Robots are key in China's strategy to surpass rivals
From April 18 - April 27, 2023, the 20th Shanghai International Automobile Industry Exhibition welcomes more than 1,000 automakers from 20 countries and regions at home and abroad, with more than 150 new models making their global debut. What makes the auto show this year stand out is its significantly enhanced global influence, which mainly comes from the strong performance of China's new energy vehicles (NEVs) shaking the foundation of the global auto market. The growing dominance of the Chinese NEVs industry makes us wonder whether the domestic robot industry is heading towards the same path, as they share several similarities such as strong government support, reliance on technological advancements, changing market demand, and global aspirations. This article takes a deeper dive into whether Chinese robotics companies can surpass foreign giants and whether the path of the new energy vehicles can be emulated.
Why is China expected to surpass foreign companies and lead the era of robotics?
The market is the ultimate truth - China has the world's largest market base for robots. China's industrial scale is the largest in the world, providing a natural foundation for automation demand, and the industrial robot consumer market is rapidly rising. Since surpassing the United States in manufacturing value-added in 2011, China has consistently ranked first in the world for several years, thanks to its massive and comprehensive industrial foundation, which provides a natural environment for automation demand. According to the International Federation of Robotics (IFR), China has remained the world's largest market for industrial robot applications for consecutive years, with a shipment of 2.68 million units in 2021, equivalent to the total sum of robots installed in all other regions worldwide. China's share of the global market in 2021 was 51.8%.
The increasing proportion of the tertiary industry in China's GDP and the upgrading of consumption are important drivers for the high-quality development of the service robot industry. According to data from the National Bureau of Statistics, the value-added of the tertiary industry in China's GDP has been increasing year by year, and the rapid development of service industries such as education, healthcare, and catering within the tertiary industry is expected to drive the demand for service robots, promoting the rapid improvement in quality and variety of service robots. The rise in purchasing power and consumption levels has led to changes in consumer attitudes, making it easier to tap into the market space for service robots under the macro background of consumption upgrading." According to AskCI Research, the market size of service robots in China reached CNY 46.7 billion in 2021, and it is projected to increase to CNY 73.5 billion in 2023.
Technology Innovation and Industrial Ecosystem
China has already developed a mature technological and industrial foundation, and the development of the smartphone and smart automobile industries has laid a solid technological foundation for the current stage of the smart robotics industry. China used to rely heavily on imported core components for industrial robots, but domestic manufacturers such as Estun Automation (Chinese: 埃斯顿自动化), Inovance Technology (Chinese: 汇川技术) and leaderdrive (Chinese: 绿的谐波) are currently at a turning point from defense to offense, with market share expected to exceed 50%. In the next 3-5 years, China is expected to catch up with foreign levels in terms of manufacturing capability and cost.
The soil for the development of the robotics industry in China is conducive, with factors such as low-cost agile supply chains, low-cost clean energy supply, dividends from engineers, and vast data collection scenarios. As for domestically produced robots, China's manufacturing industry has a diverse structure, and the long-tail effect of industrial robot applications is evident. This enables domestic manufacturers to temporarily avoid direct competition with the leading international brands such as FANUC and Yaskawa Motoman, gradually accumulate and breakthrough core technologies, and achieve overtaking on the curve. With continued investment in talent and research and development for domestic brands, the domestic industrial chain is gradually improving, and the localization rate is expected to gradually increase.
What aspects of the developments of Chinese robotics companies indicate a trajectory similar to that of new energy vehicles?
Government support and policies have played a significant role in the rise of Chinese NEVs companies, including financial subsidies for NEV manufacturers, purchase subsidies for consumers, exemptions from purchase taxes, R&D funding, charging Infrastructure investment, carbon emission regulations and more. And the Chinese government has been following the same playbook for the robotics industry as well, actively supporting the industry through various measures, such as financial incentives, tax breaks, and policy support for research and development.
The Chinese government has identified robotics as a strategic priority in its "Made in China 2025" plan, which aims to upgrade the country's manufacturing capabilities and promote high-tech industries. In April 2022, the "Intelligent Robots" key special project under the National Key Research and Development Program was launched with a funding of USD 43.5 million. On January 19, 2023, the Ministry of Industry and Information Technology (MIIT) and 16 other departments in China issued the "Robot++" Application Action Implementation Plan. The plan aims to accelerate the expansion of robot applications to inject a strong impetus into economic and social development. By 2025, the robot density in the manufacturing industry is expected to double compared to 2020, and the depth and breadth of application in the service robots and special robots industries will significantly increase.
Another critical step in Chinese auto makers’ journey to lead in the global NEVs industry is an aggressive international expansion strategy. For example, companies like Geely, BYD, and Great Wall Motors have established production facilities or formed partnerships in countries such as Europe, North America, and Southeast Asia to gain access to local markets and customers. This has allowed them to increase their market share and compete with foreign giants in those markets.
Robotic companies are on the same path. GGII (高工产业研究院) data shows that in 2022, the proportion of export orders for mobile robots from China exceeded 25% for the first time. Chinese companies have been setting up operations and expanding their presence in international markets, leveraging their competitive pricing and manufacturing capabilities. Moreover, Chinese companies have also been engaging in strategic partnerships and collaborations with foreign companies to gain access to advanced technologies and markets. For example, in 2017, Chinese home appliance maker Midea (Chinese: 美的) acquired German robotics firm KUKA, which has advanced robotics technologies and a strong global presence. This acquisition has helped Midea strengthen its position in the global robotics market and expand its product portfolio.
What Challenges do the robots companies face that might derail them from emulating the path of NEVs?
While there are similarities for robotics companies to emulate the success of new energy vehicles, differences and challenges also exist. It is worth noting that the global robotics market is highly competitive, with established players from various countries, including Japan, Germany, the United States, and South Korea, dominating the market. These companies have a long history of innovation and have established strong brand recognition, customer base, global networks, quality and reliability standards, safety compliance, AI capabilities, and distribution and service networks. While Chinese companies have made significant strides in recent years, they are still catching up on these fronts.
In conclusion, Chinese robotics companies have made significant progress in recent years, driven by technological advancements, market demand, government support, and rising international expansion. Chinese companies have emerged as major players in the global robotics market, particularly industrial robots and service robots. However, there are still challenges to overcome, and the timing to emulate the success of new energy vehicles may not be there yet. The robotics industry is still evolving, and there is a need for continued investment in R&D, innovation, performance and international collaborations to further strengthen the position of Chinese robots on the global stage.