The global secondary market of used and refurbished semiconductor equipment will grow to $5.4 billion this year and reach an astonishing $8.2 billion in 2009, according to estimates from the SEC/N® (Surplus Equipment Consortium / Network, Inc), presented at SEMICON Singapore. This rapid expansion of the secondary market will have a significant impact on SEMI members selling and servicing new 200 mm equipment, as well as have unknown impacts on certified used equipment programs, service and spare programs, intellectual property violations, and other areas. As much as 15% of the world’s capital investment will be met by the secondary market this year and 2009.

The glut in used equipment is being driven by the transition to 300 mm wafer production, primarily by NAND, NOR and DRAM memory makers. According to Gary Alexander of SEC/N, as many as seventy 200 mm lines will be shut down this year with only forty new 200 mm lines starting up. Average selling prices of used equipment can be expected to drop as a result of the rapid availability of supply, and buyers will be more selective, demanding “as new” refurbished equipment with warranties, as opposed to “as is” equipment. The quality of used equipment is also expected to increase, further impacting new tool pricing. IDM to IDM deals are expected increase and the availability of quality refurbishing firms will decline. Spare parts availability may also drop and many used equipment deals will be just for part harvesting.

Sellers on the market will be major IDMs, such as Intel, Samsung, Toshiba, and Hynex, and buyers will be foundries and non-memory IDMs. Analog will be the fastest growing segment for the secondary market and dominated by buyers in China and Taiwan. As much as 30% of the equipment sales in China will for used equipment; in Japan, however, used equipment amounts to less than 5%. Average selling price for used equipment today ranges from 60-70% of a new tool, and this will drop as the market becomes flooded equipment in the coming months.

The used equipment market is a dynamic marketplace and price fluctuations and significant price fluctuations will increase. The price of used piece of equipment can drop 50% overnight as new fab closings are announced. The best equipment often disappears though established networks and brokers, and the proliferation of brokers can lead to buyers bidding against themselves.

A significant concern in the jump in supply of used equipment is the impact on intellectual property violations resulting from the demand for refurbishing services by new and less qualified refurbishing companies. Hundreds of refurbishing companies currently serve the secondary markets, many small 1-2 person shops in Asia. It is feared that systems, parts and core technologies will be duplicated in violation if IP laws to keep used equipment operating and productive. With a flood of used equipment on the market, it is also feared that wholesale “cloning” of equipment will increase.

At a recent seminar on the secondary market held at SEMICON Singapore, panelists urged the audience not to make stereotypical perceptions that OEMs and independent refurbishers were in opposition to each other. The expanding market may further compel OEMs and quality secondary market service firms to work even closer together.

SEC/N® will hold a seminar for users, buyers, and sellers of secondary equipment during SEMICON West at the Yerba Buena Salon 8 room at the San Francisco Marriott for the SEC/N program on Wednesday, July 16th, from 2 pm to 5 pm.

For more information visit Programs and Events at www.semiconwest.org or contact Gary Alexander at galexander@secn.org