Bernstein: Automotive Semiconductors Officially Enter an Upward Cycle

After nearly two years of adjustment, the automotive semiconductor market has officially entered an upward cycle.

Bernstein's latest quarterly tracking report shows that automotive semiconductor revenue in the first quarter of 2026 increased by 11% year-over-year, with clear acceleration momentum, and a new round of price hikes by analog chip manufacturers has fully unfolded.

The report indicates that driven by three factors—AI server power demands squeezing production capacity, upstream wafer foundries raising prices, and the Strait of Hormuz crisis pushing up raw material and energy costs—major analog chip manufacturers such as Infineon Technologies AG, Texas Instruments, and NXP have all announced a second round of price increases, with some products seeing hikes of 15% to 85%.

Bernstein believes that downstream inventory is at historic lows, and price hikes will further stimulate restocking demand, creating a positive cycle of demand growth and supply tightness, which is expected to lead to continuous upward revisions in related companies' earnings.

Price Hikes Spread Widely, Second Round of Increases Underway

Since the beginning of 2026, analog chip manufacturers have launched a new wave of collective price hikes, with some leading enterprises announcing a second round of price increases within the year.

Infineon Technologies AG implemented its first round of price hikes for customers starting April 1 and has notified customers that a second round will take effect on July 1, citing comprehensive increases in energy and raw material costs, as well as demand growth exceeding expectations, necessitating accelerated expansion investment.

Texas Instruments reportedly raised prices by 15% to 85% for certain analog and embedded products starting April 1, 2026, and will implement a second round of price hikes on July 1. Management stated that if demand remains strong in the second half of the year, further case-by-case price increases cannot be ruled out.

NXP also raised prices for certain products starting April 1 and is reportedly preparing to implement a second round of price hikes starting June 1, citing rising costs for raw materials, energy, labor, and logistics.

Renesas Electronics plans to raise prices starting July 1. Management stated that tight capacity supply, combined with competitors taking the lead, makes price adjustments inevitable.

Analog Devices (ADI) stated that it had already raised prices in fiscal year 2026 to offset cost increases and will continue to adjust pricing based on cost trends.

There are three core logics driving this round of price hikes:

First, AI server power demands are heavily consuming semiconductor capacity, with spillover effects spreading to adjacent product areas; Infineon Technologies AG confirmed that price increases for AI power products were implemented in the current quarter;

Second, upstream wafer foundries have successively raised prices. Vanguard expects low single-digit price increases in the second quarter of 2026, and UMC also guided for low single-digit price hikes in the second quarter, with potentially more increases in the second half of the year;

Third, the Strait of Hormuz crisis has pushed up costs for raw materials, memory, logistics, and energy, leading analog chip manufacturers to tend to pass these costs on to customers.

Bernstein points out that downstream inventory is currently extremely lean, and price hikes will trigger restocking demand, thereby exacerbating supply shortages, which is expected to drive further earnings upward revisions.

Upward Cycle Momentum Accelerates, Industry-Wide Broad-Based Growth Emerges for the First Time

After six consecutive quarters of year-over-year declines, automotive semiconductor revenue returned to positive growth in the fourth quarter of 2025 (+4% year-over-year) and further accelerated to +11% year-over-year in the first quarter of 2026, remaining flat quarter-over-quarter, outperforming the seasonal patterns of the past six years.

From a regional perspective, this is the second consecutive quarter where all regions recorded year-over-year positive growth, a pattern not seen in the previous three years.

The United States region saw the fastest growth, accelerating 12% year-over-year, mainly benefiting from Qualcomm's strong growth and ADI's structural exposure in ADAS and high-performance computing; Europe grew 10% year-over-year, and Japan grew 7%, both having experienced more significant declines previously due to larger exposures to electric vehicles and traditional automotive applications.

At the company level, this is the first time in over four years that all covered companies achieved year-over-year positive growth in US dollar terms.

Qualcomm led with a 38% year-over-year growth rate, with its Snapdragon Digital Chassis platform adopted by over 30 global OEMs and more than 350 vehicle models;

STMicroelectronics ranked second with 15% year-over-year growth, Melexis also at 15%, Infineon Technologies AG grew 10%, Renesas Electronics grew 8%, NXP grew 7%, Texas Instruments grew in the mid-single digits, ON Semiconductor grew 5%, and ADI grew 2%.

Bernstein points out that the decline in this downward cycle was only in the low-to-mid single digits, far lower than the historical double-digit declines. The "soft landing" previously predicted by management has largely materialized, and the continuous growth in semiconductor content per vehicle has to some extent offset the pressure of inventory digestion.

