Talent shortages and geopolitics will be the AI chip industry’s biggest challenges in 2025

The semiconductor industry stands at a crossroads as artificial intelligence drives unprecedented optimism while geopolitical tensions and talent concerns create complex challenges for 2025.

Key findings from industry research: KPMG and the Global Semiconductor Alliance’s 20th annual outlook report reveals strong confidence among semiconductor executives for 2025, with 92% forecasting industry growth.

• The KPMG Semiconductor Industry Confidence Index increased to 59 from 54 in 2023, reflecting positive sentiment across revenue, profitability, workforce, R&D, and capital expenditures
• Small companies (under $100 million revenue) displayed the highest optimism among all segments surveyed
• 86% of executives expect their company’s revenue to grow in 2025, with 46% projecting growth exceeding 10%

AI emerges as primary growth driver: For the first time in the survey’s history, artificial intelligence has displaced automotive as the top semiconductor revenue driver.

• Microprocessors and GPUs used for AI processing are now considered the leading product opportunity
• Cloud/data centers rose to second place among revenue drivers, followed by wireless communications
• High-bandwidth memory and other AI-enabling technologies are projected to have the greatest industry impact over the next three years

Geopolitical and talent challenges: Territorial tensions, trade restrictions, and workforce concerns emerge as the primary challenges facing the industry.

• Armed conflicts and tariffs rank as the most concerning geopolitical factors
• Government subsidies and semiconductor technology nationalization are also significant concerns
• Companies are prioritizing supply chain flexibility and geographic diversity to improve resilience
• Talent development and retention remain crucial priorities amid surging chip demand

Competitive landscape evolution: Non-traditional players are reshaping industry dynamics, creating new competitive pressures.

• 39% of executives view talent competition as the primary industry impact
• The emergence of new competitors (35%) has become a nearly equal concern, up significantly from 19% last year
• Tech giants and platform companies are increasingly competing with traditional semiconductor players
• Significant investments and innovative strategies will be essential for companies to maintain competitive positions

Looking ahead – Industry transformation: As the semiconductor industry adapts to AI-driven demand and geopolitical pressures, success will likely depend on companies’ ability to navigate an increasingly complex landscape while balancing technological innovation with strategic risk management.