Instead of talking about chips and circuits, I would like to take a minute to address the question I hear most often these days: How bad is it? After a period of rapid growth, the semiconductor industry has suddenly encountered some nasty turbulence.

This down cycle was inevitable, but it was probably triggered by and is certainly exacerbated by the current weakness in the U.S. and other economies. But as Intel's Andy Grove points out, recessions always end, and so do semiconductor down cycles.

Yes, orders for networking equipment are down, but the Internet suddenly became a bad idea. The Internet continues to fundamentally change the way we work and play, and those changes are just beginning.

There will be a huge rollout of new networking equipment over the next several years, as Internet users move to an always-on broadband environment.

I won't pretend to tell you whether those orders will go back up this year or next, but I have no doubt that the orders will eventually come.

Similarly, cell phones have not become a bad idea. We will not go back to searching for a phone booth to make a call. And the number of consumers using Tivo and similar devices to take control of their television viewing will continue to grow.

Even the demise of Napster will not stem the legions of users who manage their music collections using MP3 (and other audio compression schemes). They will keep buying MP3 players, many in form factors that are just emerging.

A down cycle weeds out the weaker semiconductor companies. Giants such as Intel and IBM have billions of dollars in the bank, more than enough to weather the downturn. Note that the "layoffs" Intel announced are mainly through attrition and will not affect key R&D projects or fab investments.

Many pre-IPO companies have raised enough capital in the past year to last for several more months. Others are having no problem raising $20 million or $40 million in the current environment, though money will become tighter if the downturn lasts for the entire year.

Down cycles are never fun if your company is the one in trouble, or your job is the one that's lost. But many smaller companies are still hiring. In any case, this down cycle will eventually end, leaving an industry that is healthier because of it.

Linley Gwennap is the founder and principal analyst of the Linley Group (www.linleygroup.com), a technology analysis firm in Mountain View, Calif.