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Opinion | As AI revolutionises the tech economy, countries focusing on semiconductor fabs may need to think again

  • Tech consumers will increasingly be attracted to the latest AI capabilities, rather than hardware, and the biggest profits will be in AI software inventions and fee-based apps
  • With tech manufacturing already facing cost pressures and competition, these transformations will challenge the outlook for many countries

Reading Time:4 minutes
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Illustration: Stephen Case
Microsoft’s recent announcement that it would charge fees for its artificial intelligence (AI) software Copilot is a sign that the future of the global tech economy is being upended – from one dominated by hardware superiority to one powered by an intangible product that is reinventing how we think, work and live.
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Apple, a major tech competitor, affirmed the importance of software services in its outlook when reporting its third-quarter earnings. Its services segment is delivering record revenues against falling sales in hardware from iPads to iPhones.

Services are the critical pipeline through which Apple, the world’s largest company by market capitalisation, will deliver the AI tools it envisions running, for example, on its smartphones, without needing an internet connection or the cloud. Hardware improvements that distinguished new models from past iterations will be supplanted by advancements in AI capabilities.

The emerging rivalry for AI dominance between Apple and Microsoft is looking a lot like the contest between their operating systems. That experience taught them that the product that first captures the largest market share effectively becomes the standard.

Microsoft, which achieved that with Word, the most widely used word-processing program in the market, has a leg-up in the new AI contest – it reportedly has a 49 per cent share in OpenAI, the company behind AI-powered chatbot ChatGPT.
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Even at this very early stage, the stakes are enormous. Generative AI could add up to US$4.4 trillion annually to the global economy, according to a McKinsey report. In a Centre for Macroeconomics and Centre for Economic Policy Research survey of Europe-based economists, most of them said that AI could push economic growth worldwide to 4-6 per cent every year, compared to the 4 per cent average over previous decades.

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