The emerging robotics industry is booming in China.
The move to advanced technology is aligned with the government plan – Made in China 2025 – to upgrade China’s manufacturing base.
In turn, the development plan for the industry, issued in April, seeks to accelerate Chinese robotics with breakthrough products in 2016-20.
Critics argue that the industry is being sustained mainly by local government subsidies.
What is the role of Chinese robotics in the global industry and will it survive on its own?
China’s robotics boom is often explained by rising costs and an aging population.
But that’s only part of the big picture.
In the mainland, the robotics boom has been fueled by several forces, including demographics (growing engineering talent, declining factory-age workforce, aging work force), increasing costs (rising wages, costs of training and housing), and favorable financing (low-cost loans, factory incentives, investment by foreign tech giants that manufacture in China, including Foxconn and Apple).
Furthermore, the boom has been driven by government policies (central government encouragement, local government mandates, tax credits), rising quality requirements (ramping of automakers for export), and the emergence of early adopters in China (an expansive middle class with disposable income, more capital–intensive companies).
Not so long ago, the robotics markets were in Japan, the United States, Germany, South Korea and China, with a combined share of 70 percent.
By 2014, robotics sales soared in China, which became the largest market of industrial robots with a 25 percent share of the global total.
Yet, sales remained dominated by foreign giants, such as the Swedish-Swiss ABB, the Japanese FANUC and Yasukawa Electric, and the German KUKA.
Last year, Japan still dominated the manufacturing of global industrial robots, with some 60 percent of the global total.
But by the end of the current year, China hopes to overtake Japan, while Chinese robotics pioneers, including Shenyang Siasun and Ningbo Techmation’s subsidiary E-Deodar, have been scaling up fast.
China is about to triple the annual production of robots in manufacturing to 100,000 in five years, and sell over US$4.6 billion worth of service robots by 2020, thanks to surging demand in healthcare, education and entertainment.
In addition to industrial robotics, service robotics hold great potential as well, including almost 50 mainly new Chinese companies, such as Shenzhen DJI Innovations which projected sales of US$1 billion of its devices in 2015.
Toward advanced manufacturing
In spring, China’s growing robot industry turned to acquisitions, heralding efforts at consolidation, as evidenced by the acquisition of the Michigan-based Paslin by Wanfeng Technology, Siasun’s planned acquisitions, and Chinese venture funds’ investments in robotic ventures in Russia, Israel and Silicon Valley.
Due to its huge population, China still has a long way to go. The density of robots in the mainland is still relatively low – about 36 per 10,000 manufacturing workers – relative to current robotics leaders, including Germany (292), Japan (314) and South Korea (478).
Chinese robotics has the potential to grow five to 10 times in the medium term.
Critics say that subsidies can contribute to the rise of inefficient robotics companies. The argument is not invalid but misses the point.
If China did not try to scale up its industrial capacity in promising emerging industries, it would remain just a buyer and dominated by foreign companies, while profits would continue to flow out from the country.
That was the case in mobile networks and smartphones until the rise of Chinese industry pioneers such as Lenovo, Huawei and Xiaomi.
That, however, requires innovation, which has accelerated fast since the early 2000s.
Today, R&D as share of the economy exceeds 2 percent and is higher than in Europe.
In cutting-edge megacities, such as Shenzhen, the ratio is closer to 4 percent, almost as high as that of South Korea or Israel, the world’s R&D leaders.
In years to come, China will still continue to dominate many industries as a low-cost player, thanks to its large population base.
But it is also rising in advanced manufacturing, such as robotics, as the major producer. That is vital for China’s economic rebalancing, which is transforming the mainland into a global R&D hub.
For more of Dr Dan Steinbock’ articles, see http://www.differencegroup.net
– Contact us at [email protected]