Japanese robots are coming, Europe

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Japanese robots will become a more common sight in Europe. Rising wages are driving demand for factory robots that can handle everything from food handling to car welding. For its manufacturers, which have begun an aggressive campaign, there is room for growth.

Fanuc, one of Japan's largest robotics companies, has quadrupled the size of its Spanish sales center near Barcelona, ​​adding to its expansion in Europe where it already has 10 facilities, including Germany, Italy and Turkey.

Until now, demand for robotic workers has been largely concentrated in Asia, where about three-quarters of the region's newly deployed robots have been installed. Asia's urgent need for automation has grown over the past decade, as falling birth rates and labor shortages due to an increasingly aging population cause problems for businesses.

China has long been the largest market for Japanese robotics companies. The number of robots used in manufacturing in China reached 322 units per 10,000 employees in 2021, exceeding the density of robots in the United States. For Fanuc, the country accounted for nearly 30 percent of its sales in FY2022.

But Chinese orders during the December quarter-to-quarter period fell by more than a third, the largest decline among the markets in which it operates. This is partly due to the local economic slowdown but also to the results of price competition from local competitors entering the market.

A standard robot arm costs about $330,000. With labor costs rising around the world, the investments required to improve productivity are starting to look more attractive than ever. Negotiated wage growth in the euro zone rose 4.7 percent in the third quarter of last year, an all-time high, before slowing slightly to 4.5 percent in the fourth quarter.

Companies were already struggling to find workers in the EU's tight labor market. Volkswagen has been using Fanuc robots for nearly a decade. The machines themselves are also becoming more sophisticated, able to handle an increasing number of tasks, such as painting, welding, quality inspection and handling of hazardous chemicals. Generative AI functionality will help increase the scope of robot activities as real-time object detection and decision making enhances efficiency and productivity.

Fanuc shares, which enjoy gross margins of about 40 percent, have fallen by a fifth from their peak in June, reflecting concerns about a slowdown and growing competition in China. But Europe, whose revenue contribution to group sales is just 17 percent, offers plenty of room for growth. The robots are coming.