KPMG: AI brings structural opportunities, while multiple real-world risks constrain the sustainability of the cycle.

KPMG releases the "2026 Global Semiconductor Industry Outlook" report. The report argues that AI is not a short-term bubble, but a structural shift in the market, driving demand expansion across the entire industry chain. At the same time, the industry also faces multiple real-world constraints. Tariff and trade policy risks have risen to the industry's top concern, while power supply for advanced chip manufacturing, high-end talent shortages, and supply chain restructuring pressures have become the main variables constraining industry development. More than 60% of surveyed companies plan to expand capital expenditure, but they also list enhancing supply chain resilience as a core strategic task for the next three years. The report also notes that although market optimism is high, whether the super cycle can continue depends on whether companies can balance capacity expansion, capital investment, and multiple risks including geopolitics, energy, and talent. Against the backdrop of the super cycle reshaping the semiconductor industry, risks and opportunities coexist. Artificial intelligence has become a primary revenue engine for the first time. The survey shows that 73% of business leaders regard AI as a major factor in their revenue growth, up from 67% last year, and ahead of cloud computing and data centers. Surging AI computing demand is driving memory demand higher: 67% of respondents believe memory has the greatest growth potential, roughly on par with 66% for microprocessors, the first time this has occurred in the history of the survey. This indicates that AI is driving comprehensive market development, with computing, storage, and mobile data chips growing simultaneously. Semiconductor industry leaders have already made supply chain flexibility their top strategic priority for responding to geopolitical pressure and trade uncertainty. 45% of respondents said that for the first time in three years, their focus on improving supply chain responsiveness and flexibility has surpassed talent development. Their development priorities are clear: combine building in-house and buying externally, implement digital planning, and shorten the overall supply chain response cycle. Business leaders are beginning to bring AI internally to address the talent gap. 66% of companies plan to use AI to improve employee productivity, including upgrading team skills, automating routine tasks, and freeing up scarce engineering and operations talent to focus on high-value work. These growth-promoting measures are not only appearing at the company level; the same is true across the industry as a whole. Although risks have emerged, confidence continues to rise. In 2025, the semiconductor industry confidence index rose from 59 in 2024 to 63, reaching the third-highest level in the 21 years we have conducted this survey. Many companies are beginning to formulate growth plans, and most of them expect to increase capital expenditure, headcount, and IT investment. This optimism stems from strong cross-quarter demand signals, although business leaders remain vigilant about geopolitics, trade friction, and resource constraints. Although the survey shows that AI is opening a semiconductor super cycle, many technology leaders still have concerns about demand and its sustainability, tied to supply chain constraints, energy supply, and geopolitical instability. To remain resilient, semiconductor companies should build flexible business models, diversify supply chains to reduce geopolitical risk, and increase R&D investment to lead the next round of architectural and application changes. At the same time, companies should also use AI to empower employees so they can adapt to AI-enabled ways of working. In short, only with the right strategy can business leaders lay the foundation for strong corporate performance over the next decade. Against the backdrop of a global economy marked by extremes, AI is leading an unprecedented boom, attracting massive investment and driving rapid development in chip manufacturing and the technology ecosystem. At the same time, traditional industries face challenges such as layoffs, blocked trade, and fiscal tightening, creating a sharp contrast. The semiconductor industry is at the center of this transformation, and AI has surpassed cloud computing to become the semiconductor industry's largest revenue DRIVE. However, leveraged investment, macroeconomic volatility, and global events have also raised concerns about the sustainability of demand. The survey shows that AI market demand is real, not short-term hype. The survey also shows that if business leaders can build flexibility, diversify supply, and make good use of AI to empower operations, it will help companies gain significant advantages over the next decade. AI becomes the main driver of revenue growth 73% of respondents believe AI is their biggest revenue growth driver, an increase from last year. The widespread application of AI, mainly in scenarios such as defect detection, sales proposal generation, and autonomous driving, all depends on the high-speed data processing capabilities provided by semiconductors. Chips serve as the "muscle and memory" of AI systems, determining whether they can achieve efficient decision-making and large-scale deployment. Therefore, chip selection is gradually becoming the starting point for many companies' product roadmaps and strategic planning. AI is rapidly and broadly driving semiconductor industry growth, far exceeding previous technology waves, and its importance has surpassed cloud computing. Data shows that the global AI semiconductor market is expected to exceed $438.5 billion by 2029, with a five-year compound annual growth rate of 25.9%. AI is not just an added feature, but a core force driving revenue. The key challenge now is whether the supply chain has sufficient responsiveness. Memory ties with microprocessors as the largest growth opportunity In the latest semiconductor industry survey, memory solutions entered the top growth ranks for the first time, mentioned by 67% of executives, making it one of the fastest-growing technology areas and significantly narrowing the gap with microprocessors. This trend is mainly driven by AI, due to rising strong demand for high-bandwidth, high-capacity memory. Technology giants such as Amazon, Google Cloud, and Microsoft Azure are accelerating their push into high-bandwidth memory, driving the industry toward advanced memory solutions, and some DRAM manufacturers are also shifting to produce high-bandwidth memory to meet market demand. This shift not only intensifies DRAM supply tightness, but also marks a deep reshaping of the competitive landscape of the semiconductor industry chain. AI is no longer an added feature, but a major force capable of creating revenue growth. As AI drives overall industry demand growth, whether the supply chain can respond quickly has become the next strategic question. Supply chain becomes the top issue The survey shows that for the first time in three years, the supply chain has become the top priority in the semiconductor industry. This shift reflects the real challenges companies face in terms of risks exposed by the pandemic, geopolitical tensions, and difficulty obtaining key raw materials such as rare earths. 