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 ...

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.

Time to be conservative with your 401K

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...