Hey everyone and welcome back for another deep dive.
Today we're cracking open the KPMG 2024
global semiconductor industry outlook report.
Ooh, interesting.
Yeah, right.
They surveyed 172 big shot execs
to see what they think is coming next
for the semiconductor industry.
So like the CEOs and whatnot.
Exactly.
And let me tell you,
there's some pretty exciting stuff in here.
We're talking major comebacks, the AI explosion.
I've had whispers about that.
Oh, it's more of the whispers at this point,
I can assure you.
And there's also this underlying challenge,
like a hidden current,
that's keeping those execs up at night.
Okay, now I'm intrigued.
Well, let's dive right in and find out.
Sounds good to me.
So one of the things that really jumped out at me
from this report is just the sheer optimism.
Really?
Yeah, like remember last year,
there was a lot of chatter about a possible downturn
in the semiconductor market.
Oh yeah, for sure.
But now, forget about it.
A full 85% of these execs are predicting growth in 2024.
Wow, that's a big turnaround.
It really is.
They're even saying global semiconductor sales
could hit $588 billion.
That's a huge jump from last year.
Absolutely massive.
And get this, by 2030,
they're projecting the industry
could reach a trillion dollars in sales.
A trillion?
A trillion, it's wild.
Okay, so something big must be driving all of this.
Oh, you better believe it.
Yeah.
It can't just be everyone upgrading their phones, right?
Yeah, there has to be more to it than that.
Well, the report points to two major factors
that are really fueling this growth.
Artificial intelligence.
Ah, misses.
And the automotive industry.
Cars still.
I thought that chick shortage was using up.
That's what's so interesting,
but we'll get to that in just a second.
Okay, I'm all ears.
So first, AI.
It's basically the rocket fuel
propelling this incredible growth, you know?
The report actually ranks it
as the second most important revenue driver
for semiconductor companies.
Second, what's number one?
That would be our old friend, the automotive industry.
Interesting, so AI is really having
that much of an impact already.
Oh yeah, all those incredible AI advancements
we keep hearing about,
they're translating into a huge demand for chips.
Makes sense.
What kinds of chips are we talking about here?
Well, we're seeing a massive surge in demand
for microprocessors, especially GPUs.
GPUs, those are like for graphics cards, right?
Right, but they're also the workhorses behind AI,
crunching all that data for complex AI models.
Ah, so they're not just for gaming anymore?
Not at all.
In fact, the report specifically
singles out microprocessors, especially GPUs,
as like the biggest opportunity for growth.
Huh, that's pretty amazing.
It is.
But now let's talk about that automotive industry.
I was a bit surprised to see it still holding
the top spot as a revenue driver,
especially with all the talk about
the chip shortage you're using up.
Yeah, I was curious about that too.
You'd think the demand would start to slow down, right?
You'd think so, but it's actually the opposite.
Car companies are still hungry for more chips.
Why is that?
Are they stockpiling or something?
It's not about stockpiling, it's about the future of cars.
Think electric vehicles.
Right, those need chips.
And then all those advanced driver assistance systems,
like lane assist and automatic braking.
Oh yeah, those features are getting pretty common.
Exactly, and of course, the race
towards fully autonomous driving.
So basically, cars are becoming more like computers on wheels?
You got it.
And all of these trends are pushing the need
for more and more sophisticated, powerful chips.
So even though the immediate chip shortage
might be easing up, the long-term demand
from car companies is actually growing.
Precisely.
KPMG predicts that the automotive semiconductor market
could hit a jaw-dropping $250 billion by 2040.
Wow, $250 billion.
That's almost half of the entire projected
semiconductor market by that time, just for cars.
So we have this exciting story of growth
with AI and automotive in the lead roles.
It is exciting.
But like any good story, there's a twist.
Oh, a plot twist.
You could say that.
The report also hints at some potential roadblocks ahead.
Oh no, roadblocks.
What kind of roadblocks?
Well, there's one major challenge
that could really throw a wrench in the works,
the talent shortage.
Uh-oh, the infamous talent shortage.
I know, right?
I feel like we've been hearing about this forever.
It's like the industry's Achilles heel.
Exactly.
And it's not just lingering.
It's actually getting worse.
Really?
Yeah.
For the third year in a row, the talent shortage
is the number one concern for semiconductor companies.
OK, so how bad is it?
Well, basically, the industry is growing so fast
that there just aren't enough skilled workers to keep up.
It's like a classic supply and demand problem,
but with much higher stakes.
Exactly.
Think about it.
They can build these massive state-of-the-art chip
factories.
Right.
We've seen the news about those.
But they might not have enough people to actually run them.
Ooh, that's a problem.
It's a huge bottleneck.
And it's not just engineers either.
Oh.
Who else is in demand?
We're talking about a shortage across the board,
technicians, data scientists, AI specialists.
So all the hot jobs right now.
Even skilled tradespeople to build and maintain those factories.
So it's not just a tech industry issue.
