Robotics has been one of the fastest-growing industries for the last few years. Covid19 lockdown opened up more opportunities for robot companies to infiltrate new markets and get additional investment. But now, the companies are bracing themselves for the winter. Companies are increasingly downsizing as they struggle to make as much profit as expected.
Jobs Cuts and Shutdowns – Robots
iRobot, a U.S.-based robot company, has recently decided to lay off 10% of its employees as part of its restructuring plan. The plan is not limited to job cuts; the company would transfer some of the non-core engineering functions to lower-cost regions. It also will reduce some of its global facility footprint and short-term advertising plans. The company expects the restructuring measures to deliver net savings of approximately $5 million to $10 million in 2022 and roughly $30 million to $40 million in 2023.
iRobot is famous for its app-controlled robot vacuum cleaner, Roomba. But in the second quarter of this year, iRobot saw its revenue fall by 30%. The company said it had suffered unanticipated order reductions, delays, and cancellations in many countries because of lower-than-anticipated demands. According to iRobot, the changes in foreign exchange rates also impacted the decline in sales. Geographically, the company’s revenue fell 39% from the second quarter of last year in Europe, the Middle East, and Africa. The sales declined by 29% in the U.S. and 18% in Japan.
DoorDash, a food delivering company that accounts for about 60% of the U.S. market, shut down its robot subsidiary company Chowbotics in August. The decision was made less than two years after DoorDash bought Chowbotics. Chowbotics’ blueprint was making custom meals accessible 24/7 with their robots, starting with Sally the robot, a vending machine-look-alike salad-making robot.
“The entire industry has a fundamental problem”
Robot companies in Asia are also trimming their fat. Pudu Robotics recently announced its second layoff plan this year; according to the local reports, the cuts could be about one-sixth of the employees.
It shows the typical problem that the robotics companies are facing; the service robot business is not initially making as much money as expected. Pudu is well known for its food-serving robot. According to market research company IDC, Pudu is the second-largest in China as of last year, with a market share of about 25.9%. And yet, they are far from making profits.
The biggest reason is that the service robot market is about cost reduction. Small business owners adopt service robots to reduce labor costs. Naturally, it is challenging for companies to raise the price of robots. It does not help that most service robots, such as food-serving and cleaning, provide relatively simple and repetitive features. There’s not much room for each company to compete with high-end technologies, so the whole competition comes down to the price point and marketing.
On the other hand, the companies cannot keep an excessive price-cutting race for long, mainly when demand is stalling from lower-than-expected public acceptance due to potential safety and security risks.
Many robot companies have supported themselves with outside investments that they’ve scored with ‘growth potential.’ This wasn’t hard when the capital was flowing. According to IDC, the size of the Chinese commercial robot market grew 110.4% yearly to $84 million. Last year, Pudu received a total of 1 billion yuan(about $145 million) in their Series C round. The total market size was less than 60% of what Pudu got at an investment round. With the money, Pudu expanded its workforce from 300 to 2000 in one year. But since the financial market is cooling down, the company cannot maintain such a scale.
“The whole point of the business is to make money, but the commercial robot industry is generally not getting much profit.” IN A LEAKED LETTER TO EMPLOYEES, Pudu CEO Felix Zhang Tao said, “The entire industry has a fundamental problem to solve.” “The global capital market has been on a sharp decline.” He added, “As it is expected to be a long-term trend, the industry would have to look for a survival plan.”