1. High noon for robots in the land of the morning calm
2015-2016 has seen tremendous strides in Korea’s robotics sector—from the Korean team’s stunning win in the
DARPA Challenge to the acquisition of Samsung Techwin by Hanwha Group, to the international partnerships
between Israel Aerospace Industry (IAI) and Hankuk Carbon and strategic alliances between Miele and Yujin Robotin
the cleaning robot segment. In the drone space, Pusan is now host to Asia’s largest drone show. In addition, the
startup scene is thriving with smaller players such as UVify, Robo Block, and others attracting more interest because
of their innovative technologies.
The Internet of Things (IoT) is evolving into the Robot Internet of Things (RIoT) and companies with a view of the
larger picture are positioned to benefit from this shift. Although many of the companies are US-based and include
such names as Amazon (Echo home AI, AWS cloud computing services, drones, Kiva logistics robots, and its in-house
robotics development program), Google with its robotics division, AI and machine learning development endeavors,
cloud services, self-driving cars, and connected home business (Nest). In Korea, we have identified companies that
also have a broad view of the emerging RIoT landscape and therefore have the opportunity to surf the swelling
tsunami of socioeconomic change. In this regard we like Hanwha Techwin (012450.KS, Not rated) due to its potential
to become a leader in the defense/security RIoTbusiness. Astrong player in the global defense and security business,
Hanwha Group’s acquisition of Techwin (and its portfolio of technologies in robotics and drones) from Samsung
Group puts it in a favorable place in the emerging RIoT defense space. We also note the strategic alliances being
forged between international robotics companies and Korean partners, which we view as a vote of confidence in
Korea’s prowess in robotics technologies. Hankuk Carbon will form a JV with IAI to develop next-generation vertical
takeoff and landing (VTOL) drones for the Korean military with a view on expanding the business to the global
market.
Service robots, medical robots, and drones: Korean players are underrated
Despite having the technological wherewithal and infrastructure in place to be a leader in the international RIoT
game, the Korean robotics industry is underrated relative to its global peers. Furthermore, the bulk of promising
Korean robotics makers and robotics component manufacturers are wanting in terms of effectively communicating
their marketing message to the global market. Within the global robotics community, however, there is swelling
interest in the Korean robotics sector and investments into promising Korean players are growing. We believe the
aforementioned weakness in marketing provides investors with an opportunity to invest in promising companies.
On the M&A front, we see some companies as potential targets due to their unique technologies. THINK Surgical,
Robot Biweekly NEUTRAL
Robotics
Robert Cheek
+822-3787-2301
r.cheek@hmcib.com
Major issues and conclusions
- Korean Air Lines (003490.KS Marketperform) was awarded a government contract in 1Q16 to develop drones
for the Korean military. We believe this will create tremendous growth opportunities for KAL and related
domestic component makers.
- Israel’s IAI and Hankuk Carbon (017960.KS , Not rated) to form JV to developnext-generationVTOLdrones.
- Yujin Robot (056080.KQ, BUY) is scheduled to launch its silver care robot GoCart in the EU in 4Q16 and the US
in 1Q17.The alliance with Germany’s Miele is deepening as demand for the Scout RX1 cleaning robot grows.
- Curexo (060280.KQ, Not rated) receives a series of approvals from EU and US regulators for its TSolution One
Surgical System.
Industry and stock outlook
- Government initiatives and foreign interest in Korean robotics-related companies to continue growing.
- Several component manufactures and robot makers poised to benefit from increasing appetite for robotics
- Growing interest in autonomous systems likely due to long-term growth outlook stemming from accelerating
investments in robotics and robotics component makers.
Rise ofAsia’s quiet robotics powerhouse
Industry Note
March 18, 2016

2. 2
Robotics Robert Cheek +822-3787-2138 / r.cheek@hmcib.com
which is owned by Curexo was awarded the CEmarkforitsTSolutionOneSurgicalSystemfortotalhiparthroplasty(THA)procedures
inSeptember2015.TheTSolutionOneSurgicalSystemreceived510(k)clearancefromtheUSFDAforTHAandcupplacementproceduresin
October2015.InFebruary2016theTSolutionOneModel200wasFDAclearedforfemoralcanalandacetabularcuppreparationforTHA.
Fig 1. Global cleaning robot shipments Fig 2.Global aerial drone market
Source:ABI Research, HMC Investment Securities
Source:Teal Group, HMC Investment Securities
Fig 3. Yujin Robot GoCart V1 and V2 Fig 4. Total discharges for knee/hip replacements
Source: Companydata, HMCInvestment Securities Source: JBIS.org, HMC Investment Securities
0
5
10
15
20
1Q15 2Q15 3Q15 4Q15 1Q16F
Note series S6/Edge S7(mn)

3. 3
Robotics Robert Cheek +822-3787-2138 / r.cheek@hmcib.com
Fig 5. Hanwha Techwin’s folding propeller drone Fig 6. Hanwha Techwin’s mobile security robots
Source: Companydata, HMCInvestment Securities Source: Companydata, HMCInvestment Securities
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Stock ratings distribution (January 1-December 31, 2015)
Rating Count % of rating category
BUY
MARKETPERFORM
SELL
129
26
1
82.7
16.7
0.6
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