Summary of the Key Points in Plain Language
This article summarizes the performance of 24 domestic manufacturers of analog chips (the core components that power and transmit signals for various electronic devices) in the A-share market during the first half of 2026. The main points can be summarized in three sentences:
1. The industry is indeed recovering: Nearly 80% of the companies are experiencing revenue growth, with 8 companies growing by more than 40%. The phase of overstocking that persisted for the past two years, during which products could not be sold, has passed. There is now a clear demand for products in the offline market, and the prices of some in high demand have started to rise, with delivery times also extending.
2. The recovery is a highly uneven and structural phenomenon: The driving force for growth has shifted significantly from the familiar consumer electronics sectors such as smartphones and home appliances to the new areas of AI servers and automotive electronics. Companies that have successfully entered these new markets are seeing revenue growth rates that are more than ten times higher than those still competing in the consumer electronics sector.
3. The industry has not yet reached a stage where all companies are making profits: Nearly 40% of the companies are still in the red, with most of their earnings being invested in research and development (R&D) and covering upfront costs for production capacity. The increased costs from upstream suppliers have not yet been fully passed on to downstream customers, so the recovery is still in its early stages.
---
Detailed Analysis
1. The logic of growth has completely changed: Those still relying on consumer electronics are at a disadvantage from the start
In previous years, the growth of domestic analog chip manufacturers was driven by supplying components for smartphones, power banks, and home appliances. There was intense price competition for power chips, resulting in minimal profits for all parties. However, this year’s half-year reports show that none of the companies with rapid growth relied on consumer electronics. For example, Naxin Micro, which ranked second in terms of growth, only had 9.65% of its revenue from consumer electronics; nearly 60% came from industrial and new energy applications, and 30% from the automotive sector, enabling it to turn from a loss last year to a profit. In contrast, Nansoft Technology, which also claims to be focusing on new markets, still relies heavily on consumer electronics, with 87% of its revenue coming from this sector. Although it has mentioned investments in AI and automotive electronics, its new businesses have not yet generated significant revenue, resulting in a growth rate of only just over 5%—more than ten times lower than Naxin Micro’s 66%.
The growth in AI and automotive electronics is not just theoretical; for instance, Siripu’s signal chain chips are being used in 1.6T optical modules on a large scale, and Naxin Micro’s specialized power chips for AI servers are being shipped in large quantities. The automotive industry has moved beyond the initial stage of requiring individual chips to meet automotive-grade standards. Leading manufacturers now provide complete chip solutions for car companies, generating much higher revenue per vehicle compared to the past. The potential for growth in these sectors is orders of magnitude higher.
2. Revenue has increased, but profits have not kept up: Three hidden issues are consuming the profits
Many people wonder why nine companies are still losing money despite the overall revenue growth. The reason is that the money is being invested in critical areas that will determine the future success of the companies. Three main factors are responsible for this:
- Intensive R&D investment: Analog chips are not created by using the most advanced manufacturing processes; they require expertise from engineers to improve precision, resistance to interference, and stability under various temperatures. In scenarios like AI servers and automotive applications, a single chip failure can result in significant losses. Leading manufacturers are willing to invest heavily in R&D, even if it means incurring losses. For example, Jiehuate’s revenue increased by 44%, but it still lost 500 million yuan due to R&D expenses accounting for 37% of its total revenue.
- Upstream cost increases and downstream price sensitivity: Manufacturers of wafers and packaging services have seen cost increases of 5%-15%, but chip manufacturers cannot pass on these costs to customers easily. While companies in the AI and automotive sectors can maintain profit margins of over 50% and absorb these increases, those in the consumer electronics sector face significant price sensitivity from customers. A 5% price increase may lead to customers switching to competitors, and an 10% increase from upstream suppliers results in only a 2% increase for them, effectively eroding their profits.
- Competitive capacity investment: Manufacturers are worried about future shortages of production capacity and are therefore paying millions or even tens of millions in advance as capacity guarantees to wafer manufacturers and stocking up on raw materials. This reduces their available cash flow and, as a result, their reported profits.
3. The recovery is not a widespread boom: We are still in a transitional phase
Don’t mistake news about rising chip prices and shortages for a return to the frenzied situation of 2021. The current recovery is a complex and uneven process:
- Shortages are not due to a sudden surge in demand: The shortage is caused by a reduction in 8-inch wafer production capacity. Most analog chips are produced using 8-inch wafers, which are less costly. Wafer manufacturers are shifting production to more profitable chip types, leading to supply shortages.
- Slow price transmission: Although prices have risen by about 10% for suppliers, downstream customers are hesitant to accept them and are comparing prices before placing orders. This means that distributors are not benefiting from the price increases. Those who stocked up on cheap products before the year have made some profits, but those who restocked after the New Year are facing higher prices, resulting in reduced profits.
- Uneven industry distribution: There is still an oversupply of consumer electronics-related analog chips, while shortages are only present for products used in AI and automotive applications. The industry has moved from a period of aggressive inventory clearance to one of cautious stockpiling, indicating a gradual recovery.
4. The industry’s hierarchy is becoming clear: The fates of different types of companies are already determined
The performance of the 24 companies clearly shows a three-tiered structure, with the gap between them widening:
- Top-tier companies (platform players): These companies have a wide range of products and cover all downstream markets, benefiting from the growth in AI, automotive, and industrial applications. Their revenue and profits have increased by more than 40%, with profit margins exceeding 51%. They are in a position of steady, high-profit growth and are likely to gain more market share.
- Mid-tier companies (those seizing new market opportunities): These companies have successfully entered the AI and automotive electronics sectors and are seeing rapid growth. They have just turned from losses to small profits and are continuing to invest in R&D to expand their product lines. If they make no mistakes, they will soon catch up with the top-tier companies.
- Low-tier companies (still stuck in consumer electronics): These companies are slow to enter new markets, relying heavily on consumer electronics for over 90% of their revenue. They are unable to raise prices due to customer sensitivity and are squeezed by rising upstream costs. They lack the funds for R&D and are at risk of being acquired by leading companies or being phased out by the market.