The 1998 slump in chip-production
investments keeps digging deeper into a hole despite some predictions -- and
hopes -- that it may be bottoming out.
The latest evidence comes from North American suppliers of chip-manufacturing tools, which posted a book-to-bill ratio of 0.69 for July, the
lowest point in the current downturn, said Semiconductor Equipment
and Materials International. A book-to-bill ratio of 0.69 means $69 in
orders were received for $100 worth of products shipped. June's
book-to-bill figure was revised upward slightly to 0.74 by SEMI in the new
The trade group, based in Mountain View, Calif., said its three-month moving average of
chip-equipment billing shows suppliers shipping $1.105 billion worldwide in
July compared with $1.235 billion in June -- a 10.5 percent drop. Orders in July
dropped 18.9 percent to $757 million vs. $933 million in June, SEMI said.
"The July data confirms a continuation of the softening of equipment orders,"
said Dick Greene, principal analyst with SEMI. "As has been the case since
this downturn began, surplus semiconductor production capacity and the
Asian economic situation continue to dampen both the chip and the
While there are no clear signs of a recovery yet, industry observers continue
to see factors that could hint of an end to the downward trends in chip-production spending. One shred of optimism is coming from dynamic RAM prices,
which have recently stabilized after continually dropping during the first half
After SEMI issued its July book-to-bill report Tuesday, investment
banker Morgan Stanley Dean Witter & Co. said it believes the drop in
semiconductor sales compared with a year ago has hit a trough in the current
"We expect a seasonal uptick in the semiconductor industry, which has
started to drive smaller year-over-year semiconductor industry revenue
declines starting in August and September, which should drive improved
photomask and equipment stock performance," the investment banker told
its clients. "Comparisons get much easier in October and beyond, which
should help the stocks trend in the upward direction as late 1998 unfolds.