Emergent Markets: Robotics

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Robotics

Robotics (and drone solutions) are increasingly growing in demand owing to the need for improved operational processes, lower manufacturing costs, and efficient logistics.

Introduction

This is one of the 16 market profiles produced as part of the Economic Market’s foresight study commissioned by the North East LEP. It provides an overview of the future growth prospects for the Robotics market globally, a summary of the enterprise base serving the market in the North East and relevant regional assets, and an analysis of how the continued convergence of global trends will affect future market development.

These markets were selected as those most likely to present opportunities for future regional growth in the North East LEP. This was done based on a trends analysis conducted by Frost and Sullivan, which identified 37 high impact trends driving continued change and growth in these markets globally. A shortlist of markets from this trends analysis was then cross-referenced against the current North East position by Cambridge Econometrics. This analysis identified the most significant opportunities for the North East LEP.

Each of these profiles also uses findings from the Data City platform to quantify the number of firms serving the Robotics market in the North East. This platform links companies house data to companies’ websites and uses the website text and machine learning to classify firms into Real Time Industrial Classification Codes, which can allow analysis of markets often too emergent to be precisely measured in SIC codes. The data from this platform has been triangulated against ONS data to consider a variety of perspectives on the market.

More detail about the methodology can be found here for the 16 market profiles.

Description and global outlook

Robotics (and drone solutions) are increasingly growing in demand owing to the need for improved operational processes, lower manufacturing costs, and efficient logistics. An ageing workforce is also a key driver.

Manufacturing and industrial solutions have emerged as the largest market for the robotic solutions owing to improvements in competitiveness.

Market drivers

The robotics market is being driven with increasing integration of IoT, AI, Data Analytics, and Cloud, which are driving the development of dark factories. Healthcare is another key area where robotic solutions are being implemented for surgery, diagnostics, cleaning, disposal, delivery etc.

This is expected to be further boosted by the demand generation due to COVID-19 pandemic which forced the companies to shift towards automated solutions for a faster recovery and increased competitiveness.

The drone market is expected to be primarily driven by demand from enterprise solutions, involving demand from construction, utilities, logistics and manufacturing. The consumer drones category, with positive regulatory support, can also emerge as leading market segment for drone solutions.

Among others, cobots (collaborative robot) are also driving the market with increasing adoption across several sectors where human workforce efficiency is boosted.

Key challenges for robotics and drones are:

resistance from existing solutions
regulatory challenges for drone usage
ensuring security of network
high cost of development and implementation
limitation of endurance in self-powered solutions

Scale and scope of global market

The combined market for robotics and drones in 2020 was estimated to be US$ 112 billion, with predicted growth rate of CAGR 19.6% for the period of 2021-2023. The robotic solutions are expected to continue to lead the market by revenue, but drones will experience a faster growth rate.

South Korea and Singapore are among the leading countries in terms of density of robots employed in the industries, while China has emerged as the fastest growing market for robotics. This has placed Asia-Pacific as the largest market for the robotics.

$112 bn

The COVID-19 close downs, supply chain disruptions and increasing cost of production provide a new opportunity for the UK industries to adopt robotics and drones across their processes. Some of leading global companies in the robotics and drones market are iRobot , Zebra Technologies,  Intuitive Surgical, Rockwell Automation, KION Group, Seiko Epson, Yamaha Motor, Terra Drone, Parrot Drones, Yunnec Insitu, AeroVironment, and Boeing.

Capital flows and FDI

Funding for ICT and Data ventures (VC and PE-based) rose by 183% between 2019 and 2020. This is expected to be higher in 2021, partly as a result of the COVID pandemic, but also buoyed by the increasing numbers of innovative startups and growth companies in the market across the UK. This represented 42.6% of all VC and PE investments made across the nation over the period.

As with other markets, the regional breakdown of this capital liquidity does not favour the North East, with an aggregated 1.1% of all investments made in the North East region. There appears to be significant regional differences in either availability of private capital, or the readiness of regionalised ventures to attract such investment.

Further exploration into the barriers to private capital flows into the region, and how public-sector initiatives can support the crowding-in of such capital, is suggested.

North East presence and capabilities

Regional overview

The North East has robotics and automation manufacturing expertise, and research facilities. The Technology, Innovation and Green Growth for Offshore Renewables (TIGGOR) programme aims to boost supply chain growth and productivity in the North of Tyne and wider North East region, as well as to encourage new companies to enter the offshore wind and subsea industries.

