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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 few of the predictions in KPMG‘s twentieth annual World Semiconductor Outlook report from the U.S. audit, tax and advisory agency in addition to the World Semiconductor Alliance (GSA).
About 92% of the semiconductor executives interviewed for the survey forecasted total {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 important optimism for 2025 amongst semiconductor executives.
The KPMG Semiconductor Trade Confidence Index rose to 59, up from 54 in 2023, indicating elevated optimism (a price above 50 signifies a extra constructive outlook than damaging), and showcasing bolstered confidence throughout the next components: Firm income progress, profitability progress, workforce progress, analysis and improvement (R&D) spending, and capital expenditures.
“AI underpins the {industry}’s near-term progress and income expectations,” mentioned KPMG know-how media & telecommunications chief Mark Gibson, in an announcement. “The upward trajectory for the {industry} within the short-term is evident, however the firms that may handle their provide chains and entice and retain expertise would be the ones well-positioned to maintain and profit from the AI growth.”
Regardless of widespread optimism, executives nonetheless anticipate important challenges in 2025, together with geopolitical territorialism—akin to tariffs and commerce restrictions—and ongoing expertise points inside 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 adaptability, together with enhancing expertise improvement and retention, might be essential as demand for chips continues to develop. Navigating this advanced panorama in 2025 would require adaptive methods.
Concerning the survey
Within the fourth quarter of 2024, KPMG and the GSA carried out the milestone twentieth annual world 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 had 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 improve 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, probably seeing alternatives for speedy income will increase because of their earlier levels of improvement.
Amongst these taking part 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 multiple third predicting income progress by at the very least 10%.
The overwhelming majority (86%) anticipate their firm’s income will develop in 2025, with nearly half (46%) anticipating progress to exceed 10%. And 92% forecast total {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.
Consequently, microprocessors, together with graphics processing models (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 affect on the {industry} over the subsequent 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, notably territorial tensions and commerce restrictions like tariffs, are an important points shaping the {industry}’s provide chains. Expertise threat stays a persistent concern as chip demand surges.
Territorialism (together with tariffs and commerce restrictions) tied with expertise threat as the largest situation dealing with the {industry} over the subsequent three years. Nonetheless, territorialism was the clear-cut greatest situation 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 subsequent two years. Authorities subsidies and the nationalization of semiconductor know-how additionally rank close to the highest.
In response, semiconductor leaders are growing geographic variety to enhance provide chain resiliency. Making the availability chain extra versatile and adaptable to geopolitical adjustments (tied with expertise improvement and retention) is the highest strategic precedence, after being named second in final yr’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 affect to the {industry} over the subsequent three years, the emergence of latest opponents has turn into an nearly equally important concern amongst execs (35%), signaling a shift within the {industry}’s outlook.
To check, final yr solely 19% of semiconductor execs cited the emergence of latest opponents as a priority.
“Tech giants and established semiconductor gamers are beginning to battle for market share, with ongoing technical developments and optimization of chips for AI aiming to boost and supply options for AI coaching and inferencing capabilities,” mentioned KPMG world semiconductor chief Lincoln Clark, in an announcement. “Because the {industry} turns into extra aggressive, important investments and cutting-edge methods might be important for firms to not solely survive however thrive on this quickly evolving panorama.”
The total World Semiconductor Trade Outlook report might be launched in early 2025.
