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

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here:   https://tradingstockalerts.com/software/downloadpatch Contact us if you have questions or identify any new issues.

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. 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 ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what...

Pick 'o the Month - a two'fer

Usually I focus on a single smaller, more obscure stock. In this case, I would like to submit two stocks, a large-cap, Cisco Systems ( CSCO ), and a small-cap, Big Band Networks ( BBND ). These two stocks embody a resurgence in the network infrastructure space. That theme is what ties these two picks together. With the rising tide of video, music and movies downloaded over the Internet and cable companies offering bundled TV, phone and Internet, we have finally absorbed the glut of network capacity created during the Internet bubble. This deluge of multimedia is changing service providers’ business models, and the ways they manage and develop networks. The focus now is on how to move, manage and monetize content that is richer and more complex than ever before. In response, as telecommunications companies ramp up newer, faster networks to handle all this traffic, Cisco Systems is a prime beneficiary. As the dominant player in network infrastructure, it has already seen profits begin to...