Navigating shortterm volatility inthe semiconductor
industry
Makers of vital tech are ready to overcome
today’s obstacles

2023 KPMG Global Semiconductor Industry Outlook
February 2023
kpmg.com/semiconductors

Key findings

Impact of COVID-19

Financial expectations

Contents

Foreword.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2Key findings.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3Financial expectations.  .  .  .  .  .  .  .  .  .  .  .  .  . 4Operational expectations. .  .  .  .  .  .  .  .  .  .  . 9Growth products. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
Strategic and industry issues .  .  .  .  .  .  . 17
Next steps.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23

Growth products

Issues & priorities

Next steps

This is the 18th annual KPMG Global Semiconductor Industry Outlookwith key findings from a survey of 151 senior executives from global
semiconductor companies conducted in the fourth quarter of 2022 by
KPMG and the Global Semiconductor Alliance (GSA).The publication isdesigned for semiconductor CEOs, COOs, CFOs, controllers, financeleaders, and strategic and corporate development personnel. This
report is equally relevant for executives of companies whose products
are heavily reliant on semiconductor components, including products
for telecommunications, telecommunication infrastructure, cloudservices, platform providers, Internet of Things (IoT) applications, andautomotive electronic applications.

Research methodology .  .  .  .  .  .  .  .  .  .  .  . 24
About KPMG and the GSA .  .  .  .  .  .  .  .  . 25
About the authors. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26

1

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Foreword
No one doubts that the world runs on small but powerful semiconductors inside all things digital and connected.
Despite supply chain, talent, and political-economic challenges, the 2023 KPMG Global Semiconductor Outlook
shows the industry future is looking bright.
In the fourth quarter of 2022, KPMG LLP and
the Global Semiconductor Alliance (GSA)
surveyed 151 semiconductor executives
about the financial, strategic, and operational
trends, issues, and agenda items across theindustry and ecosystem. The research showsthat despite headwinds, global semiconductor
executives maintain an overall positive outlook
for the industry in 2023 and beyond.
Forward-looking perspectives on a rangeof topics demonstrate this optimistic view.
Eighty-one percent of respondents expect theircompany’s revenue to grow year over year.
Eighty percent expect to soon see an end to thechip shortage that has been burdening OEM
and other manufacturers and frustrating end
customers in search of all sorts of everyday
items that were in short or limited supply.
And—using government funds in certain
geographies—companies plan to invest in chipproduction, research, innovation, and talent tomeet demand from expanding end markets,

2

Global semiconductor industry outlook

such as automotive, wireless communications,and cloud computing. Taken together, we see
the criticality of semiconductor technologies tothe world’s economy, infrastructure, products,
and services continuing to be dominant.
Macro economic factors, supply/demand
imbalance, talent, and political risks aremajor forces of pressure on today’s global
semiconductor market. However, industry
executives see growth potential in their own
companies and know that long term, theindustry is viable and growing, even if a normal
cyclical correction is underway. Strategic plans,actions, and investments through 2023 willallow chipmakers to power through these
uncertainties with resilience.

Lincoln Clark
Leader, Global Semiconductor Practice
KPMG LLP
lincolnclark@kpmg.com© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Key findings

Impact of COVID-19

Financial expectations

Key findings

Growth products

Issues & priorities

Next steps

Financial expectations

Growth products

81%
64%

 xpect theirecompany’s
revenue toincrease in 2023.

 xpectations for annualE
operating profitability of theindustry going up or down
are evenly split.

#1 xpect industryerevenue toincrease in 2023.

The majority plan toincrease spending on
Capex, workforce and R&D.

#2

Operational expectations

52%
24%

think the chip

supply shortage
will ease by mid2023.

46%

 elieve there is already anbinventory excess and the chip
supply shortage is over.

Automotive is the mostimportant application
driving semiconductor
companies’ revenue
streams.

Sensors/MEMS are the mostimportant growth productfor the industry.

Wireless ranks as thesecond most-criticalend market, followed bycloud, IoT, and AI.

Strategic and industry issues
 ill increasew
geographicaldiversity of the
supply chain
in the next 12months.

#1

A global talent shortageis the top issue in thesemiconductor ecosystem.

67%

Nationalization ofsemiconductor technology
is a top geopolitical concern.

s ay talent risk is the top strategic
priority over the next three years.

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

3

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Key findings

Impact of COVID-19

Financial expectations

Growth products

Financialexpectations

Issues & priorities

Next steps

Key takeaways— 81% expect their company’s revenue
to increase in 2023, and 64% expect
industry revenue to increase.
— Expectations for annual operating
profitability of the industry going up
or down are evenly split.
— The majority plan to increase spending
on Capex, workforce and R&D.

