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Semiconductor executives predict the automotive industry will become the No. 1 driver of chip demand, according to a survey. KPMG And this Global Semiconductor Alliance.
That means chips for cars will move on the fast track, surpassing demand for chips for wireless communications as the most important revenue driver next year for the first time, the 18th annual KPMG Global Semiconductor Outlook found.
The survey captured insights from 151 semiconductor executives about their outlook for the industry in 2023 and beyond. More than half of the respondents were from companies with annual revenues of more than $1 billion.
Chip executives are more positive about their futures as deficits remain difficult to overcome despite a weak economy. The Semiconductor Industry Confidence Index score for the coming year is 56. A value above 50 indicates a more positive outlook than a negative one.
This is lower than the previous four years, but understandable given the economic uncertainty and geopolitical events that have arisen in the past year.
“Geopolitical concerns, supply chain shocks, post-pandemic changes in consumer behavior, a persistent talent shortage — there have been no barriers to movement for the semiconductor industry over the past few years,” said Mark Gibson, KPMG global and US president. For Technology, Media and Communication, in a statement. “Despite these challenges, the automotive industry’s growing demand for chips keeps the industry cautiously optimistic about future growth.”
Leaders are optimistic about revenue growth
81 percent of executives expect their company’s revenue to grow in the coming year, with half expecting growth of more than 10%. Although these are lower than last year’s survey (95% and 68%, respectively), the report says that perceptions of the current economic environment and industry inventory levels, discussed below, are still encouraging.
Leaders are slightly less enthusiastic about industry revenue growth. Sixty-four percent predict industry revenue will grow in the coming year, with 19% predicting growth of more than 10%. These are also significantly lower than last year’s survey (97% and 49% respectively).
The Russia-Ukraine war may be a contributing factor to the lower industrial earnings growth forecast. Forty-one percent are concerned that war will affect industry revenue growth in 2023. When KPMG and GSA conducted a Pulse survey in May 2022, only 25% had this concern.
Automotive takes pole position
In related research, KPMG predicts that automotive semiconductor revenue will reach $200 billion annually by the mid-2030s and exceed $250 billion by 2040.
Wireless communications, long seen as the industry’s most important revenue driver, moved to second place in the 2023 outlook.
Internet of things, cloud computing and artificial intelligence are ranked third, fourth and fifth in terms of importance.
In its first year in the survey, Metaverse was ranked last (out of 10) in importance to driving a semiconductor company’s earnings over the next year. It will be interesting to see how this view changes in the coming years as metawares technology evolves and adoption increases.
Semiconductor shortage will end
Sixty-five percent of surveyed executives expect semiconductor supply shortages to decrease by 2023 and 15% believe supply and demand are already in balance for most products. Only 20% think the deficit will last until 2024 or beyond.
Because the semiconductor industry is cyclical, the survey asked respondents when the next oversupply of semiconductor inventories would occur. Twenty-four percent believe it is already high, and 31 percent think it will happen in 2023. And 36% think the surplus will happen between 2024 and 2026, while 9% believe demand will continue to rise and inventory will not be high. The next four years. I think the art of forecasting is still not very good because there is such a large variation in predictions.
Leaders also don’t see a Russia-Ukraine war impacting the semiconductor supply chain in 2023. Less than a third (twenty-nine percent) are concerned, down from 39% in the Pulse survey conducted by KPMG. GSA in May 2022
Talent is a key priority
Talent risk is seen as the biggest issue facing the semiconductor industry in the next three years. Underscoring the current need for professionals in this growing, sophisticated industry, 71% of respondents expect to increase their global workforce by 2023. This is lower than last year (87%), but still a healthy expectation in the current economic environment.
The survey also shows that talent development and retention is a top strategic priority for industry leaders, with 67% naming it a “top 3” strategic priority. Although lower than the 77% score in last year’s survey, this year it still clearly shows supply chain flexibility (53%) and digital transformation (32%).
Although still important to any business, only 15% of semiconductor executives rank mitigating cybersecurity risk as a “top three” strategic priority, and only 10% say formalizing ESG reporting, despite mandatory reporting requirements.
Nationalization of semiconductor technology is a major geopolitical concern
In terms of geopolitics, the impact of the nationalization of semiconductor technology is a major concern in the minds of executives, as it affects supply chains, talent acquisition, and access to government subsidies (eg, the US-enacted CHIPS and SCIENCE Act and the proposed European CHIPS Act).
Nationalization of semiconductor technology has been linked as the second biggest issue facing the industry in the next 3 years (related to global inflation). Other major geopolitical concerns include Taiwan’s importance in the supply chain, tariffs and trade agreements, and the long-term implications of the Russia-Ukraine war.
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