Chip Shortage Leads Major Firm to Scavenge Semiconductors From Old Washing Machines

President Joe Biden holds a semiconductor chip as he speaks prior to signing an executive order, aimed at addressing a global semiconductor chip shortage, in the State Dining Room at the White House on Feb. 24, 2021. Jonathan Ernst/Reuters

The global semiconductor shortage has led a major industrial conglomerate to resort to buying up old washing machines and removing chips from inside them for use in their own products, according to the head of a supplier of key technologies to chipmakers.

Peter Wennink, CEO of ASML, a company that dominates the global market for machines used to etch circuits into silicon wafers, made the remarks in an April 20 earnings call, without identifying by name the conglomerate that was scavenging chips from washing machines.

Wennink said ASML had a record year in terms of sales and profits and was facing “unprecedented customer demand” across all sectors, including for its lithography machines that function as a kind of printing press for silicon chips.

“With this unprecedented demand exceeding our capacity, we are ramping our output capability to meet the strong demand,” he said, acknowledging challenges such as labor force constraints and the vulnerability of operating at full steam. “We are even more vulnerable when running at maximum capacity as there’s little room for recovery when things don’t turn out as planned.”

Wennink noted that ASML went on a major hiring spree last year, although many of the new hires still have to be fully trained.

Like the chipmakers it supplies, ASML is also having to work through its own equipment and component shortages and COVID-related supply chain disruptions, according to Wennink.

“All of what I just mentioned needs maximum attention and monitoring, creativity and flexibility of all our partners and stakeholders,” he said, noting that some testing of ASML equipment was being downstreamed to customer sites, which has freed up additional production capacity.

Wennink told Financial Times in March that chipmakers’ multibillion-dollar expansion plans will be constrained by shortages of key equipment over the next two years as the supply chain struggles to accelerate production. Surging demand for semiconductors has exposed supply chain kinks, prompting a historic wave of investment and an unlocking of government subsidies.

“It took 50 years to become a half-a-trillion-dollar industry. It’ll take just eight to 10 years to reach a trillion dollars,” Tom Caulfield, CEO of GlobalFoundries, one of the world’s largest semiconductor manufacturers, told The Wall Street Journal in a recent interview.

In telling the anecdote about the unnamed major industrial company that he said was buying old washing machines in order to salvage the chips in them, Wennink said the story wasn’t unique, illustrating the desperation on the part of chipmakers to meet demand.

Wennink also said on the earnings call that the utilization rates of ASML’s machines were at all-time highs, suggesting that customers are buying more not to stockpile, but because they can’t keep up with surging demand.

“We’re just looking at the data points; they just point to a market that is significantly short of semiconductor manufacturing capacity, this year and next year,” he said.

Intel, which relies on ASML’s lithography equipment, told Financial Times that there’s still time to resolve the shortage of the lithography machines. That’s because it takes two years to build the shell of a chip factory and ASML’s machines won’t be needed until year three or four, Pat Gelsinger, CEO of Intel, told the media outlet.

But while Wennink told Financial Times that there’s still some time to expand capacity, it’s not a simple task, because of long lead times for key components, such as lenses, that are needed to make the machines.

ASML shares were up by about 1 percent at $649.50 at 7:30 a.m. ET.