[Global Issue+] Robots Dominating the Service Industry Amid COVID-19 Prevention Challenges

Expansion into various fields such as serving, cooking, and barista work
Expected to grow to a 150 trillion won scale in 3 years...Concerns over job issues

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] One of the sectors that experienced a boom due to COVID-19 is the robotics industry. Robots, which were primarily deployed in manufacturing sites, have now been massively introduced into the service industry where face-to-face interactions have become difficult, thus permeating people's daily lives. Until now, robots were mainly introduced in a limited way in developed countries such as the United States, Europe, and Japan, but now they are beginning to spread to developing countries as well. It is forecasted that the service robot market alone will grow to about 150 trillion KRW in size within three years. However, the issue of job displacement caused by robots is also expected to emerge as a major social problem in various countries.

The Paradise of Service Robots, Japan: Market Size Grows 2.74 Times in 5 Years

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Japan is undoubtedly the most active country in the global robot market, accounting for more than 50% of the worldwide market. According to the Nihon Keizai Shimbun on the 21st, data from the New Energy and Industrial Technology Development Organization (NEDO), a national research institute specializing in new technologies including robotics, shows that Japan's robot market size grew from about 1.6 trillion yen (approximately 17 trillion KRW) in 2015 to about 2.9 trillion yen last year, nearly doubling in five years. It is predicted to grow to about 9.7 trillion yen by 2035, more than tripling from now.

The growth in the service robot sector is particularly remarkable. Japan's service robot market grew about 2.74 times from 373.3 billion yen in 2015 to 1.0241 trillion yen last year. Japan, facing overlapping issues of an aging population and low birth rates with a population decline of nearly one million people annually, is already experiencing a severe labor shortage, which robots are significantly filling in the service sector. In Japan, robots are used in various service fields including cooking, serving, housekeeping, and even hospital caregiving robots. It is also forecasted that from 2025, the service robot market will dominate 50.3% of the entire robot market, surpassing the industrial robot market.

Chinese Robots Flooding the Global Market... Robotization Begins in Developing Countries

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Until now, robots were considered the exclusive domain of developed countries such as Japan, the United States, and Europe due to high introduction costs and technological gaps. However, with the mass production of Chinese robots, which are cheaper compared to those from developed countries, robots are now being introduced into developing country markets. This is attributed to the Chinese government's massive budget investment aimed at domesticating robot manufacturing technology. China has announced plans to invest about 170 trillion KRW over ten years specifically in the semiconductor manufacturing sector, a vulnerable area for the country.

According to Hong Kong's South China Morning Post (SCMP), a medical team at Shanghai Thoracic Surgery Hospital successfully performed thoracic surgery on a pig using a Chinese-made endoscopic robot on the 9th. This demonstrates that Chinese robots are advancing beyond simple tasks to high-tech applications. The Chinese government announced last year that domestic robots accounted for 39% of the domestic market share and stated that this would soon exceed the target level of 50%.

With the increase in production and technological advancement of Chinese robots, prices are gradually decreasing, accelerating the spread of robots to developing countries. Recently, Rwanda in Africa has introduced drones used for transporting medical supplies such as blood and is actively operating them. In South Africa, service robots have been employed as hotel staff for the first time. As artificial intelligence (AI) development and 5G technology are rapidly introduced worldwide, robot usage is expected to expand actively not only in developed countries but also in developing countries.

Risk of 800 Million Jobs Disappearing Within 10 Years... A Challenge for Governments Worldwide

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While the increased utilization of robots brings convenience, it also carries the risk of producing massive unemployment. Concerns are growing that jobs lost due to COVID-19 could decrease even further.

According to the International Labour Organization (ILO), more than 350 million jobs worldwide were lost last year due to the COVID-19 pandemic. Moreover, if non-face-to-face business continues to be emphasized and such pandemics persist, robotization could accelerate, potentially causing over 800 million jobs worldwide to disappear within ten years.

There are also concerns that robots affect not only the quantity but also the quality of jobs. According to Bloomberg, a study by MIT on the impact of robots on the U.S. labor market found that from 1990 to 2007, the use of one industrial robot per 1,000 workers reduced employment rates by 0.18 to 0.34 percentage points, resulting in a loss of about 360,000 to 370,000 jobs. During the same period, wages also decreased by 0.2 to 0.5 percentage points. If robot adoption accelerates beyond the current pace, the number of robots per 1,000 workers is expected to rise to 5.25 by 2025, which could reduce employment by 0.94 to 1.76 percentage points and wage growth by 1.3 to 2.6 percentage points.

As robots threaten jobs in almost all sectors, governments worldwide are expected to face increasing challenges. A decline in the number of workers leads to significant tax revenue losses for governments, potentially causing the collapse of social security systems maintained by current taxation and posing a serious threat to democracy.