In this year’s Global Semiconductor Outlook, seismic changes are redefining the global semiconductor industry:

• China is viewed as a rising center of semiconductor influence, as well as the industry’s most attractive growth market.
• Rapid M&A activity is reshaping the semiconductor landscape at an unprecedented rate.
• Is Moore’s Law slowing down? The ramifications could be significant.

Perhaps these forces help explain why executive confidence is the lowest since 2011. After several years of optimistic sentiment, global semiconductor executives have lowered their expectations for 2016. This year’s Semiconductor Industry Confidence Index shows a value of 46, the lowest since 2011. Forecasts for 2016 revenue, profitability and spending are flatter or at lower growth rates.

China replaced the United States as the industry’s top market for revenue growth in both the one-year and three-year outlooks as well as the top market for headcount growth. Growing consumer demand, and the Chinese government’s planned investment in semiconductors, have clearly stoked the collective opinion that China is critical to the industry’s future.

Survey respondents expect the pace of M&A activity to remain the same, or increase, in 2016. Driving this activity is the premium placed on intellectual property and inorganic revenue growth. The need to achieve scale and cost efficiency in R&D and manufacturing are also driving industry consolidation.

The foundation of the semiconductor industry, Moore’s Law, is starting to show some signs of age. Executives are concerned that Moore’s Law could slow, leading to longer innovation cycles. We have already started to see potential ramifications such as higher R&D costs, a war for talent, and increased consolidation.

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