Industrial Technology ̶ Update

Introduction

Harris Williams is pleased to present our Q3 2020 industrial technology industry update. This report provides commentary and analysis on current capital market trends and dynamics within the industrial technology space.

The year 2020 was heavily impacted by Covid-19, with countries worldwide enforcing lockdowns, resulting in the disruption of supply chains and the freeze of entire industries. While the search for a vaccine continues, the long-term impact on shifting business models, the acceleration of automation and digitization, as well as changing customer trends, can already be observed today.

Covid-19 has raised questions about the resilience of global supply chains and makes clear that new forms of collaboration across companies and industries are needed. The manufacturing landscape will have to diversify geographically to protect supply chains from future disruptions and to ensure business continuity, while caring about employees’ health. Industrial automation and cobots will help to increase overall productivity and enable safe work environments. Read more about the development and use of cobots in our Know-how section. 

From a market perspective, 2020 started off positive for investors after solid economic data and the World Economic Forum left Davos looking ahead with a “confident, middle-of-the-road view of the current economic environment,” said Goldman Sachs CEO David Solomon in January. China’s equities saw a drop amid the coronavirus outbreak in January, and as the virus began spreading to the U.S. and Europe, the global stock market started weakening further and the world went into lockdown in mid-March. The rest is history.

Nevertheless, the hope for a V-shaped recovery remains as new economic data such as recent PMIs and unemployment data show a steady revival of economies globally. Moreover, the latest prediction from the IFO Institute in Germany forecasts an economic slowdown of just 5% for Germany for 2020, strongly less pessimistic than a couple of weeks ago. The hope is driven by the massive economic policy responses across the world, with central banks and economies intervening with remarkable monetary and fiscal measures exceeding their responses to the global financial crisis. However, preventing a second wave of infections is of highest importance, as it could make obsolete the successes gained so far.

We hope you find this edition helpful, and we encourage you to contact us directly if you would like to discuss our perspective on current industry trends or our relevant industry experience.

Industry Events

Our team will attend the following trade fairs over the next few months. Please let us know if you will be at one of the conferences and would like to connect with us (virtually).

Coming Up: Trade Fairs 2020 / 2021 (depending on Covid-19 developments)

screen_shot_2020-08-18_at_9.27.17_am.pngOctober 2020 in Las Vegas, Nevada (all-virtual event): ISC West is the largest converged security industry trade show in the U.S.

 

 

screen_shot_2020-08-18_at_9.28.16_am.pngOctober 2020 in Chicago, Illinois (all-virtual event): WEFTEC, the Water Environment Federation’s Technical Exhibition and Conference, is the largest annual water quality event in the world.

 

screen_shot_2020-08-18_at_9.29.45_am.pngNovember 2020 in Nuremberg, Germany: This year will mark the 30th anniversary of the SPS trade fair, which covers the entire spectrum of smart and digital automation from simple sensors to intelligent solutions.

 

screen_shot_2020-08-18_at_9.30.44_am.pngJanuary 2021 in Orlando, Florida: The world’s largest HVACR (heating ventilation, air-conditioning and refrigeration) event.

How Warehouse Automation Is Saving Workers and Companies

The most efficient way to keep staff healthy is to reduce the amount of people that are in a facility at the same time. Automated technology is key to keeping workers safe without a negative impact on productivity levels and could be the “new normal” in a post-Covid-19 world that has incorporated social distancing. With today’s automated robots and machines being able to operate independently, these have taken on an increasing number of repetitive warehouse jobs that have been deemed too dangerous for staff during Covid-19, providing a lasting solution across warehouses in the future. Read more here.

Digitization Changing Industrial Automation Market Dynamics

The digitization of industries is shifting the strategic control points (points of value creation) within automation and digital manufacturing. This has severe implications up and down the value chain and on the equilibrium of the entire machinery industry ecosystem. Moreover, the increasing pace of digitization is not only creating new business models and additional value for the customers, but also changes the revenue composition of companies. While the most important use cases for companies remain remote monitoring, predictive maintenance, and overall equipment effectiveness optimization so far, the stronger growth rates of software, platform, and application providers show that digitization has the potential to change the fundamental structure and ecosystem of the machinery and industrial automation sector. While the ownership of strategic control points will change hands, so will the underlying value pools across the value chain. Read more here.

