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Investments ramping up in Industrial Robots

robotenomics_arm-institute

In Late December 2016 Rethink Robotics, supplier of Co-Bots secured an additional US$ 18 million investment. The new round, despite being somewhat short of the US$ 33 million sought as indicated by their SEC filing, included funding from the Swiss headquartered private equity investment firm, Adveq, as well as contributions from all previous investors, including Bezos Expeditions, CRV, Highland Capital Partners, Sigma Partners, DFJ, Two Sigma Ventures, GE Ventures and Goldman Sachs.

I think that Rethink’s Baxter and Sawyer robots are setting a new standard in advanced robotics for businesses of all sizes – the only downside is that Rethink sub contract the manufacturing of their robots which gives them less control of delivery scheduling and has possibly considerably hindered their over all growth, cash flow outlays and profitably. This could reflect, in a very hot growth market, the less than enthusiastic take up by new investors and indeed appetite for considerably increasing investment from existing investors. However in the coming months I would expect Rethink would secure the additional US$ 15 million they seek, maybe via Asian manufacturing partners, a region that is becoming increasingly important for Rethink as they endeavor to capture a larger share of the co-bot market.

In addition to Rethink’s new investment – a very interesting, relative, new comer to the industrial robotic manufacturing scene, the Advanced Robotics Manufacturing (ARM) Institute, a U.S. national, public-private partnership, has announced funding of US$ 250 million.

The U.S. Department of Defense awarded the public-private Manufacturing USA institute to American Robotics, a nonprofit venture led by Carnegie Mellon, with more than 230 partners in industry, academia, government and the nonprofit sector across the U.S. The institute will receive $80 million from the DOD, and an additional $173 million from the partner organizations.

Based in Pittsburgh, ARM is led by a newly established national nonprofit called American Robotics, which was founded by Carnegie Mellon University and includes a national network of 231 stakeholders from industry, academia, local governments and nonprofits.

The mission of ARM is essentially four-pronged. To 1) empower American workers to compete with low-wage workers abroad; 2) create and sustain new jobs to secure U.S. national prosperity; 3) lower the technical, operational, and economic barriers for small- and medium- sized enterprises as well as large companies to adopt robotics technologies; and 4) assert U.S. leadership in advanced manufacturing.

ARM’s 10-year goals include increasing worker productivity by 30 percent, creating 510,000 new manufacturing jobs in the U.S., ensuring that 30 percent of SMEs adopt robotics technology, and providing the ecosystem where major industrial robotics manufacturers will emerge.

These investments keep robotics on course to be one of the main investment areas for improving manufacturing productivity and indeed increasing jobs and corporate profitability.

The ARM investment sounds very similar to those of the EU’s public / private initiative announced in June 2014, albeit that is a Euro 2.8 billion initiative and less ambitious, but very worthy, target of adding 240,000 new jobs.

 

Photo: ARM Institute impact

 

Are sales of robots overstated and overhyped?

Car Factory Assembly LineResearch finds Robot sales in 2014 may be overstated by approximately 100,000 units 

Abstract – Based on our analysis of legal compliance documents and other sources  – we analysed manufacturing capacity and revenue of Yaskawa, ABB, Fanuc and Kuka Robotics, who together supplied close to 70% of the world robot market in 2014, and others, and concluded that there were approximately 128,000 industrial robots delivered in 2014, significantly less than the approximately 230,000 the industry claims.

We also discovered, by compiling multiple data sets that could be replicated, that there are currently 850,000 installed and operational robot units in service worldwide.

In Robotics, just like in much of life, historical myths have perhaps played nearly as great a role in shaping opinion as historical facts.

Thomas Piketty in his book Capital in the Twenty-First Century bemoans that much of social policy and public knowledge of statistical facts are created on the back of: “reports <that> must often rely on heroic hypotheses and approximations, not all of them convincing.” He goes on to write that: “in the absence of reliable information… it is possible to say anything and everything and to feed fantasies of all kinds.”[1]

Piketty also reminds us in his extensively researched book with comprehensive data that: “economic theory needs to be rooted in historical sources that are as complete as possible.”[2]

As our heads swirl in a number of announcements on record sales of robots which are causing growing productivity claims, but leading to the erosion of jobs and as a consequence greater inequality, Isn’t it time to ask what historical sources can we rely on for sales of industrial robots?

The more reliable the data, the more we can analyze the impact robots are having on jobs. After all, every day, these robots that historically performed dull, dangerous and dirty jobs to produce the cars we drive, the goods we use and the foods we consume are increasingly moving into healthcare and other sectors.

What the industry claims

The latest reported statistics for worldwide sales of industrial robots indicate a ‘record number of 229,261’ were sold during the 12 months to the year-end 2014.[3] Additionally Statista and the IFR had indicated approximately 225,000 sales in 2014[4] Furthermore the IFR claimed that “The total worldwide stock of operational industrial robots at the end of 2014 increased by 11% to about 1.5 million units.”[5] This may lead to a case of what we believe, or what we think we know, about the annual sales of and total number of installed robots is dependent on data that may not mean what we think they mean. Indeed using Piketty’s model this data would not be accepted as truly objective -conclusions drawn from them must be somewhat tenuous.