Almost two-thirds of semiconductor leaders
are predicting industry revenue will increase,not contract. That’s a positive indicator for theupcoming year given the current economics andthe fact the industry is almost at the point of
having excess inventory.
Mark Gibson, Global Sector Head of Technology,
Media & Telecommunications, KPMG International
4

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Financial expectations
Leaders remain optimistic about revenue growth, thoughslower rates expected
Semiconductor executives’ views on their own company’s growth are somewhat
more bullish than anticipated, given that the industry is in the midst of a normal
correction cycle and many economists around the world are predicting a recession.
More than 8 in 10 respondents (81 percent) expect their company’s revenue toincrease over the coming year. Almost one-quarter (23 percent) expect growth of
more than 20 percent.
Although generally optimistic, expectations are lower than those expressed in lastyear’s survey, when nearly all respondents (95 percent) 1 predicted their company’s
revenue to increase. New factors in play in the semiconductor ecosystem—fears ofa downturn, increased geopolitical focus, risks to the supply chain, and rising global
inflation—are understandably hampering leaders’ outlook, though, as a general trend,
most remain positive.
Stressors in the ecosystem are having a more significant impact on this year’s
industrywide outlook, with cost pressures the key underlying factor driving down
sentiment. Facing increased prices for capital, materials, and labor, industry growthand profitability projections are somewhat uncertain.
Company growth expectations outpace those for the broad industry, as reflected inthis research and other industry forecasts. In last year’s survey, 97 percent forecasted
industry revenue would grow in 2022.2 This year, 64 percent of respondents forecast
the industry’s revenue will grow in 2023. Nearly half (45 percent) predict industry
growth of 10 percent or less. The forecast from the World Semiconductor Trade
Statistics is also in the single digits, predicting growth of 4.1 percent in 2023.3

What is your outlook for your company’s revenue growth over the next year
compared to the current year? (select one)

81%

13%

6%

What is your outlook for the annual revenue growth of the global
semiconductor industry over the next year? (select one)

64%

31%

5%

What is your estimate for the change in the annual operating profitability of
the global semiconductor industry over the next year? (select one)44%

4 Increase43%

4 Decrease13%

4 No change

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

Further, there is an even split among those who think industry operating profitability
will increase (44 percent) versus decrease (43 percent). This research indicatesrevenue growth is not all being passed through to the bottom line, largely because
inflation in supply chains is being absorbed by chipmakers and not all being passed on
to customers.

5

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Financial expectations
Indirect impacts of the Russia-Ukraine War lower growth projections
Geopolitical issues also seem to have a notable influence on industry revenue projections. Forty-one percent ofsemiconductor executives are concerned the Russia-Ukraine war will materially impact industry revenue growthin 2023, a substantial increase from prior KPMG research conducted in May 2022, when a smaller minority (25percent) expressed that view.4
The indirect impact of the war is manifested in several different ways, with some parties blaming it for the highcost of energy, which is a factor that has driven up inflation and interest rates and slowed demand. The 2023
outlook published by KPMG Economics predicts a shallow recession in 2023.5

41%

How concerned are you that the Russia-Ukraine war will materially impact revenue
growth for the semiconductor industry in 2023? (select one)

12%

4 Not at all concerned

21%

26%

32%

9%

4 Very concerned
Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

6

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Financial expectations
Spending to increase as inflationary pressure builds
When it comes to spending plans for 2023, rising global inflation and interest rates
are the big story. Sixty-two percent of semiconductor leaders expect their company’s
capital spending (CapEx) on equipment and software to increase from last year.
Only 15 percent plan to make CapEx reductions. Three-quarters also say their R&D
spending will go up. While companies need to invest to meet future demand, they
will be hesitant to borrow at the same levels as they would in a lower-interest-rateenvironment.6, 7More than 7 in 10 respondents (71 percent) also expect their company’s global
workforce to expand. Contributing to this view are the strategic commitments being
made around the world to increase chip output, including in the U.S., the E.U., andChina. To boost capacity, each country is likely to create manufacturing-related jobs tobuild new foundries and higher-paying specialized jobs to staff new facilities.8
Further, while workforce expansion would drive up the cost of doing business in any
economic environment, it could reach new levels when we factor in current wage
inflation and the competitive talent marketplace.9 It is also notable that, while major
players in the broader technology sector made headline-grabbing cuts and layoffs in
2022,10 the semiconductor industry has been slower so far in enacting headcountcuts.

