Consignment vs Outright Sale: How Fabs Actually Move Equipment

This guide is for: The fab operations director or CFO deciding whether to consign equipment through a broker or sell outright — and wanting to understand the financial trade-offs before signing anything.

A 300mm fab in Arizona called me in 2022 with 23 etch and CVD tools to move. They wanted cash fast — their board had approved a technology migration and needed the floor space in 90 days. I offered outright purchase at $4.2M for the lot. They hesitated, talked to two other brokers, and ended up consigning with a competitor at a target price of $7.5M.

Fourteen months later, the competitor had sold 11 of the 23 tools for $3.9M total. The remaining 12 were still in the fab, now blocking the renovation timeline. They called me back. I bought the remaining tools for $1.8M. Their total recovery: $5.7M over 14 months when they could have had $4.2M in 30 days. Sometimes the higher theoretical price costs you more than the discount.

How Consignment Actually Works

In a consignment arrangement, you keep title to the equipment. The broker markets and sells on your behalf, taking a 15-25% commission on each sale. You set a floor price below which the broker can't sell without your approval. The broker handles buyer qualification, negotiation, shipping logistics, and payment processing.

Your equipment sits — either in your fab, in the broker's warehouse, or at a third-party storage facility. You pay storage costs if it's not in your own facility. Insurance responsibility varies by contract, and this is where problems start.

The upside: higher per-unit recovery. A broker selling directly to an end user typically achieves 60-80% of replacement cost for in-demand tools. After commission, you net 45-65% of replacement cost.

The downside: time and uncertainty. There's no guarantee every tool sells, and the ones that don't become your problem again.

How Outright Purchase Works

A broker or dealer pays you a lump sum for the equipment. Title transfers immediately. The buyer handles all risk from that point — marketing, storage, resale, the works.

Outright buyers typically pay 40-60 cents on the dollar of fair market value. That sounds painful until you factor in the time value of money, the storage costs you avoid, and the operational burden that disappears.

On a $1M tool, consignment might net you $650K in 6 months. Outright sale gets you $450K in 30 days. The consignment is 44% more, but it takes six times longer and carries the risk of not selling at all.

When Consignment Wins

Consignment is the right choice when you have high-value, in-demand tools (ASML scanners, KLA inspection, AMAT Endura/Centura platforms), when your timeline is flexible (6-12+ months), when you have storage space that isn't needed for other purposes, and when the tools are fully documented and qualified.

The ideal consignment scenario: five AMAT Producer SE CVD systems, fully documented, with a broker who has active buyer relationships for that exact platform. Those tools sell within 3-6 months at strong prices. Your net recovery beats outright sale by 30-50%.

When Outright Sale Wins

Sell outright when the floor space is worth more than the price premium from consignment, when you need the cash within 30-60 days, when the equipment is aging or demand is declining, when you have a large volume of commodity tools where individual marketing isn't cost-effective, or when the tools require significant refurbishment before they're saleable.

I always push outright for tools in declining technology categories. 200mm equipment that's already five years past mainstream production doesn't appreciate with time. Every month in storage, the addressable buyer pool shrinks. Take the cash now.

Floor Price Negotiation Is Where Deals Get Made

In consignment agreements, the floor price is the minimum sale price the broker can accept without coming back to you for approval. Set it too high and the tool sits unsold. Set it too low and you leave money on the table.

My rule of thumb: set the floor at 70-80% of what you'd accept outright. This gives the broker room to negotiate while protecting your downside. Review and adjust the floor every 90 days based on market feedback.

If a broker refuses to share buyer inquiries and offer levels, you have a transparency problem. A good consignment broker reports monthly on marketing activity, inquiries received, and offers declined. If you're not getting this data, you're flying blind.

Unsold Inventory Clauses Protect You

Every consignment agreement needs a clear exit clause. What happens after 6 months if the tool hasn't sold? After 12 months? The standard structure: a 6-12 month initial term with the option to renew, reduce the floor price, or withdraw the equipment.

Watch for exclusive lock-up clauses that prevent you from listing with another broker or selling direct. Non-exclusive consignment agreements let you market through multiple channels. Exclusive agreements should come with committed marketing activity — specific trade shows, buyer databases, and activity minimums.

If a broker wants exclusivity but won't commit to specific marketing actions and timelines, you're giving up optionality for nothing.

Insurance and Liability During Consignment

This catches fabs off guard. While equipment is on consignment, who's liable if it's damaged? If it's in the broker's warehouse and there's a fire, whose insurance covers it?

Get this in writing before signing. Standard terms: the broker carries warehouse insurance covering the consigned value, or you extend your own property insurance to cover equipment at the broker's location. Either way, verify coverage amounts and confirm the policy covers the full consigned value.

During transit to the broker's warehouse, transit insurance is essential. A $500K tool on a flatbed is one pothole away from a total loss. Insure every shipment at full replacement value.

Tax Treatment Differs Between Consignment and Outright

In an outright sale, you recognize the gain or loss at the time of sale. Simple. In consignment, you recognize revenue when each individual tool sells, which may span multiple tax periods. Consult your tax advisor on the implications — in some cases, spreading the revenue across periods is advantageous. In others, recognizing the full amount in one period works better.

This isn't tax advice. But I've seen fabs choose consignment partly for tax timing reasons, and I've seen others choose outright for the same reasons. It depends on your specific situation.

What to Do Right Now

List your equipment with realistic market values. Get two outright purchase offers and two consignment proposals. Run the math: outright cash now versus projected consignment recovery minus commission, minus storage, minus insurance, over the expected timeline. Include the opportunity cost of the floor space. Then decide — and negotiate the contract terms aggressively either way.

FAQ

What commission do equipment brokers charge for consignment? 15-25% of sale price. Larger lots and higher-value tools can sometimes negotiate 12-18%.

How long does consignment take to sell semiconductor equipment? 3-6 months for in-demand tools. 6-12+ months for niche or older equipment. Some tools never sell on consignment.

What's the typical outright purchase price vs consignment recovery? Outright: 40-60% of fair market value, paid in 30 days. Consignment: 45-65% of fair market value after commission, paid over 3-12 months as tools sell.

Who pays for storage during consignment? It depends on the agreement. If equipment stays in your fab, you absorb the space cost. If it moves to the broker's warehouse, storage fees typically run $500-$2,000 per month per tool.

What's a floor price in a consignment agreement? The minimum price the broker can accept without your approval. Set it at 70-80% of what you'd accept in an outright sale, and review quarterly.

Should I use exclusive or non-exclusive consignment? Non-exclusive unless the broker offers significant committed marketing activity in exchange for exclusivity. Exclusivity without commitments only benefits the broker.