is only CO2, as the other gases are negligible.

Net emission footprint change in % (Scope 1+2) - Market-based	(31)	%	156	%	(3)	%
Scope 2 CO2e emissions (in kton) Location-based	n/a		n/a		193
Purchased CO2 (in kton)	0.9		0.9		0.7
Type of Energy Attribute Certificates (in TJ)
Guarantee of Origins (GOs)	802		883		840
Renewable Energy Certificates (RECs)	281		331		351
I-RECs	35		—		3
Total	1,118		1,214		1,194
Reduction in greenhouse gas emissions (GHG) split by (in kton):
Scope 1	n/a		n/a		0.16
Scope 2	n/a		n/a		2.41
Total	n/a		n/a		2.57
Significant air emissions – VOC	n/a		n/a		13,289
Number of significant fines and non-monetary sanctions	1		—		—		In 2020, there was one fine for HMI Beijing due to the fact that they had no environmental permit.
The monetary value of significant fines for non-compliance with environmental laws and regulations (in € thousands)	70		—		—


Circular economy - Waste management
Circular economy – Waste management									Circular economy – Waste management
Description	Description	2019		2020		2021		Comments	Description	2020	2021	2022	Comments
Total waste generated (in 1,000 kg)1
Total waste generated (in 1,000 kg)1 & 2									Total waste generated (in 1,000 kg)1 & 2
Total non-hazardous waste	Total non-hazardous waste	4,565		4,654		5,284			Total non-hazardous waste	4,654	5,284	6,295
Total hazardous waste	Total hazardous waste	362		372		395			Total hazardous waste	372	395	380
Total construction waste	Total construction waste	608		231		199			Total construction waste	231	199	238
Total	Total	5,535		5,257		5,878		Total waste is treated offsite, no waste treatment onsite.	Total	5,257	5,878	6,913	Total waste is treated offsite, no waste treatment onsite.
Total waste by disposal (in 1,000 kg)1	Total waste by disposal (in 1,000 kg)1								Total waste by disposal (in 1,000 kg)1
Waste diverted from disposal	Waste diverted from disposal	4,532		4,466		4,544			Waste diverted from disposal	4,466	4,544	5,186
Waste directed to disposal	Waste directed to disposal	1,003		791		1,334			Waste directed to disposal	791	1,334	1,727
Total	Total	5,535		5,257		5,878			Total	5,257	5,878	6,913
Waste diverted from disposal: Recycling1								We apply recycling of waste. Other categories like preparation for re-use and composting are not applicable to us.
Waste diverted from disposal: Recycling (in 1,000 kg)1									Waste diverted from disposal: Recycling (in 1,000 kg)1				We apply recycling of waste. Other categories like preparation for re-use and composting are not applicable to ASML.
Total non-hazardous waste	Total non-hazardous waste	3,618		3,911		4,028			Total non-hazardous waste	3,911	4,028	4,719
Total hazardous waste	Total hazardous waste	336		349		346			Total hazardous waste	349	346	309
Total construction waste	Total construction waste	578		206		170			Total construction waste	206	170	158
Total	Total	4,532		4,466		4,544			Total	4,466	4,544	5,186
Waste directed to disposal: Incineration (with energy recovery)1
Waste directed to disposal: Incineration (with energy recovery) (in 1,000 kg)1									Waste directed to disposal: Incineration (with energy recovery) (in 1,000 kg)1
Total non-hazardous waste	Total non-hazardous waste	567		411		938		Increase due to change in waste treatment by supplier. We engaged with the supplier to recycle related waste.	Total non-hazardous waste	411	938	1,246	2021 and 2022 saw an increase due to change in waste treatment by supplier. We have engaged with vendors and suppliers to improve the recycling rate in the future.
Total hazardous waste	Total hazardous waste	9				16			Total hazardous waste	9	16	37
Total construction waste	Total construction waste	20				17			Total construction waste	20	17	74
Total	Total	596		440		971			Total	440	971	1,357
Waste directed to disposal: Incineration (without energy recovery)1
Waste directed to disposal: Incineration (without energy recovery) (in 1,000 kg)1									Waste directed to disposal: Incineration (without energy recovery) (in 1,000 kg)1
Total non-hazardous waste	Total non-hazardous waste	37		3		51			Total non-hazardous waste	3	51	66
Total hazardous waste	Total hazardous waste	15		13		27			Total hazardous waste	13	27	24
Total construction waste	Total construction waste	0				0			Total construction waste	0		0
Total	Total	52		16		78			Total	16	78	90
Waste directed to disposal: Landfill1
Total non-hazardous waste		343		329		267
Total hazardous waste		2		1		6
Total construction waste		10		5		12
Total		355		335		285
Total waste disposed (% of total waste from operations)1
Incineration (with energy recovery)		12	%	8	%	17	%
Incineration (without energy recovery)		1	%	—	%	1	%
Landfill		7	%	7	%	5	%
Total		20	%	15	%	23	%
Used lithography systems sold		26		22		23		Lifetime extension of mature systems.


