VLSI: April slides in safely, utilization numbers optimistic

May 21, 2007 – The semiconductor industry coasted into April right about where it was expected to be, though utilization rates showed promising signs of returning quicker than expected to the 90% range generally seen as triggering more capacity investments, according to the latest monthly data from VLSI Research Inc.

Equipment bookings in April were a little softer than expected in April at $6.15 billion, a 3.5% decline from March and 18.8% below levels from April 2006, according to the analyst firm. Billings were right about on target at $4.74 billion, a 22.4% decline from March and 2.5% below a year ago. (March levels were helped by the Japanese fiscal year-end.) The book-to bill ratio bounced back to 1.18 — meaning $118 worth of orders were received for every $100 of product billed for the month — reversing a sluggish 0.94 in March but still below last April’s strong 1.38 showing.

IC orders, meanwhile, were slightly better than anticipated ($16.65 billion, -8.4% M-M, -7.8% Y-Y), while IC sales were about 3.7% lower than VLSI had projected ($14.62 billion, -27.7% M-M, +3.3% Y-Y).

Utilization rates ticked up slightly for frontend (just under 85%), but were up a little more than anticipated for backend test and assembly (~86%), as levels continue to claw out of the 80% trough they hit in February.

Both chip production and capacity growth slowed in April, though IC output still managed to outpace capacity increases. Production rose 2.1% in April to 492.2 MSI, about 1% higher than in April 2006. Capacity growth, meanwhile, slowed to less than 1% to 583.1 MSI, though still 11.8% higher than a year ago.

Consumption picked up noticeably in North America in April, back above 21% after falling to nearly 14% in March. Europe also showed decent consumption increases, as did China. Falling off during the month were Japan, Korea, Taiwan, and rest-of-world.

For May, VLSI is projecting equipment orders will tumble nearly 20% to $4.95 billion, with sales dropping almost 11% to $4.23 billion, for a B:B of 1.06. IC bookings and billings, though, should rise at a good clip (bookings +6.6% to $17.76 billion; billings +12.7% to $16.47 billion), for a B:B of 1.04.

Thanks to the slightly more robust April utilization rates, VLSI’s schedule has accelerated a bit — May utilization rates could push 90%, with June to ~92% as we head into the summer period. And the firm projects another month of the industry adding capacity faster than increased output, with production rising 6.1% to 524.2 MSI, and capacity +4.8% to 585.9 MSI.


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