Semiconductor Equipment Monitor

Staff -- Semiconductor International, 1/1/2002

The composite book-to-bill ratio for North American-based semiconductor equipment manufacturers rose for the second consecutive month during October 2001, to a level of 0.71. In other words, for every $100 worth of equipment shipped during the latest month, only $71 worth of new orders were received by manufacturers. Bookings have now trailed orders for 11 straight months, following 24 consecutive months when new orders exceeded the value of semiconductor equipment being shipped from North American factories.

The industry’s book-to-bill ratio declined for eight straight months from September 2000 until April 2001, finally bottoming out at the record-low level of 0.44, according to data compiled by Semiconductor Equipment and Materials International (SEMI). This measure of industry dynamics has now improved — albeit only slightly — during five of the past six months. But last October’s reading was still well below the still-healthy 1.16 level recorded during October 2000.

October 2001 billings/shipments were 64.4% lower than the level reported during October 2000, while bookings/orders were off 78% during the same period of comparison.

Reported equipment bookings were up 5.2% between last September and October, though, at the same time that billings declined by another 5.3%. Bookings represent the mouth of the industry’s pipeline and are generally a very accurate indicator (given a normal level of cancellations over any period of time) of future industry production levels. So the recent pattern suggests that the industry may be at, or near, a (very low) cyclical bottom. But the discouraging fact remains that the book-to-bill ratio’s recent improvement is attributable entirely to the fact that shipments have been dropping at an even steeper rate than new orders. And with bookings still worth just $651M last October vs. almost $3B during October 2000, it’s clear that any significant recovery in the industry is unlikely until late 2002.

Global equipment sales totals for the first three-quarters of 2001 trailed the January-September 2000 total by 31.2% (the reporting of worldwide numbers lags the report for the North American market by a month). But the value of worldwide shipments in September 2001 was an even more disheartening 61% lower than the same month of 2000.

Equipment shipments to North American chipmakers during the first nine months of 2001 were valued at a level 25% below the total for January-September 2000. Although this was a less severe decline than the global (i.e., negative 31.2%) trend, the total value of equipment shipments to the region last September trailed the September 2000 total by 59%.

Shipments to Japan during 2001 held up relatively better than throughout the rest of the world, but market conditions began to deteriorate badly in August and September of last year. Although the value of semiconductor equipment shipped to the country through the first three-quarters of 2001 was almost exactly equal to the value of January-September 2000 shipments, by last September shipments were falling 54.9% short of the total for the same month during 2000.

Shipments of semiconductor equipment to Europe during the first nine months of 2001 were 28.8% less in estimated dollar value than the cumulative total for January-September 2000 — with last September’s shipments level coming in 60% lower than in September 2000. And numbers for the Asia-Pacific (excluding Japan) region looked the worst of any part of the globe during 2001. After more than doubling between 1999 and 2000, semiconductor equipment sales to Taiwan, South Korea, Singapore, Malaysia, and the rest of the Asia-Pacific region during January-September 2001 came up 49.5% short of the total for the first nine months of 2000. And the value of shipments to the region in September 2001 was 66.4% below the level for the same month of 2000.

Our revised forecasts reflect an underlying belief that the market is in the process of bottoming out. Despite the continued severe recession in business investment spending, and the glut of manufacturing capacity worldwide, there’s increasing evidence of some momentum gathering on the technology (vs. capacity) buy side of the market. As more firms become convinced of the likelihood of a worldwide economic recovery during the second half of this year and into 2003, pressure will build for investment in new, more-efficient, cost-reducing, chipmaking equipment and technologies.

It will be a slow and bumpy road back for the industry, however. We’re still looking for the value of semiconductor equipment shipped during 2001 to come up 35-40% short of 2000’s total of $47.7B. And another decline — of a much smaller magnitude — seems likely during 2002 as well, even though momentum should slowly start to build by the fall of the year.