KPMG/GSA Survey: Auto and AI Revolutionizing Semi-Truck Industry

The automotive sector has emerged as the most important revenue driver for the semiconductor industry, according to a survey conducted by KPMG and the Global Semiconductor Alliance (GSA). This can be attributed to the increasing computerization and electrification of vehicles. The survey also revealed that artificial intelligence (AI) is the second most significant factor contributing to industry growth.

Microprocessors, including graphics processing units (GPUs) used for AI applications, were identified as the top product opportunity for industry growth over the next four years. This highlights the growing demand for advanced processing capabilities in various sectors.

Implementing Generation AI (Gen AI) was ranked among the top three strategic priorities for semiconductor companies in the coming years. Gen AI refers to the integration of AI technologies into various aspects of business operations.

When it comes to implementing Gen AI, semiconductor companies are expected to focus on three key functions: research and development (R&D), marketing, and manufacturing. These areas are seen as crucial for leveraging AI to drive innovation, improve customer engagement, and enhance production processes.

The survey also shed light on the revenue projections of semiconductor companies. More than 8 in 10 (83 percent) of the 172 executives surveyed anticipate revenue growth in the coming year, which is consistent with the previous year's findings. However, the rate of growth projections is slightly lower, with 4 in 10 leaders expecting growth of more than 10 percent compared to 5 in 10 last year.

Leaders identified lower customer demand as the biggest factor impacting their companies in the next year, surpassing concerns about inflation, interest rates, or government subsidies. This highlights the need for semiconductor companies to adapt to changing market dynamics and align their strategies accordingly.

Talent risk emerged as the biggest issue facing the semiconductor industry over the next three years. With the demand for technical talent expected to increase, semiconductor companies are grappling with the challenge of attracting and retaining skilled professionals. Talent development and retention, along with supply chain resiliency, remain the top strategic priorities for industry leaders.

Competition for talent is intensifying as nontraditional semiconductor companies, such as tech giants, platform companies, and automotive companies, expand their own silicon capabilities. This further strains the talent pool and underscores the importance of talent management strategies.

In response to the talent pressures, semiconductor companies have taken various actions, including forming partnerships with universities, reinforcing their employee value proposition, and offering remote/hybrid work positions. These initiatives aim to attract and retain top talent in a competitive market.

Inventory management is another area of concern for semiconductor companies. The survey revealed that 30 percent of respondents believe there is already an excess of semiconductor inventory, driven in part by lower customer demand. Reducing inventory levels and postponing capital expenditures are among the actions being taken to address market forces and the economic environment.

Despite these challenges, a significant faction of executives remains optimistic about the future. Almost one in five (19 percent) executives believe that emerging technologies like AI will continue to drive demand and prevent inventory excess in the next four years. This reflects a doubling of optimism compared to the previous year's survey.