Tighter supply and cost pass-through support continued MCU price increases in 2H26

Overview

The report tracks spot prices for MCUs in Greater China, foundry costs, and changes in end-market demand. The core view is that mature-node capacity is shifting toward AI power-related applications, and with some foundries raising prices again, MCU design companies will be forced to pass on costs through price increases; therefore, the chip price increase trend is expected to continue in 2H26. Demand is clearly divergent: data center-related demand is strong, industrial demand is generally stable, while consumer demand remains weak.

Core views

The MCU industry is in a price-increase phase driven by tight supply and rising costs, but this is not a broad-based demand recovery. Vendors with scale, product portfolio advantages, and edge AI opportunities are better able to withstand cost pressure and capture growth; therefore, the report prefers GigaDevice and WiFi MCU vendor Espressif Systems. Nuvoton Technology Corporation still needs to wait for gross margin improvement before a more positive rating basis emerges.

Analysis framework

The report combines monthly spot price tracking, foundry capacity and cost checks, observations of data center and consumer end-market demand, comparisons of companies' competitive positions, and residual income model valuation to assess the sustainability of industry momentum and the relative investment value of key companies.

Methodology notes

• Price and cycle trackingMonthly MCU spot price monitoring

  Assess channel supply-demand conditions and price-increase pass-through by tracking monthly spot price changes for representative 32-bit MCU models.

  The report tracks spot prices of representative 32-bit MCUs from STMicro and GigaDevice, and verifies the industry pricing trend using price increase information from local vendors.

• Industry analysisSupply-demand and cost pass-through analysis

  Assess MCU vendors' ability to pass through costs from mature-node capacity allocation, foundry quotations, and end-demand structure.

  Mature-node capacity is being diverted to AI power applications, and foundry prices continue to rise; data center demand is strong while consumer demand is weak, implying differentiated performance among vendors with different product mixes and customer structures.

• Valuation methodResidual income model

  Estimate the company's base-case value based on cost of equity, payout ratio, medium-term growth rate, and perpetual growth rate.

  The base-case assumptions for Nuvoton Technology Corporation include a 9.2% cost of equity, 55% payout ratio, 7.0% medium-term growth rate, and 3.5% perpetual growth rate.

• Valuation methodResidual income model

  Derive GigaDevice's base-case value based on assumptions for company earnings growth and cost of capital.

  GigaDevice's assumptions include an 8.9% cost of equity, 40% payout ratio, 16.4% medium-term growth rate, and 3.0% perpetual growth rate.

• Valuation methodResidual income model

  Derive Espressif Systems' base-case value based on assumptions for company earnings growth and cost of capital.

  Espressif Systems' base-case assumptions include an 8.9% cost of equity, 40% payout ratio, 18.5% medium-term growth rate, and 4.5% perpetual growth rate.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GigaDevice Semiconductor Beijing Inc (603986.SS)

  A large MCU vendor preferred by the report, rated Overweight.

  Strengths

  Scale advantages, opportunities from domestic MCU substitution, long-term edge AI potential, and optional upside from the development of NOR and DRAM businesses.

  Weaknesses

  Earnings remain affected by wafer costs, product price volatility, and the memory cycle.

  Comparison

  Compared with smaller peers or those under gross margin pressure, GigaDevice is better able to capture domestic substitution opportunities and pass through costs.

  Risks

  The MCU or NOR upcycle ends earlier than expected, prices decline rapidly, domestic substitution is slower than expected, automotive and BMC business expansion is insufficient, or DRAM development falls short of expectations.

• Espressif Systems (688018.SS)

  A WiFi MCU vendor preferred by the report, rated Overweight.

  Strengths

  Has long-term growth opportunities in WiFi MCU and edge AI, with relatively high medium-term growth assumptions.

  Weaknesses

  Some businesses may be affected by weak consumer demand and intensified competition.

  Comparison

  Compared with traditional general-purpose MCU vendors, Espressif Systems has more direct exposure to connected MCU and edge AI themes.

  Risks

  Domestic substitution progresses more slowly than expected, new customer expansion is insufficient, and intensified competition leads to gross margin decline.

• Nuvoton Technology Corporation (4919.TW)

  Rated Underweight; the report waits for gross margin recovery before turning to a more positive view.

  Strengths

  If the MCU upcycle continues, domestic substitution accelerates, and automotive and BMC businesses ramp up, earnings could have upside.

  Weaknesses

  Current gross margin recovery is insufficient, and cost pass-through and competitive pressures limit earnings improvement.

  Comparison

  It has the lowest investment preference among the three key companies; the report prefers GigaDevice and Espressif Systems.

  Risks

  The MCU upcycle ends early with severe price erosion, domestic substitution slows, automotive and BMC business progress is insufficient, and competition intensifies.

Key data

• STMicro 32-bit MCU spot priceRmb16.5The report says the August price was broadly flat month-on-month, but also mentions that STMicro spot prices had risen 29% month-on-month, which may correspond to different observation windows or channels and should be checked against the original charts.
• GigaDevice 32-bit MCU spot priceRmb8.5Flat month-on-month in August.
• Magnitude of the latest price increase by local MCU companies10% to 20%Using companies such as Nationstech as examples, this marks the second round of price increases this year.
• GigaDevice current share price and ratingRmb413.17; OverweightShare price as of August 12, 2026; rating date is May 15, 2025.
• Espressif Systems current share price and ratingRmb114.10; OverweightShare price as of August 12, 2026; rating date is May 15, 2023.
• Industry viewAttractiveApplies to the assessment of relative industry performance in Asia Pacific over the next 12 to 18 months.

Impact & implications

Supply constraints and rising costs are conducive to sustaining MCU prices, but earnings improvement depends on whether companies can smoothly pass through wafer costs. Companies related to data centers, optical modules, battery management, power control, and edge AI have stronger fundamental support; companies with a higher share of consumer business, weaker pricing power, or gross margins that have not yet recovered face greater pressure. Therefore, an improvement in industry momentum does not mean all MCU companies will benefit simultaneously; scale, customer structure, and product differentiation remain key to stock selection.

Risks

• The MCU upcycle lasts for a shorter period than expected, and notable price erosion occurs after supply-demand conditions loosen.
• Consumer electronics demand remains weak and spreads to industrial or other end markets.
• Mature-node wafer cost increases exceed chip companies' ability to raise prices, putting pressure on gross margins.
• China's domestic MCU substitution progresses more slowly than expected.
• Automotive, BMC, and new customer business expansion falls short of expectations.
• Industry competition intensifies, and vendors cut prices to compete for share.
• The NOR or DRAM cycle weakens, and related product development progress falls short of expectations.

What to watch

• Monthly changes in spot and contract prices for STMicro, GigaDevice, and local MCU vendors.
• Subsequent quotations from mature-node foundries and the extent of capacity allocation toward AI power applications.
• Whether demand for optical modules, battery management, and power control can remain strong.
• Whether consumer electronics MCU demand bottoms out or deteriorates further.
• Progress by GigaDevice and Espressif Systems in edge AI, new customers, and domestic substitution.
• Gross margin, automotive business, and BMC business recovery at Nuvoton Technology Corporation.
• Order volume, inventory, and customer acceptance after MCU vendors raise prices.