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Investing

The autonomous future has arrived and it’s changing, well, everything

The transformation is likely to happen fast as companies increasingly turn to robots.


The mechanization of mundane tasks—underway for generations and essential to the rising living standards around the world—dramatically picked up pace this past decade.  The number of industrial robots more than doubled. Software continued to replace humans in repeatable processes. Autonomous vehicles actually started traveling our roads.

We see greater change and promise ahead, as enabling technologies and macroeconomic necessities push companies and governments to increase productivity—improving bottom lines as well as society as a whole.

Driving the change: Macroeconomics and tech advances

The macroeconomics

Unlike earlier decades when China and India were integrating into the global economy and supplying the world with workers, the coming years will see only a modest increase in the supply of labor globally. As workers in tighter labor markets are able to negotiate higher wages, companies will look to enhance their productivity, or simply replace them, with automation.

The pandemic turbocharged this structural economic trend. Already, we see the ratio of hirings to job openings at a 20-year low in the United States. Unemployment rates in Europe and Japan are also falling quickly, approaching pre-pandemic levels. A recent study by the Federal Reserve found that one-third of firms having difficulty finding workers were looking to replace some existing staff with automation systems.

Technology to the rescue? 

As the charts below show, technology is certainly one partial solution to labor shortages, and even if full replacement of employees may be rare for a while, opportunities abound right now for robots to replace workers.

Indeed, we expect to see automation rapidly deployed in coming years. A number of technologies, such as 5G networks, cloud computing services and artificial intelligence (AI), are reaching the price point and reliability metrics that unlock automation solutions impossible only a few years ago.

Downsides include threats to cybersecurity and data privacy.1 On the upside, there is the potential that automation can enhance employee, client and customer experiences in every sector, while driving down costs for firms and improving profitability.2

While few occupations are fully automatable, around 60% could automate at least a third of their activities

Automation potential* in the United States, based on demonstrated technology by occupation titles

 

Three categories of activities have significantly higher automation potential

Time spent on activities that can be automated by adopting current technology (%)

Customer service gets chatbot

Companies already are turning to technology to replace customer service workers. Hence, the rise of chatbots—aka “conversational AI”—computing programs that mimic the human voice or written conversation with human users.

The use of chatbots rose from 23% of companies surveyed in 2018 to 39% in 20203,4 The technology is used in roles ranging from customer support to sales and recruiting.

More is on the horizon: Chatbot ecosystems are growing using messaging apps such as WeChat in China and Kakao Talk in Korea thanks to retailers building out their chatbot capabilities.5 Indeed, by 2025, e-commerce transactions through chatbots could account for $145 billion of spend globally.

Manufacturing, revolutionized

The “fourth industrial revolution,” coined by World Economic Forum President Klaus Schwab and referring to “the fusion of technologies which blur the lines between the physical, digital, and biological spheres” is now coming at us faster than ever—sped up significantly by the pandemic.

Industry 4.0 builds on humankind’s previous industrial revolutions by automating entire manufacturing lines and ultimately combining physical industries with the digital world and its data. Innovations in automation and connectivity are expected to improve not only productivity, but also quality and safety.

Indeed, U.S. company investment in industrial equipment was accelerating in the years leading up to COVID-19, but the pandemic quickly spurred a further surge.

Pandemic drives investment in industrial equipment

The first year of COVID-19 saw a significant acceleration of investment in industrial equipment as a percentage of real GDP

 

Many businesses now believe digital transformation and automation technology is key to their survival. In 2020, the global market for technology that enables hyper-automation (where companies automate processes quickly, using technology such as AI and virtual assistants) stood at $418 billion. By the end of 2022, that figure is forecast to reach almost $600 billion.6

Executives also are increasingly aware of automation’s potential to improve not only factory yields, but also sustainability (by reducing waste and decreasing overall factory emissions). IBM, a leader in AI and automation solutions, has found AI-driven manufacturing can increase production yields by 30% while reducing waste by 15%.7,8

Autonomous vehicles take to the road

Autonomously driven trucks are likely to have a dramatic impact on life and the supply chain as we know them. Already, logistics companies, retailers and grocers such as Walmart are experimenting with, and in some cases even deploying, them.9

Today in the United States, trucks are responsible for hauling 70% of all freight. Improving the efficiency of the trucking industry could bring great cost savings to the American consumer. Indeed, research from our Investment Bank estimates a driverless autonomous truck would have about 40% lower costs per mile compared to a traditional 18-wheeler with a driver.10

While the unpredictability of long-haul routes, traffic patterns and the last-mile portion of the supply chain may still require human intervention to make the final delivery to the consumer, autonomous trucks are likely to have a large impact on short, predictable hub-to-hub routes over the coming years—and that alone could reduce logistic costs by 46% by 2030.11,12

Moreover, using driverless trucks even in limited portions of the supply chain could help ease some of the truck driver shortages we’ve been seeing around the world, and notably in the United Kingdom.

Interested? We are here to help

Your J.P. Morgan team can offer you additional insights into how our increasingly automated world is shaping investment risk and return potential—and help you evaluate how putting your capital to work in this arena might suit your personal and financial goals.
 

1.In 2020, both the number of complaints from cyberattacks and reported losses surged relative to prior years, with Americans reporting over $4 billion in losses due to cyberattacks.
2.According to Trends in Workflow Automation 2021, Salesforce.com: Only 25% of IT leaders think their technology maximizes employment productivity, while 95% of IT and engineering leaders say they are prioritizing workflow automation, and 78% use or plan to use AI as part of workflow initiatives.  
3.Trends in Workflow Automation 2021, Salesforce.com.   
4."Digital service excellence: Scaling the next-generation operating model,” McKinsey & Company, February 2021.
5."Conversational commerce: Market outlook, emerging opportunities & forecasts 2021–2025,” Juniper Research, June 2021.
7.“Improve product quality and yield with intelligent, secure, and adaptable manufacturing operations,” IBM, April 2020.
8.In the future, a circular manufacturing process and supply chain could not only reduce emissions by up to 350 million metrics tons of CO2, but also generate annual revenues to the tune of $2 trillion in the United States, according to the 2017 Capital Landscape study by Closed Loop Partners.
9.Specifically: Walmart, Albertsons and Kroger. According to “Walmart is using fully driverless trucks to ramp up its online grocery business,” CNBC, November 2021: In 2021, Walmart partnered with short-haul logistics company Gatik to operate two fully autonomous box trucks as part of Walmart’s grocery business. According to Gatik, its autonomous vehicles can reduce logistics costs by 30% for online grocery businesses.
10.J.P. Morgan North America Equity Research, December 2021.
11.“Autonomous trucks lead the way,” Deloitte, 2021.
12."The era of digitized trucking,” PwC, Strategy&, 2018.

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