Industrial robots are becoming cheaper to install and operate every year. The result, according to BCG, is a 10% annual increase in installed units that will lead to robots performing 25% of industrial tasks by 2025. Four industries, machinery, electrical equipment, computers and transportation equipment will be the largest industrial adopters, with China, the US, German, Japan and South Korea by far the largest investors.
Industry 4.0 aims to reimagine the way industrial processes are performed through the introduction of IoT (Internet of Things) within the manufacturing value chain. One element of the technology is the replacement of human labour with robots that are more efficient and cost effective. Although robots have been part of the manufacturing process for more than a decade now, the first robots were relatively expensive, relatively dangerous and relatively limited in what they could do to repetitive simple tasks.
Advances in technology, particularly related to sensors and intelligent software, are expected to change the capabilities of robots. In addition, prices are dropping rapidly, as a result of which for many economies robots will become more and more prevalent in manufacturing. According to the Boston Consulting Group (BCG), the amount of installed robots will increase by 10% annually to reach 4 million by 2025, a sharp increase from the 1.4 million industrial robots in use around the world today.
In its recently released ‘The Robotics Revolution: The Next Great Leap in Manufacturing’, the consulting firm considers the current cost profile of the technology, as well as projections about the future costs of the devices made. The lowered cost is then considered in line with the level of integration by various countries to implement the technology as well as the competitiveness increase expected to follow from robotic manufacturing process. For the report, BCG engaged in an extensive analysis of 21 industries in the world’s 25 leading manufacturing export economies, which account for more than 90% of global trade in goods.
The adoption of robots over human labour will be predominantly driven by improvements in the cost profile of the technology. As the cost of the technology is reduced relative to wage levels, the adoption of robotic devices becomes more prevalent. In the automotive industry for instance, a considerable number of robots are already active as their operating cost is far below the wage level. In Electrical equipment the point of inflection is yet to be reached (2018) but uptake has already started. In furniture manufacturing few robots are being shipped as human labour will remain competitive until 2023.
Besides operational costs, the implementation costs are also falling rapidly. From the cost of the actual robot to installation and project management, costs across the board are expected to continue to fall as the technology advances further and the relevant component prices continue to decrease in price. The cost of a spot-welding robot has decreased from around $182,000 in total system to $133,000 today. The next ten years are projected to see the device’s capital costs drop further – all the while its performance increases – to $103,000.
As a result, the share of tasks performed by robots will increase from an average 10% today to an average 25% by 2025. The annual change in adoption stands at around 10%, which will see annual shipments jump from around 200,000 units in 2014 to more than 500,000 by 2025 according to BCG’s baseline projection, and to more than 700,000 in a more aggressive scenario.
According to the report, not every industry is ready for immediate robotic development. The analysis finds that robots are predominantly being adopted by four industries: machinery, electrical equipment, computers and transportation equipment. Combined, these industries make up more than 70% of all adoption in 2013. By 2025, the level of adoption in proportional terms will remain relatively stable, increasing around 5%. The food and the chemical industry are the least likely to see large scale adoption of robotics.
Although robots are becoming more competitive relative to the cost of labour, not every economy is seeking to invest heavily in the capital costs of the devices. According to the analysis from BCG, only 5 countries will be installing the overlarge part of the total increase in industrial robots globally. China will be the largest importer of devices, growing its share from slightly below 20% to slightly above it over the coming decade. The US is expected to start investing heavily in the technology in the coming decade to achieve an almost 20% share of all such devices by 2025. Japan and Germany will both control more than 10% of robots by 2025, while South Korea will operate a further almost 5%.