semiconductor cycle

The semiconductor cycle is the **recurring pattern of boom and bust** in chip demand, pricing, capacity, and profitability that has characterized the industry for decades. Cycles typically last **3-5 years** from peak to peak. **The Cycle Pattern** **Phase 1 - Upturn**: Demand increases, inventories tighten, lead times extend, prices rise. Companies increase wafer starts. **Phase 2 - Boom**: Demand exceeds supply. Shortages and allocation. Record revenue and profits. Companies order new equipment and plan fab expansions. **Phase 3 - Correction**: Demand softens or new capacity comes online. Customers work down excess inventory. Lead times shorten, prices decline. **Phase 4 - Downturn**: Oversupply. Utilization drops, margins compress. Companies cut capex, reduce wafer starts, delay fab construction. **What Drives the Cycle** **Demand volatility**: End-market demand (PCs, phones, autos, servers) fluctuates with economic conditions and technology transitions. **Capacity lag**: New fabs take 2-3 years to build. Capacity decisions made during boom times deliver supply during downturns. **Inventory dynamics**: Customers over-order during shortages (creating phantom demand) and destock during corrections (amplifying the downturn). **Memory amplification**: DRAM and NAND markets are highly commoditized, making memory the most cyclical segment. **Historical Cycles** Major downturns occurred in **2001** (dot-com bust), **2008-2009** (financial crisis), **2019** (inventory correction), and **2022-2023** (post-COVID correction). Major booms in **2017-2018** (crypto/data center), **2020-2021** (pandemic demand), and **2024-2025** (AI demand). **The AI Exception?** The current AI-driven demand cycle is unusually strong and sustained, leading some analysts to argue this cycle is different. However, history suggests all booms eventually moderate—the question is when and how severely.