Humanoid robots promise a multi-trillion-dollar market, but pose challenges

Agility Robotics’ Digit humanoid was in trials at GXO. Source: Agility Robotics

As an early investor in Agility Robotics, now one of the world’s leading manufacturers of humanoid robots, I’ve watched as humanoids have evolved from a fascinating concept to reality over the past five years. That’s why I wasn’t surprised when NVIDIA CEO Jensen Huang made headlines to kick off this year, saying, “Robotics will be a multi-trillion-dollar market.”

The past 12 months have seen an explosion of interest in robots, especially humanoids, driven by an increase in computing power — thanks in large part to NVIDIA — and the physical AI innovation it has unlocked. Artificial intelligence is already reinventing robotic intelligence and the entire lifecycle of machines while ushering in a third generation of the robotics industry.

From turbocharging production to enabling us to finally solve some of robotics’ biggest challenges, such as dexterous hands, we’re looking at a tenfold leap in robotics innovation with the latest AI breakthroughs. Meanwhile, AI-driven simulations of the countless scenarios robots encounter are slashing development hours and costs while making humanlike machines more realistic than science fiction.

We’re now at an inflection point where these machines are ready to transform the manufacturing, logistics, and warehousing industries. However, in order to truly enhance operational efficiency and flexibility, we must navigate the challenges of rolling them out at scale while capitalizing on specific opportunities.

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Hands, feet the last robotics dominoes to drop

As an investor who has evaluated numerous robotics companies, the current capabilities of humanoid robots are very impressive. But they still have a few minor shortcomings to overcome before rolling out on a massive scale.

Robots excel at repetitive tasks that require human-like mobility – moving materials, connecting different points of automation, and operating in spaces designed for humans. We’re still not yet at the point of complex dexterous manipulation.

However, that technology is advancing rapidly in areas like two-finger gripping and adaptive movement. For instance, at Agility Robotics, I’ve seen the progression from simple squeeze-type grippers to more sophisticated two-finger manipulation systems. This dexterous manipulation advancement is crucial because it opens up a whole new range of potential applications.

While we’re still not at the level of fine motor skills required for tasks like drilling or welding, humanoids are becoming adept at tasks that require spatial awareness and basic object manipulation.

These advancements aren’t limited to hands; they’re also coming to the feet of humanoids, proving advantageous in environments that challenge other robots. Unlike wheeled autonomous mobile robots (AMRs), which require perfectly smooth floors, humanoid robots can now handle slight gradients and steps, making them more versatile in real-world manufacturing settings. This adaptability is a key differentiator that will drive adoption in various industrial contexts.

Humanoid robots complement workers, not a replacement

Those looking to deploy humanoids within their facilities need to understand that robots aren’t meant to replace all other forms of automation or human workers. Having invested in various robotics companies, I’ve come to understand that the future of manufacturing will involve people working alongside humanoids and many other types of robots.

Just as humans use different tools for different tasks, we’ll see specialized robots – from AMRs to robotic arms to humanoids – each handling what they do best.

Think about how humans work in manufacturing environments today. We naturally seek assistance when handling items above 40 lb. (18.1 kg), and we use different tools for different tasks. The same principle applies to robotics. Some tasks are better suited to traditional robotic arms, others to AMRs, and still others to humanoid robots.

The key is understanding where each type of automation provides the most value. In a manufacturing setting of the future, you might have AMRs handling long-distance material transport, robotic arms performing assembly tasks, and humanoid robots filling the gaps between these systems – much like human workers do today.

From humanoid pilots to production: The road ahead

The manufacturing sector, which was once hesitant to adopt new technologies, has become remarkably open to automation solutions. However, the progression from humanoid pilots to full deployment follows a careful, methodical path that ensures safety.

Implementations need to start with a single cell or line, ensuring the technology works effectively in a controlled environment before expanding to broader applications. This measured approach is crucial for success, as it allows organizations to learn and adapt their processes while minimizing risk.

