[tooltalk]

This is wrong. It is NOT in their nature to keep the market under-supplied -- eg, Samsung, the industry's largest company, was notorious for expanding their capacity during the industry downturn to gain market share while everyone else was cutting back to minimize loss.

I'm guessing you are also probably unfamiliar with the terms like "chicken game" which refers to the cutthroat, high-stakes price wars where dominant semiconductor manufacturers intentionally overproduce and slash prices. This is literally how the industry went from dozens to just three majors today since the 80's.

[CGMthrowaway]

You're making the point for him. Undersupply in a boom, store cash to ramp up capacity in a downturn. Presevres capital and avoids overcapacity during the turning

[roenxi]

This sounds like a plan to sell less when prices are high and more when prices are low. That is one of the stupidest strategies a company could adopt. I assure you, the RAM makers are pumping out as much as they can and increasing capacity as fast as they think the market can handle.

I'm not sure what world we live in when the scheming capitalists are all hunched around their table working out how to dodge selling their products into an enormous price boom. Do they not like money all of a sudden?

[Tuna-Fish]

Building new capacity takes years. The idea is that the market is reliably cyclical, so you should expand when there is a downturn, when costs are low and you can afford the short-term capacity hits that expansion causes (fe. when you divide productive teams in two and fill both halves to full strength with new hires).

[roenxi]

If you prefer. But we seem to have gone from "undersupply in a boom" to a strategy of oversupplying so aggressively that manufacturers would finish ramping up supply well before the boom before it even happens. And that would be a better strategy.

[curiousllama]

Sure, but the key word here is "was"

The industry is so naturally prone to oversupply that the only stable equilibrium is undersupply. Aggressive expansion kicks off a price war, which immediately undercuts the logic of the expansion.

This only changes with new entrants, which will come, especially from China. But it takes time to build fab capacity, so the medium-term modal outcome is consistent undersupply.

[KptMarchewa]

That works when there are dozen suppliers. Does not when there are three.