Semiconductor Execs See Automotive as No. 1 Revenue Driver for Second Year in a Row; Artificial Intelligence Surges to Second

December 12, 2023 – For the second year in a row, semiconductor executives see the automotive sector as the most important sector driving revenue over the next year according to the results of the 19th Annual KPMG Global Semiconductor Outlook. Artificial Intelligence is a fast follow, placing as the no. 2 most important revenue driver for the first time.

The survey, from KPMG LLP and the Global Semiconductor Alliance (GSA) captured insights in the fourth quarter of 2023 from 172 global semiconductor executives about their outlook for the industry in 2024 and beyond. More than half of the respondents are from companies with more than $1 billion in annual revenue. 

“The computerization and electrification of automotive vehicles has helped continue to fuel growth across the semiconductor industry – the more advanced the vehicle, the more chips it requires,” said KPMG Global and U.S. Technology, Media & Telecommunications Leader Mark Gibson. “However, AI’s rapid ascension to being a top revenue driver, coupled with executives’ bullish views on Generative AI are a signal it could soon give the automotive sector a run for its money.”

A few highlights:

Executives bullish on the industry at large 

• Leaders are significantly more enthusiastic than last year about industry revenue growth. Eighty-five percent forecast the industry’s revenue will grow in the coming year, compared to 64% last year.
  
• Eighty-three percent project their company’s revenue will grow over the coming year. However, the rate-of-growth projections are slightly lower. This year, 4 in 10 expect revenue growth of more than 10%. Last year, half of respondents felt this way. 

Automotive sector continues to fuel expectations

• After topping the survey for the first time last year as the most important revenue driver, automotive again placed as the top revenue driver for the industry in 2024.
  
• Wireless communications, ranked for several years in the survey as the most important revenue driver, slipped into second place last year and this year tied for third. Cloud/data centers and internet of things (IoT) tied for third place last year and remained in this position this year, tied with wireless communications.

Artificial intelligence jumps to become a top revenue driver

• After placing fourth in the prior two surveys, artificial intelligence (AI) jumped up, ranking as the second most important revenue driver for the industry, displacing wireless communications.
  
• Implementing generative AI (Gen AI) ranked as a “top 3” strategic priority for semiconductor companies over the next three years, trailing only talent development/retention and supply chain resiliency, and ahead of other priorities such as M&A, participating in government subsidies, cyber security, and ESG initiatives.
  
• There is a faction of executives (19%) who believe there will not be any excess chip inventory over the next four years because emerging technologies like AI represent a continual growth engine. This is double the amount from last year’s survey (9%).
  
• The top three functions in which semiconductor companies expect to implement Gen AI in the next two years are R&D, marketing, and manufacturing. 
  
• Microprocessors (including graphics processing units (GPU) used for AI) ranked as the top product opportunity for industry growth over the next year. 

Talent seen as biggest concern for third year in a row

• With demand for technical talent expected to increase, talent risk extended its lead as the biggest issue facing the semiconductor industry over the next three years. It ranked as the top issue in the previous two surveys as well.
• Talent development and retention also remained atop the strategic priorities for industry leaders, once again ahead of supply chain resiliency. 

The Global Semiconductor Industry Outlook report will be released in early 2024.  Click here for more information on KPMG’s Global semiconductor practice.