Semiconductor Equipment Monitor

-- Semiconductor International, 2/1/2002

The composite book-to-bill ratio for North American-based semiconductor equipment manufacturers rose for the third consecutive month during November 2001, to a level of 0.73. In other words, for every $100 worth of equipment shipped during the latest month, only $73 worth of new orders were received by manufacturers. Bookings have now trailed orders for 12 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 had declined for eight straight months from September 2000 until April 2001 before 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 six of the past seven months. But last November’s reading was still well below the reasonably healthy 1.12 level recorded during November 2000. The book-to-bill ratio specifically for the “back end” part of the market the test and assembly related components continued to trail the composite measure. During November 2001 the book-to-bill for test/assembly fell to 0.47 its 15th consecutive month below 1.00.

November 2001 billings/shipments were 65% lower than the level reported during November 2000, while bookings/orders were off 77% during the same period of comparison.

Reported equipment bookings declined 5.4% between October and November of last year, at the same time that billings declined by an additional 6.1%. 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 convergent 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 $612M last November vs. almost $2.7B during November 2000, it’s clear that any significant recovery in the industry is unlikely until late 2002.

Global equipment sales totals for the first 10 months of 2001 trailed the January-October 2000 total by 35.8% (the reporting of worldwide numbers lags the report for the North American market by a month). But the value of worldwide shipments last October was a much more disheartening 68.6% lower than during the same month of 2000.

Equipment shipments to North American chipmakers during the first 10 months of 2001 were valued at a level 31.7% below the total for January-October 2000. Although this was a less severe decline than the global (i.e., negative 35.8%) trend, the total value of equipment shipments to the region during October 2001 trailed the October 2000 total by 71.4%.

Shipments to Japan held up relatively better than throughout the rest of the world during 2001, but market conditions began to deteriorate badly during the second half of the year. Although the value of semiconductor equipment shipped to the country through the first 10 months of 2001 was only a modest 4.6% less than the value of January-October 2000 shipments, by October of last year shipments were falling 41.8% short of the total for the same month during 2000.

Shipments of semiconductor equipment to Europe during the first 10 months of 2001 were 33.9% less in estimated dollar value than the cumulative total for January-October 2000 with last October’s shipments level coming in 66.6% lower than in October 2000. And numbers for the Asia-Pacific (excluding Japan) region deteriorated the most 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-October 2001 came up 52.8% short of the total for the first 10 months of 2000. And the value of shipments to the region last October was an extraordinary 80% below the level for the same month of 2000.

Our recently revised forecasts reflect an underlying believe 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. When final numbers are compiled for 2001, we’re looking for the value of semiconductor equipment shipped during the year to come seems likely during 2002 as well, even though momentum should slowly start to build by the fall of this year.