The semi industry over reacted in 1998, in some cases drastically reducing cap ex at a time where they should have been, at the very least, holding steady during the downturn. In 1999/2000, the industry once again over reacted, this time with excessive capital spending. To make matters worse, this latest spending boom coincided with the equity bubble, during a period when money was very easy to come by, making spending that much easier to do or justify. This "easy money" is detailed on your chart during the 12 month spending frenzy top, roughly 3 times the length of the previous 2 cycle tops.
We have come full circle. We are now are in the bottoming process and once this period is finished, the foundation will be set for the next boom. Will we ascend in a similar fashion of past booms or will this rebound be less acute? I would suspect and predict that this will be the case, a much more subdued ascent. Certainly, that's what the industry seems to be suggesting by their forward guidance. |
