In late July 2026, the global semiconductor market saw a key turning-point signal. Several leading research institutions successively published reports indicating that the chip inventory correction that has weighed on the industry for nearly two years is nearing its end, with end-market demand gradually recovering, especially as order visibility in AI servers, electric vehicles, and industrial automation has markedly improved. This news lifted semiconductor blue chips listed on the Singapore Exchange for consecutive sessions, and investors are beginning to focus on positioning opportunities at the bottom of the cycle.

Inventory digestion in final stage, supply-demand structure keeps improving

According to Gartner's latest global semiconductor inventory tracking report, worldwide chip inventory levels in Q2 2026 fell to 1.1 times the historical average, down sharply from the 2025 peak of 1.6 times, indicating faster-than-expected de-stocking progress. The report projects inventory will further decline to 1.05 times in Q3, formally returning to healthy levels. Meanwhile, SEMI data also indicates global semiconductor shipments rose 12.4% year-on-year in June 2026, maintaining double-digit growth for a fourth consecutive month, confirming demand recovery momentum.

This inventory correction mainly stemmed from weak consumer electronics demand between 2024 and 2025, which led to excessive stockpiling across the supply chain. After eight consecutive quarters of adjustment, inventories of major categories such as memory, analog chips, and microcontrollers have been significantly digested. In the memory market especially, with the top three manufacturers strictly controlling supply, spot prices of DRAM and NAND Flash have rebounded over 15% since June, serving as a leading indicator of the industry turnaround.

Singapore semiconductor blue chips lead the rebound, with earnings and share prices both surging

Inventory restocking demand directly benefits Singapore's semiconductor supply chain. UMS Holdings (SGX:558), listed on the Singapore Exchange mainboard, is a globally leading precision component supplier for semiconductor equipment, with customers including equipment giants such as Applied Materials and Lam Research. The company's recent Q2 results showed revenue up 23.4% year-on-year to S$120 million and net profit up 31.2%, both setting historical records. Management said at the earnings call that order visibility for advanced packaging equipment has extended into Q1 2027, driven mainly by surging demand for high-end testing and precision packaging from AI chips.

Another blue chip, AEM Holdings (SGX:AWX), also performed strongly. The company is a provider of semiconductor test solutions, with Q2 revenue up 18.7% year-on-year, and revenue from system-level test (SLT) equipment accounting for more than 60% of total revenue. AEM's CEO noted that as chip designs become increasingly complex, customers' willingness to spend capital on test equipment has clearly risen; capacity utilization at the group's Singapore and Malaysia plants has exceeded 90%, and the company is actively evaluating expansion plans.

In addition, precision mechatronics integrators such as Frencken Group (SGX:E28) have also benefited from increased semiconductor equipment assembly demand. The company's share price has risen a cumulative 12.5% since early July, outperforming the Straits Times Index over the same period.

Cycle turning point: how should investment strategy adjust?

From a semiconductor cycle perspective, the end of inventory adjustment is usually accompanied by share prices reacting ahead of fundamentals. Historical experience shows that after inventory levels fall below the average, the Philadelphia Semiconductor Index and Singapore semiconductor stocks have delivered average gains of 25% to 30% over the following twelve months. Currently, global semiconductor sales growth remains on an upward track, with the price-to-book ratio (P/B) at about 2.8 times, below the five-year average of 3.3 times, indicating valuations have yet to fully reflect recovery expectations.

• Timing: Q3 is the traditional stocking-up peak season, and with Apple new-device builds and AI server shipments ramping up, restocking momentum is expected to continue into H1 2027.
• Stock selection: Prioritize suppliers highly tied to advanced process, advanced packaging, and testing, such as UMS Holdings and AEM Holdings, which have high added value and strong pricing power.
• Risk management: Watch for geopolitical risks and the possibility that end-demand recovery falls short of expectations; adopt a phased position-building strategy and avoid chasing highs.

Structural industry shift makes Singapore's role increasingly important

Amid the global trend toward semiconductor supply chain diversification, Singapore has become one of the top locations for multinational semiconductor giants to set up plants, thanks to its stable political environment, well-developed infrastructure, and proactive government industrial policies. Recently, Infineon and Micron have announced expansions of their Singapore facilities, while local companies are gradually moving into higher-tier supply chains through M&A and technology partnerships. Singapore's Economic Development Board (EDB) has also launched a S$3 billion semiconductor R&D incentive scheme to encourage companies to invest in advanced packaging and compound semiconductors. These policy dividends will provide long-term growth momentum for blue chips.

Overall, the end of chip inventory adjustment marks the semiconductor industry's formal entry into a new upward cycle. Singapore semiconductor blue chips combine value and growth characteristics; driven by long-term trends such as AI, electric vehicles, and Industry 4.0, this is a key moment for investors to re-examine allocations and seize the cyclical turning point.