There’s no question about it: robots are the future.
Financial institutions are quietly pumping cash into this space, and governments have just recently begun to lay the groundwork for what’s being called “the second machine revolution.”
Following in the footsteps of leading robotic developers such as the U.S., EU, and Japan, the South Korean government has just unveiled a new plan for developing robotics to ramp up its economy.
The country plans to spend a total of 2.6 trillion won, or $2.5 billion, on the research and development of rescue, health care, and advanced manufacturing robots.
According to reports from Korea Joongang Daily, South Korea’s Ministry of Trade, Industry and Energy is calling for “a healthcare town where automated robots assist senior citizens” and a “robot business zone” where manufacturers will test new robot parts and a smart factory system.
Futuristic as that may seem, both districts are expected to be completed as soon as 2019.
The announcement came just two weeks after Japanese Prime Minister Shinzo Abe put forth a policy dubbed the “Robot Revolution,” aimed at reviving the Japanese economy and aggressively growing its manufacturing market by a target of 300%. Using current figures, that’s a projection of $24 billion.
Included in Abe’s plan, believe it or not, is an actual Robot Olympics, which will take place alongside the 2020 Tokyo Olympic games.
“In 2020, I would like to gather all of the world’s robots and aim to hold an Olympics where they compete in technical skills,” Abe reported to the Jiji Press Agency. “We want to make robots a major pillar of our economic growth strategy. We would like to set up a council on making a robotic revolution a reality in order to aid Japan’s growth.”
Many throughout Asia are referring to Shinzo Abe’s policy announcement as the “New Industrial Revolution” speech. To jump-start that revolution, the Japanese government plans to offer a tax waiver to small and midsized manufacturers purchasing new robotic facilities.
With both the Japanese and South Korean governments making a push on robotics, there are several industrial manufacturers we can expect to expand over the coming years.
Denso Corp., Keyence, Aida Engineering, and SFA Engineering are all poised to benefit from these policies. However, equity can only be purchased through American Depository Receipts (ADRs) and on foreign markets. It’s not the ideal investing scenario for those in the States.
Anything You Can Do…
Fortunately, Asia isn’t the only region participating heavily in the “New Industrial Revolution.” The U.S. launched the Advanced Manufacturing Partnership plan in 2011, investing $2.2 billion to develop industrial robots and advanced materials. And the EU’s Horizon 2020 program is pumping $1 billion into developing “life companion” robots to assist the aging population.
The U.S. stock market in particular has produced some especially profitable robotic plays recently. Adept Technology (NASDAQ: ADEP), for example, recently climbed from $3.11 to $21.90 (a 704% gain) in less than seven months.
Faro Technologies (NASDAQ: FARO) is also up 41% over 12 months. And Forum Energy (NYSE: FET) is up 19%, Lincoln Electric (NASDAQ: LECO) grew 16%, and Measurement Specialties (NASDAQ: MEAS) rose 72%.
To get a wider picture, we can take a look at the Robo-Stox Global Robotics and Automation ETF (NASDAQ: ROBO) as a benchmark. The ETF has been volatile, but it’s remained well above the Dow Jones Industrial for the majority of the last 12 months.
Remember, this is at a time when the DJI has been closing at all-time highs. ROBO is performing better than a record-breaking Dow, which certainly says something about the future of the robotics industry.
And if we look at the long-term history, it’s even more telling:
Bloomberg, GaveKal Data
… They Can Do Better
In a recent report titled “A Roadmap for U.S. Robotics”, several prestigious research institutions including Stanford University, MIT, and Carnegie Mellon provided an outlook on the future of robots and automation.
In the report, the Department of Commerce analyzed a broad set of companies and their consolidated annual growth rates, finding that the third highest level of growth in the U.S. manufacturing industry is coming from robotics.
At the same time, robotics companies had the second highest growth potential, falling only behind logistics:
The report also predicts robots will have “humanlike dexterous manipulation,” or complex hands with independent joints, approaching human capability within just 5-15 years. Once this happens, human manual labor will become virtually obsolete.
Further, these academics expect nano-manufacturing, organic computers, and even nano-robots for drug delivery, therapeutics, and diagnostics. In line with South Korea’s planned “robot town,” they also expect robots to take care of the sick and elderly, acting as both physical and social companions
Robots will be our industrial workforce, our doctors, and perhaps even our friends one day. This will take time, but for investors, that’s actually a good thing.
The market has yet to realize the full potential of this industry, keeping equity relatively cheap.
Turning progress to profits,
Jason Stutman
Check us out on YouTube!
