Semi-suckalicious semiconductor sales
Numbers are bad, but they've been a lot worse
The news is worse if you're in the Europe or the US - European sales were down 13.9 percent while the US absorbed a hefty 19.5 per cent blow.
Japan and the Asia/Pacific region did noticeably better, with drops of 7.3 and 6.2 per cent, respectively.
SIA president George Scalise exhibited an impressive grasp of the obvious when he issued a statement saying that "The worldwide economic crisis is having an impact on demand for semiconductors." Scalise then daubed a bit of lipstick on that fiscal piggy by adding, "but to a lesser degree than some other major industry sectors."
True enough - when other industries are coughing up blood, mere arterial bleeding can be seen as not so bad.
But the chip-market news is not all gloom and doom - take the book-to-bill ratio, for example. This metric is an indicator of the market's stability - the higher the number, the more chips are being ordered (book) in relation to those having been shipped and invoiced (bill). A ratio of above 1.0 indicates growth; below 1.0 indicates shrinkage.
According to the Semiconductor Equipment and Materials International (SEMI), the North American semiconductor book-to-bill ratio is improving. As recently as September it was a craptastic 0.70. However, it moved up to 0.96 in October, and in November it was exactly flat: 1.0.
While no-growth flatness is no reason to put a down payment on that yacht you've been eyeing, it does mean that either the market is stabilizing or that it's pausing before it slides fully into the dumpster. Your call.
Absolute numbers matter, as well - of course. For example, according to SEMI, the North American semiconductor industry billed for $1,159.8m worth of chip equipment in June 2008, a figure that fell to $807.3m in November's preliminary figures.
Two sides of the same coin, eh? The market appears to be stabilizing - good - but at a lower level than a few months ago - bad.
Sure, times are tough - but they've been tougher
In this morass of uncertainty, however, there's one thing that's indisputable: We've been through this before, and it was worse for the semiconductor industry last time. In mid-2001, during the depths of the carnage caused by the bursting of the dot-com bubble, the worldwide semiconductor industry saw a year-on-year drop of over 40 per cent.
Compared to that death spiral, the 9.9 per cent drop outlined in the SIA report is a mere bout of the flu. We may be living through the financial equivalent of Drillbit Taylor, but for the semiconductor industry, 2001 was a full-on Battlefield Earth.
...if ever jump into comments threads, but in this case I believe it makes sense to do so.
Mingy, don't you believe that book-to-bill of "front-end (wafer processing/mask/reticle/wafer manufacturing/fab facilities) equipment and final manufacturing (assembly/packaging/test) equipment" -- as defined by SEMI -- has anything to do with semiconductor final-product sales? Of course it does.
You are, of course, correct, in that my breeziness didn't make that clear, but the book-to-bill ratio of manufacturing equipment is directly related to chip sales. If anything, it's a better indicator of market volatility than pure monthly chip-sale reports due to that fact that fabs are, in many ways, turn-them-on, turn-them off materials-pipes, while the book-to-bill investment in equipment that supports fabs indicates market confidence.
Again, you're correct that I didn't make that clear -- but my original argument that book-to-bill is a good indicator of the overall health of worldwide chip sales still stands.
Geez. Don't Write About Things You Don't Understand
SEMI has *nothing* to do with chip sales. It is only about Semiconductor Capital Equipment sales.
Besides which, a book to bill ratio is completely meaningless: the *only* thing that matters about SEMI's book to bill is the bookings trend. Because a book to bill is a ratio, a ratio > 1 just means the number on top is bigger than the number on the bottom. So, if shipments (billings) are collapsing at a slightly faster pace than orders (bookings), then book to bill is > 1.
As it happens, demand for Semiconductor Capital Equipment *is* collapsing, and thats all that matters.
The editors should pull this piece and replace it with a comment written by somebody who at least knows something about these data. This is an embarassment.
Like a sawtooth. XP released, sales crater. Slow growth happens anyway. Vista released, two years flat. Economy craters, well, it's 2001 X 10.