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Minnesota-based Polar Semiconductor, which makes chips for automakers, has been overwhelmed with orders. However, expanding production lines to help address the chip shortage that has shut down auto factories around the world is not feasible, in part because of a shortage of old-style chipmaking equipment.
Chip factories like Polar make chips on 200-millimeter silicon wafers using equipment that was state-of-the-art two decades ago. Advanced chips are now made using larger wafers, but demand for simpler, older chips remains high.
Chip supply problems have been exacerbated by the impact of a COVID-19-driven computer equipment boom and unexpectedly strong growth in auto sales, which led to shortages. General Motors Co. on Wednesday expanded production cuts at three North American plants, and Fiat Chrysler owner Stellantis warned that the pain could last through the year. The chip shortage has forced Ford Motor Co. to slash production of its F-150 pickup truck, a longtime profit driver.
Automakers use a variety of chips in their cars. Some of them, such as those used in infotainment systems, are made in the same cutting-edge chip factories that make chips for smartphones. However, other chips, such as those in braking and engine systems, are made using older, proven technologies because they meet the durability and reliability requirements that automakers demand.
But machines to make those older chips can take six to nine months to find, said Surya Iyer, Polar's vice president of operations and quality.
“There’s nothing I can do to expand capacity except push my limits,” Iyer said. “Real capacity ramp-up will take at least nine to 12 months.”
Dealers in chipmaking equipment say they can’t find used equipment, leaving some buyers stalking older factories in the United States, Japan and Europe, waiting for them to close in hopes of snapping up the gear inside.
“There is strong demand for used equipment, but what we have is not enough to meet the demand,” said Bruce Kim, chief executive of Surplus Global Inc., South Korea’s largest dealer of used chip equipment.
He said used equipment prices have risen as much as 20% in the past six months, while the number of refurbished tools in inventory has fallen to 1,000 from 7,000 to 8,000 a decade ago.
In normal times, Ohio-based Rite Track buys old chipmaking equipment, upgrades it and sells it to chip factories. But the recent crunch has prompted the company to spend more time sending technicians to upgrade equipment already on factory floors so that more chips can be produced from it, said Tim Hayden, the company’s chief executive.
“You just can’t buy a used 200mm tool on the open market because it’s not easily available,” Hayden said. “So now people are getting more creative.”
Demand for older tools is so strong that buyers are looking for all kinds of factory help. Spin Memory, based in Fremont, Calif., is designing a new type of memory chip and runs a small "pilot line" that's mostly used to provide samples to potential customers, said Tom Sparkman, chief executive of the company. Although Spin Memory's tools use 20-year-old technology, Sparkman gets offers to buy them almost every day.
“We haven’t tried to get rid of it yet, but it’s tempting to do so someday,” he said.
Meanwhile, tool makers such as Applied Materials Inc and Lam Research Corp are building booming businesses by refurbishing or remaking some of their best-selling equipment from the 1990s and earlier.
“Demand has really exploded,” said Mike Rosa, head of strategy and technical marketing for a unit of Applied Materials, the world’s largest supplier of chip equipment.
David Haynes, managing director of Lam Research, said demand for 200mm tools once came primarily from China as it worked to build its own domestic chipmaking industry, but he noted that now, customers from around the world are looking to buy or upgrade older tools.
Still, investment in older technologies lags relative to spending on more advanced production lines, known in the industry as “advanced nodes.”
“Most of the capital spending has gone to advanced nodes,” said Tyson Tuttle, chief executive officer of Silicon Laboratories Inc. Chipmakers “have historically relied on digital chips to move out of older nodes, freeing up capacity for other supporting chips. The problem is, digital chips don’t move out that fast. The mainstream nodes are just stuck.”
Second-hand chip manufacturing equipment supplier Moov obtains financing
The booming market for used chipmaking equipment has helped online broker Moov Technologies Inc. raise $2 million in equity funding from venture capital firm NFX and angel investors.
This additional investment brings Moov’s total seed funding to $4.4 million.
“After two years of working with Moov, they are not only improving existing transactions, but also revealing underlying supply and demand to actually expand the market,” said James Currier, general partner at NFX, in the statement. “This is a $100 billion-plus opportunity for used high-tech manufacturing equipment.”
“Now more than ever, the used equipment marketplace provides a critical solution as it enables U.S. and global manufacturers to quickly scale production and respond to growing chip shortages, while creating a channel for liquidity when excess capacity is no longer needed,” said Steven Zhou, co-founder and CEO of Moov.
After rapid sales in the Asia-Pacific region in 2019, Moov hopes to grow in Europe.
Moov is trying to use the power of the Internet to expand its influence in the market. It hopes to use the market knowledge gained by matching unwanted equipment with users to provide industry analysis. Secondary semiconductor manufacturing equipment is worth between $5 billion and $10 billion a year, and its value is climbing as companies are prepared to pay more for hard-to-find equipment to expand production.
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