Robotics Is the Next Big Trend of the 2020s, but Its Facebook Equivalent Is Still Unknown

Robots has been powering our industrial revolution since the 1960s. Industrial robots enter factories to produce everything from cars to plastics to toys. In other words, when companies have repetitive and high volume jobs, robots will come into the scene. Today, robots have expanded their scope and there is massive growth in the market.

Research company, IDC, expects the robotics market to more than double from $91.5 billion in 2016 to $188 billion in 2020. Given that we are sitting in the middle of this tremendous shift to robotics in year 2017, we can ride the wave to riches as investors if we can identify the right companies to ride this wave. Broadly speaking, we can look at the robotics industry as industrial and collaborative robots.

Industrial robots are still the dominant demand for robotics. However, collaborative robots, also known as cobots, are starting to gain prominence, as they are smaller, nimbler and more intelligent. Cobots are designed to share the same workspace as humans, so they are equipped with plenty of sensors to stop as needed and not to apply too much force.

Strong Industrial Robots Growth

Let us first look at the space of industrial robots and the source of its strong growth as seen in the chart below. According to the International Federation of Robots (IFR), industrial robotics will see strong growth from the automotive, electrical and electronics, metal and electronics, rubber and plastics and finally the food and beverage industries.

Source: IFR

Industrial robots will take over dangerous, tedious and dirty jobs that are not safe, desirable or possible for humans to do. China, Korea, Japan, United States and Germany would represent the 75% of the global demand for industrial robots. Global stock of operational robots is expected to grow from 1.6 million in end 2015 to 2.6 million in end 2019.

There are several industrial robots companies such as Fanuc, ABB (ABB), Yaskawa, Mitsubishi Electric and Kawasaki Heavy (KWHIY). In the supporting industry, we have Cognex Corporation (CGNX), which provides vision system, sensors, software and surface inspection for manufacturing. We have Nabtesco, which produces gear systems, Fuji Electric, which produces circuit configuration and Citizen Watch, which produces the NC automatic lathe for robotics hands.

Nascent Cobots Provides An Opportunity

An example of cobots would be a tele-presence robot which stands in for a human that can’t be around physically in a location. It can move and provide a dimension for colleagues to face each other and to look at the same direction as if the person is there. This is more effective than a Skype call.

For instance, Singapore-based 3E Accounting, purchased a Double Robotics tele-presence robot for around $7,000 in April 2016. The owners found out that such solutions increase the productivity, revenue and staff retention with a flexible work life balance. Such telepresence robot can reduce the cost of absenteeism and be controlled by staff who are working from home. For staff who are stationed overseas, they can save on their frequent fliers miles and spend more time on the actual work on hand.

Source: Recode

Though cobots are a nascent trend, it is expected to grow strongly in the years ahead. Cobots can be used to automate certain production chain of medical equipments that industrial robots can’t do. Cobots can also be used in the medical setting which is another area of robust growth due to the ageing population, higher incidence of stroke and the need for rehabilitation. There are surgical robots, hospital robots, exoskeleton robots, nursing robots and prosthetic limbs robots.

Some of the listed cobots companies include Bionik Laboratories Corp (BNKL), Accuray Incorporated (ARAY) for the medical industry, iRobot (IRBT) for consumers, Faro Technologies (FARO) and Ekso Bionics Holdings (EKSO). Whenever a nascent trend is identified, it presents early investors with the exponential growth. It is like catching Google when it was first listed in 2004. Even Google is in the robotics business today.

No Clear Winner For Robotics

As investors, we can be right about an industry but wrong about the company to invest in. One of the way to avoid this trap would be to invest into a robotics ETF such as ROBO. The other way would be to screen and research on the above-mentioned robotics companies for strong cash flow and good credit scores.

Either way, it is clear that robotics is the next big move, like how software launched Microsoft (MSFT) in the 1980s, online marketplace launched eBay (EBAY) in the 1990s, search launched Google (GOOGL) in the 2000s and social media launched Facebook (FB) in 2010s. So who will be next robotics giant in the 2020s? There is no clear winner as of yet and there are good investment opportunities out there.