Chipmaking Machines Face a Crunch of Their Own

tech.hindustantimes.com:

A massive shortage of semiconductors over the past two years wreaked havoc in many sectors. There weren't enough machines to make the chips, either. To fix the problem, firms announced billions of dollars of capital spending for new facilities. But before these have even come online, there's already a glut.

Companies don't seem too perturbed, though, nor do investors. Some chip machinery maker stocks(1)are trading at heady valuations. They are finding comfort in the backlog of orders that will tide these firms through the troughs. Those that aren't sitting on cushy buffers will wait it out as they've done in years past. SEMI, the industry association, projects a 17% drop in front-end process equipment. For others that cut wafers into chips, or the back-end process, sales are likely to drop 9%. The forecast downturn follows record sales of semiconductor manufacturing equipment that rose to $107.6 billion in 2022.

Trouble is, the already complex cycle is getting trickier to predict. Usually, companies forecast demand two years in advance, ordering tools and building factory shells without populating them with machines. The chip cycle turns every three to five years. Every time, it's pretty consistent, falling for a few years and bouncing back up, even if the exact timing, depth and speed of the rebound is harder to determine, says Peter Hanbury of Bain & Co., a consulting firm. In downturns, cash costs are so low companies keep running plants, but future capital gets cut. Firms have worked out how to deal with the predictable variables and have become immune to the ups and downs. The broader upward trajectory keeps manufacturers humming along, churning out equipment that will, sooner or later, get installed in fabrication