Thematic ● Global

November 2020

5 years
ROI on digital factories

 Smart farms: Even though farm picking can be well paid in some parts of the world, the
conditions of the labour do not sit well with the work force of today and farmers often have
difficulty in finding workers. Due to this many companies and start-ups are busy developing
low-cost cutting edge robots to do their bidding, using soft-grippers and machine vision. We
place this smart farming technology between the “backlash” and “real applications” window,
as even though these robots are being made, they have slightly missed the boat so to
speak to help farmers during the social distancing era during the pandemic. But we expect
the pandemic to accelerate the technology and adoption over the coming few years.

Companies to watch include:

 EEMEA: Safaricom

 LatAM: SLC Agricola, Be Green, Promit, InCeres, Solinftech

10s
For a farm bot to pick a strawberry

Moving over distance:

 Drones: When one thinks of drones, probably consumer drones come to mind – like the
drone which caused havoc over Gatwick airport in 2018. However, enterprise drones are
being used today in a number of industries including construction, mining and agriculture.
They are easier to operate as they are in a controlled environment. We place these types of
drones into the “real applications” phase of the disruption framework.

The pandemic has made governments loosen regulations to permit drones to be used to
alleviate distribution issues for medical purposes. This may lead the path towards drones
for commercial use going forward. We place these type of drones in between in the early
part of the “real applications” part of our framework.

Companies working on drones include:

 Asia: Terra Drone

 US: Workhorse (deploying already for last-mile on trucks), Honeywell (expects drone
business to be USD120bn by 203032 and recently bought UAV business from Ballard
Power), Zipline (medical deliveries, next commercial), Amazon (Prime Air trials),
Walmart drones, Ambarella (chip designs for drones), AeroVironment, Northrop
Grunman, Lockheed Martin, Kratos

______________________________________
32 "Honeywell launches new business unit to capture drone market", Reuters, June 2020.

44
 Thematic ● Global
November 2020

and oil, but passenger vehicles, trucks and datacentres of the future will decarbonise and use
technologies like hydrogen and batteries.

Logistics:
 Warehouse automation: We believe that the growth of ecommerce in the DM over the
coming decade, going from 10-30% of physical commerce to up to 50% by 2030, will inspire
companies to automate their warehouses further. At the moment 80% of warehouses are still
manually operated, with only 5% being fully operated. Today, autonomous guided/mobile
vehicles, semi-automated picking systems and automated storage/retrieval systems are the
tools which are used to automate factories. There are companies which generate a total of
USD15bn of revenues in global warehouse automation today. So we place warehouse
automation into the “real applications” to “new normal” part of our framework.

Looking forwards, we believe more manual tasks like picking will be automated with machine
vision and soft grippers. For example, in the US alone, this would put at risk 2m jobs, as this
task in the warehouse needs humans – 90% of this side of the process is done manually. This
kind of technology is still in between the “backlash” and “real applications”. When it moves to
“new normal”, there will be a lot of disruption.

Companies involved in warehouse automation include:

 Europe: Ocado, Deutsche Post (as well as warehouse automation, they user AR to
assist picking and use exoskeletons too), Magazino/FEIGEG (picking)

 Asia: KION (owned by Weichai Power), Alibaba, Yaskawa

 US: Locus Robotics, GreyOrange (picking), Amazon, Walmart

5%
Of warehouses are deemed automated today

 Digital factories: Similar to warehouses, only 6% factories are digitised so far. So there is
a lot of upside. This is less a matter of the technology or platforms not existing but more
about rolling out when it makes economic sense to upgrade factories. Companies have to
make the judgement of whether the ROI makes sense. We place digital factories in
between the “real applications” to “new normal”.

Companies to follow include:

 Asia: Shenzhen Innovance, Fanuc (Japan), Cognex (US), Airtec (Taiwan), Hiwin
(Taiwan), EEKA Fashion

 Europe: ABB, Seimens, VW (announced 2,200 robots for a digital EV factory recently.
1.400 from Fanuc and 800 from ABB)31

 LatAm: WEG

 US: Honeywell, Rockwell

______________________________________
31 "2,200 robots for automation at VW plants", Electrive, October 2020.

43
 Thematic ● Global
November 2020

63bn
By 2025 for drone services worldwide

 AVs: A lot of investment and talent has gone into the promise of passenger vehicles but we
believe that it makes more sense for commercial applications like trucks to become AVs
faster than consumer vehicles.

This is due to AVs in commercial applications making meaningful economic savings in

lowering cost of operation from using more automation and the fact that they don’t need to
operate in urban areas but instead can operate over more long, uncomplicated commercial
routes. So we would place passenger AVs on the “hype mania” to “backlash” window and
commercial AV trucks in the very early part “real applications” phase.

Companies developing AVs road transport include:

 Asia: Weichai power, Zoomlion

 EEMEA: Yandex, AVL Research & Engineering (AVs), Trukker (AVs/AV trucks)

 LatAM: HiTech, iara (AVs)

 US: Otto, Nikola (AV trucks), Waymo, Uber, Cruise, (ride-hail), Amazon’s Zoox (last-
mile). Tesla

We have seen investments in mining AV trucks by: Newmont, BHP, Fortescue Metals
Group, Rio Tinto, and Hancock Prospecting in Australia; Suncor Energy and Canadian
Natural Resources in Canada. 80% of surface mining autonomous haul fleet belong to
Rio Tinto, BHP and Fortescue. Suppliers include: Komatsu and Caterpillar.

91%
Driver cost reduced from AV trucks

45

Automation technologies are
set to accelerate to take
physical human labour fully
out of the economy
42
Thematic ● Global
November 2020
Automation infrastructure
 Automation infrastructure will enable efficiencies within a variety of
industries over the coming few years and beyond
 We look at key trends enabling growth in automation technologies
through logistics, moving things over distance and 3D printing sub-
themes within our disruption framework and list over 60 companies
exposed to the themes
 We outline 16 1st tier, 2nd tier, and ESG implications from our themes
Spinning Jenny to 21st century AI bots powered by hydrogen
As a species, humans have been using technology to improve our productivity for eons. For a
long time, most productivity tools were powered physically by people, for example using a lever
to amplify power or striking flint with hard minerals to create fire. However, over the last two
centuries we developed technologies like the Spinning Jenny (1764) for production of wool or
cotton, separate condenser for James Watt’s steam engine (1781) and steam locomotive (early
1800s) powering our railways during the industrial revolution. It can be argued that WW2 then
instigated computer technology to increase the scale of automation further.
Chart 1B. HSBC Disruption Framework: Automation infrastructure
Gradient of estimated expectation vs. reality
Moving over distance Logistics
autonomous vehicles, Picking, packing, factory, smart-farm,
drones, hydrogen, remote sensing, artificial intelligence,
battery electric machine learning
3D printing
Production supply-chain, food,
clothes, printed circuit boards
Early Hype Backlash Real New normal
disruption mania window application
Source: HSBC
Today, modern automation is driven by a combination of robotics, AI and sensors for our
warehouses and digital factories. Looking forwards, to where the next investments are taking
place, if they pan out, we will likely see growth in the use of drones, autonomous vehicles and
3D printing within industry. Automation so far has been powered by fossil fuels, like coal, gas
 Thematic ● Global
November 2020

