“Exterminate! Exterminate!”
The word ‘robot’ tends to conjure up images from science fiction – usually ones in which they’re hell-bent on our destruction.
However, while a ‘robot rebellion’ is (hopefully) some way off, robotics is advancing rapidly. Faster computers, better software, and developments in electronics mean that the range of jobs that robots can do just keeps growing.
That has its positives (we can do things quicker, more safely, and more efficiently) and its negatives (what if a robot takes your job?).
But one thing’s for sure – an industry with this much potential represents a fantastic opportunity for investors…
Robots have already taken over our factories
So far, the impact of advancing robot technology has been felt most keenly in the manufacturing sector. Accountancy firm PwC estimates that more than half of all robots are deployed in the car industry, and nearly a quarter in plastics, metals and electronics.
Many manufacturing tasks are repetitive and require high precision. In short, they are ideally suited to robots rather than humans.
Who uses these robots? Until recently, it was mainly Japanese and American firms. But following a big surge in orders, China is now the largest single consumer of industrial robots, as rising wages have eroded Chinese companies’ ability to undercut their Western rivals.
But it’s not just about assembling cars or computers. One big benefit of using robots is that they can operate in conditions that are too dangerous for humans. Robots are playing ever-greater roles in disaster management – they were used in the clean-up operations in the aftermath of the September 11th terrorist attacks, Hurricane Katrina and are cleaning up radioactive waste around Fukushima. They are also used frequently in bomb disposal.
Robots also have a key role in deep-sea and space exploration. While Nasa is still talking about the idea of a manned mission to Mars by 2035, it’s more likely that its efforts will focus on robot probes such as Curiosity. Satellite repair work may even one day be carried out by a new generation of self-assembling robots that can ‘reproduce’ by building new versions of themselves.
All of these factors are leading to a big jump in the number of robots sold. The International Federation of Robotics estimates that 178,000 industrial robots were sold around the world in 2013 – compared with around 70,000 in 2002.
Meanwhile, consultancy TMR Research thinks the market for industrial robots is set for rapid growth at a rate of more than 6% a year. This should take the size of the market from $29bn in 2013 to nearly $45bn by the end of this decade.
And now robots are going to take over the office too
We’re fairly used to the idea of automated factories. After all, robots have been present on car assembly lines for decades. But they’re making the leap to the service sector too.
Strictly speaking, the big threat to white-collar jobs comes from intelligent software, rather than robots. However, machines are starting to take over some of the more mechanical service sector tasks, such as food preparation. PwC reckons that the food and consumer goods industries now account for 7% of all new robots (up from 3% in 2005).
Several companies have developed machines that claim to automate everything, from the delivery of cooked food to the cooking of burgers from scratch. Meanwhile Kura, the Japanese sushi chain, has gone a step further and developed restaurants that have almost no human input (most of the food is prepared by machines and delivered on a conveyor belt), and where even the managers monitor things remotely.
Healthcare is another sector where robots could play a big role. Indeed, the Japanese telephone company NTT has said that it aims to put a robot in the home of each elderly person, which will be able to talk to them and check their blood pressure.
Of course, if we reach a tipping point, where robots are replacing semi-skilled and even skilled workers en masse, this has important social implications. You don’t have to be a luddite to worry about what happens to those who are effectively made redundant by automation. As far back as 2011, even President Obama admitted to being worried about the structural issues raised by automation.
However, that’s not going to stop this from happening. And other world leaders think that the only problem with the robot takeover is that it isn’t happening fast enough. One of the biggest cheerleaders for robot technology is Japan’s prime minister, Shinzo Abe.
Abe sees a ‘robotics revolution’ as one way of solving problems created by Japan’s unpromising demographics and the resulting declining workforce. He has persuaded more than 200 firms to join a programme that aims to quadruple their investment in robotics over the next five years.
This is all good news for the companies that make and design robots. We’ll be taking an in-depth look at some of the fastest-growing sectors, as well as the stocks to buy, in MoneyWeek magazine in the next few weeks.
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