Yet, the datasets announced by the industry federation have led to government policy discussions and detailed economic studies on robot outcomes such as employment, total factor productivity and wages. With one important study using the IFR data and concluding that robots are: “fairly comparable to the estimated total contribution of steam technology to British annual labor productivity growth” during the industrial revolution.[6]

Objective data

Until there is a truly independent source of robot units in operation then in the meantime to obtain objective and reliable data of robot sales one would reasonably think the most complete and reliable data would come from legally reported publically available formal compliance documents such as annual reports, 20F filings, 10K filings, legally released press releases, statements and associated information from the manufacturers and its executives of industrial robots, especially those manufacturers that are listed on a recognized stock exchange, which is the case for the majority of industrial robot manufacturers, at least those that supply some 80% of world robotics sales.

How many robots are sold each year?

During our research we set out to ascertain two things.

  1. How many industrial robots have been delivered and accounted for in sales revenue from the beginning of 2004 to the end of 2014. And;
  2. Which companies use robots and what is the total number they have in operation.

During this process we went further than our initial targets and analyzed 15 years of legal filings for all robot manufacturers (where available) and their customers, together with associated reports from the manufacturers, detailed discussions with users of robots and in some cases factory visits. This analysis has resulted in an extensive database of installed robots including which robots are in use, what are their functions and at which location.

What we found:

  • There were approximately 128,000 industrial robots delivered worldwide in 2014.
  • The top four robot manufacturers delivered a combined 89,000 robot units, which they claimed represents 80% of all robots delivered. We found that the top four manufacturers total delivered robot units amounted to approximately 70% of the total robot units delivered in 2014.
  • There were between 800,000 and 850,000 robots installed and operational worldwide between 2004 and 2014 – around 650,000 less than the approximately 1,460,000 to 1,500,000 numbers reported on the Statista and IFR charts.
  • The robot manufacturers collectively indicate single digit sales growth in 2014 compared to 2013 on average.

As we can see in the analysis below the numbers were obtained from the robot manufacturers legal compliance documents, self-reported total cumulative sales of robots, and the production capabilities of those robot manufacturers (how many robots each manufacturer can produce).

To double-check our numbers we have created two complimentary and indispensable datasets. Although in some case the information received may not be perfect as to some extent it is reliant upon the manufacturers marketing claims, albeit in legal compliance documents. Nevertheless we have analyzed the sources and methods in minute detail and found comparison data from other sources in an effort to lead to clear, transparent and reproducible datasets.

In addition to the annual sales of robots reported by robot manufacturers in their legal filings we have also compiled a detailed database of robots installed. This database ranges from the 780 active robots at the Nissan plant in Sunderland, in the north east of England, to the 387 active robots at that the Porsche Macan factory in Leipzig, Germany. This total database reflects the current base of installed robots to be between 750,000 and 800,000.

Essentially we have used multiple sources and data points to compare and contrast installed robots worldwide.

See the footnote below for the definition of industrial robots.[7]

How many robots were delivered in 2014?

For the purpose of this article let’s take a look at the numbers for 2014 as legally reported in compliance documents and compare the legally reported sales of robots with the claim of approximately 229,000 delivered robots in 2014 as reported elsewhere and referenced above.

The top 4 industrial robot manufacturers

Yaskawa bill themselves as the leading Japanese robot manufacturer who: “introduced the first commercially available robot to the industry in 1977” and had delivered “cumulative shipments <since 1977> surpassing 290,000”[8] by the end of March 2014 and ‘more’ than 300,000 by the end of 2014.[9]

Yaskawa generated 136 billion Japanese yen (or about 1.13 billion U.S. dollars) in net sales revenue from its robotics segment for the year ended March 2015 according to its legally filed annual report. Which represents a nominal increase of approximately 9% on the financial year commencing from 1st April 2013 through to the end of March 2014. The various statements made by the company and financial income recorded by Yaskawa would indicate that they delivered between 19,000 and 21,000 industrial robots in the year to March 2015.[10]

The company has been very transparent on its production capacity and expects to add considerably to its production capabilities since it opened a new factory in China in 2013:[11]

In the robotics business, the production of robots at the plant in Changzhou, China, which was launched in May 2013, will be ramped up as annual production of approximately 4,000 units and annual production of approximately 6,000 units are planned for FY2014 and FY2015, respectively.

By which time (end of 2015) Yaskawa will have a total robot production capability of 2,500 industrial robots per month, or 30,000 per year:[12]

The breakdown of our production plan as of 2015 has changed from domestic production (Kitakyushu, Japan) of 1600 units per month and Chinese production of 900 units per month to domestic production of 2000 units per month and Chinese production of 500 units per month by shifting part of the Chinese production plan to domestic production.

Which represents a leap in production capabilities compared to the revenue recorded of approximately 21,000 robot sales for the year under review.

Before the addition of the China plant, Yaskawa had an annual production capacity of 19,200 robots in Japan (“Previously, we have produced robot bodies only in Kitakyushu Japan.”)[13]

The company has also expressed its hopes that this extra production capacity together with production in a new plant in Japan (Nakama City, Fukuoka Prefecture) which will begin in August 2015, will help it to increase its share of the global industrial robot market from 20% to 30%:[14]

At present, in the industrial robot global market, each of the top four companies including Yaskawa holds a share of around 20%. Although we boast of the highest cumulative shipping performance among our competitors, we have a desire to be an overriding leader by realizing a 30% share of the global market.