Story and key trends for automation infrastructure

1. The logistics story: rise of automating distribution robots


The efficiencies we gain from our associates and robots
working together harmoniously – allows us to pass along
lower cost to our customer
Tye Brady, Amazon Robotics’ chief technologist

Growth of remote commerce set to grow logistics automation

Logistics automation needs Before the pandemic, DM physical commerce was between 10-30% online, estimates James
disruption to cope with Pomeroy, our Global Economist. However, we believe that the pandemic is accelerating
demand consumer behaviour to rely more on online consumption. Pomeroy now estimates that up to
50% of goods consumed could originate online by 2030, in the DM. To achieve this number, we
must have sufficient automated logistics infrastructure to cope with this new demand. Chart 2B
shows that global warehouse automation is worth USD15bn today and is set to grow to USD27
by 2025, according to IFR.

Chart 2B. Global warehouse automation Chart 3B. Most robotics is in logistics
and robot installation growth

20 700 24
600 20
15 500
16
000 units

400
USDbn

10
300 12

5 200 8
100
4
0 0
2019e
2020e
2021e
2012
2013
2014
2015
2016
2017
2018

0
2017 '18 '19 '20 '21e '22e
Global Warehouse
Axis Title Automation market
Annual Installation of industrial robots Logistics Medical Field Defence
Source: HSBC, IFR, RoboBusiness Source: HSBC, IFR

Although Amazon’s fulfilment centres have over 200,000 robots working its warehouses today
(up from 30,000 in 2015)33, it’s an outlier with 80% of warehouses globally still operated
manually, with no supporting automation. 15% of warehouses are so called “mechanized”,
meaning they use conveyers, sorters, goods-to-picker solutions but are not necessarily
considered automated. Only 5% of warehouses today can be deemed automated. So there is
significant room for growth and disruption, and given the prevailing winds of online
consumption, automation is especially important for such high volume and low margin
businesses to make economic sense.

The online shopping model requires 300% more warehousing space than store-based
What robots do automated
warehousing need? fulfilment.34 Euromonitor say that e-commerce implies there will be a need of 2.3bn square feet
______________________________________
33 "As robots take over warehousing, workers pushed to adapt", AP News, December 2020.
34 ROBO Business

47
 Thematic ● Global
November 2020

Chart 5B. Automated robots in Chart 6B. Agri-bot system environments

warehouses today
12

10
1%
11%
8 6.8
27% Polytunnels
5.2 12%
($ bn)

6 Vineyard
4
4 3.1 Orchard
2.4 Open field
2 1.6 4.6
3.2 3.8
0.6 1
1.8
2.6 Greenhouse
0.3 1.3
0.7 0.8 0.9
0 49%
2017 2018 2019 2020 2021 2022 2023 2024 2025
Autonomous Mobile Robots (AMRs)
Automated Guided Vehicles (AGVs)

Source: HSBC, Logistics IQ Source: Sensors

Smart farming


We have to address population growth, climate change
and labour issues, and that has brought a lot of interest to
technology
Prof. Slaughter, (Biological and environmental engineering at UC Davis)

Picking automation UK farmers reported shortages of fruit and vegetable pickers during beginning of the pandemic.
At that point they needed to fill 90,000 jobs. Even before COVID-19, pickers were earning
USD50 per hour in California for example, but farmers still struggled to recruit. One option UK
farmers were considering was to ship workers from other nations but this can be a political hot
potato in today’s environment. A tempting alternative that’s become more of a reality today,
could be automation using robots with 3D vision and soft grippers. A number of companies like
Octinion (Belgium start-up), Dogtooth (UK), Agrobot (Spanish) and Harvest CROO (US) are
creating robots to pick fields.

Chart 7B shows us the accuracy of smart farming with robotics today; for example, note that
How accurate are picking
robots and where are they
citrus fruit can be picked in about 2.5 seconds but the accuracy of the pick is only 50%. On the
used today? other hand, some types of strawberries take 10 seconds to pick and the accuracy rate is 100%.
So the hit rate varies from food item to item in smart farming technologies today, but with
hardware like Lidar, ultrasonics, hyperspectral/thermal cameras and other 3D sensing devices
getting cheaper, and AI/ML (artificial intelligence/machine learning) improving, the hit rate will
improve over time and may compete against human labour.

In addition to picking on farms, smart farming technology is also automating other activities:
disease detection, seeding, spraying, crop scouting, weeding, harvesting (picking) and general
plant management. Chart 6B shows us the various agricultural environments in which robotic
systems are deployed; 49% is within open fields (unstructured areas) and 27% in greenhouses.

49
 Thematic ● Global
November 2020

3D printing:
 Additive manufacturing (AM): Mass printing at the consumer level didn’t take off in the
end and we place that firmly in the “backlash” part of our framework. Within industry, AM
has been used for rapid prototyping for years now. But for a number of reasons, AM may be
moving within industry to shorten the supply chain, re-shore to potentially make it more
resilient. We place this into the “real applications” phase even though the industry is worth
USD10bn today.

