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To: tech101 who wrote (38)	12/17/2003 6:05:48 PM
From: tech101	Respond to of 58

The Backend Is Driving the Show **************** VLSI boosts IC, fab-tool forecasts, but is market overheating? By Mark LaPedus Silicon Strategies 12/16/2003, 8:55 PM ET SANTA CLARA, Calif.--The semiconductor recovery continues to pick up steam, although there are some signs that the market is overheating, according to industry analysts at VLSI Research Inc. here today (December 16, 2003). At the same time, VLSI Research raised its chip and semiconductor-equipment forecasts for 2004--by a wide margin. In fact, happy days could be here again for semiconductor equipment vendors, as that market is expected to increase a staggering 40.1 percent in 2004 over 2003, according to VLSI Research. The firm also projected that the semiconductor market would grow by 32 percent in 2004 over 2003. In 2003, the semiconductor equipment and IC markets are projected to grow 4.3 percent and 18 percent, respectively, according to the Santa Clara-based research firm. The new forecasts are different than its previous predications. Last month, the firm projected that the fab-tool and IC businesses would grow 4.2 percent and 13.9 percent, respectively, in 2003 over 2002. At that time, the firm also projected that the fab-tool and IC sectors would each grow 21.3 percent. "2004 is expected to be a hot year," said G. Dan Hutcheson, president of VLSI Research, during a presentation at its headquarters in Santa Clara. "Next year looks like 2000. The bad news is that next year looks like 2000," Hutcheson said in an interview with Silicon Strategies. The semiconductor analyst was referring to the boom cycle in 2000, where demand and fab-capacity shortages dominated the semiconductor landscape. The reminiscent signs beget a sense of caution right now--if not concern--especially given the extending lead times and shortages of select components and process technologies in the market heading into 2004. "There's a clear sign that the IC industry is overheating," he said. Even fab-tool vendors, which have been hit hard by the downturn, are seeing a sudden demand for their products, said analyst Risto Puhakka of VLSI Research. "Everything is booked out," Pukahkka said. Demand for fab tools is currently across the board, with the backend portion of the business leading the way. "The backend has led us into this cycle," Hutcheson said. "The backend still leads."** This is not to say the front-end chip-equipment markets are taking a backseat. "193-nm tools are booming," he said. "ALD is also hot."

To: tech101 who wrote (38)	12/17/2003 11:29:41 PM
From: tech101	Read Replies (1) \| Respond to of 58

Again, BackEnd Leads the Way (35.3% Of Equipment Order Goes to Assembly and Testing) ***************************** 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 semireporter.com