Subsea Robotics

Subsea robotics and AUVs are a strength in the North East. SMD is an advanced global designer and manufacturer of subsea remotely operated and autonomous power and control solutions – including modular robotic platforms and ROV systems. Key sites for subsea robotics include testing facilities at Blyth, and Tyne Pressure Testing (formerly Tyne Subsea) - a purpose-built facility that provides unique pressure testing, subsea research and hyperbaric condition testing facilities in the North East.

Subsea UK promotes the region’s subsea credentials in design, engineering, and manufacturing nationally and internationally, including subsea robotics.

Wootzano Ltd

Wootzano Ltd closed the biggest contract for any robotics company in the UK known to date. The £300mil+ deal was signed prior to the release of their state-of-the-art robotic system known as Avarai™; capable of handling, pruning, estimating weight, inspecting quality, and packing delicate produce.

The contract was signed with one of the largest pack-house giants in Britain in April 2021, closing one of the most significant deals in the country. Wootzano Limited is a robotics company that builds dextrous robots utilising patented electronic skin (Wootzkin™), proprietary machine learning models, vision system and electronics, to enable them to sense and feel in the real world as humans do.

The Robotics and Autonomous Systems (RAS) Test Site

The Robotics and Autonomous Systems (RAS) Test Site is being developed by the Offshore Renewable Energy (ORE) Catapult in Blyth, has been awarded £3 million from the government’s Getting Building Fund, which is managed in the region by the North East Local Enterprise Partnership (LEP).

STEM skills in the North East

The North East LEP area has a strong and diverse university sector, with over 85,000 students studying at four universities: Durham University; Newcastle University; Northumbria University and University of Sunderland. In 2018/19 there were 31,475 enrolments in the four universities in the North East LEP area. Subjects that are a particular specialism by one or two of the universities include Engineering and technology (Newcastle).

It has been a priority of the North East LEP to increase the enrolment in STEM qualifications. Overall, the change in total graduates between 2014/15 and 2018/19 and who studied a STEM related subject has been roughly in line with the UK average at around 10%. However, some subjects have experienced a much faster increase in graduates, most notably in computer science, where the number of graduates increased by over 40% in the space of four academic years, compared to 19% in the UK as a whole.

There are nine Further Education colleges, providing technical education and further learning opportunities. These colleges are brought together through the North East LEP area College Hub, which has abroad remit to support the implementation and achievement of the Gatsby Good Career Guidance Benchmarks, as well as the brokering of strategic employer partnerships with further education institutions. According to the Local Skills Report from the North East LEP, a recent survey of FE colleges recorded a strength in engineering and manufacturing technology subject areas.

The sectors with the largest number of Apprenticeship achievements correspond to the priority sectors for the North East LEP area namely business, health, engineering and construction.

Strong sector outputs

Manufacturing accounts for a significant share of the North East LEP areas output, with specialisms in automotive and other vehicle manufacturing, pharmaceuticals and chemicals. The region has a number of programmes and initiatives to expand the advanced manufacturing sector, with a focus on shifting to greener processes and products, and digitisation.

Centres of Excellence

There are several centres of excellence for manufacturing skills, including the Centre of Excellence in Sustainable Advanced Manufacturing (CESAM), the Skills Academy for Sustainable Manufacturing and Innovation (SASMI) at Gateshead College, Nissan Academy and Hitachi University Technical College.

Analysis of GVA and employment by SIC sectors

Figures 1 and 2 summarise the findings from socio-economic data and economic forecasts, presenting headline findings for the Electronics industry and Machinery – the most relevant SIC classifications where CE forecasts are available. The Electronics industry employs 2,100, and is less of a specialism than nationally, with a location quotient of 0.6.

The sector, although highly productivity, has experienced a steep decline in employment and GVA. The outlook is forecast for an increase in jobs and GVA growth. The Machinery industry employers 9,900, is highly productive and has experienced declining employment with increasing GVA historically. The sector is a significant specialisation compared to nationally, and in the long-term GVA is forecast to continue to growth, with declining employment.

Electronics

Machinery

Data City findings

The Data City provides company data based on an AI-driven taxonomy search of terms and content on company websites. This is then connected to companies house data for each company and allows an aggregate analysis for new industry and market definitions. The data captures the number of business branches in the North East LEP area, which means firms registered outside of the North East LEP but with branches in the area are captured in the data.

