11-Aug-03 IC Inv: 11-Aug-03 Nodes: 11-Aug-03 BB Rto: 11-Aug-03 QtrFcst: 11-Aug-03CPPI: 11-Aug-03 Ttl Cpcty: 11-Aug-03 Utlztn: 11-Aug-03Eq & IC Rev's: 11-Aug-03 AnnFcst: 11-Aug-03
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information which in some cases has been furnished to VLSI Research by responsible persons on the understanding that it will be released by VLSI Research only to a limited audience and not be made widely available or that its release will be restricted due to its confidential nature. Publication of this report is not intended to constitute a disclosure to the public of the information contained in this report. Although data was obtained from sources considered reliable, it cannot be guaranteed. No independent steps have been taken to confirm its accuracy, truthfulness, or completeness. Printed in the United States of America. All rights reserved. No part of this publication may be used in any legal proceedings nor may any information contained
herein be disclosed to any third party, or reproduced, or transmitted to any third party, in any form or by any means -- mechanical, electronic, photocopying, duplicating, microfilming, videotape, verbally or otherwise -- without prior written permission of VLSI Research. Copyright © 2003 by VL
Research Inc.
New Orders are Haunted by the Ghosts of Old Nodes, While Storm Fears
Threaten.
For Spreadsheets: 1. For best viewing results, resize by changing size percentage to a size that fits within your monitor settings and limitations.2. To paste into Microsoft PowerPoint (tm)): click on chart, copy, and then paste into a PowerPoint slide.3. Tabs are updated as indicated in rows 6 & 7 by highlighting text and date.
General Instructions Use Restrictions
August 11, 2003
Sheet Revisions
®
VLSI's GLOBAL CHIP MAKING CLIMATE TREND INDEX(Average of Regional Order Activity Patterns in Chip Equipment)
-20-10
0102030405060708090
100110120
Dec
-98
Feb-
99
Apr-
99
Jun-
99
Aug-
99
Oct
-99
Nov
-99
Jan-
00
Mar
-00
May
-00
Jul-0
0
Sep-
00
Oct
-00
Dec
-00
Feb-
01
Apr-
01
Jun-
01
Aug-
01
Oct
-01
Nov
-01
Jan-
02
Mar
-02
May
-02
Jul-0
2
Sep-
02
Oct
-02
Dec
-02
Feb-
03
Apr-
03
Jun-
03
Aug-
03
Week
Tem
pera
ture
in D
egre
es F
9/113/01: Cisco &
Moto Warn
4/01: Nokia & Ericsson
Warn
2/00: VLSI's CPPISignals 1st Sign of Downturn
Mar to Dec 2000: RepeatedChip Insider Warnings of Short Upturn.
TCI Calls 2000 the "2 for 1 Deal "
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc.Copyright © 2003 by VLSI Research Inc.
Negative Concerns:- Chip mkrs focus on P&Ls- Pricing pressure down the chain- No market share loss fears- Natural Gas Price Rise in U.S.- Japan's Nuclear Power Crisis- Few New Demand Drivers- EU and JA in Recession
Positive Factors:+ U.S. Economy remains healthy+ EU & JA Economy picking up.+ Tax Cuts + Refi's + Auto Incntvs+ Int Rte Cuts + Corp Bond Ylds Lo+ $'s decline + CapEx @ Rcrd Lo's+ IC Inv Low + Chip Prices strong+ Chip Capacity Utilization
6/02: Cisco first talks of telecom
spending recovery in 2003
2/01: TSMCWarns
11/02: Dell
Warns.
Decline LineGrowth
1/03: Intel, TSMC, & UMC cut
spending.
5/02: TCI Signals new dip.
Last week's hopes that the slowing was a fluke proved wrong. We saw the first push-outs in some time (they came in Europe). There is
weakness throughout. The reason is not due to declines, it's the result of companies trying to clean up P&L's and Balance Sheets. Problem is, the supply chain is doing this by pushing down prices, which pushes the profitability
5/03: TCI says weak upturn underway.
