5 ms·

I think this is the problem. The downcycle for the semi industry should of came around 2-3 years ago. The issue is that never came and the industry is growing a

I think this is the problem. The downcycle for the semi industry should of came around 2-3 years ago. The issue is that never came and the industry is growing at an even more ridiculous rate. The semi industry is single handed buying a good chunk of the OEM equipment space these past 3 years. Just get a THK rail quote and look at awe at the one year+ lead time.

refulgentis 6y ago
This plus secular trends due to the shortage _itself_ inducing further future plant development at home, simply for redundancy as a hedge against tail risk...think we're closer to the start of a 5-10 year boom than the end
11thEarlOfMar 6y ago
There was a huge boom in equipment in 2017 the 3D NAND demand thundered in. Semis over-invested as they frequently do, and the equipment biz then softened in 2018-2019. 2020 was solid and now 2021 is off to the races again, thanks (sadly) to the technology accelerating effects of COVID.
- baybal2 6y ago
  Are you working in toolmaking by any chance?
  - 11thEarlOfMar 6y ago
    Yes, as it happens. https://news.ycombinator.com/item?id=25604508 https://news.ycombinator.com/item?id=25604508 AMA
    - baybal2 6y ago
      An actual RnD, or engineering? In the link you point to the need of "EU fab." Who do you think will buy its chips? Germans for their cars?
      - 11thEarlOfMar 6y ago
        System engineering. We sell subsystems and components to the equipment companies. Chips are sold globally for the most part, regardless of where they are made. EU, US, Japan, Taiwan & Korea made chips are typically leading edge and sold globally. Some China-made chips are only used in China, but they have a large export market for low-cost chips.
        baybal2 6y ago
        > Chips are sold globally Well, they aren't. I see really a lot of people even inside the industry not noticing the elephant in the room. By some digits, China is 60%+ of the world semiconductor market, and much higher than even this digit if you remove secondary products from the calculation. > System engineering. We sell subsystems and components to the equipment companies. What kind of? Do you have a niche market, or you sell whatever toolmaker want to custom order?
        11thEarlOfMar 6y ago
        For example, nVidia's chips are made in Taiwan and Korea, and end up in devices sold globally. It's true that a large % of the assembly of circuit boards and electronic products are made in China. We make control system computers. It's very, very niche. Typically, what we sell to one equipment company, we can sell to others. It's very difficult for companies that are outside of the sub-supplier ecosystem to break in. The controllers are usually customized to some extent, then we sell a few hundred annually of that design. 'A few hundred a year' is a home run product.
      - imtringued 6y ago
        Actually, I am surprised that EU isn't competitive in semiconductors. The value of the euro is pretty low considering that you get access to a high quality workforce that ought to get at least 50% higher salaries. This is how Germany has become an export nation. Adopt a currency whose value is being pushed down by neighboring countries. This makes German exports more competitive in the global market. Why has this not worked out for semiconductors?
    - panabee 6y ago
      why is the semi industry so cyclical? do you see this changing?
      - 11thEarlOfMar 6y ago
        The Semiconductor industry is driven by major market economic forces, like most. It's not terribly volatile. If you sell capital equipment to the semi makers, though, there's a compounding effect that makes the annual revenue for equipment makers very volatile. There are few Semi players, and their capital spend $s are huge and 'lumpy'. As in $10B for a new, state-of-the-art fab. 70% of that $10B is spent on capital equipment. There are very few players that can spend at that level, Intel, TSMC, Samsung & the Chinese government. What you wind up with is the spend schedules being grouped together in time. I.e., they all buy at once. Or, they all stop buying at once. The most recent roller-coaster peak was actually driven by technology innovation. NAND Flash chips were made via a '2D' process until about 2016 when '3D' processes were perfected. That meant many more bits of flash could be built for the same real estate on the chip. It also required many more deposition and etch process steps for the same output. This drove Samsung, Micron and Toshiba to all spend huge $ on equipment at the same time in order to capture market share in this new tech. Then, they realized they'd overbuilt and turned off the spend. The end result: Our business was +90% 2016-2017. Then -60% by mid-2018. We thought it had stabilized from 2010-2016. But in reality, the consolidation of players simply made the spend numbers larger and we got clobbered by 3D NAND. Next up, COVID. There will be a cliff, only question is when.
        panabee 6y ago
        fascinating. thanks for sharing. this explains why it's so lumpy. why hasn't someone tried to consolidate at the equipment layer and counter the forces from above?

