Cycle Mapping and Upturn Timing

G. Dan Hutcheson
G. Dan Hutcheson
The Chip Insider®

Cycle Mapping 2022-2023: 6-months into the slowdown, quarterly and December’s results – in particular – have revealed how this slowdown resembles previous cycles. Some believe it must be a deep one, similar to the apocalyptic ones predating 2010, due to high inventory levels. After all, the … of inventory added between January and December of 2022, along with billings declines added a full month over the year. Inventory levels relative to billings (the I:B ratio) hit 2.3 months in January of 2023 were at levels not seen since the 2000 to 2001 Y2K bug bubble. This COVID-driven cycle resembles that bubble in the extreme levels of PC and datacenter demand. However, December’s results resembled something more like the 2018 to 2019 Memory bubble. At that time the dip was felt hardest by memory suppliers due to the rapid decline in prices, where logic prices had risen, while auto and analog & power held… Looking at the impact of DRAMs, almost …% of its December market collapse can be attributed to price drops, not production cuts. Meanwhile, foundry-driven inflation kept prices for logic, auto, and analog & power rising in 2022.

Upturn Timing: The fog of this cycle has driven companies to not give clarity to quarterly guidance into the second half, though most have been willing to give full-year guidance while predicting a turn in the 2nd half of 2023. Does this make statistical sense? On the IC side, December marked the 6th sequential month of negative annual IC Billings growth. Given that this cycle is average, then we’re halfway through… Of course, to believe this: you must believe that probability drives cycles more than fundamentals…

“If you don’t like what’s being said, change the conversation”— Don Draper, Mad Men

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