VLSI's Spot Market Chip Price Performance Index
10
100
1000
1/3/1999
2/14/1999
3/28/1999
5/9/1999
6/20/1999
8/1/1999
9/12/1999
10/24/1999
12/5/1999
1/16/2000
2/27/2000
4/9/2000
5/21/2000
7/2/2000
8/13/2000
9/24/2000
11/5/2000
12/17/2000
1/28/2001
3/12/2001
4/23/2001
6/4/2001
7/16/2001
8/27/2001
10/8/2001
11/19/2001
12/31/2001
2/11/2002
3/25/2002
5/6/2002
6/17/2002
7/29/2002
9/9/2002
10/21/2002
12/2/2002
1/13/2003
2/24/2003
4/7/2003
5/19/2003
6/30/2003
8/11/2003
Week Ending
VLSI's CPPI
24 Month Moore's Law Cycle
12 Month Moore's Law Cycle
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc.Copyright © 2003 by VLSI Research Inc.
CPPI: UpLogic: Stable Memory: Unstable to Rising
The commodity of commodities, DRAM, is no longer a commodity. DRAM spot prices are up 34% since May 12th (better than stocks!).
Contract prices have been below spot for some time and DRAM makers are confidently predicting shortages. DRAM makers have finally learned the lesson of supply and demand and that controlling supply nets better pricing and profitability Fewer suppliers help (only 4 have >10% shr)
11-Aug-03 TCI 30811.03Last Update:
2001 2002
IC Inventories
0
5
10
15
20
25
30
35
40
JAN
'99
FEB
MA
RA
PR
MA
YJU
NJU
LA
UG
SE
PO
CT
NO
VD
EC
JAN
'00
FEB
MA
RA
PR
MA
YJU
NJU
LA
UG
SE
PT
OC
T N
OV
D
EC
JAN
'01
FEB
M
AR
A
PR
MA
YJU
NJU
L A
UG
S
EP
O
CT
NO
V
DE
C
JAN
'02
FEB
M
AR
AP
R
MA
YJU
NJU
LA
UG
SE
P
OC
T N
OV
D
EC
JAN
'03
FEB
M
AR
A
PR
M
AY
JU
N
JUL
PA
UG
F
IC In
vent
ory
in $
B
0
0.5
1
1.5
2
2.5
3
3.5
4
I:B R
atio
IC Inventory ($B)IC Inventory to Billings Ratio
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc.Copyright © 2003 by VLSI Research Inc.
IC inventories are starting to kick back up. As said last month, chip makers' customers are
not pulling away. It's still a soft end demand
environment, which is why fear dominates the spending environment.
11-Aug-03 TCI 30811.04Last Update:
Realized Versus Total Capacity
65%
70%
75%
80%
85%
90%
95%
100%'9
9 JA
NFE
BM
ARAP
RM
AYJU
NJU
LAU
GSE
PO
CT
NO
VD
EC'0
0 JA
NFE
BM
ARAP
RM
AYJU
NJU
LAU
GSE
PO
CT
NO
VD
EC'0
1 JA
NFE
BM
ARAP
RM
AY
JUN
JU
L AU
G
SEP
OC
T N
OV
DEC
'0
2 JA
NFE
BM
ARAP
RM
AY
JUN
JU
L AU
GSE
P O
CT
NO
V D
EC
'03
JAN
FE
BM
AR
APR
M
AY
JUN
JU
L P
AUG
F
Util
izat
ion
Total Capacity UtilizationRealized Capacity UtilizationFull Utilization Point
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc.Copyright © 2003 by VLSI Research Inc.
Like IC inventories, capacity utilization is stalling. It should be the normal
summer slump. But fear dominates the landscape. No one feels
comfortable building inventory, so they cut production instead.
Total Capacity Utilization includes unrealized capacity that is committed and in the pipeline, either as tools on back order or newly installed, but not qualified and running wafers. Realized
Utilization does not include this, nor capacity that is still counted as in production, but is only capable of producing
obsolete or discontinued products; nor capacity that is moth balled for similar reasons.