It's an economic and social challenge, too.
You hit the nail on the head.
And it's only going to get tougher
as the industry continues to boom.
So what are companies doing about it?
Are they just sitting there, wringing their hands?
Definitely not.
The report highlights how they're scrambling
to address this talent crunch.
Like what?
Throwing money at the problem?
Well, that's part of it.
They're offering attractive bonus packages.
Good sense.
But they're also getting creative.
They're partnering with universities,
offering remote work options, basically pulling out
all the stops to attract and retain skilled workers.
I guess they have to.
It's almost ironic, right?
We're talking about this cutting-edge industry.
The industry of the future.
Yeah.
They're pushing the boundaries of AI and self-driving cars.
And their biggest hurdle is finding
enough humans to make it all happen.
It really shows the human element
in all of this high-tech stuff.
It does.
Without a skilled workforce, all those ambitious plans
for growth and innovation could fall apart.
That's a sobering thought.
It is.
But hold on.
There's another layer of complexity
we haven't even touched on yet.
Oh, there's more.
The report also mentions rising geopolitical tensions.
Oh, this is where things get really complicated.
You're telling me.
Specifically, they talk about something
called territorialism.
Territorialism.
What does that mean in this context?
It basically refers to the nationalization
of the semiconductor industry.
So instead of this globally interconnected chip-making
ecosystem we have now, countries are
trying to bring more production back home.
That's exactly it.
Governments are realizing just how crucial these chips are
for, well, basically everything.
National security, consumer products, everything.
And they want to secure their own chip supplies,
reduce their reliance on foreign suppliers.
Makes sense from a national security standpoint, I guess.
Right.
So they're offering incentives, investing
in local manufacturing.
But wouldn't that disrupt the existing global supply chains?
That's the million dollar question.
And it's causing some serious ripples in the industry.
So how are companies responding to this shift?
Well, the report highlights one key strategy.
Diversification.
As in not putting all their eggs in one basket.
Exactly.
Instead of relying heavily on a single region, like Asia,
they're spreading out their operations
to different parts of the world.
So it's like a giant chess game with governments and companies
making strategic moves.
You've got it.
And the stakes are incredibly high.
I bet.
So what are some of the specific regions companies
are eyeing for this diversification?
That's a great question.
And it leads us into some of the other fascinating findings
from this report.
OK, lay it on me.
I'm ready for part two.
Well, stay tuned.
We'll be right back after a short break.
So you were about to spill the beans on which regions
are catching the eye of these chip making execs.
Right.
Well, the report highlights some really interesting shifts
happening.
OK, lay it on me.
Well, one region that's really heating up is Southeast Asia.
Southeast Asia.
Yep.
We're talking about countries like Vietnam, Malaysia,
Thailand.
Interesting.
I guess they've been building up their manufacturing sectors
for a while now.
They have.
And they offer a pretty sweet deal
for semiconductor companies.
Yeah.
Favorable manufacturing costs.
Right.
Got to keep those costs down.
Once they have skilled labor pools and some pretty
enticing government incentives.
So it's a win-win, I guess.
Exactly.
Makes a lot of sense why companies are looking that way.
For sure.
But what about closer to home?
Is there any movement towards bringing production back
closer to the US or Europe?
You're talking about near shoring.
Yep.
That's the buzzword.
Well, the report actually calls out near shoring
as a key strategy for companies trying
to navigate all these geopolitical uncertainties.
So it's not just talk.
There's actual action happening.
Oh, yeah.
Big time.
The US government, for instance,
has been pushing hard with its CHIPPS and Science Act.
I've heard about that.
It's offering billions of dollars in incentives
to lure companies into building new chip factories
right here on American soil.
Wow.
Billions with a B.
Billions.
It's a serious play by the US to regain its footing
as a semiconductor powerhouse.
Makes sense.
What about Europe?
Are they doing anything similar?
Europe is definitely not sitting on the sidelines.
The European Union has its own CHIPPS Act
aiming to beef up its semiconductor industry
and reduce reliance on Asia.
So they're playing the same game.
Pretty much.
We're seeing investments pouring into new factories,
R&D facilities, and all sorts of initiatives
to attract and train skilled workers over there.
Sounds like a global race is heating up.
It is.
Governments and companies are all
trying to grab their slice of that semiconductor pie.
Makes you wonder who will come out on top.
Time will tell.
But this whole diversification thing,
it's not exactly a walk in the park, right?
I imagine it's pretty complicated to just pick up
and move a massive manufacturing operation
to a whole new country.
Oh, yeah.
I'm sure there are tons of headaches involved.
The report actually acknowledges that.
They say diversification comes with its own set of hurdles.
Like what?
What kind of hurdles?
Well, companies have to deal with different regulations
in each country.
Paperwork.
They've got a set of completely new supply chains.
That can't be easy.
And of course, they have to make sure
they have access to all the skilled workers they need
in these new locations.
It's not just about building factories.
It's about building entire ecosystems.