What is your outlook for semiconductor-related capital spending by yourcompany (both equipment and software) over the next year compared withyour company’s current year spending? (select one)

62%

15%

23%

During the next year, do you expect your company’s global workforce toincrease or decrease? (select one)

71%

15%

15%

What is your expectation for the change in R&D spending by your company
for the next year over the current year? (select one)75%

4 Increase

4 Decrease

8%

17%

4 No change

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

7

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Financial expectations
2023 Semiconductor Industry
Confidence Index
Near-term challenges across the global semiconductor
industry and ecosystem have arisen in the past year,
impacting leader confidence. The 2023 Semiconductor
Confidence Index score of 56 represents a steep
decline from the all-time high of 74 in 2022 and thelowest level in half a decade. Every individual input of
the 2023 Semiconductor Confidence Index is downfrom the previous year. Demand has been negatively
impacted by the macro economic environment,
including increasing inflation and interest rates, andsemiconductor companies are slowing down 2023
investments. Nevertheless, the long-term viabilityof this essential industry remains strong, withrespondents expressing an overall positive outlook
despite near-term obstacles.

Industry
Confidence Index

2023

56
2022

74

2023

2022

(n = 151)(n = 152)

72

Revenue
Growth87

58

CapitalSpending

78

54

Workforce
Growth68

59

R&D Spending
Change69

39

Profitability
Change66*An index value above 50 indicates a more positive (rather than negative) outlook about the industry and its prospects.
Source: KPMG Global Semiconductor Industry Outlook Survey 2023, n=151
KPMG Global Semiconductor Industry Outlook Survey 2022, n=152

8

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Key findings

Impact of COVID-19

Financial expectations

Growth products

Operational
expectations

Issues & priorities

Next steps

Key takeaways— 52% think the chip supply shortage
will ease by mid-2023.
— 24% believe there is already aninventory excess and the chip
supply shortage is over.
— 46% will increase geographicaldiversity of the supply chain in
the next 12 months.
Softening demand in today’s tight global
economic climate is rebalancing product inthe semiconductor industry. According to our
research, many people in the know are saying
the chip supply shortage is already over.”
Chris Gentle, Partner, Global Semiconductor Practice, KPMG LLP

9Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Operational expectations
Supply chain diversification tops the operational agenda
As international conflicts give rise to more nationalization of technology and restrictive
trade policies in key regions, the resilience of semiconductor supply chains is under
threat.

To improve agility and resiliency, nearly half of semiconductor executives will increase
geographic diversity of their supply chain. It is the leading change planned for the next
12 months (46 percent) as well as 13 to 36 months into the future (48 percent).

What changes do you expect to make to improve supply chain agility and resiliency in your company? (select all that apply)
Within the next 12 months?

In the next 13–36 months?

Increase geographicaldiversity of supply chain

46%

Build a more sustainablesupply chain

36%
34%

New/revised continuity plans

Increase geographicaldiversity of supply chain

48%

Build a more sustainablesupply chain

47%

Increase manufacturing capacity

39%

Invest in digitizing my supply chain(predictive analytics, automation, etc.)

31%

Invest in digitizing my supply chain(predictive analytics, automation, etc.)

Increase manufacturing capacity

30%

Build a more customer-centric
supply chain

26%

36%

Reprioritize end markets

26%

Increase internal supply
chain capabilities

25%

Build a more customer-centric
supply chain

25%

New/revised continuity plans

25%

Increase internal supply
chain capabilities

24%
11%

Build out more inventory9%

Do not anticipate further changes
Other

2%

23%

Reprioritize end markets
Do not anticipate further changes

9%

Build out more inventory

8%

Other

1%

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

10

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Operational expectations
At a regional level, U.S. companies are particularly focused on supply chain
diversification due to trade restrictions with China, making it difficult to sourcecomponents or assemblies from Asia.11 The influence of the CHIPS and Science Act—
U.S. federal statute signed into law in August 2022—is also playing a key role. The act
provides roughly $280 billion in new funding to strengthen domestic semiconductor
manufacturing, design, and research.12
In the APAC region, making the supply chain more flexible and adaptable to geopoliticalchanges and other disruptions is the highest priority. With the U.S. government
expanding trade restrictions on technology products, Chinese semiconductor
companies are scrambling to figure out where to buy the equipment to continue
making advanced node products or whether to expand to where restrictions are lessdebilitating. Further, these trade restrictions are impacting China’s ability to importadvanced chips for their own manufacturing and end products.
In addition, Asian chip players in Taiwan, Japan, South Korea, Singapore, and Malaysia
are much more dependent on China-based imports for components than U.S. chip
manufacturers, and the gap looks set to further widen as the CHIPS and Science Act
bolsters domestic manufacturing in the U.S.

0%

Not at allconcerned

29%

Finally, supply chain sustainability is also an operational focus area for global
chipmakers. Thirty-six percent of respondents will make changes to build a more
flexible and resilient supply chain in the coming year. That percentages jumps to47 percent when looking over a two- to three-year time span.

What are you doing to address your organization’s concerns?
(select all that apply)

Adjusting prices

Alternative sources ofraw materials(e.g., neon, palladium, etc.)