Utilization by Node* IC Fab Capacity* by Node in MSINode**: 90 130 180 250 350 >500 90 130 180 250 350 >500
NOV 92% 95% 79% 75% 77% 85% 5.6 39.7 80.6 37.8 56.8 201.8DEC 88% 88% 75% 69% 71% 81% 6.0 40.4 80.6 37.8 58.7 196.0
'03 JAN 91% 90% 77% 64% 67% 82% 6.5 43.9 77.2 34.6 57.5 196.0FEB 89% 90% 78% 65% 70% 82% 7.0 47.3 73.9 31.5 56.3 197.1
MAR 92% 97% 87% 76% 78% 89% 7.7 53.4 69.5 26.6 54.5 196.0APR 93% 97% 87% 74% 76% 89% 8.3 57.3 67.6 25.8 53.2 196.3MAY 93% 97% 88% 76% 78% 90% 8.9 61.0 65.8 25.1 51.9 200.4JUN 93% 95% 87% 72% 75% 87% 9.7 65.1 63.7 24.2 50.5 204.9
JUL P 93% 95% 85% 70% 72% 86% 10.4 68.5 61.7 23.5 49.2 209.3AUG F 94% 96% 83% 68% 71% 87% 11.3 71.5 59.6 22.8 48.0 213.6
* Based on line loading. ** in nanometers * Realized
11-Aug-03 TCI 30811.05RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc. Copyright © 2003 by VLSI Research Inc.
Last Update:
Utilization is sagging more in the middle. The reason why there is no panic is that this sag is still lightly loaded. This soft underbelly is a problem. Look back to 99/2000 - all nodes were tight for 6 months before the panic set in. - - Dan
Last Update: 11-Aug-03 TCI 30811.06
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc. Copyright © 2003 by VLSI Research Inc.
Copyright © 2003 by VLSI Research Inc.
200.0
It's the summer slump. After a brief respite around SEMICON West, worries that this year will be a repeat of last summer have returned and dominate spending sentiment. At the same time, chip makers are more concerned about cash positions than capacity. Improving RONAs are a high priority. These outweigh fears of market share loss due to an inability to ship.
Most fear excess supply more and demand is lacking. We've added a 2004 forecast. It shows capacity constraints not li iti til th 2 d
CAPACITY UTILIZATION RATES(chip production/manufacturing capacity, in %)
60
65
70
75
80
85
90
95
100
2000
JA
N
MA
R
MA
Y
JUL
SEPT
NO
V
2001
JA
N
MA
R
MA
Y
JUL
SEPT
NO
V
2002
JA
N
MA
R
MA
Y
JUL
SEPT
NO
V
2003
JA
N
MA
R
MA
Y
JUL
P
SEPT
F
NO
V F
2004
JA
N F
MA
R F
MA
Y F
JUL
F
SEPT
F
NO
V F
60
65
70
75
80
85
90
95
100
W.W. Front End UtilizationW.W. Test UtilizationW.W.Assembly Utilization
11-Aug-03 TCI 30811.07RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc. Copyright © 2003 by VLSI Research Inc.
Last Update:
- The B:B ratio for equipment turned up in June and chips hit 1.1. But the summer slump has slowed things down. August is proving to be a month that is testing the upturn.
- Chip makers feel no pressure, with equipment readily available. This why some companies are doing well and others poorly. With delivery no issue, they buy the best. There's no pressure for larger orders, because they don't believe they will need it.
- We don't see the Equip to IC Sales ratio trending up in the foreseeable future
BOOK-TO-BILL & CONTENT RATIOS($/$)
0.10
0.30
0.50
0.70
0.90
1.10
1.30
1.50
2000
JA
N
MA
R
MA
Y
JUL
SEPT
NO
V
2001
JA
N
MA
R
MA
Y
JUL
SEPT
NO
V
2002
JA
N
MA
R
MA
Y
JUL
SEPT
NO
V
2003
JA
N
MA
R
MA
Y
JUL
P
SEPT
F
NO
V F
2004
JA
N
MA
R F
MA
Y F
JUL
F
SEPT
F
NO
V F
Boo
k-to
-Bill
0%
10%
20%
30%
40%
50%
60%
Eqpt
to IC
Sal
es
Semi Eq Book-to-Bill (1mo)
W.W. IC B:B (3mo avg.)
