At the end of March 2019, EqualOcean conducted an interview with Atomrobot (阿童木机器人) CEO SONG Tao (宋涛) regarding the parallel robot (also called parallel manipulator) industry in China. China is still at an initial status in parallel robots, whether in production or application and hence the market for not only parallel robots but also other types of robots is yet to be developed.

Diminishing Demographic Dividend

Traced back in the 1980s, China started the Economic Reform and in the following decades, China’s manufacturing industry has made its name in the world. Made in China can be found at almost every corner of the world and one of the important reasons that lead to the prosperity of China’s manufacturing is the demographic dividend.

During the past decade, China’s labor force’ growth was slowing down and even ceased to negative growth, and the neighbor country India’s labor force growth maintained at a growth of 1.3%+ in past 5 years. The shrinking labor force directly causes a shortage in the manufacturing industry.

The demographic dividend benefit is wearing off in China. Addition to the increased wages, the inflating labor expenses have become a hindrance for manufacturers to stay profitable and efficient at the same time. This situation gives rise to parallel robots and other robots as a better means to lower the expensive labor costs and increase efficiency.

Parallel Robots in China

The parallel robot is a closed-loop kinetic chain mechanism whose end-effector is linked to the base by several independent kinematic chains. The number of machines arms represents the degree of freedom (DoF). The DoF on the market ranges from 2 to 6 but 6-DoF is widely being researched by institutes and engineers regarding the control and accuracy topics. Atomrobot’s products’ DoF ranges from 2 to 4, which are commonly used in manufacturing.

Using machines to replace labor work is the trend throughout human history and the development of technology and science pushes the progress with a faster speed. China’s research on parallel robot did not start until the late 20th century. 6-DoF parallel manipulator was invented in the 1960s, but the first one made in China was more than 20 years later. China’s parallel robot was not popularly used in manufacturing due to the demographic dividend.

However, the rising costs of labor attract manufacturers, machinery producers, and even investors to eye on industrial robots such as parallel robots, Cartesian robots, articulated robots, SCARA robots, etc. Each type of industrial robots has its advantages and disadvantages. For parallel robots, its strength is in speed and accuracy while its capability is limited in lifting weights.

Threats and Competition

When talking about threats and competition in the industrial robot market in China, SONG Tao mentioned the top 4 industrial robot vendors in the world. ABB (Switzerland), KUKA (Germany), Yaskawa (Japan), and FANUC (Japan) take most of the market share and have deeply rooted in industrial robot industry with experience and research ability.

Nearly 70% of China’s industrial robot market share was taken by foreign companies in 2014. Dated now, top 4 industrial robot vendors have built factories in China, while domestic brands are still at an emerging phase. Atomrobot and QKM (李群自动化) are two China new-born industrial robot manufacturers. Atomrobot concentrates on the parallel robot and QKM focuses on SCARA robot.

What concerned SONG Tao was not the threat from domestic peers but the top 4 vendors since they have reputations in machinery and solid foundation. Indeed, comparing to a mature competitor, either Atomrobot or QKM is still fresh to the market and needs time to construct its brand and dominate the market. But along with the globalization and China’s increasing openness in the market, the competition between the newborns and grownups will come in the near future.

In 2014, China’s industrial robot density was 36 robots per 10,000 people, which was below the global average level at 66 robots per 10,000 people. Comparing to the highest robot density, South Korea’s 478 per 10,000 people, China was even less than 10% of its density then. In another word, the low density implies a blank market – a blue ocean for all players.

A blue ocean is a chance for all manufacturers, but also a threat to domestic brands. The Mathew Effect works in this market – the best player has a greater chance to take over the market with the best resources. Omron, the industrial automation manufacturer from Japan, is considered as the greatest threat. In SONG Tao’s perspective, Omron is an outstanding company with a profound reputation and is good at combing marketing and technology, which is preferred by the market. But China’s startups still have chances to be one of the front league members due to the flexibility, while large companies will take more time on procedures and decision making. Mentioned by SONG Tao, other than within-industry top players, new incomers from other industries are another threat for startups in the industry.

China has been reforming the industry structure since aware of the demographic dividend would diminish. Some traditional industries’ companies are looking for outlets to survive in the structural reform. For instance, Country Garden (碧桂园), a top-ranked property development company in China, has invested CNY 80 billion (USD 11.9 billion) into the industrial robot company, Bozhilin Robotics (博智林机器人).

