Military: Robotics Outlook 2025

This is the fifth in a six-part series we’re publishing on the future of robotics. Every day this week, we’re publishing a detailed outlook on a category within the robotics market including details on our thesis, outlook and market size for each category.

See previous notes in our Robotics Outlook 2025 series here: IntroIndustrialCommercial, Domestic.

While robots have been deployed in military applications for years, the number of unmanned systems used by domestic and international defense agencies continues to grow. Thanks in large part to improvements in computer vision and robotic functionalities, unmanned systems are now capable of accomplishing tasks better than traditional manned systems. Today, military robots consist of unmanned systems that operate in the air, ground, and sea. While unmanned aerial vehicles are the most common form of robots used by militaries, unmanned ground systems and marine robots are playing a bigger role in tactical missions. Given that these unmanned systems improve situational awareness, reduce a soldier’s workload and minimize overall risk to military personnel, we believe robots of all kinds will play a growing role in military operations over the next 10 years.

  • Unmanned Aerial Vehicles (UAV): Military UAVs take many forms, from drones small enough to hold in your hand to UAVs the size of manned fighter jets. Most of these drones can carry a wide variety of sensor payloads. Surveillance is primary UAV application in order to gather aerial intelligence. Military UAVs are typically more expansive than commercial drones, with pricing ranging from $50K – $1M+; however, due to technological advancements seen in commercial drones we anticipate pricing to decline steadily.
  • Unmanned Ground Vehicles (UGV): Similar to UAVs, there are different classes of military UGVs varying in size and payload capacity. Some UGVs are small enough for a person to carry, while others are the size of a tank. UGV applications include intelligence, surveillance, and reconnaissance (ISR) functions, as well as cargo transport. Compared to other unmanned systems, UGVs are superior when direct action needs be taken on the ground. For example, an attached robotic arm could inspect or deactivate a potentially hazardous material. Pricing for UGVs vary based on size and range from $10K per unit to as much as $100K+ for larger models.
  • Unmanned Marine Vehicle (UMV): UMVs include unmanned marine surface vehicles and underwater robots. While most UMVs in use today are cable of operating for multiple hours at a time, new UMVs can remain submerged for weeks at a time. UMVs are primarily used for marine surveillance, sweeping for mines, securing critical water passages, and serving as navel targets. UMVs are among the most expensive military robots in use today, with prices ranging from $200K for the low-end models to as high as $10M for high-end UMVs.

Military Robot Market to Grow to $2.8B By 2025

We believe a total of 12,336 military robots were delivered in 2016, which is up 8.8% from the prior year, and the total market value grew 6.7% y/y to $1.2B. We believe the vast majority of units were UAVs; we estimate that 10,330 military drones were sold in 2016. Over the next 10 years we anticipate UAVs will be a key focus within robotics for most militaries around the world. By 2025, we estimate that over 41K military drones will be delivered globally, representing a 16.2% CAGR and $2.1B market opportunity. We believe that the number of UGVs sold will increase from 1.9K in 2016 to over 5.9K in 2025, representing a $450M market opportunity. While we believe demand will be driven by all UGV classes, we anticipate faster growth among larger and more advanced systems.  While the category remains small from a unit standpoint today, we believe the UMV market will see healthy growth over the next 10-years and represent a lucrative market opportunity by 2025. We believe the industry shipped 131 UMVs in 2016 but expect 330 units will be delivered in 2025, representing a $260M market. UMV growth will be driven by further applications and use case development. In the exhibit below, we highlight our domestic robot forecast through 2025.

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Domestic: Robotics Outlook 2025

This is the fourth in a six-part series we’re publishing on the future of robotics. Every day this week, we’re publishing a detailed outlook on a category within the robotics market including details on our thesis, outlook and market size for each category.

See previous notes in our Robotics Outlook 2025 series here: Intro, Industrial, Commercial.

Due to advancements in computer vision, robot functionalities and, most importantly, lower component costs, adoption of robots is accelerating in both commercial and domestic markets. Domestic robots are systems used to perform household chores such as vacuuming, mowing the lawn and mopping. While home robot adoption has accelerated in recent years, we believe penetration rates remain low and foresee even higher growth in the future. Although we anticipate improvements in robotics functionalities and lower robot costs to accelerate growth, increasing consumer awareness of these technologies will be the primary growth driver. Currently, robotic vacuums lead the market in units sold, but with consumers becoming more comfortable with robotics, other technologies such as robotic lawnmowers and mops are starting to gain meaningful traction.

  • Vacuum: Robotic vacuums, or robovacs, were the first mass market robots to enter the home. Today, the robotic vacuum market accounts for the highest percentage of domestic robots in terms of spend and units shipped. Robovacs retail between $200 and $1,000, with the higher-end models offering longer battery life and WIFI-connectivity. Assuming robot vacuums only accounts for ~20.0% of global vacuum spend, we believe strong growth lies ahead for this domestic sub-market.
  • Lawnmower: We believe the robotic lawn mowing market is the second largest domestic robot market in the world. Today, robotic lawn mowers are most common in European countries due to the smaller average lawn size. Robotic lawnmowers are the most expensive domestic robots on the market today with prices ranging from $1,000 to $5,000. We believe the biggest growth catalysts include lower unit costs and improved battery endurance, especially in North America where lawns are much larger.
  • Wet Floor: The wet floor robotics market, which includes robots used for mopping and sweeping non-carpeted floors, is the third largest domestic robot market. Although small today, this domestic market has recently started to gain strong momentum across the globe. Specifically, wet floor robots are seeing strong adoption within Asian countries where carpeting is not the norm in most households. These robots are one of the least expensive of all domestic robots and retail from $150 to $300.

Domestic Robot Market to Grow to $4.4B By 2025

We believe a total of 5.1M domestic robots were delivered in 2016, which is up 25.5% from the prior year, and the total market value grew 25.7% y/y to $1.4B. We believe 4.1M robotic vacuums were sold in 2016. Over the next 10 years we anticipate the industry to see double-digit unit growth annually. By 2025, we estimate that 15.5M robot vacuums will be sold, which will equate to a $2.6B market opportunity. Meanwhile, we believe the number of robotic lawnmowers sold will increase from 340K in 2016 to over 1.4M in 2025, representing a 21.0% 10-year CAGR. Although we anticipate robotic lawnmower pricing to come down significantly from where it is today, we believe the market opportunity will exceed $1.0B in the next 10 years. While small today, we believe the wet floor market will see the highest unit and market growth over the next 10-years. We believe the industry shipped 570K wet floor robots in 2016. By 2025, we estimate that over 6.0M wet floor units will be delivered, representing a 33.9% 10-year CAGR. In the exhibit below, we highlight our domestic robot forecast through 2025.

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Commercial: Robotics Outlook 2025

This is the third in a six-part series we’re publishing on the future of robotics. Every day this week, we’re publishing a detailed outlook on a category within the robotics market including details on our thesis, outlook and market size for each category.

See previous notes in our Robotics Outlook 2025 series here: Intro, Industrial.

While the industrial robotics market accounts for the highest percentage of robot spend, we believe robot adoption in other commercial settings is approaching an inflection point and will experience faster growth than any other robotics market over the next 10 years. We define the commercial market as robots used in warehousing, healthcare, agriculture, security or any other commercial application outside of the manufacturing sector. Over the last 5 years, a wide variety of commercial verticals have integrated robotics due to lower robot costs, improved robot functionalities and enhanced safety features. Today, we believe the four biggest commercial robot markets include autonomous guided vehicles in logistic applications, drones, and medical and field robots. That said, there are several quickly emerging commercial robot markets that are small today, but that we view as large market opportunities over the next 10 years:

  • Autonomous Guided Vehicles (AGVs): Autonomous guided vehicles are robots used in many different commercial industries to improve logistic efficiencies by moving materials without any human interaction. Advancements in software and computer vision allow these robots to understand their surrounding environment in real-time, which allows them to operate in challenging environments and nearby people. The largest adopters thus far of AGVs include e-commerce companies. Pricing on AGVs varies from $35 – 50K.
  • Drones: Unmanned aerial vehicles (UAVs), better known as drones, are flying robots utilized in a handful of different verticals such as agriculture, telecom, oil and gas and public safety. Due to favorable regulation and breakthroughs in flight automation and sensor technologies, drones are providing these industries with cheaper and more efficient solutions than tradition business methods. Drones can take many forms including quadcopters and fixed wing. Pricing for UAVs can vary from sub-$1K to more advanced platforms that cost in excess of $50K.
  • Medical Robots: Medical robots primarily take the form of machines assisting healthcare professionals during surgical and rehabilitation applications. Over the last 10 years, the number of surgeries performed by these robots has significantly increased. Today, medical robots are assisting in spinal, prostate, joint replacement and open-heart surgeries. Medical robots allow surgeons to perform smaller and more precise operations. They are one of the costliest types of robots on the market with average selling prices (ASPs) over $1M.
  • Field Robots: Farms are becoming more automated as the precision ag movement gains momentum. Today, field robots take the form of milking robots, autonomous tractors, de-weeding robots, as well as robots used to pick fruits and vegetables. While these robots improve efficiencies and crop yields, we believe adoption of field robots will be highly correlated to commodity prices. However, as field robots continue to improve, farmers will likely be forced to adopt these technologies in order to remain competitive.
  • Other: While we view AGVs, drones, medical, and field robots as the largest commercial markets today, we see many other commercial markets quickly emerging. These robots include professional cleaning, security, as well as public relations robots, but there are additional markets still in the very early phases of development. The catalysts driving these other commercial robots include: decreasing robot costs, increasing robot functionalities, software application development, market awareness, and public acceptance.

