Why SoftBank's Pepper could become the iPhone of robots

Pepper goes on sale in Japan on Saturday at ¥198,000 (US$1,600) plus ¥24,600 in monthly data and insurance fees. That may sound like a lot for a machine that's basically a webcam on wheels with a penchant for chatting, but it comes with a raft of sensors and cloud-based artificial intelligence (AI) chops, and the ability to evolve its skills.

Pepper's backers, though, are perhaps its greatest asset. Japanese mobile carrier SoftBank and its heavyweight partners Foxconn Technology Group and Alibaba Group are willing to sell thousands of Peppers at a loss for at least four years. They see Pepper as a robo-pioneer for an industry they believe will be as big as automobiles, airplanes and personal computers. In their eyes, Pepper could be the iPhone of robots.

They're betting that enough consumers and businesses will buy Pepper so that their venture, SoftBank Robotics Holdings, will eventually turn profitable and generate substantial revenues in 20 or 30 years.

That's good news for the robot, because such a long-term commitment can give Pepper time to achieve the economies of scale to lower its price. That can not only attract more buyers, it can give Pepper better abilities as prices for components fall.

While Pepper's simple hands can only pick up light objects such as empty cans, giving them more sensors and servomotors would allow it to act on the physical world and perhaps take on household chores. In experiments at the University of California, Berkeley, Willow Garage's PR2 robot can now do the laundry without knowing which clothes have to be washed.

PR2, though, costs 175 times more than Pepper and requires engineering teams to improve its housework abilities.

"Pepper is still way overpriced for the functionality and doesn't present a compelling emotional purchase need, except for techies, early adopters and senior Japanese women," Lem Fugitt, a Japan-based robotics observer who runs Robots-Dreams.com, said via email, referring to a penchant among older women to like cute machines such as the baby seal robot Paro.

"Pepper is at this point still really just a toy," Damian Thong, a technology analyst at Macquarie Securities in Tokyo, said via email, adding, "The technology is improving and prices are declining, but we are still far from the point where robots can be readily integrated into our lives beyond relatively simple tasks like carpet cleaning."

Still, those early adopters will be able to use hundreds of apps for Pepper, including a photo diary, in which the machine takes photos automatically and writes in a journal; voice-driven games, and retrieving information from the Internet. Pepper can also relay messages from users' friends and family.

Thanks to its "emotion engine," Pepper can recognize human feelings and simulate them. It can also learn new skills as it spends more time with users and connects through the SoftBank cloud to thousands of other Peppers.

Even in robot-mad Japan, which has a long history of helpful robots in science fiction as well as a popular fondness for cute characters, intelligent machines have failed on the consumer market. Sony pulled the plug on its Aibo robot dog in 2006 after selling about 150,000 units globally. Around the same time, Mitsubishi Heavy Industries launched a humanoid robot, Wakamaru, that resembled Pepper in terms of its appearance, AI abilities and hardware. At about $14,000, it was a flop.

SoftBank CEO Masayoshi Son, though, sees Foxconn's high-tech manufacturing prowess in making Apple devices and Alibaba's vast e-commerce distribution reach as a game-changing partnership for robots. They plan to launch sales outside Japan sometime in 2016.

"Alibaba sold 70,000 Ecovac robotic vacuums on Singles Day in China," Frank Tobe, a robotics investor who tracks the industry on his website The Robot Report, said via email, referring to a shopping day in November that's popular with young singles. "Peppers are perfect Singles Day gifts -- if they speak Chinese."

Pepper has the ability to speak Japanese, English, Spanish and French, and more languages are planned, along with dozens more apps. SoftBank is hoping that consumers will fall for Pepper's synthetic emotions and AI, accepting it as a member of the family, and overlook its shortcomings when it comes to housework. Meanwhile, the company plans to focus on enterprise applications for Pepper starting this fall.

Many businesses in Japan are interested in buying a Pepper or two to try it out, said Tadaaki Mataga, an IT infrastructure analyst with Gartner in Tokyo who sees the robot as a powerful stimulant for a nascent market.

Pepper has already worked at electronics shops to help sell mobile phones and coffee machines in Japan. Ben Bajarin, an analyst at Creative Strategies in California, notes that major retailers such as home-improvement chain Lowe's are experimenting with various robotic platforms that can guide customers around stores.

"There's definitely a business case to be made in that capacity," Bajarin said.

Pepper may be the closest thing to a science-fiction robot butler that is also a real product, but living up to that ideal will take a long time. There are a lot of expectations riding on its shoulders. How does Pepper "feel" about this responsibility A quip it made at its consumer launch Thursday seemed to sum it up: "Please don't play with my emotions."

Tim Hornyak covers Japan and emerging technologies for The IDG News Service. Follow Tim on Twitter at @robotopia.