alt Hacker NewsThis 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.
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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
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.