KPMG has released its "2026 Global Semiconductor Industry Outlook" report. The report argues that AI is not creating a short-term bubble, but rather driving a structural shift in the market that is expanding demand across the entire supply chain. At the same time, the industry faces multiple real-world constraints, with tariff and trade policy risks rising to become the sector's top concern, while power supply for advanced chip manufacturing, a shortage of high-end talent, and pressure to restructure supply chains have become the main variables constraining industry development. More than 60% of surveyed companies plan to increase capital expenditure, but they also list enhancing supply chain resilience as a core strategic priority for the next three years. The report also cautions that while market optimism is running high, whether the super-cycle can be sustained depends on whether companies can balance capacity expansion and capital investment against geopolitical, energy, and talent risks.
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 view 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 up memory demand: 67% of respondents believe memory has the greatest growth potential, roughly on par with microprocessors at 66%—the first time this has occurred in the survey's history. This indicates that AI is driving comprehensive market development, with computing, storage, and mobile data chips growing in tandem. Semiconductor industry leaders have already made supply chain flexibility their top strategic priority for addressing geopolitical pressures and trade uncertainty. 45% of respondents say that for the first time in three years, the emphasis on improving supply chain responsiveness and flexibility has surpassed talent development. Their priorities are clear: combining in-house development with external sourcing, implementing digital planning, and shortening overall supply chain response cycles. Business leaders are beginning to bring AI in-house to address the talent gap. 66% of companies plan to use AI to improve employee productivity, including upskilling teams, automating routine tasks, and freeing up scarce engineering and operations talent to focus on high-value work. These growth-promoting measures are not limited to the corporate level—the industry as a whole is following suit.
Risks have emerged, but 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 the survey has been conducted. Many companies are drawing up growth plans, with most expecting to increase capital expenditure, headcount, and IT investment. This optimism stems from strong cross-quarter demand signals, even as business leaders remain vigilant about geopolitics, trade friction, and resource constraints. Although the survey shows that AI is ushering in a semiconductor super-cycle, many technology leaders remain concerned about demand and its sustainability, with these concerns tied to supply chain constraints, energy supply, and geopolitical instability. To maintain resilience, 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 transformation. At the same time, companies should use AI to empower employees so they can adapt to AI-driven 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 of chip manufacturing and the technology ecosystem. Meanwhile, traditional industries face layoffs, trade disruptions, and fiscal tightening, creating a sharp contrast. The semiconductor industry is at the center of this transformation, with AI having surpassed cloud computing to become the largest revenue driver for the sector. However, leveraged investment, macroeconomic volatility, and global events have also raised concerns about demand sustainability. The survey shows that AI market demand is real, not short-term hype. The survey also indicates 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 consider AI 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. As a result, 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 additional feature but a core force driving revenue, and the key challenge now is whether the supply chain has sufficient responsiveness.
Memory and microprocessors stand side by side as the largest growth opportunities
In the latest semiconductor industry survey, memory solutions entered the top growth ranks for the first time, cited by 67% of executives as one of the fastest-growing technology areas, significantly narrowing the gap with microprocessors. This trend is mainly driven by AI, which has rising demand for high-bandwidth, high-capacity memory. Tech giants such as Amazon, Google Cloud, and Microsoft Azure are accelerating their push into high-bandwidth memory, steering the industry toward advanced memory solutions, and some DRAM manufacturers are shifting to produce high-bandwidth memory to meet market demand. This shift has not only intensified DRAM supply tightness but also marked a deep reshaping of the competitive landscape in the semiconductor supply chain. AI is no longer an additional feature but a major force capable of creating revenue growth. As AI drives overall industry demand growth, whether the supply chain can respond quickly becomes 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 semiconductor industry's top priority. This shift reflects the real challenges companies face regarding risks exposed by the pandemic, geopolitical tensions, and difficulties in obtaining key raw materials such as rare earths. 45% of respondents believe enhancing supply chain responsiveness and flexibility has become urgent, while geopolitical uncertainty is seen by 37% of respondents as the third-largest risk over the next three years.
Is energy becoming 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 not be able to provide sufficient electricity for their own production equipment, while the challenge for data centers is even more severe, with 58% of respondents concerned that tech giants will struggle to secure 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 raising energy consumption. At the same time, the global semiconductor industry is highly dependent on a complex global network of specialized suppliers and manufacturing hubs, and governments will intervene more in how and where chips are made; 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 even 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 address shortages, adjust inventory, and ensure capacity.
AI aims to empower employees, not replace them
AI is empowering rather than replacing employees, 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 the new AI world. At present, within semiconductor companies, AI is already widely used in IT, R&D, supply chain, and marketing, with 44%, 36%, and 30% of companies deploying AI to optimize processes, forecast demand, and enable precision marketing, respectively. Only companies that are first to transform their product, operational, and market strategies can lead over the next decade. AI has not eliminated the need for human employees. Respondents note that talent has become a major challenge second only to tariffs, and cultivating and retaining talent is one of companies' top strategic priorities.
Optimists press ahead 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 by 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, with plans to drive growth through hiring, IT upgrades, and M&A. Nevertheless, 58% of companies remain concerned about customer demand volatility and stay alert to key resource risks. To achieve steady growth, companies are optimizing orders, product portfolios, and investment pacing, expanding capacity, strengthening talent, and hedging risks through diversified supply and prudent capital allocation, striving to turn optimism into sustainable profitability.
Global semiconductor market and industry confidence (unit: USD billions)
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 single most important revenue driver. This shift requires business leaders to quickly adjust product, operational, and capital strategies around AI and adapt flexibly to regional dynamics. To this end, recommendations include the following:
Seize the growth opportunity as memory and microprocessor demand advance side by side: The surge in memory product demand brings important opportunities. If business leaders can promptly adjust products, customer targets, and energy strategies to meet emerging needs such as large-scale data centers, they can gain an advantageous position for sustained growth.
Enhance supply chain flexibility to address geopolitical turbulence: Facing 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 semiconductor functions across the board. Executives must develop 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 balance aggressive expansion with risk control, avoid overinvestment, and ensure they build competitive advantages during 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 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 operating in parallel: demand from AI computing power, smart vehicles, industrial automation, and consumer electronics forms a pull; mature-node capacity expansion, advanced packaging and Chiplet exploration, and accelerated domestic verification of equipment and materials are advancing; 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 roadmaps, mature-node competition, and multinational corporate layouts, and may also change the shape and pace of the "super-cycle." Li Jiming believes that the answer to "Has the semiconductor super-cycle begun?" is not a simple "yes" or "no." A more accurate judgment is that it is currently in the early stage of a super-cycle, but its development will be condition-dependent, tiered, and regionally uneven. The implementation effects of China's 15th Five-Year Plan, global trade and manufacturing reshoring, AI investment returns, and the degree to which supply chain bottlenecks ease will determine whether this round of growth is a short-cycle rebound or a long-term structural reconstruction. The strategic choices business leaders make now will not only determine their companies' own development trajectories but also profoundly influence the future landscape of global technological development.