The secondary SME market is headed in a clear direction in 2021

SEMI recently released its Year-end Total Semiconductor Equipment Forecast – OEM Perspective report, predicting growth in semiconductor manufacturing equipment (SME) sales by original equipment manufacturers will increase by 16% in 2020, followed by 4% growth in 2021, and 6% growth in 2022. While growth of the primary SME market does not necessarily equate to growth in the secondary market — that is, pre-owned equipment sales — due to a variety of reasons including the fact that the secondary market predominantly includes more mature technology nodes, Moov predicts that the secondary market will likewise grow in 2021. Here’s why: Demand for Second Source Back-End Equipment Remains Strong in Q4 Moov, a global marketplace for pre-owned semiconductor manufacturing equipment, saw a surge in equipment sales in 2020 driven by the COVID-19 pandemic, supply chain uncertainties, and demand for older technology nodes. With buyers and sellers from over 20 countries worldwide transacting on Moov’s marketplace, we believe that, though only a slice of the secondary market, trends on our marketplace are representative of trends on the secondary market. More notable in predicting the 2021 secondary market outlook is the strong demand for back-end equipment on Moov’s marketplace through Q4. As is true with the primary market, back-end equipment demand tends to act as a bellwether for overall equipment demand on Moov’s marketplace — when demand contracts, we see back-end equipment purchases decrease first, and when back-end equipment purchases increase it is typically a sign of healthy demand in the coming quarter. Manufacturers are Facing Supply Shortages for 8-inch Chips As noted in a recent Trendforce report, shortages in 8-inch wafer capacity since 2H 2019 have kept demand high for 8-inch semiconductor equipment. Since it is increasingly difficult to find 8-inch equipment from OEMS, manufacturers will continue to turn to the secondary market to source equipment for 200mm fabs. The combination of demand from existing technologies combined with new applications in IoT and automotive electronics will continue to drive demand for 8-inch wafers through 2021 (and beyond). Moov expects to see this demand play out on the secondary equipment market, especially among the foundry segment. Buying Second Source is Becoming a More Accepted Option Beyond the dynamics of supply and demand alone, several industry trends point to a strong 2021 for the secondary SME market. Ten years ago, most manufacturers were reluctant to purchase semiconductor manufacturing equipment second-hand, and would be hard-pressed to find trustworthy and reliable suppliers. Today, second source equipment purchasing is a more accepted part of semiconductor manufacturing, but the market is still fragmented and only represents about 13% of the value of the primary market. However, with industry dynamics like the ongoing importance of 200mm fabs keeping older equipment relevant, the secondary market will continue to grow. With growth will come standards for reliable buying and selling, technology, and better data as is to be expected when any market matures. This will, in turn, cement second source purchasing as a go-to manufacturing strategy for more nimble supply chains in the future. Sustainable Manufacturing Will Grow in Importance on the Global Stage Based on campaign rhetoric, the incoming administration in the U.S. will introduce a shift in priorities when it comes to high tech manufacturing, including an increased focus on climate change. With emission-reduction goals for high tech manufacturing in the U.S., and climate commitments moving to the forefront of international trade negotiations, sustainability in semiconductor manufacturing will increasingly be part of the global dialogue in 2021 and beyond. At Moov, we see a robust secondary equipment market as the first, and perhaps easiest step, in driving more sustainable manufacturing through reuse and believe the industry will come to share this perspective as well. Calmer Geopolitical Waters Ahead; But Not a Return to Smooth Sailing While thought leaders in technology and specifically high tech manufacturing, like the Information Technology and Innovation Foundation (ITIF) and SEMI, predict a slowing in the rate of escalation between the U.S. and China we saw in 2020, industry leaders also agree we have entered an era of geopolitical challenges to the global supply chain. Between disruptions created by the COVID-19 pandemic and U.S.-China trade disputes, 2020 was a challenging year for manufacturers in terms of navigating supply chain strategy. To help insulate themselves from the impact of potential supply chain disruptions and delays in 2020, manufacturers opted to invest in surplus equipment. We believe this mentality will endure in 2021, with manufacturers continuing to stock up on critical equipment. In doing so, manufacturers will turn to the secondary market, with significantly shorter lead times and cost, in order to stay prepared for supply chain disruptions without sacrificing operational efficiency. All said, 2020 proved a strong year for the secondary manufacturing equipment market and Moov predicts tailwinds driving growth in 2020 will continue through 2021 and beyond.

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About the author: Steven Zhou is the CEO and co-founder of San Francisco-based Moov Technologies, a technology-driven marketplace and asset management platform that matches buyers and sellers of pre-owned semiconductor manufacturing equipment.