Dec 19 2005
The ratio of semiconductor sales to equipment bookings is currently at an historic high of 21.1 that will only worsen into 2006, according to The Information Network, a New Tripoli, PA-based market research company.
In the past 10 years, the semiconductor industry has gone through four major upturns, peaking in February 1996, October 1997, October 2000, and the current up cycle that started in January 2002 and has currently reached record revenues of nearly $230 billion.
Likewise, the semiconductor equipment industry has also gone through four major upturns, peaking in February 1996, October 1997, October 2000, and June 2004.
During these equipment peaks, the ratio of semiconductor sales revenues to equipment bookings was 6.2, 5.3, 6.5, and 13.8. Currently the ratio stands at an unprecedented 21.1.
We forecast semiconductor sales to grow 6.8% in 2006 while equipment sales will decrease another 3.0% on top of a 9.6% drop in 2005, which will result in a further increase in the ratio of semiconductor sales to equipment bookings in 2006.
Semiconductor equipment will drop 19% in Q4 2005 over Q4 2004. Sequentially, Q4 2005 over Q3 2005 revenues will drop 13%. The semiconductor equipment market is geared to increase 23.5% in 2007 and 31.0% in 2008.
Contributing to the deviation from an average ratio of 6.0 is the move to 300mm wafers. In 2000, less than 20% of tools sold were for 300mm, and more than 95% of the installed base of equipment was geared to 200mm. This is in contrast to 300mm representing 60% of tools sold in 2004 and 70% in 2005. 300mm wafers yield 2.25 times the number of chips per wafer compared to 200mm wafers.
Another factor in the high ratio is the reluctance of semiconductor manufacturers to spend. The excess semiconductor inventory problem following record capital expenditures in 2000 made semi executives cautions over the next four years until purse strings were loosened in 2004. Again excess equipment capex resulted in leaner profits and another inventory scare. Capex directly impacts a company’s bottom line, affecting stock prices and stock options.
Finally, there has been a move to more efficient chip fabrication including aggressive die shrinks and copper interconnects to reduce processing steps and enhance chip speed.
Capacity utilization is dropping as semi manufacturers slowly phase-in equipment to the 16 300mm fabs built in 2005, exacerbating the situation for equipment suppliers as further purchases are deferred, particularly for tools with 90nm and above capabilities.
“The move to 450mm, dictated in the International Technology Roadmap for Semiconductors (ITRS) for wafer production in 2012, should be welcomed by semiconductor manufacturers, provided a champion can be found to fund the transition. Intel backed the conversion to 150mm wafers and IBM supported the 200mm wafer conversion, but the onus of 300mm conversion was on the equipment vendors themselves. We suspect that equipment vendors will steer clear of driving the transition to 450mm, not wanting to shoot themselves in the foot, and leaving the burden to perhaps Intel,” noted Dr. Robert N. Castellano, President of The Information Network.