Management Confidence Turns Positive, Q2 and Full-Year Guidance Generally Optimistic

Based on guidance for the second quarter of 2026, 7 out of 10 companies expect quarter-over-quarter growth in their automotive business, with only ON Semiconductor guiding for flat performance, and ROHM not providing clear guidance.

More importantly, 9 out of 10 companies expect full-year 2026 automotive revenue to grow, indicating that industry sentiment has stabilized from the bottom and turned towards a mild upward cycle. Specifically,

Infineon Technologies AG stated that low customer inventory is triggering broader restocking initiatives, with a significantly improved order book, especially from China and Europe, and guided for a slight quarter-over-quarter increase in automotive business revenue in the third quarter of fiscal 2026 (i.e., the second quarter of 2026);

Renesas Electronics stated that both sell-in and terminal sales exceeded expectations, channel inventory needs further replenishment to meet demand, and automotive revenue in the second quarter is expected to grow quarter-over-quarter;

ADI recorded record orders, with a positive book-to-bill ratio, and customer inventory remains at lean levels. Automotive revenue in the third fiscal quarter is expected to grow mid-to-high single digits quarter-over-quarter;

Qualcomm's automotive revenue reached $1.326 billion (+38% year-over-year, +20% quarter-over-quarter), with second-quarter guidance pointing to approximately 50% year-over-year growth. It also expects to begin shipping the fifth-generation Snapdragon Digital Chassis platform within the year, which will bring the largest generational content increment in its history.

In contrast, ON Semiconductor adopted a more cautious stance, stating that it is still shipping according to organic demand and has not yet seen a comprehensive recovery or the start of a restocking cycle. Melexis maintained its guidance unchanged, but its implied second-quarter outlook was about 1.4% to 1.6% below market expectations, contrasting with the general trend of peers exceeding expectations.

Market Landscape Reshaped, Memory and SoC Grab Share

Although traditional analog IDM manufacturers experienced mild contraction for nearly two years, the overall automotive semiconductor market expanded to $87 billion in 2025 (according to Gartner data), primarily driven by a surge in demand for memory and SoCs spurred by increased ADAS penetration.

This structural change has profoundly reshaped the market landscape. Automotive revenue for memory doubled in the past two years, with Micron and Samsung benefiting the most, holding market shares of 41% and 30%, respectively. The main beneficiaries in the SoC sector include Mobileye, NVIDIA, and Qualcomm, as well as Renesas Electronics and NXP.

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 replaced Renesas Electronics to take the fifth position. The combined market share of the top five manufacturers dropped from 48% to 42%, indicating a clear trend towards market fragmentation.

The automotive MCU market remains highly concentrated, with the top five manufacturers holding a combined market share of approximately 90%.

Among them, Infineon Technologies AG's performance in this segment is particularly outstanding, with its market share jumping from 10% in 2019 to 36% in 2025, mainly at the expense of NXP (market share decreased to 20%) and STMicroelectronics (decreased 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) lowered its forecast for global vehicle sales in 2026 to a year-over-year decline of approximately 2% (previously forecasted to be roughly flat), with only mild recoveries of 1.5% and 1.2% expected for 2027 and 2028, respectively. At that time, sales will still be slightly below the 2017 peak.

S&P Global again lowered its BEV penetration forecast: 20.9% for 2026 (previously 21.7%), 25.0% for 2027 (previously 25.3%), and 27.8% for 2028 (previously 28.2%).

However, part of the impact of the lowered BEV penetration forecast is offset by the rise in hybrid vehicle penetration, which also has high semiconductor content per vehicle. Infineon Technologies AG estimates that the semiconductor content per BEV in 2025 was approximately $1,400, nearly twice that of ICE vehicles at $750.

In this context, various analog IDM manufacturers generally expect that revenue growth in 2026 will mainly come from increased semiconductor content per vehicle rather than expansion in vehicle sales, with SDV, ADAS, zonal architecture, Ethernet, and high-value MCUs being the core structural drivers.

Inventory and Capacity: Running High, Recovery Still Takes Time

Automotive semiconductor inventory days rose slightly from 166 days in the fourth quarter of 2025 to 167 days, remaining at historic highs, far above the pre-pandemic level of approximately 115 days.

Among them, ON Semiconductor's inventory days increased by 15 days to 198 days, NXP by 13 days to 165 days, and STMicroelectronics by 8 days to 139 days. Inventory days for OEMs and Tier-1 suppliers also rose, all higher than pre-pandemic levels.

Regarding wafer foundries, TSMC's automotive revenue, after starting to recover in 2025, declined again in the first quarter of 2026, highlighting that the strength of the automotive recovery is still weaker than that of AI and high-performance computing.

TSMC's current core growth engine is its HPC business, whose revenue hit a record high in the first quarter of 2026. The company also raised its full-year 2026 revenue guidance.