• Japan Will Reinvent Itself As An Industrial Superpower
  • Why Everything Depends on AI from the Cloud

Masayoshi Son, Softbank‘s irrepressible and visionary founder — on his way to building a $1 trillion war chest to invest in future tech — recently suggested that within 30 years there will be more robots than humans on the planet.

What’s more, these robots will be at least 1000 times more intelligent than the humans with whom they co-mingle.

It’s a question of AI and machine learning – and how it is mutating, improving and being delivered on a mast scale across society.

Right now, we are seeing almost every industry experimenting with AI (not least the investment community). But at the same time we are linking millions, if not billions of objects that are feeding information to this intelligence – chips, sensors, cars, phones, drone and my subject for today: robots.

Why Tokyo Rivals Tel Aviv and Silicon Valley

I met Masayoshi back in 1996 shortly after he’d acquired computer and technology publisher Ziff-Davis for whom I was doing some work.

He told us then that he had a ‘500 year vision’ based on using technology to make the world a happier place. That vision seems to be down to 30 years now.

Behind Masayoshi’s jaunty forecast is a mega-theme for global technology investors to pay heed to. Because robotics, along with genomics and codified financial services, is one of the key industries of the future.


Masayoshi Son: “10,000 Times Smarter” 

Everyone knows that Japan is the current world leader in robots and that it will have to turn to robots of all shapes and sizes to address its own issues as an ageing, urbanised society.

And this goes far beyond industrial and transport robots. We’re also talking about health, companion and eldercare robots, robots that give financial and personal advice.

As the vanguard society in an ageing, urbanised developed world, Japan will be on course to become a technology superpower by 2040…
It has robotics… genomics….regenerative medicine…and Tokyo and Osaka are fast emerging as tech hubs to rival Silicon Valley, Boston, Tel Aviv, Shenzhen and Shanghai.

I think AI and robot smarts will usher in an age of AEI <artificial emotional intelligence> that is well attuned to Japan’s Shinto culture that assumes that human artefacts have ‘spirits’, just as humans do.

Robots Are Connecting to the Cloud

The challenge facing Japanese robot makers as well as those in Korea, China, the US and Europe is that robots are becoming networked machines, fed from the cloud.

They are being loaded with sensors and high-speed wi-fi in order to communicate, learn from each other and ultimately coach themselves through machine learning.

Japan’s dominance of the global robot industry has grown out of its ability to develop caged electro-mechanical industrial robots. The kind of robots that focus on making machine tools.

But the factory of the future demands new breeds of smart, connected, collaborative robots….

Fanuc Will be a Global Leader in Cloud Robots

Japanese giant Fanuc is the world’s largest makers of industrial robots — with an installed base of 450,000 robots — and of computer numerical machines (CNC) and NC machines <a 60% market share>.

It’s moving fast into the era of cloud-based robots. Its distinctive yellow ‘Factory of the Future’ robots are on prominent display at work at Tesla’s Fremont plant and where Apple iPhones are made in China.

Via close ties with Cisco, Rockwell Automation and Japanese AI start-up Preferred Networks the company completed an advanced Factory of the Future project at GM under which equipment and process problems were anticipated and corrections and parts replacements handled automatically.

Adding AI to the Fanuc Intelligent Edge Link and Drive (FIELD) system will give robots the ability to teach themselves to do tasks faster and more efficiently. By learning together, what used to take a single robot 8 hours can now be done by eight robots in an hour.

Fanuc: Slashing Robot-Hours

The company has also just joined forces with stellar chip designer Nvidia, the world leader in specialist processor technology for AI applications, to develop AI robots.

With the developed world desperate to improve manufacturing productivity and China driving rapid and radical robot deployment to meet the objectives of the State Council’s Made in China 2015 program, Fanuc is in pole position to reap the benefits.

China’s domestic robot and robot parts industry is not yet fit for purpose and its dependence on foreign suppliers, notably Fanuc, and from Europe Kuka <now part of Chinese appliance maker Midea> and ABB is not about to fall away any time soon. A major mid-term growth market.

In 2015, partly under the spur of activist investor Daniel Loeb, the previously ultra secretive Fanuc, whose culture at ‘Forest Fanuc’ at the base of Mount Fuji reminds me of Huawei’s ‘Wolf’ culture, suddenly became a lot more investor friendly.

Despite disbursements to investor it still has a $6 billion cash war chest.

China Needs to Spend $3trn on Healthcare

It’s not just in industrial robots were Japan aims and needs to be dominant.

Almost as a matter of force majeure, with an expected shortfall by 2025 of 2 million eldercare nurses and its dire demographics, Japan has long been developing Human Support Robots <HSRs>.

The auto giants Toyota and Honda are in the vanguard here.