10%
19%

11%

3

How concerned are you that the Russia-Ukraine war will materially impact
the semiconductor supply chain in 2023? (select one)More than half (55 percent) of respondents also selected the long-term impactsof the Russia-Ukraine war as a significant geopolitical issue for their businesses.
Semiconductor companies have been dealing with the operational impacts of theRussia-Ukraine war for approximately one year, putting contingencies in place tosource neon and palladium and other raw chip materials outside of Ukraine.
(And, many companies had already divested away from the region after the Crimea
invasion by the Russian military in 2014.) Yet, nearly one in three respondents(29 percent) are still concerned or very concerned about the war materially impacting
the semiconductor supply chain. Among those who expressed concern, the leading
action planned will be adjusting prices, selected by 54 percent of respondents.

Very
concerned

Moving to long-term
contracts

54%

More vertical
integration

26%

38%

Reducing output

24%

37%

Other

13%

Source: KPMG Global Semiconductor Industry Outlook Survey, among those who are concerned
the Russia-Ukraine war will materially impact the semiconductor industry, n=68.

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

11

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Operational expectations
End of the semiconductor shortage is in sight
Our research indicates that the supply-demand imbalance in the industry has lessened
and stabilization of the global chip shortage is fast approaching or already here. In fact,
the industry could be shifting from a constrained environment, where it was difficult to
get product, to one of abundance driven by excess inventory and weakened demand,as recently seen in memory.

More than two-thirds of respondents (52 percent) think that by mid-2023, the supply
shortage with have eased. Fifteen percent think supply and demand is already inbalance for most products, while only 20 percent think the shortage will last into 2024
or later.

15%

When do you anticipate the semiconductor supply
shortage will ease?

Current supply/demand is inbalance for most products

26%
26%

13%
4%
4%

Mid
2023

52%

End
2023

Early
2024
Mid
2024

9%
3%

Early
2023

End
2024

20%

Other

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

12

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Operational expectations
Since the semiconductor industry is cyclical, the survey also asked respondents when
they think the next excess supply of semiconductor inventory will occur. On thisquestion, predictions vary significantly.

We believe these findings reflect multiple factors: the need for new chips softening
after an extended period of high demand, inflation driving production costs up, andnew foundries being created outside of Asia adding capacity.

One quarter (24 percent) believe there is already an excess while another 31 percent
think the excess will occur in 2023. Another 35 percent feel the surplus will happen
between 2024 and 2026, while 9 percent believe demand will keep increasing andthere will not be an inventory excess in the next four years.

The inconsistencies also reflect the fact that this research presents a broad industry
view, but expectations for supply deficits or excesses will most likely vary by productline, sector, and application. Pockets of the ecosystem have a huge oversupply,
like memory, while other sectors, if they are feeding a still growing end market like
automotive, are still climbing out of supply deficit.13

Similarly, semiconductor executives rank excess semiconductor capacity as a far
more important industry issue than semiconductor production constraints (25 percent
versus 14 percent). See the Strategic and industry issues chart on page 18 for more.

24%

When will the next excess supply ofsemiconductor inventory occur?

There is already an excess
supply of semiconductor
inventory

31%
15%
17%

2024

3%

2025

2023

35%

2026

9%

Demand will keep increasing: There will not be
an excess of inventory in the next four years

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

13

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Key findings

Impact of COVID-19

Financial expectations

Growthproducts

Growth products

Issues & priorities

Next steps

Key takeaways— Automotive is the No. 1 mostimportant application driving
semiconductor companies’
revenue streams.
— Wireless ranks as the second
most critical end market, followed
by IoT, cloud, and AI.
— Sensors/MEMS are the mostimportant growth product for
the industry.

As carmakers accelerate electric vehicle
production, the automotive market is now
the number one revenue growth driverfor semiconductor companies, and it’s noteven close.”Irene Signorino, Managing Director, Strategy, KPMG LLP

14

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Growth products
Automotive takes the pole position as the most important revenue growth driver
According to the 2023 outlook, semiconductor
industry growth is becoming increasingly tied to theelectrification and increased autonomous features of
new vehicles.
For the first time in KPMG’s research, the automotive
sector is considered the most important revenue
growth driver for semiconductor companies. It ranks
highest in importance among other applications by avery comfortable margin. In addition, sensors/MEMS—
key components of “computers on wheels”—areconsidered the most important growth product for theindustry in 2023.
Contributing to this sentiment is the growing availabilityof electric vehicles, which are considered cleaner andsafer than gas-powered cars, coupled with recent
regulations pushing long-term EV production in places
like Europe and California.14 KPMG research on thesetrends—which are creating strong demand for chips
to go inside the latest vehicles—predicts automotive
semiconductor revenue will reach $200 billion annuallyby the mid-2030s, and surpass $250 billion by 2040.15
With automotive taking the pole position, wirelesscommunications—long seen as the chipmakers’
most critical end market—slipped into second place.
Meanwhile, cloud computing rose to third (from fifth) andis now tied with Internet of Things as a top three revenue
stream, followed by AI.
In its first year on the survey, metaverse was ranked
last (out of 10) in importance for driving semiconductor
company revenue over the next year. It will be interesting
to see how this view changes in the coming years asmetaverse technology matures and adoption increases.

