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Jun 11, 2007 at 09:06 AM |
Major semiconductor equipment companies are having to adjust quarterly bookings/billings estimates due to a shift in the timing of chip manufacturers' tool schedule requirements.
The problem is not just focused on memory manufacturers, who are now losing money on commodity DRAM sales as prices have fallen below manufacturing cost. Though push-outs have grown in this sector in the second quarter, we have been receiving reports that both logic IDMs and foundries are shuffling schedules and in some cases actually cutting capital expenditure as sales have remained lacklustre and fab utilization rates for some have fallen to approximately 60 percent!
Even with an expected improvement in demand from the third quarter onwards, the view is that it will not be strong enough across many markets to enable utilization rates to increase significantly enough to prompt capacity additions this year.
In the first quarter of this year major OEMs painted a very plausible picture of how bookings and billings would pan-out for the year.
Initially, OEMs expected memory manufacturers to be responsible for a major part of shipments as many memory players were spending the vast majority of CapEx in the first two quarters. This was due to the belief that both DRAM and NAND demand would be strong in the second half of the year.
Major logic IDMs were expected to have a wider spread that was more second-half year loaded. Foundries, however, were expected to really come back with orders in the second half with little activity in the first-half-year period as customers were still trying to off-load inventory.
Foundries utilization rates had been falling since the second half of 2006 and as with previous practice would wait until the eleventh hour before placing orders as utilization rates approach 100 percent.
That all meant that the foundries would have a third-quarter comeback just as memory shipments would slow to a trickle.
Overall it shouldn't be a bad year, slightly up on 2006 even though the different sectors had different spending patterns.
However, the push-outs are increasing, as well as some CapEx trimming from many chip manufacturers who are trying to hold up margins in a soft market, such as Intel and AMD.
The trimming is more widespread than people believe because few manufacturers outside memory have yet to place major orders so the expectations are such that forward projections will still come to fruition.
A week of liaising with fab contacts highlights that spending is being reigned in and technology rather than capacity buys is once again the norm. The hope is that market conditions improve enough in Q3 for capacity buys to be sanctioned, but it's not looking as good as Q1's projections.
If foundry utilization rates climb slower than expected then there is every likelihood that many will not spend their allotted dollars in 2007.
We have already seen revised outlooks from Novellus and no doubt we will see a host of others follow in their footsteps in the coming months.
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