Strongest '15 sector growth opportunities lie in sensors technology, Big Data applications and medical end market; longer term, executives cite robotics, biometrics, autotech as most important drivers; Moore's Law in questionSANTA CLARA, Calif., Dec. 10, 2014 — (PRNewswire) — Semiconductor industry business leaders remain cautiously optimistic about 2015 though there are divergent views on industry expansion, according to this year's Global Semiconductor Industry Survey from KPMG LLP, the U.S. audit, tax and advisory firm.
KPMG surveyed 155 semiconductor industry business leaders in companies based around the world to create this year's KPMG Semiconductor Industry Confidence Index, which edged higher to 59, compared to 57 a year ago. A value above 50 is considered an optimistic outlook on the business environment for the next 12 months. The index is based on survey responses to questions on revenue, profitability, workforce, capital spending and R&D investment.
Respondents are split on what expansion stage the industry will see next year – or whether it will expand at all. Thirty-seven percent believed the industry cycle will be in a late expansion stage in 2015, 36 percent said early expansion stage, 19 percent believed the industry will move from expansion to contraction, and 8 percent said the industry is no longer cyclical. Interestingly, more U.S. respondents (43 percent) said late expansion stage, while more Asia Pacific respondents (38 percent) said early expansion stage.
"Last year's predictions for accelerated growth have largely been fulfilled, but consistently lower revenue guidance for the fourth quarter of 2014 emerged as we were conducting this survey, and that has affected results" said Gary Matuszak, global chair of KPMG's Technology, Media and Telecommunications practice. "The lower guidance has clearly held down a more meaningful increase in the 2014 confidence index and lowered growth expectations for 2015."
Semiconductor company leaders' outlook for industry profitability and company revenue growth over the next year and next three years was similar across the board. Greater than 80 percent of the business leaders expect an increase, up from less than 80 percent a year ago, though lower growth rates are predicted in both cases. Less semiconductor executives than a year ago anticipated 6 to 10 percent growth, while more of them saw a one to five percent increase.
"The semiconductor industry faces a myriad of challenges, including accurately forecasting demand, investing in the right new market opportunities, managing the higher development costs of more integrated solutions and navigating increased competition in China," said Packy Kelly, KPMG Global Semiconductor Practice leader. "How semiconductor companies address these challenges will help determine whether 2015 is another record year."
Most important sector, end markets, application markets
The majority of survey respondents (61 percent) predict sensors will provide the strongest sector growth opportunity for the industry in 2015. Sensors are a key to automotive technology applications (see video), touch screens, wearables and the Internet of Things.
"Competition in the industry has never been more intense as the bar is raised constantly for new product introductions and the time to market for each new design is consistently compressed," said Kelly.
Among end markets, medical (66 percent) and networking and communications (62 percent) will provide the strongest growth opportunity in 2015, according to semiconductor executives.
Semiconductor company business leaders said Cloud, Big Data and the wireless/mobile application markets are seen as their company's most important semiconductor revenue drivers over the next year. However, over the next three years, several emerging application markets will be most important, led by robotics, Big Data and automotive sensors, with Cloud, medical imaging, biometrics/security and wearables also attractive.
Rising research and development costs pose biggest challenge
Increasing R&D costs are the biggest issue facing the semiconductor industry during the next three years, said 43 percent of the respondents. Another 37 percent cited achieving technology breakthroughs, such as those resulting from Moore's Law, as the biggest issue, and about one-third (32 percent) pointed to the high cost for plant and equipment.
The challenge of continuing Moore's Law 50 years later
Asked about Moore's Law, which marks its 50th anniversary next year, 26 percent of the semiconductor company business leaders expected the benefits of Moore's Law to continue for the foreseeable future and 16 percent said it has already ended. Fifty-eight percent said Moore's Law will no longer apply at various nodes less than 22 nanometers. Moore's Law, named after Intel co-founder Gordon Moore, states that the number of transistors, or processing power, that can be placed on an integrated circuit doubles approximately every two years.
At the same time, survey respondents continued to believe in the value of 450mm wafers, though this year's results indicated higher uncertainty about when the shift will occur. Over 4 in 10 said that 450mm wafer production will have a greater impact on the industry than production at a sub 20nm technology node. In a shift from 2013, 54 percent said transition to 450mm wafers will occur between 2015 and 2018, though more likely in 2017-2018 (39 percent). In last year's survey, 63 percent believed the transition would occur by 2018.
Geographic markets for revenue and employment growth
Semiconductor executives said that the U.S., China and India will continue to be the most important markets for their company's revenue in 2015 and three years from today.
Six out of 10 indicated the U.S. was the most important end market for revenue in 2015, 55 percent said China, and 43 percent said India for 2015. The survey findings were similar for these countries when considering top revenue markets three years from today.
Executives also forecast moderate expansion in their company's global workforce. They continued to cite the U.S. (70 percent), China (64 percent) and India (42 percent) as the top three markets for headcount growth in 2015.
Additional key findings from the semiconductor survey:
- Eighty-three percent said their company's semiconductor-related capital spending will increase for the next year, with 22 percent expecting an increase greater than 10 percent. Last year, just 12 percent said spending would increase by more than 10 percent.
- Most (82 percent) expected their company's semiconductor-related capital spending to increase three years from today. More respondents than last year expected an 11 percent or greater increase in capital spending (26 percent compared to 18 percent).
- Over 8 out of 10 expected their company's semiconductor-related R&D spending to increase in the next year. However, compared to last year, fewer respondents predicted 6 to 10 percent growth and more expected one to five percent growth.
- Two-thirds, down from 73 percent last year, anticipated an increase in the number of merger and acquisition deals in the industry next year.
KPMG Global Semiconductor Industry Survey
KPMG's study, conducted in September, surveyed 155 semiconductor industry business leaders, primarily senior level executives, including device, foundry and fabless manufacturers. More than 87 percent of the companies represented in the survey have annual revenue of $1 billion or more.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm ( www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.
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SOURCE KPMG LLP