Semiconductor Sector Outlook Strengthens on Capex Surge and Memory Demand, OVERWEIGHT Rating April 23, 2026
Sector Performance Driven by Memory Demand
The semiconductor sector has demonstrated robust performance over the past three months, with the Semiconductor ETF rising 2.3% and significantly outperforming the S&P500’s decline of 7.8%. Memory companies have been the standout performers, surging 44% driven by overwhelming demand from hyperscalers for memory chips amid insufficient cleanroom capacity. This supply-demand imbalance has resulted in dramatic price increases, with DRAM prices surging 82% year-on-year in the first two months of 2026.
Production Ramp-Up and Supply Constraints
All three major memory players have commenced HBM4 production, marking a significant technological milestone. However, supply constraints are expected to persist, with memory shortages anticipated to last at least until the second half of 2027. Micron’s new facilities are expected to provide meaningful supply relief from 2027 onwards. SK Hynix has committed to maintaining its 2026 capex-to-sales ratio at approximately mid-30% levels, compared to the industry average of 31% in 2025.
The sector is witnessing significant technological advancement as memory manufacturers adopt Extreme Ultraviolet (EUV) machines to enable single-step exposure processes, replacing the previous requirement for 3-4 exposures. This development enhances cleanroom efficiency and positions ASML in a relatively stronger competitive position compared to Applied Materials (AMAT) and Lam Research.
Strong Revenue Growth Outlook
The majority of processor and memory companies, excluding Qualcomm and AMD, have guided for accelerating revenue growth in the first quarter of 2026. This optimistic outlook is underpinned by hyperscalers’ robust demand for AI chips, with Google, Meta, and Amazon collectively guiding their combined capex to surge 72% year-on-year to US$505 billion for AI infrastructure investments in 2026.
Geopolitical Considerations
From a risk perspective, Micron appears better positioned to weather potential Middle East conflicts compared to SK Hynix and Samsung, owing to its stronger presence in the United States. The US accounts for approximately 45% of global helium production, compared to Qatar’s 30% share, providing Micron with greater supply chain resilience.
Investment Recommendation
Phillip Securities Research maintains an OVERWEIGHT rating on the semiconductor sector, reflecting confidence in the sustained growth trajectory driven by AI infrastructure investments and memory demand fundamentals.
Frequently Asked Questions
Q: How has the semiconductor sector performed recently compared to broader markets?
A: The Semiconductor ETF rose 2.3% over the past three months, significantly outperforming the S&P500 which declined 7.8% during the same period.
Q: Which segment has been the strongest performer within semiconductors?
A: Memory companies led the sector with gains of 44%, driven by overwhelming demand from hyperscalers for memory chips and insufficient cleanroom capacity.
Q: How long are memory shortages expected to continue?
A: Memory shortages are expected to last at least until the second half of 2027, with meaningful supply from Micron’s new facilities expected to ramp from 2027 onwards.
Q: What is driving the strong revenue growth outlook for semiconductor companies?
A: The majority of processor and memory companies are guiding for accelerating revenue growth driven by hyperscalers’ strong demand for AI chips, with major tech companies planning significant capex increases.
Q: How much are hyperscalers planning to spend on AI infrastructure?
A: Google, Meta, and Amazon have guided their combined capex to surge 72% year-on-year to US$505 billion on AI infrastructure in 2026.
Q: What technological advancement is improving manufacturing efficiency?
A: Memory manufacturers are adopting EUV machines to enable single-step exposure processes, replacing the previous requirement for 3-4 exposures, which boosts cleanroom efficiency.
Q: Which company appears best positioned regarding geopolitical risks?
A: Micron is considered better insulated from Middle East conflicts than SK Hynix and Samsung due to its stronger US presence, as the US accounts for about 45% of global helium production compared to Qatar’s 30%.
Q: What is Phillip Securities Research’s recommendation on the semiconductor sector?
A: Phillip Securities Research maintains an OVERWEIGHT rating on the semiconductor sector based on the positive growth outlook and strong fundamentals.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
Disclaimer
These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products.
Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance.
Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries.
The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.
Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
About the author
Yik Ban Chong
Ben covers fundamental research on construction and semiconductor companies. He graduated from the National University of Singapore with a Second-Upper Honours Degree in Industrial and Systems Engineering.
Elite UK REIT Shows Strong Capital Management and Portfolio Growth, BUY Rating with S$0.41 Target 
Frasers Centrepoint Trust Maintains Defensive Edge Amid Macro Uncertainty with BUY Rating and S$2.70 Target Price 
Keppel Ltd Shows Resilient Asset Growth Amid Middle East Conflict Benefits, Maintains BUY with S$13.80 Target 
OUE REIT Delivers Strong Performance Amid Lower Financing Costs, Maintains BUY Rating with S$0.45 Target 
