The automotive semiconductor market has officially entered an upward cycle after nearly two years of adjustment.
A latest quarterly tracking report from Bernstein indicates that automotive semiconductor revenue grew 11% year-over-year in Q1 2026, showing clear acceleration. A new wave of price increases among analog chip manufacturers is also fully underway.
The report points out that three key drivers—AI server power demands consuming fab capacity, price hikes from upstream foundries, and the Strait of Hormuz crisis raising raw material and energy costs—have prompted major analog chip makers like Infineon Technologies AG, Texas Instruments, and NXP Semiconductors NV to announce a second round of price increases, with some product prices rising by 15% to 85%.
Bernstein believes that downstream inventory is at historically low levels. Price hikes will further stimulate restocking demand, creating a positive cycle of rising demand and tight supply. Profits for related companies are expected to be revised upward continuously.
**Price Hikes Roll Out Comprehensively, Second Round Underway**
Since the beginning of 2026, analog chip manufacturers have initiated a new collective wave of price increases, with some leading firms already announcing a second round of hikes within the year.
Infineon Technologies AG implemented its first round of price increases for customers starting April 1 and has notified customers of a second round effective July 1. The company cites comprehensive increases in energy and raw material costs, coupled with demand growth exceeding expectations, necessitating accelerated capacity expansion investments.
Texas Instruments reportedly raised prices for some analog and embedded products by 15% to 85% starting April 1, 2026, and will execute a second round of increases on July 1. Management indicated that if demand remains strong in the second half, further case-by-case price adjustments are possible.
NXP Semiconductors NV also raised prices for some products starting April 1 and is reportedly preparing for a second round of increases effective June 1, citing rising costs for raw materials, energy, labor, and logistics.
Renesas Electronics plans price increases starting July 1, with management stating that tight capacity supply, combined with competitors taking the lead, makes price adjustments inevitable.
Analog Devices stated it has already raised prices in fiscal 2026 to offset cost increases and will continue adjusting pricing based on cost trends.
Three core logics are driving this round of price increases:
First, AI server power demands are consuming significant semiconductor capacity, with spillover effects spreading to adjacent product areas. Infineon Technologies AG confirmed that price increases for AI power products have taken effect this quarter.
Second, upstream foundries have successively raised prices. Vanguard expects a low single-digit percentage price increase in Q2 2026, and UMC also guides for a low single-digit increase in Q2, with more potential hikes in the second half.
Third, the Strait of Hormuz crisis has elevated costs for raw materials, memory, logistics, and energy. Analog chip manufacturers tend to pass these costs on to customers.
Bernstein notes that current downstream inventory is extremely lean. Price hikes will trigger restocking demand, further exacerbating supply shortages, and are expected to drive more profit upgrades.
**Growth Cycle Momentum Accelerates, Industry-Wide Gains Emerge**
After six consecutive quarters of year-over-year decline, automotive semiconductor revenue returned to positive growth in Q4 2025 (up 4% YoY) and further accelerated to 11% YoY in Q1 2026, remaining flat sequentially and outperforming the seasonal pattern of the past six years.
From a regional perspective, this marks the second consecutive quarter where all regions recorded positive YoY growth, a pattern not seen in the previous three years.
The US region showed the fastest growth, accelerating by 12% YoY, primarily benefiting from Qualcomm's strong performance and Analog Devices's structural exposure to ADAS and high-performance computing. Europe grew 10% YoY, and Japan grew 7%. Both regions, due to greater exposure to electric and traditional vehicle applications, experienced more pronounced declines previously.
At the company level, this is the first time in over four years that all covered companies achieved positive YoY growth in US dollar terms.
Qualcomm led with 38% YoY growth. Its Snapdragon Digital Chassis platform has been adopted by over 30 global automakers for more than 350 vehicle models.
STMicroelectronics NV ranked second with 15% YoY growth, followed by Melexis also at 15%. Infineon Technologies AG grew 10%, Renesas Electronics grew 8%, NXP Semiconductors NV grew 7%, Texas Instruments grew in the mid-single digits, ON Semiconductor grew 5%, and Analog Devices grew 2%.
Bernstein points out that the decline during this recent downturn was only in the low to mid-single digits, significantly lower than historical double-digit drops. The "soft landing" previously anticipated by management has largely materialized. The continuous growth in semiconductor content per vehicle has partially offset inventory digestion pressures.
**Management Confidence Turns Positive, Q2 and Full-Year Guidance Generally Optimistic**
Based on Q2 2026 guidance, seven out of ten companies expect sequential growth in their automotive businesses, with only ON Semiconductor guiding for flat performance and ROHM not providing explicit guidance.
