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Robots, Robots Everywhere!

We believe that the robotics theme is now at the start of a secular growth cycle and therefore presents long-term investors with a highly compelling investment opportunity.

Robots leaving the factory floor

The word “robot” often evokes rows of brightly colored mechanical arms in production lines, operating behind protective plexiglass with a perfect, monotonous precision. Younger readers, perhaps influenced by Hollywood science fiction movies, may be inclined to think of robots in more human forms. While the movies may provide a glimpse of things to come, most robots operating in the world today remain on the factory floor, often in the automotive and semiconductor sectors. However, this is changing fast. Continued advances in technology are enabling robots to be effective in performing tasks in industries beyond these “traditional” use cases. Robots today are already assisting in surgical procedures and medical rehabilitation, get deployed in disaster relief missions and are increasingly capable of driving motor vehicles.

Areas of application and market potential

Robots are fundamentally changing the way work gets done. Today they already match or even surpass human capabilities in many tasks, so it is not surprising that robotics and artificial intelligence have found their way into so many areas of our lives. In the future, robots will be deployed to perform tasks for which they are better suited than people or that help to make our daily lives easier:

  • In manufacturing, robots are destined to increasingly enhance the flexibility and efficiency of production in a large number of industries.
  • Robots will also be used in tasks that people are unwilling or unable to perform because they are too dangerous, are unpleasant or repetitive, or require superhuman physical strength.
  • Digitization of devices and information will lead to the creation of such massive volumes of data that it will require automated intelligent systems to process and analyze it (e.g. real-time data mining, etc.).
  • As technologies advance, mission-critical procedures may rely on and require exceptional precision, flexibility or speed that only robots and artificial intelligence can deliver.

Opportunities lie beyond the industrial sector

We estimate that demand for robots is now set to embark on an accelerated long-term growth trajectory. The industrial sector is the traditional market for robotics and is large and well-established. While we expect to see continued growth in this area, we believe that the greater investment opportunity for robotics technology lies beyond the industrial sector. This idea is also supported by market research. We think this fact is largely underappreciated at present, however, robots for use in the home, in the field of medicine, in the entertainment industry, the agriculture sector and in unmanned vehicles look set to shape the future of robotics technology. Revenue from non-industrial robots is projected to increase from USD 20 billion to USD 130 billion over the period from 2015 through 2020. Over the same period, revenue for traditional industrial robots could nearly double to USD 20 billion. Falling prices of components and advances in processors are the main drivers of this growth. As computing power accelerates, the cost of high-quality robots and their components rapidly decreases.1 Furthermore, it becomes increasingly easy to program and reprogram robots for specific tasks. Consequently, robots are becoming cheaper, smaller, more flexible and more efficient. As they gain sophistication, their value in adapting to suit a broader range of applications increases.2 We believe that over the next few years, the disruptive force of robotics will be increasingly visible in our daily lives.

Excursus: Robotics in the healthcare sector

The use of robots in the healthcare sector is an interesting area for investment from a long-term perspective. We expect the growing demand for minimally invasive surgical procedures to fuel increasing demand for sophisticated surgical technologies. Aging demographics and innovations in technology are additional drivers of the growth in medical robotics. Market research firm MarketsandMarkets projects that the annual market for medical robotics will grow from USD 4.2 billion in 2015 to USD 11.4 billion in 2020. Those numbers imply a compound annual growth rate of 22.2% for the period. Medical robotics breaks down into a number of different categories: surgical robotic systems, noninvasive radiosurgery systems, emergency response robotic systems, prosthetics and exoskeletons, and medical rehabilitation systems.

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