Nearly three in five semiconductor firms say that next-generation technologies such as genAI, IoT, autonomous vehicles, and edge computing are impacting their strategies, according to a new study from the Capgemini Research Institute.

Capgemini’s report, The Semiconductor Industry in the AI Era: Innovating for Tomorrow’s Demands, found that only two in five semiconductor companies are confident in the resilience of their supply chains due to geopolitical pressures and international trade restrictions, with tensions rising as the industry looks to meet the growing demand for AI and custom silicon chips.

According to the research, based on surveys of 250 executives from across the semiconductor industry, fewer than three in ten downstream organisations believe chip supply is sufficient to keep up with technology breakthroughs enabling smarter, more efficient products.

While 39% of semiconductor organisations anticipate that genAI will drive demand for custom chips in the next two years, most downstream organisations (81%) expect their demand to increase by 21% over the next twelve months, leading more to explore in-house chip design to tailor semiconductors to unique specifications and minimise reliance on external vendors.

Additionally, increased adoption of AI and genAI is driving the need for specialised neural processing units (NPUs) and graphics processing units (GPUs), with more than half of downstream industries (54%) believing that advancements in GPU computing, as well as AI and machine learning acceleration, will bring the most value.

In an attempt to meet the rapidly rising demand, semiconductor manufacturers expect R&D budgets to increase by around 10% over two years, with nearly half of manufacturers reporting they are also relying on AI and machine learning to optimise their processes.

More than half of downstream organisations plan to prioritise chip sustainability, supply chain resilience, and cybersecurity features, with nearly 60% saying that chip sustainability is going to be crucial in their chip selection.

Meanwhile, semiconductor firms expect to increase domestic sourcing to mitigate risks associated with international logistics, with 74% expecting to increase their US investments, compared to 59% increasing their investments in Europe.

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“We are at a pivotal moment for the semiconductor industry. GenAI is driving accelerated demand for chips and semiconductor companies face increasing demands from customers who want more personalised and software-centric experiences,” said Brett Bonthron, global high-tech industry leader at Capgemini. 

“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 genAI 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.”