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AUGUST 2019         TAP TIMES          -9-         than the first year after a downturn since
                                                                most semiconductor producers acted very
               CAPEX forecast to slump                          conservatively coming out of the slowdown
                     in 2019 and 2020                           and waited until they had logged 4-6 quar
                                                                ters of good operating results before sig-
                                                                nificantly increasing their capital spending
        SCOTTSDALE, Arizona—Over the past
        34 years, there have been six periods
        when semiconductor industry capital                     Conservative budgets
        spending (CAPEX) declined by double-                    This is expected to be the case for 2020
        digit rates for one or two years (1985-                 with most semiconductor producers likely
        1986, 1992, 1997-1998, 2001-2002,                       to be very conservative with their spend-
        2008-2009, and 2012-2013).                              ing budgets for next year given the poor
                                                                semiconductor market expected in 2019.

        Two-year downturns                                      IC Insights believes that Micron’s attitude
        Five of the past six semiconductor industry             toward next year’s capital spending out-
        CAPEX downturns have lasted two years                   look will be representative of the industry
        before recovering.                                      in general.

        In every case between 1983 and 2010                     In its most recent conference call, Micron
        where spending declined, a surge in                     stated that, “For fiscal 2020, we plan for
        spending of at least 45 percent occurred                CAPEX to be meaningfully lower than fiscal
        two years later.                                        2019.”

        The second year increases in spending af-               As shown in the figure, the streak of
        ter the cutbacks were typically stronger                strong ≥45% capital spending growth
                                                                two years after spending cutbacks ended
                                                                                   in 2015, finished with a 1
                                                                                   percent decline.

                                                                                   Industry maturing
                                                                                   Moreover, only a 4 percent
                                                                                   increase occurred in 2016.
                                                                                   Although capital spend-
                                                                                   ing jumped by 41 percent
                                                                                   in 2017 (four years after
                                                                                   the 2012-2013 downturn
                                                                                   in spending), IC Insights
                                                                                   believes that the relatively
                                                                                   muted cyclical behavior
                                                                                   of the capex growth rates
                                                                                   since 2013, as compared
                                                                                   to past cycles, is another
                                                                                   indication of a maturing
                                                                                   semiconductor industry.
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