Long Lead Times Seen For Equipment

There are a number of big stories in the semiconductor market thus far in 2021. Automotive chip shortages and tight foundry capacity are among the bigger ones. That’s just for starters.

What hasn’t received much attention is the ongoing shortages and long lead times for semiconductor equipment. In some cases, lead times have stretched out to 12 months or more for some equipment. Some tools, including 200mm systems, simply aren’t available.

Looking back, meanwhile, it’s been a topsy-turvy period in the semiconductor and equipment industries. In early 2020, the business looked bright, but the market dropped amid the Covid-19 pandemic outbreak.

Throughout 2020, different countries implemented a number of measures to mitigate the outbreak, such as stay-at-home orders and business closures. Economic turmoil and job losses soon followed.

But by mid-2020, the IC market bounced back, as the stay-at-home economy drove demand for computers, tablets, and TVs. The momentum has carried over into the first part of 2021.

IC Insights recently raised its IC market growth forecast from 12% to 19% in 2021. “In 2020, the global pandemic accelerated the digital transformation of the worldwide economy, which led to an increase in sales of new electronic systems and a marked uptick in the IC market in the second half of the year,” said Bill McClean, president of IC Insights. “Moreover, this demand has continued in full force in 1Q21. While the Covid-19 situation is still very fluid, many semiconductor companies have released strong 1Q21 guidance and expect healthy demand to continue throughout this year.”

Fueled by demand for electronic devices, fab equipment spending increased by 16% in 2020, followed by forecast gains of 15.5% this year and 12% in 2022, according to SEMI.

That’s only part of the story. Extended lead times for new equipment are the norm across the board. Demand is driven by chipmakers in China and elsewhere.

“The average lead time of 300mm tools has been 4 to 6 months so far,” said Bruce Kim, chief executive of SurplusGlobal. “Recently, the average lead time became 10 months. Some OEMs forecasted it will be extended to longer than a year.”

For the last several years, 200mm equipment has been scarce with long lead times. Demand for automotive chips, RF and other devices have created a shortfall of 200mm fab capacity and equipment. China is also buying a slew of used 200mm systems.

“In terms of lead times, 200mm brand new tools become longer these days. We see more demand of used tools in both 200mm and 300mm,” Kim said. “The lead times of backend tools are similar to last year, about 3 to 5 months so far.”

Lead times for leading-edge lithography tools, namely extreme ultraviolet (EUV) scanners, are long. So are backend tools like wirebonders.

“Litho still seems to have the longest lead time. EUV is supply-chain constrained this year,” said Krish Sankar, an analyst at Cowen. “But there seems to be general tightness in different parts of the value-chain. For example, ASE on their last earnings call highlighted that lead times for wirebonders are 6+ months. We have not seen those types of lead times for bonders in the last 10+ years.”

What’s driving this? “It’s seems to be a combination of demand coming back sharply, especially in automotive, after the Covid-infused weakness almost a year ago,” Sankar said. “The supply chain is not fully prepared for the rebound. We’ve seen under-investment in certain aspects, such as 200mm and wirebonders, over the last couple of years.”

So how long will this all last? “The tool supply chain will not be stabilized quickly. If the chip shortages last until the next year, the deliveries will not be shortened. Furthermore, some of the major front-end tool vendors estimate the average delivery will be longer than a year. Some day, the market will stabilize, however. It will take more than a year at least,” SurplusGlobal’s Kim said.