Bernstein: Automotive semiconductors have officially entered 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 Q1 2026 grew 11% year-on-year, with momentum accelerating significantly. A new wave of price hikes from analog chip manufacturers has also fully begun.

The report notes that driven by a triple combination of AI server power demand squeezing capacity, upstream wafer foundry price hikes, and the Strait of Hormuz crisis pushing up raw material and energy costs, major analog chip manufacturers including Infineon, Texas Instruments, NXP, etc., have announced a second round of price increases, with some products rising by as much as 15% to 85%.

Bernstein believes that downstream inventories are at historic lows, price hikes will further stimulate restocking demand, forming a positive cycle of growing demand and tight supply, and related companies' profits are expected to continue to be revised upwards.

Price hike wave spreads fully, second round of increases underway

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

Infineon implemented the first round of price hikes for clients from April 1st and has notified customers of a second round beginning July 1st, citing rising energy and raw material costs and faster-than-expected demand which requires accelerated expansion investment.

TXN reportedly raised prices on some analog and embedded products by 15%–85% from April 1st, 2026, and will execute a second annual round from July 1st. Management indicated that if strong demand persists in the second half, further case-by-case price increases are possible.

NXP also increased prices on some products from April 1st and is reportedly preparing a second round from June 1st, citing rising costs in raw materials, energy, labor, and logistics.

Renesas plans to raise prices from July 1st, and management stated that tight capacity supply and competitors already acting make price adjustments inevitable.

Analog Devices (ADI) says it has raised prices in fiscal 2026 to offset cost increases and will continue to adjust pricing depending on cost trends.

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

First, AI server power demand is consuming a massive amount of semiconductor capacity, with spillover effects spreading to related product fields. Infineon confirms AI power product price hikes have taken effect in the current quarter.

Second, upstream wafer foundries have successively raised prices. Vanguard expects low single-digit price increases in Q2 2026, UMC guides to low single-digit hikes in Q2, with further hikes possible in the second half.

Third, the Strait of Hormuz crisis is pushing up raw material, memory, logistics, and energy costs, and analog chip manufacturers tend to pass these costs onto their clients.

Bernstein points out that downstream inventories are now extremely lean, price increases will trigger restocking demand, further aggravating supply shortages and likely driving further profit revisions upwards.

Upcycle momentum accelerates, industry sees across-the-board gains

After six consecutive quarters of year-on-year decline, automotive semiconductor revenue returned to positive growth in Q4 2025 (+4% YoY), further accelerating to +11% YoY in Q1 2026, with quarter-on-quarter steady, outperforming seasonal norms seen over the past six years.

From a regional perspective, this marks the second consecutive quarter in which all regions have recorded year-on-year positive growth, a trend never seen in the prior three years.

The US grew fastest, accelerating 12% YoY, mainly benefitting from Qualcomm's strong growth and ADI's structural exposure in ADAS and high-performance computing. Europe grew 10% YoY, Japan 7%; both had significant exposure to electric and traditional vehicles, accounting for their sharper declines earlier.

At the company level, this is the first time in over four years that all covered companies have recorded YoY growth in USD terms.

Qualcomm led with 38% YoY growth, with its Snapdragon Digital Chassis platform adopted by over 30 OEMs and more than 350 models worldwide;

STMicroelectronics grew 15% YoY, Melexis also 15%, Infineon 10%, Renesas 8%, NXP 7%, TXN mid-single digits, Onsemi 5%, ADI 2%.

Bernstein notes that this downturn's decline was only low-to-mid single digits, far below previous double-digit declines, largely validating management's prior "soft landing" forecasts; ongoing growth in semiconductors per vehicle has partially offset inventory digestion pressures.

Management confidence turns positive, Q2 and annual outlooks broadly optimistic

Based on Q2 2026 guidance, 7 out of 10 companies expect quarter-on-quarter growth in automotive business, with only Onsemi guiding flat and ROHM having no clear guidance.