Based on the company records and production capabilities for 2014 we can safely estimate that they delivered 21,000 industrial robots from 1st January 2014 to 31st December 2014.

If 20% of the robot sales equals 21,000 what are we to think?

If we are to believe that Yaskawa deliver 20% of industrial robots per annum we could stop our analysis assuming that the top 4 companies have approximately 80% of the market and annual sales of circa 18,000 to 22,000 on average each, and thus the total market had global annual sales and production capability of approximately 110,000 at the end of 2014. In other words based on Yaskawa’s claim of producing 20% of the global robot sales and 3 others produce an additional 60% — this 110,000 is considerably lower than the 225,000 robots delivered as otherwise reported. However, we can’t take one companies word for it and proceed with our analysis of what other manufacturers in the sector state.

Assessing the other leading robots makers legal submissions

In it’s legally filed compliance document “ABB Annual Report 2014”, the company states:[15]

ABB is a leading supplier of industrial robots and modular manufacturing systems, and has installed more than 250,000 robots worldwide.

Which interestingly is a similar number declared in the legal compliance document “ABB Annual Report 2013” for the financial year ended 31st December 2013:[16] “Since 1974, ABB has delivered 250,000 robots for a wide variety of industries.” The difference between the two statements is ABB’s use of the phrase “more than” in its 2014 filing. The number of 250,000 is however 60,000 more than the: “190,000 installed worldwide,” reported on it’s legally compliant corporate website on 7th July 2011 and elsewhere.[17]

Let’s keep in mind the ‘more’ than 250,000 of total delivered robot units since they began production of robots in 1974 up to the end of 2014

Now let’s take a look at several other factors; a) ABB’s stated reorganization in the robotics division during the 3 and half year period from mid 2011, b) the long lead times from receipt of orders to delivering the final products, c) ABB’s annual manufacturing capabilities for robots, and d) numbers from ABB’s reported revenue indicators from their annual reports and SEC filings from 2004 through 2014. In 2013 and 2014 these data points indicate ABB had annual revenue applicable to sales of a maximum of 22,000 robots each year (2013 and 2014).

As a side note — it is also worth noting that ABB indicates in its 2014 annual report that sales for the division responsible for robotics grew by 2% from 2013 to end of 2014 (it is possible robotics grew more within this division and other automation products performed lower comparatively). See for example ABB’s statement in its SEC 20F filing for the year ended 2014:

Supported by growth in the second half of the year, orders in the Discrete Automation and Motion division grew 2 percent (2 percent in local currencies), as higher orders in the Robotics business and the positive impact of acquiring Power-One.[18]

What we can decipher from the numbers reported is that delivered robots, those actually sold and counted in revenues appear to have grown in the single digits versus 2013. This is similar to the single digit growth numbers reflected at Yaskawa of 9%.

Additionally ABB is very diligent at formally announcing robot sales orders received and providing many case studies of companies using its robots. Through these legal press releases, whilst for multiple reasons not all sales orders of robots are announced, we can further build our understanding of the activity related to orders received and clients usage of ABB’s robots – and therefore ascertain extra data when arriving at the number of total robot sales.

Building the numbers

Now we know that ABB and Yaskawa, arguably among the largest providers of industrial robots, and both of whom delivered and recorded sales revenue of 22,000 robots and 21,000 robots respectively in 2014 or 43,000 collectively, and thus (theoretically) 40% of total robots delivered, how did the other robot manufacturers perform and what are the real total annual sales of industrial robots?

Like Yaskawa, Fanuc headquartered in Japan commenced commercial production and shipment of Robots in 1977. For the fiscal year ended 2015 Fanuc recorded sales of Japanese Yen 181,988 millions or USD 1,516,567.[19]

This represents sales of approximately 24,000 to 26,000 robots in the year reviewed, based on competitive sales analysis and recorded knowledge of individual robot costs.

Fanuc, who uses many of its own robots producing robots states, that it’s “Robot Factory has a capacity to produce 5,000 robots a month.”[20] Which would give it the largest production capacity of all current robot manufacturers. However as it’s sales revenue for the robot division shows over the last 10 years, it has not reached this level of production capability, currently producing less than 2,000 robots per month. Which is a significant increase on the 200 to 250 per month the company was capable of producing in 1984.[21]

To help with our analysis of global sales of industrial robots Fanuc claims it has “250,000 robots installed worldwide,” since it began deliveries in 1977.[22] From the companies reported revenues between 2004 and 2014 we can see that 180,000 of these units were delivered over this 10 years period or an average of 18,000 per year (an average which is skewed as it reported sharp declines in robots sales between 2008 and 2011).[23]

For our 2014 compilation, allowing for annual growth and based on the review of Fanuc’s legal annual report we will consider that they delivered 26,000 industrial robots in 2014.

At this stage we can reasonably estimate from the above three companies stated data, albeit some of it marketing material, that they have collectively delivered approximately 800,000 robots since they began deliveries more than 38 to 40 years ago. In the case of Yaskawa circa 300,000 since 1977, ABB claiming 250,000 since 1974 and Fanuc stating 250,000 since 1977. Are we to believe that this 800,000 represents 60% of all robot sales, since robots sales began? The manufactures seem to indicate this to be the case.[24]

Now we turn our attention to Kuka robots of Germany.

Kuka is another company that indicates in its legal annual reports that it delivers 20% of the world’s industrial robots. Kuka also offers us detailed data on its current and target manufacturing capability numbers in its 2014 Annual report.

