Why automation is poised to accelerate?
Why automation is poised to accelerate?
The level of automation is set for a sharp increase as innovation sparks a new smart manufacturing revolution. Covid-19 pandemic has brought the need for automation into the spotlight. Yet, we also see several structural reasons why automation is due to pick up.
Increased robotics innovation
Advances in robotics and artificial intelligence (AI) have created robots that can perform many more tasks than was previously the case. Improved embedded technology such as 3D vision systems means that robots can “see” where they are in space. This has led to the rise of “cobots” (collaborative robots) that can work safely alongside human employees and have a more advanced range of capabilities, mainly expanding into non-repetitive tasks.
With a wider range of capabilities comes a wider set of applications. Automation has previously been strongly associated with the car manufacturing sector, but increasingly robots are being used in tech and other industries like food & beverage production. The robots can now move out from behind the cage, and perform more flexible manual processes, such as assembly and inspection tasks.
Innovations in communications also play a key role in automation adoption. 5G and new wireless communications networks mean latency issues can theoretically be solved and could also enable the introduction of cloud powered AI to the equation, to further drive new markets for robotics.
In addition, as the innovations scale up, economies of scale mean the cost of producing and purchasing such robots will fall. As a result, they are likely to become more widely used across a broader range of industries as the economics makes them that much more affordable.
Rising focus on energy efficiency and sustainability
Recently, fiscal stimulus packages have been unveiled in developed markets to help turn around economies struggling with the pandemic. The overwhelming focus has been on sustainability and solutions to solve the climate change crisis as demand is re-stimulated.
We believe automation plays an important role in improving manufacturing productivity and therefore energy efficiency. For example, new innovations are helping reduce the need for human oversight on production lines, thus raising throughput, and lowering the amount of waste in production.
There are numerous reasons why companies would turn towards greater automation of their activities. Our Data Insights Unit’s survey showed that all types of companies were expecting their budget for industrial automation to rise in the next two to three years.
Rather than the manufacturing sector being the main driver of this, the survey found that warehousing and logistics companies are more likely to expect rising budgets, and therefore have more potential for growth in automation.
As investors, this is very interesting to us because it confirms that companies producing robots are not solely reliant on traditional automotive customers for growth. The demand is broadening to other areas of manufacturing, and moving out of the factory and into the supply chain and logistics network.
With recent innovations, robots are now more nimble than ever. They also have broader uses, meaning that automation demand is accelerating and becoming less cyclical.
Automation is just one area of the smart manufacturing investment theme. We also see great growth potential from advanced manufacturing hardware (like lasers), data and software analytics providers, advanced material suppliers, and domain experts, which are uniquely positioned in certain end markets to capture the value from these innovations.
Any security(s) mentioned above is for illustrative purpose only, not a recommendation to invest or divest.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Opinions stated are matters of judgment, which may change. Information herein is believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. Exchange rate changes may cause the value of the overseas investments to rise or fall. For risks associated with investment in securities in emerging and less developed markets, please refer to the relevant offering document.
The information contained in this document is provided for information purpose only and does not constitute any solicitation and offering of investment products. Potential investors should be aware that such investments involve market risk and should be regarded as long-term investments.
Derivatives carry a high degree of risk and should only be considered by sophisticated investors.
This material, including the website, has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.
- Everything you need to know about sustainable investing
- Navigating China’s “healthy bull market”
- How does an asset manager like Schroders actively influence the companies it invests in?
- How working flexibly can give investors an edge
- What does value investing have in common with Forrest Gump?
- Monthly markets review - August 2020