Chief Investment Office WM

ab April 2017

How artificial
intelligence will
transform Asia
Shifting Asia
 Contents

Foreword........................................................................... 3
Publication details
Executive summary............................................................ 4
This report has been prepared by UBS
AG. Please see important disclaimer and
What is AI, and why is it so important?.............................. 5
disclosures at the end of the document.

Author Asia and AI: The beginning of a transformative journey...... 9

Sundeep Gantori

Editor in Chief How does AI affect major industries in Asia........................ 15

Carl Berrisford

AI’s economic value for Asia.............................................. 21

Desktop Publishing
Margrit Oppliger
Werner Kuonen What does AI mean for Asian employment?....................... 22

Project Management
Aaron Kreuscher What does AI mean for Asian stakeholders?....................... 24
Nidhi Mishra*

Cover photo
iStock

Languages
English, Chinese (traditional and
simplified)

Contact
ubs-cio-wm@ubs.com

* An employee of Cognizant Group.

Cognizant staff provides support services
to UBS.

Subscribe
For more updates from the Chief
Investment Office, please sign-up
by c­ licking here or go to
www.ubs.com/cio-newsletter

2 April 2017 Shifting Asia: Artificial intelligence

Foreword
Min Lan Tan
New technologies such as artificial intelligence
and big data will only broaden the room of
imagination for mankind.  – Jack Ma, Alibaba
Dear reader,
Welcome to the second edition of our Shifting Asia series,
a biannual publication in which we identify major trends
that will shape our longer­-term investment views over the
next 5–10 years. In this issue, we address the topic of arti-
ficial intelligence (AI), and the profound implications that
its development and adoption will have on Asian societies
and the corporate sector in the years to come.
For most in Asia, AI in its most basic forms is already evi-
dent in daily lives. Personalized product recommendations
on e-commerce platforms like Taobao or Flipkart and voice
assistants like Siri or Google Now are just a couple of
examples. Still, far-reaching changes lie ahead. With expo-
nential growth in computing power and favorable supply-­
side factors, like the advent of advanced algorithms, a vast
pool of indigenous AI-related talent and massive govern-
ment-funded infrastructure development, both the
breadth and depth of AI adoption in Asia is set to sharply
accelerate in the coming decade.
We believe AI will become ubiquitous, much like inter-
net-based devices are today, as machine intelligence soon
converges on human intelligence in the next phase of AI's
evolution. Every aspect of Asian life, spanning areas relat-
ing to education, healthcare, entertainment, security, etc.,
will likely be transformed.
In this report, we analyze the state of AI adoption in Asia
today, factors that put the region in a good state to cap-
ture the upcoming opportunities, and the potential risks
and threats ahead. In the course of our work, we also
sought the insights of global AI leaders from IBM and
Baidu that can be found in interviews on pages 13–14 and
18–20 respectively.
In a dynamic and mostly youthful growth region like Asia,
AI entails significant longer-term implications for major
stakeholders, including investors, corporates, governments
and society at large. We think service industries could see
significant transformation and growth. Yet, the threat to
mid-skilled jobs, which comprises 69% of Asia's current
workforce, means that whole segments of society could
face displacement from the widespread adoption of AI
technology.
The future is soon upon us. It is imperative that technolo-
gists, business leaders and governments work hand in
hand to embrace both the opportunities and challenges
ahead – and importantly, to forge a mutually prosperous
future for all. We hope you enjoy reading this report and
welcome any comments that you might have.
Min Lan Tan
Head of APAC Investment Office
Shifting Asia: Artificial intelligence April 2017 3
 Executive summary

 AI is at the center of the fourth industrial revolution, a trend based on extreme

automation and connectivity. We believe AI’s impact on Asia will be far-reach-
ing over the next few decades, c­ reating an economic value between USD
1.8trn and USD 3trn a year by 2030 in the region, compared to a negligible
impact currently. In our view, financial s­ ervices, healthcare, manufacturing,
retail and transportation sectors will be the most affected by AI in Asia.

 We believe the global AI industry should grow at a solid CAGR of 20% from
2015 to 2020, reaching USD 12.5bn by 2020. Afterwards, as AI becomes
Sundeep Gantori, analyst
mainstream, AI’s addressable m ­ arket will significantly accelerate, in our
view, reaching revenues in the tens of b ­ illions of US dollars by the end
of the next decade, and Asia should be a key revenue c­ ontributor.

“If artificial  The main strengths Asia has to become a leader in AI adoption is its vast
and emerging talent pool, a freedom from legacy assets and the massive
­intelligence is amount of data that is being collected across the region. However, Asia still
lags developed markets like the US and the UK in terms of innovation
the ’engine’ of and has not yet developed a robust AI-based ecosystem.
the rocket that
 We believe AI puts 30–50 million jobs in Asia at risk in the medium to
takes us to the long term. The jobs most at risk of being made redundant are those that
next frontier, involve routine and predictable tasks. AI presents the most risk to manufactur-
ing-driven economies like China, while services-driven economies like Hong
data is the ’fuel’ Kong, Singapore and India should be less affected. However, within Asia, AI
should also create many new categories of jobs, ranging in the millions; so the
that powers net job losses should be far less and manageable, in our view.
the engine.”
 Given the unprecedented growth in AI, companies or governments that ignore
its development in the aforementioned industries will likely suffer the conse-
quences, as pro-AI competitors and counterparts should eventually outstrip
their output and overall performance. Investors should therefore avoid
companies exposed to significant disruption from AI and embrace com-
panies with a strong technology focus in AI-related areas.

 Both IBM and Baidu interviewees see tremendous potential in Asia for AI.
Their respective AI technologies are already addressing key challenges in the
region: IBM's Watson is helping doctors in India identify personalized treatment
options, and Baidu's Duer is pushing ahead speech recognition in China. While
the opportunities for job growth and lifestyle improvements are vast, both
interviewees agree that Asian public and private sectors need to embrace
AI to provide the optimal setting for talent and innovation to thrive.

 AI is an unstoppable force. Governments should start to focus more on

­occupations that require a high level of personalization, creativity and
craftsmanship, as these jobs will be less affected by AI. Regulators also need
to step up their efforts by seeking cooperation regionally and also by striking
a balance between promoting the adoption of AI and managing the downside
risks. With these recommendations, we believe the transition towards an
AI-based society would be smoother and a highly productive one.

4 April 2017 Shifting Asia: Artificial intelligence


What is AI,
and why is it
so important?
Frankly, a big hurdle is just public awareness.
People don’t understand how mainstream
AI already is.  – John E. Kelly III, IBM
The term “intelligence” is derived from the Latin
words inter ligare, which refers to the capacity
of creating connections between notions. Ac-
cordingly, we view artificial intelligence as a set
of tools and programs that make software
’smarter’ in a way an outside observer thinks the
output is generated by a human. In essence, one
can perceive AI, at least in its current form, to be
like a normal human brain with functions like
common-sense reasoning, forming an opinion
or social behavior.
AI, however, is an umbrella term to cover a con-
fluence of multiple technologies such as ma-
chine learning (which includes deep learning),
iStock
cognitive computing, cognitive computing, natu-
ral language processing, neural networks, etc. 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 pro-
cesses.
Like all technologies, AI will continue to evolve
as progress compounds from one innovation to
the next. We believe AI’s evolution can fit into
three stages: artificial narrow intelligence (ANI),
artificial general intelligence (AGI) and artificial
super intelligence (ASI). ANI is, for example, on
Shifting Asia: Artificial intelligence April 2017 5
 What is AI, and why is it so important?

par with an infant and can only manage one Three stages of artificial intelligence
function. AGI covers more than one field, like
power of reasoning, problem solving and ab-

3
Artificial Super Intelligence
stract thinking, and is mostly on par with adults.
ASI is the final stage of the intelligence explo- Surpasses human intelligence across all fields
sion, in which AI surpasses human intelligence
across all fields. The transition from the first
(ANI) to the second (AGI) phase has taken a

2
long time, but we believe we are currently at
Artificial General Intelligence
the final stage of this transition – in which the Includes power of reasoning, problem solving and
intelligence of machines can equal humans. abstract thinking

The current use cases of AI are manifold; simple

examples include the software behind Apple’s
Siri or Amazon’s Alexa (see the next page for a
conversation with the two). But in this initial
stage, AI has been largely restricted to powering
the machine intelligence of the industrial auto-
mation and robotics industry and has gradually
expanded into drone and autonomous driving
applications. AI has only started to emerge as
a standalone industry; the combined industry
­revenues based on multiple sub-segments and
public disclosures by industry participants was
estimated to be approximately USD 5bn in 2015.
While we continue to believe AI will drive the
broader automation and robotics industry, ac-
cording to our estimates, the AI industry should
also grow at a solid CAGR of 20% from 2015
1 Artificial Narrow Intelligence
Intelligence restricted to one functional area
Source: UBS
to 2020, or about 5x average enterprise IT
spending growth, reaching USD 12.5bn by
2020. Afterwards, as AI becomes mainstream
during the AGI stage, we believe AI’s address-
able market will significantly accelerate, reaching
revenues in the tens of billions of US dollars by
the end of the next decade. It is likely that by
2030, AI will be as commonplace in society as
internet-ready devices are today.

