12

A NEW INDUSTRIAL
REVOLUTION…THIS TIME
DIGITAL

THE GLOBAL ECONOMY

IS UNDERGOING A THIRD The world has gained from the recent “digital

WAVE OF INVENTION, this revolution”, but the innovations have also

disrupted traditional growth patterns. Historically,
industrial revolutions have produced losers as well
one digital, whose effect on living as winners, and it has often taken time to see how
different stakeholders would fare. Among major
standards is yet to be seen economies including the US and the UK, growth in
recent decades has slowed compared to the past
century averages, a reminder of the harsh nature
of industrial revolutions

Three Industrial Revolutions and Impact on GDP per Capita Growth

(In Average Annual Percent Growth over 25 Year Periods, 1775-2010)

First Second Third

(1760-1840) (1870-1914) (1970s - Ongoing)
Mobile Phone
2.5 PC
Light Bulb
Steam Steam Electrical World
Engine Locomotive Generator Automobile Wide
2.0 Web
Radio

1.5 Machine
Intelligence

1.0

0.5

0.0
1775 1800 1825 1850 1875 1900 1925 1950 1975 2000-2010

UK US
Industrial Revolutions

Post-Industrial Revolution Growth Period

Key Inventions

Sources: Maddison Project; “The third great wave”, Special Report: The World Economy, The Economist, Oct. 2014

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 A DIGITAL REVOLUTION WILL
FACILITATE THE CREATION The Industrial Internet, otherwise known as the

OF AN INDUSTRIAL “Internet of Things”, describes the integration of

physical machinery through Internet-connected
sensors and software systems. By 2020, global
INTERNET ECONOMY with the spend on industrial Internet technology is
expected to reach US$ 514 Billion, with a return
potential to add US$15.3 Trillion to on investment of nearly 150%. The current
industrial Internet market opportunity is estimated
the global economy by 2030 at US$ 32.3 Trillion, equal to 38% of the global
economy, with the potential to add more than
US$15 Trillion to the global economy by 2030

Industrial Internet Market Opportunity Value

(In US$ Trillion 2013)

Total Segment Share of Global GDP

(In % of Total GDP, 2013)

100 Total Global GDP: US$ 70 Trillion

21

17 Advanced
Economies

5.3
6.1 2.6
3.6
Manufacturing Other Industrial Healthcare Transportation
Activities
1.7 2.2
62 5.5
Developing 5.3
Economies

Segment Share
of Global GDP Industrial Sectors with Opportunity for Industrial Internet

Non-Industrial Sector with Opportunity for Industrial Internet

Other Non-Industrial Sectors – Negligible Industrial Internet Opportunity

Potential Impact of Industrial Internet on 2030 Global Economy

(In US$ Trillion 2030)

26.8 World + 15.3

27.8 Asia Pacific + 4.2

21.0 North
+ 6.5
America
25.6
Europe + 2.8
31.2
Africa and the
Middle East + 0.8

Latin
33.3 + 0.9
America

0 20 40 60 80 100 120 140

X Average Industry Value Add

(In % of GDP, 2012) 2030 Base 2030 with Industrial Internet

Source- Upper Chart: Industrial Internet Insights Report GE and Accenture, 2015
Sources- Lower Chart: Industrial Internet Insights Report GE and Accenture, 2015; World Bank Databank

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 THE DIGITAL REVOLUTION
WITH 3D PRINTING / The 3D printing market exceeded US$ 2.2

ADDITIVE MANUFACTURING Billion in 2012 and is expected to approach

US$ 12 Billion by 2020. Initially a tool for
product design and development, 3D printers
IS RESHAPING SUPPLY are increasingly used to manufacture finished
parts and goods, disrupting traditional supply

CHAINS, enhancing localization and chains by enabling enhanced localization and

customization. As technology progresses,
goods will increasingly be produced by smaller,
customization flexible workforces in close proximity to their
point of consumption

Supply Chain Evolution Driven by 3D Printing

Traditional Supply Chains

Manufactured goods High Transport Large Carbon
Products are are “pushed out” and Long Lead Time
Costs Footprint
mass produced distributed through
warehouse networks
to customers

Manufacturing and
Production Lead Time Transport Costs Carbon Footprint
Distribution

Locally Printed and

distributed

“Pulled” by end
Customized customer demand Low Transport Low Carbon
production Short Lead Time Costs Footprint

