Lehman's: B-to-B soft; recommends companies specializing in .25 upgrade:
Headline: Semiconductor Equipment: SEMI Book-to-Bill Ratio is Weakest since Oct/96
Author: Edward C. White, Jr., CFA 1(212)526-4744/Tolomy Erpf 1(212)526-5744
Company: AMAT, KLIC, KLAC, NVLS, PRIA, ETEC, SFAM, SVGI, TER, LRCX, LTXX
Country: ECO CUS
Industry: SEMICO
Today's Date : 04/17/98
* Semiconductor Equipment and Materials International, the trade association for the semiconductor equipment industry, publishes monthly (3-month moving average) shipment, order and book-to-bill statistics.
* The book-to-bill ratio for the 3-month average ended in March for total equipment was 0.80, down from a revised 0.91 in February. Total shipments and total orders were down 12.4% and 1.4%, respectively from February levels.
* The front-end ratio was 0.78 in March, down from a revised 0.86 in February. Orders for this sector have continued to sequentially decline over the last four reporting periods.
* The assembly & test ratio declined to 0.86 in March from a revised 1.01 in February. Orders for this sector have continued to progressively weaken over the last four reporting periods.
Highlights:
The semiconductor equipment market continued to weaken in March. Three-month average orders for March declined 12.4% from February, roughly in line with the 10.9% decline in the January to February reporting periods. This represents the fourth month of sequential decline in orders since November, 1997. The decline in the overall book-to-bill ratio was due to weak growth in orders in both the front end and the back end, and is the lowest reported book-to-bill ratio since October, 1996.
Shipments also declined a modest 1.4%, representing the fourth month of sequential declines since November, 1997. In addition to weakness in equipment purchases by DRAM manufacturers and Asian chipmakers, U.S. based semiconductor equipment manufacturers are now experiencing softening in orders from U.S., Taiwanese, and non-DRAM manufacturers. While anecdotal evidence suggests that Korean customers are beginning to make limited purchases again, their financial constraints hamper any significant impact.
Front-end equipment orders and shipments in March declined 13.2% and 4.2%, respectively, versus declines in orders and shipments in February of 11.9% and 10.4%, respectively. This is the sixth sequential month during which growth in orders has been less than the growth in shipments.
Test & Assembly orders in March declined 10.6% from February levels, following an 8.8% decline in January. Shipments in March increased 5.4%, versus a decline of 1.4% in February. The data from the last four reporting periods suggests that this sector is suffering not only from the fall-off in buying subsequent to substantial capacity additions which took place in 1997, but also from the hangover of the seasonally robust end-of-fourth quarter buying spree.
We continue to recommend select companies in the semiconductor equipment sector which stand to benefit from technology buying of 0.25 micron equipment by chipmakers. The key beneficiaries of 0.25 micron technology: Applied Materials (AMAT, $35 7/16, Rated 1); KLA-Tencor (KLAC, $38 7/8, Rated 1); Etec Systems (ETEC, $60 1/8, Rated 1); SpeedFam (SFAM, $29 1/8, Rated 1); PRI Automation (PRIA, $24 1/4, Rated 1). |
