The Robotics Revolution

As research in the robotics sector continues to advance so does investment interest in it, as well as the switch from human contribution within a variety of sectors to the use of robots within the same roles. This has seen many companies benefit from the new technologies, through streamlining of processes with automation.

Baxter, a working robot © Plastiques Photography, courtesy of the Science Museum

In a recent deal Google has sold its advanced engineering and robotics unit, Boston Dynamics, to Japanese multinational company Softbank. The acquisition, which is believed to have been for around $100 million is just one of many recent acquisitions by Softbank, as part of its $100 billion tech investment “Vision Fund”. They have also recently taken over British chip designer, ARM Holdings for $32 billion, and office space start up WeWork for £300 million.

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Following the introduction of their dual-arm collective robot in 2015, Swiss industrial company ABB has experienced significant growth in interest, with their American depository receipts having gained 11% since March 2017. In fact, many robotic stocks have remained attractive to long-term investors, with German robotics company Kuka up 9% and Rockwell Automation, an American industrial automation company, up 7% since March 2017. The fear with the rapid growth of this industry is that many people may lost their jobs as companies choose to automate more and more of their processes. However, Jeff Immelt, CEO of General Electric, believes that, at least in the first part of the revolution, robots will actually help to make existing workers more efficient in their roles, rather than replacing them.

While this may be the case in some companies, in others the threat of replacement by robots is more immediate. Following Amazon’s $13.7 million deal to acquire Whole Foods, founder and CEO Jeff Bezos plans to automate the warehouses of both companies with a new fleet of robots, aimed at streamlining the distribution process. This could potentially put thousands of employees out of work in America, as well as in Canada and the UK. However, currently, Amazon’s hiring rates have not been affected, with employee numbers up 43% on last year, with 351,000 employees at the end of March, and the full effect of bringing in new robots awaits to be seen.

Asimo at the Robots exhibition © The Board of Trustees of the Science Museum

The future of manual work within big industries remains uncertain, however, interest in the robotics industry seems set to continue growing. As new products are continuously developed their uses within various sectors will continue to expand.

(Please note: James O’Leary does not currently hold a position in Kuka, Rockwell Automation, Amazon, Whole Foods or Google. Henry James International does not currently own a position in Kuka, Rockwell Automation, Amazon, Whole Foods or Google, for any client portfolios).

(Please note: James O’Leary does currently hold a position in ABB, General Electric, Boston Dynamics, or Softbank. Henry James International does currently own a position in ABB, General Electric, Boston Dynamics, or Softbank for any client portfolios).

Market Overview – Australia’s Recent Finance and Retail Activity

Recent financial developments in Australia have signalled overall positive growth in several sectors, including areas of technology and finance, while in the retail sector recent announcements may have negative impacts on national businesses in the short term.

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A recent dip in interest rates has eased up mortgage stress, with the number of mortgage holders in Australia considered “at risk”, dropping by 1.6% in the last year, from 744,000 to 660,000, making up 16.8% of all mortgage holders compared to the previous 18.4%. While this is a move in the right direction, those with lower incomes are still at a higher mortgage risk. Of mortgage holders with a household income over $100,000 per annum only 1% were considered to be “at risk” while this jumped to 85.3% of mortgage holders with an income of under $60,000. If interest rates continue in this downward trend fewer mortgage holders may be considered “at risk” however, an appreciation in interest rates will abruptly have the opposite affect.

The Australian state of Victoria is experiencing changes in another area of the financial sector with the release of development plans by the Victorian government, announcing the establishment of a fintech center in Melbourne. According to the Victorian Premier Daniel Andrews the hope is that this will not only strengthen the Australian fintech sector by bringing together start-up companies with investors, researchers, and industry corporates in one work space, but that it will also create new jobs in the area. Technology is fast changing the way the financial sector works and the plans for this fintech hub will provide Victoria with the opportunity to win a bigger share of the industry.

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While developments with in the financial technology sector are positive, Amazon’s announcement of their $13.7 million bid for the grocery company Whole Foods has had a drastic effect on Australia’s retail sector. Supermarket company Woolworths experienced a drop in value of 3% while Metcash fell 1.7% and Wesfarmers, the operators of the supermarket chain Coles, dropped by 1% following the announcement. Companies in the electronic appliance field have also noticed depreciations as Amazon announced their bid to expand into the grocery sector. JB Hi-Fi is down 18% this year while Harvey Norman dropped 25%, and its stocks are down by 2%. Alongside the acquisition of Whole Foods, these drops are fuelled by Amazon’s intention to expand across Australia this year. Many analysts believe that this will have further negative effects on Australian companies, as Amazon eats into their earnings.

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(Please note: James O’Leary does not currently hold a position in Amazon, Whole Foods, Woolworths, Metcash, Wesfarmers, Coles, JB Hi-FI, or Harvey Norman. Henry James International does not currently own a position in Amazon, Whole Foods, Woolworths, Metcash, Wesfarmers, Coles, JB Hi-FI, or Harvey Norman. for any client portfolios).