Certainly not even close to the scale of the jaw-dropping billions that gets wagered on its high-tech IT brethren, robotics investments, small in comparison, are finally breaking into the open and ascending rapidly.
Such is the clear message from the first half of 2015 as robotics investments soared to a record-breaking performance through June 30.
As Sinatra sang it, “This could be the start of something big.”
$573.3 million was invested as venture capital (VC) in robotics through June 30, which bested all of 2014 ($341.3 million) by a whopping $232 million. The first-half trouncing is made even more conspicuous when seen in the context of 2014 outperforming 2013 by 36 percent.
Having already destroyed 2014’s record in VC investment, the last half of 2015 could well get very interesting, especially given the recent white-hot play in drones and the upcoming market launches for a spate of personal/home robots slated for 4Q2015.
Drones definitely have the ear of the big money people. “It’s blindingly obvious to us that this is going to be a big space,” said John Frankel, founding partner of FF Venture Capital.
Pepper, SoftBank’s household companion robot, was test marketed in June and the first 1,000 units sold out in one minute (at $1,611 each, plus a $200 a month service and maintenance contract), according to CIO Magazine.
Seems buyers are ready for home robots. Although SoftBank says it’s selling Pepper at a loss per unit, like the Smartphone biz before it, the monthly service fee of $2,400 annually looks palatable enough, especially year after year.
SoftBank will produce 1,000 units per month (Foxconn is the manufacturer) and there are about 200 apps already available for the robot.
The 2015 Consumer Robotics Survey, conducted last summer by Robotics Business Review, showed pent up demand in consumers for these new home/personal robots as well as a willingness to pay upwards of $7,000 to own one, and a startling $15,000 for a personal “home-care” robot. Pepper’s $4,011 total cost of ownership easily fits the profile.
A recent Business Insider Intelligence report said the “multibillion-dollar global market for robotics, long dominated by industrial and logistics uses, has begun to see a shift toward new consumer and office applications.”
That may partly explain the very sizable $118 million each from Alibaba and Foxconn ($236 million total) that those partners are venturing with SoftBank Robotics.
To date, there are more than a dozen personal/home robots from as many developers, each possessing a different feature set of capabilities from basic to quite advanced that are all clamoring for a home or a family and all getting ready to roll into the market in 4Q. No doubt all or most of them will make January’s Consumer Electronics Show 2016 a must-attend event.
The consumer market, the Business Insider Intelligence report goes on to predict, will grow at a CAGR of 17 percent between 2014 and 2019, seven times faster than the market for manufacturing robots.” Given the decidedly steep upward trend in VC interest so far in 2015, the year-ending momentum, as it did in 2015, might well carry into early 2016 and beyond.
If the events from early 2015 are any indicator of repeating themselves, then be ready for a brisk 1Q2016. Last January opened with a quick $51.6 million in VC funding going to Rethink Robotics ($26.6 million) and Jibo ($25 million).
See related research report: Investing in Robotics: What to Watch for in 2015
See related webcast: Investing in Robotics for 2015
Venture capital recipients (millions):
- Clearpath Robots $11.2
- Rethink Robotics $13.4
- Rethink Robotics $26.6
- Grabit $10.6
Mergers and acquisitions for the first half were few but very telling: $494.13 million was recorded, while a number of significant partnerships never disclosed their financial arrangements.
For example, when Segway was acquired by its Chinese rival, Ninebot, no financial terms were disclosed. Near simultaneously, however, Ninebot said that it had also raised $80 million in funding from investors including Xiaomi, Sequoia Capital, and Shunwei Foundation, all or some of which went to the purchase of Segway from its owner, Summit Strategic Investments.
Old line robot builder ABB Robotics scooped up tiny Gomtec because of its highly innovative robot arm Roberta and intellectual property (IP). No price was disclosed, but it was another sign of legacy robot builders growing through acquisition of a youthful, more nimble technology developer, as was other old liner KUKA buying Swisslog the previous October (2014) for $357 million.
Then this year, KUKA’s Swisslog acquired Forte Industries without disclosing deal money.
Zhuzhou CSR Times Electric (a subsidiary of South China Rail) paid $202.9 million for the UK’s maritime engineering firm Specialist Machine Developments (SMD); meanwhile U.S. maker of test equipment Teradyne forked over in excess of $285 million for one of the best, young, shooting-star darlings of the robot arm business, Universal Robot.
If you can’t innovate, buy it from someone who can
Acquisitions may well become the major tool for corporate financing in robotics.
When Yaskawa’s chairman and president, Junji Tsuda, signed off on a strategic alliance with the ReWalk exokeleton group on an exclusive for all of East and Southeast Asia, a capital investment from Yaskawa came with the signing, which has yet to be disclosed.
With exoskeletons popular not only for physical rehabilitation but also in industrial settings for workers to accommodate heavy lifting, Yaskawa now has solid value added for its industrial robot sales to compete with industrial exoskeleton leaders like Japan’s Cyberdyne or Korea’s Daewoo. French and German manufacturers and logistics companies have already made inquiries about sales of Cyberdyne’s wearable robots to Europe.
Yaskawa is one of the world’s leading robotics firms, with about 20 percent of the world market. Although focused on machine-control systems, robotics now provides 34 percent of its sales, and growing.
