Fab Utilization Nearly Hits 99% in November;
Tool Leadtimes Stretch to Q4 of 2004, says VLSI Research
The Semiconductor Reporter
Dec. 17, 2003, 6:55 p.m. EST
SANTA CLARA, Calif. -- Delivery leadtimes for semiconductor equipment are now stretching out to the fourth quarter of 2004 as a result of a growing wave of new tool orders being placed by IC makers, which are suddenly strapped for wafer fab capacity, said VLSI Research Inc. today.
Worldwide wafer fab capacity utilization jumped to 98.8% in November, which virtually means that the chip industry was sold out last month, said analyst Risto Puhakka, vice president of operations at VLSI Research. In October, wafer fab utilization was at 96.4%. The research firm is estimating that fab utilization will ease slightly in December to 97.1%.
On Tuesday, VLSI Research told its clients that it was significantly increasing its sales forecast for ICs and semiconductor equipment to reflect much stronger growth in 2004 and 2005 as markets move into an overheated state (see Dec. 16 story). The research firm raised its growth forecast for ICs to 32.8% from a prior projection of 20%, and it is now expecting semiconductor equipment sales to jump by 40.1% next year instead of 20%. IC sales are now expected to reach $189.6 billion in 2004, an increase from $142.7 billion in 2003, while chip equipment revenues will hit $43.5 billion next year from $31.1 billion this year, said the new forecast.
"The chip industry is seeing a spike in demand brought about by a strong economy and consumers’ growing thirst for anything electronics," said VLSI Research in issuing its monthly report on market conditions. "Years of under investment have left the industry with little spare capacity. Frontend capacity utilization reached 98% in November, surpassing the peak in 2000."
The research firm warned that chip makers are now "paying for delivery slots all the way out to Q4 of 2004," and added that "this is something that has not happened well over a decade."
The worldwide semiconductor equipment book-to-bill ratio reached 1.11 in November as a result of the climb in new tool orders, said VLSI Research. Chip production equipment orders grew 10.7% in November to $3.01 billion from $2.72 billion in October, while sales rose 3.0% to $2.71 billion last month from $2.63 billion in the prior month, said the VLSI Research report (see table below).
Of the semiconductor equipment billings, $1.405 billion were for wafer-processing systems, $752 million for test and related equipment, $206 million for assembly tools, and $348 million for service and spares, said VLSI Research.
Meanwhile, the integrated circuit industry's book-to-bill reached 1.18 in November, based on a three-month moving aver for bookings of $16.47 billion and shipments of $13.19 billion, said the Santa Clara-based research firm. The company uses sales data from the World Semiconductor Trade Statistics (WSTS) industry group and estimates its own bookings numbers.
VLSI Research's new upgraded forecast for semiconductor equipment shows the strong growth continuing into 2005. The firm is forecasting a 51.1% increase in chip equipment sales to $65.8 billion in 2005, but then the next recession hits with revenues dropping 30.7% in 2006. But before the semiconductor equipment sales drop, the current record of $60.3 billion in worldwide revenue will be eclipsed in 2005, based on the new forecast.
"This is all being driven by under investments in the last two years," said Puhakka in a phone interview. "If equipment companies could ship everything the chip makers order for 2004, we could see 60-to-70% growth next year, but if that happens, we'll see a crash in 2005. However, there has been enough damage to the semiconductor equipment industry infrastructure in the past three years that it will take time to build up those productions capacities and deliver tools."
Worldwide semiconductor equipment billings and bookings
Month Billings
($ millions) Bookings
($ millions) Book-to-bill ratio Front-end capacity utilization
December* $2,754.3 $3,184.1 1.16 97.1%
November** $2,712.0 $3,009.3 1.11 98.8%
October $2,634.0 $2,718.5 1.03 96.4%
*Forecast**Preliminary estimate
Source: VLSI Research
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