AI-driven demand indicates an extended semiconductor upcycle lasting until 2026 and possibly beyond.
Credit: UBS
At the UBS Greater China Conference 2026 held in Shanghai on Wednesday, Jimmy Yu, a Semiconductor Analyst for UBS Securities, presented his current perspectives on the global and Chinese semiconductor industry cycles, AI-driven growth trends, and investment themes. He indicated that with the rapid advancement of AI, the global semiconductor industry is entering a new upward cycle, with anticipated growth momentum and sustainability poised to outstrip previous cycles.
Globally, Yu forecasts the semiconductor market will near $700 billion by 2025 and exceed $1 trillion in 2026, which would represent more than 40% year-on-year growth. By 2027, the market is expected to reach about $1.18 trillion, maintaining double-digit growth. Although such growth has historical precedence, Yu pointed out the key distinction this time is the structural demand shift prompted by AI.
Memory is anticipated to be a significant contributor to this cycle. Yu stated that the memory market could expand by nearly 50% by approximately 2027, primarily due to rising prices enhancing overall revenue. Even when excluding memory, the demand for logic chips, foundry services, and related areas remains robust, enabling ongoing double-digit growth between 2025 and 2027.
On the demand front, AI applications are rapidly broadening their reach beyond data centers and cloud computing into sectors like financial services, enterprise applications, and security. While some applications are in their infancy, their potential market size is becoming increasingly evident, according to Yu. Consequently, investment in AI infrastructure is likely to emerge as one of the most reliable growth catalysts for the semiconductor industry in the coming years.
Regarding industry cyclicality, Yu noted that semiconductors are inherently a cyclical sector. Based on global revenue trends, the industry may approach a near-term peak around the third quarter of this year. However, indicators such as foundry capacity utilization, capital expenditure, and corporate profitability suggest that the cycle's peak might be postponed until the third quarter of next year. Yu also highlighted that equity markets typically anticipate cyclical changes one to two quarters in advance, encouraging investors to adjust their positions ahead of fundamental shifts.
Focusing on China, Yu stated that the development of AI infrastructure is significantly enhancing domestic demand for computing chips, advanced process nodes, advanced packaging, and semiconductor equipment. Although China currently trails behind international counterparts in advanced manufacturing capabilities, there is considerable potential for improvement in localization and self-sufficiency.
In recent years, the revenue growth of Chinese semiconductor equipment firms has outpaced the industry average, with several subsegments demonstrating signs of sustained progress.
AI is transforming the demand landscape of the semiconductor industry. From cloud computing to edge applications, and from autonomous driving to robotics and smart devices, the need for high-performance, low-power chips continues to grow rapidly. Supported by both global and China-specific factors, the ongoing semiconductor upcycle is projected to persist into 2026 and possibly beyond.
Jessie Wu is a technology reporter based in Shanghai, covering consumer electronics, semiconductors, and the gaming industry for TechNode. Connect with her via e-mail: jessie.wu@technode.com. More from Jessie Wu.
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