Gartner senior research analyst Sonia Francisco told Investor’s Business Daily that “larger and mature companies — even those that are beginning to sell advanced-manufacturing robotics, such as ABB — will almost certainly acquire their way to new-generation product lines.
“For example,” Francisco said, “they’re ill-prepared to adequately integrate soon-to-be-mandatory technologies building cybersecurity, the Internet of Things and artificial intelligence into product lines. The giants likely will court entrepreneurs specializing in critical technology niches.”
Robotics equities loiter on the sidelines
The headline of an article from Investor’s Business Daily says it all when it comes to equities: “Robotics Stocks Still Don’t Compute; Few Exist.”
Robots are on the rise and investors should be paying attention, but they aren’t.
The International Federation of Robotics (IFR) is doing its best at promotion. In March, the IFR reported that “companies worldwide installed 225,000 factory robots in 2014, with almost two-thirds going to Asia. That total is up 27 percent from 2013.”
The IFR claims that at present there are approximately 1.6 million industrial robots working in factories around the world. IFR president Arturo Baroncelli predicts a total number in use in factories around the world could reach 2 million by the end of 2017.
However, compared with the amount of manufacturing that goes on around the globe, shouldn’t there be way more industrial robots than 1.6 million?
That industrial robots are generally single-purpose machines, aren’t intelligent at all, and can’t work around people puts a damper on wider utilization and sales.
Intelligent robots that are easily repurposed and are easy to set up will be the eventual winners.
Not helping industrial robots at all is price: a typical industrial robot sells for between $100,000 to $200,000, including software [software is 50 percent of the sale price].
“We’re getting away from the [structures and machinery] that can only be used for one thing on the factory floor and [instead] using robots that can be easily repurposed,” said Henrik Christensen, director of robotics at Georgia Institute of Technology.
Such new-age robots are entering the workforce now. Wall Street may be waiting to invest until the day comes when smart robots reach critical mass, which may well be too late. Buying now is to buy cheap.
Martin Hutchinson, chief strategist at Pacific Wealth advisory, was sanguine on the industrial side of things.
“It’s still industrial robots that drive the market,” he said. “The IFR estimated the total market for industrial robots and associated equipment at $25 billion in 2011; the Japanese government believes it will reach $70 billion by 2025.”
Richard Wottrich, CEO at DSI Global View LLC, takes the view that the robotics marketplace is vast and varied.
“In principle, robotics is composed of established large manufacturing, automated machine manufacturers and new public start-ups investing in the cloud, drones, nano applications, remote monitoring systems, and GPS directed applications,” he said.
“Tesla is a highly speculative auto and battery tech company that holds an investment in Japanese global robotics leader Fanuc Corp,” he said.
“Inside the Fanuc corporate campus dozens of canary yellow robots operate 24/7 in over 22 automated factories, replicating themselves,” Wottrich said. “Fanuc robots build more Fanuc robots and other CNC machinery. Fanuc makes 22,000 to 23,000 CNC units a month generating $6 billion in revenues and a market capitalization approaching $60 billion.”
“Buying Tesla thus gives you a piece of several leading tech trends including robotics,” he said.
What was a $15 billion industry back in 2010 is projected to top $65 million by 2025. That’s a nearly 9 percent annual compound growth rate.
What about a robotics-only ETF?
Robo-Stox is robotics only Exchange Traded Fund or ETF. The Robo-Stox Global Robotics and Automation Index (NASDAQ: ROBO) consists of 82 stocks trading on exchanges in the United States and 15 foreign countries.
Cheryl Hall, writing in the Dallas Morning News, said the ETF‘s “companies include multinational giants Siemens Co. and Rockwell Automation Inc.; consumer products iRobot Corp., which makes robotic vacuum cleaners; and stock-market newbie Mobileye NV, which develops seeing-eye systems for vehicles.”
“The fund went public in October 2013 and has attracted $123 million in assets in its first 17 months,” she added.
“But from an investment standpoint,” Hall said, “it hasn’t exactly set the world on fire — it’s up about a buck and a half from its initial offering price of $25.”
As of July 17, 2015, Morningstar has the ETF’s NAV at $25.82 with $118.77 million under management.
Like Wall Street in general, it appears the Robo-Stox Global Robotics and Automation Index is also loitering along the sidelines.
It’s almost all here
As the industrial Internet, cloud robotics, advanced manufacturing, mobility, 3D printers, and the reenergized quest for “productivity through automation” take hold and link up with the new-age, intelligent co-robots now coming online, Wall Street will finally stampede from the sidelines and fully engage.
For now, at the end of 2015’s first half of the business year, drones, consumer robots, healthcare robotics, and mobile logistics are attracting the lion’s share of the attention — and money.
Speaking of robotics stocks that are well-liked by Wall Street, healthcare robotics accounted for the sole robotics IPO during the first half of 2015. Corindus Vascular, which sells robotic systems used in angioplasties, raised $42 million by offering 11 million shares at $3.80.
That was in May. Here in July, NASDAQ: CVRS is trading for $3.56, which, mind you, is a well-liked robotics stock.
Please keep in mind that robotics still has a long, interesting road ahead to year’s end.
Keep up with robotics investing throughout 2015, see related: Investing in Robotics: What to Watch for in 2015
See PDF download: Top 21 Companies in the Industrial Robot Marketplace (Worldwide)