More thoughts on the business cycle for semis:
I note that once overcapacity in the semi industry is created it typically takes three years to work its way out, and we thus have a 6 months to a year to go. My guess is that the typical cycle is that initially many start cutting back on purchases, causing a drop in sales. Then some of the stronger companies elect to try to get a generation ahead of the competition and resume their purchases, leading to a temporary boost in sales of equipment, but then the situation gets worse again as the weaker members have to resort to price cuts, and the stronger ones, now ahead, slow down their purchases again to await the collapse of the weaker ones.
This cycle seems to be what happened in DRAM, for example. Equipment purchases slowed, and DRAM prices stabilized for a time, and it was better for the DRAM makers, but not good enough. Thus equipment purchases accelerated again, leading to further price cutting, and now we await a separation between the winners and losers. Once the losers give up, then equipment purchases will accelerate to a sustainable level once again. Who will the losers be? Korea? MU? The Japanese? Tiawan? Hard to say. Years ago the Americans were the ones to give up, but later got back in, and considering that MU does nothing else, I don't expect them to get out unless MU goes broke. The Japanese were stubborn about staying in the memory business, and I think they will be again. My guess is that the Koreans will be the losers because they do not have the money to buy the equipment to keep up, and the weakness of the Korean currency makes equipment purchases even more expensive. Even though they benefit from the weak currency in terms of production costs, in the long term the cost savings from shrinks dramatically outweighs labor savings, and they will be doomed without current equipment. As for MU, they are weak, but I think they will survive.
Carl
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