Analog Chip Market Enters Uptrend as Major Companies Report Growth

Recently, the four major simulation giants released their financial reports.

ON Semiconductor reported revenue of $1.604 billion, up 9% year-over-year and 6% quarter-over-quarter. Texas Instruments reported revenue of $5.463 billion, up 23% year-over-year and 13% quarter-over-quarter; its analog business, which accounts for nearly 80% of the company's revenue, grew 26%. STMicroelectronics reported revenue of $3.487 billion, up 26% year-over-year and 12.7% quarter-over-quarter. NXP Semiconductors reported revenue of $3.496 billion, up 19% year-over-year and 10% quarter-over-quarter. All four companies provided guidance for the third quarter that still points to quarter-over-quarter growth.

Beyond earnings, several operational metrics also shifted simultaneously. STMicroelectronics’ book-to-bill ratio approached 2, indicating that demand for certain products has outpaced supply; Texas Instruments’ backlog continued to grow in the second quarter, with lead times extending by several weeks from below 13 weeks; NXP’s channel inventory declined to 11 weeks.

By mid-2026, the analog chip market finally began to enter an upward cycle.

The industrial market was the first to recover. At the beginning of the earnings call, TI President and CEO Haviv Ilan disclosed that industrial revenue increased approximately 30% year-over-year and about 10% quarter-over-quarter in the second quarter; data center revenue doubled year-over-year and rose approximately 20% quarter-over-quarter. Meanwhile, the automotive market, which had lagged for so long, also began to rebound, with year-over-year growth reaching double digits and quarter-over-quarter growth nearing double digits.

Source: NXP

NXP's revenue structure shows similar trends. According to NXP's financial reports, industrial and IoT revenue increased 38% year-over-year and 20% quarter-over-quarter; automotive revenue rose 12% year-over-year and 9% quarter-over-quarter; and communications infrastructure and other segments grew 41% year-over-year. Mobile revenue declined 10% quarter-over-quarter, and consumer electronics remained the weakest segment.

Source: STMicroelectronics

STMicroelectronics' industrial revenue increased by 34% year-over-year, automotive revenue rose by 16%, and communications equipment and computer peripherals revenue grew by 50%. Revenue from analog, MEMS, and sensors businesses increased by 26%, driven by contributions from the acquisition of NXP's MEMS business as well as renewed demand in industrial and automotive sectors.

Source: ON Semiconductor

Onsemi's recovery pace has been relatively moderate. Automotive revenue amounted to $781 million, a 2% sequential decline; industrial revenue reached $423 million, a 1% sequential increase; and revenue from other markets, including AI data centers, totaled $400 million, up 34% sequentially. By business segment, power solutions revenue increased 19% year-over-year, analog and mixed-signal business declined 2% year-over-year, and intelligent sensing business grew 7%. Different product lines within the same company are already showing clear disparities.

According to the earnings reports of the four giants, growth is no longer driven by a single market. Industrial applications lead, followed by data centers, with automotive showing clear momentum in the second quarter. TI CEO Haviv Ilan stated on the earnings call: A broad-based upcycle may have just begun.

However, "broad coverage" does not mean all products have improved simultaneously. According to financial reports, STMicroelectronics' power and discrete devices revenue increased by only 3.7% year-over-year, with an operating margin still at -21.4%; NXP's mobile business also did not recover along with the broader market. Demand has expanded from isolated bright spots to multiple markets, yet significant disparities persist among products.

The real turning point is in inventory.

This temperature difference should be viewed from the perspective of the inventory location.

Demand for analog chips is dispersed, and their product lifecycles are long. A leading manufacturer may carry tens of thousands of part numbers, serving a wide range of customers in automotive, industrial equipment, home appliances, communications, and other sectors—many of which can be sold continuously for over a decade or longer. In contrast to digital chips, which feature concentrated customer bases and faster iteration cycles, analog chip inventory is embedded in longer, more complex supply chains.

