Geopolitics and AI will affect the chip industry in 2025 | KPMG

AI technology is making semiconductor leaders more optimistic about 2025, but headwinds could come from geopolitical and talent retention concerns.

These are some of the predictions from KPMG’s 20th annual Global Semiconductor Outlook report, prepared by the US audit, tax and advisory firm, as well as the Global Semiconductor Alliance (GSA).

About 92% of semiconductor executives interviewed for the survey predicted overall industry growth in 2025.

With promises of continued demand for chips thanks to artificial intelligence, cloud, data centers, wireless communications and automotive applications, new data from KPMG and GSA reveals significant optimism for 2025 among semiconductor executives.

KPMG’s Semiconductor Industry Confidence Index rose to 59, up from 54 in 2023, indicating greater optimism (a value above 50 indicates a more positive than negative outlook) and showing greater confidence in the following factors : company revenue growth, profitability growth and workforce. growth, research and development (R&D) spending and capital expenditures.

“AI underpins the industry’s near-term growth and revenue expectations,” Mark Gibson, KPMG’s technology media and telecommunications leader, said in a statement. “The industry’s upward trajectory in the near 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. (President-elect Donald Trump promises to impose tariffs on his first day in office on January 20.)

Strengthening supply chain resilience and flexibility, along with improving talent development and retention, will be crucial as chip demand continues to grow. Navigating this complex landscape in 2025 will require adaptation strategies.

About the survey

In the fourth quarter of 2024, KPMG and GSA conducted the historic 20th annual global semiconductor industry survey, gathering insights from 156 semiconductor executives on 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.

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

Overall, all semiconductor companies have positive Confidence Index scores, with smaller companies showing the most optimism for 2025, potentially seeing opportunities for rapid revenue increases due to their early stages of development.

Among those who participated in the survey were 58 large companies ($1 billion or more in annual revenue); 54 medium-sized companies (between $100 and $999 million in annual revenue); and 68 small businesses (less than $100 million in annual revenue).

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

The overwhelming majority (86%) anticipate their company’s revenue will grow in 2025, and nearly half (46%) expect growth to exceed 10%. And 92% predict overall industry revenue growth, with a third (36%) predicting industry revenue growth of more than 10%.

For the first time in the history of the outlook, AI is the largest revenue driver for semiconductors, 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/MEM.

AI enablers, such as high-bandwidth memory, are the manufacturing technology predicted to have the biggest impact on the industry over the next three years. Other key revenue drivers expected in 2025 include data center/cloud (increased to 2^{North Dakota} place), wireless communications (remained in 3^third place), and automotive (dropped to 4^th place, previously the main income generator).

Geopolitical concerns, particularly territorial tensions and trade restrictions such as tariffs, are the most important issues shaping industry supply chains. Talent risk remains a persistent concern as demand for chips rises.

Territorialism (including tariffs and trade restrictions) was linked to talent risk as the biggest issue facing the industry over the next three years. However, territorialism was the clear biggest problem among large companies with $1 billion or more in annual revenue.

Semiconductor executives surveyed see armed conflict and tariffs as the two most concerning geopolitical issues that could affect the semiconductor ecosystem in the next two years. Government subsidies and nationalization of semiconductor technology also rank near the top.

In response, semiconductor leaders are increasing geographic diversity to improve supply chain resilience. Making the supply chain more flexible and adaptable to geopolitical changes (linked to talent development and retention) is the top strategic priority, having been named second in last year’s survey.

Executives are also on high alert for disruption as nontraditional semiconductor companies — tech giants, platform companies and automotive companies — carve out their own place in the industry.

While the majority of executives (39%) still believe that competition for talent will be the main impact on the industry over the next three years, the emergence of new competitors has become an almost equally important concern among executives ( 35%), indicating a change in industry strategy. perspective.

By comparison, last year only 19% of semiconductor executives cited the emergence of new competitors as a concern.

“Tech giants and established semiconductor players are beginning to fight for market share, with continued technical developments and chip optimization for AI aiming to improve and provide alternatives for AI training and inference capabilities,” KPMG global semiconductor leader Lincoln Clark said in a statement. . “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 full Global Semiconductor Industry Outlook report will be released in early 2025.

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