Both are investing heavily in AI robotic labs. Toyota, for example, is investing $1 billion over three years in two labs in Silicon Valley, headed up by former DARPA roboticist Gill Pratt. Honda is investing on a similar scale in a Tokyo based lab.

Both companies will use the R&D to further both their robot and their self-drive car projects.

China needs to spend $3 trillion on healthcare over the next decade and it is ageing fast. They could spend that money on 5,000 bed mega-hospitals. Or they could follow the Dutch model of HSRs helping in specialist residential communities for people who suffer from dementia, Alzheimer’s, strokes and immobility.

Honda, of course, is the developer of the famous Asimo humanoid robot and has joined forces with SoftBank to develop its NeuV ’emotional car’ project — a car with sensors, cameras and intelligence that can read the drivers emotions and converse appropriately with him/her.

Honda has a well reviewed robot lawn mower in the market.

At the same time, at CES 2017 Toyota demoed its Kirobo, 4 inch high, charming driver companion robot that sits in the glove compartment or drink holder.

Don’t expect Toyota, or Honda, to become ‘a robot company that makes cars on the side’ but both will use their robot launches and businesses to raise their corporate profiles and to develop growing businesses which will impact shareholder valuations.

It’s just beginning.

Before leaving the medical side I have to mention the Japanese cyborg manufacturer Cyberdyne, which makes exoskeletons and robot back braces to help stroke victims and others walk again and enable care workers, porters or airport staff having to lift patients, luggage without causing back injuries.

Cyborgs: Controversial but High Growth

The company is highly controversial but operates in a high growth area and its product are well reviewed.

It was the subject of an unflattering study by short selling research outfit Citron which shot its shares. Only for those with intestinal fortitude.

Masoyoshi is the Japanese Musk

The global market for social, personal and household robots will be huge — bigger according to Bill Gates back in 2008 than the PC industry was then, some $60 billion.

According to Frost & Sullivan, very much with the consumer/care robot scene in mind, robots are where the internet was 20 years ago.

For now, there’s chaos as a vastly oversupplied market, full of arm waving and demoes, struggling with a Cambrian explosion in robot forms and functions limbers up to ‘cross the chasm’ into mass markets within the next five years.

All and sundry are platform leaping into robot markets, whether Toyota, Honda or Panasonic — the latter showed off a household hub robot at CES and among others has a laundry folding robot in the market.

The best shot so far has been made by Amazon with its Echo/Alexa hub robot.

Which returns me to where I began, with Masayoshi and SoftBank.

SoftBank acquired French robot designer Aldebaran for $100 billion in 2014 out of which it has spawned its witty, mobile social robot Pepper.

Pepper has its brains in the IBM Watson Cloud but while getting oceans of favourable media coverage Pepper has not been a hit in the Japanese consumer market.

Masayoshi has teamed up with Foxconn and Alibaba to take Pepper global. In what is generally considered to have been a brilliant coup he snatched up chip designer ARM, whose energy efficient chip designs are ubiquitous, for $31 billion as part of his future plans in IoT and robots will be major ‘things’ in IoT, along with humans fitted with nanobots, farms, jet engines and course smart phones.

You can bet your bottom dollar that a good slug of the SoftBank inspired $100 billion ‘visionary fund’ and deals emanating from the SoftBank acquisition of hedge fund-cum-private equity operation Fortress Capital will go towards creating a vertical stack of AI/robotics smarts.

For investors backing Masoyoshi is like backing Elon Musk or Jeff Bezos–faith in the story telling power of the missionary founder to attract patience money and the ultimate ability of the missionary company to make a lot more money than its mere merchant adversaries: the charisma of narrative over immediate bottom line numbers

Why Everything Depends on AI from the Cloud

Meanwhile, may be the smartest way for investors to play this world of rising industrial automation and soaring numbers of robots is to look at where all the intelligence for these systems will come from.

Japan, which needs to play catch-up in AI, is taking AI seriously.

The National Institute of Advanced Industrial Science and Technology is sponsoring and managing a $150 million project to develop an AI supercomputer under its AI Bridging Cloud Infrastructure program.

The aim is to develop a 130 petaflop AI supercomputer to be in operation by early 2018.

At 130 petaflops the computer would be appreciably faster than the current world champion–the 93 petaflop Chinese TaihuLight. The Japanese AI supercomputer will be a utility available to Japanese public research labs and companies to tap into.

In the current industrial climate, if you don’t have huge computing scale you can’t compete.

Investors might also look at some of Japan’s specialist parts suppliers, who have a throttle hold on the Chinese market, such as Nippon Ceramic which is the leader in force sensors vital in crash avoidance systems or Nabisco, which leads in motion control reduction gears.

Among other things both will benefit from the sudden growth in Japan’s huge robotic push to reinvent itself as an industrial superpower.

Regards
Michael