More crucially, 9 out of 10 companies expect full-year 2026 automotive revenue to grow, indicating industry sentiment has shifted from stabilizing at the bottom to a gentle upcycle. Specifically,

Infineon says low client inventories are triggering broader restocking, order books are improving noticeably—especially from China and Europe—and guides for modest quarter-on-quarter growth in automotive revenue in Q3 of fiscal 2026 (i.e., Q2 2026).

Renesas reports both channel and end sales exceeding expectations and that channel inventory needs further restocking to meet demand; Q2 automotive revenue is expected to grow quarter-on-quarter.

ADI records a record-high order book, positive book-to-bill ratio, and client inventories remain lean; Q3 automotive revenue is expected to grow mid-to-high single digits quarter-on-quarter.

Qualcomm automotive revenue reached $1.326 billion (+38% YoY, +20% QoQ); Q2 guidance is for ~50% YoY growth and expects to begin shipping its fifth-generation Snapdragon Digital Chassis within the year, which will bring the biggest generational content increase in its history.

By comparison, Onsemi remains cautious, saying it is still shipping according to natural demand and has not yet seen a full recovery or restocking cycle. Melexis maintains guidance, but implied Q2 outlook is about 1.4–1.6% below market expectations, contrasting with industry peers that generally exceeded expectations.

Market structure reshapes, memory and SoC capture share

Despite nearly two years of mild contraction by traditional analog IDM manufacturers, the overall automotive semiconductor market expanded to $87 billion in 2025 (according to Gartner), mainly driven by soaring demand for memory and SoC due to higher ADAS penetration rates.

This structural change profoundly reshaped the market landscape. Automotive memory revenue doubled over the past two years, with Micron and Samsung the biggest beneficiaries at 41% and 30% market share respectively. Mobileye, Nvidia, Qualcomm, Renesas, and NXP are the main beneficiaries in the SoC field.

Of particular note, for the first time in over a decade, a new entrant ranks in the top five automotive semiconductor suppliers. Micron, according to TechInsights, replaced Renesas for fifth place. The five largest suppliers' combined share fell from 48% to 42%, indicating significant market fragmentation.

The automotive MCU market remains highly concentrated, with the top five suppliers retaining about 90% combined share.

Infineon's performance in this segment is especially prominent, with market share jumping from 10% in 2019 to 36% in 2025, mainly at the expense of NXP (down to 20%) and STMicroelectronics (down to 9%).

Vehicle sales under pressure, content growth becomes core driver

The automotive end market remains under pressure. S&P Global (data from April 2026) has lowered its forecast for 2026 global vehicle sales to a YoY decline of about 2% (previously expected to be flat). Modest rebounds of 1.5% and 1.2% are expected in 2027 and 2028 respectively, with sales still slightly below the 2017 peak.

S&P Global has again cut its BEV penetration rate forecasts: 20.9% in 2026 (previously 21.7%), 25.0% in 2027 (previously 25.3%), and 27.8% in 2028 (previously 28.2%).

However, part of the BEV penetration reduction is offset by increased hybrid penetration, which also carries high semiconductor content per car. Infineon estimates that in 2025, BEV contains about $1400 worth of semiconductors per car, nearly double the $750 of ICE vehicles.

Against this backdrop, analog IDM manufacturers generally expect that revenue growth in 2026 will mainly come from increased semiconductor content per vehicle, not vehicle sales expansion. SDV, ADAS, zonal architecture, Ethernet, and high-value MCUs are the core structural drivers.

Inventory and capacity: running high, recovery still needs time

Automotive semiconductor inventory days rose slightly from 166 days in Q4 2025 to 167 days, still at historic highs, far above the ~115 days before the pandemic.

Onsemi's inventory days increased 15 days to 198; NXP increased 13 days to 165; STMicroelectronics added 8 days to 139. OEMs and Tier-1 suppliers also saw inventory days climb, all above pre-pandemic levels.

At the wafer foundry level, TSMC's automotive revenue, after beginning to recover in 2025, fell again in Q1 2026, highlighting that automotive recovery remains weaker than AI and HPC.

TSMC's main growth driver is now HPC business, with Q1 2026 revenue hitting a record high and the company raising its full-year 2026 revenue guidance.

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The above highlights are from Chasing Wind Trading Desk.

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