Think back to some of your favorite TV shows when you were a kid. It’s likely that the technology they depicted as merely possible is very much a reality today.
You may not yet have this futuristic technology in your own home. But you can bring home some serious returns in the meantime, as there are many ways that you can now invest in it as it becomes more-mainstream.
Like most men in their 50s, I grew up watching popular shows like “Batman,” “Leave it to Beaver” and “Gilligan’s Island.” But I had a soft spot for science fiction shows and never missed an episode of “Time Tunnel,” “Star Trek” and “Lost in Space.”
I identified with young Will Robinson, had a crush on Judy Robinson, and daydreamed about having my own personal robot like the “Lost in Space” robot. Although the robot didn’t have a name, it often displayed human characteristics such as laughter, sadness and mockery and could even play the guitar.
The robot’s most famous line was, “Danger, Will Robinson, danger!”
Robots were a mere pipe dream when I was a child, but there are millions of them in use today.
Not “Lost in Space” type of robots, but industrial robots that toil away in factories all around the world.
And there are about to be millions more!
Could Robots Drive Up
The Unemployment Rate?
The factories of today are highly automated and use amazing robotic machines to do the work of thousands of men. These factory machines don’t look like robots in the movies, but they are a very specialized breed called CNCs, which stands for Computer Numerical Control machines. These sophisticated machine tools are operated by computer programs.
But these aren’t new toys, by any means. CNCs have been around since the early 1970s when computer-controlled systems were introduced.
The first modern-day industrial robot, the Unimate, was put into use by General Motors in 1961. The Unimate was a 4,000-pound robotic arm that attached to a giant steel drum and did things like pour liquid metal into die casts, weld auto bodies and lift 500-pound car bodies.
The Unimate performed tasks that humans often found dangerous or boring, and did them with speed and exacting detail. The robot never called in sick, asked for a raise or went on strike. Plus, it worked 24 hours a day. As you can imagine, robots are a productivity and profit lifesaver for factories.
According to the International Federation of Robotics, robot sales are up by 18% in the first half of 2011 to 140,000 units, a new all-time high, and it predicts that the stock of robots operating will increase to about 1.3 million units at the end of 2014.
Apple and the New
Wave of Robots
That is a healthy amount of growth but I think it is way, way too low. Heck, just one company — Foxconn of Taiwan — said it plans to increase its use of robots in its factories by 100-fold to 1 million robots by 2015.
Foxconn currently uses just 10,000 robots, but that number is expected to jump to 300,000 in 2012 and to 1 million by 2015.
Most Americans have never heard of Foxconn, but it is one of the largest manufacturers in the world. It employs 1.2 million workers and is the largest contract electronics manufacturer in the world. In fact, Foxconn is the primary assembler of Apple (AAPL) products like the iPhone and iPad.
Those 1 million new robots will be used to improve efficiency and, most importantly, increase profits.
Foxconn is making more iPhones, iPads and iPods than ever, but its profits for the first six months of 2011 are down 36% from the previous year, thanks to rising wages and increased benefits.
Salaries for migrant workers increased by 30% to 40% in 2010 and are expected to increase by another 20% to 30% by 2013. Chinese factories are complaining about labor shortages as well.
China’s seemingly endless supply of cheap labor has started to run out, plus wage costs are increasing — this is a watershed change that confirms the cost of labor is no longer cheaper than the cost of capital, the key metric that business owners consider when evaluating equipment purchases.
Could Foxconn’s 1.2M Employees
Still Have Jobs by 2014?
The Nikkei Business Daily predicted last year that demands by Chinese workers for higher wages marked a “sea change” in China’s low-cost production model. “The situation poses a major strategic challenge to all manufacturers that have set up production in the country to capitalize on its low labor costs.”
It looks like that prediction was on-the-money, so much so that Japan, a leader in robotics, has taken notice.
Kyodo News quoted an unnamed Japanese auto executive who was stunned at the rapid rise in factory wages in China. “The pace of wage hikes is so fast that we will have no choice but to accelerate factory automation and curb the rise in labor costs by installing robots that will perform tasks currently done by workers,” Kyodo cited the executive as saying.
This is big news for the robotics industry not only because it will more than double the world population of industrial robots — in fact, it will open a new, larger market for robotics.
Historically, the automotive industry has been the main user of industrial robotics, but a new tidal wave of demand for robots is going to come from the electronics industry.
Foxconn built its business by using cheap Chinese labor but, it is now leading the Asian charge to spend some serious money to automate its production. It makes you wonder how many of Foxconn’s current employees will still have their jobs just a few years from now!
Foxconn’s actions are a loud investment alarm, but this is just the start of a new tidal wave of automation and investing in the companies that make the labor- and money-saving robotics that are headed for a new period of prosperity.
The Robotic Revolution:
How You Can Cash In
What’s the best way to invest in the robotic revolution? Foxconn is traded on the Taiwan Stock Exchange (TPE:2354), but there are several U.S. and European stocks that get a significant part of their revenues from robotics and trade on the NYSE and Nasdaq:
- iRobot (Nasdaq:IRBT) produces military robots and the Roomba vacuum cleaner.
