While modest improvements continued to be seen in the global semiconductor sales as well as the SEMI’s book-to-bill ratio, we are maintaining our NEUTRAL rating on the sector as we understand that the recovery will only be reflected in the local companies in three to six months’ time. The latest global semiconductor sales in March 2013 inched up by 0.9% YoY as the decent growth contributed by the Asia Pacific (+6.9% YoY) and Europe (+0.7% YoY) segments was somewhat erased by a sharp decline in the Japan (-18% YoY,) and Americas segments (-1.5% YoY). Meanwhile, on a MoM comparison, global semiconductor sales in March 2013 grew by 1.1% from its low base in February 2013. On a separate measure, the book-to-bill ratio for North America-based semiconductor equipment manufacturers came in higher at 1.14x in March compared to 1.10x in February. Although the ratio remained above the 1.0x parity which indicates a stronger demand, a YoY comparison basis in terms of absolute bookings and billings numbers still suggest that both orders and billings remained relatively soft, likely due to the pressure of a frail global economic condition. All in all, we are reiterating our earlier conviction that any lights at the end of the tunnel could only be seen in 2HCY13 on the back of a catch-up in global chip demand amid a possible better global economic condition then.

Global semiconductor sales in March 2013 continued to inch up on a YoY and MoM basis. According to the Semiconductor Industry Association, global semiconductor sales in March 2013 inched up by a mere 0.9% YoY to US$23.5b. In terms of the regional sales performance breakdown, the decent growth contributed by the Asia Pacific (+6.9% YoY) and Europe (+0.7% YoY) segments was negated by the sharp decline in the Japan (-18% YoY, which also reflected in part the devaluation of the Japanese yen) and Americas segments (-1.5% YoY). On a MoM basis, global semiconductor sales in March 2013 grew by 1.1% from its low base in February 2013 (due to a weak seasonal trend) driven by the Europe (+5.7%) and Asia Pacific (+1.7%) segments despite the weaker sales of the Americas (-1.9%) and Japan (-1.6%) segments.

SEMI’s book-to-bill ratio came in higher at 1.14x in March 2013. According to Semiconductor Equipment and Materials International (SEMI), the book-to-bill ratio for North America-based semiconductor equipment manufacturers improved to 1.14x in March from 1.10x in February. A ratio of 1.14x means that USD114 worth of orders were received for every USD100 of products billed for the month. Delving deeper, on a MoM basis, March’s bookings grew by 6% while billings also increased by 3%. On the other hand, on a YoY basis, February’s bookings and billings both declined by 21% and 22% respectively. That said, although the ratio of 1.14x points to a stronger demand, a YoY comparison basis on absolute bookings and billings numbers suggests that both orders and billings still remained relatively soft and we reckon that this could be due to the ongoing pressure from a frail global economy.

Review of tech companies’ results under our coverage. Unisem’s 1QFY13/1QCY13 results came in below expectations, although the group managed to narrow its LBIT with the rationalisation of certain low margin and unprofitable product lines. The main culprit was the weaker top line performance (-3% YoY, -7% QoQ) dragged down by a lower sales volume in its Asia segment. On the other hand, while MPI’s 3QFY13/1QCY13 managed to turn its YTD net profit back into the black driven by stringent cost controls, its results, nonetheless, also came in below market expectations due to its flat revenue growth. If we were to take the latest results of these two main players as indicators, other tech companies’ 1QCY13 results under our coverage could also come under pressure, mainly on the back of lacklustre sales momentum amid the frail global economic condition.

Still keeping our conservative stance unchanged. On a macro view, while modest improvements continued to be seen in these main indicators, we are still being prudent and prefer to err on the conservative side as we understand that the recovery will only be reflected in the sales of the companies in three to six months’ time. Thus, we are reiterating our earlier conviction that any lights at the end of the tunnel could only be seen in 2HCY13 on the back of a catch-up in global chip demand amid a possible better global economic condition then.

Source: Kenanga