Semiconductor Book-to-Bill Ratio Soars
The chip industry’s monthly book-to-bill ratio surged to 1.10 in October from 0.98 in September, exceeding expectations and marking the first time this year that the measure has been above 1.00.
The Semiconductor Industry Assn., which releases the number, also said Monday that it plans to phase out the monthly figure because it isn’t a global number and doesn’t accurately reflect what is going on in the $150-billion-a-year world market.
The association reported that the book-to-bill ratio rose to 1.10 in North, Central and South America, the biggest market for computer chips.
The preliminary figure for October means manufacturers got $110 in new orders for every $100 worth of semiconductors they shipped. The ratio has been below 1.0--the dividing point between market growth and contraction--since January.
The SIA on Monday revised September’s book-to-bill ratio to 0.98 from 0.99.
“These strong numbers for new orders in the Americas market should reinforce our industry’s cautious optimism for a solid fourth quarter,” SIA spokesman Douglas Andrey said.
The San Jose-based organization’s figures were the latest indication that the semiconductor industry is emerging from a slump after last year’s rapid growth. The peak came in October 1995, when the ratio surged to 1.16.
The rise in the ratio was spurred by increased orders from PC makers, which are getting ready for the holiday sales season, which is expected to be strong. Intel said last week that its fourth-quarter sales will be higher than expected because PC makers are stepping up orders for its chips.
Prices for computer memory have also been stabilizing, after plummeting about 80% since the beginning of the year. Dynamic random-access memory prices bounced up a little in September as demand increased and have not fallen as quickly as they did earlier in the year, analysts said.
“Ordering for PCs took off in September, DRAMS have stabilized and now other sectors are starting to kick in,” said analyst Dan Niles of Robertson Stephens & Co. He cited networking and telecommunications equipment as two markets that use chips and have seen demand rise.
According to the SIA’s recently released forecast, the chip market--falling an estimated 10.5% this year--should grow 7.4% next year and resume its double-digit rate in 1998. The SIA credited worldwide demand for chips in a wide range of electronic products, not just computers, for the expected gains.
In October, new orders for semiconductors grew to more than $3.73 billion, from $3.17 billion in September. Last October’s peak orders totaled nearly $4.88 billion.
Last month’s billings rose 5% to about $3.39 billion, up from $3.23 billion in September. October 1995 billings reached $4.22 billion.
The ratio measures revenue from semiconductors rather than how many units are sold. It has been hurt by falling prices of memory chips this year as well as slower overall growth.
The SIA said it will report the last book-to-bill ratio in January. After that, it will release its first global billings report, which will represent a three-month rolling average of monthly sales in the world’s major markets.
The announcement to end the book-to-bill, though sudden, is not a surprise to most analysts and investors, who long have lamented the narrow North and South American focus of the ratio.
“The book-to-bill ratio has been unreliable for a while as the market became more global,” Niles said. The two fastest-growing markets are Japan and Asia, and those weren’t included in the monthly number.