Furthermore, 3D printing also exists for things like making organs, food, homes, PCBs and more
but this is in the “early disruption” space, meaning it’s still pretty much in the venture capital,
angel investing and R&D phase of our disruption framework. 3D printing companies include:
Companies involved with 3D printing:

 3D Systems, Proto Labs, Faro Technologies, Materialise, ExOne

10bn/12trn
The size of the 3D printing market vs total
manufacturing sector

46
 Thematic ● Global
November 2020

of additional warehouse space needed by 2035. Chart 3B shows that the logistics robotics
market is larger than the robotics for medical, field and defence spaces combined today. Chart
4B shows selected companies making logistics automation robots and below are the different
types of logistic robotics and automation which will fill those warehouses going forward35:
 Autonomous guided/mobile vehicles (AGV, AMV) is set to be 14.7% of global
warehouse automation by 2025. AGV/AMV has doubled in last 3 years and will have 35%
CAGR till 2025. See chart 5B to see that AGV/AMV market is just over USD1bn in 2019
and set to balloon to over USD11bn by 2025, a tenfold growth.
 Picking systems is set to be 12.3% of the market by 2025, and is the toughest
technologically speaking, to automate fully. But if retail wants to become more cost efficient
in the longer term, reducing or eliminating labour is key in this process. Today, it’s mostly
about bringing the item to the picker, to minimise picker travel time, rather than the robot
doing the picking.
 Automated storage/retrieval systems (AS/RS) will be 12.3% of the market by 2025. It
includes automated racking, shelving and shuttling systems, permitting denser
warehouse storage.

Table 4B. Warehouse Automation Robot Players

Company Country Solution Function
Amazon U.S Kiva Automated guided vehicle (AGV)
Fetch Robotics U.S HMIShelf AGV
GreyOrange U.S Butler Picking
HAHN Group/Rethink Robotics Germany Baxter/Sawyer Packaging/assembling
Hitachi Japan Racrew Picking
IAM Robotics U.S Swift Picking/AGV
Kollmorgen Germany Pick-n-go Picking
Locus Robotics US LocusBots Picking/AGV
Magazino/FIEGE Logistik Germany TORU Picking
Scallog System France - Picking
Swisslog Switzerland CarryPick, AVGPick, Picking and automated
Autostore storage/retrieval (AS/AR) system
6 River Systems US Chuck AGV
Sources: HSBC, LogisticsIQ

Just to contrast logistic robotics to industrial companies with factories for production, only 6% of
What about automated digital
factories?
factories are fully digitised as of yet according to a PwC survey, comparable to fully automated
warehouses, which is 5% of the market so far. They also contrast this in the survey where 91%
of industrial companies are investing into implementing digital factories.

The key reason for digitising factories is that they bring efficiency in production (on average
12% efficiencies), with most expecting ROI over 5 years. In addition, digital factories are likely to
use the following technologies in the next 5 years, in the process of deploying automation
technologies: connected sensors (39% in use today, 64% of respondents to use in 5 years’
time, according to a PwC survey), 3D printing (18% today, 37% in 5 years), AR/AR (13% today,
33% in 5 years), humanoid robots (12% today, 22% in 5 years), AI (9% today, 20% in 5 years)
and drones (2% today, 4% in 5 years).

______________________________________
35 LogisticsIQ

48

Pandemic accelerating
drones for medical purposes
50
Thematic ● Global
November 2020
Chart 7B. How good is robot farming today?
100%
80%
Picking rate (%) 60%
40%
20%
0%
0 10 20 30 (sec)
Harvesting time 40 50 60
Apple Mushroom Strawberry Tomato Cherry Tomato Cucumber Melon Citrus
Source: Sensors
2. The moving over distance story: autonomous and fuels

We wanted flying cars, instead we got 140 characters
Peter Thiel, Venture Capitalist
Is it a bird, a plane… no it’s a drone!
For some years now, drones have been much vaulted as having disruptive transport potential
for small items, through the air, for B2C. However, legacy regulations in the developed world
have limited the scope and drones have seen more success in the EM, due to some of these
nations accepting the leapfrog potential of the technology. Nevertheless, the pandemic has
enabled drone companies to get waivers from governments all over the world, to deploy them.
Perhaps this might also increase social acceptance of the use of drones, too, going forward.
Below are some examples of what drone companies had been up to during the pandemic36:
 United States: Zipline got permission from the FAA to deliver medical supplies and PPE to
medical centres in North Carolina during the pandemic. Zipline had been using drones in
Africa for a number of years, delivering to hospital settings. In Virginia, Alphabet’s Wing
drone project delivered pharmacy and take-out orders within 10mins, during the crisis,
alleviating last-mile delivery infrastructure for businesses.
 China: Antwork (part of Japanese Terra Drone) had a licence from Civil Aviation
Administration of China (CAAC) and used drones to deliver medical supplies and test
samples in Zhejiang province (February 2020). They halved transport time compared to
road transport.
______________________________________
36 "COVID-19 transport brief", International Transport Forum OECD, June 2020
 Thematic ● Global
November 2020

Chart 8B. Drone market Chart 9B. Drone industry growth (2019)
North America South America
50 Europe Oceania 300%
MEA Asia 43
40 Total
200%
30
22
20 40 100%
37
33
28
10
0%

Construction

Mining

Surveying
Agriculture

Real Estate
0
2020e 2021e 2022e 2023e 2024e 2025e

Source: HSBC, Droneii estimates Source:DroneDeploy

 Ireland: Manna Aera got clearance from the aviation authority to deliver medication and
supplies to households in the rural town of Moneygall, with a payload of 4kg, after VC
between patient and doctors (April 2020). They did 100 flights a day and look to expand to
more towns in Ireland and the UK. Could expand into non-medical items like groceries.
 Ghana: Zipline, the US company, used drones from April 2020 to deliver contactless test
samples from 1,000 rural health facilities, to labs in Accra and Kumasi. Drone transport
avoided difficult routes by road, and time was reduced from several hours to one hour in
some instances.
 Switzerland: Matternet had permission to fly beyond LOS (line of sight) since 2017,
transporting blood samples in hospitals in Lugano, for 20km with 2kg payload. But
Switzerland did not use drones during the pandemic.

In addition to using drones during the pandemic for delivering medical related products, a number of
countries have been using drones for surveillance and enforcement. China, France India, Italy
Oman, Colombia and the US are some of these countries – using drones to enforce lockdowns and
identify citizens with high body temperature (though, in May 2020, French courts banned drones with
cameras due to privacy concerns). Furthermore, some nations used drones to sanitise spaces too:
China (900km^2 in 20 provinces, 2,600 drones), Korea (10,000m^2 in 10 mins), India (Delhi, Indore
City, Madhya Pradesh) and US (sports arenas and concert venues).

Whilst drone use for commercial last mile deliveries (like Amazon) is what bubbles up when one
B2B drone use is growing…
thinks of these flying contraptions, and they may be easier to deploy in the future for consumers
due to these pandemic induced accelerated trials, various industries are already using drones
today for B2B. For example, Terra Drone Corporation worked with Plimsoll UAV Brazil to
service oil & gas customers, Sky-Futures worked with Bureau Veritas for doing industrial
inspection services in Europe and Identified Technologies used drones for haul road and slope
analysis in the mining and infrastructure sector. Chart 9B shows the growth rates of various
industries utilising drones in 2019.

