China Sets the Pace in Race to Build the Factory of the Future
China’s factories turned it into the world’s second-largest economy by tapping into its vast and relatively cheap workforce to churn out everything from t-shirts to plastic toys to mobile phones. But as its poorer neighbors take a growing slice of its low-cost manufacturing base, China is now following Japan and South Korea’s example: Embrace automation or get left behind.
China has been the top market for industrial robots since 2013—and it's getting bigger. The country is currently on track to take delivery of 45% of all shipments between now and 2021, up from 39% last year, according to the International Federation of Robotics.
16 Countries Are Responsible for 90% of Industrial Robots
Source: Intenational Federation of Robotics
By comparison, the next biggest market, Japan, will be responsible for 11% of all shipments over that same period and the U.S. for 7%. Developing-world markets Mexico, India, Thailand, Vietnam and Brazil will collectively buy just 5% of industrial robots.
This automation drive has been good news for the world’s top robotics makers—such as Germany’s Kuka AG, which was acquired by Chinese appliance maker Midea Group Co. in 2017—but also for a domestic Chinese industry. Its growing market share is what the government was aiming for when it made robotics one of the 10 key sectors in its controversial Made in China 2025 plan to jump-start the country’s high-tech economy.
Made in China
Source: International Federation of Robotics
The industries driving China’s insatiable demand for robots are primarily consumer electronics and car manufacturing.
China has about 70% of the world’s electronics production capacity. Five of its leading smartphone makers—led by Huawei Technologies Co.—shipped 17% more handsets in 2018 than the year before, at a time when worldwide shipments were down 5% and by 12% at Korea’s Samsung Electronics Co.
China is the world’s largest car market, supporting a growing list of domestic carmarkers but also attracting investment from larger and better-established foreign brands who are building factories in the country.
Smartphones and Cars
Note: Figures do not add up to 100% due to rounding.
Source: China Robot Industry Alliance
Yet, despite the huge demand, China’s robot density is barely higher than the world average. In 2017, it had 97 industrial robots per 10,000 manufacturing workers, half as many as the U.S. and one-seventh as many as South Korea. Even if the government meets its target of 150 by 2020, it’d still lag far behind the other largest robot markets.
Most Automated Factory Floors
Source: International Federation of Robotics
Projections for robot shipments reveal another challenge to China’s ambitions: Whereas its purchases grew 60% in 2017, the rate of increase will slow to 16% in 2021. The U.S. and Japan will see factory automation speed up in the coming years.
China Slowing as U.S. Ramps Up
Note: Includes projections through 2021.
Source: International Federation of Robotics
Yet, as the last few decades illustrate, China has regularly overcome deficits with wealthier nations by adeptly leveraging its immense scale and centralized political authority. The race to automate is unlikely to be any different.