Global Explainable AI 2024-2031

Global Explainable AI 2024-2031

Explainable AI Market Size, Share & Trends Analysis Report by Component (Solutions, and Services), by Methods (Model-Agnostic Methods, and Model-Specific Methods), by Deployment Mode (Cloud, and On-Premises), and by End-User (Healthcare, BFSI, Aerospace & Defense, Retail and E-commerce, Public Sector & Utilities, IT & Telecommunication, Automotive, and Others) Forecast Period (2024-2031)

Explainable AI market is anticipated to grow at a CAGR of 20.9% during the forecast period (2024-2031). The Explainable AI (XAI) market is experiencing substantial growth driven by the regulatory requirements for transparency in AI decision-making, the widespread adoption of AI in different industries, technological advancements, and increasing public awareness. Ethical AI guidelines emphasize fairness, accountability, and transparency, which necessitate the use of explainable AI techniques. Technological advancements like SHAP and LIME are driving the development of more interpretable models, while the integration of XAI solutions with existing systems facilitates easier adoption and implementation for organizations.

Market Dynamics

Increasing Adoption of AI Across Industries

The high AI adoption in telecommunications and network optimization driving XAI adoption owing to sector-specific demand for transparent, interpretable solutions. In February 2024, Ericsson launched Explainable AI in Cognitive Software to accelerate AI adoption in network optimization. The new capabilities enable a shorter time to value from AI-based solutions, improving efficiency in RAN optimization. The solutions rely on AI models trained on diverse global data sets and can be retrained locally for fast deployment.

The process of utilizing advanced AI technologies, such as generative AI and large language models, significantly enhances classification accuracy across various languages. Take leverage of these technologies, in September 2023, Temenos launched a secure Generative AI solution in banking, enabling banks to automatically classify customers' transactions. This solution provides personalized insights, enhances customer loyalty, and improves digital banking experiences. The solution uses Generative AI and large language models to understand various modalities, allowing banks to classify and label transactions with high accuracy in different languages.

Market Segmentation

Based on components, the market is segmented into solutions, and services.

Based on deployment mode, the market is segmented into clouds, and on-premises.

Based on methods, the market is segmented into model-agnostic methods and model-specific methods.

Based on end-user, the market is segmented into healthcare, BFSI, aerospace & defense, retail and e-commerce, public sector & utilities, IT & telecommunication, automotive, and others (government and defense, and telecommunications).

Cloud-based is Projected to Emerge as the Largest Segment

The high adoption of cloud-based XAI solutions due to their high scalability and cost-effectiveness is a key contributor to the high share of this market segment. Therefore, key players are focusing on offering cloud-based solutions to gain a high share of the global market. For instance, in April 2024, Neo4j partnered with Google Cloud to introduce new GraphRAG capabilities for GenAI applications, enabling developers to create knowledge graphs from unstructured data, analyze real-time data in seconds, and build GenAI applications powered by knowledge graphs on Google Cloud.

Retail and E-commerce Sub-segment to Hold a Considerable Market Share

In the retail & E-commerce sector, XAI is essential for ensuring transparent AI-driven decisions, promoting regulatory compliance, and creating consumer trust. In January 2023, Google Cloud introduced new AI tools for retailers, including a shelf-checking solution using Vertex AI Vision and machine learning capabilities for its Recommendations AI solution, which optimizes product ordering and recommendations on e-commerce pages based on product visual features. Such developments are further aiding the growth of this market segment.

Regional Outlook

The global explainable AI market is further segmented based on geography including North America (the US, and Canada), Europe (UK, Italy, Spain, Germany, France, and the Rest of Europe), Asia-Pacific (India, China, Japan, South Korea, and Rest of Asia-Pacific), and the Rest of the World (the Middle East & Africa, and Latin America).

Rapid Digitalization of Healthcare Records in Asia-Pacific Region

The rapid digitization of healthcare records is demanding the use of AI technologies to increase transparency has driven the adoption of XAI across the region. According to the National Center for Biotechnology Information, in March 2023, the Indian government successfully implemented the Unified Payments Interface (UPI) to enhance its digital public infrastructure. With 1.2 billion wireless connections, 600 million smartphone users, and 800 million internet connections, digitization has reached remote areas. Aadhaar's 90.0% penetration and integration with JAM and UPI have minimized government subsidy leakages, demonstrating India's proficiency in digital technology.

North America Holds Major Market Share

The high R&D for AI, high adoption of AI across several regional industries, and favorable government policies are key factors driving the regional XAI market. Increased federal investment serves as a driving force for innovation, enhancing higher exploration and advancements in AI R&D across the region. In January 2024, the National Security Commission proposed a federal spending target of $32.0 billion for non-defense AI R&D by Fiscal Year 2026, comparable to the current federal investment in biomedical research. To achieve this objective, federal funding for non-defense AI R&D should be increased to $8.0 billion and continue to double annually for the next three fiscal years. This increased funding would encourage innovation and scientific advancements by involving various stakeholders in the field and supporting the testing and evaluation of cutting-edge models.

Market Players Outlook

The major companies serving the explainable AI market include Accenture PLC, IBM Corp., Google LLC, Microsoft Corp., and SAS Institute Inc.. The market players are increasingly focusing on business expansion and product development by applying strategies such as collaborations, mergers and acquisitions to stay competitive in the market. For instance, in March 2024, Apple acquired DarwinAI, an AI visual quality assurance startup that offers a patented Explainable AI platform for improving product quality and increasing production efficiency.