Semi Book-to-Bill Plummeting

Highlighted stocks include ASML Holding N.V. (ASML - Snapshot Report), Varian Semiconductor (VSEA), Electroglas, Inc. (EGLS) and Cymer Inc. (CYMI - Analyst Report).

Recently SEMI [the global industry association serving the manufacturing supply chains for the microelectronic, display and photovoltaic industries] announced preliminary numbers for January of 2009.

North America-based manufacturers of semiconductor equipment posted $285.6 million in orders in January 2009 (on a 3-month average basis) and a book-to-bill ratio of 0.48 according to the January 2009 Book-to-Bill Report published today by SEMI. A book-to-bill of 0.48 means that $48 worth of orders were received for every $100 of product billed for the month.

The 3-month average of worldwide billings in January 2009 was $592.2 million. The billings figure is about 12 percent less than the final December 2008 level of $672.4 million, and about 54 percent less than the January 2008 billings level of $1.28 billion. The book-to-bill ratio is the dollar amount of orders on the books (delivered and invoiced) compared to the dollar amount of orders filled. A high ratio (greater than 1) indicates a backlog of orders that should produce revenues and profits in future periods (improvement). A book to bill of less than 1 indicates a decline. The book-to-bill ratio is often used to analyze the health of technology companies.

Historically close to a bottom?

Looking at the monthly data from January of 2009 all the way back to December of 1996, this is the 2nd lowest book-to-bill ever recorded. The lowest was May of 2001. It took 11 months for the book-to-bill to rise above 1 that year. The highest was 1.46 in March of 2000.

So who do these numbers hurt?

The numbers just confirm what we already know. Manufacturers are on the sidelines and are delaying equipment purchases. Firms either make excess profits making equipment that is technologically superior or they make excess profits when capacity at the fabs is high. Right now capacity at some fabs is less than 50%. Firms such as ASML Holding N.V. (ASML - Snapshot Report) and Varian Semiconductor (VSEA) will fare better than firms such as Electroglas, Inc. (EGLS) and Cymer Inc. (CYMI - Analyst Report).

Read the full analyst report on ASML

Read the full analyst report on VSEA

Read the full analyst report on EGLS

Read the full analyst report on CYMI

Read the full analyst report on VSEA

Read the full analyst report on CYMI

Read the full analyst report on ASML

Read the full analyst report on EGLS