SEMI Book-to-Bill Improves

Semi equipment book-to-bill continues trend of improvement

North America-based manufacturers of semiconductor equipment posted $253 million in orders in April 2009 (on a three-month average basis) and a book-to-bill ratio of 0.65 according to the April 2009 Book-to-Bill Report published today by SEMI. A book-to-bill of 0.65 means that $65 worth of orders were received for every $100 of product billed for the month.

The three-month average of worldwide bookings in April 2009 was $253 million. The bookings figure is three percent greater than the final March 2009 level of $245.6 million, and about 77 percent less than the $1.09 billion in orders posted in April 2008.

The three-month average of worldwide billings in April 2009 was $389.9 million. The billings figure is 11 percent less than the final March 2009 level of $438.3 million, and about 71 percent less than the April 2008 billings level of $1.34 billion.

The ratio explained

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 off a bottom?

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

The last four months have shown an uptrend: January 0.47, February 0.49 March 0.56, April 0.65.

So who do these numbers hurt or help?

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. Recently capacity at some fabs is less than 50%.

Firms such as ASML Holding (ASML - Analyst Report) and Varian Semi (VSEA - Analyst Report) will fare better than firms such as Electroglas (EGLS).