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capgemini.com/us-en/insights/expert-perspectives/7-major-trends-shaping-the-future-of-the-semiconductor-
industry

December 18, 2023

The global semiconductor industry is in the throes of change. The last several years
have welcomed a new set of challenges that have impacted the industry and propelled it
towards innovation.

In this article, we’ve identified seven major trends that will define the future of the
semiconductor industry. These include supply chain volatility, sustainability, government
investments, generative AI, geopolitical tensions, equality, and the tremendous
opportunities in automotive.

We’ve also mapped out Capgemini’s role as an intermediary in building trust and
understanding and helping to welcome new players to the market.

1 – Ensuring semiconductor supply chain resiliency

Semiconductors are the brain of digitization and are among the most traded goods in the
world. Any disruption in the semiconductor supply chain can significantly impact the
global economy.

The first big trend centers around building resilience to the volatility of the
semiconductors’ supply chain and ensuring end-to-end transparency to predict forecasts
better and manage demand. Issues caused by supply chain fragility and the
incompatibility of production cycles have cost semiconductor company customers
billions of dollars in lost sales and profits.

For semiconductor companies, it is imperative to build resilience and process maturity

that will enable them to switch easily between industries and increase inter-industry
cooperation through strategic relationships.

2 – Harnessing the transformational power of sustainability

Another major trend that’s rising in prominence is a clear focus on sustainability and
producing the products that drive it. As the earth’s ability to provide what we need
decreases, the need to act on sustainability is increasing. Semiconductor companies
have come out with their strategy and goals to become sustainable. Companies are
launching initiatives focused on producing sustainable products that enable low-power
consumption or reduce the carbon footprint of their customers.

“Semiconductor companies need to embrace sustainability and aim to make

technology sustainable. Sustainability is everyone’s responsibility,” says Sanjiv
Agarwal, vice president, global semiconductor industry leader, Capgemini.

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With the semiconductor industry projected to double by 2030, and carbon emissions
projected to quadruple by 2030, sustainability and government investments are
becoming major talking points as well. Five key, emerging messages are:

1. AI is high-computing and power intensive. For example, a ChatGPT search

consumes thirteen times as much energy as a Google search.
2. Companies should design for sustainability. There is a need for dedicated
engineering teams to support sustainability goals (equipment, sub-fab, process
recipes, and operations). Companies like Intel and Applied Materials have
engineers dedicated to sustainability.
3. Semiconductor companies have thousands of suppliers. However, most
suppliers have yet to set their sustainability goals. There is an urgent need to
establish metrics and develop a measurable roadmap to achieve net zero, and
sustainable procurement is gaining attraction in the market.
4. Digital technologies can help reduce the carbon footprint and make
FABSmore sustainable. This can be achieved by optimizing efficiency through
advanced analytics (machine learning, analytics, and AI); improving digital lifecycle
collaboration within FABS (a digital twin platform across the lifecycle of a fab can
reduce production loss and energy waste); and ensuring enterprise-level
collaboration across FABS.
5. Companies have made more progress on their US sites than in other
regions. For example, Intel and STMicro are net positive water in the US, but not
in other regions.

3 – The rise of Generative AI

GenAI is probably our generation’s most disruptive innovation, and it can potentially
shape humanity’s future. From simple task automation, to writing code, to drug
discovery, the scope of areas where it can find use is practically limitless.

The semiconductor industry is right at the forefront to enable this transformation journey.
With technologies that have the potential to impact so many different industries, there
are always the early adopters, the ones who need a plan, the late risers, the ones with
the FOMO, and the ones who choose to be in their state of inertia unless the market
forces apply.

Surprisingly with Gen AI, no one wants to maintain the status quo. There is a clear
indication that almost every industry is looking for ways to adopt Gen AI in its day-to-day
operations – and the high-tech segment is leading the pack in terms of adoption.

Gen AI-based applications and use cases for design and manufacturing support will
transform how the current automation in factories functions. This will create a major shift
in how the industry adapts to this new reality. According to Vignesh Natarajan, hi-tech
segment leader of Europe, Capgemini:

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“As generative AI becomes mainstream, the transformation of the data center
space will be driven by semiconductor players, who will be the crucial building
blocks in the power chain competence.”

At Capgemini, the biggest trends we see are generative AI-based use cases, AI-based
development use cases, AI-based joint design use cases, and foundry solutions. This
will be the big wave as demand for consumer electronics continues to grow, albeit
slower than during the COVID era. Government funding of large-scale projects will
provide a floor for demand to produce the next “boom” cycle for semis.

“Our ambition is to support the semiconductor ecosystem companies in scaling

up to meet their market opportunity with solutions in Intelligent Industry and
Enterprise Management,” says Shiv Tasker, global industry vice president,
semiconductor and electronics, Capgemini.