3D Printing Supply Chains

Share of End-Use Parts and Final Products Projected Growth of 3D Printing Market
Produced Through 3D Printing (In % of Total Products Produced, 2009-2020)
(In % of Total Products Produced Through 3D Printing,
2003-2012)

30 28.3 12

24.0
25 10 Service & Parts

+24.6% 19.6
20 8
17.2

14.0 Direct Parts

15 6
11.7
9.6
10 8.3 4
6.6 Materials
3.9 2
5
Systems
0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source- Upper Chart: Wohlers 3D Printing Industry Report 2013

Source- Lower Charts: Credit Suisse

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 GLOBAL MANUFACTURING
IS MOVING EAST BUT MANY With the advancement of technology and the

EMERGING COUNTRIES ARE spread of global supply chains, the past century
has witnessed the fastest shift in the geographic
distribution of manufacturing in history. The
“DEINDUSTRIALIZING” TOO developing world now produces nearly 40%
of the world’s manufactured output, while the

EARLY in their development share from developed Western countries has

dropped from more than 80% to just over 50%
in the same period. But the connection between
industrialization and wealth-creation is being
tested. Developing nations are reaching their
cap level of industrialization at very low income
levels, making it hard to imagine other routes for
increasing income

Distribution of Global Manufacturing Output over Time

(In % of Total Manufacturing Output, 1750-2009)

100%

90% US

80%

70%
Other Developed
Western Countries
60%

50% Russia
Japan
40%

30% Developing
Countries
20%

10% China

0%
1750 1800 1830 1860 1880 1900 1928 1953 1973 1990 2009

Employment in Industry and Income Level at Peak Industrialization

(In % of Workforce Employed in Industry, Year of Peak Industrialization)

50

Romania

40 Bulgaria
Singapore South Korea
Malaysia
30
Argentina
Chile South Africa Sri Lanka
Paraguay Mexico Jordan
20 Brazil
Philippines
Bangladesh

10

0
1980 1985 1990 1995 2000 2005 2010

GDP per Capita based on PPP at Peak Industrialization

(In % of US GDP per Capita at Current International $,
Year of Peak Industrialization)

100% 10%

Sources- Upper Chart: “International Industrialization Levels from 1780-1980”, Paul Bairoch, 1982; “The Clash of Civilizations”, Samuel Huntington, 2007;
Morgan Stanley
Sources- Lower Chart: World Bank Development Indicators; “Emerging Economies: Arrested development”, The Economist, Oct. 2014

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 WITH ALL ITS POTENTIAL
BENEFITS, THE DIGITAL Half of US jobs face at least a 65% likelihood

REVOLUTION IS of being computerized in the coming decades.

Jobs that remain will require a multi-dimensional
workforce skilled in technology, problem-
THREATENING TO BE JOB solving, and interpersonal relations. While
computerization is largely driven by the efficiency

DESTRUCTIVE, and has not benefits of technology, global productivity growth

has slowed over the past two decades, with total
factor productivity dropping below zero in 2013,
yet resulted in the sought-after to -0.1%. Policymakers expect the productivity
gains from the digital revolution to become
productivity gains clearer in the future

Number of Job Occupations by Susceptibility to Computerization

(In Number of Jobs per Susceptibility Score Grouping(1), 2013)
Jobs Most Susceptible to Computerization

50%

24%
100
90
80
70
60
50
40
30
20
10
0
<1 1-5 Ranks of occupations according to their probability of computerization 95-100
Unlikely to be Highly Likely to be
computerized computerized

Growth in Global Total Factor Productivity and Technology Application

(In % Y-o-Y Growth and Users per 100 People, 1997-2013)

4 38.1 40
35.6
32.0
3 30
26.2

2 20

9.8
1 10

Productivity Internet
0 0
Growth Penetration

-1

-2

-3
1997-2006 2007-2011 2011 2012 2013

World Other Mature Economies Other Developing Asia Sub-Saharan Africa

US China Latin America World Internet Penetration

Europe India Middle East and North Africa

Note: (1) All segments five point intervals

Source- Upper Chart: “The Future of Employment: How Susceptible are Jobs to Computerisation?”, Carl Benedikt Frey & Michael A. Osborne, 2013
Sources- Lower Chart: The Conference Board Total Economy Database; World Bank Development Indicators

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