The goal is to produce more than 20,000 robots per year,” says Andreas Ostermann von Roth, Executive Vice President Operations at KUKA Robotics.[25] And later we read that according to Sebastian Bodenmüller, head of robot production ‘the target number of robots was produced even before 2014 drew to a close.[26]

This would hold up to other statements by Kuka in the same 2014 annual report.

Back in 2013 and during the year under review (2014), annual production capacities in Augsburg were increased from 15,000 robots previously to a current level of up to 22,000 (as at end March 2015).[27]

In addition during 2014 Kuka’s newly opened factory in shanghai China began an annual production of 3,000 Kuka Robots.

Kuka’s order book for 2014 was only slightly ahead of 2013 (by approximately Euro €12 million) as can be understood from this statement in Kuka’s 2014 annual report:[28]

KUKA Robotics exceeded the orders received in 2013 of € 793.5 million with a total of € 805.5 million in 2014. The orders from the automotive industry totaled € 327.9 million in 2014 (previous year: € 318.3 million). Orders received from general industry continued to remain at a high level at € 315.0 million, yet were slightly below the value for the previous year of € 330.9 million.

However Kuka Robotics recorded sales revenues of € 834.6 million (USD $ 941 million) for the year ended 2014, which would indicate delivery of approximately between 18,000 to 20,500 robot units for the year under review.

We will consider the top end and add 20,500 to our list of robot units delivered in 2014.

After the addition of the Shanghai factory and increases in Augsburg Kuka indicate that they will have an annual production capacity of 25,000 robot units.

Total robots delivered over the last 10 years

Crucially, with respect to the ten year period we are assessing, the sales reported in annual reports and associated legal compliance documents for each of these 4 companies indicate that between 2004 and 2014 they have collectively delivered approximately 640,000 robot units over the 10 years analyzed. Representing approximately 80% of total robot sales during the period.

Total robots delivered by top 4 manufacturers in 2014

Now we know that the top 4 manufacturers, who combined supply approximately 80% of the industrial robot sales, delivered robot units as follows in 2014:

Manufacturer   Total delivered
Yaskawa 21,000
ABB 22,000
Fanuc 26,000
Kuka 20,500
Total delivered 89,500

Which effectively would indicate that the total number of industrial robot sales for 2014 was approximately 112,000 units – If as these manufacturers suggest they each have 20% of the market.

How many robots have these companies delivered since they began making robots?

Our analysis has covered all know manufacturers of and their claims of total robots delivered since robots entered the factory floor – as one snapshot we can see that the following manufacturers have delivered approximately 920,000 robots.

Manufacturer Total stated as delivered by manufacturers over approximately 40 years to the end of 2014
Yaskawa 310,000
ABB 260,000
Fanuc 250,000
Kuka 100,000
Total delivered 920,000

Note this 920,000 represents ALL units delivered since these 4 manufacturers began delivering robots, in some cases over a 40 years period.

Robot sales not as high as thought

We analyzed the above companies together with sales and production capabilities of other robot manufacturers such as Kawasaki (claims to have delivered 100,000 units since it began production), Hitachi, Nachi, Stäubli, China’s LXD Robotics, robots’ that are ‘self-built’ by companies such as Foxconn and many others.

What we found

Based on our analysis of legal compliance documents and other sources indicated above – we consider that Yaskawa, ABB, Fanuc and Kuka supply closer to 70% of the world robot market in 2014 (not 80% as claimed) and there were approximately 128,000 industrial robots delivered in 2014.

We also discovered by compiling multiple data sets that could be replicated that there are currently 850,000 installed and operational robot units in service worldwide.

The future – How many robots can be built per year?

The total robot manufacturing capabilities for 2015 of these 4 manufacturers are:

Manufacturer Total manufacturing capability for 2015
Yaskawa 30,000
ABB 25,000
Fanuc 50,000
Kuka 25,000
Total delivery potential 130,000

Despite the current manufacturing capacity for all robot manufacturers being approximately between 180,000 to 200,000 units per annum we believe that this number will increase significantly with the advent of the smaller, more lightweight robots such as YuMi from ABB, Baxter from Rethink Robotics, Inc. Universal Robots and other lightweight models from existing manufacturers, which will greatly increase the number of robots installed worldwide and lead to further job displacement.

Call for National Statistic Offices to assess robot impacts

To overcome the hype cycle of claims and counter claims we need a truly objective database of robots installed and operational. This is something we believe that national governments should be doing as a matter of urgency through their national statistics offices to closely monitor the impact of robots on total factor productivity, employment and wages.

Notes.

This is an abridged discussion of a far more detailed report produced by Robotenomics for our clients.

This specific analysis excludes other robots such as automated guided vehicles (AGV’s) as seen for example in Amazon, Inc. dispatch centers).

