AI technology has semiconductor leaders optimistic about 2025, but headwinds may come from geopolitical and talent retention concerns.

These are some of the predictions KPMGThe 20th annual Global Semiconductor Outlook report from the US audit, tax and advisory firm and the Global Semiconductor Alliance (GSA).

About 92% of semiconductor executives surveyed predicted overall industry growth in 2025.

New data from KPMG and GSA shows significant optimism for 2025 among semiconductor executives, promising steady chip demand driven by AI, cloud, data centers, wireless and automotive applications.

KPMG's Semiconductor Industry Confidence Index rose to 59 from 54 in 2023, indicating increased optimism (a score above 50 indicates a more positive than negative outlook) and strengthened confidence in the following factors: Company revenue growth, profitability growth, workforce growth, research and development and development (R&D) costs and capital expenditures.

Mark Gibson, technology media and telecommunications leader at KPMG, said in a statement: "AI will underpin the industry's near-term growth and revenue expectations," he said. "In the short term, the industry's growth trajectory is clear, but companies that can manage their supply chains and attract and retain talent will be well-positioned to benefit from and support the AI ​​boom."

Despite widespread optimism, executives still anticipate significant challenges in 2025, including geopolitical territoriality, tariffs and trade restrictions, and ongoing talent issues in the industry. (President-elect Donald Trump is promising to impose tariffs on his first day in office on January 20).

Strengthening supply chain flexibility and agility, along with talent development and retention, will be critical as chip demand continues to grow. Managing this complex landscape in 2025 will require adaptive strategies.

About the survey

In the fourth quarter of 2024, KPMG and GSA conducted their 20th annual Global Semiconductor Industry Survey, which includes insights from 156 semiconductor executives on their industry outlook for 2025 and beyond. More than half of the respondents were from companies with annual revenues of $1 billion or more.

Semiconductor executives have a positive outlook on all factors through 2025, with the confidence index increasing five points year over year (from 54 to 59). Interestingly, small companies, defined as organizations with less than $100 million in annual revenue, have the most positive outlook.

In other words, all semiconductor companies with positive Confidence Index scores show the most optimism for 2025, seeing opportunities for rapid revenue growth due to earlier stages of development.

Among those surveyed were 58 large companies (with annual revenue of $1 billion or more); 54 mid-sized companies (annual revenue from $100 million to $999 million); and 68 small companies (less than $100 million in annual revenue).

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

The vast majority (86%) expect their company's revenue to grow in 2025, with almost half (46%) expecting growth to exceed 10%. And 92% predict 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 future, AI is the most important driver of semiconductor revenue, replacing the top-ranked automobile in the last 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 manufacturing technology predicted to have the biggest impact on the industry over the next three years. Other key revenue drivers expected in 2025 include cloud/data centers (2^n.d place), wireless connection (left in 3^rd seat), and car (down to 4^th seat, formerly a high-income driver).

Geopolitical concerns, particularly regional tensions and trade restrictions such as tariffs, are the most important issues shaping the industry's supply chains. Talent risk remains a constant concern as demand for chips continues to grow.

Territorialism (including tariffs and trade restrictions) is tied with talent risk as the biggest challenge facing the industry over the next three years. However, territorialism was the biggest issue among large companies with annual revenues of $1 billion or more.

Semiconductor executives surveyed see armed conflict and tariffs as two geopolitical issues that could affect the semiconductor ecosystem over the next two years. Government subsidies and nationalization of semiconductor technology are also at the forefront.

In response, semiconductor leaders are increasing geographic diversity to improve supply chain flexibility. Making the supply chain flexible and adaptable to geopolitical changes (related to talent development and retention) is a top strategic priority after coming in second place in last year's survey.

As non-traditional semiconductor companies (tech giants, platform companies and automotive companies) take hold in the industry, executives are also on high alert for disruption.

While most executives (39%) still see competition for talent as a major impact on the industry over the next three years, the emergence of new competitors is an almost equally significant concern among executives (35%), signaling industry change. point of view.

By comparison, last year only 19% of semiconductors worried about the emergence of new competitors.

"Tech giants and established semiconductor players are fighting for market share, with chip optimization and technical development for AI focused on improving and enabling AI training and inference capabilities," said Lincoln Clark, global leader of semiconductors at KPMG. . "As the industry becomes more competitive, significant investments and advanced strategies will be essential for companies not only to survive, but to thrive in this rapidly evolving landscape."

The full global semiconductor industry forecast report will be released in early 2025.