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AI fuels 2025 optimism for semiconductor leaders despite geopolitical and talent retention headwinds

-AI drives semiconductor optimism with 92% forecasting overall industry revenue growth in 2025

-Concerns mount regarding geopolitical territorialism and talent

December 17, 2024

December 17, 2024 – Ninety-two percent of semiconductor executives predict overall industry revenue growth in 2025, according to the 20th annual Global Semiconductor Outlook by KPMG LLP, the U.S. audit, tax, and advisory firm, and the Global Semiconductor Alliance (GSA).

With promises of ongoing demand for chips thanks to AI, cloud, data centers, wireless communication, and automotive applications, new data from KPMG and GSA reveals significant optimism for 2025 among semiconductor executives. The KPMG Semiconductor Industry Confidence Index rose to 59, up from 54 in 2023, indicating increased optimism (a value above 50 indicates a more positive outlook than negative), and showcasing bolstered confidence across the following factors: Company revenue growth, profitability growth, workforce growth, research and development (R&D) spending, and capital expenditures.

"Artificial intelligence underpins the industry’s near-term growth and revenue expectations,” said KPMG Global and U.S. Technology Media & Telecommunications Leader Mark Gibson. “The upward trajectory for the industry in the short-term is clear, but the companies that can manage their supply chains and attract and retain talent will be the ones well-positioned to sustain and benefit from the AI boom.”

Despite widespread optimism, executives still anticipate significant challenges in 2025, including geopolitical territorialism—such as tariffs and trade restrictions—and ongoing talent issues within the industry. Strengthening supply chain resilience and flexibility, along with enhancing talent development and retention, will be crucial as demand for chips continues to grow. Navigating this complex landscape in 2025 will require adaptive strategies.

About the survey:

In the fourth quarter of 2024, KPMG and the GSA conducted the milestone 20th annual global semiconductor industry survey, capturing insights from 156 semiconductor executives about their outlook for the industry in 2025 and beyond. More than half of the respondents were from companies with $1 billion or more in annual revenue.

Key takeaways from the survey are highlighted below:

Semiconductor executives have positive outlooks for 2025 across all factors, with a five-point Confidence Index increase year-over-year (from 54 to 59). Interestingly, the smaller companies, defined as the organizations with less than $100 million in annual revenue, have the most positive outlook.

Across the board, all semiconductor companies have positive Confidence Index scores, with smaller companies displaying the most optimism for 2025, potentially seeing opportunities for rapid revenue increases due to their earlier stages of development.
  • Large companies ($1 billion or more in annual revenue): 58
  • Mid-size companies ($100 million to $999 million in annual revenue): 54
  • Small companies (less than $100 million in annual revenue): 68

Semiconductor executives are very optimistic about their company and the overall industry revenue growth, with more than one third predicting revenue growth by at least 10%.

  • The overwhelming majority (86%) anticipate their company's revenue will grow in 2025, with almost half (46%) expecting growth to exceed 10%.
  • Additionally, 92% forecast overall industry revenue growth, and one-third (36%) predict industry revenue growth of more than 10%.

For the first time in the history of the outlook, AI is the most important semiconductor revenue driver, displacing automotive, which held the top spot for the past two years.

  • As a result, microprocessors, including graphics processing units (GPUs) used for AI, are seen as the leading product opportunity for industry growth, ahead of memory and sensors/MEMs.
  • AI enablers, such as high bandwidth memory, are the production technology that is projected to have the greatest impact on the industry over the next three years.
  • Other key revenue drivers expected in 2025 include cloud/data centers (rose to 2nd place), wireless communications (remained in 3rd place), and automotive (dropped to 4th place, previously the top revenue driver).

Geopolitical concerns, particularly territorial tensions and trade restrictions like tariffs, are the most important issues shaping the industry's supply chains. Talent risk remains a persistent concern as chip demand surges.

  • Territorialism (including tariffs and trade restrictions) tied with talent risk as the biggest issue facing the industry over the next three years. However, territorialism was the clear-cut biggest issue among large companies with $1 billion or more in annual revenue.
  • Semiconductor executives surveyed view armed conflicts and tariffs as the two most concerning geopolitical matters that could affect the semiconductor ecosystem over the next two years. Government subsidies and the nationalization of semiconductor technology also rank near the top. 
  • In response, semiconductor leaders are increasing geographic diversity to improve supply chain resiliency.
  • Making the supply chain more flexible and adaptable to geopolitical changes (tied with talent development and retention) is the top strategic priority, after being named second in last year’s survey. 

Executives are also on high alert for disruption as non-traditional semiconductor companies (tech giants, platform companies, and automotive companies) carve out their own place in the industry.

  • While most executives (39%) still view competition for talent as the primary impact to the industry over the next three years, the emergence of new competitors has become an almost equally significant concern among execs (35%), signaling a shift in the industry’s outlook.
  • To compare, last year only 19% of semiconductor execs cited the emergence of new competitors as a concern. 

“Tech giants and established semiconductor players are starting to battle for market share, with ongoing technical developments and optimization of chips for AI aiming to enhance and provide alternatives for AI training and inferencing capabilities,” said KPMG Global Semiconductor Leader Lincoln Clark. “As the industry becomes more competitive, significant investments and cutting-edge strategies will be essential for companies to not only survive but thrive in this rapidly evolving landscape.”

The Global Semiconductor Industry Outlook report will be released in early 2025. Click here for more information on KPMG’s Global Semiconductor practice.

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