By Sumaira
In the realm of automation, North American companies have significantly scaled back their orders for cutting-edge machines during the second quarter, as reported by data aggregated by the Association for Advancing Automation, a prominent industry consortium.
The deceleration in these orders began its sluggish journey towards the end of the preceding year. Elevated interest rates and anemic economic growth jointly contributed to diminishing enthusiasm for acquiring novel robots, elucidated the group, fondly known as A3.
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Nancy Kleitsch, the Chief Financial Officer of ICON Injection Molding, a manufacturer specializing in plastic components located in Phoenix, shared her perspective on this prevailing sentiment. She stated, “We wouldn’t even consider buying a robot right now.”
ICON’s narrative mirrors that of numerous manufacturers. During the throes of the COVID-19 pandemic, their businesses surged, notably for items like plastic tubes employed in pandemic testing. However, presently, the demand for these tubes and other facets of their businesses has plummeted to a nadir not witnessed for at least seven years.
Worries about inflation and the trajectory of economic growth appear to underlie the hesitation prevalent among various companies. Factory settings and other industrial users, encompassing e-commerce warehouses and medical testing firms, collectively procured 7,697 robots during the second quarter, registering a stark 37% reduction compared to the same period last year. This contraction follows a 21% dip in the first quarter and a 22% slump in the final quarter of the preceding year.
Remarkably, robot sales experienced an unprecedented boom during the pandemic’s turbulence, as manufacturers scrambled to deploy these mechanical marvels to meet the surging demand for critical goods. Despite the noticeable downturn that gripped the latter part of the previous year, 2022 still managed to etch itself into history as a record-breaking year for robot orders, as affirmed by A3.
However, it’s worth noting that robots represent only a single facet of the multifaceted equipment tapestry that companies require. Other measures of expenditure have displayed slightly more resilience within the U.S. economy. For instance, orders for non-defense capital goods excluding aircraft—a closely watched metric for economists tracking business spending—edged up by 0.1% in the latest month, as reported by the Commerce Department. This observation hints at the possibility that investments across a diverse range of equipment might sustain their upward trajectory, a trend that had already commenced during the second quarter.
“It’s not that we’ve soured on automating,” remarked Jeff Burnstein, the President of A3, during an interview with Reuters. “But when people are worried about inflation and the economy, it puts a damper on everything – they hold off.”
The sentiments expressed by Burnstein echo a prevalent sentiment in many industries. It’s not so much a disenchantment with automation as it is a consequence of pervasive concerns about inflation and the overall economic climate. These apprehensions often cast a shadow over investment decisions, prompting companies to adopt a more cautious stance.
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Certain sectors, it seems, may have gone a bit overboard in their enthusiasm for automation during the recent boom. E-commerce enterprises, for instance, hurriedly constructed highly automated warehouses, anticipating an enduring surge in demand for goods. However, this anticipation did not align with reality. Jeff Burnstein identified another challenge that added to this conundrum: companies that ordered excessive quantities of robots due to fears of supply chain disruptions.
“They were worried they wouldn’t get what they needed, so they overbought,” Burnstein explained. He further added that A3 anticipates this subdued demand for robots to persist until the fourth quarter of this year or perhaps even into early next year.
In the grand tapestry of factors influencing robot sales, one notable driver in recent years has been the tightening labor market. The unemployment rate, as of July, stood at a remarkably low 3.5%, harking back to levels not witnessed for over half a century. However, the scenario is gradually shifting. Another key indicator of U.S. job opportunities, released by the Labor Department, disclosed a drop to its lowest level in nearly 2-1/2 years in July. This is indicative of a labor market that is slowing down, albeit mildly.
Simultaneously, robots continue their relentless integration into an ever-expanding array of job roles. In the past, they were predominantly concentrated in the automotive sector and its intricate web of suppliers. Notably, these industries still constitute a substantial portion of all robot orders. However, data from A3 reveals a notable shift in recent years, with robots infiltrating realms as diverse as construction sites, hospitals, and food processing plants.
Aaron Anderson, the Director of Innovation at Swinerton, a major construction company headquartered in Concord, California, shared insights into their journey with robotic automation. Swinerton has embraced robots for drilling holes in concrete ceilings, a task that paves the way for plumbing and other mechanical systems to be subsequently installed by human workers.
Nonetheless, Anderson emphasized that justifying the cost of procuring one of these machines can be challenging. Construction projects vary considerably in size and complexity, leading to instances where the robot remains dormant, not contributing to the workflow. Swinerton’s pragmatic solution to this dilemma has been to lease the machine instead, a choice that is notably more economical and adaptable to their variable needs.
In conclusion, the recent slowdown in robot orders reflects a complex interplay of economic factors and industry dynamics. As industries recalibrate their approach to automation amidst economic uncertainties, there’s a need for thoughtful consideration of investment strategies. Rather than overcommitting to automation, companies might explore flexible solutions like leasing to adapt to evolving needs. The future of robotics lies in diversification, as robots continue to find new roles across various sectors. To navigate these changing tides successfully, businesses should stay agile, monitor market trends closely, and collaborate on a broader regional scale for sustained growth in the robotics industry.
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