For more than half a century Canadian manufacturers have relied on advances in technology to boost productivity, redistribute labour resources, and enhance profitability. Advances in industrial automation, a concept used to refer to a set of interrelated technologies that monitor, control, and expedite the production of goods and services, have greatly improved manufacturing by introducing repeatability, waste management, quality controls, and end-to-end business integration.
The proceeding study explores the impact of industrial automation and robotics on Canadian goods producers, especially the manufacturing sector, which is the biggest end-user market for automation technologies in Canada. The study also examines the competitive landscape of Canadian automation companies with the aim of understanding the size of the Canadian market, barriers to adoption, and avenues for growth.
Below is a snapshot of the key findings of the study.
Canada’s industrial automation industry
Canada is home to a small cluster of industrial automation companies (i.e., developers) operating in specialized ICT industries across the country. Developers are companies that design, manufacture, and install industrial automation and robotics equipment.
- Canada’s industrial automation sector, which includes Canadian and foreign-based developers operating in Canada, generates an estimated $2 billion in revenues annually.
- One half (49 percent) of industrial automation companies are based in Ontario, one quarter in the Western provinces and more than one-fifth (23 percent) in Quebec.
- Canadian developers face growing competition from international vendors; 73 percent of Canada’s end-user market turns to suppliers outside of Canada for their automation equipment.
Canada’s end-user market
Canadian businesses rely on industrial automation technologies for manufacturing/product assembly, product packaging, product testing, and to perform hazardous work. Automation has had a significant impact on productivity, business expenditure, and employment.
- Seventy percent of businesses indicated their use of automation changed significantly over the past ten years. Of these businesses, two-thirds (68 percent) report production costs have decreased as a result, and 90 percent say productivity has increased.
- Two-thirds of these businesses said the integration of industrial automation reduced production costs. Nearly half of companies (42 percent) said production costs fell between 10 percent and 29 percent as a result of automation.
- For more than half of Canadian businesses (55 percent), automation expenditures account for between 5 percent and 49 percent of total operational expenditure.
- Canadian businesses routinely source automation equipment internationally because foreign suppliers have greater experience and more advanced equipment that can fulfill very specific functions.
- Although most companies indicated a relationship between industrial automation and staffing levels, no clear trend emerged. Among businesses that said their usage of automation had increased over the past decade, about one quarter (29 percent) said the adoption of automation reduced overall employment. About the same (30 percent) said industrial automation led to higher employment in the company.
- Canadian businesses are staffing automation services locally. Almost half (45 percent) of businesses say they rely exclusively on Canadian sources for professional services.
- While businesses tend to currently only have a fraction of their staff using industrial automation, this is likely to change significantly in the next three-to-five years. Most businesses do not anticipate their automation-related employment levels will increase this year, but most believe they will increase within five years. Very few businesses expect to reduce the number of workers who are using automation.
- More than half (57 percent) of businesses said they always or sometimes experience difficulty recruiting qualified automation-related talent.
Supporting Canada’s Industrial Automation Industry
Given that manufacturing is by far the biggest end-user market for industrial automation, Canada’s automation industry operates in a much smaller domestic market. In order to compete, Canadian developers must expand internationally to tap into strong manufacturing economies in Asia and Europe. A series of recommendations have been suggested by industry to strengthen Canada’s industrial automation and robotics sector.
Supportive Trade Policies:
- A major hurdle for Canadian developers is accessing the US market. Refining trade agreements to include how cross border interaction between companies are handled should be considered. Policymakers should offer foreign companies incentives to buy Canadian. One way this can be accomplished is by supporting innovations that result in intellectual property that can be supported and protected in Canada. ICTC firmly believes that the adoption of a “patent” box approach that rewards businesses for the commercialization of intellectual property should be considered. This will not only boost the pool of capital available to Canadian companies, it will allow them to sell patented products and licence out patent rights to the international market. Bringing Canadian innovations to the international market is a critical step to increasing national prosperity not just in the industrial automation and robotics sector, but in the rest of the digital economy.
- Trade Commissioners should consider playing a bigger role in developing programs to attract foreign businesses to Canada through incentives. Other programs that help Canadian companies broker foreign partnering, licensing or reseller agreements may also help boost Canadian visibility abroad.
Increasing Funding Opportunities:
- Building off the “patent” box, policymakers should consider expanding direct funding opportunities to innovative technology companies that may lack marketing expertise. Such a program would not be limited to a certain technologies, but would be open all sub-sectors that could have a positive impact on the end-user market.
- Policymakers should consider providing businesses with a larger investment fund (e.g. equity financing, investment from angel groups, direct funding) to commercialize their intellectual property with favourable lending terms on the basis their commercial product would yield large returns in the market (for example, AVAC Ltd., Alberta).
- Policymakers should consider developing an accompanying program that provides assistance in the commercialization process. This program can help ensure that SR&ED recipients receive the business support they need to succeed in the marketplace. This will also help streamline the SR&ED program toward business growth, as companies will be required to demonstrate how their research will be linked to business growth and commercialization goals. Such a program would help companies compete internationally and ensure that businesses capitalize on their SR&ED-based research.