Industry watchers said yesterday that the semiconductor industry may be emerging from a two-year slump.
Silicon Valley-based Semiconductor Equipment and Materials International (SEMI) and VLSI Research Inc announced an increase in the February book-to-bill ratio -- which measures new orders against products sold each month -- and predicted the industry would emerge from a two-year slump next month.
The announcement was welcome news for local chipmakers.
"An increasing book-to-bill ratio is very good news for Taiwan Semiconductor Manufacturing Co (TSMC,
A book-to-bill ratio of 1.00 means that manufacturers received US$1 of new orders for every US$1 of products they sold. For the past two years, book-to-bill ratios in the global chip industry have been below 1.00, meaning fewer orders coming in than products being sold each month.
"A book-to-bill ratio of less than 1.00 means the industry is in decline," said Chris Hsieh (
"More than one means we are moving out of the slump," he said.
The researchers were cautiously optimistic.
"While the bookings outlook appears sluggish, over 20 new [fabrication plants] are expected to begin production in the next two years," Stanley Myers, president of SEMI, said in a statement.
SEMI reports on North American chipmakers, while VLSI Research studies global manufacturers of the machines used in the manufacture of computer chips.
SEMI announced Tuesday that the North American semiconductor book-to-bill ratio had risen from 0.94 in January to 0.99 last month. A day earlier, VLSI Research said the worldwide chip-making equipment book-to-bill ratio had increased from 0.95 in January to 0.98 in February.
"Book-to-bill ratios showed that both January and February were tough months," VLSI's Aida Jebens said in a statement.
"It was due to war fears, a falling stock market," and the fact that many executives are not buying new equipment, she said.
By next month, VLSI predicts the book-to-bill ratio will climb above 1.00, indicating that the industry is returning to growth.
"The [book-to-bill] ratio is expected to increase to 1.05 in March, a seasonally strong month for equipment," Jebens said.
TSMC chairman Morris Chang (張忠謀) forecast at the end of January that the global chip industry would see a pick-up in demand in the second quarter.
However, this does not mean his company will be increasing its orders for new equipment, he warned at a technology conference in Taipei yesterday.
"We're not going to spend any money unless we're confident it's going to be utilized 100 percent from the beginning," Bloomberg News quoted Chang as saying.
TSMC also announced in January that it had cut its planned spending on new equipment from US$1.65 billion to US$1 billion this year. Meanwhile UMC cut its planned expenditure from US$800 million to US$500 million this year.
Analysts do not expect a change in this figure before the second half of the year.
"Morris Chang's new message is that he will look very closely at his fab utilization rate before deciding on capital expenditure," said James Huang, (
"Globally, there is more than enough capacity in terms of chipmakers," Hsieh said. "Customers are not obligated to give a firm commitment to buy from foundries. And after getting burned in the 2001 slump, they are carefully controlling their inventories."
Few are ordering more than one or two months in advance, he said.
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