August 19, 2004 – The unusually strong post-holiday performance earlier this year is being felt all the way through midsummer, and the semiconductor equipment industry may end up holding off a downturn for at least another year, according to the latest data from VLSI Research.

Worldwide bookings of semiconductor manufacturing equipment were $5.67 billion in July, an increase of 2.5% from June ($5.53 billion) and 115.2% higher than July 2003 ($2.64 billion). Sales of chipmaking tools in July were $4.41 billion, down 10.6% from June ($4.93 billion) but up 70.6% from a year ago ($2.58 billion). Of total billings, $2.44 billion were for wafer-processing equipment, $1.02 billion for test and related equipment, $332.6 million for assembly, and $609.7 million for service and spares. The three-month average for equipment sales stands at $2.90 billion, a slight increase from June ($2.86 billion) and down nearly 10% from a year ago ($3.20 billion).

The equipment book-to-bill ratio in July rallied to 1.29, up from 1.12 in the prior month and 1.15 in July 2003. A B:B ratio of 1.29 means that $129 worth of new orders was received for every $100 of product billed for the month.

For ICs, worldwide billings in July (a three-month average) rose to $19.00 billion, up from $16.95 billion in June and $12.54 billion a year ago. Billings were $13.98 billion, down 20% from June ($17.48 billion) but up 36% from July 2003 ($10.28 billion). The IC B:B ratio was 1.25, compared with 1.14 in June and 1.15 a year ago.

Utilization levels, which have been hovering near 99% since early spring, fell back to 93%-94% in July across frontend, test, and assembly. Geographically, North America, Japan, and Taiwan all increased their consumption from June (at the expense of China, Europe, and “rest of world”), and together accounted for nearly two-thirds of all global chip consumption.

The latest round of data from VLSI contained a large amount of revised data points, all stemming from market anomalies in 1Q04 that exceeded estimates, according to VLSI Research senior economist Aida Jebens. The result has been a wave of revisions that has swept all the way through 2Q, and second-quarter data likely will be revised again next month based on the latest earnings calls, Jebens noted.

For August, VLSI projects equipment bookings of $4.34 billion and billings of $4.17 billion, for a B:B of 1.04. IC bookings are expected to slide 12% to $16.57 billion, with sales increasing 8% to $15.10 billion, for a B:B of 1.07. Jebens predicted 3Q04 will be slightly lower than typical — “we’ve seen a slowdown in order activity in 2Q, and probably [will again] in 3Q, if the industry can prolong the upturn by slowing order activity,” she said. A pickup in 4Q will carry through for most of next year — meaning 2005 will end up being positive over 2004, pushing any downturn out to 2006, she added.