ROBOTICS AND AUTOMATION: FIVE THINGS I HAVE LEARNT

Robotics and automation is not a new concept and is undoubtedly here to stay. With the backdrop of a global pandemic though, automation’s positive potential is increasingly seen as an industrial panacea. As an example, more heavily automated sectors, like manufacturing, appear to be experiencing less disruption than services and construction, which are more dependent on labour.

Where next? The rise of automation and robotics and its future must be understood in the context of its core advantages: productivity, flexibility, quality and simplicity. 

Today, tomorrow and thereafter

As the world reacts to coronavirus, there is a pressing need for the increased digital transformation of industries to meet high and growing demand in countries where workers are unable or unwilling to work. Decisions initially scheduled for the mid to long term now require action and implementation to alleviate the pain of sharp productivity losses.

However, as the world looks to robotics and automation as a solution, future investment in these industries should be seen beyond the world’s current crisis. At ABB’s recent investor day, the Swiss industrial company, who are a major global player in robotics and discrete automation, showcased the leading trends driving the industry. Here are some of my key takeaways:

1. Logistics is the fastest growth of robot demand, driven by e-commerce

The robotics market is growing 6% annually but more automation is being used in logistics to satisfy growing e-commerce demands. Sorting, picking, packing and palletising are increasingly becoming automated.

2. Healthcare robots that eliminate laboratory work are a growth area

Covid-19 has exposed the realities of underfunded healthcare systems around the world. This may be the turning point, heralding increased investments in robotics to unburden healthcare workers from simple and repetitive tasks and to enable faster laboratory testing work.

3. Automotive is the largest end market for robotics but electric vehicles will provide further opportunities

The automotive industry is a major end market for robots – especially at final assembly, body shop and in paint. This segment is currently depressed given falling car sales and the need for manufacturers to spend on the research and development of EVs but there is opportunity to raise penetration in Tier 1 suppliers, who provide parts to the leading car makers. Additionally, while EVs have fewer parts, creating lower demand for robot assembly, there will be increasing opportunities in putting together battery modules, battery packs and electrical motors.

4. Customisation of batches is becoming a reality

A batch size of one is becoming increasing possible due to a growing trend toward personalisation. Systems and factory production lines can cope with individualised orders and this is becoming increasing helpful to custom orders in the consumer world as well as in patient medicine.

5. Collaborative robots are growing market share

Many robots that are used in production lines act with such power that they must work separately from humans to ensure safety. However, now there is a growing need for robots to work collaboratively with humans to drive intelligence and increase efficiency. These ‘cobots’ are now less expensive, easy to programme/train and more interactive, releasing employees to spend more time on other activities to drive customer value.

On the horizon: Asia’s potential

One region which has yet to fully realise its potential is Asia where robotics penetration per 1000 workers still remains low after a long period of growth. Robots are not new and companies like ABB currently have 40% of robots sold in China. However, penetration can still rise towards the levels in other western countries. As trained labour and wage inflation becomes more intense we see Asia as a continued bright spot to increase penetration over time.  

Robotics and automation is not a new investment theme as this ‘third’ industrial revolution began in the 1970s. However, understanding its evolution and customers’ needs is key to identify how the growth drivers may change over time. Covid-19 has shown that many industries are still reliant on labour but has also highlighted key opportunities for the further adoption of automation.

Written by

Sanjay Patel
Equity Research Analyst

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