This interview highlights Telexistence’s unique approach in the B2B sector and its transformational vision, as well as delving into the TX SCARA robot's capabilities, challenges in development, and potential applications.
It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, and short lead times when it comes to production. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not? What are the key advantages of Japanese firms in this economic environment?
In the realm of macroeconomic factors, such as the weakened Japanese yen, there is no denying their significance. However, the most pressing challenge that Japan confronts today does not revolve around innovation. Instead, it is the looming specter of an aging population that takes center stage as a fundamental hurdle. This is a challenge that Japan has grappled with for nearly three decades, with elusive, concrete solutions.
The aging demographic issue is the crux of the matter. Without addressing this issue, Japanese corporations may find it difficult to fully harness the potential of the prevailing macroeconomic landscape. It is worth noting that the government's approach appears to be one of ignoring the problem, in the hope that it will naturally dissipate. Regrettably, the stark reality paints a different picture; Japan's population has been on a steady decline for close to three decades now.
The implications of this demographic shift are profound, and they warrant a deeper examination in the context of Japan's business landscape. The clock is ticking, and solutions are overdue.
Over the last 25-30 years Japan has seen a rise in regional manufacturing competitors from countries like China, Taiwan, and Korea, who have replicated Japan’s model for success but done so at a cheaper labor cost, thus pushing Japan out of certain mass markets. However, we still see Japanese firms as leaders in niche B2B fields. What are the core strengths of Telexistence that will appeal to potential foreign and domestic clients?
As you astutely pointed out, Japan boasts some impressive niche players in its market. However, the backdrop to this is the challenging period known as the "Lost Decades" that followed the burst of the economic bubble in the 1990s. During that time, a slew of groundbreaking innovations, particularly in consumer electronics, which had flourished in the 1980s, seemed to vanish into thin air by the early 1990s. An example of this shift can be found in the story of the Apple iPhone. While it's true that Japanese firms contribute approximately 20% of its components, it's Apple that captures the lion's share of the user market.
In contrast to the prevailing trend among Japanese companies today, our company is charting a different course in the realm of B2B products. We are determined not to confine ourselves to the role of a niche component supplier. Our ambition extends far beyond that; we aim to be the kind of organization that delivers final, fully realized products and solutions. Currently, our focus revolves around retail end-users, aligning with a broader vision of eliminating repetitive human tasks. This vision transcends the retail sector and extends to a myriad of other professions as well. Our ultimate goal is to introduce robotics that supplants the need for humans to engage in any form of repetitive work, thereby positioning ourselves as the premier provider of end-to-end robotic solutions.
This transformational perspective underlines our commitment to reshaping the business landscape in Japan, moving from the past's "Lost Decades" to a future that's both innovative and liberating.
Compared to other remote-controlled robots, what is your key advantage or competitive edge?
In our current operations across the United States, China, and Japan, we've observed a unique market landscape. Remarkably, we find a scarcity of companies integrating remote control and machine learning into robotics in these key regions. Our vision transcends the confines of factory walls; we are not interested in industrial robots. Instead, our focus centers on the dynamic environments beyond factory premises. Deep learning alone falls short of ensuring precise control of our robots in these settings.
It's worth noting that a company offering a comprehensive package of nearly 100% remote-controlled robot operation coupled with advanced machine learning is a rare find. This rarity holds especially true within the realm of the retail industry, where our solutions stand out as innovative and unparalleled.
In a landmark development for our company, we secured our first commercial contract in 2022, marking a pivotal moment in our journey. This contract involved the deployment of 300 robots, with a unique mission: conducting restocking activities in Japanese convenience stores. Our partner in this endeavor was FamilyMart, one of Japan's top three convenience store franchises, boasting a network of approximately 17,000 stores, a significant presence within Japan's convenience store industry, which, in total, spans around 56,000 stores serving over 1 billion people and making it a crucial part of our daily social infrastructure.
