Recently, the four major analog chip giants released their financial reports.

Onsemi reported revenue of $1.604 billion, up 9% year-over-year and 6% quarter-over-quarter. TI reported revenue of $5.463 billion, up 23% year-over-year and 13% quarter-over-quarter, with its analog business, accounting for nearly 80% of its revenue, growing by 26%. STMicroelectronics reported revenue of $3.487 billion, up 26% year-over-year and 12.7% quarter-over-quarter. NXP reported revenue of $3.496 billion, up 19% year-over-year and 10% quarter-over-quarter. The third-quarter guidance provided by the four companies still points to quarter-over-quarter growth.

Beyond performance, several operational indicators have also shifted simultaneously. STMicroelectronics' book-to-bill ratio approached 2, indicating tightening supply for some products. TI's backlog continued to increase in the second quarter, with lead times extending by several weeks from less than 13 weeks. NXP's channel inventory dropped to 11 weeks.

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

The industrial market was the first to recover. TI President and CEO Haviv Ilan disclosed at the beginning of the earnings call that industrial revenue grew by approximately 30% year-over-year and 10% quarter-over-quarter in the second quarter, with data center revenue doubling year-over-year and growing by approximately 20% quarter-over-quarter. The automotive market, which had been sluggish, also began to rebound, with year-over-year growth reaching double digits and quarter-over-quarter growth approaching double digits.

Source: NXP

NXP's revenue structure showed similar changes. According to NXP's financial report, its industrial and IoT business grew by 38% year-over-year and 20% quarter-over-quarter, its automotive business grew by 12% year-over-year and 9% quarter-over-quarter, and its communications infrastructure and other businesses grew by 41% year-over-year. Its mobile business declined by 10% quarter-over-quarter, with consumer electronics remaining a relatively weak segment.

Source: STMicroelectronics

STMicroelectronics' industrial revenue grew by 34% year-over-year, automotive revenue grew by 16%, and communications equipment and computer peripherals revenue grew by 50%. Its analog, MEMS, and sensor business revenue grew by 26%, driven by both the acquisition of NXP's MEMS business and the rebound in industrial and automotive demand.

Source: Onsemi

Onsemi's recovery was relatively moderate. Its automotive revenue was $781 million, down 2% quarter-over-quarter, while its industrial revenue was $423 million, up 1% quarter-over-quarter. Revenue from other markets, including AI data centers, was $400 million, up 34% quarter-over-quarter. By business segment, power solutions revenue grew by 19% year-over-year, analog and mixed-signal business revenue declined by 2% year-over-year, and intelligent sensing business revenue grew by 7%. Different product lines within the same company showed significant performance differences.

Judging from the financial reports of the four giants, performance growth is no longer supported by a single market. Industry led the way, followed by data centers, with automotive significantly catching up in the second quarter. TI CEO Haviv Ilan judged on the earnings call that a broad-based upward cycle may have just begun.

However, "broad-based" does not mean all products are improving simultaneously. According to the financial data, STMicroelectronics' power and discrete device business revenue grew by only 3.7% year-over-year, with an operating profit margin of negative 21.4%. NXP's mobile business also did not rebound with the overall market. While demand has expanded from individual bright spots to multiple markets, significant performance differences remain among products.

The Real Turning Point Lies in Inventory

This performance difference must be viewed from the perspective of inventory levels.

Demand for analog chips is fragmented, and product lifespans are long. A leading manufacturer may have tens of thousands of part numbers, serving a large number of customers in automotive, industrial equipment, home appliances, communications, and other sectors, with many products sold continuously for a decade or more. Compared to digital chips with concentrated customers and rapid iteration cycles, analog chip inventories are hidden in longer and more complex supply chains.

Chip manufacturers hold finished goods, distributors maintain inventory, automotive Tier 1 suppliers and equipment manufacturers stock components, and end customers may also hold equipment and finished goods inventory. During market upturns, duplicate orders amplify along the supply chain; when demand weakens, inventory can only be digested step by step. A decline in manufacturer inventory does not necessarily mean channel inventory has been cleared, nor does a decline in channel inventory indicate that equipment manufacturers and end customers have resumed purchasing.

Haviv Ilan mentioned on the earnings call that in the previous stage, customers had accumulated not only chips but also equipment and finished products. End customers need to digest these inventories first before new systems designed in the past four to five years can translate into new semiconductor orders. This also explains why the adjustment in industrial analog chips has lasted so long: destocking occurs not only in chip warehouses but also along the supply chain from manufacturers to channels, Tier 1 suppliers, and end equipment manufacturers.

In the second quarter of this year, inventory levels at different tiers began to return to normal ranges simultaneously. STMicroelectronics' inventory days dropped from 166 days a year earlier to 126 days, with distribution inventory falling below the company's normal target. NXP's channel inventory dropped to 11 weeks, returning to its long-term target. TI CFO Rafael Lizardi said on the earnings call that TI's inventory value decreased by $90 million quarter-over-quarter, with inventory days dropping by 13 days. Haviv Ilan was more direct in his assessment of downstream conditions: industrial customers have largely completed destocking, while automotive customers' inventory levels have dropped to unsustainably low levels.

