On July 5, 2026, the global semiconductor industry continued to undergo a deep restructuring driven by the strong demand for AI computing power, but short-term market fluctuations significantly intensified. On the one hand, international investment banks such as UBS, Bank of America, and Nomura Securities have been releasing research reports intensively, generally optimistic about the long-term prospects of the semiconductor sector related to AI infrastructure. On the other hand, the Philadelphia Semiconductor Index suffered a sharp sell-off in the first week of July, with a cumulative decline of more than 11% over two trading days. This pattern of "strong fundamentals and short-term pullback" has become a typical feature of the current semiconductor industry.
UBS pointed out in its latest report that the technology industry is undergoing an "extraordinary" transformation, and the performance of artificial intelligence infrastructure stocks will far exceed that of most of the "Tech Big Seven". Ubs's analyst team, citing cash Flow return on investment (CFROI) forecast data, pointed out that the economic profits of AI infrastructure companies have soared from approximately $200 billion in 2023 to an projected $1.4 trillion in 2027, an increase of up to 600%. Among them, storage stocks are expected to contribute half of the projected growth in the infrastructure sector.
In response to this, China Galaxy Securities released a research report stating that the internal main line of technology manufacturing has clearly shifted from "AI+ new energy" in May to the three major directions of "semiconductors +AI+ aerospace" in June. The theme rotation has slowed down, and the market main line has become more focused. Wang Guizhong, the director of the big Technology Research department of Harvest Fund, also stated that he remains optimistic about Chinese technology assets overall and holds a positive and optimistic attitude towards the accelerated catch-up trend of domestic AI.
The memory chip sector has become the focus of recent market competition. Despite the significant pullback of related individual stocks, many international investment banks remain optimistic.
In its latest weekly report on the storage industry, Bank of America clarified one by one the three major concerns of the market, clearly stating that the vast majority of the negative news currently circulating is not valid. In response to rumors of Meta cutting orders, Bank of America visited chip manufacturers and reached the opposite conclusion - Meta's long-term orders for HBM, LPDDR5 and eSSD are still continuously increasing. In response to the rumor that Chinese DRAM manufacturer Changxin Memory might enter Apple's supply chain, Bank of America pointed out that there are three hard barriers: the barriers of the US export control policy, the product specifications not yet meeting Apple's requirements, and the deep intellectual property moat of the three major DRAM manufacturers in South Korea and the US. In response to the view that South Korea's 800 trillion won investment plan is seen as a signal of the peak of the cycle, Bank of America believes that the cluster will not produce substantial output until at least 2033, and there are no signs of the peak of the cycle at this stage.
Nomura Securities further stated in its latest report that the core contradiction in the current global storage industry remains a severe shortage of supply. The structural demand growth driven by AI has yet to peak, and investors' recent concerns about oversupply have been significantly excessive. Nomura emphasized that the cycle for converting semiconductor investment into actual production capacity is extremely long. South Korea's investment plan of up to 480 trillion won will take at least 5 to 10 years to be converted into actual production capacity, and the squeeze on general memory production capacity by high-profit HBM is leading to a severe supply shortage in the market.
In terms of market size, the World Semiconductor Trade Statistics (WSTS) predicts that the global memory chip market size will exceed 800 billion US dollars by 2026, with a growth rate as high as 249.5%.
The foundry industry also shows a situation of supply falling short of demand. Samsung Electronics' foundry business has implemented capacity quota management at some advanced process nodes since the second quarter of 2026. As of early July, the total backlog of orders was approximately 50 trillion won. Among them, the capacity for the 4-nanometer process has been fully allocated, and the capacity for 2027 has also been basically booked. The capacity of the 8-nanometer process is also in a highly saturated state.
In terms of customer structure, Samsung is mass-producing in-vehicle autonomous driving chips for Tesla and manufacturing dedicated chips for large language model inference for AI startup Groq. At the same time, it is deepening joint development and mass production cooperation with companies such as NVIDIA and Google. The tightening of production capacity combined with the upgrading of demand has driven up the prices of some advanced process contract manufacturing by 15% to 20%. Industry analysis generally suggests that Samsung's foundry division is expected to break even in the second half of 2026 or early 2027.
