Who Needs Santa? Robotics, Automation & Artificial Intelligence Is Delivering a Sleigh Load of Christmas Joy

Written by: Jeremie Capron With the end of 2017 just around the corner, it’s clear that companies within the ROBO Global Robotics & Automation Index will be bringing joy to many investors this holiday season. And based on the results of Q3 (as well as a an informed peek into Q4), it looks like the cheer is likely to continue into the coming year and beyond.Momentum for the Index continued to grow throughout the third quarter, with results that surprised even the most enthusiastic investors. The median EPS growth was even stronger than anticipated at 26% YoY—the strongest since 2011 and 69% of Index members beat consensus estimates. And revenue growth across the Index accelerated to nearly 12%, led by particularly industrial-flavored sectors such as manufacturing and actuation, sensing, and food and agriculture.While solid earnings in every area of the market aren’t too surprising considering the pick up in global GDP growth, what is unique in robotics, automation and artificial intelligence are the specific trends that are driving this stellar growth. It is this very tangible activity that is setting the stage for what’s to come—regardless of whether or not the bull decides to keep charging forward into 2018.

Some of the most notable trends at the moment include:

Japan’s stunning results

Japanese companies, which currently account for nearly 30% of the ROBO Global Robotics & Automation Index, were shining stars in 3Q. More than half of the Japan-based index members raised full-year profit guidance, and despite a weaker Yen that provided a nice tailwind, organic sales growth was simply stunning. Fanuc, the world’s leading provider of industrial robotics and computerized numerical controllers, topped the rankings with revenue growth of 39%, followed closely by Daifuku, the top supplier of logistics automation solutions, which was up 35%. SMC, the global leader in pneumatic actuators, was not far behind at +29%, along with Keyence at +28%, and Yaskawa at +25%, while Omron grew its Industrial Automation sales by 23%.

Strong demand in the electronics industry

While demand for factory automation grew in virtually all major end-markets, the technology sector was a key driver of growth. Major contributors included manufacturers of smartphones, semiconductor production equipment, flat panel display, and lithium batteries. A major investment cycle in OLED technology and connected devices is driving demand for sensing. This was reflected in astounding 3Q sales growth of 75% at Cognex which was boosted by massive orders from Apple and its iPhone supply chain, as well as significant upticks at Keyence and new index member Koh Young.

Spectacular growth in China

Sales to China delivered surprising upside growth for nearly every index member with sizeable exposure to the country. IPG Photonics’ China sales grew more than 70% YoY to reach 45% of group revenue. This spectacular growth was rooted primarily in the adoption of high power laser for use in cutting, welding, and engraving applications. Other Chinese companies that contributed to the quarter’s major upswing include Omron, Cognex, Fanuc, Yaskawa, Nabtesco, Keyence, and Renishaw.

Growing demand for industrial robotics

Sales atthe world’s top-three suppliers of industrial robots continued to trend skyward. Sales rose +20% at Fanuc , +24% at Yaskawa, and +10% at ABB Robotics & Motion. Meanwhile, Teradyne’s Universal Robotics sales accelerated to +70% YoY—and an impressive +77% in the first nine months of 2017. These numbers reflect the continued adoption of collaborative robots across a growing range of applications.This global, sector-wide growth is evident not only in the earnings results for each company, but also in the capacity constraints that began to emerge in various areas of the supply chain earlier this year. Despite aggressive expansion plans, it looks like Fanuc will be unable to meet higher-than-anticipated demand for its robots and computerized numerical control systems. Harmonic Drive, the world’s number-two supplier of precision speed reducers for industrial robots and l cobots, saw its sales of speed reducers rise by 54%, and orders jump 161% in Q3, creating significant capacity constraints. Related: How Smart Factories Are Transforming Manufacturing as We Know It At the same time, global manufacturing is driving broad-based growth in factory automation spending, and demand for factory automation equipment continues to accelerate. This is perhaps best reflected in the continued acceleration in revenue growth at the global factory automation “do-it-all” companies such as Siemens, which grew digital factory sales by 9%, and Rockwell Automation(+8%,the fastest pace since 2011).And while robotics and automation have been a given when it comes to creating competitive advantage, AI is in greater demand than ever. Amazon, Baidu, Microsoft, and other leading cloud vendors recently announced strategies that include the use of field-programmable gate array products (FPGAs) for machine learning (deep learning and inference), which would greatly benefit Xilinx. Cognex acquired Vidi, a leader in deep learning-based machine vision, which can solve some of the most difficult quality inspection problems in manufacturing. Korean 3D inspection specialist Koh Young announced the release of a new AI-powered software for its automated optical inspection equipment, and industrial robot powerhouses Fanuc and ABB have announced the deployment of AI-based solutions to facilitate programming.Healthcare companies are also leveraging the power of AI—using it to drive new advancements in surgical robotics to radiology and radiation treatment. The sector’s keen focus on robotics has resulted in quite a few positive surprises as well.Intuitive Surgical delivered another large beat and raise with robotics surgery procedures up 15% YoY and better margins, and the success of Mazor Robotics spine surgery solutions confirmed that spine surgery is rapidly moving towards robotics adoption, with sales up 126% YoY.As we head into the final days of Q4 and start to look toward what’s to come in the New Year, the ROBO Global Robotics & Automation Indexmay be just the place for investors to seek out some holiday surprises of their own. If Q3 is any indication, there will be lovely surprises aplenty in Q4 and beyond!

Want all the details? Download the 3Q17 ROBO Earnings Report or visit www.roboglobal.com .