[1] Thomas Piketty, Capital in the Twenty-First Century (2014, page 437)

[2] Thomas Piketty, Capital in the Twenty-First Century (2014, page 10)

[3] International Federation of Robotics – 2014: By far the highest volume ever recorded (Last accessed 15th October 2015 – http://www.ifr.org/industrial-robots/statistics/)

[4] “Industrial robot sales increased from about 179,000 in 2013 to around 225,000 in 2014, mainly due to decreased demand in the motor vehicle manufacturing industry.” (http://www.statista.com/statistics/264084/worldwide-sales-of-industrial-robots/) and “Sales go through the roof” – “Based on the preliminary results of the global statistics on industrial robots, the IFR estimates that about 225,000 units were sold in 2014, 27% more than in 2013.” (IFR International Federation of Robotics – http://www.ifr.org/news/ifr-press-release/global-survey-703/ both links accessed on 5th October 2015)

[5] International Federation of Robotics – 2014: By far the highest volume ever recorded (Last accessed 15th October 2015 – http://www.ifr.org/industrial-robots/statistics/)

[6] G. Graetz and G. Michaels , Robots at Work. Centre for Economic Performance
London School of Economics and Political Science (Last accessed 15th October 2014 http://cep.lse.ac.uk/pubs/download/dp1335.pdf)

[7] For the purpose of defining a robot we have used the International Organization for Standardization as defined by ISO 8373 which refers to a manipulating industrial robot as: “An automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes, which may be either fixed in place or mobile for use in industrial automation applications.” And further defined by the International Federation of Robotics as: “An automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes, which may be either fixed in place or mobile for use in industrial automation applications. Reprogrammable: whose programmed motions or auxiliary functions may be changed without physical alterations.”

[8] Yaskawa Report 2014, page 15 (Last accessed 6th October 2014 at http://www.yaskawa.co.jp/wp-content/uploads/2014/12/ar2014e1.pdf

[9] Yaskawa Motoman corporate profile (Last accessed 6th October 2015 http://www.motoman.com/about/corporateprofile.pdf)

[10] Yaskawa Report 2015 (Last accessed 5th October at http://www.yaskawa.co.jp/en/wp-content/uploads/2015/01/ar2015_E.pdf)

[11] Yaskawa Report 2014 (Last accessed 6th October 2014 at http://www.yaskawa.co.jp/wp-content/uploads/2014/12/ar2014e1.pdf

[12] Ibid

[13] Ibid

[14] Ibid

[15] ABB Annual Report 2014 | Customer segments (page 19) – Last accessed online 5th October 2015 at http://new.abb.com/docs/default-source/investor-center-docs/annual-report/abb-group-annual-report-2014-english.pdf

[16] What ABB does | ABB Annual Report 2013 (Page 12) – Last accessed online 5th October 2015 at http://www02.abb.com/global/seitp/seitp255.nsf/0/74b9eafca5502c14c1257c850037b8f8/$file/ABB+Group+Annual+Report+2013_English.pdf

[17] “ABB has installed more than 190,000 robots worldwide.” (Archived 3rd July http://web.archive.org/web/20110707074107/http://www.abb.com/product/us/9AAC910011.aspx – on 7th July 2011 and accessed 5th October 2015).

[18] ABB -SEC Filings 20F report 2014 – http://new.abb.com/docs/default-source/investor-center-docs/sec-filings/abb-ltd-2014-form-20f.pdf last accessed 6th October).

[19] Fanuc Annual Report to 31st March 2015, page 29 (Last accessed 6th October 2015 – http://www.fanuc.co.jp/en/ir/annualreport/pdf/annualreport2015_e.pdf)

[20] Fanuc corporate website (Last accessed 6th October 2015 http://www.fanuc.co.jp/en/profile/production/factory1.html)

[21] The International Robot Industry Report. By John Mortimer, Brian Rook

[22] Fanuc EU corporate website, About Us, History (Last accessed 6th October 2015 http://www.fanuc.eu/uk/en/who-we-are/fanuc-history)

[23] See for example Fanuc corporation annual report for 2013 (Last accessed 6th October 2015 http://www.fanuc.co.jp/en/ir/annualreport/pdf/annualreport2013_e.pdf)

[24] Note also that most manufacturers indicate the current life span of an industrial robot is 10 to 12 years.

[25] Kuka Annual Report 2014, Page 15 (last accessed 6th October 2015 – http://www.kuka-ag.de/res/AG/financial_reports/2015/kuka_gb14_e_s.pdf )

[26] Ibid. Page 16

[27] Ibid. Page 23

[28] Ibid. Page 25

Photo credit – Tobias Mikkelsen (Car Factory Assembly Line) Creative Commons on Flickr

Japan’s government holds first “robotics revolution council” meeting

The Japanese government has held the first meeting of a new panel focused on its goal of a “robotics revolution,” a key item in the government’s economic growth strategy adopted in June.

The robot revolution panel is tasked with promoting measures to increase the use of robots and related technologies in various fields, extending out of the manufacturing sector and into hotel, distribution, medical and elderly nursing-care services. The appropriate use of robots will be a key to solving these problems, according to Prime Minister Shinzo Abe who instigated the robot panel.

Despite Japan being a leader in the field of industrial robots, companies still rely heavily on human labor, making it difficult to secure enough workers and blocking efforts to improve productivity. Prime Minister Shinzo Abe instructed ‘the robot revolution council:’

“To work out a strategy for using robots as the key means to solve labor shortages amid the declining birthrate and aging population, low productivity of the services sector and other challenges plaguing Japan and for developing the robot industry into a growth sector to explore global markets.

Adding his hope that the government will seek to make Japan a showcase for robots in service for various areas ahead of other countries by 2020.

