“We have always envisioned a world where robots make the lives of people safer, easier, and more productive,” Brain Corporation CEO Eugene Izhikevich noted in a recent press release. He was talking about Brain Corp’s role in helping businesses through the COVID-19 crisis. The San Diego-based company specializes in autonomy solutions for commercial robots. But Izhikevich’s aspirations for his company are gaining traction across the business world, and investors are taking notice.
AMR companies, notably those producing robots for use in e-commerce fulfillment, factories and warehousing, are experiencing a boom in investment. There was a strong growth driver even before coronavirus: AMR technology has come of age. It is advanced enough and matured (to some extent) to be applicable to a much wider range of functions than in the past, improving the cost and efficiency of product handling, and, as Brain Corp’s CEO said, improving the quality of life of the workforce. Now, COVID-19, which has ravaged so many business sectors, is set to be a new major driver. Widespread use of mobile robots on the factory floor or in the warehouse will help enable the effective social-distancing of a workforce, and will make companies more resilient to future, similar shocks by being less reliant on human labor.
Rather than replacing workers, the introduction of AMRs in the fast-growing warehouse and fulfillment center sector is often driven by the fact that there is a shortage of workers. Amazon tells an instructive story: in the past 5 years the company has rolled out 200,000 mobile robots in its warehouses but has seen a similar increase in size of its workforce.
The age of the autonomous mobile robot has arrived, and investors are seizing the day.
Acquisitions and High Multiples
In 2019, I reported on Shopify’s $450m acquisition of 6 River Systems, manufacturers of Chuck robots (Person-to-goods AMRs for use largely in E-commerce fulfillment). At the time I reported that, whilst the acquisition was not surprising, the eye-watering price paid was, given that it was 60 times the amount that 6 River Systems generated in revenue in 2018. What the price actually reflected, though, was the exponential growth predicted for the company in the next few years, as the potential of the Chuck robot is recognized, rising from a deployment of 200 robots in 2018 to an expected 2000 in 2020.
The high purchase price of 6 River Systems reflects a pattern. Valuations of AMR companies appear to be hugely inflated when compared to their current earnings, but massive growth is expected (and very likely) so investors are coughing up. The revenues of many of these companies are expected to increase 10-fold in the next few years.
Figures 1 and 2 below illustrate some recent investments in the sector:
Ramping Up. An Overview of the Investment Pattern in AMRs
Companies purchasing AMRs typically have two options for payment: Outright purchasing, or leasing. Most manufacturers and logistics companies go for the outright purchasing option, as they expect to hold on to the equipment for some time, thereby reducing the total cost of ownership of the kit. The rapid development in smart technology is, however, having a bearing on the choice of purchasing or leasing, with some companies preferring the flexibility that a lease arrangement will bring.
As seen in the image below, new investment by a company in AMRs follows a simple trajectory, starting with a small number of pilot machines in a single warehouse, and expanding to nationwide or global application of the technology.
Where is the Funding Going? Who Benefits?
The four main mobile robot approaches are conveying, Goods-to-Person (G2P), Person-to-Goods (P2G), Conveying and mobile picking. Goods-to-Person technology has attracted by far the most investment. Admittedly this is partly because it is typically the most expensive of the four solutions: it is the most capital intense, requires more infrastructure changes, and demands major investment, usually a minimum of $5m. But the other side of the coin is that it is also the most proven technology; in part simply because Amazon has invested such a significant amount in it that it has driven the entire market on by leaps and bounds. The chart below compares investment figures for the four main AMR technologies over the past four and half years.
Likely Next Developments
All sectors of the autonomous mobile robot market are likely to benefit from the significant growth that is forecast. The expectation is that the larger AMR companies will continue to attract investment and grow and potentially file for an IPO. Smaller companies, however, will not struggle. They will most likely be bought by big manufacturers or logistics companies. Both Amazon and rival Shopify, have gobbled up AMR companies (at a combined cost of over $1bn), albeit taking quite different strategies; how other ecommerce companies will respond will be interesting to observe. Given the vast number of AMR companies now in existence, acquisition offers little competitive advantage. Amazon and Shopify aside, companies that could buy smaller mobile robot enterprises include major automation conglomerates such as Siemens or ABB; companies such as Dematic or Honeywell, that are in the business of automating warehouses for other customers.
All in all, the AMR market is a chink of light in relatively dark economic times, and one likely to see further influx of funding capital in the near future.
Editors Note: Robotics Business Review would like to thank Interact Analysis for permission to publish this piece. All views, thoughts, and opinions expressed therein belong solely to the author. To contact Interact Analysis click HERE.
About the Author
Ash Sharma has spent close to 20 years in technology research and is now Research Director for robotics & warehouse automation at Interact Analysis. In this role, he leads our industry-leading market intelligence on the use of robots and other technology that enable intelligent automation, providing expert insight based on our robust research techniques. Sharma is also Managing Director at Interact Analysis, leading its EMEA operations.
In his previous role, Sharma served as VP & Senior Director at IHS Markit where he led its Power & Industrial Technology research practices. In this role, he led a team of more than 80 analysts providing market-leading research on several sectors, including industrial automation and smart manufacturing, smart home, solar power and energy storage, drones and robotics, medical technology and building automation. His in-depth experience in these sectors and broad experience in market research and analysis helped establish Interact Analysis as a new leader in Intelligent Automation research.
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