AI technology is reshaping the semiconductor industry chain from both the demand side and the supply side.
inSemiconductor testingIn the field, digital and intelligent transformation centered on AI large models, automated equipment, and multi-source data fusion has become a consensus in the industry. At the recently held 4th Semiconductor Third-Party Analysis and Testing Ecosystem Strategy Conference, experts attending the conference pointed out that the traditional testing model has become difficult to adapt to the development of the advanced semiconductor industry. Zhang Suxin, the chairperson of the Shanghai Modern Service Industry Development Research Foundation and the former chairman of Hua Hong Group, stated that how to leverage AI to restructure the laboratory system and enable testing data to empower front-end R&D in reverse is an urgent problem that the entire industry needs to solve at present. The iWUDI intelligent closed-loop system launched by Sembco Nano, which is equipped with a large semiconductor physics model, can reduce the traditional two-week time for formulating chip failure analysis plans to just seconds of output, and the initial plan matching accuracy can reach 95%.
In the field of advanced packaging, the packaging supply chain in Chinese mainland is seizing the strategic opportunity of the expiration of Corning's two core patents on glass substrates to fully develop the semiconductor glass packaging industry. With the exponential growth in the size of AI chips and the demand for computing power, glass substrates, with their outstanding properties, are regarded as the next-generation core materials to break through the physical limits of advanced semiconductor packaging. Corning's two core patents that have dominated the market for over 20 years will expire on October 7, 2026 and November 13, 2026 respectively. This provides an important institutional window for Chinese enterprises to enter the high-end glass substrate market.
The international competitive landscape in the semiconductor field continues to evolve, and the patent competition in the gallium nitride (GaN) power semiconductor field is particularly intense.
The global gallium nitride patent battle between Infineon and Innosemi, which has lasted for more than two years and spans China, the United States and Germany, heated up again in July. In May 2026, the Suzhou Intermediate People's Court ruled in the first instance that Infineon's G3 series was infringing and ordered it to be completely banned from sale. On June 12th, the Intellectual Property Division of the Supreme People's Court issued a final ruling maintaining the effect of the injunction. At the Shanghai Munich Electronics Show, Innosemi successfully pushed Infineon to remove the products involved in the lawsuit from the exhibition site. This was the first time that a judicial injunction in the domestic gallium nitride field was publicly implemented at a major international electronics exhibition. Meanwhile, Infineon's encirclement in overseas markets has not been fully achieved - the import ban imposed by the US ITC only targets the outdated products that have been discontinued from Innosemi, while its main products on sale can still be sold normally in the US market.
In addition, German semiconductor giant Infineon has recently officially launched a 5-billion-euro (approximately 5.7 billion US dollars) smart power wafer fab in Dresden. The factory was completed three months ahead of schedule and received a subsidy of 1 billion euros from the EU's Chips Act. This marks that Infineon is no longer mainly a supplier to the automotive industry, but is actively seeking to benefit from the investment boom in artificial intelligence.
Although the industry fundamentals continue to improve, short-term market fluctuations cannot be ignored. In the first week of July, global chip stocks suffered a sharp sell-off, with the Philadelphia Semiconductor Index falling by more than 11% over two trading days. Semiconductor stocks suffered their worst two-day sell-off in a month as investors reassess whether the boom in AI infrastructure spending can continue beyond 2026. The sell-off swept across the entire semiconductor supply chain. SK Hynix dropped 9.2% in Seoul, Samsung Electronics fell 7.5%, and Micron Technology declined 5.5% in New York.
Before this round of correction, the Philadelphia Semiconductor Index soared by 74% in the second quarter, marking its best quarterly performance on record. Analysis suggests that after valuations have soared due to a significant increase, even a moderate shift in investment logic could trigger a rapid compression of valuations.
In the medium and long term, WSTS predicts that the global semiconductor market will grow by 90% in 2026, with a total scale of 1.51 trillion US dollars. Semiconductor sales are expected to reach 1.9 trillion US dollars by 2027. Arm CEO Rene Haas recently stated in an interview that the current market demand for advanced AI cpus is at an "extreme" level. As the demand for AI computing power continues to expand, the structural growth trend in the semiconductor industry has yet to peak.
Citation Note
This article is a synthesis of information from the following public sources: UBS Global Technology Report (July 2026); Bank of America Storage Industry Weekly Report (First Week of July) Nomura Semiconductor Industry Report (July 3rd) World Semiconductor Trade Statistics (WSTS) Spring 2026 Forecast Official announcement and media disclosure of Samsung Electronics' foundry business; Report on the 4th Strategic Conference of the Semiconductor Third-Party Analysis and Testing Ecosystem Judicial documents related to the patent lawsuit between Infineon and Innosemi and on-site reports at the exhibition; As well as real-time reports from international financial media such as Reuters, Bloomberg, and Nikkei on the Philadelphia Semiconductor Index and individual stock performances. All the data and viewpoints in this article are sourced from the above-mentioned public channels and are provided for industry reference only.
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