BY: HANS ALBRECHT, CIM®, FCSI, VICE-PRESIDENT, PORTFOLIO MANAGER AND OPTIONS STRATEGIST, HORIZONS ETFS
What do we mean by Industry 4.0? Put simply, it’s the current – and future – progression of technology. It’s a convergence of a sudden surge in the availability of data and more widely available advanced hardware, which together, create transformative technologies that we only dreamed about decades ago.
Are robotics—which are just one of the categories involved in Industry 4.0—new? Not really, but many of today’s newer robots are smaller, more customized, less expensive and safer than ever. More importantly, many are benefitting from cognitive algorithms/automation that enable them to learn from their environments and use artificial intelligence to improve existing capabilities on an ongoing basis. That means they learn over time from mistakes and successes and many have sensors and machine vision that help them see and pick up items of varying size and weight. Some even work alongside humans to improve productivity.
So, how did we get here? Let’s dial the clock back to see how we arrived at Industry 4.0.
A history of industry
Industry 1.0 occurred in the early 1800s as the first Industrial Revolution took hold. Mass urbanization brought workers from agricultural areas into cities, where they worked in factories using modern technologies to produce goods. Think of it as a big transition from producing things mostly by hand to production methods that used machines and steam power.
Industry 2.0 took place between 1870 and 1914, and involved extensive railroad networks to transfer people and goods more quickly. Notably, this work spurred the emergence of electricity by electrifying manufacturing and processes to produce more products cheaply and quickly. The assembly line was born; think of Henry Ford’s model T production line, which brought down the retail cost of an automobile by over two-thirds. This concept of cheaper and more plentiful goods created a prospering middle class, as many people could now buy things instead of just making them. The consumption era was just beginning, and this was a time of great societal and economic change.
Industry 3.0 set the foundation for Industry 4.0. With the advent of the personal computer around 1970, the digital revolution began to pick up momentum. The ability to digitize information and complete tasks more quickly using computers allowed valuable time and resources to be spent more efficiently. A lot of early technology—such as word processing and spreadsheets—allowed us to automate more basic tasks so that we could focus on being more creative and innovative. Use of industrial robots began to pick up, and then of course, the internet came along and changed everything. The internet connected folks like never before with social media and e-mail, enabled online shopping and created a place for mass information sharing, thereby generating untold amounts of data.
This brings us to today.
Industry 4.0 and beyond
Industry 4.0 is transformative, as it touches on more aspects of our personal and professional lives than ever before, merging the physical with the digital world. Desktop computing was one thing, but now we have smartphones in our pockets that are thousands of times more powerful than computers of 20 years ago. We are online and networked on an ongoing basis, creating data at an exponential rate via social media and online transactions. As a result, computers are beginning to know us perhaps better than we know ourselves, knowing what we like and dislike, where we’re going, what we’re buying and how we’re feeling. This is translating into opportunities for companies that are able to gather intelligence from this data and know what, when and how to sell to us.
Data proliferation will only accelerate as the Internet of Things—the ever-expanding number of connected devices including your fridge, phone, watch, and car —becomes more mainstream. As the number of these devices increases, more information is created and more opportunity arises. 5G technology will add another tailwind to what we're talking about by exponentially increasing the speed at which we transmit, process and create data. Back in 2016, IBM claimed that ninety per cent of the world’s data has been created in the previous two years than ever before. Fast forward to 2019, that number has likely increased as more smart devices come online and we’re not slowing down any time soon. But there’s a downside to this increasingly connected world; cybercrime has exploded in recent years, and that’s why one of the categories (Cyber Security) of the Industry 4.0 index focuses on is companies that can protect data and hardware.
Industry 4.0 investing is about big data, smart robotics and automation, artificial intelligence, augmented and virtual reality and new devices, just to name a few. It is also about protecting it all as we see our lives change in amazing ways. That’s where the Horizons Industry 4.0 Index ETF comes in (FOUR), giving investors exposure to what’s next in these important areas of innovation. The Industry 4.0 ETF Index is sub-divided into five categories, and selects the top 10 companies within each category.
Industry 4.0 innovations are all around us and it’s inherently exciting, so perhaps it’s time for investors to get excited about getting their investment dollars involved as well.
The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.