Onsemi provides another example. According to its financial report, its inventory was $2.0475 billion in the second quarter, virtually unchanged quarter-over-quarter. Executive Vice President and CFO Thad Trent said on the earnings call that inventory days decreased by 9 days quarter-over-quarter to 192 days, as the company continues to digest strategic inventory prepared for long-term customer demand. Stable inventory value and improved turnover indicate that shipping recovery is absorbing existing inventory rather than simply relying on production cuts to reduce inventory.

The inventory cycle for analog chips is passing through three stages: destocking → inventory normalization → new order transmission.

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

The automotive market showed the clearest signs of restocking. TI noted that automotive demand strengthened month-by-month in the second quarter, primarily driven by new energy and hybrid vehicles in the Chinese market. Meanwhile, automotive customers had kept inventory levels very low. Even a slight increase in end-user sales prompted the supply chain to replenish safety stock simultaneously. Automotive orders thus included two components: growth in sales and per-vehicle chip content, as well as delayed procurement.

The industrial market more closely reflected a recovery in end-user demand. TI achieved year-over-year and quarter-over-quarter growth across all industrial sub-sectors and regions, with contributions from energy infrastructure, aerospace, robotics, and industrial automation. The company attributed this growth to the ramp-up of new equipment introduced in previous years and an increase in the number of chips required for next-generation equipment, rather than price hikes. Haviv Ilan later added that new systems designed in the past four to five years are now driving demand.

The order structure is also changing. STMicroelectronics CEO Jean-Marc Chery said on the earnings call that the book-to-bill ratio exceeded 1 in all end markets in the second quarter, approaching 2 overall, with communications equipment and computer peripherals significantly exceeding 2, driven by optical connectivity and silicon photonics businesses. TI's backlog increased for both immediate and future deliveries.

Immediate orders typically correspond to low inventory levels and urgent replenishment needs, while future orders reflect customers' confidence in future production plans. The simultaneous increase in both types of orders indicates that this rebound extends beyond mere channel restocking. While restocking has lifted orders from their lows, end-user demand will determine the length of the upward cycle.

After orders rebound, channels become most sensitive to pricing. This year, reports of price adjustments for certain products by TI, STMicroelectronics, Infineon, and other manufacturers have frequently surfaced, with some product quotes showing notable increases. However, reported transaction prices in financial reports have been much more stable.

From TI's perspective, Haviv Ilan believes that overall prices remained largely flat in the first half of 2026. Long-term prices for analog chips typically decline slightly each year, so stabilization itself indicates improved supply-demand balance. TI is also implementing a new round of price adjustments, but given its large customer base and varying contract cycles, price increases require individual negotiations: some take effect in the third quarter, some in the fourth quarter, and others will be addressed in next year's price negotiations. TI expects that third-quarter revenue growth will still primarily come from shipment volumes, with price contributions being "almost negligible." While price increase notices indicate that manufacturers are beginning to regain some pricing power, they do not mean that quoted prices have been widely converted into revenue.

Lead times send a similar signal. TI's lead times remained below 13 weeks in the second quarter but recently extended by several weeks. The company still has available cleanroom space for further capacity expansion and maintains inventory for rapid supply. Although STMicroelectronics saw tightening supply for some product categories, it still incurred $37 million in idle capacity charges in the second quarter and factored in approximately 70 basis points of idle capacity impact in its third-quarter gross margin guidance.

Domestic chip design companies feel tighter conditions. When asked about 8-inch foundry capacity, 3PEAK noted that as downstream demand releases, upstream foundry capacity has tightened overall, and the company is seeking additional capacity from core suppliers. Jetsemi believes that tightness in wafer fabrication and packaging may be related to AI demand crowding out capacity and shifts in overseas orders. Awinic stated that price increases for mature process foundry services have put pressure on gross margins.

These differences stem from business models. IDM manufacturers like TI and STMicroelectronics have their own wafer fabrication capabilities, with unused cleanroom space and idle capacity providing supply buffers. Most domestic analog chip companies rely on external foundries, making them more susceptible to structural tightness in 8-inch production lines. Tightness may first emerge in the foundry segment without immediately translating into shortages for all end products.

The WSTS Spring 2026 forecast further highlights performance differences across segments. WSTS projects that the global semiconductor market will grow by 90% in 2026, reaching $1.51 trillion, driven primarily by approximately 250% growth in memory chips. Analog chips are expected to grow by about 10%, discrete devices by 8%, and sensors and optoelectronic devices by about 3%. While analog chips have entered an upward cycle, they are not the hottest segment in this semiconductor rally.

Currently, tight supply is concentrated in automotive analog, power management, AI server power supply chains, optical module analog front ends, and certain sensors. General-purpose components, consumer electronics, and some power and discrete devices remain in price competition.

