We recently attended the RoboBusiness Conference, produced by Robotics Business Review, to hear from leading experts in robotics and automation and to discuss with them the industry’s outlook. We boiled down the conference into three key trends taking place in the robotics industry today:

• The Growth Potential of RaaS (Robotics-as-a-Service)
• The Movement Towards Task-Specific Robots
• China: The Industry’s X-Factor

The Growth Potential of RaaS (Robotics-as-a-Service)

Taking cues from software-as-a-service (Saas), robotics-as-a-service (RaaS) provides firms with an avenue for implementing automation into their processes while avoiding large upfront capital expenditures and reducing the risks associated with maintenance and upgrades. Traditionally, a firm looking to incorporate robotics would need to secure financing to purchase robotic equipment upfront. This ownership model is capital-intensive and often requires the purchaser to service the robots on their own or pay on an as-needed basis for maintenance. RaaS, by comparison, allows firms to pay a recurring fee to a robot manufacturer to lease the machinery. Such fees can be structured to include upfront implementation costs as well as preventative and emergency maintenance.

Firms will have different preferences for either the ownership model or RaaS. For example, a large auto manufacturer with cheap access to capital and a long production cycle may find the ownership model more attractive. By comparison, a local mall looking to enhance its security around the holiday season may prefer to add security robots on a shorter term RaaS contract. But as the robotics industry matures, expanding the choices for firms to incorporate robots into their processes will be critical for accelerating the overall growth of the industry.

The Movement towards Task-specific Robots

The concept of a single robot that can do anything and everything remains compelling to both robot manufacturers (who would prefer to only have to make one universal robot) and to robot purchasers (who would prefer to only have to buy one type of robot). Yet limitations in engineering, artificial intelligence, and costs, have swung the pendulum the other way, leading to the rise of task-specific robots. It is simply much easier and cheaper to develop a robot that can do one thing really well.

Many of the robots on display at this year’s conference embrace this single-task approach, including:

• Robots designed to inspect oil and gas pipelines
• Drones that fly above construction sites to monitor progress
• Warehouse robots that deliver items picked off a shelf by a human to a specific location

None of these robots represent monumental leaps in technological progress, but that’s not their goal. By leveraging proven technologies, these robots are designed to be low cost, reliable, and easily integrated into existing business processes. In doing so, they lower the barriers to adopting robotics and expand the range of industries that can utilize robots in their everyday functions.

China: The Industry’s X-Factor

Its no secret that China’s status as the world’s leading manufacturer is under threat by the rise of robotics and automation. In the 1990’s and 2000’s supply chains around the world began rerouting through China to utilize its huge base of low cost labor. As wages in China continue to rise, firms are increasingly looking elsewhere for new sources of low cost labor: some are shifting manufacturing to less developed countries like Vietnam and Bangladesh where wages remain low, while others are exploring re-shoring manufacturing in developed markets, but heavily utilizing automated processes to keep costs down.

In response, China has made massive investments into robotics to maintain its pole position in global manufacturing. In 2017, the country was the largest market for industrial robotics and saw its purchases of robots increase 58% year-over-year.¹ With a domestic robotic industry lagging those of its Asian peers like Japan and Korea, China imported roughly 75% of those robots from overseas. This year, robot purchases in China are expected to grow only 10-20% over 2017’s record numbers.² While these numbers will still likely be record highs, the growth rate is tapering. Meanwhile China is rapidly trying to catch up by developing its own robotics and artificial intelligence industry. Ultimately, China will likely be both a major purchaser of robotics as well as an emerging competitor to existing firms, making it a true x-factor for the industry.

Conclusion

Its easy to get caught up in dreamland with robotics, envisioning a world of incredibly intelligent and capable machines revolutionizing how things are made and how we live. What impressed me about this year’s RoboBusiness Conference was seeing the industry develop a sense of focus. This conference was not about moonshot ideas or experimental technology. Instead, it fixated on how to leverage today’s proven technologies to develop practical robots that can be accessed by a broad range of firms. While engineering and artificial intelligence will continue to improve, this focus on the pragmatic, business side of the industry is invaluable to sustaining the industry’s long term growth trajectory.

Related ETFs

BOTZ: The Global X Robotics & Artificial Intelligence ETF seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.