Also, overcapacity in the industry is less than it was during the 1996-98 cycle, said Rodgers. And on the upside, prolonged overcapacity creates cheaper ICs and eventually, people find the low prices irresistible. Their overinvestment in the dot-com sector led to overinvestment in telecommunications equipment, much of it financed by the equipment vendors themselves. Now the Cisco boxes piling up in warehouses have to be sold before Cisco will turn the lights on again for the silicon vendors. It's a free economy, and you have the right be stupid.
Historical trends suggest the year after a big slump is one of recovery.
In 1986, the chip sector grew 22.7 percent. Nobody is expecting that kind of gain in 2002, but analyst McClean predicted next year's figure will be in the high teens, while LSI's Corrigan thinks it could crack 20 percent. There are already some signs of light. The PC segment, one of the first areas to feel the slowdown last fall, is now starting to see increased sales. Waddel said that most PC OEMs were bracing for a shortage of DRAMs last fall, and stocked up on parts in anticipation of holiday sales.