BOOK-TO-BILL FIGURES AND TRENDS
By Dan Tracy, senior director, and Lara Chamness, senior market analyst, Industry Research and Statistics group
SEMI has been issuing the Book-to-Bill report for North American headquartered equipment manufacturers since 1991. The report aggregates bookings and billings information from over 60 North American headquartered companies to determine bookings in relation to billings – the Book-to-Bill ratio. It is important to note, as some confusion remains out there, that the ratio reported by SEMI is for semiconductor capital equipment, not devices (chips).
Since North American equipment manufacturers currently represent almost 50 percent of the global semiconductor equipment market, the Book-to-Bill report provides an early indication of capital equipment order and spending trends for the global semiconductor market. The Book-to-Bill ratio is calculated from a three-month average of the net bookings over billings, with the three-month average calculation used to smooth out volatility caused by seasonality and/or the financial calendar in the reported data.
The following chart shows the SEMI Book-to-Bill data from January 2003 through to September 2006. The chart shows that bookings were flat throughout 2003 prior to the industry spending growth observed in 2004; followed by another period of flat bookings in 2005; and then by another pick up in bookings in early 2006. Three-month average bookings in the current cycle appear to have peaked in June 2006 at $1,782 billion and had slowed down through the previous quarter.
The Semiconductor Equipment Association of Japan (SEAJ) also issues Book-to-Bill information for Japanese headquartered equipment manufacturers. The data are presented in a three-month average format, with the Japanese companies representing about 40 percent of the global semiconductor equipment market.
The figure below shows the SEAJ Book-to-Bill data from January 2003 through September 2006. Looking at the history shown here, bookings and billings levels for Japanese equipment manufacturers began to recover in early 2003—a full six months before North American companies experienced a similar recovery. In 2003, Japanese device makers sharply increased capital spending and this benefited the Japanese headquartered equipment companies. Equipment spending in Japan grew by over 40 percent in 2003, while the remainder of the global semiconductor equipment market spending grew at just about five percent that year. Since 2003, Japan has been the largest market in terms of capital equipment spending.
In examining the SEAJ data, it is important to note that the Japan fiscal year ends in March. Even though the SEAJ Book-to-Bill is reported on a three month average basis, a sharp increase in billings for March is typical in this Book-to-Bill report as companies account for revenues by year end. As a result, the SEAJ Book-to-Bill ratio tends to decline in the March data report because the denominator, billings, increases. Also, many Japanese companies report public financial information at the mid-fiscal year point instead of on a quarterly basis. Similar to the year-end billings reporting impact in March, there tends to be a sharp increase in reported billings and a corresponding decrease in the Book-to-Bill ratio in September, the mid-point in the Japan fiscal year.
As the result, the SEAJ Book-to-Bill ratio for September 2006 declined to 1.08 based on an increase in billings to $1,339 billion from the $1,247 billion reported in August. Three-month average bookings remained essentially flat in September. Consistent with the current cyclical trends reported by the North American equipment manufacturers, bookings for SEAJ members also peaked in June.
Detailed SEMI North American Book-to-Bill data by front-end and final manufacturing equipment is available through a subscription to the SEMI North American Book-to-Bill newsletter.
Detailed global equipment bookings and billings reported monthly by 22 equipment categories and seven market regions is available in the Worldwide Semiconductor Equipment Market Statistics (WWSEMS) report through the Equipment Market Data Subscription.
The SEAJ Book-to-Bill data can be found at www.seaj.or.jp.