The most insane semiconductor business sector is, of course, the DRAM sector. DRAM capex in relation to DRAM revenues has always been crazy, but the ten years in which the relationship between capex and revenue was at its most unbalanced were the last ten years:
Year Rev $bn Capex $bn
2000 29 9
2001 11 7
2002 15 5
2003 17 6
2004 26 11
2005 25 13
2006 33 15
2007 31 21
2008 23 20
2009 20 4
Source: iSuppli
What is "balanced" CapEx in this business? What is it for example in the rest of semiconductor, for comparison? 2008 was the killer year of course, but I guess the foundations were laid by companies like Qimonda in 2007.
Well Ian, you're right. There's no such thing as balanced capex because no one has ever been able to match capex with whatever will be the market size in eighteen months' time. So balanced capex can only ever be an unattainable aspiration. The long-term trend line for level of capex vs semiconductor market is 20%. It was 12% in 2008 and 16% in 2009. It takes a year from ordering new equipment to getting first silicon out of it, and another 6 months to ramp up, so you have about as much chance of balancing capex and market as pigs have of flying. I remember Andy Grove saying something like:' One day semiconductor supply and demand will match up - for all of 30 minutes.'