Industrial automation is a growing industry not just in Canada, but internationally as well. According to Sandler Research, the global market for industrial automation will grow at a compound annual growth rate of 6.87 percent through 2018. The penetration of wireless sensor networking solutions is one of the defining trends in the end-user market, as organizations rely on these new technologies to overcome the limitations of centralized architecture.[1]

The end market value of industrial automation in terms of revenue is worth more than $150 billion annually, divided almost evenly between factory automation ($72 billion) and process automation ($83 billion).[2] Key end markets for factory automation include automotive and packaging. Key markets for process automation include the pharmaceutical and natural resource sectors. As the world’s largest manufacturer, China is considered a major growth driver for industrial automation.

Emerging markets present a large growth opportunity for industrial automation; they account for 50 percent of global manufacturing output, but are behind developed economies in industrial robot density. According to Credit Suisse, industrial automation penetration in emerging markets is still considered weak, with only seven industrial robot installations per 10,000 manufacturing employees. By contrast, industrial robot density in developed markets is 149 per 10,000 manufacturing employees.

The adoption of industrial automation and robotics is highest in developed economies where manufacturing is prevalent, such as Japan, Germany, and South Korea. Manufacturing output represents a large segment of GDP in these countries, so they are more likely to integrate industrial automation.

Japan, which has the highest adoption rate of industrial robots in the world at more than 300 per 10,000 manufacturing employees,[3] has a large manufacturing sector that accounts for nearly one-fifth of GDP.[4] Japan is closely followed by South Korea, where industrial robot density is less than 300 per 10,000 manufacturing employees. Manufacturing output accounts for 31 percent of South Korea’s economy.[5] Germany, where manufacturing accounts for 22 percent of GDP, is third on the list of industrial robot density at around 250 per 10,000 manufacturing employees.[6][7]

2013 witnessed the largest ever increase in industrial robotics sales, according to the International Federation of Robotics (IFR). Industrial robot sales increased 12 percent to 178,123, led by the automotive, chemical and rubber plastics, and food industries. China became the biggest robot maker with a 20 percent share of the global production pie.

China is now considered the biggest international market for industrial robotics, overtaking Japan last year with a total of 37,000 purchases, according to the IFR. However, at 96,000, China still lags considerably behind other nations in the number of industrial robots in use. The United States and Japan, by contrast, have 168,000 and 310,000 industrial robots in use, respectively.[8]

In contrast to manufacturing powerhouses such as Japan and Germany, Canada has a smaller manufacturing sector at approximately 11 percent of GDP.[9] Unlike Germany, Japan, and South Korea, Canada has a rich natural resources sector that accounts for 14 percent of GDP. Untransformed natural resources, which strip away manufacturing activity that transform resources into intermediate goods, represent nearly 11 percent of GDP.[10] When you factor in other industries tied directly and indirectly to natural resources, the sector’s contribution to GDP is 20 percent.[11] Natural resources and related industries account for 50 percent of Canada’s nearly $480 billion export market.[12]

Global Innovation Policies

In 2013 approximately 70 percent of total robot sales were concentrated in five countries: Japan, China, the United States, Korea, and Germany.[13] Innovation is high on the policy agenda in these counties. Governments are placing greater emphasis on R&D, innovation, industry partnerships, and talent development while promoting their national innovation strategies to the globe.[14]

In 2011 the US government launched A Strategy for American Innovation, a blueprint for a private sector-led innovation strategy focusing on digital skills, research, physical infrastructure, and developing a strong ICT ecosystem. By prioritizing market-based innovation, the strategy seeks to harness innovation to attain sustainable growth and create quality jobs following the 2007-08 financial crisis. The blueprint laid out several priority areas, including a wireless initiative to boost high-speed wireless access, patent reform to boost the production of innovative goods, an improved K-12 education program, the development of clean technology, and encouraging entrepreneurship across the country.[15]

The government of Japan has long emphasized science and technology as a means to boost the resource-poor country’s high standard of living. This emphasis is shared by the private sector and general public, which increasingly look to technology to overcome the challenges of an ageing population and increased global competition. The Basic Law on Science and Technology is considered the linchpin of Japanese innovation policy. Enacted in 1995, the strategy produces five-year plans designed to drive innovation in science and technology. The fourth plan, covering the 2011-2016 period, “proposes the internationalization of [the] Japanese science and technology system.”[16]

Germany is supported by the High-Tech strategy, which was initially adopted in 2006 and ratified in 2009 and 2010. While the bulk of government funding has gone to post-secondary institutions, “Demand-side innovation policies are gaining increasing attention in Germany,” according to the European Commission.[17] The current scheme has prioritized five key areas: climate/energy, health and nutrition, mobility, safety, and communication.[18]

Germany’s high uptake of industrial robots, which is by far the highest in Europe, is due largely to its robust automotive market, particularly among motor vehicle suppliers. All other industries decreased automation investments in 2013 with the exception of the pharmaceutical and primary metals industries.[19]

China is witnessing higher adoption rates across a wide spectrum of emerging technologies, including cloud computing, mobile technology, high performance computing (HPC), and industrial robots. Naturally, production costs are much lower in China than they are in Canada and other advanced industrialized nations, which means the world’s second-largest economy could become the main destination for robotics companies.

