Tech Industry

Key chip-sector indicator rises

The semiconductor equipment industry's book-to-bill ratio rose in July, indicating that the sagging semiconductor market may have begun a turnaround.

The semiconductor equipment industry's book-to-bill ratio rose in July, a possible indication that the sagging semiconductor market has begun a turnaround.

The book-to-bill ratio, measured by Semiconductor Equipment and Materials International (SEMI), rose 5 percent to 0.67 in July, the organization announced Thursday.

The ratio measures the amount of new semiconductor manufacturing equipment ordered versus the amount of equipment shipped in a given month. This means that, in July, $67 in new orders were placed for every $100 of equipment that was shipped.

The ratio, which uses a three-month average of worldwide semiconductor equipment orders versus a three-month average of worldwide semiconductor equipment shipments, is one indicator of the health of the semiconductor industry.

Generally, if equipment orders rise against the amount of equipment shipped in a given month, it reflects chipmakers increasing production capacity to meet growing demand for their products.

However, if orders placed fall versus the amount of equipment shipped, it shows that chipmakers are slowing plans to increase manufacturing capacity due to falling demand.

This has been the case throughout much of late 2000 and early 2001.

While ratios of 1 or more are seen as most favorable, July's 0.67 figure represents a significant increase over June's book-to-bill ratio of 0.56, according to SEMI. May's book-to-bill ratio was 0.49. The industry bottomed out last April at 0.44, which SEMI said was the lowest book-to-bill ratio seen in 10 years.

July's jump could indicate the semiconductor industry is beginning to turn around. However, with last week's terrorist attacks against the United States rattling an already fragile economy, SEMI representatives said it is difficult to predict the future.

July equipment shipments, for example, were 12 percent lower than June shipments. And July order bookings were 74 percent below those posted in July 2000, while July shipments were 52 percent lower than in July 2000.

SEMI researchers suggested the industry may bump along the bottom for a bit.

"The (July) bookings figures provide some indication that capital equipment orders may have reached bottom, though capital equipment manufacturers remain cautious given the existing uncertainties for the world's economies and for the semiconductor industry looking ahead," Elizabeth Schumann, director of industry research and statistics for SEMI, said in a statement released with the report.