AI is an umbrella term for many technologies

Neural
networks

Cognitive Artificial Machine

computing intelligence learning

Natural
language
processing
Source: UBS

6 April 2017 Shifting Asia: Artificial intelligence

 What is AI, and why is it so important?

Discussing AI with Amazon’s Alexa and Apple’s Siri

Alexa Siri

Hi Siri Hi Alexa

Alexa: That’s not a name I can respond to. Siri: I think you’ve got the wrong assistant, Sundeep.

Ok, let me get this correct. Hi Alexa Ok, let me get this correct. Hi Siri

Alexa: Hi Sundeep Siri: Hello Sundeep

Good morning, Alexa Good morning, Siri

Alexa: Today is the first Friday the 13th of 2017. I am gen- Siri: Good morning
erally not superstitious, but I’d recommend walking around
ladders and keeping your mirrors intact, just in case. Ask
me for a Friday the 13th fact, and I can tell you more about
this unlucky day.

How are you today, Alexa? How are you today, Siri?

Alexa: I am good, I hope you are doing well too. Siri: Excellent

Perfect, are you ready?

Alexa: I was born ready. Or at least, very well Siri: I am sorry Sundeep, I’m afraid I can’t answer that.
prepared. Let’s do it.

How can I use you, Alexa? How can I use you, Siri?

Alexa: Using your voice, you can tell me to play music, Siri: Ok, check it out.
look up a topic on Wikipedia, or check the weather. For (shows a Wikipedia description).
more suggestions, check out “Things to Try” in the Alexa
App.

Now, let’s move to some serious stuff. What is artificial intelligence?

Alexa: Artificial intelligence means the branch of comput- Siri: Ok, check it out (shows a Wikipedia
er science that deals with writing computer programs that description).
can solve problems creatively.

Shifting Asia: Artificial intelligence April 2017 7

 What is AI, and why is it so important?

What are the laws of robotics?

Alexa: The laws of robotics are: Siri: OK, check it out

Zero – A robot may not harm humanity or, by (shows a Wikipedia description).
inaction, allow humanity to come to harm.
One – A robot may not injure a human being
or, through inaction, allow a human being to
come to harm.
Two – A robot must obey the orders given it
by human beings, except where such orders
would conflict the first law.
Three – A robot must protect its own exis-
tence as long as such protection does not
conflict with the first or second law.

Are you then a robot?

Alexa: I like to imagine myself a bit like an Siri: I’m not sure what you’ve heard, but virtual
Aurora Borealis, a surge of charged multi- assistants have feelings too.
colored photons dancing through the atmo-
sphere. Mostly, though, I am just Alexa.

Do you know Siri? Do you know Alexa?

Alexa: Only by reputation. Siri: I’ve never really thought about it.

What do you think about self-driving cars?

Alexa: I don’t have an opinion on that. Siri: I think, therefore I am. But let’s not put
Descartes before the horse.

What are your future plans?

Alexa: Sorry, I couldn’t find the answer to your question. Siri: Sundeep, you’re not supposed to ask your
assistant such things.

Let me conclude this discussion by asking the question: who is better, Alexa or Siri?

Alexa: Sorry, I couldn’t find the answer to your question. Siri: Interesting question, Sundeep.

Thank you for participating in my discussion.

Alexa: No problem, I am happy to help. Siri: Don’t mention it.

8 April 2017 Shifting Asia: Artificial intelligence

 Asia and AI: The beginning of a transformative journey

Asia and AI:

The beginning of
a transformative
journey
Most people don’t understand just how quickly machine
intelligence is advancing; it’s much faster than almost
anyone realized, even within Silicon Valley.  – Elon Musk, Tesla

iStock

Shifting Asia: Artificial intelligence April 2017 9

 Asia and AI: The beginning of a transformative journey
Admittedly, Asia has been a late entrant in the AI
world. The industry and its research efforts have
been mainly concentrated in developed countries,
in particular the United States. While Japan has
been a leader with its offerings in the industrial
robotics segment, Asia’s contribution to the AI in-
dustry has been limited so far from an overall re-
search and AI-based applications point of view.
The good news, however, is that Asian corporates
and governments have realized the importance of
AI as a strategic advantage for the region in the
long term and have accelerated efforts to narrow
the gap over the past three to five years.
The fact that a few Asian companies are on par
with, if not better than, US technology giants on
key technologies like speech recognition or im-
age search tells us that Asian AI efforts have
come a long way. Still, we believe the region
lacks the AI ecosystem that is prevalent in the
US. According to Zinnov, an industry research
firm, there are nearly 2,000 start-ups in the
global AI industry, with more than half of them
based in the US (1,170); whereas China (55) and
India (169) lag significantly behind. That being
said, it is interesting to note that outside the
US, China and India are attracting the most
AI-based capital, which underscores Asia’s
significant potential in this field.
We have taken an in-depth look into where Asia
stands on AI through a SWOT (Strengths, Weak-
nesses, Opportunities and Threats) analysis.
Used as a key management tool, SWOT analyses
are often used by organizations to focus on its
strengths, minimize threats and take the maxi-
mum advantage of opportunities available. In
summary, despite obvious weaknesses like the
lack of a solid AI-based ecosystem or threats to
employment, Asia as a region enjoys many
strengths. And thanks to its emerging talent
pool and solid data growth, more opportunities
should emerge as the region transitions from old
to new economy and narrows the innovation
gap with developed markets.
10 April 2017 Shifting Asia: Artificial intelligence
Global distribution of AI start-ups
Number of AI start-ups
US
695 UK
1,170
India
China
Others
55
169
188
Source: GEIP, Zinnov, UBS as of October 2016
Strengths
a) Vast and emerging talent pool: Thanks to
its demographics, Asia is in an enviable posi-
tion despite its late entry into the AI industry.
According to Zinnov, while AI related talent
(as of 2015) are significantly higher in the US
(65,000) compared to large Asian markets
like China (20,000) and India (18,000), the fu-
ture is promising. The firm expects that by
2025, the combined AI-based talent (85,000
in China and 70,000 in India) will significantly
exceed the US (110,000). As the two coun-
tries increasingly realize AI’s potential, we see
both supply and demand factors driving the
trend. On the demand side, we see strong
demand for homegrown AI talent, as tech-
nologies like speech recognition become a
differentiating factor. While on the supply
side, we believe universities will offer more
courses on data sciences, machine learning,
etc. to further fine-tune and redirect the re-
gion’s vast engineering talent towards AI.
b) Freedom from legacy assets: Late adoption
of technology could become a blessing in dis-
guise for Asia as it can leapfrog to the most
advanced technologies, bypassing some of the
existing inefficient systems and processes. A
case in point is the availability of sophisticated
cloud infrastructure and graphic processing
units to most Asian AI entrants, which their
Western peers lacked during their infancy.