Our people - Workforce indicators
Number of FTEs (payroll and temporary)	Total ASML			Asia			Europe			US
	2019	2020	2021	2019	2020	2021	2019	2020	2021	2019	2020	2021
Payroll employees (in FTE)	23,219	25,082	28,747	5,664	6,027	7,404	12,393	13,627	15,444	5,162	5,428	5,899
Female (in %)	16	17	18	16	17	17	16	17	18	17	17	17
Male (in %)	84	83	82	84	83	83	84	83	82	83	83	83
Temporary employees (in FTE)	1,681	1,399	2,095	68	30	26	1,339	1,087	1,786	274	282	283
Female (in %)	17	16	18	34	28	19	17	19	20	11	7	8
Male (in %)	83	84	82	66	72	81	83	81	80	89	93	92
Total	24,900	26,481	30,842	5,732	6,057	7,430	13,732	14,714	17,230	5,436	5,710	6,182
Number of FTEs (by age group)
< 30	4,894	4,798	6,344	1,628	1,518	2,191	2,378	2,381	3,041	888	899	1,112
30 - 50	15,606	16,848	19,058	3,902	4,300	4,933	8,924	9,615	11,007	2,780	2,933	3,118
> 50	4,130	4,556	5,158	201	238	305	2,430	2,718	3,182	1,499	1,600	1,671
Unknown 1	270	279	282	1	1	1	—	—	—	269	278	281
Total	24,900	26,481	30,842	5,732	6,057	7,430	13,732	14,714	17,230	5,436	5,710	6,182


Our people - Workforce indicators
Number of payroll FTEs (split in full-time and part-time)	Total ASML			Asia			Europe			US
	2019	2020	2021	2019	2020	2021	2019	2020	2021	2019	2020	2021
Full-time payroll FTEs (by age group)
< 30	4,397	4,351	5,664	1,612	1,512	2,185	1,898	1,941	2,367	887	898	1,112
30 - 50	13,567	14,938	16,682	3,856	4,280	4,917	6,937	7,730	8,651	2,774	2,928	3,114
> 50	3,674	4,028	4,501	193	232	299	1,988	2,207	2,542	1,493	1,589	1,660

Total	21,638	23,317	26,847	5,661	6,024	7,401	10,823	11,878	13,560	5,154	5,415	5,886
Full-time payroll FTEs (by gender)
Female (in %)	15	15	16	16	17	17	14	14	15	17	17	17
Male (in %)	85	85	84	84	83	83	86	86	85	83	83	83
Part-time payroll FTEs (by age group)
< 30	41	39	46	—	—	—	41	39	46	—	—	—
30 - 50	1,264	1,337	1,420	1	1	2	1,259	1,332	1,415	4	4	3
> 50	276	389	434	2	2	1	270	378	423	4	9	10

Total	1,581	1,765	1,900	3	3	3	1,570	1,749	1,884	8	13	13
Part-time payroll FTEs (by gender)
Female (in %)	37	37	37	17	—	—	37	37	37	62	46	27
Male (in %)	63	63	63	83	100	100	63	63	63	38	54	73


Circular economy – Water management
Description	2020		2021		2022		Comments
Water consumption (in 1000 m3), split by:
Veldhoven	658		728		834
San Diego	80		105		115
Wilton	94		95		90
Linkou	28		26		22
San Jose	—		21		32		In scope for this indicator since 2021.
Tainan	—		30		33		In scope for this indicator since 2021.
Other	—		36		36		In scope for this indicator since 2021. Other includes the locations with more than 250 FTE combined.
Total	860		1,041		1,162		Municipal water supply.

Total ultrapure water consumption (in 1000 m3)	127		84		86		Only Veldhoven, Linkou and HMI Tainan are in scope for this indicator. The other locations are excluded from the scope because the data to report on the indicator is not yet available.
Total water recycled and re-used (in %)	1.8	%	1.2	%	1.6	%	Only Veldhoven, Linkou and HMI Tainan are in scope for this indicator. The other locations are excluded from the scope because the data to report on the indicator is not yet available.
Water intensity (in 1000m3/€m revenue)	62		56		55		Water intensity is calculated as total water consumption (in m3) divided by total revenue (in millions).


Our people - Workforce indicators
Number of new hires payroll employees (in FTEs)	Total ASML			Asia			Europe			US
	2019	2020	2021	2019	2020	2021	2019	2020	2021	2019	2020	2021
Number of new hires	2,219	1,932	4,373	558	598	1,848	1,102	879	1,737	559	455	788
New hires as a % of the total payroll employees	10	8	15	10	10	25	9	6	11	11	8	13
Gender
Female	542	454	896	123	123	313	280	216	432	139	115	151
Male	1,677	1,478	3,477	435	475	1,535	822	663	1,305	420	340	637
Total	2,219	1,932	4,373	558	598	1,848	1,102	879	1,737	559	455	788
Age group
< 30	923	854	2,392	318	338	1,213	380	329	783	225	187	396
30 - 50	1,136	947	1,789	233	253	627	643	491	848	260	203	314
> 50	160	131	190	7	7	6	79	59	106	74	65	78
Unknown			2			2
Total	2,219	1,932	4,373	558	598	1,848	1,102	879	1,737	559	455	788


Our people - Workforce indicators
Employee attrition (in FTE)	Total ASML			Asia			Europe			US
	2019	2020	2021	2019	2020	2021	2019	2020	2021	2019	2020	2021
Number of involuntary employee attrition	177	186	199	40	38	41	80	102	101	57	46	57
Number of voluntary employee attrition	761	723	1,234	198	201	421	257	239	341	306	283	472
Total	938	909	1,433	238	239	462	337	341	442	363	329	529
Gender
Female	196	189	258	55	56	78	72	69	89	69	64	91
Male	742	720	1,175	183	183	384	265	272	353	294	265	438
Total	938	909	1,433	238	239	462	337	341	442	363	329	529
Age group
< 30	219	218	337	78	73	143	61	67	69	80	78	125
30 - 50	519	479	806	144	149	292	198	179	257	177	151	257
> 50	200	212	290	16	17	27	78	95	116	106	100	147
Total	938	909	1,433	238	239	462	337	341	442	363	329	529


Our people - Employee engagement
Engagement score We@ASML by gender	2019		2020		2021		Comments
Female	75	%	80	%	78	%
Male	77	%	80	%	78	%