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The robot invasion encountered a setback in 2023 due to a slowdown in the North American economy.

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The robot invasion encountered a setback in 2023 due to a slowdown in the North American economy.

The robot invasion encountered a setback in 2023 due to a slowdown in the North American economy.

On February 12 (Fonrey) Concerns about a decelerating economy and higher interest rates led North American companies to order approximately a third fewer robots last year. This marks the first setback in the steady progression of the robot invasion into the region’s workforce over the past five years.

Jeff Burnstein, president of the Association for Advancing Automation, an industry group tracking robot orders, noted, “When the economy isn’t great, it’s easier to delay purchases.”

According to A3, the group monitoring robot orders, companies purchased 31,159 robots in 2023, representing a 30% decrease from the previous year. This drop is the largest in percentage terms since 2006 and the largest ever in net units. The decline was particularly pronounced in automotive-related industries, constituting about half of the market in the previous year, and also affected sectors such as food and metals manufacturing.

In the fourth quarter, orders reached 7,683, reflecting an 8% drop compared to the same period a year earlier.

Interestingly, the slowdown in robot orders occurred even as some companies unveiled initiatives to develop more advanced versions of these machines. Last month, robotics startup Figure announced a partnership with Germany’s BMW to deploy humanoid robots in the carmaker’s South Carolina factory for specific physical tasks. Electric-vehicle manufacturer Tesla is also in the process of developing a humanoid robot.

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However, numerous robot manufacturers have faced challenges in selling their current machines due to concerns about a weakening economy and the surplus inventories accumulated during the COVID-19 pandemic. Universal Robots, a Danish company specializing in small, flexible robots, recently disclosed a 7% decline in its revenue last year, totaling $304 million.

Kim Povlsen, the president of Universal Robots, conveyed to investors that “2023 was marked by a challenging economic and business environment for many of our core customers, with a slowdown in global industrial activity during the first half of the year.”

COMING OFF A RECORD YEAR

The demand for robots surged during the COVID-19 pandemic, driven by producers utilizing these machines to address the challenges of a severe labor shortage and ensure continuous production. In fact, 2022 recorded an all-time high in orders, as per data from A3.

It’s important to note that while robots are essential equipment for companies, various spending indicators in the U.S. have demonstrated more resilience. Orders for non-defense capital goods, excluding aircraft, a metric closely monitored by economists to gauge trends in business spending, increased by 1.7% last year, according to the Commerce Department. This suggests that investments in fundamental equipment types remained relatively stable, defying expectations of a more pronounced economic slowdown.

Dave Fox, the president of CIM Systems Inc in Noblesville, Indiana, a company recognized as an integrator assembling robotic systems for customers, shared that his business experienced a robust start in the previous year but then faced a downturn. Several significant projects were postponed to the current year, and concerns about the economy were raised by some customers. Fox estimates a 30% decline in his business volume in 2023 compared to the previous year.

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While some customers who initially postponed orders are now seeking updated quotes, indicating a positive outlook for the coming months, Fox remains cautious. It is still premature to determine whether business will return to the heightened levels witnessed during the pandemic.

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According to Burnstein from A3, most robot producers he interacts with are hopeful that business will see an upturn in the second half of this year. He mentioned that the industry has largely navigated through the disruptions caused by the pandemic.

In the midst of the crisis, many companies placed extra orders for robots due to concerns about potential delays in deliveries amid production setbacks and a breakdown in global supply chains. Burnstein pointed out, “There’s still this sense that companies were making purchases ahead of their needs (in 2022),” adding that numerous companies now have excess inventory to manage before considering substantial orders for new robots.

Joe Gemma, the chief revenue officer of Wauseon Machine, a systems integrator in Ohio, concurred that there was an inventory surplus causing distortions in the business. “Many of us were acquiring extra inventory,” he stated. “Our customers were doing the same.” Gemma highlighted that the ongoing labor shortage in the U.S. indicates a continued thriving outlook for the robot business. He shared an example of visiting a plant that typically employs 600 people in production but currently has 140 open positions, emphasizing the prevalent workforce challenges in many places.

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