China’s robotics industry: Analyst takes a look at what’s new in 2020

The China International Industry Fair, or CIIF, China’s largest robotics and automation show, was this past week in Shanghai. The macroeconomic situation is mixed. The COVID-19 crisis hit all economies worldwide. China, which had the first major outbreak and went through a full lockdown in February and early March, appears to have found its way back to normal, at least at home.

This does not mean that everything was fine, however. Foreign suppliers of production technology that established a presence in the country in recent years were already confronted with a challenging environment in 2019.

On the demand side, the trade conflict with the U.S., as well as factors such as the continuing rise in debt and stagnating productivity, had a negative impact on consumer sentiment and companies’ willingness to invest. Even before COVID-19, car sales in the world’s largest market had declined for the first time since 1990 for two consecutive years.

Industrial robot sales also fell slightly for the first time in 2019, after their number had grown sevenfold since 2010. The list of goods and sectors could be continued. For many foreign companies that came to China with global key customers from the automotive sector and that only knew growth in this market, this was an unfamiliar experience.

In September 2020, the Chinese economy seems to be doing relatively well — not only compared with most other regions of the world, but some sectors have also performed better than during the same period in the previous year since April. Largely, this development is driven by a push for infrastructure upgrading, doubling down on existing policy goals. While it remains to be seen how sustainable this will be, it offers short- and mid-term opportunities for foreign suppliers of production technology. We will publish a study that explicitly deals with chances in industries, which we are seeing on an upward trend, later this fall.

China’s sales a bright spot for the global robotics industry

Industrial robots were among China’s industries that performed better in the second quarter than in the same period of the previous year. Based on the evaluation of the sales figures of the 20 leading domestic and foreign manufacturers of industrial robots in China, the market grew by 3.8% from the beginning of April to the end of June.

In a year-on-year comparison for the entire first six months, sales were 5.4% below those of the previous year (in terms of units).

The growing robot sales in the second quarter of 2020 were mainly caused by catch-up effects and robust demand from the electronics sector, especially for SCARA robots (+40%). Delta robot sales also rebounded, up 22% thanks to increasing demand from the food and beverage, healthcare, and electronics sectors.

Other segments with robust growth were automated guided vehicles (AGVs, +17%) and collaborative robots (+9%). They particularly benefited from resuming projects that had been halted during the outbreak. Sales of traditional multi-axis robots (-10%) and handling technology (-6%) continued to decline in the second quarter, mainly due to the persistently weak demand from the automotive sector.

At the present time, China can be seen as a bright spot in the global robotics market. However, one should highlight the enormous price pressure, which has even turned worse in the current situation. For example, Honyen, the fastest-growing domestic robot manufacturer last year, is currently going through bankruptcy proceedings after there had been rumors about outstanding payments to suppliers and employees already last year.

Also, DJI, the global leader in consumer threats, was forced to deny reports of layoffs in mid-August. Increasing security concerns in overseas markets will not make doing international business any easier for the company.

The trend that domestic industrial robot makers were able to increase their market share has not continued. This was ensured in particular by the strong sales performance of Epson, Yamaha, and FANUC in the field of of SCARA robots.

China stays strong in investments

Using data from The Robot Report and our database of transactions in China, our team analyzed 392 transactions that occurred in the global robotics industry in the first seven months of 2019 and 2020.

Global robotics investments fell by over 60% from January to July 2020 compared with the same period last year. The U.S. remained the destination with the most investments, with more than 53.8%.

China’s robot users gained relative importance in 2020. In the first seven months, 30.8% of the investments were made here. The main drivers were the initial public offerings of several manufacturers of industrial robots and a large integrator of logistics systems, as well as investments in mobile robotics, robotics-related AI chips, and 3D sensors (lidar).

Despite the impressive sums of capital, young Chinese robotics companies find themselves in a difficult environment. In addition to the price-sensitive domestic market with still comparatively low wage costs, access to foreign technology is becoming more difficult for them.

In AGVs, for example, the chips for control come from the U.S., and navigation sensors come from Europe or Japan. Two companies in this area, Megvii and Hikvision, have already become subject to American sanctions due to their business activities in the area of mass surveillance.

The start-up Cloudminds, which raised over $300 million (U.S.) and wanted to develop cloud-based humanoid robots in Silicon Valley and China, closed its branch in Santa Clara, Calif., this spring because of tightened export regulations for critical military-grade technologies.

The traditional strengths of Europe and Japan in industrial robots and automation are not reflected in investments in new fields of robotics. This should be of concern for both businesspeople as well as policymakers.

About the author

Georg Stieler is managing director for Asia at international consulting firm STM Stieler. The company’s Trend Report “Robotics in China” is a comprehensive update of its report from 2018 and will be available later this month. This article is reprinted with permission.