Chart 9A shows that the drone market was USD22bn in 2020 and is expected to grow to
USD43bn by 2025, with the biggest growth regions to be Asia and North America, according to
Droneii. On the other hand, the drone services market was USD4.4bn in 2019 and is expected
to grow to USD63.6bn by 2025 (55% CAGR)37, becoming larger than the physical drone market
itself, again similar to IoT discussions earlier when we highlighted platform services can
generate more sales than hardware.

______________________________________
37 Droneii

51
 Thematic ● Global
November 2020

Autonomous road transportation

The AV ready countries… Aside from having the right technology developed for autonomous vehicles (which we will look
at shortly), the key for deploying autonomous vehicles for trials (like drones we spoke of earlier)
is to have the right regulatory environment.

Chart 10B shows us a list of 30 countries ranked by how ready they are for deploying
autonomous vehicles, the autonomous vehicles readiness index, taking account of various
factors including: quality of roads, technology infrastructure, cybersecurity, population living
near test areas, AV related patents, industry partnerships, government funded pilots and more.
The top 10 include: Singapore (#1) and South Korea (#7) from Asia, UAE (#8) from the Middle
East, United States (#4) from the Americas, Netherlands (#2), Norway (#3), Finland (#5),
Sweden (#6), UK (#9) and Denmark (#10) from Western Europe. Chart 11B also shows us the
list of countries that have supportive policies and legislation for AVs. Note that top is Singapore,
with UK in second place.

Table 10B. Overall AV readiness by country

#1 Singapore #6 Sweden #11 Japan #16 Israel #21 Belgium #26 Russia
#2 The Netherlands #7 South Korea #12 Canada #17 New Zealand #22 Spain #27 Chile
#3 Norway #8 United Arab Emirates #13 Taiwan #18 Austria #23 Czech Republic #28 Mexico
#4 United States #9 United Kingdom #14 Germany #19 France #24 Italy #29 India
#5 Finland #10 Denmark #15 Australia #20 China #25 Hungary #30 Brazil
Source: HSBC, KPMG

Chart 11B. Most AV friendly policy wise Chart 12B. Where AV investments are
going (2016-2022)
Brazil 1.53
Mexico 2.00
Physical Other systems (steering,
India 2.16
Italy 3.78 Systems chassis components, etc.)
Russia 3.82 Non-AI 3%
Hungary 3.93
software 4%
Chile 3.96 Ridesharing
Spain
Czech Republic
4.65
4.89
4% App
China 5.07
Belgium 5.17 HD Mapping 1%
Israel
Japan
5.27
5.78 4%
Australia 6.02
South Korea 6.14 AI
Sweden 6.22 Microchips
France 6.24 5%
Taiwan 6.33 (GPU's,
Denmark 6.34
Austria 6.37 Auto ECU's)
Norway
Canada
6.64
6.74 Electronics 49%
United Arab Emirates 6.79
Germany 6.81 10%
United States 7.02
New Zealand 7.08
Finland 7.10
The Netherlands 7.17 Sensors
United Kingdom 7.23
Singapore 7.82 20%
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

Source: HSBC, IBM Source: Frost & Sullivan

According to Frost & Sullivan, 2016 was the year when investments started properly into AV
Investments for AV
technology
technology. They estimate that between 2017 and 2023, nearly 50% of investments deployed
will be into microchips (GPU, ECU) for AVs, 29% in sensors and 10% into auto electronics.
Surprisingly AI software is only estimated to take 5% of the investment and non-AI software
another 4%, so in total software will be about 9%, similar to the total amount for auto
electronics. See chart 12B.

Chart 13B shows us the hardware and software combinations of both OEMs and disruptors.
Most of them appear to be developing the software in-house, with partnerships for hardware
sensors and chips. Moreover, chart 15B gives us an overview of the various sensors, their
vision reach, approximate costs and data transfer rates.

52
 Thematic ● Global
November 2020

Although much of the public buzz for AVs over the years has been about passenger vehicles,
What about AV commercial
trucks?
the actual implementation is proving to be trickier than expected for a number of reasons and
current COVID-19 may make things more difficult from an economic point of view (selling
expensive new AV cars and possible pressure on ride-hailed AVs due to shared spaces).

Table 13B. AV hardware and software partnerships

OEM/Disruptor Apple BMW Daimler Ford GM Tesla Uber VW Volvo Waymo
H/W N/A Mobileye, Qualcomm, Velodyne, Mobileye, Nvidia Velodyne Mobileye, Velodyne In-house, FCA,
Nvidia, Intel Mobileye Nvidia Delphi In-house Nvidia, LG Lyft
S/W In house IBM Watson In-house In-house Cruise In-house In-house In-house In-house In-house
Automation
Source: HSBC, Frost & Sullivan

However, we believe that the B2B AV market may prove to make more sense, especially in the
commercial truck and heavy-goods vehicles (HGVs) markets, in particular as there is due to be a
refreshing of HGVs and other trucks over the coming few years, with new greener fuel (battery
electric and hydrogen) based on electric drive-trains, as we have written extensively within HSBC
Global Research. These trucks will be driven on pre-determined commercial highway routes, away
from dense human populated city streets, making it safer from a practical point of view.

Table 14B. Freight truck savings

_________________ 2025 __________________ _________________ 2040 __________________
Freight Passenger Freight Passenger
Driver costs 91.1% 77.3% 87.3% 73.8%
Fuel 1.8% 10.8% 3.1% 9.2%
Emissions 1.2% 4.3% 2.2% 3.1%
Safety 3.5% 3.5% 3.9% 9.8%
Net new traffic 2.4% 4.1% 3.5% 4.1%
Source: Linkoping University

Chart 14B compares passenger and freight AVs and the expected gains from both types of
vehicles from automation. For example, in 2025 it’s expected that in terms of driver costs from
automation, fright trucks will save 91% of driver costs against 77% for passenger vehicles,
according to Linkoping University. This is a significant savings in terms of hiring drivers, for
businesses. Chart 16B shows us the average cost per ton-mile of transport by load type. Air
freight is the costliest at USD125, truck cargo sits at USD18 and rail at USD4.