Market attention on AI hardware has long focused on GPUs, HBM, advanced process nodes, and high-speed interconnects. As the power density of computing clusters rapidly increases, power conversion, thermal management, and signal transmission are becoming system bottlenecks, propelling analog chips from peripheral components to core Bill of Materials (BOM) (bill of materials).

Cloud AI has created the first incremental demand path: data center power supplies, optical modules, energy infrastructure, and cooling and environmental monitoring. An AI data center needs to convert grid-supplied AC power step-by-step into the different voltages required by GPUs, CPUs, memory, and network chips, while continuously monitoring current, temperature, power consumption, and faults. From AC-DC conversion, intermediate bus converters, board-level power supplies to point-of-load supplies, each layer requires power management ICs, power devices, current sensors, isolation chips, hot-swap controllers, temperature sensors, and control chips. The higher the computing density per rack, the more complex the power system becomes, increasing the analog chip content per unit.

Optical modules require transimpedance amplifiers, drivers, clocks, data converters, and power management ICs. Domestic manufacturers have already generated revenue in this chain. Nexperia noted that its AI server power business serves multiple leading customers, with related digital power revenue growing rapidly year-over-year and quarter-over-quarter in the first quarter. The company's products cover primary and secondary power supplies, including digital isolators, drivers, interfaces, sampling chips, and current sensors. Its high-voltage GaN driver chips have entered mass production, while mid- and low-voltage GaN co-packaged products have completed sampling tests.

Bright Power Semiconductor's digital multiphase controllers, DrMOS, POL regulators, and electronic fuses (eFuses) have entered mass production and scale sales. In 2025, the company's high-performance computing power chip revenue reached 96 million yuan, up 122.26% year-over-year, with next-generation graphics card customers beginning mass shipments. 3PEAK has delivered multiple optical module chips at scale, with analog front ends (AFEs) for high-speed optical modules achieving stable supply. SGMicro said its optical module-related revenue is growing rapidly.

The second demand path comes from Physical AI, where AI enters automotive, robotics, and industrial equipment. Robots need to sense their environment, control motors, manage batteries, and ensure operational safety. Vehicles require radars, sensors, battery management systems, body control, and powertrains. Industrial equipment relies on real-time control, predictive maintenance, and edge computing. While processors handle computation, sensors, analog front ends, isolators, motor drivers, and power management ICs connect computation to the physical world.

Along these two paths, international leaders have set expectations: STMicroelectronics raised its 2026 data center revenue target to over $1 billion and expects it to exceed $2 billion in 2027. TI's data center revenue doubled year-over-year in the second quarter. NXP identifies data centers and Physical AI as new growth engines alongside automotive and industrial markets.

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

The scope of benefits brought by AI has clear boundaries. It increases the value of analog chips in scenarios with high power density, high reliability, and high-speed signals, while general consumer products are less likely to benefit to the same extent. Manufacturers in this field have gained a new growth curve that does not rely on traditional consumer electronics cycles, and the differentiation in products and profits will deepen accordingly.

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

SG Micro's product platform already covers multiple promising directions. During its earnings briefing in late July, the company stated that orders in the second half of the year would increase compared to the first half, with most products supplied normally, while delivery times for some products have been extended due to rapid demand growth. Its broad product and customer structure enable it to simultaneously capitalize on recoveries in industrial, computing, and automotive sectors.

Novosense measures product expansion by the value added per vehicle. Currently, the value of automotive chips it has mass-produced covers approximately 1,700 yuan per vehicle, nearing 2,000 yuan when including products undergoing sampling and validation; the company's long-term goal is 3,000 to 4,000 yuan. Its products already cover the three-electric systems, body control and lighting, intelligent driving and cockpit, and chassis and safety.

3PEAK's current modular analog front-ends have progressed from R&D to stable delivery; automotive audio bus chips have been stably supplied to some automakers, power battery BMS AFE has completed customer technical validation, and LiDAR custom products are still in the R&D and delivery phases.

Domestic analog chip companies still face a time lag between costs and selling prices. Novosense has issued a price increase notice and is currently negotiating with customers; Jiehuaite stated that prices will only be adjusted when cost increases absolutely need to be passed on; Awinic adjusted pricing for some products in the first quarter to maintain market share while absorbing mature process wafer price hikes, putting pressure on its overall gross margin. Awinic's improvement path is to increase the proportion of industrial and automotive businesses, which have relatively higher gross margins. Market recovery first affects revenue; whether it translates into profits depends on the speed of price increases, product mix, and cost control.

This round of adjustments in the analog chip sector has successively cleared inventories from original manufacturers, distribution channels, Tier 1 suppliers, and end-device makers. In the second quarter, the industrial, automotive, and data center sectors recovered simultaneously, bringing inventory levels back to normal ranges and redirecting orders to original manufacturers. Some automotive analog, power management, and optical communication products have already shown signals of extended lead times and price increases, while general-purpose products and some power devices still face supply pressures.

Currently, the bottom of the analog inventory cycle is becoming evident.