- Raytheon (NYSE:RTN) is a giant aerospace/defense company, but it produces many types of robots such as drones and vision systems.
- Moog (NYSE:MOG-A) is also an aerospace/defense company. It makes sensors and haptics, which are unmanned aerial drone systems.
- Dover Corp (NYSE:DOV) makes all kinds of industrial machines including robotic grippers and components.
- ABB (NYSE:ABB) is a Swiss conglomerate and gets roughly 20% of revenue from producing robots.
- Elbit (Nasdaq:ESLT) is an Israeli defense contractor that produces unmanned aircraft and surveillance systems. It also gets about 20% of its business from robotics.
- Adept Technology (Nasdaq:ADEP) makes robots for manufacturing, food processing, automotive and warehousing applications.
My No. 1 robotic pick, however, is a company very few American investors have ever heard of. But boy is it making a mountain of money!
This Asian gem manufactures a wide range of robots for the aerospace, automotive, consumer goods, food, metal fabrication, medical, pharmaceutical, solar panel, and many other industries.
It has over 100,000 robots installed in the Americas and another 220,000 robots installed around the world. But there are a lot more reasons why this robotic innovator’s profitability is headed to the moon with the “Lost in Space” robot.
5 Reasons to Like Fanuc
The company is Fanuc Corp. (FANUY.PK), and my Asia Stock Alert subscribers are sitting on a nice gain in this name.
The stock has plenty of upside ahead and looks very attractive at current levels. Here’s why …
Reason #1: Robot Sales Are Soaring. Foxconn isn’t the only company in the world that has figured out that it can reduce costs and increase profits by automating its factories.
Robot sales DOUBLED from 2009 to 2010 to 118,337 units worth $5.7 billion, so a lot of companies are obviously pursing an aggressive automation strategy.
That’s nothing, though, because the International Federation of Robotics expects that number to increase to $17 billion in 2013!
But even that BIG number estimates the size of the industry. If you include the cost of software, peripherals and systems engineering, the dollar value roughly TRIPLES.
Reason #2: The China Connection. This company just opened a new 400,000-square-foot factory in Shanghai.
This new state-of-the-art factory essentially uses robots to build more robots and has the capacity to produce approximately 4,000 robot systems a year as well as 1,400 injection molding machines. Annual sales from this factory are expected to hit $150 million (USD) this year.
Reason #3: Follow the Leader. This company absolutely dominates the robot market. According to ARC Advisory Group, it controls a staggering 60% of the robotic tool systems — lathes, grinders and milling machines that turn metal into just about any manufactured products — in the world.
These machines make it possible to shape metal into iPhone cases or the skeletons of Boeing airplanes.
Reason #4: Lead or Get Left Behind. Commodore, Packard Bell, Kaypro and Tandy. If you’re around my age, you may remember those as the big names of the burgeoning home computer industry. But all of them are deader than a doornail today.
When it comes to the technology industry, you better be an innovator or you will get left in the cemetery of tech has-beens. When it comes to robotics, nobody is as innovative as this Asian superstar. Businesses are always coming out with new products, but it is a rare company that comes up with innovations that truly change the way we live.
In fact, Forbes magazine recently named Fanuc to its list of the World’s Most Innovative Companies.
The 100-company list was based upon a comprehensive eight-year study and attempts to identify companies that are likely to continue to succeed today and in the future.
Reason #5: Off Wall Street’s Radar Screen. This company is so secretive that it acts more like a top-secret military installation than a publicly traded company.
It is unheard-of, but this company doesn’t have an investor relations department and doesn’t have conference calls for analysts. It only gives bi-annual performance updates. And even those are often short and cryptic.
E-mail is limited to just a small handful of office computers and it’s carefully monitored to guard against leaks of corporate/technology secrets. Most communication is done by phone and old-fashioned fax.
Outsiders, including me, are rarely allowed inside the main factory. Even employees that are not directly involved in research or operations are banned from the factory floor. Even one member of its Board of Directors told Businessweek, “I can’t even get in.”
That is unacceptable to the Wall Street crowd, since they think that everybody should kiss their posteriors … and that is why you’ll probably never hear about this stock from them.
However, companies like Fanuc are exactly the type of exciting growth stories that I share with my Asia Stock Alert subscribers. So if you’d like to start building a portfolio with these types of Asian superstocks, I invite you to join my Asia Stock Alert and get alerted to all the best names to trade in this incredible market. I think you will be VERY pleased with the results.
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P.S. It’s clear that neither the media nor Wall Street understands just how critical China is to the future of the global economy. But where they see trouble, I see opportunity — and lots of it.
Get in on all the best China and other emerging-market plays in my Asia Stock Alert service, and join my subscribers for what looks to be a profitable 2012 from the market that most others are missing out on. Start here today.