T-Waves

[Tetres]

Here are some thoughts on the Semi equipment B-2-B last night... here is a T-Waves chart depicting, the overall trends for the past 5+ years…I have an extensive Data base on the B-2-B Sometime a picture is very valuable

http://www.twaves.com/T-waves%20Book%20to%20Bill%20Chart.htm

Capital spending cuts by chip makers (INTC, TSM, USM, TXN, AMD) all took their toll last month on the makers of the equipment used to build and test chips, according to data released yesterday by the SEMI. North American makers of semiconductor equipment recorded $1.15 billion in new orders in July, a decline of 2%. Equipment billings, a measure of the value of equipment accepted by customers and booked as revenue, rose 7% in July to $995 million from $927 million in June. "The July bookings data likely reflects renewed questions about the robustness of the economic recovery and the prospects for the consumption of electronic goods," said Dan Tracy, director of industry research and statistics for SEMI. The monthly data shows a ratio of orders to billings known in the industry as the book-to-bill ratio of 1.16. A ratio higher than 1 means that orders for new equipment outpaced deliveries of equipment orders in previous months.

Lehman remains cautious on semi equipment Following last night's semi book-to-bill report for July Lehman remains cautious on the prospects for semi equipment shares due to the belief that end market dynamics remain weak, consensus expectations for CY03 are too high, and valuations could come under further pressure near-term.

Chip equipment maker Kulicke & Soffa (KLIC) warned yesterday morning during a mid-quarter update. The company makes tools to build and test microchips and said the last quarter has been a roller coaster ride. They said companies were deferring orders and recent capital expenditure cutbacks were hampering sales. They also said customers were unwilling to pay for higher performance products and were content to keep their current equipment until demand returns. They are now forecasting a steeper downturn than expected.

After the bell Newport Corporation a global supplier of high-precision test, measurement and automation systems and subsystems that enable manufacturers of fiber optic components, semiconductor capital equipment, high-precision products to automate manufacturing processes, enhance product performance, and improve manufacturing efficiencies and yields. WARNED...The company, citing the downturn in the fiber optics communications market and the current uncertainty in the semiconductor equipment area. They announced a cost reduction program and a reorganization of its business units geared toward achieving profitability during "this period of weak demand"; they expect these actions to result in annualized savings of $12.0-$14.0 million. "As a result of the potentially lower sales to semi customers and the removal of sales from our Minnesota facility, we believe that our Q3 sales may fall slightly below the $48.0 million we forecasted as the low end of the range in guidance provided in July 2002. We are, however, confident that we will show increased sales sequentially compared with the $44.0 million of sales recorded in Q2". They now expect to report a loss for Q3 as opposed to the prior expectation of $0.00-$0.02.

The chip equipment industry has been hit hard by a fresh wave of cuts in capital spending by chipmakers, and weakness in demand for chip-hungry hardware like personal computers. On Monday Banc Of America Securities reduced its semiconductor capital spending estimate for 2003, mainly because personal-computer chip makers are unlikely to increase spending next year and because memory chip makers will likely continue to invest in equipment at very low levels. Analyst Mark FitzGerald said Intel Corp. (INTC) one of the largest purchasers of chip equipment will scale back its capital-spending budget in 2003 to $4 billion from the $5 billion to $5.3 billion range in 2002. The analyst is now calling for total spending in 2003 to increase 7.1% year over year to $28.8 billion, which is lower than his previous estimate for 10% to 20% growth. "If we are correct," wrote the analyst, "then the recovery will be the most protracted and modest recovery in the industry's history."

Thomas Weisel analysts issued a research report about inventory levels in the electronics supply chain this week. The analysts conclude that semiconductor manufacturers hold the most inventory at 64% of the total which compares with 33% in the second quarter of 2001. Analyst Mark FitzGerald cut his estimates on Novellus and Lam Research. He also culled his industry projection for 2003 capital expenditures. "We are looking at a modest recovery in spending by non-PC chip segments. But we are less optimistic that the PC chip business will participate to the same extent." He also expects DRAM manufacturers to invest at low levels. A picture is worth 10,000 words, I have an extensive data base of B-2-B data.... T-Waves Book to Bill Chart Forbes did a great article called "A Double-Dip In Chips?" http://www.forbes.com/2002/08/20/0820chips.html?partner=yahoo&referrer= It was supposed to be in full recovery mode by now, but the bounce-back of the global semiconductor industry seems to be stalled for the foreseeable future . In fact, industry insiders are now expressing fears that a double-dip scenario may be in the works. Following last year's 33% drop in chip sales, this year is on course to show modest growth. But, as with the wider economy, some analysts are starting to talk about the possibility of a weaker 2003.



Best of Luck
Steve