Geopolitics and AI will influence 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 in KPMGis the 20th annual Global Semiconductor Outlook report from the U.S. accounting, tax and consulting firm and the Global Semiconductor Alliance (GSA).

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

New data from KPMG and GSA promises continued demand for chips thanks to AI, cloud, data centers, wireless communications and automotive applications, showing clear optimism for 2025 among semiconductor executives.

The KPMG Semiconductor Industry Confidence Index rose to 59 from 54 in 2023, indicating increased optimism (a reading above 50 indicates a more positive than negative outlook) and increased confidence in the following factors: company revenue growth, profitability growth, Workforce growth, research and development (R&D) spending and capital expenditure.

“AI underpins the industry’s near-term growth and revenue expectations,” Mark Gibson, head of technology, media and telecommunications at KPMG, said in a statement. “The industry’s near-term upside is clear, but the companies that can manage their supply chains and attract and retain talent will be well positioned to sustain and benefit from the AI ​​boom.”

Despite the widespread optimism, executives still expect significant challenges in 2025, including geopolitical territorialism – such as 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, January 20.)

Strengthening supply chain resilience and flexibility and improving 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, gathering insights from 156 semiconductor industry executives about their outlook for the industry in 2025 and beyond. More than half of respondents came from companies with annual revenue of $1 billion or more.

Semiconductor industry executives across the board are positive about 2025, with the confidence index increasing five points year-over-year (from 54 to 59). Interestingly, the smaller companies, defined as organizations with annual revenue of less than $100 million, have the most positive outlook.

In general, all semiconductor companies have positive scores on the Confidence Index, with smaller companies being the most optimistic for 2025 and potentially seeing opportunities for rapid revenue increases given their earlier stages of development.

Survey participants included 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 businesses (less than $100 million in annual revenue).

Semiconductor industry executives are very optimistic about revenue growth for their company and the industry as a whole. More than a third forecast sales growth of at least 10%.

The overwhelming majority (86%) expect their company’s revenue to increase in 2025, with almost half (46%) expecting growth of more than 10%. And 92% predict overall industry revenue growth, and a third (36%) predict industry revenue growth of more than 10%.

For the first time in the outlook’s history, AI is the top revenue driver in semiconductors, displacing the automotive industry, which has held the top spot for the past two years.

Therefore, microprocessors, including graphics processing units (GPUs), used for AI, are seen as the key product opportunity for industry growth, ahead of memory and sensors/MEMs.

AI enablers such as high-bandwidth storage are the production 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 (increased to 2).^nd place), wireless communication (remains in 3rd place^approx place) and Automotive (dropped to 4th place).^Th place, the most important sales driver to date).

Geopolitical concerns, particularly territorial tensions and trade restrictions such as tariffs, are the key issues shaping the industry’s supply chains. Talent risk remains an ongoing issue as demand for chips increases.

Territorialism (including tariffs and trade restrictions) coupled with talent risk is the biggest issue the industry will face over the next three years. However, territoriality was clearly the biggest problem for large companies with annual revenues of $1 billion or more.

Semiconductor industry executives surveyed believe armed conflict and tariffs are the two geopolitical issues of greatest concern that could impact the semiconductor ecosystem over the next two years. Government subsidies and the nationalization of semiconductor technology are also at the top of the list.

In response, leading semiconductor companies are increasing geographic diversity to improve supply chain resilience. Making the supply chain more flexible and adaptable to geopolitical changes (linked to developing and retaining talent) is the top strategic priority after the company ranked second in last year’s survey.

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

While most executives (39%) still see competition for talent as the most important impact on the industry over the next three years, the emergence of new competitors has become almost as big a concern for executives (35%) Change in the industry indicates outlook.

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

“Tech giants and established semiconductor companies are starting to fight for market share. Ongoing technical developments and optimizations of chips for AI aim to provide alternatives for AI training and inference capabilities,” said Lincoln Clark, global semiconductor leader at KPMG, in a statement. “As the industry becomes increasingly competitive, significant investment and innovative strategies will be critical for companies to not only survive but thrive in this rapidly evolving landscape.”

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