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Semiconductor equipment manufacturers posted a book-to-bill ratio of 1.01 in June, according to VLSI Research. Dan Hutcheson, VLSI, reports. It was the first increase above parity since July 2008. Worldwide equipment bookings amounted to $2.5 billion in June, up 40% sequentially, but down 41% from the same month a year ago. Worldwide billings jumped 31% from the previous month to $2.4 billion, but were still a 57% lower from a year ago. Although bookings and billings remain well below normal levels, business activity is beginning to improve. Back-end suppliers, in particular, are seeing a considerable pick up in business activity amid soaring utilization rates at the subcontractors.
At the front-end, most of the equipment orders are still technology-related, driven primarily by the 3x and 4x nm ramp. In addition, the transition to DDR3 is finally picking up and is beginning to drive some orders in the memory sector, which had been lifeless for months.
2010 is expected to be better. First of all, Moore's Law is not dead and for memory it's on a much more sustainable rate of halving every 2 years. Asia's attempt to make Hwang's 'law' a law proved costly, but this has been essentially over since 2001. It was just that the memory makers hadn't figured it out and over invested. That's not a problem anymore.
When you look at the data, cost-per-bit has continued to decline and this year's price/performance increases as demonstrated in VLSI Chip Price Performance Index (CPPI) is making memory profitable. But that profitability is highly dependent on continued scaling.
On the logic side, INTEL is more committed to scaling than ever. So are IBM and its partners, like GLOBALFOUNDRIES and TOSHIBA.
This summer's upturn in equipment orders is being driven by the 3x nm ramp. Plus, 2x nm is hot on 3x's heels. Lithography is well up to the task of making these transitions, as are CMP, implant, deposition, and etch. Assembly is being driven by the shift out of gold and into copper wire. Obviously, with gold prices continuing to kiss $1000 per ounce it makes loads of sense. Back in the day when gold went for $300/oz, contract package prices were around a penny a wire and the largest chunk of that penny was gold.
Improvements in wire bonders and other assembly equipment took that below half-a-penny, but gold prices have pushed costs back up. Copper wire is the only solution. Test is being driven by ever more complexity of mixed RF with baseband and memory as well as new generations of memory devices with new fault modes.
Capacity utilization at 45nm and below is at 90%, as it is for 300mm utilization. Test and Assembly utilization are similar for their advanced technologies. Averages for all three will be above 90% next month if the current trend continues.
Semiconductors have been on a fairly steady growth path since January. Inventory build-up has been readily consumed and is 35% below where it was at the peak, last September. The inventory-to-billings ratio has stayed below 1.5 since February, another good sign.
Electronics shipments are up 44% since January. Ironically, the economic downturn with its "staycations" is driving consumer demand. Surveys showed and now people have voted with their money that they are more willing to give up going out than they are willing to give up their high-speed Internet connections.
Then there's been the netbook and more widespread availability of 3G mobile networks. Next year, the 4G build-out starts. Apple has proven that consumers want more data to their cell phones. The cell phone has become a mobile infotainment center, when you get your news, e-mail, tweets, and watch the latest YouTube videos. The smart phone has moved out of the executive jewelry category and into the mainstream.
This is what happened in the late 1990s with the cell phone and let's not forget the personal computer, which kicked off demand for the VLSI era. Speaking of the PC, while others disagree, we believe Windows 7 will be an important driver. In the last decade or so, Window's releases haven't had the punch they had in the nineties. But Microsoft has never messed up a product launch as badly as they did with Vista. There should be a significant backlog of demand.
Finally, it looks like we will finally see Internet TV in the living room. NETFLIX is committed to making it the next movie delivery mode.
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