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Gear Orders Not Bottoming Out Yet San Francisco -- While the North American semiconductor industry's book-to-bill ratio of 0.74 makes June the cruelest month so far, July may not be much better. In fact, it could be much worse, based on information gathered at Semicon/West. At the Semiconductor Equipment & Materials International (SEMI) press conference, Applied Materials CEO James Morgan said that Applied's lower expectations for its July-ending third quarter (EN, Antenna, July 13) directly related to a three-week orders' bath the equipment juggernaut took. Mr. Morgan elaborated on disappearing orders at a meeting of industry CEOs. He said that Applied Materials stood in line with its expectations when the company's most recent board meeting adjourned. However, the No. 1 gear maker saw 20 percent of its anticipated orders for the quarter evaporate in a little more than a two-week time span following that meeting. He did not specify which area of the globe had pushed out orders; only that it was "across the board." Mr. Morgan touched upon the lack of confidence in Japan's general economy as contributing to a "holding pattern" that Japanese semiconductor interests have taken toward equipment purchases. Mr. Morgan recently took the entire Applied board of directors and some senior Applied executives on a field trip to Japan to understand the market dynamics of the Japanese economy. The world's second largest economy continues to stumble. The yen is down 6 percent compared with the dollar since Jan. 2, according to SEMI statistics, and this month's resignation of Prime Minister Hashimoto has served only to rattle investor confidence and reinforce the notion of Japan's unwillingness to change. Roger Blethen, CEO of LTX Corp., an automatic test equipment supplier, said he sees no orders coming out of Japan until the Japanese fiscal year concludes in March 1999. Japan has not been the only source of vanishing orders; U.S. and Taiwanese gear buys have dried up as well, says Byron N. Walker, managing director of BT Alex. Brown. Analysts believe resolutely in the long-term viability or "investability" of semiconductor capital equipment; however, a heavy fog has descended on the road to recovery. "We've never had 30 percent of the world melt down on us before," says Mr. Walker. And based upon a vanishing of gear orders recently, he believes the industry has yet to see the worst of the downturn. If investors can wait a little while, gear makers' stocks "could get cheaper." When will the industry get back to growth mode? Mr. Walker suggested around Semicon/West 99. Most equipment vendor chief executives feel the downturn will persist anywhere from 12 months to into the 21st century, according to a SEMI CEO survey, which Stanley Myers, president of SEMI, related to a packed pressroom. Asked if new fabs would be built in late 1998 or 1999, Mr. Morgan noted in jest that new fabs are being built -- "They just aren't putting any equipment in them." But he wasn't advising anyone to throw in the towel. "Unless we plan to print punch cards, the path to the 21st century is paved in silicon," Mr. Morgan said. |