As automation and robotics become more sophisticated, they're proving even better at helping manufacturing businesses to meet their global challenges.
Industrial automation is one of the key drivers of the modern age, assisting manufacturers to address a wide range of global challenges that include demographic change, reshoring production, and ever-increasing manufacturing complexity.
What exactly do we mean by automation? One clear definition is: the use of technology, machines, systems, or processes to perform tasks with minimal human intervention, with the overall goal of improving efficiency, consistency, and safety while reducing the human workload.
Manufacturing giants like China, the US, Germany and Japan are already grappling with demographic decline, making it more difficult to maintain traditional labour-intensive manufacturing systems. With demographic change affecting employment relationships, wages, and productivity, automation is an increasingly crucial tool for combating labour shortages and higher labour costs.
Post-pandemic, some of the downsides of globalisation have become more apparent, most notably the highly concentrated manufacturing locations of some essential components like semiconductors. At the same time, rising geopolitical tensions and intensifying trade wars are pushing governments and companies to promote local production. Particularly in high-wage economies, automation is essential to making local manufacturing more cost-effective.
Manufacturing complexity is also increasing over time. One factor driving this today is the requirement for mass customisation, as consumers demand more personalised, high-quality products with fast delivery times. Automation facilitates flexible manufacturing processes with production lines that can be adapted quickly to produce small batches of customised product without sacrificing efficiency.
Rising sustainability scrutiny and targets, as well as growing compliance requirements for documentation and traceability, are adding further complexity. Automation can help to streamline these processes while also optimising manufacturing inputs.
It's no surprise that the industrial automation market is growing rapidly. According to various independent estimates, this market is worth USD 200 billion today, and is forecast to grow at a high single-digit rate on average up to 2030.
The manufacturing process affects the type of automation required. There are two main categories:
Of course, automation isn't limited to these two types. Many industries utilise "hybrid automation", which combines both discrete and process operations. For example, a brewery that produces, bottles, and then packages beer.
Some industries are more discrete-oriented, and others more process-oriented, and this difference affects the type of automation equipment needed. Industries that use more process automation (like energy-related ones such as oil & gas) tend to have a longer cycle with larger project sizes and longer lead times. Discrete industries (like automotive or machinery) tend to have shorter cycles, and are more economically sensitive.
The automotive industry is one of the most important markets for discrete automation. From the development of the assembly line for the Ford Model T to the introduction of the first robotic arm in the 1970s, car companies have been at the forefront of industrial automation.
Automation also plays an increasingly important role in process industries, managing the flow of gases, liquids, and other materials, particularly in complex and dangerous environments. Here automation using intelligent systems improves quality, consistency, safety, and productivity. It also helps to minimise downtime in processes that often run 24/7.
The installed base of industrial robots grew at a compound annual growth rate of 12 % between 2017 and 2023, according to the International Federation of Robotics (IFR). This translates into over four million robots installed worldwide, more than double the number used in 2017.
The main markets for new installations are the automotive and electronics industries, with China leading the pack, followed by Japan, the USA, Korea, and Germany. Altogether these countries account for 80 % of global installations. While installations slowed in 2023 and 2024, IFR expects a return to a higher growth trajectory in 2025, with new installations expanding at an average annual rate of 4 % through 2027.
Human-robot collaboration continues to develop rapidly. Collaborative robots help human workers with tasks like heavy lifting, repetitive motion, or work in dangerous environments. These so-called "cobots" account for about 10 % of new robotic installations, and their use is growing much faster than that of traditional robots.
Unsurprisingly, artificial intelligence (AI) is changing the future of robots. Robots run on codes that are programmed by robot engineers to control their actions. Recent advances in AI speed up coding by seamlessly translating human language into code using Large Language Models (LLMs). On the other hand, AI is making robots smarter, allowing them to perform more complex and less predictable tasks.
Humanoid robots have recently emerged as eye-catching prototypes. These general-purpose robots are expected to operate independently without task-specific programming, potentially transforming areas such as assembly lines and driving automation in other sectors (e.g. health care). While their potential is huge and the progress so far is impressive, they need further AI training and costs need to come down for mass market adoption.
The automation market has consolidated over the past few decades, with advances in computer technology leading to a convergence between control systems used in discrete and process industries. At the same time, automation companies originally focused on discrete industries have expanded into process industries, and vice versa, with the result that most are now active in both areas.
With limited opportunities left for horizontal consolidation in the automation industry, larger players have turned their focus to software companies. In a modern digital factory, where a lot of valuable data is gathered, software supports further optimisation potential. It also allows for greater convergence between the physical and digital worlds, often through the use of digital twins, enabling engineers to design, model, and test physical processes in the digital world.
Automation is already integral to a wide variety of industrial processes. As it spreads further and deeper, automation and robotics companies offer a way for investors to benefit from a fast developing, if somewhat hidden area of technology.
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