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FOCUS-Global semiconductor shortage spurs run on vintage chipmaking tools

Thu 4th March, 2021 11:00am
By Stephen Nellis and Hyunjoo Jin
    March 4 (Reuters) - Minnesota-based Polar Semiconductor
makes chips for automakers and is booked beyond capacity. But
expanding production lines to help solve a chip shortage that is
shutting down car factories around the world is not feasible -
in part due to the scarcity of older-style chipmaking machinery.
    Chip factories like Polar use these tools to make chips on
200-millimeter silicon wafers, which were state-of-the-art two
decades ago. Now, advanced chips are made using much larger
wafers, but there is still a lot of demand for simpler, older
    The demand has been supercharged by a combination of the 
COVID-19-driven boom in computer gear and unexpected strength in
auto sales that resulted in shortages. General Motors Co  GM.N 
on Wednesday extended production cuts at three North American
plants and added a fourth to the list of factories hit, and Fiat
Chrysler owner Stellantis  STLA.MI  warned the pain could linger
far into the year.*:nL2N2L11LZ Shortages forced Ford Motor Co
 F.N  to slash shifts for production of its F-150 pickup truck,
a longtime profit driver.*:nL1N2KA223
    Automakers use a range of chips in cars. Some, such as those
in infotainment systems, are made in the same cutting-edge chip
factories that make smartphone chips. But other chips in braking
and engine systems are made using older, proven technologies
that meet automakers' durability and reliability requirements.
    But the machines to make those older chips can take six to
nine months to find, said Surya Iyer, vice president of
operations and quality at Polar.
    "There's no way I can expand capacity beyond just stretching
my limits," Iyer said. "A real capacity increase would take nine
to 12 months, minimum."
    Resellers of chipmaking gear saying they cannot find used
equipment, leading some buyers to stalk old factories in the
United States, Japan and Europe, waiting for them to close in
hopes of snapping up the gear inside.
    "Demand is hot for used equipment, but we don’t have enough
of them to cope with demand," said Bruce Kim, chief executive of
South Korea's Surplus Global Inc  140070.KQ , one of the largest
dealers of used chipmaking gear.
    He said used equipment prices have gone up by as much as 20%
over the past six months, while the number of refurbished tools
in its inventory fell to 1,000, down from between 7,000 to 8,000
a decade ago.
    Ohio-based Rite Track, in normal times, buys up old
chipmaking equipment, upgrades it and sells it to chip
factories. But Chief Executive Tim Hayden said the recent
squeeze has spurred the company to spend more time sending
technicians out to upgrade tools that are already installed on
factory floors in order to squeeze more chips out of them. 
    "You just can't go out on the open market and buy a used
200-millimeter tool - they're just not readily available,"
Hayden said. "So people are getting a little bit more creative."
    Demand for old tools is so robust that buyers are looking at
every kind of factory. Spin Memory in Fremont, California, is
designing a new kind of memory chip and maintains a small "pilot
production line," mostly to provide samples to potential
customers, said Chief Executive Tom Sparkman. Even though Spin
Memory's tools use 20-year-old technology, Sparkman gets offers
to buy them almost every day.
    "We haven't taken the plunge to get rid of it yet, but some
days it's tempting," he said.
    Toolmakers such as Applied Materials Inc  AMAT.O  and Lam
Research Corp  LRCX.O , meanwhile, are building booming
businesses by refurbishing or recreating some of their greatest
hits from the 1990s and earlier.
    "It's really exploding," said Mike Rosa, head of strategic
and technical marketing for a group at Applied Materials, the
world's biggest chip-equipment vendor.
    David Haynes, a managing director at Lam Research, said
demand for 200-millimeter tools was once mostly from China as it
worked to build up its domestic chipmaking industry. Now, he
said, customers from around the world are looking to buy or
upgrade older tools.
    Still, investment in older technology lags relative to the
spending on more advanced production lines, or "nodes" as they
are known in the industry.
    "Most of the capital expenditure has been going into
advanced nodes," said Tyson Tuttle, chief executive of Silicon
Laboratories Inc  SLAB.O , which designs automotive chips to be
made on older technology. Chipmakers "have always relied on the
fact that the digital guys move out of the older nodes, and that
frees up capacity for all the support chips. The problem is, the
digital guys aren't moving out as fast. The mainstream nodes are
all just jammed."

 (Reporting by Stephen Nellis and Hyunjoo Jin in San Francisco
Editing by Jonathan Weber and Matthew Lewis)
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