Semi Equipment Orders Declining At a Faster Rate

According to Semiconductor Equipment and Materials International [SEMI]:

North American-based manufacturers of semiconductor equipment posted $1.65 billion in orders in June 2007 (three-month average basis) and a book-to-bill ratio of 0.94 according to the June 2007 Book-to-Bill Report published today by SEMI. A book-to-bill of 0.94 means that $94 worth of orders were received for every $100 of product billed for the month.

The figures for last month were also adjusted downward, indicating that it isn’t just the forecasts that should be taken with a grain of salt. I noted last month that the tiny upturn was probably a head-fake, and believe that the order growth trend will continue to decline for the highly unscientific reason that it always does.

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The good news, of course, is that ordering less equipment will allow demand for semiconductors to catch back up with supply.

Disclosure: author has a short position in SMH put options at time of publication.

Comments

[Dr. Duru]

I am trying to figure out how to sync this analysis up with the supposedly bullish comments made by KLAC and NVLS at SEMICON West last week?

[WilliamTrent]

I sync it up the same way I sync up positive comments from any other industry insiders - considering their angle. It is possible that KLAC and NVLS will buck the industry trend, or that for the first time in history there will be no down part of the cycle- just perpetual supply demand balance because for the first time the industry gets it right.

The thing is, management at these companies can see the orders coming in, but they typically can't anticipate when those orders are likely to be canceled or pushed out. Often when things look best is when they are about to turn.

[Dr. Duru]

Cool. Makes sense to me. Thanks for the quick response!