1. Lee Sedol, the John Henry of the 21st
century
Google made headlines last month with DeepMind’s stunning victory over Lee Sedol, one of the world’s top-ranked
Go players. Two weeks before the matches took place Google released a video of its humanoid robot Atlas II from
subsidiary Boston Dynamics. Boston is widely viewed by the global robotics community as the premier robotics
developer. Two days after AlphaGo’s win, the company announced that it was selling Boston, causing market
observers to believe that Google is giving up its robotics business. We, however, believe such views are groundless
due to the following: X, Google’s semi-secret research and development arm, has a large portfolio of top-tier
robotics and AI companies that it acquired in a 2013-2015 buying spree. These acquisitions were made by the Robotics
divisionofGoogle,ledbyAndy Rubin,co-founderofAndroid.Thecompany is now integrating these technologies into other
projects within the organization. GooglenevermadeclearitsgoalofitsroboticsandAIacquisitions,whilethemediainvokedimages
ofrobotsforhomesorhospitals.Infact,theareainwhichthecompanyhasmadethemostprogressisitsself-drivingcars.
The high-profile Boston is on the cutting-edge of robotics technologies, many of which could take several years to
become profitable. Furthermore, the former head of Google’s robot initiative, AndyRubinleftthecompanyin2014tocreate
Playground,atechincubator.Itislikelythatthereisnolongerthesameincentiveundercurrentmanagement.
We believe the company’s moves with AlphaGo and Boston are part of a carefully orchestrated move to divert
attention from its ongoing efforts to integrate robotics and AI technologies to build a global Robot Internet of
Things (RIoT) ecosystem. In addition to Boston, Google (not including AI and drone acquisitions) owns SCHAFT (r,
humanoidrobots),IndustrialPerception(roboticarms,computervision),RedwoodRobotics(roboticarms),MekaRobotics(robots),Holomni
(roboticwheels),andBot&Dolly(roboticcameras).
Companies such as Google and Fanuc are aggressively integrating AI into their robots. In2014,theSwissrobotmakerABB
investedinanAIstartupcalledVicarious.This trend will only accelerate going forward because the opportunities for success
are tremendous.
Evolutionary algorithms and evolving opportunities
Korea has several companies positioned to capitalize on this trend. Samsung Electronics, LG Electronics , Yujin
Robot, Hanwha Techwin, and SK Telecom have teams of top-notch developers and are expanding their international
partnerships with leading technology firms in the US and EU. In this regard, we think LG is interesting for its
HomeBot as it has one of the most advanced navigation systems in the world and it has the potential to integrate
Robot Biweekly OVERWEIGHT
Major issues and conclusions
- Google’s recent decision to put robotics company Boston Dynamics on the market causes many technology
market watchers tospeculate that theyare giving up their robotics endeavors.
- The company has several other robotics companies with similar capabilities as Boston.
- Googleis shifting its focus to artificial intelligence and robotics areas that improveefficiency and lower costs
Industry and stock outlook
- We continue to like companies with the ability to see the forest from the trees in the emerging RIoT market.
- Google is streamlining is operations and focusing on integrating AI and robotics for practical applications.
- Yujin Robot, Samsung Electronics, LG Electronics, SK Telecom, and Hanwha Techwin all have a high-level view
of the emerging RIoT ecosystem and are the companies towatch.
Google’s Go Feign
2016. 04. 04
Robotics/ AI/ Automation
Robert Cheek
+822-3787-2138
r.cheek@hmcib.com

2. 2
INDUSTRRY NOTE
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4. 4
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6. 6
(005680)INDUSTRY NOTE
▶ Compliance note
•The author(s) of this report does(do) not haveany interests in the company(ies) covered herein.
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past six months.
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▶ Investment rating
▶ HMC Investment Securities offers three sector investment ratings based on six-month forward fundamentals and share price outlook.
• OVERWEIGHT: Sector-wide fundamentals and share prices are expected to turn up.
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Stock ratings distribution (April 1,2015-March 31, 2016)
Rating Count % of rating category
BUY
MARKETPERFORM
SELL
131
26
1
82.9%
16.5%
0.6
•ThisreporthasbeenpreparedforinformationalpurposesonlyandthusmaynotbereproducedordistributedwithoutthepriorconsentofHMCInvestmentSecurities.
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