Semiconductor Equipment Monitor

Staff -- Semiconductor International, 9/1/2002

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

According the most recent survey conducted by Semiconductor Equipment and Materials International (SEMI), the book-to-bill ratio reached the relatively lofty height of 1.28 during June. This tells us that for every $100 worth of equipment shipped during the month, an estimated $128 worth of new orders were received by manufacturers. During June of last year, the book-to-bill measure stood at the near-record-low level of 0.54.

Despite the encouraging turn, however, both shipments and new orders remained at comparatively subdued levels over the first half of this year. The recent upturn in the book-to-bill ratio also primarily reflects the fact that bookings have improved solidly and consistently over the past six months, even as shipments values have "treaded water." June billings — at an estimated $906.4M — were still only modestly higher (by about 10%) than the average of $824.1M for the preceding six-month period.

Preliminary data for June shows bookings increasing 4.9% from their revised May level, following cumulative gains of about 50% during the prior five months. Billings, on the other hand, increased by a smaller — if still encouragingly solid — 4.2% between May and June.

The value of equipment shipped by North American manufacturers has now fallen below $1B for 10 consecutive months. June billings were still one-third lower than during the same month a year earlier (and June 2001 billings had already fallen to a point almost 40% below the June 2000 total). But the $1.159B worth of new bookings was about 59% higher than the level of bookings reported during June 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 May of this year (just a one-month lag from the North American market data). During the first five months of 2002, global semiconductor equipment sales were worth about $6.86B — about 57% less than the $16.04B worth of equipment sold worldwide during January-May 2001.

Compared with January-May 2001 levels, equipment sales to the North American market during the first five months of this year were off the least severely (-48.9%), while sales into the Asia-Pacific market (excluding Japan) were 49.3% lower during January-May 2002 than during the first five months of 2001. Much steeper equipment sales declines were recorded in both the Japanese (-70.2%) and European (-65.5%) markets during the first five months of this year.

There’s currently little need for immediate capacity expansion on the part of chipmakers, although some deep-pocketed and/or forward-looking companies are continuing to make investments in the new technologies (involving larger wafer size and ever-more-refined geometries) designed to make them — and their customers — more competitive, productive and profitable once the market turns. However, we’re still confident that the global market will bottom out by late summer/early fall, and that we’ll start to see some sequential gains (from the very depressed base) over the final quarter 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 69.6% during June — 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.