Semiconductor industry leaders say AI, cloud and IoT to have greater impact on revenue In 2018 - Study

Nearly two-thirds of the 150 semiconductor industry leaders surveyed cited IoT as one of the top revenue drivers this year.

Signaling more diversification, leaders of semiconductor industry companies say artificial intelligence, cloud computing and IoT are expected to have a much greater impact on their revenues this year, according to KPMG. Nearly two-thirds of the 150 semiconductor industry leaders surveyed cited IoT as one of the top revenue drivers this year, making it the second most-cited and up from 56 percent last year.

Cloud computing and AI rocketed into the top 10 as they were each cited by 43 percent of respondents, compared to 27 percent for cloud last year and 18 percent for AI. Wireless communications again topped the list, but was cited by fewer respondents.

The annual KPMG global semiconductor industry outlook captures the fall 2017 survey of 150 industry leaders on several topics such as priority markets, profitability, revenue, headcount, R&D, mergers and acquisitions, capital spending, applications and semiconductor technology trends.

The survey also found that semiconductor leaders are more optimistic this year than last year when asked for their outlook on profitability, revenue growth, capital spending, research and development spending, and workforce growth.

"Given the industry's historically strong performance in 2017, we interpret these responses as tempered optimism," said Lincoln Clark, KPMG Global Semiconductor Industry Leader. "It's unlikely we'll see a repeat of 2017's growth rate for global semiconductor revenues, but 2018 should be another successful year in its own right as more than one-quarter of the respondents expect their revenue to grow at least six percent."

The majority of semiconductor leaders said they expect their companies—and the industry as a whole—to increase revenue, largely driven by diversification into revolutionary new technology segments, such as artificial intelligence (AI), the internet of things (IoT), and autonomous vehicles. Most executives expect profitability to increase alongside revenue, as companies obtain revenue from new markets and rationalize costs in research and development (R&D). Companies also plan to increase investment in their workforce and equipment.

Asked to list their top three strategic priorities over the next three years, respondents again this year placed diversifying into new businesses areas, at the top, followed by M&A and joint ventures, and talent development/management. Implementing disruptive technology made a significant jump to fourth.

Minimizing cyber-security risk cracked the top 10 in the outlook, and likely would have been higher had the survey been taken after the Meltdown and Spectre news hit in early January. Fourty-seven percent of those surveyed said the United States is most important to their company's semiconductor revenue over the next three years, followed by China, Europe, Taiwan and Japan. The latter two countries were more widely cited this year compared to last, while the first three dipped in importance.

Image source: KPMG