Eqpt to IC Sales Ratio (1mo)
11-Aug-03 TCI 30811.08
y
Last Update:
Our 2003 forecast remains unchanged. But, weak demand has driven down our monthly forecasts for 2004. The net growth for the year is now 19% versus 24% last month. The demand picture is poor, bookings are tracking billings, and there is slow capacity expansion. All this pushes the probability for a hard upturn out to 2005.
This month extends the OFR line out through 2004. For now, the base is a flat high/low for each month instead of the Dec based trumpet shaped curves shown for 2003. A high-low range of +40% to
Worldwide Chip Making Equipment Markets
0
1
2
3
4
5
6
7
8'9
9 JA
N
AP
R
JUL
OC
T
'00
JAN
AP
R
JUL
OC
T
'01
JAN
AP
R
JUL
OC
T
'02
JAN
AP
R
JUL
OC
T
'03
JAN
AP
R
JUL
P
OC
T F
'04
JAN
AP
R
JUL
F
OC
T F
Rev
enue
s in
$B
Eq BookingsEq Billings36 Mo Rolling Avg. of Eq Billings Dec Forecast OFR High OFR Low
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc.Copyright © 2003 by VLSI Research Inc.
11-Aug-03 TCI 30811.09Last Update:
2Q03 closed with chips splitting the upper and lower OFR lines in each month. Preliminary results for July show bookings rolled over. It continues to be a weak recovery, exemplified by weak end-demand.
This month extends the OFR line out through 2004. A high-low range of +45% to 0% is shown.
One critical issue is where is no-man's land in the New Reality? It used to be +12 to 20%. Is it now +5 to 13%? There's no answer, so watch out. - - Dan
Worldwide Chip Making Markets
0
5
10
15
20
25'9
9 JA
N
AP
R
JUL
OC
T
'00
JAN
AP
R
JUL
OC
T
'01
JAN
AP
R
JUL
OC
T
'02
JAN
AP
R
JUL
OC
T
'03
JAN
AP
R
JUL
P
OC
T F
'04
JAN
AP
R
JUL
F
OC
T F
Rev
enue
s in
$B
WW IC BILLINGS ($B)
WW IC BOOKINGS ($B)
36 Mo Rolling Avg. of ICBillings Dec Forecast
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc.Copyright © 2003 by VLSI Research Inc. Source: WSTS & VLSI Research Inc
Equipment ChipsCurrent Qtr/Qtr B:B Eq-to-IC Current Qtr/Qtr B:B UpturnForecastGrowth Ratio Ratio ForecastGrowth Ratio Prob.*
($B) (%) (%) ($B) (%) (%)3Q02 8.1 10.1% 1.04 26% 3Q02 31.4 8.4% 0.91 - - 4Q02 7.9 -2.1% 1.00 24% 4Q02 32.3 2.9% 1.04 - - 1Q03 8.0 0.9% 1.00 26% 1Q03 31.0 -4.2% 0.96 - - 2Q03 7.8 -2.1% 0.97 25% 2Q03 31.8 2.7% 1.13 - - 3Q03 7.8 -0.6% 22% 3Q03 35.1 10.2% 0%4Q03 8.0 3.1% 22% 4Q03 36.3 3.6% -5%1Q04 8.3 4.1% 22% 1Q04 37.3 2.7% -10%2Q04 9.0 8.7% 23% 2Q04 40.0 7.1% -15% * Ratio of Equipment Sales to IC Sales. * Judgmental probability of catching a wave in a quarter.
