SEMI Sep. back end Book-to-bill increased! KLIC is the first one to be
benefited, analyst says.
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06:05am EDT 20-Oct-98 BancBoston Robertson Stephens (Billat, Susan 415-676-289
NORTH AMERICAN SEMICONDUCTOR CAPITAL EQUIPMENTSEPTEMBER BOOK-TO-BILL ...
BancBoston Robertson Stephens
Sue Billat (415) 676-2892
Crosby Byers (415) 676-2883
October 20, 1998
NORTH AMERICAN SEMICONDUCTOR CAPITAL EQUIPMENT
SEPTEMBER BOOK-TO-BILL RATIO REACHES HISTORIC LOW
**Overall ratio remains depressed at 0.57, flat with August and sets
historic low
**Front end ratio slides further to 0.55; down from August's 0.59
(revised)
**Back end ratio ticks up to 0.60 from August's 0.53, still weak
** Just when it seemed that things couldn't get worse, they did. Not only was
the preliminary semiconductor capital equipment book-to-bill ratio for
North American based companies of 0.57 flat with August's revised number,
but it also represents the lowest level in the history of the series since
SEMI began tracking the data in 1991. In particular, the front end
bookings' precariously low level is consistent with our thesis that
shrinks are taking a steep toll on front end (wafer processing) capital
expenditures.
** For perspective, three month average front end orders of $316 million have
not seen these levels since the $302 million posted in March 1993 and,
moreover, they declined 24% sequentially from August's already weak
number. Three month average shipments also fell a marked 18% to $573
million. Notably, the three sharpest sequential declines in front end
bookings as well as shipments have occurred over the last three months,
suggesting that the equipment companies, in aggregate, continue to burn
backlog. The preliminary book-to-bill for the front end was 0.55 in
September, down from August's 0.59 (revised).
** The back end (test and assembly) fared moderately better than the front
end. Three month average bookings ticked up 4% to $161 million while
shipments declined 9% to $267 million, generating a preliminary ratio of
0.60, up from 0.53 (revised) in August. Although positive, the uptick is
still in the noise level, in our opinion, and we caution that the series
is likely to be more volatile at the currently low level of business
activity. Nevertheless, this is consistent with our thesis that, in this
cycle, we expect to see a significant divergence between trends in the
back end, which is units driven, versus those in the front end, which is
wafer driven.
** Specifically, we believe that the back end recovery is likely to precede
that of the front end by significantly more than the one to two quarters
that have typified recent cycles due chiefly to the unrelenting pace of
geometry shrinks that have enabled device makers to produce significantly
more die per single wafer with only a modest incremental investment in
front end process tools.
** While the dramatic increase in die per wafer has come as a blessing to
device customers, bookings in the wafer driven front end have clearly
languished. In contrast, the units driven back end equipment companies
benefit from the increased number of die. Thus, while shrinks depress
demand for front end tools, the resultant uptick in units (or die) per
wafer is a relative boon for back end companies, particularly those in the
test sector, and this may be starting to surface in the book-to-bill data. |