Commercial Robot Market to Grow to $29.9B By 2025

We believe a total of 130,321 commercial robots were delivered in 2016, which is up 86.6% from the prior year, and the total market value grew 29.1% y/y to $4.9B. We specifically believe 33,250 AGVs were sold in 2016, and over the next 10 years we anticipate the AGV market to be one of the fastest growing commercial robotics markets. By 2025 we believe the total AGV market value can exceed $10.0B, which represents a 29.4% CAGR and equates to over 370K unit shipments. We anticipate medical robots growing from $1.6B in 2016 to $8.0B by 2025, representing a 18.6% 10 year CAGR. Due to the abnormally high ASPs for medical robots, we anticipate the unit volume to be much lower than any other commercial category.

Within commercial robotics, we anticipate the commercial drone market to see the highest unit and market value growth over the next 10 years, due to the number of verticals drone technology will likely disrupt. We believe annual commercial drone shipments will increase from 84,000 in 2016 to over 830,000 by 2025, representing a 35.5% CAGR, and the drone market will eclipse $6.8B by 2025. Meanwhile, we believe the industry shipped 7,277 field robots in 2016, and believe just under 22,000 units will be shipped by 2025, totaling a $2.6B market opportunity.

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Apple Will Become The Leading AR Platform Over Night

Here’s our take on the most important announcements from Apple’s WWDC 2017 keynote event:

  • New AR Developer Tools. ARKit is the single most important announcement from today’s keynote, enhancing iOS 11 devices for augmented reality. ARKit instantly creates a multi-100m user base for AR developers over night, which compares to Google’s Tango platform which we believe has well under 10 million users. We believe AR will be the core technology that eventually replaces the smartphone. Today’s announcement lays the groundwork for Apple to succeed in that future as ARKit represents the first tangible commitment from Apple to establish itself as the leader in the race to build a dominant AR-driven OS. The company will build AR-enhanced iPhones that include depth cameras and other additional hardware in the future, but they will also bring along the existing iOS device base to bring AR to all sooner than later.
  • New VR Developer Tools. Apple also dedicated a meaningful chunk of the keynote to introduce new technology, announcing support for SteamVR, Unity and Unreal. The company also announced Metal for VR, which supports VR content creation.  These announcements show that Apple views VR as an important computing paradigm in the future, a market they have been shut out of to date because of their focus on integrated graphics and downplaying the powering of external hardware. We believe that today’s announcements represent a small step toward eventually launching a VR platform for iPhone.
  • New AI Developer Tools. Apple showed an increasing focus on artificial intelligence across its product line. The company announced Core ML, a new machine learning API to make AI faster on mobile devices. Ultimately, this will enable on-device processing for AI with data privacy across iOS, macOS, watchOS, and tvOS. Robust AI requires: 1) broad understanding and learning across devices, 2) advanced natural language processing, and 3) advanced computer vision. Apple highlighted its strengths across all three of those requirements throughout today’s keynote.
  • HomePod. Natural language will be a key user interface in the future of computing and Apple is playing catchup today with HomePod. Based on the product demo at WWDC, HomePod clearly offers a premium audio experience. The company is differentiating the device from other home assistants by focusing on music, but make no mistake: Siri is the killer app on HomePod. Apple fully understands the importance of Siri for HomePod and we expect updates to Siri when HomePod ships in December. We expect Apple to gradually open Siri up to developers and create an Alexa Skills-like offering for voice based apps. Today, developers are only able to integrate Siri skills if their apps fall within nine app domains (ride booking, restaurant reservations, etc.), but that won’t cut it in the future.