15

Global semiconductor industry outlook

How important are each of the following
applications in driving your company’s revenue
stream over the next fiscal year?
(average rating on a scale of 1-5)

Rate each of the following in terms of growth
opportunity for the semiconductor industry
over the next year.
(average rating on a scale of 1-5)

3.9

Sensors/MEMS

3.6

3.6

Analog/RF/Mixed signal

3.5

Cloud computing/data centers

3.5

Microprocessors (GPU/MCU/MPU)

3.4

Internet of Things

3.5

Optoelectronics

3.3

Artificial intelligence

3.4

Other logic

3.0

Consumer electronics

3.2

Discretes

2.9

Industrial equipment

3.2

Memory(Flash/DRAM)

2.7

Wireline communications

2.8

Personal computing

2.7

Metaverse

2.4

Automotive
Wireless communications (including 5G
technology and infrastructure, smartphones, andother mobile devices)

Source: KPMG Global Semiconductor Industry Outlook Survey, averages on a
1-5 rating scale where 1=not at all important and 5=very important, n=151.

Source: KPMG Global Semiconductor Industry Outlook Survey, averages on a
1-5 rating scale where 1=extremely low growth opportunity and 5=extremely
high growth opportunity, n=151.

© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Growth products
The research also shows that structuring and aligning organizations around end
markets is becoming ever more crucial to semiconductor strategies. Continuing a
trend found in last year’s research, more companies (57 percent agree or strongly
agree) are becoming oriented by end markets as opposed to products.

automotive,16 are building more direct relationships with chip companies, that might
involve committing to higher volume over longer periods of time and a more hands-on
approach to chip development. In turn, chip companies are reorganizing themselves
around these new partnerships, helping them better manage their costs and risks.

To help ensure they have a supply of chips needed for key components in the event of
the next semiconductor shortage, manufacturers from high-growth sectors, including

To what degree do you agree with the following statement?
Our organizational structure has moved towards being more oriented
by end markets (for example: automotive, communications, etc.).
(select one)

32%

24%

16%

26
15%

25%

9% 1
4%

0%

%

2

20%

57%

To what degree do you agree with the following statement?
Our organizational structure has moved towards being more organizedby product BUs (such as sensors and MEMS) that sell into multiple
end markets. (select one)

Strongly Disagree

Strongly Agree

Strongly Disagree

Strongly Agree

No change inorganizational structure

Significant changes inorganizational structure

No change inorganizational structure

Significant changes inorganizational structure

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

16

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Key findings

Impact of COVID-19

Financial expectations

Growth products

Strategic andindustry issues

Issues & priorities

Next steps

Key takeaways— A global talent shortage is the No. 1
issue in the semiconductor ecosystem.
— 67% say talent risk is the top strategic
priority over the next three years.
— Nationalization of semiconductor
technology is a top geopoliticalconcern.

Strategic investments among major global powers
to boost domestic manufacturing of semiconductor
technology are having ripple effects through theecosystem. In particular, they are exacerbating
the struggle for talent as chipmakers expand theirworkforces and shuffle their supply bases to boost
capacity within their own borders.”
Lincoln Clark, Leader, KPMG Global Semiconductor Practice17

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Strategic and industry issues
Talent repeats as the biggest industry issue and strategic priority
From chip technologists, engineers, and designers
to back-office staff and project managers, to factory
workers in plants and foundries, people resources
are crucial assets to keep the global semiconductor
ecosystem running. Where they will come from is amajor source of concern in 2023 and beyond.

According to our research, talent is the hottest topic in thesemiconductor C-suite. Talent risk—including lack of skilledworkers and attraction and retention struggles—ranks as
the top issue for the industry in the next three years.

What do you see as the biggest issues facing the semiconductor industry over the next three years? (select up to three)46%

Talent risk (not enough skilled workers, struggle for talent)
Global inflation and government responses

41%

Territorialism / The nationalization of semiconductor
technology and intellectual property

41%
28%

Supply chain disruption

25%

Excess semiconductor production capacity
High foundry cost17%

Increasing R&D costs

17%

Global ramifications of the Russia-Ukraine war

15%

Government subsidies to localize
investment in semiconductors

15%
14%

Semiconductor production capacity constraints

13%

Cyber security
ASP erosion
Other

7%
6%
Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

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Strategic and industry issues
Corroborating this key finding, talent supply,
development, and retention is also the No. 1 strategic
priority for chipmakers. Two-thirds of respondents(67 percent) name it as the top strategic priority over the
next three years. While lower than the 77 percent markin last year’s survey, it still clearly outpaces supply chain
flexibility (53 percent) and digital transformation(32 percent) this year.

