Why Robotics Is the Next Big Growth Industry

An inside look at the rise of robotics and how investors can profit from this trend.

Apr 8, 2014 at 6:00PM

There's a lot of talk these days about the opportunities for investors in wearable technology and the "Internet of Things." However, one futuristic industry that hasn't gotten enough attention lately is the area of robotics. Better sensors and cheaper chips are making it easier than ever for companies both big and small to take advantage of advances in robotic technology. This explosive growth in robotics creates a clear opportunity for forward-thinking investors.

Google (NASDAQ:GOOG) went on a bot-buying spree last year, acquiring eight robotics companies including Boston Dynamics and the Japanese start-up that created the award-winning SCHAFT robot. E-commerce giant Amazon.com (NASDAQ:AMZN) is also heavily investing in robotics to help make its business more efficient. In 2012, for example, Amazon coughed up $775 million to buy robot maker Kiva Systems. Using Kiva's robots, Amazon is now able to fulfill shipment orders faster than ever before. Not to mention, analysts estimate that Amazon's robots save the company more than $900 million each year in fulfillment efficiencies.

Today, interest in robots is soaring to new heights with companies from Amazon to Facebook (NASDAQ:FB) finding new ways to use aerial drones in business. More on that in a minute. First, let's look at some of the factors that are powering this rise of the robots era.

Why now?
The robotics industry has slowly emerged from the pages of fiction into an exciting new growth market, at least in part because building robots has gotten cheaper. Smarter computers, better sensors, and cheaper chips are indeed behind the recent boom in robotics. Additionally, technology such as Microsoft's (NASDAQ:MSFT) Kinect and the availability of more affordable 3-D printing software is also fueling growth in the robotics industry today.

In fact, most robotics labs now use some form of Microsoft's Kinect sensor as way of providing "both a sense of depth and a kind of person-detector" for robots, according to a report in The Economist. This technology is also being used to help autonomous machines navigate their surroundings -- think self-driving cars, for example. It's not surprising, then, that Microsoft founder Bill Gates envisions a future in which there will be a robot in every home.

Screen Shot

Source: iRobot. 

Gates isn't the only one looking to robotics as the next big growth industry. David Bourne of Carnegie Mellon's Robotics Institute told CNN it's a "trillion-dollar industry that's staring everyone in the face." Robots, after all, are finding their way out of large-scale manufacturing factories and into our everyday lives thanks to companies like iRobot (NASDAQ:IRBT).

Science fiction meets real-world application
The Massachusetts-based robot maker is most famous for its Roomba line of home-cleaning bots. iRobot has sold more than 8 million of its consumer robots to date, and that number continues to grow as the company rolls out new products. In fact, iRobot is on track to generate home robot sales of between $500 million and $515 million this year, which underscores the growing popularity of robots for everyday use.

We're also seeing consumer-facing companies like Amazon and Facebook look to drones for future commercial purposes such as delivering small packages or bringing basic Internet to rural areas. In November, Amazon unveiled plans for what it calls Amazon Prime Air, a delivery system that would enable the online retailer to deliver packages to customers in just 30 minutes using unmanned aerial vehicles.

Believe it or not, the Federal Aviation Administration is actively drawing up rules for drones of this variety. Amazon says its drones will be ready to enter commercial operations in a few years, as soon as the necessary regulations are in place. Meanwhile, Facebook is making similar strides today.

Last month, Facebook said it was working with aerospace and communications experts from NASA on a project that uses drones to bring Internet connectivity to hard-to-reach areas around the world. Looking to the future, we could see more companies follow Amazon's and Facebook's lead, once a legal framework for commercial drone use is in place in the U.S.

Together, all of these factors point to a promising new growth market in the area of robotics. With companies from all walks of industry now using robots to advance their businesses, investors can expect explosive demand for robotics technology in the years to come.

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Tamara Rutter owns shares of Amazon.com. The Motley Fool recommends and owns shares of Amazon.com, Facebook, and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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