September 22, 2004 – Worldwide semiconductor equipment sales have overshot orders for the first time in a year, and IC orders are falling back as well — but VLSI Research claims the market simply is taking a pause after a big meal earlier in the year, and not pushing back from the dinner table.

Worldwide bookings of ICs in August (a three-month average) were $15.25 billion, down 15% from July but up 24% from a year ago. (July’s final IC numbers also were revised slightly downward.) Billings were $14.78 billion, up 8.5% from July ($13.57 billion) and 27% from August 2003 ($11.55 billion). The IC B:B ratio was 1.00, compared with 1.14 in July (revised down from 1.25) and 1.08 a year ago.

Equipment bookings in August were $3.65 billion, a 20.8% drop from July but an increase of 73.7% from a year ago. Sales were $3.89 billion, down 6.2% sequentially but up 74.2% from August 2003. The three-month average for equipment sales rose 1.3% to $2.92 billion, a 6.3% decline from a year ago ($3.12 billion). July’s final figures were revised significantly downward, by as much as 20% for backend equipment.

The equipment book-to-bill ratio in August slipped below the parity level for the first time in 12 months to 0.94, down from 1.11 in July, and flat with 0.94 in August 2003. A B:B ratio of 0.94 means that $94 worth of new orders was received for every $100 of product billed for the month.

“Clearly, the industry slowed down in August, but we believe that this is a ‘correction’ period rather than the beginnings of a downturn,” stated VLSI. “The industry is just going through a digestion phase after buying too much equipment during the first half of 2004.”

Capacity utilization rates fell to their lowest levels since January, at 93.1% for frontend and 88.1%-90.1% for backend equipment. However, VLSI calls these levels “far healthier for the industry than the near-100% utilization marks we saw in the March-May time frame.” Geographically, every region showed decreased consumption except “Rest of World,” which nearly doubled to 14.2% of global consumption — vaulting past China, Europe, and Korea for fourth place overall, and only two percentage points behind North America.

VLSI’s predictions for September are mixed, depending upon which figures are called into focus. IC bookings are expected to be $13.40 billion (a one year low), with billings of $18.55 billion, for a B:B of 0.86 — the lowest since July 2001. Capacity utilization rates will be flat to slightly up for the frontend, down 4.1% for test, and slightly down for assembly.

For equipment, bookings and billings are expected to rebound to $4.42 billion and $4.94 billion, with three-month-average sales of $2.99 billion. The B:B ratio, however, is projected to further sink to 0.89, its lowest mark since November 2002.