Originally published by BetaShares
Thanks to rapid technological advances, the global robotics and artificial intelligence (A.I.) sectors stand poised to significantly boost global economic productivity and redress worker shortages caused by population ageing over coming decades. As this note will demonstrate, moreover, the robot revolution also offers the growth potential to reward investors who tap into this emerging global investment mega-trend.
The world faces looming labour shortages
Contrary to fears that “robots will take our jobs”, the reality is that the global economy faces labour shortfalls in coming years due to both population ageing and declining birthrates.
According to United Nations projections, for example, the working-age labour force will shrink in several major countries and regions such as Japan, China and Europe over the next decade – and will barely move higher even in the United States. At the same time, the UN projects that the ratio of older citizens to those of working age will broadly double in many advanced economies – along with China – over the next few decades.
Put simply, without dealing with this demographic challenge, living standards would be threatened.
Robots to the rescue
Thankfully, necessity is often the mother of invention, with rapid advances in the use of robotics (essentially programmable mechanical devices) producing a widening array of goods and services with minimal human input. A.I. (otherwise known as “machine learning”) takes these advances even further, by effectively teaching robots to teach themselves, and thereby enabling them to undertake tasks of ever greater complexity.
Indeed, robotics and A.I. technologies are increasingly being used in a broadening array of industries, such as(1):
- Manufacturing: Companies such as Japan’s FANUC Corp. are producing robots to undertake large scale manufacturing assembly work. According to The Boston Consulting Group, one quarter of US manufacturing operations will be automated by 2025, compared with only around one tenth in 2015.
- Defence: Companies such as AeroVironment are developing drones and wheeled robots that can undertake various reconnaissance missions without risk to human life. The US Army estimates the use of robots could allow around a 25% reduction in the required size of combat teams by 2030.
- Health Care: Companies such as Intuitive Surgical (NASDAQ:ISRG) have developed robotic devices that allow surgeons to undertake once difficult operations – in areas such as heart and brain surgery – with greater precision and less patient risk than ever before.
- Transport: A.I. facilitated self-driving cars promise to revolutionise the transport industry, with some estimates suggesting they could account for 15% of car sales worldwide by 2030.
- Agriculture: Robotic planting and harvesting machines are also anticipated to transform the agricultural sector.
- Personal services: In some health care facilities, robots are now providing patients the medicine and care they require on a 24-hour basis.
Demand for robotics and A.I. is growing rapidly
As would be expected, companies engaged in robotics and A.I. have been enjoying a strong upturn in demand that is anticipated to continue for some time to come. According to Tractica Research, the global robotics industry had sales revenue around US$52 billion in 2017, and is forecast to reach $US500 billion by 2025, implying compound annual growth of 32% p.a.
Additionally, Tractica forecasts revenue from A.I. software will grow from US$0.6 billion in 2016 to US$36.8 billion by 2025, implying compound annual growth over this 9-year period of 56.8%.
Note projections may differ from actual outcomes.