Skip to main content

Semiconductor Equipment Manufacturers - what does this month's Book-to-Bill signify?

The SEMI trade group released the February 2009 Book-to-Bill Report for North America-based manufacturers of semiconductor equipment. Rather than list the numbers in detail, we'll just present the charts below (values in millions of dollars, February numbers are preliminary).

Before digging into the numbers, I expected to write another post on how the semiconductor equipment sector was crashing even further. But maybe we can say there's light at the end of the tunnel.

This first chart shows that billings in dollar terms are decreasing and, of course, that is bad. Bookings, however, now seem to be decreasing at a much slower rate; they are down only 5% month-over-month. This might not sound that great but from November to December 2008 bookings dropped 26% and from December 2008 to January 2009, they dropped over 52% so this is very welcome reduction in the rate of decline.

Bookings comprise the forward-looking aspect for the industry, similar to new orders. The indication now, after the huge drops seen in previous months, is that in the near term maybe things won't be getting too much worse.

SEMI Bookings and Billings, 03-20-2009
This is not to make light of the fact that both bookings and billings are at historic low levels, the worst since SEMI started keeping records. Furthermore, the numbers for January have been revised downward and February 2009 is 78% worse than the previous year. Still, the downward momentum has begun to slow and that is good news for the industry.

Further suggesting that a bottom might be in sight is the Book-to-Bill ratio. The following chart shows that Book-to-Bill stopped falling in February and actually moved up though only very slightly. After the devastation registered thus far in this sector, even a slight positive becomes a welcome sign.

SEMI - Book-To-Bill Ratio, 03-20-2009
Conclusion --

There's no great rush to go out and buy the big names in this sector such as Applied Materials (AMAT), KLA-Tencor (KLAC) or Lam Research (LRCX). Capacity utilization is low, margins are compressed, sales are at multi-year lows.

Nevertheless, February's numbers might show that the sector is engaged in a "bottoming process". Could things get worse? Possibly. Do two months make a trend? Possibly not. But this is the best news the sector has had in months. Given the current levels of bookings and billings, that is somewhat of a sad statement. But for tech investors, this may represent a whiff of hope.

Disclosure: no positions in any stocks mentioned

Comments

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional