By Shachi Merchant, Vice President, Index Specialist, ROBO Global
Cognex (NASDAQ: CGNX) is a ROBO index member in our Computing and AI subsector and currently holds a 1.53% weight (as of close 1/22/22). Cognex is a manufacturing company that uses its proprietary machine vision technology to capture and analyze visual information and automate manufacturing processes for its customers. Cognex designs, develops, and manufactures machine vision systems, software, and sensors that are used to identify defects, detect parts, and perform various other tasks for product assembly.
Cognex helps its customers improve product quality, reduce production costs, and lower manufacturing costs while producing high quality products. Early on, Cognex became the leading supplier of machine vision technologies to semiconductor and consumer electronics companies like Apple and Unilever. The company was instrumental in Apple’s automated inspection of its smartphone assembly. Other notable customers include Amazon and BMW.
More recently, Cognex is continuing to investigate new ways to improve the performance of industrial machine vision systems and, through R&D, maintain themselves as a frontrunner in machine vision, with over 1,000 patents. Recent cutting-edge innovations include their 2D & 3D scanners, Edge Intelligence (EI) software, and deep learning based on industrial image analysis.
Why Machine Vision?
Machine vision is important where a human’s vision is inadequate to fulfill tasks related to accuracy or speed. Machine vision dramatically lowers the cost of production by reducing the amount of labor needed. It is imperative for retailers in all industries to use machine vision to better improve performance and lower production cost. Furthermore, the need for robotic-guided vision systems has gained traction across industries such as automotive, food and beverage, pharmaceutical/medical, semiconductor, and all packaging segments. With the growing number of retailers moving production online, each will require large factory operations to boost large-scale adoption. That, combined with strong expectations that supply chain constraints will ease in 2022, should present a massive opportunity for machine vision technologies, placing Cognex in a positive position for the future. Additionally, if and when supply chain issues resolve, Cognex may benefit from the expected ramp-up in production in consumer electronics and automotive. Due to these factors, we believe Cognex will profit from macro conditions especially with rising labor shortages and cost demands adding fuel for additional investments in automation and machine vision. Cognex is and will continue to be a growing technology leader in the robotic guided vision systems space.
According to a 2020 report published by McKinsey, 31% of businesses have fully automated at least one business process. In 2021, we (ROBO Global Research) saw tremendous demand for products surrounding the automation of manufacturing & industrial and logistics. (Sub-Sectors in ROBO’s Index: Manufacturing & Industrial 16% & Logistics Automation 13%) However, many of these industrial automation companies were not able to keep up with demand due to supply constraints. As a result, industrial and logistics automation stocks actually did not perform that well in 2021, but importantly, this appears to be because companies were significantly underreporting the actual state of demand. Machine vision is just one of the many solutions involved in helping pave the way for increased and more accurate productivity in industrial manufacturing.