Investing in Automation

Investing in Automation

The Industry 4.0 revolution has kickstarted a worldwide demand for more automated technology. The creation of ever more innovative technologies promises to transform global economies—and provide a world of investing opportunities.

What is Automation?

From intelligence to production, investors exploring the automation technology market are quick to spot its cross-sector impact. Smart robotics, automated workflow systems, 5G infrastructure and design, digitization, the cloud, the Internet of Things (IoT), among other innovations were once sci-fi. Now every day in finance and healthcare, retail and manufacturing, they perform and facilitate tasks that would otherwise be done by people; however, the strategies are more far-reaching than reducing labor costs.

It's important to explore relevant topics, mainly the automation meaning as it pertains to these various industries to better understand the impact and application of automation.

Smart tech means smart investing: companies that create these technologies as well as businesses that utilize these automation systems to boost their performances are equally worth checking out.

There are many types of automation that investors should keep in mind. Here are three automation examples to know (1): discrete automation (such as automotive production), process automation (processing of raw materials such as oil and chemicals), and hybrid automation (like food and beverages). In all these markets, companies see automation tech as a way to rapidly scale up production, reduce bottlenecks, ensure quality and safety, upskill work, and address consumer demand for faster manufacturing, speedier delivery, and connectivity.

The pandemic forced rapid, widespread adoption of automation technology, to keep people safe and support escalating demand for remote workforces, e-commerce, and more resilient supply chains.

Since the shutdowns and COVID protocols have drawn to a close, these technologies have continued to transform industries as there are many advantages of automation. Automation is becoming increasingly accessible to small businesses thanks to the flexibility and lower cost of cloud-based platforms and services. In addition, it’s become part of everyday experience, with mobile apps and wearable devices. Investors interested in automation tech can become part of a disruptive groundswell of innovation at every scale.

The machine control (automation synonym) market was estimated to be worth as much as $177 billion in 2021, on track to grow nearly 8% per year through at least 2030 (2).

Much of this growth is happening in Asia, the world’s manufacturing center, which owned 32% of the total automation market. Since the pandemic, these numbers have soared. Sectors as varied as electronics, metal and machinery, automobiles, plastics, and food manufacturing are pulling in industrial robots to help them fill demand.

In North America alone, robot sales still lag behind Asia but are accelerating, thanks to the post-pandemic rebound in sales of cars and trucks and the e-commerce boom. Globally, mid-year 2022 saw a 25% jump in robot sales compared to the same period in 2021, with sales continuing to grow (3). Worldwide in 2022, the industrial robot population was 3.5 million, an increase of 31% over the year before.

Traditional industrial machines were the bulk of the sales but a 50% increase in more flexible, programmable machines highlights a growing interest in devices that can work alongside humans.

Automation tech has also boosted the performance of tasks in sectors such as healthcare, HR, and finance, supporting the staying power of hybrid working and remote collaboration.

In HR settings, even the simple ability to autofill data rather than manually enter it both improves efficiency and reduces the opportunity for human error. When harnessed, it could be a “driver of growth and job creation, including in new occupations and industries never before imagined,” according to the Aspen Institute.

Industry 4.0, the “fourth industrial revolution,” has brought together the physical and digital worlds on an unprecedented scale (4).

“Digital twins” via the Internet of Things (IoT) allow companies to connect physical assets and digital assets. For example, digital twins reduce the risk of systems failure and track shipments of food to ensure safety from farm to table.

Automation technology collects and analyzes data at a scale and speed impossible for humans, providing insights that can optimize productivity, quality control, and availability as well as predict servicing.

Additionally, much of the growth in the automation market is expected to happen in 3D printing, where automated 3D printers are already being used to produce on-demand machine parts, and nano-manufacturing, where automation is helping produce solar cells, batteries, and other tiny manufactured parts. The automated 3D printing market is expected to grow from $1.5 billion in 2023 to 7.3 billion by 2028, representing a compound annual growth rate of 36.4% during that period (5).

By layering together automation with these intelligent technologies, organizations are able to transform how they work, how they deliver services, and how they scale their businesses.

Why Invest in Automation?

Demand, declining workforce populations, and less expensive technologies are driving growth in the rapidly evolving automation technology market. Investors look for three areas of opportunity: tech companies that are enabling automation, sectors that could experience a surge in automation, and non-tech companies that are harnessing automation to drive efficiency and more.

Companies that develop and produce sensors, controllers, and other systems can provide worlds of opportunity, as they work with companies in fields as diverse as semiconductors, automobiles, chemical manufacturing, and scientific research.

Industrial software developers show an equally diverse client base, from an augmented intelligence interface between humans and machines to operations management, data acquisition and analysis to smart robots that are accelerating assembly line processes and high-precision tasks.

Meanwhile, consumers are pushing for instant, personalized service, with the retail market growing increasingly dependent on robotics, from e-commerce giants like Amazon (AMZN) who use robots to move packages and optimize space in their warehouses, to smaller retail companies that use AR and VR to help people buy exactly what suits them.

