VLSI: “Brisk” tool demand in 2006 continues

October 24, 2006 – There’s still a lot of demand for semiconductor manufacturing equipment, with tool orders and sales still sporting hefty 30%+ growth in September and on track for 20%+ growth overall in 2006, according to new data from VLSI Research Inc.

Worldwide bookings of semiconductor manufacturing equipment totaled $6.81 billion in September, a 33.7% increase from August and 43.8% from Sept. 2005. Billings (including display equipment) totaled $6.39 billion, up 30.8% sequentially and 35.6% year-on-year. The September book-to-bill ratio (B:B) was 1.07, meaning that $107 worth of orders were received for every $100 of product billed for the month.

Tallying up results from the past three months, 3Q06 tool orders actually slid 4.0% ($18.61 billion) vs. 2Q06 though remain 36.9% higher from 3Q05, while sales increased slightly sequentially (6.1%) and healthily year-on-year (30.2%).

VLSI noted that for the first nine months of 2006, tool orders are 48% higher than the same period in 2005 (to $55.7 billion), more than twice the rate of billings growth (22% to $46.9 billion). Seeing no “show-stoppers” on the horizon, VLSI points to a healthy macroeconomic picture, projected 8%-9% growth for the semiconductor industry, and a supply/demand balance in the semiconductor industry. “Barring any unforeseen factor that could mar the fourth quarter, the equipment industry is set to post revenue growth of over 20% in 2006,” the firm stated.

The industry taked on an additional 3% to output in the month of September to 521.6 millions of sq. inches (MSI), ramping up for holiday demand, while adding just 1.1% capacity to 543.3 MSI. Utilization rates for frontend, test, and assembly crept up to 95%-96%, with “hot” backend growth driven by 20% device production growth this year, VLSI noted, though utilization rates were below Sept. 2005’s levels of 96%-99%.

For ICs, bookings were practically flat sequentially in September (+0.9%, to $18.55 billion), while billings rose 24.4% to $21.40 billion, for a B:B of 1.04. Compared with a year ago, chip orders were up 9.9%, while chip sales were up 8.1%. Adding up the previous three months, 3Q06 chip orders rose 2.9% sequentially and 12.7% year-on-year to $55.9 billion. Chip sales were up 8.2% from the prior month and 8.0% from the same period a year ago, to $53.7 billion.

Projecting into October, VLSI expects a decline in equipment demand — orders will dip about 9.4% to $6.14 billion, with an 18% drop in tool sales to $5.21 billion — but still with a robust B:B of 1.18. For ICs, VLSI is predicting the first-ever month of $20 billion in chip orders, representing 9.4% sequential growth, while chip sales slip 19% to $17.33 billion, for a B:B of 1.09. Utilization rates are expected to inch up to the 96%-97% range.


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