The inventory levels in the semiconductor industry are trending towards normalization. UBS Group AG is the first to recommend Texas Instruments Incorporated (TXN.US), Renesas Electronics Corporation (RNECY.US), and Infineon Technologies (IFNNY.US).

UBS Group AG has released its latest research report, based on the monitoring of inventory and pricing data of over 100 distributors worldwide by its evidence laboratory, indicating that the current semiconductor industry inventory and pricing trends are generally improving, especially with the continuous digestion of MCU inventory easing market concerns about supply and demand imbalance. The bank believes that although trade tensions and tariff risks may suppress further destocking momentum, the industry is gradually moving towards supply-demand balance, and continues to favor Texas Instruments Incorporated (TXN.US), Renesas Electronics (RNECY.US), and Infineon Technologies AG (IFNNY.US). Key trends: Inventory steadily adjusting, pricing stable to slightly rising The report points out that in July, global semiconductor inventory overall showed a stable adjustment trend. Except for capacitors and sensors with a 6% month-on-month increase in inventory, the rest of the product categories had either stable or a 2% decrease in inventory on a monthly basis. Among them, MCU inventory has been continuously digested since February, with a 1% decrease month-on-month this month, although the decline is slower than the 5% drop last month, it continues the destocking trend. In terms of pricing, the average prices of all product categories increased by 1% on a monthly basis, with a year-on-year increase of 14% (UBS Group AG believes that this is mainly influenced by product mix adjustment). Specifically, transistor prices rose by 1% month-on-month and soared by 18% year-on-year, with bipolar transistors being the main driver; capacitor, diode, and sensor prices increased by 2%-3% month-on-month, while prices of other categories remained stable or rose by 1%, indicating an overall stable pricing environment. Dynamic of key product areas MCU: Standard unit inventory has declined for three consecutive months, with a 1% decrease month-on-month this month, while prices remained stable month-on-month but increased by 1% year-on-year, with prices of various subcategories remaining stable or slightly rising. Although current inventory levels are still relatively high compared to January 2023, UBS Group AG emphasizes that this category was in severe shortage at the beginning of 2023. Transistors: Inventory decreased by 2% month-on-month, with prices rising by 1% (up 2% from last month), and a year-on-year increase of 18%. Passive components: Multilayer ceramic capacitors (MLCC) inventory increased by 2% month-on-month at the end of June, with a further 5% increase in July; capacitor prices rose significantly by 36% year-on-year and increased by 3% month-on-month, while inventory decreased by 12% year-on-year. Sensors: Prices increased by 18% year-on-year and by 2% month-on-month, mainly driven by magnetic sensors; inventory increased by 31% year-on-year and by 6% month-on-month, with significant fluctuations in inventory in recent months. Observations at the enterprise level From the analysis of the enterprise heat map, the weighted average pricing increased by 3% year-on-year in July (same as in May). Overall, inventory remained stable, with a slowing pace of MCU inventory digestion, previously driven mainly by Microchip Technology Incorporated (MCHP.US) and STMicroelectronics NV ADR RegS (STM.US), while Infineon's MCU inventory proportion increased from the historical average of 2.6% to 4%, indicating signs of inventory accumulation.