The primary challenge is that there is simply not enoughtalent with the specialized skills needed to design
chips and the software that goes with them. According
to a recent study, the U.S. alone faces a shortage ofdesign workers and is on track for a shortage of 23,000
designers by 2030.17 While this is a U.S.-centric data
point, it lends credence to our global survey result thatsays 71 percent expect to add headcount in the next
year. This is lower than last year (87 percent), but still ahealthy expectation in the current economic climate.

Driving demand for talent are political actions by
numerous global governments to make domestic
semiconductor manufacturing a strategic imperative.
For example, the enacted CHIPS and Science Act
in the U.S. and the proposed European Chips Act
contain government funding and support for talentdevelopment.18 These incentives will make it more
attractive to make, build, and staff new fabs needed tomatch increased domestic capacity goals.

In addition to growth, what are the top three strategic priorities for your organization over the next three years? (select up to three)
Talent supply / development / retention

67%

Making the supply chain more flexible and adaptable togeopolitical changes and other disruptions

53%

Digital transformation (including
implementation of AI, blockchain, 5G, etc.)

32%
26%

Price renegotiation due to inflation
Participating in government subsidy funding

21%

Transformative merger and acquisition activity

21%
15%

Mitigating cyber security risk

10%

Formalizing ESG (environmental, social, governance) reporting
Divestiture of noncore business units

9%

Implementing a carbon footprint reduction plan

9%

Inclusion and diversity, including
women in leadership roles
Other

7%
2%
Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

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Strategic and industry issues
Another factor adding to high levels of talent risk is tech giants, platform companies and now some automotive
companies developing their own chips and silicon capabilities. With big tech asking for the same specialized talentthat traditional chip manufacturers need, there simply is not enough to go around. About half of respondents(51 percent) think the primary impact of these newer players entering the semiconductor industry is increased
competition for talent. Adding to the talent strain is that many tech-adjacent industries, such as automotive, arestarting their own semiconductor divisions that must be staffed.

As the tech giants and platform companies continue to develop their own chips and silicon capabilities, what doyou expect the primary impact will be to the industry over the next 3 years? (select one)

51%

21%

16%

13%

Increased competition
for talent

New competitors
will emerge

Increased foundrycapacity constraints

Supply chains will
be disrupted

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

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Strategic and industry issues
Nationalization of semiconductor technology
is a top geopolitical concern
Countries moving toward “tech sovereignty” is one of themost significant challenges in the global semiconductor
industry in 2023. This political trend is spreading across thesemiconductor space, with major global powers enacting
legislation to bring chip manufacturing back home instead of
relying on foreign supply chains.
Recent incentives for various countries to onshore productionof semiconductor-based products—including the CHIPS andScience Act in the U.S., the Made in China 2025 initiative,
and the proposed European Chips Act—have widespread
implications on global supply chains, talent acquisition andaccess to government subsidies.
Among geopolitical matters, semiconductor executives
rank the nationalization of semiconductor technology
and intellectual property as a top concern, tied with theprominence of Taiwan in the supply chain. The same concern
also ranks second among all industry issues over the next
three years, tied with global inflation and government
responses and behind only talent risk. See chart on page 18 for
more.
Other top geopolitical concerns include tariffs and trade deals,
long-term impacts of the Russia-Ukraine war, and government
subsidies to localize investment in semiconductors.

21

Global semiconductor industry outlook

How concerned are you about the impact of the following geopoliticalmatters on the global semiconductor industry and ecosystem overthe next two years? (average rating on a scale of 1-5)
The nationalization of semiconductor technology
and intellectual property

3.9

The prominence of Taiwan in the supply chain

3.9

Tariffs and renegotiated trade deals

3.7

Long-term impacts of Russia’s invasion of Ukraine,
including inflationary pressure

3.5

Government subsidies to localize investment insemiconductors

3.5

Global tax reform

3.1

Climate change legislation

2.9

Source: KPMG Global Semiconductor Industry Outlook Survey, averages on a 1-5
rating scale where 1=not concerned at all and 5=very concerned, n=151.

© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

Strategic and industry issues
Industry to build on efforts related to ESG, cyber and M&A
Though still important, other noteworthy strategic areas
rank lower on the semiconductor C-suite agenda overthe next three years, compared to talent supply.
For example, only 10 percent of respondents rank
formalizing ESG reporting a “top 3” strategic priority,
despite looming mandatory reporting requirements.
This is likely because the industry is not starting fromscratch. Many large public companies have long been
publishing sustainability reports which—based on thelatest SEC proposals—encompass many elementsof what is now likely to be required. Their focus now
is putting compliance around ESG reporting. With
reporting mechanisms in place and talent already aligned
to the effort, ESG reporting should be a less intensive
undertaking than the industry’s top-ranked priorities.

