Doosan Robotics’ blockbuster IPO—the biggest in Korea this year—shows that the robot stock craze has well and truly arrived
2 min
Our future looks increasingly robotic—whether we like it or not. But the investment craze in robotics stocks may already be getting ahead of itself.
The latest example: South Korea’s Doosan Robotics, whose shares nearly doubled in value on their first day of trading Thursday. The company, which is part of the conglomerate Doosan Group, raised around $300 million from an initial public offering, making it Korea’s biggest IPO this year so far.
Doosan makes collaborative robots, or cobots, designed to work together with humans on factory floors. Such robotic helpers are most suitable for smaller companies that may not be ready to automate their whole production line but use cobots to automate processes better done by machines. Apart from its heavy-duty industrial robots, Doosan also makes variants that can serve coffee—and beer.
Doosan isn’t the only robotics company looking frothy of late. Shares of its smaller peer Rainbow Robotics, which is backed by Samsung Electronics, have more than quadrupled this year. Samsung raised its stake in Rainbow to 15% in March.
To be fair, there are plenty of good reasons to be optimistic about industrial robots. Poor demographics and poisonous immigration politics in most advanced economies will mean weak labor-force growth in the future. Robots rarely go on strike. And in the U.S., the enormous surge in manufacturing investment—courtesy of the Inflation Reduction Act and other industrial policy bills—means demand for manufacturing workers could remain strong for quite a while. Reshoring to advanced economies is another tailwind for robotics.
In 2022, almost 60% of Doosan’s sales came from North America and Europe. Though cobots are still a small part of the overall robot market—accounting for 7.5% of industrial robots installed in 2021, according to the International Federation of Robotics—shipments have been growing faster than the market as a whole. Installations for all industrial robots grew 5% year on year to a record high in 2022.
The company is the seventh-largest maker of cobots globally, according to its prospectus. But since the top two companies, Denmark’s Universal Robots and Japan’s Fanuc, dominate the sector with nearly half of the market, Doosan’s market share amounted to only 3.6%.
Doosan has been growing fast: Its sales more than doubled to around 45 billion won, the equivalent of $33 million, in 2022 from 2020. But it isn’t cheap. With a market capitalisation of around $2.5 billion, Doosan now trades at 74 times last year’s revenue. Fanuc trades at just 4.7 times revenue. Doosan is also unprofitable, though its chief executive expects it to move into the black next year.
The robot craze, like the artificial-intelligence craze, is grounded in real technological trends—and demographic ones too. But like human workers, not all robot firms are created equal. Jumping aboard the robot stock bandwagon at any price might not serve investors over the long run.
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Multinationals like Starbucks and Marriott are taking a hard look at their Chinese operations—and tempering their outlooks.
4 min
For years, global companies showcased their Chinese operations as a source of robust growth. A burgeoning middle class, a stream of people moving to cities, and the creation of new services to cater to them—along with the promise of the further opening of the world’s second-largest economy—drew companies eager to tap into the action.
Then Covid hit, isolating China from much of the world. Chinese leader Xi Jinping tightened control of the economy, and U.S.-China relations hit a nadir. After decades of rapid growth, China’s economy is stuck in a rut, with increasing concerns about what will drive the next phase of its growth.
Though Chinese officials have acknowledged the sputtering economy, they have been reluctant to take more than incremental steps to reverse the trend. Making matters worse, government crackdowns on internet companies and measures to burst the country’s property bubble left households and businesses scarred.
Now, multinational companies are taking a hard look at their Chinese operations and tempering their outlooks. Marriott International narrowed its global revenue per available room growth rate to 3% to 4%, citing continued weakness in China and expectations that demand could weaken further in the third quarter. Paris-based Kering , home to brands Gucci and Saint Laurent, posted a 22% decline in sales in the Asia-Pacific region, excluding Japan, in the first half amid weaker demand in Greater China, which includes Hong Kong and Macau.
Pricing pressure and deflation were common themes in quarterly results. Starbucks , which helped build a coffee culture in China over the past 25 years, described it as one of its most notable international challenges as it posted a 14% decline in sales from that business. As Chinese consumers reconsidered whether to spend money on Starbucks lattes, competitors such as Luckin Coffee increased pressure on the Seattle company. Starbucks executives said in their quarterly earnings call that “unprecedented store expansion” by rivals and a price war hurt profits and caused “significant disruptions” to the operating environment.
