Due to the Semiconductor Shortage, Manufacturing Equipment Also Faces 'Shortage'... Prices Rise

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As the global semiconductor shortage continues, the prices of semiconductor manufacturing equipment are also rising. With semiconductor manufacturers consecutively deciding on large-scale facility investments, demand has surged, leading to longer lead times (the time from order to delivery) for equipment and rising prices for used manufacturing equipment.

According to industry sources on the 12th, the foundry (semiconductor contract manufacturing) sector is rapidly expanding its facility investments, increasing demand for semiconductor manufacturing equipment. They view the semiconductor supply shortage and price increases caused by COVID-19 not as temporary phenomena but as structural issues, prompting efforts to secure equipment.

As demand suddenly increases, the supply speed of manufacturing equipment companies is somewhat slowing down. Generally, the lead time for semiconductor manufacturing equipment was around 3 to 6 months, but recently, with surging demand, it has extended to about 10 months and is expected to exceed one year soon. For example, Hanmi Semiconductor, a domestic semiconductor equipment company, had an average equipment lead time of 2.8 months last year, but from early this year to the present, it has doubled to 6.4 months.

Prices for used semiconductor manufacturing equipment are soaring. In particular, demand has significantly increased for 200mm wafer equipment needed for semiconductors used in driver ICs for TVs, laptops, PCs, and power ICs used in Internet of Things (IoT) devices. The scale of 200mm equipment produced by semiconductor manufacturing equipment companies is small compared to demand, and used equipment is also scarce, causing prices to rise.

Kim Jung-woong, CEO of Surplus Global, a used semiconductor equipment company, explained the current situation: "Until about 10 years ago, there were around 7,000 to 8,000 used 200mm equipment units available in the market, but now it has dropped below 1,000. Used equipment prices have risen by about 20% on average over the past six months. There are many pieces of equipment that people want to buy but cannot."

This trend is expected to continue for the time being. With evaluations that the semiconductor supercycle (period of booming demand) has officially begun, aggressive facility investments are anticipated. According to the Semiconductor Equipment and Materials International (SEMI), equipment sales reached a record high of $68.8 billion (approximately 78 trillion KRW) last year, and semiconductor equipment investments are projected to be $72.1 billion and $76.1 billion this year and next year, respectively. Based on semiconductor manufacturing equipment companies centered in the North American region, the transaction volume in January increased by 13.4% compared to the previous month and by 29.9% compared to the same month last year, surpassing $3 billion monthly for the first time ever. This indicates that demand for manufacturing equipment is rapidly increasing this year as well.

Researcher Cho Yoon-su of Yuanta Securities said, "Semiconductor equipment investment historically follows an investment cycle of about 3 to 5 years. In 2019, semiconductor equipment investment decreased by 6% compared to the previous year, marking a contraction and signaling the end of one cycle. In 2020, it reached an all-time high, suggesting the start of a new semiconductor investment cycle."