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Robotics is moving from concept to necessity as manufacturers confront labor scarcity, reshoring pressure, and rising demands for precision and efficiency. Developed markets need automation to offset labor shortages and improve cost competitiveness, while China’s shrinking workforce points to rising demand for labor replacement, echoing trends already visible in South Korea and Japan. Reflecting these structural shifts, the operational stock of industrial robots has doubled over the past decade, with Asia dominating both demand and supply (Figure 1).
Figure 1
Factory automation is where robotics is scaling today
We see attractive opportunities in companies benefiting from real-world demand, evidenced by rapid revenue growth and strengthening margins. Demand for factory automation is rising across electric vehicles, electronics, and precision manufacturing, driven by supply chain localization in high-cost labor markets such as the US and by aging workforces globally.
By contrast, while humanoid robotics continues to capture headlines — and we see potential in parts of the enabling supply chain — many end applications remain early-stage, with limited visibility on scalable or profitable deployment.
Physical AI expands opportunity
Physical AI — AI applied to machines operating in real-world environments — is expanding the capabilities of automation and robotics while helping reduce costs. It enables more complex tasks, such as assembling moving parts without halting production lines, and supports the creation of digital manufacturing sites, where simulations can reduce trial periods, shorten delivery times, and improve efficiency in real-world launches. In doing so, AI adds a structural growth driver to what has historically been a cyclical industry.
Japan’s leadership in global automation
Automation exhibits a favorable industry structure: high concentration, long product life cycles, high-margin service and software ecosystems. Together with high switching costs created by deep integration within factory production systems, these characteristics support durable customer relationships and help sustain margins.
Japan stands out as a key player. The country is home to multiple leaders, including within machine vision — the sensors enabling a robot to “see” and interact with the physical world. This is a critical enabling layer for robotics, quality control, traceability, and AI-enabled manufacturing. The market leader in this space benefits from accelerating revenues and gross margins that continue to rise, having been above 80% for a decade1. Improving governance and returns to shareholders provide an additional tailwind.
With structural demand accelerating and AI broadening the scope of what automation can achieve, Asia’s automation investment case is only strengthening.
1Source: Wellington Management and company financial statements as of April 2026.
The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed.
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