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The Covid-19 crisis has 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. That includes the robotics sector.
Earlier Struggles
This does not mean that everything was fine, however. Foreign suppliers of production technology which 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 USA, but also 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 their global key customers from the automotive sector and only knew growth in this market, this was an unfamiliar experience.
Infrastructure Upgrading
In September 2020, the Chinese economy seems to be doing relatively well not only compared to most other regions of the world, 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.
Robotics a Bright Spot
Industrial robots were among the industries in China which 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 percent 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 percent below those of the previous year (in terms of units).
Figure 1: Chinese Industrial Robotics Sales 2018-Q2 2020. Q2’s 43,589 units was a 3.8% increase over Q2 2019 (Source: National Bureau of Statistics PRC, STM Research).
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 percent). Delta robot sales also rebounded, up 22 percent thanks to increasing demand from the food and beverage, healthcare and electronics sectors.
Other segments with robust growth were AGVs (+17 percent) and cobots (+9 percent). They particularly benefited from resuming projects that had been halted during the outbreak. Sales of traditional multi-axis robots (-10 percent) and handling technology (-6 percent) continued to decline in the second quarter, mainly due to the persistently weak demand from the automotive sector.
Despite the impressive sums of capital, young Chinese robotics companies find themselves in a difficult environment.
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. Honyen Robot, for example, 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 drones, 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.
Investment Strong
Using data from The Robot Report and STM Stieler’s database of transactions in China, Stieler analyzed 392 transactions that occurred in the global robotics industry in the first seven months of 2019 and 2020 (Figure 2). It was found that global robotics investments fell by over 60 percent from January to July 2020 compared to the same period last year. The US remained the destination with the most investments with more than 53.8%. China gained relative importance in 2020. In the first seven months, approximately 31% of the investments were made in China. The main drivers were the IPOs 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).
Figure 2: Global Robotics Investments January to July 2020 (By Value). Includes investments in industrial robots, service robots, AGVs, drones and more. Does not include investments in self-driving vehicles. (Sources: The Robot Report, STIELER Research).
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 driverless transport vehicles (AGVs), for example, the chips for control come from the USA and navigation sensors 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 USD 300 million and wanted to develop cloud-based humanoid robots in Silicon Valley and China, closed its branch in Santa Clara in Spring due to 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 business people as well as policy makers.
Editor’s Note: This article was republished (with slight alterations) with permission from STM Steiler.
Georg Stieler, Managing Director, Stieler Technologie & Marketing
Georg Stieler started the office of Stieler Technology & Marketing Consultants in Shanghai in 2011. He constitutes the base for the firm’s extensive knowledge in the global robotics and automation industry and has become one of the leading independent experts in this field. In this function, Stieler frequently lends his expertise to investors and startups from Europe, the US and China. Stieler is also a sought-after speaker at international conferences in Asia, Europe and North America. He is frequently being quoted on economic affairs in China by leading German and international publications. Stieler studied business and economics at the University of Mannheim, Tongji University Shanghai and graduated with a B.A. in Corporate Management & Economics from Zeppelin University.
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