In brief: Equipment makers in the semiconductor industry have been reluctant to increase capacity, even as the world's biggest chipmakers are scrambling to expand their operations. Even if they did, ongoing shortages of essential materials and components would severely limit their ability to deliver more equipment in a timely manner.
Chipmakers like TSMC, Samsung, and Intel are pouring billions into their ambitious expansion plans. The semiconductor industry has had difficulty adapting to the surge in demand for everything powered by silicon, which has prompted foundries to invest in building additional factories across different regions in the hopes of catching up.
Furthermore, silicon giants have been looking for ways to diversify their supply chains in the face of geopolitical and pandemic-related uncertainties. Meanwhile, rising costs for materials and gases needed in the chipmaking process have added even more complexity to a supply chain that's highly concentrated in a few countries and thus prone to serious disruptions to the overall output.
On top of these issues lies an even greater problem that could have a significant impact on the capacity expansion plans of all chipmakers.
According to a Nikkei report, specialized chip tool manufacturers like ASML, Lam Research, Applied Materials, and KLA have warned their clients this week that they may have to wait up to 18 months to receive critical equipment.
The main reason is a shortage of everything from engineering plastics to microcontrollers, precision lenses, pumps, valves, special cables, sensors, and more. It's also worth noting that lithography machines are some of the most advanced pieces of equipment in the world. For instance, a single EUV lithography machine made by ASML requires over 100,000 components from almost 800 global suppliers and costs up to $200 million, so it's not exactly a high volume commodity — in fact far from it.
ASML says 96 percent of the machines it has ever sold are still working, and the company regularly refurbishes some of the older deep ultraviolet systems for use on mature process nodes. The company projects a 20 percent sales growth this year, but that doesn't mean it can significantly speed up the production of its sought-after wafer etching equipment.
US-based chip packaging and test equipment manufacturer KLA is also affected by the ongoing supply chain woes, with wait times for some of its products now stretching to more than 20 months. Unimicron, who is the world's largest manufacturer of chip substrates, says the equipment deliveries it desperately needs now have lead times of up to 30 months, up from estimates of 12 to 18 months last year.
Further exacerbating the supply chain issues is a dearth of skilled workers that has seen chipmakers and electronic component manufacturers go on a hiring spree. And if that wasn't enough, there are signs of slowing demand for consumer electronics that are already leading to higher production costs.