June 14, 2012      

Apple is about to single-handedly make robots a fixture in consumer electronics while potentially delaying deliveries for its competitors. Robots are a natural fit for electronics as the miniaturization of consumer products calls for greater precision and speed in production, and this investment marks a revolutionary push towards the inevitable.

Foxconn?s purchase of 1 million robots rocked the boat in the consumer electronics market last year, but now it appears the majority of those robots will be owned by Apple and utilized exclusively for that company?s products. Apple has made $7.1 billion available for non-retail expenditure this year, which is a 78% increase overall.

Seeking Alpha reports that analysts in Asia and America believe that the size of Apple’s robot purchases could tie up the market for several years, making it difficult for companies such as Samsung(SSNLF.PK), Nokia (NOK) and HTC (HTCXF.PK) to compete.

SEEKING ALPHA?Apple is likely to sell around $95 billion worth of iPhones this year, a number equal to the total sales of personal computers that will be sold in the USA and China. To add more context to that number, consider the following: The iPhone was launched five years ago. PCs, by comparison, have been on sale in the US since the late 1970s. Apple itself went public in 1980.

The main beneficiary of Apple’s move will be FANUC, the world’s leading robot maker. However, other firms, such as ABB (ABB) and Siemens (SI) may also benefit.

FANUC trades on almost 19 times this year’s numbers and a price to book of 2.67 times. The book value is about twice the average for corporate Japan. Together factory automation and robots represent just over 80% of FANUC’s sales. This makes it far and away the purest play of any of the world’s major companies. The likes of ABB and Siemens also make robots and industrial automation systems, but their main area of business is power generation. FANUC has about 20% of the global robot market, about the same as ABB.

Robotics and re-shoring

In regions such as China, where the working population is soon expected to experience a sustained decline, it will become increasingly difficult to gain workers, so robots and deeper levels of automation than we have seen in the past are the only solution. Apple is one of those companies that can use labor shortages to increase its competitive advantage. Japan is doing the same as a nation, and what happens there is likely to find an echo in South Korea. As a nation, China will be forced to look at increasing the number of robots its uses. However, even though robots might be situated in China, making goods for Apple, it is hard to see how China as a country benefits.

In the same token, if companies are no longer benefitting from a cheap work force, there is nothing stopping them from purchasing robots and bringing production back home (and closer to their product?s consumers).