4 ms·

why is the semi industry so cyclical? do you see this changing?

• 11thEarlOfMar 6y ago
  The Semiconductor industry is driven by major market economic forces, like most. It's not terribly volatile. If you sell capital equipment to the semi makers, though, there's a compounding effect that makes the annual revenue for equipment makers very volatile. There are few Semi players, and their capital spend $s are huge and 'lumpy'. As in $10B for a new, state-of-the-art fab. 70% of that $10B is spent on capital equipment. There are very few players that can spend at that level, Intel, TSMC, Samsung & the Chinese government. What you wind up with is the spend schedules being grouped together in time. I.e., they all buy at once. Or, they all stop buying at once. The most recent roller-coaster peak was actually driven by technology innovation. NAND Flash chips were made via a '2D' process until about 2016 when '3D' processes were perfected. That meant many more bits of flash could be built for the same real estate on the chip. It also required many more deposition and etch process steps for the same output. This drove Samsung, Micron and Toshiba to all spend huge $ on equipment at the same time in order to capture market share in this new tech. Then, they realized they'd overbuilt and turned off the spend. The end result: Our business was +90% 2016-2017. Then -60% by mid-2018. We thought it had stabilized from 2010-2016. But in reality, the consolidation of players simply made the spend numbers larger and we got clobbered by 3D NAND. Next up, COVID. There will be a cliff, only question is when.
  • panabee 6y ago
    fascinating. thanks for sharing. this explains why it's so lumpy. why hasn't someone tried to consolidate at the equipment layer and counter the forces from above?