November 2014 Issue
Robotics has been a longstanding fascination for mankind. From Hollywood action films to classic literature to the factory floor, the role of robots and their impact on everyday human life is a captivating subject. Although today robots are not as ubiquitous in our day to day lives as some futurologists and authors have previously predicted, there have been huge advancements made in the sector in recent years. Prominent robotics firms such as the iRobot Corporation, the recently acquired Boston Dynamics and Mazor Robotics have all done pioneering work in the field. Generally divided into four categories – industrial robots, professional service robots, consumer robots and defence – robots have been in use since the 1960s. However, recent technological developments in the sector have seen the whole industry advance considerably in recent years.
In light of the industry’s groundbreaking work, there is likely to be an explosion of robotics spending in coming years. According to a report from management consultancy firm Boston Consulting Group (BCG), the expected boom in robotics will see spending on the sector worldwide jump from just over $15bn in 2010 to approximately $67bn by 2025, with a 10.4 percent compound annual growth rate. BCG’s report suggests that a combination of falling prices and significant performance improvements throughout the sector will serve as the catalyst for predicted growth in the industry. The cost of high-quality robots and component parts has fallen rapidly in recent years. This decline has coincided with dramatic improvements in CPU processing speeds. Application programming has also become easier, and will continue to do so over the next decade. Not only have robots become cheaper, smaller and more energy efficient, they have also gained significant flexibility and finesse in their movements, as has been demonstrated by Boston Dynamic’s various military robotics projects. As a result of these developments, the extent to which robotics can be utilised has grown exponentially. “The fact that robotics and automation are crossing price, performance, and adoption thresholds is a clear sign that the robotic megatrend is growing in relevance and a tipping point may be near,” said Alison Sander, head of BCG’s Centre for Sensing & Mining the Future.
“Robotics can be a divisive and often troubling subject, as developments can generate extensive ethical and social debate.”
Further technological advancements in other areas have also helped to fuel the growth of the robotics industry. Areas such as 3D printing and Microsoft’s motion sensing input device ‘Kinect’ have had dramatic impacts on the industry. While 3D printing has enabled companies and consumers to produce their own parts for projects, the Kinect system has enabled machines to develop a rudimentary kind of depth perception. Technology of this sort has enabled companies to produce machines which can navigate their surroundings autonomously and efficiently. Furthermore, the recent development and testing of driverless vehicles by companies such as Google and conventional companies in the motor industry such as Mercedes-Benz, General Motors and Nissan, is a testament to the capabilities, and impact, of Kinect like technology on the robotics sector.
Global spend
According to BCG, growth in the robotics sector will be spread throughout the four main categories. The professional sector – in which robots will be utilised for entertainment, cleaning, education, security and household purposes – is expected to see the fastest growth over the next decade. The sector will see a compound annual growth rate of 15.8 percent, rising from approximately $1bn in 2010 to around $9bn by 2025. The commercial segment in which robotics are utilised for medical and surgical purposes, as well as in the agricultural, construction and other sectors, will see growth at a compound growth rate of 11.8 percent rising from $3.2bn to $17bn. The industrial segment, which utilises robotics in a variety of applications including welding, assembly, painting and material handling, will continue to be the largest robotics sector moving forward. The industrial market will develop at a compound annual growth rate of 10.1 percent, rising from $5.8bn in 2010 to $24.4bn by 2025. The military segment, which includes robotics involved in the manufacturing and operation of unmanned aerial, ground and underwater vehicles, among other applications, is expected to grow at a compound growth rate of 8.1 percent from 2010 to 2025 and, accordingly, will be the second largest robotics sector, at $16.5bn.
China
In terms of annual sales, China is the largest global robotics market. In 2013, approximately 37,000 industrial robots were sold in China. Chinese robot suppliers installed approximately 9000 units, according to data from the China Robot Industry Alliance. Furthermore, China’s sales volume of robots was almost three times higher in 2013 than in 2012. Foreign robot suppliers also increased their sales in the region by around 20 percent in 2013. Accordingly, between 2008 and 2013, the total supply of industrial robots increased by roughly 36 percent per year on average. In 2013, every fifth robot sold in the world was installed in China.
Although there has been steady growth in robotics in China over the last five or six years, the last two years has seen exponential growth in the sector. The number of robots installed was up 60 percent in 2013 year on year from 2012. This growth has been based primarily on both the rising wage costs of the human workforce and growing competition from other emerging economies.
