The Upgrading of the Manufacturing Industry Brings Opportunities to Beiren
The next five to ten years will be a critical period for the manufacturing industry's upgrading, automation and intelligence transformation, which will provide the industrial robot company Beiren with an unprecedented chance to advance.
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● Beiren's quick development in recent years was a result of its good management ideas and also external opportunities. The manufacturing industry's upgrading is playing an essential role in the firm's expansion.
● Although the era of intelligent transformation will bring more chances for Beiren, it still should keep an eye on other potential risks around innovation and its big clients.
Affected by COVID-19 and the declining global economy, vehicle firms' sales volumes decreased massively in the first half of 2020. According to the firms' press releases, most of them did not reach 30% to 40% of their target sales volumes until recently. The decreasing development rates slowed down firms' investments in fixed assets, but the demand for intelligent transformation is gradually rising. In other words, the manufacturing industry's upgrading and robotic innovation will bring new chances for the system integration market.
As a solution provider of robot automation and intelligent system integration, Beiren developed from a startup to a system integrator with total assets over CNY 1.24 billion. Moreover, although affected by COVID-19 in the first half of 2020, Beiren's operating income decreased by 24.3%. It is still making progress in promoting new businesses such as engineering machinery and heavy trucks. Surprisingly, the robot automation integration provider made up its deficits and reached surpluses, as its operating incomes rose 52.94% to CNY 0.26 billion in the third quarter of 2020.
How has Beiren grown up rapidly and further developed its businesses? This may have occurred due to both internal and external factors. With the internal factors, its president, Zhenyou Zhu, outlined three vital elements for Beiren's development. Firstly, he focused on one main area – as a startup, it did not have enough time and money initially. Hence, Beiren started its businesses from the welding tasks, and it accounts for 85% of its operating incomes. Specifically, welding production lines of automotive robots and intelligent welding equipment of carrier rockets are the two primary income resources of its weld businesses. Moreover, welding production lines of automotive robots occupy an average 55.9% operating income of Beiren’s core businesses. Secondly, the team's core values. A small firm is supposed to have the same values to increase its cohesion. For instance, Beiren aims to become a leader in intelligent manufacturing, so its members try their best to innovate and explore markets. Lastly, not to focus too much on valuations. When finding investors, Zhenyou does not pay too much attention to their valuations and even the amounts; he cares more about what else they can bring to Beiren. Oriza Holdings – a market-oriented investment platform – could be seen as an example, it invested in two rounds of Beiren's fundraisings for a total amount of around CNY 7 million. Except for the investment, Oriza Holdings also helped Beiren enter industrial parks and obtain land for construction.
Having benefitted from the welding businesses' mature development, Beiren is conducting its business development centers around the welding process and expanding out. The auto industry's system integration areas are supporting branches for Beiren to expand its businesses, with a crucial emphasis on informatization. In the future, the robot automation integration provider will focus on intelligence, and gradually transfer its emphasis to the high-end manufacturing industry and non-automotive fields, such as aerospace and engineering machinery.
When it comes to external factors, some social issues triggered the manufacturing industry's change and are further promoting the system integration industry's development. To be more precise, with the severity of the aging population, rising social costs and labor shortage, manufacturing firms have started the robot replacement plan, aiming to lower labor costs. This upgrading of the manufacturing industry further increases the need for automated and intelligent equipment. To respond to this change, Beiren will develop automated logistics later, proving a complete solution for traditional industrial manufacturing. Additionally, smart manufacturing's rising demand increases system integrators, but most of their operating incomes are lower than CNY 30 million, scattering across cars, 3C and other different areas. In other words, the system integration industry has low concentration ratios, and its market scale is merely about CNY 35 billion, indicating more room for it to develop.
Regarding the system integrator's core competencies, three advantages could not be ignored. Firstly, it has strong R&D ability. By the end of the first half of 2020, the firm owned 69 intellectual property rights, including 17 patents, 18 software copyrights and three trademarks. Secondly, stable partnerships. Because of the car industry’s complicated product structure, car manufacturers have strict standards for suppliers. Relying on high-quality services, Beiren has become one of the most popular suppliers – and its customers include SAIC MOTOR, Dongfeng Motor Corporation, ZHENGZHOU YUTONG BUS CO., Ltd., Tesla and other auto groups. Thirdly, a professional team. After a few years' efforts, Beiren has a team with over 300 professional R&D staff, and its president has more than 20 decades' research experience.
Although the manufacturing industry is upgrading in multiple ways and intrinsic competencies help accelerate Beiren's development, it still faces several risks. First, there are technological risks, which are embodied in innovative sustainability and new products' R&D. Although the firm highly emphasizes R&D investment, if its technical R&D and product upgrading cannot catch up with market changes, its competitive position and profitability will face threats. Moreover, the new products' R&D and market promotion also carry uncertainties to some extent, it may meet the failure in new products' R&D. Secondly, there is a downturn in the auto industry. Most of Beiren's products are absorbed by the auto industry, accounting for approximately 92.71% of total income. China's auto sales volumes saw negative growth in 2018; if the sales volumes keep decreasing in the future, Beiren's performance will be threatened. Last but not least, the customer concentration rate is too high. Following Beiren's customer income ratios, the big clients occupy too much space, as the top five clients account for 60%~70% of total income. Precisely, 80% is from SAIC MOTOR. If there are conflicts with SAIC MOTOR in the future, Beiren's profits will be mainly affected. To make a comparison with its peer, SINSUN, – the latter is also a solution provider of robots and automated equipment, but its top five clients merely occupy an average of 17.37% of its total.
Facing uncertainties in the macroeconomy and influences brought by the upgrading of the manufacturing industry, Beiren might have further market transformation issues later. However, in the long term, the firms' intelligent upgrading and robot replacement could present a good opportunity for system integrators. It is probable that Beiren will keep exploring other niche industries, based on its extensive competence in welding.
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