Stephen Howe is a trader of expensive "antiques". Although the buyer's demand has reached the highest level in history, he is not happy: the goods are in short supply, and he can hardly find any goods to sell.
Stephen Howe bought and sold not old watches or classic cars, but chip manufacturing equipment that was extremely scarce these days. The machines he sells are often at least ten years old-because the most capitalized chip makers like Samsung, Intel and TSMC can hold new chip equipment in their hands for about ten years. The machines he sells are much older.
The chip shortage in 2020 and 2021 has severely hindered the world's ability to produce products ranging from cars to smart phones. According to many analysts, semiconductor manufacturers and Stephen Howe himself, the shortage of second-hand chip manufacturing equipment is one of the reasons why the chip shortage is so serious.
No one knows exactly how many chips in the world are made with second-hand equipment, but according to Stephen Howe's estimation, the ratio may be as high as 1/3.
Wayne Ram, the research director of CCS Insights, a technology consulting firm, said that more than half of the global semiconductor industry’s revenue comes from older chips. Intel’s new advanced notebook processor chips cost hundreds of dollars. In contrast, many older-generation chips cost only a few dollars, and some even cost a few cents.
These chips using more mature technologies will be implanted into cameras and other sensors installed in people's mobile phones and automobiles, power electronics, logic controllers of factory equipment, and chips that implement wireless communication. The shortage of these chips is the root cause of problems such as car manufacturing shutdowns and Apple’s inability to meet demand for the latest iPhone.
In addition, the new crown epidemic indirectly triggered the current chip shortage, which not only caused the closure of factories that are critical to the manufacturing and packaging of these chips, but also caused a surge in demand for home remote office equipment and other products that use chips. But the problem does not stop there.
Over the years, a longer-term trend—that is, the demand for chips for various electronic devices is expanding and cannot be met—has kept the equipment supply chain at the core of the chip supply chain busy.
Hassan Cooley, CEO of ON Semiconductor, a semiconductor manufacturer based in Phoenix, Arizona, said that part of the reason for the continued increase in demand is the development of the "Internet of Things" in the past five years or so. Not only are many of the things people buy now equipped with chips, the number of chips implanted in some things has far exceeded.
Faced with these demands, chip manufacturers have promised to increase chip production more than ever before, but it is very difficult or impossible to accelerate the production of chips that so many companies currently need.
One of the reasons is that even under the best circumstances, it would take months to expand the capacity of a chip manufacturer, partly because the complexity of chip manufacturing is almost unbelievable-even when using older technology.
This level of complexity means that even if a start-up or less experienced chip manufacturer can obtain chip manufacturing equipment, it may not be able to make chips that are good enough to be profitable. Even the best chip manufacturers have to throw away 10% of the chips they make on average, and achieving such a low scrap rate requires considerable professional technical experience.
Stephen Howe said that as this chip shortage has intensified, the battle for second-hand equipment has continued to intensify. Even chip manufacturers themselves are affected by this chip shortage.