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ABSTRACT Industrial robotic systems in the era of Industry 4.0 play a pivotal role in modern manufacturing. These systems, which belong to the larger class of cyber‐physical systems (CPSs), rely heavily on advanced sensing capabilities to execute complex and delicate tasks with high precision and efficiency. It is of no surprise that the integration of sensors with Industry 4.0 robotic systems exposes them to potential cyber‐physical risks/threats. This paper addresses a critical gap in the literature of industrial robotics cybersecurity by presenting a comprehensive analysis of vulnerabilities in the sensing systems of industrial robots. In particular, we systematically explore how sensor performance limits, faults and biases can be exploited by attackers who can then turn these inherent weaknesses into security threats. Our investigation relies on a detailed literature review of a multitude of commonly used sensors in industrial robotic systems through the lens of their physics‐based operating principles, classifications, performance limits, potential faults and associated vulnerabilities against disturbances such as temperature fluctuations, electromagnetic and acoustic interference, and ambient light variations. The result of this systematic investigation is a ring chart illustrating the overlaps and entanglements of sensor faults and performance limits, which can be exploited by cyber‐physical adversaries. Additionally, we investigate the cascading effects of compromised sensor data on the operation of industrial robotic systems through a cause‐and‐effect analysis, where the sensor vulnerabilities can cause malfunction and lead to cyber‐physical damage. The result of this analysis is a sensor cyber‐physical threat cause‐and‐effect diagram, which can be employed for design of robust and effective cyber‐physical defence measures. By providing insights into sensor‐related cyber‐risks, our cyber‐physical threat analysis paves the path for enhanced industrial robotics security.