Semiconductor Gauge Drops Again in April
SAN FRANCISCO — The semiconductor industry’s key indicator fell to a nine-year low Thursday as new orders for computer chips plunged nearly 23% last month from the year-earlier period.
The U.S. Semiconductor Industry Assn. said the book-to-bill ratio, which measures orders against shipments in North, South and Central America--the largest market for chips--fell to 0.78 in April from a revised 0.79 in March.
The ratio means that for every $100 in shipments, semiconductor manufacturers received $79 in new orders.
The closely watched ratio has been below break-even, or 1.0, since January--the longest running negative reading since 1989. The 0.78 ratio is also the lowest level since trade groups started compiling the monthly data using the same accounting system in 1987.
Analysts had expected the April ratio to show little improvement over March, with estimates ranging from 0.82 to 0.84.
In a statement, the association said new orders topped $3.13 billion last month, down 2.8% from March and 22.5% from the year-ago period. Shipments exceeded $4 billion in April, down 2.6% from March but up 14.8% from the year-earlier period.
“April’s numbers suggest that the chip market, after a sluggish first quarter, has stabilized,” the association said, adding that it expects 1996 will be a year of slower growth than 1995, when the world chip market grew by 42%.
Industry analysts attributed much of the drop to a glut in semiconductors earlier in the year after personal computer makers placed large orders expecting demand to remain strong. When the demand failed to materialize, PC makers started to slash their orders.
Wilf Corrigan, chief executive of LSI Logic Corp., said many computer makers and other customers have decided to reduce their inventories of chips.
“I’ve talked to a lot of customers over the past few months. In very few cases does it mean their business has slowed down,” he said.
Demand outside the Americas remains stronger, but the ratio doesn’t cover that. “It really says nothing about what demand is in Europe or Japan, and that isn’t broadly understood,” Corrigan said.
About half of all semiconductors are used in computers, while the rest go into cellular phones, consumer electronics products, automobiles and other devices.
A sharp drop in memory chip prices has also affected the book-to-bill ratio, which measures the value of semiconductors in dollars rather than units.
The book-to-bill ratio is a three-month moving average.
