Semiconductors: Disti Survey 1Q'26: From Stabilizing to Accelerating

Core Thesis

The semiconductor cycle has shifted from stabilization to acceleration, with 2Q26 sequential growth expectations far exceeding seasonal norms. Demand recovery is broadening beyond data center into analog, MCU, and connectors, while inventory replenishment and tightening supply create a setup for strong JunQ earnings guidance. This upcycle carries more breadth than the market currently prices.

What the Market Is Underpricing

Three gaps between consensus and survey reality are material:

1. Auto semiconductor improvement is underappreciated. Only 6% of respondents now expect auto sales weaker than seasonal, versus 24% last quarter. Despite cautious sell-side sentiment, conditions are better-than-feared and normalization is underway.

2. Analog and MCU pricing power has surged but is not yet reflected in earnings estimates. 65% of respondents report analog pricing stronger than usual (from 33% last quarter); 58% report MCU pricing stronger (from 33%). The magnitude of increases is shifting toward +LDD, and 0% see connector pricing weakening.

3. The inventory inflection from depletion to replenishment is being ignored. Only 18% of respondents plan to deplete inventory (from 33% last quarter). In MCU, 52% plan to build inventory (from 33%). Lead times are extending: 65% report supplier lead times increasing (from 50%), the highest since 1Q22.

Evidence Chain

Broad-based growth acceleration: 71% of respondents expect analog sequential growth in 2Q26 (vs. 44% last quarter), 64% for MCU (vs. 50%), and 56% for connectors (vs. 34%). The share expecting above-seasonal strength doubled: analog 59% (from 31%), MCU 58% (from 24%), connectors 31% (from 17%).

Supply constraints widening beyond memory: 68% of respondents report at least one product with supply constraints (from 57%). Analog constraints rose to 38% (from 29%), MCU to 39% (from 19%), connectors to 28% (from 17%). Expedite orders jumped: analog from 24% to 35%, MCU from 12% to 27%. Double ordering increased from 10% to 26% overall.

End-market improvement across the board: Industrial weaker-than-seasonal expectations dropped to 9% (from 17%); communications to 3% (from 19%); PLD to 3% (from 19%). Automotive improved most dramatically from 24% to 6% expecting weakness.

AlphaWise cycle analysis confirms acceleration: Analog and MCU shipments were near end-demand as of February, with forecasted acceleration over the next several quarters. IGBT sales cycle is also improving.

Key Risks

• Supply constraints remain selective, not a full-blown shortage. If demand slows, inventory could rebuild to excess.
• Semiconductor company inventories are still above 10-year medians, raising questions about replenishment durability.
• Some demand may reflect pull-forward, creating a 2H26 correction risk.
• Geopolitical disruptions (Nexperia, Iran conflict) and input cost inflation add volatility. The tightening dynamic is partly driven by memory shortages that may ease.

Valuation or Trading Implications

We expect very strong JunQ prints. The data support positioning in industrial (ADI, MCHP), power (ON, TXN), and auto-exposed (NXP, ALGM). Auto upside is the largest potential surprise vs. cautious expectations; recent downgrades in the sector create room for positive catalysts. Current valuations do not fully embed the earnings upgrade potential, particularly for analog and MCU names with pricing leverage. If supply continues to tighten, upside will expand further.

Appendix: Key Survey Metrics Summary