Semiconductor Equipment Mass Orders Followed by Supply Surplus: A Vicious Cycle
Since 2023, backed by AI demand, fab-less and foundry companies have aggressively pursued capital investment. Now that investment has resulted in unexpected supply glut, and the entire industry has entered a correction phase. Short-term earnings recovery appears unlikely.
The Gap Between Investment Surge and Weak Demand
Since mid-2023, fab-less and foundry companies have invested massive capital to prepare for semiconductor shortages. Advance orders flooded equipment suppliers like ASML for cutting-edge equipment adoption. However, actual demand recovery has been slower than expected. QCOM, as of November 5, 2026, closed at $156.75 (reference date November 5, 2026), with a one-month decline of -11.50% and revenue growth rate of -8.4%. A paradox has emerged where semiconductor designers’ (fab-less) revenues are actually shrinking.
INTC is even more severe. As of November 5, 2026, it closed at $52.25, plunging -53.81% over one month. Its net profit margin has fallen to -20.1%, showing severe losses. If a major foundry like Intel faces such a situation, the financial flexibility of foundries overall is extremely limited.
Why Is Correction Intensifying Now: Four Factors
1. Equipment Installation Completion Meets Demand Gap Head-On: Equipment installed in 2024–2025 is in operation, but actual orders (demand) have not materialized as previously expected. Fab-less and foundry companies, already equipped with facilities, are deferring additional investment. ASML’s revenue growth rate of 55.2% (as of November 5, 2026, closing at $1,356.65) remains high, but subsequent market reduction in advance orders has already begun to be reflected. One-month decline of -24.74% and three-month decline of -21.97% prove this.
2. Inventory Buildup and Cost Pressure: When semiconductor demand weakens, excess production capacity automatically drives up costs. As fixed cost burden increases, net profit margin deteriorates. Both QCOM’s negative growth and INTC’s losses stem from this structure.
3. Cascading Impact of Economic Slowdown: Weakening demand for PCs, smartphones, and servers is materializing. Orders were especially excessive when AI chip demand came in ahead of expectations. Now correction is inevitable. The decline in fab-less revenues directly reflects this.
4. Breakdown of Capital Investment Cycle: In the past, it was a virtuous cycle of equipment adoption → production expansion → profit growth → reinvestment. Now it has become a vicious cycle of equipment adoption → overproduction → price decline → profit deterioration → investment contraction. ASML’s P/E of 35.0 reflects high expectations, but customers’ worsening performance signals future order weakness.
Structural Weaknesses Run Deeper
1. End of Virtuous Cycle: The initial AI demand surge has ended. Now the market is in a correction phase seeking balance between actual supply and demand. Profitability must come under pressure in this process.
2. High Fixed Cost Structure: Cutting-edge semiconductor facilities must operate at high utilization rates to generate profits once installed. Partial operation sends costs soaring. INTC’s losses exemplify this.
3. Intensifying Competition: In an environment of excess production capacity, price competition intensifies. Foundry price cuts erode fab-less margins as well.
Conclusion
The 2023 investment surge was a necessary step for technological innovation. However, at this point, that investment has distorted market supply-demand balance and turned into correction pressure. The stock price declines of ASML, QCOM, and INTC show how severe that correction is. Individual stock volatility is expected to remain high until the industry’s realignment is complete.
This article is for information only and is not investment advice.