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 traditional seasonal slow periods in March–April 2026 to achieve month-over-month growth, demonstrating a significant “off-season not slow” 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 manufacturers with deep layouts in servers, optical modules, and related fields are expected to achieve more flexible performance growth driven by demand recovery and product upgrades.

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CITIC Construction Investment: Leading Overseas Analog IC Companies Validate Turning Point, Clear Structural Recovery Mainline

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 backlog orders rising. The Book-to-Bill ratio (BB Ratio) remains above 1, indicating new orders have begun to surpass shipments. Notably, several major overseas analog IC firms expect to see month-over-month growth during the traditional slow period of March–April 2026, a rare “off-season not slow” feature, showing demand recovery strength has exceeded seasonal fluctuations. Overall, the industry has shifted from passive destocking to order recovery and growth, with clear signs of bottoming out.

(1) Leading overseas companies are returning to growth, with industry 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 the traditional seasonally slow first quarter of 2026, a rare “off-season not slow” phenomenon, indicating demand recovery has surpassed seasonal constraints. The industry has transitioned from passive destocking to order recovery and growth, with signs of a bottoming out of fundamentals.

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

Unlike previous cycles driven by consumer electronics, many overseas major companies’ financial reports show the current downstream prosperity ranking 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 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, shows gradual order recovery, with 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. The consumer electronics sector lags due to slow storage price increases and terminal demand recovery.

In this differentiated structural prosperity environment, 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 resilient performance growth.

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

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 are changing rapidly, prompting leading firms to expand externally to quickly fill technological gaps and strengthen control over niche segments. Currently, the industry is in the recovery bottom phase, with overseas analog IC companies 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 leading firms are increasing capital deployment at the cycle inflection point. This trend reflects their forward-looking judgment of long-term demand and strategic positioning, further consolidating scale barriers and platform advantages.

(4) Risks include:

• Market demand recovery falling short of expectations due to macroeconomic changes, with downstream sectors like smartphones and automotive electronics experiencing uncertain recovery, possibly leading customers to adjust inventories and weaken upstream order strength.
• Product R&D and iteration progress may underperform; continuous innovation is vital for maintaining competitiveness. Failure to accurately grasp market needs and technological trends or to overcome technical challenges could impair competitiveness and profitability.
• Intensified market competition could lead to price declines, reducing product margins and adversely affecting operational results.

(Source: Yicai)