Semiconductor Equipment Monitor

Staff -- Semiconductor International, 10/1/2002

The composite book-to-bill ratio for North American-based semiconductor equipment manufacturers fell sharply between June and July, although it recorded a reading well above the parity level of 1.00 for the fifth month in a row. This improved relationship between orders and shipments follows a period of 15 consecutive months when the book-to-bill 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 declined from a level of 1.26 in June to a reading of 1.16 during July. This tells us that, for every $100 worth of equipment shipped during the month, an estimated $116 worth of new orders were received by manufacturers. During July of last year, the book-to-bill measure stood at 0.65 -- not too far above the record-low level of 0.44 recorded during April of 2001.

But after an encouraging six-month run of improved orders, bookings eased during the first month of 2002’s second half. Preliminary data for July 2002 showed bookings declining by 1.6% from their revised June level, following cumulative gains of about 55% during the prior five months. Billings, on the other hand, actually increased by a solid 7.4% between June and July — thanks to the accumulation of new orders placed over the first half of the year.

The value of equipment shipped by North American manufacturers has now fallen below $1B for 11 consecutive months. And July 2002 billings were still more than 20% lower than during the same month a year earlier. But the $1.153B worth of new bookings was about 51% greater than the level of bookings reported during July of 2001.

SEMI has also compiled global sales data covering trends for the rest of the world through the entire first half of this year (just a one-month lag from the North American market data). During the first six months of 2002, global semiconductor equipment sales were worth ~$8.72B — about 52% less than the $18.17B worth of equipment sold worldwide during January-June of 2001.

Compared to first-half 2001 levels, equipment sales to the Asia-Pacific market (excluding Japan) market during the first six months of this year were off the least severely (-40.4%), while sales into the North American market were 46.7% lower during January-June of 2002 than over the first six months of 2001. Much steeper equipment sales declines were recorded in both the Japanese
(-66.7%) and European (-62.4%) markets during the first half of this year.

Given the realities of the global economy — and weak demand for most kinds of IT and communications equipment — there’s little need for immediate capacity expansion on the part of chipmakers during 2002. So most “buys” this year are technology-, not capacity-driven. However, we’re still confident that the global market will “bottom out” by this 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 67.8% during July — a relatively modest gain off an abysmally low level, but unambiguously moving in the right direction. Still, it pales in comparison to the 90%-plus utilization rates that were the norm from 1998-2000, or even the 35-year-average capacity utilization rate of 79.6%. Nevertheless, 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.