• February 9, 2023

Accelerating Industrial Automation and the Companies to Watch

L.Last week we started our automation series with an overview of the various branches of industry that are increasing their level of automation. This week we’re delving deeper into industrial automation, which has already experienced a pre-acceleration pandemic. The pandemic provided another strong tailwind as human interaction became riskier and supply chains were brutally disrupted. The new US presidential administration is likely to push for higher wages, which will only fuel this trend.

The pandemic forced many factories to either close or significantly reduce their production, which caused industrial production to drop to a Level not seen for over ten years and a profound loss of jobs that have not yet been restored. As the lockdowns subsided, companies had to find ways to make their production lines more secure, which meant fewer on-site workers and increased automation needs to enable higher levels of production with less labor.

The 2021 BDO Manufacturing CFO Outlook surveyThe study, conducted in September 2020, offers fantastic insight into the changes in manufacturing companies with sales between $ 250 billion and $ 3 billion and the impact the pandemic is having on them. The report says: “Before the pandemic, the Industry 4.0 The paradigm shift was already underway, bringing the physical and digital worlds together to transform the very fundamentals of manufacturing. COVID-19 has accelerated the paradigm and shortened the timeframe for the industry to enter. “The CFO’s top priority for 2021 is“ Invest in technology or infrastructure ”. According to medium-sized manufacturers, the most important factor for the recovery is “stability of the supply chain”, followed by “productivity gains”, and the second highest priority (after diversity and inclusion as a business strategy) for the further development of their personnel strategy in the coming year is automated manual labor.

According to the latest research reportIndustrial Automation Market by components (plant-level controls, enterprise-level controls, plant instrumentation), automation mode (semi-automatic, fully automatic) and end-users (oil and gas, automotive, food and beverage) – Global Forecast to 2027 “The industrial automation market is expected to grow by Grows at an annual growth rate of 9.3% from 2020 to 2027 and grows from $ 164.2 billion to $ 306.2 billion by 2027.

Industrial automation is in the midst of a breakthrough change. Advances such as machine learning, augmented reality, Cyber-physical systems, autonomous assets, real-time analyzes and the IIoT (Industrial Internet of Things) promise extraordinary operational success. Furthermore, we see similar pressure against closed systems here as in enterprise automation (which we will cover in the coming weeks). In the way that consumers of office software and automation systems have pushed for solutions to be more easily integrated with other products and to be less fussy about the platforms they run on, we see similar demands on industrial automation solutions . This is a good sign for more flexible and faster improving solutions.

Closed systems are expensive to upgrade and maintain, limit innovation, and limit access to best-in-class technology. As we saw in the office, industrial companies are increasingly demanding open, standards-based automation systems that are portable, interoperable and intrinsically safe. Looking ahead, we see digital-first industrial companies and smart factories using universal automation that will dramatically increase efficiency, reliability, and productivity through secure (often remote) operations that are easily adaptable to market changes and customer needs . In short, industries of the future will be data-driven, plant-oriented architectures that leverage human innovation rather than relying on a workforce dedicated to endlessly repetitive tasks. We also expect an accelerated rollout of Edge computing together with 5G and WiFi 6. After experiencing firsthand the weaknesses of their operation during the lockdown, we expect a boost in the implementation of systems that allow maintenance and upgrades to be performed remotely and / or via automation.

What does this mean for investors?

First, much of this automation will depend on advanced data networks such as 5G and WiFi 6, which means further demand for products from companies that leverage the underlying digital infrastructure technologies such as: Maxlinear (MXL), Skyworks Solutions Inc (SWKS), Applied Optoelectronics Inc (AAOI), and Broadcom (AVGO).

Companies offering products for factory automation include: Fanuc (FANUY),Danaher Corporation (Mr.), Siemens AG (SIEGY), Yaskawa Electric Corp (YASKF), Emerson Electric Co (EMR),Honeywell (THEY),Rockwell Automation Inc (YEAR), and Eaton Corp (ETN).

Finally, we mustn’t forget that many manufacturers are turning to 3D printing, which is a good sign for companies like The ExOne Co (XONE), Markforged – what has announced plans to go public through a merger with the publicly traded SPAC One (A ONE),Stratasys Ltd (SSYS), and Materialize NV (MTLS).

Disclosure

Maxlinear (MXL), Skyworks Solutions Inc (SWKS), Applied Optoelectronics Inc (AAOI), and Broadcom (AVGO) are components of the Tematica BITA index for digital infrastructure and connectivity.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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Jack

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