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Regarding the AI Design market: Analyze market trends through the Porter’s five forces analysis.
Good Day!
Thank you for your request to analyze market trends in the AI Design market through the Porter's Five Forces analysis. The most useful sources I found to answer your question are Computer World and Markets & Markets. The short answer is that Porter's five forces analysis determines that the market will be more economically empowered than the sellers, buyer, rivals, substitutes and new entries. For example, there is no threat of substitution, as there is currently no way to substitute AI. Below you will find a deep dive of my findings.
METHODOLOGY
We used Porter's five forces to analyze where power lies within the AI design market. We found excellent sources such as articles that provide insight into expected market trends, industry reports that detail the economics of AI Design and other research findings to further expand our knowledge of the topic so that we may provide you with more answers. We also tried our best to keep our findings current by focusing only on the articles published not earlier than Q1 of 2016. Data we included in our research and source materials have been limited to North America and Canada.
BARGAINING POWER OF SUPPLIERS
Research findings show that there are a wide selection of substitute suppliers within the industry. This effectively lowers the bargaining power of suppliers—which ultimately further propels the growth of the market.
BARGAINING POWER OF CUSTOMERS
An article published by Business Wire on 2016 states that demand for intelligent systems is increasing due to the continuous diversification of applications. AI has been deployed for a wide array of uses, covering everything from analyzing image files and other big data to piloting drones, cars, and robots. Considering that the number of customers is inversely proportional to their bargaining power, this gives the AI industry a significant advantage in power.
COMPETITIVE RIVALRY
The intensity of the competition between companies within the market is expected to increase even further this year. An article by Fortune mentions that startups focusing on artificial intelligence will be among the top targets for mergers and acquisition. We also found findings of a number of M&A dealing this year such as Intel's $400 million purchase of Nervana and ARM Holdings' $350 million deal for Apical.
Through further research, we found that the boost in growth within the industry was in part also because of the government's support. The National AI R&D Strategic Plan is a government backed program that aims to increase the incorporation of AI into our daily lives by implementing a number of strategies such as the development of shared public datasets and environments for AI training and testing. The full PDF includes a detailed explanation of all 6 strategies.
Despite the extreme competition within the market, exponentially increasing demand and continuous support from the government equally empowers companies in the AI industry.
THREAT OF SUBSTITUTES
Switching to substitutes will be very expensive especially for bigger corporations who have standardized their systems with specific Artificial Intelligence. An increase in spending would translate to an increase in pricing. Loyal customers may not approve or be able to afford the new prices, which would in turn empower them significantly. For this reason, companies often remain with their system even after they've discovered an alternative which has proven to be more efficient. A full switch would require years of research and preparation prior.
THREAT OF NEW COMPETITORS
For the same reason that switching to a substitute would be a big investment, new competitors would find it hard to catch-up with the bigger tycoons unless you propose a product or concept that would be worth an M&A dealing.
MARKET SIZE
According to our sources, the artificial intelligence market is forecast to grow at a compound annual growth rate (CAGR) of 62.9% from 2016 to 2022. The industry is expected to be worth USD 16.06 billion by 2022.
CONCLUSION
To wrap it up, the increase in competitive startup companies within the past 2 years, an demand increase, and a solid self-sufficient structure to keep improving the industry still empowers the Artificial Intelligence market. This will be most evident in the Top companies such as Google and Facebook and the startups that are being merged with them.
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