How can AI unlock the next era of Industrial Automation?
AI and automation can provide several benefits to the capital goods industry such as optimizing production processes and allowing companies to produce goods at a lower cost and with higher quality. AI-enabled automation impacts capital goods companies both for their own internal usages as well as for customer offerings. Three key areas that are likely to see the most impact include: (1) Enhanced monitoring & auto-correction (predictive maintenance), (2) Supply-chain & production optimization, and (3) On-demand/customised production.

Smart Manufacturing - $300bn market growing at 13-15% CAGR
The global smart manufacturing industry stood at US$250-300bn in 2022, with industry data sources forecasting it to reach/exceed US$300bn in 2023 and grow to US$700-750bn by 2030, implying 13-15% CAGR over 2023-30. Regionally, the largest market is Asia Pacific (led by China), at 35-40% in 2022, and is expected to be the fastest-growing market, followed by North America and then Europe (though they are also expected to grow at high-single-digit/double-digit CAGR). By end-market, the Automotive industry has the largest share of over 24% in 2022 and is anticipated to be one of the fastest-growing end-markets with an estimated CAGR of >15% over the next decade.

Structural trends driving faster growth for EU automation companies
Organic growth for automation businesses has outpaced the broader EU Cap Goods coverage universe in 25 of the last 36 quarters, with a clear breakout in the growth trends since early 2021. Overall, these divisions have recorded a 250-300bps higher organic growth rate versus the sector in the past three years (c.100bps above sector growth since 2014). Furthermore, the average sales growth for these businesses has also been higher than their own historical run-rate for the past three years, recording average organic growth of 11% over 2021-23 versus c.3-5% in the past.

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