Cybersecurity risk is also a middle-of-the-pack strategic
priority, selected by 15 percent of respondents intheir top three ranking. Semiconductor leaders alsoranked cybersecurity as one of the lower issues
facing the semiconductor industry over the next three
years. These track with findings in the latest KPMG
Technology Industry CEO Outlook.19 Cybersecurity wastied for the fifth biggest threat to technology company
growth over the next three years, after being named theclear top threat in the previous survey.

and divestitures in the next three years say they will
be primarily pursuing small scale deals (48 percent).
Economic constraints—namely the high cost of
borrowing capital—are a key factor driving downtransaction activity in the semiconductor ecosystem.
Regulatory roadblocks in the U.S. are creating
resistance. And Chinese trade policies are limiting
dealmaking in one of the semiconductor industry’s
largest markets.

Lastly, smaller percentages of respondents rank
transformative merger and acquisition (M&A) activity(21 percent) and divestiture of non-core business
units (9 percent) among their top 3 strategic priorities.
Most companies that do plan to engage in acquisitions

What type of M&A and/or divestiture activity do you predict your company will undertake over the next 3 years? (select all that apply)

48%

32%

16%

25%

Small scale,“tuck-in” M&A

Transformative
M&A

Divestiture of
non-core assets

No plans for M&A or
divestiture activity overthe next 3 years

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

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Key findings

Impact of COVID-19

Financial expectations

Next steps

Growth products

Issues & priorities

Next steps

Entering 2023, chip companies will confront challenges related to high inflation, pockets ofexcess inventory, supply chain disruption, talent risk, and political reforms. Yet this is a strong,resilient industry with products that are critical to our high-tech world. There is plenty of growth
opportunity to be had. We offer strategic and tactical advice across key industry themes forsemiconductor executives to deliver today, counter disruption, and seize emerging opportunities.

Make the most of the downturnFine-tune your commercial strategy, hold on to key talent with recognition and rewards and use M&A toprune the portfolio while investing in assets that deliver new sources of growth. This will strengthen yourcompany’s position when the market recovers.

Navigate supply chain uncertainty
Turn supply chain challenges into a competitive advantage by enhancing planning, agility, and visibility. A
mature planning capability helps you stay a step ahead of risks and opportunities. A responsive supply chain
helps you deal with unexpected threats efficiently and profitably. And forward-looking visibility, enabled bydigitization, helps you enhance collaboration across your end-to-end supply chain ecosystem.

Tap into nontraditional talent
In a job hunter’s market, past strategies to attract, retain, and develop workers have become less effective.
Shifting your approach to incorporate nontraditional talent can help you fill open positions and increase
retention of sought-after talent once hired. A good starting point to a future-forward talent strategy isassessing the strategic skills that need to be added to the workforce as the nature of work evolves using
advanced data analytics.

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Research methodology
The insights in this report are drawn from a web-based survey of 151 senior executives from global semiconductor companies,
conducted in the fourth quarter of 2022 by KPMG and the GSA. In this report, percentages may not sum to 100 percent due torounding, unless otherwise noted. Respondent demographics are as follows.

Geography

Company size

Respondent title

9%

16%

Rest of world

1 U.S.

38%

26%

30%

EMEA

28%

$1B or more

1 Less than $100M

1 ASPAC$100M-$999M

Vice President
1 President/CEO/Chairman

17%

1 $100M–$999M

51%

1 EMEA ASPAC

1 Other OtherLess than $100M
1 $1B or more(Europe/Middle East/Africa)

1 Vice President

U.S.

1 Rest of the world

19%

26%

Other C-level (CFO, CIO, CMO, etc.

1 Director/Executive Director

21%

19%

President/CEO/Chairman

1 Other C-level(CFO, CIO, CMO, etc.)

Director/Executive Director

Company type

Industry segment
7%

11%
Venture-funded startup

Other

16%

31%

60%

Fab semiconductor
company
company(IDM) (IDM)
1 Fab semiconductor

1 Private
Public1 Venture-funded startup

Service, systems, software, or solutions provider

1 Industry supplier or vendor

1 Public Private
29%

1 Fabless semiconductor company

1 Service, systems, software, or solutions provider
Industry supplier or vendor

20%

1 Other26%

Fabless semiconductor company

Source: KPMG Global Semiconductor Industry Outlook Survey, n=151.

