Brian/all, Credit Suisse analysis of BTB numbers dated 12/18/98. Jeff
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Book/Bill Continues to Improve in NovemberSummary
November's 0.84 book/bill, while still below parity, was up
from 0.75 in October on 29% sequential improvement in orders.
Advancing technology requirements to ramp production of 0.25-
micron-and-below ICs are loosening purse strings. Front-end orders
rose 34%, and improving IC industry prospects for 1999 point to
further strengthening.
Test & assembly orders rose 13%, and the back-end book/bill
rose to 0.71. With little slack in test capacity, rising IC unit
volume may improve orders sharply early in 1999.
Book/Bill: SEMI, the global semi-equipment trade group, reported
U.S. semi-equipment manufacturers 3-month-average orders and
shipments to IC manufacturers worldwide:
Overall: November's orders increased 29% to $805 million, led by
the front-end but also reflecting the first rise in test demand
since November 1997. In line with expectations -- still well below
parity -- November's 0.84 book/bill was up significantly from 0.75
in October. Growth in front-end deliveries drove shipments up 15%
to $963 million, as equipment suppliers continued to work offbacklogs.
Front-End-(AMAT, ASMLF, BRKS, IPEC, KLAC, LRCX, NVLS, SFAM, SMTL,
SVGI, VAR, WJ) The front-end book/bill continued to improve,
rising to 0.87 in November from 0.81 in October, and its trough
0.56 in September. This summer's order spiral reversed in October,
and front-end orders continue to increase from a very low base,
climbing 34% sequentially to $645 million in November. The top MP
producer is moving forward with 0.18-micron production and,
prompted by higher PC activity, the other leading MP suppliers and
the two top memory makers are also increasing investments. Thus,
front-end shipments rose 24% sequentially to $738 million.
Back-End-((CMOS, EGLS, LTXX, TER) The test/assembly book/bill
increased to 0.71 in November, from 0.59 in October. Orders rose
13% from a trough $142 million in October, at the same time
shipments were cut 7%. Test capacity utilization rates currently
exceed 80%, the level which typically justifies capacity additions.
However, anticipating seasonal weakness in Q1, many chip makers and
assembly & test houses have deferred test buys. Prospects for flat-
to-up IC demand near-term could pull forward test capacity buysfrom Q2 into Q1.
Stage Set for Recovery in 1999 -- Driven by the shift to finer
geometries, technology-driven demand for equipment including DUV
lithography, HDP CVD, and CMP, copper electro-planting, and oxide
etch, should drive continued order growth. Solid Q4 PC sell-
through would suggest that IC production may not slip in Q1. Thus,
IC makers may pull forward spending to address seasonal strength inQ2.
Tight utilization rates set the stage for an upturn in ATE with any
pickup in IC units. Longer term, test demand will benefit from
increases in unit output and IC clock speeds. Where testing is key
to chipmakers generating revenue, demand is very sensitive to anupturn.
With low-teens growth in IC revenues and little growth in capital
spending expected in 1999, utilization rates are likely to rise to
the high 70%s, close to 80% which requires additional capacity.
The impact from lower capital investments in 1997 and 1998 will
materially tighten capacity as chip sales rebound, setting the
stage for a vigorous investment cycle. Year-over-year order
comparisons should ease through 1999, with positive comparisons
likely beginning in Q2. Capacity investment may resume by H2, and
bolstered by continuing technology investments, could generate 50%-
plus year-over-year improvement in orders in Q3 and Q4, against
weak 1998 comparisons.>> |
