When it comes to powering the future, size doesn't matter.
Despite being small and compact — some measuring no more than 2-nanometers (nm) — semiconductors continue to play a critical role in an increasingly connected world. Often regarded as the brains behind modern tech, they continue to fuel the innovation needed to operate modern-day digital infrastructure across key sectors like telecommunications, healthcare and defence.
Advancements in IoT and AI continue to feed the demand for leading-edge semiconductors, further outlining its importance in shaping the future. Yet, a combination of supply chain issues and talent shortages threaten to undermine the sector. Rising geopolitical tensions are also complicating matters as rising inflation and interest rates result in reduced demand.
Despite existing headwinds, semiconductor executives remain optimistic about future growth in the sector thanks to improvements in inventory and increased spending in R&D and talent. Together with the Global Semiconductor Alliance (GSA), we surveyed 151 semiconductor executives to understand their outlook for the industry in 2023 and beyond. Conducted in the fourth quarter of 2022 the 18th annual global semiconductor industry survey outlines key concerns and strategies that semiconductor exectutives can embrace as they navigate a new normal.
Almost two-thirds of semiconductor leaders are predicting industry revenue will increase, not contract. That’s a positive indicator for the upcoming year given the current economics and the fact the industry is almost at the point of having excess inventory.
Mark Gibson, Global Sector Head of Technology, Media & Telecommunications, KPMG International
By the numbers: Sizing up semiconductors
expect company revenues to increase in 2023
say talent risk remains the top strategic priority for the next 3 years
feel chip supply shortages will ease by mid-2023
believe there is currently a semiconductor inventory excess and the supply chain shortage is over
plan to diversify their supply chain geographies in the next 12 months
Key findings are detailed below
- 81% project their company’s revenue will grow over the coming year, and half expect growth of more than 10%. While these are lower than last year’s survey (95% and 68 %, respectively), it is still encouraging given the current economic environment and perceptions regarding industry inventory levels discussed below.
- Leaders are slightly less bullish on industry revenue growth. Sixty-four percent forecast the industry’s revenue will grow in the coming year, with 19% predicting growth of more than 10%. These are also significantly lower than last year’s survey (97% and 49%, respectively).
- The Russia-Ukraine war may be a contributor to the lower industry revenue growth projection. 41% are concerned the war will materially impact industry revenue growth in 2023.
- For the first time, survey respondents clearly rate the automotive sector as most important for driving semiconductor company revenue over the next year. In correlating research, KPMG predicts automotive semiconductor revenue will reach $200 billion annually by the mid-2030s and surpass $250 billion by 2040.
- Wireless communications, long seen as the industry’s most important revenue driver, slips into second place in the 2023 outlook.
- Internet of Things, cloud computing, and artificial intelligence rank third, fourth, and fifth in terms of importance.
- In its first year on the survey, metaverse was ranked last (out of 10) in importance for driving semiconductor company revenue over the next year. It will be interesting to see how this view changes in the coming years as metaverse technology evolves and adoption increases.
- 65% percent of the executives surveyed think the semiconductor supply shortage will ease in 2023, and 15% believe that supply and demand is already in balance for most products. Only 20% think the shortage will last into 2024 or later.
- As the semiconductor industry is cyclical, the survey also asked respondents when they think the next excess supply of semiconductor inventory will occur. 24% believe there is already an excess, and 31% think it will occur in 2023. Another 36% feel the surplus will happen between 2024 and 2026, while 9% believe demand will keep increasing and there will not be an inventory excess in the next four years.
- Leaders also do not see the Russia-Ukraine war materially impacting the semiconductor supply chain in 2023. Less than one-third (29%) are concerned with this, which is down from 39% in the pulse survey conducted by KPMG and the GSA in May 2022.
- Talent risk is seen as the biggest issue facing the semiconductor industry over the next three years.
- Underscoring the ongoing need for specialists in this growing, cutting-edge industry, 71% of respondents anticipate increasing their global workforce in 2023. This is lower than last year (87 %), but still a healthy expectation in the current economic climate.
- The survey also shows that talent development and retention remains the top strategic priority for industry leaders, with 67% naming it a “top 3” strategic priority. While lower than the 77% mark in last year’s survey, it still clearly outpaces supply chain flexibility (53%) and digital transformation (32%) this year.
- Though still important for any business, only 15% of semiconductor executives rank mitigating cybersecurity risk a “top 3” strategic priority and just 10 percent say the same about formalizing ESG reporting, despite looming mandatory reporting requirements.
- Among geopolitical matters, the impact of the nationalization of semiconductor technology is the biggest concern on the minds of executives, as this has implications with supply chains, talent acquisition, and access to government subsidies (e.g., the enacted CHIPS Act in the U.S. and the proposed European Chips Act).
- The nationalization of semiconductor technology is also tied as the second biggest issue facing the industry over the next three years (tied with global inflation).
- Other top geopolitical concerns include the prominence of Taiwan in the supply chain, tariffs and trade deals, and long-term impacts of the Russia-Ukraine war.
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