IC-equipment orders to fall 25-30% in Q4, says report
By Mark LaPedus
Semiconductor Business News
(10/02/02 09:48 p.m. EST)
MONTEREY -- Just how bad is the semiconductor equipment industry?
Vendors continue to search for the bottom, as the worldwide chip-equipment industry is projected to show a decline of 25-30% in the fourth quarter of 2002, as compared to the third period, according to a new report from U.S. Bancorp Piper Jaffray of Minneapolis.
The decline could be even worse, however. “At these estimated levels, we believe the industry will be close to a sustainable bottom for orders, assuming that semi equipment customers are willing to spend 15% of sales on capital,” the report said.
“Orders have fallen off the map,” lamented one chip-equipment vendor at this week's BACUS Symposium on Photomask Technology in Monetary. “I still have a backlog for one product line, but even that's shrinking.”
“The de-acceleration in the market has accelerated,” added Mary Puma, president and CEO of Axcelis Technologies Inc., in a recent interview with SBN. Beverly, Mass.-based Axcelis is a supplier of ion implanters, rapid thermal processing equipment and other tools.
While most agree that current business conditions are terrible, others believe there is no visibility in the market right now, thereby making it difficult to cast a valid predication for the fourth quarter of 2002 and beyond.
“It's too foggy out there,” said Thomas Blake, vice president of marketing for DuPont Photomasks Inc., a Round Rock, Tex.-based supplier of photomasks.
“We're in a demand driven downturn verses a capacity driven downturn,” Blake said. A possible uptick in Q4 and beyond “will hinge on consumer spending,” he told SBN at the BACUS event.
The prospects look dim for chip-equipment and material vendors, however. “In addition, we believe pushouts/cancellations have emerged recently, which will also drive some misses in top and bottom line results for the September quarter,” according to the report from U.S. Bancorp.
“At the semiconductor device level, a deteriorating demand climate has evolved in the last few months,” according to the report. “Consumer, computer, and communications end markets all appeared to have weakened, with the exception of wireless, which experienced some modest gains,” it said.
“Both back to school and holiday seasonal builds have been essentially absent this year, reflecting the deteriorating consumer demand curve,” the report said. “Additionally, corporate IT departments have kept the lid on spending, further pressuring semiconductor demand,” it added.
And what about 2003? “While we have no evidence to support this yet, we continue to base our 2003 estimates on a modest recovery in orders beginning in the first half of the year followed by modest sequential growth,” according to the report.
“In addition, we believe pushouts/cancellations have emerged recently, which will also drive some misses in top and bottom line results for the September quarter,” according to the report from U.S. Bancorp.
“At the semiconductor device level, a deteriorating demand climate has evolved in the last few months,” according to the report. “Consumer, computer, and communications end markets all appeared to have weakened, with the exception of wireless, which experienced some modest gains,” it said.
“Both back to school and holiday seasonal builds have been essentially absent this year, reflecting the deteriorating consumer demand curve,” the report said. “Additionally, corporate IT departments have kept the lid on spending, further pressuring semiconductor demand,” it added.
.nths. Consumer, computer, and communications end markets all appeared to have weakened, with the exception of wireless, which experienced some modest gains. Both back to school and holiday seasonal builds have been essentially absent this year, reflecting the deteriorating consumer demand curve. Additionally, corporate IT departments have kept the lid on spending, further pressuring semiconductor demand. * We expect semi equipment orders overall to decline 25%-30% sequentially from June levels. The decline may be more pronounced for front-end equipment, largely due to the faster run-up in orders earlier this year due to aggressive ordering from foundries. Cancellations are also expected to be meaningful as foundries and other customers over-ordered equipment earlier this year due to growth expectations that were overly optimistic. In our opinion, September order levels will not represent a bottom for this most recent mini-cycle. * We continue to expect that December orders will decline another 10%-20% from September order levels. At these estimated levels, we believe the industry will be close to a sustainable bottom for orders, assuming that semi equipment customers are willing to spend 15% of sales on capital. While we have no evidence to support this yet, we continue to base our 2003 estimates on a modest recovery in orders beginning in the first half of the year followed by modest sequential growth. * There are very few companies under our research coverage that will be able to significantly outperform the broader semi equipment group relative to orders. One worth mentioning is Veeco Instruments (VECO - Outperform - #>). While we expect that Veeco will miss its order guidance due to a weakening semiconductor/data storage environment (50%+ of sales), a substantial portion of its business is driven by research budgets (25% of sales), which are supported by government and university resources. We believe that Veeco's atomic force microscope business (AFM) is actually holding up quite well relative to order activity, particularly for nanoscience research applications. “We expect equipment orders overall to decline 25-30% sequentially [in the fourth quarter] from
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