Now We Know!

Why So Little Robot Automation in America?

5-state “black hole” sucks in 77% of all industrial robots sold in America

The net-net of what Erik Brynjolfsson et al, Stanford, and the National Bureau of Economic Research have unlocked is that the automation robotics journey that America is on is only in its infancy; yet there seems to be no plan or consistent leadership in place to lead America’s robot automation into adulthood.

Podcast Excerpt: America's Lack of Robot Automation

Why 7 out of every 10 industrial robots sold in America go to live and work
…in only five states, while the remaining 45 states split what’s left.

A black hole for industrial robots
A new study shows that there’s a 5-state “black hole” in the U.S. that has sucked in 77% of all industrial robots sold (see video). Why is that? And why are these five states: Iowa, Michigan, Kansas, Wisconsin, and Minnesota, being called Robot Hubs?

The report is a newbie, writing: “This is the first establishment-level analysis of the use of robots in U.S. manufacturing, leveraging data on approximately 35,000 establishments.”

Obviously, last year was a banner year (2022) for robot vendors placing orders for 44,196 robots [historical high] for all of North America, according to Control Engineering. Canada and Mexico, according to the International Federation of Robotics (IFR) combined for about 10,000 industrial robots; the balance to the U.S. of 34,196. The vast majority of America’s share of industrial robots went into automotive production and its suppliers, most of which just happen to be living mostly in the same “black hole”.

As a point of comparison, China the world’s largest manufacturing nation (U.S. is #2), bought 243,000 industrial robots in 2021, 20,250 per month. China buys nearly the same number of industrial robots in under two months as the U.S. does in a year.

How long has this been going on?
Brynjolfsson et al were surprised to see the large number of robots in these Robot Hubs, what the report terms an “agglomeration” (a large, densely, and contiguously populated area) and suggested that “future research should dig deeper to understand the causes and agglomeration consequences of technology adoption” such as witnessed in the black hole of Robot Hubs.

The breakdown for America, after Canada and Mexico get their shares, is the 77% of what America’s black hole of Robot Hubs are due, if they are to maintain that percentage:

For calendar year 2022, the total industrial robot and cobot sales for America: 34,196 (93% industrial robots and 7% cobots). Using past sales as a guide, the total number getting sucked into the black hole at 77% is 26,330.

That leaves 7,866 for the other 45 states to split, which averages out to about 175 industrial robots per state.

Going forward, that is not a pretty picture of robots automating American manufacturing. If robots are set to fundamentally change how economies operate, much like the Internet and electricity, then America is in for a tough time showing so little robot automation in most of the country.

It would also seem that robot vendors and their partnering robot integrators are heavily targeting the Robot Hub states where sales might be easier to come by, rather than prospecting for other, less favorable sales opportunities away from the obvious hot spots.

Many thanks are due to Erik Brynjolfsson et al, Stanford University, and the National Bureau of Economic Research for the research piece on Robot Hubs: The Characteristics and Geographic Distribution of Robot Hubs in U.S. Manufacturing Establishments.

Amazingly, that report was key to automation insights from two other reports on industrial robots in America, parts of which appear below. The other two insightful research reports:

MIT’s Manufacturing in America: A View from the Field (2020)

The Century Foundation’s How Robots Are Beginning to Affect Workers and Their Wages (2019)

Factories badly need industrial robots
2023 was also a good time for factories in America. The Wall Street Journal reported in July: America’s Factory Building Boom [$200 billion spent monthly on new factory construction]. It’s been advantageous for new factories as well as existing manufacturers to position themselves for success by automating their factories with robots. Hence, part of the historical high in robot sales.

But, as the Journal goes on to say: the Institute for Supply Management reports that America’s index of manufacturing activity slipped, indicating a contraction in factory activity. This is likely a reflection of the fact that while the economy still appears to be growing, it is growing slowly.

And already in 2Q2023, we see a slowing in sales of industrial robots and cobots. “U.S. robot sales plummet by 37% in Q2 of 2023. The slow US economy and high interest rates are being blamed for a 37% drop in the number of industrial robots ordered in North America from April to July 2023, compared to same period in 2022.”

As good and as wonderful as it is for the states with a Robot Hub, the “black hole” has caused a huge tilt in the access to and spread of robot technology to the other 45 states. And now with this startling 37% sales decline, the tilt may get steeper.

Out of the Top 10 U.S. manufacturing states, only two are on the Robot Hub list (Michigan and Wisconsin). There’s a plentitude of manufacturing companies in the remaining non-Robot Hub states.

Interestingly, the report found “that establishments with robots tend to be larger, have higher earnings per worker, have a larger share of production workers, and spend more on capital expenditures, including IT, than establishments without robots.”

More importantly, the new report also sheds light on the fact that “Robot-adopting firms can gain market share and potentially displace less productive non-robot-using firms.” In other words, factories that are not automated can’t compete with those that are; and those currently getting “outproduced” are thus in jeopardy of going under. For non-Robot Hub states that’s bad news.

But that’s exactly what is happening, especially with SMEs (small to medium manufacturing enterprises with 499 or fewer employees). Such a contraction is borne out in MIT’s Manufacturing in America: A View from the Field.

“The puzzle of slow productivity growth in the U.S. economy has led us to be especially interested in technology and skills in the manufacturing SMEs. The gap between the productive performance of these SMEs and that of large manufacturing firms has widened.

“In the early 1970s, the productivity (measured in shipments per employee) of large manufacturing establishments—plants with over 500 workers—was only about 22% higher than in plants with fewer than 500 workers.

“By 2012, revenues per employee at plants with more than 500 workers were 96% higher than those at smaller plants. Trying to explain slow productivity growth in SMEs and what appears to be their worsening relative performance seems a critical step in understanding the future prospects of U.S. manufacturing.

“When, why, and how manufacturing firms acquire new technology; how they find or train workers with new skills—these issues are central to figuring out why productivity lags in smaller companies.”

And why is all of that important?
The power of these Robot Hubs on manufacturing elsewhere in the U.S. can be startling. To repeat: “Robot-adopting firms can gain market share and potentially displace less productive non-robot-using firms in geographically distant locations.”

That finding was a trigger to MIT’s two-year field study Manufacturing in America: A View from the Field, concluding in 2020 that tracked manufacturing in Massachusetts, Ohio, and Arizona, and found little to no evidence of industrial robots or cobots in those three states.

The five states with Robot Hubs may be acting like a manufacturing black hole, sucking in nearly all of the robot automation in the United States…and growing ever larger and more powerful because of it.

Now we know:
Why America lags in manufacturing automation.

Why America’s manufacturing productivity is stubbornly inert.

Why 7 out of every 10 industrial robots sold in America go to live and work…in only five states, while the remaining 45 states split what’s left.

Why MIT’s Manufacturing in America: A View from the Field found few, if any, robots and cobots in operation among America’s small to medium manufacturers.

Why robot-adopting firms can gain market share and potentially displace less productive non-robot-using firms.