26 January 2021

Asia Equity Trends: The Rise of ‘Steel Collar’ Workers

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Asia Equity Trends: The Rise of ‘Steel Collar’ Workers

Throughout the year, our Asia Equities team will discuss key trends shaping opportunities in the region and fueling the long-term trajectory of Asian enterprises. We start off this series with our insights into the rise of automation and robotics: the “steel collar” workers of Asia.

At the onset of the global pandemic a year ago, many companies found themselves on the back foot as supply chains ground to a halt in key manufacturing hubs. But the disruption fueled the acceleration of digitalization globally. We expect this to lead to greater automation and an increase in the use of industrial robots in Asia – presenting long-term opportunities across markets and sectors in the region.

Asia’s ‘rise of the machines’

Asia is already the world’s largest industrial robotics market: two out of three newly deployed robots in 2019 were installed in the region. We believe the pandemic, coupled with aging populations and demand for complex and precision machinery, will shape sales of robotics systems going forward. In the medium and long term, this will create growth opportunities for companies that can shift to adopt automation as well as for the broader global robotics industry.

Asia Has Led the World in Industrial Robot Installations Since 2010

Asia Has Led the World in Industrial Robot Installations Since 2010

Source: World Robotics Report 2020, International Federation of Robotics, PineBridge Investments as of 24 September 2020. For illustrative purposes only. We are not soliciting or recommending any action based on this material.

China remains the world’s largest market for industrial robots. Within Asia ex Japan, South Korea ranks second, and India has quickly ramped up adoption as well. Within the five-year period to 2019, India doubled the number of industrial robots operating in the country´s factories, according to the International Federation of Robotics.

China Has Outpaced the US and Japan in Industrial Robot Installation

China Has Outpaced the US and Japan in Industrial Robot Installation

Source: World Robotics Report 2020, International Federation of Robotics, PineBridge Investments as of 24 September 2020. For illustrative purposes only. We are not soliciting or recommending any action based on this material.

Our own channel checks indicate that manufacturers in Asia have become more interested in automation equipment in recent months. The advantages are clear: “steel collar” workers can work without disruption, 24/7, regardless of the pandemic, improving productivity and cost efficiencies. The payback period for industrial robots with a lifecycle of 10 years is expected to continue to shorten, to just under one year. In addition, while density of robotics is already high in countries such as Singapore and South Korea, China and Taiwan have room to grow.

Industrial Robot Density in Asia Has Room to Grow

Industrial Robot Density in Asia Has Room to Grow

Source: World Robotics Report 2020, International Federation of Robotics, PineBridge Investments as of 24 September 2020. For illustrative purposes only. We are not soliciting or recommending any action based on this material.

Opportunities amid disruption

The rise in industrial robotics is creating opportunities across markets, sectors, and capitalizations, but we favor a selective approach to identify those that offer the most value. For example, China’s domestic robotics and automated machineries manufacturers lead globally in certain segments. This industry is now complemented by a growing number of domestic suppliers of robotics parts, which until recently had been largely imported. Last year, amid the pandemic, China announced fresh efforts to push for “new infrastructure” projects, which include automation, to jumpstart consumer demand and as an economic multiplier.1 China’s desire for technological self-sufficiency could open up opportunities for its domestic industry over the long term.

Meanwhile, South Korea aims to be the fourth-largest global player in robotics by 2023. In its 2021 budget, the government increased the amount earmarked for the robotics industry by 23%, with priority given to the commercialization of industrial, public service, and medical robots.2  

Like other technological disruptions, automation in general could also precipitate displacement of labor. Whether the benefits of automation will offset this cost – e.g., by spurring an increase in non-automated jobs or new labor-intensive jobs – remains to be seen. This transition could create opportunities for “re-skilling” in response to a more digitized world. In the military, for instance, the use of unmanned aerial vehicles (drones) has created a new breed of pilots beyond just the “Top Guns.” Seven to 10 pilots are required to remotely operate one Predator or Reaper drone “orbit” providing 24/7 continuous coverage over a given area, and another 20 people are needed to operate the drone’s sensors.3

With government support in Asia playing a key role in the speed of innovation in automation, and with industry leaders proving highly adaptive, we see this trend reshaping the dynamics of industry in the factory of the world.

See our 2021 Asia Economic Outlook for more insights on developments driving investment in Asia and beyond.

Footnotes

1 See China State Council, “China to Speed Up Development of New Infrastructure Facilities,” 28 April 2020.
2 See Pulse News, “Korea to Lift Nearly All Regulations on Robotics to Quadruple Market Within Five Years,” 29 October 2020.
3 Paul Scharre, Army of None: Autonomous Weapons and the Future of War, (W. W. Norton & Company: New York, 2018)


Disclosure

Investing involves risk, including possible loss of principal. The information presented herein is for illustrative purposes only and should not be considered reflective of any particular security, strategy, or investment product. It represents a general assessment of the markets at a specific time and is not a guarantee of future performance results or market movement. This material does not constitute investment, financial, legal, tax, or other advice; investment research or a product of any research department; an offer to sell, or the solicitation of an offer to purchase any security or interest in a fund; or a recommendation for any investment product or strategy. PineBridge Investments is not soliciting or recommending any action based on information in this document. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author, may differ from the views or opinions expressed by other areas of PineBridge Investments, and are only for general informational purposes as of the date indicated. Views may be based on third-party data that has not been independently verified. PineBridge Investments does not approve of or endorse any re-publication or sharing of this material. You are solely responsible for deciding whether any investment product or strategy is appropriate for you based upon your investment goals, financial situation and tolerance for risk.

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