The hero of this deployment was our TX SCARA robot, designed to perform tasks with remarkable human-like precision. When a box arrives at a store, the conventional procedure typically involves a human team member transporting the box to the store's refrigerators, unboxing it, and then carefully stacking the products one by one. The employee further inspects the shelves, identifies products running low on stock, and proceeds to reorder.
However, as we've previously discussed, Japan faces a daunting challenge with a declining population. The reality is that there simply aren't enough human resources available to fulfill such tasks, particularly when considering the scale of these operations. Looking ahead, it's difficult to imagine that humans will continue to be the primary workforce in such stores within the next decade. This is where our robots come into play.
Our robots seamlessly integrate into the store's existing infrastructure, without requiring any modifications. The TX SCARA performs tasks mirroring human actions, and to date, it has successfully restocked over seven million items with an impressive success rate of 98.9%.
To break down this success rate, it comprises two integral components. First, there's the automation rate, driven by advanced machine learning, standing at an impressive 96%. The delta between the 96% automation rate and the overall success rate of 98.9% is attributed to our remote control interventions, ensuring a seamless and reliable operation.
In terms of numbers, our operational model relies on a dedicated team of remote operators stationed at our Filipino office. The rationale behind this decision is twofold: wages and population dynamics. The Philippines boasts a burgeoning population of approximately 113 million people, with an average age of around 20. Within this demographic, those working in traditional retail roles may typically earn a mere USD 3 per day. We believe in providing better opportunities and compensation for our operators, which is why we equip them with VR displays and internet connectivity, enabling them to remotely take control of robots located in Tokyo and execute the restocking tasks.
This innovative approach to remote-control restocking empowers us to offer our customers 100% coverage. To provide further clarity on the statistics, the robot operates autonomously and accomplishes restocking tasks without human intervention 96% of the time. The remaining 2.9% is skillfully executed by our operators in the Philippines via remote control. As of now, there remains a 1.1% gap between the success rate of 98.9% and the ultimate goal of 100%. Rest assured, we are diligently working to narrow this gap, striving for even greater operational efficiency.
What were some of the key challenges in developing the TX SCARA and the remote-control infrastructure that surrounds its operation?
To create a robot that is intricately optimized for its environment, one must immerse themselves in the actual store operations or even become a franchise owner. This level of engagement is indispensable to grasp every nuanced detail, from the quantity of bottles in stock to the smallest operational particulars. In our relentless pursuit of excellence, we committed a significant one and a half years to actively running these stores, meticulously observing and documenting every aspect. Subsequently, we invested a considerable amount of time in refining and evolving our prototypes to reach the advanced stage where we stand today. This is the tangible, hardware aspect of the challenge.
Controlling a robot in the manner we do necessitates having a foothold in a foreign country. It calls for a dedicated team of skilled individuals who can be trained to operate the robot using VR headsets. Each of these elements significantly distinguishes us from the competition. Our holistic approach encompasses both a deep understanding of the real-world operational context and the global collaboration required to make it all work seamlessly.
We saw that the robots can handle small bottles all the way to 2-liter bottles. Are there any limitations?
In the current operational environment, we have successfully tailored our robots to be exceptionally versatile, ensuring they can perform a broad spectrum of tasks without any notable constraints. This adaptability is a testament to our commitment to meeting the dynamic needs of the retail industry. Moreover, our robots offer a unique advantage—leveraging the valuable sales data collected from individual stores, they can contribute to boosting sales. By analyzing this data, our robots gain insights into which drinks are in higher demand and can efficiently prioritize their stocking placement, surpassing human capabilities. Additionally, the robots are programmed to understand the precise limits of each shelf, preventing any overstacking that might hinder efficient storage.
This advanced understanding of the store's real-time needs is a testament to our commitment to providing a solution that aligns seamlessly with the retail industry's requirements.
You developed this technology for retail spaces, but we wondered if it is possible to duplicate this technology in other industries. Are there any other industries you would like to explore with your automation solutions?
