This is the second in a six-part series we’re publishing on the future of robotics. Every day this week, we’re publishing a detailed outlook on a category within the robotics market including details on our thesis, outlook and market size for each category. Read the intro here.

Over the last 20 years, the industrial market has been the primary adopter of robotics technology and accounted for the majority of all robot spend. We characterize the industrial robot market as robots used in manufacturing or assembly applications within automotive, electronic or other machining industries. Largely due to the size and power of most industrial robots in use today, these systems are typically installed in caged environments with minimal human contact for various safety reasons. However, due to advancements in computer vision and motion sensing capabilities, a new type of industrial robot has emerged known as collaborative robots, or co-bots. While the co-bot market is small today, we believe this sub-category of the industrial market will see extraordinary growth over the next 10 years. Our model for the industrial market is broken down into two sub-categories: traditional and collaborative robots.

• Traditional Industrial Robots: Most traditional robots are installed in caged environments away from people allowing them to handle heavy payloads and operate at fast speeds. However, the high integration costs associated with industrial robots limits the flexibility of these machines. In addition, traditional robots typically require programming from advanced software engineers, which can drive total cost of ownership well over $100K per system.
• Collaborative Industrial Robots (Co-bots): Co-bots are built with multiple motion and force detecting sensors, which makes it safer for these systems to collaborate alongside humans. Programming co-bots is also less sophisticated than traditional robots, which lowers overall cost and improves flexibility. With the average selling price on co-bots ranging from $25 – 45k, robot automation is now accessible outside of large industrial manufacturing. That said, limited payload capacity and a slower operating speed are two drawbacks to co-bots in the market today.

Industrial Robot Market to Grow to $33.8B By 2025

According to the International Federation of Robotics (IFR), a total of 253,748 industrial robots were delivered in 2015, and the total market value grew 9.0% y/y to $11.1B. Of all the industrial units shipped, we believe 250,073 of industrial robots were in the form of traditional systems, while the remaining 3,675 units were collaborative machines. Over the next 10 years, we anticipate the traditional industrial market to see healthy growth, but due to lower costs and higher flexibility we anticipate the co-bot market seeing much faster adoption. We expect total co-bot units shipped will increase from 8,950 in 2016 to 434,404 by 2025, representing a 61.2% CAGR. Over this time frame we anticipate costs to continue to come down, but believe the total co-bot market value will exceed $9.0B by 2025. While we expect, co-bots will drive overall industrial growth, we anticipate the traditional market to also see steady adoption. We believe the traditional market alone will represent a $24.0B market by 2025. In total, we believe the industrial robotics market will grow 11.8% on an annual basis to over $33.0B in the next 10 years.

China and US To See Strongest Industrial Robot Adoption

From a geographic perspective, Asia and specifically China has historically been the largest buyers of industrial robot technology. According to the International Federation of Robotics, China consumed 68,556 industrial robots in 2015, which represented 27.0% of all robots sold. Meanwhile, the Republic of Korea, North America, Japan and Germany rounded out the top five, respectively. Over the next 10 years, we anticipate the install base of industrial robots to increase in almost every single country, but believe China and North America will see the fastest adoption of industrial robots. As shown in the exhibit below, we expect annual units shipped to China and North America to grow 22.1% and 20.4%, respectively on a CAGR basis through 2025. We believe rising labor costs will be a lead catalyst to robot adoption in both regions, but see the theme of bringing manufacturing back to the United States as potential driver in North America.

Automotive and Electronic Verticals to Drive Demand

From a vertical standpoint, the automotive and electronics industries have been the largest integrators of industrial robots. According to the IFR, 97,500 and 64,600 industrial robots were sold to automotive and electronic in 2015, respectively. Metal and Machinery as well as the Plastics and Rubber industries are also large buyers of industrial robots. As displayed in the exhibit below, we see robot adoption growing in all 4 verticals over the next 10 years, but due to the high demand for new electronic products (e.g. smartphones, wearables, medical devices, etc.), robot adoption in the electronic manufacturing space will experience above average growth. That said, we believe the rise of the low-cost collaborative robot movement will access automation technology to a handful of new applications, which will drive adoption across a handful of new verticals.

Bottom Line:

Today, the industrial robot market accounts for the highest percentage of all robot spend (61%), and by 2025 we anticipate industrial will remain the largest robotics category. However, due to advancements in computer vision, AI and motion sensing capabilities, collaborative robots are beginning to take center stage. In the manufacturing sector robots and humans are beginning to work together side-by-side; as a result the co-bot industrial market will likely be one of the fastest growing markets in the robotics space. That said, we believe co-bots will remain limited to certain applications given payload and speed constraints, and we anticipate demand for traditional robots will remain strong. Note that we do not view traditional robots as competitive to collaborative systems, but rather view the two as complementary; together the will enable new automation techniques and a wide array of new applications. Key drivers to growth in the industrial sector will include lower costs, improved robot functionalities, rising labor costs, and manufacturing insourcing.

Next: Commercial Robots

In our next piece, we look at the fastest growing category in robotics, commercial robots, and how automation is affecting jobs outside of the manufacturing sector.

Austin Bohlig contributed to this note.