That's a great way to put it.
And then there's a whole incentive game
that governments are playing.
Yeah, you mentioned that earlier.
What kind of incentives are we talking about?
Like tax breaks?
Tax breaks, for sure.
But it goes way beyond that.
Really?
We're talking subsidies for building those factories.
Like free money?
Pretty close.
There's funding for research and development,
even streamlined permitting processes
to get things moving faster.
Wow, it sounds like they're really
rolling out the red carpet for these chipmakers.
They are.
It's a pretty competitive landscape out there,
with countries practically begging companies to set up shop.
The semiconductor industry is getting the VIP treatment,
for sure.
It is.
But with all this focus on manufacturing,
it kind of makes you wonder, what's that?
Are we overlooking the other parts of the value chain?
Like what about the brains behind these chips?
The folks who are actually designing
the next generation of semiconductors.
Ah, the designers and innovators.
Yeah.
It feels like all the attention is on building more factories.
But what about the innovation side of things?
Good point.
That's where the real magic happens.
Exactly.
And that brings us to another crucial theme
highlighted in this report.
Ooh.
OK, what is it?
We'll dive into that right after this.
OK, we're back and ready to wrap things up for today's deep
dive into that KPMG semiconductor report.
Feels like we've covered a lot of ground.
We have.
From AI and car chips to that talent shortage,
and now this global chess game, it's a wild ride.
It really underscores how dynamic this industry is.
It does.
But before the break, I was wondering
if all this talk about factories and supply chains
is overshadowing something pretty important.
Oh.
What's that?
The innovation side of things.
Oh, yeah.
Good point.
It seems everyone's obsessed with building more factories.
Right.
Got to pump out those chips.
But what about the brains behind the chips?
The people dreaming up the next generation
of semiconductors.
The designers, the engineers, the innovators.
Exactly.
Are they getting lost in the shuffle?
Well, the report actually emphasizes
that design and innovation are still
the heart and soul of the semiconductor industry.
So they haven't been forgotten.
Not at all.
Companies are realizing it's not just about making more chips.
It's about making better chips.
Better, faster, more specialized chips.
So the real battle isn't just on the factory floor.
It's in the R&D labs and design centers.
Got it.
That's where the real breakthroughs happen.
And that's also where the talent shortage becomes even more
critical, right?
Absolutely.
We need brilliant minds to push the boundaries
of semiconductor technology.
To create those chips that will power the AI revolution,
self-driving cars.
All those incredible innovations we can only
dream of right now.
So it's a race on two fronts.
Building the infrastructure, and nurturing
the intellectual capital.
It's a two-pronged approach, for sure.
OK.
So what are some of the areas where
we're seeing real innovation happening in semiconductors?
What's next on the horizon?
Well, the report highlights a few exciting areas.
Hit me with it.
One big one is the development of new materials for chips.
New materials?
Like what?
We've been relying on silicon for decades.
The old silicon.
But now researchers are exploring other materials
that could offer better performance, lower power
consumption, all that good stuff.
So silicon might be on its way out.
It's facing some stiff competition.
What are some of the contenders?
Well, there's gallium nitride, silicon carbide.
Those are some pretty sci-fi names.
They are.
And they have properties that make them perfect for high power,
high frequency applications.
Which are essential for the IBG networks, electric vehicles.
The future.
Exactly.
Another area of intense focus is something
called heterogeneous integration.
Heterogeneous integration?
Try saying that five times fast.
I know, right?
But it's a pretty cool concept.
OK, break it down for me.
It basically involves combining different types of chips.
Each one optimized for a specific task onto a single package.
So instead of one chip trying to do it all,
you get a system of specialized chips working together.
Like a dream team of chips.
Exactly.
It's all about maximizing efficiency and performance.
That makes a lot of sense.
It's a pretty exciting development in the world of chip design.
It sounds like the semiconductor industry
is entering a whole new era.
New materials, new designs, new manufacturing techniques.
It's mind-boggling.
But at the end of the day, what does all this
mean for us regular folks?
That's the key question, isn't it?
How will these trends shape our lives?
Exactly.
I mean, the semiconductor industry
might seem kind of invisible, but.
It's the foundation of our digital world.
Our smartphones, our laptops, our cars,
even the infrastructure that connects us all
runs on these tiny chips.
And as those chips get more powerful, more efficient.
It's going to unlock incredible possibilities.
Things we can barely even imagine right now.
It's both exciting and a bit daunting, you know?
It feels like we're on the verge of something truly
revolutionary, and those tiny semiconductors
are at the heart of it all.
I think that sums it up perfectly.
Well, this has been an amazing deep dive.
I learned so much.
Thank you for walking us through it all.
My pleasure.
It's always a fascinating topic.
And to all our listeners, we hope
you enjoyed this journey into the world of semiconductors.
It's an industry worth keeping an eye on.
Absolutely.
Until next time, keep exploring, keep learning.
And we'll see you back here for another deep dive
into the world of tech and innovation.