What lies ahead for semiconductors in 2026? With AI-driven momentum, resilient supply chains, a pragmatic ESG outlook, and sustained innovation, Microchip Technology’s CEO, Steve Sanghi, predicts a confident, opportunity-rich year ahead despite geopolitical headwinds.
Q. What is your outlook on the semiconductor industry’s growth in 2026? What opportunities and challenges do you foresee?
A. The outlook for the semiconductor industry in 2026 is highly positive. While artificial intelligence (AI) and data centre markets have led growth in 2025, we anticipate a strong rebound in trailing-edge technologies such as analogue and microcontrollers as the inventory correction in these areas nears completion. This transition positions these segments to achieve stronger results in the coming year. I also anticipate that memory, particularly high-bandwidth memory used in AI servers, will remain in high demand.
Opportunities in 2026 will expand beyond data centres. We are seeing notable recoveries in the automotive and industrial markets. Consumer markets, previously affected by tariffs, are stabilising as these costs normalise across the economy. Overall, we expect broad-based growth across the industry, and Microchip is well-positioned to support customers by delivering innovative solutions that address these evolving market needs.
Q. The semiconductor supply chain continues to face impacts from geopolitical tensions and supply shortages. What are your thoughts on how to establish a secure, reliable and stable supply chain in the current environment?
A. The ongoing supply chain challenges are largely driven by the evolving relationship between the US and China, with export restrictions and tariffs impacting global trade and access to critical materials. Microchip has been proactively working to increase supply chain resiliency and provide customers with more geographically diverse sourcing options, reducing dependency on any single region. This includes increasing capacity in Japan and strengthening our own internal manufacturing capabilities.
Q. How would you respond to the idea that many governments are pushing for semiconductor independence?
A. Semiconductors are becoming so critical to national security that many major geopolitical blocs, rather than individual governments, seek greater self-sufficiency in their supply of semiconductors. However, building fully independent semiconductor supply chains within each bloc is impractical due to immense costs, limited manufacturing capacity, and the complexity of duplicating advanced technologies. If anything, we are seeing the emergence of two leading supply chains: one centred in China and another outside China. While governments may encourage local sourcing, most customers continue to prioritise product quality and availability, and there is little evidence of widespread demand for region-exclusive manufacturing. Some customers may seek ways to increase local content, but a truly independent supply chain for each bloc does not exist today and is unlikely to emerge in the near future.
Q. Environmental, Social and Governance (ESG) requirements, carbon regulations and supply-chain transparency are still prominent. How will these non-technical factors influence semiconductor industry decision-making in 2026?
A. Looking ahead to 2026, we expect these non-technical factors like ESG requirements, carbon regulations and supply chain transparency to have a diminished impact on industry decision-making in the US than they have in the past few years. Many companies, including Microchip, maintain ESG reporting to meet international expectations and set long-term sustainability goals, but these items are becoming less influential in the US due to recent regulatory changes.
Q. The semiconductor industry is facing persistent talent shortages. What long-term strategies are essential to secure and develop semiconductor talent globally?
A. The challenge of securing and developing semiconductor talent is a global issue, but one that is particularly acute in the United States, where interest and proficiency in science, technology, engineering and mathematics (STEM) fields have lagged behind other regions. Many countries continue to produce large numbers of engineers. Still, the US faces unique cultural and educational challenges, notably, the difficulty of inspiring students to pursue math and science careers when these fields must compete for attention against the allure of pop culture, Hollywood and professional sports.
Addressing this requires early engagement through programs such as FIRST (For Inspiration and Recognition of Science and Technology) Robotics and VEX Robotics, which inspire students by making STEM learning hands-on, competitive, and collaborative. Expanding the reach of these initiatives and building a supportive ecosystem where STEM achievements are celebrated alongside sports and the arts will be essential. By fostering partnerships among schools, industry partners, and communities, and by investing in mentorship and resources, the US can strengthen its engineering talent pipeline to meet the demands of the semiconductor industry.
Despite the positive impact of programs like FIRST Robotics, their reach remains limited, with only a small fraction of schools and students participating. Expanding access and aiming for a STEM team in every high school in the country, much like every school has sports teams, is critical for building the next generation of engineers. These programs not only build technical expertise but also foster teamwork, communication and leadership skills, preparing students to be well-rounded contributors to society. Microchip has supported FIRST Robotics for more than 22 years and remains committed to inspiring and developing future engineers.
Q. What do you think about the AI boom and the concern that it is a bubble just waiting to bust?
A. The excitement surrounding the AI boom is understandable, and concerns about a potential bubble are valid. It is essential to recognise that transformative technologies have historically experienced periods of rapid growth followed by market corrections. Innovations like the Internet have gone through similar cycles: initial exuberance, a market reset, and then a decade of steady, productive integration into everyday life. The actual value of AI will be realised as it delivers tangible productivity gains and sustainable business outcomes.
At Microchip, we are embracing AI as a powerful tool to enhance efficiency and deliver greater customer value, while remaining committed to a diversified technology portfolio across our 20 business units. By investing in both AI and our legacy technologies, we ensure resilience and continued innovation, positioning Microchip to deliver long-term benefits to our customers and partners.
