From ML research-- note the front-end B/B.
Investment Highlights:
• The preliminary October semiconductor capital equipment book-to-bill for
the US equipment companies came out at 1.17, flat with September’s book-to-
bill which was revised up from 1.16. We believe the consensus range was
1.13-1.17.
• Overall orders increased 5% month-to-month. Orders increased 89% year
over year. Shipments also grew strongly 5% month-to-month and 75% year
over year. October is normally a strong seasonal order month with the 10
year average order growth of 9% month-to-month. The average was was
pulled down by weak backend assembly and test orders.
• Front-end (AMAT, KLAC, LRCX, NVLS …) orders were strong increasing
8% month to month and 112% year over year. The front-end book-to-bill
remained very healthy at 1.29, up from 1.26 last quarter! Shipments also
grew strongly at 6% M/M and 83% Y/Y.
• Back-end (TER, KLIC…) orders declined 7% sequentially, and revenues
grew a modest 2%. Thus, the back-end book-to-bill decreased from 0.89 to
0.81, quite weak and an indication of continuing over-supply in the
backend.
• The strength in Front-end orders reflects the continuation of 0.18 micron
capacity additions combined with the beginning of strong investment in
300mm, copper and other materials as well as the start of 0.13 micron
development buys. Back end does not benefit from these trends as back end
equipment is largely IC unit driven rather than process technology driven.
• Wafer Utilization data from the SIA also came out indicating a new record
in capacity utilization at 97.1% for the third quarter up from 95.5% in the
previous quarter. All technology levels are now over 95% utilized. Overall
MOS wafer capacity grew 7% Q/Q and 26% Y/Y. Through the first 9
months of the year wafer capacity increased 21.7%, in-line with our
estimates.
• The combination of strong front end orders and high capacity utilization
data reflect positively on the fourth quarter outlook for semiconductor
capital equipment. However, given recent inventory concerns across the
semiconductor industry and continued DRAM price weakness, we do not
expect this data to provide a significant catalyst to the stocks. We would
focus on technology driven companies including Novellus, Photronics,
Photon Dynamics, Veeco etc. for investors looking for exposure to the
group.
Merrill Lynch & Co.
Global Securities Research & Economics Group
Global Fundamental Equity Research Department
RC#30232729
fred |
