Chip demand slows in 3Q, but overall growth steady

October 20, 2004 – VLSI’s latest monthly data shows a mixed bag for chip and equipment demand: several multiyear highs and lows, but in the end, growth that’s right where it’s supposed to be.

September’s IC orders (a three-month average) were a year-low $13.49 billion, down 6.1% from August and 0.9% from September 2003. Billings, however, jumped 26% sequentially and 24% year-on-year to $18.40 billion, a level not seen since September 2000. The IC B:B ratio slid further below parity to its lowest level since July 2001 at 0.87, down from 0.94 in August and 1.11 a year ago. (A book-to-bill ratio of 0.87 means that $87 worth of new orders was received for every $100 of product billed for the month.)

Worldwide equipment sales also showed strength in September, up 21.1% sequentially and 37.3% year-on-year to $4.85 billion, while equipment bookings fell 5.8% in September to $3.71 billion, a slight 1.8% gain from a year ago. The B:B was 0.81, its lowest level since July 2002, compared with 0.93 in August and 1.03 in September 2003.

Adding up the past three months worth of data from VLSI provides a preliminary snapshot of the industry’s 3Q performance. IC bookings in 3Q add up to $42.78 billion, a 12% decline from 2Q04 with steady declines from July through September, but an 11% increase from 3Q03. Billings were $46.57 billion, up 4% quarter-on-quarter and 27% year-on-year. Equipment orders of $12.71 billion represent a 12% decline from 2Q04 (the final month of the quarter didn’t rebound as strongly as before), but a 52% increase from 3Q03, while equipment sales rose 4% sequentially and 61% year-on-year to $13.39 billion.

Looking ahead to October, VLSI projects equipment bookings of $3.40 billion, billings of $4.07 billion, and a B:B ratio roughly flat at 0.84. IC orders and sales for October are pegged at $14.01 billion and $15.53 billion, for an unchanged B:B of 0.87. VLSI projects equipment sales will bounce in November to $4.24 billion and $4.79 billion; chip orders will slide to $16.01 billion and rebound to $18.07 billion, which “puts us at 30% IC sales growth for 2004,” noted Jebens.


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