Artificial intelligence and Asia

Shifting Asia

5 April 2017 | Tags: Al, Shifting Asia

What is artificial intelligence (AI)?

We all have seen the headlines: "Google's AlphaGo defeats world-class Chinese “Go” player"; "IBM's Watson is tackling healthcare with artificial intelligence"; "Facebook artificial intelligence spots suicidal users"; and so on. Artificial intelligence (AI), which is essentially a set of tools and programs that make software ’smarter’ in a way an outside observer thinks the output is generated by a human, is starting to break out on the global stage.

In its current state, AI has the potential to benefit businesses through significant cost savings due to its high scalability, an elimination of both omission and commission errors, and the ability to instantaneously document and optimize processes. Like all technologies, AI will continue to evolve as progress compounds from one innovation to the next. And it is likely that by 2030, AI will be as commonplace in society as internet-ready devices are today.

Shifting Asia

Welcome to the second edition of UBS CIO's "Shifting Asia" series, a biannual publication that identifies major trends that will shape UBS CIO's longer-term investment views over the next 5–10 years.

AI in Asia: The beginning of a transformative journey

With a few exceptions, references to AI are typically related to breakthroughs in Silicon Valley or the impact to developed markets. But what about Asia, a region that includes over half of the world's population and produces over one-third of the world's economic output? (Source: IMF) Already, several major Chinese players like Baidu, Alibaba and Tencent have jumped into the race for AI supremacy, while many smaller Asian start-ups from India to Japan are making significant advances in this highly nascent field. According to Zinnov, China and India are attracting the most AI-based capital outside of the US, underscoring Asia’s significant potential in this field.

And given the possibilities, Asian governments and corporates are becoming much more proactive in developing their AI capabilities. There is a lot going for the region in terms of its ability to shape the global AI movement.

Source: UBS

Asia has the potential to become a global AI leader, but it still has a long way to go

AI's economic value in Asia

According to UBS CIO's estimates, AI could produce economic value - created from the introduction of new product services and categories, cost savings arising from better products, lower overall prices and improvements in lifestyles - between USD 1.8-3trn a year by 2030 in the region. Notably, AI will have a disproportionally high impact on the industries of financial services, healthcare, manufacturing, retail and transportation, which combine to contribute around two-thirds of the Asia's GDP currently. However, the region still faces an uphill path due to the lack of an AI-based ecosystem and Asia's rather late entrance into industry. Moreover, the potential disruption to long-entrenched business models and the risks of job losses in traditional industries and may dissuade some markets from pursuing an AI-ready future. The latter point, in particular, is a contentious one when evaluating AI's impact on society.

Interested to know more.

Recording of the Q&A call held on 11 April is available now.

Source: World bank, UBS estimates as of January 2017

Notably, AI will affect five industries the most in Asia – financial services, retail, transportation, healthcare & manufacturing.

How should investors and Asian stakeholders respond?

Given the anticipated growth in AI, UBS CIO believes that companies or governments that ignore AI's development in the aforementioned industries will likely suffer the consequences, as pro-AI competitors and counterparts would eventually outstrip their output and overall performance. Investors should therefore avoid companies exposed to significant disruption from AI and embrace companies with a strong technology focus in AI-related areas. Asian corporates, particularly those in old economy sectors, should have an open mind and try to embrace AI rather than fight against it; the benefits outweigh the risks, in UBS CIO's view.

The publication also features insightful interviews from top AI leaders and provides recommendations for key stakeholders to best prepare for an AI-ready future.

Further reads