Semiconductor market hits $319bn in 1Q26 as memory revenue surges 80%

The semiconductor industry posted its strongest quarterly growth in over two decades as memory chip revenue nearly doubled.

Global semiconductor revenue surged 27% quarter-over-quarter to $319bn in 1Q26, the fastest growth since Omdia began tracking the market in 2002, as memory chips accounted for over 40 percent of all chip sales.

"Four consecutive quarters of double-digit revenue growth for the market show the strength of the current demand for semiconductors," Clifford Leimbach, Practice Leader at Omdia, said.

NAND flash memory revenue reached just under $48bn, rising 96 percent sequentially, with average selling prices jumping 95 percent as AI and data center demand collided with ongoing supply constraints. DRAM revenue also nearly doubled in the quarter. Outside memory, non-memory semiconductor revenue grew just over 2 percent — still outperforming the typical 4 percent Q1 seasonal decline, driven by AI and data center components that bucked historical patterns.

The trajectory puts the industry on track to surpass $700bn in first-half revenue and cross the $1tn threshold for the full year, according to Omdia. Second-quarter growth is expected to exceed 20 percent sequentially, though at a slower pace than 1Q26, as memory supply recovery remains limited by technology transitions and yield challenges.

Memory's structural shift reshapes the chip industry

The memory market's outsized contribution marks a structural departure from historical norms. DRAM and NAND have historically accounted for roughly 20 percent of semiconductor revenue, but that share has doubled to over 40 percent as AI workloads drive demand for high-bandwidth memory and large-capacity NAND storage. NAND ASPs rose 95 percent sequentially, reflecting sustained AI and data center procurement alongside supply constraints from technology node transitions and product mix challenges.

The shift has major implications for competitive dynamics. Samsung Electronics, SK Hynix and Micron Technology — the three dominant memory producers — stand to benefit disproportionately from the pricing environment. SK Hynix, which leads in high-bandwidth memory (HBM) for AI accelerators, has seen its market capitalization more than double over the past year as HBM became a critical component in Nvidia's GPU systems.

Non-memory segments show divergent performance

Outside memory, the picture is more mixed. Microcontrollers, discretes and optical components posted slight to mid-single-digit QoQ declines in 1Q26, consistent with normal seasonal patterns. But companies tied to the AI and data center supply chain — including Nvidia, Advanced Micro Devices and Broadcom — outperformed the typical first-quarter slowdown, providing the non-memory segment with modest overall growth of just over 2 percent.

TSMC, the world's largest chip foundry, reported strong utilization rates across its advanced nodes, particularly 3nm and 5nm, which are used for AI accelerators and data center processors. The company's CoWoS advanced packaging capacity remains constrained, with expansion plans extending into 2027.

Investment implications

For investors, the data reinforces the AI-driven semiconductor cycle's durability. Nvidia, trading at elevated multiples on expectations of sustained data center growth, faces a favorable demand backdrop but also supply-side risks if memory constraints ease faster than expected. Memory producers Samsung, SK Hynix and Micron are seeing structural re-rating as memory transitions from a cyclical commodity to a strategic enabler of AI infrastructure. The broader semiconductor ETF complex — including the VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX) — has benefited from the sector's broadening rally, though valuation dispersion between memory and non-memory names remains wide.

This article is for informational purposes only and does not constitute investment advice.