Wit Soundview not too excited with the sector yet....
Semiconductor Equipment
M O'Brien
SEMI reported May's three-month average billings and bookings for U.S.-based
semiconductor equipment manufacturers.
Overall bookings in May were down by about 3% compared to April, while billings
declined by 9% sequentially. Although we were expecting the book-to-bill ratio to
improve to the 0.5-0.6 range, billings in May declined faster than bookings did,
resulting in an overall book-to-bill of 0.46.Although front-end bookings appear to have
reached a floor (nearly flat sequentially in May), back-end bookings in May continued
to decline sequentially by another 11%.The reported front-end booking for the month
of May is now 76% below the peak of $2,479 million reported for October 2000.
Additionally, the reported back-end booking is now 87% below the peak of $766
million reported for May 2000.We believe that the May book-to-bill indicates a
bottoming in bookings, but we believe that bookings will remain flat over the next
several months, and we do not expect them to bounce back up as some pundits
have suggested ("V" shape vs. our contracted "U"- shape recovery). We remind
investors of the recent announcements on capital-expenditure cutbacks by the likes
of Infineon, Micron Technology, ST Micro, and Philips. We, therefore, find a quick
recovery in bookings a very unrealistic expectation. Although we expect the
migration to sub-0.18 micron process technology with new materials like copper and
low-k to continue (mostly as a pilot line project), we would not rule out large fabs like
TSMC and UMC delaying some of their 300-mm projects. We continue to caution
investors about the inherent risks associated with semiconductor equipment stocks
at these levels. With further cutbacks in our 2002 estimates, we do not believe that
these stocks warrant such rich multiples, indicating that a quick recovery is in order.
We, therefore, continue to be cautious in the short term and encourage investors to
be patient on the sidelines and wait for a better entry point. |
