U.S.-Borne Economic Uncertainty Will Test OEMs and Hamper AI-Augmented Robot Development

The robotics world is divided between East and West. Chinese progress within Artificial Intelligence (AI) and robotics automation is buoyed by government backing, a receptive public, and a permissive regulatory environment. Contrastingly, automation growth across the rest of Asia, in the United States, and in Europe depends on the largesse of Venture Capital (VC), which is predicated on tangible, near-term Return on Investment (ROI) and, ultimately, the ability to deliver a viable product.

Uncertainty surrounding tariffs and trade will begin to squeeze VC, which, in turn, will start to look for surer bets. A balance must be struck between long-term investment in real innovation and the baseless hype that the robotics industry is currently inundated with (consider the Figure AI US$40 billion valuation). On a normal day, Blue Sky Robotics research, which is currently riding on the wave’s crest of the “AI revolution,” has no place within the profit-driven private sector. Furthermore, large companies will consider pausing Research and Development (R&D) efforts into robotics products out of a need to shore up resources around primary revenue generators.

Established industrial robot Original Equipment Manufacturers (OEMs) represent the other, and considerably larger, side of the automation economy. For OEMs, the current unrest, trade war, and geopolitical tension will either create another hostile market in the United States or reshoring initiatives will take hold, creating new and bountiful opportunities. This is opportune timing as China’s domestic industrial robot OEMs increasingly present stiff competition for foreign robot OEMs.

For the large established OEMs—KUKA, FANUC, ABB, YASKAWA—tariffs and economic uncertainty are a further addition to their litany of woes. These companies are already facing stiff competition from domestic Chinese industrial robot OEMs and suffering the consequences of manufacturers over-ordering robots during the pandemic. An important observation is that none of the large robotics OEMs manufacture products within the United States, making them subject to any further import tariffs enacted by the current U.S. administration. The OEMs listed above now all manufacture robots within China to adhere to the unwritten “Buy Chinese” policy, which encourages manufacturers to buy homegrown robotics—robots that use Chinese software, hardware components, or are completely manufactured in China are preferrable over imported products. It would be a very daunting prospect for OEMs if they were obliged to entirely manufacture hardware within the United States.

As it stands, potential customers are uncertain of the value proposition posed by AI-augmented robotics. Repeatability and long-term support remain major challenges that inhibit the uptake of innovation. Manufacturers and supply chain managers have adopted innovative solutions such as humanoid robots—primarily at lighthouse facilities—because they can spare the resources and want to be considered forward looking, rather than these solutions offering greater efficiency or economic advantage in the near term. Decision makers may well decide to turn away from aiding experimentation, perhaps soon to be considered a frivolous and unnecessary expense. This would damage the funding prospects for innovators and deprive them of real-world deployments. This is especially true of the automotive sector, which has worked closely with several humanoid developers—seemingly due to their structured environments and the need to perform dexterous tasks.

For the innovators—Agility Robotics, Apptronik, and Figure AI—this is a major lifeline. VC keeps these startups afloat, allowing them to field-test their robots, working through edge cases and harvesting crucial real-world data.

The Trump administration wishes to reshore manufacturing. Implicitly, automation must be a large part of this initiative. But robots themselves are not generally manufactured in the United States; high tariffs will raise operational costs for budding manufacturers. Although protectionism might be a boon to domestic robot manufacturing, the time and capital investments required to build manufacturing plants will dampen competitiveness until at least the end of the decade. Furthermore, AI-driven robots are far from mature. Large, specialist engineering staffs will be required to build up manufacturing to a fraction of the capacity of Chinese manufacturers.

Ultimately, both tariffs and political uncertainty will be wholly damaging to the entire robotics industry. The embryonic overlap between AI and robotics requires delicacy, patience, willing industry partners, and patient VC funding. As these begin to evaporate, and investors get cold feet, innovation will begin to dissipate. For OEMs that already do assembly in the United States, extending production to full-blown robot manufacturing is likely to be near untenable due to cost considerations. Feasibly, the U.S. administration may adopt a “Made in the USA” strategy comparable to China, allowing assembly and software components to qualify. Such action may appease officials in the near term, while OEMs scope out the viability of domestic manufacturing.

One facet of the current tumult could be beneficial: eliminating the funding for hype-based funding that results in the overvaluation of certain robotics startups. Startups must push to demonstrate value now as investors review their portfolios. Robotics OEMs should expand U.S. operations to curry favor with the U.S. government. All should be aware that, ultimately, tariffs and uncertainty are internecine.