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

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

Those are some predictions in KPMGThe 20th annual Global Semiconductor Outlook report issued by the US audit, tax and consulting firm as well as the Global Semiconductor Alliance (GSA).

About 92% of semiconductor executives interviewed in the survey expect the overall industry to grow in 2025.

With promises of continued demand for chips thanks to artificial intelligence, the cloud, data centers, wireless communications and automotive applications, new data from KPMG and GSA reveal high 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 than negative outlook), and displays enhanced confidence across the following factors: company revenue growth, Profitability and workforce growth. Growth, R&D spending, and capital expenditures.

“AI is supporting the industry’s growth and near-term revenue outlook,” Mark Gibson, leader of media, technology and communications at KPMG, said in a statement. “The industry’s short-term upward trajectory is clear, but companies that can manage their supply chains and attract and retain talent will be well positioned to sustain and capitalize on the AI ​​boom.”

Despite widespread optimism, executives still expect significant challenges in 2025, including geopolitical regionalism — such as tariffs and trade restrictions — and persistent talent issues within the industry. (President-elect Donald Trump pledged to impose tariffs on his first day in office on January 20.)

Enhancing supply chain resilience and flexibility, along with enhancing talent development and retention, will be critical 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 GSA conducted the 20th Annual Global Semiconductor Industry Survey, capturing insights from 156 semiconductor executives on their expectations for the industry in 2025 and beyond. More than half of the survey participants were from companies with annual revenues of $1 billion or more.

Semiconductor executives have a positive outlook for 2025 across all factors, with the Confidence Index increasing by five points year-on-year (from 54 to 59). Interestingly, small businesses, defined as organizations with less than $100 million in annual revenue, have a more positive outlook.

Across the board, all semiconductor companies have positive Sentiment Index scores, with small companies showing the most optimism for 2025, likely to see opportunities for rapid revenue growth due to early stages of development.

Among the survey participants, there were 58 large companies (annual revenues of $1 billion or more); 54 mid-sized companies ($100 million to $999 million in annual revenue); and 68 small businesses (less than $100 million in annual revenue).

Semiconductor executives are highly optimistic about their company and overall industry revenue growth, with more than a third expecting revenue to grow by at least 10%.

The vast majority (86%) expect their company’s revenues to grow in 2025, and nearly half (46%) expect growth to exceed 10%. 92% expected industry revenues to grow in general, and a third (36%) expected industry revenues to grow by more than 10%.

For the first time in the forecast’s history, artificial intelligence is the most important driver of semiconductor revenues, replacing automotive, which held the top spot for the past two years.

As a result, microprocessors, including graphics processing units (GPUs) used in AI, are viewed 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 expected to have the greatest impact on the industry over the next three years. Other key revenue drivers expected in 2025 include cloud/data centers (up to 2^{Second abbreviation} place), wireless communications (remained at 3^Third Place), Auto (decreased to 4^y Place, which was previously the top revenue driver).

Geopolitical concerns, especially regional tensions and trade restrictions such as tariffs, are some of the most important issues shaping industry supply chains. Talent risks remain an ongoing concern as demand for chips rises.

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

Semiconductor executives surveyed see armed conflicts and tariffs as the most worrisome geopolitical issues that could impact the semiconductor ecosystem over the next two years. Government subsidies and nationalization of semiconductor technology also rank near the top.

In response, semiconductor leaders are working to increase 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, after coming in second place in last year’s survey.

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

While most executives (39%) still view competition for talent as the primary 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 Industry transformation. Expectations.

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

“Technology giants and established semiconductor players are beginning to compete for market share, with ongoing technical developments and improvement of AI chips aiming to enhance and provide alternatives to AI training,” Lincoln Clark, global semiconductor leader at KPMG, said in a statement. Artificial intelligence and reasoning capabilities. . “As the industry becomes more competitive, significant investments and sophisticated 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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