"Automotive Sector Fuels Semiconductor Chip Demand as AI Technology Rapidly Advances | KPMG"

Semiconductor industry executives have identified automotive as the primary driver of chip revenue, according to KPMG's Global Semiconductor Outlook report.

Surveying 172 global chip leaders, KPMG found that for the second consecutive year, automotive remains the key revenue generator, although artificial intelligence (AI) is rapidly rising in importance.

Revenue Projections and Sector Drivers

Executives are optimistic about industry growth, with 85% predicting revenue expansion in the near term—up from 64% last year. However, expectations for revenue growth exceeding 10% have slightly declined, with only 40% of respondents forecasting such increases this year.

The automotive sector’s lead is attributed to the continued computerization and electrification of vehicles, driving semiconductor demand. Wireless communications have fallen to third place, sharing this position with cloud/data centers and the Internet of Things (IoT). AI has soared to the second spot, overtaking wireless communications as a crucial revenue contributor.

AI's Rise and Strategic Focus

AI is quickly becoming a major demand driver for chips. The importance of AI signifies a transformative shift in industry dynamics, with microprocessors tailored for AI emerging as a key growth opportunity. Implementing generative AI ranks as a top-three priority for semiconductor companies over the next three years, underscoring the industry's focus on talent development and supply chain resilience.

Talent Challenges and Strategic Responses

The talent gap remains a critical issue. Industry leaders recognize the increasing demand for technical expertise, placing talent development and retention at the forefront of strategic priorities, ahead of supply chain concerns. The competition for skilled professionals is intensifying, particularly from non-traditional semiconductor players. To address this, firms are forming university partnerships and adopting remote/hybrid work models.

Inventory Insights and Emerging Technologies

Despite rising worries about inventory surplus, 19% of executives expect sustained demand from emerging technologies like AI, suggesting confidence in continued growth without excess inventory over the next four years. Concerns about excessive production capacity highlight the need for effective inventory management strategies.

Future Outlook and Expectations

The forthcoming Global Semiconductor Industry Outlook report, set to launch in early 2024, will provide deeper insights into these trends and their implications for the semiconductor sector. The findings underscore a landscape where automotive revenue dominance is challenged by AI, marking a pivotal shift in the industry. Talent acquisition and management, along with adept navigation of inventory challenges, will be crucial in this rapidly evolving technological environment.