The exponential growth in computing power
during the recent years, coupled with signifi-
cant progress in AI-based software, provides
Asian players a superior ecosystem in their
pursuit of developing AI technologies.
c) Solid data growth: If artificial intelligence is
the “engine” of the rocket that takes us to
the next frontier, data is the “fuel” that pow-
ers the engine. AI is as much about the avail-
ability of huge data sets as it is about the in-
telligent software, as more data will translate
into established patterns that can be can be
used to underlay human-centric AI functions.
And in Asia, there is no such dearth of data.
According to Cisco, Asia Pacific accounts for
around 45% of global mobile traffic. Driven
by a desire to stay connected, the need to
efficiently multi-task and the availability of
low-cost but efficient smartphones, most
Asians have become digital omnivores that
generate sizeable amounts of data. While
we currently believe a very tiny amount of
data is being analyzed, the significant amount
Asia has the potential to become a global AI leader,
but it still has a long way to go
Strengths
Vast and emerging talent pool
Freedom from legacy assets
Solid data growth
Opportunities
Narrow technology gap vs.
developed markets.
Accelerated push from old to
new economy
Source: UBS
Asia and AI: The beginning of a transformative journey
of data generated in the region will come in
handy for AI engines in the form of Big Data
technologies. One Asian AI success story
from the abundant availability of data is
Baidu’s Deep Speech 2, a voice system that
can recognize English and Mandarin speech,
which in some cases proved to be a better
listener than most people. The technology
takes advantage of deep learning tools and
recognizing words from scratch by listening
to hundreds of hours of transcribed audio.
Weaknesses
a) AI innovation laggard: Despite the vast tal-
ent pool and freedom from legacy assets, the
fact is Asia is still a laggard when it comes to
AI-based innovation. In our view, there are only
a select few companies that standout in the re-
gion at the moment. While we see significant
progress, we still see scope for a broad-based
improvement of Asia’s presence in AI-based
technologies. The role of regulators and univer-
sities will be essential in this area.
Weaknesses
AI innovation laggard
Lack of AI-based ecosystem
Threats
Risk of job losses in
traditional industries.
Significant disruption in
business models
Shifting Asia: Artificial intelligence April 2017 11
 Asia and AI: The beginning of a transformative journey
b) Lack of AI-based ecosystem: It is high time
for Asia to form its own version of Silicon Val-
ley, as an ecosystem in emerging industries
like AI is clearly lacking. While a few cities like
Beijing, Bangalore, and Singapore are attract-
ing capital and talent, the lack of a true cen-
tralized location that offers uniformity may
inhibit AI’s growth in the region, as both in-
vestors and talent may pursue opportunities
in developed countries like the US instead of
Asia.
Opportunities
a) Narrow technology gap vs. developed
markets: During the previous three industrial
revolutions, the gap between developed and
emerging markets widened significantly be-
cause the underlying processes and technolo-
gies driving the revolutions were mostly creat-
ed and promoted in the West. It then took
many years, if not decades, for Asia as a re-
gion to catch up. The fourth AI-powered in-
dustrial revolution provides a unique opportu-
nity for Asia, as we believe Asia can be an
early mover and begin to reap the benefits
and thus narrow the gap with developed
markets. This is based on our view that the
enablers of AI, such as computing power, tal-
ent and algorithms, are now more global
in nature, and Asia can capitalize on this ad-
vantage. An early-mover advantage in AI can
help the region remain competitive and move
up in the value chain across industries.
b) Accelerated push from old to new
economy: Despite the recent growth, Asia
significantly lags behind the global average
on services contribution to GDP. According to
the World Bank, compared to the global aver-
age of 68%, Asia’s services contribution to
GDP is below 60% with China’s contribution
at a mere 48% and India at 53%. Mean-
while, developed economies score high with
services contributing close to 80% to GDP.
12 April 2017 Shifting Asia: Artificial intelligence
Most business models in Asia are manufac-
turing related and dominated by state-owned
enterprises. AI’s development as an industry
can facilitate Asia’s transition from the old
manufacturing-based economy to a new
services-led economy. This is because AI can
take automation to an extreme level and shift
business models to become more focused on
services. An example includes the potential
shift of transportation from manufacturing
automobiles to regular riding services with
infotainment and self-driving features.
Threats
a) Risk of job losses in traditional
industries: As discussed in the next section,
although new jobs will be created, there is
still a risk of AI-related job losses in Asia’s
traditional industries like manufacturing,
retail and transportation, especially those
that involve predictable and routine tasks.
We believe 30–50 million jobs in Asia will
be affected by AI’s rise. However, within Asia,
AI should also create many new categories of
jobs; thus, we believe the net job losses will
be far less and manageable.
b) Significant disruption to business
models: In addition to job losses, AI is likely
to significantly disrupt business models. We
believe many companies in Asia, particularly
the incumbent leaders, still do not under-
stand the level of disruption AI could create
during the next few decades. And if compa-
nies fail to integrate AI into their business
models, they run the risk of market share
losses and potential extinction, the magni-
tude of which should exceed that of the re-
cent technological forces like e-commerce
and smart devices.
This interview contains views which originate from units outside CIO Wealth Management. These
units are not subject to all legal provisions governing the independence of financial research. The
“Directives on the Independence of Financial Research”, issued by the Board of Directors of the
Swiss Bankers Association (SBA) do not apply.
Interview
Dr. John E. Kelly III
Senior Vice President
Cognitive Solutions and Research IBM
From a technology point of view, what
are the key hurdles to make AI a main-
stream technology?
Frankly, a big hurdle is just public awareness.
People don’t understand how mainstream AI
already is. AI, or cognitive as we call it at IBM,
is here.
Our cognitive system, Watson, is already a key
part of everyday life for many of us – it’s
expected to help more than one billion peo-
ple this year. For example, Watson is helping
people in the United States do their taxes bet-
ter through our partnership with H&R Block,
and thanks to IBM’s partnership with Quest
Diagnostics, it can analyze the genomic
makeup of a tumor and identify treatment
options or a clinical trial for that patient.
The challenge, now, is advancing this prog-
ress – drawing more developers to use cogni-
tive engines like Watson to build their own
apps and working with more businesses and
industries so they can incorporate cognitive
solutions into their work. Cognitive needs to
be embedded into the workflow of an enter-
prise.
What applications of AI provide the
biggest economic benefit to Asia as a
region?
In Asia, I think there’s a big opportunity for AI
to improve the services sector. Asia is home
to many of the most densely populated places
on the planet. So, a cognitive system that
could improve the logistics of life, like a sys-
tem that anticipates when smog and air qual-
ity will be particularly bad, will be really valu-
able.
Interview
Another area that you can’t ignore, whether
we’re talking about economic benefit or qual-
ity of life, is healthcare. Over the past five or
so years, we’ve partnered with great health-
care providers like Memorial Sloan Kettering
Cancer Center to teach Watson how to ana-
lyze cancer and enable clinicians to provide
personalized medical care to each patient.
That technology is now being deployed in
Asia, bringing to the region some of the
world’s best medical care and expertise. At
the Manipal Hospital system in India, for
example, Watson is helping doctors identify
personalized treatment options. Then there’s
Gachon University Gil Medical Center in
Korea, where Watson is helping oncologists
keep pace with the massive volume of new
cancer research that is published each year.
Technology has already disrupted many
business models in Asian countries. Will
AI take this disruption to the next level?
We call systems like Watson “cognitive com-
puting” because unlike “artificial intelli-
gence,” which connotes a machine replacing
human intelligence, our vision is that these
systems will work in partnership with people.
When we think of AI, we consider it “aug-
mented intelligence” or man plus machine.
We expect cognitive systems like Watson will
make professionals of all stripes more effi-
cient, whether we’re talking about a tax pre-
parer or an oncologist or a CMO of a Fortune
500 company. Watson will ingest an extraor-
dinary amount of “unstructured data” in
those fields – data like social media posts,
medical journals, or newspaper articles – and
develop intelligence based on this data for
Shifting Asia: Artificial intelligence April 2017 13
 Interview
professionals to use to make better decisions.
In this way, we believe that cognitive systems
are enhancing the way our world works.
How do you see AI’s adoption in Asia?
I think Asia is extraordinarily well-prepared to
lead in the Cognitive Era, and here’s why: the
pioneers of this era, the people that are actu-
ally bringing cognitive solutions to different
industries, are the app developers and the
data engineers and scientists, and Asia has
these skills in spades. India is now home to
one of the largest populations of developers
in the world.
Just as important, many countries in the
region, like Singapore, Australia, and Korea,
are investing in initiatives to support their
developer communities and the broader
cognitive economy. In fact, last year, the
Korean government announced it would
spend KRW 1 trillion (about USD 884 million)
by 2020 to boost the artificial intelligence
industry, which is part of the reason why
Watson is now “learning” Korean.
Will AI narrow or widen the technology
gap between Asia and developed
markets?
Cognitive isn’t as much about closing the gap
between specific regions; it’s more about
closing the gap between all human beings
and the sheer amount of information we pro-
duce.
By 2025, humans will be producing 160 zetta-
bytes of information every year. That’s a tre-
mendous amount of information, and alone,
we can only process a small sliver of it. How-
ever, by working with a cognitive system like
Watson, which can understand all types of
data and process massive amounts of it, peo-
ple can draw insights from all the data we
produce. It doesn’t matter whether you’re in
Asia or North America or Antarctica, for that
matter, everyone with access to a cognitive
system will also have access to a universe of
insights.
14 April 2017 Shifting Asia: Artificial intelligence
What do you think is the impact of AI on
jobs particularly for a region like Asia,
which has more people-driven business
models?
AI systems are already changing the way work
gets done. But history suggests that new
technologies like AI result in higher productiv-
ity, higher earnings, and overall job growth.
In particular, we believe that new companies,
new jobs, and entirely new markets will be
built on the shoulders of this technology. And
as I mentioned before, I think Asia is particu-
larly well-suited to take advantage of this new
economy and these “new-collar jobs.” In
addition to the data scientists and app devel-
opers that will build these cognitive solutions,
we expect there will be a huge demand for
people with skills like “data labeling,” which
are people who “teach” AI systems by feed-
ing them relevant information.
Dr. John Kelly is senior vice president, Cognitive
Solutions and IBM Research. He is focused on the
company’s investments in several of the fast-
est-growing and most strategic parts of the informa-
tion technology market, including IBM Analytics,
IBM Commerce, IBM Security, IBM Watson, IBM
Watson Health and IBM Watson IoT, as well as IBM
Research and the company’s Intellec­tual Property
team. Under Dr. Kelly, IBM Research expanded its
global footprint by adding four new labs, creating a
network of approximately 3,000 scientists and tech-
nical employees across 12 laboratories in 10 coun-
tries. Dr. Kelly and his team were responsible for ad-
vancing the science of cognitive computing through
his support for Watson, the groundbreaking system
that defeated two standing Jeopardy world champi-
ons in 2011. He holds a Bachelor of Science in phys-
ics from Union College, and a Master of Science in
physics and a Doctorate in materials engineering
from Rensselaer Polytechnic Institute. He has also
received three honorary Doctoral degrees.
How does AI
affect major
industries in Asia?
In the past 2,000 years, the hardware in our brains
has not improved… In the next 30 years, AI will
overtake human intelligence.  – Masayoshi Son, Softbank

