Chip gear book-to-bill to keep rising, but how long, how strong?
Backend tool recovery appears to be ahead of wafer fab segment, for now
Semiconductor Business News
(04/25/02 09:56 a.m. EST)
SAN JOSE -- With the book-to-bill for North American-based chip equipment suppliers rising above parity in March for the first time since November 2000, analysts tracking semiconductor capital spending appear to be confident that the ratio has no where to go but up--probably for at least several months. It will be in the summer when the chip industry determines if the current "recovery" has legs to run beyond the second half of 2002.
Some industry observers were a little surprised that the book-to-bill for March poked its ratio above the 1.0 mark to a preliminary reading of 1.04--meaning that chip equipment suppliers were taking in $104 worth of orders for every $100 of products billed, according to the Semiconductor Equipment and Materials International (SEMI) trade group.
The San Jose-based trade group this week said North American-based tool suppliers posted $838.8 million in bookings during March, based on a three-month moving average, while billings were at $808.1 million, also based on the moving average (see April 22 story). It has been 16 months since the ratio had been above 1.0, and the book-to-bill dipped as low as 0.44 in April 2001.
The SEMI Express report also breaks down book-to-bill figures for frontend and backend equipment (wafer processing and chip assembly/test segments, respectively). The more expensive frontend fab equipment ratio is lagging the backend side of the business in the recovery cycle. The frontend book-to-bill was at 0.97, up from February's 0.85 reading, while the ratio for backend chip packaging and testing systems was way up at 1.41 in March compared to 1.18 in the prior month, according to SEMI.
"With both competitive incentive and access to capital, we expect IC manufacturers to sustain stronger-than-expected technology retooling --in both front-end and back-end operations-- driving continued quarter-to-quarter expansion of bookings and book-to-bill through 2002," said a newsletter to stock investors from analysts at CIBC Semiconductor in New York City this week.
Analysts are encouraged by the recent wave of small-but-important (psychological) increases in capital spending budgets at a number of chip makers, which have indicated a willingness to move ahead with some fab projects placed on hold last year. Foundries are quicker and bolder in their capex hikes--especially Taiwan Semiconductor Manufacturing Co. Ltd., which has added $1 billion to its planned 2002 budget now set at $2.57 billion (see MArch 28 story). Even Chartered Semiconductor Manufacturing Pte. Ltd., with its foundry fabs operating at nearly 30% capacity, is nudging up its capital spending from $400 million to $500 million, and it is pulling in the start of its delayed 300-mm fab to the third quarter of 2003 (see April 18 story).
"We believe that pull-ins from the foundries and major memory manufacturers are driving the order growth that we are seeing in the book-to-bill, which is underscored by the strong March quarter orders reported by the semi equipment companies on their most recent round of quarterly conference calls," said analysts at Goldman, Sachs & Co. in an e-mail newsletter this week.
"We believe that we are still in the early stages of an order recovery," added the analysts, who are now estimating a SEMI book-to-bill ratio for April at 1.05 with overall orders increasing 5% to $880 million and shipments up 3% to $835 million for North American-based suppliers.
The last time the SEMI Express book-to-bill ratio moved above the 1.0 parity mark, it stayed there from January 1999 to November 2000, a 23-month stretch that represented the biggest boom in capital spending. The 15-month bust cycle (December 2000 to February 2002) represented the worst downturn in industry history.
Guess what's next. Most industry observers believe it will be a boom, but a more selective boom for equipment suppliers serving those chip maker still planning to stay in the manufacturing business vs. outsourcing wafer processing or backend assembly (see feature on shrinking "$1 billion Capex Club"). |
