KPMG releases Semiconductor Industry Confidence Index

The 2013 Global Semiconductor Industry Survey from KPMG has revealed that semiconductor business leaders see less momentum today for a sustained industry recovery in 2014 than a year ago.

KPMG surveyed 193 semiconductor industry business leaders in companies based around the world, half of them in companies based in the Asia-Pacific, to create the 2013 KPMG Semiconductor Industry Confidence Index, which remains flat at 57. This reflects a continued positive view of the sector’s revenue and profitability growth, but also suggests the momentum executives forecast a year ago has waned. In the 2012 survey, the index increased from 46 to 57, indicating expectations of strong industry growth.

Gary Matuszak, global chair of KPMG’s technology, media and telecommunications practice, said that muted optimism best describes the semiconductor outlook for 2014 and that lower levels of anticipated revenue growth reflect more short-term uncertainty than a year ago.

‘We see reductions at the upper ends of growth predictions yet higher percentages of respondents predicting modest improvements. This reflects both the industry’s penetration into broader applications and broader geographic markets, resulting in less volatility combined with a slowing growth rate for mobile devices,’ he added.

About three quarters of the semiconductor executives, similar to last year, say their company’s revenue growth will increase in the next year. However, those expecting revenue to increase more than 10 per cent dropped by a third.

On the other hand, business leaders are more optimistic about annual industry profitability. Seventy-eight per cent say industry profitability will increase over the next year, compared with 71 per cent in 2012. The semiconductor executives anticipating a six per cent to 10 per cent hike in industry profitability jumped by almost 50 per cent.

At the same time, optimism continues regarding the industry’s longer-term prospects. Business leaders point to a broadening applications market for semiconductor industry revenue growth over the next three years, signalling reduced dependence on the three historically most important applications: wireless handsets/communications; consumer electronics; and computing.

Ron Steger, global semiconductor practice leader at KPMG, said the broadening of applications markets can lead to more diverse revenue sources and a lower likelihood of feast-or-famine cycles.

‘As computing declines in relative importance for the semiconductor industry, the companies that had the foresight to identify and invest in emerging application markets such as automotive and medical, as well as devices that enable the emerging internet of things, will be well positioned to enjoy competitive advantages.’