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Robot orders faced a setback: North American companies sharply reduced orders in Q2.

TraderKnows
TraderKnows
05-08

Data compiled by the Association for Advancing Automation (A3) shows that North American companies significantly reduced their orders for high-tech machinery in the second quarter.

Data compiled by the Association for Advancing Automation (A3) shows North American companies significantly reduced orders for high-tech machinery in the second quarter. A3 states the demand for new machines has declined since the end of last year, due to rising interest rates and a slowdown in economic growth curbing the demand for high-tech robots.

Nancy Kleitsch, Chief Financial Officer of ICON, a plastic parts manufacturer in Phoenix, mentioned that the demand for the company's vacuum tubes and other businesses has fallen to its lowest level in seven years, and the company is now almost not considering purchasing new robots.

Factories or other users, including e-commerce warehouses and medical testing companies, are hesitant to purchase new machines just like ICON. Data shows that North American companies ordered 7,697 robots in the second quarter, a 37% decrease year-over-year. This decrease far exceeds the 21% and 22% decreases seen in the first and fourth quarters of last year.

During the pandemic, many manufacturers saw rapid business growth, competing to acquire new robots to produce urgently needed goods, which led to a surge in new robot sales. According to A3 data, even though new robot sales began to decline in the first quarter of last year, the total orders for new robots in 2022 still hit a record high.

In an interview with Reuters, A3 President Jeff Bernstein pointed out, although industrial automation remains popular, rising inflation, climbing interest rates, and uncertainty about the economic outlook could limit industries' demand for robots. Bernstein emphasized that the high-tech robot market might still be impacted by these factors in the short term.

The supply-demand mismatch triggered by the COVID-19 pandemic caused some industries to overpurchase new robots. E-commerce companies, anticipating continuous growth in product demand and concerned about supply chain delays, constructed highly automated warehouses and logistics centers, boosting the demand for new robots. However, as factors like supply chain tensions gradually ease, some industries are facing a severe surplus of robots.

Additionally, a tight labor market and significant labor shortages in companies were major reasons behind the surge in new robot orders in previous years. However, the latest data shows that the tightness in the U.S. job market is easing, with indicators measuring job vacancies dropping to a new low in nearly two and a half years.

Job Vacancies - Unemployment Rate

Meanwhile, the broad demand for automation also supports the need for robots. A3's data indicate that, in recent years, robots have expanded into various sectors, including construction sites, hospitals, and food processing plants. Aaron Anderson, Director of Innovation at the large construction company Swinerton, mentioned the company has started using robots to drill holes in concrete ceilings, paving new paths for the manual installation of other mechanical systems.

However, Anderson notes that due to the varying scale and complexity of construction projects, it's challenging to justify the cost of purchasing new robots, and renting is often more cost-effective than buying in most cases.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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An order backlog refers to the accumulation of orders that have not yet been fulfilled or completed.

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