Thanks AA this is helpful work to frame the cycle. Just a question on your capex/ASP framework, if I look at the big 3 memory players and TSMC, their 2026 capex expectation would far exceed ~20% YoY increase - where the chart shows as capex is ‘peaking’. How do their 2026 capex guidance fit into your framework?
(2a) During shortages, consensus tends to overestimate future capex growth. Time and again, these estimates are revised downward when the shortage begins to ease.
I didn't have enough time to collect the data on forecasted vs actual capex for the big 3.
However, I believe it will look similar to the revenue chart I just posted in my notes. After all, capex is funded by revenue growth.
That said, I do have more detailed data on Micro-Mechanics.
During the shortage in FY2022, Micro-Mechanics forecasted SGD 5 mn capex for FY2023.
This was too optimistic.
The actual capex was only SGD 3 mn because the market flipped into oversupply during FY2023.
(1) The capex growth chart with red circles around the peaks ends in Q4'25.
On hindsight, I should start numbering my charts!
(2) Yup, after a brief pause in Q1’26, the consensus expectation is that capex growth will accelerate and peak only around Q1’27. I show this in the final chart.
If this happens, the shortage will probably end around Q1’28, a year later than I expect. Accordingly, SOXX will likely only start declining in Q4’27.
However, I am skeptical.
(a) During shortages, consensus tends to overestimate future capex growth. Time and again, these estimates are revised downward when the shortage begins to ease.
(b) Furthermore, the target production date of new fabs cluster around early 2027.
I asked Perplexity to compile data on major memory fabs under construction and their expected production date.
Please see the table in the post.
(c) Finally, if the shortage will end only in Q1’28, this would make the current shortage the longest since 2011.
At 17 quarters long, this shortage would be twice the duration of each of the past 3 shortages.
Thanks AA this is helpful work to frame the cycle. Just a question on your capex/ASP framework, if I look at the big 3 memory players and TSMC, their 2026 capex expectation would far exceed ~20% YoY increase - where the chart shows as capex is ‘peaking’. How do their 2026 capex guidance fit into your framework?
(2a) During shortages, consensus tends to overestimate future capex growth. Time and again, these estimates are revised downward when the shortage begins to ease.
I didn't have enough time to collect the data on forecasted vs actual capex for the big 3.
However, I believe it will look similar to the revenue chart I just posted in my notes. After all, capex is funded by revenue growth.
That said, I do have more detailed data on Micro-Mechanics.
During the shortage in FY2022, Micro-Mechanics forecasted SGD 5 mn capex for FY2023.
This was too optimistic.
The actual capex was only SGD 3 mn because the market flipped into oversupply during FY2023.
tyub, thanks for the question.
(1) The capex growth chart with red circles around the peaks ends in Q4'25.
On hindsight, I should start numbering my charts!
(2) Yup, after a brief pause in Q1’26, the consensus expectation is that capex growth will accelerate and peak only around Q1’27. I show this in the final chart.
If this happens, the shortage will probably end around Q1’28, a year later than I expect. Accordingly, SOXX will likely only start declining in Q4’27.
However, I am skeptical.
(a) During shortages, consensus tends to overestimate future capex growth. Time and again, these estimates are revised downward when the shortage begins to ease.
(b) Furthermore, the target production date of new fabs cluster around early 2027.
I asked Perplexity to compile data on major memory fabs under construction and their expected production date.
Please see the table in the post.
(c) Finally, if the shortage will end only in Q1’28, this would make the current shortage the longest since 2011.
At 17 quarters long, this shortage would be twice the duration of each of the past 3 shortages.
Great article man, actually enjoyed reading it.
Subscribed, would love to have you along too 🙂🙌
Glad you found it useful!
thanks for sharing your take!
Thanks for your kind words!