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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Jacob Snyder who wrote (30700)8/29/2000 9:52:50 PM
From: sditto  Read Replies (1) of 54805
 
<<They have to spend 1-2 Billion $, and then hope that when the fab is running at capacity (2 years later), demand is there. The time it takes to go from deciding on capacity expansion to full production, means that semi cycles will continue. I don't see anything changing that, anytime soon. >>

The essence of the problem you are describing is what systems thinkers describe as a delayed feedback loop. The classic example is a shower with a single knob to regulate hot and cold. If there is a long delay between the time the handle is turned and the time the water temperature changes most people will alternately burn then freeze themselves repeatedly even if told in advance to expect a delay.

The good news is there are some trends on the horizon which could help reduce the severity of this problem in the semiconductor industry. The first is the general increase in the size and diversity of the industry which dampens the cycle. The second is the trend toward joint ventures where capacity can be shared and alternative products can be substituted when demand changes like the recently announced SNDK/TOBSF flash memory plants. The third is the rise of sophisticated third party manufacturers like TSM who can absorb demand from across the industry and bring the same flexibility to the semiconductor industry that SLR and others brought to the electronic assembly industry. The last is the rise of fabless semiconductor companies like ARMHY who follow Moore's advice in LOTFL to focus on their core (research) and outsource their context (manufacturing) to companies for which manufacturing is core. These four trends combined form a positive feedback loop which is the key to offsetting a delayed feedback loop.

I don't know if we are going to break the cycle this time around but the elements are falling into place.
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