Restrictions to curtail the spread of Covid-19 have reduced operations at factories and global supply chains have been impacted. We think factory automation will accelerate further in a post-Covid world, as machines don’t get sick and can work continuously 24/7/365, excluding maintenance.
Industrial robots were installed rapidly across the global manufacturing sector throughout the 2010s, and there are now around 34 robots per 10,000 workers. However, overall penetration remains low, and looks set to deepen as robotic technologies improve in areas such as flexibility, vision, sensing and grasping.
In addition, the average cost of an industrial robot has continued to decline and is now equivalent on average to two years of wages in the Chinese manufacturing sector, or about one-fifth the cost of ten years ago. A lower fixed-cost burden should also boost the adoption of industrial robots.
Japan is a global leader in industrial robotics. Factory automation encapsulates a broad range of companies that provide the related components, systems, and services, and there are many competitive Japanese companies that command dominant market positions in each of these fields. Since the tech bubble burst two decades ago, the share prices of FA-related companies listed in Japan have steadily outperformed the TOPIX, and we expect them to maintain their strength as the world emerges from the Covid-19 crisis.
But it’s not just factories. In recent years, the use of collaborative robots (or cobots) and robots in the services industry has risen, thanks to new technologies and breakthroughs in artificial intelligence. We believe this will also accelerate in a post-Covid world.
Published by Fidelity International investment experts