Why can the industry make 28nm chips, but not control supply and demand?

Are we set for another round? Demand for semiconductors is growing, with sales likely to be up by 30% over last year. Now, according to market researcher Gartner, sales of semiconductor manufacturing equipment this year are set to grow by 113%. That's not a great surprise, bearing in mind the state of the industry last year, but it does point to potential over capacity in the next couple of years. When the global economic crisis unfolded, many semiconductor manufacturers mothballed their fabs and laid off staff. Now, they are scrambling to get production back to the necessary level as demand rises. This has seen several technologies being placed on allocation, with lead times in some cases of up to 52 weeks. Yet demand for semiconductors has always been cyclical. While revenues have historically grown by about 10% a year, there have been regular peaks and troughs – some quite violent – along the way. Managing these swings while investing in the appropriate manufacturing technology is not easy. Despite this, manufacturers have often made substantial investments in capacity at the wrong point in the cycle. Instead of investing ahead of a boom, they invested at the crest of the boom when revenues were high. But capacity then came onstream as demand fell, followed by over supply, a collapse in prices and another violent downswing in the industry's fortunes. It's an interesting paradox that an industry which can create devices with feature sizes of only a few atomic diameters is unable to solve its long term manufacturing challenges.