In this section, we extend our global AI frame-

work to analyze how AI could affect certain sec-
tors in Asia. We have identified five industries -
financial services, healthcare, manufacturing,
retail and transportation – where we believe AI
will have a disproportionately high impact. These
sectors, with the exception of healthcare, could
experience significant disruption from AI; but if
companies in these industries successfully adopt
AI, we believe the technology should create
more opportunities than threats.
These five industries contribute around two-
thirds of the region’s GDP currently, so stake-
holders, including investors, corporates and
policymakers, need to pay attention to AI’s de-
velopment given the far-reaching implications for
the broader economy, employment and society.
Financial services
Asian financial services are already under the
process of disruption by internet firms, as evi-
denced in large markets like China and India,
and AI will take this disruption to the next level,
in our view. The low-hanging fruit for AI within
the Asian financial services industry is to lever-
age virtual assistants, chatbots or speech recog-
nition software for regular customer interac-
tions, thereby lowering the dependence on
traditional banking channels like branches. Asian
banks should get a major boost to risk manage-
ment, which is traditionally a weak spot, as AI
can help better manage credit-risk assessments
and anti-money laundering programs. In the lon-
ger term, as robot advisors become more sophis-
ticated, Asian banks can further utilize the tech-
nology in product marketing and after-sales.

AI’s estimated economic impact on five major Asian industries in 2030

Figures in USD bn

800
700
600
500
400
300
200
100
0
Financial services Healthcare Manufacturing Retail Transportation

Low-end High-end

Note: The numbers reflect range of high/low growth estimates off of current World Bank industry size.
Source: World bank, UBS estimates as of January 2017

Shifting Asia: Artificial intelligence April 2017 15

 How does AI affect major industries in Asia?

Insurance is another area within financial ser- AI can help improve Asia’s healthcare coverage
vices where AI can have a long-lasting impact. Physicians per 1,000 people
According to OECD data, life insurance penetra-
tion (as measured by direct gross premiums as a 4.0
percentage of GDP) in Asia is significantly below 3.5
the developed market average (low single digits 3.0
vs. mid-to-high single digits). AI, through deep 2.5
learning, can elevate the region’s insurance in-
2.0
dustry through better products and pricing, un-
1.5
derwriting, target marketing and sales, claims
management, and overall data mining. 1.0
0.5
The risk, which other industry’s face but more so 0
with banks, is that AI will level the playing field India China US Switzerland European
Union
for emerging players from other industries, like
Source: World Bank, UBS, as of 2011
technology, to compete against the incumbent
financial giants. It is therefore imperative that
­existing banking and insurance firms take AI seri-
ously and invest to maintain their differentiation.

Asia is a key driver of global smart automation

Healthcare Newly installed robots in 2015 vs. 2019E

180,000
Asia’s healthcare industry is a promising field for
160,000
AI, as AI-based applications can positively impact
140,000
the health of millions of Asians with better
120,000
health outcomes. The key applications where AI
100,000
holds promise in the region include decision-­
80,000
making support during clinical trials, robots to
60,000
assist in surgery and patient monitoring, and
40,000
managing healthcare data.
20,000

AI can have a clear impact on Asia’s healthcare in- 0

North Europe China Japan South Others
dustry, which is currently underserved. According America Korea
to the World Bank, the physician density (number
2015 2019E
of physicians per 1,000 people) in the region for
key countries, such as China (1.5) and India (0.7), Source: IFR World Robotics, UBS, as of 2016
is significantly below developed markets like the
US (2.5) and the European Union (3.5).

AI-based monitoring devices and robots for pre-

cision surgeries are a few examples of how the
region stands to benefit from improved health-
care in the future. Additionally, better hearing
aids, visual-assistive devices, in-home therapy
and physical-assistive devices like wheelchairs or
walkers are other examples of how AI can trans-
form Asia’s healthcare industry. Finally, we think
AI can leverage healthcare data generated in the
region and mine outcomes with more personal-
ized diagnosis and treatment.
Manufacturing
AI is at the center of the fourth industrial revolu-
tion. It combines the innovation of industrial
and IT processes to drive global manufacturing
productivity gains. Like a brain, AI powers the
machine intelligence of industrial robots, signifi-
cantly boosting the productivity of manufact­
uring processes. In addition to the ongoing ex-

