Equipment makers continue to suffer:
SEMI Index Show No Relief In Sight, Hits 3-Year Low
(2:20 p.m. EDT, 9/23/98)
By Jennifer L. Baljko
Silicon Valley
The semiconductor equipment industry continued to bear the brunt
of the current market downturn last month, posting the lowest
book-to-bill figure in more than three years.
The ratio fell to 0.60 in August, according to Semiconductor
Equipment and Materials International (SEMI), Mountain View,
Calif. A book-to-bill of 0.60 means $60 in orders were received
for each $100 worth of products shipped.
Three-month average shipments last month dropped 21%, to
$1.06 billion compared with last year. Sequentially, three-month
average shipments fell 5%.
Three-month average bookings plummeted 55.9%, to $632
million, and dropped 14.7% from July.
"One has to look as far back as 1994 before previously seeing
order levels this low," said Min Pang, an analyst at SG Cowen
Securities Corp., San Francisco. "In assessing different leading
indicators of recovery, we have found an upturn in total orders to
give the best signal of fundamental improvement. Alas, this
month's data offers no such indicator."
August's figures were not too surprising given the continued
problems that have been surfacing around the global chip market.
For instance, fab utilization rates in Taiwan have averaged only
about 50% on the back-end. And the ongoing merger activity in
the semiconductor sector will create manufacturing efficiencies and
affect short-term spending for equipment, Pang noted in his First
Call report.
Overall, total 1998 capital spending is likely to decline 30% to
35% from last year, down even further from previous projections
of a 25% to 30% decrease, added Jay Deahna, an analyst at
Morgan Stanley Dean Witter, San Francisco.
The chip market, though, appears to have stabilized, which could
help fuel a recovery in the equipment business. But not until late
1999, analysts said.
"Computer sales are apparently strong heading into the fall season
and Intel reported better than expected chip sales in the third
quarter," said Dick Greene, an analyst with SEMI, Mountain
View, Calif. "While the equipment market should also see a
leveling, the prospects for recovery still appear to be at least
twelve months off."
Semiconductor equipment capital spending is expected to increase
modestly next year as orders pick up in the first six months of
1999, Deahna said. But the health of the equipment industry in the
first half of 1999 will be determined by the amount of growth seen
later this year.
"The magnitude of sequential revenue growth in the second half [of
1998] will determine whether or not global semiconductor capital
spending is up or down next year," Deahna said.
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