Date July 2019
- Through 2022, semiconductor and circuit manufacturing industry revenue is expected to grow at an annualized rate of 0.9%
- Current projections for equipment market growth are in the low teens for 2017, which would place the equipment market above the last market high in 2011 but below the industry high-water mark set in 2000
- The value of both 200mm and 300mm tools has risen sharply in the past few years
Semiconductor fabs require significant investment: Integrated circuits are manufactured in a semiconductor fabrication plant, commonly called a “fab.” The manufacturing takes place in a cleanroom, which controls for particulate matter, temperature, and humidity, and contains the tools used in the processing of silicon wafers. Semiconductor equipment is expensive to purchase, operate, and maintain, with new costs for the most sophisticated tools ranging up to $50 million each. Major processes include lithography, deposition, etch, diffusion, ion implant, and metrology. A typical fab may have several hundred tools.
Wafer sizes important: Fabs and tools are typically referenced in terms of the size of the wafers they handle, measure, and process. The current state-of-the-art wafer is 300mm, supplanting 200mm in the mid-2000s. Wafer size is important, since the number of devices per wafer increases geometrically with its diameter. Currently, 300mm tools are used only by the industry’s top chip manufacturers, with 200mm tools still widely used across the industry. Also of note, 200mm and 300mm tools are not compatible and thus cannot be used interchangeably.
Equipment valuable on secondary market:The secondary market for semiconductor tools is significant; currently estimated to be between $5 and $10 billion annually, it comprises nearly 10 percent of the overall equipment market. Semiconductor tools are refurbished and sold through a highly fragmented supply chain. In addition to the original equipment manufacturers, semiconductor manufacturers, refurbishers, dealers, and brokers buy and sell equipment. One piece of equipment can change hands several times before it is put back into a production or research facility.
Following are several key considerations for lenders to keep in mind when considering semiconductor equipment as collateral:
- A minimum of six months is recommended for the orderly liquidation of semiconductor equipment; more time may be needed in the case of a large tool set or complete facility liquidation
- Liquidation expenses can be significant, as facilities and personnel must be maintained to protect the tools from contamination
- Over the past few years, the value of 200mm and 300mm tools has risen sharply, as demand has outstripped supply
- Semiconductor values can be volatile, as supply and demand dictate market prices and the industry is highly cyclical
- Equipment is subject to both technological obsolescence and industry cycles
- Technological obsolescence varies by tool type and technology