Country Garden’s financing in robotics can be considered a part of its development strategy plan since its main business heavily relies on labors. Using machinery to replace labors in the construction which is safer and more efficient besides lowering the operating costs. The depth of robotics R&D of Bozhilin is sufficient to support non-constructional robotics production and with the strong financial background, Bozhilin can prepare itself a strong research team to solve the robotics control part, which is the soul of robotics.

Yet, Country Garden, top vendors, and other players in the industrial robot part is a potential threat, and the real competition might still take years to come considering the blue ocean. When parallel robots’ sales volume was only approximately 2,000 in 2018, all players in the market can only focus on its own growth,

Atomrobot Plan & Target

Development

Atomerobot has received two rounds of financing and valued at CNY 200 million (USD 30 million) after latest series B funding. Founded in 2013, Atomrobot’s team has expanded to more than 80, in which 30-40 are process designers, 30 belong to sales and marketing, and 10 are algorithm designers.

As disclosed by SONG Tao, the orders in 2018 were around 1,000 robots from different classes of clients. Clients varied from small factories to large integrators and integrators’ orders took a large share. Though received orders, the productivity could not catch up with the growth of order numbers.

Recently, Atomrobot is preparing for the next round of financing. The company needs to build more factories to produce and deliver orders received in 2018 and be well-prepared for the 300% growth, production of 3000 machines yearly. Atomrobot will extend the factory area from current 2,000 m2 to 9,000 m2. Besides the equipment, land, etc., the team will grow to a size of more than 100 in this year.

The team construction will aim at expanding the post-sale service team to adapt to the increased business map. The company recognized CNY 40 million (USD 6 million) in 2018 and reached the break-even point with a gross profit rate estimated at 40%. 50% of the COGS was spent on motors and decelerators, approximately 15% was spent on machine body, 20% was the cost for visual and control system and other costs. In 2019, Atom target revenue is CNY 100 million (USD 14.9 million) and expects to receive 1,500 – 2,000 machine orders.

Plan & Target

Atomrobot’s expertise in parallel robots is accounting on its control and vision algorithm, which is wholly self-developed and differentiates Atomrobot from peers. Parallel robot’s key feature is speed, which can move 80 – 100 time/s. Due to the feature, the parallel robot’s material selection is restricted, and titanium material is frequently used because of the lightness.

SONG Tao shared some Atomrobot’s achievements. It is the best robot in sorting dairy products (fresh milk products). For a long time, even, for now, shelf-stable milk (ultra-high-temperature pasteurized milk) and milk powder predominate the market, In the past, the fresh milk (traditionally pasteurized) market was considerably undeveloped because the time costs in the packaging process and other reasons had restricted it to grow. Since 2015, fresh milk products have increased apparently, from past handful varieties and brands to current more than 400 SKUs.

Atomrobot's product involves in the packaging process, which originally cost time - time is the key for fresh milk products since they can only stay in the fridge no more than two weeks. Parallel robot’s speed can efficiently reduce the time costs and it can replace labors and run 24 hours a day. The improved efficiency gives rise to the fresh milk market.

Fresh milk is only one of the scenarios that need parallel robots. Considering to China’s industrial structural reformation and diminishing demographic dividend, newly-emerged scenarios will provide more opportunities for the industrial robot industry. Atomrobot’s plan for the coming years will focus on penetrating verticals and form brand effect from verticals to a broader scale, i.e. becoming the top in noodle manufacturing scenario and then expanding to others like dumplings, buns, etc. and finally the flour-related manufacturing.

As stated earlier, the market for an industrial robot, especially parallel robot, is still a blue ocean. Before facing competition, what Atomrobot intends to do is rooting different verticals deep enough and construct brand effect – the market will first think of Atomrobot when thinking parallel robot.

By the end of 2020, Atomrobot is expecting to reach an annual production of 2,000 and at least 20% (optimistically 40%) of the total market share in China. Other than equalizing Atomrobot to parallel robot, the expected market position for its robots (parallel and other possible robot types in the future) is Fast and Accurate. Fast and Accurate, the two characteristics are dependent on the R&D level and hence Atomrobot will have more input on the R&D department including product design, process design, motion control, and others.