semiconductor

Semiconductor Production & Equipment

Industry Insight

Date July 2020

Semiconductors - Projected Values

 

Current Trends

  • Global sales of semiconductor manufacturing equipment fell 7 percent to $59.8 billion in 2019 from the historic high of $64.5 billion in 2018; however, North American sales increased 40 percent to $8.15 billion for the same period.
  • A sales decline in the single digits for semiconductor tools is expected in 2020, as the industry has shown resilience during COVID-19 shutdowns.
  • The semiconductor and circuit manufacturing industry is projected to remain relatively flat through 2025 driven by growing competition from Asian countries and companies shifting their operations offshore.
     

 

Synopsis

Semiconductor Fabs Require Significant Investment: A semiconductor fabrication plant (commonly called a fab) is where integrated circuits are manufactured. The manufacturing takes place in a cleanroom, a room that 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.

In terms of industry performance and outlook, global sales of semiconductor manufacturing equipment fell 7 percent to $59.8 billion in 2019 from the historic high of $64.5 billion in 2018, but North American sales increased 40 percent to $8.15 billion. However, a sales decline in the single digits for semiconductor tools is expected in 2020, as the industry has shown resilience during COVID-19 shutdowns. The semiconductor and circuit manufacturing industry is projected to remain relatively flat through 2025, driven by growing competition from Asian countries and companies shifting their operations outside of the U.S., based on research conducted by IBISWorld.

Wafer Sizes are 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, which supplanted 200mm wafers in the mid-2000s. Size is important, since the number of devices on a wafer increases geometrically with its diameter. 

Only the industry’s top chip manufacturers use 300mm tools; however, 200mm tools are still widely used across the industry. It is important to note that 200mm and 300mm tools are not compatible. 

Whether a fab is 200mm or 300mm is largely dependent on the products it makes. High volume chips such as DRAM, flash memory, and central processing units are made at 300mm fabs using the latest technology. Lower volume devices not requiring the latest technology, such as Internet of Things (IoT) devices, are generally made at 200mm fabs. There are a limited number of 300mm fabs in the United States.

In terms of equipment values on the secondary market, the value of both 200mm and 300mm tools has remained relatively stable since 2019. 

Equipment is Valuable on the Secondary Market: The secondary market for semiconductor tools is significant, estimated to be between $5 billion and $10 billion annually and comprising 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, re-furbishers, 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 relative to the disposition of semiconductor equipment:

  • 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 a complete facility.
  • Liquidation expenses can be significant as facilities and personnel must be maintained to protect the tools from contamination.
  • Over the past few years, demand for 200mm tools has risen sharply, as many objects in the IoT use 200mm wafers. Used equipment can be an inexpensive starting point to fulfill the demand.
  • However, some types of used equipment are in short supply. The demand for 200mm wafers is expected to continue into the foreseeable future for the fabrication of image sensors, analog products, microcontrollers, display drivers, and other legacy items associated with the IoT.
  • Equipment is subject to both technological obsolescence and cycles of the industry, with obsolescence varying by tool and technology.


Note: This publication is provided for informational marketing purposes only. The material contained herein should not be regarded as advice, nor relied upon to make financial, operational or other decisions; nor should it be used as a substitute for an asset appraisal. Actual recovery values may vary from transaction to transaction and the recovery values referenced herein are for representative transactions without regard to specific key factors. This material may be redistributed only in its entirety, including notice of copyright. All rights reserved. ©2020 Gordon Brothers, LLC.
 

Reference sources: Semiconductor Equipment and Materials Institute, VLSI Research, Ibisworld