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Executives in the semiconductor industry believe the automotive sector will continue to be the leading source of chip revenue, as revealed by a survey conducted by KPMG. In the KPMG Global Semiconductor Outlook report, 172 global chip executives indicated that, for the second consecutive year, the automotive sector remains the top revenue driver, although artificial intelligence (AI) is quickly catching up.
Revenue projections and key sector drivers predict strong industry growth, with 85% of executives expecting revenue to increase in the near future, up from 64% the previous year. However, the number of executives forecasting a revenue growth above 10% has decreased slightly from half to 40% this year.
The automotive sector maintains its top position for the second year, reinforcing its role as the key revenue driver in the semiconductor industry. The increasing computerization and electrification of vehicles continue to drive the demand for semiconductors, according to KPMG.
In this evolving landscape, wireless communications, once dominant, has slipped to third place, now sharing the spot with cloud/data centers and the Internet of Things (IoT). Meanwhile, AI has risen dramatically as a major revenue generator, overtaking wireless communications. AI’s strong demand for chips represents a significant shift in the industry.
AI’s rapid rise emphasizes the growing importance of microprocessors, particularly those used in AI, as major opportunities for future industry growth. Implementing generative AI has emerged as one of the top three priorities for semiconductor companies over the next three years, along with talent development/retention and supply chain resilience.
The competition for talent is intense, with a high demand for technical expertise driving strategic priorities. Semiconductor companies are focusing on talent development and retention more than ever before, even ahead of supply chain resilience. The increasing competition for talent from new players in the semiconductor arena has added to this challenge. In response, semiconductor firms are partnering with universities, enhancing their value proposition, and adopting remote or hybrid work setups.
Despite concerns about an oversupply of semiconductor inventory, 19% of executives believe that emerging technologies like AI will sustain demand, suggesting there will be no inventory surplus over the next four years. However, there are growing concerns about excess production capacity, highlighting the need for effective inventory management strategies.
The Global Semiconductor Industry Outlook report, set for release in early 2024, will further explore these insights and their implications for the semiconductor industry. The survey findings indicate that while the automotive sector currently dominates semiconductor revenue, AI is becoming a formidable contender, signaling a significant shift in industry dynamics. Talent acquisition and development remain critical, as does managing inventory in a rapidly evolving technological landscape.