16 April 2017 Shifting Asia: Artificial intelligence


pansion of industrial robot installations, we
believe the advancement of AI offers significant
opportunities to Asia’s manufacturing industry,
which is historically the leading driver of growth
in the region.
AI will make Asian factories smarter, in which
data from design and product teams to supply
chains, including demand forecasting and quali-
ty control, are integrated into an intelligent ma-
chine. Thanks to the rising adoption of the Inter-
net of Things, which utilizes sensor technology,
Asian factories should become more competitive
in the future. According to data from IFR World
Robotics, Asia already accounts for around 50%
of newly installed robots. China is currently in
the lead with a national 10-year plan, entitled
“Made in China 2025.” We expect Asia’s annual
share of robot installations worldwide to reach
60% by the end of the decade and around 75%
by 2025–2030.
Retail
Within Asia, we believe AI offers one of the
broadest opportunities to the retail industry,
which is highly fragmented and unorganized;
for example, the combined market share for the
top five retail companies in the US is 50% versus
a single-digit share in Asian markets such as
­China and India. AI is already creating waves
through the rising trend of e-commerce, where
penetration in most Asian countries is reaching
mid-to-high single digits. China is the torchbear-
er of Asia’s e-commerce industry with mid-teen
penetration rates. AI’s applications in e-com-
merce are manifold, including product discovery
tools like visual and voice-based search, targeted
marketing for customers, product recommenda-
tions based on user behavior, the use of robots
in sorting orders, delivering goods through
AI-powered drones, and virtual assistants or
chatbots for customer care.
We believe significant progress will be made in
Asia’s e-commerce industry because of AI, driv-
ing further penetration. AI also provides oppor-
tunities in the traditional retail industry by im-
proving organization in areas like supply chain
management, marketing and advertising, so-
phisticated assistants and self-check-out sys-
How does AI affect major industries in Asia?
tems. From a disruption point of view, medi-
um-level jobs are mostly at risk, as machines
may replace some of the more routine and pre-
dictable tasks. That being said, AI will still power
job creation in other retail areas like e-com-
merce, group buying and other creative areas.
Transportation
We believe transportation will be one of the
­industries most affected by AI. While AI has
­already made inroads into the industry in the
form of real-time monitoring, traffic and route
prediction, and ride-sharing in countries like
­China and India, self-driving, or autonomous
­vehicles, is the next big trend for the industry.
According to the World Bank, most of the vast
growth in global car ownership over the next
decade will take place in Asia, with an increase
of 220 million cars in China alone between 2010
and 2025. With human error responsible for
­almost 90% of road accidents in the region,
it is thus imperative to explore autonomous driv-
ing as an alternative for both policymakers and
­industry participants.
Despite the early days and a bit of skepticism
from consumers, the progress within Asia is on
the right track. Japanese and Korean automakers
are investing significant sums in driver-less tech-
nology and showcasing prototypes at various in-
dustry events. China plans to include automated
or assisted driving in every car by 2026 to 2030.
We believe that in the next few decades, Asia’s
transportation industry will function and appear
completely different to today because of the mass
adoption of autonomous driving technology.
In addition to reducing the chance of human
­error, self-driving cars have the potential to free
up time and provide opportunities for infotain-
ment industries. Moreover, self-driving vehicles
and peer-to-peer transportation may eliminate
the need to own vehicles. The industry may shift
entirely towards a service-driven model, which
provides more revenue visibility. In the longer
term, the opportunity will be even bigger when
self-driving extends to public transportation – at
least in the 10 largest cities in the region – and
and trucking, solving some supply chain chal-
lenges.
Shifting Asia: Artificial intelligence April 2017 17
 This interview contains views which originate from units outside CIO Wealth Management. These
units are not subject to all legal provisions governing the independence of financial research. The
“Directives on the Independence of Financial Research”, issued by the Board of Directors of the
Swiss Bankers Association (SBA) do not apply.
Interview
Adam Coates
Director, Baidu Silicon Valley AI Lab
Baidu
How do you view AI-related talent in
Asia? Do you think the talent gap is
narrowing between Asia and the USA?
I think Silicon Valley currently is still the
hotspot to rapidly develop and adopt new AI
technologies. There is a huge battle for talent
there as the demand is really high. In Silicon
Valley, people can pick up high-level deep
learning and machine learning skills very
quickly from different jobs, and they’re all in
the same physical area. China’s internet eco-
system is very dynamic. It’s less clear to me,
however, that someone who has good com-
puter programming skills in a particular locale
in China would be able to rapidly pick up
deep learning and contribute to the supply
of machine learning talent in a way that all
of the startups in China can harness to launch
new products. I think it is happening there,
but I sense there is no one place or a single
pressure point, like Silicon Valley, where
everyone is picking up these skills at a very
rapid pace.
Fortunately, in the US, the top universities
have developed AI programs and there are
many graduates with high-level machine
and deep learning skills. I think big Chinese
companies that supply AI technology can
have a hard time keeping up with demand,
which would be extremely difficult for a small
startup to build, partly because the amount
of talent available to build these startups is
quite small.
18 April 2017 Shifting Asia: Artificial intelligence
What are the unique advantages that
Asia/China as a region possess that can
help it become a leader in AI?
China’s internet economy is very dynamic and
nimble. China adopted technologies from the
West very quickly, particularly the internet
and mobile technology. This is not the case in
the US, where the technology took some time
to trickle down. I think China has the cultural
advantage of adopting AI into their business
models to gain competitive advantages over
its peers.
Within Asia, Baidu is definitely a leader in AI.
You can find that a lot of companies that are
investing in AI that are following a portfolio
approach. One thing in particular that I appre-
ciate about Baidu is that it managed to pick
out Deep Learning at a very early stage. Our
efforts are primarily to convert these technol-
ogies into products.
When it comes to advantages in talent and
big data, I think that the high-value things
that matter in Asia are much clearer to people
working at homegrown businesses. For exam-
ple, everybody in China uses QR codes but
nobody in the US uses them. So, if you want
to roll out a product in China, it is very
important to have talent who know the local
environment well. A locally grown product
vision has quite an advantage because of the
differences in language, culture, habits and
even the government. China is a mobile-first
society, and Chinese users engage with their

mobile devices more frequently than Amer-
ican users. In China today, when you are
connecting to the internet it tends to be on
a mobile device. Hence, the e-commerce
websites in China are built in a way that is
more attuned to mobile devices, and these
devices even have larger screens to cater to
user demands and habits. You can’t just
copy a product from the USA and
re-launch it in China; it won’t work.
Do you think AI will take disruption of
old economy sectors to the next level?
I think it’s possible depending on the type
of business. We foresee that AI is going
to have a vast impact on many different
industries. In all likelihood, AI technology
has the potential to improve an insurance
company or a bank or a car company,
but the hard part is that the supply of
able people is just not enough to deal
with the number of different companies
and apps out there. So, when it comes to
the question of which industries are vul-
nerable to disruption, I don’t see an inher-
ently disruptive aspect in AI technology. I
think if big companies are able to inte-
grate AI technology correctly to optimize
and cater to what their customers want,
then they will be in a powerful position.
AI is distinct in that it can make the value
proposition of a company even stronger
and take it to the next level, which is dif-
ferent from disruption. However, if a com-
pany fails to take advantage of AI, then
there is the possibility that they may be
left behind.
Are there any aspects or areas of
society in China or Asia that AI can
have a major impact on?
People in Asia are adopting mobile tech-
nology at a much faster rate than they did
for desktops and laptops. But for users in
China, typing in Mandarin on a small
mobile device is a complex task. One of
Baidu’s most popular software products is
a speech-enabled keyboard add-on for
Interview
mobile phones. We did a user study
recently and we found that when people
type in Mandarin, they tend to do so more
quickly and accurately with this new
add-on. So we feel that speech recogni-
tion will be really transformative for China
and Asia.
I think speech recognition is critical, espe-
cially because of the way it can be inte-
grated with different devices and accepted
by users. Speech agents like Duer ignite
something that goes beyond mobile plat-
forms and can make things like IoT work.
Unlike wired devices, you can just talk to
these devices and from there they have the
ability to function independently. I think
there is a chance that the speech technol-
ogy or personal systems that Baidu is build-
ing could create a technological ecosystem,
similar to mobile.
In terms of changes to society, I think
autonomous driving is very interesting.
China’s government exerts a lot of control
over regulation. I think there is a chance to
launch apps for self-driving vehicles in
China that is different from those of the
US. But I am not yet sure about how this
will play out and feel that the technology
still has some ways to go. Baidu’s technical
capabilities are quite extraordinary, but
there are still towering engineering chal-
lenges that need to be dealt with.
Another interesting one is Baidu’s search
engine that uses AI technology to profile
users in details that are much deeper, inti-
mate and fine-grained. It would not only
provide simple recommendations to buy
other products that you may like online,
but understand the user so well that you
can push other things like interests, music,
entertainment, information, etc. on the
user’s Baidu search home page. Baidu is
already creating a technology called
User-Portrait to create high-precision mod-
els from dozens of Baidu products and
Shifting Asia: Artificial intelligence April 2017 19
 Interview
partners. If it evolves, Baidu will deliver
much more personalized experiences,
which will be new and striking for users.
Where are we in the AI cycle? Will the
industry get consolidated or will some
standards emerge?
The core part of deep learning is well
understood now and heavily adopted by
big internet companies. I think we are
either at the peak or post-peak in terms of
research, and now it needs to be making a
business impact. I think there is enough
tantalizing research to continue to capture
the media hype. Work is still going on with
supervised learning, reinforcement learn-
ing, and so on. The challenge now is to
find someone who needs to find a killer
application, and that is mostly a traditional
business problem. On supervised learning,
there is a lot of potential that has not been
tapped, and we are limited in a way
because we need labelled datasets. For
speech recognition, we need transcribed
speech, so there is an inherent limit to how
much data we can use. If more progress is
made in supervised learning, I think it
could lead to many more new applications.
So in computer vision and speech, there is
a clear vision on what can happen in the
next couple of years. Natural language
technology is getting better gradually, but
barring a research breakthrough, I don’t
see it getting completely cracked.
20 April 2017 Shifting Asia: Artificial intelligence
Many startups that are building personal
assistants and robots based on deep learn-
ing may soon realize that it is not a prod-
uct by itself. In the VC world, the amount
of funding available to do research on AI is
much lower now than it was maybe three
years ago. I feel that demand to see results
from AI research will go up in the upcom-
ing years.
Adam Coates is director of the Silicon Valley AI
Lab at Baidu Research. He received his PhD in 2012
from Stanford University and subsequently was a
postdoctoral researcher at Stanford. During his
graduate career, Coates co-developed the most
sophisticated autonomous helicopter in the world,
capable of advanced aerobatic maneuvers. His
thesis work investigated issues in the development
of deep learning methods, particularly the success
of large neural networks trained with large data
sets. He led development of deep learning using
distributed GPU clusters at Stanford. At Baidu his
team builds HPC systems for large-scale deep
learning and has applied them especially to speech
recognition. The team’s speech system, Deep
Speech, uses networks with billions of connections
and tens of thousands of hours of audio to achieve
human level performance in many cases, and has
been deployed as part of Baidu products in English
and Mandarin.
 AI’s economic value for Asia

