Semi Equipment Orders Starting to Drop

According to Reuters:

North American suppliers of equipment for making microchips saw orders slip slightly in February, a U.S. trade group said on Thursday.Bookings in February were $1.65 billion, down 1 percent from the previous month but up nearly 28 percent from a year earlier. Bookings increased sequentially in each of the previous two months.

This, however, doesn’t begin to tell the whole story. For example, orders were down 1 percent from January’s revised bookings of $1.675 billion but were down more than 3 percent from the $1.71 billion originally reported for January. What happened to the other $33 million of equipment orders? They were pushed out - which means that at best they will prevent $33 million from being ordered later this year, and at worst they will be canceled completely.

The good thing about the downward revision, and also the decline in February, is that it restores some balance to at least the trend in equipment orders relative to end demand for semiconductors. Although supply (chip equipment orders) is still growing much faster than the roughly 10% growth in semiconductor demand, at least the rate at which the capacity is growing is starting to slow down again. Furthermore, the billings (which represent what is actually installed rather than orders, which may prove too optimistic) have been running at a slower rate than orders. The 22% growth of installed equipment is still well higher than what is needed, but has less far to fall.

Disclosure: William Trent has a long position in SMH.

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