POWER SEMICONDUCTORS Chip industry update, Q2 2026: Memory goes on allocation as power demand turns

Component markets tightened faster in the second quarter of 2026 than at any point since the 2021-2022 shortage. DRAM contract prices climbed 58-63% in the quarter after nearly doubling in Q1, according to TrendForce, while Micron's DDR4 lead times reached 52 weeks on allocation-only terms, and spot prices for high-capacitance MLCCs rose 50-60%.

Power semiconductors moved the other way after two years of correction: STMicroelectronics closed the quarter reporting "signs of tight supply in several product categories," 6-inch SiC substrate prices bottomed out, and Infineon opened a €5 billion Dresden fab months ahead of schedule. Global semiconductor sales reached $298.5 billion in Q1, up 25% on Q4 2025, and China's suspension of its gallium and germanium export bans is now set to expire in November.

Power semiconductors turn the corner

STMicroelectronics reported Q2 revenue of $3.49 billion on July 23, up 26% year on year, with CEO Jean-Marc Chery saying in the results statement: "During the quarter demand increased further, with strong bookings in all end markets. We saw improved visibility and signs of tight supply in several product categories." The recovery isn't uniform: ST's own Power & Discrete segment was its weakest performer, with revenue of $464 million, up 3.7% year on year, and an operating loss of $99 million.

Texas Instruments posted $5.46 billion a day earlier, up 23% year on year and led by industrial, data center, and automotive demand. NXP guided Q2 up 14-21% year on year with channel inventory at a normal 11 weeks, and CEO Rafael Sotomayor said the company expects momentum "to accelerate through the remainder of 2026." onsemi reported 5% automotive growth in Q1, its first annual increase in that segment after seven quarters of decline, alongside a third consecutive quarter of gross margin improvement as utilization recovered.

Prices for 6-inch SiC substrates have bottomed out and begun recovering, with distributors describing supply as tight after a two-year price war driven largely by Chinese capacity. Yole Group's June update forecasts the power SiC device market reaching $11 billion by 2031 at a 20% CAGR, with power supplies above 3 kW and 800V DC distribution for AI data centers joining EV traction as demand drivers. "Power SiC is no longer an automotive-only story," Yole Group analyst Ahmad Abbas said in the update.

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Infineon opened its €5 billion Smart Power Fab in Dresden on July 2, the company's largest-ever single investment and, by its description, the world's largest fab for power semiconductors and analog/mixed-signal. The 300mm site doubles Infineon's Dresden capacity and feeds AI data center power supplies, renewables, and vehicle platforms. The company posted Q2 FY2026 revenue of €3.81 billion, raised full-year guidance above €16 billion in May, and targets €1.5 billion of AI data center power revenue this fiscal year rising to €2.5 billion in FY2027, with its power semiconductor content estimated at $100 to $250 per kilowatt of installed AI compute and an addressable market of €8 billion to €12 billion by 2030. CEO Jochen Hanebeck told analysts: "The AI boom strengthens further, and our power supply solutions for AI data centers are in very high demand." Bosch finalized $225 million in CHIPS Act funding on July 16 toward converting its Roseville, California, fab to 200mm SiC, with sample production already running and first commercial chips targeted for this year.

Rohm closed its fiscal year in March with a ¥163.2 billion impairment on SiC assets and a ¥158.4 billion net loss, citing the slower BEV ramp, Chinese competition, and 6-inch substrate oversupply. Wolfspeed, seven months out of Chapter 11, reported quarterly revenue of $150.2 million in May, refinanced $476 million of first-lien debt to cut total borrowings by a further $97 million, and holds $1.2 billion in cash; its AI data center revenue grew around 30% sequentially, from a small base. Upstream, silicon wafer shipments rose 13% in Q1, and TSMC reported a record Q2 with net profit up 77% year on year alongside a further $100 billion committed to its Arizona build-out.

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Memory goes to allocation

Conventional DRAM contract prices rose 93-98% quarter on quarter in Q1, lifting DRAM industry revenue 81% to a record $97 billion, and TrendForce's Q2 projection added another 58-63% for DRAM and 70-75% for NAND. Server DRAM is set to climb a further 13-18% in Q3, moderated mainly by the long-term agreements U.S. hyperscalers signed to cap their pricing through 2027 and 2028. Enterprise SSD demand shows no sign of slowing, and TrendForce rates eMMC and UFS as carrying the tightest supply gap of any product segment.

HBM wafer input will grow from 18% of total DRAM wafer starts at the end of 2025 to 22% by the end of 2026 and 30% by the end of 2027, according to TrendForce, and AI demand overall is on track to consume around 20% of global DRAM wafer capacity this year. Nvidia's Rubin Ultra platform is specified at 384GB of HBM per GPU, and HBM4 has become the mainstream product in 2027 contract negotiations, with prices expected to move sharply higher.

