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IC stocks pummeled by decline in equipment orders

The share prices of the nation’s major semiconductor companies tumbled yesterday after orders for North American semiconductor equipment fell 39 percent last month, an indicator that chipmakers may further reduce spending on capacity expansion (capex) to cope with a deteriorating global economy.

Shares of the world’s two biggest contract chipmakers, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電), plunged near the 3.5 percent daily limit to NT$44.95 and NT$9.80 respectively.

North American semiconductor equipment orders dropped 39 percent year-on-year to US$754 million last month, the trade group Semiconductor Equipment and Materials International (SEMI) said in a statement on Thursday.

“The continued decline in capex spending is accompanied by a major global economic downturn that may have a significant impact on overall consumer electronics spending,” Stanley Myers, president and CEO of SEMI, said in the statement. “Clearly, concern over these larger economic issues is restraining any immediate capacity investment plans.”

TSMC and UMC plan to spend US$1.8 billion and US$500 million respectively on new equipment this year, about a third less from their expenditure last year.

The book-to-bill ratio, a tool used to gauge the health of the semiconductor industry, fell to 0.76 last month, meaning chip equipment producers in North America received US$76 in new orders for every US$100 in products billed for the month, the statement said.

The ratio was higher in August at 0.81, SEMI said.
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