Recent Morgan Stanley Blue Paper cites growth factors, industry analysis, and automation scenarios
By RBR Staff
December 28, 2012
AUTOMATION WORLD: According to a recent Morgan Stanley Blue Paper, the current demand for robotics in China is relatively small; however, rising wage pressures and other factors will push the automotive, electronics and the metal/machine tool industries to automate production.
With continuous improvement pressures and China’s recent economic slowdown, analysts are becoming more bullish on Chinese manufacturers expanding factory automation investments and, in particular, robotics.
The paper, China—Robotics: Automation for the People, states that even with a tepid 2012 for China, robot suppliers continued to move operations there.
Robotics Expands: $1.2B today to $6B by 2020–a five-fold increase
Robotic automation in China is seen by many as low-hanging fruit and their reasons why are: 1) Plant managers used to see automation and its associated depreciation equipment costs as a negative; 2) Automotive industries are requiring more standardization; and 3) Rising wages, and the ever-increasing elderly population.
The report points out that “robot usage is some 60 percent below the global average—a market of $1.2 billion today could be worth $6 billion by 2020–a five-fold increase.”
The report also suggests that even though China’s robotics demand today is small at $1.2 billion last year, on a relative basis its share of total automation spend is actually quite high at 27 percent, compared with the global average of close to 4 percent.
The report projects that China’s robot usage effectively catches up with the global average of 55 robots per 10,000 workers (adjusted for GDP per capita), and then the market could easily reach $6 billion. This would still be a long way short of usage in Japan and South Korea at 343 per 10,000 workers.
According to the Financial Times: “The challenge for China’s electronics factories, which produce the majority of the world’s smartphones and computers, is to develop robots that can manipulate flexible wires and calculate how much force is needed to insert that wire into a delicate motherboard. Consumer electronic products also evolve much faster than car models, which means the next generation of robots has to be easily reprogrammable.”
China, says Jerry Li, knitwear manager, tries to hold on to work in garments and textiles by automating, amid increasing competition from lower-cost countries such as Bangladesh and Cambodia.
Order sizes to Chinese factories are declining, leading to lower margins and less money to invest in the business. This has led some owners across southern China to close rather than automate.
The report also provides a detailed analysis of four automation suppliers in China: ABB Fanuc Yaskawa and Kuka Robotics. Adept Technology is referenced for its 128 SCARA robots used in a Philips application and, of course, automotive is presented by Kuka and its 330 robots in building the Mercedes A Class sedan.
China’s robotics is still heavily dependent on the automotive industry with 59 percent of demand, relative to electronics at 17 percent.
- The paper compares the current situation in China with developments in Japan during the 1970s and 1980s. The parallels are both relevant and compelling. In Japan: the nature of the workforce and rising wage pressures are a meaningful factor; ‘cultural drivers’, in terms of willingness to displace workers and adopt technology are meaningful also; quality issues become important, as a domestic industry evolves; and growth rates, as robot penetration occurs, can be quite spectacular during the ‘ramp-up’ phase.
- Machine tools account for 11 percent of the total demand.
- China could reach 50 robots per 10,000 workers in applications outside of automotive. This is again not a demanding target and would make its usage ex-auto similar to that of France, but still ~65 percent below the current average for these applications. Robotics is used significantly in assembly functions in advanced electronics but also in many types of industrial machinery and machine tool applications.
- China and South Korea are mirror images in auto and electronics demand. We find this point very interesting, because it tends to suggest the following: that China’s robotics market is still in its infancy, and is disproportionately dependent on the automotive industry; that in more advanced economies such as South Korea and Japan, robot applications are far more broad-based.
- The automotive industry is nation-wide, not just coastal. The production of motor vehicles is widespread throughout the country and the top seven provinces in terms of vehicles output only concentrates. 60 percent of the total production.