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Report shows chip-equipment demand slowing

Semiconductor manufacturing equipment orders fell in December, according to a trade association--yet another indication of grim months ahead for chipmakers.

Semiconductor manufacturing equipment orders fell in December, according to a trade association--yet another indication of grim months ahead for chipmakers.

Semiconductor Equipment Manufacturers International (SEMI), based in San Jose, Calif., reported Wednesday that December was the second month in a row in which orders had fallen for the North American industry.

The average number of orders compared with sales--known as the book-to-bill ratio--fell in December to 1.03 orders for every one sale, versus 1.12 orders for November and 1.16 in October. A ratio above 1 means demand is outpacing current capacity.

The book-to-bill ratio is the average of three months of equipment orders booked in North America versus the average equipment shipments for the same three months.

SEMI said the three-month average of orders booked worldwide in December totaled $2.5 billion, 10 percent less than November's average.

The December 2000 total is still 29 percent higher than December 1999's $1.9 billion. This underscores the fact that the semiconductor equipment manufacturing industry saw its largest growth year in history, according to SEMI.

But Stanley Myers, CEO of SEMI, said to expect a tough first half of 2001 because of a decline in the microprocessor market.

"As this capacity is absorbed, a pause in new investment is expected," he said in a statement. "The widely anticipated market softening is confirmed in (SEMI's December) report, which shows a decline in equipment orders and shipment rates for a second consecutive month.

"The general consensus of analysts at our recent industry forecasting symposium suggests that the slowing trend may persist through the first half of 2001."

Meanwhile, SEMI reported that its three-month average of worldwide equipment shipments in December was $2.4 billion, or 2.4 percent lower than November's average.

The numbers reflect a slowdown in the semiconductor industry, as detailed by companies such as Intel and Advanced Micro Devices in their earnings statements last week.

However, the switch to new manufacturing techniques, including the transition from 200-millimeter to 300-millimeter wafers, a move designed to increase production and lower costs, is expected to continue to spur equipment orders over the coming year.