Much of the Chinese robotics growth has been related to the automotive industry. Foreign robotics firms such as the Kuka Robotics Company, ABB of Switzerland, and Fanuc and Yaskawa Electric of Japan have been drawn to China as a result of burgeoning developments in the auto space. In 2013, more than 15 million passenger cars were manufactured in China. Foreign car manufacturers such as Volkswagen and General Motors have pledged investments in the region of $36bn over the coming years. Much of that investment is expected to involve robotics and automation processes in manufacturing plants.
Of the robotics equipment currently operating in China, the overwhelming majority has been imported from abroad, at more than 90 percent of robots and core parts. However, there is an increasing push among local governments within China to reverse this trend. In Guangzhou, the local government has pledged to develop two or three robot industrial development zones, with the aim of producing 100,000 robot units a year domestically by 2020. The Guangzhou government will also establish a number of government owned companies to develop their own brands and IP around robotics. Both foreign investors and local partner firms will be solicited by these government owned groups, a move which could potentially open the door for lucrative investment opportunities in Guangdong province and elsewhere for foreign and domestic investors. The Chinese Ministry of Commerce has also encouraged foreign firms to invest further in manufacturing the country’s most commonly used industrial robots.
Growth in the robotics sector, however, is not merely the preserve of the South East Asia region. There have also been significant developments in the industry in the US. The Robotics Industry Association (RIA) saw an increase in robot sales in the US in the first half of 2014, compared to the same period in 2013, rising approximately 16 percent. Growth in the US market has been seen across multiple industries, including military, commercial, industrial and personal applications. The RIA noted that in H1 2014, a record 14,135 robots, valued at $788m, were ordered from North American robotics companies.
M&A
Mergers and acquisition (M&A) activity has also picked up in the American robotics sector in recent years. Google in particular has been remarkably active in the robotics space, acquiring eight robotics firms in deals totalling in the region of $50m-$60m. Although initial impressions of Google’s M&A activity suggested that the company would be focusing its attention on factory automation applications, as the company has continued to add to its impressive robotics portfolio its aims appear to be more diffuse. As a result of these acquisitions, the company is becoming ideally positioned to revolutionise a variety of different processes and sectors. One of Google’s most surprising moves in the robotics industry was its acquisition of Boston Dynamics in December 2013. In recent years, in its role as a defence contractor Boston Dynamics has designed mobile research robots for the Defence Advanced Research Projects Agency. Although Google’s reasons for the deal have not been made clear, it was a significant purchase in this space.
Amazon, too, has become active in the robotics M&A industry of late. In 2012, the firm paid $775m for Kiva Systems, a firm which manufactures robots used in shipping centres. The Kiva acquisition allows Amazon to fulfil customer orders in a quicker and more efficient manner than ever before. The deal for Kiva has reportedly allowed Amazon to save more than $900m per year in fulfilment efficiencies. Furthermore, in late 2013 Amazon announced its plan to introduce air drone delivery systems in the coming years. Google has also publicised its intention to enter the drone delivery industry. The potential scope of the drone space, however, is not merely restricted to retail deliveries; drone technology has the potential to impact a number of sectors from agriculture to the military to internet services. In April, Google beat competition from a number of firms including Facebook to acquire drone manufacturer Titan Aerospace, a firm that produces high-altitude drones. Google will utilise Titan’s drone technology to help facilitate its plans to provide internet access to isolated areas. The development of this particular stratum of the robotics industry will depend on the Federal Aviation Administration, which is currently drawing up guidelines for commercial drone use. Once those guidelines are released in late 2015, an explosion of activity is expected in the sector.
The sector is also drawing interest from outside of the internet giants. Progress is beginning to attract investment from a diverse pool of interested parties. VC firms Andreessen Horowitz and Felicis Ventures, among others, have invested in drone companies in recent years.
Conclusion
Robotics can be a divisive and often troubling subject, as developments can generate extensive ethical and social debate. However, ethical concerns notwithstanding, the industry is due to see extensive and lucrative investment in the years to come. Firms active in the space have made great strides in recent years, and that is likely to continue. The robotics industry has the ability to play a major role in the development of a number of different sectors. The application of robotics in areas such as the medical and healthcare sectors, aerospace and defence, and security and surveillance, can be almost limitless.
But there are caveats which must be considered. As the industry continues to develop, regulation becomes a must. The formation of government agencies assigned to manage the complex legal and regulatory environment surrounding artificial intelligence is the next logical step in the continued development of the robotics sector. Regulators should be positioned to help direct the flow of funding into research and advising on robotics law and policy.
© Financier Worldwide
BY
Richard Summerfield