45% of respondents believe enhancing supply chain responsiveness and flexibility has become urgent, while geopolitical uncertainty was also seen by 37% of respondents as the third-largest risk over the next three years. Will energy become a bottleneck? As AI-driven demand surges, energy supply has become an important issue on the supply side. 34% of respondents worry that within the next three years they will be unable to provide sufficient electricity for their own production equipment, while the challenge facing data centers is even more severe, with 58% of respondents concerned that technology giants will struggle to obtain enough energy to support AI infrastructure expansion. Coordinated response between technology and energy: To address energy constraints, companies are using AI to optimize energy efficiency and increase data center capacity without increasing energy consumption. At the same time, the global semiconductor industry is highly dependent on a complex global network of specialized suppliers and manufacturing hubs. Governments will intervene more in how and where chips are manufactured, and this complexity also brings new opportunities and risks. Resilience building and regional diversification strategies: To enhance supply chain resilience, 54% of respondents plan to expand the regional distribution of their supply chains within the next 12 months to ensure supply can still be guaranteed if problems arise in one region. In addition, 36% of respondents plan to adopt generative AI in procurement and supply chain management, using predictive analytics and automation tools to respond to shortages, adjust inventory, and ensure capacity. AI aims to empower employees rather than replace them AI is empowering employees rather than replacing them, helping semiconductor companies address talent shortages and improve productivity. As human-machine collaboration deepens, the definition of competitive advantage continues to evolve, and semiconductors are becoming an important pillar of AI Shanghai New World. At present, within semiconductor companies, AI has been widely used in areas such as IT, R&D, supply chain, and marketing, with 44%, 36%, and 30% of companies respectively deploying AI to optimize processes, forecast demand, and conduct precision marketing. Only companies that take the lead in transforming product, operational, and market strategies can lead in the next decade. AI has not eliminated companies' need for human employees. Respondents noted that talent has become a major challenge second only to tariffs, and cultivating and retaining talent is one of companies' top strategic tasks. Optimists press ahead at full speed despite risks Facing geopolitical and resource challenges, semiconductor companies' confidence continues to strengthen, with the confidence index rising to 63, the third-highest in 21 years. Market expectations are positive, with the global market size expected to reach $1 trillion in 2026. Since late 2022, sales have grown by nearly 50%, and more than half of companies expect revenue growth of more than 11% over the next year, and plan to drive growth through hiring, IT upgrades, and M&A. Nevertheless, 58% of companies remain concerned about fluctuations in customer demand and stay vigilant about key resource risks. To achieve steady growth, companies are optimizing orders, product portfolios, and investment pace, expanding capacity, strengthening talent, and at the same time hedging risks through diversified supply and prudent capital allocation, striving to turn optimism into sustainable profitability. Figure: Global semiconductor market and industry confidence (unit: USD billion) Source: Global Semiconductor Industry Survey jointly conducted by KPMG and the Global Semiconductor Alliance, Q4 2025 For semiconductor companies, AI is no longer an emerging opportunity, but the industry's most important single revenue driver. This shift requires business leaders to quickly adjust product, operational, and capital strategies around AI, and flexibly adapt to regional dynamics. To this end, it is recommended to proceed from the following aspects: Seize the growth opportunity created by memory and microprocessors advancing side by side: The surge in demand for memory products brings important opportunities. If business leaders can adjust products, customer targets, and energy strategies in time to meet emerging demand such as large-scale data centers, they can gain an advantageous position for sustained growth. Enhance supply chain flexibility to respond to geopolitical turbulence: In the face of trade barriers and resource risks, companies must strengthen supply chain flexibility, reduce weak links, and improve responsiveness to maintain innovation and competitiveness. Use AI to strengthen talent resilience and productivity: Generative AI and agentic AI are reshaping various functional areas of semiconductors. Corporate executives must formulate strategies that balance talent and technology to accelerate decision-making, optimize processes, and drive innovation. Maintain strategic growth amid economic and geopolitical uncertainty: Despite high industry confidence and record capital expenditure, business leaders still need to strike a balance between aggressive expansion and risk control, avoid overinvestment, and ensure they build competitive advantage in a high-growth cycle. Li Jiming, KPMG China Semiconductor Industry Leader Partner, said that as the world's largest semiconductor consumer market, China is entering the opening period of the "15th Five-Year Plan." The plan emphasizes scientific and technological self-reliance and self-strengthening, new quality productive forces, a modern industrial system, and the resilience and security of industrial and supply chains, with semiconductors placed at the core. At present, China's semiconductor industry shows multiple forces advancing in parallel: demand from AI computing power, smart vehicles, industrial automation, and consumer electronics forms traction; mature-node capacity expansion, advanced packaging and Chiplet exploration, and accelerated domestic verification of equipment and materials; at the same time, advanced processes, high-end EDA/IP, and key equipment remain constrained. China's policy orientation, capital expenditure, and domestic substitution process will profoundly affect global supply and demand, technology routes, mature-node competition, and multinational corporate layout, and may also change the shape and pace of the "super cycle." Li Jiming believes that the answer to "Has the semiconductor industry super cycle begun?" is not a simple "yes" or "no." A more accurate judgment is that we are currently in the early stage of a super cycle, but its development will be condition-dependent, layered, and regionally uneven. The implementation effect of China's "15th Five-Year Plan," global trade and manufacturing reshoring, the return on AI investment, and the degree to which supply chain bottlenecks are eased will determine whether this round of growth is a short-cycle rebound or a long-term structural restructuring. The strategic choices business leaders make now will not only determine their companies' own development trajectories, but also profoundly affect the future landscape of global technological development.