Sixty years ago, the first industrial robot started work in a car assembly line in the US state of New Jersey. Shaped as a giant heavy-lifting arm, it unloaded metal car parts from a die-cast press. Today, robots are no longer confined to the factory floor, they are increasingly part of our day-to-day lives.
There are some 3.5 million of them in the world,1 capable of not only assembling your car but also of hoovering your house, delivering your shopping and even playing bingo with your granny. Yet the signs are the robotics industry has entered a new, more dynamic phase in its evolution.
Advances in technology, be that artificial intelligence (AI) or ever smaller and more powerful semiconductors, are paving the way for the development – and adoption – of a new breed of sophisticated machines. At the same time, labour shortages, an ageing population and falling productivity are fuelling demand for automation.
For investors, this creates a very compelling opportunity, backed by strong secular growth trends and spanning beyond the robots themselves. We see five key themes which will drive the industry over the coming years.
Supply bottlenecks during the Covid pandemic highlighted the dangers of relying on far away countries for manufacturing. Geopolitical tensions between US and China and the war in Ukraine added more pressure on global supply chains. As a result, governments and companies are increasingly looking to shift production to their home territories or at least nearby – so-called “re-shoring” and “near-shoring”. This should fuel demand for industrial robots to staff these new factories as well as other automation equipment and software solutions. Some 41 per cent of US manufacturers are looking to increase automation, according to a recent survey by ABB Robotics.2
The semiconductor industry is one of the key sectors targeted by the re-shoring trend, due to the increasingly vital nature of semiconductors and other related technologies, as well as national security concerns. Building semiconductor factories is a major focus of Washington’s USD550 billion federal infrastructure spending package, and similar incentives have been approved across several nations and economic unions.
Robots may have started out making cars, but today they are increasingly driving them. Fully driverless cars, lorries and buses, are still some years away from becoming viable for the mass market. Nevertheless, live trials are already in progress across the world, including in San Francisco, Beijing, Shanghai, and Phoenix. Alphabet-owned Waymo, for example, has notched up millions of miles on public roads (and billions more in simulation), and has been offering driverless rides to San Francisco residents for over a year. Autonomous vehicles are also already partly a reality through the inclusion of various aspects of advanced driver assistance (ADAS) technologies in the latest car models. As these become more common and more advanced, semiconductor demand should surge. By 2031, each car is expected to contain USD1,550 worth of semiconductors, up from just USD665 in 2021, according to research by Gartner.
AI is fuelling a new wave of innovation, revolutionising robotics and automation technologies. Thanks to its ability to increase productivity, reduce costs and help solve the challenges linked to a global labour shortage, we believe robotics and automation is set to grow faster than the broader economy. That creates a very compelling thematic investment opportunity – both in companies that make the robots and in those that provide all the building blocks, from semiconductors to software.
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