COVID-19 Will Upend the Robotics Market, but not Necessarily for the Worse

The year 2019 was an unprecedented year of strength for the robotics investment landscape. Both venture and corporate entities ploughed money into autonomous systems, with a concentration of funds going to Autonomous Passenger Vehicles (APVs), surgical robots, and robots for warehousing and logistics. While US$28 billion was invested over 320 separate rounds, corporations also acquired robotics companies at an accelerating rate, with 77 deals making US$17 billion for the year.

Three months into 2020, however, COVID-19 is enacting havoc on the global economy, with major tumbles across all major stock markets. This follows a decade-long bull run fueled by flat interest rates and wracking up large deficits. While all economic sectors could suffer from a transition into a bear market, the robotics industry could be affected more than most others, for better and for worse.

There are some significant challenges facing robotics in light of the economic shock. The industrial robotics sector is entirely dependent on capital expenditure from major manufacturing sectors and is particularly reliant on the automotive sector. With many auto giants suspending their operations, this will deliver further body-blows to industrial robot vendors after a bruising 2019.  

For those developing APVs, a downturn could be transformative; 2019 saw US$10.9 billion invested into APVs and a further US$7.1 billion in acquisitions. The market for self-driving cars has swelled to US$100 billion invested, for next to no revenue. The concentration of testing in California has meant that, with the state’s response to the pandemic, all testing has been suspended.

The pandemic came even as investors and onlookers became increasingly skeptical of massive investments in untested technology with a long and arduous roadmap to deployment. Ride-sharing companies like Uber and Lyft are suggesting that autonomous taxis will be their route to profitability, by cutting out the wage expenses of drivers. This is a dubious proposition, since anything less than perfect Level 5 SAE technology will mean additional hardware costs without losing the driver.

While coronavirus is very likely to slay some sacred cows in Silicon Valley, the crisis also presents a huge opportunity to robotics companies that can tailor their solutions to helping the medical, governmental, and corporate response.

The virus has been a good opportunity for companies to display robots for public applications. One of the more popular applications has been deploying mobile unmanned platforms with Ultraviolet (UV) light to disinfect facilities. Danish company UVD Robots is reaping the benefits of this opportunity and is scaling up deployments of its US$67,000 robots to disinfect hospitals. The company has deployed robots in 45 countries but has only recently been able to enter the Chinese market as a result of increased demand. But after striking a deal with Sunay Healthcare Supplies, UVD will be able to serve 2,000 Chinese medical facilities, indicating that 2020 will see thousands of shipments for disinfection robots in the first half of the year. Based on the hypothetical shipment of 2,000 robots, UVD (only formed in 2013) could receive revenues of over US$100 million, well above the norm for such a young company. A subsidiary of commercialization incubator Blue Ocean Robotics, UVD is expected to be sold off to an acquirer in due course and is likely to prove very popular with the health market going forward. With over 19,000 hospitals worldwide, it can expect significant growth in shipments for the next 24 months.

Apart from UVD, U.S.-based Germ Falcon is offering a similar UV disinfection solution for aircraft, while Chinese TMIRob is deploying disinfection robots in Wuhan. Aside for using ultraviolet lighting, companies like Hong Kong, China-based MTR are using robots to spray hydrogen peroxide on trains and public infrastructure for decontamination. Though only 20 MTR robots have been deployed, the situation is leading to an increase in public and private actor’s receptibility to automation.

Another use case is material handling and delivery. Chinese Pudu Technology is using mobile robots to deliver medical supplies and food to patients within hospitals. This will likely be tested outside of China, with mobile robot developers Aethon and Savioke well-placed to see an uptake in robot shipments for indoor logistics in medical facilities. JD.Com, the Chinese e-commerce giant, has used mobile robots to carry last mile delivery for small to midsized goods in the cities of Changsha (Hunan) and Hohot (Inner Mongolia). In the wake of the virus, JD robots will deliver basic necessities and medical supplies from delivery stations to hospitals in Wuhan. Overall, the automated material handling market for Health will reach US$4.2 billion in 2030, up from US$178 million in 2019.

Inspection, monitoring and detection are all key aspects of containing the pandemic, and Softbank-back CloudMinds has deployed a handful of mobile robots to measure temperatures in Hubei province. Drones have also been deployed with loudspeakers to enforce curfews and surveil areas for security purposes. This thus represents a big opportunity for aerospace and drone companies to increase sales with government agencies. Delivery drones have also become more prominent during the crisis. In China, delivery drones have made over 3,000 trips carrying 11 tons of supplies to Wuhan. In early February, the U.S. Federal Aviation Administration (FAA) began creating safety standards for specific delivery drone models, accelerating testing and eventual commercialization in the United States. ABI Research expects the small drone delivery market will reach US$10.4 billion by 2030.

Drone manufacturers received US$281 million in investment in 2019, and drone services received US$497 million. While the industry has been wracked by the commodification of consumer drones and major incidents affecting the presumed safety of large-scale drone operations, the value of commercial services is no not in doubt, and the industry will receive significant increases in orders from law enforcement agencies as a result of COVID-19.

For the fledgling companies developing mobile robots for disinfection, delivery, security and more, the crisis presents an opportunity to show their worth. Across the developed world, healthcare services and security agencies are likely to get their resources tested, and if novel deployments of robots for aforementioned applications can prove their value, this could represent a test case for robotics to show their worth for challenging applications in health, security, and government.

The use of robots for disinfection, material handling, and surveillance is responding to the first order effects of the coronavirus. But with the virus threat metastasizing on a daily basis, the fallout is beginning to affect the global supply-chain. One particular area of anxiety is the effect of the pandemic on labor shortages in agriculture and food production. The Food and Agriculture Organization of the United Nations (FAO) notes that, while disruption has been minimal, there is already difficulty in moving food products throughout the supply-chain. The picking of high-value goods like fruits and vegetables is likely to fall due to restrictions on pickers and social distancing.

For some robotics vendors, particularly larger actors in the industrial space, COVID-19 is going to add further stress to a difficult market and could force significant cutbacks in staff and expenditures, severely impeding automation. On the flipside, the crisis has highlighted the potential value of automating industrial processes to a greater degree so that disruptions in the supply-chain and workforce can be mitigated. While AGV manufacturers will take an initial hit, they will be in high demand as the crisis subsides and factories return back to work. A large ecosystem of robot developers is targeting manual vehicles for automation, including forklifts, tow tractors, and yard trucks. Companies like Outrider (which received US$53 million in early 2020) are among this new crop of developers that will be in demand for the next few years.

In summary, the coronavirus represents a disaster for robotics vendors building solutions for developed markets in manufacturing, industry, and the supply-chain. But for vendors targeting markets closer to government, like health, security, and defense, it represents a big opportunity.

ABI Research recommends that industrial players develop bespoke solutions for non-manufacturing use cases or look to build comprehensive solutions for enabling a scale-up in medical supply manufacturing. For mobile robotics vendors and software companies targeting more nascent markets, this represents a big chance to highlight the importance of robotics for dealing with national emergencies and mitigating economic shock.