Interact Analysis – Industrial robots: from maturity to a rapid growth phase

Author: Maya Xiao, Interact Analysis

July 13, 2022

The industrial robot market has, in the wake of COVID, done something very unusual – it has moved from a mature, conservative phase to an exciting, fast-growing, almost start-up-like phase.

Maya Xiao, interaction analysis

That said, in the short term, although industrial robots have received a COVID boost, they are also susceptible to the same post-COVID challenges as all industries.

2017-2021 – A story of ups and downs
2017 was a good year for the industrial robot sector, with revenues up 20%. But bad times were just around the corner. As of 2018, weak consumer demand in the automotive sector (by far the largest consumer of industrial robotic technology), an underperforming electronics market – notably smartphones, a difficult machine builder market, and wars commercial activities in progress have led to a sharp drop in income. And then the pandemic hit.

Over the two-year period 2019-20, revenues decreased by 10%. These losses are mainly the result of the poor performance of the automotive industry and the global macro-economic environment, and have not been compensated by the increase in demand from the automotive sector for new energies. If the market cycle had followed the expected trend, 2020 would have seen the industry rebound. However, COVID has broken this cycle and completely disrupted the pace of recovery due to forced slowdowns and warehouse and factory closures.

But the 2020 trough was followed by a 2021 peak, when shipments saw a 31.9% year-over-year increase. This remarkable growth was in part only a rebound in 2020, but pandemic-driven enthusiasm among manufacturers for automation solutions as a way to ease labor shortages and plant shutdowns ongoing ventures caused the market to surpass its 2019 level.

A revitalized market facing multiple challenges
Repeated waves of COVID continue to disrupt machinery production in Asia, where China accounted for 52.5% of global industrial robot shipments in 2021. These recurring COVID outbreaks are disrupting the supply chains feeding robot manufacturers. Other major issues with shipping capacity and pricing and wild fluctuations in commodity prices are also affecting supply lines. Industrial robot order books may be full, but if parts aren’t on the shelves, production lags behind demand and delivery times skyrocket.

The Russian-Ukrainian conflict has also impacted the robot market – particularly in the EU – as energy prices, which were already rising, hit record highs. The war also causes monetary instability across the world, hitting exchange rates which have a significant impact on foreign trade.

In this unstable atmosphere, renewable energy investment decision making has become a hesitant process for all manufacturers, and especially for end users of industrial robot solutions, as industrial robots tend to be very expensive.

Robot prices will decline at a much slower pace than we were used to
The pressures described above, combined with increased demand, naturally have a big impact on the prices of industrial robots. We had already seen price increases in 2021 in the Americas and EMEA markets, and they also started showing up in APAC markets earlier this year.

Even local Chinese suppliers who are more price sensitive are following this upward price trend due to pressures in the supply chain. Upstream of robot manufacturers, it has become a seller’s market for suppliers of key components to the robotics industry, such as gearboxes, servos, controls and sensors. The performance of the major component manufacturers is very strong and, if demand exceeds supply, they are the ones in control of prices.

This will inevitably drive up the prices of finished industrial robot products. But we consider this to be primarily a short-term phenomenon, with price increases soon followed by average comparable price declines of around 2-3% per year over the next few years. These reductions will be moderate compared to what we are used to, in part due to increased sales of larger payload models that come at a higher cost.

Medium-term optimism: 10% annual growth expected until 2026
The COVID-19 pandemic, resulting labor shortages, and rising labor costs have accelerated factory automation across a range of industry sectors.

It is widely recognized that automation protects businesses against future crises and increases levels of efficiency and productivity, and with that, profitability. Despite the current tensions in the industrial robot market, there is strong optimism for the future.

We forecast overall 10% year-over-year growth in the robotics market through 2026, when global sales are expected to exceed 770,000 units.

Continued increases in labor costs, continued decline in robot prices, the trend away from mass production in favor of semi-custom production, the demand for shorter and faster product cycles and the desire to further increase the efficiency and quality of products encourage the adoption of robots.

The future of the industrial robot industry seems secure for one simple reason: robots increase productivity. And, as the famous saying goes, “Productivity isn’t everything, but in the long run, it’s almost everything.”

To learn more about the latest trends in industrial robots, contact Maya today.

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Mavis R. Bernier