20 Japanese Stocks Involved in Robotics
Robotics remains a hot topic with +46% compound annual growth rate forecasted until 2021 by Research and Markets. Those growth forecasts are about as accurate and useful as tarot cards, but nobody doubts there’s money to be made here. The market has reached a turning point where the non-industrial segment is taking over the playing field, which has been dominated so far by industrial automatons (imagine big metal arms assembling your car and carving out your iPhone case). Robots are now flipping burgers, picking fruit, and cleaning floors, much to the chagrin of high school kids and Mexicans around the nation. It’s time for investors to pay attention.
We’ve covered ways to invest in robotics in an earlier article as well as the go-to robotics ETF and some of its US and European constituents but none of these options were overly compelling as they don’t provide the sort of pure-play exposure to the robotics theme we had hoped for. When it comes to performance, this past year treated the ROBO Global ETF well (+34% vs Nasdaq’s +20%), but its 5-year performance remains on par with Nasdaq’s at +36%. The obvious question is how to get a piece of the real robot action by investing in pure-play robotics stocks. Maybe the answer lies in the land of the rising sun.
Meanwhile in Japan
Japan’s demographic issues of an ageing population and shrinking labor market make it a prime location for robotics research, with other developed countries facing similar problems following suit, like zee Germans. In order to find out which companies in Japan are working on robots, we turned to the Japan Robot Association. Established in 1971, this organization promotes the development of robots in Japan and has a handy members list, most of which are companies listed on the Tokyo Stock Exchange. This means we have a potential list of robot stocks that are accessible to any retail investor with an investment account that allows for global exchange access (like Interactive Brokers). Now we need to examine how pure-play the members of that list are. We will be focusing on listed and purely Japanese companies while leaving out Japanese subsidiaries of US or European firms such as ABB or Cognex.
Japanese Pure-Play Robot Stocks
We isolated the list down to 20 stocks, yet only 5 had a meaningful proportion of revenues coming from robotics that would qualify them as “pure-play”. Here are those 5 stocks along with their returns over 1-year and 5-year time frames (Nasdaq returns for the same time frame were +25% and +110% respectively):
|Company||Ticker||Market Cap (Billions)||1-Year Return||5-Year Return|
|Fuji Machine MFG Co.||TYO:6134||1.8||+74%||+125%|
|Yushin Precision Equipment||TYO:6482||0.48||+22%||+123%|
Fanuc (TYO:6954) is the largest of the bunch, and consequently has a 1.6% weight in the ROBO Global ETF placing it alongside ABB and Rockwell Automation, the largest players to the West. The world leader in industrial robotics, Fanuc has three main businesses: factory automation, robots and robotic machines. Their activities are as pure play as a company this size can get, and revenues from the sales of robots are on an upward trajectory:
While they offer solutions across 18 different industries including aerospace, agriculture, automotive, construction and energy, we can see that the majority of their revenues come from the automotive sector. Fanuc robots are powered by NVIDIA chips, and they’re responsible for all those Tesla vehicles you see on the roads.
Yaskawa (TYO:6506) is another major constituent of the ROBO ETF and manufactures motion control, system engineering and other IT-related products besides robots. The robotics division’s share of net sales was 35% in 2016, and the motion control division, which produces component parts for robotics, made up 44% of net sales making Yaskawa a good potential addition into a pure-play robotics portfolio:
Geographical diversification of revenues ensure that less risk is being taken on any single country.
Cyberdyne’s (TYO:7779) is a company we’ve covered before, in particular, their lower body exoskeleton offering. When it comes to the exoskeleton market, the main differentiator is the low price tag and the ability to lease the product. The company offers the exo suit alongside a cleaning robot and a large table interface, which seems a bit unusual. You may have heard of notorius research firm Citron. They called Cyberdyne “the most rediculously priced stock in the world” and by that they meant overpriced. Here’s how that commentary impacted shares:
Shares are presently hovering around the 1,500 mark. In the last quarter ending June 30, 2017, Cyberdyne had $3 million in revenues and losses of $2.3 million. They’ve been trying to get FDA approval since 2015 and have not made very good progress in that respect.
Fuji Machine MFG Co. (TYO:6134) is a $1.8 billion market cap company manufacturing robotic solutions and machine tools, focusing on automotive, telco and computer equipment sectors. Robotic solutions make up 86% of sales so we’re looking at another pure play here:
It’s interesting to note that the Chinese market makes up almost half of their sales.
Yushin Precision Equipment (TYO:6482) develops take-out robots of injection molded plastic products, automated stock systems and labor-saving automation equipment. Take-out robots are tasked with removing the hardened plastic parts out of molds and transferring them to subsequent steps of the manufacturing process such as packaging. Here’s what they look like:
These are really specialized robots and Yushin is a smaller company compared to others on this list with half a billion-dollar market cap. Might be worth digging in to see how (or if) they’ll be impacted by 3D printing technology.
