Semiconductor Leaders Say Artificial Intelligence, Cloud And IoT To Have Greater Impact On Revenue In 2018: KPMG Study

Press Releases

Feb 13, 2018

SANTA CLARA, Calif., Feb. 13, 2018 /PRNewswire/ — Signaling more diversification, leaders of semiconductor industry companies say artificial intelligence (AI), cloud computing and the Internet of Things (IoT) are expected to have a much greater impact on their revenues this year, according to KPMG LLP, the audit, tax, and advisory firm.

[To read KPMG Global Semiconductor Industry Outlook, Semiconductors: Can the surge continue?, please go to https://home.kpmg.com/us/en/home/insights/2018/02/semiconductors-can-the-surge-continue.html]

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 increasing demand for IoT, AI and cloud applications is driven by their individual value and their value to each other. Cloud infrastructure is critical to enabling AI and capturing IoT-produced data. AI will enable better analysis and use of the data,” said Lincoln Clark, KPMG Global Semiconductor Industry Leader. “Though the number one revenue driver remains wireless applications, its importance fell slightly in 2018 though we do anticipate growth as 5G begins to rollout in future periods.”

Disruptive technology and cyber security rising as strategic priorities
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.

2017 boom year produces caution in 2018
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 Clark. “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.”

Tax reform impact on semiconductor industry
“While the survey was conducted before the passage of US tax reform regulation, we are starting to see the impact of tax reform reflected in the recent earnings announcements by semiconductor companies,” said Tim Zanni, Global and U.S. Technology Sector Leader. “We anticipate that the access to offshore funds will increase the speed and intensity of activities such as capital equipment investments, M&A, and the reassessment of buybacks and other capital management strategies.”

Asked to rate which region of the world is most important to their company’s semiconductor revenue over the next three years, 47 percent of those surveyed said the United States, 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.

About the KPMG 2018 Global Semiconductor Industry Outlook
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.

About KPMG
KPMG LLP is the independent U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s independent member firms have 197,000 professionals working in 154 countries. Learn more at www.kpmg.com/us.