November 21, 2007 – Backend equipment orders are looking flat to down in 4Q07, and frontend equipment bookings are looking more likely to be unstable for the next half-year, according to a recent analyst report.
FBR Research analyst Mehdi Hosseini says such a pushout in equipment bookings, from 1H08 to 2H08, is another shoe to drop, driven by two factors: expected continued weak DRAM pricing, leading to red ink at DRAM makers; and concerns about foundry wafer start demand (with foundries themselves uncertain about end market demand).
“Although inventories at Samsung and Hynix remain in a 2- to 3-week range, others, including module makers, are believed to be carrying much higher than 3 weeks of DRAM inventories, with some in the range of 4-5 weeks,” Hosseini writes in a research note. He also notes that industry checks now suggest bit supplies will surge as much as 35%-40%, making overall bit supply grow by >90% in CY07, vs. estimated demand bit growth of 75%-80%. Hosseini also noted “disappointing” October monthly sales for Taiwan-based distributors.
With DRAM fundamentals still in decline, added to likely declining utilization risks due to later bottoming out of chip unit growth rates, Hosseini says he expects frontend bookings “to continue to decline until 3Q08,” and backend bookings will be flat-to-down from 3Q07 levels for a full year, “until 3Q08, the earliest it could show a pickup.”