CITIC Construction Investment: Overseas Simulated IC Leader's Performance Validates Turning Point, Structural Recovery Main Line Is Clear

CITIC Construction Investment Research reports that overseas analog IC manufacturers have gradually resumed year-over-year quarterly revenue growth in 2025, and expect to see sequential growth during the traditional Q1–Q3 season in 2026, demonstrating a significant “off-season not off” characteristic. Meanwhile, backlog orders are rising. A series of positive signals indicate that industry turning points have been more widely validated, and the supply chain is transitioning from passive destocking to order recovery and growth phases. This round of recovery shows clear structural features. AI data center-related demand has become the core engine, with continuous volume increases in supporting analog ICs for servers and high-speed optical modules; aerospace and defense maintain high prosperity; traditional industrial sectors also show signs of cyclical recovery. Under this structural prosperity trend, domestic analog IC manufacturers with deep layouts in servers, optical modules, and related fields are expected to achieve more resilient performance growth driven by demand recovery and product upgrades.

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CITIC Construction Investment: Leading Overseas Analog IC Companies Validate Turning Point; Structural Recovery Main Line Clear

Overseas analog IC manufacturers have gradually returned to positive year-over-year revenue growth in 2025, with many companies reporting channel inventory returning to healthy levels, improved customer order-taking pace, and some observing rising backlog orders. The Book-to-Bill ratio remains above 1, indicating new orders are surpassing shipments. Notably, several major overseas analog IC firms expect to see sequential growth in the traditional Q1–Q3 season of 2026, a rare “off-season not off” phenomenon, showing demand recovery has exceeded seasonal fluctuations. Overall, the industry has shifted from passive destocking to order recovery and growth, with clear signs of bottoming out.

The current recovery exhibits prominent structural features, with AI data center demand serving as the core driver. The demand for supporting analog ICs in servers and high-speed optical modules continues to grow; aerospace and defense sectors remain highly prosperous; traditional industrial sectors also show signs of cyclical warming. Under this structural prosperity, domestic manufacturers with deep layouts in servers, optical modules, and industrial applications are expected to achieve more flexible performance growth driven by demand recovery and product upgrades.

(1) Leading overseas companies are returning to growth, with industry indicators continuously improving.

The operating data of major overseas analog IC leaders have gradually returned to positive growth, with many disclosing channel inventory returning to healthy levels, and customer order-taking improving. Some observe backlog orders rising, and the Book-to-Bill ratio remains above 1, reflecting new orders exceeding shipments. Importantly, several large overseas analog IC firms expect sequential growth in the traditional Q1–Q3 season of 2026, a rare “off-season not off” feature, indicating demand recovery has surpassed seasonal constraints. Overall, the industry has transitioned from passive destocking to order recovery and growth, with signs of a bottoming out in fundamentals.

(2) This round of recovery shows significant structural features, with data center chain prosperity ranking first.

Unlike past cycles dominated by consumer electronics, many overseas major companies’ financial reports show the current downstream prosperity order as: data centers (including servers, optical modules, etc.) > aerospace and defense > industrial > automotive > consumer electronics. First, driven by AI computing power demand, data center construction accelerates, with strong demand for supporting analog ICs in servers and high-speed optical modules, becoming the growth engine for many IC companies. Second, aerospace and defense sectors remain highly prosperous: on one hand, commercial space development is rapid, with companies like SpaceX expanding launch and satellite deployment, boosting demand for high-reliability analog components; on the other hand, geopolitical changes lead the US, Europe, and others to increase military budgets, driving higher investment in defense electronic systems. The industrial sector, after initial inventory adjustments, shows gradual order recovery, exhibiting typical cyclical repair features. The automotive sector faces short-term pressure from terminal sales and inventory rhythms, but the trend toward electrification and intelligence continues to increase per-vehicle semiconductor value, supporting long-term growth logic. The consumer electronics sector lags due to rising storage prices and slower terminal demand recovery.

Under this differentiated structural prosperity, domestic analog IC manufacturers in server, optical module, and industrial fields with deep layouts are expected to benefit from demand recovery and product upgrades, achieving more resilient performance growth.

(3) Overseas mergers and acquisitions are active again, with strategic deployment during cyclical windows accelerating.

Historical experience shows that industry cycle bottoms or early recovery phases are important windows for leading companies to push strategic M&As. Represented by TI and ADI, overseas giants have expanded their product portfolios and sales channels through multiple acquisitions over decades, strengthening scale and platform advantages. During cycle lows, asset valuations fall, providing better prices for quality targets; simultaneously, downstream demand structures change rapidly, prompting leaders to expand externally to quickly fill technological gaps and strengthen control over niche segments. Currently, the industry is in the bottoming and recovery phase, with overseas analog IC M&A activity heating up again. For example, TI’s recent acquisition of Silicon Labs assets is a rare large-scale external expansion in over a decade, indicating leading firms are increasing capital deployment at the cycle inflection point. This trend reflects top-tier companies’ forward-looking judgment on medium- and long-term demand trends and strategic positioning, further consolidating their scale barriers and platform-based competitive advantages.

Risks and Challenges

(1) Market demand recovery falling short of expectations: influenced by macroeconomic changes, the recovery pace in downstream sectors like smartphones and automotive electronics may be uncertain, with terminal clients potentially adjusting inventories, weakening upstream order-taking strength.

(2) R&D and product iteration progress may fall short: continuous innovation is vital for maintaining competitive advantage. Failure to timely and accurately grasp market needs and technological trends, or to overcome technical challenges, could impair the company’s competitiveness and profitability.

(3) Intensified market competition leading to price declines: increased competition may reduce product prices and gross margins, adversely affecting operational results.

(Article source: Yicai)