• Japanese robotics set to double in size
  • China wants to buy 40% of all industrial robots
  • Robin Geffen on “the story of the decade

Recently it was revealed that the level of radioactive caesium in the tunnels at the Fukushima nuclear plant was 4,000 times higher than a year before.

An unnerving spike.

And there are now growing fears that contaminated water could leak into the ocean from a crack in the barrier.

Mitsuhei Murata, a former Japanese ambassador to Switzerland, has gone public saying that Japan should honourably withdraw from hosting the 2020 Olympic games.

It’s a far cry from the 1964 Olympics in any case, which was followed by over 20 years of scorching growth and economic advance.

I remember being in Silicon Valley in the mid 1980s when there was serious talk that Japan was well on the way to world domination via MITI, semiconductors, sub-compact cars and Fifth Generation super-computers.

This time the Olympic event occurs with Japan three decades past it peak, seemingly on the ropes as the nation sinks into a phase of stasis and lethargy under the weight of epic debt.

However, there is one notable area of Japanese growth — robotics.

The Japanese robot industry is set to double or triple its growth rate over the next decade as the world is forced to tackle the protracted and serious issue of flagging global productivity through automation — less than 10% of factory tasks worldwide are handled by robots, now expected to rise to 25% by 2020 — as well as deploy new breeds of robots to help care for ageing populations as human resources are exhausted and healthcare budgets run out of control.

Japan’s Prime Minister Abe made the growth of the domestic robot industry front and centre of Japan’s next phase — aiming to triple the domestic sector’s aggregate revenues to over $22 billion a year within four years against the backcloth of a global robot industry tracking on 10% growth a year.

And it’s a firmly grounded policy, for three reasons.

Japan is a natural home for robots

Japan, along with S.Korea, is the world’s most ‘robotised’ country.

A Shinto culture that sees artefacts as spiritual beings makes Japan a natural home for robots.

There is little robot-phobia in Japan.

In addition to filling its factories with them, robots are already acting as hotel receptionists — visit the Henn-Na hotel in downtown Tokyo — as greeters in stores and pop stars and companions for the elderly, many of whom say they prefer them to human ‘companion/carers.’

Despite Japan’s need to catch up in AI and make headway in the fast growth sub-sector of mobile, sense aware ‘co-bots’ for workshops and warehouses, it dominates the 80% of the overall market comprised of industrial robots via Fanuc, Yaskawa and Kawasaki, and despite fierce competition from ABB and Kuka from Europe shows no sign of losing it dominance.

Moreover, a high octane AI start-up, Preferred Networks, backed by Fanuc, NTT, Toyota and Panasonic among others is a world class machine learning operation wrong to bring Japanese industry up to speed in AI.

China wants to buy 40% of all industrial robots

China is key to the success of Abe’s robot policy.

In order to meet various Party-State fiats and goals, notably the Made in China 2025 Plan for China to become a world beating manufacturer of high quality product, Chinese manufacturing industry is going to have to activate huge numbers of robots to vastly boost its productivity and precision manufacturing.

It purchased nearly 30% of all industrial robot shipments last year but still only has half the world average robot density, less than 50 robots per 10,000 manufacturing workers.

By 2020 it is expected to buy 40% of all industrial robot shipments.

Despite the political tensions between China and Japan China depends for 50% of its robot supplies on Japan from Fanuc, Yaskawa and Kawasaki, and for 90% of its specialist robot components such as force sensors and reduction gears on Japanese suppliers such as Nabisco, Harmonic Drive.

China’s indigenous robot industry, led by Siasun, is weak and shows little sign of being able to provide the quality robots China needs within the next five years. Japan has much to gain as a supplier.

Robots are now part of the social fabric

Meanwhile, there is a growing emphasis on the development and deployment of healthcare and companion robots for a famously ageing population with over 20 million Japanese households to be composed of ‘singletons’ over 65 in short order.

In the vanguard of care robots for the elderly is Toyota which has long been developing HSRs . The quip goes that Toyota will become a robot company that makers cars on the side.

Sumitomo Riko has a nursing care robot and NTT is developing Sato, a voice-driven robot.

SoftBank, amid a blaze of publicity has bought its charming Pepper ‘social robot’ to market for now in very small batches but has formed a $350m joint venture with Alibaba and Foxconn to ‘globalise’ it.

Pepper is to get its smarts from IBM’s cognitive computer Watson in the Cloud.

And the ‘evil’ named Cyberdyne is a world leader in making ‘smart’ exoskeletons to help those with spinal injuries to walk again unaided and other remedial apparel.

In fact, come the Olympics, Fukushima permitting, Japan will present itself as the Precursor Society, albeit a lot more robo-philiac than any other society outside S.Korea.

The building of the Olympic facilities will have been carried out by robot diggers, excavators and haulage trucks led by drones that 3D map sites in real time to provide data on everything — right down to the amounts of dirt and cement being pushed.

This, at least, is what construction giant Komatsu is planning to do with US drone start-up Skyworks in which it has a stake. After all, where is demographically stricken, migrant averse Japan to find the 25,000 human labourers to build Olympic City?

Robot porters will operate in the airports and robot taxis ferry people to and fro, while robots will be all over hotels, stores, restaurants and night clubs.

As Neptune boss Robin Geffen pointed out to the Evening Standard this week, these technologies are already radically restructuring the economy…

  • A 2013 study said that 47% of jobs in America were at risk from automation.
  • Half of the chief executives of US companies believe a significant competitor is emerging or could emerge from the technology sector,
  • Companies are in large part already technology companies — or will soon have to be if they wish to survive. And there is an important message for investment professionals, says Geffen…

“Just as it was crucial in the last decade for fund managers to understand what was happening in the financial system if they were to have a hope of making money for their clients, in the next decade their success will be depend even more on their ability to understand the disruptive power of technology.”

It’s an interesting article, not least because it reads like a conversion experience for its author, Anthony Hilton…

You can read the article here.

Keep an eye out for my own report on the vast, disruptive power of technology over the next week.

The report focuses on several key industries that will have to restructure as Tech Titans plant sensors, devices and robots in the physical economy — learning and thriving on vast feeds of data.

We have already seen how brutal the change has been for the chip industry — you can read my Chips for the Chop article here.

Since 2013, a third of the Philadelphia SOX index has vanished through bankruptcies and largely defensive M&A, and a further 20%-30% are expected to go by 2018.

I expect to see that kind of destruction in across the board. Robin Geffen is right. Companies are having to develop Math House capabilities in order to adapt and survive.

There is a basic realisation that the Big Data, network-centric methods pioneered by Apple, Facebook, Google and Amazon have won and need to be emulated.

In fact, these Tech Titans seem free of economic and political constraint in a way that the early railroads or Standard Oil were in their heyday.

You should contact me if want to discuss in general terms how this might affect your portfolio….

But I will go into more detail about how to invest in this environment in the report next week.