53
 Thematic ● Global
November 2020

Table 15B. Sensor specs for AVs (diagram of sensor range)

LIDAR
Measurement distance (m): Up to 250
RADAR Cost ($): 1,000-75,000
Measurement distance (m): 0.2-300 Data rate (Mbps): 20-100
Cost ($): 30-400
Data rate (Mbps): 0.1-15

Camera
Measurement distance (m): 0-250
Ultrasound
Cost ($): 4–200
Measurement distance (m): 0.02-10
Data rate (Mbps): 500-3500
Cost ($): 30-400
Data rate (Mbps): < 0.01
Source: HSBC, Frost & Sullivan

So truck is four times more costly than rail to transport goods. Though is mostly because of
labour costs, which is about 40%+ of per ton-mile for trucks. Also one must account that trucks
can be direct A to B, at any time (convenience) and air freight has more complex pathways for
getting to the end destination, likely involving road too, thus adding more time to the journey and
so forth. Chart 17B shows us that the testing phase for AV trucks is supposed to be from now till
2022, with more automated truck AVs on the road from 2023 onwards including tele-operation.

Chart 16B. Avg cost per ton for transport Chart 17B. Expected timeline for AV trucks
(2019)

140 50%
125 L4 L4 L5 penetration
45%
120 automation automation accelerates
40%
in semi- penetrates
100 35% and peaks
commerical
Labour costs is 30% trials
80
25%
USD

approx 40% of truck

60 20%
15%
40 10%
18 5%
20
4 3 0%
0
2020e
2021e
2022e
2023e
2024e
2025e
2028e
2029e
2032e
2034e
2035e
2036e
2037e

Air freight Truck Rail Cargo Domestic

Waterways
Level 4 Level 5
Source: HSBC, Umlaut Source: HSBC, Idtechx

54

3D printing for consumers
failed but not for industrial
applications
Thematic ● Global
November 2020
3. The 3D printing story: production on demand

Tea. Earl Grey. Hot
Captain Pickard, Star Trek: The Next Generation
3D printing – the real life equivalent of the replicator from Star Trek
We don’t quite have Star Trek’s Replicator device from the science fiction television series,
where people can order at will anything from this device (like tea), and it will create. However,
back in the real world, the first 3D printer patent was issued in the 70s, and today 3D printers or
additive manufacturing (AM) exist for a number of fields, in various stages of technological
progress and application. 3D printing or AM “prints” layer by layer from a 3D model and can
create structures and shapes that would be very difficult or even impossible using traditional
“reductive” methods of manufacturing.
In the early 2010s, consumer 3D printing made a lot of headlines due to key patents expiring,
and encouraged a swathe of B2C companies to create 3D printers for consumer market.
However, this wave of hype didn’t materialise to everyone having a 3D printer in their home, like
everyone has a computer in their homes.
Chart 18B. Global 3D printing revenues
10,000
9,000
8,000
Global 3DP revenues (in million $)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Products Services
Source: Wohlers
Today, AM manufacturing is making headlines again, especially industrial uses of 3D printing, in
part due to the pandemic highlighting that some of our supply chains are not as resilient as we
assumed previously. In Italy during the height of the first wave of the pandemic, a local
company 3D printed components for ventilators for EUR1 each, when the global supply chain
was disrupted, helping to save lives. We expect 3D printing to go beyond the typical use of rapid
prototyping and become more embedded in localisation of supply chains.
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 Thematic ● Global
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Chart 19B. 3D printers by country of use Chart 20B. 3D printing market share by
(2019) type (2019)
Research
Other
Post- Institutions Polymer
Russia 13.9% processing 5.2% machines
1.5% 4.8% 14.7%
Taiwan US Metal
1.5% 35.3% materials Desktop
10.8% machines
8.7%
China Polymer
10.6% materials
9.5%
Korea
3.9% MES and Metal
Turkey Workflow
Japan machines
1.3% 2.2% 22.5%
9.2% Slicer and
Spain Canada Data
1.2% 1.8% 2.6% Design &
Italy Stimulation Ceramic
Germany 7.4% Composite Electronics
3.3% UK machines
Sweden France 8.3% machines
machines 3.9%
4.0% 3.1% 4.3%
1.1% 2.2%
Source: Wohlers Source: Wohlers

In 2019, it was estimated that the AM sector was worth nearly USD10bn but this pales in
Quick AM market overview
comparison to the US12trn of the whole manufacturing sector.38 Today 35% of AM printers see
their home in the US, followed by 10% in China and then 8% in Germany – chart 19B. The 3D
printing market ecosystem is composed of hardware manufacturers (metals, polymers, desktop,
composites, ceramic and electronics), software vendors (design and simulation, slicer and data
preparation, workflow, security), materials suppliers (metals, polymers, composites) and post
processing manufacturers. From an investing point of view, it is interesting to see that hardware
makes up 56% of the AM market, 23% by software, 20% by materials and 5% by post
processing. Chart 20B shows that metal printers are the most popular product in the AM market,
at almost 23%.

Chart 21B. Additive manufacturing uses Chart 22B. Additive manufacturing can
less energy than conventional machining reduce CO2 within industry (Global CO2
savings %, CO2 savings within category %)
3000 3.00
1.6% 25%
CM energy intensity
AM energy intensity 1.4%
Energy Consumption (MJ)

20%
Energy Intensity (GJkg))

2250 2.25 1.2%

1.0% 15%
1500 1.50 0.8%
0.6% 10%
750 0.75 0.4%
5%
0.2%
0.0% 0%
0 0
Oil and Gas
Passenger Cars

Aviation
Manufacturing

Residential Heat
Trucking
Shipping
Industrial Heat
Power Generation

Bracket Seat buckle Bionic Engine cover Fork

bracket Door hinge fitting
Resource production Distribution I
Manufacturing Distribution II

Source:Procedia Manufacturing Source:Thurun Energy

The high degree of freedom in design, means components can have significant reduction in
Energy and CO2 savings
from AM
weight and generally means that one can reduce the amount of energy in the life cycle of the
product made. For example, using traditional manufacturing machines an aircraft bracket,
studies have shown that over 200,000MJ is used but using EBM (electron beam melting
technique), a AM process, under 80,000MJ was used. There is not only a reduction of weight of
the final product (1.09kg vs 0.38kg), through using less ingot (8.72kg vs 0.57kg) and raw
______________________________________
38 AFMG

