Robotics: a solution to the European population decline?

Populations in developed industrial countries are generally expected to shrink over the next 75 years, and where populations are expected to be maintained, they are reliant on significant immigration to do so. Immigration is currently a very hot political topic in such countries (think the United States, the Netherlands, Germany), and there is significant pressure to reduce immigration in these countries. But continued growth in production is needed to ensure economic growth and sovereignty, which is increasingly important with tariffs and the de-globalisation of supply chains. This sets the stage for automation in order to reduce the reliance on populations for growth. Artificial intelligence can provide some of this automation, but for the production of goods, which is important for industrial businesses, robotics is key.

Graph 1: UN population growth expectations

Source: UN 2024 population expectations

Asian countries such as South Korea, Japan and China, all of which are expected to see significant reductions in populations, are ahead of the curve in automation, and their adaptation provides insight into what is possible today with the currently available technology.

The EU and the US have been notable laggards in the past 10 years when it comes to investment in robotics for automation. That said, the nature of economies and what needs to be automated differs. China, South Korea and Japan have large automotive and electronics assembly industries which have more existing robotics solutions today, and are thus easier to automate.

Graph 2: Robots installed per 10 000 employees

Source: International Federation of Robotics 2024 report

Graph 3: Annual installations of industrial robots

Source: International Federation of Robotics 2024 report

The Fairtree Elevant Ventures team believe that there is significant scope for the industry to automate, particularly in Europe, where there are high levels of technical expertise and a high need, given the need to localise production and to offset expected population decline in the coming years.

Asian countries are showing the potential to have significantly higher levels of robots in industrial manufacturing to unlock significant productivity improvements, relevant to offsetting skills shortages and population decline. This is also to drive productivity growth, evident even in countries such as China with relatively high availability and low cost of labour. Given the trade tariffs and the need to reduce dependence on other countries (the US and China), there is a strong push within Europe to localise expertise in automation and to source locally. This is already visible in policies relating to the sourcing of equipment for new renewable energy projects. Furthermore, there is an opportunity to use robotics in new segments where there are still low levels of automation and high reliance on people.

Think of the agriculture and construction industries, which are still highly reliant on low-cost labour, which is increasingly hard to source.

Some areas where innovation is needed are:

• Next-generation sensors, which allow robots to have better sensing capabilities, are particularly useful in harsher production environments.
• Improvements in tactile sensing of robots, so that they are able to better adjust their robotic manipulation. Think of robots that are able to fold laundry.
• Edge computing that provides low-latency robot navigation, thus increasing robot speed and productivity.
• Advancements in robotic actuation precision to allow robots to do tasks with the precision of a surgeon.
• Improvements in energy consumption and storage are making robots more energy efficient and able to be mobile and untethered from a power source.
• AI models that work with robotics solutions in order to improve the efficiency, versatility and autonomy of robots, as opposed to many robots today, which are manually programmed to do specific tasks, and need reprogramming for efficiency improvements or a change in tasks.

These areas are all within our investment scope at Fairtree Elevant Ventures. We expect to see significant advancements in robotics and automation in the coming years.