Paul and Intel investors:
Another commentary by WitSoundview on semi B2B.
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Semiconductors Industry
July 24, 2001
Michael O'Brien - Research Analyst
Mehdi Hosseini - Associate Analyst
SEMI May Book-to-Bill Report: The Bottom Has Formed
--Last night, SEMI reported June's three-month average billings and bookings for U.S.-based semiconductor equipment manufacturers.
--Overall bookings in June were nearly flat compared to May, while billings declined by 12%.
--As anticipated, since billings (denominator) declined faster than bookings (numerator), the overall book-to-bill ratio increased to 0.54 (from 0.48 reported in May).
--Although front-end bookings appear to have bottomed, they are down by 75% since the peak that was reported in October 2000.
--Back-end bookings continued to slide, and they are now down by 89% from the peak that was reported 13 months ago. Back-end bookings are at the lowest level since March 1991.
--Going forward, we expect overall bookings to be relatively flat, while billings continue to decline. We, therefore, would not be surprised if the overall book-to-bill ratio improved slightly from the current value.
--Nonetheless, the ratio itself, in our opinion, does not reflect the bleak fundamental outlook, and we caution investors not to read too much into the absolute ratio.
--Although IDMs and foundries are continuing to invest in leading-edge tools for such new materials as copper and low-k, we remind investors that the migration of 300-mm pilot to production could be further postponed if chip manufacturers continue to lose money and if capacity utilizations are below 50%.
--We believe that "shrinks" could provide chip manufacturers with reasonably more real estate on 200-mm wafers. So, migration to 300-mm rests on economic gains achieved. If there is no economic benefit and if the company is still losing money, there is no need for the migration.
--We, once more, remind investors of our protracted "U"-shape recovery thesis. We believe that June's bookings indicate a bottoming has formed.
--In terms of capital equipment stocks, we caution investors of volatility in the near term, and for those with a longer investment horizon, we would recommend using our suggested entry points (as outlined in Figure 6) for starting to accumulate.
--Our favorite names include ASMI, PLAB, RTEC and IBIS.
Ibexx |
