The Future of Robotics an Inside View on Innovation in Robotics
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The Future of Robotics An Inside View on Innovation in Robotics FEATURE Robots, Humans and Work Executive Summary Robotics in the Startup Ecosystem The automation of production through three industrial revolutions has increased global output exponentially. Now, with machines increasingly aware and interconnected, Industry 4.0 is upon us. Leading the charge are fleets of autonomous robots. Built by major multinationals and increasingly by innovative VC-backed companies, these robots have already become established participants in many areas of the economy, from assembly lines to farms to restaurants. Investors, founders and policymakers are all still working to conceptualize a framework for these companies and their transformative Austin Badger technology. In this report, we take a data-driven approach to emerging topics in the industry, including business models, performance metrics, Director, Frontier Tech Practice and capitalization trends. Finally, we review leading theories of how automation affects the labor market, and provide quantitative evidence for and against them. It is our view that the social implications of this industry will be massive and will require a continual examination by those driving this technology forward. The Future of Robotics 2 Table of Contents 4 14 21 The Landscape VC and Robots Robots, Humans and Work Industry 4.0 and the An Emerging Framework Robotics Ecosystem The Interplay of Automation and Labor The Future of Robotics 3 The Landscape Industry 4.0 and the Robotics Ecosystem The Future of Robotics 4 COVID-19 and US Manufacturing, Production and Nonsupervisory Workers the Next 12.8M Automation Wave 10.2M Recessions tend to reduce 9.0M employment, and some jobs don’t come back. This trend is 1 glaring for US manufacturing 7.8M in the prior two downturns as 2011 2012 2017 2013 2015 1997 1995 2018 2014 2016 2019 1998 1996 1999 2001 2010 2002 2020 2007 2003 2005 2008 2004 2006 2009 businesses reconsidered their 2000 supply chains and looked to Automation Stock Performance move production offshore or April 14–May 14, 2020 Share of executives investing to automate. The pandemic’s in accelerating automation effect on global supply chains due to COVID-19 has made the offshoring ROBO Index 2 option problematic, increasing S&P 500 41 percent the likelihood that this cycle +3.3% Forecast 2021 robotics will see an increase in market size after COVID-19 investment in automation. -1.5% 3 Executive surveys and $23 billion robotics stock performance 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 indicate this has started. Days since April 14 Notes: 1) Preliminary reading. 2) Based on Ernst & Young survey results. released 3/30/2020. 3) Based on ABI Research study results released 4/2/2020. Source: Bureau of Labor Statistics, S&P Capital IQ, Ernst & Young and ABI Research. The Future of Robotics 5 Production US GDP per Capita through Four Industrial Revolutions Over the First Second Third Fourth Past Two Watt’s steam engine The internal combustion The advent of Frontier technologies like 3D becomes an energy engine and electricity computing is printing, IoT, AR/VR and AI source for industry and enable the operation of applied to promise to make industry Centuries transportation. Textile larger factories and new industry, enabling fully digital. A new innovations, such as modes of transportation. increased task generation of industrial the power loom, Telegraph and telephone automation. The robots can more fluidly Global civilization has drastically increase drive a concurrent applied robotics integrate with a factory, grown exponentially British output. communications industry is born. learn new tasks, and work revolution. safely alongside humans. wealthier and more An unprecedented amount of data productive through three is generated. industrial revolutions. A fourth is now underway, one which promises to unlock new opportunity, but may also unleash transformative shifts for labor, industry, and society at large. 1790 1840 1890 1940 1990 Source: Barro-Ursua Macroeconomic Dataset. The Future of Robotics 6 The Fourth BCG Constituent Technologies of Industry 4.0 Industrial Revolution Is Upon Us Additive A confluence of technological Manufacturing advancement in various fields has allowed entrepreneurs to develop solutions to common Big Data Analytics Simulation problems in industry. These solutions are far from isolated and cross the digital and physical realms. Robotic performance of tasks is a key element in this interplay. In a Augmented Reality Robotics Internet of Things recent cross-industry McKinsey study, 70% of surveyed executives said they expect advanced robotics to become a very important productivity Vertical and Horizontal Cybersecurity driver by 2025. System Integration The Cloud Source: Boston Consulting Group. The Future of Robotics 7 Driven by Annual Installations of Industrial Robots by Region Asia, the Thousands of Units CAGR % Industrial North America Europe 69 9% Robo-force Asia/Australia 64 Swells 87 8% 59 Annual installations of 83 industrial robots have more 55 54 46 than doubled since 2013, 79 1 74 growing at 18% CAGR . This 67 76 is expected to slow in the next four years to 9%. China 41 has led the way, increasing 38 56 420 17% its stock of industrial robots 33 50 nearly fivefold. 