According to Woofun AI, UBS determined that the upward trend in the analog chip cycle had not changed, and established Texas Instruments (TXN.US) as the preferred target for the sector. Despite recent weak market sentiment, distributors' inventories fell 7% to 10% month-on-month and prices rose 9% to 12% month-on-month. The structural tightening of supply and demand has become the core logic supporting the continuation of the cycle.
The US semiconductor report released on October 16, 2026 revealed drastic changes in the micro market. According to data compiled by Woofun AI, the True Analog inventory index was 85, down 7% from the previous month and 15% from the previous year; the Power Analog inventory index was 76, down 10% month-on-month and 18% year-on-year; and the MCU inventory index was 91, down 5% month-on-month and 3% year-on-year. The price side showed differentiation, with the average sales price of True Analog rising 12% month-on-month, Power Analog rising 9%, discrete devices surging 34%, and MCU alone falling 7%.
The supply and demand survey further confirmed the tense situation: net demand expected to reach +79%, recent net demand +75%, recent net price increase 68%, expected net increase 65%, and delivery time momentum +65%. In terms of supply sufficiency, 38% of distributors and 26% of direct buyers think supply is above target, but 70% of distributors and 76% of direct buyers are concerned about shortages over the next six months, up 3 percentage points. In order to lock in supply, 73% of respondents adopted early orders or long-term agreements, 53% increased inventory, and those with extended delivery times increased from 62% to 65%.
In-depth analysis of corporate profit forecasting and inventory shows the divergence of industry sentiment. In the third quarter, TXN's revenue grew 10.7% month-on-month (6.1% seasonal), ADI grew 8.5% (seasonal 4.6%), MCHP grew 8.5% (seasonal 4.3%), and ON grew 5.4% month-on-month (4.0%), while ALGM's 6.0% growth was lower than seasonal 7.1%. In terms of inventory structure, TXN finished product inventory was 75 days higher than the industry average of 39 days and NXP (NXPI.US)'s 43 days. According to data for the second quarter, production increased 7% month-on-month, revenue increased 11% month-on-month, and total inventory remained flat. MCHP implemented a nine-point plan, and the number of inventory days dropped by 9 to 175 days; ON inventory days fell by 11 to 189 days, and production was about 100% of sales. TXN is regarded as a target with special share growth conditions due to its share recovery potential and free cash flow inflection point after capital expenditure falls back.
UBS has set the fourth-quarter month-on-month growth forecast at 200 to 300 basis points, which is higher than normal seasonal levels. The upward cycle is driven by four major signals: low distributors' inventories, continued price increases, strong demand, and tight supply. However, the technology sector faces risks such as rapid technological changes, increased competition, macro-cycle exposure, and high capital investment. TXN is also constrained by price pressure and cyclical demand in the terminal market. The key variables in the sustainability of the cycle are when distributors start replenishing stocks and the duration of supply tightening.