Chip manufacturers hold finished goods, distributors maintain stock, automotive Tier 1 suppliers and equipment manufacturers stockpile components, and end customers may also hold excess equipment and finished products. During an upward market cycle, repeated orders amplify up the supply chain; when demand weakens, inventory can only be gradually absorbed at each level. A decline in original manufacturer inventory does not necessarily mean channels are cleared; a reduction in channel inventory does not indicate that equipment manufacturers or end customers have resumed purchasing.

Haviv Ilan mentioned during the conference call that, in the previous phase, customers accumulated not only chips but also equipment and finished products. Terminals must first absorb this inventory before newly designed systems from the past four to five years translate into new semiconductor orders. This also explains why the adjustment in industrial analog chips has lasted so long: inventory reduction is not limited to chip warehouses but has been transmitted all the way from manufacturers through distributors, Tier 1 suppliers, and end-device manufacturers.

Looking at the second quarter, inventories across different levels have begun to return to normal ranges. STMicroelectronics' inventory days decreased from 166 days in the same period last year to 126 days, and distributor inventories have fallen below the company’s targeted normal level. NXP’s channel inventory has dropped to 11 weeks, returning to its long-term target. TI’s CFO, Rafael Lizardi, stated on the earnings call that TI’s inventory value decreased by $90 million quarter-over-quarter, with inventory days declining by 13 days. Haviv Ilan’s assessment of downstream trends was more direct: industrial customers have largely completed their inventory destocking, and automotive customers’ inventories have fallen to levels so low they are difficult to sustain long-term.

Onsemi provided another data point. According to the company’s financial report, inventory stood at $2.0475 billion in the second quarter, with little change quarter-over-quarter. Thad Trent, Executive Vice President and CFO, stated on the earnings call that inventory days decreased by 9 days quarter-over-quarter to 192 days, as the company continues to work through strategic inventory built up for long-term customer demand. The flat inventory value alongside improved turnover indicates that shipment recovery is absorbing existing stock, rather than simply relying on production cuts to reduce inventory.

The inventory cycle for simulation chips is passing through three phases: destocking → inventory normalization → new orders retransmitting.

After inventory levels dropped to low levels, customers needed to resume purchasing, but not all new orders stemmed from end-demand. In the second quarter, the automotive, industrial, and data center markets were driven by both inventory restocking and genuine demand.

The automotive market shows the most pronounced restocking characteristics. TI noted that automotive demand strengthened month-over-month during the second quarter, with the increase primarily driven by new energy and hybrid vehicles in the Chinese market. Meanwhile, automotive customers had previously maintained very low inventory levels. A slight rise in end-demand prompted the entire supply chain to simultaneously replenish safety stock. As a result, automotive orders consist of two components: increased sales volume and higher chip content per vehicle, along with previously deferred purchases.

The industrial market is closer to a recovery in end-demand. All industrial sub-segments and regions for TI reported year-over-year and quarter-over-quarter growth, driven by energy infrastructure, aerospace, robotics, and industrial automation. The company attributes this growth to new products introduced over the past few years entering mass production and an increased number of chips required for next-generation devices, rather than price increases. Haviv Ilan further added that new systems designed over the past four to five years are now driving demand.

The order structure is also changing. STMicroelectronics CEO Jean-Marc Chery stated on the earnings call that the book-to-bill ratio exceeded 1 across all end markets in the second quarter, with an overall ratio nearing 2; communications equipment and computer peripherals saw ratios significantly above 2, primarily driven by optical connectivity and silicon photonics businesses. TI’s backlog has increased for both immediate and forward delivery demands.

Spot orders typically correspond to low inventory levels and urgent restocking, while forward orders reflect customers' confidence in their future production plans. The simultaneous increase in both types of orders indicates that this recovery has moved beyond mere channel restocking. Inventory rebuilding has pulled orders off their lows, but the duration of the upward cycle will be determined by end-demand.

After order volumes rebounded, channels became most sensitive to pricing. Since the beginning of this year, rumors have frequently emerged about price adjustments from manufacturers such as TI, STMicroelectronics, and Infineon, with notable increases in quotes for some products. However, the transaction figures reported in financial statements have been much more subdued.