56

Future of 3D printing…
Replacing pickers in
warehouses has an impact
on jobs
Warehouse automation has
labour advantages but is
vulnerable to cyber-attacks
Automation to make goods
cheaper
Thematic ● Global
November 2020
material (8,000MJ vs 500MJ) but also less energy used for the manufacturing (900MJ),
transport (40MJ vs 14MJ) and use phase (217MJ vs 76MJ).
The usage of AM, it has been shown, can save 7-173 million GJ/year by 2050 for say,
lightweight metallic aircraft components. Chart 21B shows us the significant savings in energy
and energy intensity during the AM manufacturing process for aircraft: brackets, buckle belts,
bionic bracket, and engine cover door hinge and for fork fitting. Chart 22B shows us that this
kind of energy savings in the life-cycle of components can translate into up to 25% of CO2
savings within certain industries, manufacturing gaining the most. It also shows that nearly 7%
of global CO2 can be reduced by using an AM process.
3D printing in industry is clearly in the real applications stage of our disruption framework but
there are more spaces where 3D printing is in earlier stages of development. For example, 3D
printing is being used to print shoes by Adidas39 today and exploration of making human
organs40, PCBs41, food42, homes43 and more, layer by layer.
Thematic 1st, 2nd tier and ESG implications for automation
Logistics
 ESG: Robotic arms in warehouses impact DM today, EM tomorrow: Warehouse
automation is set to grow over the coming decade. The global logistics industry is valued at
USD5trn, with US companies employing 2m workers to carry out stock and order fulfilment.
90% of warehouse picking is currently done by hand. Automated picking will give gains of
2-3x productivity (vs pick conveyer operations), and 5-6x productivity increase when
compared to manual pick-to-pallet fulfilment centres.
As consumption of physical goods grows to 50% of the market by 2030 in the DM, in order
for the economics to make sense from a business point of view, we believe that the picking
part of the warehouse will be increasingly vulnerable to automation. This physical task
which was formerly in the domain of the human hands (quite literally), poses a threat to 2m
jobs in the US, and countless more in warehouses in the rest of the DM. These automated
pickers will increasingly use computer vision technologies in conjunction with soft-grippers.
If the cost of these technologies fall, sooner rather than later, similar issues could arise in
the EM (as their use grows), especially in regions where wages are rising. The question is
what percentage (if any) of the displaced workers can re-train for different jobs.
 ESG: Automated warehouses are more resilient to labour issues but are vulnerable
to cyber-attacks: Currently only 5% of warehouses globally are fully automated. These are
the warehouses which would be most resilient to labour related shocks (e.g. pandemic or
otherwise) due to a prudent reduction of humans in indoor space, allowing social distancing
of smaller number of workers. This resiliency will be helpful should there be any future flare
ups from pandemics or employment issues, like rising wages. However, full automation also
comes with possibility of cybercriminals targeting these fully automated warehouses to
disrupt the company and distribution of goods in the economy.
 Warehouse automation could be deflationary for online goods: Companies which deploy
more automation logistics, by removing human labour costs, naturally create the possibility of
passing on the savings to the consumer. Naturally this is deflationary, if it breaks the online
conundrum, making low margin products like groceries profitable to sell online.
______________________________________
39 "Adidas to release a new version of 3D printed show, Alphaedge 4D!, 3D Printing Industry, May 2019.
40 "3D printing offers hope of building human organs from scratch", FT, December 2019.
41 Hensoldt and Nano Dimension create 10-layer 3D printed circuit board", 3D Natives, May 2020.
42 "Meat grows in space with 3D printer on ISS", Business Insider, October 2019.
43 "Scientists create 3D-printed buildings from soil", The Guardian, August 2020.
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 ESG: Automation and alternative incomes: Automation of physical labour as in

UBI or robot dividends for
lost warehouse jobs?
warehouses and digital factories will naturally bring to the forefront further discussions
about alternative income models like UBI or robot dividends. As we outlined before, if
picking alone is automated in warehouses, then that is a threat to 2m jobs. Many other
tasks in digital factories can also be automated over time.
 Automation creates higher paid jobs: Whereas physical automation in industries like
New jobs created to automate
logistics will reduce previously un-automatable jobs due to advances in machine learning,
computer vision and robotics – this next generation of automation is likely to create some
jobs too. For example, this kind of automation will require the hiring of knowledge economy
workers who are highly qualified and innovative, with expertise in software and hardware,
and computer systems engineers who are on the cutting edge of technology. These will
naturally be higher paid roles too. They will also likely be kept on the books to continue to
maintain the equipment over time and improve it also.
 ESG: More urban farming and organic farming tech to feed the world: As populations
Intensive farming helped with
smart farming
grow and there is likely to be more demand for greater variety of foods from the EM.
Moreover, climate change, shrinking farmland, water security, and overfishing are likely to
place pressure on global nutrition supply and create biodiversity issues. Add to this, people
are living longer and it’s expected that by 2050 the global population will hit 10bn and each
person will consume 12% more than they did at the turn of the century, with total food
consumption increasing by 70% by the midpoint of the century, according to the UN. To
generate an additional 7,400tn calories by then would in theory require twice the landmass
of the size of India.44 Note that there are 570m farms globally, 90% run by families or
relying on family labour, producing 80% of food worldwide.

To meet the task of supplying the increasing demand for calories, global trade and
technology will play an important role in keeping up yields to demand. Part of this will be
making farming more efficient. So we expect global food supply chains to deploy more
smart farming tools to help support yields. But using more land for food is complicated,
placing pressure on forests, peatlands, wild areas and thus releasing carbon stored within
them, adding to climate change. This also impacts biodiversity. Could organic (2% UK food
sales only and 5.5% in the US) farming be preferred in some places over intensive farming
techniques, but assisted with smart farming tools? Urban farming (makes a fifth of the
world’s food today) technologies could also be part of the solution to make use of spaces in
cities, which may be cleared up as consequences of WFH trends going forward.45

Moving over distance

 ESG: Can hydrogen eventually power drones safely? As a market and society, we have
Green power for drones
already discussed and funded the pipeline of making passenger vehicles green, meaning
battery electric powered. The next transport category that is currently the hot topic is
decarbonising HGVs, through either hydrogen or battery electric. However, what is not
widely discussed yet is what will power drones, and this may become an important
discussion point if drones are going to become a USD43bn market by 2025.

There are a few options on the horizon for drones, including gas, battery and hydrogen.
Gas will be able to get the drone further, in terms of distance, but isn’t green, so should
probably be discouraged from the outset. Battery electric power drones are the best bet in
the medium term. However, there is also the potential of (safe) hydrogen-powered drones
looking out into the future a little. A team called H2Go Power based in Imperial College
London are busy developing the tech (stable hydrogen without compression) and this is a
______________________________________
44 World Resources Institute, 2018.
45 "Can we ditch intensive farming - and still feed the world?", The Guardian, January 2020.