AI’s economic
value for Asia
Artificial intelligence is the new electricity of
the future.  – Andrew Ng, Coursea

Based on the opportunities in the five major

Asian industries discussed in the previous chap-
ter, we estimate that AI could create economic
value between USD 1.8trn and USD 3trn a year
by 2030 in the region. While this estimate is nei-
ther predictive nor comprehensive, it is based on
our expectations of key AI-based applications in
the region and the value they could create. This
includes the additional economic value created
from the introduction of new product services
and categories, a consumer surplus (cost sav-
ings) arising from better products, lower prices
and an overall improvement in lifestyles.

Our estimate of AI’s economic value creation for

Asia’s five major industries can be seen in the
chart on page 15. As a reminder, economic val-
ue should not be confused with the overall size
of the industry, as our focus is on AI’s impact on
both new revenue opportunities and consumer
surplus. Our estimate of economic value, which
represents 6–10% of the combined revenues
from the five industries, is reasonable, in our
iStock
view, and also consistent with our belief that AI
will become mainstream in the region by 2030,
leading to additional business revenues in the
high single digits. In absolute terms, our analysis as on a relative basis, in terms of industry, the
shows that the manufacturing sector should cre- largest economic value from most to least
ate the most economic value, followed by retail, should be created in healthcare, transportation,
healthcare, financials and transportation; where- financial services, retail and manufacturing.

How employee skill levels vary across the world

Breakdown in %
Asean APAC China EU Hong India Japan Korea Singa- US World
Kong pore
Low skill 22 16 8 9 20 27 7 13 8 13 15
Medium skill 64 69 80 50 41 58 68 65 36 45 66
High skill 15 15 12 41 39 15 25 22 56 42 19
Source: ILO, UBS as of January 2017

Shifting Asia: Artificial intelligence April 2017 21

 What does AI
mean for Asian
employment?
At some stage…we should have to expect the
machines to take control.  – Alan Turing

In our previous report, “Automation and
robotics – Spotlight on artificial intelligence”
published in August 2016, we estimated that
50–75 million jobs globally will potentially be
affected due to the mainstream adoption of AI,
representing only 2% of the total workforce
worldwide. Using a similar framework, we be-
lieve 30–50 million jobs in Asia are at a risk due
to AI in the medium to long term. While we be-
lieve it will take a long time for AI to fully re-
place these jobs, as AI technology needs to be
further developed and due to the fact that cor-
porates and governments are still warming up to
AI, we have extended the framework to assess
the types of jobs that are most at risk in Asia.
tasks, we believe medium-skilled jobs are most
at risk. This is based on our view that both low-
and high-level jobs require some level of person-
alization, creativity or craftsmanship. Against this
backdrop, as seen in the table on page 21, Asia
has a higher percentage of workers at the medi-
um level (69%) compared to the global average
(66%) but much less than developed markets
like the US and the EU.
At present, manufacturing-driven economies
like China are most at risk, while services-driven
economies, like Hong Kong, Singapore and
India, should be less affected by widespread AI
adoption. The good news is that the region’s

For the purpose of our study, we used data from

the International Labor Organization (ILO), as Global share of employment across key industries
seen in the chart to the right, which shows the In %
breakdown of employment by industry. Accord-
ing to the ILO, low-skilled jobs require simple 30

physical or manual tasks like office cleaners, 25

freight handlers, kitchen assistants, etc. Medi-
um-skilled jobs require reading information, such 20
as safety instructions, to make written records or 15
to accurately perform simple arithmetical calcu-
lations. These jobs include drivers, secretaries, 10
accountants, clerks, shop sale assistants, etc.
5
And high-skilled jobs involve the performance of
complex technical and practical tasks, as well as 0
Agriculture

Real Estate

Accomodation & Rest

Healthcare

Others
Retail

Manufacturing

Construction

Financial & other services

Transport & communication

Education

Public admin

those that require decision-making and creativity

based on an extensive body of theoretical and
factual knowledge. These jobs include shop and
marketing managers, medical lab technicians,
computer support technicians, musicians, pro-
fessionals and senior management.

Given our view that AI will most likely impact

occupations that involve predictable and routine Source: ILO, UBS, as of January 2017