Logistics stands out as another promising frontier, being an integral part of people's daily lives. Our current efforts are concentrated on developing hardware solutions tailored for this crucial domain. However, it's important to recognize that controlling robots in this context demands the automation of more intricate tasks, particularly in the realm of warehouse management for major players like Amazon. To meet these demands, a portion of operations must be overseen remotely, necessitating our skilled workforce in the Philippines to take charge of these robotic systems.
Our overarching objective in this endeavor is to maximize the automation rate as much as possible. Yet, we acknowledge the inherent challenges of the dynamic and unpredictable environments in which these robots operate. This recognition implies that achieving a 100% success rate may remain an aspiration rather than an attainable reality. Consequently, we continue to rely on human intervention to some extent. To address this, we are actively working on making it feasible for individuals to contribute physical labor from any location across the globe. Our journey in logistics automation remains a dynamic and evolving pursuit, driven by the imperative of harmonizing human capabilities with cutting-edge technology to create a seamless logistical infrastructure.
In the logistics industry are there any dimensions that are perhaps too large or complex for you to help with?
We're fully committed to bridging this remaining gap, understanding that it's essential to offer a comprehensive solution. Ensuring that our services encompass even the most intricate and critical aspects of logistics remains a top priority, and we are diligently working to fulfill this objective. Our dedication to delivering a holistic logistics solution is unwavering, and we aim to provide clients with the utmost reliability and completeness in our service offerings.
We saw that you’ve started to commercialize the TX SCARA for the retail industry, but your company really originated in the 1980s as an R&D-focused firm working on developing humanoid robots that can be controlled remotely, with the first TELESAR prototype being completed in 1988. Since then you’ve improved on the TELESAR going up to today with the latest version being the TELESAR version 5. What other industries do you believe the TELESAR can be of assistance in? Do you believe that the TELESAR can assist humans in tough environments such as space travel?
The question of which other industries can benefit from TELESAR's capabilities is an intriguing one. Dr. Susumu Tachi, one of our founders and a Professor Emeritus at the University of Tokyo, has been instrumental in shaping our vision. In the 1980s, he had a visionary idea of controlling robots as if they were an extension of one's own body, long before the advent of the internet. His academic journey led him to prestigious institutions like the University of Tokyo and the Massachusetts Institute of Technology (MIT).
The original concept behind TELESAR was to create a workforce that could operate remotely from any location through robotics. This fundamental premise remains unchanged. Although our current robot developments are more task-specific, we maintain our commitment to the vision of a general-purpose, remote-controlled humanoid robot. This vision, however, is a long-term pursuit that demands time and dedication. Our latest TELESAR model, with its 27 joints matching the complexity of a human hand, exemplifies our continuous progress.
Our future steps involve commercializing such a humanoid robot within the next 10 to 15 years. Building a humanoid robot itself may not be a significant challenge today, but the pivotal decision revolves around making this product accessible to a broader audience at an affordable price point. Realistic pricing is a paramount consideration for widespread adoption. The company that successfully navigates this challenge is poised to emerge as a leader in this dynamic and transformative industry.
In July 2020 you announced the new Model-T, a remote-controlled robot for the retail industry. What applications do you foresee for this humanoid robot besides stocking activities that we’ve seen from your TX SCARA?
Indeed, the Model-T represents an exciting step forward in our pursuit of remote-controlled robotics, with the retail sector being its initial focus. However, the possibilities for this humanoid robot extend far beyond its current role in stocking activities, as exemplified by our TX SCARA.
One of the key factors that will drive the broader adoption of the Model-T is achieving a reasonable price point. Once we attain that milestone, we envision that this versatile robot can serve as a multipurpose solution in convenience stores and supermarkets, enhancing overall operational efficiency and productivity across various tasks.
The pressing issue of population decline is acutely felt, leading to labor shortages and vacant roles in certain professions. For instance, there's a notable gap between apartment managers and caretakers. In this context, the Model-T has the potential to become a valuable resource, addressing workforce gaps while ensuring seamless operations. Once again, the feasibility of these applications hinges on achieving an economically viable price point.
