Five Megatrends

Fortunately, humans do not lack creativity and inspiration. When we start to look toward appropriate solutions, it helps to examine them through the lens of five specific global megatrends.

The global population will continue to grow, but we can expect to see marked disparities in this growth. Africa’s population will almost double between 2000 and 2050, while the populations of Europe and China will decrease. Growth in some regions is slowing, yet the over-65s’ share of the global population will almost triple over the same period.*

Consequently, younger generations will bear a larger share of healthcare costs. Consider the United States, where under-35s made up almost half of the population in 2019 but accounted for just 20% of healthcare spending.

Economic growth will become increasingly dependent on productivity gains achieved by technology and digitalization, rather than absolute population growth. Artificial intelligence (AI), automation, and robotics will help achieve these gains, by taking on labor previously performed by the working-age demographic.

The emerging industrial metaverse will allow the workforce to better collaborate in an immersive, intuitive, real-time environment. AI will perform highly repetitive tasks, freeing up humans to focus on what they do best: driving creativity, innovation, and inspiration.

Many of the challenges posed by demographic change can be addressed by technology. But are the world’s organizations, governments, and workforce embracing this opportunity? The answer is a qualified “yes.”

Aging society
Population development by age (bn, CAGR) a)
• Slower growth but strong aging of world population
• Highest growth within group of people 65+ (2000 – 2050: 2.7%)

a) Source: United Nations, Department of Economic and Social Affairs, Population Division (2022, World Population Prospects 2022)

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Megacities are on the rise. Today, the world has 33 cities with more than 10 million inhabitants and some of those – Tokyo, Shanghai, and New Delhi among them – are home to more than 20 million people. Forecasts suggest that, by 2030, there will be a total of 43 megacities, with most of the expansion occurring in developing countries.*

In a related development, the demand for mobility in 2050 will more than double compared with 2015. According to predictions, passenger-kilometers will triple in the next 30 years from 44 trillion to 122 trillion.* Meeting this demand will require significant investment in sustainable mass transit systems that provide seamless transportation.

Beyond public transportation, growing cities will require smart buildings, hospitals, schools, and communication networks that provide connectivity and edge computing. Software-based optimization and intelligent hardware technologies will help reduce energy consumption and boost the efficiency of buildings and factories.

In less than a year, the 70,000-m2 Coca-Cola European Partners production facility in Jordbro, Sweden, cut its energy use by 13%, thanks to an upgraded building management system and the installation of new fans and high-pressure compressors. This resulted in an annual energy savings equivalent to the amount of energy needed to charge a hybrid car 400,000 times.* Similar projects could make a difference all over the globe, and the G7’s Partnership for Global Infrastructure and Investment (PGII) is making strides to do just that. Together with its EU investment partner, Global Gateway, it has already committed to over US$600 billion of investment in sustainable infrastructure in developing countries between 2022 and 2027.*

As populations in cities and developing regions expand, they encroach on arable land, and require more water and food. One response to this scarcity challenge is vertical farming, a market that is expected to grow at a compound annual growth rate of 25% from 2020 to 2030.* Enabled by advances in LED technology, robotics, and automation, vertical farming offers agricultural solutions in a controlled environment. AI-based crop management makes 17 to 20 more annual growing cycles possible and can help produce 300 times more food per square foot than conventional agricultural methods.* One vertical farm in Dubai, for example, requires 95% less water than a conventional farm and yields more than 1 million kilograms of food – free of pesticides, herbicides, and chemicals.* Solutions such as these will feed more people and support the increased demand for productivity while also reducing the need for synthetic fertilizers.

Digital technologies also play a decisive role in making urban expansion sustainable. Smart buildings, smart signaling powered by 5G, and software platforms have the potential to deliver significant energy savings and a better travel experience for millions.

Urbanization primarily takes place in less developed regions
% of total population residing in urban/rural areas over time b)

b) Source: UN World Urbanization Prospects (2018)

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While decades past were marked by globalization, that is, the increasing integration of the global economy through free trade and the free flow of capital, a massive change has occurred in recent years: European and North American influence in the global economy has declined and economic power has shifted eastward. Both India and the Regional Comprehensive Economic Partnership (RCEP),* an Asia-Pacific free-trade agreement, will account for over 35% of global GDP by 2050. The GDP of its member countries already exceeds the GDP of the EU and that of the member countries of the USMCA (United States-Mexico-Canada Agreement – formerly NAFTA). Overall, what can be classed as the ‘free’ and ‘mostly free’ economies’ share of global GDP has declined significantly, from 56% in 2006 to 46% in 2021.*

While a globally connected industry stimulates competition and innovation, locating production close to markets – known as nearshoring or local-for-local business – makes local economies more resilient and sustainable. This megatrend is termed “glocalization,” and its prerequisites are economic freedom, standardization, a reduction of technical barriers to trade (TBTs), and policies that support the digital economy.

