No Longer a Contrarian View: The Semi Equipment Slowdown

Trade organization Semiconductor Equipment and Materials International [SEMI] released the April book-bill figures for semiconductor equipment orders:

The three-month average of worldwide bookings in March 2007 was $1.60 billion. The bookings figure is over 12 percent higher than the final March 2007 level of $1.42 billion and even with the $1.60 billion in orders posted in April 2006.The three-month average of worldwide billings in April 2007 was $1.60 billion. The billings figure is over 11 percent than the final March 2007 level of $1.44 billion and almost 11 percent higher than the April 2006 billings level of $1.44 billion.

“This year, several large integrated device manufacturers are believed to be investing a substantial part of their capex in the first quarter. This is one reason that the April book to bill report shows strong gains in both billings and bookings for new semiconductor equipment from North American based suppliers,” said Stanley T. Myers, president and CEO of SEMI. “Updated figures also show relative equilibrium of orders and shipments over the past few months, reflecting continued market stability for North American providers of chip making equipment.”

Although SEMI says year/year bookings were “even” with last year, my spreadsheet calculates “even” as down 0.6%. This is, of course, the beginning of a quite natural correction after the recent extended period of overordering, as depicted in the chart below.

What I have described over the last year as a “building imbalance,” SEMI calls “relative equilibrium” and Citi calls “bleeding to death.” A rose by any other name, I suppose. The good news (for me, anyway) is that with the downturn now widely accepted I can continue to be contrarian but take a more bullish stance on the sector - and being bullish is usually more fun.