Advancement of Cobots

With the Covid-19 crisis spreading globally, companies of all   sizes shift their operational focus on automation to keep  factories running without compromising the health and safety  of their workers. Besides health and safety concerns, companies have also changed their calculations of automation investments with a higher focus on productivity gains and accelerated payback times. As cobots become cheaper, safe to be around, and can be adopted seamlessly to new tasks, they have become the robot of choice in a time of social distancing and fear of a pandemic-induced recession. Read more here

The Future of Micro Mobility Post-Covid-19

While the use of micro mobility solutions has declined dramatically over the past few months and the shared-micro mobility regulatory development remains fragmented  ̶̶  even on a city level  ̶̶  the micro mobility sector is expected to make a strong post-pandemic recovery. The favorable mid- to long-term outlook is driven by the segments’ ability to provide cities first- and last-mile solutions in combination with public transit. Moreover, the growth is fueled by shifting consumer behavior as well as greater support from cities for biking and other micro mobility solutions at the expense of traditional mobility solutions. Read more here.

Our Know-how section presents a trending strategic concept in the industrial technology space.

Know-how: Cobots

The use of robots across industries is steadily growing, driven by robots being able to take on more and more tasks and applications. This development is creating a wealth of completely new options for the manufacturing industry.

A key role in this development is the use of so-called collaborative robots (also known as cobots), which represent a new generation of industrial robots that are able to interact safely with humans. Employees and cobots can work alongside without the need for a cage or barriers for protection, enabling true collaboration between humans and robots. Moreover, the latest generations of cobots are equipped with artificial intelligence, enabling them to learn from their experiences, resulting in higher flexibility and productivity. Innovation is shifting toward application-enabling technologies, resulting in an increasing application range from packaging and palletizing through picking and placing to machine tending and screwdriving.

The cobot trend started with the foundation of Universal Robots in 2005, creating and commoditizing the market. Today, there are already more than 100 cobot competitors, industry incumbents such as KUKA and Yaskawa have launched their own cobots, and market shares are changing quickly. This surge has made cobots much more affordable, enabling more producers, especially small and medium-sized enterprises, to implement cobots benefitting from lower investment amounts, shorter payback periods, lower manufacturing costs, and increased productivity.

Market Forecast

According to a report by MarketsandMarkets, the global collaborative robot market is forecast to grow to about $12 billion by 2025 – a CAGR of 50.3% over the forecast period from 2018 to 2025. The Automotive sector holds the largest market size during the forecast period followed, by Electronics and Metals & Machining.

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Source: MarketsandMarkets – Collaborative Robot Market, Global Forecast to 2025

Further Reading

How to Safely Implement Collaborative Robots – AutomationWorld

How New Wave of Robotic Automation is Reshaping Industry – Financial Times

How the Coronavirus Advances the March of ‘Cobots’ – Reuters

Valuation Metrics Overview

Peer group trailing average LTM share price; indexed

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Source: Capital IQ (as of Aug. 10, 2020)

After Covid-19-Induced Turbulences, Global Stock Markets Recovered rapidly in Q2

In Q2 of 2020, global stock markets recovered rapidly after the Covid-19-induced slump in Q1. According to Fidelity, the velocity of economic recovery differs between geographies, with China ahead of Europe and the U.S. due to its earlier shutdown and reopening. Key drivers for the recovery in the U.S. were the Fed’s sizeable monetary accommodation as well as the gradual reopening of the U.S. economy. Nevertheless, uncertainty and volatility remain high as economic activity lingers far below pre-crisis levels. Additionally, industries that were most impacted by the virus (e.g., travel, restaurants) may be the most challenging to reopen.

According to Schroders, the reopening of economies and strong monetary accommodations spurred economic recovery in Europe as well. As part of these measures, the European Central Bank expanded its pandemic emergency purchase program to €1.4bn. Stock markets were further accommodated by European Commission president Ursula von der Leyen’s call for an additional €750bn recovery fund (in addition to the €540bn rescue package agreed upon in April).

Public Markets | Key Trading Statistics

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Source: Capital IQ (as of Aug. 10, 2020)

Public Markets Overview

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Source: Capital IQ (as of Aug. 10, 2020)

Public Comparables Detail

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Source: Capital IQ (as of Aug. 10, 2020); $ in Millions, except per share amounts

Our Sector Practice & Selected Experience

Automation

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Test & Measurement

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Engineered Components

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Communication & Connectivity

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