A new report reveals that more than half of organisations relying on semiconductors are concerned about supply adequacy over the next two years. The findings are based on a global survey conducted in November 2024 by the Capgemini Research Institute. The survey gathered responses from 250 semiconductor industry executives and 800 downstream industry leaders across 12 countries.
According to the study “The Semiconductor Industry in the AI Era: Innovating for Tomorrow’s Demands,” downstream industries anticipate a 29% acceleration in chip demand by the end of 2026. This growth rate is double what semiconductor organisations expect. In the short term, 81% of downstream firms project a 21% increase in demand over the next 12 months. However, fewer than 30% of these organisations believe current supply levels can meet their needs.
Generative artificial intelligence (Gen AI), 5G, Internet of Things (IoT), and edge computing are driving increased demand for advanced semiconductors. Nearly 60% of semiconductor organisations indicate these technologies are influencing their strategic priorities. Specialised neural processing units (NPUs) and high-performance graphics processing units (GPUs) are in particularly high demand, with 54% of downstream industries identifying GPU advancements as critical for meeting their computational requirements.
“Gen AI is driving accelerated demand for chips and semiconductor companies face increasing demands from customers who want more personalised and software-centric experiences,” said Capgemini global high-tech industry leader Brett Bonthron. “The industry should see this as an opportunity to ramp-up production and adopt a ‘chip-to-industry’ approach that supports a full stack, ’software-first’ set of capabilities. Investment in cutting-edge fabrication methods and design processes powered by AI and Gen AI will be key to meet the specialised needs of emerging applications. Equally, it is crucial that the industry further enhances sustainable manufacturing processes and uses advanced security to safeguard IP.”
The Capgemini report shows that one in three downstream organisations are exploring or have initiated in-house chip design projects. These efforts aim to achieve greater customisation and reduce reliance on external vendors while enhancing supply chain control. Semiconductor companies, meanwhile, are advancing chip manufacturing technologies, including extreme ultraviolet (EUV) lithography, smaller process nodes, and 3D packaging. The industry expects research and development budgets to grow by 10% over the next two years to address these needs.
The survey also highlights how ongoing semiconductor supply shortages are being exacerbated by geopolitical tensions and trade restrictions. To address these issues, the semiconductor industry anticipates increasing domestic sourcing from 40% to 47% over the next two years, marking a 17% rise in domestic production reliance. Nearshoring efforts are also expected to grow by 4% during the same period. Investment patterns show a focus on the US, where 74% of semiconductor organisations plan to increase activity, compared to 59% prioritising Europe.
Sustainability is a growing focus for downstream organisations, with nearly 60% prioritising eco-friendly chip designs. Measures include energy conservation, implementation of water recycling systems, reduced chemical usage, and waste minimisation. Security is another key area, with nearly three in five semiconductor design organisations investing in cryptographic protection to enhance chip resilience within complex supply chains.
Semiconductor supply shortages worrying major tech players
Several companies have recently reported significant struggles with semiconductor supply shortages, underscoring the broader industry challenges highlighted by the Capgemini survey.
For instance, TSMC’s efforts to expand capacity have been impacted by supply chain challenges. The Taiwan-based company’s planned fabrication plant in Arizona, initially scheduled to begin production in 2024, has been delayed to 2025 due to rising construction costs and a shortage of skilled labour. These delays have potential implications for TSMC’s clients, many of whom depend on its advanced chip manufacturing technologies to meet growing demand.
Meanwhile, Nvidia has reported delays from key suppliers in providing high-bandwidth memory chips crucial for AI applications. This has limited Nvidia’s ability to meet the surging demand for AI-related hardware, further illustrating the strain on the semiconductor supply chain.
Samsung Electronics, on the other hand, has faced obstacles in capitalising on the expanding AI market due to delays in delivering high-bandwidth memory chips to clients such as Nvidia. These supply chain issues have contributed to a 29% decline in the company’s operating profit for the fourth quarter of 2024, falling short of market expectations. Furthermore, Samsung’s traditional memory chip business continues to be affected by declining prices and demand, further weighing on its financial performance.
Read more: Samsung faces profit slowdown amid AI chip supply delays and weak memory market
