Cheaper, better robots are coming for your job

New research finds that over the next decade, advanced robots will boost productivity by up to 30% in many industries, while cutting labour costs by 18%.

The Boston Consulting Group (BCG) research predicts that the use of advanced industrial robots is nearing the point of takeoff, which could power a new wave of productivity growth in many industries and lead to changes of up to 5 percentage points in the cost competitiveness of major export economies.

Depending on the industry and country, output per worker could rise by an estimated 10% to 30% over and above productivity gains that typically come from other measures.

The biggest gains in labor savings will occur in nations that are at the forefront of deploying industrial robots, such as South Korea, China, the US, Japan, and Germany.

Manufacturing labor costs in 2025, when adjusted for normal inflationary increases and net of other productivity measures, are projected to be 18% to 33% lower in these economies when advanced robots are factored in.

BCG noted that although industrial robots have been used in factories for decades, robots currently perform only around 10% of manufacturing tasks that can be done by machines, on average.

By 2025, the consulting group estimates, the portion of “automatable tasks” performed by robots will near 25% for all manufacturing industries worldwide.

A confluence of forces is likely to power the robotics takeoff in many industries in the near term. One is declining cost. BCG cites an example where the total cost of owning and operating an advanced robotic spot welder has dropped 27%, from an average of $182,000 in 2005 to $133,000 in 2014. The price is forecast to drop by a further 22% by 2025.

At the same time, the performance of robotics systems is likely to continue improving by around 5% each year.

“For many manufacturers, the biggest reasons for not replacing workers with robots have been pure economics and technical limitations,” said Michael Zinser, a BCG partner. “But the price and performance of automation are improving rapidly.”

BCG estimates that manufacturers begin to ramp up investment in robotics when the costs of owning and operating a system reach a 15% discount over the cost of employing a worker.

In industries such as automotive manufacturing in the US, where it costs around $8 an hour to use a robot for spot welding compared with $25 for a worker, that point has already arrived.

Manufacturers in some countries are currently installing robots much faster than in others. China, the US, Japan, Germany, and South Korea account for nearly 80% of robot purchases, a share that is likely to hold steady for the next decade.

A number of countries, however, have been relatively slow to adopt robots. Some slow adopters, such as Mexico and India, however, are unlikely to lose much competitive ground, because their costs are forecast to remain low for the next decade.

A number of high-cost economies are lagging in robot use, largely because of inflexible labor laws that make it difficult to replace workers through automation.These countries include Belgium, France, Italy, and Brazil.

Adoption will vary by industry, BCG’s research found. The transportation equipment, computers and electronics, electrical equipment, and machinery industries are expected to account for around 75% of advanced robotics installations through 2025.

By that time, robots should be able to handle 30% to 40% of automatable tasks in these industries.

Adoption will be slower in industries such as food products, plastics, fabricated metal, and wood products, where many tasks will remain difficult to automate and wages are relatively low, the research said.

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Cheaper, better robots are coming for your job