A Markov Regime-Switching Model for the Semiconductor Industry Cycles

Because of the huge fluctuation in the semiconductor business, it has been a challengingwork for the industry researchers to predict the turning points of the semiconductor industry cycles. To catch the cyclical behavior of the semiconductor business, we propose a Markov Regime-Switching model with two regimes representing expansion and contraction. The simple nonlinear, two states, regime-switching model shows a successful insample prediction on the contraction of semiconductor industry sales during the period of 1990:01-2003:08