Over 16,000 people attended the first day of the co-located SEMICON/SOLARCON China exposition, a first-day record, with visitors talking about productivity solutions, continued China government support, a glut of used equipment, and a rise in capacity utilization at China’ largest foundry.

According to Reuters, Semiconductor Manufacturing International Corp. (SMIC) experienced a clear rise in orders and expects its capacity utilization rate for the first quarter to be substantially higher than original expectations, with further improvements expected in the second quarter. Last week, Taiwan Semiconductor Manufacturing Co. (TSMC), raised its first quarter revenue forecast, citing orders from customers, especially from the mainland Chinese market.

The good news was greeted by exhibitors, who welcomed the crowds and keynote speeches that emphasized the China government’s continued support of the semiconductor industry. In the next five years, $20–$25 billion will be invested in the semiconductor industry by local governments throughout the country. Going forward, the central government will invest up to $30 billion in the industry by 2020.

Yet with current capex spending at a trickle, exhibitors were featuring productivity solutions and touting “do more with less.” Many suppliers on the show floor were able to make strong cases that productivity improvements were needed even at low capacity levels, and smart improvements to yield, uptime, cycle time, and resource utilization could deliver positive ROI even in the current industry climate.

Representative of this emphasis on productivity was a presentation by Gang Zou, General Manager of Applied Materials Xi’an in a presentation entitled “Managing Through the Downturn.” Zou said that low fab utilization rates required even more emphasis on operational flexibility, and declining ASPs have increased the need for operational efficiencies. With limited financing, fabs were not taking strategic risks, but they were making tactical investments. Consequently, Applied is focusing on automation and fab services during this business cycle.

Predictive maintenance and remote equipment monitoring were among the key areas that fabs could use to reduce costs, according to Zou. Automated tool monitoring can deliver higher uptime, better resource utilization, and faster time to repair. E-Diagnostics can be used to monitor, analyze, and recommend fab floor actions in real time. Remote services can be used to connect experts, databases, and known best practices on demand at low cost.

Other automation solutions discussed by Zou include comprehensive data generation at the factory and tool level that can be used for statistical process control, energy cost savings, fault detection and classification, run-to-run analysis, and yield management.

Used equipment has always played a critical role in the China semiconductor market and dramatic changes are unfolding in the secondary equipment market. Gary Robertson, Division General Manager at KLA Tencor’s KT Certified Division, painted a dim picture of the used equipment market at the Local Manufacturing Seminar in a presentation entitled “Tooling/Retooling 200mm Fabs: 5 Keys to Succeed with Used Equipment.” According to Robertson, “Profound changes in the industry are being reflected in the secondary market and these changes may be permanent.” Robertson indicated that recent, isolated good news reports may in fact be “bounces on the bottom.” He estimates the number of used tools on the market is now around 7000, up from 6000 only 4 months ago, and the number will only increase throughout the year. These tools are held by financial entities, brokers, OEMS, device makers, and others. More 200 mm fabs are closing and many sellers may be holding off selling their tools waiting for the market to improve. Currently there is a no-bid situation for the vast majority of tools, many of which will never be sold. When bids do come in, prices will be low, but they could rise quickly as the market turns.

With the glut of used equipment, opportunities will present themselves. Cost-reduced tool additions will be taken advantage of by many buyers, including MEMS fabs and GaAs wafers for LEDS. Some buyers will attempt to equip an entire fab with used equipment, whole fleets of tools will be sold as a single sale unit, and there is a ready access to low-cost parts.

With opportunities come risks. Bad decisions can be easy to make in the current market and buyers must “audit, audit, audit.” And these short term opportunities might conflict with long term goals for many device makers.

The industry has never seen times like these. But hopefully, Gang Zou is correct when he concluded, “The road ahead will be bumpy, but the future will be bright.”