The Road to the Robot Apocalypse

Exists somewhere in Northern Indiana

There are a lot of predictions about the end of the world these days. There are folks who think nuclear war is imminent - who think that the end is nigh. Some think that global warming will melt us all down and cover the whole world in water in a matter of months. Others believe that our demise will come at the hands of the Yellowstone Caldera. Every generation all over the world has had some fear of world ending, cataclysmic event. But one of the more recent hypotheses is that of the robot apocalypse - our robot overlords will wipe us all out and supplant us as the ultimate apex predators. The irony of this fear, of course being that this revelation will be due to a product of our own making - technology we continued to advance, without asking whether or not we should. We design Artificial Intelligence to help us live better lives, but it just ends up removing the need for our lives altogether.

This fear - doom by our own design - is not what’s new. Most apocalypse allegories do have some reference to the folly of man’s pride. But the specific technological aspect is not as new as it would seem. In fact, the word Robot was first coined in 1920 and its etymology stems from certain slavic languages, meaning “forced labor” - in other words, a robot is just an alternate translation for serfs. People have been dreaming about robots for over a century. And the robot apocalypse almost as long - it’s even recently gained some interesting steam.

But if the idea behind the term robot was coined over 100 years ago (and realistically, the humanoid mechanical creature has been a part of mythology for much, much longer), then where are the robots? It seems like surely we would all have our own iRobots following us around, acting as our assistants and catering to our every need. Or is the robot akin to the jetpack - nothing but fanciful futurism with no place in the real world - not something people want or can actually build. On the contrary, robots do exist, but each serve very specific, individual functions. Roombas, Washing Machines, Siri, etc. are all in our lives reducing some the menial tasks that we used to have to perform for ourselves. They still require some level of maintenance, but in general, they make our lives easier.

And, as they say, we are still early when it comes to this robot thing.

Outside of our personal lives, robots are everywhere. Industrial settings are littered with various automated arms and robotic programs. If you are even remotely attuned to the software startup market, you know that artificial intelligence seems to have found its way into every platform, point solution, and SaaS business (to what degree is that “AI” actually AI is open for discussion). Our ascent (or descent, depending on your point of view) into new-age automation has happened slowly over time. The forefront of the automation movement is not the tin man serving as your personal assistant at home - it’s the yellow arm welding thousands of parts together every day.

Our robot overlords are not going to come in the form of a consumer product, but rather, where the true investment is coming from - the industrial sector. In 2021, there were approximately 435,000 industrial robots installed into industrial settings globally. This was an increase of 10% from 2020, and a sign of acceleration in the robotics space around the world. Most of these sales were to China, but there are signs that installations in the United States are going to / have already picked up pace.

For a long time, the industrial robotics industry in the US (and almost everywhere else) was dominated by the US automotive industry. However, as car companies and the relevance of the automotive industry have loosed their grip on the American economy, the need to industrial automation also slowed down in near lock-step. For a long time FANUC, other robot manufacturers and robotic integrators were almost entirely geared to car companies and their suppliers. Big Auto was also the only industry that had the funds to purchase and install useful robotics. But now, industrial robots have become more accessible and more industries have more capital at their disposal to further automate. Moving forwarded, it is expected that non-auto automation is going to lead incredible growth in the space over the next decade. As other industries continue advance and add more automation to their manufacturing process, it is expected that the pace of robotics installation is going to accelerate in the US rapidly.

On top of these sector tailwinds, there is an ongoing labor shortage in the United States, which is causing more companies to look for alternatives to solve their production needs. It is generally anticipated that the robotics industry will help supplement this labor shortage, possibly/hopefully reducing the need for jobs that are harder to fill. Coupled with the potential trend of increased reshoring (bringing manufacturing back to the United States), industrial robots will not only become more and more economically feasible, but they will become necessary as well.

The most famous recent reshoring example is TSMC’s new facility in Arizona. The Taiwanese chip-manufacturing giant is currently spending $12 billion on a facility in the US Southwest for a variety of reasons, but chief among them is the need to have chip manufacturing happen domestically for their US customers. The Company is also going to build a facility in Japan as well. Recent supply chain constraints have emphasized the need for certain products to have a more local presence. Chips are the most high-profile (the shortage even has it’s own name and wikipedia page), but definitely are not the only product that is required on-shore. This is just one high-profile example of a trend that is likely going to grow over the next decade: bring manufacturing back to the US for supply chain reasons.

But that doesn’t necessarily mean a pure boon in the manufacturing jobs sector. US labor is still expensive and many of the products that are being reshored are currently produced in very high-tech facilities (after all, China is where most industrial automation growth took place last year). So in order to make that manufacturing work here, we will need to see a noted increase in industrial automation. And an increase in industrial automation also means an increase in the robotics industry across the board, but specifically in the installation, design, and integration of actual robotics systems.

It’s not just as simple as buying more robots however - an entire ecosystem exists around the automation sector. You can’t just buy a robot and put it into your warehouse and expect productivity gains to occur immediately. Most industrial robots are installed by a third party integration firm who designs, tests, installs, and maintains automation systems separately from OEM’s. It is estimated that there are at least 57,000 robotics integrators in the United States, who come in all different shapes and sizes. It is a remarkably fragmented industry, with only a few key players, and even they are relatively small. An integrator plays a key role in designing and installing a robot for a company looking to add automation into their processes. As a result, while they are not making the actual robots, they are critical to automation market. Integrators make sure a robot actually works the way a customer wants it to. While technical advancements occur at the robot OEM level, practical advancements occur at the integrator level. OEMs can develop a more high-tech robot all it wants, but the integrators have to make sure it has a real practical use.

What’s more, a bulk of these integrators are located in the Great Lakes / Midwest region because they were located close to the automotive industry. As a result, this region is well poised to be a the leading edge of robotics and automation. It is incredibly difficult to find the technical talent that is required to actually install and design an automation system, and a lot of this talent base is already in this region. Of course, there are integrators all over the country and more will continue to sprout up as needs are demanded. A recent study put together the following table of ranked robotics regions:

While some coastal cities are notably involved at the top of the chart, it’s no surprise to those of us who live here that Ohio has four of the top twenty five regions alone. Half of the top 30 robotic regions are in the Great Lakes region.

Why this matters: robotics talent is hard to find. It’s currently one of the most in-demand job sectors in the country and it’s not being replicated at a quick enough pace. It’s also an industry that is heavily reliant upon apprentice-like training and skilling. As a result, the front lines of practical applications of automation are happening where existing integrators are based. If you are a startup selling into this space, it wouldn’t hurt to have a presence here as many of your customers are going to be in your own backyard.

This is a big market at a clear inflection point, especially in the midwest. As a result, I expect there to be a lot of startup activity in the space - selling to integrators, building better robots, new robot use cases, improving process automation, etc. I also don’t think there are a ton of winners in the space yet either. Some names have gone on to raise a fair amount of capital, but no true leader in the yet. I am going to keep my eyes peeled as we welcome our robot overlords with open arms.