March bounce can’t hide IC slowdown

April 23, 2007 – A typical boost in March from Japanese firms’ fiscal year-end created big gains in equipment demand and also helped ICs, though chip demand is still clearly softer than it was a year ago, according to the latest data from VLSI Research.

Worldwide equipment bookings in March totaled $6.34 billion, up nearly 45% from February but down 10.5% from March 2006. Billings fared even better, up nearly 57% sequentially, though just a marginal improvement (4.7%) from a year ago. Perhaps more revealing is the book-to-bill ratio of 0.94 (vs. 1.01 in Feb 07, and 1.08 in March ’06), representing the lowest B:B in nearly two years.

IC bookings (+9.5%, $17.34 billion) and billings (+25.3%, $18.85 billion) also were carried higher in March vs. the previous month, but both show declines from a year ago. IC sales were off 4.3% from March 2006, showing a typical recovery after end-of-year holiday seasonal sales, and IC orders were off nearly 8%, continuing a more pronounced slump. The IC B:B, though, pushed back above parity to 1.03 after three slow months.

The slowdown in IC sales is more clearly seen in quarterly trends, now that data for the first three months of 2007 are in. 1Q07 IC orders were down -14.4% sequentially and -8.3% year-on-year to $49.98 billion, the slowest quarter since 3Q05. IC sales shrunk nearly 10% Q-Q and were essentially flat Y-Y, their lowest since 2Q06.

Industry chip production rose slightly in March (~4%) to 483.1 millions of sq. in. (MSI), about 1% below where it was a year ago. Capacity kept inching up, by 1.1% sequentially to 579.2 MSI. Since a peak of 515.7 MSI in November, the industry has cut overall production by about 6%, but has added about 3.4% to capacity levels — pushing utilization rates down to 82%-83% in March. VLSI expects that to climb through the rest of the year, though, pushing past 90% in June to another peak of 95% in October.

By regional consumption, share gains were seen in Japan, Taiwan, China, and Rest-of-World, with reduced consumption in North America, Korea, and Europe.

For April, VLSI projects equipment orders will slip a bit (-1.6%) to $6.24 billion, with a typical seasonal plunge in sales (-22%) to $4.76 billion, pushing the B:B well above parity to 1.19. IC orders are seen falling another 6% to $16.35 billion, with sales dropping 19.5% to $15.18 billion, for a B:B of 1.09. The firm projects utilization rates to creep above 84%-85%.


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