368 30 46 320 28 280 283 285 While impressive, this rate 43 41 200 of growth is not tremendous. 161 134 Innovating the existing stock 85 99 of robots is a compelling opportunity, as is expanding 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 that stock. Projected Notes: 1) CAGR = Compound Annual Growth Rate. Source: International Federation of Robotics. The Future of Robotics 8 Robotics Three Virtues of Modern Applied Robotics Enjoys Unique Advantages There are three key features that set robotics apart from Closed Environments Immediate Value Data Acquisition other thriving sectors. Unlike other autonomous hardware Innovation can occur The boldest applications Many industries have grown such as AVs, many applied without physical interaction may seem distant (e.g., used to an abundance of with an end customer. humanoid robot assistants), data; the primary and robotics use cases occur in Robots safely operate within but startups and corporates secondary sectors are closed and well-mapped constrained and less- are finding immediate behind this curve. Inserting environments, thereby trafficked environments. success deploying robots to robots into production This significantly reduces achieve specific tasks. ROI environments unlocks new reducing engineering engineering problems, and can be immediately streams of physical data, problems. In many allows machines to learn achieved for repetitive catalyzing positive feedback industries, robots can add faster while producing tasks, such as agtech use loops that further optimize insightful data. cases, or in scenarios where production. immediate value and unlock overnight work enables visibility into new step-ups in productivity. productive data. The Future of Robotics 9 VC Appetite Global VC Investment in Robotics and Related Hardware for Robotics Growing Fast 201 2–201 9 CAGR Venture investment in Robotics VC 55% companies building robots or related hardware has All VC 23% exploded over the last 789 $5.4B business cycle, topping $2B in 746 the first quarter of 2019. 681 Investment in robotics has 606 significantly outpaced the rest Capital Invested $3.9B 531 of venture, making robotics Deals one of the hottest sectors of $3.1B the decade. Near the beginning of 2018, growth in 310 deal count stalled, while $1.8B $1.8B dollars invested continued to rise. This suggests that 164 category leaders are 112 75 $0.6B 43 58 beginning to be established. $0.3B $0.4B 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: PitchBook. The Future of Robotics 10 VC Challenges Public Robotics Business Revenue and Robotics VC Investment Incumbent Public Company Revenue1 Venture Capital Investment2 Strongholds (Global Share by Region) (Global Share by Region) The market for industrial 39% 3% robots is dominated by 26% 0.5% large public companies, with a handful of Japanese 17% 55% conglomerates ahead of the pack. 14% 1% 2% 26% VC investment in robotics startups is, by contrast, concentrated in the United 2 States and China. VC Investment in Robotics (201 3–201 8) This is both an indication of where the larger industry may shift in the future and a competitive risk for incumbent firms, which has already motivated several $11B $5B $4B strategic acquisitions. Rest of World Notes: 1) Encompasses robotics-related segments of public companies, where reported, for 2018. 2) VC investment calculated for 2013–2018 VC investment in robotics and related hardware startups. Source: S&P Capital IQ and PitchBook. The Future of Robotics 11 Percentage of VC Deals by Stage Robotics Robotics Hardware Companies Startups Cross the Seed Early Stage Later Stage Early Stage 12% 13% 16% An increasing share of 20% 17% 17% 19% robotics venture deals is comprised of Series A and B rounds, with seed representing a declining 50% share and later stage 38% 45% 47% 55% holding steady. This 56% 56% suggests that in the coming years we will likely see more later stage activity as the market matures. The next phase of segment maturity will be a surge of later stage 42% 38% 36% 38% activity. 32% 28% 26% 2013 2014 2015 2016 2017 2018 2019 Source: PitchBook. The Future of Robotics 12 Robotics SVB Robotics Market Map1 Solves Many Industry & Agriculture Service & Consumer Different Problems Manufacturing/Supply Chain Food Like AI or cloud computing, robotics is a general purpose technology capable of adding value to a wide range of industries. Robots are Construction Consumer Tech increasingly prevalent in factories, farms, warehouses, hospitals, homes, and elsewhere. This market map is not exhaustive, but it shows some exemplars in identified categories. Agriculture Research & Other Service Notes: 1) Includes a selection of representative companies; not exhaustive.