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40 Citi GPS: Global Perspectives & Solutions February 2015 The Market for Industrial Robotics Industrial Robotics – Big Opportunity in China, the US and Japan Graeme McDonald Japanese Machinery & Shipbuilding Analyst Natalia Mamaeva Head of European Engineering Research Klaus Bergelind European Machinery Analyst Despite rapid growth the adaptation rates of robotics remains relatively low. In the US, for example, only ~10% of companies that would benefit from automated production have installed any robots so far Global manufacturing labour costs today account for $6 trillion annually and further adaptation of automation could represent considerable cost savings; according to McKinsey, in developed countries, across occupations such as manufacturing, packing, construction, maintenance, and agriculture, 15-25% of industrial worker tasks could be automated cost-effectively (based on estimated 2025 wage rates) and in developing countries (on average) 5-15% of manufacturing worker tasks could be automated across relevant occupations by 2025. McKinsey estimates a potential economic impact of $600 billion to $1.2 trillion per year by 2015 based on cost savings using the estimated annual cost of advanced robots compared with the annual employment cost of an equivalent number of workers. Industrial robotics in particular has been one of the higher growth segments amongst automation. However, despite the rapid growth, the adaptation rate of robotics world-wide remains relatively low. The Robotic Industries Association (RIA) estimates that only ~10% of US companies, for example, that would benefit from automated production have installed any robots so far. Figure 23 and Figure 24 show the value and volume of shipments of robotics in North America and we see an ample opportunity for continued investments in this field. Figure 23. Value of robot shipments in North America Figure 24. Volume shipments of robots in North America (US$mn) 500.0 450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 Q1: 05 Q1: 06 Value(LHS) Q1: 07 Q1:08 Q1:09 Q1:10 Q1:11 Q1:12 Q1:13 Q1:14 (YoY) 80% 60% 40% 20% 0% -20% -40% -60% (Units) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1: 05 Q1: 06 Q1: 07 Q1:08 YoY (RHS) Q1:09 Q1:10 Q1:11 Q1:12 Units (LHS) Q1:13 Q1:14 (YoY) 80% 60% 40% 20% 0% -20% -40% -60% Source: Citi Research, Robotic Industries Association Source: Citi Research, Robotic Industries Association By 2025 there will be 25 million industrial robots sold worldwide, up by 15 million, growing at an average annual growth rate of 25-30% from 2013...this will require investments totalling about $900 billion to $1.2 trillion According to McKinsey, the number of industrial robots installed globally by 2025 will rise to 25 million, up 15 million from the current level, implying 25% to 30% average annual growth in robot sales, which is considerably higher than the average growth rate over the past two decades. This in turn would require considering investments totalling about $900 billion to $1.2 trillion. It is worth noting that McKinsey’s definition of industrial robots is much broader than the one presented by the International Federation of Robotics (IFR). The IFR which tracks units of industrial robots sold globally, measures articulated, SCARA, cylindrical, parallel and linear robots. Therefore the size of the addressable market differs considerably. © 2015 Citigroup
February 2015 Citi GPS: Global Perspectives & Solutions 41 IFR forecasts the industrial robotics market to grow by 12% per year to 2017 compared to an average annual growth rate of 10% during 2000-2013 (vs. GDP at 2.3% and industrial production at 3% over the same period) The IFR forecasts the market to grow by 12% per year to 2017 (Figure 25). This compares to an average annual growth rate of 10% during 2000-2013 compared to an average growth of global GDP of 2.3% and Industrial Production of 3% over the same period. In recent years there has been a clear acceleration of growth, with double digit growth rates (for example 40% year-over-year growth in 2011). In terms of the number of units, the IFR estimates 298,000 units will be sold in 2017 compared to 98,000 units sold in 2000 and 166,000 units sold in 2011. In terms of the sales value, (according to the IFR), in 2013, the sales value increased 12% to $9.5 billion. Including the cost of software, peripherals and systems engineering, the actual robotic systems market value is estimated to be $29 billion. Figure 25. Annual supply of industrial robots, 2000-2017E (Units) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Expansion in Automotive Expansion in General Industry and EM 0 2017E 2016E 2015E 2014E 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Source: IFR China is rapidly becoming the largest and fastest growing market for industrial robots, estimated to grow by 25% CAGR during 2014-2017 (vs. 15% CAGR during 2011- 2013) There is a significant scope for growth in robotics across all geographies, but in terms of the rate of growth Asia (in particularly China) is expected to outpace North America and Europe (Figure 26 and Figure 27). China, in particular, is rapidly becoming the largest and fastest growing market for industrial robots estimated by the IFR to grow by 25% CAGR during 2014-2017 compared to 15% per year between 2011 and 2013. According to the IFR almost 37,000 industrial robots were sold to China in 2013 (of which Chinese suppliers installed 9,000 units), up from 14,978 units in 2010. Despite this growth, robot density in China is still low relative to other countries (only 23 robots per 10,000 employees in China vs. 332 in Japan) and structural drivers of (1) wage inflation, (2) changing demographics, and (3) the need for standardised quality, mean penetration should increase. The European and US markets, where demand is more closely tied with replacement needs, are expected to grow at 6% per year between 2014 and 2017. These high growth rates are driven by: (1) increased productivity requirements in developed markets; (2) increasing global competitiveness requirements in emerging markets; (3) the strategic importance of robotics in China; (4) rising wage inflation globally; (5) shortening life cycle of products; (6) declining cost of robotics; and (7) new applications for robotics which are emerging as technology advances. © 2015 Citigroup
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