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Mixed signals seen in IC-equipment market

Posted: 21 Jul 2005 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor equipment?

There are still plenty of mixed signals - and little visibility - in the chip-equipment market despite a sudden jump in Japan's fab-tool book-to-bill ratio.

Japanese-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 1.09 in June, up from 0.91 in May, according to new figures from the Semiconductor Equipment Association of Japan (SEAJ).

The three-month average of worldwide bookings in June were 106,768 million yen ($941.2 million), down 9 percent from the revised May 2005 level and a decline of 32.3 percent from the orders posted in June 2004.

The three-month average of worldwide billings in June were 97,898 million yen ($862.9 million), down 23.8 percent from the revised May 2005 level and a decline of 26.2 percent from the June 2004 billings level.

Still, this is the first time that Japan's fab-tool book-to-bill ratio has exceeded parity in 2005. In December, Japan's book-to-bill was above parity, but the ratio has been on a downward cycle since then.

"Japan's capex is down this year," said Scott Foster, senior analyst with HSBC Securities Japan Ltd. (Tokyo).

Japanese chip-equipment bellwethers are seeing mixed results. While Advantest Corp.'s orders are "flat," Tokyo Electron Ltd. (TEL) has a huge backlog, Foster said.

The overall chip-equipment market is expected to fall 5-to-6 percent in 2005 over 2004, said Louis Steen, vice president of marketing for TEL's U.S. subsidiary in Austin, Texas. "Next year, it is expected to be flat," Steen said.

"The expectation of a recovery in the equipment industry seems to be pushed out into late '05 and early '06 now, from the [second half of 2005] three months ago," added Avinash Kant, who watches the fab-tool industry for investment banking firm Adams Harkness Inc. (Boston).

Among the problems are that memory makers and silicon foundries are not buying vast quantities of gear. But on Tuesday, Intel Corp. raised its capital spending for the full year to $5.9 billion from $5.4 billion. That's $100 million more than previously expected.

That should benefit several suppliers that sell into Intel, including Advantest, Applied Materials, ASML, Cohu, Hitachi, Nikon, Novellus, among others, analyst said.

Cloudy outlook

But like Japan, the picture is cloudy for U.S. suppliers. For example, on Tuesday, Novellus Systems Inc. (San Jose) reported June quarter orders of $309 million, up 2.5 percent quarter-over-quarter "and at the high end of its order guidance between $302-to-$310 million," said American Technology Research analyst Bill Ong.

"While revenue of $329.6 million was in-line with consensus, a substantial improvement in the gross margin from 45.3 percent to 47.9 percent sequentially resulted in EPS upside of $0.24 versus our estimate and consensus of $0.21," Ong said.

Unable to gain traction in CMP, dry-strip and PVD, Novellus expects orders to be sequentially flat-to-down 10 percent sequentially in the September quarter, according to Ong. Revenue is expected to be down 1-to-4 percent sequentially, he said.

"Chip customers remain cautious in outlook, while also prepared to place orders quickly should capacity constraints prompt increased purchasing activity," Ong said. "Foundry providers remain weak in order placement."

Overall, North American-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 0.93 in June, up from 0.84 in May, according to the Semiconductor Equipment and Materials International (SEMI) trade group on Tuesday (July 19) (see July 17 story).

The front-end book-to-bill came in at 0.87 in June, up from 0.79 in May, according to Adams Harkness. However, the back-end book-to-bill hit 1.26 in June, up from 1.10 in May, according to the firm.

The worldwide chip-equipment book-to-bill ratio hit 0.91 in June, up from 0.83 in May, according to VLSI Research Inc. on Tuesday (July 19) (see July 19 story).

- Mark LaPedus

EE Times

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