New Deloitte Paper: Physical AI set to transform industrial operations, powering the next wave of smart manufacturing

HONG KONG, March 18, 2026 /PRNewswire/ -- Deloitte today released its new paper, "Physical AI: The moment of acceleration", outlining how Physical AI (PAI), the merger of physical systems with AI, is shifting from experimentation to large-scale deployment across a wide range of business sectors and applications. The report underscores why industrial robotics has become PAI's "proving ground", and how early adopters in manufacturing, logistics and related sectors are already building the foundations needed to scale intelligent systems across the value chain.

Today, just 5 percent of firms say PAI is transforming their organisation, yet 41 percent expect it will within three years. The gap between current impact and future expectations and the fact that only 3 percent of firms have PAI extensively integrated into operations today, a figure forecast to reach 18 percent within two years^[1], highlights the urgency for early movers to build the capabilities that will define their operational edge and organisational learning underpinning their competitive advantage over the next decade.

Business leaders around the world are now looking seriously at how to integrate PAI into their operations. Over 500,000 industrial robots were deployed in 2024, with annual installations forecast to reach 700,000 by 2028, and collaborative robots comprising a growing share at almost 65,000 installations in 2024.^[2]  According to Citi GPS report^[3], there are currently around 405 million robots of all kinds in production globally, a figure projected to reach 1.3 billion by 2035. Increasingly, the number of these robots will be augmented with some form of PAI.

Key findings

• Only 5 percent of firms report PAI is transforming their industry today^[4], compared with 45 percent for traditional AI and machine learning.
• Adoption will be highest in consumer and life sciences and healthcare sectors (both 22 percent), technology, media and telecommunications (18 percent), and energy, resources and industrials (16 percent).
• Industrial robotics remains PAI's most mature testbed, providing critical lessons for broader adoption.
• PAI is not simply a technology installation but a capability requiring disciplined operations and organisational learning. Leadership will depend on the ability to align operational maturity with technology readiness.
• The main barriers to adoption include cost and resource requirements (41 percent), challenges identifying use cases (36 percent), talent and skills gaps (33 percent), and technology or data availability (31 percent)^[5].

"Physical AI marks the moment when intelligence moves off the screen and into the real world, transforming factories into learning systems that sense, decide and improve continuously. Organisations that are acting now will shape the operating models, skills and standards that define industrial leadership for the next decade," said Chris Lewin, Deloitte Asia Pacific AI Lead.

Three questions every operations leader should be asking now

PAI is no longer a question of "if" or "when" for business leaders, it is a question of readiness. With 41 percent of business leaders expecting transformational impact within three years and PAI integration set to grow six-fold in two years, the window to build the operational foundation is narrowing^[6].

"There are internal readiness factors that determine how effectively businesses can deploy and scale any PAI solution, today or tomorrow and critically, they are in the organisation's control. Successful PAI implementation is as much about adapting as it is adopting," added Lewin.

As PAI becomes more widely adopted and its value more tangible, its application will expand rapidly across sectors and value chains. The paper provides a structured, practical framework for business leaders navigating PAI adoption – where to start, how to sequence investment, and what organisational foundations must be in place for technology to deliver its potential.

Technology application maturity determines what is possible. Operational maturity determines what is executable. The paper highlights even the most sophisticated PAI system will deliver little value if deployed into an organisation lacking the foundational discipline, flow, and human architecture to absorb it. The cost of moving too slowly is not just missed efficiency, but the loss of the organisational learning that comes from being an early mover.

For industrial and manufacturing leaders, three questions should drive the agenda:

1. Where are you on the technology maturity ladder?
2. How ready are your operational fundamentals for PAI?
3. How are you shaping your human architecture for PAI?

Deloitte China's Physical AI Center of Excellence

To help organisations accelerate the shift from pilots to scaled adoption, Deloitte China has established a Physical AI Center of Excellence (CoE) in Shanghai. The CoE brings together Deloitte's expertise in advanced manufacturing, robotics, and AI to help clients design, simulate, and deploy Physical AI solutions in real-world environments^[7]. By leveraging immersive digital simulation technologies and Deloitte's deep industry experience, the Shanghai CoE enables organisations to accelerate time-to-value, reduce operational risk, and scale intelligent machines into production with confidence.

"Shanghai sits at the intersection of advanced manufacturing, industrial robotics, and global supply chains, making it an ideal hub for our new Deloitte Asia Pacific Physical AI Centre of Excellence through our strategic alliances. We are helping clients move beyond pilots and proofs of concept to scaled deployments, using simulation, governance, and workforce transformation to unlock the full potential of Physical AI safely, responsibly, and at speed. The pioneers of Physical AI on today's factory floors are writing the competitive playbook for the next decade," said Deloitte Asia Pacific CEO David Hill. 

To access the full report and learn more about the findings, please visit https://www.deloitte.com/ap/en/perspectives/physical-ai-acceleration.html

Contact: 
Kashish Sakhrani
Media Manager, Deloitte Asia Pacific
Tel: +852 2852 1600
Mob: 852 6689 0757
Email: [email protected]

About Deloitte  

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms, and their related entities (collectively, the "Deloitte organization"). DTTL (also referred to as "Deloitte Global") and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. 

Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related entities, each of which is a separate and independent legal entity, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Bengaluru, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Mumbai, New Delhi, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei and Tokyo. 

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms or their related entities (collectively, the "Deloitte organization") is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.  

No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication.   

©2026 Deloitte Asia Pacific Services Limited

SOURCE Deloitte Asia Pacific Limited