The government said Japan will double its robot-related market to ¥1.2 trillion (US$11.3 billion) by 2020 in the manufacturing sector and achieve a 20-fold jump in the non manufacturing sector, also to ¥1.2 trillion (US$11.3 billion).

A government paper lays out the factors behind the robot revolution with respect to manufacturing, stating:

The Government will seek to improve (factory) productivity through the utilization of robot technology, thereby improving the profitability of companies and helping to raise wages.

The panel, chaired by Mitsubishi Electric Corp. consultant Tamotsu Nomakuchi, will work out a five-year plan to be presented by the end of 2014, with details on how they will achieve the numerical targets.

The robot council will also discuss the legal regulations needed to promote the use of robots and related technologies.

Study indicates Robots could replace 80% of Jobs

PerezIn a few decades, twenty or thirty years — or sooner – robots and their associated technology will be as ubiquitous as mobile phones are today, at least that is the prediction of Bill Gates; and we would be hard-pressed to find a roboticist, automation expert or economist who could present a strong case against this. The Robotics Revolution promises a host of benefits that are compelling (especially in health care) and imaginative, but it may also come at a significant price.

The Pareto Principle of Prediction

We find ourselves faced with an intractable paradox: On the one hand technology advances increase productivity and wellbeing, and on the other hand it often reinforces inequalities.

A new study due to be published in the forthcoming Oxford Handbook of Skills and Training by Stuart Elliot visiting analyst at the Organisation for Economic Co-operation and Development (OECD), who incidentally is on leave from the Board on Testing and Assessment of the National Research Council, indicates that technology could replace ‘workers for 80 percent of current jobs.’

In his study Elliot relies on advances in speech, reasoning capabilities and movement capabilities to illustrate how robots and technology can replace jobs. I am in agreement with the general thoughts of the study, although I believe speech recognition is now far more advanced than Elliot states. This element alone will lead to a reduction in many jobs, such as translation over the next five years.

Elliot is not the first to claim that robotics and technology will have such a profound impact on employment or inequality. Michael Hammer, a former MIT professor and prime mover in the restructuring of the workplace in the 1990’s estimated that up to 80 percent of those engaged in middle management tasks were susceptible to elimination due to automation.

In the book Average is Over Professor Tyler Cowen also predicts a hollowed-out labor market, devoid of middle-skill, middle-wage jobs, where 80% or more of our citizens will be unable to prosper. They will become a permanent underclass, unable to improve their lot.

This ‘underclass’ may be happening sooner than Cowen predicted. While there are ‘short term’ adjustments in the employment numbers, the majority are in the low-paying sectors, 73% of ‘new’ jobs are in the bottom of the wage pyramid and temporary employment positions rather than permanent.

The US Bureau of Labor Statistics estimates that among the most rapidly growing occupational categories over the next ten years will be “healthcare support occupations” (nursing aides, orderlies, and attendants) and “food preparation and serving workers” – overwhelmingly low-wage jobs.

Projected job marketAs recent as last month the FT reported that: “New technologies are transforming the structure of the US economy but creating only modest numbers of jobs, according to the biggest official survey of businesses, conducted only once every five years.”

In the book Race Against The Machine the authors state: “Digital technologies change rapidly, but organizations and skills aren’t keeping pace. As a result, millions of people are being left behind. Their incomes and jobs are being destroyed, leaving them worse off.”

Speaking at the World Economic Forum in Davos earlier this year, Google’s Eric Schmidt warned that the problem of new technologies substantially changing and replacing jobs will be “the defining one” for the next two or three decades.

Thinking machines

Increasingly, machines are providing not only the brawn but the brains, too, and that raises the question of where humans fit into this picture. Earlier this year, Jörg Asmussen State Secretary in the German Ministry of Labor and Social Affairs emphasized this trend when he said:

“Digitization, or the “second machine age” (as in the title of the best seller by Erik Brynjolfsson and Andrew McAffee), has only just begun. It is in the process of relieving and ultimately replacing first our physical and then our intellectual labor. This trend will be a threat to brainworkers such as accountants and stock-market traders. And check-out clerks at supermarkets will also soon be a thing of the past.”

Echoing this, Randall Parker, Professor of Economics at East Carolina University, recently wrote:

“Robots and other automated equipment have increased factory automation so much that factories are a dwindling source of all jobs. The next big target for automation has been and continues to be office work.”

In the US manufacturing sector there was a solid increase in sales of 8 percent between 2007 and 2012 but with significant falling employment, the industry shed 2.1m jobs and its payroll dropped $20 billion.

Approximately one out of 25 workers in Japan is a robot, this is in part due to a growing elderly population and declining birthrates, which mean a shrinking workforce, but it is also a fact that global business seeks to drive productivity, efficiency, and effectiveness to new heights with robotics.

This time is different, or maybe not

In his seminal book, The Enlightened Economy, Joel Mokyr argued that: “in Britain the high quality of workmanship available to support innovation, local and imported, helped create the Industrial Revolution.” Dig a little further and Mokyr refers to: “the top 3 to 5 percent of the labor force in terms of skills: engineers, mechanics, millwrights, chemists, clock and instrument makers, skilled carpenters and metal workers, wheelwrights, and similar workmen.”

It was a small minority of the working population that had the skills to help advance the Industrial Revolution, others had to learn new skills to adapt to the technology changes. This time is no different. Just as each revolution sets a higher potential level of productivity each revolution requires a new set of skills to overcome the resistance of the old paradigm, which is deeply embedded in the minds and the practices.

