CSFB on Semi Equip Book-Bill Ratio:
Semiconductor Equipment - SCE July Book-to-Bill
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Book-to-Bill downward trend to begin
Book-to-Bill a Lagging Indicator. SEMI reports July Book to Bill Tuesday after the close at 3 PM PST.
Book to bill is a "best guess" science complicated by a 3 month moving average and inconsistent company reporting of SAB 101 revenue/shipment data. With AMAT already reporting 26% sequential revenue growth and 4% growth in net orders, we do not expect event to generate significant news.
B:Bill should begin falling in-line as bookings momentum wanes. Estimate B:B of 1.11 to 1.19 with a single point estimate of 1.15, down from 1.28 in June. We expect bookings to be down 3% sequentially, billings up 8%. Results will be helped by AMAT results, which were up 6% seq., but not yet fully reflect the 10-15% bookings decline we believe SCE is now facing.
Bookings Rebound Hinges on September Demand Inflection. In our opinion, the difference between a one-quarter pause and a three quarter downturn in bookings is dependent on seasonal sell-through. If sellthrough is strong, we anticipate orders stabilizing by December. Near-term bookings weakness should continue to carry book-to-bill lower over the next few months until demand visibility is clearer.
Cyclical Trade Possible, Remain underweight on secular issues. We maintain our underweight stance on SCE. After a weaker than expected 2Q02 for end markets, current expectations for PC's, wireless, and wireline are for muted seasonality. With SCE off over 40% YTD, a better than expected H202 could drive a 2H02 trade for our stocks. Longer-term, we remain cautious that secular supply issues with 300mm and slower end market growth will mute the LT growth for SCE.
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