Robotics and automation: The next megatrend for investors?

Twenty years ago, the idea of robots assisting doctors with surgical procedures or packages being delivered by drones was considered science fiction. Today, however, these scenarios are not at all far-fetched. Various economic, social and technological factors are converging to make the emerging robotics and automation sector one of the most promising trends in the global economy.
Household name companies have already taken notice of the potential within the robotics and automation space over the past year — and so has Wall Street. 2013 was a banner year for robotics in the media — featured twice on “60 Minutes,” the subject of two cover stories in Time magazine, a Smithsonian feature film and many mentions in the financial press. Google, Amazon and Apple have entered the fray and heavy advertisers such as GE and Wal-Mart are including robotics in their advertising messages.
In February, The Wall Street Journal reported that Google and Taiwanese contract manufacturer Foxconn Technology Group, which assembles Apple’s iPhones and iPads, have begun cooperating on the development of new robots and automated manufacturing systems.
That report followed Google’s creation last year of a robotics division, for which it acquired eight companies, and Apple’s 2013 announcement that it would allocate $11 billion toward robotics and automation technology. Furthermore, in December, Amazon chief executive Jeff Bezos said in a “60 Minutes” interview that his firm is developing drones that can deliver packages within 30 minutes of receiving customer orders.
Industrial robots have been used for decades (especially by automobile manufacturers), but until recently, high costs associated with such automation meant that it could only be deployed by companies in developed nations to replace high-wage jobs considered dangerous, dirty or dull. However, new technology such as machine vision, motion and location/tracking sensors, image and voice recognition software, component miniaturization and microcontrollers enable robots to perform and manage more advanced capabilities than ever before. For example, Unbounded Robotics, a venture-funded Bay Area start-up, is in the process of developing robots that inspect hotel rooms after they have been cleaned by maids, and also recover the trays after waiters made earlier room service deliveries.
Today’s robots can be programmed to see, touch, listen and speak, and the underlying technology making this all possible has reached critical mass, which means they are now becoming cost-effective and can be installed, integrated and made to work faster. As a result, small and medium enterprises — businesses with 500 employees or less — in a variety of general industries heretofore outside the traditional industries that have benefited from robotic automation (such as hospitality, agriculture and food service) now have the opportunity to integrate robots into their workforces. There are at least 1.1 million SMEs around the world and they provide a large market for robot manufacturers.
This new reality creates numerous opportunities for investment — not only in robot manufacturers but also all their support businesses. The International Federation of Robotics expects global sales of robots to increase by 6% compounded annual growth between 2014 and 2016, and that more than 190,000 industrial robots will be supplied to companies worldwide in 2016. Additionally, the IFR estimates that about 22 million service robots for personal use will be sold between 2013 and 2016.
Some have reacted negatively to the robotics and automation sector’s progress, claiming that robots will eventually replace humans in the workforce and cause massive unemployment. However, workers and investors alike are being slowly educated that robots keep jobs from going offshore; on the contrary, they create high-tech jobs, and their success in enhancing product quality at competitive prices increases sales, distribution and other non-manufacturing jobs. Robots can perform some human tasks but won’t be able to acquire humans’ in-depth subject expertise or interpersonal communication skills for many decades to come.
Furthermore, many developed countries will need robots and automated technology to help support their aging populations. Besides utilizing robots to enable the elderly to live independently and assist doctors with surgical procedures, developed markets will also need robots to make up for likely human labor shortages. The dependency ratio, which measures the amount of elderly and children compared with working-age citizens, is expected to increase dramatically over the next few decades in Japan, South Korea and Europe, with China not far behind. The U.S. will also experience a rise in its dependency ratio, with retiring baby boomers and high labor costs likely making the deployment of robots an essential part of future re-industrialization efforts.
All of the above-mentioned economic, social and technological trends have pushed the global robotics and automation industry past a tipping point. Although the integration of robotics and automation technology is still in its relatively early stages, the sector offers many long-term investment opportunities, and advisers should encourage investors to take advantage of them now rather than later.

Frank Tobe is co-founder of ROBO-STOX and editor of The Robot Report