How are robots driving growth in non-automotive industries?
- Automation processes are increasingly being applied to non-automotive industries.
- Food & consumer goods, semiconductor & electronics, and life sciences have each benefited from such innovations.
- We believe automation will continue to drive growth in non-automotive sectors.
What long-term trend are we observing?
Since the 1950s, robotics have historically been applied to – and has been instrumental in the development of – the automotive industry, cutting out time-intensive inefficiencies such as manual errors and rework time.
However, recent years have seen automation technologies and robotics increasingly being applied to non-automotive industries. This has been driven by the rapid development of artificial intelligence and robotics, which offer the potential to hugely benefit businesses and economies worldwide by reducing operating costs, increasing productivity, improving services and developing new products.
One of these segments is food and consumer goods, where demand for advanced automated systems has been high, due, in part, to increasing food safety regulations and the growing challenges faced by food manufacturers around packaging. Ocado, the British online supermarket retailer, uses automated fulfilment centres to improve operational efficiencies. Recently, Ocado has looked at commercialising its automation technology platform through partnerships with supermarket chains across the globe, including Kroger in the US1 and Coles in Australia.2
Source: US Non-Automation Segments, Association for Advancing Automation, Reuters, 28 February 2019
Often viewed as an enabler of technology shifts, the semiconductor and electronics industry has been proliferating over the last decade as the world has become more connected. Demand for chips related to automation technologies is expected to significantly contribute to the industry’s overall growth, largely driven by the automotive and industrial markets.3 We believe we are at the early stages of a growth inflection for semiconductors as new areas such as electric and autonomous vehicles, 5G communications and connected factories are beginning to see more adoption. Xilinx, a US semiconductor manufacturer, is seeing rising demand for 5G base station rollouts, an area set for significant growth in the coming years.4
As we enter a new digital age, the life sciences industry is becoming ever-reliant on automation as ongoing tech innovations have seen a gradual transition from traditional methods to new and advanced healthcare applications. Tech giants Alphabet (through Verily) and Apple have been working closely with DexCom, a glucose monitoring manufacturer, to explore ways of bringing tools and services to market to help diabetics better manage their health.5 Its creations include a medical device app that allows its customers to check their glucose readings via a smartphone or watch.6 Predictive technologies like this can therefore improve cost savings and efficiency, and can potentially reduce the number of costly treatments and help keep patients out of hospital.
What does this mean for investors?
More than one million new industrial robots are expected to be installed in factories worldwide in 2019 and 2020.7
We believe that continued technological innovation will contribute to the application of robotics across a wide variety of industries and create further opportunities outside of automotives. As robots become cheaper and easier to program, they grow more accessible to small and medium-sized companies – not just large companies with deep pockets or those with the in-house technical capabilities to install and manage them.
As new technology emerges, there becomes an increasing need for companies to explore different ways of applying automation processes to maintain high levels of precision and increasing output in order to keep pace with consumers’ ever-increasing expectations. While we expect automation and robotics to be increasingly used in food processing, electronic products and life sciences, we believe that ongoing technological advancements mean that new non-automotive uses are still emerging, with many still yet to be discovered.
We therefore believe that this is a significant growth opportunity, and that we are still in the early stages of this long-term disruptive trend.
1 Sarah Halzack, ‘Kroger goes full robot to take on Amazon’, Bloomberg, 22 July 2019
2 Siddarth Shrikanth and Jonathan Eley, ‘Ocado strikes technology partnership with Australia’s Coles’, Financial Times, 26 March 2019
3 Opportunities for the global semiconductor market, PwC, 3 April 2019
4 Stephen Nellis, Sonam Rai, ‘Chipmaker Xilinx’s 5G orders kick off race to cash in on new networks’, Reuters, 28 January 2019
5 Christina Farr, Erin Black, ‘Why Alphabet, Amazon and Apple are all working on diabetes tech’, CNBC, 3 August 2019
6 Jack Woodfield, ‘Dexcom upgrade directly monitors diabetes via Apple Watch’, Diabetes.co.uk, 18 June 2019
7 International Federation of Robotics 2018, as at December 2018
Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.