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by UBS

The content in this infographic was relevant when it was published on 18 June 2020.

Current views may differ.

Automation always picks up sharply following a recession, though this time a confluence of circumstances could spark a shift from the factory to the mainstream.

Firstly, business may read the current health shock as a signal to limit reliance on labour where possible.

Sectors characterised by low labour productivity and high potential for automation include consumer goods, wholesale trade and e-commerce.

Automation potential vs. annual labour productivity - sector overview

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Annual labour productivity growth

-1%

-2%

20%

30%

40%

50%

60%

70%

80%

Low

Automation potential

High

Source: Brookings analysis, BLS, EMSI, Moody’s, McKinsey, UBS. Note: Annual labour productivity growth is from 2000 to 2016.

Next, the Internet of Things effect.

UBS expects so-called general purpose robots to be at the epicentre of automation’s next wave, permeating sectors including Retail, Consumer Goods, Food and Beverages and Healthcare.

The shift is enabled by digitalization and AI technologies – which drive the Internet of Things.

Robot average selling price: Average price by application

FPD

12.5

Receiving/ shipment

8.7

Arc welding

5.5

Load/ unload

3.7

Injection moulding

3.5

Spot welding

3.3

Semiconductor

3.3

Material handling

2.8

General assembly

2.6

(JPYm)

Nominal average price

Source: Jara, UBS

Cost is key. Despite soaring demand, prices of robots fell over the past decade, driven by general-purpose robots gaining market share.

Add age. Ageing populations motivate companies to use automation to reduce their reliance on humans.

Funding is a factor. The greatest amount of AI investment goes to autonomous vehicles, but health tech, facial recognition, e-commerce, augmented reality and fashion retail are all receiving strong funding too.

Percentage of world AI private investment, start-up cluster (2018-19)

Autonomous Driving

9.9%

Drug, Cancer Study

6.2%

Facial Recognition

Digital Content

4.5%

Finance, Identity Authentication

3.9%

Real Estate and Property

3.7%

Semiconductor

3.7%

Data, Database Management

3.6%

Lending, Loans

3.4%

Fashion Retail

3.3%

Cybersecurity

3.1%

Healthcare and Medical

2.7%

Robotic Automation

2.5%

AR/VR

2.5%

Software Platform

2.4%

Cloud, Data Center

2.1%

E-commerce, Marketing

Cryptocurrency

1.7%

Sales Automation

1.7%

Supply Chain Management

1.7%

Source: CAPIQ, Crunchbase, Quid-2019, Stanford University - Institute for Human-Centered Artificial Intelligence, UBS, Note: The chart shows the sum of total private AI investments from January 2018 to October 2019.

Add the desire to shrink value chains to the mix, and the status quo of the last 20 years, where three industries – autos, electronics and metal – and five countries – China, Korea, Japan, the US and Germany – drove nearly 74% of all robotic installations, seems ripe for an upset.

China should remain the biggest market, but demand should spread, with Italy, France, the Nordics and Spain likely to contribute significantly to new demand.¹ Elsewhere, the UK, Israel, Canada and France have made strong investments in AI, and there is clear room for an upside surprise in the demand for robotics globally – particularly in the US.

Total private investment in AI from January 2018 to October 2019

$0.0bn

$0.5bn

$1.0bn

$1.5bn

$2.0bn

$2.5bn

$3.0bn

United States

$36bn

China

$25bn

United Kingdom

$2.9bn

Israel

$2.3bn

Canada

$2.1bn

France

$1.6bn

Japan

$1.4bn

Singapore

$1.3bn

Germany

$1.2bn

India

$1.15bn

South Korea

$0.45bn

Australia

$0.35bn

Switzerland

$0.35bn

Finland

$0.25bn

Sweden

$0.25bn

Spain

$0.22bn

Hong Kong

$0.22bn

Belgium

$0.21bn

Mexico

$0.18bn

Ireland

$0.16bn

Source: CAPIQ, Crunchbase, Quid-2019, Stanford University - Institute for Human-Centered Artificial Intelligence, UBS, Note: Amounts in current USD bn

UBS’s base case estimates suggest that the compound annual growth rate for automation will grow by 8-10% until 2025, with a total addressable market of $2trn by that year, up from about $0.5trn in 2020.

Sectors in focus

As e-commerce further displaces bricks-and-mortar set-ups, the automated warehouse segment of the Capital Goods industry should continue its secular growth.

Technology software should benefit from the use of AI, automation and analytics to meet the combined interest of improving efficiency while reducing the need for workers located at physical worksites.

Sources:

1. IFR, UBS estimates, Global robot demand growth by region (2018-2025E)

by UBS

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