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Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

About KPMG and the GSA
KPMG Global Semiconductor practice

Notes

Technology touches virtually every aspect of our daily lives, especially now that much of the businessworld has entered the work-from-anywhere paradigm. The semiconductor industry is leading the way
in this digitized and connected world, and the KPMG Global Semiconductor practice is here to help
semiconductor companies navigate it. KPMG firms across the globe work with semiconductor clientsof all sizes to look beyond today’s pressing business challenges and anticipate the strategic choicesthat can best position them for both short- and long-term success.
For more information, please visit kpmg.com/semiconductors

1	KPMG Annual Semiconductor Industry Report 2022, n=152
2	KPMG Annual Semiconductor Industry Report 2022, n=152
3	WSTS Semiconductor Market Forecast Fall 2022 (WSTS,
November 29, 2022)
4	KPMG Semiconductor Industry Pulse Report (KPMG, May 2022)
n=28
5	A Wonderful World? 2023 Outlook (KPMG Economics, December
2022)
6	Global Inflation Tracker (Financial Times)
7	Central banks – summary of current interest rates (Global-Rates.
com)

Global Semiconductor Alliance
GSA is Where Leaders Meet to establish an efficient, profitable, and sustainable high-tech global
ecosystem encompassing semiconductors, software, solutions, systems, and services. A leadingindustry organization that represents more than 30 countries and 300 corporate members, including
100 public companies, GSA provides a unique, neutral platform for collaboration, where global
executives interface and innovate with peers, partners, and customers to accelerate industry growthand maximize return on invested and intellectual capital. Members of the GSA represent 70 percentof the over $550 billion semiconductor industry, and membership continues to grow.
Learn more at www.gsaglobal.org

8	The Rise Of Silicon Nationalism—And Why It Matters (Forbes.
com, April 19, 2022)
9	Wages Growth by Country (TradingEconomics.com)
10	Tech Layoffs In 2022: The U.S. Companies That Have Cut Jobs
(Crunchbase.com, December 9, 2022)
11	China Buys Fewer Chip-Making Machines as US Restrictions
Start (Bloomberg.com, November 22, 2022)12	FACT SHEET: CHIPS and Science Act Will Lower Costs,
Create Jobs, Strengthen Supply Chains, and Counter China(Whitehouse.gov, August 9, 2022)13	From dearth to glut: why there’s an oversupply of somecomputer chips (Marketplace.org, November 10, 2022)
14	Electric-vehicle charging gets a $7.5 billion boost (KPMG LLP,
2022)
15	Growth in automotive semiconductors outpace expectations(KPMG LLP, 2022)
16	Chip makers have a message for car makers: Your turn to pay(Reuters, August 3, 2022)
17	The growing challenge of semiconductor leadership (SIA/BCG,
2022)
18	The European Chips Act: A Strategy to Expand Semiconductor
Production Resiliency (Center for Strategic and International
Studies, March 7, 2022)
19	2023 Technology Industry CEO Outlook (KPMG LLP, 2022)

25

Global semiconductor industry outlook© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMGInternational Limited, a private English company limited by guarantee. All rights reserved.

About the authors
Lincoln Clark is the leader of the
KPMG Global Semiconductor
practice and a member of the
KPMG Technology, Media &Telecommunications practice.
He has more than 35 years ofexperience providing auditing
and accounting services,
including as lead partner for a significant numberof Fortune 500 companies. Lincoln has extensive
experience working with semiconductor companies
on initial public offerings, debt financings,
acquisitions, and equity financing.
lincolnclark@kpmg.com

Mark Gibson is the global
sector head of Technology,
Media & Telecommunications
for KPMG International. During
his more than 30 years in public
accounting and advisory, he hasserved clients in the technology,
consumer products, and retailindustries as both an Audit and Advisory partner.
Prior to his current role, Mark was the Seattle
office managing partner. He serves as the accountexecutive for several large clients in the Seattle andSilicon Valley markets and as global lead partner for aleading technology company, where he works with
KPMG professionals from Audit, Tax, and Advisory
in more than 15 countries.

Irene Signorino is a managing
director and Technology, Media& Telecommunications Strategy
Semiconductor Lead in the U.S.
She has 25 years of experience
working with semiconductor,
electronic materials, andadvisory companies in a wide
variety of functions, including strategic operations
and business management. Irene has led projects
to support the cost-effective expansion of a criticalfab, led teams in the creation of new product lines,
and led multiple multi-billion dollar transformational
integration and separation projects.
isignorino@kpmg.com

mgibson@kpmg.com

Contributors
Chris Gentle, Partner, Global Semiconductor practice, KPMG LLP, christiangentle@kpmg.com
Jessica Mueller, VP, Research, Global Semiconductor Alliance, jmueller@gsaglobal.org

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Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates and related entities.

kpmg.com/semiconductors
kpmg.com/socialmedia

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