iRobot, the U.S. company behind the Roomba smart vacuum cleaner, has filed for bankruptcy protection after rising competition from Chinese manufacturers and higher costs linked to U.S. trade tariffs eroded its financial position.
Pre-Packaged Chapter 11 and Ownership Change
The company said it entered a pre-packaged Chapter 11 bankruptcy process under which its primary device manufacturer, Shenzhen-based Picea Robotics, will take ownership of the business. iRobot said the filing is not expected to disrupt its app services, supply chains, or product support for customers.
Cost Pressures and Pricing Cuts
Court documents filed on Sunday described a challenging commercial environment that forced iRobot to cut prices and increase spending on new technology. The company said U.S. import duties of 46% on goods from Vietnam, where most of its devices for the American market are produced, raised costs by $23 million, or £17.2 million, this year.
Valuation Decline and Share Price Drop
iRobot, which has been operating at a loss, was valued at $3.56 billion in 2021, when pandemic-related demand boosted sales of home automation products. The company is now valued at about $140 million. On Friday, iRobot shares fell more than 13% on the Nasdaq exchange in New York.
Company Background and Market Position
Founded in 1990 by three members of the Massachusetts Institute of Technology’s Artificial Intelligence Lab, iRobot initially focused on defense and space-related technology. The company launched the Roomba robotic vacuum cleaner in 2002.
According to iRobot, Roomba products account for about 42% of the U.S. robotic vacuum cleaner market and 65% of the Japanese market.
Impact of Trade Policy and Failed Acquisition
The company said trade tariffs imposed by former U.S. President Donald Trump on imported goods added to manufacturing costs for businesses that rely on overseas production, including iRobot. Trump has said the tariffs are intended to support domestic jobs and industry.
Last year, iRobot’s planned $1.7 billion acquisition by Amazon was abandoned after opposition from the European Union’s competition regulator.
New Owner’s Manufacturing Footprint
Picea Robotics, which will take ownership of iRobot, manufactures robotic vacuum cleaners and operates research, development, and production facilities in China and Vietnam. The company employs more than 7,000 people worldwide and has sold more than 20 million robotic vacuum cleaners.
Featured image credits: Wikimedia Commons
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