July 10, 2017
The German mechanical engineering sector recently tripled its growth forecast for 2017, from 1% to 3% (both in real terms). Robotics and automation is an important growth driver; this sub-segment is likely to increase output by 7%, i.e. double the rate of the segment as a whole. The mega issue “Industry 4.0” plays a key role for this development. As this trend is gaining importance both in Germany and around the world, the medium-term outlook for the sub-segment remains excellent as well. [more]
PROD0000000000447454 1 | July 10, 2017Talking Point July 10, 2017 Robotics and automation outperform, backed by "Industry 4.0" Author www.dbresearch.com Deutsche Bank Research Management Stefan Schneider Josef Auer +49(69)910-31878 email@example.com The German mechanical engineering sector recently tripled its growth forecast for 2017, from 1% to 3% (both in real terms). Robotics and automation is an important growth driver; this sub-segment is likely to increase output by 7%, i.e. double the rate of the segment as a whole. The mega issue “Industry 4.0” plays a key role for this development. As this trend is gaining importance both in Germany and around the world, the medium-term outlook for the sub-segment remains excellent as well. The fourth industrial revolution, also nicknamed “Industry 4.0”, is probably one of the most important topics of this decade across all industrial sectors, from mechanical engineering to carmaking. Ultimately, the “Industry 4.0” aims to create a smooth and perfect symbiosis between traditional, established industrial production procedures and the latest digital information and communication technologies. Companies which (try to) escape the trend towards digital networks and the optimisation of value-creation chains are in danger of losing competitiveness and market relevance in the near future. There is more and more evidence to suggest that factories will be almost fully automated and robotised in the future. The aim is a “smart factory” which will intelligently combine different approaches and become a highly efficient manufacturing location, with machines at different production stages and logistics systems that permanently exchange information, (re-)organise and improve themselves – and all that without much human interference. If this vision is to become reality and if industrial production is to become considerably more efficient, we will need to see further technological innovations. Technological progress is visible at many levels even today. Modern production plants are highly flexible. Flexible automation solutions enable tailor-made production, which helps to meet the ever more sophisticated client and consumer needs. “Mass customisation” is one of the key goals of the “Industry 4.0” and is no longer in its infancy in many different sectors, including textiles, shoes, furniture, clocks or jewellery. Production efficiency is also increased by component management networks. And in addition, modern industrial production outfits utilise up-to-date image processing systems for quality management purposes. Digitalisation, automation and robotisation also affect people’s working lives and are fundamentally changing the workplace. On the one hand, technological progress will certainly help to make many simple, repetitive and often highly Deutsche Bank Research Robotics and automation outperform, backed by "Industry 4.0" 2 | July 10, 2017Talking Point strenuous production steps superfluous. On the other, stabilising or even increasing competitiveness will require ever more efficient production procedures. In the end, Germany, a highly industrialised country, relies for its export success on a clear commitment to modern production procedures, product innovation and cost efficiency. In the era of “Industry 4.0”, we will need to rethink the relationships between workers and robots to create a win-win situation. What is key is that humans and machines work together as a team and interact more closely. Industrial robots work with unrivalled steadiness, precision, speed and – thanks to modern image processing – at an error rate of zero, which is impossible for humans. Thus, robots are really perfect assistants. However, it is still humans who need to pull the strings. Humans are creative and flexible and able to gauge complex and critical situations accurately. What is sometimes overlooked is that humans can rely on intrinsic knowledge, which is (yet) out of reach for robots. This intrinsic human knowledge is ultimately at the bottom of market-relevant values such as aesthetics, fashion or taste. Personal criteria doubtlessly play a key role in many consumer decisions, from the purchase of a car to that of a new dress, and thus shape the market success of many industrial goods. Until a short time ago, many young, ambitious and creative people thought that industry jobs were profoundly uninteresting. Unsurprisingly, many mechanical engineering companies worried about their attractiveness for students and qualified workers. However, the “Industry 4.0” and the ever more sophisticated requirements for a successful collaboration between humans and robots will change this and probably reverse the trend. In fact, the interaction between humans and robots and its optimisation will require particularly creative individuals who are open to unorthodox approaches and believe that this will provide them with new chances for development. This means that the numerous German medium-sized companies which form the backbone of the domestic mechanical engineering sector should become particularly attractive for people who are interested in technology. It is often small and medium-sized companies which adopt new products and new production procedures early on. If medium-sized companies come to rely more and more on human-robot collaboration solutions in the future, they will probably be able to create new jobs thanks to their success on both the domestic and foreign markets. Even today, the German mechanical engineering sector with its many small and medium-sized companies employs more people than at any time since the German unification, despite numerous technological challenges in the last few decades. We believe that digitalisation and “industry 4.0” will remain important issues on the agenda for all domestic and foreign industrial sectors. In particular, producers of robots and automation solutions will benefit from the necessary modernisation investments. This means that, in the period up to 2025, robotics and automation will probably continue to register double the growth rates of mechanical engineering as a whole, like in the current year. We forecast an average growth rate (including weaker years) of 1 – 2% p.a. for mechanical engineering as a whole. Deutsche Bank Research Robotics and automation outperform, backed by "Industry 4.0" 3 | July 10, 2017Talking Point © Copyright 2017. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, licensed to carry on banking business and to provide financial services under the supervision of the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin). In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Inc. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.