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Reshoring with Robotics & Bridging the Labor Gap

May 19, 2023

Read Time 3 MIN

Watch the industrial robotics sector – tech progress, population trends, and the potential for reviving domestic manufacturing offer a prospect to worldwide labor shortages and aging populations.

The affordability and capabilities of robots have led to their widespread adoption in many different industries, making them an essential part of our daily lives. Robotics technology will continue to revolutionize the way we work by automating mundane and dangerous tasks that previously required humans to perform. As businesses strive to stay competitive and meet the demands of their customers, the need for robotics continues to grow. From manufacturing and healthcare to logistics and agriculture, robots are now an integral part of many industries.

With a growing number of applications, the industrial robotics industry presents a compelling investment opportunity. This industry involves tasks like designing, developing, manufacturing, and selling robots or robotics systems for a wide range of applications. The cost-effectiveness of robots, along with advancements in technology and demographic shifts, have created a favorable environment for investors to consider this rapidly growing sector.

Robotics Affordability: More Bang, Fewer Bucks

In recent years, the significant improvement in the cost-effectiveness of robots can be attributed to remarkable technological advancements. These advancements have led to the development of more efficient and affordable robots capable of executing a wide range of tasks with precision and accuracy. This has made automating robotics tasks easier for companies to achieve a return on investment.

Average Cost of Industrial Robots

Average Cost of Industrial Robots

Source: Statista. As of 2022.

Reshoring: Can Robotics Revive Domestic Manufacturing?

Companies can now consider reshoring their manufacturing operations with robots' increased affordability and capability. This trend of bringing production back home from overseas is being fueled by the ability of customized robots to be quickly programmed and integrated into operations, providing greater flexibility and scalability. Despite companies not previously considering reshoring due to high costs and limited robot capabilities, advancements in technology and increased efficiency have made robot installation more feasible. As a result, reshoring has become a viable option for companies, paving the way for a potential shift in manufacturing from offshore to domestic locations.

New Robotics Tech: Fueling Demand Across Industries

Rapidly growing technology has strengthened the demand for robotics. Advancements in user-friendly interfaces, programming languages, and sensor technologies have made robots become more intuitive and easier to operate. Keyence Corp’s (TYO: 6861) vision-guided robots exemplify this cutting-edge technology through streamlining tasks, boosting productivity, and minimizing changeover delays. These advancements have enhanced production efficiency and broadened the scope of robot implementation across various sectors, including healthcare, logistics, and agriculture.

Industrial Robotics: Solution to an Aging Population and Labor Shortage

Demographic factors are playing a role in the growing use of industrial robotics. With many countries seeing a dwindling labor force and declining birth rates, companies struggle to find skilled workers to meet production demands. The aging population in countries such as China has led to higher labor costs and a shortage of workers. To tackle these challenges, businesses are turning to automation and robotics as a solution. Several robotics companies are responding to this demand by expanding operations in China. ABB (NYSE: ABB) opened up a $150M robotics mega factory in Shanghai in December of 2022 solidifying its robotics and automation leadership in the region. It is imperative for robotics companies to continue investing in regions confronting such demographic challenges.

China’s Population is Growing Older by 2050

China's Population is Growing Older by 2050

Source: United Nations. As of 2022.

VanEck Robotics ETF (IBOT) offers concentrated exposure to the promising investment opportunity in the robotics industry, fueled by the widespread adoption of robots in various industries and sectors. The fund seeks to track a diversified index emphasizing the many subthemes in robotics. Enhanced affordability and advanced capabilities of robots have played a pivotal role in fueling this adoption, making them an attractive option for those seeking long-term growth in the field.

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Important Disclosures

Keyence Corp is 5.58% of IBOT net assets as of 5/15/23.

ABB Ltd is 5.31% of IBOT net assets as of 5/15/23.

This is not an offer to buy or sell or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third-party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its employees.

An investment in the Fund may be subject to risks which include, among others, investing in the robotics industry, information technology sector, industrials sector, equity securities, medium-capitalization companies, Japanese issuers, foreign securities, semiconductor industry, depositary receipts, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risk, all of which may adversely affect the Fund. Medium-capitalization companies may be subject to elevated risks.

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