The Reason US Industrial Robot Demand Is Declining Post-Pandemic

Companies overbought industrial manufacturing robots during the Covid pandemic and immediately afterwards, believing - erroneously - that the difficulty in finding workers was a long term trend rather than a cyclical event. 

And many of those companies also underestimated the cost of maintenance and tech skill required to keep them working, let alone optimize their functionality. Now that more workers are available, robot sales have dropped. JL

Bob Tita reports in the Wall Street Journal:

Manufacturers are cutting back on purchases of automation equipment, executives said, as business slows on production lines and shop floors as more human workers are lining up for work. Orders for factory robots in North America plunged by nearly one-third last year from 2022’s record. Automation equipment attracted heavy investment after the Covid-19 pandemic left many factory jobs unstaffed. (But) “When companies were buying robots out of fear, they tended to overbuy.” (And) companies that bought robots during the pandemic-driven labor crunch underestimated the maintenance and programming skill needed to deploy them to more complicated tasks.

Robots are getting less work at U.S. factories. 

Manufacturers are cutting back on purchases of automation equipment, executives said, as business slows on production lines and shop floors. More human workers are lining up for work again, too.

 

Orders for factory robots in North America plunged by nearly one-third last year from 2022’s record volume, according to the Association for Advancing Automation, a trade group for the robotics industry. Orders slipped further over the first six months of this year.

Automation equipment attracted heavy investment after the Covid-19 pandemic left many factory jobs unstaffed and hard to fill, between high absenteeism and workers seeking better pay or less physically demanding roles. Supply-chain bottlenecks further juiced demand as companies looked for ways to accelerate production when parts and materials became available.

“When companies were buying robots out of fear, they tended to overbuy,” said Paul Marcovecchio, director of general industries for Kawasaki Robotics in the U.S., which makes equipment for the auto industry and for warehouse automation. “Now, they don’t have to fear-buy.”

U.S. industrial production in August was flat compared with the same month a year earlier, according to the federal government. Production of appliances, heavy-duty trucks, machinery and oil wells all declined. In Cleveland, manufacturing company Jergens produces attachments that enable robot arms to pick up and hold parts in a factory. Company President Jack Schron said that while sales are growing this year in aerospace and defense, business is flat in its other markets.

For factory managers who have struggled to find workers willing to do boring, repetitive or physically taxing jobs, robots present a dream solution—not needing breaks and being immune to injuries and suddenly quitting.

But Schron said some companies that bought robots during the pandemic-driven labor crunch underestimated the maintenance and programming skill needed to deploy them to more complicated tasks. “Robots are pretty finicky,” Schron said. “The use of robots is not going away, but it is slowing down.”

Companies’ interest in automation is creating anxiety for some workers who see their jobs being threatened by robots, artificial intelligence and other technology. Dockworkers continue to negotiate limits on expanded use of automated equipment and vehicles at East and Gulf Coast ports after reaching a tentative agreement on wages with shipping companies last week, which ended the workers’ strike. 

Robot manufacturers said customers have become choosier about their investments. High interest rates and lower production volumes mean that it is taking companies longer to recoup the money spent on robots.

Austin, Texas-based Athena Manufacturing bought seven robots in 2021 and 2022 when it couldn’t find enough workers to keep up with rising orders for welding and cutting metal parts used by the semiconductor, aerospace and energy industries. The company added just one more since then because Athena’s production volume is down 20% from 2022, said John Newman, chief financial officer.  “The robots are still being used but just not as much as during Covid and after Covid,” Newman said.  

Diminishing labor concerns

Finding skilled workers such as machinists remains hard, manufacturing executives said. But lower employee turnover and falling production volumes have lessened their need to hire. About 21% of manufacturers cited labor shortfalls as an impediment to full production during the second quarter, down from 45% in the same quarter in 2022, according to Census Bureau survey data compiled by Michigan State University supply management professor Jason Miller. Material shortages were cited by less than 12% of manufacturers, compared with 39% two years earlier.

Some robots are still selling briskly. Second-quarter robot orders from food and consumer-goods manufacturers rose 64% from last year, the automation association said.

Rajat Bhageria, chief executive of Chef Robotics, said he has seen no postpandemic letup in demand. The five-year-old company’s systems assemble fresh-food meal kits and ready-to-heat dinners for hospitals, schools and airlines. The robots pluck food from bins and place it in trays moving down an assembly belt. Incorporating artificial intelligence, the robots can quickly shift to different menu combinations and order sizes, making them more versatile than traditional food-dispensing equipment, Bhageria said. The San Francisco-based company’s sales quadrupled in 2023 from 2022, he said.

Chef’s robots are designed to operate continuously in rooms with near-freezing temperatures that require human workers to take breaks and work in shifts. “It was never a good job for people,” Bhageria said. “Instead of needing two people for two shifts, it’s just one robot.”

EV slowdown hits robots

The automotive industry is the largest user of industrial robots in North America, but the sector’s second-quarter orders for robots dropped 20% from the same period last year, the automation association said. Auto-industry robots represented 46% of all robot orders in the quarter, down from nearly 60% of orders in the same period in 2022.

Automakers and their suppliers had been buying more robots to outfit plants and increase electric-vehicle production. But U.S. auto companies have hit the brakes on some new EV models in response to disappointing sales. “There was a lot of excitement about EVs, and then demand changed,” said Scott Marsic, product manager for the robotics group at Epson, which specializes in high-speed, precision robots used in manufacturing electronics and other small components.

Marsic said he expects robotics demand to rebound as interest rates come down, making them cheaper for manufacturers. “With robots, companies are in a holding pattern,” he said.  

Bill Adler, president of Cleveland-based automotive supplier Stripmatic Products, said he had expected two years ago to add an automated workstation with a robotic laser welder to produce small metal tubes for electric-vehicle frames. 

Instead, his employees are doing much of the work manually because orders for EV parts this year are running about at quarter of the annual volume originally forecast when the company received the contracts.  

“It doesn’t justify the expenditures to automate it,” Adler said.