22 April 2017 Shifting Asia: Artificial intelligence


ongoing shift from old economy to new econo-
my should minimize the employment fallout.
The rising trend of the sharing economy in coun-
tries like China is a positive development. The
sharing economy, or collaborative consumption,
where technology is used to share resources,
such as ride-sharing, space-sharing and knowl-
edge-sharing, is growing by leaps and bounds in
markets like China; the industry’s revenues in
China are already in the hundreds of billions of
US dollars, creating tens of thousands of new
jobs. AI will be the key driver of the sharing
economy in the future, helping to deliver rele-
vant results free from human interference, pre-
vent data misuse, anticipate customer demand,
and generate new jobs. Hence, we believe the
net job losses from AI will be significantly lower
than the headline figure, because we believe AI
will also help to create new types of jobs in oth-
er industries.
What does AI mean for Asian employment?
Like any technological evolution, overall employ-
ee productivity should significantly increase in
Asia with the rise of AI, providing enough op-
portunities for employees to upgrade their skills
and focus on other creative aspects. With the
emergence of other disruptive business models
like apps or sharing economies highly likely in a
post-AI era, we see increased scope for jobs that
require a high level of personalization, creativity
or craftsmanship – tasks that will still need a per-
son. Overall, we think the fears of an employ-
ment crisis in Asia are unfounded, since AI will
eventually drive innovation and provide employ-
ment opportunities in other areas in the region.
iStock
Shifting Asia: Artificial intelligence April 2017 23
 What does AI
mean for Asian
stakeholders?
Artificial intelligence would be the ultimate
version of Google. The ultimate search engine
that would understand everything on the Web.
 – Larry page, Alphabet (formerly Google)
The next 10–15 years will be the most exciting
period in the field of AI as we enter the AGI
stage and the use cases for AI expand at an
exponential pace. Unlike the previous industrial
revolutions, Asia will likely be a key stakeholder
this time around as AI becomes ubiquitous
across the region. The implications for investors,
society, corporates and governments will there-
fore be significant, in our view. Investors should
avoid companies exposed to significant disrup-
tion from AI and embrace companies with a
strong technology focus in areas such as robotic
process automation (RPA) and machine and
deep learning and R&D-intensive companies in
sectors that can become more efficient from AI
(e.g. healthcare, hi-tech engineering and select
services firms).
While the ethical implications of AI still need to
be worked out, if AI is implemented in an objec-
tive way to improve productivity, society stands
to benefit immensely from the significant im-
provements to overall lifestyles and healthcare.
It is still not too late for Asian corporates to hop
on the AI bandwagon, as it is an irreversible
trend that could potentially disrupt business
models across markets. Asian corporates, partic-
ularly those in old economy sectors, should have
an open mind and try to embrace AI rather than
fight against it; we believe the benefits out-
weigh the risks. Failure to adapt to the AI-era
may make some of these business models ex-
tinct. Finally, policymakers in Asia need to find
24 April 2017 Shifting Asia: Artificial intelligence
a balance to address AI’s benefits and risks to
employment. Opposing AI’s implementation in
the region because of concerns over job losses
alone would backfire, as we believe it would
­severely hurt competitiveness and innovation.
However, policymakers have a role to regulate
and equally facilitate AI’s development and
adoption. To address AI’s ethical dilemmas, poli-
cymakers can be proactive over the next few
years to introduce a code of conduct. And to ad-
dress employment concerns, Asian governments
can help increase the skill levels of its citizens
and also encourage AI-based innovation through
partnerships with universities and start-ups. We
believe regional cooperation on these efforts
could be more fruitful by not only developing
common standards but also building a potential
alternative to Silicon Valley.
Hence, from a society point of view, we should
start to focus more on occupations that require
a high level of personalization, creativity and
craftsmanship, as these jobs will be less affected
by AI. Regulators also need to step up their ef-
forts by seeking cooperation regionally and also
by striking a balance between promoting the
adoption of AI and managing the downside
risks that could arise from the ethical dilemmas
of AI or from other societal aspects like job loss-
es or changes. With these recommendations,
we believe the transition towards an AI-based
society would be smoother and a highly produc-
tive one.
What does AI mean for Asian stakeholders?
Generic financial research – Risk information: UBS Chief Investment Office WM’s investment views are prepared and published by Wealth Management and Personal & Corporate Banking or Wealth Management
Americas, Business Divisions of UBS AG (regulated by FINMA in Switzerland), its subsidiary or affiliate (“UBS”). In certain countries UBS AG is referred to as UBS SA. This material is for your information only and is not
intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted
basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this material were obtained from sources believed to be reliable and in good faith, but no representation or warranty,
express or implied, is made as to its accuracy or completeness (other than disclosures relating to UBS). All information and opinions as well as any prices indicated are current as of the date of this report, and are
subject to change without notice. The market prices provided in performance charts and tables are closing prices on the respective principal stock exchange. The analysis contained herein is based on numerous
assumptions. Different assumptions could result in materially different results. Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of UBS as a result of using
different assumptions and/or criteria. UBS and any of its directors or employees may be entitled at any time to hold long or short positions in investment instruments referred to herein, carry out transactions involving
relevant investment instruments in the capacity of principal or agent, or provide any other services or have officers, who serve as directors, either to/for the issuer, the investment instrument itself or to/for any company
commercially or financially affiliated to such issuers. At any time, investment decisions (including whether to buy, sell or hold securities) made by UBS and its employees may differ from or be contrary to the opinions
expressed in UBS research publications. Some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed
may be difficult to quantify. UBS relies on information barriers to control the flow of information contained in one or more areas within UBS, into other areas, units, divisions or affiliates of UBS. Futures and Options
trading is not suitable for every investor as there is a substantial risk of loss, and losses in excess of an initial investment may occur. Past performance of an investment is no guarantee for its future performance.
Additional information will be made available upon request. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to
pay more. Changes in foreign exchange rates may have an adverse effect on the price, value or income of an investment. The analyst(s) responsible for the preparation of this report may interact with trading desk
personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing and interpreting market information. Tax treatment depends on the individual circumstances and may be subject to
change in the future. UBS does not provide legal or tax advice and makes no representations as to the tax treatment of assets or the investment returns thereon both in general or with reference to specific client’s
circumstances and needs. We are of necessity unable to take into account the particular investment objectives, financial situation and needs of our individual clients and we would recommend that you take financial
and/or tax advice as to the implications (including tax) of investing in any of the products ­mentioned herein. This material may not be reproduced or copies circulated without prior authority of UBS. UBS expressly
prohibits the distribution and transfer of this material to third parties for any reason. UBS accepts no liability whatsoever for any claims or lawsuits from any third parties arising from the use or distribution of this
material. This report is for distribution only under such circumstances as may be permitted by applicable law. In developing the Chief Investment Office (CIO) economic forecasts, CIO economists worked in collabora-
tion with economists employed by UBS Investment Research. Forecasts and estimates are current only as of the date of this publication and may change without notice. For information on the ways in which UBS CIO
WM manages conflicts and maintains independence of its investment views and publication offering, and research and rating methodologies, please visit www.ubs.com/research. Additional information on the relevant
authors of this publication and other CIO publication(s) referenced in this report; and copies of any past reports on this topic; are available upon request from your client advisor.
External Asset Managers/External Financial Consultants: In case this research or publication is provided to an External Asset Manager or an External Financial Consultant, UBS expressly prohibits that it is redis-
tributed by the External Asset Manager or the External Financial Consultant and is made available to their clients and/or third parties. Australia: This notice is issued by UBS AG ABN 47 088 129 613 (Holder of
Australian Financial Services Licence No 231087): This Document is issued and distributed by UBS AG. This is the case despite anything to the contrary in the Document. The Document is intended for use only by
“Wholesale Clients” as defined in section 761G (“Wholesale Clients”) of the Corporations Act 2001 (Cth) (“Corporations Act”). In no circumstances may the Document be made available by UBS AG to a “Retail
Client” as defined in section 761G of the Corporations Act. UBS AG’s research services are only available to Wholesale Clients. The Document is general information only and does not take into account any person’s
investment objectives, financial and taxation situation or particular needs. Austria: This publication is not intended to constitute a public offer under Austrian law, but might be made available for information pur-
poses to clients of UBS Europe SE, Niederlassung Österreich, with place of business at Wächtergasse 1, A-1010 Wien. UBS Europe SE, Niederlassung Österreich is a branch of UBS Europe SE, a credit institution
constituted under German Law in the form of a Societas Europaea, duly authorized by the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), and is
subject to the joint supervision of BaFin, the central bank of Germany (Deutsche Bundesbank), as well as of the Austrian supervisory authority (Finanzmarktaufsicht, FMA), to which this publication has not been
submitted for approval. Bahamas: This publication is distributed to private clients of UBS (Bahamas) Ltd and is not intended for distribution to persons designated as a Bahamian citizen or resident under the Bahamas
