Semiconductor market pulse: Six insights for Q1 2026
The latest insights on market trends, technological advancements, and supply chain shifts shaping Q1 2026.
As the semiconductor industry enters 2026, early indicators suggest a gradual shift in market conditions. After an extended period of volatility, demand is improving across multiple end markets, and growth drivers are evolving. However, supply chain pressures have not disappeared; they have become more selective, with constraints concentrated in specific product categories rather than across the market as a whole.
Avnet Silica’s latest Trendliner Q1 2026 report offers a data-driven overview of the current state of the market and the key areas for engineers and buyers to watch as projects transition from the planning phase to execution. Here are the key insights for the quarter:
1. The recovery broadens beyond high-end compute
The global semiconductor market is entering a more balanced recovery phase. Although artificial intelligence (AI) remains a key growth driver, demand is no longer focused on high-end cloud infrastructure. Instead, growth is increasingly evident across a wider range of devices and applications.
A notable shift is the trend of moving AI inference from the cloud to the edge. This transition extends activity beyond leading-edge processors and advanced nodes. It increases the demand for a wider range of semiconductor devices, such as analog components, power management ICs, sensors, and microcontrollers.
Furthermore, applications such as advanced driver-assistance systems (ADAS), AI-enabled PCs, and intelligent edge devices continue to support demand across multiple parts of the semiconductor value chain.
Michael Speyerer, Regional Vice President for Central Europe at Avnet Silica, talks you through some of the insights uncovered in our latest Trendliner release.
2. Growth forecasts strengthen, with regional differences
Global growth expectations have improved further at the start of 2026. The semiconductor market, excluding DRAM, Flash memory, and high-end compute devices, is forecast to grow by more than 9% year-on-year in 2026, with a positive trend expected to continue until 2028.
Asia remains the dominant region, accounting for roughly two-thirds of total market demand, while the Americas are showing particularly strong acceleration. EMEA continues to recover more gradually, reflecting its higher exposure to industrial activity and export-oriented sectors, where demand has softened.
These regional dynamics continue to play a significant role in the decision-making processes of engineers in global organisations when it comes to assessing supply availability, sourcing strategies, and demand planning across different markets.
3. Europe shows caution - but confidence is improving
Towards the end of 2025, manufacturing activity in Europe softened. Output declined for the first time since early 2025, and new orders, particularly export orders, weakened, contributing to a further drop in the Manufacturing PMI. Manufacturers continued to reduce purchasing activity and inventory levels, even as supplier lead times were lengthening in parts of the supply chain.
At a country level, performance remained uneven. Germany and Italy recorded disappointing results, while Spain – one of the stronger performers earlier in the year – also saw an unexpected slowdown. In contrast, France experienced its strongest expansion since 2022, going against the broader regional trend.
Despite these challenges, business optimism has improved and reached its highest level since early 2022. This suggests a more positive outlook for companies as they move into 2026.
4. Automotive is still the anchor for EMEA growth
The automotive segment continues to be the largest vertical market for semiconductors in EMEA, accounting for nearly half of total demand. Within this segment, ADAS, electrified powertrains, and automotive high-performance computing remain the strongest growth areas. Other significant contributors to regional demand include industrial, communications, and data processing.
Looking beyond absolute market size, the three-year growth outlook highlights a number of smaller but faster-growing application areas. Among them, agriculture-related applications are forecast to see the strongest growth rates through 2028, reflecting increasing adoption of automation, sensing, and connectivity in equipment and infrastructure. Smartphones, as well as military and aerospace applications, are also expected to grow at double-digit rates over the next three years.
While automotive remains the dominant volume driver, these trends indicate that growth opportunities across EMEA are becoming more diversified when viewed over the longer term.
5. Advanced manufacturing prepares for the next wave
Behind the scenes, the industry is laying the groundwork for the next generation of semiconductor technology. Investment in advanced manufacturing continues, with analysts projecting around 14% compound annual growth (CAGR) in advanced fabrication capacity (below 7nm) through 2028.
Leading foundries are preparing for 2nm mass production in the second half of 2026 and expanding the adoption of gate-all-around transistor architectures (GAAFET). These developments are focused on delivering higher performance and improved power efficiency, particularly for AI, high-performance computing, and power-constrained edge applications.
While these technologies will primarily affect longer-term roadmaps rather than near-term designs, they continue to shape technology planning and investment decisions across the semiconductor ecosystem.
6. Supply chain pressure persists in targeted areas
From a supply chain perspective, conditions are still uneven across the semiconductor market. Pricing pressure and extended lead times continue to affect specific categories, with memory being the most impacted area.
Flash products, including NOR and NAND, continue to see upward pricing pressure, reflecting tight supply and sustained demand from automotive, industrial, and data-centre applications. DRAM pricing has increased sharply, driven by constrained capacity and prioritisation toward high-margin segments. Solid-state drives are experiencing rising prices as enterprise demand remains strong, and eMMC pricing continues to trend upward, influenced by broader NAND cost inflation and ongoing supply shortages.
In contrast, SRAM is characterised primarily by lead-time pressure rather than acute price volatility. Lead times remain extended, often stretching multiple months, particularly for automotive- and industrial-grade devices.
Beyond memory, selected automotive-grade MCUs, DSPs, and programmable logic devices continue to face extended lead times, and end-of-life notifications remain an important consideration for engineers managing long-lived designs. Overall, the supply chain picture in Q1 is one of targeted constraint rather than broad disruption, reinforcing the importance of early engagement and forward planning.
Conclusion: A selective recovery takes shape
As 2026 begins, the semiconductor market is entering a selective recovery. Demand is improving across a broader range of end markets, but momentum varies by region, application, and product category, and supply chain pressure remains concentrated in specific areas.
For design engineers, this underlines the importance of focusing on detail rather than averages. Knowing which applications are driving growth, where technology investment is accelerating, and which components continue to face pricing or lead-time constraints is critical for effective planning.
Avnet Silica’s Trendliner report brings together the latest market insights, pricing, and lead-time trends to help you make informed decisions in the months ahead. For a detailed analysis, download the full Trendliner Q1 2026 report.
