Investing in automation and robotics - How are companies capitalizing on robotics – and what does this mean for investors?
What is Automation?
Automation is the creation and application of technologies to improve or optimize processes. Automation began life on the factory floor, as automotive companies aimed to improve manufacturing techniques, but has since evolved to influence multiple aspects of how we live and work.
What are the potential benefits of investing in Automation?
Automation can help companies:
- Increase the efficiency and lower costs
- Improve reliability and consistency
- Perform highly sophisticated and delicate tasks
- Work safely alongside human workers
- Keep pace with customers’ increasingly on-demand preferences
While we are still in the early stages of this disruptive trend, its long-term potential seems evident to a growing number of equity investors. And, with an opportunity set across both larger and smaller companies, robotics is increasingly being recognized as a viable investment and potentially superior growth area of the market.
The warehouse automation market
is expected to grow at circa 10% p.a. in the coming years.
Source: BofA Merrill Lynch - Fancy forklifts, smart warehouses (July 2018)
To help investors tap into the multi-decade investment potential of automation, our Robotech strategy focusses on the investable area of the robotics market. This includes:
- Industrial Automation: Technologies helping companies increase precision, reliability and efficiency across industries.
- Transport: Technological advances focusing on vehicle safety and the pathway towards autonomous vehicles. Additional opportunities outside of the car industry in areas such as agriculture and mining.
- Healthcare: Companies involved in robotic surgery, assistance and remote healthcare.
- Technology Enablers: The intelligence that powers and controls robotics. This provides the sensors, connectivity and intelligence used to gather and analyse information
Why invest in automation now?
The demand for industrial robots has accelerated in recent years due to the ongoing trend towards automation and innovative technological advancements. Advances in technology have made robots capable of performing highly sophisticated and delicate work as well as working alongside humans to drive productivity and efficiency.
We believe this is just the beginning of a multi-decade theme:
Worldwide annual supply of industrial robots
*Forecast. Source: AXA IM. Chart: IFR World Robotics 2018. Performance results of the past are not a reliable indicator for any future returns or trends. The growth of the global robotics market is not a reliable indicator of performance of the securities/companies which will be selected.
Robotics and automation technologies are also being applied more extensively across more industries than ever. In 2018, shipments of robots increased to every industry outside of the automotive industry:
+60% - To food and consumer goods companies
+50% - To semiconductor and electronics plants
+13% - To metals producers
Source: Association for Advancing Automation, via World Economic Forum, March 2019.
Robots are also becoming more affordable while labour cost is increasing and the working population is shrinking in many countries.
Labour cost vs robot prices
Source: Economist Intelligence Unit/IMB/IAB/IRF/SSA/McKinsey 2017
Example shown is for average robot prices and labour compensation in US manufacturing (1990 = 0%)
All investment involves risk and capital is not guaranteed. Such investment strategies are invested in financial markets and use techniques and instruments which are subject to some levels of variations, which may result in gains or losses. Additional risks may include Counterparty Risk; Credit Risk; or risks associated with the impact of any techniques such as derivatives or leverage.
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The robotics industry and the broadening application of this technology
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Ageing and Lifestyle
The number of over-60s is likely to grow more than 5 time faster than the under-60 population until 2030*
Just 9% of retail transaction are made online today, which will likely grow as smartphone adoption rises globally*
Huge demographic and environmental changes are forecast to make CleanTech a $1.3 trillion market by 2020*
The growth of the global middle class is at a 150-year high, boosting consumption in Asia and the developing world*
*Ageing & Lifestyle - US Department of Commerce, latest data available as of March 2018
*Connected Consumer - Citi Research, Citi GPS “Technology at work v3.0”, August 2017
*Automation - IFR World Robotics Report 2017, latest available data as of March 2018.
*Transitioning Societies - UN, correct as at March 2018
*Performance Drivers - AXA IM, correct as at 29 December 2017
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