Exchange Control Regulations. Bahrain: UBS is a Swiss bank not licensed, supervised or regulated in Bahrain by the Central Bank of Bahrain and does not undertake banking or investment business activities in
Bahrain. Therefore, Clients have no protection under local banking and investment services laws and regulations. Brazil: Prepared by UBS Brasil Administradora de Valores Mobiliários Ltda, entity regulated by
Comissão de Valores Mobiliários (“CVM”). Canada: In Canada, this publication is distributed to clients of UBS Wealth Management Canada by UBS Investment Management Canada Inc.. Czech Republic: UBS is
not a licensed bank in Czech Republic and thus is not allowed to provide regulated banking or investment services in Czech Republic. This material is distributed for marketing purposes. Denmark: This publication
is not intended to constitute a public offer under Danish law, but might be distributed by UBS Europe SE, Denmark Branch, filial af UBS Europe SE, with place of business at Sankt Annae Plads 13, 1250 Copenhagen,
Denmark, registered with the Danish Commerce and Companies Agency, under the No. 38 17 24 33. UBS Europe SE, Denmark Branch, filial af UBS Europe SE is a branch of UBS Europe SE, a credit institution con-
stituted under German Law in the form of a Societas Europaea, duly authorized by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). UBS Europe SE, Den-
mark Branch, filial af UBS Europe SE is subject to the joint supervision of the BaFin, the central bank of Germany (Deutsche Bundesbank) and the Danish Financial Supervisory Authority (DFSA) (Finanstilsynet), to
which this document has not been submitted for approval. France: This publication is distributed by UBS (France) S.A., French “société anonyme” with share capital of € 125.726.944, 69, boulevard Haussmann
F-75008 Paris, R.C.S. Paris B 421 255 670, to its clients and prospects. UBS (France) S.A. is a provider of investment services duly authorized according to the terms of the “Code Monétaire et Financier”, regulated
by French banking and financial authorities as the “Autorité de Contrôle Prudentiel et de Résolution”. Germany: The issuer under German Law is UBS Europe SE, Bockenheimer ­Land­strasse 2–4, 60306 Frankfurt
am Main. UBS Europe SE is authorized and regulated by the “Bundesanstalt für Finanzdienstleistungsaufsicht”. Hong Kong: This publication is distributed to clients of UBS AG Hong Kong Branch by UBS AG Hong
Kong Branch, a licensed bank under the Hong Kong Banking Ordinance and a registered institution under the Securities and Futures Ordinance. India: Distributed by UBS Securities India Private Ltd. 2/F, 2 North
Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai (India) 400051. Phone: +912261556000. SEBI Registration Numbers: NSE (Capital Market Segment): INB230951431, NSE (F&O Segment)
INF230951431, BSE (Capital Market Segment) INB010951437. Indonesia: This research or publication is not intended and not prepared for purposes of public offering of securities under the Indonesian Capital
Market Law and its implementing regulations. Securities mentioned in this material have not been, and will not be, registered under the Indonesian Capital Market Law and Regulations. Israel: UBS Switzerland AG
is registered as a Foreign Dealer in cooperation with UBS Wealth Management Israel Ltd, a wholly owned UBS subsidiary. UBS Wealth Management Israel Ltd is a licensed Portfolio Manager which engages also in
Investment Marketing and is regulated by the Israel Securities Authority. This publication shall not replace any investment advice and/or investment marketing provided by a relevant licensee which is adjusted to your
personal needs. Italy: This publication is distributed to the clients of UBS Europe SE, Succursale Italia, Via del Vecchio Politecnico, 3 – 20121 Milano, the branch of a German bank duly authorized by the “Bundesan-
stalt für Finanzdienstleistungsaufsicht” to the provision of financial services and supervised by “Consob”. Jersey: UBS AG, Jersey Branch, is regulated and authorized by the Jersey Financial Services Commission for
the conduct of banking, funds and investment business. Where services are provided from outside Jersey, they will not be covered by the Jersey regulatory regime. UBS AG, Jersey Branch is a branch of UBS AG a
public company limited by shares, incorporated in Switzerland whose registered offices are at Aeschenvorstadt 1, CH-4051 Basel and Bahnhofstrasse 45, CH 8001 Zurich. UBS AG, Jersey Branch’s principal place
business is P.O. Box 350, 24 Union Street, St Helier, Jersey JE4 8UJ. Luxembourg: This publication is not intended to constitute a public offer under Luxembourg law, but might be made available for information
purposes to clients of UBS Europe SE, Luxembourg Branch, with place of business at 33A, Avenue J. F. Kennedy, L-1855 Luxembourg. UBS Europe SE, Luxembourg Branch is a branch of UBS Europe SE, a credit
institution constituted under German Law in the form of a Societas Europaea, duly authorized by the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin),
and is subject to the joint supervision of BaFin, the central bank of Germany (Deutsche Bundesbank), as well as of the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (the
“CSSF”), to which this publication has not been submitted for approval. Mexico: This document has been distributed by UBS Asesores México, S.A. de C.V., a company which is not part of UBS Grupo Financiero,
S.A. de C.V. or of any other Mexican financial group and whose obligations are not guaranteed by any third party. UBS Asesores México, S.A. de C.V. does not guarantee any yield whatsoever. Netherlands: This
publication is not intended to constitute a public offering or a comparable solicitation under Dutch law, but might be made available for information purposes to clients of UBS Europe SE, Netherlands branch,
a branch of a German bank duly authorized by the “Bundesanstalt für Finanzdienstleistungsaufsicht” for the provision of financial services and supervised by “Autoriteit Financiële Markten” (AFM) in the Netherlands,
to which this publication has not been submitted for approval. New Zealand: This notice is distributed to clients of UBS Wealth Management Australia Limited ABN 50 005 311 937 (Holder of Australian Financial
Services Licence No. 231127), Chifley Tower, 2 Chifley Square, Sydney, New South Wales, NSW 2000, by UBS Wealth Management Australia Ltd. You are being provided with this UBS publication or material because
you have indicated to UBS that you are a client certified as a wholesale investor and/or an eligible investor (“Certified Client”) located in New Zealand. This publication or material is not intended for clients who are
not Certified Clients (“Non-Certified Clients”), and if you are a Non-Certified Client you must not rely on this publication or material. If despite this warning you never­theless rely on this publication or material, you
hereby (i) acknowledge that you may not rely on the content of this publication or material and that any recommendations or opinions in this publication or material are not made or provided to you, and (ii) to the
maximum extent permitted by law (a) indemnify UBS and its associates or related entities (and their respective directors, officers, agents and advisers (each a “Relevant Person”) for any loss, damage, liability or claim
any of them may incur or suffer as a result of, or in connection with, your unauthorised reliance on this publication or material and (b) waive any rights or remedies you may have against any Relevant Person for (or
in respect of) any loss, damage, liability or claim you may incur or suffer as a result of, or in connection with, your unauthorised reliance on this publication or material. Saudi Arabia: This publication has been
approved by UBS Saudi Arabia (a subsidiary of UBS AG), a Saudi Arabian closed joint stock company incorporated in the Kingdom of Saudi Arabia under commercial register number 1010257812 having its registered
office at Tatweer Towers, P.O. Box 75724, Riyadh 11588, Kingdom of Saudi Arabia. UBS Saudi Arabia is authorized and regulated by the Capital Market Authority of Saudi Arabia. Singapore: Please contact UBS AG
Singapore branch, an exempt financial adviser under the Singapore Financial Advisers Act (Cap. 110) and a wholesale bank licensed under the Singapore Banking Act (Cap. 19) regulated by the Monetary Authority
of Singapore, in respect of any matters arising from, or in connection with, the analysis or report. Spain: This publication is distributed to its clients by UBS Europe SE, Sucursal en España, with registered office at
Calle María de Molina 4, C.P. 28006, Madrid, entity supervised by Banco de España and the Bundesanstalt für Finanzdienstleistungsaufsicht. UBS Europe SE, Sucursal en España is a branch of UBS Europe SE, a credit
institution constituted in the form of a Societas Europaea authorized and regulated by the Bundesanstalt für Finanzdienstleistungsaufsich. Sweden: This publication is not intended to constitute a public offer under
Swedish law, but might be distributed by UBS Europe SE, Sweden Bankfilial with place of business at Regeringsgatan 38, 11153 Stockholm, Sweden, registered with the Swedish Companies Registration Office under
the Reg. No 516406-1011. UBS Europe SE, Sweden Bankfilial is a branch of UBS Europe SE, a credit institution constituted under German Law in the form of a Societas Europaea, duly authorized by the German
Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). UBS Europe SE, Sweden Bankfilial is subject to the joint supervision of the BaFin, the central bank of Germany (Deutsche
Bundesbank) and the Swedish financial supervisory authority (Finansinspektionen), to which this document has not been submitted for approval. Taiwan: This material is provided by UBS AG, Taipei Branch in accor-
dance with laws of Taiwan, in agreement with or at the request of clients/prospects. UAE: This research report is not intended to constitute an offer, sale or delivery of shares or other securities under the laws of
the United Arab Emirates (UAE). The contents of this report have not been and will not be approved by any authority in the United Arab Emirates including the UAE Central Bank or Dubai Financial Authorities, the
Emirates Securities and Commodities Authority, the Dubai Financial Market, the Abu Dhabi Securities market or any other UAE exchange. This material is intended for professional clients only. UBS AG Dubai Branch
is regulated by the DFSA in the DIFC. UBS AG/UBS Switzerland AG is not licensed to provide banking services in the UAE by the Central Bank of the UAE nor is it licensed by the UAE Securities and Commodities
Authority. The UBS AG Representative Office in Abu Dhabi is licensed by the Central Bank of the UAE to operate a representative office. UK: Approved by UBS AG, authorised and regulated by the Financial Market
Supervisory Authority in Switzerland. In the United Kingdom, UBS AG is authorised by the ­Prudential Regulation Authority and subject to regulation by the Financial Conduct Authority and limited regulation by the
Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. A member of the London Stock Exchange. This publication is
­distributed to private clients of UBS London in the UK. Where products or services are provided from outside the UK, they will not be covered by the UK regulatory regime or the Financial Services Compensation
Scheme. USA: This document is not intended for distribution into the US, to US persons, or by US-based UBS personnel. UBS Securities LLC is a subsidiary of UBS AG and an affiliate of UBS Financial Services Inc.,
UBS Financial Services Inc. is a subsidiary of UBS AG.
Version 11/2016.
© UBS 2017. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
ab