Probability is cumulative with + for an upturn – for a downturn.TCI 30811.10
Last Update: 11-Aug-03
\/ Macro & Electronics \/ \/ Forecasts \/
U.S. MACROECONOMIC DATAELECTRONICS MONEY SUPPLY PRIME T-BILL
GDP SHIPMENTS (M1) RATE RATE NFLATION
($B)*Percent Growth ($B)
Q/Q Growth ($B)
Percent Growth† (%)
3-Month (%) (%)
4Q01 9249 2.7% 116.6 4.0% 1174 6.4% 5.2% 1.9% -0.5%1Q02 9363 5.0% 106.2 -8.9% 1182 2.5% 4.8% 1.7% 1.3%2Q02 9392 1.3% 107.0 0.7% 1184 0.8% 4.8% 1.7% 1.2%3Q02 9486 4.0% 105.5 -1.4% 1184 -0.1% 4.8% 1.6% 1.0%4Q02 9518 1.4% 109.6 3.9% 1211 9.6% 4.5% 1.3% 1.8%1Q03 9552 1.4% 101.1 -7.8% 1226 5.0% 4.3% 1.2% 2.4%2Q03 9608 2.4% 108.5 7.3% 1258 10.9% 4.2% 1.0% 1.0%3Q03 9691 3.5% 111.6 2.9% 1276 5.9% 4.0% 0.9% 1.4%4Q03 9803 4.7% 117.9 5.6% 1283 2.0% 4.0% 0.9% 1.9%* Chained '96 Dollars† Annual Rate of Growth
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc. Copyright © 2003 by VLSI Research Inc.
Preliminary results of VLSI quarterly data storms indicate the equipment market grew 1% in 1Q03 instead of the 3% decline expected. Q2 is looking like it declined instead of grew, but AMAT's not in yet. Still, 1H revenues were greater than thought. Note how the Eq-to-IC ratio jumped in Q1. Equipment got ahead of chips, like in the 1H02. So expect a flat second half. The 1H03 for Chips was worse than in '02. Strange, because U.S. electronics was better. Inventories are also declining & utilization is down, so chip makers are holding production for
The U.S. GDP grew at an annual rate of 2.4% in the 2Q03, according to Commerce Department’s preliminary estimates. Clearly, the growth rate came in higher than expected; beating our last forecast as well as the consensus forecast, which anticipated a GDP growth of 1.5%. Personal consumption, which was up 3.3%, continues to be the driving force of economic growth-- confirming our view that this will be a consumer-led upturn. With the huge growth in money supply, historic-low interest rates, and recent tax cuts/credits we expect a pretty hot second half in the U.S. economy. This is in line with our forecast for the 2H03 which remained unchanged (for specifics see table at bottom of this yellow box). - - Andrea
2Q03 Statistics VLSI R Fcst Actual Consensus GDP 2.0% 2.4% 1.5%Personal Consumption 2.2% 3.3%M1 8.2% 10.9%Prime Rate 4.2% 4.2%T-Bill 1.1% 1.0% Inflation 1.0% 1.0%
Current Annual OFR* Capacity RealizedEquipment Forecast Growth High Low Utilization (%)
($B) (%) (%) (%)2002 29.6 -24.6% 50% -30% 2002 84.3%2003 31.5 6.4% 50% -20% 2003 87.0%2004 37.6 19.3% 40% -20% 2004 92.3%
* Operational Flexibility Requirement (as measured in revenue growth)
Current Annual OFR* Capacity TotalChips Forecast Growth High Low Utilization (%)
($B) (%) (%) (%)2002 120.5 1.7% 40% -20% 2002 82.9%2003 134.1 11.3% 35% -10% 2003 84.3%2004 167.1 24.5% 45% 0% 2004 86.2%
* Operational Flexibility Requirement (as measured in revenue growth)
Last Update: 11-Aug-03
TCI 30811.11
RESTRICTED DATA: for access and use only within your company, as per your company's agreement with VLSI Research Inc. Copyright © 2003 by VLSI Research Inc.
Our forecasts for 2004 diverged, with equipment dropping from 24 to 19% & chips rising from 22 to 25%. 2003's forecast is unchanged for both. The recent weakness in equipment is the primary driver of this change. The beer gut in node utilization in another factor. - - Dan