AR and VR also help workers up-skill their work, from assembly to maintenance while robotics with advanced 3D vision and AI capabilities facilitate cutting-edge precision research and even safer food production.

In this new data era, connectivity brings together homes and cities and businesses, a promise that could fuel IT investments as much as $1.6 trillion over the next ten years—5% per year compared to the 2% average of the past ten years.

For investors, companies that manufacture or source what lies behind these connections, such as semiconductors, networking infrastructure, and sensors, are increasingly attractive.

Investors can also pay attention to cloud-based systems, which have become ubiquitous across all sectors. Moving to cloud computing has become a mass migration, with nearly 92% of companies globally turning to cloud-based solutions to increase efficiency and reduce costs, and more than half planning to prioritize spending on these systems.

For example, companies involved in supply chains and logistics turn to cloud-based platforms to trace their products’ end-to-end journey, from raw materials to point of sale. With almost all businesses using a public or private cloud, over 80% of companies are planning to spend more on automation technology (6).

While investors should always due their due diligence in a rapidly developing market like automation technology, predicted gains in productivity and efficiency for companies that utilize automation hold fast to the promise of growth.

How to Invest in Automation

Investing in automation technology doesn’t have to mean picking the next big company with the most advanced robotics.

Indeed, given the rapid growth of the automation sector, investing in one particular company can be risky, but by using Magnifi as your investment concierge you can now search for all the top automation investments and find the ones right for you.

Take a look at some of your options when searching for this investment theme:

• Invest in Automation
• Invest in Robotics
• Invest in Automation and Manufacturing

FAQs:

• How can I buy automation stocks?

There are many ways to invest in automated technology, but perhaps one of the easiest routes is to start investing is to run a quick search or ask your AI-powered investing co-pilot, Magnifi, to point you in the right direction for the various automation investments there are on the market.

• What are some top automation stocks?

While there are many automation stocks and ETFs to choose from, only you are able to decide which is the best for your portfolio. Conducting extensive research into the many automation examples out there is a great place to start when looking for the answer to this question.

• Why Investing in automation is the key to future growth?

There are many advantages of automation and investing in stocks that work to apply automation to as many industries as possible. Innovation is something that investors should always pay attention to since it increases productivity and efficiency in a given industry, which could mean healthy returns for those who invested.

• How can I identify investment opportunities in the automation sector?

The beauty of an industry that is growing such the way the automation industry is has to be the number of opportunities there are out there to choose from. There are many types of automation, just like there are many types of investments that can help you cash in on this innovative technology. Ask your investing co-pilot to direct you to many of them.

• Why automation is worth the investment?

As stated above, as a new technology comes online and provides efficiencies and productivity increases for a given industry, the value of that technology skyrockets along with the companies responsible for bringing it online. In the early stages of a technology like this, there is a lot of room to grow.

• Are there any specialized investment funds or vehicles that focus specifically on automation-related companies or technologies?

There are various ETFs that have a focus on the automation industry. Running a quick search for terms like "automation" on Magnifi will show just about all the ways an investor can gain exposure to automation.

More Questions? Ask Your AI Assistant Directly at Magnifi.com today!

References:

1. "What Is Automation?," aquentstudiosra.com, https://www.aquentstudiosra.com/WhyInvest/automation.html#:~:text=DISCRETE%20AUTOMATION,automobiles%2C%20appliances%2C%20and%20electronics.
2. "Global Industrial Automation Market Size to grow USD 441.7 Billion by 2030 | CAGR of 8.84%," March 15, 2023,, 2023, globenewswire.com, https://www.globenewswire.com/en/news-release/2023/03/15/2627754/0/en/Global-Industrial-Automation-Market-Size-to-grow-USD-441-7-Billion-by-2030-CAGR-of-8-84.html#:~:text=The%20Global%20Industrial%20Automation%20Market,published%20by%20Spherical%20Insights%20%26%20Consulting.
3. "Robot Sales Surge Across North America, Q2 Sales up 25% to $585M," August 30, 2022, dbusiness.com, https://www.dbusiness.com/daily-news/robot-sales-surge-across-north-america-q2-sales-up-25-to-585m/
4. "What is Industry 4.0?," ibm.com, https://www.ibm.com/topics/industry-4-0#:~:text=Industry%204.0%20is%20revolutionizing%20the,facilities%20and%20throughout%20their%20operations.
5. "Automated 3D Printing Market Size & Share Analysis - Growth Trends & Forecasts (2023 - 2028)," mordorintelligence.com, https://www.mordorintelligence.com/industry-reports/automated-3d-printing-market
6. "Gartner Survey Reveals 80% of Executives Think Automation Can Be Applied to Any Business Decision," August 22, 2022, gartner.com, https://www.gartner.com/en/newsroom/press-releases/2022-08-22-gartner-survey-reveals-80-percent-of-executives-think-automation-can-be-applied-to-any-business-decision

Disclosures:

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The information and data are as of December 5, 2022 unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

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