Robotics Update
Revealing Teradyne’s Vulcan Contract Win, Citrini’s China Supply Chain Tour, and Robotics Basket Winners
Introduction
Leading and lagging edge technology are converging at an accelerating pace. AI has reshaped the digital landscape, the next step is now entering the physical world. “Robotics” serves as a useful umbrella, but it’s worth elaborating on what exactly that means. Robots have long replaced routine prescribed movements with precision and efficiency, but modern robotics will think in ways they haven’t before. Breakthroughs in VLA models have continued to filter through to the real world, with Amazon’s Vulcan robot arm demonstrating significant improvements in sensing (i.e. the ability to perceive the fragility of packages based on tactile perception).
Modern robots will come in all forms – autonomous cars, smart industrial arms, factory shuttles, and yes, eventually, humanoids. But they will share core functions, and will be built with overlapping technology. And the core of our thesis rests on the cyclical nature of the robotics supply chain - a heavily automotive-exposed cycle that has, to put it mildly, seen better days.
Since publishing our primer in May, renewed optimism surrounding the automation has resulted in some meaningful outperformance of our broader robotics universe and our narrowed robotics basket. The environment for these bombed out companies, many with cynically cyclical multiples, remains constructive. We see many with the potential to capture a narrative driven re-rating on the back of a durable inflection.
In this thematic update:
First, we teamed up with financial news and investigative reporting firm Hunterbrook Media to dive deep into the story behind Teradyne’s (TER) underappreciated but significant upside to robotics.
Second, we dive into a robotics cost curve analysis resulting from our recent trip to China. From June 22nd to July 1st, CitriniResearch went to visit eleven companies in the robotics supply chain, including humanoid cost-curve champion Unitree, to discern exactly where competition is driving costs lower for key components like actuators going into a new generation of robots.
Finally, we go into the sub-baskets of our theme to uncover the developments that have driven robotics outperformance in the first couple months covering the theme. Further, we discuss our continued narrowing of the basket to focus on names with the most asymmetric upside to this cyclical inflection and secular trend.
Amazon & Teradyne: Teradyne Is Powering Amazon’s Revolutionary New Robot
In a collaboration between CitriniResearch and Hunterbrook Media, an investigative journalism firm, we reveal how the semiconductor testing giant Teradyne has turned itself into a robotics pick-and-shovel play and landed a potentially catalytic contract with Amazon.
Robots can finally feel. Not in their hearts, at least not yet, but in their limbs.
That is what Amazon has claimed about its new warehouse robot, Vulcan, which the tech giant says represents a “step change” breakthrough in automation and a “fundamental leap forward in robotics.” Forget the “numb and dumb” machines of yore, says Amazon, because the Vulcan is the first robot in history with a “sense of touch.” Vulcan represents “a technology that three years ago seemed impossible but is now set to help transform our operations," says Aaron Parness, Amazon’s director of robotics AI.
This, the company claims, enables the Vulcan to perform two tasks previously thought to be among the hardest to automate: “picking” (grabbing items from shelves to fulfill orders) and stowing (placing inventory into bins). And the Vulcan can do it, Amazon says, “at a speed comparable to that of our front-line employees.”
As we covered in our piece on humanoid robots, Amazon has more experience deploying robots to do the work of a human than any other company on earth. For longer than a decade (beginning with their acquisition of Kiva in 2012) they’ve had an actively deployed robotics fleet for pick and place and moving pallets. Currently AMZN has more than 750,000 active robots spanning 20 different model types - including their fully autonomous mobile robot Proteus.
Amazon warehouses are on the cusp of using more robots than humans for the first time, according to the Journal article from earlier this month.
The “Vulcan” robotic arm is a pick & stow robotic arm that has a fully developed tactile sensor system. In June, we pointed out that the Vulcan “would have been impossible to deploy 2-3 years ago but advancements in visual-language-action models have resulted in the ability of the arm to think in 3 dimensions and differentiate non-uniform items with multiple surfaces in a manner that can assess the force necessary and avoid damaging goods”. This makes sense - if you’re shipping a Faberge egg, you need the robot to handle it differently than the tungsten cubes ordered by Anthropic’s vending machine.
Since Amazon debuted the Vulcan in May, it has been featured in the Wall Street Journal — and it was the subject of a 12 minute segment on CNBC, framed as the biggest breakthrough in Amazon Robotics history.
We’ve partnered with investigative research firm Hunterbrook Media to reveal that Vulcan’s distinctive robotic limbs come from Teradyne (TER US). The limbs are made by Universal Robots, a Danish collaborative robot (read: “cobot”) manufacturer purchased by Teradyne for $285 million in cash in 2015. Teradyne’s robotics division, which includes Universal Robots and Mobile Industrial Robots (MiR), has since grown to represent about 10-15% of the semiconductor testing giant’s revenue. With Amazon planning to automate up to 80% of its 14 billion items stowed by hand annually, this could represent a significant payday for Teradyne (some napkin math on this beneath the paywall), as well as additional contracts from other OEMs beginning to take notice.
As our May Robotics primer covered, three factors are converging for the industry to result in a secular growth story hidden in plain sight among perceived cyclical losers:
The cost curve for robots is collapsing (more on this in our “What we learned in China” section);
AI, specifically VLA models, has finally given robots a brain worth powering, and
Key suppliers, like Teradyne, are trading at cyclical trough valuations.
Our thesis dovetails with the next phase of AI well – NVIDIA's Isaac Sim platform and GR00T models now enable robots to learn tasks in days rather than months, something we have likened to the “Matrix dojo”.
Teradyne has integrated these advancements directly into Universal Robots' arms through an ongoing partnership. The collaboration, which Nvidia posted about on its website as recently as late June, enables path planning that the companies claim is 50 to 100 times faster than traditional approaches. It “helps set a new standard for industrial automation,” Nvidia wrote.
How do we know?
See this photo from Amazon’s press release on Vulcan?
Source: Amazon
The arm has the trademark design of Universal Robots cobots — a sleek silver frame with blue joint caps.
Zoom in and you’ll see a label, which clearly says “Universal Robots.”
The arm itself is also emblazoned with the company’s “UR” logo — across various Amazon promotional materials and videos.
Source: CNBC
Source: Amazon
At the end of the arm is a gripper, which provides yet more evidence that the Vulcan was built specifically for Universal Robots.
The gripper is labeled with the name “Robotiq,” according to a video on Amazon’s website.
Robotiq is designed to be compatible with Universal Robots, including the precise arm used by Amazon’s Vulcan.
Oh, and this may be a coincidence, but look where Teradyne HQ and Amazon Robotics are located:
Hunterbrook visited the complex where both companies are based and found a Teradyne truck about 20 feet from the entrance to Amazon Robotics.
We also note that with Teradyne’s earnings coming up later in July, this is looking like the first quarter in which the company’s insiders haven’t sold a single share — since 2018.
Paid subscribers to CitriniResearch can view our analysis on just how impactful this contract could be to Teradyne, our takeaways from our trip to visit a dozen Chinese robotics and robotics hardware companies (including Unitree) and our updates on the best performing robotics names since our primer’s publication.