Tracking the next Megatrend

May 2015Richard Lightbound

richard@robostox.com

Topics for discussion

1. What is Robotics & Automation?

2. Industry Trends – Why Now?

3. ROBO-STOX Index & Methodology

Bill Gates April 2014 – Anniversary Letter

“Today though, I am thinking much more about Microsoft's future than itspast. I believe computing will evolve faster in the next 10 years than it everhas before. We already live in a multi-platform world, and computing willbecome even more pervasive. We are nearing the point where computersand robots will be able to see, move, and interact naturally, unlocking manynew applications and empowering people even more.”

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Industry in numbers

$1.2 TRILLION

7,000Businesses will have drone

permits within the next three years

In robotics-related spending by 2025

54 %Growth rate in China

last year alone

Per hour to power an industrial robot compared to

$20 per employee

75 CENTS

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What is Robotics and Automation?

Focus on Technology & Applications

INDUSTRIAL MFG MATERIALS HANDLING HEALTHCARE

MILITARY /SECURITY AGRICULTURE ENERGY

3D PRINTING

CONSUMER PRODUCTS

PRE-PROGRAMMED, REDUNDANT TASKS

SENSING, PROCESSING AND ACTING

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Robotic Applications

Unmanned Aerial Vehicles (Drones): More than 100,000 jobs will be created upon legalized integration

• Military• Surveillance• Farming• Search and rescue• Mapping and surveying• Fire fighting• Pollution control

Parrot – Assorted range of drones for sales to the consumer market

AeroVironment – received first FAA drone license for commercial use

Northrop Grumman– delivers unmanned aircraft for defense, homeland security and commercial aviation

DJI – Leaders in quadcopters. Developing products for use in filmmaking, conservation and energy infrastructure

DEVELOPMENTS COMPANIES TO WATCH

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Robotic Applications

HEALTHCARE$4 trillion annually in the US alone

• Surgical robots• Pharmacy automation• Exoskeletons• Assisted recovery and rehab• Personalized care• Non-invasive diagnosis

Intuitive Surgical – DaVinci robotic device is used for minimally invasive operations. Fewer and smaller incisions allow quicker recovery.

Accuray Inc. – robotic system for tumor treatment via radiation therapy – extraordinary precision

Cyberdyne – Hybrid Assistive Limb suit (HAL)

Aethon Inc. – automates internal logistics by delivering supplies and materials via TUG, smart autonomous mobile robot

DEVELOPMENTS COMPANIES TO WATCH

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Robotic Applications

AGRICULTURE: The global agricultural robotics market was worth $817 million in 2013 and is expected to reach $16.3 billion by 2020.

• Drones or UAVs; data gathering• Automated milking systems• Agribotics; driverless tractors

and robotic harvesting equipment

COMPANIES TO WATCH

John Deere – worldwide leader in agriculture machinery. Developed unmanned tractors capable of spraying, mowing and harvesting

Trimble Navigation – develops farm navigation equipment and crop management systems

DEVELOPMENTS

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Industry Trends

2014 – Sales go through the roof

Industrial Robots penetrate many industries

Automotives industry still dominates the automation space

IFR industrial robots shipped by industry

Automotives

Plastic and chemical

Metal

F&B

Electrical & electronics

Others

Uni

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2008 2009 2010 2011 2012 2013

Gavekal Data/Macrobond

Industrial Robots have beenaround for years andautomation is not a newconcept.

Most manufacturing in thelast century has been “fixedautomation” around thedull, dirty and dangeroustasks.

Due to technologicallimitations, cost and theeffort required to structurethe environment to suit thetool, traditional industrialrobots have penetrated onlyan estimated 10% of themanufacturing domain.

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Robotics is a Global trend

• Robots are goingglobal unlike the cheaplabour outsourcing erawhich was pioneeredby China and otherEMs.

• In the developed worldUSA is doing the bestjob embracing therobots revolution.

• Surprisingly Japan isthe worst.

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Robot density – look at China

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Technology costs are decreasing

Faster price declines will drive higher robots adoption

Global robotics shipment (rhs)

Avg. unit value (lhs)

New price goal? (lhs)

USD

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2000 2002 2004 2006 2008 2010 2012 2014

Gavekal Data/Macrobond

An increasing number ofcompanies are findingrobotics a cost-effectivesolution to their productionand service needs.

