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Key takeaways:
- Mainstream businesses have been increasing the uptake of the Internet of Things (IoT) and they are expected to invest further to broaden the adoption in coming years.
- The future industry landscape is driven by various key structural trends. Identifying companies that can adopt and innovate their business models to these mega trends can help capture the underlying long-term growth drivers.
The world we live in today is undergoing rapid digital transformation, and the world we live in tomorrow will become increasingly connected with widespread technology adoption.
Advanced wireless technologies such as 5G have enhanced the application of artificial intelligence and cloud computing in everyday life. And this trend towards digitalisation has also accelerated the commercial and home-use of software.
Over the past few years, IoT has emerged to connect everyday objects such as home appliances and vehicles to the internet via sensors or software embedded in them. A network of physical objects is formed in which data can be shared for real-time analytics and even machine learning, and thus enabling concepts like automation.
In this article we consider the growth opportunities in two of the most widely used IoT applications:
- Industrial automation in manufacturing
- Autonomous vehicles in transportation and mobility
Industrial automation
Robotics density in the manufacturing industry1
- The adoption of industrial automation is still in its infancy with secular growth opportunities across the robotic, vision and laser industries.
- The global average robot density in the manufacturing industry is still significantly below that in Singapore, South Korea, Japan and Germany, suggesting that there is much room for other markets to catch up.
- In addition to seeking capacity expansion or capacity upgrades, global manufacturers are trying to reduce labour costs and improve operational efficiency amid the incremental reshoring of production.
Autonomous vehicles aim to help improve safety on the road
Number of motor deaths and fatal crashes in the US2
- Fully automated vehicles3 are still in the distant future. The algorithms and software required to provide automotive grade safety in all driving conditions is still lacking, while cybersecurity is also a concern.
- Still, continuing advancements of automotive driving technology are making good progress in improving the safety of semi-autonomous vehicles, which are attracting a wider consumer base.
- Sensor technologies or advanced driver assistance systems enable the digitalisation of information for control and communication, and allow the automation of certain functions. For example, adoptive cruise control, parking assist and fatigue recognition are becoming more common fixtures in motor vehicles.
The Investment Manager seeks to achieve the stated objectives. There can be no guarantee the objectives will be met.
The broader adoption of IoT in our everyday life is expected to continue and we see growth potential particularly in manufacturing and transportation.
As global manufacturers are striving for operational efficiency, there is a huge potential market size for increased automation content in robotics (e.g. robot density, robots and cobots with enhanced flexibility), vision (e.g. vision penetration, 3D vision) and laser processing (e.g. laser penetration, ultra-high power lasers).
Elsewhere, autonomous driving is expected to be a game changer. We expect mass market adoption of autonomous vehicles could markedly improve road safety and reduce traffic congestion and carbon dioxide emissions, enhancing the quality of lives of many. We are seeing exciting developments in automotive technology, with heavy investments from major automaker companies and technology giants.
Conclusion
As IoT continues to evolve and bring about rapid changes with lasting impact, a bottom-up active strategy with low active risk could be an optimal approach to seek structural growth opportunities while avoiding those companies less able to adapt to change. In both the industrial automation and autonomous vehicles industries, we have already seen the emergence of companies that are disruptors in these markets.
This content represents our investment team’s current view and overall strategy provided for information only based on current market conditions not taking into consideration any specific investor’s investment objective and risk appetite. Not to be construed as investment recommendation or advice.
Diversification does not guarantee investment return and does not eliminate the risk of loss.
1. Source: International Federation of Robotics, J.P. Morgan Asset Management. Data reflect most recently available as of 31.01.2021
2. Source: Insurance Institute for Highway Safety, J.P. Morgan Asset Management. Data reflect most recently available as of 31.01.2021.
3. Fully automated vehicles are vehicles that can perform all driving functions in all road conditions for an entire trip with no human intervention required.
Investments involve risk. Not all investments are suitable for all investors. Investors should consult professional advice before investing. Investments are not similar to or comparable with fixed deposits. It does not constitute investment advice and it should not be treated as an offer to sell or a solicitation of an offer to buy any fund, security, investment product or service. The information contained herein does not constitute J.P. Morgan research and should not be treated as such. The material was prepared without regard to specific objectives, financial situation or needs of any particular receiver. The opinions and views expressed here are as of the date of this publication, which are subject to change. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Issued by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K). All rights reserved.
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