Chip Index Highest Since October '95

From Reuters

The semiconductor industry's key indicator rose last month to the highest level in more than a year, reflecting a 6.3% increase in orders for computer chips.

The Semiconductor Industry Assn. reported Monday that its book-to-bill ratio, which measures the value of orders against shipments, rose to 1.15 in November from a revised 1.11 in October. The ratio means manufacturers received $115 in new orders last month for every $100 in shipments.

Analysts had expected the ratio to be flat to slightly higher than October's level. November's stronger-than-expected performance could give chip stocks such as Intel Corp., Micron Technology Inc. and Texas Instruments Inc. a boost today.

The ratio, a leading indicator of future demand tallied by the industry trade group, has been improving recently, reflecting an increase in orders by personal computer makers and more stable prices for memory chips.

In March, the index hit its lowest point in years when it dropped to 0.79, reflecting a glut of chips on the market. Since then it has been rising steadily as inventory levels have stabilized.

In a statement, the San Jose-based trade group said the November ratio was the highest since October 1995, when it jumped to 1.16.

Fueling the rise was a 6.3% jump in new orders last month to $3.96 billion, coupled with a 2.9% rise in shipments to $3.44 billion. The October ratio was revised from 1.10.

Association officials said the November increase marks the fourth consecutive month of real increases in orders and the third straight month of higher shipments.

"Given all that has happened in 1996, it's best to use caution in evaluating these numbers," said Doug Andrey, director of information systems for the group. "But they are undeniably the best marks we've seen for the Americas market all year. The third-quarter doldrums are behind us."

The book-to-bill ratio, which covers the North, South and Central American markets, is due to be replaced next year by a global index. The Semiconductor Industry Assn. said the worldwide ratio for October, the latest period available, was 1.09.

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