15 January 2019

Investing in robotics: the next frontier

Accountants and auditors are an endangered species. According to an Oxford University research report published last year, there’s a 94 percent chance that some jobs in those professions will be automated in the next two decades, resulting in a net decline in related job numbers.

Other occupations like technical writers aren’t far behind. The researchers found that in just under half of the hundreds of jobs they looked at, functions could be done by robots in 20 years’ time.

With that in mind, the Hong Kong Economic Journal’s investor diary column suggests that investors in markets in both the West and China would do well to consider the implications of the major theme of automation over the coming decade. 

With advances in computing power and the dawn of the big-data era, the new wave of automation won’t be limited to the manufacturing sector. Many professional, high-end, white-collar jobs will be at stake.

One vivid example of how automation is stirring up the labor market, replacing human with machine, is the case of photo-sharing service Instagram. When it was bought by Facebook in 2012 it had 13 employees; its traditional peer Kodak had 140,000 people on its payroll when it filed for bankruptcy that same year.

In China, after decades of development, wages have been rising and cheap labor is no longer easily available in the world’s factory, prompting businesses to reassess the merits of manufacturing there. Terry Gou, boss of the parent company of handset maker FIH Mobile Ltd. (02038.HK), is a pioneer of automation and has aggressive plans to deploy one million robots on the group’s production lines.

Meanwhile, the government of the manufacturing province Zhejiang is reportedly rolling out an US$82 billion automation scheme to benefit at least 5,000 businesses each year.

Use of robots is still in the early stages on the mainland, with just 21 machines for every 10,000 workers. That’s below the global average of 55 and well behind Japan and South Korea, where the figure is about 350. So the market for automation in China is huge, the column says.

China’s robot market is largely controlled by foreign brands, led by KUKA, ABB and Mitsubishi Heavy Industry. As yet no major Chinese manufacturer fits into the robot investment theme but Robo-Stox Global Robotics & Automation Index ETF, a NASDAQ-listed exchange-traded fund founded by Frank Tobe, editor of The Robot Report, is one way to gain exposure to this emerging industry.

Launched in October, the fund puts 38 percent of its money into US companies directly or indirectly related to the robot business, and the rest in firms elsewhere.

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