A KEY US indicator of the semi conductor industry has dropped to", a nine year low, although analysts are divided on the importance of the measure.
Computer chip stocks weakened after the Semiconductor Industry Association reported its book to bill ratio fell to 0.93, meaning that for every $100 in shipments there were only $93 in new orders.
Many analysts said the sharp downturn in January was indicative of an overwhelming supply of chips, although some warned that too much should not be read into's the figure.
The trade group said it was the first time since January 1991 that orders have fallen behind shipments and the first time since the group started using adjusted figures in January 1987 that the ratio was this low.
Analysts said the trade group's report showed that the supply of memory chips is overwhelming demand.
"Memory companies are going to be more affected and for good reason," said Cowen & Co analyst semiconductor analyst Mr Drew Peck. "Memory chip (bookings) have been plunging for at least a quarter and that is likely to continue," Mr Peck said. "They are primarily responsible for the lower number in the dismal January book to bill report."
Soundview analyst Mr Rick Whittington also said he believed the current industry situation increasingly resembled the cyclical conditions of the mid 1980s, when too much capacity led to oversupply and a sharp fall in semiconductor stock prices.
Excluding memory chips and other chips used in personal computers, Mr Peck maintained that the rest of the computer chip industry is doing quite well.