China has become the world’s largest market for industrial robotics, adding another layer of challenges for Canadian businesses looking to expand their market. China’s supply of industrial robots increased approximately 36 percent annually between 2008 and 2013, giving China one-fifth of the global supply market. A total of 36,560 industrial robots were sold in China in 2013, of which about 9,000 were installed by Chinese developers.[20] International developers increased their sales in China by 20 percent in 2013, feeding a country that is set to outstrip the second and third largest robot markets combined in a few years’ time.[21]

 

[1] Paul Nelson (2014). Global Industrial Automation Control Industry Latest Report 2014-2018. https://www.academia.edu/6181649/Global_Industrial_Automation_Control_Industry_Latest_Report_2014-2018
[2] Credit Suisse (2013). Global Industrial Automation. https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=emfromsendlink&format=PDF&document_id=994715241&extdocid=994715241_1_eng_pdf&serialid=hDabUewpvOqQcRiLxK7rxIQJZZ8TPLDrYHs47S97OOI%3d
[3] Ibid.
[4] The World Bank (2014). Manufacturing, value added (% of GDP). http://data.worldbank.org/indicator/NV.IND.MANF.ZS
[5] Ibid.
[6] Credit Suisse (2013). Global Industrial Automation. https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=emfromsendlink&format=PDF&document_id=994715241&extdocid=994715241_1_eng_pdf&serialid=hDabUewpvOqQcRiLxK7rxIQJZZ8TPLDrYHs47S97OOI%3d
[7] The World Bank (2014). Manufacturing, value added (% of GDP). http://data.worldbank.org/indicator/NV.IND.MANF.ZS
[8] China Labour Bulletin (19 June 2014). “China now the world’s largest market for industrial robots.” China Labour Bulletin. http://www.clb.org.hk/en/content/china-now-world%E2%80%99s-largest-market-industrial-robots
[9] Statistics Canada (2014). Gross domestic product at basic prices, by industry (monthly). http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gdps04a-eng.htm
[10] National Bank of Canada. Canada: The importance of natural resouces in the economy. National Bank Financial Markets. https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/special-report-22juil2013.pdf
[11] Government of Canada (2014). Responsible Resource Development and Jobs. http://actionplan.gc.ca/en/backgrounder/r2d-dr2/responsible-resource-development-and-jobs
[12] Ibid.
[13] International Federation of Robotics (2014). Industrial Robot Statistics: World Robotics 2014 Industrial Robots. http://www.ifr.org/industrial-robots/statistics/
[14] Christian Rammer (2011). Mini Country Report/Germany under Specific Contract for the Integration of INNO Policy TrendChart with ERAWATCH (2011-2012). European Commission. http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/germany_en.pdf
[15] The White House (2011). A Strategy for American Innovation. The White House. http://www.slideshare.net/whitehouse/a-strategy-for-american-innovation
[16] Kazuyuki Motohashi (2011). Innovation Policy Challenges for Japan: An Open and Global Strategy. Centre for Asian Studies.
[17] Christian Rammer (2011). Mini Country Report/Germany under Specific Contract for the Integration of INNO Policy TrendChart with ERAWATCH (2011-2012). European Commission. http://ec.europa.eu/enterprise/policies/innovation/files/countryreports/germany_en.pdf
[18] Research in Germany (2013). The High-Tech Strategy for Germany. http://www.research-in-germany.de/dachportal/en/Research-Landscape/R-and-D-Policy-Framework/High-Tech-Strategy.html
[19] International Federation of Robotics (2014). Industrial Robot Statistics: World Robotics 2014 Industrial Robots. http://www.ifr.org/industrial-robots/statistics/
[20] Ibid.
[21] Tanya Powley (1 June 2014). “China becomes largest buyer of industrial robots.” Financial Times. http://www.ft.com/intl/cms/s/0/a5cca8c0-e70c-11e3-aa93-00144feabdc0.html#axzz3G8B9ujtE