December 29, 2003 – Worldwide manufacturers of semiconductor equipment posted their third consecutive month of parity in November, according to VLSI, leading the firm to significantly boost its projections for the coming year.

Equipment manufacturers posted bookings of $3.01 billion and billings of $2.71 billion, up from October’s revised totals of $2.72 billion and $2.63 billion. Of the total billings, $1.41 billion were for wafer-processing equipment, $752 million for test and related equipment, $206 million for assembly, and $348 million for service and spares. Each category was up slightly from the prior month, while all but test and related equipment were down 10%-20% from a year ago.

November’s book-to-bill ratio was 1.11, up from 1.03 in both October and September, and a marked improvement from 0.87 in November 2002. A book-to-bill of 1.11 means that $111 worth of new orders were received for every $111 of product billed for the month.

For ICs, the three-month average of worldwide bookings in November was $16.47 billion with billings of $13.91 billion, up from $14.56 billion and $11.5 billion in October. The three-month IC book-to-bill ratio was 1.18, surpassing the previous yearly high of 1.15 in October, and its highest level since April 2002.

In general, the increases can be attributed to a spike in demand generated by a strengthening economy and a continued clamor for consumer electronics, according to VLSI. Additionally, “years of under-investment have left the industry with little spare capacity” — overall frontend capacity utilization in November climbed above 98% at all levels, higher than the 96.4% reported in October and surpassing the peak achieved in 2000. This is proving to be a boon to equipment order activity; chipmakers are reportedly agreeing to delivery times more than a year out, and are even agreeing to pay for materials — “something that has not happened in well over a decade,” said VLSI.

Since this rush of activity is occurring at the end of the year, its impact will not be felt fully until 2004. VLSI projects slight month-to-month growth in December: overall equipment bookings of $3.18 billion and billings of $2.75 billion, with a B:B of 1.16 and utilization rates shrinking slightly to 97.1%. For all of 2003, VLSI has slightly tweaked its forecast for the equipment industry, from $31.0 billion to $31.1 billion, a 4.3% increase from 2002. But for 2004, VLSI has raised its projections substantially from $37.7 billion to $43.5 billion, with an eye-popping annual growth of 40.1%.

VLSI has also boosted its projections for ICs. Expected 2003 sales of $142.7 billion represent a 4% increase from earlier predictions, and an 18.4% increase from a year ago. For 2004, VLSI expects revenue growth of 32.8% to $189.6 billion, up from earlier projections of $167.7 billion.