Semiconductor Equipment Monitor
Staff -- Semiconductor International, 1/1/2003
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The composite book-to-bill ratio for North American-based semiconductor equipment manufacturers fell for the fifth month in a row between September and October, total capital equipment bookings declined for the third straight month.
According the most recent survey conducted by Semiconductor Equipment and Materials International (SEMI), the book-to-bill ratio declined from a revised level of 0.80 in September to a reading of 0.73 during October. This tells us that for every $100 worth of equipment shipped during the month, an estimated $73 worth of new orders were received by manufacturers. During October of last year, the book-to-bill measure stood at a nearly identically depressed 0.72. The record-low level for this important forward-looking indicator of semiconductor equipment market health — 0.44 — was registered during April of 2001. This October's ratio was the fourth sub-1.00 book-to-bill reading of 2002, and the 17th time in the past 23 months that the value of semiconductor equipment new orders have fallen short of shipments. So the encouraging market momentum that began to build during the spring and summer of this year had completely dissipated by the time we moved into the fall of 2002.
Bookings fell by 7.9% between September and October of this year. Billings fared better, managing a 1% gain during October following a revised 5% increase the month before. Unfortunately, the recently more-positive trend in billings reflects in large part the pass-through of the solid accumulation of new orders placed over the first half of the year — work coming out of a pipeline that is seeing ever less in the way of new orders to replenish the flow.
The value of equipment shipped by North American manufacturers have risen above the $1B level for two months in a row now, though, following a period of 12 consecutive months when billings fell below this milestone. October 2002 billings to North American equipment manufacturers were worth 18% more than during the same month last year. And the $765.7M worth of new bookings received this October was 19% greater than the level of bookings reported during October 2001, so there's clearly still more work in the pipeline now than there was a year ago — just not as much as was flowing in earlier this year.
A review of sales and order data compiled by SEMI covering the world as a whole was unusually encouraging for September 2002. Since this global data summary lags by a month the book-to-bill information compiled for the North American market data, we don't yet know how sales trended during October. We can only hope that data for the final quarter of 2002 confirms the tentative signs that September represented an inflection point for trends in semiconductor equipment sales and orders.
The value of worldwide equipment billings during September 2002 was 19.8% higher than during the same month a year earlier. Sales to Europe were 7.2% lower this past September than in the same month a year earlier, but values rose for all other regions of the world. The increases ranged from 3.9% for Japan to 24.9% for the rest of the Asia-Pacific region and a stellar 39.8% for North America. Although it should be acknowledged that September 2001 billings (particularly to North America) were at very low levels in the immediate aftermath of the 9/11 terrorist attacks, so the overall year-over-year strength is undoubtedly overstated by these specific comparisons.
Nevertheless, the underlying trend does appear poised to turn more positive (or, at least, less negative) in the months immediately ahead. That's because bookings/orders during September 2002 rose at an even-stronger rate than billings/shipments. For the world as a whole, the value of semiconductor equipment bookings was 43.0% more this past September than during September of 2001. And all regions of the globe participated in this upturn: North America (+8.3%), Japan (+48.5%), Europe (+50.7%), and the rest of the Asia-Pacific region (+82.5%).
With 2002 numbers so disastrously bad, of course, any sign of good news is welcome. During the first nine months of 2002, global semiconductor equipment sales were worth ~$14.42B — about 40% less than the $23.94B worth of equipment sold worldwide during the first three-quarters of 2001.
Compared to 2001's nine-month totals, equipment sales to the Asia-Pacific market (excluding Japan) during the first three-quarters of last year were off by the smallest amount (-21.3%), while sales into the North American market were 36.9% lower during January-September 2002 than over the first nine months of 2001. Much steeper equipment sales declines were recorded in both the Japanese (-56.8%) and European (-54.2%) markets during the first three-quarters of last year.
There's little question that the vast majority of semiconductor capital equipment purchases during 2002 were driven by the desire to upgrade technology, not to increase production capacity. Although the average capacity utilization rate among U.S. semiconductor manufacturers had moved up from 63.1% at the beginning of 2002 to 67.8% during October, it remained extremely low by any standard of historical comparison.
Utilization rates of 90% or above were the monthly norm in 1998-2000. And even the industry's more modest 35-year-average capacity utilization rate of 79.6% far exceeds the current dismally low rate.
Nevertheless, as more firms become convinced of the sustainability of a global economic recovery during the first half of 2003, pressure should slowly but surely build throughout the world for investment in new more-efficient, cost-reducing, chipmaking equipment and technologies. So we remain reasonably confident that the global market will bottom out during the early months of this year, and that we'll start to see some sequential gains (from the new — very depressed — base of activity, of course) by the early summer of 2003.
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Table 1. Equipment Sales Trends by Regional Market |
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| Billions of U.S. dollars | % Change from a year ago | |||||||
| Total | Projected | Actual | Projected | |||||
| 2000 | 2001 | 2002 | 2003 | 2000 | 2001 | 2002 | 2003 | |
| World | 47.68 | 28.04 | 18.79 | 22.79 | 87.0 | -41.2 | -33.0 | 21.3 |
| Americas | 12.93 | 8.18 | 5.55 | 6.12 | 73.5 | -36.8 | -32.1 | 10.3 |
| Japan | 9.18 | 7.59 | 3.73 | 4.28 | 66.2 | -17.3 | -50.9 | 14.8 |
| Europe | 6.44 | 3.82 | 2.03 | 2.33 | 99.1 | -40.7 | -46.9 | 15.0 |
| Asia/Pacific | 19.13 | 8.45 | 7.48 | 10.06 | 106.0 | -55.8 | -11.5 | 34.4 |
| Historical Data:
SEMI Forecast: Semiconductor International | ||||||||
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Table 2. Price Trends |
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| All capital equipment for manufacturing | -0.4% |
| All semiconductor manufacturing equipment | -2.8% |
| Source: U.S. Labor Department | |