Executive anxiety extends beyond consumer companies. Elevator maker Otis Worldwide saw new-equipment orders in China fall by double digits in the second quarter, forcing it to cut its outlook for growth out of Asia. CEO Judy Marks told analysts on a quarterly earnings call that prices in China were down roughly 10% year over year, and she doesn’t see the pricing pressure abating. The company is turning to productivity improvements and cost cutting to blunt the hit.
Add in the uncertainty created by deteriorating U.S.-China relations, and many investors are steering clear. The iShares MSCI China exchange-traded fund has lost half its value since March 2021. Recovery attempts have been short-lived. undefined undefined And now some of those concerns are creeping into the U.S. market. “A decade ago China exposure [for a global company] was a way to add revenue growth to our portfolio,” says Margaret Vitrano, co-manager of large-cap growth strategies at ClearBridge Investments in New York. Today, she notes, “we now want to manage the risk of the China exposure.”
Vitrano expects improvement in 2025, but cautions it will be slow. Uncertainty over who will win the U.S. presidential election and the prospect of higher tariffs pose additional risks for global companies.
For now, China is inching along at roughly 5% economic growth—down from a peak of 14% in 2007 and an average of about 8% in the 10 years before the pandemic. Chinese consumers hit by job losses and continued declines in property values are rethinking spending habits. Businesses worried about policy uncertainty are reluctant to invest and hire.
The trouble goes beyond frugal consumers. Xi is changing the economy’s growth model, relying less on the infrastructure and real estate market that fueled earlier growth. That means investing aggressively in manufacturing and exports as China looks to become more self-reliant and guard against geopolitical tensions.
The shift is hurting western multinationals, with deflationary forces amid burgeoning production capacity. “We have seen the investment community mark down expectations for these companies because they will have to change tack with lower-cost products and services,” says Joseph Quinlan, head of market strategy for the chief investment office at Merrill and Bank of America Private Bank.
Another challenge for multinationals outside of China is stiffened competition as Chinese companies innovate and expand—often with the backing of the government. Local rivals are upping the ante across sectors by building on their knowledge of local consumer preferences and the ability to produce higher-quality products.
Some global multinationals are having a hard time keeping up with homegrown innovation. Auto makers including General Motors have seen sales tumble and struggled to turn profitable as Chinese car shoppers increasingly opt for electric vehicles from BYD or NIO that are similar in price to internal-combustion-engine cars from foreign auto makers.
“China’s electric-vehicle makers have by leaps and bounds surpassed the capabilities of foreign brands who have a tie to the profit pool of internal combustible engines that they don’t want to disrupt,” says Christine Phillpotts, a fund manager for Ariel Investments’ emerging markets strategies.
Chinese companies are often faster than global rivals to market with new products or tweaks. “The cycle can be half of what it is for a global multinational with subsidiaries that need to check with headquarters, do an analysis, and then refresh,” Phillpotts says.
For many companies and investors, next year remains a question mark. Ashland CEO Guillermo Novo said in an August call with analysts that the chemical company was seeing a “big change” in China, with activity slowing and competition on pricing becoming more aggressive. The company, he said, was still trying to grasp the repercussions as it has created uncertainty in its 2025 outlook.
Few companies are giving up. Executives at big global consumer and retail companies show no signs of reducing investment, with most still describing China as a long-term growth market, says Dana Telsey, CEO of Telsey Advisory Group.
Starbucks executives described the long-term opportunity as “significant,” with higher growth and margin opportunities in the future as China’s population continues to move from rural to suburban areas. But they also noted that their approach is evolving and they are in the early stages of exploring strategic partnerships.
Walmart sold its stake in August in Chinese e-commerce giant JD.com for $3.6 billion after an eight-year noncompete agreement expired. Analysts expect it to pump the money into its own Sam’s Club and Walmart China operation, which have benefited from the trend toward trading down in China.
“The story isn’t over for the global companies,” Phillpotts says. “It just means the effort and investment will be greater to compete.”
Corrections & Amplifications
Joseph Quinlan is head of market strategy for the chief investment office at Merrill and Bank of America Private Bank. An earlier version of this article incorrectly used his old title.