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space to watch, as a hydrogen-based economy continues to be a popular theme for

investors. H2Go are partnering with Ballard Power to see if they can deploy the technology
for drones.46
 Drones could make deliveries cheaper: Drones may help lower the cost of local
Cheap drone delivery
deliveries, if the technology is scaled and collected from fulfilment centres in close proximity
to metropolitan areas. For example, in the US, Amazon operate most of their fulfilment
centres within 5 minutes of big cities. A study looking at the economics of truck vs drone
delivery for Amazon estimated that it costs on average USD1.20 for truck delivery vs
USD0.36 for drones.47

Another study looked at drone vs e-van delivery costs for biomedical samples, food
deliveries and parcel deliveries. It found that transport of biomedical samples could be
cheaper for drones (EUR1.92 within 15 minutes) vs e-van (EUR4.59 within 42 minutes) in
Rouen, France. For food delivery it estimated drones (EUR0.89 within 6 minutes) vs e-bike
(EUR1.90 within 13 minutes) in London. For parcels it estimated drones (EUR0.59 within 7
minutes) and e-van (EUR0.14 but within 352 minutes).48
 ESG: AV passenger vehicles vs AV trucks: Since about 2016, the investments in AV
Trucks to go AV soon as they
get new fuels too?
technology have been increasing, as we highlighted previously. On top of this, there has been
a lot of hype about passenger vehicles in the media about the development of disrupters, such
as Waymo, Uber and Tesla. However, the reality is that today we don’t necessarily have level 4
autonomy passenger vehicles on the roads. The reason for this is partly technological, meaning
it’s fairly difficult to navigate AVs around densely population regions safely.

The other issue is similar to the drone problem of getting the right regulatory support, with high
profile outlier AV accidents (note Uber’s 2018 crash with their “safety driver” now being charged
with negligent homicide this year49) bringing negative media attention and headlines. The high
AV accident occurred with Uber in 2018, where the back-up driver was recently charged with
negligent homicide for the death of a pedestrian in Arizona. The safety driver was streaming a
TV episode during the time of the accident. It’s important to note that Uber didn’t face criminal
charges but it meant that they ended the testing of the technology in Arizona at the time.50

Although we are not ruling out passenger AVs rolling out over the coming few years like Tesla
FSD (full self-driving) or through ride-hailing services (Waymo started fully AV trips in Arizona in
October 2020) or supporting last-mile commerce services like with Amazon’s Zoox purchase,
we believe from an investor point of view, commercial truck AV might the angle which becomes
a reality somewhat more easily with scale.

AV trucks would reduce the cost of drivers, have pre-determined commercial routes on
highways, be away from dense urban areas and be entirely a B2B model. Moreover, with
HGVs now on the global decarbonisation agenda, with hydrogen/battery electric fuel input, new
trucks can be deployed with AV technology. Other commercial AV applications can also be
attractive to companies, to improve safety, costs and efficiency – like within the mining industry.
500 AV trucks currently operate at surface mines around the world with 80% of them in
Australia. It’s expected that this global number will triple by 2023, according to GlobalData’s
Mining Intelligence Center.51

______________________________________
46 "H2Go Power seeks to power drones with 'happy gas'", BBC, January 2020.
47 "A cost analysis of Amazon Prime Air (drone delivery", Journal for Economic Educators, 2016.
48 "Comparing the cost-effectiveness of drones v ground vehicles for medical, food and parcel deliveries", Unmanned
Airspace, November 2020.
49 "Uber's "safety driver" during deadly self-driving car crash charged with negligent homicide", Futurism, September 2020.
50 "Uber's self-driving operator charged over fatal crash", BBC, September 2020.
51 "Australia dominate global autonomous haul truck use with numbers set to triple", Mining Technology, March 2020.

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 ESG: Negative impact on jobs from automating trucks: The push for automating trucks
Automating trucks can put
pressure on the supporting
is not only for technological awe but there is a practical reason to do this also. For example,
economy in the United States there is currently a shortage of truck drivers, which is driving driver
wage inflation. In 2018, it was reported that there was a gap of about 51k drivers to meet
the demand from companies like Amazon and Walmart.

If this problem is not solved, then it could mean deliveries getting delayed and the price of
goods going up. The reason it’s a struggle to hire truck drivers is that it’s said that the
lifestyle is tough, meaning a truck driver does not see family often, is more likely to gain
weight gain from sitting all day and lack of healthy food on the road, and so forth. Going
forwards will the digital natives want such time consuming, anti-social and potentially
repetitive work, even with a median pay of USD42k in the industry, which doesn’t require
more than a high school education.52

 Risks from AV testing: In technology, being an early mover has advantages but can also
Real life AV testing important
but comes with reputational
risks
According to the BLS there are more than 3m truck driving-related jobs in the US alone.
Furthermore, there are the usual support infrastructures that truck drivers will utilise,
especially long-haul HGVs, at cafes, motels and other rest stops – this part of the support
economy could be negatively impacted too. An interesting comparison is to observe what
happened when the knowledge economy workers worked from home during the pandemic
and shops which supported the office economy were hard hit.
pose risks. Deploying AVs on real roads gives a company a dialogue with regulators, and
ability to learn from miles driven – both being positives.

Waymo have said they have driven 20m miles (800 times around the globe) on public roads
over 25 cities, adding 10m miles over the most recent year. Yandex and Baidu have done
1m miles each. GM’s Cruise AV entity is said to be adding 1m miles on monthly basis. 53
Tesla have said they have done over 3bn miles in Autopilot mode.54 Uber have said they
have done “millions” of AV miles in testing and “tens of thousands” of passenger journeys.
This kind of real road data can improve the AI/ML technology, as to make it come across
real life situations that it may have not modelled and so can learn from them.