In robotics, there were 54 active firms in June 2022 with a presence in the North East LEP area, representing 4.2% of all Robotics firms in the UK.

Local Authority location quotients

In terms of enterprise counts, the Data City intelligence suggests that North Tyneside and Sunderland are emerging centres for robotics, with 12 enterprises located in North Tyneside and 11 in Sunderland. Both these local authorities had very strong location quotients. South Tyneside and County Durham also had strong locations quotients and Gateshead a moderate positive location quotient. In contrast, Newcastle and Northumberland did not have a particular concentration of firms operating in this market.

Connections with other regions

The Data City results suggest that the robotics sector in the North East has a high proportion of firms with out of region locations. Of the 54 enterprises with a presence in the North East LEP 56% also had a location outside the wider North East region. In contrast only 20% of robotics firms nationally had locations in more than one NUTS region.

The data also suggests robotics in the North East LEP has strong links with other regions. Over 10% of North East LEP robotics firms had an additional location in the North West, Yorkshire, the West Midlands, the East of England and the South East. Compared to the UK overall the North East LEP had a strong connection to the North West and a moderately strong connection to Yorkshire and the Humber, the West Midlands, the East of England and Scotland.

Robotics and sector crossover

One of the innovative features of the Data City methodology is that it allows firms to be classified in multiple sectors. The platform does so through real time industry classifications (RTICs), which are constantly evolving classifications generated by an AI from companies’ websites. Firms can be classified under multiple RTICs at any one time.

This means the data can be used to demonstrate interdependencies where sectors overlap. In terms of the North East LEP robotics market, there were three RTICs in which over 10% of North East LEP firms were also operating in. These were advanced manufacturing, automation and robotics and research and consulting – physical sciences and engineering. Compared to robotics firms nationally the North East LEP had a much stronger degree of overlap with research and consulting – physical sciences and engineering. This suggests there may be greater interaction between these sectors in the North East LEP than elsewhere1.

Overall, UK robotics firms also operated in 40 different RTICs, of which 15 were operated in by firms with a location in the North East LEP.

Robotics and subsectors

The Data City methodology also includes individual subsectors within the RTIC taxonomy which allows detailed analysis of the North East LEP’s focus within robotics. The data suggests that the North East LEP may have a slight specialisation in robotics and automation related to advanced manufacturing and a strong specialisation in engineering research consulting.

Overall robotics firms in the UK were also operating in 117 different subsectors, of which firms with a location in the North East LEP area were operating in 31.

North East clusters

Robotics firms in the North East LEP are spread across the 7 local authorities in the North East LEP area, but there appears to be a cluster of firms in North Tyneside close to the Port of Tyne.

Regional prospects

Robotics:

Emergent status in the North East
International scope in terms of firm activities and ownership
Significant presence in the North East with 4.2% of firms in this market having a North East location (compared to 2% of firms in all sectors)

The Assessment Framework below rates each emergent market on regional capabilities:

Existing regional specialisms

Moderate: average location quotient; some employment and firm presence

Firms

Moderate: 1 to 3 major firms and/or start-ups and SME presence

Value chain cluster

Moderate: 1 to 3 major firms and/or start-ups and SME presence

Innovation / technology

Moderate scale of R&D activity, with national leadership

Skills and human capital

Complementary: associated and foundational skills with infrastructure and provision

Local institutions

Related: can be adapted

Local assets

Relevant major assets: of national significance

Click here to download the assessment framework.

Strategic commentary

Robotics and autonomous drone technology both have potential to localise successfully in the North East. What has been historically a technology with high financial barriers to entry for would-be customers, is transitioning quickly to be affordable to a range of budgets. There is also strong evidence of a capability base (both in terms of skills, infrastructure and R&D pipelines) to support investment in robotics as a regional differentiator and growth market.

The enablers section highlight that this investment will have an impact beyond the core robotics market within the North East. Many markets across manufacturing and biotechnology are strongly enabled by robotics. This includes bio pharmaceutical and immersive technology, two areas where the other profiles suggest the North East has a competitive advantage, further development of the North East robotics market could help reinforce a range of strategic areas.

There is a strong dependency within Robotics and Drones, on Data Analytics and Software Development, Cloud Computing and Cyber security, which operate as a cohesive system of capabilities. Good software and Data analytics drive good robotic products and services. The North East will need to be mindful that the successful deployment of robotics will require strengths across a wider range of regional capabilities than just the core robotics market.