Semiconductor Equipment Monitor

Staff -- Semiconductor International, 5/1/2002

The composite book-to-bill ratio for North American-based semiconductor equipment manufacturers rose to 0.87 during February. This means that for every $100 worth of equipment shipped during February, an estimated $87 in new orders was received by manufacturers.

The ratio was encouragingly higher than the 0.71 reading recorded during February 2001, and much stronger than the sub-0.50 levels registered in the spring of last year. However, both shipments and new orders remained at depressed levels over the first two months of the new year, and the recent upturn in the book-to-bill ratio primarily reflects the fact that bookings have improved slowly but steadily over the past three months even as shipment values have stagnated at a very low level.

Preliminary data for February shows bookings increasing 10.3% over January, following cumulative gains of ~9% during the prior two months. Billings, on the other hand, improved by a less substantial 2.8% between January and February, after recording a net loss over the preceding two months. The value of equipment shipped by North American manufacturers has now fallen below $1B for six consecutive months. And an average of only $639M in new orders was received by equipment makers over the same six-month period, so there’s still no sign that the industry’s fortunes will improve significantly in the months immediately ahead. February billings were 64% lower than the same month a year earlier, while new bookings were 56% lower than the total reported during February 2001. Still a bleak picture, to be sure, but with the orders trend now leading the shipments trend we finally have clear evidence that the industry’s fortunes have at least bottomed out.

Global semiconductor equipment sales during 2001 were worth an estimated $28B, according to revised summary data compiled by Semiconductor Equipment and Materials International (SEMI). This was 41.2% below the record total of $47.7B in equipment shipped during 2000.

During the first month of 2002, global semiconductor equipment sales were worth ~$1.44B <\m> less than one-third as much as the $4.35B in equipment sold worldwide during the first month of 2001. Compared with January 2001 levels, equipment sales to the North American market during the first month of this year were down 48.3%, while sales to Japan were down 5.7%. Sales to European manufacturers this past January were 64.4% lower than a year earlier, while sales to the Asia-Pacific market (excluding Japan) were 73.7% lower in January compared with the same month last year.

Equipment shipments to North American chipmakers during the 12 months of 2001 were valued at 36.8% below the total for 2000, and represented about 29% of the total global market. The value of shipments of semiconductor equipment to Europe during 2001 was 40.7% less than in 2000, while shipments to Japan were off a comparatively modest 17.3% last year. Sales to the Asia-Pacific market were off the most of any region during 2001. But even with a 55.8% over-the-year decline, sales to this region accounted for slightly more than 30% of the worldwide total (down from 40% in 2000).

As we entered 2002, the Asia-Pacific region was showing signs of improvement from its very depressed base, but both North America and Europe were still treading water, while market conditions in Japan were deteriorating rapidly. Our revised forecasts anticipate another double-digit decline in worldwide equipment sales during 2002 <\m> although the magnitude of the loss shouldn’t be nearly as severe as that recorded last year.

Although there is some evidence of gathering momentum on the technology (vs. capacity) "buy" side of the market, the continued glut of global chipmaking capacity and depressed corporate profits simply won’t support enough new investment to push equipment sales higher this year. However, the market will bottom out during the first half of 2002, and we should start to see some sequential gains (from the very depressed base) over the year’s final two quarters. And as more firms become convinced of the likelihood of a worldwide economic recovery during the second half of this year and into 2003, pressure should build for investment in new, more efficient, cost-reducing chipmaking equipment and technologies.