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Future Themes | Science

Robots won’t take our jobs (and other reasons to be excited about factory automation)

David Reid, CFA, Equity Research Analyst
Angel Pan, CFA, Research Associate
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PROGRESS IN FACTORY AUTOMATION IS POISED TO DRIVE SIGNIFICANT OPPORTUNITIES FOR INDUSTRIES AND TO HAVE BROAD IMPACTS ON THE ECONOMY AND SOCIETY AS A WHOLE. These fascinating and rapidly evolving innovations raise key questions for the future. What needs to happen to enhance human/robot collaboration in factories? What role will software play in future factories? Will robots reduce or increase human employment opportunities? How will business models evolve? And what broader economic and social implications could this create?

In this paper, we answer these questions by profiling three key areas in the future of factory automation:

  • Collaborative robotics: We explore the current opportunities, limitations, and potential solutions of human/robot collaboration on the factory floor.
  • Industrial software revolution: We highlight the impacts of smarter software, such as greater flexibility and predictive maintenance. In addition, we explore the potential for changing business models and consolidation within the sector.
  • Economic and social implications: We discuss the labor market and social implications of higher levels of automation, including thoughts on robot taxes and reskilling.

Finally, we share the investment implications these compelling innovations present.

Collaborative robotics

Collaborative robotics has humans and robots working side by side on the factory floor. There is huge untapped potential for automation on factory floors, in our view, as manufacturing has thus far only embraced robotics at a low level. If we use robot density as a proxy for automation adoption, there are currently just 110 robots per 10,000 factory workers on average.1 Notably, there is a relatively high concentration of robotics in one manufacturing industry: automobiles. One-third of the three million robots installed globally are in auto manufacturing; as technology advances, more industries may be able to move in this direction.

Autos and robots: Room to grow

The auto industry is still a significant area of potential robotics growth according to Dr. Henrik Christensen, a roboticist and professor at the University of California San Diego. Dr. Christensen notes, “Even automotive, which is thought of as the most robot-penetrated manufacturing process, only has roughly 10% of the manufacturing done by robots. The smaller, more flexible parts of the process are manual leaving a lot of room for growth.

The shift to factory automation is often framed in terms of increasing productivity while also addressing rising labor costs and aging populations. In addition to these drivers, automation penetration is also fueled by other long-term trends like a greater focus on quality, safety, and product individualization.

The significant opportunity collaborative robotics presents stretches far beyond hardware and the traditional mainstay consumer industries (such as autos and, to a lesser extent, electronics). The pandemic has acted as a catalyst for other industry changes that were already expected but have been moved forward, creating opportunities in areas such as…

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1Source: International Federation of Robotics, data as of September 2020.

Authored by
David Reid, CFA
Equity Research Analyst
Angel Pan, CFA
Research Associate