Right! The manufacturers know this is a bubble and aren’t going to put themselves into debt to build new factories! They’re going to ride the bubble til it pops and then try to go back to normal, but significantly richer.
“As long as the music’s playing, you’ve got to get up and dance.”
That’s Citi’s former CEO, who explained that he would devote his company’s resources to making money in a bubble (during the 2007 housing bubble), even when he knew it was a bubble.
The memory chip producers are absolutely going to try to maximize production during this bubble. The normal life cycle is to run fabs on offsetting cycles where at any given time, the company has a few fabs in the planning stages, in the construction stages, R&D stages, early “risk” production, high volume production, and retooling for a new process.
That means that during a bubble, it makes sense to try to accelerate the speed at which new fabs come online or old fabs get retooled. It makes sense to keep old fabs running longer at higher yields, even for previous generation product. These aren’t mature businesses that were already planning on running the same factories forever. They already anticipate the cycle of multiple generations, and what that looks like is going to be more aggressive during periods where customers are throwing money at them.
Right! The manufacturers know this is a bubble and aren’t going to put themselves into debt to build new factories! They’re going to ride the bubble til it pops and then try to go back to normal, but significantly richer.
“As long as the music’s playing, you’ve got to get up and dance.”
That’s Citi’s former CEO, who explained that he would devote his company’s resources to making money in a bubble (during the 2007 housing bubble), even when he knew it was a bubble.
The memory chip producers are absolutely going to try to maximize production during this bubble. The normal life cycle is to run fabs on offsetting cycles where at any given time, the company has a few fabs in the planning stages, in the construction stages, R&D stages, early “risk” production, high volume production, and retooling for a new process.
That means that during a bubble, it makes sense to try to accelerate the speed at which new fabs come online or old fabs get retooled. It makes sense to keep old fabs running longer at higher yields, even for previous generation product. These aren’t mature businesses that were already planning on running the same factories forever. They already anticipate the cycle of multiple generations, and what that looks like is going to be more aggressive during periods where customers are throwing money at them.