Despite the job losses in the US manufacturing sector factories are increasingly employing more skilled engineers to tend complex equipment and at higher wages, Annual payroll per employee in the manufacturing sector rose from $45,818 in 2007 to $52,686 in 2012.

It’s time to act

Robotic hardware, Artificial Intelligence, automated software and connected networks are only going to get more powerful and capable in the future, and have even bigger impact on jobs, skills and the economy.

The message for all of us can be summed up in a quote from Abraham Lincoln’s second address to Congress.

“As our case is new, so we must think anew, and act anew.”

In his paper Elliot raises a very good question: “Even if alternative jobs are available, how will the displaced workers acquire the necessary skills for the new tasks?” This should be a wake up call. All of us must give serious consideration to our future and learn the skills that will give us the best chance of working WITH the machines. I’ll repeat Lincoln’s statement, since that’s the big takeaway. “As our case is new, so we must think anew, and ACT anew.” These are exciting and challenging times…

The rise of industrial robots and decline of manufacturing jobs

BofA Merrill Lynch chief investment strategist Michael Hartnett – the one who coined the term “Great Rotation” — in a note to clients writes about where they are forecasting growth in 2014:

“BofAML’s tech analysts favor innovative hardware, the socially mobile consumer and cloud collaboration as their big 2014 themes. We are long tech but wary of the close correlation between Internet stocks and central bank liquidity.”

In an interview he added Tech innovations like 3-D printing, big data & the cloud are primed to fuel corporate growth in 2014 with more and more investments.

The client letter also included this chart indicating:

“The rise in the use of industrial robots and the decline in the number of manufacturing jobs for human beings.”

This is very much in line with my article on the significant increases in orders for industrial robots.

Long Robots short human beings

Original source: Business Insider – H/T Ruben Harris

The future of work in the Robot economy

50 years ago, author Isaac Asimov prophesized about the future: “What will the World’s Fair of 2014 be like?” he wrote in the New York Times. “I don’t know, but I can guess.”

His essay forecast everything from self-driving cars:

“Much effort will be put into the designing of vehicles with ‘Robot-brains’”

To Keurig machines:

“Kitchen units will be devised that will prepare ‘automeals,’ heating water and converting it to coffee.”

To photochromic lenses:

“The degree of opacity of the glass may even be made to alter automatically in accordance with the intensity of the light falling upon it.”

But Asimov’s most impressive prophecy had less to do with gadgets than perceiving what that progress would mean for society.

”The world of A.D. 2014 will have few routine jobs that cannot be done better by some machine than by any human being,” he wrote. Later, he added, ”The lucky few who can be involved in creative work of any sort will be the true elite of mankind, for they alone will do more than serve a machine.”

A proliferation of new books, scientific studies, newspaper and journal articles are informing us that it was advances in technology and automation that have contributed to the extended period of unemployment that continues in the Great Recession. They tell us that robots will take our jobs, with headlines such as: “How Technology is Destroying Jobs[i]“Will Robots Steal Your Job?  You’re highly educated. You make a lot of money. You should still be afraid[ii].” We read that: “Factories have replaced millions of workers with machines.[iii]

Automation and other productivity improvements are expected to have eliminated 2.2 million business-services jobs in the United States and Europe from 2006 to 2016, at a rate of about 200,000 jobs annually, according to the Hackett Group, a Miami-based consultancy.

The Economist magazine calls this the “Third Industrial Revolution[iv].” I call it the Robot Economy, one that millions can and should benefit from and thereby avoid being displaced with what the brilliant Joseph Schumpeter termed ‘the inevitable creative destruction‘ that will lead us out of the great recession.

Over the last 20 years there has been incredible advances in automation. Windows 3.1 was released between 1992 and 1994, the first viable desktop publishing program which catapulted more and more individuals and businesses to begin using computers. In 1993 the Internet was in its infancy, used mainly by some government department and universities – it is only in the last 10 years that internet communication has taken off and streamlined many business processes; just look at banking and airline/travel reservations. It is as recent as 2009 that we began to see the widespread use of smartphones. Manufacturers assembly lines have largely replaced people with machines.

In short technology has advanced at a vast pace and the advantages technology has brought to automating processes and improving daily tasks within homes and businesses has had a significant impact on reshaping the workplace – eliminating many jobs, whilst creating new ones.

It’s not just that the old economy, built on factory work and mid-level office jobs, has stagnated. It’s that the nature of work itself is changing, largely because of the increasing power of intelligent machines and new evolutionary companies, such as Google, Tesla and Amazon and bell-weather IBM with their Watson artificial intelligence platform.

We may all immediately think of machines and automation as common features in factories, but also consider the insurance sector, in the UK alone some 75% of car insurance is now purchased online, just one example of a multi billion dollar industry that has considerably automated its sales reach and in so doing eliminated the job of the door-to-door friendly neighborhood insurance salesman.

Smart software is transforming almost everything about work, and ushering in an era of a new meritocracy. It makes workers redundant, by doing their work for them. It makes work more unforgiving, by tracking our mistakes. And it creates an entirely new class of workers: people who know how to manage and interpret computer systems, and whose work, instead of competing with the software, augments and extends it. Over the next several decades wages for that new class of workers will grow rapidly, while the rest will be left behind.

