The rise of the PC in the 1980s, the internet in the 1990s, and smartphones in the following decade heralded today’s digital age, but now the digital age is paving the way for the autonomous age – where artificial intelligence will eventually control our transport and resource infrastructure and decide, for instance, whether we are insurable or can receive medical treatment.
Disruptive technologies include innovations that create new markets then disturb existing ones, but even incremental improvements can be disruptive. Look how PC-based e-commerce has already unsettled traditional bricks-and-mortar stores in developed economies, but how smartphones are now disrupting shopping in emerging countries.
The internet, artificial intelligence and virtual reality are decentralising technologies that alter the way we work, trade, educate and entertain ourselves. They will change the way industries operate too: today’s market leaders may be toppled.
We see five phases of destructive technology. ‘Early disruption’ leverages the maturity of past innovation to produce a breakthrough but is followed by ‘hype mania’ when expectations can exceed reality, producing a ‘backlash window’ because the innovation doesn’t deliver the desired disruption.
However, as expectations normalise, ‘real applications’ emerge. Expectations and reality start to align. Then a ‘new normal’ materialises as applications become common and the technology is no longer considered disruptive.
The arrival of disruptive technologies often allows new competitors to enter markets and upset long-standing industries. Almost every business is entering a digitisation era and will need to spend more on technology to survive.
No sector is immune to disruptive innovations. The Internet-of-Things can create smart farms, factories, and retail supply chains that optimise operations: it means improved healthcare diagnosis and the digitalisation of medical data.
More than 50 HSBC analysts in 20 countries have studied the impact on different sectors. Autonomous and electric vehicles will affect transportation, demand for oil and materials such as lithium, besides robo-taxis and automated freight terminals. Improved computational power and sensors help devices to see, hear, display and communicate more accurately.
The internet and cloud services are driving disruption in retail, education, food and drink, payments and professional sports. ‘Green buildings’ counter climate change while synthetic diamonds and blockchain help ensure raw materials are conflict-free. Indoor vertical farming can cut water usage by 95% and eliminate the need for pesticides.
Tech-savvy young consumers will drive the global adoption of these new technologies, but there are economic consequences. Better price information, virtual consumption, and cheaper production are disinflationary.
Automation and better artificial intelligence will cut costs and displace jobs - though squeezing wages rather than employment levels as ousted middle-skill workers compete against low-skill workers for the remaining jobs.
Virtual-reality could also make work locations less important, widening the available labour pool for most jobs. When offices in London or New York can hire someone based in India, China or Brazil, there is a clear impact on wages.
But technologies that support growth could boost productivity: artificial intelligence is already helping businesses from manufacturing to taxi services. And some gains are hard to measure: route-finding software on mobile phones may reduce map sales, for instance, but it allows millions to arrive on time, which has some economic value.
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Steven Pelayo
Equities: Stock ratings and basis for financial analysis
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HSBC & Analyst disclosures
Company Stock code Recent price (local currency) Price date Disclosure
AAC TECHNOLOGIES 2018.HK 131.50 18 April 2018 2, 4, 7, 11
AP MOLLER MAERSK MAERSKb.CO 9,000.00 18 April 2018 1, 2, 5, 6, 7
DELTA ELECTRONICS 2308.TW 120.00 18 April 2018 4, 6, 7
GLENCORE PLC GLEN.L 3.74 18 April 2018 1, 2, 5, 6
IFLYTEK CO LTD 002230.SZ 57.25 18 April 2018 7
MERRY ELECTRONICS 2439.TW 143.00 18 April 2018 7
PING AN INSURANCE GROUP 2318.HK 80.85 18 April 2018 2, 4, 5, 6, 7, 11
SIEMENS AG SIEGn.DE 106.06 18 April 2018 1, 2, 4, 5, 6, 7
SK HYNIX INC. 000660.KS 84,600.00 18 April 2018 4, 7
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