Semiconductors’ Book-to-Bill Bites the Dust

It’s tough being an economic indicator these days.

First, there was the index of leading indicators, which had been so over-vigilant that it predicted eight of the last three recessions. So the government gave it away, turning it over to a private group.

Then there’s the consumer price index, upon which all manner of pensions and economic calculations are based. A blue-ribbon panel says the CPI overstates inflation, but the government says it’s hard to know by how much--or what to do about it even if it is.

And starting this month, you can bid farewell to one of Wall Street’s favorite numbers, the semiconductor industry’s book-to-bill ratio--the ratio of the dollar value of new orders computer chip manufacturers receive in a month to the value of the chips they have shipped and billed. Instead, the industry will now issue only a single number each month--the dollar volume of chips it has shipped and billed around the world.

A book-to-bill ratio of greater than one was considered a sign of growth and industry health; less than one signaled contraction. But from now on, the Semiconductor Industry Assn. says it will stop publishing data on orders and report only on billable sales.

Book-to-bill has recently become an imperfect predictor of semiconductor industry sales and shipments. The index’s sharp dive one year ago on the top chart warned accurately of an industry slump in 1996.