Four analog chipmakers post 9% to 26% growth as upcycle begins

Texas Instruments, STMicroelectronics, NXP and onsemi posted Q2 revenue growth of 9 percent to 26 percent year over year as industrial, automotive and data center demand recovered in tandem.

"One broad upcycle may just be beginning," Haviv Ilan, CEO of Texas Instruments, said on the company's earnings call.

TI's analog business, which accounts for roughly 80 percent of revenue, grew 26 percent. Industrial revenue rose 30 percent year over year, data center revenue doubled, and automotive climbed into the double digits. STMicroelectronics posted a book-to-bill ratio near 2, meaning orders nearly doubled shipments, while NXP's channel inventory fell to 11 weeks, back within its long-term target.

The synchronized recovery carries implications beyond the four vendors. Chinese analog designers including Sageband, Nanochip and 3PEAK are seeing tighter 8-inch foundry capacity, and AI data center power chains are pulling analog content into the core bill of materials. WSTS forecasts analog chip revenue will grow about 10 percent in 2026, a slower pace than memory's roughly 250 percent surge but a clear turn from the multi-year downturn.

Destocking Ends as Inventory Days Return to Normal

The recovery's foundation is inventory. Analog chips have long lifecycles and are distributed across complex supply chains — chipmakers hold finished goods, distributors stock inventory, automotive Tier 1 suppliers and equipment makers keep component buffers, and end customers may hold finished devices. When demand weakened, destocking rippled through every layer.

By Q2 2026, that process had largely completed. STMicroelectronics cut inventory days to 126 from 166 a year earlier, with distribution inventory below its normal target. NXP's channel inventory fell to 11 weeks, within its long-term range. TI reduced inventory by $90 million and cut inventory days by 13. Onsemi's inventory days fell 9 to 192, with the company absorbing strategic stock built for long-term customer demand.

TI CEO Ilan said industrial customers have essentially finished destocking, and automotive customers' inventory has fallen to levels that are "hard to sustain long-term." The implication: new orders now reflect genuine demand rather than channel correction.

AI Data Centers Pull Analog Into the Core Bill of Materials

The second driver is AI infrastructure. A single AI data center must convert grid AC power through multiple stages — AC-DC conversion, intermediate bus, board-level power and point-of-load regulation — each requiring power management ICs, power devices, current sensing, isolation, hot-swap controllers, temperature sensors and control chips. Higher rack power density means more analog content per server.

TI's data center revenue doubled year over year in Q2. STMicroelectronics raised its 2026 data center revenue target to above $1 billion and expects more than $2 billion in 2027. Onsemi said AI data centers are now its fastest-growing business, with 2026 revenue expected to more than double, and disclosed design wins in NVIDIA's MGX ecosystem and at Chinese cloud infrastructure provider Great Wall.

Optical modules — the high-speed interconnects linking AI servers — are another analog-heavy growth area. Transimpedance amplifiers, drivers, clocks, data converters and power management are all required. Chinese suppliers are already monetizing this: Nanochip said its AI server power business covers multiple top-tier customers, with high-voltage GaN driver chips shipping in volume. Bright Power's digital multi-phase controllers, DrMOS and eFuse products entered mass production, with high-performance computing power chip revenue of 96 million yuan in 2025, up 122 percent.

Pricing power is returning selectively. TI said H1 2026 prices were roughly flat — a meaningful shift for a sector where analog prices typically decline a few percent annually. The company is negotiating increases with customers, with some taking effect in Q3, others in Q4, and some deferred to next year's contract talks. TI expects Q3 revenue growth to come primarily from shipments, with price contribution "almost negligible."

STMicroelectronics saw some product categories tighten, though it still absorbed $37 million in idle capacity costs in Q2. Infineon announced its second price increase of 2026, effective July 1, citing AI-driven demand for data center power solutions.

Chinese analog designers feel the pressure earlier because most rely on external foundries. 3PEAK said 8-inch wafer capacity is tightening as downstream demand releases, and the company is negotiating for more allocation from core suppliers. Joulwatt attributed wafer and packaging tightness to AI demand crowding and overseas order transfers. Awinic said mature-node foundry price increases are pressuring gross margins.

The tight spots are concentrated in automotive analog, power management, AI server power chains, optical module analog front-ends and select sensors. General-purpose parts, consumer electronics and some power discrete devices remain in price competition.

The upcycle's durability depends on whether restocking gives way to sustained end demand. TI's backlog grew in Q2 across both immediate and forward orders — immediate orders reflect low inventory and urgent replenishment, while forward orders indicate customers' confidence in future production plans. Both rising together suggests the recovery has moved beyond pure channel restocking.

For investors, the four vendors' Q3 guidance points to continued sequential growth. The bigger question is whether AI infrastructure investment — which has carried the semiconductor market through the consumer electronics slump — can sustain the pace. IDC forecasts smartphone shipments falling 13.9 percent in 2026 to 1.09 billion units, the steepest annual drop on record, as memory costs push consumer device prices higher.

Analog chipmakers have a structural advantage: their products are embedded in long-lifecycle equipment across automotive, industrial and infrastructure markets. The question is whether AI-driven demand for power management and signal chain components can offset consumer electronics weakness. So far in Q2, it has.

This article is for informational purposes only and does not constitute investment advice.