Simon Clements

The Cobot revolution

Simon Clements

Rising interest in robotics and artificial intelligence is broadly seen as a double-edged economic sword, improving efficiency for many companies but potentially putting thousands of people out of work. For sustainable investors, that trade-off is a poor one and the debate around automation looks set to be a key battleground over the coming years.

What appears undeniable is the fact we are standing at the beginning of a new industrial revolution, with lines blurring between the physical and digital world. In that context, we continue to explore opportunities in the area of collaborative robots or Cobots, a small subsector but one that currently has minimal impact on the global workforce.

In simple terms, Cobots are designed to work alongside humans rather than replacing them, which also tends to be much cheaper than fully automated factory lines – tens of thousands of dollars rather than millions.

While robots are effective at repetitive actions, they tend to struggle with more complex and delicate tasks: it takes a robot 20 minutes to fold a towel for example. Bringing Cobots into the production line can free up people for work that requires ingenuity and manual dexterity rather than precision and stamina.

While there is structural growth potential in more traditional automation, the real inflection point – and supernormal growth – is evident in the Cobot market. According to Deloitte, only 9,000 of 300,000 robots produced last year were Cobots but this market is expected to grow close to 50% per annum up to 2025, compared to 12% for industrial models. 

Key drivers in this growing penetration have been the falling price of robots overall alongside rising labour costs, plus the importance of efficiency in areas such as consumer electronics and logistics. Estimates suggest the cost of a Cobot has fallen from $150,000 in 2010 to $24,000 today and this is expected to keep dropping.

Amazon was one of the early movers on Cobots, buying manufacturer Kiva in 2012 and renaming it Amazon Robotics. The sheer scale of volumes this type of company faces means finding cost-effective ways to improve output and efficiency is vital. And after Amazon stole a march on its competitors, Cobots are becoming critical for peers as they attempt to compete with its increasingly efficient delivery network.

Elsewhere, a study from academics at MIT looked at BMW’s plant in the US, where Cobots are now working alongside humans on the factory floor. The Cobots come from Danish company, Universal Robots, and their job on the production line is to roll a layer of protective foil over electronics inside the door. This task can lead to repetitive strain injuries when done by hand but Cobots can do it quickly and in a line next to humans. MIT’s research showed humans and robots working together are 85% more efficient than either alone, as their introduction is so effective in reducing human idle time. 

Improved safety is another plus point, with Cobots able to take on repetitive, dangerous and dirty jobs, such as lifting heavy objects. The emergence of vision and sensor technology means these robots can detect humans, and unlike large enclosed automation models, they tend to operate at slower speeds so the risk of workplace accidents is significantly reduced. 

Despite obvious benefits however, the risk to jobs – the replacement argument – understandably remains the most divisive factor when it comes to wider acceptance of robots in the workplace.

Recent data from the OECD estimated that only 14% of jobs are actually at high risk from automation, while a further 30% will face major changes in the tasks required. This is much less than previously estimated, with claims that up to 75% of all jobs could ultimately be automated.

Cobots are clearly less likely to cause direct displacement of jobs than fully automated lines and data from a Gartner study suggests the former could create 2.3 million jobs by 2020 while only replacing 1.8 million. 

To quote MIT director Erik Brynjolfsson: “Most jobs will be partly affected by machine learning, but there will be things that humans need to do. Instead, the future will likely involve partnerships between humans and machines to more efficiently get work done. Rarely will we completely wipe out entire job categories.”  

In terms of investment opportunities, we currently hold Japanese company Keyence across the SF Global and Managed funds, which supplies the sensors and machine vision technology critical to Cobots. It is the global leader in this type of technology and a core position across our portfolios.

Making up just 3% of robots produced in 2018, Cobots remain a small corner of a growing industry. But we see major growth potential in this exciting area of automation and believe it can bring some tangible benefits from a sustainability perspective, improving efficiency and workplace safety while creating more jobs than it displaces.

Around 70% of the world’s manufacturing is done by small and medium-sized businesses and with the majority of this yet to be automated, Cobots look set to play a vital role as these business shape up for the future.

 

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Monday, July 9, 2018, 11:17 AM