As manufacturers shift to automation, robots and other automation technologies, chiefly from Japan, are becoming critical to industrial supply chains.
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Labour shortages, supply chain snags and rising wages have fuelled a surge in demand for automation systems in the past two years, creating a boom—particularly for industrial equipment manufacturers in Japan. Industrial robots have proliferated, and according to the International Federation of Robotics (IFR), Japan is the world’s top robot manufacturer, supplying 45% of the global supply.
Japan also produces a considerable share of other automation equipment and robotic technologies such as sensors, vision systems, numeric controls and lasers. The collective worth of the country’s top four producers in this area, Keyence, FANUC, SMC and Lasertec, has risen some 250% in just five years. The Economist contends that their hardware is becoming “as mission-critical to many industrial supply chains as semiconductors”.
Exports are robust, with high foreign demand coming from semiconductor firms as they struggle to keep up with voracious demand for chips while trying to bolster their domestic chip manufacturing. This is especially the case in the U.S. in Europe. Japanese companies that make components for semiconductor production, including SMC, Lasertec and Keyence, are flourishing at home and abroad.
The devices needed to make semiconductors are used in other industrial realms as well, notably automotive, where the push to produce electric vehicles is driving higher demand. Mike Cicco, President and CEO of FANUC America, which makes robotic arms, says the development of electric cars requires a range of new capabilities on the part of carmakers, and this necessitates new types of robots.
Along with sustained demand, a capital-light approach has fattened the profit margins of Japan’s top industrial automation companies—all of which are over 20%. Keyence, whose profit margin exceeds 50%, mainly designs products rather than manufacturing them, and spends only 3% of its net sales on R&D. Likewise SMC allots just 4% to R&D. FANUC differs in that it manufactures most of its products and invests more in production capacity and R&D, but by deploying its own robots, the firm uses its capital efficiently.
Human capital strategy also plays a role in the success of Japan’s automation leaders. They typically employ legions of well-compensated salespeople who are also systems engineers. These professionals provide hands-on support to customers during initial deployment of their automation systems, and on an ongoing basis, diagnosing issues and making adjustments as needed. Thus the efforts of automation companies to keep industrial supply chains running is bolstered by highly skilled talent.