Japanese Stocks with Less Exposure to Robots
The list also contained a slew of names that we wouldn’t consider to be pure-play, but that are worth looking at in order to understand all the players in the Japan robot space. Here are 15 more Japanese stocks that are dabbling in robotics:
- Fujitsu (TYO:6702) is involved in numerous businesses connected to IT systems, software, infrastructure and process management & automation. There are a number of robots they’ve been developing ranging from Matey a retail helper in stock management to Mi-ro a surgery assistant. They’ve also dabbled in other concepts like humanoids and office delivery robots but these all seem to be novelties as opposed to anything with traction. Here’s a service robot they introduced about 12 years ago that doesn’t seem to have gone anywhere:
- Hitachi (TYO:6501), similarly to Fujitsu, is a large conglomerate with a small robotics division. Their current $34 billion market cap operation gets most of the revenue from IT, telco, infrastructure and industrial systems. Like Fujitsu, their robotics activities are more interesting side-research than a fully-fledged commercial division though they’d have you believing differently:
- IHI Corporation (TYO:7013) A comprehensive heavy industry manufacturer involved in energy, resources, machinery and aerospace & defense industries among others, their robotics related R&D focuses on factory automation and image & 3D data processing. As in the case of Fujitsu and Hitachi, robots make up a fraction of their exposure though they do confirm a future focus on robotics to address Japan’s labor gap.
- Juki Corporation (TYO:6440) makes industrial and household sewing machines and surface mounting systems that pick and place items automatically (could be considered robotics) but makes up 20% of the company’s revenues, so more of a side business for Juki. On a side note, our MBA who dabbles in fashion design tells us their sewing machines are great.
- Kawasaki Heavy Industries (TYO:7012) manufactures and maintains heavy industry machinery for aerospace, infrastructure, energy and other capital intensive sectors. The robotics business is part of their precision machinery unit making up about 12% of sales but not meaningful enough for this to be a pure-play.
- Kobe Steel (TYO:5406) offers iron, steel, copper and aluminum related products and equipment including an arc welding robot called Kobe. Robotics exposure is negligible in this case, below 5%.
- Komatsu Ltd. (TYO:6301) multinational corporation that manufactures construction, mining, and military equipment. Since 2008 they’ve been offering a so-called Autonomous Haulage System (AHS), a fleet of unmanned dump trucks for mines utilizing GPS, an obstacle detection system and a central control network.
- Mitsubishi Electric Corporation (TYO:6503) manufactures a diverse range of industrial systems (energy, space, transportation), IT systems and home appliances. Their range of industry automation robot arms called MELFA offer a dedicated motor controller and collision detection system, and can work with relatively heavier payloads. As in other cases above, this remains a complimentary offering alongside other industrial solutions for Mitsubishi.
- Nachi-Fujikoshi Corporation (TYO: 6474) is a relatively smaller company with $1.4 billion market cap and manufactures heavy industry equipment. According to the latest annual report, robots made up 11% of their $1.9 billion sales, a slight decrease from the previous year’s numbers.
- Seiko Epson Corporation (TYO:6724) excels in precision control robots combined with detailed image processing to assess object orientation. While revenue share of robotics is a mere 2.7% (printing and visual communications take up the bulk of the business), segment growth has been 53% over the past year.
- Toshiba Machine Co., Ltd. (TYO:6104) has a lineup of robots typically for placement, assembly and inspection ranging from light to high payload, with different arm length options and functions such as collision detection and acceleration/deceleration control. These represent about 11% annual revenues alongside molding machines, die casting machines and servo motors.
- Yamaha Motor Co. (TYO:7272) obtains most of its revenue from motorcycles, but they do have an industrial machinery & robot division making up about 3.7% of sales. They offer the usual array of single and multi-axis, pick-and-place, linear and non-linear movement robots with controllers and vision systems.
- Daihen (TYO:6622) is an industrial conglomerate producing heavy electrical equipment, solar inverters, and welding equipment. About 15% of their revenues come from welding robots.
- Denso Wave (TYO:6902) is developing, manufacturing and selling automatic data capture equipment, industrial robots, programmable controllers and other apparatus and systems. The company doesn’t break out market share of each segment, but we know they’ve sold and installed 90 thousand robots since they entered the business.
- IDEC Corporation (TYO:6652) is manufacturing human-machine interfaces, automation, safety and industrial panel solutions. They recently acquired a company to shore up their focus on human-machine interfaces like joysticks and control panels. We’re not seeing any robots on offer here.
So there you have 5 Japanese pure-play robot stocks and 15 others that are dabbling but have not quite reached meaningful levels of revenue attributed to the sale of robots that would make them interesting to robotics investors. If you want to invest in any of these Japanese stocks, you’ll need to open up an account with Interactive Brokers.
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