Robots take on portfolios

RobotChina could present attractive opportunities for manufacturers of robotics equipment as rising wages coincide with declining costs of automation technologies.

One expert says that the robotics and automation space is set to offer "a lot of very interesting investment opportunities" in the near future, and has published a report with the intriguing title of Robots take China's manufacturing floor.

The over-arching theme of automation is interesting in various sectors across the value chain, says Bojana Bidovec, senior analyst for RobecoSAM Smart Materials Strategy, in a foresight report.

Bidovec says that while the past two decades have seen China develop into a strong player in global manufacturing, as a result of low wages, plentiful manpower, and a fast-growing domestic market, the country's labour cost advantage has been gradually declining as wages in China have risen much faster than in the US.

Robotics and automation could be the solutions to help Chinese companies to reduce costs and improve the quality and speed of production, Bidovec says.

Last year, China was the largest market for robots, accounting for 20% of global sales. Bidovec says room for further growth has been created by the combination of rising wages in China, declining costs of robots, and low robot density.

"China has approximately eight times the number of people in manufacturing compared to the US, but uses approximately half of the number of robots" she writes in the report. "China is expected to be a major driver of demand for robots over the next few years."

RobecoSAM's research follows the launch of what is thought to be the first exchange-traded fund (ETF) in Europe to target the robotics industry, at the end of October.

The Robo-Stox Global Robotics GO Ucits ETF, created by ETF Securities, which partnered with Robo-Stox Partners, aims to provide investors with a global portfolio of listed robotics and automation companies.

Richard Lightbound, chief executive of Robo-Stox Partners, says the increasing adoption of robotics and automation technologies is creating a "transformational new economic era".

The International Federation of Robotics forecasts "double-digit growth" between 2014 and 2017, with customers such as the automotive industry investing heavily in robot installations. The estimated yearly shipment of multipurpose industrial robots to China alone is forecast to double between by 2017 to 100,000.

Bidovec sees opportunities in a range of areas related to robotics and automation. She says that robotics manufacturers such as Kuka, ABB, Fanuc and Yaskawa Electric, four companies that currently control most of the market, particularly stand to benefit from this growing market for robots in China over the next few years.

However, further opportunities can also be found in niches around robots production. Bidovec highlights software providers such as the French company Dassault Systèmes, and others focusing on areas such as the testing of LED lighting or lithium-ion batteries.

"We look at companies along the value chain; in particular you want to look at the parts of the value chain where markets are most concentrated and barriers to entry are high ...We try to identify the growth areas," she says.

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