Robots can take over when work is too dangerous, dirty, dull or dear – Expert Investment Views: Invesco Blog

Like many other trends, the shift to automation, and the use of robotics, has accelerated during the global pandemic. Even though unemployment has risen dramatically, particularly in the US, the move to automation is continuing because of the value it brings. Robots can complement work done by humans or perform tasks humans would prefer not to because the work falls into one of the four D’s – dangerous, dirty, dull, or dear (as in expensive.)

At home and at work

Who will be our future companions at work and at home?  Hunter-Gatherers accepted grey wolves into their tribes 15,000 years ago, and this domestication process has led to the pets we know as dogs today.  These wolves were additive to the tribe, as their superior sense of smell increased the productivity of hunting, with the added benefit of being able to detect strangers in the vicinity. But can you imagine the committee meetings about this idea?  We’re going to bring vicious predators into our tribes that we have to feed with part of our hunting haul, all good?  The productivity and security benefits outweighed these concerns, and clearly this partnership between human and wolf has proven to be successful.

Like welcoming a wolf into your tribe, many people may have some trepidations about bringing a robot into their home. As time goes on, however, people are starting to see the benefits of getting some mechanical help at home. iRobot’s Roomba, the vacuum-cleaning robot, was the first such machine than many people welcomed under their roof. Since its release in 2002, iRobot has steadily improved the quality and navigational capabilities of each successive generation of Roomba and have built a nice market share in the vacuum industry. Vacuuming is certainly a dull, repetitive task, and people clearly value having a robot keep their floors clean.

While the company experienced some challenges because its manufacturing plants had been shut down during the early days of the crisis, demand for the Roomba increased because people are at home more, creating more dirt in the house. iRobot also now has a product that does mopping – the Braava. They have also developed Terra, a lawnmowing robot, though that launch was delayed because of the disruption of the current pandemic.

The pandemic has increased the number of jobs that are seen as dangerous. There have been reports of large outbreaks of the virus in meat processing plants, for instance. Tyson Foods has been testing robots in some of their plants and have highlighted advancements in robustness and robotic vision as reasons that robots may be able to help in their meat plants.  Meat processing requires a lot of washing and disinfecting steps, which older robots could not withstand.    

Two of the companies in the Invesco Oppenheimer Global Opportunities Fund have contributed to advances in computer vision, Basler and Cognex.  Basler makes small, robust, and high precision cameras that can be integrated into robots as well as placed around factories for security and monitoring uses. Cognex has advanced software that analyzes the information acquired by cameras. This allows fast inspection of parts that are being manufactured, and allows robots to deal with non-standardized shapes, such as animal carcasses.  

The automotive industry has led the way in automating production, as for certain tasks where the robots see identical parts and require identical motions every time, older generations of robots could function quite well. But these older robots may not do so well with more complicated tasks, such as sorting through a box of nuts and bolts and being able to grasp a bolt no matter the orientation in the box. Yaskawa Electric makes robots with the finer motor skills needed for this task. Yaskawa robots have a delicate enough touch to grasp strawberries and place them on top of cakes.

The increased precision of robots and factory automation has led to more industries adopting them.  The semiconductor industry has taken to using more robots in their inline processing of chips. Moving silicon wafers requires extreme precision, with as little vibration as possible.  Any defect in the production steps can ruin a wafer full of semiconductor chips, each possibly costing tens of thousands of dollars. THK is the leader in linear motion guides, tools that can enable robotic arms or machines parts to move in swinging arcs or straight lines and stop exactly when needed to perform delicate, precise tasks.

Nidec is the leader in small motors, historically used in hard disk drives and home appliances. Today, they are finding more uses for these in robots and factory automation. These motors need to produce smooth motion without jerks.  Nidec has also started production of reduction gears, which function as robot joints, and are essential for smooth movement and precision stopping action with no spring-back motion.

Core to our investment philosophy is to seek out big changes going on in the world, and then invest in the industries and individual companies that can benefit the most from these changes. The increasing prevalence of automation and robotics has been a consistent feature of the global economy since the industrial revolution, and the very first attempts at mechanizing laundry in the late 1700’s.  We see this structural trend being accelerated in the age of COVID-19, as robots can navigate through the world untroubled by fears of a pandemic.  In addition, facilitating the rise of automation has been recent advancements in the area of cognitive assistance, but that is a topic for another day. Stay tuned for more!

As of 6/30/20, Invesco Oppenheimer Global Opportunities Fund (Class A shares) had the following percent of assets invested in:
iRobot: 1.08%
Tyson Foods: 0.00%
Basler: 0.57%
Cognex: 1.02%
Yaskawa Electric: 0.99%
THK: 0.70%
Nidec: 0.57%
Holdings are subject to change and are not buy/sell recommendations.

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