Tom RileyPortfolio Manager, AXA IM robotics strategy

October 20, 2020

How has the pandemic impacted the outlook for robotics?

By Tom Riley , Portfolio Manager, AXA IM robotics strategy.

Data in Health

Read time:4 minutes

Original Content: AXA IM

There are now 2.7m industrial robots operating in factories worldwide. This marks a new record, and a significant 85% increase over the five years to 2019, according to the International Federation of Robotics (IFR)[1].

Today, Asia is the largest market for industrial robots, with China top of the table, followed by Japan and the US. In Europe, Germany is the biggest user.

However, the remarkable rise of the machines, is not surprising. For some time, robots have been working alongside humans, helping them carry out intricate and sometimes even dangerous tasks - from operating in extreme and unsafe situations, to assisting in highly delicate medical procedures.

Short vs. long-term expectations

The coronavirus pandemic doesn’t appear to have slowed growth in the sector. By the end of 2019, the global robotics market was worth $34bn and it is forecast to grow at a double-digit rate between 2020 and 2025[2] on the back of increased production demands and improved workplace health and safety measures.

But while the global economic slowdown has forced many companies to put investment plans on hold to conserve cash - impacting short-term demand for industrial and commercial robots - we expect the long-term trend to remain positive.

The IFR predicts that by 2022, an operational stock of almost four million industrial robots are expected to work in factories worldwide[3] - and it believes these machines will play a vital role in automating production to speed up the post-COVID-19 recovery.

E-commerce and supply chains

Many of the changes witnessed in consumer behaviour and the way companies operated during the coronavirus-driven global lockdown has involved increased automation, from picking stock in warehouses to fulfilling retail orders.

Presently we see significant investment activity in the warehouse automation space fuelled by the growth in online shopping during the pandemic. While some of this shift to e-commerce may be temporary, we believe that for many, spending habits will be permanently altered. This will likely mean significant corporate expenditure on logistics and fulfilment centres, presenting opportunities for a wide range of robotics component suppliers such as sensor, software and semiconductor manufacturers.

Greater precision and lower cost: The growing use of robotics in healthcare

Our changing society is also increasing the need for robotics in industries such as healthcare while ageing populations are driving demand for more efficient and cheaper ways of administering care. Robotic surgery and healthcare are seeing new applications developed – much of the market is currently focused on hernia and colorectal procedures but the use of robotics is increasingly broadening into general surgery.

Using computer technology to continuously monitor patients’ health can also act as a preventative measure, detecting changes before there are noticeable symptoms – not only reducing the need for expensive treatments and procedures but potentially helping to save lives. This kind of data and analysis is vital in settings such as care homes, or where a patient is housebound, and has come to the fore during the pandemic.

Speeding up the transition to electric vehicles

A push to create a green recovery post-COVID-19 has placed additional emphasis on carbon emissions. Electric vehicles (EVs) and autonomous driving technology go hand in hand and mass-market EVs are already a reality, while partial autonomy is becoming more broadly adopted. The sector is likely to see a boost as governments and consumers look to lower-polluting methods of transport.

The infrastructure surrounding the electric vehicle market is also expected to attract significant levels of investment. As such, robotics and component suppliers are very-well placed to potentially benefit from this demand.

Longer-term trends remain intact

Meanwhile, the pandemic has not halted or disrupted longer-term trends impacting the robotics sector.

5G infrastructure such as base stations are being rolled out across the world, and we anticipate widespread adoption of new 5G smartphones as they are launched - a trend likely to be supportive of the robotics sector. This boost should come via the need for automation equipment, to manufacture these new handsets, as the consumer electronics sector is one of the largest purchasers of industrial robotics, as well as numerous semiconductors used in 5G devices.

Looking further into the future, the broader adoption of 5G will allow for enhanced connectivity and communications that we believe will spur the development of increasingly smart and automated factories, as well as connected vehicles.

Meanwhile, the disruption of global supply chains across sectors as a result of COVID-19 lockdowns, as well as ongoing international trade disputes, are forcing companies to rethink their manufacturing footprints and sourcing of crucial components. While it will take time to reconfigure global supply chains, there could be new opportunities for robotics companies in the US and Europe as we anticipate incremental investments in nearshoring manufacturing, partly as the cost benefits of outsourcing production to developing countries continues to diminish each year.

Coronavirus lockdowns have meant that we can add social distancing to the list of advantages robots provide, and as well as growth in the areas outlined above. But while the pandemic should ultimately pass, the long-term growth drivers for the robotic industry remain intact and we believe the increased demand is here to stay.

[1] https://ifr.org/ifr-press-releases/news/record-2.7-million-robots-work-in-factories-around-the-globe
[2] https://www.globenewswire.com/news-release/2020/05/13/2032482/0/en/Impact-of-Coronavirus-COVID-19-Pandemic-on-Global-Robotics-Market.html
[3] https://ifr.org/ifr-press-releases/news/high-demand-for-robotics-skills-in-post-corona-recovery
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