Geopolitics and artificial intelligence will affect chip manufacturing in 2025. | KPMG

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

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

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

With promises of continued chip demand driven by AI, cloud, data centers, wireless communication 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 from 54 in 2023, indicating increased optimism (a value above 50 indicates a more positive outlook than negative) and indicating increased confidence in the following factors: company revenue growth, profitability growth, workforce growth, research and development (R&D) spending, and capital spending.

“Artificial intelligence is at the heart of the industry’s near-term growth and revenue expectations,” KPMG’s technology media and telecommunications leader Mark Gibson said in a statement. “The upward trajectory for the industry in the short term is clear, but companies that can manage their supply chains and attract and retain talent will be the ones well-positioned to support and benefit from the AI ​​boom.”

Despite widespread optimism, executives still expect significant challenges in 2025, including geopolitical territorialism — such as tariffs and trade restrictions — and continued industry talent issues. (President-elect Donald Trump promises to impose the 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 critical as chip demand 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 landmark 20th Annual Global Semiconductor Industry Survey, gathering insights from 156 semiconductor executives on their outlook for the industry in 2025. and after that. More than half of those surveyed were from companies with annual revenue of $1 billion or more.

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

Overall, all semiconductor companies scored positive on the confidence index, with smaller companies showing the most optimism for 2025, potentially seeing opportunities to grow revenue quickly due to their earlier stages of development.

Among those participating in the study were 58 large companies ($1 billion or more in annual revenue); 54 mid-sized companies ($100 million to $999 million in annual revenue); and 68 small companies (under $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% forecast overall industry revenue growth, and a third (36%) forecast industry revenue growth of more than 10%.

For the first time in the outlook’s history, AI is the most important driver of semiconductor revenue, 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 expected to have the biggest impact on the industry over the next three years. Other key revenue drivers expected in 2025 include cloud/data centers (growing to 2^n.d place), wireless communications (rest in 3^rd place) and automotive (dropped to 4^th place, previously the top revenue driver).

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

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

The semiconductor executives surveyed see armed conflicts and tariffs as the two most concerning geopolitical issues that could affect the semiconductor ecosystem over the next two years. Government subsidies and nationalization of semiconductor technology are also 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 the lookout for disruption as non-traditional semiconductor companies (tech giants, platform companies and automotive companies) take their place in the industry.

While most executives (39%) still see competition for talent as the main impact on the industry over the next three years, the emergence of new competitors has become an almost equally significant concern among executives (35%), signaling a shift in the industry perspective.

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

“Technology giants and established semiconductor players are beginning to battle for market share, with continuous technical development and optimization of AI chips aiming to improve and provide alternatives for AI training and inference capabilities,” said KPMG’s global semiconductor leader Lincoln Clark in a statement. “As the industry becomes more competitive, significant investment and cutting-edge strategies will be essential for companies to not only survive, but thrive in this rapidly evolving environment.”

The full Global Semiconductor Industry Outlook report will be published in early 2025.