Robust semiconductor industry outlook

By Barbara K. Mednick

For the global semiconductor industry, tariffs are the nexus of the global trade issue. In the new KPMG Global Semiconductor Industry Outlook 2020 study, 67 percent of senior executives at semiconductor companies said they expect some or all of the tariff costs to be passed onto customers. The study also found that despite the sector’s 2019 underperformance, leaders are optimistic and expect a resumption of growth in the semiconductor industry in 2020.

The report focuses on finance and operations and is the first in a series of three reports on the semiconductor industry. The research is based on a survey of 195 global semiconductor executives conducted by KPMG and the Global Semiconductor Alliance. 

According to the report, the current trade environment presents significant challenges for the semiconductor industry and the associated supply chain. Managing abrupt new and changing trade costs and policies is top of mind. To mitigate tariff risk, 58 percent of senior executives said they expect some type of supply chain operational response. Top actions include sourcing vendors from new geographies not impacted by tariffs and establishing incremental manufacturing and assembly/test locations away from locations subject to tariffs. 

“International tariffs are not just a financial issue -- they are also introducing significant complexity into the supply chain, from inventory planning to logistics to customs clearance and compliance,” said KPMG Global Semiconductor Leader Lincoln Clark.

Positive financial outlook

Despite lower revenues in 2019 and the ongoing possibility of new tariffs, semiconductor leaders are optimistic and have a positive outlook for 2020 industry performance. In fact, this year’s Semiconductor Industry Confidence Index is a healthy 59 -- a score based on respondents’ one-year view of their companies’ annual change in revenue, operating profitability, workforce size, capital spending, and R&D spending.

“We found that anticipated 2020 revenue growth for both big and small semiconductor companies is particularly healthy,” said Clark. “With the recovery expected and prices ticking back up, nearly nine in 10 of semiconductor executives surveyed expect their companies’ revenue to grow next year.”

And the degree of expected revenue growth is also significant. For example, among all companies, 74 percent of respondents expect their companies’ annual revenue to increase by 6 percent or more. And among smaller companies (less than $100 million in annual revenue), which typically focus on leading edge products and services, 58 percent predict revenue growth of 20 percent or higher in 2020.

Industry-wide comeback

As the industry rebounds back to expected year-over-year revenue growth, most semiconductor companies plan to invest in equipment, R&D, and the workforce to help drive revenue growth in 2020 and beyond. In addition, the report found that:

  • Nearly six out of ten (59 percent) executives plan to increase capital spending.
  • Nearly three-quarters (73 percent) expect the size of their workforce to increase.
  •  With price erosion no longer a major concern, annual operating profitability expectations are also largely positive.

To learn more or to arrange an interview with Lincoln Clark, please contact Barbara K. Mednick.

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Untapped opportunities for semiconductor companies
Global Semiconductor Industry Outlook 2020

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Barbara K. Mednick

Barbara K. Mednick

Associate Director, Corporate Communications, KPMG US

+1 612-305-5471


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Lincoln Clark

Lincoln Clark

Partner, Audit, KPMG US

+1 408-367-4914