Roller coasters are always scariest the first time you ride them. After two or three rides, you still feel the thrill, but the elements of surprise and suspense are gone. You prepare yourself for each turn or drop with increasing expertise, changing the essence of the experience. So it is with semiconductor market cycles. After more than a few trips through the turnstile, I've segmented the ride into four phases and determined how to fare best during each one.

The first phase I call "Hysteria." The sky is falling around you, and everything you once believed is now wrong. You're headed downhill fast and picking up momentum. This was the market three years ago. The rule during Hysteria is to keep your cool and land on your feet. You need to arrive safely and smoothly at the bottom with money left in the bank and people willing to work.

At the end of the free fall begins a series of false hills and valleys that I like to call "Despair." Emotionally, this is where you are tempted to cry in your beer and wait impatiently for the recovery. However, Despair is perhaps the most important phase of all — the phase where fortunes are really made. During Despair, you gaze into your crystal ball, predict what the market will need when it rebounds and place your bets accordingly.

Today we're in what I call the "Renewed Hope" phase, marked by a universal realization that recovery is imminent and this time it's real. The important thing to do during Renewed Hope is to keep your head down and execute. This is the time when you bring your bets to the table. If you're selling semiconductors, now is when you'd better have samples ready.

The fourth and final phase, "Inflated Ego," is both the easiest and most dangerous stretch of track we have encountered. During Inflated Ego, you drive your big armored car to the bank, admired by all for the wealth you've amassed; yet you know the money was really made during Despair and Renewed Hope. The thing to remember during Inflated Ego is that Despair will always make another appearance here. The fact that you're making money doesn't mean you are doing everything right. You must identify and focus on the strategies that are paying off and avoid the temptation to believe you have the Midas touch. Above all, you would be wise to save some of that cash for the inevitable ride down.

If the semiconductor market is now truly in Renewed Hope, as I believe it is, then the winning bets were placed some time ago. Now it's just a matter of time to see who bet (and executed) best.

John East, President and CEO, Actel Corp., Mountain View, Calif.