For private equity investors, the real question surrounding artificial intelligence (AI) isn’t whether it will transform industries. It’s how those transformations will translate into real returns. Amid the excitement around model-building and chatbot launches, the best opportunities may be found far from Silicon Valley — in the world’s ageing manufacturing plants, testing facilities and industrial supply chains.
We’re calling AI the fourth industrial revolution (4IR). The keyword is “industrial”. Global investment in AI infrastructure is expected to exceed $7-trillion (R110.91-trillion) over the next decade, spanning everything from hyperscalers’ data centres to the power grids that feed them.
For that investment to pay off, trillions of dollars of productivity gains need to show up in traditional industrial businesses. Manufacturing remains one of the least digitised sectors of the global economy, despite sitting at the heart of everything from energy systems to consumer goods. In a 2023 report, the consultancy group McKinsey estimates that revitalising productivity in key US manufacturing sectors could boost US GDP by a cumulative $10-trillion (R158.44-trillion) by 2030, while Bain finds that “factory of the future” tools can drive productivity improvements for machinery companies exceeding 30%.
Read Full Article on TimesLIVE
[paywall]
AI isn’t a science experiment. It’s a revolution that is going to divide winners and losers Yet most manufacturers have captured only a fraction of this value. In a sector where margins are tight and downtime is costly, the transformative potential here is enormous.
For leading manufacturers, AI is about offence. Large players can use it to widen their lead, increasing uptime, compressing costs, tightening quality control, and expanding margins at a pace others can’t match. In this, they become price setters, not price takers, and over time, those advantages should compound.
For commoditised businesses, the equation is harsher. For them, AI is not about upside; it’s about survival. Without it, inefficiencies become more visible, costs become harder to absorb, and competitiveness becomes harder to sustain.
In this context, AI isn’t a science experiment. It’s a revolution that is going to divide winners and losers. Nowhere is this dynamic clearer than among mid-sized manufacturers across the US, Germany and China.
These are companies that produce goods that form the backbone of the global economy. These businesses aren’t short on demand; they’re short on digital capability. Their inefficiencies, underused assets and fragmented supply chains leave significant productivity gains on the table.
[/paywall]
