World Robotics recently published their annual update on the industry. It captures very clearly the trend in China towards higher value added production and towards substituting capital for labor. They believe global sales of multipurpose industrial robots last year was around 162,000, of which 25,000 were sold in China, slightly fewer than were sold in North America or Japan. By only 2016, they forecast that China will be consuming 38,000 robots, 20% more than either Japan or North America is expected to buy.
However that won’t mean that China’s installed base of industrial robots has yet caught up. With only 120,000 in use in 2013 versus 310,000 in Japan and 215,000 in North America, that will take a number more years, but China will most likely overtake Germany’s installed base by 2016.
In many ways this is not surprising: after all, around 40% of these robots end up in the automotive industry. China’s automotive factories look as capital intensive as those in Europe or the Americas, and are producing more cars than any other country worldwide.
There is a “but” in this, which is that Chinese robot producers are not part of this global industry association, and so robots produced in China for use in China don’t get counted in the global statistics. So if you thought the numbers above were small, you were correct. Foxconn’s in-house production of robots are excluded, as are the sales of the several hundred Chinese robot producers that a quick search on Alibaba throws up. In fact, China could easily be 40% of the global market today.
China could easily be 40% of the global market today
Net net, this is like so many other industrial sectors. China is for a period a massive net importer. Over time, Chinese companies see the market and look for opportunities to enter. We will have over competition, focused on the low-end, and gradually winners who start to develop their own IP will emerge. My sense is that we are about at that stage in China today, and that Chinese manufacturers will gain domestic market share quite rapidly in the mid-market.
Unlike in some other sectors, exports by Chinese companies may be harder to come by. The largest international markets – Japan, USA and Germany – represent more than 50% of the non-China market, and all have strong domestic industrial robot industries closely tied to their customers in the defense and automotive sectors. Displacing them will be hard. I suspect that there will be more international growth through M&A by the Chinese manufacturers than through organic expansion.
Don’t come to China for cheap labor, come to China for cheap robots for your factory instead.
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