Global technological advances could signal the dawn of a robot revolution as automated mobile machines move beyond the factory floor into our everyday lives. Jason Conway of Investment Management assesses the financial and social benefits advanced robotics could bring to the global economy.
Global technological advances could signal the dawn of a robot revolution as automated mobile machines move beyond the factory floor into our everyday lives. Here, we assess the financial and social benefits advanced robotics could bring to the global economy.
In November 2014 a European robot space probe, Philae, successfully landed on a comet over 300 million miles from Earth, as part of the ambitious Rosetta space mission. This historic breakthrough afforded a glimpse of what advanced robotics can already achieve and what might be achievable in the future.
Back on Earth the use of robotics has steadily spread from its early use in car manufacturing lines to encompass an ever growing range of applications in healthcare, education, industry and even farming and leisure. In a world where driverless cars are no longer mere fantasy, robotic advances once seen as science fiction pipe dreams are becoming increasingly real.
At the Starwood Hotel in Palo Alto, California robot butlers now bring guests clean towels1 and robot vacuum cleaners are winning new sales across Europe and the US. Jibo, the latest ‘family robot’ designed by Massachusetts Institute of Technology (MIT) robotics expert Cynthia Breazeal is designed to act as a household personal assistant. It can even recognise and acknowledge different family members and read stories to children.2 At a more prosaic level, heavy duty robots make up an increasingly large part of the global industrial workforce.
Robotics has become big business. According to industry trade body the International Federation of Robotics (IFR), robot sales reached 178,132 units in 2013 — by far the highest level ever recorded for one year.3 Since then, based on the latest preliminary results of the global statistics on industrial robots, the IFR also estimates that about 225,000 units were sold in 2014, 27% more than in 20134 and the Federation predicts sustained market growth in the next three years. The automotive industry is currently the most important customer of industrial robots with healthcare increasingly considered one of the biggest potential markets for robotics.5
The IFR report projects that sales of all types of robots for domestic tasks could reach almost 23.9 million units from 2014-17 with an estimated value of US$6.5bn. About three million robots for education and research alone are expected to be sold during this period.6
In Japan the business of robotics is taken seriously enough for Japanese prime minister Shinzo Abe to pledge to make robots a pillar of the country’s growth plan. Earlier this year he announced a new drive to treble the Japanese robot market by 2020, even suggesting the country should organize its own robot Olympics.7
On the development front Japanese manufacturers such as Fanuc, Yaskawa, Kawasaki Heavy Industries and the advanced medical service provider Cyberdyne are all major players working to reinforce Japan’s reputation as a center of global excellence in commercial and civil robotics.
Abe’s faith in the market is based on hard business reality and export potential. China has become the world’s biggest buyer of robots — thanks to spiraling wage costs and growing competition from other emerging economies8 and represents a huge potential market.
Commenting on Chinese market needs and potential Japanese opportunity Miyuki Kashima, head of Japanese equity investment division at BNY Mellon Asset Management Japan Limited says: “China’s current global role as a major manufacturer creates a potentially huge market for robotics and this is one of the few areas where the Japanese still lead. Japan may have lost some of its market share for finished end products but it still has a strong market share in making the machines that physically manufacture these.”
There is little doubt robots are here to stay and can only become more advanced. While the investment potential of this sector is yet to be fully realized, it continues to present some fascinating prospects for future development and further technological progress ahead.
Jason Conway, Senior Investment Editor, BNY Mellon Investment Management
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According to Kashima there are also some pressing domestic reasons for Japanese industry to invest in robotics. Economic conditions in the so-called lost era of Japanese deflation gave manufacturers little incentive to reinvest in their businesses. She adds that in many cases these companies increasingly rely on ageing, equipment and technology well overdue an update and feels Abe’s latest initiative could go some way to helping address this issue.
“In some ways it is natural the Japanese government wants to boost growth in automation, technology and robotics,” she says, “as from a demographic perspective the working population of Japan peaked a number of years ago and can only decline. Many manufacturers deferred investing in new equipment during the deflationary years so a lot of their infrastructure needs replacing anyway. With deflation ending many companies are starting to think about replacing old equipment or if there is any investment made in new technology considering whether they adopt automated solutions instead of people.”
The rise of the robots could ultimately deliver positive benefits to the investment management community and increase returns for their underlying investors. Commenting, Newton global strategist Peter Hensman points to the potential created by exciting new advances in technology. “Technology is advancing rapidly and some robots are already becoming phenomenally capable and sophisticated,” he says.
“Global Positioning System (GPS) based technologies, advanced sensors and laser guidance systems are helping to make robotic technologies safer and ever more reliable. While we wouldn’t like to put a figure on the economic growth potential for the robotics sector there is no doubt this is a major area of interest for investors.”
The Boston Company Asset Management (TBCAM) is also keeping a watching brief on developments in this sector. However, TBCAM senior research analyst David Borah, points out the sector is still at a fairly early stage in its development in the US and European markets. He agrees accurately valuing its potential investment opportunities can prove somewhat challenging.
“A problem robotics shares with many new technologies is that the market is so nascent. Some of the new technologies involved can require so much investment their market potential is difficult to assess. While the size of the market and its potential are vast there are uncertainties over how much it will cost companies to enter the sector and be competitive,” says Borah.
Despite these potential drawbacks there is no shortage of practical use for robots in the US. TBCAM’s senior research analyst Brian Duncan adds that the US automotive industry continues to see major automation and the healthcare sector is adopting robots which allow for greater precision surgery in the operating theater.
At a global level the IFR says the trend towards automation is accelerating, driven by increased global competitiveness and the need to boost productivity and quality while expanding production lines. While automation can threaten some jobs it argues robots can actually improve the quality of work by taking over dangerous, tedious and dirty jobs that are not possible or safe for humans to perform.9
As robots become a more common feature of our work and lives, a potential hurdle is how comfortable people feel interacting with increasingly able bodied, intelligent and responsive machines. In the healthcare sector such machines could offer valuable support and, perhaps, greater independence to frail and elderly people in an increasingly aging developed world, but their application remains a sensitive issue.
According to Hensman, much depends on how the human perception of robots changes as they become more sophisticated and tailored to everyday use. “This is a sensitive area,” he says. “How would people feel if their healthcare assistant was a robot? Perhaps not terribly comfortable. However, attitudes can change. People would once have been very uncomfortable with voice recognition systems but these applications are now commonly used by many without a second thought. A lot depends on perception and comfort with these new concepts.”
While economies must weigh these and other considerations while striving to maintain a healthy balance between automation with human employment, there is little doubt robots are here to stay and can only become more advanced. While the investment potential of this sector is yet to be fully realized, it continues to present some fascinating prospects for future development and further technological progress ahead.
1 Automation is on the rise: will robots soon be commonplace? Forbes. 11.04.14
2 Jibo Mail Online. 16.07.14
3 World robotics 2014 – industrial robots. IFR. 04.06.14.
4 Global Robotics Survey: Industrial Robot sales go through the roof Exceeding demand from Asia. IFR Press Release. 23.01.15
5, 6 World robotics 2014 – industrial robots. IFR. 04.06.14.
7 Japan aims to turn robotics into profit. FT. 08.10.14.
8 China becomes largest buyer of industrial robots. FT. 01.06.14.
9 World robotics 2014 – industrial robots. IFR. 04.06.14.
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