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 a passive destocking phase to order recovery and growth. 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 sectors remain highly prosperous; traditional industrial sectors are also showing signs of cyclical recovery. Under this structural prosperity trend, domestic analog 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 Clearly Defined

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

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

Leading overseas analog IC companies’ operating data are gradually returning 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 major overseas analog IC firms expect to see sequential growth in 2026 during the traditional Q1–Q3 season, a rare “off-season not off” feature, indicating demand recovery has surpassed seasonal constraints. Overall, the industry has transitioned from a passive destocking phase to order recovery and growth, with signs of a bottoming out in fundamentals.

(2) This cycle’s recovery exhibits prominent structural features, with data center chain prosperity leading.

Unlike previous cycles dominated by consumer electronics, many overseas major companies’ financial reports show the current downstream sector ranking as: Data Centers (including servers, optical modules, etc.) > Aerospace & Defense > Industrial > Automotive > Consumer Electronics. First, driven by AI computing power demand, data center construction is accelerating, with strong demand for supporting analog ICs for servers and high-speed optical modules, becoming the growth engine for many analog 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, is gradually recovering orders, showing 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 slow recovery in storage prices and terminal demand.

Under this differentiated structural prosperity, domestic analog manufacturers with deep layouts in servers, optical modules, and industrial applications are expected to benefit from demand recovery and product upgrades, achieving more flexible performance growth.

(3) Overseas mergers and acquisitions are active again, with strategic deployment during cycle 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 low valuation phases, asset prices fall, providing better opportunities for high-quality acquisitions; simultaneously, downstream demand structures are changing rapidly, prompting leaders to expand externally to quickly fill technological gaps and strengthen control over niche segments. Currently, as the industry bottoms out and begins to recover, overseas analog IC giants are increasing M&A activity. For example, TI’s recent acquisition of Silicon Labs assets is a rare large-scale external expansion in over a decade, indicating that leading firms are ramping up capital deployment at the cycle inflection point. This trend reflects their forward-looking judgment on medium- and long-term demand and strategic positioning, further consolidating scale barriers and platform advantages.

(Additional risks and uncertainties are noted, including market demand recovery not meeting expectations due to macroeconomic impacts, product development delays, and intensified market competition leading to price declines.)