 ESG: Impact of AVs translating to fewer vehicles on the road: If AV vehicles take off at
Fewer vehicles needed on
road with AVs, but impact on
metals and insurance?
However, the downside with AV today is that road testing has the risk of leading to
accidents and thus bringing a host of associated public reputational risks. Additionally, the
current AV regulation frameworks around the world, it could be argued, are very
fragmented, where no international standards have been agreed upon. This poses further
risks for AV companies in terms of roll-out.
some point for passenger vehicles, there is the potential due to fleet sharing efficiencies for
ride hail services, traffic mapping algorithms and others, that fewer vehicles may be
required on the road when compared to current traffic patterns with traditional human-driven
vehicles. For example, a study shows that within an American city like New York, it could
reduce the volume of cars by 76% - therefore reducing emissions and improving quality of
life for citizens in urban areas.55

In theory, fewer vehicles on the road naturally means that there could be an impact on the
demand for metals. On the flip side, as these vehicles will be more efficient, they will do
more miles than human driven ride-hailing or privately owned cars, so could need replacing
______________________________________
52 "America has a massive truck driver shortage. Here's why few want an $80,000 job", Washington Post, May 2018.
53 "Waymo's autonomous cars have driven 20 million miles on public roads", Venture Beat, January 2020.
54 "Tesla drops a bunch of new Autopilot data, 3 billion miles and more", Electrek, April 2020.
55 "On-demand high-capacity ride-sharing via dynamic trip-vehicle assignment", Javier Alonso-More, Daniela Rus et al,
National Academy of Sciences of the United States, November 2016.

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more frequently due to wear and tear. On the insurance side of things, as the AVs will
contain more computing and sensing equipment, the insurance per AV could be high when
compared to traditional vehicle sensor content.

3D printing
 ESG: Pressure for 3D production to drive CO2 down: One of the big theme discussions to
Can 3D printing reduce CO2
and inadvertently jobs in
come out of the pandemic is whether some global supply chains should be re-localised.
some regions? Automation technologies like 3D printing or AM (additive manufacturing) could play a role if this
becomes more of a trend, to make businesses more resilient. We believe the economic reason
is not the only reason to re-localise some parts of global production. It’s estimated that using
AM manufacturing can reduce CO2 emissions by 25% CO2, according to Thurun Energy.

There is the potential for localised production of goods through technologies like AM to place
pressure (e.g. from investors or through regulation) on some companies to adopt the
technology, due to the ESG gains. It’s estimated that if AM is used by a variety of industries
such as manufacturing goods, passenger vehicles, industrials/power generation, aviation,
trucking, shipping and O&G, it could reduce global CO2 by almost 7%. Another knock-on
implication of 3D printing locally is the re-shoring of manufacturing jobs from overseas.
 ESG: 3D printing in industry can reduce waste, cost and time: Many industries like
3D printing gives many
efficiencies automotive keep spare parts in stock. Not only does this add to the cost but also creates
potential waste. 3D printing using AM techniques has the potential to reduce this waste
going forwards, with lower volume production (say vs. injection moulding as an example).
There can also be cost savings associated with optimised printing from single builds.

For example, a company called Betatype used laser powder bed fusion (LPBF) to create 300+
metal auto parts. Using the optimised system, they produced each part for USD4 vs. USD40+
un-optimised 3D printing. They were also able to reduce the lead times from 444 to 34
hours.56 In another example GE used 3D printing to reduce the part count from their catalyst
turboprop engine from 845 to only 11 – meaning fewer parts to certify. It not only reduced the
cost but also fuel consumption by 20% and reduced the overall engine weight.57
 ESG: 3D printing and IP issues: The ability to 3D print a host of things, anywhere in the
Revise IP for 3D printing era?
world, raises issues of IP. For example, an object can be reverse engineered and made into a
3D computer model (e.g. an STL file), from using a combination of 3D scanning tools and
design work. This means that teams with skills can replicate almost any object thus lowering
the barrier to entry for manufacturing a variety of widgets. There was an interesting case in the
United States, where a company (ClearCorrect) which made 3D printed orthodontic aligners,
had their 3D model sent over the internet from their overseas internal designers. Another
company (Align Technology), also operating in the United States, filed a patent infringement
against ClearCorrect. The Federal Circuit overturned the initial US ITC (International Trade
Commission) decision that they had no jurisdiction over digital data, including 3D printing files
sent into the United States from overseas, as they can’t be considered ‘material things’.58

In some areas like medical equipment, countries may face a dilemma going forward; should
existing IP be respected, or should IP laws be changed to adapt to new technologies, to lower
cost for health-related products, for the public good. This kind of easing of patents has
happened previously during wars and also during the current pandemic (for potential COVID-
19 vaccinations). Going forward governments will have to re-visit IP in the digital economy to
balance the public good and the ability to foster investment in innovation via patents – perhaps
even enabling pooling of patents for easier use.
______________________________________
56 "How real value of metal additive manufacturing can be leveraged for automotive production", September 2020.
57 "6 ways to reduce manufacturing costs with 3D printing", AMFG, September 2018.
58 "ITC connot police 3D printing data transmission in ClearCorrect case", 3Ders, November 2015.

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 3D printing, trade and tax… An interesting question to ask is what are the implications of
Death, taxes and 3D printing
reduced trade flows, if it becomes a normal business model for goods or parts to be printed for
a company locally rather than sourced from abroad? 3D printing has trade and tax implications,
which are very complicated issues, and can vary regionally.

Currently, digital flows including 3D printing files are not subject to tariffs. In fact, World Trade
Organization (WTO) members have periodically renewed commitments to ban customs duties
on electronic transmissions (see Taxing digital trade). The moratorium is due to expire to expire
in mid-2021 unless renewed further. However, some countries such as South Africa and India
are concerned that developing economies will lose out on future tariff revenue as goods
become increasingly digitised (e.g. via 3D printing). The ECIPE present the other side of this
discussion, and estimate that imposing tariffs on digital flows could lead to an annual GDP
decline of USD10.6bn for developing economies. Removing the moratorium could also affect
public finances via tax erosion. For example, they calculate that India could lose USD2bn in
VAT, as well as corporate and income taxes if duties are imposed.

Moreover, according to the World Economic Forum, digital duties could slow down 3D printing
adoption due to the higher trade costs and suggest that VAT or sales tax could be a better way
to approach this. They suggest that 3D printing could also foster innovation and level the
playing field between countries in production.[1] If there is a revenue gap due to loss in imports,
how might governments bridge the revenue gap? There are several good open questions.
In 2019, the Federal Revenue Service (FRS) in Brazil ruled that a 3D printer is considered a
device which manufactures products, taking raw materials and morphing it into a new real
product. The implication of this is that if a retailer 3D printed something for a customer, they
could be liable for an indirect tax on the sale of goods – paid by the merchant, who passes it to
the consumer through the price of the product. 59

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59 "Brazil rulign on tax treatmet of 3D printing could have global implications", 3D printing media network, July 2019.

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