However, what’s particularly encouraging is the level of sophistication in the next step up of pilots I’m seeing today. We’re witnessing robots operating autonomously for extended periods, handling various tasks, and adapting to different scenarios. Furthermore, the question from manufacturers and other facility operators has evolved from “Can this work?” to “How quickly can we scale this?”

Integration with existing systems is another critical aspect of deployment. Humanoid robots need to work with warehouse management systems (WMS), resource-planning tools, and other automation systems. While this requires some learning and adaptation, the integration process is often smoother than with other forms of automation. This is partly because humanoids can operate in environments designed for people without requiring significant modifications.

Humanoid economics make sense

Drawing from my background in the cellphone industry, I see strong parallels in how economies of scale will drive down costs. Robotics is the new mobile computing platform.

Even at current robot-as-a-service (RaaS) pricing — typically $4,000 to $10,000 monthly — the economics work for both manufacturers and robotics companies. As volumes increase, these costs will decrease significantly, just as we’ve seen with other technologies.

Consider the smartphone in your pocket – even the most advanced models cost around $1,000, yet they contain incredibly sophisticated technology. The same principles of scale and manufacturing efficiency will apply to humanoid robots. As production volumes increase, we’ll see significant cost reductions, making the technology even more accessible to a broader range of manufacturers.

The RaaS model is being adopted more frequently because it aligns with both the interests of robotics suppliers and industrial users. It reduces the initial capital investment required and ensures ongoing support. We’re seeing various pricing models emerge, from pure rental arrangements to hybrid models that include rent-to-buy options.

Modular design meets the maintenance challenge

I’m often asked about maintenance. Given the complexity of humanoids. It’s a valid concern, but I’ve seen how robotics engineers are addressing this through modular designs and partner networks. Success here isn’t about having manufacturers develop extensive in-house expertise but rather creating robust support ecosystems through system integrators and service partners.

The key to effective maintenance lies in modular design. Well-engineered systems allow for quick component replacement and updates, minimizing downtime and simplifying maintenance procedures. This is where quality really shows – companies that invest in thoughtful design and robust construction will have a significant advantage in the market.

We’re seeing the emergence of sophisticated maintenance networks similar to what exists for other forms of industrial automation. These networks combine the expertise of robotics companies, system integrators, and local service providers to ensure reliable operation and quick response to any issues. This distributed support model is crucial for scaling the technology across different regions and industries.

Looking forward to human-robot collaboration

As someone who was early into the robotics space, I am confident that humanoid robotics will transform manufacturing. But this transformation won’t happen overnight, and it won’t look quite like what many people imagine.

Instead of a wholesale replacement of human workers, we’ll see a gradual integration of humanoid robots into workflows, working alongside both people and other forms of automation. It’s not only about basic safety and functionality — though these are imperative — it’s also about creating natural, intuitive interactions between humans and robots.

Robotics companies will need to develop interaction models that consider both practical and psychological aspects of human-robot collaboration. This might include visual cues, movement patterns, and other forms of non-verbal communication that make the robots more predictable and comfortable to work alongside. These subtle elements of interaction design can make a huge difference in workplace acceptance and effectiveness.

The technical challenges are significant but solvable. The real key to success will be thoughtful implementation strategies that consider both the technological and human elements of the workplace.

As we move forward, humanoids will enhance productivity, improve working conditions, and reinvent industries. The market potential is multi-trillions, but realizing it will require patience, careful engineering, and a clear understanding of how these robots fit into the broader ecosystem.

About the author

Karthee Madasamy is founder and managing partner of MFV Partners. He has been an investor and board observer for numerous technology companies, and he was also a consultant at Boston Consulting Group and managing director and vice president at Qualcomm Ventures.

Madasamy has an MS in electrical engineering from the University of Michigan and an MBA from The University of Chicago Booth School of Business. This article is posted with permission.

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