December 01, 2016      

Following Midea Group Co.’s acquisition of KUKA Robotics AG this past summer, the German Economic Ministry said it wanted to stop “unwanted takeovers” from “state-owned and partly state-owned companies in non-European countries.” Basically, if you aren’t European, stay away from acquiring European technology. This is a prime example of why all global robotics companies should consider a “georobotics strategy.”

A resurgence of protectionism in Germany means that even North American robotics and artificial intelligence companies that are looking to acquire European innovations could be locked out. Now that the so-called Brexit has passed, will U.K. firms join the U.S. in being unable to form similar partnerships?

What is taking place in Germany is reflective of what many countries are experiencing — a fear that foreign powers are gaining technologies, patents, and market access that can give them an unfair advantage when it comes to the economic competitiveness.

Business takeaways:

  • The German government has become wary of Chinese acquisitions of German technology companies, and this could lead to increasingly protectionist measures in the EU and elsewhere.
  • Any U.S. robotics company considering international business should develop a georobotics strategy to prepare for shifts in regulations.
  • Factors for a georobotics strategy to consider include intellectual property protection, global market access, and safety and trade regulations.

What is a georobotics strategy?

Robotics enterprises that have a georobotics strategy should be better prepared to deal with the ongoing political and business changes in different markets. As nation-states become more protective of their own workers, intellectual property (IP), and market access, it’s imperative for multinational businesses to be ready to manage unexpected changes.

Let’s take a look at the relationship between China and Germany as an example. While KUKA is the only major robotics maker to be acquired by a Chinese company, it is one of many Chinese acquisitions in Germany. Of all the Chinese acquisitions in Germany since 1995, five of the six largest have taken place in 2016 alone.

A georobotics strategy would note that China has stepped up major acquisitions in Germany.

Chinese businesses have increased strategic acquisitions in Germany.

Direct technology isn’t the only aim of China. So is indirect technology, like patents.

The pending acquisition of Osram Licht AG by China’s San’an Optoelectronics Co. for €5.7 billion ($6 billion) will also give China access to the 18,000 patents that the high-end lighting company has registered. Such a large transfer could jolt the German government (and the EU) to enact new regulations around IP such as banning the transfer of patents in an acquisition. Will other Western nations adopt this model?

Ironically, earlier this year, China experienced its own challenge when it comes to dealing with technology. And artificial intelligence was front and center.

In July, following a ruling against China’s claims in the South China Sea by the Permanent Court of Arbitration (PCA), iPhone users in China began messaging one another about the incident, some talking about whether ships will be sunk after the ruling.

Apple’s AI was paying attention and, because of an incident earlier in the year which resulted in a Chinese boat being sunk by Argentina, its predictive capabilities proposed “China” when the word “sunk” was inputted.

U.S. companies in China faced a backlash. One store owner, under the banner of “patriotism”, asked his 50 employees to trade in their iPhones for Chinese smartphones and even offered a bonus. A woman walked into KFC and accused the staff of funding “American bullets” that would later be aimed at “Chinese sailors.”

The lesson here is simple. Robotics and AI companies face a new vulnerability, even as their products become more advanced. They can be used in ways they never imagined — like connecting two words and sparking outrage in the world’s second-largest economy.

Avoiding disruption

Without a georobotics strategy, your business is at risk of disruption if regulations are introduced that you didn’t expect. What if a product or service operates in a way that causes backlash in a particular country? With suppliers geographically distributed and robots in the supply chain, healthcare, and increasingly, in the service industry, can you afford to take that risk?

On Oct. 26, Germany withdrew its support for Fujian Grand Chip Investment Fund LP to purchase Aixtron SE, a German semiconductor equipment company. The reason? Authorities in the U.S. allegedly showed German officials evidence that Aixtron products could be used by China for military purposes.

Did Aixtron expect the German and American governments to think this way?

More on GeoRobotics Strategy:

U.S. robotics companies should begin asking themselves how much exposure they have in their different markets and what kind sorts of geopolitical developments could send their operations into unchartered territory.

Countries such as China, Russia, India, and Iran remain challenging when it comes to technology acquisitions. One of the main reasons is that companies in these countries have access to the advanced technologies that Western companies don’t have in those countries.

In fact, market access was one of the areas examined when 10 robotics companies from Massachusetts recently visited China.

A georobotics strategy is a lot like a geopolitical strategy. Except that, instead of fuel or weapons exports, robotics is the main variable. Wherever robots and AI go, new competitive and IP risks are springing up, risks that will only grow as capabilities such as autonomy improve.

In other words, robotics companies are entering a new world. And, one of the prerequisites of operating in this world is to develop a georobotics strategy — now.