2005 Articles

On the preowned equipment market, "what you heard" is not always "what the vendor offered."

During the last downturn, the electronics industry saw many manufacturers use the secondary equipment market as a smart business management tool. In some cases, the acquisition of used equipment permitted companies to survive the dramatic downcycle. The secondary market is not new – semiconductor fabrication houses learned this important lesson several market cycles earlier – but widespread participation by our segment is a recent development. Like all endeavors, successful capitalization requires a thorough understanding of the market.

The secondary market runs the gamut from lower cost/higher risk “as is” machines from third-party brokers to higher cost/lower risk machines provided by the OEM. The extensive variety of available vendors includes auctions, brokers, third-party resellers, third-party refurbishers and the OEM. Due to this range of resources, due diligence is required. The general assumptions you make when purchasing a new machine – machine condition, performance to published specifications, warranty and technical support availability – are no longer valid or remotely equivalent between vendors. The buyer’s first task is to level the playing field.

With the secondary equipment market, this is a challenging task. Assuming “what you heard” is “what the vendor offered” has led to many problematic transactions in the secondary market. Readers have no doubt heard a tale or two about problems with secondary market machine purchases. Obviously, a common language is the best way to prevent communication errors. To resolve potential conflict, an organization has been established to help avoid these issues.

SEC/N, the Secondary Equipment Consortium Network (secninc.com), is a global nonprofit trade group that focuses on the secondary equipment market for the electronics industry. With over 50 member companies, the organization exists to create and continuously improve standards, guidelines and definitions of common terminologies used in the secondary equipment market. In addition, SEC/N establishes standards of ethical behavior and respect for intellectual property rights among the industry participants on a global basis.

To assist buyers purchasing secondary equipment, the organization published Definitions of Industry Terms (SECN.S1.DF.01.A), which can be downloaded from its Web site. By referencing this document in quote requests, you can ensure that equipment meets expectations upon arrival at your facility.

Due to the large number of variables with used equipment, it is a more difficult task to purchase equipment on the secondary market than to buy a new machine. A guiding factor in the secondary market is that risk and prices are inversely proportional. For lower priced secondary equipment, no performance guarantee is implied – you are buying the equipment “as is” for a lower price. On the other hand, an OEM may charge higher prices but can guarantee performance to published specifications and can offer more robust services to protect your investment.

It is incumbent on the buyer to fully assess the condition of the equipment under consideration. A used machine from some sources will most likely not perform to OEM original published specifications; do not assume that level of performance.

First, decide what machine performance your manufacturing floor requires to be profitable. Always consider the required reliability. Ask the OEM for mean time to failure (MTTF) rates and the expected lifespan for that variable. Establish the level of risk your manufacturing can accept. Only then are you are ready to search the secondary market for a machine.

Informed use of the secondary market is an intelligent way to manage overhead costs. Use independent, published criteria and definitions to prevent perceived misrepresentation of machine condition and contract terms. Third-party service providers can be contracted to test and document the machine’s current level of performance. Buy smart, and you will get a smart buy.

Doug Eidle is business manager, preowned equipment, at Speedline Technologies (speedlinetech.com); deidle@speedlinetech.com.