From TI’s perspective, Haviv Ilan believes that overall prices in the first half of 2026 will remain largely flat. Analog chip prices have historically declined slightly each year, and the stabilization itself indicates an improvement in supply-demand dynamics. TI is also initiating a new round of price adjustments; however, with a large number of customers and varying contract cycles, price increases require individual negotiations—some will take effect in the third quarter, others in the fourth quarter, and some will be deferred to next year’s pricing discussions. TI expects that revenue growth in the third quarter will still be driven primarily by shipment volumes, with price contributions being “nearly negligible.” The price increase notices signal that manufacturers are beginning to reclaim some pricing power, but this does not yet mean that quoted increases have been broadly reflected in revenue.

The lead time signals are also similar. In Q2, TI’s lead times remained below 13 weeks, though they have recently extended by several weeks. The company still has available cleanroom space for further equipment installation and ramp-up, as well as inventory maintained for rapid fulfillment. STMicroelectronics, although observing tightening conditions in some product categories, incurred $37 million in idle capacity costs in Q2, and its gross margin guidance for Q3 includes an approximate 70-basis-point impact from idle capacity.

Domestic chip design companies are feeling tighter constraints. When asked about 8-inch foundry capacity, Silan Microelectronics stated that as downstream demand ramps up, upstream foundry capacity overall has become tighter, and the company is working to secure additional capacity from its core suppliers. JHW (Jiahua Tech) believes that the tightness in wafer and packaging segments may be related to AI demand crowding out other needs and the shift of overseas orders. AW (Awei Electronics) noted that rising prices for mature-node foundry services have put pressure on gross margins.

The difference stems from business models. IDM companies like TI and STMicroelectronics have their own wafer fabrication capabilities, and unused cleanroom space and idle capacity serve as a supply buffer; most domestic analog chip companies rely on external foundries and are more likely to feel the structural tightness in 8-inch production lines first. The strain may initially occur at the foundry level and has not yet translated into shortages across all end products.

The WSTS spring 2026 forecast further highlights temperature differences across sectors. WSTS predicts that the global semiconductor market will grow by 90% in 2026, reaching $1.51 trillion, driven primarily by a roughly 250% increase in memory chips; analog chips are expected to grow by about 10%, discrete devices by 8%, and sensors and optoelectronics by approximately 3%. Analog chips have already entered an upward phase, but they are not the hottest segment in this round of semiconductor momentum.

Products currently in tight supply include automotive simulation, power management, AI server power chains, optical module analog front-ends, and certain sensors. General-purpose components, consumer electronics, and some power and discrete devices continue to face price competition.

Market attention for AI hardware has long been focused on GPUs, HBM, advanced process nodes, and high-speed interconnects. As the power and density of computing clusters rise rapidly, power conversion, thermal management, and signal transmission are increasingly becoming system bottlenecks, causing analog chips to move from peripheral components to core bill-of-materials items.

Cloud AI has introduced the first incremental pathway: data center power supplies, optical modules, energy infrastructure, and thermal and environmental monitoring. An AI data center must progressively convert AC power from the grid into the different voltage levels required by GPUs, CPUs, memory, and network chips, while continuously monitoring current, temperature, energy consumption, and faults. From AC-DC conversion and intermediate bus to board-level power and point-of-load delivery, each layer relies on power management, power devices, current sensing, isolation, hot-swap, temperature sensing, and control ICs. The higher the computing power per rack, the more complex the power system becomes, and the greater the value of analog chips per unit.

Optical modules require transimpedance amplifiers, drivers, clocks, data conversion, and power management. Domestic manufacturers have already established revenue along this supply chain. Nexperia states that its AI server power business serves multiple leading customers, with digital power revenue in the first quarter growing significantly both year-over-year and quarter-over-quarter. The company’s products are integrated into both primary and secondary power systems, covering digital isolation, drivers, interfaces, sampling, and current sensors, with high-voltage GaN driver chips already in mass shipment and medium- and low-voltage GaN integrated products completed for sampling and testing.