Robots are becomingcheaper, more productive,and more sophisticed whilethe cost of human labourcontinues to rise.

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Convergence of Robot costs and wages

China wages increased 500%since 2000 and are expectedto continue at 18% perannum.

Robotics and automationcan boost the productivity ofhuman labour, reducing unitoutput costs through scaleproduction as well as cost-effective highly precise andsophisticated production.

A labour substitute is mandatory

The world is aging causingthe traditional working agepopulation to shrink.

That process has alreadystarted in Japan and EU

China could see its workingage population contract asearly as 2020.

Even India is expected toexperience this trend by2045.

These 5 regions produceapproximately 70% of theworld’s output.

Automation Tour - Nov’14 Japan & China

• 35 interviews with a broad sample of companies:– 3 largest robot makers: Fanuc, ABB & Yaskawa

• CN - Siasun Robot & Automation, GSK, Estun Automation and Effort IntelligentEquipment

• TW - Hiwin and Delta– Machinery Builders: Fuji Machine, Toshiba Machine, JTEKT, Mitsubishi– Industrial Automation: Rockwell– Component suppliers to robot makers:

• Servo Motor: Yaskawa and Delta Electronics• Industrial Lasers: Rofin-Sinar

– Major suppliers to automotive sector: Fauerica and CSSC– System integrators– Feel from the research perspective:

• Professor Sugano – human robotic interaction• Professor Ishikawa – active control and high speed imaging

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Automation Tour - Insights

Key Market Findings and Technology Trends:

1. Automotive and Smartphone capex strong for 2015 and beyond2. Internet of Things - Software costs coming down due to common standards, open

source coding, machine learning and self teaching

3. Ultra high speed vision – Focus on location & navigation technology driving advances in machine vision and less expensive: sensors, gyros, accelerometers etc…plus the algorithms that fuse it all together getting better and cheaper

4. New industry applications – not just automotive and electronics

5. China – Buyer and Maker of Robots1,000 Robot Companies • “US$154 billion rise of the robots planned for Pearl River Delta manufacturing” – SCMP April 7th 2015

6. Big players going “COBOT”

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COBOTS - inexpensive table-top robots will disrupt light manufacturing

BAXTER SAWYER YUMI

UR3

LBR iiwa

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What does ROBO-STOX do…?

Part 1 – Industry Analyst Team

Professor Henrik Christensen - Dept. Chair of Robotics at GA Tech University

Professor Raffaello D’Andrea – ETH Zurich, Dynamic Systems & Control. Co-founder of Kiva Systems

Professor Wyatt Newman - Humanoid Robotics & AI

RESEARCH

Mr. Morten Paulsen - CLSA, Head of Research for Robotics and Machinery Industry

Mr. Louis Gave - Gavekal, CEO Money Management and Global Research

Mr. Scott Davis - Barclays Capital, Head of Global Industrials Equity Research

ACADEMICS

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Part 2 – Global Database w/3,000+ companies

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Part 3 – ROBO-STOX Industry Classification

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Part 4 – ROBO-STOX UCITS Compliant Index

• This index is global, deliberately broad across the industry and built for the long term whichreflects the early stages of the robotics and automation industry

• Including all players in a proportionate and equally weighted fashion ensures that we capturethe overall growth trend while minimizing company-specific risk.

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Equal weighing approach across two tiers

Bellwether Non-Bellwether

Index made up of “bellwether” stocks (40%) and“non-bellwether” stocks (60%)

Bellwether companies are well established leadingcompanies, whose core business is directly related torobotics and automation.

Non-bellwether companies have a distinct portion oftheir business and revenue in robotics andautomation and have the potential to grow throughinnovation and/or market adoption of their productsand/or services.

This approach ensure the index provides exposure tocompanies in the early stages of new innovation andtechnologies as well as the more established players.

The 40/60 weighting results in each bellwetherhaving roughly twice the weight of each non-bellwether

The index then weights each of its constituents on anequally weighted basis, avoiding the largecapitalisation and “buy high, sell low” biases ofmarket capitalisation indices

Index Components – bellwether companies

Geography and market capitalization

Part 5 – ETF Securities

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Thank You

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