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The View from Wall Street
tough times. According to Semiconductor
Equipment and Materials International
(SEMI), a trade group based in San Jose,
Calif., the North American semiconductor
equipment industry posted a book-to-bill
ratio of 0.48 in February. That is, $48 of
orders was booked for every $100 of product billed for the month. The three-month
average for billings was under $550 million, down from more than $925 million
in September. Compared with the year before, bookings were down 78 percent and
billings were down 58 percent.
SEMI has been compiling book-to-bill
data since 1991. Over that nearly 20-year
span, the industry has gone through several boom-and-bust cycles. As a result,
“To the extent the manufacturing sector does well,
you would expect machine vision to do well.” – Paul
Kellett, Automated Imaging Association.
there is data from a number of down
cycles to compare with the current state of
affairs. When the latest figures were announced in March of this year, Dan P.
Tracy, SEMI’s senior director of industry
research and statistics, said current bookings levels were the lowest ever seen.
Given that, it would seem that a company like Cymer could be in for challenging times and a low stock price. However,
an individual company’s situation always
comes into play when the investment community evaluates it.
For example, a good chunk of Cymer’s
business involves nonsystem sales, noted
Weston D. Twigg, senior research analyst
with Pacific Crest Securities, a full service
investment bank with headquarters in
Portland, Ore. The firm makes a market in
shares of Cymer.
One difference between Cymer and
other semiconductor capital equipment
makers is that laser light sources don’t last
forever. Popping in a new one isn’t as easy
as changing a lightbulb and keeping the lithography tools going isn’t a trivial affair,
Twigg said. “There’s a lot of maintenance
to be done.”
This has an effect on the bottom line.
Although a typical manufacturer might get
15 to 25 percent of its revenue from maintenance and nonsystem sales, Cymer gets
about 60 to 70 percent. As a result, even
when there is little capital equipment
spending, there is a revenue stream. The
amount of revenue is tied to semiconduc-
tor factory utilization rates. This number is
currently low, but it could ramp up quickly
when the economy recovers. These facts
are reflected in Cymer’s share price.
As for the future, major drivers that
could boost revenues for those in the
semiconductor supply chain are node transitions and capacity expansion. The first
involves a change in feature size. Today’s
state of the art is in the 45- to 65-nm
range, with various companies and chip
types at different nodes. The second would
involve growth of existing chip factories
or construction of entirely new semiconductor fabrication plants (fabs).
Although a node transition might take
place over the next few years, Twigg does
not see capacity expansion happening until
conditions change. “Capacity expansion is
pretty much on hold right now because
there’s a huge amount of overcapacity, and
the memory companies, in particular, can’t
afford to build new fabs – and there’s really no need to.”
A material world
Not all photonics companies, of
course, are heavily involved in semiconductors or otherwise dependent on heavy
capital expenditure markets. That’s a
plus, but an even bigger advantage is
having a technological edge. A company
that fits this description in terms of application and technology is IPG Photonics
Corp. of Oxford, Mass., which makes
fiber lasers for a variety of uses, although
most of the current growth comes from
one area in particular.
The composite stock price index for the 28 largest machine vision companies has lagged behind the Nasdaq composite, with the gap growing larger over time.
Courtesy of Paul Kellett, Automated Imaging Association.