Robotics and artificial intelligence have crossed over from science fiction to everyday use and growth in the supply chain is where Tom Riley, manager of the AXA WF Framlington Robotech fund, is seeking opportunities.
The fund, which was initially launched for a Japanese client in 2015, has been available as a Luxembourg-domiciled Sicav since December 2016 and has since raised more than $2.5 billion, including $400 million in the Sicav version since.
According to Riley, who runs the strategy alongside Jeremy Gleeson, consumer electronics are poised to overtake automotives as the biggest end-market for industrial robots, making systems driven by ‘machine vision’ one of the ‘most interesting’ areas for robotics at the moment.
Machine vision is a technology that allows image-based automatic inspection and has a number of potential applications, from quality control on factory floors to more accurate sensors for drones or automatic cars.
Japanese sensors supplier Keyence and Massachusetts-based machine vision firm Cognex are two top holdings within Riley’s fund. The latter counts with two of the world’s largest corporations as customers, Apple and Amazon. Apple uses it for quality control for assembly of their smart phones while Amazon uses it in logistic centers to minimize the risk of things going wrong, for example ensuring items' barcodes are correct.
‘They are aiding the customer experience by reducing error and improving quality. What you do find with firms like Amazon and Apple is they are first to adapt to new technologies.
‘It’s likely that as other vendors try to replicate what the “best of breed” companies are doing in this space, it helps grow throughout the industry. We do see big opportunities for robotics and automation continuing in consumer electronics and smart phones but also moving into newer areas like automation of warehouses and logistic centers as others adopt this technology.’
Beyond improving client experience, image recognition technologies could also cut costs in less traditionally techy industries.
Riley added: ‘Those could be things related to agriculture where you scan the environment and work out how much pesticide needs to be delivered in different areas […] this reduces the amount of pesticide that’s used and can leak into the environment.’
Co-bots & China
The biggest growth area in the market, Riley believes, is collaborative robots, also called co-bots, which are designed to work alongside human workers. They’re much more affordable and safe than machines of the past so more likely to be used by small and medium-sized companies, he added.
‘They have a sense of awareness in them. They have semiconductors in them that can feel a sense of touch. If I touch it stops.’
The healthcare sector, which as of the end of October made up 13.3% of the portfolio, is an area where collaborative robots are expected to improve cost savings and efficiency.
Riley sees demographic changes in China also propping up growth in robotics as it is becoming one of the biggest buyers of industrial automation.
‘One of the things that’s not fully appreciated about China is that China’s workforce peaked last year. From 2016 onwards China’s working population will be shrinking. We’ve seen significant wage increasing in manufacturing in China because of labor shortages - people don’t want to do these dull, dirty jobs associated with heavy manufacturing/heavy industry.
‘The need to automate if they want to keep their manufacturing presence is pretty significant. It should be a strong driver of growth for the industry in the coming years.’
He said that while the portfolio is exposed to less than 5% of emerging markets firms, if he was to look at it from a sales point of view it would be probably closer to a third.
‘China is the biggest buyer of industrial robots,’ he said.