Manufacturer resorts to salvaging chips from washing machines

A recent report from ASML Holding NV revealed that an unknown major manufacturer has been purchasing washing machines just to get access to key semiconductor parts. How has the semiconductor industry been so unlucky in the past two years, what do we know about the salvaging operation, and what challenges does this present?

How has the semiconductor industry been so unlucky?

If there’s one thing that repeatedly makes the headlines, it’s that the world is low on semiconductors and that countries worldwide have only just realised that they are extremely important. The extreme level of semiconductor integration into modern life means that any drop in semiconductor supply has a large effect on the prices of goods, the ability to develop new technologies and even changes in global markets.

Now, individual events such as an earthquake or a hurricane can cause catastrophic damages to infrastructure that may be involved with semiconductor production, but the many foundries around the world separated by large distances generally means no one event can cause too much harm. However, the semiconductor industry has been extremely unfortunate in the past two years with not one, not two, but at least five isolated events which have caused mayhem.

The global lockdowns from COVID saw the demand for automotive vehicles drop to virtually nothing, which in turn saw the demand for automotive-grade semiconductors also drop. At the same time, the demand for office equipment (as a result of remote working) rose significantly, and thus semiconductor manufacturers turned their attention to commercial-grade parts. When the automotive industry restarted its operation around 6 months later, the lack of automotive-grade parts meant that vehicle manufacturing could not be easily restarted, and the long delay in automotive parts had a massive knock-on effect on other industries.

As manufacturers worldwide were running around trying to source automotive parts, fires and earthquakes hit Japan which hit a major automotive part manufacturer, Renesas. Of all the foundries to get hit, the one that played a major role in automotive parts was the one to now face delays. To make matters worse, the current labour shortage has seen semiconductor manufacturers struggle to find new employees. The semiconductor industry thought it saw it all, but oh no, in February 2022, Russia decided to invade Ukraine (sorry, “Peacekeeping special operations”), which has now threatened the world with food shortages, fuel shortages, and shortages in key gasses used to fabricate semiconductors.

Overall, the semiconductor industry has had nothing but bad luck for the past two years, and now, manufacturers are turning to all kinds of desperate measures to continue production.

Major manufacturer reported to be salvaging semiconductors from new products

Recently, ASML Holding NV revealed that it is aware of a major manufacturer purchasing washing machines, scrapping them for their parts, and using the semiconductors in their own product. Unfortunately, ASML would not report which manufacturer was purchasing washing machines. This may negatively affect their image as a manufacturer, but the fact that it is happening shows how desperate the situation is for many. However, ASML also mentioned that the strong demand for semiconductors shows how manufacturing is coming back strong, which is also a good sign for post COVID recovery of markets.

While we cannot be sure who is purchasing washing machines for their parts, we can make an educated guess as to what their industry may be. Firstly, washing machines are nothing more than a basic microcontroller with power circuitry for driving a powerful motor. It is unlikely that a manufacturer would purchase an entire washing machine just to get a microcontroller, and there is no shortage of motors, so it is highly likely that the power circuitry is the point of interest.

Interestingly, washing machine motors have a lot in common with the electric vehicle and hybrid industry as they both need to provide a large amount of torque (the Sinclair C5 was famous for using a washing machine motor). It is possible that the machines are being salvaged by an automotive manufacturer. Considering that washing machines experience large temperature swings and are subject to extreme mechanical vibration, they likely need automotive-grade parts. If this is true, then it is highly likely that the manufacturer doing the salvaging is a maker of either electric vehicles or hybrid vehicles.

It is also possible for the manufacturer to be involved with industrial and/or aerospace environments as they also have vibration and temperature requirements. These industries would be favoured over automotives when considering that it is impractical for a manufacturer to purchase washing machines in bulk, and thus it is likely to be a speciality item with expected sales to be a few hundred.

Another clue is that ASML used the term conglomerate, which specifically refers to a large parent company with many sub-companies in different industries. As such, companies such as Mitsubishi, BWM, Ford, Honda, and Hyundai would fit as they are all multi-disciplinary companies that deal with automotive and industrial.

What challenges does this present?

It is clear that companies are getting desperate for semiconductors but resorting to salvaging electronic products could introduce a range of new challenges.

The first is the environmental impact of creating waste; not every part of a product can easily be recycled. For example, a washing machine can have its frame, casing, motor, and wires recycled, but the PCB will likely be scrapped. If semiconductor supplies do not stabilise, it could result in widespread waste production as manufacturers scramble to get key parts.

The second issue with using scrapped parts is that those parts have already undergone reflow processes, and trying to extract and resolder them could degrade their performance and/or reliability. This practice will likely come with no guarantee from the original semiconductor manufacturer and thus will require additional risk-taking from the company that is reusing the part.

The third issue is that the scarping of consumer-grade goods will see an increase in their price, making it harder for everyday consumers to get other unrelated products, especially if manufacturers offer above market rate prices directly to OEMs.

Overall, the shortage of semiconductors is causing chaos in the industry, and it is clear that semiconductors need to be produced in excess as opposed to manufacturing just enough to meet demand.