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When people are being laid off in a cyclical industry, it's usually a sign of bottom for the industry. If the lay-off continues unabated, there wouldn't be the cyclical industry left. Of course, one can sell the theory that the industry is going bust, but that's as daring (or foolhardy) as buying the theory that the industry would break its cyclicity to the up side at the cycle peak.
The demand economy model doesn't work well at all for the semiconductor industry. Due to the heavy capital commitment and long period of time it would take to bring new fab facility on line (like 2-4 years, almost an election cycle sometimes), companies would be dead meat if they wait till the demand picks up to order new fab facility. It's not just Intel that is contiueing the miniturization process, NVDA, ATI etc are all moving to 0.13u process now; some memory makers are even moving to the 0.09u process ahead of INTC. The tremendous differences in variable production cost and profit margin (due to speed difference) between new fab and old fab is such that old fab is nearly worthless. Low capacity utilization rate could be an indication that too much fab capacity out there are really old stuff and nobody wants to feed them silicon wafers.
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