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SEMI book-to-bill flat as market stalls

Posted by inet - 2005-10-19

SAN JOSE, Calif. — Als the fab-tool industry appears to have stalled, North American-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 1.02 in September, down from 1.05 in August, according to the Semiconductor Equipment and Materials International (SEMI) trade group.

A book-to-bill of 1.02 means that $102 worth of orders were received for every $100 of product billed for the month. The SEMI book-to-bill is a ratio of three-month moving averages of worldwide bookings and billings for North American-based semiconductor equipment manufacturers.

In August, the book-to-bill ratio for North American-based suppliers of semiconductor equipment went above parity for the first time in recent memory, but the industry remains in a slump. North American-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 1.05 in August, up from 0.93 in July, according to SEMI (San Jose).

"The book-to-bill ratio is above parity for the second month sequentially, with bookings and billings remaining essentially unchanged from the prior three-month average period," said Stanley T. Myers, president and CEO of SEMI, in a statement. "Chipmakers are currently maintaining conservative spending patterns although we see indications of improving capacity utilization levels."

The three-month average of worldwide bookings was $1.09 billion in September, down 1 percent below the revised August 2005 level of $1.10 billion and 19 percent below the $1.35 billion in orders posted in September 2004.

The three-month average of worldwide billings in September 2005 was $1.07 billion. The billings figure is one percent above the revised August 2005 level of $1.06 billion and 26 percent below the September 2004 billings level of $1.44 billion.

Chip-equipment makers have reported mixed results over the last week. Lithography equipment company ASML Holding NV last week claimed it is leading in the race to offer scanners for 45-nm chip manufacturing as it produced a steady, if unspectacular, set of financial results for the third quarter of 2005.

During a conference call last week, ASML said it sees a flat Q4. The company also confused the market by projecting growth in 2006 despite having a flattish sales forecast for next year.

Eric Meurice, president and chief executive of ASML, indicated that the equipment market in 2006 could resemble that of 2005. “The first half of 2006 looks strong,” he said, noting that the market looks uncertain — if not slow — in the second of 2006.

On Monday (Oct. 18), Novellus Systems Corp. missed its forecast for the third quarter, causing its stock to drop over 12 percent by Tuesday (Oct. 19).

“Our analysis shows that Novellus' overall market share is stronger with memory customers than it is with logic customers,” said Bill Lu, an analyst with Piper Jaffray. “In a nutshell, the company does better with HDP-CVD (memory) than with PECVD (logic), and while electroplating (logic) market share helps to offset some of the difference, we don't believe the electroplating market is big enough.”

Novellus’ Q4 forecast calls for orders to be flat-to-up 10 percent ($287-to-$316 million), shipments and revenues down 5-to-10 percent and EPS of $0.15-to-$0.17. Wall Street expected an EPS of $0.24 on sales of $331 million for Q4, said Avinash Kant, who watches the fab-tool industry for investment banking firm Adams Harkness Inc., in a report.

Even the “small caps” are taking a hit. “We are lowering our recommendation on Zygo Corporation to a ‘Hold’ from a ‘Buy,’ ” said Darice Liu, an analyst with Maxim Group LLC. “While it is our belief that business remains strong and that the upcoming quarter is intact, we believe that investors should wait for a more favorable entry point.”

Metrology vendor Zygo will report its results on Oct. 27. “The company continues to outperform the semicap industry and has been focused on expanding its product portfolio and gaining market share,” Liu said.

“In the past two years, the company has added Nikon (for its 193-nm platform -- dry and wet) and Intralase to its revenue generating customer list,” he said. “It has also expanded into the semiconductor OEM world with its back end metrology tool and is currently making strides with a large North American IDM.”

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