refulgentis 6y ago

This plus secular trends due to the shortage _itself_ inducing further future plant development at home, simply for redundancy as a hedge against tail risk...think we're closer to the start of a 5-10 year boom than the end

11thEarlOfMar 6y ago

There was a huge boom in equipment in 2017 the 3D NAND demand thundered in. Semis over-invested as they frequently do, and the equipment biz then softened in 2018-2019. 2020 was solid and now 2021 is off to the races again, thanks (sadly) to the technology accelerating effects of COVID.

baybal2 6y ago
Are you working in toolmaking by any chance?
- 11thEarlOfMar 6y ago
  Yes, as it happens. https://news.ycombinator.com/item?id=25604508 https://news.ycombinator.com/item?id=25604508 AMA
  - baybal2 6y ago
    An actual RnD, or engineering? In the link you point to the need of "EU fab." Who do you think will buy its chips? Germans for their cars?
    - 11thEarlOfMar 6y ago
      System engineering. We sell subsystems and components to the equipment companies. Chips are sold globally for the most part, regardless of where they are made. EU, US, Japan, Taiwan & Korea made chips are typically leading edge and sold globally. Some China-made chips are only used in China, but they have a large export market for low-cost chips.
      - baybal2 6y ago
        > Chips are sold globally Well, they aren't. I see really a lot of people even inside the industry not noticing the elephant in the room. By some digits, China is 60%+ of the world semiconductor market, and much higher than even this digit if you remove secondary products from the calculation. > System engineering. We sell subsystems and components to the equipment companies. What kind of? Do you have a niche market, or you sell whatever toolmaker want to custom order?
        11thEarlOfMar 6y ago
        For example, nVidia's chips are made in Taiwan and Korea, and end up in devices sold globally. It's true that a large % of the assembly of circuit boards and electronic products are made in China. We make control system computers. It's very, very niche. Typically, what we sell to one equipment company, we can sell to others. It's very difficult for companies that are outside of the sub-supplier ecosystem to break in. The controllers are usually customized to some extent, then we sell a few hundred annually of that design. 'A few hundred a year' is a home run product.
    - imtringued 6y ago
      Actually, I am surprised that EU isn't competitive in semiconductors. The value of the euro is pretty low considering that you get access to a high quality workforce that ought to get at least 50% higher salaries. This is how Germany has become an export nation. Adopt a currency whose value is being pushed down by neighboring countries. This makes German exports more competitive in the global market. Why has this not worked out for semiconductors?
  - panabee 6y ago
    why is the semi industry so cyclical? do you see this changing?
    - 11thEarlOfMar 6y ago
      The Semiconductor industry is driven by major market economic forces, like most. It's not terribly volatile. If you sell capital equipment to the semi makers, though, there's a compounding effect that makes the annual revenue for equipment makers very volatile. There are few Semi players, and their capital spend $s are huge and 'lumpy'. As in $10B for a new, state-of-the-art fab. 70% of that $10B is spent on capital equipment. There are very few players that can spend at that level, Intel, TSMC, Samsung & the Chinese government. What you wind up with is the spend schedules being grouped together in time. I.e., they all buy at once. Or, they all stop buying at once. The most recent roller-coaster peak was actually driven by technology innovation. NAND Flash chips were made via a '2D' process until about 2016 when '3D' processes were perfected. That meant many more bits of flash could be built for the same real estate on the chip. It also required many more deposition and etch process steps for the same output. This drove Samsung, Micron and Toshiba to all spend huge $ on equipment at the same time in order to capture market share in this new tech. Then, they realized they'd overbuilt and turned off the spend. The end result: Our business was +90% 2016-2017. Then -60% by mid-2018. We thought it had stabilized from 2010-2016. But in reality, the consolidation of players simply made the spend numbers larger and we got clobbered by 3D NAND. Next up, COVID. There will be a cliff, only question is when.
      - panabee 6y ago
        fascinating. thanks for sharing. this explains why it's so lumpy. why hasn't someone tried to consolidate at the equipment layer and counter the forces from above?