And here’s our take on the rest of the announcements from WWDC:

  • ApplePay for person-to-person transactions. Apple is now the only company to integrate a comprehensive payments platform directly into the OS. The significance of OS integration will only increase as computing becomes more immersive in the screenless future. A clear negative for PayPal’s Venmo.
  • macOS High Sierra. Support for VR will excite some developers and Mac gamers who have avoided the Mac.
  • watchOS 4. We’re looking forward to the Siri watch face.
  • iOS 11. Classic Apple software updates to keep iOS ahead of the pack. New iPad features for iOS show that Apple is trying to push the limits of the iPad as a productivity device. We think it might be enough to bend the growth curve from negative to flat.
  • New iMacs and MacBook Pros. An unexpected price cut on the most popular MacBook Pro.
  • New 10.5″ iPad Pro. Makes sense given that Apple’s getting rid of the 9.7″ iPad Pro. Generally, the iPad line makes more sense now.
  • Amazon Prime Video on Apple TV. More of a negative for Netflix than a positive for Apple or Amazon.
  • Redesigned App Store. Unifying the UI across iOS.

Hinting Towards an AR-enhanced iPhone.

Today’s announcement of ARKit leaves us incrementally more confident that an AR-enhanced iPhone is coming this fall. The software groundwork has been laid for Apple to unveil new iPhones with dual cameras across all models (regardless of screen size), a new 3D mapping chip, and perhaps an edge-to-edge display with no hardware home button. Apple’s new Siri UI showed a Siri button that looks like it could be a Siri-specific home button on a home button-less iPhone. And the new design of the dock, which is now self-contained in iOS 11 (as opposed to the edge-to-edge dock design in iOS 10), makes more sense in a UI with display area below the button. The next iPhone continues to look like it will be the most important update to the device since iPhone 6.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Industrial: Robotics Outlook 2025

This is the second in a six-part series we’re publishing on the future of robotics. Every day this week, we’re publishing a detailed outlook on a category within the robotics market including details on our thesis, outlook and market size for each category. Read the intro here.

Over the last 20 years, the industrial market has been the primary adopter of robotics technology and accounted for the majority of all robot spend. We characterize the industrial robot market as robots used in manufacturing or assembly applications within automotive, electronic or other machining industries. Largely due to the size and power of most industrial robots in use today, these systems are typically installed in caged environments with minimal human contact for various safety reasons. However, due to advancements in computer vision and motion sensing capabilities, a new type of industrial robot has emerged known as collaborative robots, or co-bots. While the co-bot market is small today, we believe this sub-category of the industrial market will see extraordinary growth over the next 10 years. Our model for the industrial market is broken down into two sub-categories: traditional and collaborative robots.

  • Traditional Industrial Robots: Most traditional robots are installed in caged environments away from people allowing them to handle heavy payloads and operate at fast speeds. However, the high integration costs associated with industrial robots limits the flexibility of these machines. In addition, traditional robots typically require programming from advanced software engineers, which can drive total cost of ownership well over $100K per system.
  • Collaborative Industrial Robots (Co-bots): Co-bots are built with multiple motion and force detecting sensors, which makes it safer for these systems to collaborate alongside humans. Programming co-bots is also less sophisticated than traditional robots, which lowers overall cost and improves flexibility. With the average selling price on co-bots ranging from $25 – 45k, robot automation is now accessible outside of large industrial manufacturing. That said, limited payload capacity and a slower operating speed are two drawbacks to co-bots in the market today.

Industrial Robot Market to Grow to $33.8B By 2025

According to the International Federation of Robotics (IFR), a total of 253,748 industrial robots were delivered in 2015, and the total market value grew 9.0% y/y to $11.1B. Of all the industrial units shipped, we believe 250,073 of industrial robots were in the form of traditional systems, while the remaining 3,675 units were collaborative machines. Over the next 10 years, we anticipate the traditional industrial market to see healthy growth, but due to lower costs and higher flexibility we anticipate the co-bot market seeing much faster adoption. We expect total co-bot units shipped will increase from 8,950 in 2016 to 434,404 by 2025, representing a 61.2% CAGR. Over this time frame we anticipate costs to continue to come down, but believe the total co-bot market value will exceed $9.0B by 2025. While we expect, co-bots will drive overall industrial growth, we anticipate the traditional market to also see steady adoption. We believe the traditional market alone will represent a $24.0B market by 2025. In total, we believe the industrial robotics market will grow 11.8% on an annual basis to over $33.0B in the next 10 years.

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