Why is 2018 the year of the robot?

11 July, 2018

Steve Pillsbury
Partner, PwC US

Robots – and automation in general – have been riding a steep maturity curve in the last several years. Adoption rates are up. They’re getting smarter, doing more, and becoming more affordable. The “factory of the future” has become an established buzzword, and the rise of the robots is now conventional wisdom.

But, for many manufacturers, is now the time to jump in? Certain trends and policy developments suggest it is, indeed, the perfect time. And many manufacturers, big and small, are sensing that they need to either get on board or risk being left behind. Building a strategy to enlist robots, though, is key to successful adoption for the long haul.

For industrial products companies, of course, deploying the newest cost-cutting, productivity-raising technology is nothing new. Indeed, manufacturers have never been strangers to automation – from Henry Ford’s mass-production assembly lines to the deployment of industrial robotics more than four decades ago.

More recently, industrial products manufacturers have been first-mover adopters of a wide range of advanced manufacturing technologies beyond robotics, from 3D printing to augmented reality. Indeed, robot adoption is already hitting new highs. Annual shipments of industrial robots in the US rose from 17,000 in 2010 to 41,000 in 2016.1

2018 looks to be a big year for robotics buy-in. While robots have been edging into human work at a rapid pace for some time, 2018 seems to present an inflection point for even wider adoption. A convergence of conditions is making investment in robotics technology particularly attractive and momentous. A number of trends begging the industrial sector to take a closer look at robot adoption have been gathering steam for some time. The most potent include greater pressures to customize products, rising global competitiveness, and a tightening industrial labor force. Meanwhile, newer types of robots, including autonomous mobile robots and collaborative robots (aka co-bots) and even autonomous aerial vehicles have expanded the options (and use cases) robotics technology now offer manufacturers.

Such momentum has not gone unnoticed by investors. US venture capitalists invested $937 million in US robotics technology start-ups in 2017 up from $209 million in 2013.2

The tax-reform trigger. Another potentially powerful trigger is the 2017 overhaul of the US tax code, lowering statutory corporate income tax rate from 35% to 21%, which could free up cash for manufacturers that they can, in turn, deploy for automation technology investment. In addition, the tax reform allows full expensing of equipment expenditures, although this provision is set to phase down from 2023-2026 and phase-out completely by the end of 2026. This comes at a time when the average price for an industrial robot has dropped about 40% in the last decade and is forecast to drop by a further 65% to about $11,000 by 2025.3

It is too early, however, to know how capital spending by manufacturers will be affected amid the new tax environment (and how much of that spending will be earmarked to robotics and automation technology). US orders of manufacturing equipment, though, have been rising steadily since mid-2017 and spiked by 27% in the first two months of 2018 (compared to the same period in 2017), according to the Association of Manufacturing Technology.4

A chance to future-proof. When viewed in a larger and more forward-looking context, placing well-considered bets on industrial robotics technology now could help manufacturers future-proof their production and processes, enabling more industrials to accelerate their path to the much-vaunted “factory of the future.” And, this is just as true for large multinationals as it is for small and mid-sized enterprises.

Integrating robotics into operations (and even the supply-chain), however, is easier said than done. In my next blog on robotics in manufacturing, we will explore the strategies for adoption. I’ll also take a hard look at the real pain points that companies with weak strategies are feeling – and how they can best be avoided.

1 Executive Summary World Robotics 2017 Industrial Robots”, International Federation of Robotics, 2017.
2 “Robot-ready: Adopting a new generation of industrial robots”, PwC June 2018.
3 “Industrial Cost Decline,” ARK Invest, August 7, 2017.
4 “Manufacturing Technology Shows Strength”, Aerospace Manufacturing and Design,” April 18, 2018.