NOR flash prices rose 100-120% in the first half and SLC NAND 130-150% as suppliers redirect wafers toward HBM and advanced 3D NAND, with no new legacy capacity planned. Mobile LPDDR5X contract prices climbed 78-83% in Q2, and phone makers have begun cutting 2026 production plans, downgrading flagship memory configurations from 16GB to 12GB and mid-range models toward 8GB. Sourceability's July lead-time report lists Micron DDR4 at 52 weeks and allocation-only, Samsung SSDs on allocation, and AI-related components such as GPUs and HBM averaging around 40 weeks; the distributor expects the memory supply-demand imbalance to persist through 2030. At retail, TrendForce expects demand for price-sensitive products such as memory cards and USB drives to contract outright this year as the increases pass through to shelf prices.

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AI demand reaches passives, transformers, and copper

High-capacitance MLCC lead times ran 20-26 weeks or more in Q2 against a pre-tightening baseline of 8-10 weeks, with spot prices up 50-60% for the X6S and X7R decoupling parts AI accelerators consume in volume. A single Nvidia GB200 NVL72 rack contains roughly 440,000 MLCCs, and Murata and Samsung Electro-Mechanics control an estimated 80-85% of AI-grade supply between them. Polymer capacitor lead times reached 50 weeks, which is expected to cause AI and automotive passive prices to rise 15-35% across 2026.

Server CPU shortages slowed system assembly during the quarter, leaving DRAM inventory building at OEMs waiting on processors, while Sourceability described FPGAs as notably tight and AI-related capacity as booked through 2028. ECIA's Market Sentiment Index reached 154.1 in June, its highest reading since March 2021 and within four points of its record, though the July outlook figure of 137.2 suggests participants expect the pace to cool slightly.

Power transformer lead times averaged 128 weeks entering 2026, with generator step-up units at 144 weeks, and power transformer prices have risen 77% since 2019, against roughly $1.8 billion of announced North American capacity expansion. Copper set a COMEX record of $6.72 per pound on May 13 and traded near $14,000 per metric ton on the LME this week, with S&P Global forecasting a 2026 LME average of $12,600, up 26% on 2025, after the Grasberg outage, which isn't expected to recover fully until 2028, and a 22.5% guidance cut at Kamoa-Kakula. Transformer windings, busbars, and cabling feed that copper price directly into data center and grid build-outs already constrained by the hardware itself.

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Nexperia becomes two companies

Nexperia's China unit was running at 60-70% of capacity in April on stockpiles and domestically qualified wafers, targeting 90% during Q2 and full localization of most products in the second half of 2026. Nine months after a standoff that briefly halted Honda's Mexican production, the automotive components it makes are flowing again, but through an increasingly divided company.

The Dongguan operation, which shipped more than 11 billion chips to over 800 customers between mid-October and year-end, began small-batch production of bipolar discretes on domestic 12-inch wafers in March and says it's building a supply chain independent of the Dutch parent, which suspended wafer shipments to China last October and has been requalifying assembly capacity elsewhere, including Malaysia.

Wingtech sued the Nijmegen-based entity for €1 billion in a Chinese court in May, while the Amsterdam Enterprise Chamber's court-ordered investigation continues and CEO Zhang Xuezheng remains suspended. The practical result is two effectively separate suppliers operating under one brand, and cross-qualification between their parts is no longer a given for buyers of commodity discretes.

Tariffs and a November deadline

A 25% Section 232 tariff on certain advanced logic ICs took effect on January 15, drawn narrowly around high-performance parts and carrying exemptions for U.S. data centers, R&D, startups, consumer electronics, and automotive. The proclamation also ordered a 90-day report on broader coverage, which kept the possibility of expansion hanging over procurement planning throughout Q2; power devices, analog, and passives remain outside the tariff's scope for now.

China's suspension of its export bans on gallium, germanium, antimony, and superhard materials to US civilian end-users, agreed as part of last November's trade truce, runs out in November 2026, and the ban on sales to US military end-users hasn’t been lifted. The April 2025 controls on seven rare earths also remain in effect, with S&P Global reporting in January that heavy rare earth supply to US and allied defense programs has dried up and that ex-China alternative capacity won't arrive before 2027. Gallium feeds GaN epitaxy, and germanium feeds fiber and infrared optics, so a lapse of the suspensions in November would land directly on the power and optoelectronics supply chains.

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The quarter ahead

It’s expected that memory tightness will persist through 2027 at minimum, with hyperscaler purchase agreements already stretching to 2028 and HBM4 dominating next year's negotiations.

Power semiconductor demand is recovering into capacity that, as covered in our 2026 outlook, still runs well below full utilization until 2027-2028, which has so far kept the recovery orderly on pricing. The tightest components right now mostly sit around the chip rather than in it: memory, high-capacitance passives, transformers, and copper. The November expiry of the gallium and germanium suspensions, together with the still-open Section 232 expansion report, makes Q4 the point at which the truce either holds or the materials chokepoints of 2023-2025 return.

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