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AI know-how is making semiconductor leaders extra optimistic about 2025, however headwinds may come from geopolitical and expertise retention issues.
These are a number of the predictions in KPMG‘s twentieth annual International Semiconductor Outlook report from the U.S. audit, tax and advisory agency in addition to the International Semiconductor Alliance (GSA).
About 92% of the semiconductor executives interviewed for the survey forecasted general {industry} progress in 2025.
With guarantees of ongoing demand for chips due to AI, cloud, knowledge facilities, wi-fi communication and automotive functions, new knowledge from KPMG and GSA reveals vital optimism for 2025 amongst semiconductor executives.
The KPMG Semiconductor Business Confidence Index rose to 59, up from 54 in 2023, indicating elevated optimism (a price above 50 signifies a extra constructive outlook than unfavorable), and showcasing bolstered confidence throughout the next components: Firm income progress, profitability progress, workforce progress, analysis and growth (R&D) spending, and capital expenditures.
“AI underpins the industry’s near-term growth and revenue expectations,” mentioned KPMG know-how media & telecommunications chief Mark Gibson, in an announcement. “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.”
Regardless of widespread optimism, executives nonetheless anticipate vital challenges in 2025, together with geopolitical territorialism—akin to tariffs and commerce restrictions—and ongoing expertise points throughout the {industry}. (President elect Donald Trump is vowing to impose tariffs on his first day in workplace on January 20).
Strengthening provide chain resilience and suppleness, together with enhancing expertise growth and retention, shall be essential as demand for chips continues to develop. Navigating this complicated panorama in 2025 would require adaptive methods.
Concerning the survey
Within the fourth quarter of 2024, KPMG and the GSA performed the milestone twentieth annual international semiconductor {industry} survey, capturing insights from 156 semiconductor executives about their outlook for the {industry} in 2025 and past. Greater than half of the respondents have been from firms with $1 billion or extra in annual income.
Semiconductor executives have constructive outlooks for 2025 throughout all components, with a five-point Confidence Index enhance year-over-year (from 54 to 59). Curiously, the smaller firms, outlined because the organizations with lower than $100 million in annual income, have essentially the most constructive outlook.
Throughout the board, all semiconductor firms have constructive Confidence Index scores, with smaller firms displaying essentially the most optimism for 2025, doubtlessly seeing alternatives for fast income will increase on account of their earlier phases of growth.
Amongst these collaborating within the survey, there have been 58 massive firms ($1 billion or extra in annual income); 54 mid-size firms ($100 million to $999 million in annual income); and 68 small firms (lower than $100 million in annual income).
Semiconductor executives are very optimistic about their firm and the general {industry} income progress, with a couple of third predicting income progress by at the very least 10%.
The overwhelming majority (86%) anticipate their firm’s income will develop in 2025, with virtually half (46%) anticipating progress to exceed 10%. And 92% forecast general {industry} income progress, and one-third (36%) predict {industry} income progress of greater than 10%.
For the primary time within the historical past of the outlook, AI is an important semiconductor income driver, displacing automotive, which held the highest spot for the previous two years.
In consequence, microprocessors, together with graphics processing items (GPUs) used for AI, are seen because the main product alternative for {industry} progress, forward of reminiscence and sensors/MEMs.
AI enablers, akin to excessive bandwidth reminiscence, are the manufacturing know-how that’s projected to have the best impression on the {industry} over the following three years. Different key income drivers anticipated in 2025 embody cloud/knowledge facilities (rose to 2nd place), wi-fi communications (remained in 3rd place), and automotive (dropped to 4th place, beforehand the highest income driver).
Geopolitical issues, significantly territorial tensions and commerce restrictions like tariffs, are an important points shaping the {industry}’s provide chains. Expertise danger stays a persistent concern as chip demand surges.
Territorialism (together with tariffs and commerce restrictions) tied with expertise danger as the most important difficulty dealing with the {industry} over the following three years. Nonetheless, territorialism was the clear-cut largest difficulty amongst massive firms with $1 billion or extra in annual income.
Semiconductor executives surveyed view armed conflicts and tariffs as the 2 most regarding geopolitical issues that might have an effect on the semiconductor ecosystem over the following two years. Authorities subsidies and the nationalization of semiconductor know-how additionally rank close to the highest.
In response, semiconductor leaders are rising geographic range to enhance provide chain resiliency. Making the provision chain extra versatile and adaptable to geopolitical modifications (tied with expertise growth and retention) is the highest strategic precedence, after being named second in final 12 months’s survey.
Executives are additionally on excessive alert for disruption as non-traditional semiconductor firms (tech giants, platform firms, and automotive firms) carve out their very own place within the {industry}.
Whereas most executives (39%) nonetheless view competitors for expertise as the first impression to the {industry} over the following three years, the emergence of latest rivals has develop into an virtually equally vital concern amongst execs (35%), signaling a shift within the {industry}’s outlook.
To check, final 12 months solely 19% of semiconductor execs cited the emergence of latest rivals as a priority.
“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,” mentioned KPMG international semiconductor chief Lincoln Clark, in an announcement. “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 total International Semiconductor Business Outlook report shall be launched in early 2025.
