The robotics automation sector is, says data compiled by International Data Corporation, the world’s fastest growing industry. The data company forecasts global spending on robotics systems and drones to hit $210.3 billion by 2022, with an average compound annual growth rate of 20.2% over the four years from 2018.
But robotics is a huge industry, and can be broken down by software, hardware and field of application. For any potential investor in the robotics sector, an important insight is where, of all the possible routes into robotics spending, the money is flowing. Of course, it doesn’t mean that more niche robotics technologies and applications won’t develop into strong, profitable and growing businesses. But given the longer average timelines or robotics investments when compared to other technology sectors, such as SaaS (software as a service) products, for example, there is some logic in looking at technologies targeting large, proven markets that offer a big upside.
So where is the money trail leading in robotics? To answer that question, let’s look at the sub-sectors within the sector attracting the most spending and investor attention, as well as the biggest deals done so far in 2019.
DCI’s data analysis forecasts that between spending on robotics systems and drones, the former will prove to be the larger of the two categories over the next few years. Overall spending on robotics systems is forecast at $103.4 billion over 2019 with a much smaller sum of $12.3 billion spent on drones. However, drones is the category showing higher growth rates – a 30.6% compound annual growth rate compared to 18.9% for robotics systems.
IDC also forecasts two thirds of the spending on robotic systems will be on hardware with industrial and service robots accounting for 30% of all spending across the industry. The lion’s share of software spending will be on ‘command and control applications’ and ‘robotics-specific applications’. Services spending in the sector will be spread across systems integration, application management, hardware deployment and support. Growth in software spending will be ahead of that on services or hardware – 21.7% to 19% and 18.2%.
Almost half of spending on robotics systems, $50.2 billion, will be focused on those applied in discrete manufacturing. Process manufacturing, resource industries, healthcare and consumer products will account for most of the rest. The value of robotics sold into the wholesale, retail and construction industries will see the highest rates of growth at 31.4%, 29.6% and 28.1% respectively.
Dr Jing Bing Zhang, IDC’s worldwide robotics research director, believes:
"Industrial robotics continues to top the technology investment priorities of manufacturing organizations across all major markets surveyed by IDC in 2018. While the looming trade war between the United States and China is likely to dampen the market growth slightly in the near term, we expect the growth trend to pick up from 2020 onward."
John Santagate, the company’s commercial service robotics research director adds:
"The worldwide market for commercial service robotics will continue to grow at a rate of 20% per year for the coming five years. This growth is due to continued innovation in ease of use as well as the drive for flexible automation across industries. We expect to see growth driven by increased adoption of autonomous mobile robots and collaborative robots being deployed as a means to deliver improvements in capacity, productivity, and efficiency."
On the market for drones, customer insights and analysis research director Stacey Soohoo contributes the insight:
"The market is working to simplify the use and integration of drones with efforts ranging from enabling new drone applications through improved technological capabilities to understanding the regulatory implications of drones and the viability of these applications. Drones are developing new skills, coupling 3D mapping and fully autonomous navigation capabilities with rapid improvements in battery performance and air-traffic management systems. Drone adopters continue to search for a safe, cost-efficient, and repeatable drone solution that can be easily implemented in a variety of situations and use cases.”
90% of spending on drones is expected to be on hardware, with the consumer sector accounting for slightly over 40% of all spending on the technology.
Perhaps surprisingly, robotics used in welding are expected to represent the biggest percentage of spending by use case, followed by assembly-line robots.
Source: International Data Corporation
And what about the biggest investments in robotics over 2019? The largest so far has been $2 billion invested into Intuitive Surgical, which is developing surgical robots. The investment was made via a share buy-back – an ideal exit opportunity for early investors.
The next three biggest investments, $1.15 billion, $1 billion and $940 million respectively, were all made into the autonomous vehicles sector. The largest was made by Honda, which acquired a stake in Cruise, GM’s self-driving unit, followed by two Softbank Vision Fund investments into Uber and Nuro.ai.
A $600 million investment by SK China into AI and IOT start-up Horizon Robotics is the meat in the sandwich before another two big investments into autonomous vehicles technology. Those were Amazon’s $600 million investment into Aurora Innovation and Baidu’s $450 million investment into Weltmeister Motor. The Vision Fund also invested $300 million into service robots company Cloudminds.
There have also been investment deals worth over $100 million into drone delivery company Zipline, LiDAR technology developer Innoviz Technologies, Think Surgical, again surgical robots, Beijing Auto AI Technology, a Chinese AI company, machine learning start-up Black Sesame Technologies and Exoskeletons developer Ekso Bionics.