Semiconductor Equipment Monitor

Staff -- Semiconductor International, 8/1/2002

The composite book-to-bill ratio for North American-based semiconductor equipment manufacturers was above parity for the third month in a row during May, and looks ready to stay there for quite some time. This brighter horizon follows a period of 15 consecutive months when the ratio was mired below 1.00.

According to the most recent survey conducted by Semiconductor Equipment and Materials International (SEMI), the book-to-bill ratio reached the relatively lofty height of 1.26 during May 2002. This tells us that for every $100 worth of equipment shipped during the month, an estimated $126 worth of new orders was received by manufacturers. During May of last year, the book-to-bill measure stood at the near-record-low level of 0.49.

Despite the encouraging turn, however, both shipments and new orders remained at comparatively subdued levels over the first half of this year. And the recent upturn in the book-to-bill ratio reflects primarily the fact that bookings have improved solidly and consistently over the past six months even as shipment values have "treaded water." May 2002 billings -- at an estimated $861.7M -- were still only modestly higher (by about 6%) than the average of $811.1M for the preceding six-month period.

Preliminary data for May 2002 show bookings increasing 8.9% from their revised April level, following cumulative gains of about 42% during the prior four months. Billings, on the other hand, increased by a smaller -- if still encouragingly solid -- 5.8% between April and May.

The value of equipment shipped by North American manufacturers has now fallen below $1B for nine consecutive months. May 2002 billings were still 41% lower than during the same month a year earlier. But the $1.084B worth of new bookings was about 50% higher than the level of bookings reported during May 2001. So things are definitely looking up for the industry -- although it will be quite a while before we see strength on the shipments/billings side of things that comes close to matching the encouraging recent recovery in orders/bookings.

SEMI has also compiled global sales data covering trends for the rest of the world through April of this year (just a one-month lag from the North American market data). During the first four months of 2002, global semiconductor equipment sales were worth ~$5.72B -- ~60% less than the $14.12B worth of equipment sold worldwide during the first third of 2001.

Compared with January-April 2001 levels, equipment sales to the North American market during the first four months of this year were off the least severely (-49.5%), while sales into the Asia-Pacific market (excluding Japan) were 53.2% lower during January-April 2002 than during the first third of 2001. Much steeper equipment sales declines were recorded in both the Japanese
(-72.2%) and European (-67.3%) markets during the first four months of this year.

There continues to be little demand for immediate capacity expansion on the part of chipmakers, although some deep-pocketed and/or forward-looking companies are making investments in the new technologies (involving larger wafer size and ever-more-refined geometries) that will make them more competitive, productive and profitable once the market turns. However, we’re still confident that the global market will bottom out by mid-year, and that we’ll start to see some sequential gains (from the very depressed base) over the year’s final two quarters of 2002.

The average capacity utilization rate among U.S. semiconductor manufacturers has moved up from 63.1% at the beginning of this year to 66.9% during May -- a relatively modest gain off an abysmally low level, but unambiguously moving in the right direction. And as more firms become convinced of the likelihood of a global economic recovery during the latter months of this year and into 2003, pressure should build throughout the world for investment in new more-efficient, cost-reducing, chipmaking equipment and technologies.