After four quarters of inventory correction, the global semiconductor industry has recently shown clear bottoming signals. According to the latest data from the Semiconductor Industry Association (SIA), global semiconductor sales in Q2 2026 grew 3.2% quarter-over-quarter, with the year-over-year decline narrowing to 1.5%, beating market expectations. Capacity utilization at several leading foundries has recovered from below 70% at end of last year to over 80%, with stronger customer wafer starts, indicating that inventory adjustment is nearing its end.
Inventory Levels Return to Healthy; Downstream Pull-In Momentum Strengthens
Since H2 2025, global semiconductor manufacturers have actively reduced inventory. After three consecutive quarters of inventory reduction, the overall inventory days have fallen to near historical average levels. By application segment, consumer chip inventory has returned to normal levels first; PC and smartphone-related chip orders have notably recovered since Q2. Automotive and industrial chips, which were previously under tighter supply, have seen smaller inventory adjustments, but recent signs of restocking have appeared.
The Japan Electronics and Information Technology Industries Association (JEITA) noted that global IC shipments grew over 2% month-over-month in both May and June, the first such streak in nearly two years. In particular, memory product prices, after sharp declines, have stabilized and risen in Q2 for DDR5 and NAND Flash, boosting profitability for Samsung, SK Hynix, and other memory manufacturers.
AI and Automotive Chip Demand Remain Hot, Becoming Dual Engines of Recovery
Artificial intelligence (AI) chip demand remains strong, with NVIDIA, AMD, and other major players continuously increasing wafer starts at TSMC for advanced processes, while CoWoS advanced packaging capacity remains in short supply. In automotive chips, although some mature-node products are no longer in shortage, demand for high-performance computing (HPC) and sensor chips is growing rapidly with rising EV penetration. NXP and Renesas have recently raised their H2 revenue guidance, bullish on long-term growth in automotive electronics.
Southeast Asia Supply Chain Becomes More Important; Packaging and Testing and Components Benefit First
Amid rising geopolitical risks and supply chain diversification trends, the Southeast Asia semiconductor supply chain is undergoing structural growth opportunities. Countries such as Thailand, Malaysia, and Vietnam, leveraging mature packaging and testing capacity and relatively low labor costs, continue to attract international manufacturers to expand production. According to Malaysia’s Ministry of International Trade and Industry, foreign direct investment (FDI) in the semiconductor packaging and testing sector in H1 2026 rose 25% year-over-year, with US and Japanese companies accounting for the majority.
In Thailand, the printed circuit board (PCB) and passive component industries have formed clusters, with several Japanese MLCC manufacturers recently announcing expansion plans. The Thailand Board of Investment (BOI) expects total semiconductor-related investment applications in 2026 to exceed 300 billion baht, a record high.
Foundry Capacity Utilization Recovers; Mature-Node Price Pressure Remains
Foundry leader TSMC stated at its latest earnings call that 3nm and 5nm capacity remains fully loaded, with 7nm utilization also returning above 90%. However, for mature nodes above 28nm, although utilization has improved, price competition pressure persists as some Chinese fabs compete for orders with low pricing, affecting overall average selling prices. UMC and GlobalFoundries also face margin pressure on mature nodes but are optimistic about gradual recovery in IoT and display driver IC demand.
Investment Strategy: Focus on Inventory Restocking Cycle and Southeast Asia Localization Themes
Looking ahead to H2, the semiconductor market overall will show a moderate recovery pattern. Investors can watch the following directions:
- Inventory restocking beneficiaries: including memory makers, module houses, and distributors such as Samsung, Micron, ADATA, which have greater profit elasticity in a rising price cycle.
- Advanced packaging and AI supply chain: TSMC, ASE, Amkor, and others continue to benefit from AI chip packaging demand; related equipment and material suppliers are also worth attention.
- Southeast Asia local supply chain: Packaging and testing, PCB, and passive component manufacturers in Malaysia and Thailand can benefit from order shifts, such as Inari Amertron, FTI, and others.
However, macroeconomic uncertainties remain, including US Fed interest rate policy and potential geopolitical conflicts, which may suppress end consumer demand. In addition, China's accelerated semiconductor localization leading to overcapacity in mature nodes is a potential risk.
Conclusion
Overall, the worst of global semiconductor inventory adjustment is over. Demand will gradually improve in H2, but the pace of recovery depends on continued expansion of end applications. Southeast Asia, as a key part of the global semiconductor supply chain, is facing new development opportunities. Investors should closely monitor the movements of leading companies in the region to seize the next growth opportunity.
