Explainable AI Market's Pathway to USD 24.58 Billion by 2030
According to research conducted by Next Move Strategy Consulting, the global Explainable AI (XAI) Market had a valuation of USD 5.10 billion in 2022 and is anticipated to reach USD 24.58 billion by 2030, displaying a compound annual growth rate (CAGR) of 21.5% from 2023 to 2030. This remarkable growth can be attributed to the widespread adoption of Industry 4.0, characterized by the convergence of advanced technologies and digital transformation across various industries.
The rise of Industry 4.0, characterized by the merging of advanced technologies and digital transformation across diverse industries, is crucial in driving the demand for XAI. A collaborative survey conducted by the World Economic Forum and McKinsey in June 2022 identified 103 sites worldwide as pioneers of Industry 4.0. These companies have successfully modernized their factories by integrating digital technologies, making them more agile and customer-centric. Industry 4.0 has empowered these organizations by leveraging digital tools to enhance their operations.
Furthermore, the integration of AI and explainable AI methodologies with Industry 4.0 technologies provides a wide range of precise and high-quality applications. This advancement enables businesses to make well-informed decisions and improves the overall effectiveness of AI technologies within Industry 4.0.
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Additionally, the growth of the XAI market is driven by the increasing adoption of AI technologies in the banking, financial services, and insurance (BFSI) sector. The BFSI industry has recognized AI's potential to revolutionize aspects such as customer service, risk assessment, fraud detection, and personalized financial recommendations. However, AI systems lacking transparency and interpretability can erode customer trust. XAI addresses this issue by providing explanations for AI decisions, allowing customers to understand and validate the reasoning behind recommendations, loan approvals, or risk assessments. Many banks are actively focusing on expanding and implementing XAI techniques, collaborating with academic and scientific communities to advance XAI research.
Nonetheless, the growth of the explainable AI market faces significant obstacles due to concerns regarding data privacy and regulatory compliance. As organizations increasingly utilize AI technologies, there is a growing emphasis on safeguarding personal data and complying with privacy regulations like the General Data Protection Regulation (GDPR) and local data protection laws. XAI inherently requires access to sensitive data, raising concerns about data privacy, security, and the potential misuse of personal information. This is anticipated to restrain the growth of the XAI industry.
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Conversely, government regulatory requirements are expected to create substantial opportunities for the explainable AI industry in the near future. As governments and regulatory bodies prioritize the responsible and ethical deployment of AI, they may introduce regulations mandating transparency and interpretability in AI systems. These regulations could necessitate organizations to provide explanations and justifications for AI-based decisions, particularly in sectors such as finance, healthcare, and law. These regulatory requirements will open avenues for the deployment of explainable AI solutions as businesses seek compliance and transparency in their AI-driven decision-making processes.
The report categorizes the market based on offerings into solutions and services, deployment modes into cloud-based and on-premise, applications into medical, industrial, cybersecurity, financial services, customer service, and others. The medical segment includes diagnosis, surgery, and other medical applications, while the industrial segment comprises predictive maintenance, supply chain management, and warehouse management. The cybersecurity segment further divides into intrusion detection, threat intelligence, and other categories. In the financial services segment, there are subcategories such as risk assessment and fraud detection. The customer service segment includes chatbots and sentiment analysis. Additionally, the report classifies the market based on end-user industries into BFSI, healthcare & biotechnology, retail & e-commerce, manufacturing, telecommunications, public sector, military & defense, and others. Regionally, the global explainable AI market is divided into North America, Europe, Asia-Pacific, and the rest of the world (RoW).
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Several factors, including the increased use of AI, growing investments, and supportive government policies, are driving the growth of the explainable AI market in North America. Moreover, heightened research and development activities in AI are expected to enhance the utilization of XAI in the region. For example, in March 2021, researchers from the University of Toronto and LG AI Research collaborated to develop an XAI algorithm, addressing defects in display screens transparently and reliably.
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Furthermore, the growth of the industry is accelerated by emerging startups and collaborations with prominent investors to drive innovation and technological advancements. For instance, in September 2022, Diveplane, an XAI startup, secured USD 25 million in funding to develop an "understandable AI decision system" called Reactor. This system allows data scientists and engineers to build decision-making models using historical data observations, enhancing existing operations.
Asia-Pacific is expected to experience a steady increase in demand for XAI due to rapid advancements in AI research and development in the region. The rise of electric vehicles in China is driving demand for XAI solutions, ensuring transparency, safety, and optimal performance in the electric vehicle (EV) industry. Additionally, the growing manufacturing industry in countries such as China, Japan, and India is boosting the explainable AI market by creating a need for AI-powered solutions and technologies. As these countries adopt advanced automation and digitalization in manufacturing, there is a growing requirement for XAI systems to gain insights into AI-driven decisions, establish trust in AI systems, and comply with regulatory standards.
Key players in the explainable AI market include IBM Corporation, Alphabet, Inc. (Google), Microsoft Corporation, Intel Corporation, SAS, C3 AI, Equifax, FICO, Salesforce, and H2O.ai. The report provides a comprehensive analysis of the competitive landscape in the global market.
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