Since the 1960s, engineers have been working on suits that enhance human strength. Over the years, these exterior skeletons, or exoskeletons, have improved hugely, clearing the way for a large number of use cases. For investors, it is key to identify the companies that will benefit from this trend and those that will lose out.
In the 1960s, the US Defense Department introduced their ‘man amplifier’, which would augment a soldier’s capacity to lift and carry heavy items. The exoskeleton was born. Initially, a human operator wore an exoskeleton following the master-slave principle. Every movement the human made was copied by the exoskeleton. This approach lacked practicality, mainly due to the bulky size required for strength and the lack of flexibility for the human operator. After years of development, the man-slave principle has been replaced by autonomous robotic systems that react to, but do not necessarily depend on, human movement. This clears the way for many use cases in the medical industry, elderly care, industrials and in the army.
The medical exoskeleton market currently focuses on rehabilitation of spinal cord injury patients. This was a USD 45 million market in 2013, which is expected to grow to USD 2 billion by 2020. With exoskeletons, rehabilitation is much more efficient and quicker, which saves a lot of money. In addition, the upward position was proven to be superior to sitting in a wheelchair. Reduced pain and spasticity, improved bowel and urinary tract function, increased lean muscle mass, decreased fat and less dependence on medications are examples of direct benefits of standing up. We believe this technology is applicable to a much wider set of medical conditions and expect the number of users to grow substantially over the years, depending on regulatory approval.
Exoskeletons can become a very important tool to keep elderly-care costs low. Exoskeletons allow elderly people to stay at home for a longer period of time and reduce the chance of mobility accidents. Most elderly people end up in nursing homes as a direct result of decreased mobility, not due to other decreasing skills to live independently. Still, current exoskeletons are too expensive and difficult to handle. Another important objection of elderly people is that exoskeletons look very lumpy. Developments of ‘soft-skeletons’ could be a solution. These increase muscle strength and are concealed under clothes.
The potential market for home mobility in the US concerns about 7.5 million people. This amounts to a USD 7.5bn market opportunity, assuming a conservative USD 10,000 cost per suit and a 10% adoption level. The cost reductions that can be realized through lower usage of elderly care facilities are substantial in developed countries. Japan is expected to be the first market for elderly care exoskeletons because of their fast increasing average age and state-of-the-art robot technology. We do not expect quick suit adoption in the near term. Once medical use cases have been proven, and the technology becomes more user friendly, we expect bigger appetite from this customer group.
The medical exoskeleton market is dwarfed by the potential market size of industrial exoskeletons. In the industrials segment there is no regulator that needs to approve devices before they can be used, which increases adoption speed. Industrial exoskeletons augment strength, safety and endurance.
The US construction and manufacturing market consists of 13.5 million workers executing production and non-supervisory jobs. A large part of these jobs are repetitive and physically demanding. The annual costs related to back injury in the US construction industry are estimated at USD 50 billion. Industrial exoskeletons could reduce these costs substantially and improve productivity. Industrial exoskeletons could be a USD 19 billion market in the US by 2025, assuming suits will be applicable to 20% of industrial workers, at an average price of USD 7,100 per suit.
In 2000, DARPA, a US defense agency, started to invest in exoskeleton research. In 2011, Lockheed Martin joined efforts by developing exoskeletons for army purposes in cooperation with robotics start-ups. Suits for the army are used to enable soldiers to walk long distances, climb steep mountains and carry heavy loads. They are also used for rescue missions after natural disasters. The military market is potentially large, and there are substantial entry barriers. It is difficult to determine the exact market size, also because many contracts are initiated by governments that prefer secrecy.
It is clear that robotics companies with exposure to this trend are expected to benefit. It is too early to determine winners though. First of all, competition is increasing very rapidly, thereby reducing economics quickly which makes it harder to invest in Research & Development. Secondly, well-established industrials are setting up units to develop suits and compete with pure-play start-ups. From an investment perspective, industrials are not pure-play enough and pure-plays are not yet mature enough to invest in.
In the industrial exoskeleton market, companies that use this new technology in their day-to-day business have a chance to outperform versus peers due to lower injury rates (and related costs) and increased productivity.
Exoskeleton technology does not compete with existing offerings in the military or in industrial use. Although one could argue that exoskeleton technology competes with automation providers, it is not unthinkable that both trends will develop alongside each other. On the medical side, this is not always the case. Suppliers of wheelchairs and walking aids may be impacted. Elderly care centers can also be affected if exoskeleton technology enables elderly people to live in their own homes for a longer period. Finally; chiropractors and other medical professions treating injuries related to heavy-physical labor might consider retraining into robotics engineers.
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