More importantly, nine out of ten companies expect automotive revenue growth for the full year 2026, indicating industry sentiment has stabilized from the bottom and shifted towards a mild upturn cycle. Specifically:
Infineon Technologies AG stated that low customer inventory is triggering a broader start to restocking, with order books significantly improving, especially from China and Europe. It guides for a slight sequential increase in automotive revenue for its fiscal Q3 2026 (corresponding to calendar Q2 2026).
Renesas Electronics reported that sell-in and sell-through both exceeded expectations, and channel inventory needs further replenishment to meet demand. Automotive revenue is expected to grow sequentially in Q2.
Analog Devices recorded record orders with a book-to-bill ratio above 1. Customer inventory remains lean. Automotive revenue for its fiscal Q3 is expected to grow in the mid to high single digits sequentially.
Qualcomm's automotive revenue reached $1.326 billion (up 38% YoY, up 20% QoQ). Its Q2 guidance implies approximately 50% YoY growth. The company also expects to begin shipments of its fifth-generation Snapdragon Digital Chassis platform within the year, which is projected to bring its largest generational content increase ever.
In contrast, ON Semiconductor remains more cautious, stating it is still shipping to natural demand and has not yet seen a full recovery or the start of a restocking cycle. Melexis maintained its guidance, but its implied Q2 outlook is about 1.4% to 1.6% below market expectations, contrasting with the generally better-than-expected performance of peers.
**Market Structure Reshaped, Memory and SoCs Gain Share**
Despite a nearly two-year mild contraction for traditional analog IDMs, the overall automotive semiconductor market still expanded to $87 billion in 2025 (according to Gartner data). The main drivers were surging demand for memory and SoCs fueled by increasing ADAS penetration.
This structural change has profoundly reshaped the market landscape. Automotive memory revenue has doubled over the past two years, with Micron Technology and Samsung benefiting the most, holding market shares of 41% and 30%, respectively. Major beneficiaries in the SoC space include Mobileye, NVIDIA, Qualcomm, as well as Renesas Electronics and NXP Semiconductors NV.
Notably, for the first time in over a decade, a new player has entered the top five in automotive semiconductors. According to TechInsights data, Micron Technology replaced Renesas Electronics to take the fifth position. The combined market share of the top five players decreased from 48% to 42%, indicating a clear trend towards a more fragmented market structure.
The automotive MCU market remains highly concentrated, with the top five players holding a combined market share of approximately 90%.
Within this segment, Infineon Technologies AG's performance is particularly notable. Its market share jumped from 10% in 2019 to 36% in 2025, largely at the expense of NXP Semiconductors NV (share down to 20%) and STMicroelectronics NV (down to 9%).
**Vehicle Sales Under Pressure, Content Growth Becomes Core Driver**
The automotive end-market continues to face pressure. S&P Global (April 2026 data) revised down its 2026 global vehicle sales forecast to a decline of approximately 2% YoY (from a previous forecast of roughly flat). For 2027 and 2028, it only anticipates mild recoveries of 1.5% and 1.2%, respectively, with sales still expected to be slightly below the 2017 peak.
S&P Global also revised down its BEV penetration forecasts: 20.9% for 2026 (previously 21.7%), 25.0% for 2027 (previously 25.3%), and 27.8% for 2028 (previously 28.2%).
However, the impact of lower BEV penetration is partially offset by rising hybrid vehicle penetration, which also features higher semiconductor content per vehicle. Infineon Technologies AG estimates that the semiconductor content for a BEV was about $1,400 in 2025, nearly double the approximately $750 for an ICE vehicle.
Against this backdrop, analog IDM manufacturers generally expect that revenue growth in 2026 will primarily come from increased semiconductor content per vehicle, rather than expansion in vehicle sales. SDV, ADAS, zonal architecture, Ethernet, and high-value MCUs are the core structural drivers.
**Inventory and Capacity: High Levels Persist, Recovery Takes Time**
Automotive semiconductor days of inventory (DOI) edged up slightly from 166 days in Q4 2025 to 167 days, remaining at historically high levels and well above the pre-COVID-19 level of around 115 days.
ON Semiconductor's DOI increased by 15 days to 198 days, NXP Semiconductors NV's increased by 13 days to 165 days, and STMicroelectronics NV's increased by 8 days to 139 days. Inventory days for automakers and Tier-1 suppliers also rose, remaining above pre-pandemic levels.
Regarding foundries, TSMC's automotive revenue, after beginning to recover in 2025, declined again in Q1 2026, highlighting that the automotive recovery remains weaker than AI and high-performance computing.
TSMC's current core growth engine is its HPC business, whose revenue reached a record high in Q1 2026. The company also raised its full-year 2026 revenue guidance.
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