Robotics may conjure up images of futuristic androids (like Data from Star Trek) or quirky, electronic children’s toys – like Aibo, the robot dog. Yet robotics is penetrating an ever-wider range of sectors, bringing transformation to company productivity and consumer problems. Below, our investment team at Bure Valley Group outlines the board market landscape for investors in 2022, key players and trends, new entrants, risks and opportunities to consider when adding robotics investments to a portfolio. We hope this is helpful and inspiring to you.
Robotics: market overview
The global robotics industry was valued at $27.73bn in 2020 and is projected to grow to $74.1bn by 2026 – representing a CAGR (compound annual growth rate) of 17.45% from 2021-26. The COVID-19 brought greater innovation and urgency to the robotics world, with robotics providing disinfecting and cleaning services to key facilities.
Car manufacturers continue to grow their reliance on robots in their production process – automating laborious, repetitive tasks with greater precision and speed compared to human workers. Warehouses are also bringing robots increasingly into their systems and processes. Amazon has already made large investments into companies like Kiva, allowing robots to manoeuvre shelves by scooting beneath and lifting them up. Alibaba has also increased the specialisation of its workforce by replacing 70% of its warehouse labour workforce with robots.
Trends & major players
The robotics industry can be segmented in many relevant ways. One dimension is to divide things by component – encompassing hardware, software and service. Here, hardware is presently the most lucrative and is expected to grow the most between now and 2027. The industry can also be segmented by type – i.e. traditional industrial robots, cobots, professional service robots and other. Thirdly, robotics can be divided by application – i.e. healthcare, logistics, manufacturing, media & entertainment, aerospace and defence and others.
Geography is also an important lens through which to view robotis, with the Asia-Pacific region expected to experience the most growth between now and 2027. Some of the key players are well known, whilst others may not have crossed your path. They include:
- ABB Ltd, formerly ASEA Brown Boveri (Switzerland).
- DENSO Corporation (Japan).
- FANUC (Japan).
- Kawasaki Robotics (Japan).
- KUKA (Germany).
- Mitsubishi Electric Corporation (Japan).
- Omron Corporation (Japan).
- Seiko Epson Corporation (Japan).
- Stäubli (Switzerland).
- Yaskawa Electric Corporation (Japan).
You’ll notice that Japan is a key market in the robotics industry, with a decades-long tradition of innovation in the hardware technology space. Robotics investors will, therefore, need to think about their global diversification strategy when including this exciting industry in their portfolio. Yet there are other, rising stars in many other parts of the world that are noteworthy.
With so many potential applications for robotics, it is hardly surprising that hundreds of dynamic startups have emerged to offer innovative solutions to problems. Skydio is an interesting case for consideration. Formed in the USA by former MIT graduates in 2009, this drone manufacturer has experienced 2,200% search engine growth in the last five years. The business has gone on to win a $20.2m project with the US Department of Defense for its SRR (Short Range Reconnaissance) Program of Record.
Another exciting example is Anduril Industries, an autonomous aerospace robotics company providing the USA and its military allies with software-focused solutions. These include its Lattice OS, an “an autonomous sensemaking and command & control platform” which can help turn the tide on a battlefield. After securing a $450m Series D financing round in June 2021, the business is now valued at around $4.6bn.
Finally, one other noteworthy startup is Zipline – another drone company, but focused on global shipments using autonomous aircraft. Founded in California in 1994, Zipline has recently gained $483m in Series E funding to aid its work in delivering blood and medical supplies to patients. It has also launched a partnership with Walmart in Arkansas, which could mark the start of a vastly profitable relationship.
Investment opportunities & risks
Robotics is a fairly “crowded industry”. Investors, therefore, need to be mindful of the fierce competition their prospective investments likely face. Yet the range of markets, sectors and applications that are open to robotics companies are vast. Those businesses with flexible business models may have plenty of space to pivot as the competitive landscape evolves.
A notable example of this is professional services robots, which currently comprises just a sliver of the market – yet with huge room for startup innovation and growth. With global robotics expected to hit as much as $260bn global market capitalisation by 2030, professional services robots could potentially form $170bn of this amount. Across the world, consumers are expecting faster and more reliable deliveries amidst a shortage of human labour in many parts of the world (e.g. UK lorry drivers). Such trends are likely to drive up demand for robotics services to meet demand. Ageing populations, moreover, will plausibly increase the drive for mobile services robots – helping with personal hygiene, exercise, meal delivery, and other jobs. Finally, advances in AI (artificial intelligence) are also expected to enhance human-to-robot interactions, enabling the latter to carry out more complex, independent functions without the former’s oversight and involvement. Many customers are likely to see the benefits of these innovations and desire them to make their own lives easier.
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
+44 160 334 0827