Take a peek out your window to catch a glimpse of the cars passing you by on the streets outside. Now take a moment to think about the massive industrial robot arms working behind the scenes to transform enormous sheets of metal into these functional, polished, and sleek methods of transportation.
Thanks to the complex art of these systems, a robot can now complete dirty, dull and dangerous tasks like welding, painting, and picking so we don’t have to. For that reason, it can be easy to forget the important role industrial robots frequently play in our lives. However, the companies developing these solutions are foundational to our economy, and therefore should not be overlooked by investors. Yaskawa Electric Corporation is one of these robotics stocks.
As a holding in the ROBO ETF since its inception in 2013, Yaskawa has played a major role in automation over the century. This Japanese industrial robotics company delivers automation solutions to the commercial, industrial, and energy industries. Specifically, Yaskawa manufactures mechatronics products that combine electrical and mechanical systems with core technologies related to motion control, robotics, and power conversion.
We believe that Yaskawa is set up for continued growth and success as a leader in Motion Control and Robotics.
Source: Yaskawa Electric Company
Key Investment Takeaways
- Yaskawa (ticker: 6954 JT) saw its robotics business segment grow 178% year over year(YOY) in 2021 with all global segments seeing growth & an operating profit increase of 99.2% YOY despite COVID concerns. (operating margin grew from roughly 7% in 2020 to 12% 2021)
- Because of increasing demand for all industries to automate and upgrade production, many of which might also require semiconductor and electronic component production. Yaskawa along with 26 other robotics stocks in the ROBO ETF could be beneficiaries of secular trends in most industries moving forward. (As of 2/14/2022)
- 39% of companies in ROBOs portfolio have an Enterprise Value to Sales1 (EV/Sales) of less than 3 making valuations much more appealing. (As of 2/14/22)
- More than 32% of ROBOs companies provide investors with exposure to logistic automation & manufacturing / industrial automation. We believe that this makes the ROBO ETF more of an “all-weather” opportunity for investors rather than just a “tech” play. (As of 2/14/22)
The ROBO Global View
Yaskawa falls into the ROBO ETF ‘Manufacturing & Industrial Automation’ subsector and holds a 1.34% weight as of 2/4/22. The products and technologies being created by Yaskawa are lowering costs and improving productivity. Yaskawa’s cutting-edge products serve a plethora of industries including semiconductor, automotive, packaging, food and beverage, oil & gas, and petroleum.
The company has the leading global share with AC Servo motors/controllers and is also considered as third in the “big four” industrial robotics companies. The company has three main business segments:
(a) motion control “48% of revenue”
(b) robotics “36% of revenue”
(c) system engineering “16% of revenue”.
In 2021, Yaskawa saw active investments in all segments of the manufacturing industry as companies were racing to automate and upgrade production. Specifically, the semiconductor and electronic components markets saw growth globally. As a result, Yaskawa saw all four of its geographic segments grow (US, Japan, Europe, China) in 2021. Additionally, investments related to massive adoption in EVs have accelerated and new global infrastructure (5G and Energy) have continued to grow throughout the year.
Despite the company being affected by supply parts shortages, revenue increased significantly in the same period specifically in their Motion Control and Robotics segments. Yaskawa motion control segment for 2021 reported an operating profit of 29,703 million JPY, a 62.8% increase year-on-year, and their Robotics segment grow to 11,747 million JPY, a whopping 178.4% increase year-on-year. Yaskawa’s operating margin also grew from roughly 7% in 2020 to 12% in 2021.
Also, Yaskawa's revenue purity in robotics should continue to grow with the expansion of EVs accelerating globally but also in general industries where companies are looking to upgrade and automate their production. In addition, semiconductor robots will continue to see significant growth with the growing usage of computers, communication, and consumer electronics. We see the automotive, semiconductor, and packaging industries to be the biggest opportunities for Yaskawa’s Robotics segment moving into this year.
Yaskawa’s Business Focuses
Three main business segments:
- Motion Control
- AC Servo Drives & Controller business
- Painting Robots
- Handling Robots
- Arc and Spot welding robots
- Transfer robots for semiconductor and LCD- manufacturing equipment
- System Engineering
- Steel Plant businesses
- Industrial Electronics
- Environment and Energy
Industries Served by Yaskawa:
- Electronic Assembly
- Water and Pumping
- Food and Beverage
- Material Handling
- Oil, Gas, and Petroleum
This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular. Any opinions expressed reflect our analysis at this date and are subject to change.
Past performance does not guarantee future results. Holdings are subject to change. Current and future holdings are subject to risk.
1 Enterprise value-to-sales (EV/sales) is a financial ratio that measures how much it would cost to purchase a company's value in terms of its sales (Source: Investopedia)