At the end of July 2026, the global semiconductor market brought new positive signals: the inventory adjustment that has lasted for more than a year is nearing completion, and many industry research institutions and investment banks have successively released reports, believing that the semiconductor industry is about to usher in a new round of inventory replenishment cycle, especially in automotive, industrial and consumer electronics fields, demand is showing clear signs of recovery. For investors, this may mean that the chip sector is standing at the starting point of a cyclical reversal.
According to research reports released by multiple investment banks such as Morgan Stanley and Goldman Sachs on July 30, global semiconductor inventory levels fell below historical average levels in the second quarter, and capacity utilization of wafer fabs began to bottom out and recover. The report pointed out that this is the first positive change since the industry's active destocking in 2025, and it is expected that shipments will increase by 6%-8% quarter-on-quarter in the second half of 2026, with double-digit growth expected in 2027.
This news corroborates the monthly shipment data recently released by SEMI (Semiconductor Industry Association) - global semiconductor equipment shipment value stopped falling and rose year-on-year in June, indicating that chip manufacturers are preparing for a new round of capacity expansion. Although the demand for AI-related chips remains strong, the driving force for this recovery is spreading from AI accelerators to broader traditional chip fields.
Cycle bottom, why is it the golden window for chip investment
The semiconductor industry has distinct cyclical characteristics, historically experiencing a cycle of recovery, prosperity, recession, and depression every 3-4 years. The current market is in the stage of switching from "active destocking" to "passive destocking", which is usually regarded by professional investors as the best time to layout cyclical stocks.
From both supply and demand sides, the logic is clear:
On the supply side, major global wafer fabs have slowed down the pace of new capacity investment in the past two years, and some mature process expansion plans have been delayed or cancelled; on the demand side, automotive electronics, industrial automation, IoT and traditional consumer electronics replacement demand still exists, but is temporarily suppressed by high inventory. As inventory is cleared, real demand will re-dominate orders.
Historically, every semiconductor cycle reversal has created opportunities for excess returns. At the cycle bottom in 2019, the SOX index rose more than 150% in the following two years; the cycle bottom in 2023 also brought significant returns. Currently, the global semiconductor sector valuation is still at a relatively low position compared to historical median, while profit expectations are gradually being revised, forming the potential conditions for "Davis Double Kill".
Policy dividends and domestic substitution provide additional driving force
In addition to cyclical factors, the semiconductor industry is also supported by long-term structural logic. In recent years, major global economies have elevated the chip industry to the height of national security, promoting supply chain localization and domestic substitution processes. The US "Chip Act", EU "Chip Act", Japan's semiconductor revival plan, and China's self-reliant strategy are continuously injecting policy funds and market space into the industry.
Take Southeast Asia as an example, Singapore, as an important hub for the global semiconductor industry, is actively attracting investment in wafer manufacturing, packaging and testing, and equipment materials. Semiconductor-related companies listed on SGX, such as UMS Holdings, AEM Holdings, etc., are also benefiting from the adjustment of the global supply chain. They not only serve international large customers, but also benefit from the trend of regionalized production migration.
Policy support not only reduces investment uncertainty, but also provides a long-term growth ceiling for the industry. For investors, this means that chip investment is no longer a simple "cyclical game", but a composite investment logic that combines "growth attributes" and "strategic value".
How to layout chip investment? Focus on inventory inflection point and demand elasticity
At the current time point, investors can find opportunities from the following dimensions:
- Focus on细分 fields with the most thorough destocking: Memory chips, power semiconductors, and analog chips have been the categories with the most inventory pressure in the past two years. Once demand recovers, price elasticity will be the greatest.
- Track wafer foundry and equipment sectors: The recovery of foundry capacity utilization is a leading indicator of industry prosperity, while equipment manufacturers will directly benefit from the new round of capital expenditure cycle.
- Pay attention to the value re-evaluation of SGX-listed semiconductor companies: The Singapore Stock Exchange has many semiconductor industry chain companies, their valuations are relatively lower than global peers, and they have stable profitability and high dividend characteristics, suitable for medium and long-term layout.
- Use ETF tools to diversify risks: For ordinary investors, semiconductor ETFs (such as related ETFs listed on SGX) can reduce individual stock volatility risk while capturing the overall industry recovery dividend.
Risk warning: rebound is not achieved overnight
Despite the optimistic outlook, investors still need to be alert to potential risks. Geopolitical frictions may disrupt supply chain recovery; if AI chip demand shows a temporary retreat, it may affect market sentiment; in addition, industry destocking may also rebound, especially if macroeconomic growth falls short of expectations, terminal demand may weaken again.
Therefore, in terms of investment strategy, it is recommended to adopt a phased position building approach and cooperate with stop-loss discipline. At the same time, closely follow the global semiconductor sales data, inventory turnover days, and financial guidance released by major manufacturers every month, which will help investors confirm the effective signals of the cyclical inflection point.
In summary, the second half of 2026 is at a critical point of cyclical reversal in the semiconductor industry. With the resonance of fundamentals, policy and valuation, the answer to "why invest in chips" is becoming clearer - now may be a good time to layout the market for the next two years.