4 – Fast scalability with Digital Twin technology

Digital Twin showcases huge potential in the semiconductor industry through its ability to
simulate the entire fab, manufacturing processes, and various use cases and models to
improve efficiency and productivity. Companies are looking to transform various aspects
of the manufacturing process.

Some examples of where semiconductor companies are focusing are:

1. Device-scale twin: detailed visualization of a device to reduce cycles of silicon

learning, thus reducing waste and resources.
2. Process-scale twin: using simulation to streamline process development thus
reducing chemicals and electricity usage.
3. Equipment-scale twin: improving the first time right from design through
installation by finding issues before physical build or building equipment expertise
faster and more effectively.

Digital twin, or the digital omniverse, coupled with Generative AI, provides an incredible
opportunity by providing millions of variations to the model, and through reinforcement
learning, can change models for best-performing output or model. When implemented
well, it can escalate product output at speed and scale.

5 – Meeting OEMs’ growing needs, especially in automotive

Automotive is a huge driver for many of the changes facing the semiconductor industry.
In fact, there’s even a palpable tension between the semiconductor representatives and
auto manufacturers. The auto market is hard to resist for any semi-manufacturer due to
its size, but the auto manufacturers will never forget the chip shortages of the COVID
era and the tremendous damage that did to their business.

“At Capgemini, we work both sides of the equation, helping chip manufacturers get to
market and fit into the automotive ecosystem, working with the automotive
manufacturers to create their chip strategy, working with foundries to manufacture those

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chips, and integrating chips into their designs,” says Agarwal. “We bring in the promise
to create an affordable, ever-smarter, software-driven mobility ecosystem that’s centered
around customer needs and protects them from both physical and digital threats.

6 – Navigating geo-political tensions

Geopolitical tensions are a shared concern rather than a trend, but they will have a
large impact on the way semiconductor companies work, since 60-70 percent of all chips
are manufactured in Taiwan or South Korea, which are both relatively volatile. Divergent
national approaches exacerbate these concerns. The US, for example, has shifted from
outsourcing production to encouraging chip producers to transfer operations stateside.
In general, the US CHIPS Act and the European Chips Act will “onshore” more
production and drive diversification of production geography.

“Through the two CHIPS acts, semiconductor companies see that governments
understand the criticality of the industry,” says Brett Bonthron, executive vice
president and global high-tech industry leader, Capgemini.

The US Chips Act is a true public-private partnership model and probably the first
proactive federal program where the program will be executed along with the states,
which would manage permits, labor, land, and other logistics.

Statements of interest are currently being accepted for all direct funding opportunities
and over 400 have already been received. The US CHIPS Act envisions success in four
areas:

1. Leading-edge logic. At least two new large-scale clusters of leading-edge logic

FABS wherein US-based engineers will develop the process technologies
underlying the next-generation logic chips.
2. Memory. US-based FABS will produce high-volume memory chips on
economically competitive terms and R&D for next-gen memory technologies
critical to supercomputing and other advanced computing applications will be
conducted in the US.
3. Advanced packaging. The US will be home to multiple advanced packaging
facilities and a global leader in commercial-scale advanced packaging technology.
4. Current generation and mature chip production. The US will have strategically
increased its production capacity for current-gen and mature chips. Chipmakers
will also be able to respond quickly to supply and demand shocks.

The European Chips Act enables the EU to address semiconductor shortages and
strengthen Europe’s technological leadership. It will mobilize more than €43 billion of
public and private investments through the Member states through five key areas:

1. Strengthen Europe’s research and technology leadership towards smaller and

faster chips
2. Put in place a framework to increase production capacity to 20 percent of the
global market by 2030

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 3. Build and reinforce capacity to innovate in the design, manufacturing, and
packaging of advanced chips
4. Develop an in-depth understanding of the global semiconductor supply chains
5. Address the skills shortage, attract new talent, and support the emergence of a
skilled workforce

7 – Developing a diverse workforce

Diversity, workforce development, and talent are also major topics, with the consensus
being that inclusion must start at a much earlier age and that more women and
minorities must be allowed to enter leadership positions. Considering the existing
workforce, many companies are partnering with universities, granting scholarships, and
launching apprenticeship programs so that when these FABS are ready, the new, more
diverse talent will also be ready.

The future of the semiconductor industry

The semiconductor industry is in a state of flux, with seven major trends — including
supply chain resiliency, generative AI, geopolitical tensions, the impact of the automotive
industry, and sustainability — emerging from this transition.

There are, of course, numerous other factors at play, including issues around inclusion
and reducing barriers to entry within the industry, shifting relationships between
automotive OEMs and tier-one suppliers, and evolution of the semiconductor company
value chain.

At the end of the day, semiconductors are fundamentally about propelling civilization
forward and enabling the creation of better societies. Capgemini has substantial know-
how and near-tech vision to drive this goal forward.

© Capgemini, 2024. All rights reserved.

© Capgemini, 2024. All rights reserved.

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