Is a billion-euro boost coming?

German industry hopes for the “AI dividend”

The use of artificial intelligence (AI) could give German industry a boost worth billions. According to a study by the IW Consult research institute on behalf of Google, which was presented in Berlin on Tuesday, gross value added in the manufacturing sector could be increased by up to 7.8 percent through generative AI. This would correspond to a total increase of 56 billion euros.

Gross value added refers to the total value of goods and services less intermediate inputs, and therefore the added value created in the production process. Generative AI is a variant of artificial intelligence that can be used to create ("generate") new, original content. Algorithms and so-called language models can be used to generate content such as texts, images and videos, but also music or program codes. The specifications for the AI system do not have to be programmed, but can be transmitted in natural language. An important milestone for generative AI was the release of the chatbot ChatGPT by the start-up OpenAI in November 2022. Google, among others, offers its own dialog system for generative AI, Gemini, which competes with ChatGPT.

Many things will change in the office
According to the study by the subsidiary of the Cologne Institute for Economic Research (IW), academics and office workers in particular will have to adapt to major changes in their work as a result of AI. In the manufacturing industry, around 0.6 million employees are expected to experience a major impact of AI on their work. For a further 4.1 million employees, generative AI could support their own work, for example in the optimization of program codes or as a source of ideas in product design.

In contrast, AI will be used much less frequently in traditional industrial jobs such as repair or maintenance work. According to the study, these approximately 3.3 million jobs are difficult or impossible to automate using AI. This affects around 41 percent of all jobs in the manufacturing industry.

Hoping for an "AI dividend"
The Director of the Cologne Institute for Economic Research, Michael Hüther, explained that since 2018, real labor productivity in mechanical engineering and other areas of manufacturing has remained almost constant at just 0.4 percent growth per year. "Generative artificial intelligence could enable the industry to achieve a considerable AI dividend and thus secure its productivity advantages on the global markets." It is encouraging that many companies have already recognized this opportunity.

The IW study shows that more than 50 percent of industrial companies in Germany are already using AI. This puts the sector well above the average for the German economy (17%). Artificial intelligence is used in the manufacturing industry to automate internal systems (42%), create documents (31%) and analyze data (24%).

The manufacturing industry is one of the most important economic sectors in Germany. According to the IW, the value added in this sector amounts to 781 billion euros and there are almost eight million employees. Compared to other industrialized countries, the share of manufacturing in Germany's overall economic value added is significantly higher at more than 20 percent and almost twice as high as in the UK or the USA. For the economy as a whole, the potential value added by AI is estimated at 330 billion euros.