The world is on the eve of the fourth industrial revolution. New developments in robotics and exponential growth in digitization will make factories smart, flexible and very efficient. Renewable energy will take over as the world’s main energy source and cyber insecurity will unlock massive investments to protect companies. Our Global Industrial Innovation strategy aims to benefit from these rapid transformations.
While the first industrial revolution was marked by the shift from manual to mechanical production, the second one by mass production and the third one by automation, the fourth industrial revolution is about robotics and digitization. In this era of industrial innovation, we discern four disruptive trends: robotics, digital manufacturing, energy transition and cybersecurity. In this article, we give a brief update on the two key trends: robotics and digital manufacturing.
Nowadays, robots and machines have sensors, machine vision and other features that allow them to work together in an intelligent and highly efficient way. Not only will they enable a new wave of productivity increases, they will also improve quality, shorten lead times for new products and require less energy to produce them. What’s interesting at this stage is that robots are being combined with new technologies, such as self-learning software, allowing the robot to collect and analyze data and give feedback autonomously.
A sector that is being completely overhauled by these developments, is the logistics sector. Many tasks that used to be done by humans are now being carried out by robots in all shapes and forms, such as automated guided vehicles (AGVs). Demand for robotic systems in warehouses is expected to surge from 40,000 in 2016 to a mind-boggling 620,000 in 2021, says 13D Research. A 2013 Oxford University study already estimated that up to 98% of US packaging and filling machine operators and tenders, shipping, receiving and traffic clerks’ jobs would be robotized by 2030.
An unintended but interesting effect is that production capacity is moving back from low-wage countries to developed countries, as it no longer pays off to have the products made by cheap labor in Asia. Production by robots at home, without transport costs, is cheaper.
With all that is being written about robotics nowadays, people often ask us if it isn’t it a hype, which has already been discounted in stock prices. The answer is that we are already past the hype and investors are actually underestimating robotics’ potential.
To explain why we believe this, we first have to explain the Gartner hype cycle, which we use as a tool in our portfolio construction process (see Figure 1)1 . In the first two stages of the hype cycle (technology trigger and peak of inflated expectations), the investment community gets excited about a trend and the media picks it up. Every company that can be associated with the trend increases in value. Overreaction can result in bubble-like valuations.
During this phase, there are no clear winners yet, and we construct broad baskets of companies with good (preferably pure) exposure to the technology in question. Another approach is to invest in companies that facilitate the new technology. This is the ‘picks and shovels’ approach. Instead of trying to invest in a (presumed) star gold miner during the gold rush, our approach is to invest in the shop in town that is supplying the picks and shovels.
After the hype has peaked, the next phase is the ‘trough of disillusionment’. Sentiment is very negative and some companies cease to exist. It is hard to invest during this period.
The second stage of investment opportunity takes place halfway up the ‘slope of enlightenment’ and continues onto the ‘plateau of productivity’. This is where we find the companies that have survived. Companies actually implement the new technology and are able to monetize this development with a sound business model. The best investment opportunities occur during the ‘slope of enlightenment’, when sentiment is still negative because many investors witnessed the crash period. The portfolio approach during this phase is to identify and invest in the long-term winners. Industrial robots are in this slope of enlightenment phase. We are past the hype and investors are underestimating the potential of robotics companies.
1 For more detailed information about our trends investment philosophy, please read our white paper The rationale for trends investing, Bergakker and Van Oerle, August 2017.
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.
Please read this information carefully.
This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.
2. Important risk disclosures
Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:
3. Local legal and sales restrictions
The information contained in the Website is being provided for information purposes.
Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.
4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.
5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.
6. Third party websites
Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage.
7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.
8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.
10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.