Our overarching vision is to create a general-purpose robot, capable of performing a wide spectrum of tasks equivalent to what a human can do. We firmly believe that the true scalability and affordability of our product lie in its ability to cater to diverse applications. By making one robot that can emulate human versatility, we aim to revolutionize the industry and bring about a transformative change in society.
Japan is a country that historically has sought a lot of innovation, and this is reflected in the country’s R&D spending. Compared to other countries, Japan invests 3% of the GDP into R&D, whereas the US only invests 1.5% and China only invests 2%. Recently you managed to raise USD 170 million in Series B funding in June 2023. What would you like to achieve with this funding and what is your current focus in terms of your R&D strategy?
It's important to clarify that the majority of our financial resources are directed toward development rather than pure research. Our journey unfolds in two essential phases. First, we aim to achieve the requisite scale for our operations. Subsequently, our goal is to deploy robots to undertake tasks that are no longer efficiently fulfilled by humans.
As a company, our mission extends beyond conventional business models. Currently, we derive monthly fees from our B2B customers for the use of our robots, essentially positioning the robot as another employee for the customer. However, as we advance in scale, our approach is set to evolve. We intend to transition to selling and transferring the technology to our customers, including general consumers, marking a significant shift in our business model. The plan involves redirecting the fees back to the customers, contributing to the establishment of a fundamental income infrastructure supported by robotics and AI.
The Series B funding serves a pivotal role in our pursuit of creating single and double-purpose robots, which, in turn, generate revenue for our customers. Ultimately, the goal is to offer the robots for sale to these customers in the future. In the final phase, we envision a reality where humans are no longer burdened with menial tasks, as our robots are fully equipped to assume these responsibilities.
Additionally, it's noteworthy that discussions are already underway in Europe, particularly in countries like France and Spain, exploring the possibility of taxing robots and reallocating the generated funds to individuals rendered redundant by automation. This utopian concept presents an optimistic perspective; however, it's essential to acknowledge the complexity of the endeavor and the challenges associated with ensuring that the reallocated funds serve their intended purposes effectively.
Right now your products are only being developed in Japan, and in order to penetrate new markets and to develop new products, many companies we speak to mention partnerships and co-creation as a key strategy. You’ve announced a partnership with SoftBank to promote your business globally with a specific focus on North America. You’ve also announced a partnership you established with Foxconn to begin mass production. What role does partnership play in your business model and are you looking for any new partnerships in overseas markets?
As we expand into overseas markets, we've been engaged in discussions with prominent retailers in the United States. The US market presents compelling automation needs, largely driven by comparatively higher labor costs, exemplified by minimum wage rates in states like California reaching around USD 20 per hour. Our vision is to deploy our robots in a manner similar to what we've achieved in Japan. However, the execution will differ.
Overseas partners will play a vital role in not only deploying our robots in the US but also providing essential maintenance services. In Japan, we manage these aspects in-house, but in the US, the scale and logistics necessitate a different approach.
While our reach extends to North America, China remains a unique challenge due to its distinct labor dynamics. Currently, the relatively lower wages in China make our automation solutions less feasible in the local context. Automation predominantly finds its home in Chinese factories rather than in the realm of Chinese retail. The potential for China as a target market may become more viable as wages continue to rise, but for now, our primary focus remains on regions where the labor economics align more favorably with our automation solutions.
Imagine that we come back in five years and have this interview all over again. What goals or dreams do you hope to achieve by the time we come back for that new interview?
Looking ahead to the next five years, we have an ambitious vision in our sights. One of our foremost goals is to embark on an initial public offering (IPO), with the explicit intention of securing the necessary funding to advance the development of more versatile general-purpose humanoid robots. Our aspiration is to make these robots available to a broader audience, transitioning from the business-to-business (B2B) model to a business-to-consumer (B2C) approach.
By 2027, our aim is to offer these general-purpose humanoid robots directly to individual customers, starting in Japan. This marks a significant shift in our strategy, aligning with our mission to create robots that can perform a wide array of tasks, ultimately benefiting everyday consumers. Our dream is to democratize access to these cutting-edge technologies and bring about a transformative change in the way people interact with and benefit from robotics in their daily lives.