Now that the end-of-year rally looks pretty much like a done deal, is it time to starting worrying about the usual first-quarter slowdown in technology? Not really. Demand for PCs and mobile handsets has been strong all year, and that pushed overall sales of semiconductors well beyond expected levels. The resulting low inventories in hard drives and semiconductors, as well as stronger-than-expected sales of enterprise storage products, along with other positive indicators, are convincing some analysts and investors that 2006 will get off to a strong start. "At the beginning of 2005 we were concerned that high inventories would undermine pricing," says Shane Rau, who follows the chip market for IDC. At the time, Rau and his colleagues forecast that overall chip-industry revenue would decrease by about 1% over 2004. But strong sales likely will have swung the estimated loss of revenue to a year-over-year gain of 5% by the end of the month, he said. Sales, of course, are just one part of the semiconductor equation. If the industry fails to manage its capacity correctly, it can create gluts that decimate margins, or shortages of product that can eat into market share, as Intel ( INTC) demonstrated this year . "Chipmakers have been more disciplined about adding capacity than they have been in some time," says Graham Tanaka, principal of Tanaka Capital. Those companies have the healthy cash reserves to expand their factories, but have used their strength in a controlled fashion, he says. Giving the industry more flexibility is the decreasing time it takes to order, produce and deliver semiconductor-manufacturing equipment. Cycle time has decreased from 18 months or two years to less than a year, says Tanaka, who notes that some chipmakers in Taiwan are running their factories at close to 100% of capacity.