Jingboshi's digital multiphase controllers, DrMOS, POL, and eFuses have also entered mass production and large-scale sales. In 2025, the company's revenue from high-performance computing power chips reached RMB 96 million, a year-over-year increase of 122.26%; large-scale shipments to new-generation GPU customers have begun. Sinopower has delivered multiple optical module chips at scale, with stable supply of analog front-end (AFE) components required for high-speed optical modules; SG Micro reports that its revenue related to optical modules is growing rapidly.

Another path comes from Physical AI, where AI enters automobiles, robots, and industrial equipment. Robots must perceive their environment, control motors, manage batteries, and ensure operational safety; automobiles require radar, sensors, battery management, body control, and powertrain systems; industrial equipment relies on real-time control, predictive maintenance, and edge computing. Processors handle computation, while sensors, analog front-ends, isolators, motor drivers, and power management chips connect computation to the physical world.

On these two pathways, industry leaders have set their expectations: STMicroelectronics has raised its 2026 data center revenue target to over $1 billion, with projections exceeding $2 billion by 2027; Texas Instruments reported that its data center revenue doubled year-over-year in Q2; NXP has identified data centers and Physical AI as new growth engines alongside automotive and industrial segments.

Onsemiconductor's President and CEO, Hassane El-Khoury, stated in the earnings report that AI data centers have become the company's fastest-growing business, with revenue expected to more than double year-over-year by 2026. The company also disclosed that it has expanded its power supply business within NVIDIA’s MGX ecosystem and secured design wins for EliteSiC, silicon MOSFETs, and controllers on Great Wall’s AI data center platform for cloud infrastructure in China.

The benefits brought by AI have clear boundaries. It increases the value of analog chips in scenarios requiring high power density, high reliability, and high-speed signals, while general consumer products are unlikely to benefit to the same extent. Manufacturers in this space have gained a new growth trajectory independent of traditional consumer electronics cycles, leading to increased differentiation in both products and profits.

In recent years, domestic analog chip companies have generally expanded their product lines, increased investment in R&D, and extended their reach into markets such as automotive, industrial, communications, and high-performance power.

SG Micro's product platform covers multiple high-growth sectors. At its earnings briefing at the end of July, the company stated that orders in the second half of the year increased compared to the first half, with most products supplying normally; however, delivery times for some products have extended due to rapid demand growth. Its broad product and customer portfolio enables it to simultaneously benefit from the recovery in industrial, computing, and automotive markets.

Xinli Micro measures product expansion by the value per vehicle. Currently, the value per vehicle covered by its mass-produced automotive chips is approximately RMB 1,700, rising to nearly RMB 2,000 when including products in sample validation; the company’s long-term goal is RMB 3,000 to RMB 4,000. Its products already cover the three-electric system, body control and lighting, intelligent driving and cockpit, and chassis and safety systems.

The analog front-end module for SiRui's current product line has progressed from R&D to stable delivery; the automotive audio bus chip is now steadily supplying selected automakers; the battery management system (BMS) AFE has completed technical validation with customers; and the LiDAR custom product is still in development and delivery phases.

Domestic analog chip companies still face a time lag between rising costs and price adjustments. Nexchip has issued a price increase notice and is currently negotiating with customers; Jiahua Technology states it will adjust prices only when cost increases must be passed on; Awei Electronics adjusted pricing for some products in Q1 to maintain market share while absorbing higher wafer costs for mature processes, putting pressure on its overall gross margin. Awei’s path to improvement involves increasing the proportion of higher-margin industrial and automotive business. As the market recovers, revenue growth comes first; whether this translates into improved profits depends on the speed of price increases, product mix, and cost control.

This round of simulation chip adjustments successively drained inventories from OEMs, distributors, Tier 1 suppliers, and end-device manufacturers. In the second quarter, demand recovered simultaneously in industrial, automotive, and data center sectors, bringing inventory levels back to normal ranges and reactivating order flow back to OEMs. Lead times are extending and prices are rising for certain automotive analog, power management, and optoelectronic products, while general-purpose components and some power devices continue to face supply constraints.

Currently, the simulated inventory bottom has appeared.

This article is from the WeChat public account "Semiconductor Industry纵横" (ID: ICViews), author: Jiulin.