15: Semiconductor Equipment Overview 00:29am EST 20-Feb-02 Robertson Stephens (Billat, Sue AMAT KLAC February 20, 2002
Technology Research S e m i c o n d u c t o r E q u i p m e n t O v e r v i e w
January Book-to-Bill Inches Up to 0.81
Sue Billat Suresh Balaraman Heidi Poon Emma Park
Investment Conclusion January s flat bookings are consistent with our views that although there are early signs of a recovery, a sustained upturn is likely to commence only in 2H:02. Despite flat overall bookings, we believe the orders for sub-0.15 micron process tools continue to be strong. We are pleased that back end orders have rebounded from abysmal levels of 2H:01, reflecting the drop in cancellations and improving utilization levels at packaging and test houses. Our current favorites remain Applied Materialsa (AMAT$45.80, Strong Buy) KLA- Tencora (KLAC $58.47, Buy), Cabot Microelectronicsa,b (CCMP $55.03, Buy) and Rudolph Technologiesa,b (RTEC $38.25, Buy).
Key Points * The January book-to-bill ratio of 0.81 is not fully comparable to historical metrics, in our view, as SEMI has changed its definition of billings. From now on, SEMI will use SAB 101 revenues rather than shipment as a measure of billings. While the difference is minimal for some like Applied Materials, there could be a substantial impact in the case of most other OEMs, in our view, due to the delay between shipment and revenue recognition. * The three-month average industry bookings inched up 1% sequentially to $637MM, after a 7% increase in the previous month, resulting in a book-to- bill ratio of 0.81, up from 0.77 in December (see Figures 2 and 3 for a summary of book to bill data). Overall billings declined 4% sequentially to $784MM, partly reflecting SEMI s switchover to SAB 101 revenues. * Front end orders declined 6% to $507MM for the three months ending in January and fared worse than Applied s, which reported a flat bookings (and a book to bill of 1.0) in its January quarter. We believe Applied is benefiting from its strength in Taiwan and products targeting 300-mm and copper. In addition, we note that Applied does not include orders from Applied Komatsu (its Japanese subsidiary), Etec (which is not categorized under semiconductor front end) or service orders in the number it reports to SEMI. Front end billings declined 5% to $649MM, leading to a book-to-bill ratio of 0.78 (vs. 0.79 in December). * Back end equipment bookings surged 50% sequentially to $135MM, at the heels of a 45% in December. Given the substantial order improvement, the book-to- bill ratio leaped from 0.65 in December to 0.97 in January. We believe the significant month over month gains reflect rising capacity utilization and increased output from packaging and test subcontractors compounded by an absence of back end equipment order cancellations. Although we expect orders for the back end to remain at current levels for the next several months, we note that the back end is a leading indicator for the group. Thus, the positive signs from this segment bodes well for the industry overall, in our view.
Figure 1: SEMI Bookings and Billings ($ in millions)
Source: SEMI
Figure 2: Semiconductor Equipment Bookings Trend Trailing Twelve Months ($ millions)
Source: SEMI
Figure 3: Semiconductor Equipment Bookings and Billings ($ millions)
Source: SEMI
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