A recent scientific study indicated that people with ‘numeracy’ skills are likely to fair better in the workplace than those with literacy skills. On average people with 1 basis point more in numeracy skills earn 18% more than those with literacy skills. Clearly numeracy skills are essential for people programming the algorithms that are driving the robot economy through software.  I’ll write more about this study in the coming weeks as I am not so convinced and creative types with marketing and psychology skills will be much in demand as Professor Tyler Cowen has written in his book Average is Over.

Finally back to Asimov, who also wrote in his essay Whatever you Wish: “It may be that machines will do the work that makes life possible and that human beings will do all the other things that make life pleasant and worthwhile.

Will we have and want more leisure time? Having meaningful work that stimulates and challenges the mind is something I certainly I hope to continue to do – isn’t that something most of us want?

Robot manufacturers report significant growth in orders and revenue

As the world economy continues to trickle forward and record nominal growth the industrial robotics-manufacturing sector is growing at record levels with some robot manufactures reporting year on year growth from 18% to 25%.

Kuka RoboticsABB the $39 billion turnover power and automation technology company reported in their annual report for the year ended 2012: “Strong order performance in robotics.” Further adding: “Increase in large orders for robotics.” During each of the 3 quarterly reports so far in 2013 ABB have indicated: ‘robotics orders are up.’ And “Revenues reflect execution of strong order backlog, especially in robotics.”

The discrete automation and motion division, which includes robotics, had approximately 29,300 employees and generated $9.4 billion of revenues in 2012 – it is unclear how much robotics contributed to sales but it is clearly reported that robotics is the sector that is growing most.

The strong growth in the Discrete Automation and Motion division reflected continued demand for energy-efficient automation solutions leading to an increase of 63 percent. While all businesses contributed to the increase in orders in that division, Robotics (and power electronics) posted the highest growth rates.

And

Revenues rose in the Discrete Automation and Motion division, as the Robotics business continued to grow at a double-digit rate in 2012.

The Robotics business also “grew at a double-digit pace in 2011.”

ABB also reported the highest increase in EBITDA was due to “the Robotics business.”

In 2012, orders (across the group) were flat due to slower industrial growth globally in a more challenging macroeconomic environment.  Lower demand from the renewable energy sector was offset by increased volumes from large orders in other sectors.

The highest growth was achieved in the Robotics business due to several larger automotive orders.

Later adding: “Robotics orders increased due to improving demand in automotive and general industry sectors.” Further emphasizing business growth came from the robotics division: “The highest increase (in orders) came from the Robotics business.”

During the second quarter of 2013 the Precision Machinery division of Kawasaki Heavy Industries reported:

Consolidated orders received increased ¥6.1 billion ($58.6 million) year on year to ¥61.7 billion ($592 million), largely by virtue of growth in robot orders from the auto industry and orders for cleaning robots for semiconductor production lines.

In the first quarter of 2013 the same division of indicated additional growth:

Consolidated orders received grew ¥1.2 billion ($11.5 million) year on year to ¥29.8 billion ($286 million). The increase was largely a net result of growth in robot orders from overseas automobile manufacturers.

German headquartered Kuka Robotics, who it is thought have 7% of the industrial robotic market, showed remarkable growth between 2011 and 2012 for their industrial robots:

Their robots (excluding robot services) order book increased by 22.7% from Euro 654.4 million ($894) in 2011 to Euro 803.1 million ($1.1 billion) in 2012. And actual sales revenue increased by 20.5% from Euro 616.3 million ($842.6) in 2011 to Euro 742.6 million ($1.015 billion) in the financial year 2012.

Combining the robot manufacturing with robotic services is even more impressive. Kuka reports combined revenues for their robotics sales and service orders as increasing by 22% to Euro 1.89 billion (2.58 billion) and sales revenues increasing by 21% to Euro 1.74 billion ($2.38 billion).

Yaskawa the Japanese conglomerate recently reported robot sales of 58.6 billion yen ($506.2 million) for the first six months of 2013 up 7.9% against the previous year.

For the financial year ended 2012 Yaskawa had reported a 9.1% increase in sales revenue for its robots up to 110.2 billion Yen ($1.05 billion). Effectively recording more than 18% increase in eighteen months

Another Japanese manufacturer Fanuc indicated growth for robot orders for the six months ended September 2013: “Looking at the performance by business group, the FA Group posted consolidated sales totaling ¥109,645 million, up 2.0%, the Robot Group posted consolidated sales totaling ¥73,619 million, up 25.0%. Bloomberg provides a comprehensive directory of approximately 110 industrial robot companies many of whom are reporting significant increases in revenue as manufacturers seek to automate much of the supply chain.

According to an International Federation of Robotics (IFR) study of World Robotics conducted in 2012, there were at least 1.15 million operational industrial robots by the end of 2011. This number is expected to increase by over 36% to 1.58 million by the end of 2015. Other reports indicate the market is currently worth $17 billion per year, and is expected to cross $37 billion by 2018, excluding services.

The figures reported by the robot manufacturers in their financial releases would appear to support this growth.

Whilst some jobs will be displaced due to the increased rollout of robots in the manufacturing sector, many will also be created as robot manufactures recruit to meet their growing demand and jobs that were previously sent offshore are brought back to developed countries, such as Apple manufacturing its Mac Pro in America.

The future looks bright for robotic manufacturers and those skilled in developing and working alongside the machines.