To a high degree, the success of glocalization depends on access to digital technology. A secure and trusted industry-wide exchange of digital information, such as envisioned by the ESTAINIUM Association,* will make it possible to reduce the emissions of global supply chains and develop strategies to establish and optimize circular economies and, so, to optimize resource efficiency on a local level. Successfully implemented standards initiated by industry players, like the IEC 63278 series of international standards, allow for the global interoperability of industrial digital twin architectures that result in improved circularity in local economies. A digital product passport would be another benefit of such advances.*

Deglobalization is not a viable option. Therefore, government and business should further strengthen and reshape international cooperation through strategic multilateralism.*

From globalization to glocalization
Ratio of global goods traded to global industrial production (Index 01/1991 = 100) c)
Localization and regionalization increasing
• Nearshoring
• Competition of great powers

c) Source: Global Trade Alert, Bureau for Economic Policy Analysis

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As things stand, 90 to 100 billion tons of raw minerals are extracted and processed each year. This amount will double by 2060 to 190 billion metric tons. Plastic waste in marine ecosystems is expected to increase by 65% in 2030, even under the current ambitious commitments set by governments. Water scarcity in urban areas is expected to increase throughout the world, impacting 1.3 billion people in Asia by 2050 (in 2016, it was 609 million). The population affected by water scarcity in Africa will nearly quadruple, from 80 million in 2016 to 311 million in 2050. While progress has been made in addressing many of the causes of anthropogenic global warming, current policies will not suffice to limit it to +1.5°C compared to preindustrial levels, at least not in this century.*

Resolving the sustainability paradox – doing more with less – is possible by combining the real and digital worlds. The Azores island of Terceira provides a great example of that. Terceira aims to reduce carbon emissions by more than 3,600 tons per year by combining forecast energy consumption and production with a powerful battery-based energy storage system.*

Broadly speaking, comprehensive digital twins can help us achieve net-zero carbon emissions. The decarbonization of regional transportation is now becoming reality. Hydrogen technology is making rail transportation climate-friendly: CO2 savings of 520 tons per train per year are now possible. Emission-free operation of long distance trains is no longer a distant dream; it is becoming reality.*

Circular economy solutions – supported largely by digital passports, cryptographic tokens, and data analytics – represent yet another opportunity to improve resource efficiency. Product carbon footprints (PCFs) enable targeted emission management on a product level in the supply chain.* For example, a test-case analysis of an industrial circuit breaker showed that an increase of up to 37% recycled resins reduced the CO2 footprint of the product by 5.3%.*

Another example is the growing market of lithium-based automotive batteries, which is expected to reach 4,400 GWh in 2030 and could increase to 11,000GWh by 2050. Recycling rates of end-of-life batteries could progressively grow from 7% in 2030 to up to 43% in 2050.* Data analytics, closed-loop material flows, as well as the integration of sustainability criteria in product design will be key.

Indeed, we have the tools to halt climate change and environmental pollution. We can do more with less.

Climate change continues
Global annual mean temperature variation (°C) d)
Current policies are insufficient to limit global warming to +1.5° C in this century

d) Source: National Oceanic and Atmospheric Administration (2022), deviation from global 20th century average

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Digitalization is a megatrend in its own right as it pervades every industry and offers solutions for many of the challenges mentioned above.

In all industries, software has grown at double the rate of industrial equipment, with a compound annual growth rate of 15% to 19%.*

Internet connectivity is expanding steadily. While in 2022 3.4 billion IoT communication interfaces were installed, this number is expected to significantly grow – to up to 9.6 billion devices in 2032 as further industrial and infrastructure devices are connected.* In 2030, 100% of the world population will have access to the internet.

The edge computing market in China, the world’s second-largest economy, is forecast to reach a market size of US$2.4 billion in the year 2026, with a compound annual growth rate of 35% through the analysis period.* Machines controlled by AI will become autonomous and intelligent participants in markets – which will result in an increase of automation and robotics in the IT/OT space.*

Furthermore, the platform economy is entering B2B. For rail companies selling tickets to passengers, managing seat reservations, and tracking inventory availability can be both expensive and time-consuming – and passengers prefer easy booking processes. The digital transformation of these processes has led to more modular and scalable Mobility as a Service (MaaS) platforms. In Spain and the Netherlands, this is encouraging more and more people to choose door-to-door travel options. For one transportation operator, the MaaS platform contributes to a predicted additional revenue in the first five years of €156 million. This will be achieved by accelerating the process of finding collaboration partners like eScooter, taxi companies, car-sharing and other transportation providers. Elsewhere, a fully scalable and modular web-based platform already processes 10.5 billion trip queries and issues 300 million tickets per year for leading providers, enabling dynamic pricing that optimizes capacity utilization, and revenue.*

Digital twins and the emerging industrial metaverse (IMV) also give industry the ability to test real-world data in the digital world, using a minimum of natural resources and in real time. Open, interoperable, and collaborative. Infinite data will replace finite resources.

Given the large proportion of the world population currently entering retirement, the need for supporting technologies that offer assistance and an enhanced user experience will rise dramatically. These include plug-and-play digital solutions, industrial-grade AI, executable digital twins, edge computing, automation and robotics, 5G and cybersecurity. And power electronics, like smart converters, is important as well because it represents the digital access point for power system data and control. Additionally, an AI-enabled industrial metaverse will open new, immersive, photorealistic spaces for people to collaborate in and find new, better solutions to real-world problems.

Digital transformation continues
IoT communication interfaces e) (in bn. units)
Number of industrial and infrastructure devices connected is constantly increasing

e) Source: Graphic created and calculation performed by Siemens based on Gartner research.

Gartner is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.

Gartner Forecast 2023: Internet of Things, Endpoints and Communications, Worldwide, 2022-2032, 2Q23 Update – IoT Endpoint Installed Base Worldwide by Sector, Healthcare Providers, Manufacturing & Natural Resources, Smart Buildings, Transportation.

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*sources and bibliography are listed in Megatrends paper