Editor’s Note: As with Japan in the 1970s and ’80s, many industry observers depict Chinese automation as an unstoppable rival to Western business. However, the state of robotics and artificial intelligence in China, market interdependence, and political and economic concerns are parts of a more complex reality. Robotics suppliers, integrators, and end users need to take all of these factors into account in their multinational strategies.
This article is part of a series by Georg Stieler, managing director of STM Stieler Asian investments, who will be speaking at RoboBusiness 2018 in Santa Clara, Calif. He will be participating in a keynote panel on global robotics. (Robotics Business Review produces RoboBusiness.)
Stieler previously provided an overview of Chinese automation and how the country’s technology sector is developing. Future articles will consider risks for foreign companies. In this article, he looks at growth prospects for the Chinese automation market.
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Will the growth in Chinese automation hold on?
2017 was another very successful year for the Chinese robotics industry. According to official numbers, approximately 130,000 industrial robots were sold in this period, which corresponds to an increase in sales of approximately 44%.
Even though official figures on Chinese automation should always be taken with a degree of caution, these developments have been reflected on the enterprise level. Robot exports from Japan to China increased by 57.9% in 2017.
Domestic robot producers such as Greatoo increased their sales by more than 50%. In the meantime, lead times of the biggest European producers ABB and KUKA temporarily accounted up five to six months during this period.
Based on our talks with robot producers and systems integrators this past spring, we expect the market to cool off a bit in the upcoming year. This is in particular due to the expiration of several investment programs, including publicly funded ones.
However, it must be noted that this is happening on a high level: China is responsible for approximately 35% of global industrial robot sales today.
Nevertheless, primary market forces continue to be in place: increasing labor costs, China’s rapidly aging population, and demand for high-quality products.
China’s low robot density [number of robots per 10,000 human workers] in comparison with the rest of the world will continue to provide a strong demand for robots.
Also, modernization of the country’s manufacturing sector remains a top priority of the government in Beijing.
In addition, prices for robots keep decreasing, while robots gain more skills, which consequently opens up new applications.
Where does the Chinese automation market offer opportunities for Western players?
Broadly speaking, Western companies possess an advantage when we are talking about complex systems as well as high precision and reliability. This goes through the whole value chain – from PLM [project lifecycle management] software to more demanding control systems, MEMS [microelectromechanical] sensors, or grippers.
Is China only a market for large robot manufacturers? Or can foreign systems integrators also benefit?
Most of the European systems integrators expanded to China following their customers from the automobile industry. They usually did not develop their Chinese automation business and customer base from scratch.
Big Chinese systems integrators like Guangzhou Mino and Dalian are currently cooperating with German premium producers and have established their first bridgeheads in Europe and North America.
Foreign systems integrators attribute their relatively weak presence in the Chinese automation market as the result of price-level disadvantages, difficulties in establishing a local customer network, and a different approach towards compliance.
In addition, the cyclical nature of the project-driven business model poses a challenge.
From this perspective, their hesitation is understandable. However, these companies are risking to miss out on the development of knowledge in promising industries such as battery technology or consumer electronics.
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