TECHNOLOGY AT WORK

February 2015
Citi GPS: Global Perspectives & Solutions
79
Much of the benefits from the most recent
development in machine learning and
mobile robotics are yet to be seen
reorganisation. He further argues that his findings are “consistent with the view that
benefiting from IT takes substantial intangible organisational investments that, with
a lag, raise measured productivity. By the mid-2000s, the low-hanging fruit of IT had
been plucked.”
Much of the benefits from recent developments in machine learning and mobile
robotics are yet to be seen. Another recent study suggests that productivity follows
investment in digital technologies with lags of between 5 and 15 years. 123 As many
of the technological developments we are currently witnessing, such as
autonomous vehicles, are yet to be realised, and other developments in online
education and medical diagnosis have just started, we are likely to see substantial
future productivity gains.
Digital technologies offer much potential in traditional low productivity sectors, such
as healthcare and education. In other words, services in sectors that have
traditionally been associated with William Baumol’s cost disease — meaning that
they experience wage growth without productivity growth, pushing costs onto
consumers — may become more affordable.
Jim Suva, CPA
US IT Hardware Analyst
The more transformative a technology, the longer it may take for individuals,
organisations and economies to adapt. There is still much to be gained from the
digital economy, but shifts in mindsets and organisational structures can take time.
Automation and Productivity
Adopting automation technology to increase productivity and lower manufacturing
costs has been the trend in the technology supply chain for several years. However,
the recent increased flexibility to more easily reprogramme the automation process
has enabled this trend to accelerate. One example is the evolution in technology for
the wafer and semiconductor chip manufacturing sector, which has now evolved to
a “lights-out manufacturing environment” wherein a factory is fully operated by
machines and robots without the need for humans on-site. The development of
automation significantly increased semiconductor fabrication productivity and
compares to the traditional manual operating mode where humans previously
touched and moved wafers through the manufacturing process, which is less
precise and also involved toxic working environments for human beings.
Additional examples include the production of smart electronics using automated
injection moulding with the help of vision system mounted robots, which can more
precisely determine the placement, shape and density accuracy of components
(metal and plastic) and inspect them faster than a human can in quality control for
insert moulded parts. In addition, evolving automation manufacturing processes
enable Electronic Manufacturing Services (EMS) companies to provide tailored
designing capability in both high volume low mix (i.e.. consumer electronics such as
smartphones or TVs) and low volume high mix (i.e. hospital and doctor medical
devices) products and create value for customers. Putting pen to paper and
quantifying the financial impact of this can be seen by looking at Flextronics, one of
the biggest EMS companies in the world. Flextronics was able to improve its
revenue per employee by 95% to $174,000 in 2014 from $89,000 in 1997 with
product portfolio ranges from traditional consumer electronics to automotive smart
electronics and clean tech products.
123 Basu and Fernald (2007).
© 2015 Citigroup